Signature Group Holdings, Inc. Reports Third Quarter 2013 Results

      Signature Group Holdings, Inc. Reports Third Quarter 2013 Results

- Strategic Steps Taken to Implement Growth Strategies -

PR Newswire

SHERMAN OAKS, Calif., Nov. 6, 2013

SHERMAN OAKS, Calif., Nov.6, 2013 /PRNewswire/ --Signature Group Holdings,
Inc. (OTCQX: SGGHD) today announced financial results for the third quarter
ended September30, 2013.

The Company's Adjusted EBITDA from continuing operations for the third quarter
of 2013 was $0.3 million, compared to $1.2 million in the prior year period.
As a result of the 31.9% increase in the value of Signature's common stock
price per share during the quarter, the Company recognized a $3.3 million
noncash expense associated with the increase in the fair value of its common
stock warrant liability. This noncash charge was the primary driver for the
Company's EBITDA from continuing operations being a negative $4.3 million,
compared to a negative $0.6 million in the prior year. (See Non-GAAP
Financial Measures below for more information about EBITDA and Adjusted
EBITDA, and a reconciliation to the most comparable GAAP financial measures.)

The Company's net loss for the third quarter of 2013 was $5.9 million, or
$0.49 per share, compared to a net loss of $2.6 million, or $0.23 per share,
reported for the third quarter of 2012. The previously mentioned
noncashchargerelated to the Company's common stock warrant liability
contributed to the net loss by $0.28 per share during the quarter while the
2012 third quarter results included a $0.9 million, or $0.07 per share,
noncashcharge related to this liability. The per share results reflect the
Company's outstanding share count as adjusted for its one-for-ten reverse
stock split, which became effective October 15, 2013.

"The last few months were noteworthy for the strategic steps taken to position
the company for growth, including a $300 million Shelf Registration becoming
effective, the completion of a reverse stock split and plans for our
reincorporation to Delaware," stated Chairman and CEO Craig T. Bouchard. "From
a financial standpoint, our third quarter results reflect cost cutting
measures that were taken to streamline the business. We are continuing to
manage down our SG&A costs, while supporting the consistent growth of our
Industrial Supply business. We continue in our pursuit of acquisition
opportunities that will reshape the company."

Quarterly Results

Operating revenues from continuing operations were $9.8 million in the third
quarter of 2013, compared to $11.3 million in the third quarter of 2012. The
decrease is primarily related to a $1.0 million reduction in interest income,
resulting from the sale of the residential loan portfolio in the second
quarter of 2013 which generated $27.1 million of cash, and a $0.6 million
impairment on nonmarketable equity securities that was sold subsequent to
quarter end for $1.4 million of cash.

Operating costs decreased $0.4 million year over year, primarily from a $0.3
million decrease in selling, general and administrative expenses associated
with reduced compensation expense and professional fees.

The operating loss in the third quarter of 2013 was $2.4 million, compared to
a $1.3 million operating loss in the third quarter of 2012.

At September30, 2013, the Company had $74.2 million in cash and cash
equivalents, $84.1 million of working capital and $44.9 million in total debt.

Key Segment Developments

  oIndustrial Supply – This business continued to expand its geographic
    footprint with the opening of two new warehouse locations during the
    quarter – Charlotte, North Carolina on July 1, and Birmingham, Alabama on
    September 1. Subsequent to quarter end, Industrial Supply became an
    international supplier with the opening of the first warehouse location
    outside of the U.S. on November 1 in Toronto, Canada.
  oSignature Special Situations – The Company took an impairment charge
    relating to a non-marketable equity security interest in conjunction with
    a decision to sell the asset. Subsequent to quarter end, the equity
    interest was sold for cash proceeds of $1.4 million, which approximated
    the carrying value at September 30, 2013.
  oCorporate and Other – Corporate expenses declined during the quarter as
    the Company realized the benefits of previous staff reductions and other
    cost cutting measures.

About Signature Group Holdings, Inc.

