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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 8-K
 

 
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934


Date of Report (Date of earliest event reported):
November 10, 2014

AROTECH CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
 
0-23336
 
95-4302784
(State or other jurisdiction
 
(Commission
 
(IRS Employer
of incorporation)
 
File Number)
 
Identification No.)

1229 Oak Valley Drive, Ann Arbor, Michigan
 
48108
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code:
 
(800) 281-0356

                                                                                                                        
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
o    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 

 
SEC 873 (01/12)
 

Potential persons who are to respond to the collection of  information contained in this form are not required to respond unless the form displays a currently valid OMB control number.
 
 
 
 
 

 
 
Item 2.02                      Results of Operations and Financial Condition.
 
On November 10, 2014, Arotech Corporation (the “Registrant”) publicly disseminated an earnings release (the “Release”) announcing its financial results for the quarter and nine months ended September 30, 2014. A copy of the Release is attached as Exhibit 99.1 hereto.
 
The information included in the attached Exhibit 99.1 is being furnished pursuant to Item 2.02 of Form 8-K, insofar as it discloses historical information regarding the Registrant’s results of operations and financial condition as of and for the quarter and nine months ended September 30, 2014. In accordance with General Instructions B.2 of Form 8-K, the information in this Current Report on Form 8-K, including Exhibit 99.1, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such a filing.
 
Item 9.01                      Financial Statements and Exhibits.
 
As described above, the following Exhibits are furnished as part of this Current Report on Form 8-K:
 
Exhibit
Number
Description
99.1
 
 
 
 

 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
AROTECH CORPORATION
 
 
(Registrant)
 
   
 
/s/ Steven Esses
   
Name:
Steven Esses
   
Title:
President and CEO
Dated:           November 10, 2014

 


Exhibit 99.1
 
 
 graphic Earnings News
 
 
FOR IMMEDIATE RELEASE
 
AROTECH CORPORATION REPORTS RESULTS
FOR THE THIRD QUARTER AND FIRST NINE MONTHS, 2014
__________
 
Revenues, operating profit, EBITDA and net profit for 2014 all continue up;
2014 EBITDA guidance again increased
 
Ann Arbor, Michigan, November 10, 2014 – Arotech Corporation (Nasdaq GM: ARTX), a provider of quality defense and security products for the military, law enforcement and security markets, today reported results for the quarter and nine months ended September 30, 2014.
 
Third Quarter Results
 
Revenues for the third quarter reached $24.8 million, compared to $23.2 million for the corresponding period in 2013, an increase of 6.9%.
 
Gross profit for the quarter was $8.0 million, or 32.3% of revenues, compared to $6.4 million, or 27.5% of revenues, for the corresponding period last year, a 4.8 point improvement in the gross margin percentage.
 
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (adjusted EBITDA) for the quarter was $2.6 million, compared to $2.2 million for the corresponding period in 2013. Arotech believes that information concerning adjusted EBITDA enhances overall understanding of its current financial performance. Arotech computes adjusted EBITDA, which is a non-GAAP financial measure, as reflected in the table below.
 
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The Company reported an operating profit for the third quarter of 2014 of $1.2 million, compared to an operating profit of $1.4 million for the corresponding period in 2013. Operating expenses in the quarter grew to $6.8 million versus $5.0 million in the corresponding quarter in 2013. A large portion of the increase was due to the consolidation of the operations of UEC, which was acquired at the start of the second quarter, as well as an increase in R&D investment related to development of the Company’s iron flow battery technology.
 
The Company’s net income from continuing operations for the third quarter was $379,000, or $0.02 per diluted share, compared to net income of $861,000, or $0.05 per share, for the corresponding period last year.
 
First Nine Months Results
 
Revenues for the first nine months of 2014 reached $75.0 million, compared to $67.6 million for the corresponding period last year, an increase of 10.9%.
 
Gross profit for the first nine months of 2014 was $25.3 million, or 33.8% of revenues, compared to $18.0 million, or 26.5% of revenues, for the corresponding period last year, a 7.3 point improvement in the gross margin percentage.
 
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (adjusted EBITDA) for the first nine months of 2014 was $8.9 million, compared to $6.2 million for the corresponding period last year. Arotech believes that information concerning adjusted EBITDA enhances overall understanding of its current financial performance. Arotech computes adjusted EBITDA, which is a non-GAAP financial measure, as reflected in the table below.
 
The Company reported an operating profit for the first nine months of 2014 of $4.8 million, compared to an operating profit of $3.8 million for the corresponding period in 2013.
 
