SOURCE: Great American Group, Inc.

Great American Group, Inc.

March 30, 2012 16:00 ET

Great American Group®* Announces Improved Fourth Quarter and Full Year 2011 Financial Results

WOODLAND HILLS, CA--(Marketwire - Mar 30, 2012) - 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 fourth quarter and full year ended December 31, 2011.

Fiscal Year Highlights

  • Fiscal 2011 total revenues of $63.5 million, an increase of 50.7% from a year ago
  • Fiscal 2011 operating income of $7.4 million, up from an operating loss of $11.4 million a year ago
  • Fiscal 2011 net income of $602,000, up from a net loss of $11.0 million a year ago
  • Fiscal 2011 diluted earnings per share of $0.02, up from diluted loss per share of $(0.39) a year ago

Fourth Quarter Results

For the fourth quarter ended December 31, 2011, the Company reported total revenues of $11.4 million, an increase of 3.3% from revenues of $11.0 million in the fourth quarter of 2010. Revenues from services and fees were $10.5 million, compared to $10.6 million in the same period the prior year. Revenues from sales of goods were $0.9 million, compared to $0.4 million in the fourth quarter of 2010. The increase in total revenues during the quarter was primarily due an increase in revenues from the sale of goods in the Auction and Liquidation segment.

"During fiscal 2011 we experienced year-over-year improvements in our financial results with a strong increase in revenues and a return to profitability. The retail liquidation of T.J. Hughes Limited in Europe and our participation in the joint venture involving the liquidation of Borders Group in the United States contributed to the increase in revenues and operating profit in the auction and liquidation segment during fiscal 2011," said Andrew Gumaer, Chief Executive Officer of Great American Group. "We continue to monitor expenses, and our cost reduction initiatives had a positive financial benefit during the year and help to contribute to a significant increase in operating income. Going forward, we will continue to invest in our newer revenue generating initiatives such as GA Keen and GA Europe and expect these businesses to continue to complement our core businesses going forward."

Direct cost of services was $3.8 million, compared to $4.5 million a year ago. The decrease in direct cost of services was primarily the result of a decrease in the number of fee and commission engagements in the fourth 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 $1.1 million in the fourth quarter of 2011, compared to $0.6 million in the fourth quarter of the prior year. The increase was primarily the result of the sale of goods in 2011 with high asset values and a lower of cost or market charge of $0.2 million for goods held for sale or auction in 2011 compared to the prior year.

Selling, general and administrative expenses were $6.1 million, compared to $6.8 million in the fourth quarter of 2010. The decrease was primarily the result of the Company's corporate cost savings initiatives and a decrease in contractual compensation with noncontrolling shareholder's that earn a profit and bonus based on a percentage of the operating profits from their operations.

Operating income for the fourth quarter of 2011 was $0.3 million, compared to operating loss of $0.8 million during the same period of 2010.

Interest expense during the fourth quarter of 2011 was flat at $1.0 million, compared to the prior year.

Loss from operations before a provision for income taxes was $0.5 million during the fourth quarter of 2011, compared to loss from operations of $2.1 million in the fourth quarter of 2010.

During the fourth quarter of 2011, the Company recorded a provision for income taxes of $0.2 million, compared to a benefit for income taxes of $0.2 million in the fourth quarter of 2010. Overall, in the fourth quarter of 2011, the Company generated net loss of $0.7 million, or $0.02 per diluted share, compared with net loss of $1.9 million, or $0.07 per diluted share, in the fourth quarter of 2010.

Full Year 2011 Results

For the year-ended 2011, the Company reported total revenues of $63.5 million, an increase of 50.7% from $42.1 million in 2010. Revenues from services and fees were $60.6 million, up from $37.0 million a year ago. Sales of goods were $2.9 million, compared to $5.1 million in the prior year.

Total operating expenses were $56.1 million, compared to $53.5 million in 2010. Operating income was $7.4 million, compared to an operating loss of $11.4 million in the prior year. Income before provision for income taxes was $2.7 million, compared to a loss before income taxes of $16.1 million during 2010. The Company recorded a provision for income taxes of $2.1 million during 2011, compared to a benefit for income taxes of $5.1 million in the same period of 2010. Net income for 2011 was $0.6 million, or $0.02 per diluted share, compared with a net loss of $11.0 million, or $(0.39) per diluted share, in the same period of 2010.

