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):
August 19, 2014
EMRISE CORPORATION
(Exact name of registrant as specified in its charter)
| Delaware |
|
001-10346 |
|
77-0226211 |
(State or other jurisdiction
of incorporation) |
|
(Commission
File Number) |
|
(IRS Employer
Identification No.) |
2530 Meridian Parkway
Durham, North Carolina 27713
(Address of Principal Executive Offices)
(408) 200-3040
Registrant’s telephone number, including
area code
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:
[ ] Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition.
On August 19, 2014, EMRISE Corporation (the
“Company”) issued a press release entitled “EMRISE Announces 2014 Second Quarter, Six-Month Results” regarding
the Company’s financial results for the period ended June 30, 2014. A copy of the press release is hereby furnished as Exhibit
99.1 and incorporated herein by reference.
The information contained in this Current Report
on Form 8-K and the exhibit attached hereto shall not be deemed to be “filed” for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor
shall such information or such exhibits be deemed incorporated by reference in any filing under the Securities Act of 1933, as
amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 7.01 Regulation FD Disclosure.
The disclosure contained in Item 2.02 is incorporated by reference
into this Item 7.01.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. |
|
Description |
| |
|
|
| 99.1 |
|
Press release issued by the Company entitled “EMRISE Announces 2014 Second Quarter, Six-Month Results,” dated August 19, 2014. |
SIGNATURE
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.
| |
EMRISE CORPORATION |
| |
|
|
| Date: August 22, 2014 |
By: |
/s/ Carmine T. Oliva |
| |
|
Carmine T. Oliva |
| |
|
Chief Executive Officer |
 |
 |
| |
2530
Meridian Parkway |
| |
Durham,
NC 27713 |
| |
(919)
806-4722 |
| |
www.emrise.com |
CONTACT:
Allen &
Caron Inc.
Rene Caron
(investors)
Len Hall
(media)
(949)
474-4300
rene@allencaron.com
len@allencaron.com
EMRISE
ANNOUNCES 2014 SECOND QUARTER, SIX-MONTH Results
Overall
Net Sales for Quarter Increase Year-over-Year 13%;
Electronic
Devices and Communications Equipment Segments Generated Operating Profits
DURHAM,
NC – August 19, 2014 – EMRISE CORPORATION (OTCQB: EMRI), a multi-national manufacturer of defense and aerospace
electronic devices and communications equipment, today announced its financial results for its second quarter and six months ended
June 30, 2014, and that it is filing its Quarterly Report on Form 10-Q for the period ended June 30,
2014, with the U.S. Securities and Exchange Commission today.
Overall
net sales in the 2014 second quarter increased 13 percent to $9.1 million from $8.1 million in the 2013 second quarter and rose
approximately 18 percent from $7.8 million in the first quarter of this year. For the first six months of 2014, net sales increased
approximately 7 percent to $16.9 million from $15.8 million in the first six months of 2013.
Chairman
and CEO Carmine T. Oliva noted that the surge in this year’s second quarter net sales generated the highest net sales level
in any second quarter since 2011. “The level of shipments in the Company’s Electronic Devices and Communications Equipment
segments increased 15 percent and 10 percent, respectively, in the 2014 second quarter, when compared to last year’s second
quarter, and both segments generated operating profits for the quarter,” Oliva said.
“In
addition, incoming orders in our Electronic Devices and Communications Equipment segments were strong during this
year’s second quarter and by the end of the quarter our total backlog had increased 22 percent to $31.5 million from
$25.9 million at the end of 2013, and 31 percent from $24.1 million at the end of the 2013 second quarter,” Oliva
added. He also said that as of June 30, 2014, the overall backlog was at its highest month-end level since 2008.
Oliva
noted that the process initiated by EMRISE
in the Fall of 2013 to determine a range of strategic opportunities to maximize stockholder value is progressing, and that
the process continues to be a priority of the Board and management.
EMRISE also
announced it recorded charges in the 2014 second quarter due to: 1) an accrual of approximately $362,000
for a charge to engineering and product development expense related to a repayment claim from the Direction Generale des Finances
Publiques in France for Research and Development grants awarded to the Company’s French subsidiary for the years 2009 to
2012 received in June 2014 and 2) an accrual of approximately $300,000 for a corporate charge related to an indemnity the
Company provided to the holders of the promissory notes originally issued in 2008. The Company had indemnified the former note
holders against increases in federal taxes on the capital gains arising on the redemption of the notes between 2008 and the date
of redemption. The potential sum claimed by the noteholders was advised in May 2014 based on their expressed tax position for
this year.
