Great American Group(R)* Announces Improved Second Quarter 2012 Financial Results
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Grt Amer Grp (OTCBB:GAMR)
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Today : Tuesday 14 August 2012
Great American Group, Inc. (OTCBB: GAMR)
Total revenues of $19.7 million, an increase of 100% from a year ago
Operating income of $0.8 million, versus an operating loss of $2.2 million a year ago
Net income of $0.6 million, versus a net loss of $2.2 million a year ago
Diluted earnings per share of $0.02, versus a diluted loss per share of $0.08 a year ago
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 second quarter ended June 30, 2012.
Second Quarter Results
For the second quarter ended June 30, 2012, the Company reported total revenues of $19.7 million, an increase of 100% from revenues of $9.8 million in the second quarter of 2011. Revenues from services and fees were $13.3 million, compared to $9.6 million in the same period the prior year. Revenues from sale of goods were $6.4 million, compared to $0.3 million in the second quarter of 2011. The increase in total revenues during the quarter was primarily due to increases in the auction and liquidation segment of $6.7 million, an increase in revenues in the valuation and appraisal services segment of $0.3 million, and revenues of $2.8 million from the UK retail stores segment, as a result of the Company's investment in Shoon Trading Limited ("Shoon"), a shoe retailer with operations in the United Kingdom. This represents a new reportable segment in our financial statements.
"During the quarter we experienced improvements in our financial results from the previous year," said Andrew Gumaer, Chief Executive Officer of Great American Group. "Our enhanced performance reflects increased activity in our auction and liquidation segment from operations in the United Kingdom and contributions from our GA Keen Realty Advisors division. The new UK retail stores segment operates eleven Shoon retail stores in the United Kingdom and is complementary to our continued expansion in the UK. As we head into the second half of 2012, we remain highly focused on the execution of our business initiatives and achieving our financial objectives to position the business for continued growth and profitability."
Direct cost of services was $5.0 million, compared to $3.5 million a year ago. The increase in direct cost of services was primarily the result of an increase in the number of fee and commission engagements in the second quarter of 2012, where the Company contractually bills fees, commissions and reimbursable expenses, in the auction and liquidation segment as well as an increase in headcount which resulted in an increase in salaries, wages and benefits in the valuation and appraisal segment compared to the same period in 2011. Cost of goods sold was $4.1 million in the second quarter of 2012, compared to $0.4 million in the second quarter of the prior year. The increase in cost of goods sold in the second quarter of 2012 included costs of goods sold of $1.5 million related to retail sales from the Shoon stores located in the United Kingdom.
Selling, general and administrative expenses were $9.8 million, compared to $8.2 million in the second quarter of 2011. The increase in selling, general and administrative expenses was primarily the result of an increase of $0.5 million in the auction and liquidation segment and $1.1 million in the UK retail stores segment which is new in the second quarter as a result of the consolidation of Shoon on May 4, 2012. The increase in selling, general and administrative expenses of $0.1 million related to corporate overhead was offset by the decrease in selling, general and administrative expenses $0.1 million in the valuation and appraisal segment.
On May 4, 2012, the Company invested $0.1 million for a 40% interest in the common stock of Shoon. Shoon purchased the rights to operate the former Shoon internet business and retail stores that were in administration in the United Kingdom. As part of the investment, the Company has also loaned Shoon approximately $1.3 million that is collateralized by retail inventory. The Company, together with its 40% investment in the common stock of Shoon and its control of the majority of the board or directors, is deemed to be the primary beneficiary of Shoon. As such, for generally accepted accounting principles in the United States, the Company is required to consolidate the operations of Shoon. The results of operations of Shoon from May 4, 2012, the date of investment, through June 30, 2012, have been included in the Company's condensed consolidated statements of operations.
In addition, during the second quarter, the Company recorded a gain on bargain purchase of $1.4 million since the fair value of assets acquired in the Shoon transaction exceeded consideration paid. The gain on bargain purchase is record net of tax and is included as a separate component of other income (expense) in the condensed consolidated statements of operations.
