SOURCE: Great American Group, Inc.

Great American Group, Inc.

November 14, 2013 16:00 ET

Great American Group Announces Third Quarter 2013 Financial Results

WOODLAND HILLS, CA--(Marketwired - Nov 14, 2013) -  Great American Group, Inc. (OTCBB: GAMR) ("Great American Group" or the "Company"), 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 third quarter ended September 30, 2013.

For the third quarter ended September 30, 2013, the Company reported total revenues of $21.8 million, an increase from $14.2 million in the third quarter of 2012. Revenues from services and fees increased to $11.4 million, compared to $11.0 million in the same period the prior year. Revenues from sale of goods were $10.4 million, compared to $3.3 million in the third quarter of 2012. The increase in revenues during the quarter was primarily due to an increase in revenues from the sale of goods in the auction and liquidation segment which increased by $7.1 million, to $10.4 million, from $3.3 million in the prior year quarter. The increase in revenues from the sales of goods primarily related to the sale of four oil rigs under a sales type lease in the amount of $9.3 million during the third quarter of 2013.

 "Our third quarter 2013 revenues increased to $21.8 million and we had net income of $0.4 million or $0.01 per diluted share. This was a decrease from the net loss we reported of $0.6 million or $(0.02) per diluted share in the prior year's quarter," said Andrew Gumaer, Chief Executive Officer of Great American Group. "During the third quarter, we experienced a slight increase in business activity in our auction and liquidation segment as we were engaged on a number of retail liquidation engagements including the liquidation of 17 Orchard Supply Hardware stores as part of the bankruptcy sale to Lowe's. We are still working on these engagements at the end of the quarter and they should contribute favorably to our operating results in the fourth quarter."

Direct cost of services in the third quarter was $5.6 million, compared to $4.8 million a year ago. Cost of goods sold was $8.2 million, compared to $2.2 million in the third quarter of 2013. Selling, general and administrative expenses were $7.1 million, compared to $7.9 million in the third quarter of 2012. The decrease in selling, general and administrative expenses was primarily due to a decrease in selling, general and administrative expenses of $0.3 million in the auction and liquidation segment and a decrease in selling, general and administrative expenses of $1.0 million in the UK retail store segment; offset by a increase in selling and administrative expenses of $0.5 million in the valuation and appraisal segment. Corporate expenses remained flat at $2.4 million during each of the third quarter periods ended in 2013 and 2012.

Interest expense during the third quarter of 2013 was $0.6 million, a decrease from $0.7 million in the comparable prior year quarter. Interest expense in the third quarter of 2013 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 revolving credit facility and letter of credit fees and amortization of deferred loan fees on our asset based credit facility.

Operating income for the third quarter of 2013 was $0.8 million, compared to an operating loss of $0.7 million during the third quarter of 2012.

Income before income taxes was $0.1 million compared to a loss before income taxes of $1.1 million in the third quarter of 2013. Net income in the third quarter of 2013 was $0.4 million compared to a net loss of $0.5 million for the third quarter of 2012. Diluted net income per share was $0.01 in the third quarter of 2013 compared to diluted net loss per share of $(0.02) in the third quarter of 2012. 

Financial Position
At September 30, 2013, the Company had $14.0 million in cash and cash equivalents and $2.5 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 third quarter ended September 30, 2013. To participate in the live event by telephone, please dial 1-877-407-0789 ten minutes prior to the start time (to allow time for registration) and use conference ID #13572817. International callers should dial 1-201-689-8562.

The call will also be broadcast live over the Internet and may be accessed on the Investor Relations section of the Company's website at www.greatamerican.com.

For those unable to participate during the live broadcast, a replay will be available at 7:30pm ET on November 14, 2013 and will run through November 21, 2013, at 11:59pm ET. To access the replay, dial 1-877-870-5176 (U.S.), and use conference ID #13572817. International callers may dial 1-858-384-5517 and enter the same conference ID number. A replay of the call will also be available for 90 days on the Company's website at www.greatamerican.com.

