Quarterly Report (10-q)

Date : 02/13/2019 @ 10:10PM
Source : Edgar (US Regulatory)
Stock : Arc Grp. Worldwide, Inc. (ARCW)
Quote : 0.25  0.0 (0.00%) @ 1:00AM

Quarterly Report (10-q)

 

 

 

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10 - Q

 

QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended December 30, 2018

 

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to _______

 

PICTURE 1

 

ARC Group Worldwide, Inc.

(Exact name of registrant as specified in its charter)

 

Utah

(State or other jurisdiction of incorporation or organization)

 

 

 

 

001-33400

    

87-0454148

(Commission File Number)

 

(I.R.S. Employer Identification Number)

 

810 Flightline Blvd.

Deland, FL 32724

(Address of principal executive offices including zip code)

 

(303) 467-5236

(Registrant’s telephone number, including area code)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).  Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

 

 

 

 

Large accelerated filer ☐

 

Accelerated filer ☐

 

 

 

Non-accelerated filer ☒ 

 

Smaller reporting company ☒

 

Emerging growth company ☐

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ☒

 

As of February 13, 2019, the Registrant had 23,349,478 shares outstanding of its $.0005 par value common stock.

 

 

 


 

 

ARC Group Worldwide, Inc.

 

Table of Contents

 

 

 

 

 

PART I. FINANCIAL INFORMATION  

 

 

 

 

    

 

Item 1.  

Financial Statements

 

3

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Operations for the Three and Six Months Ended December 30, 2018 and December 31, 2017

 

3

 

 

 

 

 

Unaudited Condensed Consolidated Balance Sheets as of December 30, 2018 and June 30, 2018

 

4

 

 

 

 

 

Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended December 30, 2018 and December 31, 2017

 

5

 

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

 

6

 

 

 

 

Item 2.  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

18

 

 

 

 

Item 3.  

Quantitative and Qualitative Disclosures About Market Risk

 

26

 

 

 

 

Item 4.  

Controls and Procedures

 

26

 

 

 

 

PART II. OTHER INFORMATION  

 

 

 

 

 

 

Item 1A.  

Risk Factors

 

28

 

 

 

 

Item 6.  

Exhibits

 

29

 

 

 

 

SIGNATURES  

 

29

 

 

 


 

PART I — FINANCIAL INFORMATIO N

 

ITEM 1.  FINANCIAL STATEMENT S

 

ARC Group Worldwide, Inc.

Unaudited Condensed Consolidated Statements of Operation s

(in thousands, except for share and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

For the six months ended

 

 

December 30,

 

December 31,

 

December 30,

 

December 31,

 

    

2018

    

2017

    

2018

    

2017

Sales

 

$

20,907

 

$

17,428

 

$

41,473

 

$

36,514

Cost of sales

 

 

19,415

 

 

17,725

 

 

36,872

 

 

35,619

Gross profit

 

 

1,492

 

 

(297)

 

 

4,601

 

 

895

Selling, general and administrative

 

 

3,345

 

 

3,357

 

 

6,479

 

 

6,671

Loss from operations

 

 

(1,853)

 

 

(3,654)

 

 

(1,878)

 

 

(5,776)

Other income (expense), net

 

 

64

 

 

165

 

 

90

 

 

129

Interest expense, net

 

 

(898)

 

 

(912)

 

 

(1,829)

 

 

(1,889)

Loss before income taxes

 

 

(2,687)

 

 

(4,401)

 

 

(3,617)

 

 

(7,536)

Income tax benefit (expense)

 

 

(33)

 

 

366

 

 

(68)

 

 

194

Net loss from continuing operations

 

 

(2,720)

 

 

(4,035)

 

 

(3,685)

 

 

(7,342)

Loss on sale of subsidiaries and loss from discontinued operations, net of tax

 

 

(822)

 

 

(287)

 

 

(1,554)

 

 

(534)

Net loss

 

$

(3,542)

 

$

(4,322)

 

$

(5,239)

 

$

(7,876)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share, basic and diluted:

 

 

 

 

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.12)

 

$

(0.22)

 

$

(0.16)

 

$

(0.40)

Discontinued operations

 

$

(0.03)

 

$

(0.02)

 

$

(0.06)

 

$

(0.03)

ARC Group Worldwide, Inc.

 

$

(0.15)

 

$

(0.24)

 

$

(0.22)

 

$

(0.43)

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

23,349,478

 

 

18,265,323

 

 

23,343,044

 

 

18,229,320

 

See accompanying notes to the unaudited condensed consolidated financial statements.

3


 

ARC Group Worldwide, Inc.

Unaudited Condensed Consolidated Balance Sheet s

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

December 30, 2018

    

June 30, 2018

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash

 

$

249

 

$

365

 

Accounts receivable, net

 

 

10,044

 

 

11,103

 

Inventories, net

 

 

14,815

 

 

12,102

 

Prepaid expenses and other current assets

 

 

1,105

 

 

2,781

 

Current assets of discontinued operations

 

 

3,444

 

 

547

 

Total current assets

 

 

29,657

 

 

26,898

 

Property and equipment, net

 

 

36,067

 

 

36,879

 

Goodwill

 

 

6,412

 

 

6,412

 

Intangible assets, net

 

 

14,582

 

 

16,270

 

Other

 

 

353

 

 

347

 

Long-term assets of discontinued operations

 

 

 —

 

 

3,127

 

Total assets

 

$

87,071

 

$

89,933

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

11,050

 

$

11,345

 

Accrued expenses and other current liabilities

 

 

2,121

 

 

2,000

 

Deferred revenue

 

 

561

 

 

825

 

Bank borrowings, current portion of long-term debt

 

 

1,704

 

 

1,721

 

Capital lease obligations, current portion

 

 

1,278

 

 

456

 

