SOURCE: ARC Group Worldwide, Inc.

ARC Group Worldwide

February 09, 2016 16:05 ET

ARC Group Worldwide, Inc. Reports Second Quarter Fiscal Year 2016 Results

DELAND, FL --(Marketwired - February 09, 2016) - ARC Group Worldwide, Inc. ("ARC" and the "Company") (NASDAQ: ARCW), a leading global provider of advanced manufacturing and 3D printing solutions, today reported its second quarter fiscal year 2016 (December 27, 2015) results.

Highlights for the quarter ended December 27, 2015, compared sequentially to the quarter ended September 27, 2015:

  • Sales of $25.0 million, an increase of 2.2%; and
  • Adjusted EBITDA of $2.9 million, an increase of 8.4%.

Second Quarter Results

Second fiscal quarter 2016 revenue was $25.0 million, a 2.2% increase sequentially, compared to the first fiscal quarter of 2016. The increase was due to early stages of momentum in several key market segments served by the Company, along with record metal 3D printing revenue. Adjusted EBITDA for the second fiscal quarter was $2.9 million, an 8.4% increase sequentially, compared to the first fiscal quarter of 2016. Adjusted EBITDA Margin increased to 11.5%, from 10.8% in the prior sequential quarter, reflecting greater operational efficiencies.

ARC Mexico

ARC has launched a new initiative in Mexico, which is expected to begin operations in the next several months. ARC Mexico should help the Company be more competitive in winning new North American business and improving margins.

Jason Young, Chairman and CEO, commented, "While we are encouraged by the positive sequential performance, we are still in the early stages of building momentum in sales. We remain focused on improving speed to market for our customers and helping them consolidate their supply chain with our holistic solution. Under our new sales leadership and focus, we believe we are making good progress educating our customers about our differentiated solution and expect to get continued traction over time. We are also encouraged by the growing demand for our metal 3D printing services, which we expect to be a major growth driver in the future."

GAAP to Non-GAAP Reconciliation

EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Earnings and Adjusted Earnings Per Share are non-GAAP financial measures. EBITDA Margin and Adjusted EBITDA Margin are calculated by dividing EBITDA and Adjusted EBITDA, respectively, by sales. The Company has provided non-GAAP financial information to provide additional, meaningful comparisons of current results to prior periods' results by excluding items that the Company does not believe reflect its fundamental business performance and are not representative or indicative of its results of operations. Non-GAAP financial measures are not in accordance with, or an alternative for, generally accepted accounting principles in the United States. The Company's non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures, and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP.

The reconciliation to GAAP is as follows (dollars in thousands):

                         
For the three months ended:   December 27, 
2015
    September 27, 
2015
    June 30, 
2015
    December 28, 
2014
 
Net Loss   $ (594 )   $ (441 )   $ (666 )   $ (2 )
  Interest Expense, Net     1,126       1,141       1,248       1,213  
  Income Taxes     (132 )     (426 )     1,158       237  
  Depreciation and Amortization     2,388       2,362       2,402       2,355  
EBITDA   $ 2,788     $ 2,636       4,142     $ 3,803  
EBITDA Margin     11.1 %     10.8 %     14.4 %     14.0 %
  Merger Expenses     -       -       -       11  
  Reorganization Expenses     90       9       -       -  
Adjusted EBITDA   $ 2,878     $ 2,645     $ 4,142       3,814  
Adjusted EBITDA Margin     11.5 %     10.8 %     14.4 %   $ 14.1 %
                                 
Net Loss   $ (594 )   $ (441 )   $ (666 )   $ (2 )
  Merger Expenses     -       -       -       11  
  Reorganization Expenses     90       9       -       -  
Adjusted Earnings   $ (504 )   $ (432 )   $ (666 )   $ 9  
Adjusted Earnings Per Share   $ (0.03 )   $ (0.02 )   $ (0.04 )   $ -  
Weighted Average Common Shares Outstanding     18,123,883       18,123,883       17,752,915       14,673,205  
                                 

EBITDA excludes interest expense, net and income taxes because these items are associated with our capitalization and tax structures. EBITDA also excludes depreciation and amortization expense because these non-cash expenses reflect the impact of prior capital expenditure decisions which may not be indicative of future capital expenditure requirements.

