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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 10, 2004
AROTECH CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 0-23336 95-4302784
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
250 WEST 57TH STREET, SUITE 310, NEW YORK, NEW YORK 10107
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 258-3222
(Former name or former address, if changed since last report)
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits. A list of exhibits required is given in the Exhibit Index
that precedes the exhibits filed with this report.
ITEM 12. RESULTS OF OPERATIONS AND FINANCIAL CONDITION.
On August 10, 2004, we publicly disseminated an earnings release (the
"Release") announcing our financial results for the quarter ended June 30, 2004.
A copy of the Release is attached as Exhibit 99.1 hereto.
The information included in the attached Exhibit 99.1 is being
furnished and shall not be deemed "filed" for purposes of Section 18 of the
Securities Exchange Act of 1934, as amended, or otherwise subject to the
liabilities of that Section, or incorporated by reference in any filing under
the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended, except as shall be expressly set forth by specific reference in such
a filing.
To supplement the consolidated financial results as determined in
accordance with generally accepted accounting principles ("GAAP"), the Release
presents a non-GAAP financial measure, "Adjusted LBITDA" (Loss Before Interest,
Taxes, Depreciation and Amortization, adjusted to eliminate certain non-cash
charges). We believe that the use of Adjusted LBITDA enhances overall
understanding of our current financial performance. As required by the
Securities and Exchange Commission, Adjusted LBITDA is reconciled to Net Profit
(Loss) in the Release.
SIGNATURES
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.
AROTECH CORPORATION
(REGISTRANT)
By: /s/ Robert S. Ehrlich
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Name: Robert S. Ehrlich
Title: President, Chairman of the Board and
Chief Executive Officer
Dated: August 10, 2004
2
EXHIBIT INDEX
The following exhibits are filed with the Current Report on Form 8-K.
EXHIBIT
NUMBER DESCRIPTION
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99.1 Earnings press release dated August 10, 2004
3
[AROTECH LOGO]
EARNINGS NEWS
250 West 57th Street, Suite 310, New York, NY 10107
Tel: (212) 258-3222 o Fax: (212) 258-3281
www.arotech.com
FOR IMMEDIATE RELEASE
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AROTECH CORPORATION REPORTS RECORD SECOND QUARTER
AND FIRST HALF REVENUES
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Backlog including AoA now at $37.0 million -
positive EBITDA anticipated for second half
NEW YORK, NEW YORK, AUGUST 10, 2004 - AROTECH CORPORATION (NasdaqNM:
ARTX), a provider of quality defense and security products for the military, law
enforcement and security markets, today reported second quarter and first half
2004 results.
The Company reported that revenues for the quarter were $9.9 million, an
increase of 184% over the corresponding period in 2003. The Company also
reported that backlog as of the end of June 2004 stood at $25.6 million, which
increases to $37.0 million with the addition of Armour of America's backlog.
Adjusted LBITDA was reduced substantially compared to the same quarter last
year. Net loss increased over the same period last year, primarily due to
non-cash charges associated with acquisitions and financings.
Arotech Chairman and CEO Robert S. Ehrlich commented, "Once again, we
are able to report record revenues. This quarter's revenues represent our eighth
consecutive quarter of revenue growth," continued Ehrlich. "For the first time
ever, our operating cash exceeded our cash expenses, and we anticipate achieving
positive EBITDA beginning in the second half of 2004 and beyond," concluded
Ehrlich.
CONFERENCE CALL
Arotech Corporation will hold it second quarter 2004 conference call on
Wednesday, August 11, 2004 at 11:00 a.m. EDT. Those wishing to take part in the
conference call should call 1-888-695-0608 (US) or +1-719-457-2659
(international) a few minutes before the 11:00 a.m. EDT start time. In addition,
an instant replay will be available Wednesday, August 11, 2004 at 1:00 p.m. EDT
until Friday, August 13, 2004 at 8:00 p.m. EDT. The replay telephone number is
1-888-203-1112 (US); +1-719-457-0820 (international). The confirmation number is
138511.
RESULTS FOR THE SECOND QUARTER
REVENUES FOR THE QUARTER ended June 30, 2004 increased to $9.9 million
as compared with $3.5 million for the corresponding period of 2003. This
increase is largely attributed to strong sales in the Company's Armored Vehicle
Division, as well as the addition of the results of the Company's new
acquisitions, FAAC and Epsilor, to its results.
