Great American Group Announces Third Quarter 2012 Financial

Great American Group Announces Third Quarter 2012 Financial Results 
WOODLAND HILLS, CA -- (Marketwire) -- 11/14/12 --  Great American
Group, Inc.(R) (OTCBB: GAMR) ("Great American Group" or the
"Company"), a leading provider of asset disposition, valuation and
appraisal services, today announced financial results for its third
quarter ended September 30, 2012. 


 
--  Total revenues of $14.2 million, a decrease from $28.5 million a year
    ago
--  Net loss of $0.5 million, versus net income of $4.0 million from a
    year ago
--  Diluted loss per share of $0.02, versus a diluted earnings per share
    of $0.14 from a year ago

  
Third Quarter Results 
For the third quarter ended September 30, 2012, the Company reported
total revenues of $14.2 million, a decrease from revenues of $28.5
million in the third quarter of 2011. Revenues from services and fees
were $11.0 million, compared to $27.6 million in the same period the
prior year. Revenues from sale of goods were $3.3 million, compared
to $0.9 million in the third quarter of 2011. The decrease in total
revenues during the quarter was primarily due to decreases in the
auction and liquidation segment of $17.3 million, and a decrease in
revenues in the valuation and appraisal services segment of $0.1
million, offset by an increase in revenues of $3.1 million from the
UK Retail Stores segment.  
"During the third quarter we experienced a slowdown in business
activity in our auction and liquidation segment. In the prior year
quarter, we generated revenues of $14.7 million from the TJ Hughes
retail liquidation engagement in the United Kingdom and the Borders
retail liquidation engagement in the United States and there were no
similar large retail liquidation engagements in the third quarter of
this year," said Andrew Gumaer, Chief Executive Officer of Great
American Group. "Revenues from our auction and liquidation segment
typically comprise a significant amount of our total revenues and
thus can impact our operating results from quarter to quarter. I am
happy to report that we are currently participating in the joint
venture that is conducting the sale of all inventory for Fashion Bug,
a 568 store women's apparel and accessories chain. The 568 Fashion
Bug stores are located in 39 states and is part of Ascena's planned
divestiture of the Fashion Bug brand and orderly wind down of the
Fashion Bug operations. In addition, we were recently engaged to
provide consulting services on the store closure for Comet, a 236
store electronics chain in the United Kingdom. We expect our
engagement on Comet to be mostly completed by the end of 2012. We
continue to be highly focused on the execution of our business
initiatives and expanding our business outside the United States." 
Direct cost of services was $4.8 million, compared to $7.6 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 third quarter of 2012, where the Company contractually bills
fees, commissions and reimbursable expenses as compared to the third
quarter of the prior year. Cost of goods sold was $2.2 million in the
third quarter of 2012, compared to $1.0 million in the third quarter
of the prior year.  
Selling, general and administrative expenses decreased to $7.9
million, compared to $10.9 million in the third quarter of 2011. The
decrease in selling, general and administrative expenses was
primarily the result of a decrease of $2.0 million in the auction and
liquidation segment, a decrease of $0.1 million in the valuation and
appraisal segment, and a decrease of $2.6 million in corporate and
other, offset by an increase of $1.6 million in the UK Retail Stores
segment as a result of the consolidation of Shoon in May 2012.  
Loss before the benefit of income taxes was $1.1 million during the
third quarter of 2012, compared to income before the provision of
income taxes of $6.0 million in the third quarter of 2011. During the
third quarter of 2012, the Company recorded a benefit for income
taxes of $0.4 million, compared with a provision for income taxes of
$2.0 million in the third quarter of 2011. Net loss attributable to
the Company was $0.6 million, or $0.02 per diluted share, compared to
net income of $4.0 million, or $0.14 per diluted share in the third
quarter of 2011.  
Nine Month Results  
For the first nine months of 2012, the Company reported total
revenues of $53.2 million, compared to $52.2 million in the first
nine months of 2011. Revenues from services and fees were $41.1
million, compared to $50.1 million a year ago. Sales of goods were
$12.1 million compared to $2.0 million in the same period of 2011.  
Total operating expenses were $50.7 million, compared to $45.0
million in 2011. Operating income was $2.5 million, compared to $7.1
million in the prior year. Income before provision for income taxes
for the first nine months of 2012 was $2.2 million, compared to $3.1
million during the first nine months of 2011. The Company recorded a
provision for income taxes of $0.4 million compared to $1.9 million
in the same period of 2011. Net income attributable to the Company
during the first nine months of 2012 was $1.1 million, or $0.04 per
diluted share, compared with $1.3 million, or $0.04 in the same
period of 2011.  
Financial Position 
At September 30, 2012, the Company had $19.0 million in cash and cash
equivalents, an increase compared to $15.0 million at December 31,
2011. Working capital was $26.5 million at September 30, 2012.  
Conference Call 
The Company will host a conference call today at 4:30 p.m. EST, to
discuss results for the third quarter ended September 30, 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 # 403231. International callers should dial (201)
689-8562. A digital replay will be available beginning November 14,
2012, at 7:30 p.m. EST, through November 21, 2012, at 11:59 p.m. EST.
To access the replay, dial (877) 870-5176 (U.S.), and use passcode
403231. 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. 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 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 Stat
ements 
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                 
                   Condensed Consolidated Balance Sheets                    
                  (Dollars in thousands, except par value)                  
                                                                            
