DURHAM, N.C., May 13, 2013 (GLOBE NEWSWIRE) -- EMRISE CORPORATION (OTCQB:EMRI), a multi-national manufacturer of defense and aerospace electronic devices and communications equipment, today announced financial results for its first quarter ended March 31, 2013.
Chairman and CEO Carmine T. Oliva said net sales in the first quarter of 2013 increased modestly year-over-year and the net loss, which was expected, declined by more than 39 percent compared to the 2012 first quarter. He also said that even though the first quarter of each year is typically the Company's weakest quarter, EMRISE continued to make operational and financial progress in its turnaround plan during this year's first quarter.
Oliva noted that net sales and profitability for the 2013 first quarter improved year over year in local currencies in each of the Company's European subsidiaries, which was in line with management's expectations. However, the strengthening of the U.S. dollar against the British Pound Sterling and the Euro diluted the impact of those local currency increases when translated into U.S. dollars for consolidation purposes.
For the 2013 first quarter, overall net sales were $7.7 million compared to $7.5 million in the prior year first quarter. The year-over-year increase could have been larger had it not been for the delay in France of the shipment of a $300,000 Communications Equipment order due to unforeseen supplier delays. First quarter sales in the U.K. increased by 4 percent over the comparable period in 2012, but when translated into U.S. Dollars the weakness of the British Pound Sterling reduced the benefit of the sales increase by approximately $116,000.
"In our Electronic Devices segment, net sales during the quarter were driven by higher sales of our commercial aerospace In-flight Entertainment and Connectivity (IFE&C) and military product lines," Oliva added. "The Company is currently seeing a steady inflow of orders for both of these product lines including a number of new development contracts for promising future military programs. Also, as evidenced by the $2.7 million of recently announced orders for electronic devices used in IFE&C systems, the demand from that market remains strong."
Net sales of EMRISE's Electronic Devices segment in this year's first quarter rose slightly to $5.5 million from $5.4 million in the prior year first quarter. Communications Equipment sales in this year's first quarter were $2.2 million, compared with $2.1 million in first quarter of 2012. Even though the year-over-year increase in Communications Equipment net sales was modest, management is encouraged that sales in the U.S. portion of that segment appear to have stabilized after three quarters of declining sales.
Overall gross margin in the first quarter of this year was 29.6 percent, up from 28 percent in the prior year's first quarter. The year-over-year improvement in gross margin was due to a shift in product mix to higher margin military sales.
Loss from operations for the 2013 first quarter declined by 38 percent to $368,000 from $593,000 in the prior year first quarter. Included in loss from operations for the 2013 and 2012 first quarters were the annual first quarter increases in general and administrative expenses associated with required year-end financial reporting and other public company matters that do not normally occur in subsequent quarters of the year.
Net loss in the first quarter of 2013 was $528,000, or $0.05 loss per basic and diluted share, which was in line with management's expectations, and reflected an improvement of more than $340,000, or 39 percent, over the net loss of $871,000, or a loss per basic and diluted share of $0.08, for last year's first quarter. Net loss for the 2013 first quarter included $166,000 in taxes on profits of the U.K. subsidiaries; a $34,000 severance charge in EMRISE's U.S. Communications business segment; the negative impact of the absence of approximately $50,000 in additional profits from the delayed shipment in France; and the increases in general and administrative expenses associated with being a public company.
Backlog at the end of the first quarter of 2013 was $24.5 million compared to $22.6 million at December 31, 2012. The Company currently has a large backlog of orders for its Electronic Devices business, and it believes it will see moderate sales increases in this business unit during the remainder of 2013 as it ships those orders to meet customer delivery schedules. Management, however, recognizes that there is a risk that customers may seek to delay production and/or deliveries should the strength of the world economy continue to remain uncertain.
As of March 31, 2013, approximately 89 percent of the Company's backlog was related to its Electronic Devices business, which tends to have long manufacturing lead times due to the custom nature of the products. Approximately 11 percent of this backlog was related to the Company's Communications Equipment business, which generally delivers standard products from inventory as orders are received.
Management continues to be encouraged by the strong bookings in its Electronic Devices segment in Commercial and Military Aerospace, as well as other Military markets. The Company believes its French subsidiary's increasing success with new products in the utilities and public and private communications network markets can provide it with an improved platform upon which to build its communications business.
