SOURCE: Great American Group, Inc.

Great American Group, Inc.

May 16, 2011 16:00 ET

Great American Group®* Announces First Quarter 2011 Financial Results

WOODLAND HILLS, CA--(Marketwire - May 16, 2011) - 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, 2011.

First Quarter Results

For the first quarter ended March 31, 2011, the Company reported total revenues of $13.8 million, an increase of 14.5% from revenues of $12.1 million in the first quarter of 2010. Revenues from services and fees were $13.0 million, compared to $10.6 million in the same period the prior year. Revenues from sales of goods were $0.8 million, compared to $1.4 million in the first quarter of 2010. The increase in total revenues during the quarter was primarily due to increases in revenues from capital advisory services, retail liquidation engagements and the auction of machinery and equipment in the auction and liquidation segment, which were partially offset by a decrease in revenues from gross sales of goods where the Company held title.

"We experienced further improvement in our business during the first quarter, particularly in our auction and liquidation segment," said Andrew Gumaer, Chief Executive Officer of Great American Group. "An increase in the revenue contribution from our newer business initiatives, GA Europe and GA Capital, helped to deliver overall increases in revenues and operating income during the current quarter. At the same time, the cost reduction initiatives we implemented in October 2010 helped reduce our overall operating expenses. This resulted in positive adjusted EBITDA of $0.9 million for the first quarter, compared to $(2.1) million a year ago."

Direct costs of services were $4.8 million, compared to $5.2 million a year ago. The decrease in direct costs of services was primarily the result of a decrease in the number of fee and commission engagements in the first quarter of 2011, where the Company contractually bills fees, commissions and reimbursable expenses in the auction and liquidation segment as compared to the same period in 2010. Cost of goods sold was $0.9 million in the first quarter of 2011, compared to $1.5 million in the first quarter of the prior year, primarily as a result of the sale of goods with lower asset values and gross margins in 2011 compared to the prior year.

Selling, general and administrative expenses were $7.8 million, or $0.7 million less than the $8.5 million in the first quarter of 2010. The reduction in SG&A expenses were primarily attributed to a reduction in corporate overhead expenses of $1.3 million and a reduction in expenses in our valuation and appraisal segment of $500 thousand, offset by an increase in expenses in our auction and liquidation segment of $1.1 million. The decrease in corporate overhead expenses was primarily due to a $900 thousand decrease in share based compensation related to consideration paid to the Phantom Equityholders in connection with the Acquisition on July 31, 2009 and $400 thousand of payroll and related expenses as a result of the cost reduction measures implemented in October 2010, which included a voluntary salary reduction to the base salaries of the executive officer's and members of senior management ranging from 10% to 40%. The decrease in selling, general and administrative expenses in the Valuation and Appraisal Segment was primarily due a decrease in payroll and related expenses from the headcount reduction and cost saving measures we implemented in October 2010. The increase in expenses in the Auction and Liquidation Segment is primarily the result of an increase in expenses from the expansion of our European operations and operating expenses from our newly formed division in January GA Keen Realty Advisors.

Operating income for the first quarter of 2011 was $0.3 million, compared to an operating loss of $3.2 million during the first quarter of 2010.

Interest expense during the first quarter of 2011 declined to $0.3 million from $1.0 million in the same period a year ago. The decline in interest expense was primarily the result of a decrease in interest expense due to the interest rate reduction from 12.0% to 3.75% on $52.4 million of the $55.6 million of notes payable to the former Great American Members and certain Phantom Equityholders that was effective February 1, 2010 and the reversal of interest expense as a result of the execution of an amendment to the Company's credit facility, which is collateralized by machinery and equipment.

Income from operations before a provision for income taxes was $0.2 million during the first quarter of 2011, compared to a loss from operations of $4.6 million in the first quarter of 2010.

During the first quarter of 2011, the Company recorded a provision for income taxes of $0.7 million, compared to a benefit for income taxes of $1.6 million in the first quarter of 2010. Overall, in the first quarter of 2011, the Company generated a net loss of $0.5 million, or $(0.02) per diluted share, compared with a net loss of $3.0 million, or $(0.11) per diluted share, in the first quarter of 2010.

Financial Position

At March 31, 2011, the Company had $21.9 million in cash and cash equivalents. Working capital was $23.7 million at March 31, 2011. During the first quarter of 2011, the Company used $0.2 million in cash from operations.