Electronic
Devices Segment
Net
sales of EMRISE’s Electronic Devices segment in the 2014 second quarter increased to $5.3 million from $4.6 million in
the prior year’s second quarter. For the first six months of 2014, net sales in the segment increased to $10.5 million
from $10.1 million in the first six months of 2013. Operating profit in the Electronic Devices
segment for the second quarter and first six months of 2014 was $432,000 and $610,000, respectively, compared to
$362,000 and $987,000 in the comparable periods of 2013.
The continuing
escalation of demand for the electronic devices produced by the Company’s UK subsidiaries and used in In-flight Entertainment
and Connectivity (IFE&C) systems is encouraging and the order rate for these products is expected to continue. There can be,
however, some uncertainty as to when customers may schedule delivery of these orders. In addition, sales of the Company’s
Radio Frequency products rebounded in the second quarter of this year as orders that were delayed in 2013 began to materialize.
Communications
Equipment Segment
Communications
Equipment net sales in the 2014 second quarter increased to $3.8 million from $3.5 million in the second quarter of 2013. For
the first six months of 2014, net sales in the segment increased to $6.4 million from $5.6 million in the first six months of
2013. Operating profit in the Communications Equipment segment for the second quarter and first six
months of 2014 was $33,000 and $55,000, respectively, compared to $322,000 and $66,000 in the comparable periods of 2013.
The Company’s
French communications equipment business unit constitutes the predominant part of this segment. Sales of the Company’s French
Network Access products have continued to provide a solid backlog of orders that translated into sales in this year’s second
quarter. This business is project driven and, therefore, by its nature difficult to trend against prior periods but the Company
continues to receive orders from regular customers and is witnessing increased demand from new buyers. The backlog remains substantially
higher than in previous years.
Operating
Loss (Income), One-Time Accruals, Net Loss
The
overall loss from operations in this year’s second quarter was $163,000, compared to income from operations in the second
quarter of 2013 of $75,000. For the first six months of 2014, the overall loss from operations was $818,000, compared to loss
from operations of $293,000 in the first six months of 2013. Included in loss from operations for 2014 is the estimated
accrual for the French Government’s R&D repayment claim.
Excluding
this specific accrual, the Company would have reported income from operations in this year’s second quarter of $102,000.
Net loss
for the second quarter of 2014 was $836,000, or $0.08 per basic and diluted share, compared to net loss for the 2013 second quarter
of $100,000, or $0.01 per basic and diluted share. Net loss for the first six months of 2014 was $1.6 million, or $0.15 per basic
and diluted share, compared to net loss for the first six months of 2013 of $628,000, or $0.06 per basic and diluted share. Net
loss of the 2014 second quarter and first six months includes the aforementioned estimated accruals for the charges related to
the French Government’s R&D repayment claim, as well as the estimated accrual of $300,000 related to the indemnity.
Excluding
the accruals for the R&D repayment claim and the indemnification, the net loss for the 2014 second quarter would have been
$174,000, or a loss per share of $0.02, and for the first six months of this year, net loss would have been $960,000, or a loss
per share of $0.09. This is a Non-GAAP financial measure as defined by SEC Regulation G.
Further
details related to the aforementioned accruals are included in EMRISE’s Quarterly Report on Form 10-Q for the period ended
June 30, 2014.
Gross
Margin, Balance Sheet Data, Adjusted EBITDA
The Company’s
overall gross margin in the second quarter of 2014 was 27.5 percent, compared to 31.2 percent in the prior year’s first
quarter. Overall gross margin in the first half of 2014 was 26.7 percent compared with 30.4 in the
comparable 2013 period. An increase in sales in both IFE&C and Radio Frequency products in the 2014 second quarter resulted
in a decline in gross margin percentage compared with prior periods because the sales and production mix favored engineering design
projects for customers rather than power system production contracts, which tend to yield higher gross margins. This has been
offset to some extent, by the strong gross margin for the Communications Equipment segment.
As of June
30, 2014, the Company’s cash and cash equivalents were $845,000, compared to cash and cash equivalents of $1.2 million on
December 31, 2013. Total assets were $26.3 million, total debt obligations were $6.9 million and stockholders’ equity was
$9.9 million at the end of the second quarter of 2014, compared to total assets of $26.5 million, total debt obligations were
$6.5 million and stockholders’ equity was $11.2 million at the end of 2013.