Accrued escrow obligations, current portion

 

 

776

 

 

943

 

Current liabilities of discontinued operations

 

 

1,364

 

 

1,422

 

Total current liabilities

 

 

18,854

 

 

18,712

 

Long-term debt, net of current portion

 

 

38,892

 

 

37,013

 

Capital lease obligations, net of current portion

 

 

1,273

 

 

617

 

Other long-term liabilities

 

 

967

 

 

965

 

Long-term liabilities of discontinued operations

 

 

 —

 

 

462

 

Total liabilities

 

 

59,986

 

 

57,769

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 2,000,000 shares authorized, no shares issued and outstanding

 

 

 —

 

 

 —

 

Common stock, $0.0005 par value, 250,000,000 shares authorized; 23,357,879 shares issued and 23,349,478 shares issued and outstanding at December 30, 2018, and 23,324,316 shares issued and 23,315,915 shares issued and outstanding at June 30, 2018

 

 

12

 

 

12

 

Treasury stock, at cost; 8,401 shares at December 30, 2018 and June 30, 2018

 

 

(94)

 

 

(94)

 

Additional paid-in capital

 

 

42,027

 

 

41,829

 

Accumulated deficit

 

 

(14,866)

 

 

(9,627)

 

Accumulated other comprehensive income

 

 

 6

 

 

44

 

Total stockholders'equity

 

 

27,085

 

 

32,164

 

Total liabilities and stockholders' equity

 

$

87,071

 

$

89,933

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

4


 

ARC Group Worldwide, Inc.

Unaudited Condensed Consolidated Statements of Cash Flow s

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

For the six months ended

 

 

    

December 30, 2018

    

December 31, 2017

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net loss

 

$

(5,239)

 

$

(7,876)

 

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

5,468

 

 

5,051

 

Share-based compensation expense

 

 

199

 

 

397

 

Loss on sale of asset

 

 

34

 

 

 —

 

Loss on sale of subsidiaries

 

 

 —

 

 

109

 

Bad debt expense and other

 

 

59

 

 

84

 

Changes in working capital:

 

 

 

 

 

 

 

Accounts receivable

 

 

986

 

 

(137)

 

Inventory

 

 

(2,706)

 

 

(138)

 

Prepaid expenses and other assets

 

 

1,897

 

 

609

 

Accounts payable

 

 

(227)

 

 

1,486

 

Accrued expenses and other current liabilities

 

 

(18)

 

 

(1,472)

 

Deferred revenue

 

 

(265)

 

 

222

 

Net cash provided by (used in) operating activities

 

 

188

 

 

(1,665)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(760)

 

 

(1,500)

 

Proceeds from sale of subsidiary

 

 

 —

 

 

3,000

 

Net cash (used in) provided by investing activities

 

 

(760)

 

 

1,500

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from debt issuance

 

 

38,417

 

 

49,533

 

Repayments of long-term debt and capital lease obligations

 

 

(37,858)

 

 

(50,040)

 

Issuance of common stock under employee stock purchase plan and exercise of stock options

 

 

 —

 

 

155

 

Net cash provided by (used in) financing activities

 

 

559

 

 

(352)

 

Effect of exchange rates on cash

 

 

(103)

 

 

311

 

Net decrease in cash

 

 

(116)

 

 

(206)

 

Cash, beginning of period

 

 

365

 

 

593

 

Cash, end of period

 

$

249

 

$

387

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

Cash paid for interest

 

$

1,052

 

$

1,244

 

Cash paid for income taxes, net of refunds

 

$

87

 

$

48

 

 

See accompanying notes to the unaudited condensed consolidated financial statements.

5


 

ARC Group Worldwide, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

NOTE 1 – Nature of Operations and Basis of Presentation

 

Nature of Operations

 

ARC Group Worldwide, Inc. (the “Company” or “ARC”) is a global advanced manufacturer offering a full suite of products and services to our customers, with specific expertise in metal injection molding (“MIM”).  To further advance and support our core capabilities, the Company also offers complementary services including: (i) precision metal stamping; (ii) traditional and clean room plastic injection molding; and (iii) advanced rapid and conformal tooling.  Through its diverse product offering, the Company provides its customers with a holistic prototyping and full-run production solution for both precision metal and plastic fabrication.  The Company further differentiates itself from its competitors by providing innovative, custom capabilities that improve high-precision manufacturing efficiency and speed-to-market for its customers.

 

Basis of Presentation

 

The Company’s fiscal year begins July 1 and ends June 30, and the quarters for interim reporting consist of thirteen weeks; therefore, the quarter end will not always coincide with the date of the calendar month-end.

 

The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”).  In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments necessary for a fair presentation of its financial position and results of operations.  Interim results of operations are not necessarily indicative of the results that may be achieved for the full year.  The consolidated balance sheet as of June 30, 2018, was derived from the audited financial statements as of that date, but does not include all disclosures, including notes required by GAAP.  As such, this quarterly report should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2018.  The Company follows the same accounting policies for preparing quarterly and annual reports.  

 

Principles of Consolidation

 

The unaudited condensed consolidated financial statements include the accounts of ARC and its controlled subsidiaries.  All material intercompany transactions have been eliminated in consolidation.

 

Correction of Immaterial Errors

 

In the first quarter of fiscal year 2019, the Company's management determined that there was an error with respect to the recording of the full cost absorption adjustment for inventory.  The Company assessed the materiality of the misstatement both quantitatively and qualitatively and determined that the error was immaterial to all prior consolidated financial statements taken as a whole. Accordingly, prior period amounts have not been adjusted to reflect the correction of the error.  The correction resulted in an increase in gross profit for the six months ended December 30, 2018 of $1.0 million.  All statement of operations totals following were also impacted by the increase.