The Company defines Adjusted EBITDA as EBITDA plus merger expenses, other non-recurring expenses and reorganization expenses. Merger expenses are costs incurred to effectuate our acquisitions, such as advisory, legal and accounting fees. Other non-recurring expenses consist primarily of accounting and legal fees associated with our acquisitions and financing activities. Reorganization expenses are primarily labor and labor related costs associated with the termination of employees.

Adjusted Earnings removes the impact of merger expenses and reorganization expenses.

About ARC Group Worldwide, Inc.

ARC Group Worldwide, Inc., is a leading global advanced manufacturing and 3D printing service provider. The Company offers its customers a compelling portfolio of advanced manufacturing technologies and cutting-edge capabilities to improve the efficiency of traditional manufacturing processes and accelerate their time to market. In addition to being a world leader in metal injection molding, ARC has significant expertise in plastic and metal 3D printing, precision stamping, traditional and clean room plastic injection molding, advanced rapid tooling, thixomolding, lean manufacturing, antennas, hermetic seals, robotics, and flanges and forges.

Forward Looking Statements

This press release may contain "forward-looking" statements as defined in the Private Securities Litigation Reform Act of 1995, which are based on ARC's current expectations, estimates and projections about future events. These include, but are not limited to, statements, if any, regarding business plans, pro-forma statements and financial projections, ARC's ability to expand its services and realize growth. These statements are not historical facts or guarantees of future performance, events or results. Such statements involve potential risks and uncertainties, and the general effects of financial, economic, and regulatory conditions affecting our industries. Accordingly, actual results may differ materially. ARC does not have any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. For further information on risks and uncertainties that could affect ARC's business, financial condition and results of operations, readers are encouraged to review Item 1A. - Risk Factors and all other disclosures appearing in ARC's Form 10-K for the fiscal year ended June 30, 2015 and Form 10-Q for the period ended September 27, 2015 as well as current reports on Form 8-K filed from time-to-time with the Securities and Exchange Commission.

   
ARC Group Worldwide, Inc.  
Unaudited Condensed Consolidated Statements of Operations  
(in thousands, except for share and per share amounts)  
                         
    For the three months ended     For the six months ended  
    December 27,  2015     December 28,  2014     December 27,  2015     December 28,  2014  
Sales   $ 25,028     $ 27,106     $ 49,517     $ 55,804  
Cost of sales     20,407       20,719       40,412       42,434  
Gross profit     4,621       6,387       9,105       13,370  
  Selling, general and administrative     4,312       4,919       8,525       10,418  
  Merger expense     -       11       -       187  
Income from operations     309       1,457       580       2,765  
  Other income (expense), net     91       (9 )     94       (11 )
  Interest expense, net     (1,126 )     (1,213 )     (2,267 )     (2,134 )
(Loss) income before income taxes     (726 )     235       (1,593 )     620  
  Income tax benefit (expense)     132       (237 )     558       (390 )
Net (loss) income     (594 )     (2 )     (1,035 )     230  
Less: Net income attributable to non-controlling interest     (35 )     (58 )     (64 )     (114 )
Net (loss) income attributable to ARC Group Worldwide, Inc.   $ (629 )   $ (60 )   $ (1,099 )   $ 116  
Net (loss) income per common share:                                
  Basic and diluted   $ (0.03 )   $ -     $ (0.06 )   $ 0.01  
                                 
Weighted average common shares outstanding:                                
  Basic and diluted     18,123,883       14,673,205       18,123,883       14,673,205  
                                 
