SOURCE: Great American Group, Inc.

Great American Group, Inc.

March 31, 2014 16:00 ET

Great American Group Announces Fourth Quarter and Full Year 2013 Financial Results

WOODLAND HILLS, CA--(Marketwired - Mar 31, 2014) - Great American Group, Inc. (OTCBB: GAMR), a leading provider of asset disposition and auction solutions, advisory and valuation services, capital investment, and real estate advisory services, today announced financial results for its fourth quarter and full year ended December 31, 2013.

  • Fiscal 2013 total revenues of $76.1 million, a 9.3% decrease from $83.9 million a year ago
  • Fiscal 2013 net income of $1.1 million, versus net income of $3.5 million from a year ago
  • Fiscal 2013 diluted earnings per share of $0.04, versus diluted earnings per share of $0.12 from a year ago

"During 2013, we saw lower revenues and operating income due in part to a slowdown in retail liquidation activity in the United States and United Kingdom relative to the stronger activity levels that we experienced in 2012. Additionally, our pre-tax income was negatively impacted by a $1.0 million pre-tax loss from the operations of Shoon Trading Limited, our UK Retail Store investment which was subsequently sold in early 2014," said Andrew Gumaer, Chief Executive Officer of Great American Group, Inc. Mr. Gumaer added, "Nonetheless, we completed a number of engagements in the fourth quarter including the liquidation of 17 Orchard Supply Hardware stores as part of the bankruptcy sale to Lowe's." 

Fourth Quarter Results

For the fourth quarter, the Company reported total revenues of $18.2 million, a decrease from revenues of $30.7 million in the fourth quarter of 2012. Revenues from services and fees were $17.7 million, compared to $24.5 million in the same period the prior year. Revenues from sale of goods were $0.4 million, compared to $6.3 million in the fourth quarter of 2012. The decrease in total revenues during the quarter was primarily due to a decrease in revenues from the UK Retail Stores segment and a decrease in revenues in the Auction and Liquidation segment from our operations in Europe. In August 2013, the Shoon Trading Limited ("Shoon") shareholder agreement was amended and restated to eliminate the Company's [super] majority voting rights which enabled the Company to control the Board of Directors of Shoon. As a result of the amendment, the Company no longer controls Shoon and the operations of Shoon are not consolidated for any quarterly periods after July 31, 2013. As such, the Company did not have any operations in the UK Retail Stores segment in the fourth quarter of 2013. Additionally, the Company participated in the liquidation of Comet, a 236 store electronics chain in the United Kingdom in the fourth quarter of 2012, and there were no similar large retail liquidation engagements in the fourth quarter of 2013. 

Direct cost of services were $6.7 million, a decrease from $7.8 million a year ago. The decrease in direct cost of services was primarily the result of a decrease in costs incurred in the Auction and Liquidation segment in the fourth quarter of 2013 as compared to the same period in the prior year. Cost of goods sold was $0.2 million in the fourth quarter of 2013, compared to $4.3 million in the fourth quarter of the prior year. The decrease in costs of goods sold was primarily due to the operations of Shoon no longer consolidated in the Company's financial statements for periods after July 31, 2013, as previously discussed.

Selling, general and administrative expenses decreased to $8.3 million, compared to $13.7 million in the fourth quarter of 2012. The decrease in selling, general and administrative expenses was primarily attributed to a decrease in payroll related expenses from the Company's UK retail liquidation operations and Shoon's operating expenses no longer included in the Company's financial statements for periods after July 31, 2013.

Operating income for the fourth quarter of 2013 was $2.9 million, compared to $4.9 million during the fourth quarter of 2012.

Interest expense during the fourth quarter of 2013 declined to $0.8 million, a slight increase from $0.7 million in the same period a year ago. The increase in interest expense was primarily the result of an increase in borrowings under the Company's asset based credit facility in the fourth quarter of 2013 as compared to the same period in the prior year.

Pretax income was $2.0 million compared to pretax income of $4.1 million in the fourth quarter of 2012. Net income was $0.9 million, or $0.03 per diluted share, compared to net income of $2.4 million, or $0.08 per diluted share in the fourth quarter of 2012.

Twelve Months Ended December 31, 2013

For the twelve months of 2013, the Company reported total revenues of $76.1 million, compared to $83.9 million in the twelve months of 2012. Revenues from services and fees were $60.0 million, compared to $65.6 million a year ago. Sales of goods were $16.2 million compared to $18.3 million in the same period of 2012.

