GlassBridge Reports Third Quarter 2018 Financial Results
GlassBridge Divested Nexsan Business
Reported a Net Gain of $6.9 million
OAKDALE, Minn., Nov. 13, 2018 /PRNewswire/ -- GlassBridge Enterprises, Inc. (OTCQX: GLAE) ("GlassBridge", the "Company" or "we") today announced its financial results for the third quarter of 2018.
Overview
During the third quarter, we completed the divestiture of the Nexsan business. Gross proceeds from the transaction were approximately $5.7 million including certain repayments of intercompany debts to GlassBridge. In addition, the Company announced the prepayment of its entire outstanding obligation under a $4 million promissory note due to IOENGINE, LLC at a reduced price of $2.25 million. The transaction represents the final step in exiting our legacy businesses.
"I am pleased that through GlassBridge's executive leadership we were able to get the Nexsan business to profitability and position it for such a strategic transaction." stated Danny Zheng, GlassBridge Interim CEO and Nexsan's former CEO, "This transaction positions the Company to focus on its asset management business and pursuing the levy claims in Europe."
Like many companies with cash balance pension plans, we are facing increasing pension obligations and higher pension insurance premiums while our employee base has shrunk significantly over the last few years. The Company did not make a required contribution of $1.7 million that was due September 15, 2018 due to a pending discussion with Pension Benefit Guaranty Corp ("PBGC"). In addition to the foregoing, the Company did not make a required contribution of approximately $0.4 million, which was due October 15, 2018. The above past due payments are recorded as other current liabilities. The Company is seeking relief of funding obligations. The future pension obligation is projected to be between $1.5 million and $2.0 million a year over the next seven years. If the Company is unsuccessful in its attempts to reach an agreement with PBGC, we would have to reevaluate our business strategies and alternatives.
GlassBridge Asset Management Update:
We have repositioned the resources of the Company to develop and grow our asset management business. In addition to our technology-focused alternative asset management business driven by quantitative trading strategies, we have also focused on venture capital and other investment opportunities, including through our strategic partnership, "ARRIVE," with Primary Venture Partners and Roc Nation, a global sports and entertainment management organization.
GlassBridge Asset Management, LLC ("GBAM") our investment advisory subsidiary continues to engage in discussions with a number of strategic investors regarding our product offerings, and we have had some success curating and positioning our multiple sub-strategies into products designed to match an investor's needs. We continue to move forward with our Asia-focused joint venture, announced earlier this year, to offer dedicated quantitative products tailored for the Asian financial markets. We believe there is opportunity in these regions due to geographic interest in technology-driven products, and there has been positive institutional feedback. We are currently in discussions with a number of well-established financial institutions, including several which specialize in digital distribution.
ARRIVE has continued to execute on its business plan of making early-stage investments in consumer facing businesses where they can be a value-added partner. The investments ARRIVE has made to date have performed well and the pipeline for additional investments is robust. ARRIVE has also been focused on growing its business through multiple avenues including raising third-party capital.
In light of recent underperformance in the overall quantitative space and resultant headwinds, we are currently conducting a complete business review. This involves all areas of our business including implementing cost-reduction programs, evaluating the viability of certain initiatives as well as pursuing strategic transactions that can complement or supplement our existing businesses.
We will continue to grow the asset management business in a measured way moving forward. Our board continues to be open to all strategic alternatives to maximize shareholder value.
We will provide updates on our quantitative fund business review as well as the status of our attempts at resolution with the PBGC to enable us to operate and grow our business in the most efficient and profitable way possible.
Overview of Financial Results
Following the sale of the Nexsan Business, the Company does not have any revenue, gross margin or research and development expenses in continuing operations for the periods presented. Selling, general and administrative expenses declined by $0.4 million, or 17.4 percent year-over-year. Operating loss from continuing operations decreased from $2.7 million in Q3 2017 to a loss of $2.0 million in Q3 2018. The current quarter loss was due to the asset management business and corporate expenses. Gain from discontinued operations increased from $6.1 million in Q3 2017 to a gain of $9.0 million in Q3 2018 primarily due to the gain on sale of the Nexsan Business of $6.1 million and the gain of $2.3 million resulting from IOEngine Note settlement. Our cash balance was $6.3 million as of September 30, 2018.
