SAN DIEGO--(BUSINESS WIRE)--Heritage Global Inc. (OTCQB:HGBL, CSE:HGP), a leader in distressed and surplus corporate and financial asset valuations and transactions, today reported financial results for the year and fourth quarter ended December 31, 2015 as summarized below.
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Quarter ended
December 31, |
Year ended
December 31, |
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| 2015 | 2014 | 2015 | 2014 | |||||||
| Revenues | ||||||||||
| Services revenue(1) | $ 3,952 | $ 4,053 | $ 13,485 | $ 13,270 | ||||||
| Asset sales(2) | 1,512 | 59 | 3,946 | 6,716 | ||||||
| Total revenues | 5,464 | 4,112 | 17,431 | 19,986 | ||||||
| Earnings of equity method investments(3) | 181 | 196 | 286 | 143 | ||||||
| Operating loss | (5,783) | (514) | (10,354) | (1,900) | ||||||
| Net loss | (5,504) | (171) | (10,421) | (26,514) | ||||||
| Net loss per share – basic and diluted | $ (0.19) | $ (0.01) | $ (0.37) | $ (0.94) | ||||||
(1) Services revenue represents revenue generated from activities where Heritage Global acted in an agent capacity where it either brokered a transaction or provided some other fee-based service.
(2) Asset sales represent revenue generated from activities where Heritage Global acted in a principal capacity, reselling assets that it had purchased.
(3) Represents equity income from investments by Heritage Global in joint ventures that conducted asset liquidation transactions.
Fourth Quarter 2015 Financial Results Summary:
- Total revenues increased 33% to $5.5 million from the year ago fourth quarter level of $4.1 million. The increase in total revenues and cost of revenues was primarily as a result of a large asset sale in the fourth quarter of 2015.
- Gross profit, or total revenues and earnings of equity method investments net of cost of services revenue and asset sales, was flat at $3.4 million, compared to the year ago fourth quarter.
- During the fourth quarter, Heritage Global completed a number of successful global online sales, including Source Nutrition, AE Solar Energy, Aptuit, Compressor Products International, Pfizer and Amgen.
- Selling, general and administrative expenses were $3.6 million during the period, compared to $3.7 million in the 2014 fourth quarter.
- The Company recorded a $5.4 million non-cash impairment charge to reduce the carrying value of the goodwill and customer network related to the acquisition of HGP, to their respective fair values as of October 1, 2015 (the date at which the Company tested its goodwill and intangibles for impairment). There was no similar charge in 2014.
- Inclusive of the impact of the $5.4 million non-cash impairment charge, the net loss for the fourth quarter of 2015 was $5.5 million or $0.19 per common share. This compares to a net loss of $0.2 million or $0.01 per common share in the prior year period. Excluding the impairment charge, the net loss for the fourth quarter of 2015 would have been $67,000, or $0.00 per common share.
Full Year 2015 Financial Results Summary and Key Corporate Events:
- Total revenues decreased by $2.6 million to $17.4 million in 2015 compared to $20.0 million in 2014. Cost of services revenue and asset sales decreased 36% to $6.5 million compared to $10.3 million in 2014.
- Gross profit, or total revenues and earnings of equity method investments net of cost of services revenue and asset sales, increased approximately 14% to $11.2 million compared to $9.8 million in 2014. The year-over-year increase reflects the timing of certain asset liquidation transactions as well as an increase of $2.4 million of gross profit from National Loan Exchange Inc. (NLEX).
- The significant non-cash items in 2015 included a $5.4 million impairment of goodwill and intangible assets charge (reviewed above) and a $2.7 million real estate inventory write-down charge related to the sale of certain Company-owned real-estate. In 2014 the most significant non-cash item was a $24.7 million income tax expense relating to recording a valuation allowance against the Company’s deferred tax assets.
