ANN ARBOR, Mich., Nov. 9, 2015 /PRNewswire/ -- Arotech
Corporation (NasdaqGM: ARTX) today announced financial results
for its quarter and nine months ended September 30, 2015.
Third Quarter 2015 Financial and Business Highlights:
- Total revenues of $23.3 million
versus $24.8 million for the same
time last year and $21.6 million from
the prior quarter
- Adjusted EPS of $0.03 versus
$0.07 for the same time last year and
$(0.04) from the prior quarter
- Adjusted EBITDA of $1.5 million
compared to $2.6 million for the same
time last year and $(200,000) from
the prior quarter
- Backlog of orders as of September 30,
2015 totaled approximately $61.1
million versus $74.1 million
for the same time last year and $58.7
million from the prior quarter
- Implemented cost reduction initiatives to increase operational
efficiencies in the company's Power Systems Division
- Simulation Division awarded five new contracts for the
company's MILO Theater Product
"We took specific and targeted actions during the third quarter
to implement important changes that should produce significant
improvement and improved profitability and that are aligned with
our strategy and support our long-term outlook for the business,"
commented Steven Esses, Arotech's
President and CEO. "We added to our backlog, reduced our
staffing-related expenses, instituted performance metrics and
controls and continued our investment in feature-rich product
enhancements to support our pursuit of opportunities outside of our
core customer base."
"Our simulation and training business again generated strong
margins as we deliver on a number of new customer deployments and
follow-on orders," Esses added. "The MILO Range Theater system,
which provides a fully immersive training environment, continues to
gain traction in the market. At the same time, we expect our focus
on improving efficiencies, growing the revenue base, and
right-sizing overheads to improve the performance of our Power
Systems division and enhance operational efficiency, will lead to
improved financial results going into 2016."
"Demand for our advanced simulation and training solutions and
more effective power systems remains strong," Esses continued. "We
are creating new products, expanding our pipeline of new
opportunities and better aligning our cost structure, which we
believe will position us to meet market demands, grow our business
and bring improved profitability. We believe we have the right team
in place, and an offering which is resonating in the market to
drive improved financial results."
Third Quarter Financial Summary
Revenues for the third quarter were $23.3
million, compared to $24.8
million for the comparable period in 2014. The
year-over-year decrease was driven by unexpected program delays on
existing orders in the Power Systems division and delays of new
orders that have shifted to future quarters.
Gross profit for the quarter was $7.0
million, or 30.2% of revenues, compared to $8.0 million, or 32.3% of revenues, for the prior
year period.
Operating income for the third quarter of 2015 was $94,000, compared to $1.2
million for the corresponding period in 2014. Operating
expenses in the quarter were $6.8
million in the third quarter of 2014 compared to
$6.9 million this year. The Power
Systems division incurred $60,000 in
costs related to the consolidation of its operations in its
South Carolina facility during the
third quarter of 2015.
Total other income for the third quarter of 2015 was a loss of
$(106,000) compared to a gain of
$59,000 for the corresponding period
in 2014.
The Company's net loss for the third quarter was $(618,000), or $(0.03) per basic and diluted share, compared to
net income of $379,000, or
$0.02 per basic and diluted share,
for the corresponding period last year.
Adjusted Earnings per Share (Adjusted EPS) for the quarter was
$0.03 compared to $0.07 for the corresponding period in 2014.
Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA) for the quarter was approximately
$1.5 million compared to $2.6 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.
Year-To-Date Financial Summary
Revenues for the first nine months were $69.2 million, compared to $75.0 million for the comparable period in 2014.
The year-over-year decrease was driven, in large part, by
unexpected program delays on existing orders in the Power Systems
division and delays of new orders that have shifted to future
quarters.
Gross profit for the first nine months was $20.2 million, or 29.1% of revenues, compared to
$25.3 million, or 33.8% of revenues,
for the prior year period.
The operating loss for the first nine months of 2015 was
$(2.4) million, compared to operating
income of $4.8 million for the
corresponding period in 2014. Operating expenses in the first nine
months of 2015 increased by $2.1
million compared to the corresponding period last year,
primarily due to approximately $1
million of costs incurred related to the consolidation of
the Power Systems division facility in South Carolina and the year over year
inclusion of UEC costs.
Total other income for the first nine months of 2015 was
$840,000 compared to $288,000 for the corresponding period in 2014.