Detailed Q3 2018 Results
The following financial results are for the current and prior period unless otherwise indicated. Included within the following financial results are our continuing operations, including the corporate holding company and our asset management business.
Net revenue Following the sale of the Nexsan Business, the Company does not have any revenue for the periods presented.
Gross margin Following the sale of the Nexsan Business, the Company does not have any gross margin for the periods presented.
Selling, general and administrative expenses in Q3 2018 were $1.9 million, down 17.4 percent from Q3 2017 primarily due to corporate cost reductions.
Research and development Following the sale of the Nexsan Business, the Company does not have any research and development expenses for the periods presented.
GBAM Fund expenses were $0.1 million in Q3 2018 compared to $0.3 in Q3 2017. GBAM Fund expenses include general and administrative expenses for our investment vehicle launched at the end of the second quarter in 2017.
Operating loss from continuing operations was $2.0 million in Q3 2018 compared to a loss of $2.7 million in Q3 2017, primarily due to reduced corporate expenditures and legal expenses.
Net loss from GBAM Fund activities were $0.2 million in Q3 2018 compared to a $1.0 million gain in Q3 2017. Net gain (loss) from GBAM Fund activities include income or loss associated with our proprietary investment in GBAM fund.
Income tax provision was $0.0 million in Q3 2018 compared to a $3.5 million benefit in Q3 2017.
Discontinued operations had a gain (after tax) in Q3 2018 of $9.0 million compared with a gain (after tax) of $6.1 million in Q3 2017. The change was primarily due to the gain on sale of the Nexsan Business of $6.1 million and the gain of $2.3 million resulting from IOEngine Note settlement.
Net gain was $6.9 million for Q3 2018 compared to a net gain of $8.0 million in Q3 2017.
Net Gain per share was $1.33 in Q3 2018 compared with a gain per share of $1.60 in Q3 2017 based on weighted average shares outstanding of 5.2 million and 5.0 million, respectively.
Cash and short-term investments were $6.3 million as of September 30, 2018, up by $1.0 million during Q3 2018, primarily driven by the cash proceeds from the Nexsan sale, offset by the IOEngine Note payment, the operating loss and pension funding contributions.
Webcast and Replay Information
A teleconference is scheduled for 10:00 AM Eastern Time today, November 13, 2018, and will be available on the Internet on a listen-only basis at:
https://www.webcaster4.com/Webcast/Page/1401/28302
A digital recording of this teleconference will be available for replay at 12:00 p.m. Eastern Time on November 13, 2018 and will be accessible via the replay number listed below until November 20, 2018.
For your convenience, you will also be able to access the recording online at:
https://www.webcaster4.com/Webcast/Page/1401/28302
Digital Recording Replay Numbers:
U.S. Toll Free: |
877-344-7529 |
International Toll: |
412-317-0088 |
Canada Toll Free: |
855-669-9658 |
Replay Access Code: |
10126306 |
All remarks made during the teleconference will be current at the time of the call and the replays will not be updated to reflect any subsequent developments.
Description of Tables
Table One -- Condensed Consolidated Statements of Operations
Table Two -- Condensed Consolidated Balance Sheets
Table Three -- Supplemental Segment and Product Information
Table Four -- Additional Information
About GlassBridge Enterprises
GlassBridge Enterprises, Inc. (OTCQX: GLAE) is a holding company. We actively explore a diverse range of new, strategic asset management business opportunities for our portfolio. The Company's wholly-owned subsidiary, GBAM, is an investment advisor focused on technology-driven and quantitative strategies and other alternative investment strategies. For more information, please visit GlassBridge's website at www.glassbridge.com.