The Company’s net income from continuing operations for the first nine months of 2014 was $3.2 million, or $0.15 per share, versus a net income of $2.8 million, or $0.17 per diluted share, for the corresponding period last year.
 
Backlog
 
Backlog of orders totaled approximately $74.1 million as of September 30, 2014, as compared to $74.4 million at September 30, 2013 and $74.1 million as of June 30, 2014.
 
Balance Sheet Metrics
 
As of September 30, 2014, the Company had $10.8 million in cash and $242,000 in restricted collateral deposits, as compared to December 31, 2013, when the Company had $5.8 million in cash and $498,000 in restricted collateral deposits.
 
The Company ended the third quarter with $2.8 million in short-term bank debt under its credit facility and $22.7 million in long-term loans outstanding, which included $4.3 million in current debt and $18.4 million in long term debt. This is in comparison to December 31, 2013 when the Company had no short-term bank debt under its credit facility and $1.9 million in long-term loans outstanding, which included $95,000 in current debt and $1.8 million in long term debt. The increase in bank loans was due to the long term debt associated with the purchase of UEC.
 
The Company also had $7.7 million in available, unused bank lines of credit with its main bank as of September 30, 2014, under a $15.0 million credit facility under its FAAC subsidiary, which was secured by the Company’s assets and the assets of the Company’s other subsidiaries and guaranteed by the Company.
 
The Company had trade receivables of $14.9 million as of September 30, 2014, compared to $12.4 million as of December 31, 2013. The Company had a current ratio (current assets/current liabilities) of 2.1, compared with the December 31, 2013 current ratio of 2.1.
 
Management Comment
 
“We are pleased to present another set of excellent quarterly results,” commented Arotech’s President and CEO, Steven Esses. “Gross margins continue to significantly surpass expectations, and as a result, despite the slippage of some revenues into future quarters, our profit and EBITDA have continued to rise. As a result, we are raising EBITDA guidance for 2014,” concluded Mr. Esses.
 
Revised Guidance
 
For the full year 2014, Arotech’s management continues to expect that full year revenues will exceed $105 million. Management increases its guidance for 2014 adjusted EBITDA, expecting in the range of between $9.2 million and $9.5 million, an increase from the formerly expected range of between $7.8 million and $8.3 million. The financial guidance provided is as of today and Arotech undertakes no obligation to update its estimates in the future.
 
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Conference Call
 
The Company will host a conference call tomorrow, Tuesday, November 11, 2014 at 9:00 a.m. EST. Those wishing to access the conference call should dial 1-888-407-2553 (U.S.) or +1-347-293-1926 (international) a few minutes before the 9:00 a.m. EST start time. For those unable to participate, the teleconference will be available for replay on Arotech’s website at http://www.arotech.com/ beginning 24 hours after the call.
 
About Arotech Corporation
 
Arotech Corporation is a leading provider of quality defense and security products for the military, law enforcement and homeland security markets. Arotech provides multimedia interactive simulators/trainers and advanced zinc-air and lithium batteries and chargers. Arotech operates through two major business divisions: Training and Simulation, and Batteries and Power Systems.
 
Arotech is incorporated in Delaware, with corporate offices in Ann Arbor, Michigan and research, development and production subsidiaries in Alabama, Michigan, South Carolina and Israel.
 
Investor Relations Contacts:
Ehud Helft & Kenny Green
GK Investor Relations
Tel: 1 646 201 9246
arotech@gkir.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, as amended, for the fiscal year ended December 31, 2013 and in Exhibit 99.3 to Arotech’s Current Report on 8-K, filed on April 1, 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.
 
TABLES TO FOLLOW

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BALANCE SHEET SUMMARY ANALYSIS (UNAUDITED)
(U.S. Dollars)
 
   
September 30, 2014
   
December 31, 2013
 
ASSETS
           
CURRENT ASSETS:
           
Cash and cash equivalents
  $ 11,044,256     $ 6,319,820  
Trade receivables
    14,911,644       12,362,871  
Unbilled receivables
    19,036,156       8,463,920  
Other accounts receivable and prepaid
    1,544,692       1,379,621  
Inventories
    10,711,913       10,074,766  
Total current assets
    57,248,661       38,600,998  
LONG TERM ASSETS:
               
Property and equipment, net
    6,114,138       4,926,949  
Other long term assets
    4,984,775       5,042,790  
Intangible assets, net
    12,396,306       1,059,151  
Goodwill
    45,730,986       31,024,754  
Total long term assets
    69,226,205       42,053,644  
Total assets
  $ 126,474,866     $ 80,654,642  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
CURRENT LIABILITIES:
               