 

 

NOTE 2 – Significant Accounting Policies

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenue and expenses during the reporting period.  Due to the inherent uncertainties in making estimates, actual results could differ from those estimates and such differences may be material to the consolidated financial statements.

6


 

 

Comprehensive Income (Loss)

 

For each of the quarters ended December 30, 2018 and December 31, 2017, there were no material differences between net income (loss) and comprehensive income (loss).

 

Accounting Pronouncements Adopted in the Current Period 

 

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers: Topic 606 (“ASU 2014-09”), to supersede nearly all existing revenue recognition guidance under GAAP.  The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services.  ASU 2014-09 defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing GAAP including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.  In August 2015, the FASB issued ASU 2015-14 which defers the effective date for one year beyond the originally specified effective date.  ASU 2014-09 is effective in the Company’s first quarter of fiscal 2019 and may transition to the standard using either the full retrospective approach or retrospectively with a cumulative effect of initially applying the amendments recognized at the date of initial application.   The Company has adopted ASU 2014-09 as of July 1, 2018 and no cumulative effect of the adoption recognized.  We obtained an understanding of the new standard and determined that the Company will retain much of the same accounting treatment used to recognize revenue as compared to current standards. See below for the Company’s updated revenue recognition policy.

 

Revenue Recognition

 

On January 1, 2018, the Company adopted Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers and all the related amendments (the “new revenue standard”) with respect to all contracts using the modified retrospective method. As a majority of the Company’s sales revenue continues to be recognized when products are shipped from its manufacturing facility, and there was no change in the recognition model historically applied to contracts with customers under the new revenue standard, there was no adjustment to the opening balance of retained earnings.  The impact to the Company’s results of operations is not expected to be material, on an on-going basis, because the analysis of the Company’s contracts under the new revenue standard supports a recognition model consistent with the Company’s current revenue recognition model.

Product revenues are primarily generated from the sale and MIM and related products. Revenue is recognized when i) persuasive evidence of an arrangement exists, ii) delivery has occurred, iii) the sales price is fixed or determinable, iv) collection is probable and v) all obligations have been substantially performed pursuant to the terms of the arrangement.

 

Deferred revenue consists of customer deposits for the development of the tooling part component for the purpose of manufacturing the assembly part.  However, as this does not trigger any income as no products have changed hands and this is done more as a collectability measure with the Customer, no other actions other than recording the deposit occur at the time of the transaction.  The Company recognizes revenue and the related expenses when the customer approves and accepts delivery the tooling part component, which is the time when the performance obligation of providing product to the customer occurs.  Costs incurred related to tooling part components in the process of being developed are deferred and are included as a current assets on the balance sheet.

In regards to the assembly parts, revenue is recognized when the assembly parts are shipped at the Company’s loading dock, which is when the customer takes control of the goods and the performance obligation is satisfied.  

We did not record any adjustments to our financial statements as part of the adoption of ASU 2014-09.

 

The Company reported segment disclosures at Note 12, whch presents disaggregated revenue information for financial reporting purposes.

 

7


 

Recent Accounting Pronouncements

 

In February 2016, the FASB issued ASU No. 2016-02, Leases: Topic 842 (“ASU 2016-02”), to supersede nearly all existing lease guidance under GAAP.  ASU 2016-02 requires the recognition of lease assets and lease liabilities on the balance sheet by lessees for those leases currently classified as operating leases.  ASU 2016-02 also requires qualitative disclosures along with specific quantitative disclosures and is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years.  Early application is permitted.  Entities are required to apply the amendments at the beginning of the earliest period presented using a modified retrospective approach.  We are evaluating additional changes to our processes and internal controls to ensure we meet the standard’s reporting and disclosure requirements. While we continue to evaluate the effect of the standard on our consolidated financial statements, the adoption of the ASU will result in the recognition of a right of use asset and related liability with an estimated immaterial effect to our retained earnings.  The Company is evaluating the requirements of this guidance and has not yet determined the impact of the adoption on its consolidated financial position, results of operations and cash flows; however, the Company’s operating lease commitments are disclosed in Note 12, Commitments and Contingencies, of the Company’s Form 10-K for the fiscal year ended June 30, 2018. 

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses Topic 326 (“ASU 2016-13”), which requires entities to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses.  ASU 2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within that year.  Early adoption is permitted.  The adoption of ASU 2016-03 is not expected to have a material effect on the Company’s consolidated financial statements.

 

In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other: Topic 350 (“ASU 2017-04”), which eliminates Step 2 from the goodwill impairment test.  The annual, or interim, goodwill impairment test is performed by comparing fair value of a reporting unit with its carrying amount.  An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.  ASU 2017-04 also eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative step, to perform Step 2 of the goodwill impairment test. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary.  ASU 2017-04 is effective for all public businesses that are SEC filers for annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019.  The Company is currently evaluating the impact of ASU 2017-04 on the financial statements.  There was no impairment noted during six months ended December 30, 2018, but the Company expects that this standard will impact the financial statements if an impairment is indicated. 

 

 

NOTE 3 – Divestitures

 

General Flange & Forge LLC (“GF&F”)

 

On September 15, 2017, the Company sold substantially all of the assets of GF&F to GFFC Holdings, LLC (“GFFC”) for $3.0 million in cash.  GFFC is owned, in part, by Quadrant Management Inc., which is an affiliate of the Company.  The sale of GF&F was therefore a related party transaction.  The GF&F sale was made pursuant to an industry-wide auction undertaken on behalf of the Company by a registered investment banking organization that managed the sale process with prospective bidders.  GFFC entered into the bidding for the GF&F assets only after the first rounds of the auction indicated uncertainty both in respect to the timing for closing any prospective sale and achieving the Company’s valuation objectives.  Mr. Alan Quasha, CEO of Quadrant Management Inc. and Chairman of the Company’s Board of Directors, recused himself from any deliberations or voting by the Board of Directors in respect of the sale of the GF&F assets to GFFC.  The Board of Directors appointed a special committee consisting solely of independent directors to oversee and negotiate the sale process.  The special committee engaged its own independent legal counsel to advise the special committee in respect of the drafting of the asset sale agreement and ancillary transaction documents in accordance with customary terms and conditions for transactions of this type.  In this manner, the special committee was able to conclude that the sale price and the terms and conditions for the transaction were superior to any other offers, as well as fair and reasonable to the Company and its shareholders.