Forward-Looking Statements
Certain information contained in this press release which does not relate to historical financial information may be deemed to constitute forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations or forecasts for future events, including, without limitation, our earnings, revenues, expenses or other future financial or business performance or strategies, our share repurchase program, the launch of our asset management business and the impact of legal or regulatory matters on our business, results of operations or financial condition. These statements may be preceded by, followed by or include the words "may," "might," "will," "will likely result," "should," "estimate," "plan," "project," "forecast," "intend," "expect," "anticipate," "believe," "seek," "continue," "target" or similar expressions. Such statements are subject to a wide range of risks and uncertainties that could cause our actual results in the future to differ materially from our historical results and those presently anticipated or projected. We wish to caution investors not to place undue reliance on any such forward-looking statements. Any forward-looking statements speak only as of the date on which such statements are made, and we undertake no obligation to update such statements to reflect events or circumstances arising after such date. Risk factors include various factors set forth from time to time in our filings with the U.S. Securities and Exchange Commission (the "SEC") including the following: our need for substantial additional capital in order to fund our business; our ability to realize the anticipated benefits of our restructuring plan and other recent significant changes; the negative impacts of our delisting from the NYSE, including reduced liquidity and market price of our common stock and the number of investors willing to hold or acquire our common stock; significant costs relating to pending and future litigation; our ability to attract and retain talented personnel; the structure or success of our participation in any joint investments; risks associated with any future acquisition or business opportunities; our need to consume resources in researching acquisitions, business opportunities or financings and capital market transactions; our ability to integrate additional businesses or technologies; the impact of our reverse stock split on the market trading liquidity of our common stock; the market price volatility of our common stock; our need to incur asset impairment charges for intangible assets and goodwill; significant changes in discount rates, rates of return on pension assets and mortality tables; our reliance on aging information systems and our ability to protect those systems against security breaches; our ability to integrate accounting systems; changes in European law or practice related to the imposition or collectability of optical levies; changes in tax guidance and related interpretations and inspections by tax authorities; our ability to raise capital from third party investors for our asset management business; the efforts of key personnel of the Clinton Group, Inc. ("Clinton") and the performance of Clinton's overall business; our ability to comply with extensive regulations relating to the launch and operation of our asset management business; our ability to compete in the intensely competitive asset management business; the performance of any investment funds we sponsor or accounts we manage, including any fund or account managed by Clinton; difficult market and economic conditions, including changes in interest rates and volatile equity and credit markets; our ability to achieve steady earnings growth on a quarterly basis in our asset management business; the significant demands placed on our resources and employees, and associated increases in expenses, risks and regulatory oversight, resulting from the potential growth of our asset management business; our ability to establish a favorable reputation for our asset management business; the lack of operating history of our asset manager subsidiary and any funds that we may sponsor; and other risks and uncertainties set forth in our filings with the SEC. We assume no obligation to update forward-looking statements except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
Disclaimers
This press release does not constitute an offer to sell or a solicitation to buy any securities or otherwise invest in any investment vehicle managed, advised or coordinated by GBAM (collectively, the "GlassBridge Vehicle"), and may not be relied upon in connection with any investment or offer or sale of securities. Any such offer or solicitation may only be made pursuant to the current Confidential Private Offering Memorandum (or similar document) for any such GlassBridge Vehicle, which is provided only to qualified offerees and which should be carefully reviewed prior to investing. GBAM is a newly formed entity and the GlassBridge Vehicles are currently either in formation state or have recently launched. GBAM is registered as an investment adviser with the SEC under the U.S. Investment Advisers Act of 1940, as amended, or under similar state laws, and nothing in this press release constitutes investment advice with respect to securities.
For Further Information
Stockholders of GlassBridge Enterprises, Inc. - Danny Zheng, Interim CEO, Chief Financial Officer, (651) 704-4311; Prospective Investors in GlassBridge Vehicles -Daniel Strauss, Chief Operating Officer, (212) 825-0400.