The improvement was due to the 2015 sale of the Company's former
facility in Alabama.
The Company's net loss for the first nine months was
$(3.3) million, or ($0.14) per basic and diluted share, compared to
net income of $3.2 million, or
$0.15 per basic and diluted share,
for the corresponding period last year.
Adjusted Earnings per Share (Adjusted EPS) for the first nine
months was $0.01 compared to
$0.31 for the corresponding period in
2014.
Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA) for the first nine months was
$2.9 million compared to $8.9 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 September 30, 2015, the
Company had $11.3 million in cash and
cash equivalents, as compared to December
31, 2014, when the Company had $11.5
million in cash and cash equivalents.
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
$387,000 in non-cash tax expenses in
the third quarter of 2015, reflecting the uncertainty of the
deductibility of intangible expenses for federal income tax
purposes.
As of September 30, 2015, the
Company had total debt of $23.6
million, consisting of $5.8
million in short-term bank debt under its credit facility
and $17.8 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 negligible
short-term debt and $21.3 million in
long-term loans.
The Company also had $6.6 million
in available, unused bank lines of credit with its primary bank as
of September 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.
Conference Call
The Company will host a conference call today, Monday, November 9, 2015 at 4:30 pm Eastern Time, to review the company's
financial results and business outlook.
To participate, please call one of the following telephone
numbers. Please dial in at least 10 minutes before the start of the
call:
US: 1-888-455-2260
International: + 1-719-325-2144
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 the 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 7:30 pm Eastern
time on Monday, November 9,
2015, and continue through 11:59 pm
Eastern time on Monday, November 16,
2015. The replay passcode is 6901429.
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)
|
|
|
|
September 30,
2015
|
|
|
December 31,
2014
|
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
11,260,996
|
|
|
$
|
11,528,212
|
|
|
Trade
receivables
|
|
|
16,173,719
|
|
|
|
17,595,811
|
|
|
Unbilled
receivables
|
|
|
10,701,463
|
|
|
|
15,937,060
|
|
|
Other accounts
receivable and prepaid
|
|
|
1,524,401
|
|
|
|
1,155,548
|
|
|
Inventories
|
|
|
9,974,354
|
|
|
|
9,811,783
|
|
|
TOTAL CURRENT
ASSETS
|
|
|
49,634,933
|
|
|
|
56,028,414
|
|
|
LONG TERM
ASSETS:
|
|
|
|
|
|
|
|
|
|
Property and
equipment, net
|
|
|
6,327,377
|
|
|
|
6,462,949
|
|
|
Other long term
assets
|
|
|
5,256,257
|
|
|
|
4,985,400
|
|
|
Intangible assets,
net
|
|
|
9,904,923
|
|
|
|
11,840,365
|
|
|
Goodwill
|
|
|
45,371,250
|
|
|
|
45,422,219
|
|
|
TOTAL LONG TERM
ASSETS
|
|
|
66,859,807
|
|
|
|
68,710,933
|
|
|
TOTAL
ASSETS
|
|
$
|
116,494,740
|
|
|
$
|
124,739,347
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Trade
payables
|
|
$
|
4,833,501
|
|
|
$
|
6,772,082
|
|
|
Other accounts
payable and accrued expenses
|
|
|
5,093,817
|
|
|
|
9,105,214
|
|
|
Current portion of
long term debt
|
|
|
4,355,436
|
|
|
|
4,380,730
|
|
|
Short term bank
credit
|
|
|
5,760,000
|
|
|
|
33,238
|
|
|
Deferred
revenues
|
|
|
5,204,867
|
|
|
|
7,826,178
|
|
|
TOTAL CURRENT
LIABILITIES
|
|
|