Signature is a diversified enterprise with current principal activities in
industrial supply and special situations finance. Signature has significant
capital resources and is actively seeking additional acquisitions as well as
growth opportunities for its existing businesses. Signature has federal net
operating loss tax carryforwards of approximately $887.3 million. For more
information about Signature, please visit its corporate website at
www.signaturegroupholdings.com.

Cautionary Statement Regarding Forward-Looking Statements

This earnings release contains forward-looking statements that are based on
current expectations, estimates, and projections about our business and
prospects, as well as management's beliefs, and certain assumptions made by
management. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "estimates," "may," "should," "will" and variations of
these words are intended to identify forward-looking statements. Such
statements speak only as of the date hereof and are subject to change. The
Company undertakes no obligation to publicly revise or update any
forward-looking statements for any reason. These statements include, but are
not limited to, statements about the Company's expansion and business
strategies and anticipated growth opportunities, as well as future
performance, growth, operating results, financial condition and prospects.
Such statements are not guarantees of future performance and are subject to
certain risks, uncertainties, and assumptions that are difficult to predict.
Accordingly, actual results could differ materially and adversely from those
expressed in any forward-looking statements as a result of various factors.
Important factors that may cause such a difference include, but are not
limited to the demand for Industrial Supply's products; the Company's ability
to successfully identify, consummate and integrate the acquisitions of other
businesses; the Company's ability to open warehouses in additional geographic
regions; changes in business or other market conditions; the difficulty of
keeping expense growth at modest levels while increasing revenues; the
Company's ability to successfully defend against current and new litigation
matters as well as demands by investment banks for defense, indemnity and
contribution; and other risks detailed from time to time in the Company's
Securities and Exchange Commission filings, including but not limited to the
most recently filed Annual Report on Form 10-K and subsequent reports on Forms
10-Q and 8-K.

(Tables follow)




Signature Group Holdings, Inc.
Consolidated Statements of Operations
(Unaudited)
                                      Three Months Ended September 30,
(Dollars in thousands, except per     2013                 2012
share amounts)
Operating revenues:
Industrial Supply                     $      10,230  $      10,203
Signature Special Situations          (453)                1,121
Corporate and Other                   -                    -
Total operating revenues              9,777                11,324
Operating costs:
Cost of goods sold                    6,481                6,416
Selling, general and administrative   4,307                4,626
Interest expense                      985                  1,012
Amortization of intangibles           397                  586
Total operating costs                 12,170               12,640
Operating loss                        (2,393)              (1,316)
Other income (expense):
Change in fair value of common stock  (3,300)              (850)
warrant liability
Other, net                            (1)                  (60)
Total other income (expense)          (3,301)              (910)
Loss from continuing operations       (5,694)              (2,226)
before income taxes
Income tax benefit                    (7)                  (60)
Loss from continuing operations       (5,687)              (2,166)
Loss from discontinued operations,    (172)                (462)
net of income taxes
Net loss                              (5,859)              (2,628)
Loss attributable to noncontrolling   -                    -
interest
Net loss attributable to Signature    $      (5,859)  $      (2,628)
Group Holdings, Inc.
LOSS PER SHARE:
Basic and diluted:
Loss from continuing operations       $              $      
                                      (0.48)               (0.19)
Loss from discontinued operations,    (0.01)               (0.04)
net of income taxes
Net loss attributable to Signature    $              $      
Group Holdings, Inc.                  (0.49)               (0.23)



