SOURCE: Great American Group, Inc.

Great American Group, Inc.

August 14, 2013 16:00 ET

Great American Group Announces Second Quarter 2013 Financial Results

WOODLAND HILLS, CA--(Marketwired - Aug 14, 2013) -  Great American Group, Inc. (OTCBB: GAMR) ("Great American Group" or the "Company"), a leading provider of asset disposition, valuations, appraisals, real estate consulting and capital investment services, today announced financial results for its second quarter ended June 30, 2013.

For the second quarter ended June 30, 2013, the Company reported total revenues of $15.2 million, a decrease from $19.7 million in the second quarter of 2012. Revenues from services and fees decreased to $12.2 million, compared to $13.3 million in the same period the prior year. Revenues from sale of goods were $3.0 million, compared to $6.4 million in the second quarter of 2012. The decrease in revenues during the quarter was primarily due to a decrease in revenues of $5.9 million in the auction and liquidation segment, offset by an increase in revenues of $1.4 million in the valuation and appraisal services segment and an increase in revenues of $0.1 million in the UK retail store segment. 

"During the quarter we experienced a slowdown in activity as opportunities in both the United States and overseas remained subdued," said Andrew Gumaer, Chief Executive Officer of Great American Group. "As we've said before, the liquidation business is inherently lumpy and activities tend to fluctuate on a quarterly basis throughout the year. Nonetheless, we are seeing a modest pick-up in the third quarter, including our liquidation of 18 Orchard Supply Hardware stores. We will continue to monitor our investments in our newer business initiatives to help us improve returns for our shareholders."

Direct cost of services were $5.6 million, compared to $5.0 million a year ago. Selling, general and administrative expenses were $10.0 million, compared to $9.8 million in the second quarter of 2012. The increase was primarily due to (a) an increase in selling, general and administrative expenses of $0.5 million in the valuation and appraisal segment; (b) an increase in selling, general and administrative expenses of $0.5 million in the UK retail store segment; and (c) an increase in selling, general and administrative expenses of $0.6 million in corporate and other; offset by a decrease in selling and administrative expenses of $1.3 million in the auction and liquidation segment.

Interest expense during each of the second quarters in 2013 and 2012 was $0.6 million. Interest expense 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 the Company's borrowings under its revolving credit facility and letter of credit fees and amortization of deferred loan fees on our asset based credit facility.

Operating loss for the second quarter of 2013 was $1.9 million, compared to operating income of $0.8 million during the second quarter of 2012.

Pretax loss was $2.6 million compared to pretax income of $1.5 million in the second quarter of 2012. Net loss in the second quarter of 2013 was $1.5 million compared to net income of $0.6 million for the second quarter of 2012. Diluted net loss per share was $(0.05) in the second quarter of 2013 compared to diluted net income per share of $0.02 in the second quarter of 2012. 

Six Month Results
For the six months ended June 30, 2013, the Company reported total revenues of $36.2 million, compared to $39.0 million in the first six months of 2012. Revenues from services and fees were $30.9 million, compared to $30.2 million a year ago. Sales of goods were $5.3 million compared to $8.8 million in the same period of 2012.

Total operating expenses for the first six months of 2013 and 2012 were flat at $35.8 million. Operating income was $0.4 million, compared to $3.2 million in the prior year. Pretax loss was $0.9 million for the first six months of 2013, compared to pretax income of $3.3 million during the same period in 2012. The Company recorded a benefit for income taxes of $0.2 million during the first six months of 2013, compared to a provision for income taxes of $0.8 million in the same period of 2012. Net loss during the first six months of 2013 was $0.2 million, or $0.01 per diluted share, compared with net income of $1.7 million, or $0.06 per diluted share in 2012.

Financial Position
At June 30, 2013, the Company had $20.6 million in cash and cash equivalents and $1.2 million of restricted cash. 