Financial Position
At December 31, 2011, the Company had $15.0 million in cash and cash equivalents. Working capital was $26.1 million at December 31, 2011. During 2011, the Company used $2.0 million in cash from operations.

Conference Call
The Company will host a conference call at 4:30 p.m. EDT on Friday, March 30, 2012, to discuss results for the fourth quarter ended December 31, 2011. To participate in the event by telephone, please dial (877) 941-1427 10 minutes prior to the start time (to allow time for registration) and use conference ID #4525808. International callers should dial (480) 629-9664. A digital replay will be available beginning March 30, 2012, at 7:30 p.m. EDT, through April 13, 2012, at 11:59 p.m. EDT. To access the replay, dial (877) 870-5176 (U.S.), and use passcode 4525808. 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 filed with the SEC on July 18, 2011, 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.

GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except par value)
December 31, December 31,
2011 2010
Assets
Current assets:
Cash and cash equivalents $ 15,034 $ 20,080
Accounts receivable, net 7,482 3,087
Advances against customer contracts 5,276 3,063
Goods held for sale or auction 12,934 13,504
Loan receivable 8,306 --
Note receivable - related parties 3,844 5,930
Deferred income taxes 5,050 5,463
Prepaid expenses and other current assets 1,110 1,353
Total current assets 59,036 52,480
Property and equipment, net 916 1,369
Goodwill 5,688 5,688
Other intangible assets, net 140 221
Deferred income taxes 9,914 11,372
Other assets 664 1,144
Total assets $ 76,358 $ 72,274
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable and accrued liabilities $ 13,718 $ 10,631
Auction and liquidation proceeds payable 18 1,712
Mandatorily redeemable noncontrolling interests 3,408 2,858
Revolving credit facility 1,942 --
Current portion of long-term debt 1,724 1,724
Note payable 11,555 12,014
Current portion of capital lease obligation 29 27
Total current liabilities 32,394 28,966
Capital lease obligation, net of current portion 13 42
Long-term debt, net of current portion 52,207 52,169
Total liabilities 84,614 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; 31,001,609 and 30,559,036 issued and outstanding as of December 31, 2011 and 2010, respectively 4 4
Additional paid-in capital 3,177 2,878
Retained earnings (deficit) (11,190 ) (11,792 )
Accumulated other comprehensive income (247 ) 7
Total stockholders' equity (deficit) (8,256 ) (8,903 )
Total liabilities and stockholders' equity (deficit) $ 76,358 $ 72,274
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands)
Three Months Ended December 31, Year Ended December 31,
2011 2010 2011 2010
Revenues:
Services and fees $ 10,480 $ 10,618 $ 60,627 $ 37,026
Sale of goods 887 387 2,899 5,119
Total revenues 11,367 11,005 63,526 42,145
Operating expenses:
Direct cost of services 3,845 4,479 19,749 15,417
Cost of goods sold 1,104 576 3,391 6,674
Selling, general and administrative 6,098 6,796 32,946 31,413
Total operating expenses 11,047 11,851 56,086 53,504
Operating income (loss) 320 (846 ) 7,440 (11,359 )
Other income (expense):
Interest income 67 188 476 522
Other income 13 -- -- --
Loss from equity investment in Great American Real Estate, LLC 153 (372 ) (369 ) (1,640 )
Interest expense (1,011 ) (1,027 ) (4,885 ) (3,667 )
Income (loss) from operations before (provision) benefit for income taxes (458 ) (2,057 ) 2,662 (16,144 )
Benefit (provision) for income taxes (196 ) 151 (2,060 ) 5,106
Net income (loss) $ (654 ) $ (1,906 ) $ 602 $ (11,038 )
Basic earnings (loss) per share $ (0.02 ) $ (0.07 ) $ 0.02 $ (0.39 )
Diluted earnings (loss) per share $ (0.02 ) $ (0.07 ) $ 0.02 $ (0.39 )
