SOURCE: Great American Group, Inc.

Great American Group, Inc.

May 14, 2014 16:00 ET

Great American Group Announces First Quarter 2014 Financial Results

WOODLAND HILLS, CA--(Marketwired - May 14, 2014) - Great American Group, Inc. (OTCBB: GAMR) ("Great American Group" or the "Company"), a leading provider of asset disposition, valuation and appraisal services, today announced financial results for its first quarter ended March 31, 2014.

For the first quarter ended March 31, 2014, the Company reported total revenues of $21.7 million, an increase from $21.0 million in the first quarter of 2013. The increase in revenues of $0.7 million in the first quarter of 2014 was primarily due to (a) an increase in revenues of $1.7 million in the auction and liquidation segment, and (b) an increase in revenues of $1.3 million in the valuation segment; offset by a decrease in revenues of $2.3 million in the UK retail store segment. Revenues from services and fees decreased to $5.1 million, compared to $12.7 million in the same period the prior year. Revenues from sale of goods increased to $9.3 million, compared to $2.3 million in the first quarter of 2013. The decrease in revenues from services and fees was primarily due to a decrease in revenues from retail liquidation engagements due to fact there were no large retail liquidation engagements in 2014 as compared to the first quarter of 2013 when we participated in the joint venture involving the liquidation of inventory for the going-out-of business sale of 568 stores of women's clothing retailer Fashion Bug in the United States. The increase in revenues from the sale of goods was primarily due to an increase in revenues from the sale of goods purchased and sold at auction in the wholesale and industrial auction business, offset by a decrease in revenues of $2.3 million in the UK retail store segment from the operations of Shoon that are no longer included in our operating results. 

"Our results for the first quarter of 2014 were disappointing, as retail liquidations and other opportunities were not as prevalent in the marketplace. We incurred a net loss of $1.3 million or $(0.05) per diluted share compared to net income of $1.3 million or $0.04 per diluted share in the prior year's quarter," said Andrew Gumaer, Chief Executive Officer of Great American Group.

Direct cost of services were $5.9 million, compared to $6.2 million a year ago. Selling, general and administrative expenses were $8.0 million, compared to $10.9 million in the first quarter of 2013. The decrease in selling, general and administrative expenses was primarily attributed to (a) a decrease in expenses incurred in the auction and liquidation segment, (b) a decrease in expenses in corporate and other, and (c) a decrease in expenses in the UK retail store segment as a result of no longer operating Shoon; offset by an increase in expenses in the valuation and appraisal segment.

Interest expense during each of the first quarters in 2014 and 2013 was $0.6 million. Interest expense in both periods included $0.5 million of interest expense on the notes payable to the Great American Members and Phantom Equity holders, and $0.1 million of interest expense on our borrowings under the Company's asset based credit facility.

Operating loss for the first quarter of 2014 was $1.3 million, compared to operating income of $2.3 million during the first quarter of 2013.

Loss before income taxes was $1.9 million in the first quarter of 2014 compared to income before taxes of $1.7 million in the first quarter of 2013. Net loss in the first quarter of 2014 was $1.3 million compared to net income of $1.3 million for the first quarter of 2013. Diluted net loss per share was $0.05 in the first quarter of 2014 compared to net earnings of $0.04 in 2013.

Financial Position
At March 31, 2014, the Company had $16.9 million in cash and cash equivalents.

About Great American Group, Inc. (OTCBB: GAMR)
Great American Group is a leading provider of asset disposition and auction solutions, advisory and valuation services, capital investment, and real estate advisory services for an extensive array of companies. A trusted strategic partner at every stage of the business lifecycle, Great American Group efficiently deploys resources with sector expertise to assist companies, lenders, capital providers, private equity investors and professional service firms in maximizing the value of their assets. The company has in-depth experience within the retail, industrial, real estate, healthcare, energy and technology industries. The corporate headquarters is located in Woodland Hills, Calif. with additional offices in Atlanta, Boston, Charlotte, N.C., Chicago, Dallas, New York, Norwalk, Conn., San Francisco, London, Milan and Munich. For more information, call (818) 884-3737 or visit www.greatamerican.com.