 

8


 

Below is a summary of the loss on sale of discontinued operations (in thousands):

 

 

 

 

 

Gross proceeds

 

$

3,000

 

 

 

 

Less:

 

 

 

Property and equipment, net

 

 

181

Accounts receivable

 

 

561

Inventory

 

 

882

Other current assets

 

 

42

Accounts payable and accrued expenses

 

 

(269)

Total net assets disposed

 

 

1,397

 

 

 

 

Goodwill

 

 

1,712

Transaction costs

 

 

394

Loss on sale of discontinued operations, before income taxes

 

$

(503)

 

The condensed consolidated statement of operations for the three and six months ended December 31, 2017, includes the results of operations of GF&F through the sale date of September 15, 2017 and the loss on the sale of GF&F.  Financial information for discontinued operations for the three and six months ended December 30, 2018 and December 31, 2017 is as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

For the six months ended

 

 

December 30, 2018

 

December 31, 2017

 

December 30, 2018

 

December 31, 2017

Sales

 

$

 —

 

$

 -

 

$

 —

 

$

726

Cost of sales

 

 

 —

 

 

 -

 

 

 —

 

 

(615)

Gross profit

 

 

 —

 

 

 -

 

 

 —

 

 

111

Selling, general and administrative

 

 

 —

 

 

 -

 

 

 —

 

 

(108)

Income from discontinued operations, before income taxes

 

 

 —

 

 

 -

 

 

 —

 

 

 3

Loss on sale of discontinued operations

 

 

 —

 

 

(21)

 

 

 —

 

 

(503)

Total (loss) income from discontinued operations, before income taxes

 

 

 —

 

 

(21)

 

 

 —

 

 

(500)

Income tax benefit on discontinued operations

 

 

 —

 

 

15

 

 

 —

 

 

224

Income (loss) from discontinued operations, net of tax

 

$

 —

 

$

(6)

 

$

 —

 

$

(276)

 

Cash flows from GF&F for the three months ended December 31, 2017 are combined with the cash flows from operations within each of the categories presented on the condensed consolidated statements of cash flows. 

 

3D Material Technologies (“3DMT”)

 

On July 25, 2018, the Board of Directors voted to sell its 3DMT division.  The Company is currently actively seeking a buyer for 3DMT while still operating until the sale. 

 

The condensed consolidated statements of operations for the three months ended December 30, 2018 and December 31, 2017, respectively, include the results of operations of 3DMT disclosed as discontinued operations.  Financial

9


 

information for discontinued operations for the three and six months ended December 30, 2018 and December 31, 2017 are as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

For the six months ended

 

 

December 30, 2018

 

December 31, 2017

 

December 30, 2018

 

December 31, 2017

Sales

 

$

332

 

$

926

 

$

668

 

$

1,790

Cost of sales

 

 

(893)

 

 

(998)

 

 

(1,791)

 

 

(1,632)

Gross profit

 

 

(561)

 

 

(72)

 

 

(1,123)

 

 

158

Selling, general and administrative

 

 

(244)

 

 

(196)

 

 

(402)

 

 

(367)

Loss from discontinued operations, before income taxes

 

 

(805)

 

 

(268)

 

 

(1,525)

 

 

(209)

Interest expense

 

 

(17)

 

 

(15)

 

 

(29)

 

 

(51)

Other expense, net

 

 

 —

 

 

 2

 

 

 —

 

 

 2

Total income (loss) from discontinued operations, before income taxes

 

 

(822)

 

 

(281)

 

 

(1,554)

 

 

 (258)

Income tax benefit on discontinued operations

 

 

 —

 

 

 —

 

 

 —

 

 

 —

Loss from discontinued operations, net of tax

 

$

(822)

 

$

(281)

 

$

(1,554)

 

$

(258)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The condensed consolidated balance sheets for December 30, 2018 and June 30, 2018 include assets related to discontinued operations as follows (in thousands):

 

 

 

 

 

 

 

 

December 30, 2018

 

June 30, 2018

Current assets:

 

 

 

 

 

Accounts receivable, net

$

162

 

$

148

Inventories, net

 

219

 

 

225

Prepaid expenses and other current assets

 

105

 

 

174

Property and equipment, net

 

2,932

 

 

 —

Other assets

 

26

 

 

 —

Total current assets

 

3,444

 

 

547

Property and equipment, net

 

 —

 

 

3,101

Other Assets

 

 —

 

 

26

Total assets of discontinued operations

$

3,444

 

$

3,674

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable and accrued expenses

$

543

 

$

449

Capital lease obligations, current portion

 

821

 

 

973

Total current liabilities

 

1,364

 

 

1,422

Capital lease obligations, net of current portion

 

 —

 

 

462

Total liabilities of discontinued operations

$

1,364

 

$

1,884

 

 

 

 

 

 

 

The Company did not reclassify its Statements of Cash Flows to reflect the various discontinued operations.  Cash flows from 3DMT for the six months ended December 30, 2018 and December 31, 2017 are combined within each of the categories presented.    