                                               September 30,   December 31, 
                                                    2012           2011     
                                               -------------  ------------- 
                                                (Unaudited)                 
                    Assets                                                  
Current assets:                                                           
  Cash and cash equivalents                    $      18,987  $      15,034 
  Restricted cash                                      6,767              - 
  Accounts receivable, net                             6,148          7,482 
  Advances against customer contracts                  2,813          5,276 
  Inventory                                            2,686              - 
  Goods held for sale or auction                      10,626         12,934 
  Loan receivable                                        537          8,306 
  Note receivable - related party                        680          3,844 
  Deferred income taxes                                4,765          4,460 
  Prepaid expenses and other current assets            1,175          1,110 
                                               -------------  ------------- 
    Total current assets                              55,184         58,446 
Property and equipment, net                              897            916 
Goodwill                                               5,688          5,688 
Other intangible assets, net                             140            140 
Deferred income taxes                                 10,311         10,504 
Other assets                                             642            664 
                                               -------------  ------------- 
    Total assets                               $      72,862  $      76,358 
                                               =============  ============= 
       Liabilities and Equity (Deficit)                                     
Current liabilities:                                                        
  Accounts payable and accrued liabilities     $      12,514  $      13,718 
  Auction and liquidation proceeds payable               612             18 
  Mandatorily redeemable noncontrolling                                     
   interests                                           2,817          3,408 
  Revolving credit facility                            1,266          1,942 
  Current portion of long-term debt                    1,724          1,724 
  Notes payable                                        9,695         11,555 
  Current portion of capital lease obligation             20             29 
                                               -------------  ------------- 
    Total current liabilities                         28,648         32,394 
Capital lease obligation, net of current                                    
 portion                                                   -             13 
Long-term debt, net of current portion                50,483         52,207 
                                               -------------  ------------- 
    Total liabilities                                 79,131         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                                  
   September 30, 2012 and December 31, 2011,                                
   respectively                                            4              4 
  Additional paid-in capital                           3,082          3,177 
  Retained earnings (deficit)                        (10,051)       (11,190)
  Accumulated other comprehensive income                                    
   (loss)                                                (36)          (247)
                                               -------------  ------------- 
    Total Great American Group, Inc.                                        
     stockholders' equity (deficit)                   (7,001)        (8,256)
Noncontrolling interests                                 732              - 
                                               -------------  ------------- 
    Total equity (deficit)                            (6,269)   
     (8,256)
                                               -------------  ------------- 
    Total liabilities and equity (deficit)     $      72,862  $      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         Nine Months Ended    
                               September 30,             September 30,      
                         ------------------------  ------------------------ 
                             2012         2011         2012         2011    
                         -----------  -----------  -----------  ----------- 
                                                                            
