ANN ARBOR, Mich., Aug. 10, 2015 /PRNewswire/ -- Arotech
Corporation (NasdaqGM: ARTX) today announced financial results
for its quarter and six months ended June
30, 2015.
Second Quarter 2015 Financial and Business
Highlights:
- Total revenues of $21.6
million
- Adjusted EPS of $(0.04)
- Completed relocation of facilities from Alabama to South
Carolina expected to lower overhead costs in excess of
$1.25 million on an annualized basis
beginning in 2016; higher expenses related to the relocation
contributed to lower Power Systems Division margins in Q2
- Unexpected order delays and failure of prime to get contract
renewal cause revision of 2015 guidance
- Backlog of orders as of June 30,
2015 totaled approximately $58.7
million versus $74.1 million
for the same time last year
- Simulation Division delivers final installation of Virtual
Clearance Training Suite (VCTS) simulators as well as the first
installation reflecting major upgrade package
- Simulation Division's Boom Operator Simulator Systems (BOSS)
receives important U.S. Air Force simulation certification
"This was a challenging quarter, indicative of the
project-driven nature of our business, but we believe the strong
demand we see for our systems over time will continue to reinforce
our long-term outlook," commented Steven
Esses, Arotech's President and CEO. "Demand for our advanced
simulation and training solutions and more energy-efficient power
systems remains strong, and we are in advanced discussions with a
growing list of potential customers on projects that would
represent a significant step-up in revenue and industry attention.
Timing for revenue remains difficult to project, but we are
encouraged by the growth and maturation of our pipeline."
"We continue to generate strong margins in our simulation and
training business and believe we are well positioned to win a
number of new domestic and international contracts in the
near-to-mid-term," Esses added. "We are also continuing to invest
in innovation and new products that will allow us to pursue
opportunities outside of our core customer base in 2016 and
beyond."
"Performance in our Power Systems division remains
unsatisfactory, but the steps we took in late 2014 and early 2015
to solidify our leadership team and advance our technical expertise
are driving operational improvements, which we believe will lead to
improved financial results going into next year," Esses added.
"These operational improvements are in place, and the benefits are
beginning to impact our organization. We have the right team in
place, and an offering which is resonating in the market, and we
expect this to yield better results in 2016."
Esses continued, "The integration and consolidation of our Power
Systems division into our South
Carolina manufacturing facilities is expected to enable us
to lower overhead costs in excess of $1.25
million on an annualized basis beginning in 2016. During the
quarter, however, we encountered a steeper than anticipated
learning curve to train new employees, which impacted expenses.
Subsequent to the end of the quarter we began to realize the
benefit from our optimization, and we expect to realize continued
improvements as a result of this co-location going forward."
Second Quarter Financial Summary
Revenues for the second quarter were $21.6 million, compared to $27.8 million for the comparable period in 2014.
The year-over-year decrease was driven, in large part, by
unexpected program delays in the Power Systems division and orders
that slipped into the second half of 2015 and beyond.
Gross profit for the quarter was $6.2
million, or 28.7% of revenues, compared to $10.0 million, or 35.8% of revenues, for the
prior year period.
The operating loss for the second quarter of 2015 was
$(1.7) million, compared to operating
income of $2.3 million for the
corresponding period in 2014. Operating costs and expenses in the
quarter decreased by $2.2 million
compared to the corresponding quarter in 2014, primarily due to
lower revenues for the second quarter of 2015. The Power
Systems division incurred $153,000 in
costs as part of consolidating operations in South Carolina in the second quarter of
2015.
Total other income for the second quarter of 2015 was
$34,000 compared to $197,000 for the corresponding period in
2014.
The Company's net loss for the second quarter was $(2.2) million, or $(0.10) per basic and diluted share, compared to
net income of $1.8 million, or
$0.09 per basic and diluted share,
for the corresponding period last year.
Adjusted Earnings per Share (Adjusted EPS) for the quarter was
$(0.04) compared to $0.15 for the corresponding period in 2014.
Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA) for the quarter was a loss of
approximately $200,000 compared to
$4.0 million for the corresponding
period of 2014.
