2015 Highlights:
MOCON, Inc. (NASDAQ:MOCO), today reported financial results for the
fourth quarter and year ended December 31, 2015.
Commenting on the Company’s full year performance, MOCON’s
president and chief executive officer, Robert L. Demorest said,
“Overall 2015 revenue grew 3 percent on a Constant Currency basis.
Our core businesses, Permeation and Package Testing, comprised 86
percent of our overall revenue on a Constant Currency basis and
each of those segments grew 11 percent year-over-year. The
remaining 14 percent was derived by our Industrial Analyzers and
Other segment. This segment was down 27 percent
year-over-year and as we have discussed previously, this segment
continues to be impacted by the soft oil and gas market.
Fully diluted earnings per share were $0.51 for the year which is a
$0.24 improvement from $0.27 reported in 2014. 2015 includes
a $1.0 million charge for realignment expenses while 2014 includes
a $3.2 million charge for the impairment of the investment in an
affiliated company.
“In November, we announced the implementation of a realignment
plan that brought the sales and marketing leadership for our
Package Testing and Permeation business segments together. In
addition, throughout 2015 we had been executing an initiative to
realign our legal entity structure. Collectively, these costs
have been classified in our Statement of Operations as realignment
expenses which were $0.7 million and $1.0 million for the fourth
quarter and year ended December 31, 2015, respectively. We
believe this realignment has positioned us to leverage our existing
customer relationships and marketing efforts more effectively
across businesses which will also reduce costs. These changes are
expected to generate approximately $1.7 million of operating
expense savings in 2016 which will be offset in part by
inflationary factors as well as by continued investment in the
growth areas of our business.”
2015 Revenue and Earnings Summary
Fourth quarter 2015 results compared to fourth quarter 2014:
- Reported revenue decreased 10 percent as compared to the fourth
quarter 2014. On a Constant Currency basis, revenue decreased 1
percent compared to the year ago quarter. Five percentage points of
year-over-year decline was driven by the impact of the oil and gas
industry.
- Reported revenue from foreign customers accounted for 65
percent (39 percent in Europe, 26 percent outside of Europe &
the U.S.A.) of total revenue for the fourth quarter of 2015
compared to 65 percent (38 percent in Europe, 27 percent outside of
Europe & the U.S.A.) in the fourth quarter of 2014.
- Net income was $0.3 million, or $0.05 per diluted share,
compared to a net loss of $2.0 million, or $0.36 per diluted share
in the year ago quarter. The net loss in the year ago quarter
reflected the recognition of a $3.2 million, or $0.56 per diluted
share, non-cash impairment charge for an investment in an
affiliated company, while the fourth quarter of 2015 included $0.7
million in realignment expenses.
- EBITDA for the fourth quarter of 2015 was $1.2 million compared
to negative $1.0 million for quarter ended December 31, 2014. (See
reconciliation to non-GAAP information below)
- Adjusted EBITDA for the quarter ended December 31, 2015 was
$2.1 million compared to $2.3 million for the quarter ended
December 31, 2014. (See reconciliation to non-GAAP information
below)
Full year 2015 results compared to full year 2014:
- Reported revenue decreased 5 percent as compared to 2014. On a
Constant Currency basis, revenue increased 3 percent compared to
2014. Six percentage points of year-over-year decline was driven by
the impact of the oil and gas industry.
- Reported revenue from foreign customers accounted for 66
percent (39 percent in Europe, 27 percent outside of Europe &
the U.S.A.) of total revenue for the year ended December 31, 2015
compared to 69 percent (41 percent in Europe, 28 percent outside of
Europe & the U.S.A.) in 2014.
- Net income was $3.0 million, or $0.51 per diluted share,
compared to $1.5 million, or $0.27 per diluted share in the year
ago period. Net income for 2015 includes realignment expenses of
$1.0 million. Net income for 2014 included an impairment of
investment in affiliated company of $3.2 million, or $0.55 per
diluted share.
