ANN ARBOR, Mich., Nov. 10, 2014 /PRNewswire/ -- Arotech
Corporation (Nasdaq GM: ARTX), a provider of quality defense and
security products for the military, law enforcement and security
markets, today reported results for the quarter and nine months
ended September 30, 2014.
Third Quarter Results
Revenues for the third quarter reached $24.8 million, compared to $23.2 million for the corresponding period in
2013, an increase of 6.9%.
Gross profit for the quarter was $8.0
million, or 32.3% of revenues, compared to $6.4 million, or 27.5% of revenues, for the
corresponding period last year, a 4.8 point improvement in the
gross margin percentage.
Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (adjusted EBITDA) for the quarter was $2.6 million, compared to $2.2 million for the corresponding period in
2013. Arotech believes that information concerning adjusted EBITDA
enhances overall understanding of its current financial
performance. Arotech computes adjusted EBITDA, which is a non-GAAP
financial measure, as reflected in the table below.
The Company reported an operating profit for the third quarter
of 2014 of $1.2 million, compared to
an operating profit of $1.4 million
for the corresponding period in 2013. Operating expenses in the
quarter grew to $6.8 million versus
$5.0 million in the corresponding
quarter in 2013. A large portion of the increase was due to the
consolidation of the operations of UEC, which was acquired at the
start of the second quarter, as well as an increase in R&D
investment related to development of the Company's iron flow
battery technology.
The Company's net income from continuing operations for the
third quarter was $379,000, or
$0.02 per diluted share, compared to
net income of $861,000, or
$0.05 per share, for the
corresponding period last year.
First Nine Months Results
Revenues for the first nine months of 2014 reached $75.0 million, compared to $67.6 million for the corresponding period last
year, an increase of 10.9%.
Gross profit for the first nine months of 2014 was $25.3 million, or 33.8% of revenues, compared to
$18.0 million, or 26.5% of revenues,
for the corresponding period last year, a 7.3 point improvement in
the gross margin percentage.
Adjusted Earnings Before Interest, Taxes, Depreciation and
Amortization (adjusted EBITDA) for the first nine months of 2014
was $8.9 million, compared to
$6.2 million for the corresponding
period last year. Arotech believes that information concerning
adjusted EBITDA enhances overall understanding of its current
financial performance. Arotech computes adjusted EBITDA, which is a
non-GAAP financial measure, as reflected in the table below.
The Company reported an operating profit for the first nine
months of 2014 of $4.8 million,
compared to an operating profit of $3.8
million for the corresponding period in 2013.
The Company's net income from continuing operations for the
first nine months of 2014 was $3.2
million, or $0.15 per share,
versus a net income of $2.8 million,
or $0.17 per diluted share, for the
corresponding period last year.
Backlog
Backlog of orders totaled approximately $74.1 million as of September 30, 2014, as compared to $74.4 million at September
30, 2013 and $74.1 million as
of June 30, 2014.
Balance Sheet Metrics
As of September 30, 2014, the
Company had $10.8 million in cash and
$242,000 in restricted collateral
deposits, as compared to December 31,
2013, when the Company had $5.8
million in cash and $498,000
in restricted collateral deposits.
The Company ended the third quarter with $2.8 million in short-term bank debt under its
credit facility and $22.7 million in
long-term loans outstanding, which included $4.3 million in current debt and $18.4 million in long term debt. This is in
comparison to December 31, 2013 when
the Company had no short-term bank debt under its credit facility
and $1.9 million in long-term loans
outstanding, which included $95,000
in current debt and $1.8 million in
long term debt. The increase in bank loans was due to the long term
debt associated with the purchase of UEC.
The Company also had $7.7 million
in available, unused bank lines of credit with its main bank as of
September 30, 2014, under a
$15.0 million credit facility under
its FAAC subsidiary, which was secured by the Company's assets and
the assets of the Company's other subsidiaries and guaranteed by
the Company.
The Company had trade receivables of $14.9 million as of September 30, 2014, compared to $12.4 million as of December 31, 2013. The Company had a current
ratio (current assets/current liabilities) of 2.1, compared with
the December 31, 2013 current ratio
of 2.1.
Management Comment
"We are pleased to present another set of excellent quarterly
results," commented Arotech's President and CEO, Steven Esses. "Gross margins continue to
significantly surpass expectations, and as a result, despite the
slippage of some revenues into future quarters, our profit and
EBITDA have continued to rise. As a result, we are raising EBITDA
guidance for 2014," concluded Mr. Esses.