Arotech believes that information concerning Adjusted EBITDA and
Adjusted EPS enhances overall understanding of its current
financial performance. Arotech computes Adjusted EBITDA and
Adjusted EPS, which are non-GAAP financial measures, as reflected
in the table below.
Year-To-Date Financial Summary
Revenues for the first six months were $45.9 million, compared to $50.2 million for the comparable period in 2014.
The year-over-year decrease was driven, in large part, by
unexpected program delays in the Power Systems division and orders
that slipped into the second half of 2015 and beyond.
Gross profit for the first six months was $13.1 million, or 28.6% of revenues, compared to
$17.3 million, or 34.5% of revenues,
for the prior year period.
The operating loss for the first six months of 2015 was
$(2.5) million, compared to operating
income of $3.6 million for the
corresponding period in 2014. Operating costs and expenses in the
first six months increased by $1.7
million compared to the corresponding first six months in
2014, primarily due to $937,000 of
costs incurred related to the consolidation of the Power Systems
division in South Carolina and the
year over year inclusion of UEC costs. It should be noted that UEC
was purchased at the beginning of the second quarter of 2014, and
thus there were two quarters of operating costs in 2015 versus one
quarter of operating costs in 2014.
Total other income for the first six months of 2015 was
$945,000 compared to $229,000 for the corresponding period in 2014.
The improvement was due to the sale of the Company's former
facility in Alabama.
The Company's net loss for the first six months was $(2.7) million, or ($0.12) per basic and diluted share, compared to
net income of $2.8 million, or
$0.14 per basic and diluted share,
for the corresponding period last year.
Adjusted Earnings per Share (Adjusted EPS) for the first six
months was $(0.02) compared to
$0.25 for the corresponding period in
2014.
Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA) for the first six month was
$1.3 million compared to $6.3 million for the corresponding period of
2014.
Arotech believes that information concerning Adjusted EBITDA and
Adjusted EPS enhances overall understanding of its current
financial performance. Arotech computes Adjusted EBITDA and
Adjusted EPS, which are non-GAAP financial measures, as reflected
in the tables below.
Balance Sheet Metrics
As of June 30, 2015, the Company
had $12.1 million in cash and cash
equivalents and $239,000 in
restricted collateral deposits, as compared to December 31, 2014, when the Company had
$11.3 million in cash and
$236,000 in restricted collateral
deposits.
As of December 31, 2014, Arotech
has net operating loss carryforwards for U.S. federal income tax
purposes of $35.0 million, which are
available to offset future taxable income, if any, expiring in 2021
through 2032. Utilization of U.S. net operating losses is subject
to annual limitations due to provisions of the Internal Revenue
Code of 1986 and similar state provisions. The Company accrued
$150,000 in non-cash tax expenses in
the second quarter of 2015, reflecting the uncertainty of the
deductibility of intangible expenses for federal income tax
purposes.
As of June 30, 2015, the Company
had total debt of $25.3 million,
consisting of $6.5 million in
short-term bank debt under its credit facility, $4.4 million in short-term debt and $14.5 million in long-term loans. This is in
comparison to December 31, 2014, when
the Company had total debt of $21.3
million, consisting of $4.4
million in short-term debt and $16.9
million in long-term loans.
The Company also had $6.0 million
in available, unused bank lines of credit with its primary bank as
of June 30, 2015, under a
$15.0 million credit facility through
its FAAC subsidiary, which was secured by the assets of the
Company's U.S. subsidiaries and guaranteed by Arotech.
The Company had a current ratio (current assets/current
liabilities) of 2.0, compared with the December 31, 2014 current ratio of 2.0.
Business Outlook
The Company is adjusting its full-year 2015 guidance for total
revenue of $100 to $105 million, with
Adjusted Earnings per Share (Adjusted EPS) of $0.08 to $0.10 and Adjusted EBITDA of
$5.0 million to $5.75 million. This
outlook includes only organic contribution, and does not take any
potential acquisition activity into account. Adjusted EPS is based
on the weighted diluted shares outstanding as of June 30, 2015, which was approximately 24
million. The financial guidance provided is as of today and Arotech
undertakes no obligation to update its estimates in the future.
