SOURCE: Cyalume Technologies Holdings Inc.

Cyalume Technologies Holdings Inc.

November 19, 2013 18:05 ET

Cyalume Technologies Holdings, Inc. Reports 2013 Third Quarter and Nine Months Financial Results

WEST SPRINGFIELD, MA--(Marketwired - Nov 19, 2013) -  Cyalume Technologies Holdings, Inc. (OTCBB: CYLU) ("the Company" or "Cyalume") today reported its financial results for the third quarter and nine months ended September 30, 2013.

                         
$ in thousands   Three Months Ended    
Change
    Nine Months Ended    
Change
 
9/30/13     9/30/12     9/30/13     9/30/12    
Revenues   $ 7,461     $ 10,095     -26.1 %   $ 25,006     $ 27,012     -7.4 %
Gross profit   $ 3,244     $ 4,032     -19.5 %   $ 11,553     $ 11,551     0.0 %
Gross margin     43.5 %     39.9 %   354 bps       46.2 %     42.8 %   344 bps  
Net loss **   $ (7,804 )   $ (47,170 )   NM*     $ (9,662 )   $ (48,526 )   NM*  
                                             

* NM - Not meaningful 
** 2012 three and nine months ended periods include $47.6 million of non-cash impairment charges related to an acquisition made several years ago.

Cyalume's President & CEO, Zivi Nedivi, noted, "The decline in revenues during the third quarter of 2013 as compared to the same period of last year primarily reflects the impacts of the U.S. federal government budget sequestration and the recent government shutdown, as well as the timing of certain military orders for our Chemical Light business. Ammunition revenues were also lower compared to the third quarter of 2012, as we are between contracts for military training rounds, with the next program we expect to participate in delayed until the second half of 2014. Partially offsetting these declines were increased sales of our Training and Simulation Products and Specialty Products. We posted an improvement in gross margin in the third quarter of 2013 relative to the comparable prior year period as a result of a favorable mix of more profitable sales during the current year quarter."

Mr. Nedivi continued, "Our reported net loss in the third quarter of 2013 was primarily comprised of a $2.0 million legal settlement with the former owner of Combat Training Solutions (CTS), a $2.7 million increase in general and administrative expenses from the third quarter of 2012 largely the result of higher legal and consulting expenses associated with the case, and a $3.7 million non-cash provision for an uncollectible receivable from a related party."

Mr. Nedivi concluded, "With the legal settlement behind us, we have stopped a significant drag on our financial and corporate resources. We will continue to execute our business plan and pursue opportunities to grow our business through new product launches, current product upgrades, and expansion into new markets."

Conference Call
Cyalume's President & CEO, Zivi Nedivi, and CFO, Michael Bielonko, will host a conference call on Monday, November 25, 2013 at 11:00 am ET to discuss these results as well as recent corporate developments. After opening remarks, there will be a question and answer period. Interested parties may participate in the call by dialing (201) 493-6739. Please call in 10 minutes before the conference call is scheduled to begin and ask for the Cyalume call. Questions may be asked during the live call, or alternatively, you may e-mail questions in advance to lcati@equityny.com.

The conference call will also be broadcast live over the Internet. To listen to the live call, please go to www.cyalume.com click on the Investors section, then to the Events and Presentations where the conference call is posted. Please go to the website 15 minutes early to download and install any necessary audio software. If you are unable to listen live, the conference call will be archived and can be accessed for approximately 90 days. We suggest listeners use Microsoft Explorer as their browser.

About Cyalume Technologies Holdings, Inc.
Cyalume designs and manufactures non-pyrotechnic tactical products and training solutions for the world's militaries and law enforcement agencies, as well as for certain safety markets. Cyalume is the exclusive supplier to the U.S. and NATO-country militaries for all of their chemical light needs and operates manufacturing facilities in the U.S. and France. Through its subsidiary Cyalume Specialty Products, Cyalume also manufactures specialty chemical components for various markets.

Forward-Looking Statements
This press release and the accompanying scheduled investor conference call include forward-looking statements concerning sales and operating earnings. These forward-looking statements are based upon management's expectations and beliefs concerning future events. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company and which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to: the effect of regional and global economic and industrial market conditions including our expectations concerning their impact on the markets we serve; the effect of conditions in the financial and credit markets and their impact on the Company and our customers and suppliers; the impact of the Company's cost reduction initiatives; the Company's ability to execute its business plan to meet its sales, operating income, cash flow and capital expenditure guidance; the impact on the Company's gross profit margins as a result of changes in product mix; the Company's vulnerability to industry conditions and competition; the effect of any interruption in the Company's supply of raw materials or a substantial increase in the price of raw materials; ongoing capital expenditures and investment in research and development; compliance with any changes in government regulations and environmental and health and safety laws; the effect on the Company's international operations of unexpected changes in legal and regulatory requirements, export restrictions, currency controls, tariffs and other trade barriers, difficulties in staffing and managing foreign operations, political and economic instability, difficulty in accounts receivable collection and potentially adverse tax consequences; the effect of foreign currency exchange rates as the Company's non-U.S. sales continue to increase; reliance for a significant portion of the Company's total revenues on a limited number of large organizations and the continuity of business relationships with major customers; the loss of key personnel; the nature and extent of military operations being conducted by customers.