Conference Call
The Company will host a conference call today at 4:30 p.m. ET, to discuss results for the second quarter ended June 30, 2013. To participate in the event by telephone, please dial 877-407-0789, 10 minutes prior to the start time (to allow time for registration) and use conference ID: 418852. International callers should dial + 1 201-689-8562. A replay will be available beginning August 14, 2013, at 7:30 p.m. ET, through August 21, 2013, at 11:59 p.m. ET. To access the replay, please dial 877-870-5176 (U.S.), and use passcode 418852. International callers should dial +1 858-384-5517 and enter the same passcode.

The call will also be broadcast over the Internet and can be accessed on the Investor Relations section of the Company's website at www.greatamerican.com. A replay of the call will also be available for 90 days on the website.

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, Melville, N.Y., 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  
Condensed Consolidated Balance Sheets  
(Dollars in thousands, except par value)  
             
    June 30,     December 31,  
    2013     2012  
    (Unaudited)        
Assets                
Current assets:                
  Cash and cash equivalents   $ 20,597     $ 18,721  
  Restricted cash     1,225       7,923  
  Accounts receivable, net     9,015       16,591  
  Advances against customer contracts     283       2,441  
  Inventory     1,968       2,216  
  Goods held for sale or auction     11,553       10,196  
  Note receivable - related party     377       611  
  Deferred income taxes     4,095       4,114  
  Prepaid expenses and other current assets     1,572       1,145  
    Total current assets     50,685       63,958  
Property and equipment, net     1,335       970  
Goodwill     5,688       5,688  
Other intangible assets, net     140       140  
Deferred income taxes     9,484       9,484  
Other assets     406       343  
    Total assets   $ 67,738     $ 80,583  
Liabilities and Equity (Deficit)                
Current liabilities:                
  Accounts payable and accrued liabilities   $ 8,715     $ 16,886  
  Auction and liquidation proceeds payable     15       864  
  Due to related party     46       -  
  Mandatorily redeemable noncontrolling interests     2,650       2,856  
  Revolving credit facility     1,516       2,304  
  Current portion of long-term debt     1,724       1,724  
  Notes payable     7,697       9,628  
  Current portion of capital lease obligation     -       13  
    Total current liabilities     22,363       34,275  
Long-term debt, net of current portion     50,483       50,483  
    Total liabilities     72,846       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 June 30, 2013 and December 31, 2012, respectively     4       4  
  Additional paid-in capital     3,082       3,082  
  Retained earnings (deficit)     (7,911 )     (7,669 )
  Accumulated other comprehensive loss     (746 )     (520 )
    Total Great American Group, Inc. stockholders' equity (deficit)     (5,571 )     (5,103 )
Noncontrolling interests     463       928  
    Total equity (deficit)     (5,108 )     (4,175 )
    Total liabilities and equity (deficit)   $ 67,738     $ 80,583  
                     
                     
                     
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Operations  
(Unaudited)  
(Dollars in thousands, except share data)  
                         
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2013     2012     2013     2012  
                                 
Revenues:                                
  Services and fees   $ 12,223     $ 13,298     $ 30,860     $ 30,198  
  Sale of goods     3,016       6,353       5,333       8,773  
    Total revenues     15,239       19,651       36,193       38,971  
Operating expenses:                                
  Direct cost of services     5,635       5,001       11,787       11,253  
  Cost of goods sold     1,513       4,128       3,033       6,277  
  Selling, general and administrative expenses     10,026       9,758       20,963       18,277  
    Total operating expenses     17,174       18,887       35,783       35,807  
    Operating income (loss)     (1,935 )     764       410       3,164  
Other income (expense):                                
  Interest income     5       77       7       156  
  Loss from equity investment in Great American Real Estate, LLC     (15 )     (40 )     (15 )     (120 )
  Gain from bargain purchase     -       1,366       -       1,366  
  Interest expense     (637 )     (646 )     (1,271 )     (1,273 )
    Income (loss) before income taxes     (2,582 )     1,521       (869 )     3,293  
Benefit (provision) for income taxes     987       (57 )     209       (762 )
    Net income (loss)     (1,595 )     1,464       (660 )     2,531  
Net income (loss) attributable to noncontrolling interests     (64 )     845       (418 )     845  
                                 