- Inclusive of the significant non-cash charges described above, net loss for 2015 was $10.4 million or $0.37 per common share. This compares to a net loss of $26.5 million or $0.94 per common share in the prior year. Excluding the significant non-cash goodwill and intangible asset impairment charges and the real estate inventory write-down charge, the net loss for the 2015 would have been $2.2 million or $0.08 per common share.
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In May 2015, the Company’s Board of Directors announced new senior
level appointments aimed at establishing Heritage Global as an
independent organization for its next phase of innovation and growth.
- Ross Dove was appointed Chief Executive Officer.
- Kirk Dove was appointed President and Chief Operating Officer.
- Scott West was appointed Chief Financial Officer.
- James Sklar was appointed Executive Vice President, General Counsel and Secretary.
- In addition, Ross Dove and Morris Perlis were appointed to serve as Class I Directors.
- Following the changes to Heritage Global’s executive officers and directors, the Company has continued to pursue initiatives aimed at managing costs, creating operating efficiencies and reducing debt.
- Heritage Global terminated its Management Services Agreement (MSA) with Street Capital Group Inc. (formerly Counsel Corporation) effective August 31, 2015 (as more fully described in the Form 8-K filed with the SEC on September 1, 2015). As a result, Heritage Global expects to achieve about $0.5 million in annual cost savings beginning in 2016. There were no one time fees or expenses related to the termination of the agreement.
Heritage Global Chief Executive Officer Ross Dove stated, “The executive management team and I are encouraged by the progress we have made throughout 2015 in strategically growing our portfolio of leading diversified global asset solutions while taking swift and meaningful action to implement initiatives aimed at reducing costs and improving profitability. This year we added complementary capabilities to our existing asset liquidation, valuation and advisory services platform by launching two new units – Heritage Zetabid Realty Services, a real estate auction division, and Heritage Global Capital, a fixed asset financing services division. The formation and successful launch of our new units enables us to effectively address the needs of our customers through our comprehensive offering of best-in-class global asset solutions and services while creating new revenue opportunities for HGI.”
“In addition to expanding and diversifying our offering of innovative global asset solutions, we continued to advance our expense management initiatives put in place during the second half of 2015 to improve operating efficiencies. We will continue to make appropriate process and operating adjustments to ensure that HGI remains efficient and competitive while simultaneously pursuing initiatives to further strengthen our balance sheet and improve our capital structure.”
“Looking ahead, our focus on expense management and de-leveraging initiatives support our goal to improve profitability and our commitment to building Heritage Global into a leading provider of diversified and unique global asset solutions and services. We remain confident that this direction will enable us to meet our goal of enhancing long-term shareholder value as we move through 2016 and beyond.”
About Heritage Global Inc. (www.heritageglobalinc.com)
Heritage Global Inc. (OTCQB:HGBL, CSE:HGP) is a value-driven, innovative leader in corporate and financial asset liquidation transactions, valuations and advisory services. Heritage Global focuses on identifying, valuing, acquiring and monetizing underlying tangible and intangible assets in twenty-eight 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, 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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-financial tables follow- |
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HERITAGE GLOBAL INC. |
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CONSOLIDATED STATEMENTS OF OPERATIONS |
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AND COMPREHENSIVE INCOME (LOSS) |
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(in thousands of US dollars, except share and per share amounts) |