 

 

 

 

 

 

 

 

 

 

December 30, 2018

 

December 31, 2017

Net Cash Used in Operating Activities

 

$

1,230

 

$

111

Net Cash Used in Investing Activities

 

 

 —

 

 

 5

Net Cash Used in Financing Activities

 

 

613

 

 

553

 

10


 

 

NOTE 4– Inventory

 

Inventories consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

December 30, 2018

    

June 30, 2018

 

Raw materials and supplies

 

$

5,370

 

$

5,414

 

Work-in-process

 

 

7,124

 

 

5,907

 

Finished goods

 

 

3,811

 

 

3,144

 

 

 

 

16,305

 

 

14,465

 

Reserve for obsolescence

 

 

(1,271)

 

 

(2,138)

 

Inventory of discontinued operations

 

 

(219)

 

 

(225)

 

 

 

$

14,815

 

$

12,102

 

 

The Company increased its inventory in the six months ended December 30, 2018 as compared to June 30, 2018.  This was primarily due to the increase of inventory at the ARC CO facility as a part of the process to drive down past due customer orders.    

 

NOTE 5 – Property and Equipment

 

Property and equipment consisted of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciable Life

 

December 30,

 

June 30,

 

 

    

(in years)

    

2018

    

2018

 

Land

 

 

 

 

$

1,264

 

$

1,264

 

Building and improvements

 

7

-

40

 

 

18,259

 

 

18,188

 

Machinery and equipment

 

3

-

12

 

 

45,134

 

 

42,899

 

Office furniture and equipment

 

3

-

10

 

 

1,634

 

 

1,267

 

Construction-in-process

 

 

 

 

 

1,221

 

 

2,735

 

Assets acquired under capital lease

 

 

 

 

 

 

5,304

 

 

3,910

 

 

 

 

 

 

 

 

72,816

 

 

70,263

 

Accumulated depreciation

 

 

 

 

 

 

(35,203)

 

 

(32,124)

 

Accumulated amortization on capital leases

 

 

 

 

 

 

(1,546)

 

 

(1,260)

 

 

 

 

 

 

 

$

36,067

 

$

36,879

 

 

Depreciation expense totaled $1.8 million and $1.5 million for the three months ended December 30, 2018 and December 31, 2017, respectively, and $3. 4 million and $3.0 million for the six months ended December 30, 2018 and December 31, 2017, respectively.

 

NOTE 6 – Goodwill and Intangible Assets

 

Goodwill

 

Total goodwill of $6.4 million is assigned to the Company’s Precision Components Group.  The Company performs a goodwill impairment assessment on at least an annual basis.  The Company conducts its annual goodwill impairment assessment during the fourth quarter, or more frequently, if indicators of impairment exist.  During the fiscal quarter ended December 30, 2018, the Company assessed whether any such indicators of impairment existed and concluded there were none.

 

11


 

Intangible Assets

 

The following table summarizes the Company's intangible assets (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of December 30, 2018

 

As of June 30, 2018

 

 

 

Gross

 

 

 

 

 

 

 

Gross

 

 

 

 

 

 

 

 

 

Carrying

 

Accumulated

 

Net Carrying

 

Carrying

 

Accumulated

 

Net Carrying

 

Intangible assets:

    

Amount

    

Amortization

    

Amount

     

Amount

    

Amortization

    

Amount

 

Patents and tradenames

 

$

3,418

 

 

(1,059)

 

$

2,359

 

$

3,418

 

$

(945)

 

$

2,473

 

Customer relationships

 

 

24,077

 

 

(12,048)

 

 

12,029

 

 

24,077

 

 

(10,838)

 

 

13,239

 

Non-compete agreements

 

 

3,654

 

 

(3,460)

 

 

194

 

 

3,654

 

 

(3,096)

 

 

558

 

Total

 

$

31,149

 

$

(16,567)

 

$

14,582

 

$

31,149

 

$

(14,879)

 

$

16,270

 

 

Intangible assets are amortized using the straight-line method over estimated useful lives ranging from five to fifteen years.  Amortization expense for identifiable intangible assets totaled $0.8 million for the three months ended December 30, 2018 and December 31, 2017, and $1.7 million for the six months ended December 30, 2018 and December 31, 2017.  Estimated future amortization expense for the next five years as of December 30 is as follows (in thousands):

 

 

 

 

 

 

Fiscal Years

    

Amount

 

2019

 

$

1,504

 

2020

 

 

2,636

 

2021

 

 

2,636

 

2022

 

 

2,636

 

2023

 

 

2,636

 

Thereafter

 

 

2,534

 

Total

 

$

14,582

 

 

There were no impairments of long-lived assets during the three and six months ended December 30, 2018 and December 31, 2017.

 

NOTE 7 – Debt

 

Long-term debt payable consists of the following (in thousands):

 

 

 

 

 

 

 

 

 

 

Balance as of

 

 

    

December 30, 2018

    

June 30, 2018

 

Senior secured revolving loan

 

$

8,268

 

$

5,692

 

Senior secured mortgage-based term loans

 

 

17,893

 

 

18,765

 

Subordinated term loan

 

 

15,000

 

 

15,000

 

Total debt

 

 

41,161

 

 

39,457

 

Unamortized deferred financing costs

 

 

(565)

 

 

(723)

 

Total debt, net

 

 

40,596

 

 

38,734

 

Current portion of long-term debt, net of unamortized deferred financing costs

 

 

(1,704)

 

 

(1,721)

 

Long-term debt, net of current portion and unamortized deferred financing costs

 

$

38,892

 

$

37,013

 

 

Senior Credit Agreement

 

On September 29, 2016, the Company and certain of its subsidiaries, entered into a new senior asset-based lending credit agreement with Citizens Bank, N.A. subsequently amended by amendments one through five (collectively, the “Senior ABL Credit Facility”).  