Forward-Looking Statements
This press release may contain forward-looking statements by Great American Group that are not based on historical fact, including, without limitation, statements containing the words "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions and statements. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results, events or developments to differ materially from those expressed or implied by these forward-looking statements. Such factors include those risks described from time to time in Great American Group's filings with the SEC, including, without limitation, the risks described in Great American Group's proxy statement/prospectus filed with the SEC on May 16, 2013, and its Annual Report on Form 10-K for the year ended December 31, 2013. These factors should be considered carefully and readers are cautioned not to place undue reliance on such forward-looking statements. All information is current as of the date this press release is issued, and Great American Group undertakes no duty to update this information.

Note Regarding Use of Non-GAAP Financial Measures
Certain of the information set forth herein, including Adjusted EBITDA, may be considered non-GAAP financial measures. Great American Group believes this information is useful to investors because it provides a basis for measuring Great American Group's performance against the contingent share earnout provisions in the AAMAC transaction. In addition, Great American Group's management uses these non-GAAP financial measures along with the most directly comparable GAAP financial measures in evaluating Great American Group's operating performance, capital resources and cash flow. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-financial measures as reported by Great American Group may not be comparable to similarly titled amounts reported by other companies.

   
   
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES  
Condensed Consolidated Balance Sheets  
(Dollars in thousands, except par value)  
                 
    March 31,     December 31,  
    2014     2013  
    (Unaudited)        
Assets                
Current assets:                
  Cash and cash equivalents   $ 16,904     $ 18,867  
  Restricted cash     80       325  
  Accounts receivable, net     10,153       8,858  
  Lease finance receivable     7,992       8,099  
  Advances against customer contracts     195       1,058  
  Due from related party     132       -  
  Goods held for sale or auction     4,906       13,964  
  Note receivable related party - current portion     -       703  
  Deferred income taxes     3,870       3,870  
  Prepaid expenses and other current assets     1,516       948  
    Total current assets     45,748       56,692  
Note receivable related party - net of current portion     -       497  
Property and equipment, net     995       1,090  
Goodwill     5,688       5,688  
Other intangible assets, net     140       140  
Deferred income taxes     9,554       8,739  
Other assets     780       831  
    Total assets   $ 62,905     $ 73,677  
Liabilities and Equity (Deficit)                
Current liabilities:                
  Accounts payable and accrued liabilities   $ 9,118     $ 11,578  
  Due from related party     -       45  
  Mandatorily redeemable noncontrolling interests     2,613       2,823  
  Asset based credit facility     -       5,710  
  Revolving credit facility     4       333  
  Current portion of long-term debt     1,085       1,724  
  Notes payable     6,570       6,856  
  Current portion of capital lease obligation     -       -  
    Total current liabilities     19,390       29,069  
Long-term debt, net of current portion     48,759       48,759  
    Total liabilities     68,149       77,828  
Commitments and contingencies                
Great American Group, Inc. stockholders' equity (deficit):                
  Preferred stock, $0.0001 par value; 10,000,000 shares authorized; none issued     -       -  
  Common stock, $0.0001 par value; 135,000,000 shares authorized; 30,002,975 issued and outstanding as of March 31, 2014 and December 31, 2013, respectively     4       4  
  Additional paid-in capital     3,082       3,082  
  Retained earnings (deficit)     (7,945 )     (6,611 )
  Accumulated other comprehensive loss     (661 )     (638 )
    Total Great American Group, Inc. stockholders' equity (deficit)     (5,520 )     (4,163 )
Noncontrolling interests     276       12  
    Total equity (deficit)     (5,244 )     (4,151 )
    Total liabilities and equity (deficit)   $ 62,905     $ 73,677  
                     
                     
   
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Operations  
(Unaudited)  
(Dollars in thousands, except share data)  
                 