Conference Call

The Company will host a conference call at 4:30 p.m. EDT on Monday, May 16, 2011, to discuss results for the first quarter ended March 31, 2011. To listen to the event in listen-only mode by telephone, please dial (877) 941-8601 10 minutes prior to the start time (to allow time for registration) and use conference ID #4440699. International callers should dial (480) 629-9762. A digital replay will be available beginning May 16, 2011, at 7:30 p.m. EDT, through May 23, 2011, at 11:59 p.m. EDT. To access the replay, dial (877) 870-5176 (U.S.), and use passcode 4440699. International callers should dial (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 Web site at www.greatamerican.com. To listen to the webcast, please visit the site at least 15 minutes prior to the start of the call in order to register, download and install any necessary audio software. A replay of the call will also be available for 90 days on the Web site.

About Great American Group, Inc.

Great American Group, Inc. is a leading provider of asset disposition solutions and valuation and appraisal services to a wide range of retail, wholesale and industrial clients, as well as lenders, capital providers, private equity investors and professional service firms. Great American Group has offices in Atlanta, Boston, Chicago, Dallas, London, Los Angeles, New York and San Francisco. For more information, please visit www.greatamerican.com.

*Great American Group and the Eagle Design are trademarks registered in the US Patent and Trademark Office and are exclusive property of Great American Group, Inc.

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 dated July 17, 2010 and filed with the SEC on July 20, 2010, and its Annual Report on Form 10-K for the year ended December 31, 2010. 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.


(FINANCIAL TABLES FOLLOW)






                        GREAT AMERICAN GROUP, INC.
                  CONDENSED CONSOLIDATED BALANCE SHEETS
                 (Dollars in thousands, except par value)

                                                  March 31,   December 31,
                                                    2011          2010
                                                ------------  ------------
                                                 (Unaudited)
                      Assets
Current assets:
  Cash and cash equivalents                     $     21,902  $     20,080
  Restricted cash                                        113            --
  Accounts receivable, net                             2,012         3,087
  Advances against customer contracts                  5,164         3,063
  Goods held for sale or auction                      12,896        13,504
  Note receivable - related party                      3,224         5,930
  Deferred income taxes                                4,999         5,463
  Prepaid expenses and other current assets            1,718         1,353
                                                ------------  ------------
    Total current assets                              52,028        52,480
Property and equipment, net                            1,225         1,369
Goodwill                                               5,688         5,688
Other intangible assets, net                             180           221
Deferred income taxes                                 11,135        11,372
Other assets                                             826         1,144
                                                ------------  ------------
    Total assets                                $     71,082  $     72,274
                                                ============  ============
 Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
  Accounts payable and accrued liabilities      $      5,553  $     10,631
  Auction and liquidation proceeds payable             5,883         1,712
  Mandatorily redeemable noncontrolling
   interests                                           3,167         2,858
  Current portion of long-term debt                    1,724         1,724
  Note payable                                        11,705        12,014
  Current portion of capital lease obligation             27            27
                                                ------------  ------------
    Total current liabilities                         28,059        28,966
Capital lease obligation, net of current
 portion                                                  35            42
Long-term debt, net of current portion                52,169        52,169
                                                ------------  ------------
    Total liabilities                                 80,263        81,177
                                                ------------  ------------
Commitments and contingencies
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; 30,741,794 and 30,559,036
   issued and outstanding as of March 31, 2011
   and December 31, 2010, respectively                     4             4
  Additional paid-in capital                           3,146         2,878
  Retained earnings (deficit)                        (12,318)      (11,792)
  Accumulated other comprehensive income (loss)          (13)            7
                                                ------------  ------------
    Total stockholders' equity (deficit)              (9,181)       (8,903)
                                                ------------  ------------
    Total liabilities and stockholders'
     equity (deficit)                           $     71,082  $     72,274
                                                ============  ============










                GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                          (Dollars in thousands)

                                                    Three Months Ended
                                                         March 31,
                                                --------------------------
                                                    2011          2010
                                                ------------  ------------