 

The Senior ABL Credit Facility provides the Company with the following extensions of credit and loans: (1) a Revolving Commitment in the principal amount of $25.0 million (the “Revolving Loan”) and (2) a mortgage-based Term Loan Commitment in the principal amount of $17.5 million (the “Term Loan”). The loans under the Senior ABL Credit Facility are secured by liens on substantially all domestic assets of the Company and guaranteed by the Company’s domestic subsidiaries who are not borrowers under the Senior ABL Credit Facility.

 

The aggregate amount of revolving loans permitted under the Senior ABL Credit Facility may not exceed a borrowing base consisting of: (i) the sum of 85% of certain eligible accounts receivable, plus (ii) the lesser of 65% of the value of certain eligible inventory and 85% of the net orderly liquidation value of certain eligible inventory, plus (iii) an amount

12


 

not to exceed $4.2 million, which amount will be adjusted based on the face amount of certain letters of credit issued to Citizens Bank, N.A. in connection with certain operating leases and capitalized leases, minus (iv) reserves for any amounts which the lender deems necessary or appropriate.

 

Borrowings under the Senior ABL Credit Facility may be made as Base Rate Loans or Eurodollar Rate Loans.  The Base Rate loans will bear interest at the fluctuating rate per annum equal to (i) the highest of (a) the Federal Funds Rate plus 1/2 of 1.00%, (b) Citizens own prime rate; and (c) the adjusted Eurodollar rate on such day for an interest period of one (1) month plus 1.00%; and (ii) plus the Applicable Rate, as described below.  Eurodollar Rate Loans will bear interest at the rate per annum equal to (i) the ICE Benchmark Administration LIBOR Rate; plus (ii) the Applicable Rate. The “Applicable Rate” will be (a) 2.50% with respect to Base Rate Loans that are Term Loans and 3.50% with respect to Eurodollar Rate Loans that are Term Loans, and (b) 2.50% with respect to Base Rate Loans that are Revolving Loans and 3.50% with respect to Eurodollar Rate Loans that are Revolving Loans, in each case until December 31, 2016, and thereafter the Applicable Rate will be adjusted quarterly, responsive to the Company’s Quarterly Average Availability Percentage, ranging from 1.25% to 1.75% with respect to Base Rate Loans that are Revolving Loans and from 2.25% to 2.75% with respect to Eurodollar Rate Loans that are Revolving Loans.  In addition to interest payments on the Senior ABL Credit Facility loans, the Company will pay commitment fees to the lender of 0.375% per quarter on undrawn Revolving Loans.  The Company will also pay other customary fees and reimbursements of costs and disbursements to the lender.

 

The Maturity Date with respect to the Revolving Loan and the Term Loan is November 10, 2019, provided, however, upon repayment of Company subordinated indebtedness the maturity date will automatically extend to five years after the Closing Date for Revolving Loans and Revolving Commitments, and with respect to the Term Loans, the earlier of the date that is (i) ten years after the Closing Date and (ii) the maturity date of the Revolving Loans.  The Senior ABL Credit Facility contains certain mandatory prepayment provisions, including mandatory prepayments due in respect of sales of assets, sales of equity securities, events of default and other customary events, with exceptions for non-core business dispositions.

 

The Senior ABL Credit Facility contains customary covenants and negative covenants regarding operation of the Company’s business, including maintenance of certain financial ratios, as well as restrictions on dispositions of Company assets.

 

In connection with the Senior ABL Credit Facility, the Company and the Borrowers together with certain subsidiaries (collectively, the “Guarantors”), have entered into an Amended and Restated Guarantee and Collateral Agreement with Citizens Bank, N.A. dated as of September 29, 2016, which secures all of the loans and credits drawn from the Senior ABL Credit Facility by the Borrowers.  The security interests established under the Amended and Restated Guarantee and Collateral Agreement include senior secured liens on substantially all of the assets of the Guarantors. The Guarantors have agreed to guarantee the unconditional payment and performance to the lender of all obligations of the Borrowers under the Senior ABL Credit Facility.

 

On March 21, 2017, the Company entered into a first amendment to the Senior ABL Credit Facility to modify various definitions, including Consolidated EBITDA and the fixed charge coverage ratio, and amend prepayment provisions.

 

On May 12, 2017, the Company entered into a second amendment to the Senior ABL Credit Facility to amend the definition of capital expenditures and amend the fixed charge coverage ratio effective with the fiscal quarter ending April 2, 2017.

 

On September 21, 2017, the Company entered into a third amendment to the Senior ABL Credit Facility to amend the definition of Consolidated EBITDA.

 

On November 12, 2017, the Company entered into the Fourth Amendment to the Senior ABL Credit Facility (the “Fourth Amendment”).  The Fourth Amendment suspends the Company’s fixed charge coverage ratio covenant through December 31, 2018.  The suspension of the fixed charge coverage ratio covenant was effective as of December 31, 2017.  The Fourth Amendment also adds a minimum revolving credit availability financial covenant. The Fourth Amendment also permits the Company to make infusions of junior capital, which may consist of subordinated debt and/or equity issuances.  The junior capital infusions made under the Fourth Amendment will not be subject to mandatory prepayment of the Senior ABL Credit Facility, but subject to certain limitations in respect of outstanding subordinated indebtedness. Under the terms of the Fourth Amendment, the initial infusion of junior capital in amount of

13


 

not less than $5.0 million must be completed by the Company no later than January 31, 2018.  The minimum revolving credit availability covenant requires the Company to maintain the following availability:  (a) at least $1,250,000 in revolving credit availability until the earlier of (i) the initial closing of the infusion of $5.0 million in junior capital and (ii) January 31, 2018; and (b) thereafter, at least $3,500,000 in such revolving credit availability. The Fourth Amendment also reduces the Line Cap (consisting of the lesser of the aggregate revolving credit commitment and the borrowing base) in respect of certain prepayment obligations and conditions precedent to borrowing, by reducing the borrowing base by $1,250,000. The Fourth Amendment contains customary representations and warranties regarding the status of the Company and compliance with all terms and conditions of the Senior ABL Credit Facility.

