Strong analysis taken from Yahoo concerning accounting issues.
Thank you so much for the challenge you laid down to analyze
the 28 M$ "loss" from last quarter. The shorts have been
extremely short on content, and you have provided some content
here.
I understand your confusion - cash flow statements are hard to
understand. Yahoo doesn't allow very long posts but let me
summarize. First, the reference is to the last 9 months, not to the
last quarter. During the last 9 months, REXI sold or refinanced
245 M$ of assets. 28 M$ of that was a realized gain on
disposition of assets (sale and refinancing of mortgages). Now a
gain on disposition of assets is considered an "investing activity"
rather than an "operating activity." The total earnings of course
contains the gain on disposition of assets, which is a cash gain. So
to calculate the "operating cash flow," the gain on disposition of
assets must be removed, and effectively re-added in the "investing
cash flow". Thus, the "gain on asset disposition" was removed
from the earnings to report the operating cash flow. Since it was
removed from the earnings, it may have appeared to be a loss,
but it was really just being moved to the "investing cash flow." It
isn't really fair that the gain on sale of assets isn't considered an
operating item, since it is a continuing part of REXI's operations,
rather than a one-time investing gain, but there you are.
The gain on sale of assets is considered part of the investing cash.
But since it is a cash flow, rather than just earnings, the total sale
price of assets, 245 M$, is reported, which includes the 28M$ of
gain on assets. This is one of the more confusing parts. Since the
245 M$ isn't broken down into return of capital (217M$) and
gain on disposition (28M$), it isn't immediately obvious that the
28M$ is read into the investing cash flow column.
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