Highlights:
- Overall Revenue increased 5 percent on a Constant Currency
basis
- Approximately $1.7 million of pre-tax savings in 2016 from
realignment plan
- Double digit growth in Permeation and Package Testing Segments
on a Constant Currency basis
MOCON, Inc. (NASDAQ:MOCO), today reported financial results for the
third quarter ended September 30, 2015.
Commenting on the Company's performance, MOCON's president and
CEO, Robert L. Demorest said, "On a Constant Currency basis, our
third quarter revenue grew 5 percent. Our Permeation and Package
Testing business segments both continue to meet our growth
expectations at 18 percent and 10 percent respectively. As
experienced in the first half of the year, our Industrial Analyzer
and Other segment continues to be challenged by the soft oil and
gas market. Our earnings are trending up; on a sequential basis
diluted EPS improved by 82 percent as revenue improved while we
prudently managed costs and expenses. While the strengthening of
the US dollar negatively impacted our revenue as reported for the
three and nine-month periods, there is less of an effect to our
operating income. A large portion of the costs to support our
international businesses are denominated in foreign currencies,
which provides a natural hedge therefore mitigating the negative
effect of a strengthening dollar to operating profits.
"As part of an ongoing process improvement initiative designed
to grow MOCON's global brand and to provide our customers with
enhanced products and services, we recently implemented a
realignment plan and as part of that plan, we brought the sales and
marketing functions of our Package Testing and Permeation business
segments under common leadership. Overall, the realignment resulted
in a 5 percent reduction in our U.S. headcount. We expect the
realignment plan, which also includes the elimination of several
vacant positions within other areas of the Company, will result in
approximately $1.7 million of pre-tax savings in 2016. We will
record a pre-tax charge of approximately $0.5 million, or $0.09 per
diluted share, in the fourth quarter of 2015 related to employee
separation costs. We believe the decision to have common leadership
over both of these businesses will not only strengthen our market
presence, but will also provide a cost-effective approach to
achieving our objectives".
2015 Revenue and Earnings Summary
Third quarter 2015 results compared to third quarter 2014:
- Reported revenue decreased 7 percent as compared to the third
quarter 2014. On a Constant Currency basis, revenue increased 5
percent compared to the year ago quarter.
- Revenue (as reported) from foreign customers accounted for 62
percent (40 percent in Europe, 22 percent outside of Europe &
the U.S.A.) of total revenue for the third quarter of 2015 compared
to 67 percent (41 percent in Europe, 26 percent outside of Europe
& the U.S.A.) in the third quarter of 2014.
- Net income was $1.2 million, or $0.20 per diluted share,
compared to $1.7 million, or $0.29 per diluted share in the year
ago quarter.
- Adjusted EBITDA for third quarter of 2015 was $2.6 million
compared to $3.3 million in the third quarter of 2014. (See
reconciliation to non-GAAP information below).
Nine months ended September 30, 2015 results compared to the
year ago nine month period:
- Reported revenue decreased 3 percent as compared to the year
ago period. On a Constant Currency basis, revenue increased 6
percent compared to the year ago nine month period.
- Revenue (as reported) from foreign customers accounted for 66
percent (38 percent in Europe, 28 percent outside of Europe &
the U.S.A.) of total revenue for the nine month period of 2015
compared to 71 percent (42 percent in Europe, 29 percent outside of
Europe & the U.S.A.) in the year ago period.
- Net income was $2.7 million, or $0.46 per diluted share,
compared to $3.6 million, or $0.62 per diluted share in the year
ago period.
- Adjusted EBITDA for the nine month period ended September 30,
2015 was $6.5 million compared to $7.7 million in the year ago nine
month period.