    Three Months Ended
March 31,
 
    2014     2013  
                 
Revenues:                
  Services and fees   $ 12,385     $ 18,637  
  Sale of goods     9,268       2,317  
    Total revenues     21,653       20,954  
Operating expenses:                
  Direct cost of services     5,863       6,152  
  Cost of goods sold     9,064       1,520  
  Selling, general and administrative expenses     7,984       10,937  
    Total operating expenses     22,911       18,609  
    Operating income (loss)     (1,258 )     2,345  
Other income (expense):                
  Interest income     2       2  
  Interest expense     (628 )     (634 )
    Income before income taxes     (1,884 )     1,713  
Benefit (provision) for income taxes     814       (778 )
    Net income (loss)     (1,070 )     935  
Net income (loss) attributable to noncontrolling interests     264       (354 )
    Net income (loss) attributable to Great American Group, Inc.   $ (1,334 )   $ 1,289  
                 
Basic income per share   $ (0.05 )   $ 0.04  
Diluted income per share   $ (0.05 )   $ 0.04  
                 
Weighted average basic shares outstanding     28,682,975       28,682,975  
Weighted average diluted shares outstanding     28,682,975       29,656,430  
                 
                 
   
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Cash Flows  
(Unaudited)  
(Dollars in thousands)  
                 
    Three Months Ended
March 31,
 
    2014     2013  
Cash flows from operating activities:                
  Net income (loss)   $ (1,070 )   $ 935  
  Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
    Depreciation and amortization     131       707  
    Impairment of goods held for sale or auction     -       22  
    Effect of foreign currency on operations     (212 )     (64 )
    Deferred income taxes     (815 )     1,007  
    Income allocated to mandatorily redeemable noncontrolling interests     333       291  
    Change in operating assets and liabilities:                
      Accounts receivable and advances against customer contracts     (415 )     7,331  
      Lease finance receivable     107       -  
      Due from related party     (177 )     (373 )
      Inventory     -       (588 )
      Goods held for sale or auction     9,058       (589 )
      Loan receivable     1,206       -  
      Prepaid expenses and other assets     (384 )     (55 )
      Accounts payable and accrued expenses     (2,470 )     (356 )
      Auction and liquidation proceeds payable     -       (618 )
        Net cash provided by operating activities     5,292       7,650  
Cash flows from investing activities:                
  Purchases of property and equipment     (36 )     (247 )
  Decrease in note receivable - related party     -       196  
  Decrease in restricted cash     245       7,693  
        Net cash provided by investing activities     209       7,642  
Cash flows from financing activities:                
  Repayments of capital lease obligations     -       (8 )
  Repayment of revolving line of credit     (329 )     (576 )
  Repayment of asset based credit facility     (5,710 )     -  
  Repayments of notes payable     (925 )     (1,170 )
  Distribution to noncontrolling interests     (543 )     (612 )
        Net cash used in financing activities     (7,507 )     (2,366 )
        (Decrease) increase in cash and cash equivalents     (2,006 )     12,926  
        Effect of foreign currency on cash     43       (554 )
        Net increase (decrease) in cash and cash equivalents     (1,963 )     12,372  
Cash and cash equivalents, beginning of period     18,867       18,721  
Cash and cash equivalents, end of period   $ 16,904     $ 31,093  
Supplemental disclosures:                
  Interest paid   $ 658     $ 57  
  Taxes paid   $ 2     $ 163  
                 
                 
   
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES  
Adjusted EBITDA Reconciliation  
(Dollars in thousands)  
                 
    Three Months Ended  
    March 31,  
    2014     2013  
Adjusted EBITDA Reconciliation:                
                 
Net income (loss) as reported   $ (1,070 )   $ 1,289  
                 
Adjustments:                
  Provision (benefit) for income taxes     (814 )     778  
  Interest expense     628       634  
  Interest income     (2 )     (2 )
  Depreciation and amortization     131       707  
                   
  Total EBITDA adjustments     (57 )     2,117  
                 
Adjusted EBITDA   $ (1,127 )   $ 3,406  
                 
                 

Contact Information

  • Investor Contacts:
    Great American Group
    Phillip Ahn
    Chief Financial Officer & Chief Operating Officer
    818-884-3737

    Addo Communications
    Patricia Nir
    310-829-5400