Sherman Oaks, CA - Signature Group Holdings, Inc. announced financial results for its second quarter ended June 30, 2013.
The company's net loss for the second quarter of 2013 was $1.9 million, or $0.02 per share, an improvement to the net loss of $3.9 million, or $0.04 per share, reported for the second quarter of 2012. The 2013 second quarter results include a $5.0 million, or $0.04 per share, gain on sale of residential loans as compared to no gain in the second quarter of 2012. The second quarter results also included a $3.7 million, or $0.03 per share, noncash charge related to the Company's common stock warrant liability while the 2012 second quarter results included a $0.6 million, or $0.01 per share, noncash charge. The Company also incurred $1.8 million of expenses related to the contested proxy and associated settlements in the second quarter of 2013, compared to $0.7 million of contested proxy and related expenses in the second quarter of 2012.
"I am satisfied with the progress the Company is making to execute on its growth plan and would like to thank the shareholders for their overwhelming support of that plan by approving the increase of our authorized share count," stated Craig T. Bouchard, Chairman and CEO of Signature. "During the quarter, we reduced headcount and operating expenses at the holding company, divested the remaining legacy residential mortgage assets and increased our cash position. Our focus now turns to completing an accretive acquisition. We are seeing an abundance of excellent opportunities."
Operating revenues from continuing operations were $14.9 million in the second quarter of 2013, compared to $9.3 million in the second quarter of 2012. The increase is primarily related to the $5.0 million gain recognized on the sale of the residential loan portfolio. Adjusting for the one-time gain, operating revenues increased 6.5 percent year over year, primarily driven by an increase in net sales at Industrial Supply.
Operating costs increased $0.9 million year over year, primarily from an increase in selling, general and administrative expenses attributable to contested proxy and related expenses, partially offset by a reduction in litigation expenses.
Operating profit in the second quarter of 2013 was $1.8 million, compared to a $2.9 million operating loss in the second quarter of 2012. Adjusting for the one-time gain on sale of loans, as well as the contested proxy and related expenses in both quarters, the operating loss in the second quarter of 2013 would have been $1.5 million; a $0.6 million improvement to what would have been a $2.1 million operating loss in the second quarter of 2012.
EBITDA and Adjusted EBITDA from continuing operations were $(0.4) million and $0.6 million, respectively, for the second quarter of 2013, compared to $(1.5) million and $(0.1) million, respectively, for the second quarter of 2012. The $0.7 million improvement in Adjusted EBITDA was primarily driven by operating cost reductions in the corporate office and the increase in net earnings from Industrial Supply. (See Non-GAAP Financial Measures below for more information about EBITDA and Adjusted EBITDA, and a reconciliation to the most comparable GAAP financial measures.)
At June 30, 2013, the Company had $76.2 million in cash and cash equivalents, $84.3 million of working capital and $49.5 million in total debt.
Key Segment Developments
- Industrial Supply – Net earnings increased 38.3 percent on a 4.3 percent increase in net sales over the comparable period in 2012. Inventory continued to increase during the quarter in preparation for the summer sales season, to support the ongoing expansion of the warehouse network and as part of a strategic effort to protect gross margins through opportunistic purchases. With the opening of the Charlotte, North Carolina facility on July 1, the Company achieved its original goal of opening two new locations in 2013 and now expects to open two additional locations in the coming twelve months.
- Signature Special Situations – As a result of the loan sales during the quarter, operating results were very strong, but this segment's asset base is now at a size that is not expected to generate material earnings in the next several quarters.
- Corporate and Other and Discontinued Operations – During the quarter, staff was reduced by six full time employees.
Mr. Bouchard added, "We are excited about Industrial Supply's continued organic growth and future prospects to increase market share throughout North America. The recent sale of our residential loan portfolio has provided further capital flexibility as we pursue strategic and targeted acquisition opportunities."