Revenue by Segment ($ in thousands)
|
Three Months
Ended September 30, |
|
As
Reported |
Year over Year
Growth |
Currency impact on 2015
Growth |
2015 Revenue at
Constant |
Year-over-Year Constant
Currency |
|
2015 |
2014 |
$ |
% |
$ |
Currency |
Growth % |
Package Testing |
$ 6,454 |
$ 7,342 |
$ (888) |
-12% |
$ (1,643) |
$ 8,097 |
10% |
Permeation |
6,482 |
5,729 |
753 |
13% |
(276) |
6,758 |
18% |
Industrial Analyzers and
Other |
2,556 |
3,578 |
(1,022) |
-29% |
-- |
2,556 |
-29% |
Total
Revenue |
$ 15,492 |
$ 16,649 |
$ (1,157) |
-7% |
$ (1,919) |
$ 17,411 |
5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
September 30, |
|
As
Reported |
Year over Year
Growth |
Currency impact on 2015
Growth |
2015 Revenue at
Constant |
Year-over-Year Constant
Currency |
|
2015 |
2014 |
$ |
% |
$ |
Currency |
Growth % |
Package Testing |
$ 19,684 |
$ 21,320 |
$ (1,636) |
-8% |
$ (3,758) |
$ 23,442 |
10% |
Permeation |
18,550 |
16,622 |
1,928 |
12% |
(764) |
19,314 |
16% |
Industrial Analyzers and
Other |
7,667 |
9,595 |
(1,928) |
-20% |
-- |
7,667 |
-20% |
Total
Revenue |
$ 45,901 |
$ 47,537 |
$ (1,636) |
-3% |
$ (4,522) |
$ 50,423 |
6% |
Revenue from the Package Testing segment for both the three and
nine months ended September 30, 2015 increased 10 percent on a
Constant Currency basis due to an increase in headspace and mixer
products and accessories. As reported, revenue decreased 12
percent and 8 percent, respectively, for the three and nine months
ended September 30, 2015.
Revenue growth for the Permeation segment for the three months
and nine months ended September 30, 2015 was 18 percent and 16
percent, respectively, on a Constant Currency basis and 13 percent
and 12 percent, respectively, as reported. The current year growth
is attributable to the continued increase in demand in the USA for
the new generation of oxygen and water vapor permeation
instrumentation, which was introduced to the marketplace during the
second half of 2014.
Representing the smallest portion of MOCON's reported revenue,
currently 16 percent and only 22 percent at its peak, our
Industrial Analyzer and Other segment declined 29 percent and 20
percent year-over-year for the three and nine months ended
September 30, 2015. This was attributable to a 70 percent and
75 percent decline, respectively, in revenue from the oil and gas
market. This decline is offset in part by increases in other
markets including sales of environmental monitoring products and
the sale of sensors into OEM partners.
Gross Profit, Operating Expenses and Other Income
Commentary
Gross profit was 54 percent of revenue for each of the three and
nine month periods ended September 30, 2015, respectively, compared
to 57 percent and 56 percent of revenue for the same periods in
2014, respectively. The decrease in the gross margin rate is driven
primarily by reduced revenue volume in Industrial Analyzer 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 third quarter and first nine months of 2015 compared to
the same periods in 2014 due primarily to favorable foreign
exchange rates partially offset by the cost of the Company's legal
entity realignment initiative of $190,000 and $318,000 in each of
the quarter and year-to-date periods ending September
2015. Research and development expenses remained consistent at
6-8% of revenue for all periods.
Balance Sheet and Cash Flow Summary
- Cash and cash equivalents increased slightly to $6.4 million at
September 30, 2015 compared to $6.3 million at December 31,
2014.
- Net cash provided by operations was $4.4 million compared to
$6.4 million in the first nine months of 2014 primarily driven by
the change in net income and a $2.3 million decline in accounts
payable and accrued compensation offset by a $1.5 million reduction
in inventory.
- Days sales outstanding were 51 days, a 6 day improvement from
57 in the third quarter of 2014 driven by an increased focus on
collections.