"Our 2013 plan continues the focus on the Electronic Devices segment and the deeper penetration of U.S., European and North African markets for the sale of our Communications Equipment products. We believe this can be achieved without a material increase in manpower," Oliva added.
The Company significantly reduced losses at its U.S. Communications Equipment business unit in 2012, and the remaining charges relating to severance costs associated with the restructuring of that unit were taken in this year's first quarter.
"As I indicated earlier this year, we remain committed to containing costs at current lower levels in our U.S. Communications business unit," Oliva said. "We believe these costs are appropriate at this time for our expected level of sales in that unit. Equally important is that we believe sales in our U.S. operation have now stabilized. We also think that our initiative to generate U.S. sales of network access products manufactured by our French operation can have a positive impact on our results."
As of March 31, 2013, the Company's cash and cash equivalents were $1.1 million, compared to cash and cash equivalents of $1.5 million and restricted cash of $407,000 as of December 31, 2012. The decline in the cash balance at the end of this year's first quarter was due in part to the first $300,000 principal payment in January of this year under the terms of the Amended Subordinated Contingent Promissory Notes payable to the former selling shareholders of Advanced Control Components, Inc. There was no restricted cash balance at the end of the 2013 first quarter as the Company was able to use the entire balance of that account as part of its down payment on the purchase of the building and land that houses the Company's Pascall Electronics, Ltd. subsidiary in England. Total assets were $25.5 million, total debt obligations were $6.5 million and stockholders' equity was $9.9 million at the end of the 2013 first quarter, compared to total assets of $24.4 million, total debt obligations of $5.1 million and stockholders' equity of $11.1 million at the end of 2012.
Adjusted EBITDA loss for the 2013 first quarter was $251,000, or a $235,000 improvement from the Adjusted EBITDA loss of $486,000 in the 2012 first quarter, and a $517,000 improvement from the Adjusted EBITDA loss of $768,000 in the first quarter of 2011.
EMRISE plans to file its Quarterly Report on Form 10-Q for the first quarter ended March 31, 2013, with the Securities and Exchange Commission (SEC) today, May 13, 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.
Conference Call and Webcast
A conference call with EMRISE management is scheduled for 11:30 a.m. EDT (8:30 a.m. PDT) today to discuss the Company's financial results for its first quarter ended March 31, 2013. To join the conference call, dial toll (877) 941-1427 five minutes prior to the scheduled start time. For callers outside the United States, dial (480) 629-9664. A live webcast of the call may also be accessed at www.emrise.com; on the EMRISE client page at www.allencaron.com; or at http://viavid.net. An archived replay of the webcast will be available shortly after the call through the same web links listed above and will be available for 90 days.
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 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 demand in the IFE&C market remains strong; it will see moderate sales increases in its Electronic devices business segment during 2013 as it ships orders from its large backlog of orders for that segment to meet customer delivery schedules; its French subsidiary's increasing success with new products in the utilities and public and private communications network markets can provide it with an improved platform upon which to build its communications business; growth in the Electronic Devices segment and the deeper penetration of U.S., European and North African markets for the sale of the Company's Communications Equipment products can be achieved without a material increase in manpower; sales in its U.S. operation have now stabilized; its belief that its initiatives to generate U.S. sales of network access products manufactured by its French operation and to generate sales of its entire line of communications products through its new U.S. network of independent sales representatives can have a positive impact on results; 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, 2012, the Company's Quarterly Report on Form 10-Q for the first quarter ended March 31, 2013, its recent Current Reports on Form 8-K, and other EMRISE filings with the SEC.