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Quarter Ended
December 31, |
Year Ended
December 31, |
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| 2015 | 2014 | 2015 | 2014 | |||||
| Revenues: | ||||||||
| Services revenue | $ 3,952 | $ 4,053 | $ 13,485 | $ 13,270 | ||||
| Asset sales | 1,512 | 59 | 3,946 | 6,716 | ||||
| Total revenues | 5,464 | 4,112 | 17,431 | 19,986 | ||||
| Operating costs and expenses: | ||||||||
| Cost of services revenue | 1,024 | 758 | 3,125 | 4,882 | ||||
| Cost of asset sales | 1,254 | 200 | 3,412 | 5,398 | ||||
| Real estate inventory write-down | — | — | 2,748 | — | ||||
| Selling, general and administrative | 3,628 | 3,655 | 12,774 | 11,183 | ||||
| Depreciation and amortization | 85 | 209 | 575 | 566 | ||||
| Impairment of goodwill and intangible assets | 5,437 | — | 5,437 | — | ||||
| Total operating costs and expenses | 11,428 | 4,822 | 28,071 | 22,029 | ||||
| Earnings of equity method investments | 181 | 196 | 286 | 143 | ||||
| Operating loss | (5,783) | (514) | (10,354) | (1,900) | ||||
| Gain on sale of equity method investments | — | 551 | — | 551 | ||||
| Other income (loss) | 438 | (112) | 297 | 52 | ||||
| Interest expense | (167) | (96) | (349) | (495) | ||||
| Loss before income tax expense | (5,512) | (171) | (10,406) | (1,792) | ||||
| Income tax (benefit) expense | (8) | — | 15 | 24,722 | ||||
| Net loss | (5,504) | (171) | (10,421) | (26,514) | ||||
| Other comprehensive income (loss): | ||||||||
| Foreign currency translation adjustments | 5 | 1 | (20) | 10 | ||||
| Comprehensive loss | $(5,499) | $(170) | $(10,441) | $(26,504) | ||||
| Weighted average common shares outstanding – basic and diluted | 28,467,648 | 28,167,408 | 28,336,876 | 28,167,378 | ||||
| Net loss per share – basic and diluted | $ (0.19) | $ (0.01) | $ (0.37) | $ (0.94) | ||||
The notes contained in our Annual Report on Form 10-K are an integral part of these consolidated financial statements.
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-balance sheets follow- |
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HERITAGE GLOBAL INC. |
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CONSOLIDATED BALANCE SHEETS |
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(in thousands of US dollars, except share and per share amounts) |
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December 31,
2015 |
December 31,
2014 |
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| ASSETS | |||
| Current assets: | |||
| Cash and cash equivalents | $ 2,777 | $ 3,633 | |
| Accounts receivable, net | 639 | 2,857 | |
| Deposits | 4 | 173 | |
| Inventory – equipment | 395 | 139 | |
| Other current assets | 449 | 587 | |
| Total current assets | 4,264 | 7,389 | |
| Inventory – real estate | 3,715 | 6,508 | |
| Equity method investments | 17 | 1,134 | |
| Property and equipment, net | 110 | 150 | |
| Intangible assets, net | 4,382 | 7,657 | |
| Goodwill | 6,158 | 8,846 | |
| Other assets | 156 | 186 | |
| Total assets | $ 18,802 | $ 31,870 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||
| Current liabilities: | |||
| Accounts payable and accrued liabilities | $ 6,673 | $ 7,225 | |
| Current portion of third party debt | — | 525 | |
| Related party debt | 1,721 | 2,985 | |
| Current portion contingent consideration | 865 | 803 | |
| Other current liabilities | 97 | — | |
| Total current liabilities | 9,356 | 11,538 | |
| Non-current portion of third party debt | 2,500 | 2,500 | |
| Non-current portion of contingent consideration | 2,592 | 3,395 | |
| Deferred tax liabilities | 960 | 960 | |
| Total liabilities | 15,408 | 18,393 | |
| Stockholders’ equity: | |||
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Preferred stock, $10.00 par value, authorized 10,000,000 shares; |
6 | 6 | |
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Common stock, $0.01 par value, authorized 300,000,000 shares; |
285 | 282 | |
| Additional paid-in capital | 284,046 | 283,691 | |
| Accumulated deficit | (280,889) | (270,468) | |
| Accumulated other comprehensive loss | (54) | (34) | |
| Total stockholders’ equity | 3,394 | 13,477 | |
| Total liabilities and stockholders’ equity | $ 18,802 | $ 31,870 | |
The notes contained in our Annual Report on Form 10-K are an integral part of these consolidated financial statements.