- Total debt was $3.7 million at September 30, 2015, a $0.9
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,
legal entity 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, the
performance of Dansensor, worldwide economic conditions and
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) |
|
|
|
|
|
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|
2015 |
2014 |
2015 |
2014 |
Revenue |
|
|
|
|
Products |
$ 12,241 |
$ 13,110 |
$ 36,442 |
$ 37,384 |
Services |
2,496 |
2,745 |
7,338 |
7,983 |
Consulting |
755 |
794 |
2,121 |
2,170 |
Total
revenue |
15,492 |
16,649 |
45,901 |
47,537 |
Cost of revenue |
|
|
|
|
Products |
5,707 |
5,648 |
16,490 |
16,318 |
Services |
1,010 |
992 |
3,074 |
3,133 |
Consulting |
457 |
447 |
1,515 |
1,412 |
Total cost of
revenue |
7,174 |
7,087 |
21,079 |
20,863 |
Gross
profit |
8,318 |
9,562 |
24,822 |
26,674 |
|
|
|
|
|
Selling, general and administrative
expenses |
5,808 |
6,125 |
17,914 |
18,216 |
Research and development
expenses |
886 |
950 |
3,081 |
3,064 |
Operating
income |
1,624 |
2,487 |
3,827 |
5,394 |
Other income (expense),
net |
(48) |
(117) |
90 |
(267) |
Income before income
taxes |
1,576 |
2,370 |
3,918 |
5,127 |
Income tax expense |
424 |
696 |
1,211 |
1,558 |
Net
income |
$ 1,152 |
$ 1,674 |
$ 2,706 |
$ 3,569 |
Net income per common
share: |
|
|
|
|
Basic |
$0.20 |
$0.30 |
$0.47 |
$0.63 |
Diluted |
$0.20 |
$0.29 |
$0.46 |
$0.62 |
Weighted average common shares
outstanding: |
|
|
|
|
Basic |
5,753 |
5,668 |
5,748 |
5,655 |
Diluted |
5,808 |
5,776 |
5,826 |
5,768 |
|
|
|
CONDENSED BALANCE SHEET DATA:
(unaudited) |
|
|
|
September 30,
2015 |
December 31,
2014 |
Assets: |
|
|
Cash and cash
equivalents |
$ 6,413 |
$ 6,332 |
Accounts receivable,
net |
8,710 |
9,877 |
Inventories |
8,390 |
8,705 |
Other current
assets |
2,829 |
2,587 |
Total current
assets |
26,342 |
27,501 |
Property, plant and
equipment, net |
6,028 |
5,562 |
Goodwill, intangibles
and other assets |
17,172 |
19,446 |
Total
assets |
$ 49,542 |
$ 52,509 |
Liabilities and Shareholders'
Equity: |
|
|
Revolving lines of
credit |
$ -- |
$ 3,300 |
Notes payable,
current |
64 |
983 |
Other current
liabilities |
9,973 |
11,166 |
Total noncurrent
liabilities |
5,708 |
2,587 |
Shareholders'
equity |
33,797 |
34,473 |
Total liabilities and
shareholders' equity |
$ 49,542 |
$ 52,509 |
|
|
|
|
|
|
CONDENSED CASH FLOW DATA:
(unaudited) |
September 30,
2015 |
September 30,
2014 |
|
|
|
Net cash provided by
operations |
$ 4,417 |
$ 6,430 |
Net cash used in investing
activities |
(1,144) |
(1,113) |
Net cash used in financing
activities |
(2,816) |
(2,965) |
Effect of exchange rate
changes |
(376) |
(344) |
Net increase (decrease) in
cash |
81 |
2,008 |
Cash beginning of
period |
6,332 |
4,133 |
Cash end of period |
$ 6,413 |
$ 6,141 |
|
MOCON,
INC. |
NON-GAAP
RECONCILIATION |
(in Thousands, Except
Share Data) |
|
|
|
|
|
|
Three Months Ended
September 30, |
Nine Months Ended
September 30, |
|
2015 |
2014 |
2015 |
2014 |
|
|
|
|
|
Net income |
$ 1,152 |
$ 1,674 |
$ 2,706 |
$ 3,569 |
Interest expense,
net |
31 |
45 |
97 |
147 |
Income tax
expense |
424 |
696 |
1,211 |
1,557 |
Depreciation and
amortization |
614 |
656 |
1,834 |
1,924 |
|
|
|
|
|
EBITDA |
2,221 |
3,071 |
5,848 |
7,197 |
Share-based
compensation |
167 |
129 |
488 |
413 |
Legal entity
realignment expenses |
190 |
-- |
318 |
-- |
Foreign currency
transaction loss (gain) |
17 |
72 |
(186) |
120 |
|
|
|
|
|
Adjusted EBITDA |
$ 2,595 |
$ 3,272 |
$ 6,468 |
$ 7,730 |
CONTACT: For More Information Contact:
Elissa Lindsoe, CFO
763-493-6370 /
www.mocon.com
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