GROSS PROFIT for the quarter ended June 30, 2004 increased to $3.4
million (with a gross margin of 34%) as compared with $1.0 million (with a gross
margin of 29%) for the corresponding period of 2003. This increase is largely
(more)
attributed to strong sales in the Company's Armored Vehicle Division, as well as
the addition of the results of the Company's new acquisitions, FAAC and Epsilor,
to its results.
ADJUSTED LOSS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
(ADJUSTED LBITDA), excluding discontinued operations and adjusted to eliminate
certain non-cash charges described below and in the table below, for the quarter
ended June 30, 2004 decreased to $857,000 as compared with $1.1 million for the
corresponding period of 2003. Arotech believes that information concerning
Adjusted LBITDA enhances overall understanding of its current financial
performance and its progress towards cash-flow break even and toward GAAP
profitability. Arotech computes Adjusted LBITDA, which is a non-GAAP financial
measure, as reflected in the table below.
NET LOSS for the quarter ended June 30, 2004 increased to $4.4 million
as compared with $2.5 million for the corresponding quarter of 2003, primarily
as a result of non-cash charges.
BASIC AND DILUTED NET LOSS PER SHARE for the quarter ended June 30, 2004
was $0.07 as compared with $0.07 for the corresponding period of 2003.
RESULTS FOR THE FIRST HALF
REVENUES FOR THE SIX MONTHS ended June 30, 2004 increased to $17.1
million as compared with $7.5 million for the corresponding period of 2003. This
increase is largely attributed to strong sales in the Company's Armored Vehicle
Division, as well as the addition of the results of the Company's new
acquisitions, FAAC and Epsilor, to its results.
GROSS PROFIT for the six months ended June 30, 2004 increased to $6.0
million (with a gross margin of 35%) as compared with $2.4 million (with a gross
margin of 32%) for the corresponding period of 2003. This increase is largely
attributed to strong sales in the Company's Armored Vehicle Division, as well as
the addition of the results of the Company's new acquisitions, FAAC and Epsilor,
to its results.
ADJUSTED LOSS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION
(ADJUSTED LBITDA), excluding discontinued operations and adjusted to eliminate
certain non-cash charges described below and in the table below, for the six
months ended June 30, 2004 decreased to $1.5 million as compared with $1.7
million for the corresponding period of 2003. Arotech believes that information
concerning Adjusted LBITDA enhances overall understanding of its current
financial performance and its progress towards cash-flow break even and toward
GAAP profitability. Arotech computes Adjusted LBITDA, which is a non-GAAP
financial measure, as reflected in the table below.
NET LOSS for the six months ended June 30, 2004 increased to $8.7
million as compared with $3.8 million for the corresponding period of 2003,
primarily as a result of non-cash charges.
BASIC AND DILUTED NET LOSS PER SHARE for the six months ended June 30,
2004 increased to $0.14 as compared with $0.11 for the corresponding period of
2003.
CASH POSITION AT QUARTER END
CASH-ON-HAND AND CASH EQUIVALENTS, RESTRICTED COLLATERAL DEPOSITS AND
OTHER RESTRICTED CASH, AND AVAILABLE-FOR-SALE MARKETABLE SECURITIES stood at the
end of the quarter at $5.1 million in cash, $8.9 million in restricted
(more)
collateral securities and cash deposits due within one year, $2.0 million in
long-term restricted securities and deposits, and $127,000 in marketable
securities, as compared to at the end of 2003, when the Company had $13.7
million in cash and $706,000 in restricted cash deposits due within one year.
STOCKHOLDERS' EQUITY stood at the end of the quarter at approximately
$44.7 million.
ABOUT AROTECH CORPORATION
Arotech Corporation provides quality defense and security products for
the military, law enforcement and homeland security markets, including advanced
zinc-air and lithium batteries and chargers, multimedia interactive
simulators/trainers and lightweight armoring.
The Battery and Power Systems Division includes Electric Fuel Battery
Corporation and Epsilor Electronic Industries Ltd. The Simulation, Training and
Consulting Division includes IES Interactive Training, FAAC Incorporated and
Arocon Security Consulting. The Armoring Division includes MDT Armor Corp., MDT
Protective Industries Ltd. and Armour of America, Incorporated.
Arotech is incorporated in Delaware, with corporate offices in New York,
and research, development and production subsidiaries in Alabama, Colorado,
Michigan, California and Israel.
