ANN ARBOR,
Mich., Aug. 8,
2016 /PRNewswire/ -- Arotech Corporation
(NasdaqGM: ARTX) today announced financial results for its second
quarter and six months ended June 30,
2016 and a more narrow range for its 2016
outlook.
Second Quarter 2016 Financial and Business
Highlights:
- Total revenues of $21.8
million
- Diluted EPS of $(0.03)
- Adjusted EPS of $0.01
(reconciliation to diluted EPS appears in tables below)
- Net loss of $(800,000)
- Adjusted EBITDA of $1.1
million (reconciliation to net loss appears in tables
below)
- Backlog of orders as of June 30,
2016 totaled $52
million
U.S. $ in thousands, except per share
data
|
|
Second Quarter
|
|
First Quarter
|
|
|
2016
|
|
2015
|
|
2016
|
GAAP Measures
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
21,780
|
|
$
|
21,644
|
|
$
|
25,406
|
Net (Loss)/ Income
|
|
$
|
(800)
|
|
$
|
(2,243)
|
|
$
|
(644)
|
Diluted EPS
|
|
$
|
(0.03)
|
|
$
|
(0.10)
|
|
$
|
(0.03)
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
1,069
|
|
$
|
(165)
|
|
$
|
1,548
|
Adjusted EPS
|
|
$
|
0.01
|
|
$
|
(0.04)
|
|
$
|
0.03
|
"While we delivered strong gross margins for the second
quarter and worked to advance a number of opportunities in our
pipeline towards the award stage, we had hoped for better results,"
commented Steven Esses, Arotech's
President and CEO. "Given the additional clarity we have regarding
the timing of future opportunities and with contract awards and our
financial results through the first half of the year, we have made
the prudent decision to narrow the range of our previously-issued
guidance. We now expect results to reach only the lower-end of our
previously issued full-year 2016 outlook."
"Our Power Systems Division secured several wins in recent
months, including a contract from the U.S. Marine Corps
valued at $2.6 million for the
design, development and delivery of four MEHPS systems to further
build upon our backlog," continued Esses. "In addition, our
Simulation Division was awarded an IDIQ contract from the U.S.
Department of State for MILO Range Training Systems valued at up to
$40 million."
Mr. Esses added, "Strategically, we are not satisfied with the
current pace of our operational turnaround, and we are working
collaboratively with our new Chairman and our entire Board,
including the independent members, to accelerate progress. In
response to our year-to-date results, the board has begun an
intensive review of our businesses, procedures and strategies,
utilizing their diverse areas of expertise to help Arotech advance
growth initiatives and further enhance operational efficiency,
Under the board's direction, we are also exploring
ways to augment our organic long-term growth strategy by leveraging
our public company infrastructure, industry relationships and
experience to increase value for our shareholders."
Second Quarter Financial Summary
Revenues for the second quarter were $21.8 million, compared to $21.6 million for the comparable period in
2015.
Gross profit for the second quarter was $7.0 million, or 32.1% of revenues, compared to
$6.2 million, or 28.7% of revenues,
for the prior year period.
Operating loss for the second quarter of 2016 was a loss
of $(247,000) compared to a loss of
$(1.7 million) for the corresponding
period in 2015. Operating expenses were $22.0 million in the second quarter of 2016
compared to $23.3 million in the year
ago quarter.
Total other income was an expense of $(184,000) for the second quarter of 2016 and
$(209,000) for the corresponding
period in 2015.
The Company's net loss for the second quarter was
$(800,000), or $(0.03) per basic and diluted share, compared to
$(2.2) million, or $(0.10) per basic and diluted share, for the
corresponding period last year.
Adjusted Earnings per Share (Adjusted EPS) was
$0.01 for the second quarter of 2016
and $(0.04) for the corresponding
period in 2015.
Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA) was approximately $1.1 million for the second quarter of 2016 and
$(165,000) for the corresponding
period of 2015.
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 six months were $47.2 million, compared to $45.9 million for the comparable period in 2015.