    Net income (loss) attributable to Great American Group, Inc.   $ (1,531 )   $ 619     $ (242 )   $ 1,686  
                                 
Basic income per share   $ (0.05 )   $ 0.02     $ (0.01 )   $ 0.06  
Diluted income per share   $ (0.05 )   $ 0.02     $ (0.01 )   $ 0.06  
                                 
Weighted average basic shares outstanding     28,682,975       28,682,975       28,682,975       28,682,292  
Weighted average diluted shares outstanding     28,682,975       29,599,424       28,682,975       29,598,741  
                                 
                                 
                                 
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Cash Flows  
(Unaudited)  
(Dollars in thousands)  
             
    Six Months Ended
June 30,
 
    2013     2012  
Cash flows from operating activities:                
  Net income (loss)   $ (660 )   $ 2,531  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation and amortization     1,397       410  
    Provision for credit losses     13       -  
    Impairment of goods held for sale or auction     28       122  
    Effect of foreign currency on operations     (172 )     405  
    Non-cash interest     -       (3 )
    Loss from equity investment in Great American Real Estate, LLC     15       120  
    Gain from bargain purchase     -       (1,366 )
    Loss on disposal of fixed assets     -       2  
    Deferred income taxes     39       154  
    Income allocated to mandatorily redeemable noncontrolling interests     1,036       993  
    Change in operating assets and liabilities:                
      Accounts receivable and advances against customer contracts     7,396       2,025  
      Due from related party     46       -  
      Inventory     99       1,421  
      Goods held for sale or auction     (537 )     2,431  
      Loan receivable     -       7,527  
      Prepaid expenses and other assets     16       (207 )
      Accounts payable and accrued expenses     (7,801 )     (3,233 )
      Auction and liquidation proceeds payable     (849 )     607  
        Net cash provided by operating activities     66       13,939  
Cash flows from investing activities:                
  Acquisition of business     -       (1,246 )
  Purchase of noncontrolling interest in subsidiary     -       (95 )
  Purchases of property and equipment     (706 )     (297 )
  Decrease in note receivable - related party     234       94  
  Equity investment in Great American Real Estate, LLC     (15 )     (120 )
  Decrease (increase) in restricted cash     6,698       (100 )
        Net cash provided by (used in) investing activities     6,211       (1,764 )
Cash flows from financing activities:                
  Repayments of capital lease obligations     (13 )     (14 )
  (Repayment) proceeds from revolving line of credit     (788 )     102  
  Repayments of notes payable     (1,931 )     (1,978 )
  Proceeds from formation of noncontrolling interest     -       78  
  Distribution to noncontrolling interests     (1,242 )     (1,824 )
        Net cash used in financing activities     (3,974 )     (3,636 )
        Increase in cash and cash equivalents     2,303       8,539  
        Effect of foreign currency on cash     (427 )     (138 )
        Net increase in cash and cash equivalents     1,876       8,401  
Cash and cash equivalents, beginning of period     18,721       15,034  
Cash and cash equivalents, end of period   $ 20,597     $ 23,435  
                 
                 
                 
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES  
Adjusted EBITDA Reconciliation  
(Dollars in thousands)  
                         
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2013     2012     2013     2012  
Adjusted EBITDA Reconciliation:                                
                                 
Net income (loss) as reported   $ (1,531 )   $ 619     $ (242 )   $ 1,686  
                                 
Adjustments:                                
  Provision (benefit) for income taxes     (987 )     57       (209 )     762  
  Interest expense     637       646       1,271       1,273  
  Interest income     (5 )     (77 )     (7 )     (156 )
  Depreciation and amortization     690       209       1,397       410  
                                   
  Total EBITDA adjustments     335       835       2,452       2,289  
                                 
Adjusted EBITDA   $ (1,196 )   $ 1,454     $ 2,210     $ 3,975  

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