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)  
             
    September 30,     December 31,  
    2013     2012  
    (Unaudited)        
Assets            
Current assets:                
  Cash and cash equivalents   $ 13,969     $ 18,721  
  Restricted cash     2,538       7,923  
  Accounts receivable, net     9,675       16,591  
  Lease finance receivable - current portion     3,829       -  
  Advances against customer contracts     1,548       2,441  
  Due from related party     18       -  
  Inventory     -       2,216  
  Goods held for sale or auction     5,430       10,196  
  Note receivable related party - current portion     686       611  
  Deferred income taxes     4,192       4,114  
  Prepaid expenses and other current assets     1,237       1,145  
    Total current assets     43,122       63,958  
Note receivable related party, net of current portion     645       -  
Lease finance receivable, net of current portion     4,506       -  
Property and equipment, net     1,066       970  
Goodwill     5,688       5,688  
Other intangible assets, net     140       140  
Deferred income taxes     9,484       9,484  
Other assets     886       343  
    Total assets   $ 65,537     $ 80,583  
                 
Liabilities and Equity (Deficit)                
Current liabilities:                
  Accounts payable and accrued liabilities   $ 9,120     $ 16,886  
  Auction and liquidation proceeds payable     34       864  
  Mandatorily redeemable noncontrolling interests     2,832       2,856  
  Revolving credit facility     1,256       2,304  
  Current portion of long-term debt     1,724       1,724  
  Notes payable     7,132       9,628  
  Current portion of capital lease obligation     -       13  
    Total current liabilities     22,098       34,275  
Long-term debt, net of current portion     48,759       50,483  
    Total liabilities     70,857       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 September 30, 2013 and December 31, 2012, respectively     4       4  
  Additional paid-in capital     3,082       3,082  
  Retained earnings (deficit)     (7,545 )     (7,669 )
  Accumulated other comprehensive loss     (809 )     (520 )
    Total Great American Group, Inc. stockholders' equity (deficit)     (5,268 )     (5,103 )
Noncontrolling interests     (52 )     928  
    Total equity (deficit)     (5,320 )     (4,175 )
    Total liabilities and equity (deficit)   $ 65,537     $ 80,583  
                     
                     
                     
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Operations  
(Unaudited)  
(Dollars in thousands, except share data)  
                         
    Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
    2013     2012     2013     2012  
                         
Revenues:                                
  Services and fees   $ 11,361     $ 10,956     $ 42,221     $ 41,154  
  Sale of goods     10,390       3,279       15,723       12,052  
    Total revenues     21,751       14,235       57,944       53,206  
Operating expenses:                                
  Direct cost of services     5,644       4,844       17,431       16,097  
  Cost of goods sold     8,240       2,172       11,273       8,449  
  Selling, general and administrative expenses     7,085       7,878       28,048       26,155  
    Total operating expenses     20,969       14,894       56,752       50,701  
    Operating income (loss)     782       (659 )     1,192       2,505  
Other income (expense):                                
  Interest income     31       30       38       186  
  Income (loss) from equity investment in                                
    Great American Real Estate, LLC     -       165       (15 )     45  
  Loss from equity investment in                                
    Shoon Trading Limited     (143 )     -       (143 )     -  
  Gain from bargain purchase     -       -       -       1,366  
  Interest expense     (567 )     (678 )     (1,838 )     (1,951 )
    Income (loss) before income taxes     103       (1,142 )     (766 )     2,151  
Benefit (provision) for income taxes     133       375       342       (387 )
    Net income (loss)     236       (767 )     (424 )     1,764  
Net income (loss) attributable to noncontrolling interests     (130 )     (220 )     (548 )     625  
    Net income (loss) attributable to Great American Group, Inc.   $ 366     $ (547 )   $ 124     $ 1,139  
                                 
Basic income per share   $ 0.01     $ (0.02 )   $ 0.00     $ 0.04  
Diluted income per share   $ 0.01     $ (0.02 )   $ 0.00     $ 0.04  
                                 