The year-over-year increase was driven, in large part, by
revenue growth in the Company's Power Systems
Division.
Gross profit for the first six months was $14.7 million, or 31.1% of revenues, compared to
$13.1 million, or 28.6% of revenues,
for the prior year period.
The operating loss for the first six months of 2016 was
$(366,000), compared to a loss of
$(1.6 million) for the corresponding
period in 2015. Included in the 2015 loss from
operations was a non-recurring expense reduction of $895,000 related to the sale of a building used
in the Company's former Armor Division, partially offset by
non-recurring costs of $803,000
related to the transition and move of the Company's former
Alabama operations to UEC based in
South Carolina. Excluding these significant non-recurring
items, the Company's income from operations improved $1.2 million during the first six months of 2016
as compared to 2015.
Total other expense for the first six months of 2016 was
$495,000 compared to total other
expenses of $521,000 for the
corresponding period in 2015. The difference was driven by
less interest expense incurred as a result of less debt
outstanding in 2016 as compared to 2015.
The Company's net loss for the first six months was
$(1.4 million), or $(0.06) per basic and diluted share, compared to
$(2.7 million), or $(0.12) per basic and diluted share, for the
corresponding period last year.
Adjusted Earnings per Share (Adjusted EPS) for the first
six months was $0.04, compared to
$(0.02) for the corresponding period
in 2015.
Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (Adjusted EBITDA) for the first six months was
$2.6 million compared to $1.3 million for the corresponding period of
2015.
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, 2016, the
Company had $10.0 million in cash and
cash equivalents, as compared to $10.7
million in cash and cash equivalents at December 31, 2015.
As of December 31, 2015,
Arotech has net operating loss carryforwards for U.S. federal
income tax purposes of $40.7 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 $229,000 in non-cash
tax expenses in the second quarter of 2016, reflecting the
uncertainty of the deductibility of intangible expenses for federal
income tax purposes.
As of June 30, 2016, the
Company had total debt of $15.4
million, consisting of $4.3
million in short-term bank debt under its credit facility
and $11.1 million in long-term loans.
This is in comparison to December 31,
2015 when the Company had total debt of $20.3 million, consisting of $4.1 million in short-term bank debt and
$16.2 million in long-term
loans.
The Company also had $10.7
million in available, unused bank lines of credit with its
primary bank as of June 30, 2016,
under a $15.0 million credit facility
through its main bank.
The Company had a current ratio (current assets/current
liabilities) of 2.3 compared with the December 31, 2015 current ratio of
1.9.
2016 Guidance
The company is affirming the low-end of its 2016 outlook
and narrowing the range of expectations of total revenue of
$100 million to $104 million
(originally $100 to $112 million),
with adjusted earnings per share (Adjusted EPS) of $0.18 to $0.20 (originally $0.18 to $0.23) and adjusted EBITDA of
$7 million to $8 million (originally
$7 million to $9 million). This
outlook includes only organic contribution, and does not take any
potential acquisition activity into account. Adjusted EPS is based
on 26.4 million current shares outstanding. Guidance is provided on
a non-GAAP basis to be consistent with past practice. Guidance for
2017 will to the extent possible be given in respect of GAAP
measures. 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 today,
Monday, August 8, 2016 at
5:00 p.m. 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: 1-877-857-6161
- International: + 1-719-325-4940
- Conference ID: 9501647
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 8 pm
Eastern time on Monday, August 8,
2016, and continue through 11:59 pm
Eastern time on Monday, August 15,
2016. The replay passcode is 9501647.
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.
Investor Relations Contacts:
Brett Maas / Rob Fink
Hayden
IR
(646) 536.7331 / (646)
415.8972
ARTX@haydenir.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, 2015, 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.
CONDENSED
CONSOLIDATED BALANCE SHEET SUMMARY (UNAUDITED)
(U.S.
