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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