Income from operations before provision for income taxes was $1.5 million during the second quarter of 2012, compared to loss from operations before benefit for income taxes of $3.1 million in the second quarter of 2011. Excluding the gain from bargain purchase of $1.4 million included in other income related to the investment and consolidation of Shoon, income from operation before provision for income taxes was $0.2 million during the second quarter of 2012. During the second quarter of 2012, the Company recorded a provision for income taxes of $0.1 million, compared with a benefit for income taxes of $0.9 million in the second quarter of 2011. Overall, in the second quarter of 2012, the Company generated net income of $0.6 million, or $0.02 per diluted share, compared with net loss of $2.2 million, or $0.08 per diluted share, in the second quarter of 2011.
Six Month Results
For the first six months of 2012, the Company reported total revenues of $39.0 million, compared to $23.6 million in the first six months of 2011. Revenues from services and fees were $30.2 million, compared to $22.6 million a year ago. Sales of goods were $8.8 million compared to $1.1 million in the same period of 2011.
Total operating expenses were $35.8 million, compared to $25.6 million in 2011. Operating income was $3.2 million, compared to an operating loss of $1.9 million in the prior year. Earnings from operations before income taxes were $3.3 million, compared to a loss from operations before income taxes of $2.9 million during the first six months of 2011. The Company recorded a provision for income taxes of $0.8 million during the first six months of 2012, compared to a benefit for income taxes of $0.2 million in the same period of 2011. Net income during the first six months of 2012 was $1.7 million, or $0.06 per diluted share, compared with a net loss of $2.8 million, or $(0.10) in the same period of 2011.
Financial Position
At June 30, 2012, the Company had $23.4 million in cash and cash equivalents, an increase of $8.4 million, from $15.0 million at December 31, 2011. Working capital was $29.0 million at June 30, 2012.
Conference Call
The Company will host a conference call at 4:30 p.m. EDT on Tuesday, August 14, 2012, to discuss results for the second quarter ended June 30, 2012. 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 #4550214. International callers should dial (480) 629-9664. A digital replay will be available beginning August 14, 2012, at 7:30 p.m. EDT, through August 21, 2012, at 11:59 p.m. EDT. To access the replay, dial (877) 870-5176 (U.S.), and use passcode 4550214. 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, Charlotte, 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 19, 2012, and its Annual Report on Form 10-K for the year ended December 31, 2011. 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.
GAMR-F
(FINANCIAL TABLES FOLLOW)
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Dollars in thousands, except par value)
June 30, December 31,
2012 2011
(Unaudited)
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 23,435 $ 15,034
Restricted cash 100 -
Accounts receivable, net 5,816 7,482
Advances against customer contracts 4,917 5,276
Inventory 2,331 -
Goods held for sale or auction 10,286 12,934
Loan receivable 779 8,306
Note receivable - related party 3,750 3,844
Deferred income taxes 4,895 4,460
Prepaid expenses and other current assets 961 1,110
------------- -------------
Total current assets 57,270 58,446
Property and equipment, net 960 916
Goodwill 5,688 5,688
Other intangible assets, net 140 140
Deferred income taxes 9,915 10,504
Other assets 1,022 664
------------- -------------
Total assets $ 74,995 $ 76,358
============= =============
Liabilities and Equity (Deficit)
Current liabilities:
Accounts payable and accrued liabilities $ 11,703 $ 13,718
Auction and liquidation proceeds payable 625 18
Mandatorily redeemable noncontrolling
interests 2,562 3,408
Revolving credit facility 2,044 1,942
Current portion of long-term debt 1,724 1,724
Note payable 9,577 11,555
Current portion of capital lease obligation 28 29
------------- -------------
Total current liabilities 28,263 32,394
Capital lease obligation, net of current portion - 13
Long-term debt, net of current portion 52,207 52,207
------------- -------------
Total liabilities 80,470 84,614
------------- -------------
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 and 31,001,609
issued and outstanding as of June 30, 2012
and December 31, 2011, respectively 4 4
Additional paid-in capital 3,082 3,177
Retained earnings (deficit) (9,504) (11,190)
Accumulated other comprehensive income (loss) 16 (247)
------------- -------------
Total Great American Group, Inc.