Dollars)
|
|
|
|
June 30,
2016
|
|
December 31,
2015
|
ASSETS
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
9,961,846
|
|
$
|
10,698,405
|
Trade
receivables
|
|
|
16,200,451
|
|
|
17,401,479
|
Unbilled
receivables
|
|
|
7,985,180
|
|
|
12,132,484
|
Other accounts
receivable and prepaid
|
|
|
2,078,376
|
|
|
1,007,358
|
Inventories
|
|
|
9,673,232
|
|
|
9,607,836
|
TOTAL CURRENT ASSETS
|
|
|
45,899,085
|
|
|
50,847,562
|
LONG TERM
ASSETS:
|
|
|
|
|
|
|
Property and
equipment, net
|
|
|
6,393,384
|
|
|
6,440,270
|
Other long term
assets
|
|
|
5,685,000
|
|
|
5,407,427
|
Intangible assets,
net
|
|
|
7,896,041
|
|
|
9,334,730
|
Goodwill
|
|
|
45,487,970
|
|
|
45,463,027
|
TOTAL LONG TERM ASSETS
|
|
|
65,462,395
|
|
|
66,645,454
|
TOTAL ASSETS
|
|
$
|
111,361,480
|
|
$
|
117,493,016
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
Trade
payables
|
|
$
|
3,075,639
|
|
$
|
5,914,042
|
Other accounts
payable and accrued expenses
|
|
|
5,551,619
|
|
5,560,040
|
Current portion of
long term debt
|
|
|
1,383,380
|
|
4,362,438
|
Short term bank
credit
|
|
|
4,326,083
|
|
4,060,000
|
Deferred
revenues
|
|
|
5,745,962
|
|
6,879,815
|
TOTAL CURRENT LIABILITIES
|
|
|
20,082,683
|
|
26,776,335
|
LONG TERM
LIABILITIES:
|
|
|
|
|
|
Accrued Israeli
statutory/contractual severance pay
|
|
|
7,857,174
|
|
7,516,980
|
Long term portion of
debt
|
|
|
9,656,601
|
|
11,856,522
|
Other long-term
liabilities
|
|
|
7,497,832
|
|
7,295,808
|
TOTAL LONG-TERM LIABILITIES
|
|
|
25,011,607
|
|
26,669,310
|
TOTAL LIABILITIES
|
|
|
45,094,290
|
|
53,445,645
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
|
TOTAL STOCKHOLDERS' EQUITY
(NET)
|
|
|
66,267,190
|
|
64,047,371
|
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY
|
|
$
|
111,361,480
|
|
$
|
117,493,016
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(U.S. $ in
thousands, except per share data)
|
|
|
Six months ended June 30,
|
|
Three months ended June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Revenues
|
$
47,186,358
|
|
$
45,870,933
|
|
$
21,779,877
|
|
$
21,644,225
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
32,496,895
|
|
32,750,960
|
|
14,784,721
|
|
15,426,613
|
Research and
development expenses
|
2,107,602
|
|
2,344,814
|
|
1,009,874
|
|
1,250,550
|
Selling and marketing
expenses
|
3,454,454
|
|
2,622,790
|
|
1,799,588
|
|
1,397,374
|
General and
administrative expenses
|
8,026,787
|
|
8,181,051
|
|
3,734,374
|
|
4,527,476
|
Amortization of
intangible assets
|
1,466,640
|
|
1,566,267
|
|
698,637
|
|
705,494
|
Total operating costs
and expenses
|
47,552,378
|
|
47,465,882
|
|
22,027,194
|
|
23,307,507
|
|
|
|
|
|
|
|
|
Operating
loss
|
(366,020)
|
|
(1,594,949)
|
|
(247,317)
|
|
(1,663,282)
|
|
|
|
|
|
|
|
|
Other
income
|
46,432
|
|
50,031
|
|
20,395
|
|
34,052
|
Financial expense,
net
|
(541,854)
|
|
(571,005)
|
|
(204,196)
|
|
(243,397)
|
