MRO Magazine

Heritage Global Inc. Reports 2016 First Quarter Operating Results


May 9, 2016
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 first quarter ended March 31, 2016 as summarized below.

 
 

Quarter Ended

($ in thousands, except per share amounts)

March 31,

2016  2015
Revenues      
Services revenue(1)$4,192   $ 3,684
Asset sales(2)  1,220     989
Total revenues  5,412     4,673
Gross profit  3,365     2,710
Operating income (loss)  192     (432)
Net income (loss)  60     (587)
Net income (loss) per share – basic and diluted  $0.00   $ (0.02)
(1)   Services revenue represents revenue generated from activities in which Heritage Global acted as an agent by either brokering a transaction or providing some other fee-based service.
(2) Asset sales represent revenue generated from activities in which Heritage Global acted in a principal capacity, reselling assets that it had purchased.
 

First Quarter 2016 Financial Results Summary:

  • Total revenues increased approximately 16% to $5.4 million from the year ago first quarter level of $4.7 million. The increase in total revenues and cost of revenues reflects a higher volume of transactions and the timing of certain asset liquidation transactions.
  • Gross profit, or total revenues and earnings of equity method investments net of cost of services revenue and asset sales, increased 24% to $3.4 million, compared to the year ago first quarter.
  • During the first quarter, Heritage Global completed a number of successful global online sales, including Cambrian Genomics, Pfizer, AE Solar Energy, Amgen, Corning, LensVector, Nokia, Atrium, Westwood College, Tennessee Valley Authority and AeroJet Rocketdyne.
  • Selling, general and administrative expenses were relatively flat, increasing $0.1 million to $3.1 million in the current period from the 2015 first quarter.
  • Following the changes to Heritage Global’s executive officers and the consolidation of its financial management functions to California, the Company has continued to pursue initiatives aimed at managing costs, creating operating efficiencies and reducing debt. As a result, the Company returned to profitability in the first quarter of 2016, recording net income of approximately $0.1 million. This compares to a net loss of $0.6 million or a loss of $0.02 per common share in the prior year period.

Key Corporate Events

  • Reflecting the complete transition of the Company from a telecommunications and patent business to a leading provider of diversified and unique global corporate and financial asset solutions and services, Messrs. Hal B. Heaton, Henry Y. L. Toh and David L. Turock resigned from the Board of Directors of Heritage Global Inc., effective May 5, 2016.
    • Hal B. Heaton served as a Class II Director, Chairman of the Compensation Committee, and member of the Audit Committee. Mr. Heaton joined the Board of Directors in June 2000.
    • Henry Y. L. Toh served as a Class II Director, Chairman of the Audit Committee, and member of the Compensation Committee. Mr. Toh joined the Board of Directors in April 1992.
    • David L. Turock served as a Class III Director. Mr. Turock joined the Board of Directors on January 16, 2008.
  • In addition, effective May 5, 2016, the Board has reconstituted its standing committees as follows:
    • The Board has appointed Mr. Samuel L Shimer to serve as the chairman of the Audit Committee, and Messrs. Morris Perlis and J. Brendan Ryan to serve on the Audit Committee.
    • The Board appointed Mr. Perlis to serve as the chairman of the Compensation Committee, and Messrs. Shimer and Ryan to serve on the Compensation Committee.
    • The Board also determined that Mr. Shimer, through his education and experience, satisfies the definition of an “Audit Committee financial expert” as defined by Item 407(d) of Regulation S-K.

Heritage Global Chief Executive Officer Ross Dove stated, “Heritage Global recorded solid first quarter operating performance with total revenue growth of 16% compared to the prior year period, inclusive of 14% growth in services revenue and a 23% rise in asset sales. Importantly, the first quarter of 2016 marks the Company’s return to profitability and reflects the early success of the initiatives put in place by our executive team during the second half of last year to reduce costs and improve top and bottom-line financial performance. While there is still more work to be done, we are confident that we are on the right path to achieve sustainable growth and profitability while enhancing long-term shareholder value.”

“In regards to the changes in HGI’s Board of Directors, we would like to thank Henry, Hal and David for their outstanding leadership and positive support they provided the Company while serving on the Board of Directors. We are grateful to them for staying on through the Company’s transition from a telecommunications and patent business to a leading provider of diversified and unique global asset solutions and services. We wish them well with their future endeavors.”

Commenting on his Board resignation, Mr. Turock stated, “I am proud of what HGI has accomplished over the last 8 years during my tenure serving on the Board of Directors. Now that the Company has fully transitioned from a telecom business to a leading provider of diversified global corporate and financial asset solutions, I felt it was the right time to transition off the Board in order to pursue other opportunities better suited to my particular industry experience and expertise. I leave it well-positioned with the current executive management team that the Board appointed last May and have every confidence that HGI will be successful with its current strategy.”

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.

HERITAGE GLOBAL INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands of US dollars, except share and per share amounts)

(unaudited)

 
 

Quarter Ended

March 31,

2016

 

2015

Revenues:
Services revenue $ 4,192 $ 3,684
Asset sales 1,220   989  
Total revenues 5,412   4,673  
 
Operating costs and expenses:
Cost of services revenue 1,003 931
Cost of asset sales 1,052 1,066
Selling, general and administrative 3,090 2,983
Depreciation and amortization 83   159  
Total operating costs and expenses 5,228   5,139  
Earnings of equity method investments 8   34  
 
Operating income (loss) 192   (432 )
Other expense (43 ) (85 )
Interest expense (73 ) (67 )
Income (loss) before income tax expense 76 (584 )
Income tax expense 16   3  
Net income (loss) $ 60   $ (587 )
 
Weighted average common shares outstanding – basic 28,318,967 28,167,408
Weighted average common shares outstanding – diluted 28,350,892 28,167,408
Net income (loss) per share – basic and diluted $ 0.00 $ (0.02 )

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

 

HERITAGE GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands of US dollars, except share and per share amounts)

(unaudited)

 
 

March 31,

 

December 31,

2016

2015

 
ASSETS
Current assets:
Cash and cash equivalents $ 1,323 $ 2,777
Accounts receivable, net 1,077 639
Deposits 130 4
Inventory – equipment 260 395
Other current assets  379    449  
Total current assets 3,169 4,264
Inventory – real estate 3,715 3,715
Property and equipment, net 97 110
Identifiable intangible assets, net 4,312 4,382
Goodwill 6,158 6,158
Other assets  188    173  
Total assets$17,639  $18,802  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 5,364 $ 6,673
Current portion of third party debt 2,500
Related party debt 1,721 1,721
Current portion of contingent consideration 851 865
Other current liabilities  84    97  
Total current liabilities 10,520 9,356
Non-current portion of third party debt 2,500
Non-current portion of contingent consideration 2,674 2,592
Deferred tax liabilities  960    960  
Total liabilities  14,154    15,408  
 
 
Stockholders’ equity:
Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and outstanding 569 Class N shares at March 31, 2016 and December 31, 2015 6 6
Common stock, $0.01 par value, authorized 300,000,000 shares; issued and outstanding 28,487,648 shares at March 31, 2016 and 28,467,648 shares at December 31, 2015 285 285
Additional paid-in capital 284,085 284,046
Accumulated deficit (280,829 ) (280,889 )
Accumulated other comprehensive loss  (62 )  (54 )
Total stockholders’ equity  3,485    3,394  
Total liabilities and stockholders’ equity$17,639  $18,802  

The notes contained in our Quarterly Report on Form 10-Q are an integral part of these 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