SAN DIEGO & TORONTO--(BUSINESS WIRE)--Heritage Global Inc. (OTCQB: HGBL, CSE: HGP), a leader in asset liquidation transactions, valuations and advisory services, today reported its financial results for the third quarter and nine months ended September 30, 2014 as summarized below.
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Summary Financial Data
(unaudited) |
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| ($ in thousands, except per share amounts) |
Three months ended
September 30, |
Nine months ended
September 30, |
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2014 |
2013 |
2014 |
2013 |
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| Total asset liquidation revenue(1) | $ | 6,103 | $ | 2,265 | $ | 10,899 | $ | 5,589 | ||||||||
| Earnings (loss) of asset liquidation investments(2) | (41 | ) | 456 | (53 | ) | 1,265 | ||||||||||
| Operating income (loss) | (140 | ) | 234 | (1,386 | ) | (1,778 | ) | |||||||||
| Net loss | (188 | ) | (260 | ) | (26,343 | ) | (1,650 | ) | ||||||||
| Earnings (loss) per diluted common share | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.94 | ) | $ | (0.06 | ) | ||||
| (1) Represents revenue generated from activities where Heritage Global acted in a principal capacity or had majority interest in a transaction. |
| (2) Represents equity income from activities where Heritage Global acted as a member of a syndicate in a transaction. |
2014 Q3 Summary:
- On August 21, 2014, Heritage Global entered into an exclusive strategic alliance with Troostwijk Auctions to monetize global energy industry assets on behalf of regional and multinational European corporate clients.
- In late September, Bryan Seeley – an industry veteran with approximately 25 years of relevant experience – was appointed Director of Heritage Global Valuations (HGV). His responsibilities include developing HGV’s growing customer base, assisting in the production and delivery of valuation products, and managing and executing the Company’s wide array of revenue generation initiatives.
- The third quarter marked the first full reporting period in which the Company operated leading North American charged-off receivables broker National Loan Exchange (“NLEX”), which was acquired at the beginning of June 2014. NLEX contributed approximately $0.8 million of Heritage Global’s net asset liquidation earnings for Q3.
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During the three-month period, Heritage Global completed a number of
successful auction sales on behalf of a diverse clientele, including:
- Surplus late model smartphone technology manufacturing assets for Nokia due to its global infrastructure reorganization (teamed with Tekmart International on this sale);
- Two online auction sales of Piaggio Avanti P180 executive aircraft and related aerospace assets (teamed with Cloud Investment Partners on these sales);
- Telephonic auction sale of an economic interest in a commercial biodiesel company and related intellectual property; and,
- Historic Model A, Model T and other classic cars and automobile-related assets.
- Asset liquidation revenues increased 169% to $6.1 million quarter over comparative quarter. Asset liquidation expense grew to $3.4 million, up from $0.9 million in the year-ago period. Asset liquidation investments produced a small loss in the quarter, versus earnings of approximately $0.5 million in the prior year. The net earnings of these three items rose to $2.7 million, compared to $1.8 million in Q3 2013.
- SG&A expenditures, including expenses paid to related parties, rose to $2.7 million from $2.1 million.
- Total operating costs and expenses approximately doubled to $6.2 million. The rise principally reflected higher asset liquidation and SG&A costs, compared to a year ago, which reflects the higher revenue in the current quarter.
- Net loss narrowed to $188,000, or $0.01 per diluted common share, versus a $260,000 net loss the prior year, or $0.01 on a per share basis.
Heritage Global Managing Partner Kirk Dove stated, “Heritage Global further expanded and diversified its suite of asset liquidation, valuation and advisory services with the forging of a new exclusive strategic alliance with Europe-based Troostwijk Auctions during Q3. This mutually beneficial alliance is with an experienced organization that shares a similar mindset to ours and is also an acknowledged leading innovator in maximizing the value of manufacturing and related assets on behalf of many top global energy companies. Our respective firms have already successfully conducted more than 100 events across continents and energy sectors and our teams are now poised and ready to join forces on numerous additional future sales for both new and former clients.”