Weighted average basic shares outstanding 28,681,609 28,239,036 28,539,651 28,075,758
Weighted average diluted shares outstanding 28,681,609 28,239,036 29,408,466 28,075,758
GREAT AMERICAN GROUP, LLC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(Dollars in thousands)
Year ended December 31,
2011 2010
Cash flows from operating activities:
Net income (loss) $ 602 $ (11,038 )
Loss from discontinued operations - -
Income (loss) from continuing operations 602 (11,038 )
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 981 792
Provision for (recovery of) doubtful accounts 424 60
Impairment of goods held for sale or auction 159 1,389
Share-based payments 431 4,420
Effect of foreign currency on operations (14 ) 21
Noncash interest expense 1,083 (193 )
Amortization of discount on note payable 609 -
Loss on equity investment in Great American Real Estate, LLC 369 1,640
Loss on disposal of assets 4 3
Deferred income taxes 1,871 (5,122 )
Change in fair value of mandatorily redeemable noncontrolling interests (83 ) (205 )
Income allocated to mandatorily redeemable noncontrolling interests 3,934 1,806
Change in operating assets and liabilities:
Accounts receivable and advances against customer contracts (7,032 ) (3,524 )
Income taxes receivable - 1,100
Goods held for sale or auction 224 121
Loan receivable (8,306 ) -
Prepaid expenses and other assets 1,093 3,222
Accounts payable and accrued expenses 3,300 (1,841 )
Auction and liquidation proceeds payable (1,694 ) 1,266
Net cash (used in) provided by operating activities (2,045 ) (6,083 )
Cash flows from investing activities:
Purchases of property and equipment (264 ) (592 )
Decrease (increase) in notes receivable - related party 2,706 (5,930 )
Equity investment in Great American Real Estate, LLC (1,202 ) (949 )
Proceeds from redemption of officer life insurance - 355
Decrease (increase) in restricted cash - 459
Net cash provided by (used in) investing activities 1,240 (6,657 )
Cash flows from financing activities:
Proceeds from revolving line of credit 1,942 -
Proceeds from note payable 7,000 -
Payment of financing costs - (752 )
Repayment of notes payable (7,759 ) -
Repayments of long-term debt (1,724 ) (1,724 )
Repayments of capital lease obligation (27 ) (25 )
Payment of employment taxes on vesting of restricted stock (132 ) (1,132 )
Distributions to noncontrolling interests (3,301 ) (1,522 )
Net cash (used in) provided by financing activities (4,001 ) (5,155 )
Effect of foreign currency on cash (240 ) (14 )
Net (decrease) increase in cash and cash equivalents (5,046 ) (17,909 )
Cash and cash equivalents, beginning of year 20,080 37,989
Cash and cash equivalents, end of year $ 15,034 $ 20,080
Three Months Ended December 31,
2011 2010
Adjusted EBITDA Reconciliation:
Net income (loss) as reported $ (654 ) $ (4,542 )
Adjustments:
Provision (benefit) for income taxes 196 (4,054 )
Interest expense 1,011 2,001
Interest income (67 ) (12 )
Depreciation and amortization 356 169
Share based compensation -- 1,965
Total EBITDA adjustments 1,496 69
Adjusted EBITDA $ 842 $ (4,473 )
Year Ended December 31,
2011 2010
Adjusted EBITDA Reconciliation:
Net income (loss) as reported $ 602 $ (11,038 )
Adjustments:
Provision (benefit) for income taxes 2,060 (5,106 )
Interest expense 4,885 3,667
Interest income (476 ) (522 )
Depreciation and amortization 981 792
Share based compensation 431 4,420
Total EBITDA adjustments 7,881 3,251
Adjusted EBITDA $ 8,483 $ (7,787 )

GAMR-F

Contact Information

  • Investor Contacts:
    Great American Group
    Phil Ahn
    SVP, Strategy & Corporate Development
    818-884-3737

    Addo Communications
    Andrew Greenebaum
    310-829-5400
    Email Contact

    or

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