stockholders' equity (deficit) (6,402) (8,256)
Noncontrolling interests 927 -
------------- -------------
Total equity (deficit) (5,475) (8,256)
------------- -------------
Total liabilities and equity (deficit) $ 74,995 $ 76,358
============= =============
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Operations and Comprehensive Income
(Loss)
(Dollars in thousands, except share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------------ ------------------------
2012 2011 2012 2011
----------- ----------- ----------- -----------
Revenues:
Services and fees $ 13,298 $ 9,569 $ 30,198 $ 22,572
Sale of goods 6,353 262 8,773 1,075
----------- ----------- ----------- -----------
Total revenues 19,651 9,831 38,971 23,647
----------- ----------- ----------- -----------
Operating expenses:
Direct cost of
services 5,001 3,479 11,253 8,291
Cost of goods sold 4,128 405 6,277 1,313
Selling, general and
administrative
expenses 9,758 8,160 18,277 15,951
----------- ----------- ----------- -----------
Total operating
expenses 18,887 12,044 35,807 25,555
----------- ----------- ----------- -----------
Operating income
(loss) 764 (2,213) 3,164 (1,908)
Other income (expense):
Other expense - (6) - (10)
Interest income 77 153 156 290
Income (loss) from
equity investment in
Great American Real
Estate, LLC (40) (416) (120) (348)
Gain from bargain
purchase 1,366 - 1,366 -
Interest expense (646) (625) (1,273) (953)
----------- ----------- ----------- -----------
Income (loss) before
income taxes 1,521 (3,107) 3,293 (2,929)
(Provision) benefit for
income taxes (57) 858 (762) 154
----------- ----------- ----------- -----------
Net income (loss) 1,464 (2,249) 2,531 (2,775)
Net income attributable
to noncontrolling
interests 845 - 845 -
----------- ----------- ----------- -----------
Net income (loss)
attributable to
Great American
Group, Inc. $ 619 $ (2,249) $ 1,686 $ (2,775)
=========== =========== =========== ===========
Basic income (loss) per
share $ 0.02 $ (0.08) $ 0.06 $ (0.10)
Diluted income (loss)
per share $ 0.02 $ (0.08) $ 0.06 $ (0.10)
Weighted average basic
shares outstanding 28,682,975 28,460,392 28,682,292 28,410,908
Weighted average diluted
shares outstanding 29,599,424 28,460,392 29,598,741 28,410,908
Comprehensive income
(loss):
Net income (loss) $ 1,464 $ (2,249) $ 2,531 $ (2,775)
Other comprehensive
income (loss):
Change in cumulative
translation
adjustment 52 (110) 263 (130)
----------- ----------- ----------- -----------
Other comprehensive
income (loss), net of
tax 52 (110) 263 (130)
----------- ----------- ----------- -----------
Comprehensive income
(loss) 1,516 (2,359) 2,794 (2,905)
Comprehensive income
attributable to
noncontrolling
interests (845) - (845) -
----------- ----------- ----------- -----------
Comprehensive income
attributable to Great
American Group, Inc. $ 671 $ (2,359) $ 1,949 $ (2,905)
=========== =========== =========== ===========
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Equity (Deficit)
(Dollars in thousands, except share data)
Preferred Stock Common Stock
----------------- ---------------------
Additional
Paid-in
Shares Amount Shares Amount Capital
-------- -------- ----------- -------- ----------
Balance, January 1,
2012 - $ - 31,001,609 $ 4 $ 3,177
Net income for the six
months ended June 30,
2012
Foreign currency
translation adjustment
Formation of
noncontrolling
interests
Cancellation of
founders contingent
shares held in escrow (1,000,000)
Purchase of
noncontrolling
interest in subsidiary (95)
Changes in
noncontrolling
interests
Adjustment from
restricted stock
awards 1,366
-------- -------- ----------- -------- ----------
Balance, June 30, 2012 - $ - 30,002,975 $ 4 $ 3,082
======== ======== =========== ======== ==========
Accumulated
Retained Other Total
Earnings Comprehensive Noncontrolling Equity
(Deficit) Loss Interests (Deficit)
--------- ------------- -------------- ----------
Balance, January 1,
2012 $ (11,190) $ (247) $ - $ (8,256)
Net income for the six