 

On November 13, 2018, the Company entered into the Fifth Amendment to the Senior ABL Credit Facility (the “Fifth Amendment”).  The Fifth Amendment extended the maturity date of the Senior ABL Credit Facility from August 10, 2019 to November 11, 2019. 

 

On February 12, 2019, the Company entered into the Sixth Amendment to the Senior ABL Credit Facility (the “Fifth Amendment”).  The Sixth Amendment extended the maturity date of the Senior ABL Credit Facility from November 11, 2019 to February 11, 2019.  Additionally, it extended the effective date of the Fixed Charge Ratio to March 31, 2019 with a ratio of 1.10 to 1.00. 

 

The Company was in compliance with all covenants as of December 30, 2018.

 

Subordinated Term Loan Credit Agreement

 

On November 10, 2014, the Company and certain of its subsidiaries entered into a $20.0 million, five-year Subordinated Term Loan Credit Agreement (“Subordinated Loan Agreement”) with McLarty Capital Partners SBIC, L.P. (“McLarty”), which bears interest at 11% annually ; subsequently the Company entered into amendments one through five.  In May 2018, McLarty rebranded to become The Firmament Group (“Firmament”).  Upon an event of default under the Subordinated Loan Agreement, the interest rate increases automatically by 2.00% annually.  The proceeds were used to repay certain outstanding loans under the Company’s previous credit facility. ARC’s Chairman is indirectly related to McLarty; therefore, the Board of Directors appointed a special committee consisting solely of independent directors to assure that the Subordinated Loan Agreement is fair and reasonable to the Company and its shareholders. 

 

The Subordinated Loan Agreement has been subordinated to the Senior ABL Credit Facility pursuant to a First Lien Subordination Agreement.  The Subordinated Loan Agreement contains customary representations and warranties, events of default, affirmative covenants, negative covenants, and prepayment terms that are similar to those contained in the Senior ABL Credit Facility described above.   

 

On September 22, 2017, the Company entered into a fourth amendment to the Subordinated Loan Agreement to amend the definition of Consolidated EBITDA and the Maximum Total Leverage Ratio.

 

On February 9, 2018, the Company entered into a fifth amendment to the Subordinated Loan Agreement to authorize discretionary omission by the administrative agent of certain non-cash items from the definition of Consolidated EBITDA and to include cash proceeds from the Rights Offering as excluded contributions of capital that will not be subject to mandatory prepayment under the terms of the Subordinated Loan Agreement. 

 

On November 13, 2018, the Company entered into the Sixth Amendment to the Subordinated Loan Agreement (the “Sixth Amendment”).  The Sixth Amendment extended the maturity date of the Subordinated Loan Agreement from November 11, 2019 to February 11, 2020. 

 

On February 12, 2019, the Company entered into the Seventh Amendment to the Subordinated Loan Agreement (the “Seventh Amendment”).  The Seventh Amendment extended the maturity date of the Subordinated Loan Agreement from February 11, 2020 to May 11, 2020. 

 

As of December 30, 2018, the Company was in compliance with its debt covenants under the Subordinated Credit Facility, after giving effect to the fifth amendment discussed above.

 

14


 

Loan Contract

 

On March 23, 2016, AFT-Hungary Kft. (“AFT Hungary”), a wholly owned subsidiary of the Company, entered into a Loan Contract with Erste Bank Hungary Zrt. in an amount equal to €4.0 million (“Loan Contract”).  The initial funding of €4.0 million drawn on the Loan Contract occurred on March 31, 2016.  Approximately $3.0 million of the net proceeds from the Loan Contract were used to partially repay obligations outstanding under the Amended & Restated Credit Agreement, with the remaining net proceeds to be used for capital expenditures and other investments to facilitate the export of goods and services provided by AFT Hungary.

 

The loan matures on March 7, 2021, and bears interest at a fixed rate of 0.98% per annum.  The Company is required to make semi-annual principal payments in an amount equal to approximately €400,000 along with monthly interest payments.  The Loan Contract is secured by certain of AFT Hungary’s assets, including the real estate and selected machinery and equipment located in Retsag, Hungary.

 

Future Debt Payments

 

The following schedule represents the Company’s future debt payments as of December 30, 2018 (in thousands):

 

 

 

 

 

 

2019 (1)

    

$

968

 

2020

 

 

39,277

 

2021

 

 

916

 

2022

 

 

 —

 

Total

 

$

41,161

 


(1)

Represents long-term debt principal payments for the six months ending June 30, 2019.

 

NOTE 8 – Income Taxes

 

The income tax receivable was $0.1 million and $0.5 million at December 30, 2018 and June 30, 2018, respectively, which are included in other current assets.  The long-term income tax receivable was $0.3 million at December 30, 2018, which is included in other non-current assets.  The Company had unrecognized tax benefits for uncertain tax positions of $1.0   million on December 30, 2018 and June 30, 2018, respectively, which are included in other long-term liabilities. 

 

On December 22, 2017, the U.S. Tax Cuts and Jobs Act (the “Tax Reform Act”) was signed into law by the President of the United States.  The Tax Reform Act significantly revised the U.S. corporate income tax regime by, among other things, lowering the U.S. corporate tax rate from 35% to 21% effective January 1, 2018.  GAAP requires that the impact of tax legislation be recognized in the period in which the law was enacted.  As a result of the Tax Reform Act, the Company recorded tax expense of $1.4 million due to a remeasurement of deferred tax assets and liabilities at a blended rate in the three months ended December 31, 2017, which is fully offset by a reduction in valuation allowance.  In addition, the Company recorded a tax benefit of $0.3 million due to a reduction in the valuation allowance previously recognized on alternative minimum tax (“AMT”) credit carryforwards.  Under the Tax Reform Act, AMT credit carryforwards are refundable credits.  The tax expense and benefit are provisional amounts and the Company’s current best estimate.  Any adjustments recorded to the provisional amounts will be included in income from operations as an adjustment to tax expense, net of any related valuation allowance.  The provisional amount incorporates assumptions made based upon the Company’s current interpretation of the Tax Reform Act and may change as the Company receives additional clarification and implementation guidance.

