B. Riley Financial
Aug 14, 2013
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Great American Group Announces Second Quarter 2013 Financial Results

WOODLAND HILLS, CA -- (Marketwired) -- 08/14/13 -- 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         Six Months Ended

                                 June 30,                  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

                                 =========  =========  =========  =========

Investor Contacts:

Great American Group

Phillip Ahn

Chief Financial Officer & Chief Operating Officer

818-884-3737



Addo Communications

Patricia Nir

310-829-5400



Source: Great American Group, Inc.

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