- EBITDA for the year ended December 31, 2015 was $7.0 million
compared to $6.2 million for the year ended December 31, 2014. (See
reconciliation to non-GAAP information below)
- Adjusted EBITDA for the year ended December 31, 2015 was $8.5
million compared to $10.1 million for the year ended December 31,
2014. The decline is primarily driven by the oil and gas market
decline and foreign exchange rates. (See reconciliation to non-GAAP
information below)
Revenue by Segment ($ in thousands)
|
Three Months Ended December 31, |
|
As Reported |
|
Year over YearGrowth |
|
Currencyimpact on2015 Growth |
|
2015 Revenueat Constant |
|
Year-over-YearConstantCurrency |
|
|
|
2015 |
|
|
|
2014 |
|
|
$ |
|
% |
|
$ |
|
Currency |
|
Growth % |
|
Package
Testing |
$ |
6,899 |
|
|
$ |
6,750 |
|
|
$ |
149 |
|
|
|
2 |
% |
|
$ |
(1,252 |
) |
|
$ |
8,151 |
|
|
|
21 |
% |
|
Permeation |
|
6,519 |
|
|
|
6,758 |
|
|
|
(239 |
) |
|
|
-4 |
% |
|
|
(277 |
) |
|
|
6,796 |
|
|
|
1 |
% |
|
Industrial
Analyzers and Other |
|
1,905 |
|
|
|
3,430 |
|
|
|
(1,525 |
) |
|
|
-44 |
% |
|
|
- |
|
|
|
1,905 |
|
|
|
-44 |
% |
|
Total Revenue |
$ |
15,323 |
|
|
$ |
16,938 |
|
|
$ |
(1,615 |
) |
|
|
-10 |
% |
|
$ |
(1,529 |
) |
|
$ |
16,852 |
|
|
|
-1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
As Reported |
|
Year over YearGrowth |
|
Currencyimpact on2015 Growth |
|
2015 Revenueat Constant |
|
Year-over-YearConstantCurrency |
|
|
|
2015 |
|
|
|
2014 |
|
|
$ |
|
% |
|
$ |
|
Currency |
|
Growth % |
|
Package
Testing |
$ |
26,583 |
|
|
$ |
28,071 |
|
|
$ |
(1,488 |
) |
|
|
-5 |
% |
|
$ |
(4,446 |
) |
|
$ |
31,029 |
|
|
|
11 |
% |
|
Permeation |
|
25,069 |
|
|
|
23,380 |
|
|
|
1,689 |
|
|
|
7 |
% |
|
|
(896 |
) |
|
|
25,965 |
|
|
|
11 |
% |
|
Industrial
Analyzers and Other |
|
9,572 |
|
|
|
13,024 |
|
|
|
(3,452 |
) |
|
|
-27 |
% |
|
|
- |
|
|
|
9,572 |
|
|
|
-27 |
% |
|
Total Revenue |
$ |
61,224 |
|
|
$ |
64,475 |
|
|
$ |
(3,251 |
) |
|
|
-5 |
% |
|
$ |
(5,342 |
) |
|
$ |
66,566 |
|
|
|
3 |
% |
|
Revenue from the Package Testing segment for the fourth quarter
and year ended December 31, 2015 increased 21 percent and 11
percent, respectively, on a Constant Currency basis due to an
increase in demand for headspace, on-line and mixer products.
As reported, revenue increased 2 percent and decreased 5 percent,
respectively, for the fourth quarter and year ended December 31,
2015.
Revenue growth for the Permeation segment for the fourth quarter
and year ended December 31, 2015 was 1 percent and 11 percent,
respectively, on a Constant Currency basis and declined 4 percent
and grew 7 percent, respectively, as reported. The current year
growth is attributable to the continued strong demand in the USA
for the next generation of oxygen and water vapor permeation
instrumentation, which were introduced to the marketplace during
the second half of 2014. As previously announced in January 2016,
we are currently in the process of selling substantially all the
assets of our business formerly known as “Microanalytics”, located
in Round Rock, Texas, to Volatile Analysis Corporation. The
revenue associated with Microanalytics was approximately $0.7
million and $0.9 million for the years ended December 31, 2015 and
2014, respectively.