 

NOTE 9 – Earnings Per Share

 

Net Income (Loss) Per Share – Basic and Diluted

 

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of shares of common stock outstanding during each period.  Diluted earnings per share is computed by dividing net income available to common stockholders by the diluted weighted-average shares of common stock outstanding during each period.  As a result of the Company’s net loss from continuing operations, for the three months ended December 30, 2018 and December 31, 2017, approximately 5,812 and 69,357 shares, respectively, and f or the six

15


 

months ended December 30, 2018 and December 31, 2017, approximately 9,469 and 105,857 shares, respectively, were considered anti-dilutive and were excluded from the computation of diluted earnings per share.  

 

NOTE 10 – Share-Based Compensation

 

The Company’s share-based compensation arrangements include grants of stock options under the ARC Group Worldwide, Inc. 2015 Equity Incentive Plan, the 2016 ARC Group Worldwide, Inc. Equity Incentive Plan, and the Employee Stock Purchase Plan.  The share-based compensation expense recognized during the three months ended December 30, 2018 and December 31, 2017 was $0.1 million, and during the six months ended December 31, 2018 and December 31, 2017 was $0.2 and $0.4 million, respectively.  These expensed are included in selling, general and administrative expense.  As of December 30, 2018, there was $0.4 million of total unrecognized compensation expense related to non-vested stock options, which is expected to be recognized over a weighted-average period of 2.2 years.

 

NOTE 11 – Commitments and Contingencies

 

The Company leases land, facilities, and equipment under various non-cancellable operating lease agreements expiring through 2022, which contain various renewal options.  The Company also leases equipment and a building under non-cancellable capital lease agreements expiring through 2024.  The capital leases have interest rates ranging from 2.90% to 8.72%.

 

From time to time, the Company is a party to various litigation matters incidental to the conduct of its business.  As of December 30, 2018, the Company was involved in two legal matters related to fiscal 2016 and 2017.  Subsequent to December 30, 2018, both matters were settled resulting in payments of approximately $0.5 million, which was accrued as of December 30, 2018.  Other than these matters, the Company is not presently a party to any legal proceedings, the resolution of which, management believes, would have a material adverse effect on its business, operating results, financial condition, or cash flows.

 

NOTE 12 – Segment Information

 

During fiscal 2017, the Company sold its non-core subsidiaries, Tekna Seal and ARC Wireless.  Subsequently, in September 2017, the Company sold its non-core subsidiary, GF&F, which comprised the Flanges and Fittings Group segment.  The completed divestiture of these non-core businesses has changed the way in which management and its chief operating decision maker evaluate performance and allocate resources.  As a result, during the quarter ended June 30, 2018, the Company revised its business segments, consistent with its management of the business and internal financial reporting structure.  Specifically, the Precision Components Group now includes the results of its plastic injection molding operations and its tooling product line, which were previously included within the 3DMT Group.  During July 2018, the Company entered into an agreement to market 3DMT for possible sale which is now being reported as discontinued operations.  In addition, its precision metal stamping operations are now reported within the newly created Stamping Group, which were previously included in the Precision Components Group.

 

As a result of the above transactions, the Company will report two segments as part of continuing operations:  the Precision Components Group and the Stamping Group.

 

·

The Precision Components Group companies provide highly engineered, precision metal components using processes consisting of metal injection molding. It also includes our tooling product line and plastic injection molding.  Industries served include aerospace, automotive, consumer durables, electronic devices, firearms and defense, and medical and dental devices.

 

·

The Stamping Group consists of our precision metal stamping operations, primarily servicing the automotive industry.

 

16


 

Summarized segment information for the three months ended December 30, 2018 and December 31, 2017 is as follows (in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended

 

Six months ended

 

 

    

December 30,

    

December 31,

    

December 30,

    

December 31,

 

 

 

2018

 

2017

 

2018

 

2017

 

Sales:

 

 

 

 

 

 

 

 

 

 

 

 

 

Precision Components Group

 

$

15,951

 

$

13,069

 

$

31,636

 

$

27,402

 

Stamping Group

 

 

4,956

 

 

4,359

 

 

9,837

 

 

9,112

 

Consolidated sales

 

$

20,907

 

$

17,428

 

$

41,473

 

$

36,514

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating costs:

 

 

 

 

 

 

 

 

 

 

 

 

 

Precision Components Group

 

$

16,146

 

$

15,353

 

$

30,935

 

$

30,622

 

Stamping Group

 

 

5,634

 

 

4,746

 

 

10,571

 

 

9,748

 

Consolidated operating costs

 

$

21,780

 

$

20,099

 

$

41,506

 

$

40,370

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Segment operating income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

Precision Components Group

 

$

(195)

 

$

(2,284)

 

$

701

 

$

(3,220)

 

Stamping Group

 

 

(678)

 

 

(387)

 

 

(734)

 

 

(636)

 

Corporate (1)

 

 

(980)

 

 

(983)

 

 

(1,845)

 

 

(1,920)

 

Total segment operating loss

 

$

(1,853)

 

$

(3,654)

 

$

(1,878)

 

$

(5,776)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(898)

 

 

(912)

 

 

(1,829)

 

 

(1,889)

 

Other income, net

 

 

64

 

 

165

 

 

90

 

 

129

 

Non-operating expense

 

 

(834)

 

 

(747)