Revenues:                                                                   
  Services and fees      $    10,956  $    27,575  $    41,154  $    50,147 
  Sale of goods                3,279          937       12,052        2,012 
                         -----------  -----------  -----------  ----------- 
    Total revenues            14,235       28,512       53,206       52,159 
                         -----------  -----------  -----------  ----------- 
Operating expenses:                                                         
  Direct cost of                                                            
   services                    4,844        7,613       16,097       15,904 
  Cost of goods sold           2,172          974        8,449        2,287 
  Selling, general and                                                      
   administrative                                                           
   expenses                    7,878       10,897       26,155       26,848 
                         -----------  -----------  -----------  ----------- 
    Total operating                                                         
     expenses                 14,894       19,484       50,701       45,039 
                         -----------  -----------  -----------  ----------- 
    Operating income                                                        
     (loss)                     (659)       9,028        2,505        7,120 
Other income (expense):                                                     
  Other expense                    -           (3)           -          (13)
  Interest income                 30          119          186          409 
  Income (loss) from                                                        
   equity investment in                                                     
   Great American Real                                                      
   Estate, LLC                   165         (174)          45         (522)
  Gain from bargain                                                         
   purchase                        -            -        1,366            - 
  Interest expense              (678)      (2,921)      (1,951)      (3,874)
                         -----------  -----------  -----------  ----------- 
    Income (loss) before                                                    
     income taxes             (1,142)       6,049        2,151        3,120 
(Provision) benefit for                                                     
 income taxes                    375       (2,018)        (387)      (1,864)
                         -----------  -----------  -----------  ----------- 
  Net income (loss)             (767)       4,031        1,764        1,256 
Net income attributable                                                     
 to noncontrolling                                                          
 interests                      (220)           -          625            - 
                         -----------  -----------  -----------  ----------- 
  Net income (loss)                                                         
   attributable to Great                                                    
  American Group, Inc.   $      (547) $     4,031  $     1,139  $     1,256 
                         ===========  ===========  ===========  =========== 
                                                                            
Basic income (loss) per                                                     
 share                   $     (0.02) $      0.14  $      0.04  $      0.04 
Diluted income (loss)                                                       
 per share               $     (0.02) $      0.14  $      0.04  $      0.04 
                                                                            
Weighted average basic                                                      
 shares outstanding       28,682,975   28,650,980   28,682,521   28,491,812 
Weighted average diluted                                                    
 shares outstanding       28,682,975   29,519,141   29,599,012   29,359,973 
                                                                            
Comprehensive income                                                        
 (loss):                                                                    
Net income (loss)        $      (767) $     4,031  $     1,764  $     1,256 
Other comprehensive                                                         
 income (loss):                                                             
  Change in cumulative                                                      
   translation                                                              
   adjustment                    (52)          36          211          (94)
                         -----------  -----------  -----------  ----------- 
Other comprehensive                                                         
 income (loss), net of                                                      
 tax                             (52)          36          211          (94)
                         -----------  -----------  -----------  ----------- 
Total comprehensive                                                         
 income (loss)                  (819)       4,067        1,975        1,162 
Comprehensive income                                                        
 (loss) attributable to                                                     
 noncontrolling                                                             
 interests                       220            -         (625)           - 
                         -----------  -----------  -----------  ----------- 
Comprehensive income                                                        
 (loss) attributable to                                                     
 Great American Group,                                                      
 Inc.                    $      (599) $     4,067  $     1,350  $     1,162 
                         ===========  ===========  ===========  =========== 
                                                                            
                                                                            
                                                                            
                GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES                 
               Condensed Consolidated Statement of Cash Flows               
                           (Dollars in thousands)                           
                                                                            
