Sherman Oaks, CA - Signature Group Holdings, Inc., a diversified enterprise with current principal activities in industrial supply and special situations finance, today announced financial results for its quarter ended March 31, 2013.
“The results for the first quarter of 2013 reflect a number of positive developments within the company, including continued strong growth in Industrial Supply’s sales and earnings,” stated Chris Colville, CEO of Signature. “We continue to leverage growth opportunities and cost containment efforts across the organization."
The company’s net loss for the first quarter of 2013 was $2.8 million, or $0.02 per share, compared to a net loss of $1.2 million, or $0.01 per share, reported for the first quarter of 2012.
Comparatively, the 2013 quarterly results include a $1.5 million (or $0.01 per share) non-cash charge related to the company’s common stock warrant liability while the 2012 quarterly results included a $2.8 million (or $0.02 per share) non-cash benefit resulting from a change in the market valuation allowance on loans held for sale.
Quarterly Results
Operating revenues from continuing operations were $9.6 million in the first quarter of 2013 compared to $12.1 million in the first quarter of 2012. The decrease is primarily related to the change in market valuation allowance on loans held for sale from a one-time $2.8 million increase in first quarter 2012 revenue within Signature Special Situations. Adjusting for the market valuation allowance in 2012, operating revenues increased 3.2 percent over the prior year period.
Operating costs declined $1.0 million, primarily from a reduction in selling, general and administrative expenses (“SG&A”). SG&A as a percent of sales declined to 37.2 percent versus 39.3 percent in the year ago quarter, reflecting in part the company’s cost reduction initiatives. The operating loss in the first quarter of 2013 was $0.6 million, compared to a $0.8 million operating profit in the first quarter of 2012. Adjusting for the previously mentioned $2.8 million change in market valuation allowance on loans held for sale, the operating loss in 2013 improved $1.3 million over the first quarter of 2012.
EBITDA and Adjusted EBITDA from continuing operations were $(0.7) million and $1.1 million, respectively, for the first quarter of 2013, compared to $2.4 million and zero, respectively, for the first quarter of 2012. The $1.1 million improvement in Adjusted EBITDA in the first quarter of 2013 was primarily driven by the aforementioned operating cost reductions and the increase in net earnings within Industrial Supply. (See Non-GAAP Financial Measures below for more information about EBITDA and Adjusted EBITDA, and a reconciliation to the most comparable GAAP measures.)
At March 31, 2013, the Company had $51.6 million in cash and cash equivalents and $60.7 million of working capital. Total debt was $50.7 million.
Key Segment Developments
- Net earnings for the Industrial Supply segment increased 17.8 percent on a 6.8 percent net sales increase year-over-year. Inventory grew 6.7 percent in advance of the opening of a new warehouse facility in Washington state as well as in preparation for the seasonally stronger second quarter when demand for replacement circuit breakers begins to increase.
- Signature Special Situations recorded a $0.3 million gain during the quarter from the sale of its remaining corporate bond position. Subsequent to the end of the first quarter, Signature Special Situations sold its performing residential loan portfolio. The company received gross proceeds of approximately $18.9 million and will record a gain of $3.8 million in the second quarter.
- SG&A expenses within Corporate and Other decreased $1.4 million year-over-year from cost reduction programs instituted in 2012, reduced litigation, and the absence of $0.2 million in proxy costs recorded in the prior year quarter.
“Our Industrial Supply business continues to perform well and we anticipate opening a second new warehouse later this year in the Southeast. In addition, we expect to close on the sale of the nonperforming residential loan portfolio and certain real estate owned in the Signature Special Situations segment by the end of the month. Our opportunistic loan sales have given us added financial flexibility to expand ongoing operations and for potential acquisition activity,” concluded Mr. Colville.
About Signature Group Holdings, Inc.
Signature is a diversified enterprise with current principal activities in industrial supply and special situations finance. Signature has significant capital resources and is actively seeking additional acquisitions as well as growth opportunities for its existing businesses. Signature has federal net operating loss tax carryforwards of approximately $886.9 million. For more information about Signature, visit its corporate website at www.signaturegroupholdings.com.