Trade payables
  $ 4,803,969     $ 5,107,208  
Other accounts payable and accrued expenses
    8,532,938       6,012,041  
Current portion of long term debt
    4,340,729       95,382  
Short term bank credit
    2,782,213        
Deferred revenues
    6,300,162       7,020,079  
Total current liabilities
    26,760,011       18,234,710  
LONG TERM LIABILITIES:
               
Long term portion of debt
    18,357,684       1,830,348  
Other long-term liabilities
    15,546,271       12,612,608  
Total long-term liabilities
    33,903,955       14,442,956  
Total liabilities
    60,663,966       32,677,666  
STOCKHOLDERS’ EQUITY:
               
Total stockholders’ equity (net)
    65,810,900       47,976,976  
Total liabilities and stockholders’ equity
  $ 126,474,866     $ 80,654,642  
 
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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(U.S. Dollars, except share data)
 
   
Nine months ended September 30,
   
Three months ended September 30,
 
   
2014
   
2013
   
2014
   
2013
 
Revenues
  $ 74,995,339     $ 67,637,517     $ 24,783,353     $ 23,187,544  
                                 
Cost of revenues
    49,682,017       49,681,174       16,775,556       16,816,012  
Research and development expenses
    2,857,144       1,935,958       925,186       807,788  
Selling and marketing expenses 
    4,180,519       3,549,483       1,202,966       1,229,225  
General and administrative expenses
    11,606,038       7,539,580       3,799,772       2,685,522  
Amortization of intangibles
    1,828,635       821,097       867,452       270,985  
Total operating costs and expenses
    70,154,353       63,827,292       23,570,932       21,809,532  
                                 
Operating income
    4,840,986       3,810,225       1,212,421       1,378,012  
                                 
Other income
    288,252       261,222       58,831       (7,460 )
Financial expenses, net
    (1,098,755 )     (475,448 )     (416,107 )     (172,569 )
Total other expense
    (810,503 )     (214,226 )     (357,276 )     (180,029 )
Income from continuing operations before income tax expense
    4,030,483       3,595,999       855,145       1,197,983  
                                 
Income tax expense
    855,178       765,962       476,617       337,060  
Income from continuing operations
    3,175,305       2,830,037       378,528       860,923  
Loss from discontinued operations, net of income tax
    -       (87,278 )     -       652  
Net income
    3,175,305       2,742,759       378,528       861,575  
                                 
Other comprehensive income, net of income tax
                               
Foreign currency translation adjustment
    (648,740 )     472,767       (749,849 )     202,844  
Comprehensive income
  $ 2,526,565     $ 3,215,526     $ (371,321 )   $ 1,064,419  
                                 
Basic net income per share – continuing operations
  $ 0.15     $ 0.18     $ 0.02     $ 0.05  
Basic net loss per share – discontinued operations
  $ -     $ (0.01 )   $ -     $ -  
Basic net income per share
  $ 0.15     $ 0.17     $ 0.02     $ 0.05  
Diluted net income per share – continuing operations
  $ 0.15     $ 0.18     $ 0.02     $ 0.05  
Diluted net loss per share – discontinued operations
  $ -     $ (0.01 )   $ -     $ -  
Diluted net income per share
  $ 0.15     $ 0.17     $ 0.02     $ 0.05  
Weighted average number of shares used in computing basic net income/loss per share
    20,998,023       15,521,974       23,137,808       15,951,602  
Weighted average number of shares used in computing diluted net income/loss per share
    21,600,763       16,124,714       23,740,548       16,554,342  
 

 
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, 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:
 
   
Nine months ended September 30,
   
Three months ended September 30,
 
   
2014
   
2013
   
2014
   
2013
 
Net Income continuing (GAAP measure)
  $ 3,175,305     $ 2,830,037     $ 378,528     $ 860,923  
Add back:
                               
Financial (income) expense – including interest
    810,503       475,448       357,276       172,569  
Income tax expenses (benefit) 
    855,178       765,962       476,617       337,060  
Depreciation and amortization expense 
    2,945,234       1,688,105       1,289,709       555,087  
Other adjustments* 
    1,160,644       392,913       143,930       226,381  
Total adjusted EBITDA
  $ 8,946,864     $ 6,152,465     $ 2,646,060     $ 2,152,020  
 
*   Includes stock compensation expense, one-time transaction expenses and other non-cash expenses.
 
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