Heritage Global Inc. (OTCQB: HGBL), a leader in distressed and surplus capital assets valuations and transactions, today reported financial results for the fourth quarter and twelve-month periods ended December 31, 2013 as summarized below.

As previously disclosed, Heritage Global’s parent company, Counsel Corporation (TSX:CXS), declared a stock dividend of its entire holdings of 20,644,481 common shares of Heritage Global, payable April 30 to all common shareholders of record as of April 1. Counsel Corp. will focus its future operations on its core mortgage lending business but will continue to provide management and other advisory services to Heritage Global.

 

Summary Financial Data

(unaudited)

($ in thousands, except per share amounts)    

Three months ended
December 31,

  

Twelve months ended
December 31,

2013

  

2012

  

2013

  

2012

Total asset liquidation revenue $ 2,479 $ 4,211 $ 8,068 $ 14,128
Intellectual property licensing - - 824 -
Total revenue 2,479 4,211 8,892 14,128
Earnings of equity accounted asset liquidation investments(1) (65 ) 574 1,200 2,023
Operating loss (1,159 ) (1,349 ) (2,937 ) (2,453 )
Net loss (4,746 ) (782 ) (6,396 ) (1,813 )
Loss per diluted common share     $ (0.17 )   $ (0.02 )   $ (0.22 )   $ (0.06 )

(1) Represents equity income from activities where Heritage Global acted as a member of a syndicate in a transaction.

 

2013 Q4 Summary:

  • Heritage Global reported a reduced operating loss of $1.2 million, down from a $1.3 million operating loss in the corresponding 2012 period.
  • Combined asset liquidation revenue and earnings of equity accounted asset liquidation investments (pre-tax) was approximately $2.4 million, compared to approximately $4.8 million in the prior year quarter.
  • SG&A expenditures, including expenses paid to related parties, dropped 26% versus the year-ago quarter.
  • Total operating costs and expenses declined approximately 42%, year-over-year.
  • The Company reported a net loss of $4.7 million or $0.17 loss per diluted common share, compared to a net loss of $782,000 or $0.02 loss per diluted common share in the prior year quarter. The net loss was primarily attributable to the income tax expense of $3.5 million in 2013 as compared to a recovery of $366,000 in 2012.
  • The increase in income tax expense in 2013 is primarily due to the Company recording a valuation allowance of $4.7 million with respect to the Company’s deferred income tax assets. There were no similar transactions in 2012.

Heritage Global Partners Managing Partner Ross Dove stated, “2013 was a transitional year for Heritage Global. We focused significant time and effort on successfully reducing our organization’s corporate overhead, infrastructure and controllable expense levels as well as ensuring a virtually seamless transition to the organization’s new senior executive team. Our business auction and advisory services pipeline, both domestically and internationally, is robust and we look forward to improved performance in 2014.

“We also are reviewing ways we can further expand our offerings to better serve our worldwide client base. Given the reduced cost structure our goal is to once again generate consistent profitability and with Heritage Global’s strong, seasoned team of industry professionals I believe this is very achievable,” added Mr. Dove.

About Heritage Global Inc. (www.heritageglobalinc.com)

Heritage Global Inc. (OTCQB: HGBL) 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 twenty-five 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

 

Three Months Ended
December 31,

Twelve Months Ended
December 31,

(In thousands of US dollars, except per share amounts)

 

 

 

 

2013

2012

2013

2012

Revenue:

Asset liquidation

Asset sales $ 247 $ 2,726 $ 2,046 $ 7,901
Commissions and other   2,232     1,485     6,022     6,227  
Total asset liquidation revenue 2,479 4,211 8,068 14,128
Intellectual property licensing   —     —     824     —  
Total revenue   2,479     4,211     8,892     14,128  
 
Operating costs and expenses:
Asset liquidation 1,022 2,641 2,423 7,001
Inventory maintenance 8 97 283 89
Patent licensing and maintenance 25 12 191 50

Selling, general and administrative, including expenses paid to
related parties

2,404 3,260 9,660 11,057
Depreciation and amortization   114     124     472     407  
 
Total operating costs and expenses   3,573     6,134     13,029     18,604  
(1,094 ) (1,923 ) (4,137 ) (4,476 )
Earnings of equity accounted asset liquidation investments   (65 )   574     1,200     2,023  
Operating loss   (1,159 )   (1,349 )   (2,937 )   (2,453 )
 
Other income (expenses):
Other income — 363 — 64
Interest expense – third party (80 ) (115 ) (388 ) (290 )
Interest expense – related party   (77 )   —     (168 )   —  
Total other income (expenses)   (157 )   248     (556 )   (226 )
Loss before the undernoted (1,316 ) (1,101 ) (3,493 ) (2,679 )
Income tax expense (recovery) 3,495 (366 ) 3,029 (978 )
Earnings (loss) of other equity accounted investments (net of $0 tax)   65     (47 )   126     (112 )
Net income (loss) (4,746 ) (782 ) (6,396 ) (1,813 )
Other comprehensive loss:
Currency translation adjustment (net of tax of $0)   (24 )   (7 )   (37 )   (7 )
 
Comprehensive income (loss) $ (4,770 ) $ (789 ) $ (6,433 ) $ (1,820 )
 

Weighted average common shares outstanding – basic and diluted
   (in thousands)

28,167 28,945 28,610 28,292
 
Loss per share – basic and diluted:
Common shares $ (0.17 ) $ (0.02 ) $ (0.22 ) $ (0.06 )
 
       

HERITAGE GLOBAL INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

As of December 31, 2013 and 2012

(In thousands of U.S. dollars, except share and per share amounts)

 
  2013       2012  
 
ASSETS
Current assets:
Cash and cash equivalents $ 3,213 $ 4,314
Amounts receivable (net of allowance for doubtful accounts of $0; 2012 - $0) 1,670 1,068
Receivable from a related party — 2,929
Deposits 17 1,481
Inventory – equipment 578 820
Other current assets 479 312
Income taxes recoverable 1 70
Deferred income tax assets   1,366     1,956  
Total current assets 7,324 12,950
Non-current assets:
Inventory – real estate 6,078 6,078
Asset liquidation investments 1,380 3,618
Investments 1,769 2,426
Property, plant and equipment, net 32 52
Intangible assets, net 4,810 5,263
Goodwill 5,301 5,301
Deferred income tax assets   23,301     25,622  
Total assets $ 49,995   $ 61,310  
 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 6,510 $ 4,415
Debt payable to third parties 1,438 10,883
Debt payable to a related party   2,550     —  
Total current liabilities   10,498     15,298  
 
Commitments and contingencies
 
Equity:

Preferred stock, $10.00 par value, authorized 10,000,000 shares; issued and
  outstanding 579 Class N shares at December 31, 2013 and 592 Class N shares
  at December 31, 2012, liquidation preference of $579 at December 31, 2013 and
  $592 at December 31, 2012

6 6

Common stock, $0.01 par value, authorized 300,000,000 shares; issued and
  outstanding 28,167,248 shares at December 31, 2013 and 28,945,228 shares at
  December 31, 2012

282 290
Additional paid-in capital 283,207 283,281
Accumulated deficit (243,954 ) (237,558 )
Accumulated other comprehensive loss   (44 )   (7 )
Total equity   39,497     46,012  
Total liabilities and equity $ 49,995   $ 61,310