Actual results and events may differ significantly from those projected in the forward-looking statements. Reference is made to Cyalume's filings with the Securities and Exchange Commission, including its most recent annual report on Form 10-K, its quarterly reports on Form 10-Q, and other periodic filings, for a description of the foregoing and other factors that could cause actual results to differ materially from those in the forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

The footnotes and other disclosures contained in the Company's annual report on Form 10-K, its quarterly reports on Form 10-Q, and other periodic filings are an integral part of its financial statements and should be read in conjunction with any review of its financial statements.

   
Cyalume Technologies Holdings, Inc.  
Consolidated Statements of Comprehensive Loss  
(in thousands, except shares and per share information)  
   
                         
    For the Three
Months Ended
September 30,
2013
    For the Three
Months Ended
September 30,
2012
    For the Nine
Months Ended
September 30,
2013
    For the Nine
Months Ended
September 30,
2012
 
Revenues   $ 7,461     $ 10,095     $ 25,006     $ 27,012  
Cost of revenues     4,217       6,063       13,453       15,461  
Gross profit     3,244       4,032       11,553       11,551  
                                 
Other expenses (income):                                
  Sales and marketing     1,200       1,262       3,650       4,229  
  General and administrative     4,411       1,679       9,107       5,105  
  Research and development     371       441       1,431       1,424  
  Interest expense, net     620       559       1,790       1,675  
  Interest expense - related party     122       2       174       18  
  Amortization of intangible assets     434       466       1,303       1,420  
  Provision for uncollectible receivable - related party     3,730       0       3,730       0  
  Impairment loss on goodwill and intangible assets     0       47,369       1,043       47,369  
  Impairment loss on equipment     0       273       0       273  
  Legal settlement     2,038       0       2,038       0  
  Change in fair value of contingent consideration     0       19       0       241  
  Other (income) loss, net     45       (31 )     49       (145 )
Total other expenses     12,971       52,039       24,315       61,609  
                                 
Loss before income taxes     (9,727 )     (48,007 )     (12,762 )     (50,058 )
Benefit from income taxes     (1,923 )     (837 )     (3,100 )     (1,532 )
Net loss     (7,804 )     (47,170 )     (9,662 )     (48,526 )
                                 
Other comprehensive income (loss), net of tax:                                
  Foreign currency translation adjustments     199       124       105       (60 )
  Unrealized gain on cash flow hedges, net of taxes of $(14), $(14), $(28) and $(21), respectively     22       15       70       48  
Other comprehensive income (loss)     221       139       175       (12 )
Comprehensive loss   $ (7,583 )   $ (47,031 )   $ (9,487 )   $ (48,538 )
                                 
Net loss per common share:                                
  Basic and diluted   $ (0.38 )   $ (2.59 )   $ (0.47 )   $ (2.67 )
                                 
Weighted average shares used to compute net income (loss) per common share:                                
  Basic and diluted     20,716,901       18,212,618       20,711,352       18,192,805  
   
   
   
Cyalume Technologies Holdings, Inc.  
Consolidated Balance Sheets  
(in thousands, except shares and per share information)  
   
    September 30,
2013
    December 31,
2012
 
Assets                
Current assets:                
  Cash   $ 1,607     $ 2,695  
  Accounts receivable, net of allowance for doubtful accounts of $41 and $155, respectively     4,242       3,875  
  Inventories, net     11,335       9,597  
  Income taxes refundable     134       173  
  Deferred income taxes     722       652  
  Prepaid expenses and other current assets     980       558  
Total current assets     19,020       17,550  
                 
  Property, plant and equipment, net     8,604       9,177  
  Goodwill     7,992       8,160  
  Other intangible assets, net     18,390       20,190  
  Due from related party     563       3,972  
  Other noncurrent assets     0       28  
Total assets   $ 54,569     $ 59,077  
                 
Liabilities and Stockholders' Equity                
Current liabilities:                
  Line of credit   $ 3,600     $ 0  
  Current portion of notes payable     16,919       9,734  
  Note payable due to related parties     2,100       0  
  Accounts payable     5,416       2,934  
  Accrued expenses     5,009       2,583  
  Deferred revenue     58       0  
  Current portion of capital lease obligation     15       14  
  Derivatives liability     43       169  
Total current liabilities     33,160       15,434  
                 
  Notes payable, net of current portion     0       8,394  
  Note payable due to related parties     0       2,100  
  Deferred income taxes     722       3,862  
  Asset retirement obligation     191       184  
  Capital lease obligation, net of current portion     10       22  
  Contingent legal obligation     3,941       3,806  
  Other noncurrent liabilities     48       0  
Total liabilities     38,072       33,802  
                 