Weighted average basic shares outstanding     28,682,975       28,682,975       28,682,975       28,682,521  
Weighted average diluted shares outstanding     29,891,401       28,682,975       29,891,401       29,599,012  
                                 
                                 
                                 
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES  
Condensed Consolidated Statements of Cash Flows  
(Unaudited)  
(Dollars in thousands)  
             
    Nine Months Ended
September 30,
 
    2013     2012  
Cash flows from operating activities:            
  Net income (loss)   $ (424 )   $ 1,764  
  Adjustments to reconcile net income to net cash provided by operating activities:                
    Depreciation and amortization     1,717       611  
    Provision for (recoveries of) bad debts     8       (116 )
    Impairment of goods held for sale or auction     28       127  
    Effect of foreign currency on operations     (289 )     (48 )
    Non-cash interest     -       (10 )
    Loss from equity investments     158       (45 )
    Gain from bargain purchase     -       (1,366 )
    Loss on disposal of fixed assets     -       3  
    Deferred income taxes     (78 )     (112 )
    Income allocated to mandatorily redeemable noncontrolling interests     1,564       1,497  
    Change in operating assets and liabilities:                
      Accounts receivable and advances against customer contracts     3,698       3,588  
      Due from related party     (18 )     -  
      Inventory     450       1,050  
      Goods held for sale or auction     7,309       2,054  
      Loan and lease finance receivables     (8,644 )     7,769  
      Prepaid expenses and other assets     (380 )     314  
      Accounts payable and accrued expenses     (6,307 )     (2,097 )
      Auction and liquidation proceeds payable     (830 )     594  
        Net cash provided by (used in) operating activities     (2,038 )     15,577  
Cash flows from investing activities:                
  Acquisition of business     -       (1,246 )
  Deconsolidation of Shoon     (771 )     -  
  Purchase of noncontrolling interest in subsidiary     -       (95 )
  Purchases of property and equipment     (972 )     (403 )
  Proceeds from sale of property and equipment     -       21  
  Decrease in note receivable - related party     611       3,164  
  Equity investment in Great American Real Estate, LLC     (15 )     (120 )
  Decrease (increase) in restricted cash     5,385       (6,767 )
  Net cash provided by (used in) investing activities     4,238       (5,446 )
Cash flows from financing activities:                
  Repayments of capital lease obligations     (13 )     (22 )
  Repayment of revolving line of credit     (1,048 )     (676 )
  Repayments of notes payable     (2,496 )     (2,042 )
  Repayments of long term debt     (1,724 )     (1,724 )
  Proceeds from formation of noncontrolling interest     -       78  
  Distribution to noncontrolling interests     (1,588 )     (2,074 )
        Net cash used in financing activities     (6,869 )     (6,460 )
        Increase (decrease) in cash and cash equivalents     (4,669 )     3,671  
        Effect of foreign currency on cash     (83 )     282  
        Net increase (decrease) in cash and cash equivalents     (4,752 )     3,953  
Cash and cash equivalents, beginning of period     18,721       15,034  
Cash and cash equivalents, end of period   $ 13,969     $ 18,987  
Supplemental disclosures:                
  Interest paid   $ 1,874     $ 1,961  
  Taxes paid   $ 175     $ 278  
                   
                   
                   
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES  
Adjusted EBITDA Reconciliation  
(Dollars in thousands)  
                         
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2013     2012     2013     2012  
Adjusted EBITDA Reconciliation:                                
                                 
Net income (loss) as reported   $ (547 )   $ 366     $ (242 )   $ 124  
                                 
Adjustments:                                
  Provision (benefit) for income taxes     (375 )     (133 )     (209 )     (342 )
  Interest expense     678       567       1,271       1,838  
  Interest income     (30 )     (31 )     (7 )     (38 )
  Depreciation and amortization     192       320       1,397       1,717  
                                   
  Total EBITDA adjustments     465       723       2,452       3,175  
                                 
Adjusted EBITDA   $ (82 )   $ 1,089     $ 2,210     $ 3,299  

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