TABLES FOLLOW
| EMRISE CORPORATION | ||
| Condensed Consolidated Statements of Operations | ||
| (in thousands, except per share amounts) | ||
| Three Months Ended | ||
| March 31, | ||
| 2013 | 2012 | |
| Net sales | $ 7,691 | $ 7,539 |
| Cost of sales | 5,414 | 5,430 |
| Gross profit | 2,277 | 2,109 |
| Operating expenses: | ||
| Selling, general and administrative | 2,350 | 2,363 |
| Engineering and product development | 295 | 339 |
| Total operating expenses | 2,645 | 2,702 |
| Loss from operations | (368) | (593) |
| Other income (expense): | ||
| Interest income | 21 | 12 |
| Interest expense | (118) | (91) |
| Other, net | 103 | (78) |
| Total other expense, net | 6 | (157) |
| Loss before income taxes | (362) | (750) |
| Income tax expense | 166 | 112 |
| Loss from continuing operations | (528) | (862) |
| Discontinued operations: | ||
| (Loss)/Income from discontinued operations | -- | (9) |
| Tax provision on discontinued operations | -- | -- |
| (Loss)/Income from discontinued operations | -- | (9) |
| Net loss | $ (528) | $ (871) |
| Weighted average shares outstanding | ||
| Basic | 10,698 | 10,668 |
| Diluted | 10,698 | 10,668 |
| Loss per share: | ||
| Basic | ||
| Continuing operations | $ (0.05) | $ (0.08) |
| Discontinued operations | -- | -- |
| Net loss | $ (0.05) | $ (0.08) |
| Diluted | ||
| Continuing operations | $ (0.05) | $ (0.08) |
| Discontinued operations | -- | -- |
| Net loss | $ (0.05) | $ (0.08) |
| Statement of Comprehensive Loss | ||
| Net loss | $ (528) | $ (871) |
| Foreign currency translation adjustment | $ (689) | $ 472 |
| Comprehensive loss | $ (1,217) | $ (399) |
| EMRISE CORPORATION | ||
| Condensed Consolidated Balance Sheets | ||
| (in thousands, except per share amounts) | ||
|
March 31, 2013 |
December 31, 2012 | |
| (unaudited) | ||
| ASSETS | ||
| Current assets: | ||
| Cash and cash equivalents | $ 1,079 | $ 1,519 |
| Accounts receivable, net of allowances for doubtful accounts of $67 at March 31, 2013 and $75 at December 31, 2012 | 7,344 | 6,784 |
| Other receivables | ||
| Inventories | 6,518 | 7,255 |
| Current deferred tax assets | 120 | 128 |
| Prepaid and other current assets | 674 | 1,138 |
| Total current assets | 15,735 | 16,824 |
| Property, plant and equipment, net | 3,812 | 973 |
| Goodwill | 4,913 | 5,146 |
| Intangible assets other than goodwill, net | 527 | 584 |
| Deferred tax assets | 55 | 59 |
| Restricted cash | -- | 407 |
| Other assets | 413 | 405 |
| Total assets | $ 25,455 | $ 24,398 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities: | ||
| Accounts payable | $ 3,634 | $ 2,970 |
| Accrued expenses | 3,832 | 3,759 |
| Lines of credit | 804 | 1,122 |
| Current portion of long-term debt | 995 | 942 |
| Income taxes payable | 428 | 307 |
| Other current liabilities | 275 | 274 |
| Total current liabilities | 9,968 | 9,374 |
| Long-term debt | 4,712 | 3,033 |
| Other liabilities | 897 | 896 |
| Total liabilities | 15,577 | 13,303 |
| 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; 10,698,337 issued and outstanding at both March 31, 2013 and December 31, 2012. | 128 | 128 |
| Additional paid-in capital | 44,177 | 44,177 |
| Accumulated deficit | (32,060) | (31,532) |
| Accumulated other comprehensive loss | (2,367) | (1,678) |
| Total stockholders' equity | 9,878 | 11,095 |
| Total liabilities and stockholders' equity | $ 25,455 | $ 24,398 |
| Reconciliation of Adjusted EBITDA to Net Loss | |||
| (Unaudited, in thousands) | |||
| Period | |||
| March 31, | |||
| 2013 | 2012 | 2011 | |
| Net Loss as reported | $ (528) | $ (871) | $ (959) |
| Additions: | |||
| Depreciation and amortization | 114 | 100 | 105 |
| Stock-based compensation | 3 | 7 | 33 |
| Interest expense, net | 97 | 79 | 74 |
| Other, net | (103) | 78 | 53 |
| Income tax provision | 166 | 112 | (15) |
| Loss from discontinued operations | -- | 9 | — |
| Subtractions: | |||
| Income from discontinued operations | -- | — | 59 |
| Adjusted EBITDA | $ (251) | $ (486) | $ (768) |
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 the 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.