For the
2014 second quarter, Adjusted EBITDA was $(432,000) compared to Adjusted EBITDA of $209,000 in the second quarter of 2013. Adjusted
EBITDA for the first six months of this year was $(950,000), compared to Adjusted EBITDA of $58,000 in the first six months of
2013.
Non-GAAP
Financial Measures - Reconciliation of Non-GAAP Measures
This news
release includes a non-GAAP financial measure, as defined by SEC Regulation G, which management believes provide a meaningful
trend of operating performance, and measure of liquidity and the Company’s ability to service debt. The non-GAAP measure included
in this news release is Adjusted EBITDA. EMRISE defines Adjusted EBITDA as earnings before interest, taxes, depreciation and amortization,
non-cash stock compensation, asset impairments charges, and net other income, less net gain or loss on discontinued operations.
Reconciliation between net income (loss) and Adjusted EBITDA is provided in the financial tables at the end of this news release.
About
EMRISE Corporation
EMRISE designs,
manufactures and markets electronic devices, sub-systems and equipment for aerospace, defense, industrial and communications markets.
EMRISE products perform key functions such as power supply and power conversion; radio frequency (RF) and microwave signal processing;
and network access to public and private communications networks. The use of its network products in public and private, legacy
and latest Ethernet and Internet Protocol (IP) networks is a primary growth driver for the Company’s Communications Equipment
business units. The use of its power supplies, RF and microwave signal processing devices and subsystems in on-board In-Flight
Entertainment and Connectivity (IFE&C) systems is a primary growth driver for the Company’s Electronic Devices business units.
EMRISE serves the worldwide base of customers it has built in North America, Europe and Asia through operations in the United
States, England and France. For more information on EMRISE, go to www.emrise.com.
EMRISE
common stock trades under the symbol EMRI on OTCQB, the venture marketplace for companies that are current in their reporting
with a U.S. regulator. Investors can find Real-Time quotes and market information for EMRISE at www.otcmarkets.com.
Safe
Harbor Statement under the Private Securities Litigation Reform Act of 1995
With
the exception of historical information, certain matters discussed in this press release, including but not limited to the Company’s
belief that the continuing escalation
of demand for the electronic devices produced by the Company’s UK subsidiaries and used in In-flight Entertainment and Connectivity
(IFE&C) systems is encouraging and the order rate for these products is expected to continue; sales of the Company’s
Radio Frequency products rebounded in the second quarter of this year as orders that were delayed in 2013 began to materialize;
the Company continues to receive orders from regular customers for its French Network Access products and is witnessing increased
demand from new buyers; and other future-oriented matters are all forward looking statements within the meaning of the Private
Securities Litigation Reform Act. The actual future results of EMRISE could differ materially from those statements. Factors that
could cause or contribute to such differences include, but are not limited to: failure to meet working capital needs that causes
supply interruptions or delays in shipments to customers; cost reductions that do not result in the anticipated level of cost
savings; whether the Company can meet its term debt obligations; whether global economic conditions will have a further negative
impact on the Company’s sales and/or, overall operations; the impact on the Company’s consolidated results of fluctuations
in currency exchange rate of the U.S. dollar against the British Pound Sterling and the Euro; inability
to develop new products; unexpected costs, cost increases or lack of expected savings that affect the future profitability of
EMRISE; or unexpected delays which prevent timely shipment of current or future orders as expected. The Company also refers you
to those factors contained in the “Risk Factors” section of EMRISE’s Annual Report on Form 10-K for the year ended December
31, 2013, the Company’s Quarterly Reports on Form 10-Q, its recent Current Reports on Form 8-K, and other EMRISE filings
with the SEC.