Ross Dove, Heritage Global Managing Partner added, “We once again generated solid top-line revenue growth in the recent quarter, driven by our combination of asset liquidation and advisory transactions, on behalf of a diverse customer base. Heritage Global’s auction, asset liquidation, advisory, going concern and investment banking businesses all continue to deliver positive results on behalf of our clients and we continue to focus on further expanding the Company’s portfolio of value-added services.”
About Heritage Global Inc. (www.heritageglobalinc.com)
Heritage Global Inc. (OTCQB: HGBL, CSE: HGP) is a value-driven, innovative leader in tangible and intangible asset valuations and transactions. Heritage Global focuses on identifying, valuing, acquiring and monetizing underlying assets in 28 global manufacturing and technology sectors. Heritage Global specializes both in acting as an adviser, as well as acquiring or brokering turnkey manufacturing facilities, surplus industrial machinery and equipment, industrial inventories, accounts receivable portfolios and related intellectual property, and entire business enterprises.
Forward-Looking Statements
The statements made in this release that are not historical facts contain forward-looking information that involves risks and uncertainties. All statements, other than statements of historical facts, which address the Company's expectations, should be considered as forward-looking statements. Such statements are based on knowledge of the environment in which the Company currently operates, but because of the factors listed herein, as well as other factors beyond the Company's control, actual results may differ materially from the expectations expressed in the forward-looking statements. Important factors that may cause actual results to differ from anticipated results include, but are not limited to, obtaining necessary approvals and other risks detailed from time to time in the Company's securities and other regulatory filings.
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HERITAGE GLOBAL INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (In thousands of US dollars, except per share amounts) (unaudited) |
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Three Months Ended
September 30, |
Nine Months Ended
September 30, |
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2014 |
2013 |
2014 |
2013 |
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| Revenue: | |||||||||||||||
| Asset liquidation | |||||||||||||||
| Asset sales | $ | 4,738 | $ | 1,201 | $ | 6,212 | $ | 1,799 | |||||||
| Commissions and other | 1,365 | 1,064 | 4,687 | 3,790 | |||||||||||
| Total asset liquidation revenue | 6,103 | 2,265 | 10,899 | 5,589 | |||||||||||
| Intellectual property licensing | -- | 624 | -- | 824 | |||||||||||
| Total revenue | 6,103 | 2,889 | 10,899 | 6,413 | |||||||||||
| Operating costs and expenses: | |||||||||||||||
| Asset liquidation | 3,283 | 819 | 4,204 | 1,401 | |||||||||||
| Inventory maintenance | 102 | 86 | 215 | 275 | |||||||||||
| Patent licensing and maintenance | 16 | 10 | 32 | 166 | |||||||||||
| Selling, general and administrative, including expenses paid to related parties | 2,682 | 2,078 | 7,424 | 7,256 | |||||||||||
| Depreciation and amortization | 119 | 118 | 357 | 358 | |||||||||||
| Total operating costs and expenses | 6,202 | 3,111 | 12,232 | 9,456 | |||||||||||
| (99 | ) | (222 | ) | (1,333 | ) | (3,043 | ) | ||||||||
| Earnings (loss) of asset liquidation investments (net of tax of $0) | (41 | ) | 456 | (53 | ) | 1,265 | |||||||||
| Operating income (loss) | (140 | ) | 234 | (1,386 | ) | (1,778 | ) | ||||||||
| Other expense: | |||||||||||||||