Representing the smallest portion of MOCON’s reported revenue,
comprising 16 percent of annual reported revenue, our Industrial
Analyzers and Other segment declined 44 percent and 27 percent
year-over-year for the three months and year ended December 31,
2015. This was attributable to a 77 percent, or $3.9 million,
decline in instrument revenue from the oil and gas market during
the year ended December 31, 2015. This decline is offset in
part by increases in other markets including sales of environmental
monitoring products and specialty gases and beverage products.
Gross Profit, Operating Expenses and Other Income
Commentary
Gross profit was 55 percent and 54 percent of revenue for the
fourth quarter and year ended December 31, 2015, respectively,
compared to 56 percent of revenue for each of the same periods in
2014, respectively. The decrease in the gross margin rate is driven
primarily by a continued decline in revenue volume in Industrial
Analyzers and Other segment which provides a lower basis to absorb
semi-variable and fixed production costs, production ramp up costs
associated with the recently introduced next generation Permeation
products, and increased cost for products produced in the USA that
are sold in euros. The overall decline was partially offset
by increased production and efficiencies for products produced
internationally.
Selling, general and administrative expenses were slightly lower
during the fourth quarter and year ended December 31, 2015 compared
to the same periods in 2014 due primarily to favorable foreign
exchange rates and the reduction of expense realized in the fourth
quarter related to the realignment plan. Research and development
expenses remained consistent at 6-8% of revenue for all
periods.
Balance Sheet and Cash Flow Summary
- Cash and cash equivalents remained consistent at $6.3 million
at both December 31, 2015 and 2014.
- Days sales outstanding continue to be healthy at 52 for each of
the fourth quarters ended December 31, 2015 and 2014.
- Total debt was $3.0 million at December 31, 2015, a $1.6
million reduction when compared to $4.6 million at December 31,
2014.
About MOCON
MOCON is a leading provider of detectors, instruments, systems
and consulting services to research laboratories, production
facilities, and quality control and safety departments in the
medical, pharmaceutical, food and beverage, packaging,
environmental, oil and gas and other industries worldwide.
See www.mocon.com for more information.
Use of Non-GAAP Financial Measures
MOCON’s management evaluates its financial results on a constant
currency basis which is calculated by adjusting the current period
reported revenue to the comparative period’s currency translation
rate (“Constant Currency”) and believes that investors may want to
consider this impact on the Company’s performance. In
addition, MOCON supplements its financial statements to provide
investors with earnings before interest, taxes, depreciation and
amortization (“EBITDA”) and EBITDA plus share-based compensation,
impairment of investment in affiliate, realignment expenses, and
foreign currency transactional losses (“Adjusted EBITDA”), which
are not calculated in accordance with general accepted accounting
principles (“GAAP”) in the United States of America.
MOCON believes that these non-GAAP measures provide useful
information to the Company’s Board of Directors, management and
investors regarding certain trends relating to its financial
condition and operating performance. MOCON’s management uses these
non-GAAP measures to compare the Company's performance to that of
prior periods for trend analyses and planning purposes. In
addition, revenue on a Constant Currency basis is used to assess
the revenue growth component of MOCON’s Incentive Pay Plan.
The method MOCON uses to produce non-GAAP results is not
computed according to GAAP, is likely to differ from the methods
used by other companies and should not be regarded as a replacement
for corresponding GAAP measures. MOCON urges investors to review
the reconciliation of its non-GAAP financial measures to the
comparable GAAP financial measures that are included in this press
release.
Safe Harbor
This press release contains forward-looking statements that are
made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These
forward-looking statements include statements that can be
identified by words such as “will,” “may,” “expect,” “believe,”
“anticipate,” “estimate,” “continue,” “planned”, or other similar
expressions. All forward-looking statements speak only as of
the date of this press release. MOCON undertakes no
obligation to update or revise any forward-looking statement,
whether as a result of new information, future events or
otherwise. In addition to the risks and uncertainties of
ordinary business operations and conditions in the general economy
and the markets in which the Company competes, there are important
factors that could cause actual results to differ materially from
those anticipated by the forward-looking statements made in this
press release. These factors include, but are not limited to,
our ability to realize the cost savings associated with the
realignment plan implemented in 2015, fluctuations in foreign
currency exchange rates, the terms of our credit agreement
including financial covenants included therein, dependence on
certain key industries, pricing and lack of availability of raw
materials, crude oil pricing impact on oil exploration activities,
and other factors set forth in the Company’s Annual Report on Form
10-K for the year ended December 31, 2014 and other documents
MOCON files with or furnishes to the Securities and Exchange
Commission.