TABLES
FOLLOW
EMRISE
CORPORATION
Condensed
Consolidated Statements of Comprehensive Income (Loss)
(in
thousands, except per share amounts)
| |
|
Three
Months Ended |
|
|
Six
Months Ended |
|
| |
|
June 30, |
|
|
June 30, |
|
| |
|
2014 |
|
|
2013 |
|
|
2014 |
|
|
2013 |
|
| Net
sales |
|
$ |
9,134 |
|
|
$ |
8,097 |
|
|
$ |
16,892 |
|
|
$ |
15,788 |
|
| Cost
of sales |
|
|
6,625 |
|
|
|
5,570 |
|
|
|
12,382 |
|
|
|
10,984 |
|
| Gross
profit |
|
|
2,509 |
|
|
|
2,527 |
|
|
|
4,510 |
|
|
|
4,804 |
|
| Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Selling,
general and administrative |
|
|
2,106 |
|
|
|
2,128 |
|
|
|
4,447 |
|
|
|
4,478 |
|
| Engineering
and product development |
|
|
566 |
|
|
|
324 |
|
|
|
881 |
|
|
|
619 |
|
| Total
operating expenses |
|
|
2,672 |
|
|
|
2,452 |
|
|
|
5,328 |
|
|
|
5,097 |
|
| (Loss)/Income
from operations |
|
|
(163 |
) |
|
|
75 |
|
|
|
(818 |
) |
|
|
(293 |
) |
| Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Interest
income |
|
|
43 |
|
|
|
23 |
|
|
|
77 |
|
|
|
44 |
|
| Interest
expense |
|
|
(155 |
) |
|
|
(136 |
) |
|
|
(290 |
) |
|
|
(254 |
) |
| Other
finance expense, net |
|
|
(421 |
) |
|
|
4 |
|
|
|
(429 |
) |
|
|
107 |
|
| Total
other expense, net |
|
|
(533 |
) |
|
|
(109 |
) |
|
|
(642 |
) |
|
|
(103 |
) |
| Loss
before income taxes |
|
|
(696 |
) |
|
|
(34 |
) |
|
|
(1,460 |
) |
|
|
(396 |
) |
| Income
tax expense |
|
|
140 |
|
|
|
66 |
|
|
|
162 |
|
|
|
232 |
|
| Net
loss |
|
$ |
(836 |
) |
|
$ |
(100 |
) |
|
$ |
(1,622 |
) |
|
$ |
(628 |
) |
| Foreign
currency translation adjustment |
|
$ |
293 |
|
|
$ |
(13 |
) |
|
$ |
391 |
|
|
$ |
(702 |
) |
| Comprehensive
Loss |
|
$ |
(543 |
) |
|
$ |
(113 |
) |
|
$ |
(1,231 |
) |
|
$ |
(1,330 |
) |
| Weighted
average shares outstanding |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Basic
and diluted |
|
|
10,720 |
|
|
|
10,698 |
|
|
|
10,717 |
|
|
|
10,698 |
|
| Loss
per share –Basic and diluted |
|
|
(0.08 |
) |
|
|
(0.01 |
) |
|
|
(0.15 |
) |
|
|
(0.06 |
) |
EMRISE
CORPORATION
Condensed
Consolidated Balance Sheets
(in
thousands, except per share amounts)
| |
|
June
30, 2014 |
|
|
December
31, 2013 |
|
| |
|
(unaudited) |
|
|
|
|
| ASSETS |
|
|
|
|
|
|
|
|
| Current assets: |
|
|
|
|
|
|
|
|
| Cash
and cash equivalents |
|
$ |
845 |
|
|
$ |
1,170 |
|
| Accounts
receivable, net of allowances for doubtful accounts of $70 at June 30, 2014 and $70 at December 31, 2013 |
|
|
6,747 |
|
|
|
7,435 |
|
| Inventories |
|
|
7,010 |
|
|
|
6,357 |
|
| Current
deferred tax assets |
|
|
8 |
|
|
|
46 |
|
| Prepaid
and other current assets |
|
|
1,175 |
|
|
|
897 |
|
| Total
current assets |
|
|
15,785 |
|
|
|
15,905 |
|
| Property, plant
and equipment, net |
|
|
4,567 |
|
|
|
4,475 |
|
| Goodwill |
|
|
5,453 |
|
|
|
5,283 |
|
| Intangible assets
other than goodwill, net |
|
|
402 |
|
|
|
457 |
|
| Deferred tax assets |
|
|
33 |
|
|
|
53 |
|
| Other
assets |
|
|
98 |
|
|
|
286 |
|
| Total
assets |
|
$ |
26,338 |
|
|
$ |
26,459 |
|
| LIABILITIES
AND STOCKHOLDERS’ EQUITY |
|
|
|
|
|
|
|
|
| Current liabilities: |
|
|
|
|
|
|
|
|
| Accounts
payable |
|
$ |
3,182 |
|
|
$ |
3,201 |
|
| Accrued
expenses |
|
|
4,827 |
|
|
|
4,259 |
|
| Lines
of credit |
|
|
2,066 |
|
|
|
1,196 |
|
| Current
portion of long-term debt |
|
|
808 |
|
|
|
2,672 |
|
| Income
taxes payable |
|
|
7 |
|
|
|
36 |
|
| Other
current liabilities |