Total other
expense
|
(495,422)
|
|
(520,974)
|
|
(183,801)
|
|
(209,345)
|
Loss before income
tax expense
|
(861,442)
|
|
(2,115,923)
|
|
(431,118)
|
|
(1,872,627)
|
|
|
|
|
|
|
|
|
Income tax
expense
|
582,280
|
|
609,724
|
|
368,827
|
|
370,343
|
Net loss
|
(1,443,772)
|
|
(2,725,647)
|
|
(799,945)
|
|
(2,242,970)
|
|
|
|
|
|
|
|
|
Other comprehensive
income (loss), net of income tax
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
62,055
|
|
383,346
|
|
(298,043)
|
|
682,860
|
Comprehensive
loss
|
$
(1,381,667)
|
|
$
(2,342,301)
|
|
$
(1,097,988)
|
|
$
(1,560,110)
|
|
|
|
|
|
|
|
|
Basic net loss per
share
|
$
(0.06)
|
|
$
(0.12)
|
|
$
(0.03)
|
|
$
(0.10)
|
|
|
|
|
|
|
|
|
Diluted net loss per
share
|
$
(0.06)
|
|
$
(0.12)
|
|
$
(0.03)
|
|
$
(0.10)
|
Weighted average
number of shares used in computing basic net loss per
share
|
25,365,756
|
|
23,451,687
|
|
25,383,440
|
|
23,599,230
|
Weighted average
number of shares used in computing diluted net loss per
share
|
25,365,756
|
|
23,451,687
|
|
25,383,440
|
|
23,599,230
|
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:
|
Six months ended June 30,
|
|
Three months ended June 30,
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net loss (GAAP measure)
|
$
(1,443,722)
|
|
$
(2,725,647)
|
|
$
(799,945)
|
|
$
(2,242,970)
|
Add
back:
|
|
|
|
|
|
|
|
Financial expense –
including interest
|
541,854
|
|
571,005
|
|
204,196
|
|
243,397
|
Income tax
expense
|
582,280
|
|
609,724
|
|
368,827
|
|
370,343
|
Depreciation and
amortization expense
|
2,334,666
|
|
2,482,485
|
|
1,159,629
|
|
1,142,252
|
Other
adjustments*
|
602,055
|
|
1,292,400
|
|
136,286
|
|
321,781
|
Building
sale
|
–
|
|
(895,000)
|
|
–
|
|
–
|
Total adjusted
EBITDA
|
$
2,617,133
|
|
$
1,334,967
|
|
$ 1,068,993
|
|
$
(165,197)
|
|
*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)
|
|
|
|
Six Months ended June 30,
|
|
Three Months ended June 30,
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
Revenue (GAAP measure)
|
|
$
47,186
|
|
$
45,871
|
|
$
21,780
|
|
$
21,644
|
Net Loss (GAAP measure)
|
|
$
(1,444)
|
|
$
(2,726)
|
|
$
(800)
|
|
$
(2,243)
|
Adjustments:
|
|
|
|
|
|
|
|
|
Amortization
|
|
1,467
|
|
1,566
|
|
699
|
|
705
|
Stock compensation
|
|
648
|
|
335
|
|
157
|
|
176
|
Non-cash taxes
|
|
379
|
|
299
|
|
229
|
|
150
|
EFB Transition/UEC Acquisition
costs
|
|
–
|
|
1,008
|
|
–
|
|
180
|
Building sale
|
|
–
|
|
(895)
|
|
–
|
|
–
|
Net adjustments
|
|
$
2,494
|
|
$
2,313
|
|
$
1,085
|
|
$
1,211
|
Adjusted Net Income/(Loss)
|
|
$
1,050
|
|
$
(413)
|
|
$
285
|
|
$
(1,032)
|
Number of shares
|
|
25,366
|
|
23,452
|
|
25,383
|
|
23,599
|
Adjusted EPS
|
|
$
0.04
|
|
$
(0.02)
|
|
$
0.01
|
|
$
(0.04)
|
To view the original version on PR Newswire,
visit:http://www.prnewswire.com/news-releases/arotech-reports-second-quarter-and-year-to-date-2016-results-300310626.html
SOURCE Arotech Corporation