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/ CORRECTION - Great American Group Announces Improved Fourth Quarter and Full Year 2012 Financial Results

Thursday, March 28, 2013 6:44 PM


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WOODLAND HILLS, CA -- (Marketwire) -- 03/28/13 -- In the news release, "Great American Group Announces Improved Fourth Quarter and Full Year 2012 Financial Results," issued earlier today, please be advised that due to formatting revisions in the Consolidated Statement of Cash Flows for the year ended December 31, 2011, the last two rows should read "20,080" rather than "-" and "15,034" rather than "(5,046)". Complete corrected text follows.

Great American Group Announces Improved Fourth Quarter and Full Year 2012 Financial Results

WOODLAND HILLS, CA -- March 28, 2013 -- 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, 2012.

  • Fiscal 2012 total revenues of $83.9 million, a 32.1% increase from $63.5 million a year ago
  • Fiscal 2012 net income of $3.5 million, versus net income of $0.6 million from a year ago
  • Fiscal 2012 diluted earnings per share of $0.12, versus diluted earnings per share of $0.02 from a year ago

"During fiscal 2012 we experienced significant year-over-year improvements in our financial results with a strong increase in revenues and profitability, as business activity across a number of our divisions improved from prior year levels," said Andrew Gumaer, Chief Executive Officer of Great American Group. Mr. Gumaer added, "GA Europe, GA Appraisals, and GA Keen Realty are three of our divisions that experienced significant increases in business activity in 2012 and helped to drive our overall financial performance. The positive contributions from all three divisions helped to diversify Great American's revenues and offset a decline in activity in our US Retail business. We are pleased with the growth that each of these three divisions have experienced over the last several years and hope to continue our investment in their future development."

Fourth Quarter Results

For the fourth quarter, the Company reported total revenues of $30.7 million, a significant increase from revenues of $11.4 million in the fourth quarter of 2011. Revenues from services and fees were $24.5 million, compared to $10.5 million in the same period the prior year. Revenues from sale of goods were $6.3 million, compared to $0.9 million in the fourth quarter of 2011. The increase in total revenues during the quarter was primarily due to increases in the UK Retail Stores segment, as well as the retail liquidation segment that participated in the liquidation of Comet, a 236 store electronics chain in the United Kingdom. The Company's results include the consolidation of Shoon, the UK shoe retailer in which the Company invested last May. Shoon contributed $10.2 million of revenue and net income of $0.5 million to our Company's consolidated results in 2012.

Direct cost of services was $7.8 million, compared to $3.8 million a year ago. The increase in direct cost of services was primarily the result of an increase in costs incurred as result of services performed in connection with the Comet liquidation engagement during the fourth quarter of 2012. Cost of goods sold was $4.3 million in the fourth quarter of 2012, compared to $1.1 million in the fourth quarter of the prior year.

Selling, general and administrative expenses increased to $13.7 million, compared to $6.1 million in the fourth quarter of 2011. The increase in selling, general and administrative expenses was primarily attributed to increases in payroll and operating expenses from the ongoing expansion of the Company's UK operations and the operating expenses of Shoon.

Operating income for the fourth quarter of 2012 was $4.9 million, compared to $0.3 million during the fourth quarter of 2011.

Interest expense during the fourth quarter of 2012 declined to $0.7 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 US retail liquidation activity that required borrowings from our line of credit in 2011.

Pretax income was $4.1 million compared to pretax loss of $0.5 million in the fourth quarter of 2011. Net income was $2.4 million, or $0.08 per diluted share, compared to net loss of $0.7 million, or $0.02 per diluted share in the fourth quarter of 2011.

Twelve Months Ended December 31, 2012

For the twelve months of 2012, the Company reported improved total revenues of $83.9 million, compared to $63.5 million in the twelve months of 2011. Revenues from services and fees were $65.6 million, compared to $60.6 million a year ago. Sales of goods were $18.3 million compared to $2.9 million in the same period of 2011.

Total operating expenses were $76.5 million, compared to $56.1 million in 2011. Operating income was $7.4 million, flat compared to the prior year. Pretax income was $6.3 million, compared to $2.7 million during the twelve months of 2011. The Company recorded a provision for income taxes of $1.9 million compared to $2.1 million in the same period of 2011. Net income during the twelve months of 2012 was $3.5 million, or $0.12 per diluted share, compared with $0.6 million, or $0.02 in the same period of 2011.

Adjusted EBITDA for the twelve months of 2012 was $8.7 million compared to $8.5 million in 2011.

Financial Position

At December 31, 2012, the Company had $18.7 million in cash and cash equivalents and $7.9 million of restricted cash, an increase compared to $15.0 million of cash and cash equivalents at December 31, 2011.

Conference Call

The Company will host a conference call today at 4:30 p.m. ET, to discuss results for the fourth quarter ended December 31, 2012. 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 # 408841. International callers should dial (201) 689-8562. A digital replay will be available beginning March 28, 2013, at 7:30 p.m. ET, through April 4, 2013, at 11:59 p.m. ET. To access the replay, dial (877) 870-5176 (U.S.), and use passcode 408841. 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 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, New York, San Francisco and London. 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 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.

                GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
                  (Dollars in thousands, except par value)
                                                December 31,   December 31,
                                                    2012           2011
                                               -------------  -------------
                    Assets
Current assets:
  Cash and cash equivalents                    $      18,721  $      15,034
  Restricted cash                                      7,923              -
  Accounts receivable, net                            16,591          7,482
  Advances against customer contracts                  2,441          5,276
  Inventory                                            2,216              -
  Goods held for sale or auction                      10,196         12,934
  Loan receivable                                          -          8,306
  Note receivable - related parties                      611          3,844
  Deferred income taxes                                4,114          4,460
  Prepaid expenses and other current assets            1,145          1,110
                                               -------------  -------------
    Total current assets                              63,958         58,446
Property and equipment, net                              970            916
Goodwill                                               5,688          5,688
Other intangible assets, net                             140            140
Deferred income taxes                                  9,484         10,504
Other assets                                             343            664
                                               -------------  -------------
    Total assets                               $      80,583  $      76,358
                                               =============  =============
       Liabilities and Equity (Deficit)
Current liabilities:
  Accounts payable and accrued liabilities     $      16,886  $      13,718
  Auction and liquidation proceeds payable               864             18
  Mandatorily redeemable noncontrolling
   interests                                           2,856          3,408
  Revolving credit facility                            2,304          1,942
  Current portion of long-term debt                    1,724          1,724
  Notes payable                                        9,628         11,555
  Current portion of capital lease obligation             13             29
                                               -------------  -------------
    Total current liabilities                         34,275         32,394
Capital lease obligation, net of current
 portion                                                   -             13
Long-term debt, net of current portion                50,483         52,207
                                               -------------  -------------
    Total liabilities                                 84,758         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
   December 31, 2012 and 2011, respectively                4              4
  Additional paid-in capital                           3,082          3,177
  Retained earnings (deficit)                         (7,669)       (11,190)
  Accumulated other comprehensive income
   (loss)                                               (520)          (247)
                                               -------------  -------------
    Total Great American Group, Inc.
     stockholders' equity (deficit)                   (5,103)        (8,256)
Noncontrolling interests                                 928              -
                                               -------------  -------------
    Total equity (deficit)                            (4,175)        (8,256)
                                               -------------  -------------
    Total liabilities and equity (deficit)     $      80,583  $      76,358
                                               =============  =============

                GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF OPERATIONS
                 (Dollars in thousands, except share data)
                            Three Months Ended
                               December 31,         Year Ended December 31,
                         ------------------------  ------------------------
                             2012         2011         2012         2011
                         -----------  -----------  -----------  -----------
Revenues:
  Services and fees      $    24,470  $    10,480  $    65,624  $    60,627
  Sale of goods                6,260          887       18,312        2,899
                         -----------  -----------  -----------  -----------
    Total revenues            30,730       11,367       83,936       63,526
                         -----------  -----------  -----------  -----------
Operating expenses:
  Direct cost of
   services                    7,814        3,845       23,911       19,749
  Cost of goods sold           4,301        1,104       12,750        3,391
  Selling, general and
   administrative             13,679        6,098       39,834       32,946
                         -----------  -----------  -----------  -----------
    Total operating
     expenses                 25,794       11,047       76,495       56,086
                         -----------  -----------  -----------  -----------
    Operating income
     (loss)                    4,936          320        7,441        7,440
Other income (expense):
  Other income (expense)           -           13            -            -
  Interest income                 15           67          201          476
  Loss from equity
   investment in Great
   American Real Estate,
   LLC                          (165)         153         (120)        (369)
  Gain from bargain
   purchase                        -            -        1,366            -
  Interest expense              (661)      (1,011)      (2,612)      (4,885)
                         -----------  -----------  -----------  -----------
    Income (loss) before
     benefit (provision)
     for income taxes          4,125         (458)       6,276        2,662
Benefit (provision) for
 income taxes                 (1,549)        (196)      (1,936)      (2,060)
                         -----------  -----------  -----------  -----------
    Net income (loss)          2,576         (654)       4,340          602
Net income attributable
 to noncontrolling
 interests                       194            -          819            -
                         -----------  -----------  -----------  -----------
    Net income (loss)
     attributable to
     Great American
     Group, Inc.         $     2,382  $      (654) $     3,521  $       602
                         ===========  ===========  ===========  ===========
Basic earnings (loss)
 per share               $      0.08  $     (0.02) $      0.12  $      0.02
Diluted earnings (loss)
 per share               $      0.08  $     (0.02) $      0.12  $      0.02
Weighted average basic
 shares outstanding       28,682,975   28,681,609   28,682,975   28,539,651
Weighted average diluted
 shares outstanding       29,614,252   28,681,609   29,614,252   29,408,466