Table One |
|||||||||||||
GLASSBRIDGE ENTERPRISES, INC. |
|||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
|||||||||||||
(In millions, except for per share amounts) |
|||||||||||||
(Unaudited) |
|||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||
September 30 |
September 30 |
||||||||||||
2018 |
2017 |
2018 |
2017 |
||||||||||
Net revenue |
$ |
- |
$ |
- |
$ |
- |
$ |
- |
|||||
Cost of goods sold |
- |
- |
- |
- |
|||||||||
Gross profit |
- |
- |
- |
- |
|||||||||
Operating expenses: |
|||||||||||||
Selling, general and administrative |
1.9 |
2.3 |
5.1 |
7.0 |
|||||||||
GBAM Fund expenses |
0.1 |
0.3 |
0.3 |
0.3 |
|||||||||
Restructuring and other |
- |
0.1 |
0.1 |
- |
|||||||||
Total operating expenses |
2.0 |
2.7 |
5.5 |
7.3 |
|||||||||
Operating loss from continuing operations |
(2.0) |
(2.7) |
(5.5) |
(7.3) |
|||||||||
Other income (expense): |
|||||||||||||
Interest expense |
- |
- |
(0.1) |
- |
|||||||||
Net gain (loss) from GBAM Fund activities |
(0.2) |
1.0 |
(0.7) |
1.0 |
|||||||||
Other income (expense), net |
0.1 |
0.1 |
0.4 |
(0.6) |
|||||||||
Total other income (expense) |
(0.1) |
1.1 |
(0.4) |
0.4 |
|||||||||
Loss from continuing operations before income taxes |
(2.1) |
(1.6) |
(5.9) |
(6.9) |
|||||||||
Income tax benefit |
- |
3.5 |
- |
3.5 |
|||||||||
Gain (loss) from continuing operations |
(2.1) |
1.9 |
(5.9) |
(3.4) |
|||||||||
Discontinued operations: |
|||||||||||||
Gain (loss) from discontinued operations, net of income taxes |
2.9 |
6.1 |
3.7 |
(1.5) |
|||||||||
Gain on sale of discontinued businesses, net of income taxes |
6.1 |
- |
6.1 |
- |
|||||||||
Income (loss) from discontinued operations, net of income taxes |
9.0 |
6.1 |
9.8 |
(1.5) |
|||||||||
Net gain (loss) |
$ |
6.9 |
$ |
8.0 |
$ |
3.9 |
$ |
(4.9) |
|||||
Gain (loss) per common share attributable to GlassBridge common shareholders - basic and diluted: |
|||||||||||||
Continuing operations |
$ |
(0.40) |
$ |
0.38 |
$ |
(1.16) |
$ |
(0.74) |
|||||
Discontinued operations |
1.73 |
1.22 |
1.92 |
(0.33) |
|||||||||
Net Gain (loss) |
$ |
1.33 |
$ |
1.60 |
$ |
0.76 |
$ |
(1.07) |
|||||
Weighted average shares outstanding: |
|||||||||||||
Basic and diluted |
5.2 |
5.0 |
5.1 |
4.6 |
|||||||||
Table Two |
||||||
GLASSBRIDGE ENTERPRISES, INC. |
||||||
CONDENSED CONSOLIDATED BALANCE SHEETS |
||||||
(In millions) |
||||||
(Unaudited) |
||||||
September 30, |
December 31, |
|||||
2018 |
2017 |
|||||
ASSETS |
||||||
Current assets: |
||||||
Cash and cash equivalents |
$ |
6.3 |
$ |
8.7 |
||
Short term investments |
- |
0.7 |
||||
Accounts receivable, net |
0.7 |
- |
||||
Other current assets |
1.0 |
0.5 |
||||
Current assets of discontinued operations |
1.1 |
11.5 |
||||
Total current assets |
9.1 |
21.4 |
||||
Intangible assets, net |
6.8 |
8.2 |
||||
Other assets |
6.4 |
6.4 |
||||
Non-current assets of discontinued operations |
1.5 |
4.2 |
||||
Total assets |
$ |
23.8 |
$ |
40.2 |
||
LIABILITIES AND SHAREHOLDERS' EQUITY |
||||||
Current liabilities: |
||||||
Accounts payable |
$ |
0.3 |
$ |
0.3 |
||
Other current liabilities |
8.9 |
7.6 |
||||
Current liabilities of discontinued operations |
4.8 |
20.2 |
||||
Total current liabilities |
14.0 |
28.1 |
||||
Other liabilities |
21.6 |
25.2 |
||||