Revised Guidance
For the full year 2014, Arotech's management continues to expect
that full year revenues will exceed $105
million. Management increases its guidance for 2014 adjusted
EBITDA , expecting in the range of between $9.2 million and $9.5 million, an increase from
the formerly expected range of between $7.8
million and $8.3 million. 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 tomorrow, Tuesday, November 11, 2014 at 9:00 a.m. EST. Those wishing to access the
conference call should dial 1-888-407-2553 (U.S.) or
+1-347-293-1926 (international) a few minutes before the
9:00 a.m. EST start time. For those
unable to participate, the teleconference will be available for
replay on Arotech's website at http://www.arotech.com/ beginning 24
hours after the call.
About Arotech Corporation
Arotech Corporation is a leading provider of quality defense and
security products for the military, law enforcement and homeland
security markets. Arotech provides multimedia interactive
simulators/trainers and advanced zinc-air and lithium batteries and
chargers. Arotech operates through two major business divisions:
Training and Simulation, and Batteries and Power Systems.
Arotech is incorporated in Delaware, with corporate offices in
Ann Arbor, Michigan and research,
development and production subsidiaries in Alabama, Michigan, South Carolina and Israel.
Investor Relations
Contacts:
Ehud Helft &
Kenny Green
GK Investor
Relations
Tel: 1 646 201
9246
arotech@gkir.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, as amended, for the fiscal year ended December 31, 2013 and in Exhibit 99.3 to
Arotech's Current Report on 8-K, filed on April 1, 2014, 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.
TABLES TO FOLLOW
BALANCE SHEET
SUMMARY ANALYSIS (UNAUDITED)
(U.S.
Dollars)
|
|
|
|
|
|
|
|
|
|
September 30,
2014
|
|
December 31,
2013
|
|
ASSETS
|
|
|
|
|
|
CURRENT
ASSETS:
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
11,044,256
|
$
|
|
6,319,820
|
|
Trade
receivables
|
|
|
14,911,644
|
|
|
12,362,871
|
|
Unbilled
receivables
|
|
|
19,036,156
|
|
|
8,463,920
|
|
Other accounts
receivable and prepaid
|
|
|
1,544,692
|
|
|
1,379,621
|
|
Inventories
|
|
|
10,711,913
|
|
|
10,074,766
|
|
Total current
assets
|
|
|
57,248,661
|
|
|
38,600,998
|
|
LONG TERM
ASSETS:
|
|
|
|
|
|
|
|
Property and
equipment, net
|
|
|
6,114,138
|
|
|
4,926,949
|
|
Other long term
assets
|
|
|
4,984,775
|
|
|
5,042,790
|
|
Intangible assets,
net
|
|
|
12,396,306
|
|
|
1,059,151
|
|
Goodwill
|
|
|
45,730,986
|
|
|
31,024,754
|
|
Total long term
assets
|
|
|
69,226,205
|
|
|
42,053,644
|
|
Total
assets
|
|
$
|
126,474,866
|
$
|
|
80,654,642
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY
|
|
|
|
|
CURRENT
LIABILITIES:
|
|
|
|
|
Trade
payables
|
|
$
|
4,803,969
|
$
|
5,107,208
|
|
Other accounts
payable and accrued expenses
|
|
|
8,532,938
|
|
6,012,041
|
|
Current portion of
long term debt
|
|
|
4,340,729
|
|
95,382
|
|
Short term bank
credit
|
|
|
2,782,213
|
|
–
|
|
Deferred
revenues
|
|
|
6,300,162
|
|
7,020,079
|
|
Total current
liabilities
|
|
|
26,760,011
|
|
18,234,710
|
|
LONG TERM
LIABILITIES:
|
|
|
|
|
|
|
Long term portion of
debt
|
|
|
18,357,684
|
|
1,830,348
|
|
Other long-term
liabilities
|
|
|
15,546,271
|
|
12,612,608
|
|
Total long-term
liabilities
|
|
|
33,903,955
|
|
14,442,956
|
|
Total
liabilities
|
|
|
60,663,966
|
|
32,677,666
|
|
STOCKHOLDERS'
EQUITY:
|
|
|
|
|
|
|
Total stockholders'
equity (net)
|
|
|
65,810,900
|
|
47,976,976
|
|
Total liabilities
and stockholders' equity
|
|
$