Revenues:
  Services and fees                               $   13,003    $   10,630
  Sale of goods                                          813         1,437
                                                ------------  ------------
    Total revenues                                    13,816        12,067
                                                ------------  ------------
Operating expenses:
  Direct cost of services                              4,812         5,204
  Cost of goods sold                                     908         1,544
  Selling, general and administrative expenses         7,791         8,516
                                                ------------  ------------
    Total operating expenses                          13,511        15,264
                                                ------------  ------------
    Operating income (loss)                              305        (3,197)
Other income (expense):
  Other income (expense)                                  (4)           --
  Interest income                                        137            90
  Income (loss) from equity investment in Great
   American Real Estate, LLC                              68          (412)
  Interest expense                                      (328)       (1,033)
                                                ------------  ------------
    Income (loss) before income taxes                    178        (4,552)
(Provision) benefit for income taxes                    (704)        1,572
                                                ------------  ------------
    Net income (loss)                           $       (526) $     (2,980)
                                                ============  ============
Weighted average basic shares outstanding         28,360,875    27,899,963
Weighted average diluted shares outstanding       28,360,875    27,899,963
Basic and diluted earnings (loss) per share     $      (0.02) $      (0.11)
Diluted earnings (loss) per share               $      (0.02) $      (0.11)






                GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
              Condensed Consolidated Statement of Cash Flows
                               (Unaudited)
                         (Dollars in thousands)

                                                    Three Months Ended
                                                         March 31,
                                                --------------------------
                                                    2011          2010
                                                ------------  ------------
Cash flows from operating activities:
  Net loss                                      $       (526) $     (2,980)
  Adjustments to reconcile net loss to net
   cash used in operating activities:
    Depreciation and amortization                        221           180
    Provision for doubtful accounts                        -            19
    Share-based payments                                 358         1,358
    Effect of foreign currency on operations             (22)            -
    Non-cash interest                                   (428)            -
    Loss (income) from equity investment in
     Great American Real Estate, LLC                     (68)          412
    Loss on disposal of assets                             3             2
    Deferred income taxes                                701        (1,572)
    Income allocated to mandatorily
     redeemable noncontrolling interests                 738           295
    Change in operating assets and
     liabilities:
      Accounts receivable and advances
       against customer contracts                     (1,026)           79
      Goods held for sale or auction                     608            85
      Prepaid expenses and other assets                  186          (542)
      Accounts payable and accrued expenses           (5,078)       (3,963)
      Auction and liquidation proceeds
       payable                                         4,171           689
                                                ------------  ------------
        Net cash used in operating activities           (162)       (5,938)
                                                ------------  ------------
Cash flows from investing activities:
  Purchases of property and equipment                    (39)         (116)
  Decrease (increase) in note receivable -
   related party                                       2,706        (2,706)
  Equity investment in Great American Real
   Estate, LLC                                           (46)         (150)
  Decrease (increase) in restricted cash                (113)          459
                                                ------------  ------------
        Net cash provided by (used in)
         investing activities                          2,508        (2,513)
                                                ------------  ------------
Cash flows from financing activities:
  Repayments of capital lease obligations                 (7)           (6)
  Payment of employment taxes on vesting of
   restricted stock                                      (90)         (948)
  Distribution to noncontrolling interests              (429)         (287)
                                                ------------  ------------
        Net cash used in financing activities           (526)       (1,241)
                                                ------------  ------------
        Increase (decrease) in cash and cash
         equivalents                                   1,820        (9,692)
        Effect of foreign currency on cash                 2             -
                                                ------------  ------------
        Net increase (decrease) in cash and
         cash equivalents                              1,822        (9,692)
Cash and cash equivalents, beginning of period        20,080        37,989
                                                ------------  ------------
Cash and cash equivalents, end of period        $     21,902  $     28,297
                                                ============  ============
Supplemental disclosures:
  Interest paid                                 $        122  $      1,670











                GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
 ADJUSTED EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
                       (Unaudited Adjusted EBITDA)
                         (Dollars in thousands)


                                               Three Months Ended March 31,
                                                --------------------------
                                                    2011          2010
                                                ------------  ------------
Adjusted EBITDA Reconciliation:

Net income (loss) as reported                   $       (526) $     (2,980)
Adjustments:
  Provision (Benefit) for income taxes                   704        (1,572)
  Interest expense                                       328         1,033
  Interest income                                       (137)          (90)
  Depreciation and amortization                          221           180
  Share based compensation                               358         1,358
                                                ------------  ------------
    Total EBITDA adjustments                           1,474           909
                                                ------------  ------------
Adjusted EBITDA                                 $        948  $     (2,071)
                                                ============  ============




GAMR-F

Contact Information

  • Investor Contacts:

    Great American Group
    Phil Ahn
    SVP, Strategy & Corporate Development
    818-884-3737

    Addo Communications
    Andrew Blazier
    310-829-5400
    Email Contact

    or

    Press Contact:
    Great American Group
    Laura Wayman
    847-444-1400 ext. 312
    Email Contact