Other liabilities of discontinued operations |
4.9 |
13.6 |
||||
Total liabilities |
40.5 |
66.9 |
||||
Shareholders' deficit: |
||||||
Total GlassBridge Enterprises, Inc. shareholders' deficit |
(16.7) |
(22.0) |
||||
Noncontrolling interest |
- |
(4.7) |
||||
Shareholders' deficit |
(16.7) |
(26.7) |
||||
Total liabilities and shareholders' deficit |
$ |
23.8 |
$ |
40.2 |
||
Table Three |
||||||||||
GLASSBRIDGE ENTERPRISES, INC. |
||||||||||
SUPPLEMENTAL SEGMENT AND PRODUCT INFORMATION |
||||||||||
(Dollars in millions) |
||||||||||
(Unaudited) |
||||||||||
Three months ended |
Three months ended |
|||||||||
2018 |
2017 |
% Change |
||||||||
Revenue |
% Total |
Revenue |
% Total |
|||||||
Asset Management |
- |
- |
||||||||
Total |
$ |
0.0 |
$ |
0.0 |
||||||
Operating |
OI % |
Operating |
OI % |
|||||||
Asset Management |
(0.9) |
NM |
(1.2) |
NM |
-25.0% |
|||||
Corp/Unallocated (1) |
(1.1) |
NM |
(1.5) |
NM |
-26.7% |
|||||
Total operating loss from continuing operations |
$ |
(2.0) |
NM |
$ |
(2.7) |
NM |
||||
Net gain (loss) |
OI % |
Net gain (loss) |
OI % |
|||||||
Asset Management (2) |
$ |
(0.2) |
NM |
$ |
1.0 |
NM |
NM |
|||
Nine months ended |
Nine months ended |
|||||||||
2018 |
2017 |
% Change |
||||||||
Revenue |
% Total |
Revenue |
% Total |
|||||||
Asset Management |
- |
- |
NM |
|||||||
Total |
$ |
0.0 |
$ |
0.0 |
||||||
Operating |
OI % |
Operating |
OI % |
|||||||
Asset Management |
(2.7) |
NM |
(2.9) |
NM |
-6.9% |
|||||
Corp/Unallocated (1) |
(2.8) |
NM |
(4.4) |
NM |
-36.4% |
|||||
Total operating loss from continuing operations |
$ |
(5.5) |
NM |
$ |
(7.3) |
NM |
||||
Net gain (loss) |
OI % |
Net gain (loss) |
OI % |
|||||||
Asset Management (2) |
$ |
(0.7) |
NM |
$ |
1.0 |
NM |
NM |
|||
NM - Not Meaningful |
|||||||||||
(1) Corporate and unallocated operating loss includes costs which are not allocated to the business segment in management's evaluation of segment performance, such as litigation settlement expense, corporate expense and restructuring and other expenses. |
|||||||||||
(2) Net gain (loss) from GBAM Fund activities are included in management's evaluation for the asset management business which include income or loss associated with our investment vehicle launched at the end of the second quarter in 2017. |
|||||||||||
Table Four |
|||||||||||||
GLASSBRIDGE ENTERPRISES, INC. |
|||||||||||||
ADDITIONAL INFORMATION |
|||||||||||||
(Dollars in millions) |
|||||||||||||
(Unaudited) |
|||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||
September 30 |
September 30 |
||||||||||||
Cash and Cash Flow Information - Continuing Operations |
2018 |
2017 |
2018 |
2017 |
|||||||||
Cash and cash equivalents - end of period |
$ |
6.3 |
$ |
14.8 |
$ |
6.3 |
$ |
14.8 |
|||||
Amortization |
$ |
0.5 |
$ |
0.5 |
$ |
1.4 |
$ |
1.4 |
|||||
Other Information |
|||||||||||||
Approximate employee count as of September 30, 2018: |
5 |
||||||||||||
Approximate employee count as of December 31, 2017: |
120 |
||||||||||||
Book value per share attributable to GlassBridge Enterprises, Inc. as of September 30, 2018: |
$ (3.21) |
||||||||||||
Shares used to calculate book value per share (millions): |
5.2 |
||||||||||||
SOURCE GlassBridge Enterprises, Inc.
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