| Interest expense – third party | (79 | ) | (39 | ) | (250 | ) | (308 | ) | |||||||
| Interest expense – related party | (43 | ) | (91 | ) | (149 | ) | (91 | ) | |||||||
| Total other expense | (122 | ) | (130 | ) | (399 | ) | (399 | ) | |||||||
| Income (loss) before the undernoted | (262 | ) | 104 | (1,785 | ) | (2,177 | ) | ||||||||
| Income tax expense (recovery) | 55 | 387 | 24,722 | (466 | ) | ||||||||||
| Earnings of other equity method investments (net of tax of $0) | 129 | 23 | 164 | 61 | |||||||||||
| Net loss | (188 | ) | (260 | ) | (26,343 | ) | (1,650 | ) | |||||||
| Other comprehensive income (loss): | |||||||||||||||
| Currency translation adjustment (net of tax of $0) | (7 | ) | (4 | ) | 9 | (13 | ) | ||||||||
| Comprehensive loss | $ | (195 | ) | $ | (264 | ) | $ | (26,334 | ) | $ | (1,663 | ) | |||
| Weighted average common shares outstanding – basic and diluted (in thousands) | 28,167 | 28,384 | 28,167 | 28,759 | |||||||||||
| Net loss per share – basic and diluted | $ | (0.01 | ) | $ | (0.01 | ) | $ | (0.94 | ) | $ | (0.06 | ) | |||
The notes contained in our Quarterly Report on Form 10-Q are an integral part of these condensed consolidated financial statements.
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HERITAGE GLOBAL INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands of U.S. dollars, except share and per share amounts) (unaudited) |
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September 30,
2014 |
December 31,
2013 |
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| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 4,400 | $ | 3,213 | ||||
| Accounts receivable (net of allowance for doubtful accounts of $0; 2013 - $0) | 2,494 | 1,670 | ||||||
| Deposits | 4 | 17 | ||||||
| Inventory – equipment | 172 | 578 | ||||||
| Other current assets | 575 | 479 | ||||||
| Income taxes receivable | 4 | 1 | ||||||
| Deferred income tax assets | -- | 1,366 | ||||||
| Total current assets | 7,649 | 7,324 | ||||||
| Non-current assets: | ||||||||
| Inventory – real estate | 6,388 | 6,078 | ||||||
| Asset liquidation investments | 1,436 | 1,380 | ||||||
| Investments | 1,500 | 1,769 | ||||||
| Property, plant and equipment, net | 42 | 32 | ||||||
| Intangible assets, net | 4,471 | 4,810 | ||||||
| Goodwill | 11,486 | 5,301 | ||||||
| Deferred income tax assets | -- | 23,301 | ||||||
| Total assets | $ | 32,972 | $ | 49,995 | ||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ | 9,218 | $ | 6,510 | ||||
| Debt payable to third parties | 2,974 | 1,438 | ||||||
| Debt payable to a related party | 3,056 | 2,550 | ||||||
| Contingent consideration | 650 | -- | ||||||
| Total current liabilities | 15,898 | 10,498 | ||||||
| Non-current liabilities | ||||||||
| Contingent consideration | 3,548 | -- | ||||||
| Total liabilities | 19,446 | 10,498 | ||||||
| Commitments and contingencies | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 575 Class N shares at September 30, 2014 and 579 Class N shares at December 31, 2013, liquidation preference of $575 at September 30, 2014 and $579 at December 31, 2013 | 6 | 6 | ||||||
| Common stock, $0.01 par value, authorized 300,000,000 shares; issued and outstanding 28,167,408 shares at September 30, 2014 and 28,167,248 shares at December 31, 2013 | 282 | 282 | ||||||
| Additional paid-in capital | 283,570 | 283,207 | ||||||
| Accumulated deficit | (270,297 | ) | (243,954 | ) | ||||
| Accumulated other comprehensive loss | (35 | ) | (44 | ) | ||||
| Total stockholders’ equity | 13,526 | 39,497 | ||||||
| Total liabilities and stockholders’ equity | $ | 32,972 | $ | 49,995 | ||||
The notes contained in our Quarterly Report on Form 10-Q are an integral part of these condensed consolidated financial statements.
