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

WOODLAND HILLS, CA--(Marketwire - Mar 28, 2013) - 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