Conference Call
The Company will host a conference call Tuesday, August 11, 2015 at 9:00 a.m. ET. To access the conference call
interested investors should dial:
US: 1-888-438-5524
International: + 1-719-325-2455
The conference call will also be broadcasted live as a
listen-only webcast on the investor relations section of Arotech's
website at http://www.arotech.com/.
The online webcast will be archived on Arotech's website for at
least 90 days and a telephonic playback of the conference call will
also be available by calling 1-877-870-5176 within the U.S. and
1-858-384-5517 internationally. The telephonic playback will be
available beginning at 12:00pm Eastern
time on Tuesday, August 11,
2015, and continue through 11:59 pm
Eastern time on Tuesday, August 18,
2015. The replay passcode is 6296680.
About Arotech Corporation
Arotech Corporation is a leading provider of quality defense and
security products for the military, law enforcement and homeland
security markets, including multimedia interactive
simulators/trainers and advanced battery solutions, innovative
energy management and power distribution technologies, and zinc-air
and lithium batteries and chargers. Arotech operates two major
business divisions: Training and Simulation, and Power Systems.
Arotech is incorporated in Delaware, with corporate offices in
Ann Arbor, Michigan, and research,
development and production subsidiaries in Michigan, South
Carolina, and Israel. For
more information on Arotech, please visit Arotech's website at
www.arotech.com.
Except for the historical information herein, the matters
discussed in this news release include forward-looking statements,
as defined in the Private Securities Litigation Reform Act of 1995.
Forward-looking statements reflect management's current knowledge,
assumptions, judgment and expectations regarding future performance
or events. Although management believes that the expectations
reflected in such statements are reasonable, readers are cautioned
not to place undue reliance on these forward-looking statements, as
they are subject to various risks and uncertainties that may cause
actual results to vary materially. These risks and uncertainties
include, but are not limited to, risks relating to: product and
technology development; the uncertainty of the market for Arotech's
products; changing economic conditions; delay, cancellation or
non-renewal, in whole or in part, of contracts or of purchase
orders (including as a result of budgetary cuts resulting from
automatic sequestration under the Budget Control Act of 2011); and
other risk factors detailed in Arotech's most recent Annual Report
on Form 10-K for the fiscal year ended December 31, 2014, and other filings with the
Securities and Exchange Commission. Arotech assumes no obligation
to update the information in this release. Reference to the
Company's website above does not constitute incorporation of any of
the information thereon into this press release.
Investor Relations Contacts:
Brett Maas / Rob Fink
Hayden IR
(646) 536.7331 / (646) 415.8972
ARTX@haydenir.com
CONDENSED
CONSOLIDATED BALANCE SHEET SUMMARY (UNAUDITED)
|
(U.S.
Dollars)
|
|
|
|
June 30,
2015
|
|
December 31,
2014
|
ASSETS
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
12,323,761
|
|
$
|
11,528,212
|
|
Trade
receivables
|
|
|
14,788,292
|
|
|
17,595,811
|
|
Unbilled
receivables
|
|
|
12,632,064
|
|
|
15,937,060
|
|
Other accounts
receivable and prepaid
|
|
