SAN DIEGO & TORONTO--(BUSINESS WIRE)--Heritage Global Inc. (OTCQB:HGBL, CSE:HGP), a leader in distressed and surplus capital assets valuations and transactions, today reported financial results for the first quarter ended March 31, 2014 as summarized below.
Summary Financial Data | |||||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||
($ in thousands, except per share amounts) |
Three months ended March 31, |
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2014 | 2013 | ||||||||||||||||||||||||
Total asset liquidation revenue(1) | $ | 1,985 | $ | 1,392 | |||||||||||||||||||||
Earnings (loss) of equity accounted asset liquidation investments(2) | (30 | ) | 802 | ||||||||||||||||||||||
Operating loss | (777 | ) | (905 | ) | |||||||||||||||||||||
Net loss | (25,571 | ) | (647 | ) | |||||||||||||||||||||
Loss per diluted common share | $ | (0.91 | ) | $ | (0.02 | ) | |||||||||||||||||||
(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. Figure is net of tax of $0. | ||
2014 Q1 Summary:
- The Company’s operating loss was $777,000, down from an operating loss of $905,000 in the 2013 period.
- Combined asset liquidation revenue and earnings (loss) of equity accounted asset liquidation investments (pre-tax) was approximately $2.0 million, compared to $2.2 million in the prior year period.
- The Company did not record intellectual property licensing revenue during Q1 2014, but did receive $200,000 related to settlement of a patent infringement lawsuit in Q1 2013.
- SG&A expenditures, including expenses paid to related parties, declined 19% to $2.1 million, versus $2.6 million in the year-ago quarter, principally reflecting the salaries and forfeiture of options by the former Co-CEOs and other employees that departed the Company effective June 30, 2013.
- Total operating costs and expenses declined 18% to $2.7 million, largely due to the aforementioned SG&A reduction.
- Net loss for the period was $25.6 million, or $0.91 per diluted common share. The Company decided to set up a valuation reserve, amounting to approximately $24.7 million, against its deferred income tax assets. The deferred income tax assets represent the future tax benefits of loss carryforwards from prior years. The reserve was a one-time, non-cash item.
Heritage Global Partners Managing Partner Ross Dove stated, “Heritage Global’s asset liquidation, advisory, going concern and investment banking businesses are all showing positive signs of growth. Successfully completed recent auctions included the assets of a GE Energy Management Division Plant in MN as well as ongoing online sales for Pfizer Inc. A sampling of upcoming auctions includes: a unique sale of the mobile fleet of PET and CT imaging equipment and trailers on behalf of Radiology Corporation of America in late May; North America’s two largest apparel manufacturing auctions on behalf of Riverside Manufacturing Company in early June; and also in early June, an equipment sale for Deluxe Laboratories, Inc.’s Hollywood film processing facility. Our European operation is starting to win significant contracts, with the most notable being the auction of the assets of Lufthansa Technik Airmotive Ireland’s Dublin plant. Our forward flow contract business is also growing as we sign new clients and expand our programs with existing clients. And our strategic alliance with Colliers International, to jointly pursue opportunities for turnkey brokerage of distressed manufacturing facilities, is generating new business.”
Heritage Global Partners Managing Partner Kirk Dove added, “On the expense side, we are benefitting from a streamlined operating structure with reduced corporate overhead as we integrate all of our operating platforms. Lastly, we wish to extend a warm welcome to our many new shareholders – many of them residing in Canada – as a result of Counsel Corporation’s recent move to dividend their entire Heritage Global holding to their shareholders as they turn their focus exclusively to their financial services business. Our shares were recently also listed on the Canadian Securities Exchange under the stock symbol HGP.”
About Heritage Global Inc. (www.heritageglobalinc.com)
Heritage Global Inc. (OTCQB:HGBL, CSE:HGP) is a value-driven, innovative leader in distressed and surplus capital assets valuations and transactions. The Company focuses on identifying, valuing, acquiring and monetizing distressed and surplus capital assets in 25 global manufacturing and technology sectors. It specializes in both acting as an advisor as well as acquiring turnkey manufacturing facilities, surplus industrial machinery and equipment, industrial inventories, accounts receivable portfolios and related intellectual property.
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.
