Great American Group Announces First Quarter 2013 Financial

WOODLAND HILLS, CA--(Marketwired - May 14, 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 first quarter ended March 31, 2013.

For the first quarter ended March 31, 2013, the Company reported total revenues of $21.0 million, an increase from $19.3 million in the first quarter of 2012. Revenues from services and fees increased to $18.6 million, compared to $16.9 million in the same period the prior year. Revenues from sale of goods were $2.3 million, compared to $2.4 million in the first quarter of 2012. The increase in total revenues during the quarter was primarily due to an increase in revenues of $2.3 million in the Company's UK retail store segment resulting from the May 2012 investments in Shoon and consolidation of Shoon's operating results. This was offset by a decrease in revenues in the auction and liquidation segment of $0.5 million and a decrease in revenues in the valuation and appraisal services segment of $0.1 million as compared to the prior year period.

"Our first quarter 2013 revenues increased 8.5% to $21.0 million and net income increased to $1.3 million, from $1.1 million in the prior year's quarter," said Andrew Gumaer, Chief Executive Officer of Great American Group. "During the first quarter, our results of operations were favorably impacted from our participation in the joint venture involving the liquidation of inventory for the going-out-of-business sale of Fashion Bug, a 568 store women's apparel retailer."

Direct cost of services were $6.2 million, compared to $6.3 million a year ago. Selling, general and administrative expenses were $10.9 million, compared to $8.5 million in the first quarter of 2012. The increase in selling, general and administrative expenses was primarily attributed to an increase in expenses incurred as a result of the consolidation of Shoon's operations from our investment in May 2012. The increase in selling, general and administrative was also impacted by an increase in headcount in our valuation and appraisal segment, and the ongoing expansion of our UK operations.

Interest expense during each of the first quarters in 2013 and 2012 was $0.6 million. Interest expense included $0.5 million of interest expense on the notes payable to the Great American Members and Phantom Equity holders, and $0.1 million of interest expense on our borrowings under the Company's revolving credit facility and letter of credit fees and amortization of deferred loan fees on our asset based credit facility.

Operating income for the first quarter of 2013 was $2.3 million, compared to $2.4 million during the first quarter of 2012.

Pretax income was $1.7 million compared to pretax income of $1.8 million in the first quarter of 2012. Net income in the first quarter of 2013 was $1.3 million compared to net income of $1.1 million for the first quarter of 2012. Diluted net earnings per share was $0.04 in the first quarter of 2013 and 2012. 

Financial Position At March 31, 2013, the Company had $31.1 million in cash and cash equivalents and $0.2 million of restricted cash. 

Conference Call The Company will host a conference call today at 4:30 p.m. ET, to discuss results for the first quarter ended March 31, 2013. 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 # 413447. International callers should dial (201) 689-8562. A digital replay will be available beginning May 14, 2013, at 7:30 p.m. ET, through May 21, 2013, at 11:59 p.m. ET. To access the replay, dial (877) 870-5176 (U.S.), and use passcode 413447. 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, London and Milan. 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, 2012. 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)
					March 31,				December 31,
					2013				2012
					(Unaudited)
Assets
Current assets:
	Cash and cash equivalents			$	31,093			$	18,721
	Restricted cash				230				7,923
	Accounts receivable, net				9,050				16,591
	Advances against customer contracts				2,218				2,441
	Inventory				2,638				2,216
	Goods held for sale or auction				10,239				10,196
	Due from related party				373				-
	Note receivable - related party				415				611
	Deferred income taxes				3,339				4,114
	Prepaid expenses and other current assets				1,608				1,145
		Total current assets			61,203				63,958
Property and equipment, net					1,036				970
Goodwill					5,688				5,688
Other intangible assets, net					140				140
Deferred income taxes					9,252				9,484
Other assets					275				343
		Total assets		$	77,594			$	80,583
Liabilities and Equity (Deficit)
Current liabilities:
	Accounts payable and accrued liabilities			$	16,058			$	16,886
	Auction and liquidation proceeds payable				246				864
	Mandatorily redeemable noncontrolling interests				2,535				2,856
	Revolving credit facility				1,728				2,304
	Current portion of long-term debt				1,724				1,724
	Notes payable				8,458				9,628
	Current portion of capital lease obligation				5				13
		Total current liabilities			30,754				34,275
Long-term debt, net of current portion					50,483				50,483
		Total liabilities			81,237				84,758
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 issued and outstanding as of March 31, 2013 and December 31, 2012, respectively				4				4
	Additional paid-in capital				3,082				3,082
	Retained earnings (deficit)				(6,380	)			(7,669	)
	Accumulated other comprehensive loss				(875	)			(520	)
		Total Great American Group, Inc. stockholders' equity (deficit)			(4,169	)			(5,103	)
Noncontrolling interests					526				928
		Total equity (deficit)			(3,643	)			(4,175	)
		Total liabilities and equity (deficit)		$	77,594			$	80,583

GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)
(Dollars in thousands, except share data)
					Three Months Ended March 31,
					2013				2012
Revenues:
	Services and fees			$	18,637			$	16,900
	Sale of goods				2,317				2,420
		Total revenues			20,954				19,320
Operating expenses:
	Direct cost of services				6,152				6,252
	Cost of goods sold				1,520				2,149
	Selling, general and administrative expenses				10,937				8,519
		Total operating expenses			18,609				16,920
		Operating income			2,345				2,400
Other income (expense):
	Interest income				2				79
	Loss from equity investment in Great American Real Estate, LLC				-				(80	)
	Interest expense				(634	)			(627	)
		Income before income taxes			1,713				1,772
Provision for income taxes					(778	)			(705	)
		Net income			935				1,067
Net loss attributable to noncontrolling interests					(354	)			-
		Net income attributable to Great American Group, Inc.		$	1,289			$	1,067
Basic income per share				$	0.04			$	0.04
Diluted income per share				$	0.04			$	0.04
Weighted average basic shares outstanding					28,682,975				28,681,609
Weighted average diluted shares outstanding					29,656,430				29,534,610

GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(Dollars in thousands)
							Three Months Ended March 31,
							2013				2012
Cash flows from operating activities:
	Net income					$	935			$	1,067
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization					707				201
		Impairment of goods held for sale or auction					22				21
		Effect of foreign currency on operations					(64	)			64
		Non-cash interest					-				(77	)
		Loss from equity investment in Great American Real Estate, LLC					-				80
		Deferred income taxes					1,007				578
		Income allocated to mandatorily redeemable noncontrolling interests					291				369
		Change in operating assets and liabilities:
			Accounts receivable and advances against customer contracts				7,331				(394	)
			Due from related party				(373	)			-
			Inventory				(588	)			-
			Goods held for sale or auction				(589	)			399
			Loan receivable				-				3,279
			Prepaid expenses and other assets				(55	)			(371	)
			Accounts payable and accrued expenses				(356	)			1,886
			Auction and liquidation proceeds payable				(618	)			406
				Net cash provided by operating activities			7,650				7,508
Cash flows from investing activities:
	Purchases of property and equipment						(247	)			(65	)
	Decrease in note receivable - related party						196				-
	Equity investment in Great American Real Estate, LLC						-				(80	)
	Decrease (increase) in restricted cash						7,693				(256	)
				Net cash provided by (used in) investing activities			7,642				(401	)
Cash flows from financing activities:
	Repayments of capital lease obligations						(8	)			(7	)
	Repayment of revolving line of credit						(576	)			(327	)
	Repayments of notes payable						(1,170	)			(106	)
	Distribution to noncontrolling interests						(612	)			(1,039	)
				Net cash used in financing activities			(2,366	)			(1,479	)
				Increase in cash and cash equivalents			12,926				5,628
				Effect of foreign currency on cash			(554	)			144
				Net increase in cash and cash equivalents			12,372				5,772
Cash and cash equivalents, beginning of period							18,721				15,034
Cash and cash equivalents, end of period						$	31,093			$	20,806
Supplemental disclosures:
	Interest paid					$	57			$	704
	Taxes paid					$	163			$	-

GREAT AMERICAN GROUP, INC. AND SUBSIDIARIES
Adjusted EBITDA Reconciliation
(Dollars in thousands)
			Three Months Ended
			March 31,
			2013			2012
Adjusted EBITDA Reconciliation:
Net income (loss) as reported		$	1,289		$	1,067
Adjustments:
	Provision (benefit) for income taxes		778			705
	Interest expense		634			627
	Interest income		(2	)		(79	)
	Depreciation and amortization		707			201
	Total EBITDA adjustments		2,117			1,454
Adjusted EBITDA		$	3,406		$	2,521