|
1,985,366
|
|
|
1,155,548
|
|
Inventories
|
|
|
9,926,450
|
|
|
9,811,783
|
|
TOTAL CURRENT
ASSETS
|
|
|
51,655,933
|
|
|
56,028,414
|
|
LONG TERM
ASSETS:
|
|
|
|
|
|
|
|
Property and
equipment, net
|
|
|
6,593,235
|
|
|
6,462,949
|
|
Other long term
assets
|
|
|
5,306,856
|
|
|
4,985,400
|
|
Intangible assets,
net
|
|
|
10,274,098
|
|
|
11,840,365
|
|
Goodwill
|
|
|
45,609,459
|
|
|
45,422,219
|
|
TOTAL LONG TERM
ASSETS
|
|
|
67,783,648
|
|
|
68,710,933
|
|
TOTAL
ASSETS
|
|
$
|
119,439,581
|
|
$
|
124,739,347
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
Trade
payables
|
|
$
|
4,523,321
|
|
$ 6,772,082
|
|
Other accounts
payable and accrued expenses
|
|
|
5,327,268
|
|
9,105,214
|
|
Current portion of
long term debt
|
|
|
4,358,554
|
|
4,380,730
|
|
Short term bank
credit
|
|
|
6,460,000
|
|
33,238
|
|
Deferred
revenues
|
|
|
5,811,802
|
|
7,826,178
|
|
TOTAL CURRENT
LIABILITIES
|
|
|
26,480,945
|
|
28,117,442
|
|
LONG TERM
LIABILITIES:
|
|
|
|
|
|
|
Accrued Israeli
statutory/contractual severance pay
|
|
|
7,465,656
|
|
7,051,630
|
|
Long term portion of
debt
|
|
|
14,514,885
|
|
16,934,360
|
|
Other long-term
liabilities
|
|
|
6,630,352
|
|
6,280,467
|
|
TOTAL LONG-TERM
LIABILITIES
|
|
|
28,610,893
|
|
30,266,457
|
|
TOTAL
LIABILITIES
|
|
|
55,091,838
|
|
58,383,899
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
|
|
TOTAL STOCKHOLDERS'
EQUITY (NET)
|
|
|
64,347,743
|
|
66,355,448
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
$
|
119,439,581
|
|
$ 124,739,347
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
|
|
(U.S. Dollars,
except share data)
|
|
|
|
|
|
Six months ended
June 30,
|
|
|
Three months ended
June 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
Revenues
|
|
$
|
45,870,933
|
|
|
$
|
50,211,986
|
|
|
$
|
21,644,225
|
|
|
$
|
27,829,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
|
32,750,960
|
|
|
|
32,906,461
|
|
|
|
15,426,613
|
|
|
|
17,863,150
|
|
Research and
development expenses
|
|
|
2,344,814
|
|
|
|
1,931,958
|
|
|
|
1,250,550
|
|
|
|
936,445
|
|
Selling and marketing
expenses
|
|
|
2,622,790
|
|
|
|
2,977,553
|
|
|
|
1,397,374
|
|
|
|
1,545,785
|
|
General and
administrative expenses
|
|
|
9,076,501
|
|
|
|
7,806,266
|
|
|
|
4,527,476
|
|
|
|
4,267,593
|
|
Amortization of
intangible assets
|
|
|
1,566,267
|
|
|
|
961,183
|
|
|
|
705,494
|
|
|
|
887,064
|
|
Total operating costs
and expenses
|
|
|
48,361,332
|
|
|
|
46,583,421
|
|
|
|
23,307,507
|
|
|
|
25,500,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
(loss)
|
|
|
(2,490,399)
|
|
|
|
3,628,565
|
|
|
|
(1,663,282)
|
|
|
|
2,329,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
945,481
|
|
|
|
229,421
|
|
|
|
34,052
|
|
|
|
197,308
|
|
Financial expense,
net
|
|
|
(571,005)
|
|
|
|
(682,648)
|
|
|
|
(243,397)
|
|
|
|
(563,647)
|
|
Total other income
(expense)
|
|
|
374,476
|
|
|
|
(453,227)
|
|
|
|
(209,345)
|
|
|
|
(366,339)
|
|
Income (loss) before
income tax expense
|
|
|
(2,115,923)
|
|
|
|
3,175,338
|
|
|
|
(1,872,627)
|
|
|
|
1,962,810
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
|
609,724
|
|
|
|
378,561
|
|
|
|
370,343
|
|
|
|
180,125
|
|
Net income
(loss)
|
|
|
(2,725,647)
|
|
|
|
2,796,777
|
|
|
|
(2,242,970)
|
|
|
|
1,782,685
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income, net of income tax:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
383,346
|
|
|
|
101,109
|
|
|
|
628,860
|
|
|
|
147,192
|
|
Comprehensive income
(loss)
|
|