Total operating expenses were $72.0 million, compared to $76.5 million in 2012. Operating income was $4.1 million, a decrease from $7.4 million in the prior year. Pretax income was $1.3 million, compared to $6.3 million during the twelve months of 2012. The Company recorded a provision for income taxes of $0.7 million compared to $1.9 million in the same period of 2012. Net income during the twelve months of 2013 was $1.1 million, or $0.04 per diluted share, compared with $3.5 million, or $0.12 in the same period of 2012.

Adjusted EBITDA for the twelve months of 2013 was $6.3 million compared to $8.7 million in 2012.

Financial Position
At December 31, 2013, the Company had $18.9 million in cash and cash equivalents and $0.3 million of restricted cash, an increase compared to $18.7 million of cash and cash equivalents at December 31, 2012.

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, 2012. 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  
CONSOLIDATED BALANCE SHEETS  
(Dollars in thousands, except par value)  
   
    December 31,     December 31,  
    2013     2012  
             
Assets            
Current assets:            
  Cash and cash equivalents   $ 18,867     $ 18,721  
  Restricted cash     325       7,923  
  Accounts receivable, net     8,858       16,591  
  Lease finance receivable     8,099       -  
  Advances against customer contracts     1,058       2,441  
  Inventory     -       2,216  
  Goods held for sale or auction     13,964       10,196  
  Note receivable related party - current portion     703       611  
  Deferred income taxes     3,870       4,114  
  Prepaid expenses and other current assets     948       1,145  
    Total current assets     56,692       63,958  
Note receivable related party - net of current portion     497       -  
Property and equipment, net     1,090       970  
Goodwill     5,688       5,688  
Other intangible assets, net     140       140  
Deferred income taxes     8,739       9,484  
Other assets     831       343  
    Total assets   $ 73,677     $ 80,583  
Liabilities and Equity (Deficit)                
Current liabilities:                
  Accounts payable and accrued liabilities   $ 11,578     $ 16,886  
  Due to related parties     45       -  
  Auction and liquidation proceeds payable     -       864  
  Mandatorily redeemable noncontrolling interests     2,823       2,856  
  Asset based credit facility     5,710       -  
  Revolving credit facility     333       2,304  
  Current portion of long-term debt     1,724       1,724  
  Notes payable     6,856       9,628  
  Current portion of capital lease obligation     -       13  
    Total current liabilities     29,069       34,275  
Long-term debt, net of current portion     48,759       50,483  
    Total liabilities     77,828       84,758  
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 December 31, 2013 and 2012, respectively     4       4  
  Additional paid-in capital     3,082       3,082  
  Retained earnings (deficit)     (6,611 )     (7,669 )
  Accumulated other comprehensive income (loss)     (638 )     (520 )
    Total Great American Group, Inc. stockholders' equity (deficit)     (4,163 )     (5,103 )
Noncontrolling interests     12       928  
    Total equity (deficit)     (4,151 )     (4,175 )
    Total liabilities and equity (deficit)   $ 73,677     $ 80,583  
                     
                     
   
   
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(Dollars in thousands, except share data)  
                         
    Three Months Ended        
    December 31,     Year Ended December 31,  
    2013     2012     2013     2012  
Revenues:                        
  Services and fees   $ 17,746     $ 24,470     $ 59,967     $ 65,624  
  Sale of goods     442       6,260       16,165       18,312  
    Total revenues     18,188       30,730       76,132       83,936  
Operating expenses:                                
  Direct cost of services     6,715       7,814       24,146       23,911  
  Cost of goods sold     233       4,301       11,506       12,750  
  Selling, general and administrative     8,334       13,679       36,382       39,834  
    Total operating expenses     15,282       25,794       72,034       76,495  
    Operating income     2,906       4,936       4,098       7,441  
Other income (expense):                                
  Interest income     (12 )     15       26       201  
  Loss from equity investment in Great American Real Estate, LLC     (6 )     (165 )     (21 )     (120 )
  Loss from equity investment in Shoon Trading Limited     (13 )     -       (156 )     -  
  Gain from bargain purchase     -       -       -       1,366  
  Interest expense     (829 )     (661 )     (2,667 )     (2,612 )
    Income before provision for income taxes     2,046       4,125       1,280       6,276  
Provision for income taxes     (1,046 )     (1,549 )     (704 )     (1,936 )
    Net income     1,000       2,576       576       4,340  
Net income (loss) attributable to noncontrolling interests     66       194       (482 )     819  
    Net income attributable to Great American Group, Inc.   $ 934     $ 2,382     $ 1,058     $ 3,521  
                                 