MOCON's shares are traded on the NASDAQ Global Market
System under the symbol MOCO.MOCON is a registered
trademark of MOCON, Inc.; other trademarks are those of their
respective holders.
MOCON,
INC. |
SUMMARY
CONSOLIDATED FINANCIAL DATA |
(in
Thousands, Except Per Share Data) |
|
|
|
|
|
|
|
|
STATEMENT OF OPERATIONS
DATA: (unaudited) |
|
|
|
|
|
|
|
|
Quarters
Ended December 31, |
|
Year Ended
December 31, |
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
Revenue |
|
|
|
|
|
|
|
Products |
$ |
11,860 |
|
|
$ |
13,312 |
|
|
$ |
48,302 |
|
|
$ |
50,694 |
|
Services |
|
2,618 |
|
|
|
2,674 |
|
|
|
9,956 |
|
|
|
10,658 |
|
Consulting |
|
845 |
|
|
|
952 |
|
|
|
2,966 |
|
|
|
3,123 |
|
Total revenue |
|
15,323 |
|
|
|
16,938 |
|
|
|
61,224 |
|
|
|
64,475 |
|
Cost of revenue |
|
|
|
|
|
|
|
Products |
|
5,289 |
|
|
|
5,857 |
|
|
|
21,778 |
|
|
|
22,174 |
|
Services |
|
1,131 |
|
|
|
1,054 |
|
|
|
4,205 |
|
|
|
4,188 |
|
Consulting |
|
502 |
|
|
|
586 |
|
|
|
2,017 |
|
|
|
1,999 |
|
Total cost of
revenue |
|
6,922 |
|
|
|
7,497 |
|
|
|
28,000 |
|
|
|
28,361 |
|
Gross profit |
|
8,401 |
|
|
|
9,441 |
|
|
|
33,224 |
|
|
|
36,114 |
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
|
5,871 |
|
|
|
6,773 |
|
|
|
23,468 |
|
|
|
24,988 |
|
Research and development
expenses |
|
1,260 |
|
|
|
1,127 |
|
|
|
4,341 |
|
|
|
4,191 |
|
Realignment
expenses |
|
731 |
|
|
|
- |
|
|
|
1,049 |
|
|
|
Impairment of investment in
affiliate |
|
- |
|
|
|
3,171 |
|
|
|
- |
|
|
|
3,171 |
|
Operating income
(loss) |
|
539 |
|
|
|
(1,630 |
) |
|
|
4,366 |
|
|
|
3,764 |
|
Other expense,
net |
|
3 |
|
|
|
(39 |
) |
|
|
93 |
|
|
|
(306 |
) |
Income (loss) before income
taxes |
|
542 |
|
|
|
(1,669 |
) |
|
|
4,459 |
|
|
|
3,458 |
|
Income tax
expense |
|
276 |
|
|
|
364 |
|
|
|
1,487 |
|
|
|
1,922 |
|
Net income
(loss) |
$ |
266 |
|
|
$ |
(2,033 |
) |
|
$ |
2,972 |
|
|
$ |
1,536 |
|
Net income (loss) per common
share: |
|
|
|
|
|
|
|
Basic |
$ |
0.05 |
|
|
$ |
(0.36 |
) |
|
$ |
0.52 |
|
|
$ |
0.27 |
|
Diluted |
$ |
0.05 |
|
|
$ |
(0.36 |
) |
|
$ |
0.51 |
|
|
$ |
0.27 |
|
Weighted average common shares
outstanding: |
|
|
|
|
|
|
|
Basic |
|
5,767 |
|
|
|
5,696 |
|
|
|
5,753 |
|
|
|
5,665 |
|
Diluted |
|
5,806 |
|
|
|
5,696 |
|
|
|
5,818 |
|
|
|
5,754 |
|
CONDENSED BALANCE SHEET
DATA: (unaudited) |
|
|
|
|
December 31, 2015 |
|
December 31, 2014 |
Assets: |
|
|
|
Cash and marketable
securities |
$ |
6,344 |
|
|
$ |
6,332 |
|
Accounts receivable,