HERITAGE GLOBAL INC. | |||||||||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||||||||||||
AND COMPREHENSIVE INCOME (LOSS) | |||||||||||||||||||
(unaudited) | |||||||||||||||||||
(in thousands of US dollars, except share and per share amounts) | |||||||||||||||||||
Three Months Ended | |||||||||||||||||||
March 31, | |||||||||||||||||||
2014 | 2013 | ||||||||||||||||||
Revenue: | |||||||||||||||||||
Asset liquidation | |||||||||||||||||||
Asset sales | $ | 975 | $ | 446 | |||||||||||||||
Commissions and other | 1, | 010 | 946 | ||||||||||||||||
Total asset liquidation revenue | 1, | 985 | 1, | 392 | |||||||||||||||
Intellectual property licensing | -- | 200 | |||||||||||||||||
Total revenue | 1, | 985 | 1, | 592 | |||||||||||||||
Operating costs and expenses: | |||||||||||||||||||
Asset liquidation | 404 | 356 | |||||||||||||||||
Inventory maintenance | 61 | 74 | |||||||||||||||||
Patent licensing and maintenance | 11 | 150 | |||||||||||||||||
Selling, general and administrative, including expenses paid to related parties | 2, | 138 | 2, | 598 | |||||||||||||||
Depreciation and amortization | 118 | 121 | |||||||||||||||||
Total operating costs and expenses | 2, | 732 | 3, | 299 | |||||||||||||||
( | 747) | (1, | 707) | ||||||||||||||||
Earnings (loss) of equity accounted asset liquidation investments (net of tax of $0) | (30) | 802 | |||||||||||||||||
Operating loss | ( | 777) | ( | 905) | |||||||||||||||
Other income (expenses): | |||||||||||||||||||
Interest expense – third party | (71) | (95) | |||||||||||||||||
Interest expense – related party | (67) | -- | |||||||||||||||||
Total other income (expenses) | ( | 138) | (95) | ||||||||||||||||
Loss before undernoted | ( | 915) | (1, | 000) | |||||||||||||||
Income tax expense (recovery) | 24, | 667 | ( | 353) | |||||||||||||||
Earnings of other equity accounted investments (net of $0 tax) | 11 | -- | |||||||||||||||||
Net loss | (25, | 571) | ( | 647) | |||||||||||||||
Other comprehensive loss: | |||||||||||||||||||
Currency translation adjustment (net of tax of $0) | (6) | (7) | |||||||||||||||||
Comprehensive loss | $ | (25, | 577) | $ | ( | 654) | |||||||||||||
Weighted average common shares outstanding – basic and diluted (in thousands) | 28, | 167 | 28, | 945 | |||||||||||||||
Net loss per share – basic and diluted | $ | (0 | .91) | $ | (0 | .02) | |||||||||||||
The notes contained in our Quarterly Report on Form 10-Q are an integral part of these condensed consolidated financial statements.
HERITAGE GLOBAL INC. | |||||||||||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||||||||||||||||||
(unaudited) | |||||||||||||||||||||
(in thousands of US dollars, except share and per share amounts) | |||||||||||||||||||||
March 31,
2014 |
December 31, 2013 |
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ASSETS | |||||||||||||||||||||
Current assets: | |||||||||||||||||||||
Cash and cash equivalents | $ | 2,802 | $ | 3,213 | |||||||||||||||||
Amounts receivable (net of allowance for doubtful accounts of $0; 2013 - $0) | 868 | 1,670 | |||||||||||||||||||
Deposits | 17 | 17 | |||||||||||||||||||
Inventory – equipment | 441 | 578 | |||||||||||||||||||
Other current assets | 448 | 479 | |||||||||||||||||||
Income taxes recoverable | 22 | 1 | |||||||||||||||||||
Deferred income tax assets | -- | 1,366 | |||||||||||||||||||
Total current assets | 4,598 | 7,324 | |||||||||||||||||||
Non-current assets: | |||||||||||||||||||||
Inventory – real estate | 6,328 | 6,078 | |||||||||||||||||||
Asset liquidation investments | 1,011 | 1,380 | |||||||||||||||||||
Investments | 1,747 | 1,769 | |||||||||||||||||||
Property, plant and equipment, net | 34 | 32 | |||||||||||||||||||
Intangible assets, net | 4,697 | 4,810 | |||||||||||||||||||
Goodwill | 5,301 | 5,301 | |||||||||||||||||||
Deferred income tax assets | -- | 23,301 | |||||||||||||||||||
Total assets | $ | 23,716 | $ | 49,995 | |||||||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 5,368 | $ | 6,510 | ||||||||||||||||||||||||||
Debt payable to third parties | 1,248 | 1,438 | ||||||||||||||||||||||||||||
Debt payable to a related party | 3,057 | 2,550 | ||||||||||||||||||||||||||||
Total current liabilities | 9,673 | 10,498 | ||||||||||||||||||||||||||||
Commitments and contingencies | ||||||||||||||||||||||||||||||
Equity: | ||||||||||||||||||||||||||||||
Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and |
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outstanding 575 Class N shares at March 31, 2014 and 579 Class N shares |
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at December 31, 2013, liquidation preference of $575 at March 31, 2014 |
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and $579 at December 31, 2013 |
6 |
6 |
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Common stock, $0.01 par value, authorized 300,000,000 shares; issued and | ||||||||||||||||||||||||||||||
outstanding 28,167,408 shares at March 31, 2014 and 28,167,248 shares at | ||||||||||||||||||||||||||||||
December 31, 2013 | 282 | 282 | ||||||||||||||||||||||||||||
Additional paid-in capital | 283,330 | 283,207 | ||||||||||||||||||||||||||||
Accumulated deficit | (269,525) | (243,954) | ||||||||||||||||||||||||||||
Accumulated other comprehensive loss | (50) | (44) | ||||||||||||||||||||||||||||
Total equity | 14,043 | 39,497 | ||||||||||||||||||||||||||||
Total liabilities and equity | $ | 23,716 | $ | 49,995 | ||||||||||||||||||||||||||
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The notes contained in our Quarterly Report on Form 10-Q are an integral part of these condensed consolidated financial statements.