25,247,621
|
|
|
|
28,117,442
|
|
|
LONG TERM
LIABILITIES:
|
|
|
|
|
|
|
|
|
|
Accrued Israeli
statutory/contractual severance pay
|
|
|
7,406,330
|
|
|
|
7,051,630
|
|
|
Long term portion of
debt
|
|
|
13,417,500
|
|
|
|
16,934,360
|
|
|
Other long-term
liabilities
|
|
|
7,042,147
|
|
|
|
6,280,467
|
|
|
TOTAL LONG-TERM
LIABILITIES
|
|
|
27,865,977
|
|
|
|
30,266,457
|
|
|
TOTAL
LIABILITIES
|
|
|
53,113,598
|
|
|
|
58,383,899
|
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
|
|
|
|
|
TOTAL
STOCKHOLDERS' EQUITY (NET)
|
|
|
63,381,142
|
|
|
|
66,355,448
|
|
|
TOTAL LIABILITIES
AND STOCKHOLDERS' EQUITY
|
|
$
|
116,494,740
|
|
|
$
|
124,739,347
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
|
|
(U.S. Dollars,
except share data)
|
|
|
|
Nine months ended
September 30,
|
|
|
Three months ended
September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
Revenues
|
|
$
|
69,160,381
|
|
|
$
|
74,995,339
|
|
|
$
|
23,289,448
|
|
|
$
|
24,783,353
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
|
|
49,005,379
|
|
|
|
49,682,017
|
|
|
|
16,254,419
|
|
|
|
16,775,556
|
|
|
Research and
development expenses
|
|
|
3,288,003
|
|
|
|
2,857,144
|
|
|
|
943,189
|
|
|
|
925,186
|
|
|
Selling and marketing
expenses
|
|
|
3,810,662
|
|
|
|
4,180,519
|
|
|
|
1,187,872
|
|
|
|
1,202,966
|
|
|
General and
administrative expenses
|
|
|
13,165,943
|
|
|
|
11,606,038
|
|
|
|
4,089,442
|
|
|
|
3,799,772
|
|
|
Amortization of
intangible assets
|
|
|
2,286,384
|
|
|
|
1,828,635
|
|
|
|
720,117
|
|
|
|
867,452
|
|
|
Total operating costs
and expenses
|
|
|
71,556,371
|
|
|
|
70,154,353
|
|
|
|
23,195,039
|
|
|
|
23,570,932
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
income
|
|
|
(2,395,990)
|
|
|
|
4,840,986
|
|
|
|
94,409
|
|
|
|
1,212,421
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
839,772
|
|
|
|
288,252
|
|
|
|
(105,709)
|
|
|
|
58,831
|
|
|
Financial expenses,
net
|
|
|
(887,771)
|
|
|
|
(1,098,755)
|
|
|
|
(316,766)
|
|
|
|
(416,107)
|
|
|
Total other (income)
expense
|
|
|
(47,999)
|
|
|
|
(810,503)
|
|
|
|
(422,475)
|
|
|
|
(357,276)
|
|
|
Income from
continuing operations before income tax expense
|
|
|
(2,443,989)
|
|
|
|
4,030,483
|
|
|
|
(328,066)
|
|
|
|
855,145
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax
expense
|
|
|
899,629
|
|
|
|
855,178
|
|
|
|
289,905
|
|
|
|
476,617
|
|
|
Income from
continuing operations
|
|
|
(3,343,618)
|
|
|
|
3,175,305
|
|
|
|
(617,971)
|
|
|
|
378,528
|
|
|
Loss from
discontinued operations, net of income tax
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Net income
|
|
|
(3,343,618)
|
|
|
|
3,175,305
|
|
|
|
(617,971)
|
|
|
|
378,528
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income, net of income tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
|
|
(106,019)
|
|
|
|
(648,740)
|
|
|
|
(489,365)
|
|
|
|
(749,849)
|
|
|
Comprehensive
income
|
|
$
|
(3,449,637)
|
|
|
$
|
2,526,565
|
|
|
$
|
(1,107,336)
|
|
|
$
|
(371,321)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net income per
share – continuing operations
|
|
$
|
(0.14)
|
|
|
$
|
0.15
|
|
|
$
|
(0.03)
|
|
|
$
|
0.02
|
|
|
Basic net income/loss
per share – discontinued operations
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
Basic net income per
share
|
|
$
|
(0.14)
|
|
|
$
|
0.15
|
|
|
$
|
(0.03)
|
|
|
$
|
0.02
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted net income
per share – continuing operations
|
|
$