   
ARC Group Worldwide, Inc.  
Unaudited Condensed Consolidated Balance Sheets  
(in thousands, except for share and per share amounts)  
             
    December 27, 2015     June 30, 2015  
ASSETS                
Current assets:                
  Cash   $ 3,867     $ 4,821  
  Accounts receivable, net     14,214       15,385  
  Inventories, net     15,274       16,386  
  Deferred income tax assets     847       672  
  Prepaid expenses and other current assets     4,809       2,330  
Total current assets     39,011       39,594  
Property and equipment, net     42,035       43,813  
Goodwill     14,801       14,801  
Intangible assets, net     24,754       26,441  
Other     1,160       1,374  
Total assets   $ 121,761     $ 126,023  
                 
LIABILITIES AND STOCKHOLDERS' EQUITY                
Current liabilities:                
  Accounts payable   $ 6,827     $ 7,338  
  Accrued expenses     2,407       3,026  
  Deferred revenue     949       991  
  Bank borrowings, current portion of long-term debt     6,700       5,995  
  Capital lease obligations, current portion     879       857  
  Accrued escrow obligations, current portion     2,842       4,291  
Total current liabilities     20,604       22,498  
Long-term debt, net of current portion     49,444       51,971  
Deferred income tax liabilities     2,577       2,029  
Capital lease obligations, net of current portion     2,369       2,784  
Accrued escrow obligations, net of current portion     1,208       -  
Other long-term liabilities     73       -  
Total liabilities     76,275       79,282  
                 
Commitments and contingencies                
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; 19,037,698 shares issued and 19,029,297 shares issued and outstanding at December 27, 2015, and 18,538,522 shares issued and 18,530,121 shares issued and outstanding at June 30, 2015     5       5  
  Treasury stock, at cost; 8,401 shares at December 27, 2015 and June 30, 2015     (94 )     (94 )
  Additional paid-in capital     29,631       29,751  
  Retained earnings     14,832       15,931  
  Accumulated other comprehensive loss     (56 )     (58 )
  Total ARC Group Worldwide, Inc. stockholders' equity     44,318       45,535  
  Non-controlling interests     1,168       1,206  
  Total equity     45,486       46,741  
Total liabilities and equity   $ 121,761     $ 126,023  
                 
   
ARC Group Worldwide, Inc.  
Unaudited Condensed Consolidated Statements of Cash Flows  
(in thousands)  
             
    For the six months ended  
    December 27, 2015     December 28, 2014  
Cash flows from operating activities:                
Net (loss) income   $ (1,035 )   $ 230  
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:                
  Depreciation and amortization     4,750       4,666  
  Bad debt expense and other     69       (56 )
  Deferred income taxes     374       12  
Changes in working capital:                
  Accounts receivable     1,157       (309 )
  Inventory     1,111       (1,200 )
  Prepaid expenses and other assets     (2,265 )     (1,502 )
  Accounts payable     (560 )     (2,944 )
  Accrued expenses     (960 )     604  
  Deferred revenue     (43 )     274  
Net cash provided by (used in) operating activities     2,598       (225 )
                 
Cash flows from investing activities:                
  Purchases of property and equipment     (1,339 )     (3,446 )
Net cash used in investing activities     (1,339 )     (3,446 )
                 
Cash flows from financing activities:                
  Proceeds from debt issuance     1,000       23,500  
  Repayments of long-term debt and capital lease obligations     (3,215 )     (25,216 )
  Stock issuance costs     -       (138 )
Net cash used in financing activities     (2,215 )     (1,854 )
  Effect of exchange rates on cash     2       -  
Net decrease in cash     (954 )     (5,525 )
Cash, beginning of period     4,821       9,384  
Cash, end of period   $ 3,867     $ 3,859  
Supplemental disclosures of cash flow information:                
  Cash paid for interest   $ 1,474     $ 1,587  
  Cash paid for income taxes   $ 514     $ 20  
                 

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