months ended June 30,
2012 1,686 845 2,531
Foreign currency
translation adjustment 263 263
Formation of
noncontrolling
interests 78 78
Cancellation of
founders contingent
shares held in escrow -
Purchase of
noncontrolling
interest in subsidiary (95)
Changes in
noncontrolling
interests 4 4
Adjustment from
restricted stock
awards -
--------- ------------- -------------- ----------
Balance, June 30, 2012 $ (9,504) $ 16 $ 927 $ (5,475)
========= ============= ============== ==========
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statement of Cash Flows
(Dollars in thousands)
Six Months Ended
June 30,
----------------------
2012 2011
---------- ----------
Cash flows from operating activities:
Net income (loss) $ 2,531 $ (2,775)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 410 439
Impairment of goods held for sale or auction 122 -
Share-based payments - 421
Effect of foreign currency on operations 405 (118)
Non-cash interest (3) (580)
Loss (income) from equity investment in Great
American Real Estate, LLC 120 416
Gain from bargain purchase (1,366) -
Loss on disposal of assets 2 3
Deferred income taxes 154 (159)
Income allocated to mandatorily redeemable
noncontrolling interests 992 1,393
Change in operating assets and liabilities:
Accounts receivable and advances against
customer contracts 2,025 894
Inventory 1,421 -
Goods held for sale or auction 2,431 665
Loan receivable 7,527 -
Prepaid expenses and other assets (206) (388)
Accounts payable and accrued expenses (3,233) (1,949)
Auction and liquidation proceeds payable 607 (1,405)
---------- ----------
Net cash provided by (used in) operating
activities 13,939 (3,143)
---------- ----------
Cash flows from investing activities:
Acquisition of business (1,246) -
Purchase of noncontrolling interest in subsidiary (95) -
Purchases of property and equipment (297) (233)
Decrease in note receivable - related party 94 2,706
Increase in note receivable - (2,409)
Equity investment in Great American Real Estate,
LLC (120) (156)
Increase in restricted cash (100) -
---------- ----------
Net cash used in investing activities (1,764) (92)
---------- ----------
Cash flows from financing activities:
Repayments of capital lease obligations (14) (13)
Proceeds from revolving line of credit 102 2,290
Repayments of notes payable (1,978) -
Payment of employment taxes on vesting of
restricted stock - (108)
Proceeds from formation of noncontrolling
interests 78 -
Distribution to noncontrolling interests (1,824) (1,612)
---------- ----------
Net cash (used in) provided by financing
activities (3,636) 557
---------- ----------
Increase (decrease) in cash and cash
equivalents 8,539 (2,678)
Effect of foreign currency on cash (138) (12)
---------- ----------
Net increase (decrease) in cash and cash
equivalents 8,401 (2,690)
Cash and cash equivalents, beginning of period 15,034 20,080
---------- ----------
Cash and cash equivalents, end of period $ 23,435 $ 17,390
========== ==========
Supplemental disclosures:
Interest paid $ 1,275 $ 193
Taxes paid 278 -
GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
(Unaudited)
(Dollars in thousands)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- --------------------
2012 2011 2012 2011
--------- --------- --------- ---------
Adjusted EBITDA Reconciliation:
Net income (loss) as reported $ 619 $ (2,249) $ 1,686 $ (2,775)
Adjustments:
Provision (benefit) for income
taxes 57 (858) 762 (154)
Interest expense 646 625 1,273 953
Interest income (77) (153) (156) (290)
Depreciation and amortization 209 218 410 439
Share based compensation - 63 - 421
--------- --------- --------- ---------
Total EBITDA adjustments 835 (105) 2,289 1,369
--------- --------- --------- ---------
Adjusted EBITDA $ 1,454 $ (2,354) $ 3,975 $ (1,406)
========= ========= ========= =========
Investor Contacts:
Great American Group
Phil Ahn
SVP, Strategy & Corporate Development
818-884-3737
Addo Communications
Andrew Greenebaum
310-829-5400
Email Contact
