MRO Magazine

Heritage Global Inc. Reports 2015 Second Quarter Operating Results


August 13, 2015
By Business Wire News

SAN DIEGO

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 second quarter ended June 30, 2015 as summarized below.

 

Summary Financial Data

(unaudited)

 

Three months ended

 

Six months ended

($ in thousands, except per share amounts)

June 30,

 

June 30,

2015  2014  2015  2014
Asset liquidation revenue(1)$2,958     $ 2,811    $6,603     $ 4,796  
Earnings (loss) of asset liquidation investments(2)  105       18      139       (12 )
Operating loss  (669)     (469 )    (1,102)     (1,246 )
Net loss  (693)     (584 )    (1,280)     (26,155 )
Net loss per share – basic and diluted  $(0.02)   $ (0.02 )  $(0.05)   $ (0.93 )
(1)   Represents revenue generated from activities where Heritage Global acted in a principal capacity or brokered a transaction.
(2) Represents equity income from investments by Heritage Global in joint ventures that conduct asset liquidation transactions.
 

Second Quarter 2015 Financial Results Summary & Highlights:

  • Asset liquidation revenue increased by approximately 5% to $3.0 million, compared to the year ago second quarter level of $2.8 million.
  • Combined Asset liquidation revenue and Earnings of asset liquidation investments net of Asset liquidation expense increased by approximately 10% to $2.5 million, compared to $2.3 million in the year ago second quarter. The increase reflects the timing of certain asset liquidation transactions as well as $1.2 million of net asset liquidation revenue from National Loan Exchange Inc. (NLEX), which Heritage Global acquired late in the second quarter of 2014.
  • Heritage Global successfully completed a number of global online sales. Some of the Company’s largest auctions during the quarter included the former assets of a national leader in mattress manufacturing and the biopharma lab R&D and processing equipment no longer required by Amgen, Aptuit and Pfizer.
  • Heritage Equity Partners provided investment banking services to Mallygirl in its sale to Beauty Visions by identifying another potential buyer and conducting a competitive bidding process that resulted in a 43% increase in the purchase price for the cosmetics company.
  • The Company’s operating loss was $0.7 million, compared to an operating loss of $0.5 million in the prior year period.
  • Total operating costs and expenses increased by $0.4 million, largely due to expenses related to NLEX operations.
  • Net loss for the period was $0.7 million, or a loss of $0.02 per common share. This compares to a net loss of $0.6 million, or a loss of $0.02 per common share in the prior year period. In the first quarter of 2014 the Company set up a valuation allowance, 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 allowance was a non-recurring, non-cash item.

Heritage Global Chief Executive Officer Ross Dove stated, “Top-line revenue growth of 38% year to date highlights the ongoing success across Heritage Global’s asset liquidation, valuation and advisory services businesses. In line with our stated objectives, we continued to focus on building our organization into a leading provider of diversified and unique global asset solutions and services during the second quarter. In this regard, in May we launched Heritage Zetabid Realty Services, a real estate auction division that will allow us to more effectively monetize clients’ commercial, industrial and luxury bank-owned real estate assets through a transparent open-bidding platform. Additionally, we recently introduced our new fixed asset financing services division, Heritage Global Capital that will provide term loans and leases secured by equipment and real estate to our customers, further leveraging and complementing our service offering.

“The formation and successful launch of our new divisions is another step in our plan to strategically grow our portfolio of global asset solutions by adding complementary capabilities that serve a broad range of businesses, while creating added value for our corporate clients, customers and investors. We are encouraged by the progress we have made in the first half of 2015 and believe that our platform of innovative global asset solutions, combined with our industry-wide reputation for delivering exceptional service to a growing base of global clients, will remain important factors in helping us generate sustainable operating growth over the long-term.”

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, 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.

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

 

Six Months Ended

June 30,

June 30,

Revenue: 2015   2014 2015   2014
Asset liquidation
Commissions and other $ 2,379 $ 2,312 $ 5,191 $ 3,322
Asset sales   579     499     1,412     1,474  
Total revenue   2,958     2,811     6,603     4,796  
 
Operating costs and expenses:
Asset liquidation 582 569 1,612 1,034
Selling, general and administrative, including expenses paid to related parties 2,985 2,609 5,908 4,758
Depreciation and amortization   165     120     324     238  
Total operating costs and expenses   3,732     3,298     7,844     6,030  
Earnings (loss) of equity accounted asset liquidation investments 105 18 139 (12 )
Operating loss   (669 )   (469 )   (1,102 )   (1,246 )
 
Other income (expenses):
Earnings of other equity method investments 24 5 35
Interest expense – third party (1 ) (100 ) (135 ) (171 )
Interest expense – related party   (23 )   (39 )   (45 )   (106 )
Total other expense   (24 )   (115 )   (175 )   (242 )
Loss before income tax expense (693 ) (584 ) (1,277 ) (1,488 )
Income tax expense           3     24,667  
Net loss (693 ) (584 ) (1,280 ) (26,155 )
Other comprehensive income (loss):
Foreign currency translation adjustments   1     22     (29 )   16  
Comprehensive loss $ (692 ) $ (562 ) $ (1,309 ) $ (26,139 )
 
Weighted average common shares outstanding – basic and diluted (in thousands) 28,240 28,167 28,204 28,167
 
Net loss per share – basic and diluted $ (0.02 ) $ (0.02 ) $ (0.05 ) $ (0.93 )

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)

 
 

June 30,

 

December 31,

2015

2014

 
ASSETS
Current assets:
Cash and cash equivalents $ 2,707 $ 3,633
Accounts receivable (net of allowance for doubtful accounts of $31; 2014 – $31) 612 3,043
Deposits 140 173
Inventory – equipment 115 139
Other current assets  492    587  
Total current assets 4,066 7,575
Non-current assets:
Inventory – real estate 6,508 6,508
Equity method investments 442 1,134
Property and equipment, net 129 150
Identifiable intangible assets, net 7,354 7,657
Goodwill  8,846    8,846  
Total assets$27,345  $31,870  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 5,587 $ 7,225
Debt payable to third parties 2,500 525
Debt payable to related party 1,604 2,985
Contingent consideration  513    803  
Total current liabilities  10,204    11,538  
Non-current liabilities:
Debt payable to third parties 2,500
Contingent consideration 3,737 3,395
Deferred tax liabilities  960    960  
Total liabilities  14,901    18,393  
 
 
Commitments and contingencies
 
Stockholders’ equity:
Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 569 Class N shares at June 30, 2015 and 575 Class N shares at December 31, 2014 6 6
Common stock, $0.01 par value, authorized 300,000,000 shares; issued and outstanding 28,467,648 shares at June 30, 2015 and 28,167,408 shares at December 31, 2014 285 282
Additional paid-in capital 283,964 283,691
Accumulated deficit (271,748 ) (270,468 )
Accumulated other comprehensive loss  (63 )  (34 )
Total stockholders’ equity  12,444    13,477  
Total liabilities and stockholders’ equity$27,345  $31,870  

The notes contained in our Quarterly Report on Form 10-Q are an integral part of these condensed consolidated financial statements.

Heritage Global Inc.
Scott West, 858-847-0656
Chief Financial Officer
or
JCIR
Jennifer Neuman, Joseph Jaffoni
HGBL@jcir.com or 212-835-8500