net |
|
8,786 |
|
|
|
9,877 |
|
Inventories |
|
7,790 |
|
|
|
8,705 |
|
Other current
assets |
|
1,782 |
|
|
|
2,587 |
|
Total current
assets |
|
24,702 |
|
|
|
27,501 |
|
Property, plant and
equipment, net |
|
5,995 |
|
|
|
5,562 |
|
Investment in affiliated
company |
|
- |
|
|
|
- |
|
Goodwill, intangibles and
other assets |
|
16,722 |
|
|
|
19,446 |
|
Total assets |
$ |
47,419 |
|
|
$ |
52,509 |
|
Liabilities and Shareholders’
Equity: |
|
|
|
Line of
Credit |
$ |
- |
|
|
$ |
3,300 |
|
Notes payable,
current |
|
65 |
|
|
|
983 |
|
Other current
liabilities |
|
9,534 |
|
|
|
11,166 |
|
Total noncurrent
liabilities |
|
4,348 |
|
|
|
2,587 |
|
Shareholders’
equity |
|
33,472 |
|
|
|
34,473 |
|
Total liabilities and
shareholders’ equity |
$ |
47,419 |
|
|
$ |
52,509 |
|
CONDENSED CASH FLOW
DATA: (unaudited) |
December 31, 2015 |
|
December 31, 2014 |
|
|
|
|
Net cash
provided by operations |
$ |
6,372 |
|
|
$ |
9,670 |
|
Net cash used
in investing activities |
|
(1,683 |
) |
|
|
(1,533 |
) |
Net cash used
in financing activities |
|
(4,002 |
) |
|
|
(5,371 |
) |
Effect of
exchange rate changes |
|
(675 |
) |
|
|
(567 |
) |
Net increase in
cash |
|
12 |
|
|
|
2,199 |
|
Cash beginning
of year |
|
6,332 |
|
|
|
4,133 |
|
Cash end of
year |
$ |
6,344 |
|
|
$ |
6,332 |
|
MOCON,
INC. |
NON-GAAP
RECONCILIATION |
(in
Thousands, Except Share Data) |
|
|
|
|
|
|
|
|
|
Quarters
Ended December 31, |
|
Year Ended
December 31, |
|
|
2015 |
|
|
|
2014 |
|
|
|
2015 |
|
|
|
2014 |
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
266 |
|
|
$ |
(2,033 |
) |
|
$ |
2,972 |
|
|
$ |
1,536 |
|
Interest expense,
net |
|
20 |
|
|
|
36 |
|
|
|
118 |
|
|
|
183 |
|
Income tax
expense |
|
276 |
|
|
|
364 |
|
|
|
1,487 |
|
|
|
1,922 |
|
Depreciation and
amortization |
|
627 |
|
|
|
631 |
|
|
|
2,460 |
|
|
|
2,555 |
|
|
|
|
|
|
|
|
|
EBITDA |
|
1,189 |
|
|
|
(1,002 |
) |
|
|
7,037 |
|
|
|
6,196 |
|
Share-based
compensation |
|
153 |
|
|
|
178 |
|
|
|
642 |
|
|
|
591 |
|
Impairment of investment in
affiliate |
|
- |
|
|
|
3,171 |
|
|
|
- |
|
|
|
3,171 |
|
Realignment
expenses |
|
731 |
|
|
|
- |
|
|
|
1,049 |
|
|
|
- |
|
Foreign currency
transaction loss (gain) |
|
(23 |
) |
|
|
16 |
|
|
|
(209 |
) |
|
|
136 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
2,050 |
|
|
$ |
2,363 |
|
|
$ |
8,519 |
|
|
$ |
10,094 |
|
For More Information Contact:
Elissa Lindsoe, CFO
763-493-6370 /
www.mocon.com
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