Basic earnings per share   $ 0.03     $ 0.08     $ 0.04     $ 0.12  
Diluted earnings per share   $ 0.03     $ 0.08     $ 0.04     $ 0.12  
                                 
Weighted average basic shares outstanding     28,682,975       28,682,975       28,682,975       28,682,975  
Weighted average diluted shares outstanding     29,907,402       29,614,252       29,907,402       29,614,252  
                                 
                                 
   
   
GREAT AMERICAN GROUP, LLC AND SUBSIDIARIES  
CONSOLIDATED STATEMENT OF CASH FLOWS  
(Dollars in thousands)  
    Year ended December 31,  
    2013     2012  
Cash flows from operating activities:            
  Net income   $ 576     $ 4,340  
  Adjustments to reconcile net income to net cash provided by (used in) operating activities:                
               
    Depreciation and amortization     1,863       835  
    Provision for doubtful accounts     (12 )     108  
    Impairment of goods held for sale or auction     428       194  
    Effect of foreign currency on operations     226       (98 )
    Loss from equity investment in Great American Real Estate, LLC and Shoon Trading Limited                
      177       120  
    Gain from bargain purchase     -       (1,366 )
    Loss on disposal of assets     -       3  
    Deferred income taxes     989       1,366  
    Income allocated to mandatorily redeemable noncontrolling interests                
      1,897       1,928  
    Change in operating assets and liabilities:                
      Accounts receivable and advances against customer contracts     5,145       (6,172 )
      Lease finance receivable     (8,099 )     -  
      Inventory     455       1,618  
      Goods held for sale or auction     (1,625 )     2,361  
      Loan receivable     156       8,519  
      Prepaid expenses and other assets     167       (33 )
      Accounts payable and accrued expenses     (3,971 )     1,641  
      Auction and liquidation proceeds payable     (864 )     846  
        Net cash (used in) provided by operating activities     (2,492 )     16,210  
Cash flows from investing activities:                
  Acquisition of business     -       (1,246 )
  Deconsolidation of Shoon Trading Limited     (1,564 )     -  
  Purchase of noncontrolling interest in subsidiary     -       (95 )
  Purchases of property and equipment     (1,142 )     (634 )
  Proceeds from sale of property and equipment     -       21  
  Decrease in notes receivable - related party     611       3,233  
  Equity investment in Great American Real Estate, LLC     (21 )     (120 )
  Decrease (increase) in restricted cash     7,598       (7,923 )
        Net cash provided by (used in) investing activities     5,482       (6,764 )
Cash flows from financing activities:                
  Proceeds from (repayments of) revolving line of credit     (1,971 )     362  
  Proceeds from asset based credit facility     5,710       -  
  Payment of financing costs     (375 )     -  
  Repayment of notes payable and capital lease obligations     (2,785 )     (2,138 )
  Repayments of long-term debt     (1,724 )     (1,724 )
  Proceeds from formation of noncontrolling interests     -       78  
  Distributions to noncontrolling interests     (1,930 )     (2,466 )
        Net cash used in financing activities     (3,075 )     (5,888 )
        Effect of foreign currency on cash     231       129  
        Net increase in cash and cash equivalents     146       3,687  
Cash and cash equivalents, beginning of year     18,721       15,034  
Cash and cash equivalents, end of year   $ 18,867     $ 18,721  
                 
                 
   
   
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES  
ADJUSTED EBITDA RECONCILIATION  
(Dollars in thousands)  
         
  Three Months Ended  
  December 31,  
  2013   2012  
Adjusted EBITDA Reconciliation:        
         
Net income as reported $ 934   $ 2,382  
             
Adjustments:            
  Provision for income taxes   1,046     1,549  
  Interest expense   829     661  
  Interest income   12     (15 )
  Depreciation and amortization   146     224  
               
  Total EBITDA adjustments   2,033     2,419  
             
Adjusted EBITDA $ 2,967   $ 4,801  
             
             
           
  Year Ended December 31,  
  2013     2012  
Adjusted EBITDA Reconciliation:          
           
Net income (loss) as reported $ 1,058     $ 3,521  
               
Adjustments:              
  Provision (benefit) for income taxes   704       1,936  
  Interest expense   2,667       2,612  
  Interest income   (26 )     (201 )
  Depreciation and amortization   1,863       835  
                 
  Total EBITDA adjustments   5,208       5,182  
               
Adjusted EBITDA $ 6,266     $ 8,703  
               
               

Contact Information

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

    Addo Communications
    Patricia Nir
    310-829-5400