COMPANY CONTACT:
Jonathan Whartman
Senior VP, Communications
1-866-325-6963
whartman@arotech.com
NY Office 1-212-258-3222
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. 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 SIGNIFICANTLY. 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; AND OTHER RISK FACTORS
DETAILED IN AROTECH'S MOST RECENT ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2003 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
(more)
AROTECH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
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2004 2003 2004 2003
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Revenues ..................................................... $ 17,110,502 $ 7,526,588 $ 9,928,248 $ 3,493,135
Cost of revenues ............................................. 11,131,967 5,112,889 6,574,747 2,479,170
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Gross profit ................................................. 5,978,535 2,413,699 3,353,501 1,013,965
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Research and development expenses ............................ 871,627 510,544 408,121 152,505
Sales and marketing expenses ................................. 2,140,696 1,637,576 1,119,611 933,589
General and administrative expenses .......................... 7,202,454 2,473,507 3,521,461 1,460,752
Amortization of intangible assets ............................ 992,025 623,543 496,013 311,771
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11,206,802 5,245,170 5,545,206 2,858,617
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Operating loss ............................................... (5,228,267) (2,831,471) (2,191,705) (1,844,652)
Financial (expenses) income, net ............................. (3,259,530) (983,821) (1,985,576) (725,609)
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Net loss before taxes ........................................ (8,487,797) (3,815,292) (4,177,281) (2,570,261)
Tax expenses ................................................. (170,065) (277,047) (174,972) (274,185)
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Net loss before minority interest in profit of subsidiary .... (8,657,862) (4,092,339) (4,352,253) (2,844,446)
Loss (profit) to minority .................................... (26,708) 160,298 (26,162) 203,526
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Net loss from continuing operations .......................... $ (8,684,570) $ (3,932,041) $ (4,378,415) $ (2,640,920)
Profit from discontinued operations .......................... -- 83,166 -- 179,127
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Net loss for the period ...................................... $ (8,684,570) $ (3,848,875) $ (4,378,415) $ (2,461,793)
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Basic and diluted net loss per share for continuing operations $ (0.14) $ (0.11) $ (0.07) $ (0.07)
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Basic and diluted net profit per share for discontinued ...... $ -- $ 0.00 $ -- $ 0.00
operations
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Combined basic and diluted net loss per share ................ $ (0.14) $ (0.11) $ (0.07) $ (0.07)
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Weighted average number of shares outstanding ................ 62,035,532 35,678,067 64,499,090 36,209,872
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RECONCILIATION OF NON-GAAP FINANCIAL MEASURE
To supplement Arotech's consolidated financial statements presented in
accordance with GAAP, Arotech uses a non-GAAP measure, Loss Before Interest,
Taxes, Depreciation and Amortization (LBITDA), as adjusted to eliminate certain
non-cash charges (Adjusted LBITDA). This non-GAAP measure is provided to enhance
overall understanding of Arotech's current financial performance and its
progress towards cash-flow break even and toward GAAP profitability.
Reconciliation of Adjusted LBITDA to the nearest GAAP measure follows:
ADJUSTED LBITDA
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SIX MONTHS ENDED JUNE 30, THREE MONTHS ENDED JUNE 30,
---------------------------- ----------------------------
2004 2003 2004 2003
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Net loss from continuing operations (GAAP measure) ........... $ (8,684,570) $ (3,932,041) $ (4,378,415) $ (2,640,920)
Add back:
Interest expense (income), net (after deduction of minority
interest) .................................................. 3,261,118 976,544 1,984,996 733,940
Taxes (after deduction of minority interest) ................. 154,290 142,696 159,196 142,696
Depreciation of fixed assets ................................. 518,332 348,401 281,924 167,810
Amortization of intangible assets ............................ 1,010,351 623,543 505,175 311,772
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LBITDA (non-GAAP measure) .................................... $ (3,740,479) $ (1,840,858) $ (1,447,124) $ (1,284,703)
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Add back certain non-cash charges:
Expenses attributed on issuance of shares and options to
consultants and employees ................................ 460,861 184,090 441,081 184,090
Expenses attributed on repricing and issuance of warrants
to investors ............................................. 1,742,384 0 149,527 0
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ADJUSTED LBITDA (non-GAAP measure) ........................... $ (1,537,234) $ (1,656,768) $ (856,516) $ (1,100,613)
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