Commitments and contingencies (Note 12)                
                 
Stockholders' equity                
  Preferred stock, $0.001 par value; 1,000,000 shares authorized, no shares issued or outstanding     0       0  
  Common stock, $0.001 par value; 100,000,000 shares authorized; 20,738,260 issued and outstanding     21       21  
  Additional paid-in capital     106,699       105,990  
  Accumulated deficit     (89,883 )     (80,221 )
  Accumulated other comprehensive loss     (340 )     (515 )
Total stockholders' equity     16,497       25,275  
Total liabilities and stockholders' equity   $ 54,569     $ 59,077  
                 

Adjusted EBITDA (a Non-GAAP Financial Measure)

Cyalume defines Adjusted EBITDA as net income before interest expense, income taxes, depreciation, amortization, non-cash stock-based compensation, foreign currency gains or losses and certain one-time income or expense items. Management uses Adjusted EBITDA for establishing internal budgets, goals and certain performance bonuses. Internal financial reports including those provided to the Board of Directors, focus on Adjusted EBITDA. Since Adjusted EBITDA is not necessarily an indicator of overall cash flows of Cyalume, management reviews capital budgets and cash flow forecasts in parallel with Adjusted EBITDA analysis. Because Adjusted EBITDA eliminates interest expense, income taxes and depreciation, amortization, non-cash stock-based compensation, foreign currency gains or losses and one-time income or expense items, Cyalume considers this financial measure an important indicator of Cyalume's liquidity, operational strength and performance. Investors may find Adjusted EBITDA useful as it illustrates underlying operating trends in Cyalume's business.

In addition, components of Adjusted EBITDA are a key component in the determination of our compliance with certain covenants under our credit agreements. Adjusted EBITDA is not a measure of financial performance under GAAP. Adjusted EBITDA should not be considered in isolation, or as a substitute for net income, cash flows, or other consolidated income or cash flow data presented in accordance with GAAP or as a measure of our liquidity or financial condition. Because Adjusted EBITDA is not a measure determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA as discussed may not be comparable to other similarly titled measures of other companies.

The use of Adjusted EBITDA as a supplemental liquidity measure is useful as it assists management in understanding and evaluating the Company's capacity, excluding the impact of interest, taxes, and non-cash depreciation and amortization charges, for servicing debt and other cash needs, prior to our consideration of the impacts of other potential sources and uses of cash, such as working capital items. Investors may find it useful for these purposes as well. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net cash provided by operating activities, as determined in accordance with GAAP, since it omits the impact of interest, taxes and changes in working capital that use or provide cash (such as receivables, payables and inventories) as well as the sources or uses of cash associated with changes in other balance sheet items (such as long-term loss accruals and deferred items). Because Adjusted EBITDA excludes depreciation and amortization, Adjusted EBITDA does not reflect any cash requirements for the replacement of the assets being depreciated and amortized, which assets will often have to be replaced in the future. Further, Adjusted EBITDA, because it also does not reflect the impact of debt service, income taxes, cash dividends, capital expenditures and other cash commitments, does not represent how much discretionary cash we have available for other purposes. Nonetheless, Adjusted EBITDA is a key measure expected by and useful to our investors, rating agencies and the banking community in the analysis of a Company's ability to service debt, fund capital expenditures and otherwise meet cash needs, respectively. Cyalume also evaluates Adjusted EBITDA because it is clear that movements in these non-GAAP measures impact the Company's ability to attract financing. Adjusted EBITDA, as calculated, may not be comparable to similarly titled measures reported by other companies.

   
Cyalume Technologies Holdings, Inc.  
Reconciliation of Net Income to Adjusted EBITDA  
(in thousands)  
   
    For the Three
Months Ended
September 30,
2013
    For the Three
Months Ended
September 30,
2012
    For the Nine
Months Ended
September 30,
2013
    For the Nine
Months Ended
September 30,
2012
 
                                 
Net Loss   $ (7,804 )   $ (47,170 )   $ (9,662 )   $ (48,526 )
                                 
Adjustments to arrive at EBITDA:                                
  Interest expense, net     742       561       1,964       1,693  
  Benefit from income taxes     (1,923 )     (837 )     (3,100 )     (1,532 )
  Depreciation     348       348       1,030       1,031  
  Amortization     434       466       1,303       1,420  
  Impairment of goodwill, intangibles and equipment     0       47,642       1,043       47,642  
                                 
EBITDA     (8,203 )     1,010       (7,422 )     1,728  
                                 
Adjustments to arrive at Adjusted EBITDA:                                
  Contingent consideration     0       19       0       241  
  Other one-time expenses (1)     270       77       752       307  
Adjusted EBITDA   $ (7,933 )   $ 1,106     $ (6,670 )   $ 2,276  
                                 

(1) Non-cash stock-based compensation and foreign exchange (gains)/losses

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