                                                         Nine Mont
hs Ended  
                                                           September 30,    
                                                       -------------------- 
                                                          2012       2011   
                                                       ---------  --------- 
Cash flows from operating activities:                                       
  Net income                                           $   1,764  $   1,256 
  Adjustments to reconcile net income to net cash                           
   provided by (used in) operating activities:                              
    Depreciation and amortization                            611        625 
    Recoveries of bad debts                                 (116)         - 
    Impairment of goods held for sale or auction             127          - 
    Share-based payments                                       -        431 
    Effect of foreign currency on operations                 (48)       (85)
    Non-cash interest                                        (10)     1,148 
    Amortization of discount on note payable                   -        424 
    Loss (income) from equity investment in Great                           
     American Real Estate, LLC                               (45)       522 
    Gain from bargain purchase                            (1,366)         - 
    Loss on disposal of assets                                 3          3 
    Deferred income taxes                                   (112)     1,735 
    Income allocated to mandatorily redeemable                              
     noncontrolling interests                              1,497      3,538 
    Change in operating assets and liabilities:                             
      Accounts receivable and advances against                              
       customer contracts                                  3,588    (11,208)
      Inventory                                            1,050          - 
      Goods held for sale or auction                       2,054        597 
      Loan receivable                                      7,769    (10,939)
      Prepaid expenses and other assets                      314       (507)
      Accounts payable and accrued expenses               (2,097)     8,482 
      Auction and liquidation proceeds payable               594     (1,712)
                                                       ---------  --------- 
        Net cash provided by (used in) operating                            
         activities                                       15,577     (5,690)
                                                       ---------  --------- 
Cash flows from investing activities:                                       
  Acquisition of business                                 (1,246)         - 
  Purchase of noncontrolling interest in subsidiary          (95)         - 
  Purchases of property and equipment                       (403)      (237)
  Proceeds from sale of property and equipment                21            
  Decrease in note receivable - related party              3,164      2,706 
  Equity investment in Great American Real Estate, LLC      (120)      (331)
  Increase in restricted cash                             (6,767)    (5,373)
                                                       ---------  --------- 
        Net cash used in investing activities             (5,446)    (3,235)
                                                       ---------  --------- 
Cash flows from financing activities:                                       
  Repayments of capital lease obligations                    (22)       (20)
  Proceeds from (repayment of) revolving line of                            
   credit                                                   (676)     1,694 
  Repayments of notes payable                             (2,042)      (306)
  Repayments of long term debt                            (1,724)         - 
  Proceeds from notes payable                                  -      7,000 
  Payment of employment taxes on vesting of restricted                      
   stock                                                       -       (132)
  Proceeds from formation of noncontrolling interests         78          - 
  Distribution to noncontrolling interests                (2,074)    (2,962)
                                                       ---------  --------- 
        Net cash (used in) provided by financing                            
         activities                                       (6,460)     5,274 
                                                       ---------  --------- 
        Increase (decrease) in cash and cash                                
         equivalents                                       3,671     (3,651)
        Effect of foreign currency on cash                   282         (9)
                                                       ---------  --------- 
        Net increase (decrease) in cash and cash                            
         equivalents                                       3,953     (3,660)
Cash and cash equivalents, beginning of period            15,034     20,080 
                                                       ---------  --------- 
Cash and cash equivalents, end of period               $  18,987  $  16,420 
                                                       =========  ========= 
Supplemental disclosures:                                                   
  Interest paid                                        $   1,961  $     887 
  Taxes paid                                                 278          - 
                                                                            
                                                                            
                                                                       
              GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES              
          Condensed Consolidated Statement of Equity (Deficit)         
               (Dollars in thousands, except share data)               
                                                                       
                                                                       
                                                            Additional 
                       Preferred Stock     Common Stock       Paid-in  
                     ------------------ ------------------             
                      Shares    Amount    Shares    Amount    Capital  
                     --------  -------- ----------  ------  ---------- 
                                                                       
Balance, January 1,                                                    
 2012                       - $       - 31,001,609 $     4 $     3,177 
Net income for the                                                     
 nine months ended                                                     
 September 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, September                                                     
 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                                                          
 nine months ended                                                          
 September 30, 2012      1,139                              625       1,764 
Foreign currency                                                            
 translation                                                                
 adjustment                                211                          211 
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                                                   29          29 
Adjustment from                                                             
 restricted stock                                                           
 awards                                                                   - 
                    --------------------------------------------------------
Balance, September                                                          
 30, 2012           $  (10,051) $          (36) $           732  $   (6,269)
                    ========================================================
                                                                            
                                                                            
                                                                            
                GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES                 
  Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization   
                                (Unaudited)                                 
                           (Dollars in thousands)                           
                                                                            
                                   Three Months Ended    Nine Months Ended  
                                     September 30,         September 30,    
                                  -------------------   ------------------- 
                                    2012       2011       2012       2011   
                                  --------   --------   --------   -------- 
Adjusted EBITDA Reconciliation:                                             
                                                                            
Net income (loss) as reported    $    (547) $   4,031  $   1,139  $   1,256 
Adjustments:                                                                
  Provision (benefit) for income                                            
   taxes                              (375)     2,018        387      1,864 
  Interest expense                     678      2,921      1,951      3,874 
  Interest income                      (30)      (119)      (186)      (409)
  Depreciation and amortization        153        186        611        625 
  Share based compensation               -         10          -        431 
                                  --------   --------   --------   -------- 
    Total EBITDA adjustments           426      5,016      2,763      6,385 
                                  --------   --------   --------   -------- 
                                                                            
Adjusted EBITDA                  $    (121) $   9,047  $   3,902  $   7,641 
                                  ========   ========   ========   ======== 

  
Investor Contacts:  
Great American Group 
Phil Ahn
SVP, Strategy & Corporate Development 
818-884-3737  
Addo Communications
Patricia Dolmatsky-Nir
310-829-5400 
 
 
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