|
126,474,866
|
$
|
80,654,642
|
|
|
|
|
|
|
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(U.S. Dollars, except share data)
|
|
|
|
|
|
Nine months
ended September 30,
|
|
Three months
ended September 30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Revenues
|
$ 74,995,339
|
|
$ 67,637,517
|
|
$ 24,783,353
|
|
$ 23,187,544
|
|
|
|
|
|
|
|
|
Cost of
revenues
|
49,682,017
|
|
49,681,174
|
|
16,775,556
|
|
16,816,012
|
Research and
development expenses
|
2,857,144
|
|
1,935,958
|
|
925,186
|
|
807,788
|
Selling and marketing
expenses
|
4,180,519
|
|
3,549,483
|
|
1,202,966
|
|
1,229,225
|
General and
administrative expenses
|
11,606,038
|
|
7,539,580
|
|
3,799,772
|
|
2,685,522
|
Amortization of
intangibles
|
1,828,635
|
|
821,097
|
|
867,452
|
|
270,985
|
Total operating costs
and expenses
|
70,154,353
|
|
63,827,292
|
|
23,570,932
|
|
21,809,532
|
|
|
|
|
|
|
|
|
Operating
income
|
4,840,986
|
|
3,810,225
|
|
1,212,421
|
|
1,378,012
|
|
|
|
|
|
|
|
|
Other
income
|
288,252
|
|
261,222
|
|
58,831
|
|
(7,460)
|
Financial expenses,
net
|
(1,098,755)
|
|
(475,448)
|
|
(416,107)
|
|
(172,569)
|
Total other
expense
|
(810,503)
|
|
(214,226)
|
|
(357,276)
|
|
(180,029)
|
Income from
continuing operations before income tax expense
|
4,030,483
|
|
3,595,999
|
|
855,145
|
|
1,197,983
|
|
|
|
|
|
|
|
|
Income tax
expense
|
855,178
|
|
765,962
|
|
476,617
|
|
337,060
|
Income from
continuing operations
|
3,175,305
|
|
2,830,037
|
|
378,528
|
|
860,923
|
Loss from
discontinued operations, net of income tax
|
-
|
|
(87,278)
|
|
-
|
|
652
|
Net income
|
3,175,305
|
|
2,742,759
|
|
378,528
|
|
861,575
|
|
|
|
|
|
|
|
|
Other comprehensive
income, net of income tax
|
|
|
|
|
|
|
|
Foreign currency
translation adjustment
|
(648,740)
|
|
472,767
|
|
(749,849)
|
|
58,247
|
Comprehensive
income
|
$
2,526,565
|
|
$
3,215,526
|
|
$
(371,321)
|
|
$
919,822
|
|
|
|
|
|
|
|
|
Basic net income per
share – continuing operations
|
$
0.15
|
|
$
0.18
|
|
$
0.02
|
|
$
0.05
|
Basic net loss per
share – discontinued operations
|
$
-
|
|
$
(0.01)
|
|
$
-
|
|
$
-
|
Basic net income per
share
|
$
0.15
|
|
$
0.17
|
|
$
0.02
|
|
$
0.05
|
Diluted net income
per share – continuing operations
|
$
0.15
|
|
$
0.18
|
|
$
0.02
|
|
$
0.05
|
Diluted net loss per
share – discontinued operations
|
$
-
|
|
$
(0.01)
|
|
$
-
|
|
$
-
|
Diluted net income
per share
|
$
0.15
|
|
$
0.17
|
|
$
0.02
|
|
$
0.05
|
Weighted average
number of shares used in computing basic net income/loss per
share
|
20,998,023
|
|
15,521,974
|
|
23,137,808
|
|
15,951,602
|
Weighted average
number of shares used in computing diluted net income/loss per
share
|
21,600,763
|
|
16,124,714
|
|
23,740,548
|
|
16,554,342
|
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:
|
Nine months ended
September 30,
|
|
Three months ended
September 30,
|
|
2014
|
|
2013
|
|
2014
|
|
2013
|
Net Income continuing
(GAAP measure)
|
$ 3,175,305
|
|
$ 2,830,037
|
|
$ 378,528
|
|
$ 860,923
|
Add
back:
|
|
|
|
|
|
|
|
Financial (income)
expense – including interest
|
810,503
|
|
475,448
|
|
357,276
|
|
172,569
|
Income tax expenses
(benefit)
|
855,178
|
|
765,962
|
|
476,617
|
|
337,060
|
Depreciation and
amortization expense
|
2,945,234
|
|
1,688,105
|
|
1,289,709
|
|
555,087
|
Other
adjustments*
|
1,160,644
|
|
392,913
|
|
143,930
|
|
226,381
|
Total adjusted
EBITDA
|
|
$ 8,946,864
|
|
$ 6,152,465
|
|
$ 2,646,060
|
|
$ 2,152,020
|
|
|
|
|
|
|
|
|
|
* Includes stock compensation expense,
one-time transaction expenses and other non-cash expenses.
SOURCE Arotech Corporation