$
|
(2,342,301)
|
|
|
$
|
2,897,886
|
|
|
$
|
(1,614,110)
|
|
|
$
|
1,929,877
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income
(loss) per share
|
|
$
|
(0.12)
|
|
|
$
|
0.14
|
|
|
$
|
(0.10)
|
|
|
$
|
0.09
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income
(loss) per share
|
|
$
|
(0.12)
|
|
|
$
|
0.14
|
|
|
$
|
(0.10)
|
|
|
$
|
0.09
|
|
Weighted average
number of shares used in computing basic net income (loss) per
share
|
|
|
23,451,687
|
|
|
|
19,892,242
|
|
|
|
23,599,230
|
|
|
|
20,311,830
|
|
Weighted average
number of shares used in computing diluted net income (loss) per
share
|
|
|
23,451,687
|
|
|
|
20,494,982
|
|
|
|
23,599,230
|
|
|
|
20,914,570
|
|
|
Reconciliation of Non-GAAP Financial Measure – Adjusted
EBITDA
To supplement Arotech's consolidated financial statements
presented in accordance with U.S. GAAP, Arotech uses a non-GAAP
measure, Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA). This non-GAAP measure is provided
to enhance overall understanding of Arotech's current financial
performance. Reconciliation of Adjusted EBITDA to the nearest GAAP
measure follows:
|
Six months ended
June 30,
|
|
Three months ended
June 30,
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
Net income (loss)
(GAAP measure)
|
$(2,725,647)
|
|
$2,796,777
|
|
$(2,242,970)
|
|
$1,782,685
|
Add
back:
|
|
|
|
|
|
|
|
Financial expense –
including interest
|
571,005
|
|
682,648
|
|
243,397
|
|
563,647
|
Income tax
expenses
|
609,724
|
|
378,561
|
|
370,344
|
|
180,125
|
Depreciation and
amortization expense
|
2,482,485
|
|
1,655,525
|
|
1,142,252
|
|
1,277,652
|
Other
adjustments*
|
1,292,400
|
|
787,294
|
|
321,781
|
|
155,371
|
Armor building
sale
|
(895,000)
|
|
–
|
|
–
|
|
–
|
Adjusted
EBITDA
|
$1,334,967
|
|
$6,300,805
|
|
$(165,197)
|
|
$3,959,480
|
* Includes stock compensation expense, one-time transaction
expenses and other non-cash expenses.
|
Reconciliation of Non-GAAP Financial Measure – Adjusted
EPS
To supplement Arotech's consolidated financial statements
presented in accordance with U.S. GAAP, Arotech uses a non-GAAP
measure, Adjusted Earnings Per Share (Adjusted EPS). This non-GAAP
measure is provided to enhance overall understanding of Arotech's
current financial performance. Reconciliation of Adjusted EPS to
the nearest GAAP measure follows:
Calculation of
Adjusted Earnings Per Share
|
(U.S. $ in
thousands, except per share data)
|
|
|
|
Six Months ended
June 30,
|
|
Three Months ended
June 30,
|
|
|
2015
|
|
2014
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
Revenue (GAAP
measure)
|
|
$
45,871
|
|
$
50,212
|
|
$
21,644
|
|
$
27,829
|
Net (loss)/ income
(GAAP measure)
|
|
$
(2,726)
|
|
$
2,797
|
|
$
(2,243)
|
|
$
1,783
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization
|
|
1,566
|
|
961
|
|
705
|
|
887
|
Stock
compensation
|
|
335
|
|
258
|
|
176
|
|
128
|
Non-cash
taxes
|
|
299
|
|
299
|
|
150
|
|
150
|
Transition and
Acquisition costs
|
|
1,008
|
|
759
|
|
180
|
|
224
|
Armor building
sale
|
|
(895)
|
|
–
|
|
–
|
|
–
|
Net
adjustments
|
|
$
2,313
|
|
$
2,277
|
|
$
1,211
|
|
$
1,389
|
Adjusted net income
(loss)
|
|
$
(413)
|
|
$
5,074
|
|
$
(1,032)
|
|
$
3,172
|
Number of
shares
|
|
23,452
|
|
20,495
|
|
23,599
|
|
20,915
|
Adjusted
EPS
|
|
$
(0.02)
|
|
$
0.25
|
|
$
(0.04)
|
|
$
0.15
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/arotech-reports-second-quarter-and-year-to-date-2015-results-300126201.html
SOURCE Arotech Corporation