                 GREAT AMERICAN GROUP, LLC AND SUBSIDIARIES
                    CONSOLIDATED STATEMENT OF CASH FLOWS
                           (Dollars in thousands)
                                                    Year ended December 31,
                                                   ------------------------
                                                       2012         2011
                                                   -----------  -----------
Cash flows from operating activities:
  Net income (loss)                                $     4,340  $       602
  Adjustments to reconcile net income (loss) to
   net cash provided by (used in) operating
   activities:
    Depreciation and amortization                          835          981
    Provision for doubtful accounts                        108          424
    Impairment of goods held for sale or auction           194          159
    Share-based payments                                     -          431
    Effect of foreign currency on operations               (98)         (14)
    Noncash interest expense                                 -        1,083
    Amortization of discount on note payable                 -          609
    Loss on equity investment in Great American
     Real Estate, LLC                                      120          369
    Gain from bargain purchase                          (1,366)           -
    Loss on disposal of assets                               3            4
    Deferred income taxes                                1,366        1,871
    Change in fair value of mandatorily redeemable
     noncontrolling interests                                -          (83)
    Income allocated to mandatorily redeemable
     noncontrolling interests                            1,928        3,934
    Change in operating assets and liabilities:
      Accounts receivable and advances against
       customer contracts                               (6,172)      (7,032)
      Inventory                                          1,618            -
      Goods held for sale or auction                     2,361          224
      Loan receivable                                    8,519       (8,306)
      Prepaid expenses and other assets                    (33)       1,093
      Accounts payable and accrued expenses              1,641        3,300
      Auction and liquidation proceeds payable             846       (1,694)
                                                   -----------  -----------
        Net cash (used in) provided by operating
         activities                                     16,210       (2,045)
                                                   -----------  -----------
Cash flows from investing activities:
  Acquisition of business                               (1,246)           -
  Purchase of noncontrolling interest in
   subsidiary                                              (95)           -
  Purchases of property and equipment                     (634)        (264)
  Proceeds from sale of property and equipment              21            -
  Decrease (increase) in notes receivable -
   related party                                         3,233        2,706
  Equity investment in Great American Real Estate,
   LLC                                                    (120)      (1,202)
  Decrease (increase) in restricted cash                (7,923)           -
                                                   -----------  -----------
        Net cash provided by (used in) investing
         activities                                     (6,764)       1,240
                                                   -----------  -----------
Cash flows from financing activities:
  Proceeds from revolving line of credit                   362        1,942
  Proceeds from note payable                                 -        7,000
  Repayment of notes payable and capital lease
   obligations                                          (2,138)      (7,786)
  Repayments of long-term debt                          (1,724)      (1,724)
  Payment of employment taxes on vesting of
   restricted stock                                          -         (132)
  Proceeds from formation of noncontrolling
   interests                                                78            -
  Distributions to noncontrolling interests             (2,466)      (3,301)
                                                   -----------  -----------
        Net cash (used in) provided by financing
         activities                                     (5,888)      (4,001)
        Effect of foreign currency on cash                 129         (240)
                                                   -----------  -----------
        Net (decrease) increase in cash and cash
         equivalents                                     3,687       (5,046)
Cash and cash equivalents, beginning of year            15,034       20,080
                                                   -----------  -----------
Cash and cash equivalents, end of year             $    18,721  $    15,034
                                                   ===========  ===========

                GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
                       ADJUSTED EBITDA RECONCILIATION
                           (Dollars in thousands)
                                                      Three Months Ended
                                                         December 31,
                                                   ------------------------
                                                       2012         2011
                                                   -----------  -----------
Adjusted EBITDA Reconciliation:
Net income (loss) as reported                      $     2,382  $      (654)
Adjustments:
  Provision (benefit) for income taxes                   1,549          196
  Interest expense                                         661        1,011
  Interest income                                          (15)         (67)
  Depreciation and amortization                            224          356
  Share based compensation                                   -            -
                                                   -----------  -----------
  Total EBITDA adjustments                               2,419        1,496
                                                   -----------  -----------
Adjusted EBITDA                                    $     4,801  $       842
                                                   ===========  ===========

                                                    Year Ended December 31,
                                                   ------------------------
                                                       2012         2011
                                                   -----------  -----------
Adjusted EBITDA Reconciliation:
Net income (loss) as reported                      $     3,521  $       602
Adjustments:
  Provision (benefit) for income taxes                   1,936        2,060
  Interest expense                                       2,612        4,885
  Interest income                                         (201)        (476)
  Depreciation and amortization                            835          981
  Share based compensation                                   -          431
                                                   -----------  -----------
  Total EBITDA adjustments                               5,182        7,881
                                                   -----------  -----------
Adjusted EBITDA                                    $     8,703  $     8,483
                                                   ===========  ===========

Investor Contacts:

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

Addo Communications
Patricia Nir
310-829-5400

(Source: Market Wire )
(Source: Quotemedia)

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