|
|
333 |
|
|
|
261 |
|
| Total
current liabilities |
|
|
11,223 |
|
|
|
11,625 |
|
| Long-term debt |
|
|
3,989 |
|
|
|
2,664 |
|
| Deferred income
taxes |
|
|
18 |
|
|
|
17 |
|
| Other
liabilities |
|
|
1,168 |
|
|
|
992 |
|
| Total
liabilities |
|
|
16,398 |
|
|
|
15,298 |
|
| Commitments and
contingencies |
|
|
— |
|
|
|
— |
|
| Stockholders’
equity: |
|
|
|
|
|
|
|
|
| Preferred
stock, $0.01 par value. Authorized 10,000,000 shares; no shares issued and outstanding |
|
|
— |
|
|
|
— |
|
| Common
stock, $0.0033 par value. Authorized 75,000,000 shares; 10,725,337 and 10,719,337 issued and outstanding at June 30, 2014
and December 31, 2013, respectively. |
|
|
128 |
|
|
|
128 |
|
| Additional
paid-in capital |
|
|
44,215 |
|
|
|
44,205 |
|
| Accumulated
deficit |
|
|
(33,546 |
) |
|
|
(31,924 |
) |
| Accumulated
other comprehensive loss |
|
|
(857 |
) |
|
|
(1,248 |
) |
| Total
stockholders’ equity |
|
|
9,940 |
|
|
|
11,161 |
|
| Total
liabilities and stockholders’ equity |
|
$ |
26,338 |
|
|
$ |
26,459 |
|
Reconciliation
of Adjusted EBITDA to Net Loss
(Unaudited,
in thousands)
| | |
Three Months Ended
June 30, | | |
Six Months Ended
June 30, | |
| ($000s) | |
2014 | | |
2013 | | |
2014 | | |
2013 | |
| Net (Loss) Income from continuing operations | |
$ | (836 | ) | |
$ | (100 | ) | |
$ | (1,622 | ) | |
$ | (628 | ) |
| Stock based compensation | |
| 5 | | |
| 7 | | |
| 10 | | |
| 7 | |
| Interest income | |
| (43 | ) | |
| (23 | ) | |
| (77 | ) | |
| (44 | ) |
| Interest expense | |
| 155 | | |
| 136 | | |
| 290 | | |
| 254 | |
| Other, net | |
| _ | | |
| _ | | |
| _ | | |
| _ | |
| Depreciation & Amortization | |
| 147 | | |
| 123 | | |
| 287 | | |
| 237 | |
| Tax provision | |
| 140 | | |
| 66 | | |
| 162 | | |
| 232 | |
| ADJUSTED EBITDA | |
$ | (432 | ) | |
$ | 209 | | |
$ | (950 | ) | |
$ | 58 | |
Use
of Non-GAAP Financial Measures In evaluating its business,
EMRISE considers and uses Adjusted EBITDA as a supplemental measure of its operating performance. The Company defines Adjusted
EBITDA as earnings before interest, taxes, depreciation and amortization, non-cash stock compensation, and net other income, less
net income or loss on discontinued operations. Management believes that Adjusted EBITDA is a meaningful measure of liquidity and
the Company’s ability to service debt because it provides a measure of cash available for such purposes. Management provides an
Adjusted EBITDA measure so that investors will have the same financial information that management uses with the belief that it
will assist investors in properly assessing the Company’s performance on a period-over-period basis.
The term
Adjusted EBITDA is not defined under GAAP, and is not a measure of operating income, operating performance or liquidity presented
in accordance with GAAP. Adjusted EBITDA has limitations as an analytical tool, and when assessing EMRISE’s operating performance,
investors should not consider Adjusted EBITDA in isolation, or as a substitute for net income (loss) or other consolidated income
statement data prepared in accordance with GAAP. Other companies may calculate similar measures differently than EMRISE, limiting
their usefulness as comparative tools. EMRISE compensates for these limitations by relying primarily on its GAAP results and using
Adjusted EBITDA only supplementally.
#
# # #