|
(0.14)
|
|
|
$
|
0.15
|
|
|
$
|
(0.03)
|
|
|
$
|
0.02
|
|
|
Diluted net
income/loss per share – discontinued operations
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
$
|
–
|
|
|
Diluted net income
per share
|
|
$
|
(0.14)
|
|
|
$
|
0.15
|
|
|
$
|
(0.03)
|
|
|
$
|
0.02
|
|
|
Weighted average
number of shares used in computing basic net income/loss per
share
|
|
|
23,452,773
|
|
|
|
20,998,023
|
|
|
|
23,684,904
|
|
|
|
23,137,808
|
|
|
Weighted average
number of shares used in computing diluted net income/loss per
share
|
|
|
23,452,773
|
|
|
|
21,600,763
|
|
|
|
23,684,904
|
|
|
|
23,740,548
|
|
|
Reconciliation of
Non-GAAP Financial Measure – Continuing Operations
|
|
|
To supplement
Arotech's consolidated financial statements presented in accordance
with U.S. GAAP, Arotech uses a non-GAAP measure, Earnings Before
Interest, Taxes, Depreciation and Amortization (EBITDA). This
non-GAAP measure is provided to enhance overall understanding of
Arotech's current financial performance and its progress towards
GAAP profitability. Reconciliation of EBITDA to the nearest GAAP
measure follows:
|
|
|
|
Nine months
ended
September
30,
|
|
|
Three months ended
September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
Net income (GAAP
measure)
|
|
$
|
(3,343,618)
|
|
|
$
|
3,175,302
|
|
|
$
|
(617,971)
|
|
|
$
|
378,528
|
|
|
Add
back:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial expense –
including interest
|
|
|
942,999
|
|
|
|
810,503
|
|
|
|
422,475
|
|
|
|
357,276
|
|
|
Income tax
expenses
|
|
|
899,629
|
|
|
|
855,178
|
|
|
|
289,905
|
|
|
|
476,617
|
|
|
Depreciation and
amortization expense
|
|
|
3,662,420
|
|
|
|
2,945,234
|
|
|
|
1,179,936
|
|
|
|
1,289,709
|
|
|
Other
adjustments*
|
|
|
1,601,640
|
|
|
|
1,160,644
|
|
|
|
258,760
|
|
|
|
143,930
|
|
|
Armor building
sale
|
|
|
(895,000)
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Total adjusted
EBITDA
|
|
$
|
2,868,070
|
|
|
$
|
8,946,861
|
|
|
$
|
1,533,105
|
|
|
$
|
2,646,060
|
|
|
|
|
*
|
Includes stock
compensation expense, one-time transaction expenses and other
non-cash expenses.
|
|
CALCULATION OF
ADJUSTED EARNINGS PER SHARE
|
|
(U.S. $ in
thousands, except per share data)
|
|
|
|
Nine months ended
September 30,
|
|
|
Three months ended
September 30,
|
|
|
|
2015
|
|
|
2014
|
|
|
2015
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue (GAAP
measure)
|
|
$
|
69,160
|
|
|
$
|
74,995
|
|
|
$
|
23,289
|
|
|
$
|
24,783
|
|
|
Net (Loss)/ Income
(GAAP measure)
|
|
$
|
(3,344)
|
|
|
$
|
3,175
|
|
|
$
|
(618)
|
|
|
$
|
379
|
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
|
|
|
2,286
|
|
|
|
1,829
|
|
|
|
720
|
|
|
|
867
|
|
|
Stock
compensation
|
|
|
476
|
|
|
|
393
|
|
|
|
141
|
|
|
|
136
|
|
|
Non-cash
taxes
|
|
|
687
|
|
|
|
548
|
|
|
|
387
|
|
|
|
248
|
|
|
Transition and
Acquisition costs
|
|
|
1,126
|
|
|
|
767
|
|
|
|
118
|
|
|
|
8
|
|
|
Armor building
sale
|
|
|
(895)
|
|
|
|
–
|
|
|
|
–
|
|
|
|
–
|
|
|
Net
adjustments
|
|
$
|
3,680
|
|
|
$
|
3,537
|
|
|
$
|
1,366
|
|
|
$
|
1,259
|
|
|
Adjusted Net
Income
|
|
$
|
336
|
|
|
$
|
6,712
|
|
|
$
|
748
|
|
|
$
|
1,638
|
|
|
Number of
shares
|
|
|
23,453
|
|
|
|
21,601
|
|
|
|
23,685
|
|
|
|
23,741
|
|
|
Adjusted
EPS
|
|
$
|
0.01
|
|
|
$
|
0.31
|
|
|
$
|
0.03
|
|
|
$
|
0.07
|
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/arotech-reports-third-quarter-and-year-to-date-2015-results-300175151.html
SOURCE Arotech Corporation