Signature Group Holdings, Inc.
Consolidated Balance Sheets
                                    September 30,         December 31,
(Dollars in thousands)              2013                  2012
ASSETS                              (Unaudited)
Current assets:
Cash and cash equivalents           $      74,172   $      53,699
Investment securities, available    -                     3,060
for sale
Trade accounts receivable, net      4,133                 3,607
Inventory                           10,502                10,247
Loans receivable, net due within    2,358                 620
one year
Other current assets                2,115                 1,266
Current assets of discontinued      687                   3,614
operations
Total current assets                93,967                76,113
Loans receivable, net               1,967                 23,752
Intangible assets, net              3,113                 4,329
Goodwill                            17,780                17,780
Other noncurrent assets             1,287                 3,087
Noncurrent assets of discontinued   581                   650
operations
TOTAL ASSETS                        $     118,695    $     125,711
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Trade payables                      $       3,586  $       2,222
Lines of credit                     500                   1,000
Contingent consideration            -                     4,000
Long-term debt due within one year  2,373                 3,490
Other current liabilities           1,326                 1,009
Current liabilities of discontinued 2,065                 2,292
operations
Total current liabilities           9,850                 14,013
Long-term debt                      42,046                43,562
Common stock warrant liability      10,800                2,350
Other noncurrent liabilities        211                   60
Noncurrent liabilities of           6,750                 7,500
discontinued operations
TOTAL LIABILITIES                   69,657                67,485
TOTAL SHAREHOLDERS' EQUITY          49,038                58,226
TOTAL LIABILITIES AND SHAREHOLDERS' $     118,695    $     125,711
EQUITY

Non-GAAP Financial Measures

A non-GAAP financial measure is a numerical measure of historical or future
financial performance, financial position or cash flows that excludes amounts
or is subject to adjustments that have the effect of excluding amounts that
are included in the most directly comparable measure calculated and presented
in accordance with generally accepted accounting principles ("GAAP") in the
balance sheets, statements of operations, or statements of cash flows; or
includes amounts, or is subject to adjustments that have the effect of
including amounts, that are excluded from the most directly comparable
measures so calculated and presented. EBITDA and Adjusted EBITDA are not
measures computed in accordance with GAAP. EBITDA and Adjusted EBITDA are
presented and discussed because management believes they enhance the
understanding of the financial performance of the Company's operating segments
by investors and lenders. As a complement to financial measures provided in
accordance with GAAP, management believes that EBITDA and Adjusted EBITDA
assist investors who follow the practice of some investment analysts who
adjust GAAP financial measures to exclude items that may obscure underlying
performance and distort comparability. Because EBITDA and Adjusted EBITDA are
not measures computed in accordance with GAAP, they are not intended to be
presented herein as a substitute for net earnings (loss) as an indicator of
operating performance. EBITDA and Adjusted EBITDA are primarily performance
measurements used by our senior management and the Company's Board of
Directors to evaluate certain operating results.

We calculate EBITDA, and Adjusted EBITDA, as earnings (loss) before interest,
taxes, depreciation and amortization, or EBITDA, which is then adjusted to
remove or add back certain items, or Adjusted EBITDA. These items are
identified below in the reconciliation of net earnings (loss) to EBITDA and
Adjusted EBITDA from continuing operations. Net earnings (loss) is the GAAP
measure most directly comparable to EBITDA and Adjusted EBITDA.

Our calculation of EBITDA and Adjusted EBITDA may be different from the
calculation used by other companies for non-GAAP measures having the same or
similar names; therefore, our calculations may not be comparable to those of
other companies.

The following tables present our reconciliation of net loss to EBITDA and
Adjusted EBITDA from continuing operations for the three months ended
September 30, 2013 and 2012:

                                      Three Months Ended September 30,
(Dollars in thousands)                2013                 2012
Loss from continuing operations       $      (5,687)  $      (2,166)
Plus:
Interest                              985                  1,012
Taxes                                 (7)                  (60)
Depreciation                          30                   18
Amortization of intangibles           397                  586
EBITDA from continuing operations     (4,282)              (610)
Adjustments:
Change in fair value of common stock  3,300                850
warrant liability
Change in fair value of contingent    -                    76
consideration
Impairment of nonmarketable equity    581                  -
securities
Share-based compensation              556                  462
Accretion of discounts                (23)                 (189)
Amortization of other capitalized     18                   13
costs
Contested proxy and related expenses  101                  570
and settlements
Total adjustments                     4,533                1,782
Adjusted EBITDA from continuing       $            $      
operations                            251                  1,172



SOURCE Signature Group Holdings, Inc.

Website: http://www.signaturegroupholdings.com
Contact: Signature Group Holdings, Inc., Jeff Crusinberry, SVP and Treasurer,
(805) 435-1255, invrel@signaturegroupholdings.com
 
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