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8-K - 8-K - ARC Group Worldwide, Inc.a14-24339_18k.htm

Exhibit 99.1

 

FOR IMMEDIATE RELEASE

DATE: NOVEMBER 12, 2014

 

 

ARC GROUP WORLDWIDE REPORTS RECORD SALES AND GROSS PROFIT

 

For the quarter ended September 28, 2014, compared sequentially to the quarter ended June 30, 2014:

 

·                  Record Sales of $28.7 million, compared to $23.7 million, an increase of 21.1%;

·                  Record Gross Profit of $7.0 million, compared to $5.8 million, an increase of 20.7%; and

·                  Adjusted EBITDA of $4.0 million, compared to $2.2 million, an increase of 81.8%.

 

DELAND, FL., November 12, 2014/PRNewswire/—ARC Group Worldwide, Inc. (“ARC”) (NASDAQ: ARCW), a leading global provider of advanced manufacturing and 3D printing solutions, today announced results for its 2015 fiscal first quarter ended September 28, 2014, including record sales and gross profit.

 

Fiscal Year First Quarter Operating Results

 

Revenue of $28.7 million during the first quarter exceeded all previous Company quarterly results, reflecting an increase of 56.0% compared to the prior year period.  Similarly, the Company also achieved record gross profit of $7.0 million, an increase of 22.8% compared to the prior year period.  Gross margins increased sequentially, from 20.6% in the fourth quarter (pro-forma for acquisitions during the full 90 day period) to 24.3% during the first quarter.  Plant-level EBITDA increased during the quarter to $5.1 million, from $3.7 million, representing sequential growth of 37.8%.  Overall, adjusted EBITDA was $4.0 million, an increase of 17.6% compared to the prior year period.  On a sequential basis, adjusted EBITDA grew 81.8% from the fiscal fourth quarter of 2014.  Adjusted EPS was $0.04 per share for the quarter, as compared with $0.14 for the prior year period, resulting primarily from higher depreciation and amortization and interest expense as a product of our recent acquisitions.

 

Jason Young, Chairman and CEO, commented, “In fiscal 2012, annual revenue for the Company was $30 million.  Two years later, quarterly revenue is now approaching what we previously achieved on an annual basis.  More importantly, we have assembled world-class advanced manufacturing capabilities to sell an enterprise-level product offering, as opposed to the single-solution capability of years past.  While our sales cycles are 9-12 months, early signs of our cross-selling efforts have resonated well with our customers.  Gross margins added close to four hundred basis points sequentially, on a pro-forma basis, bringing gross profit to a record level.  We remain focused on driving synergies, integration, automation, lean manufacturing and cost saving initiatives, which should provide margin expansion over time.  Adjusted EBITDA has improved, adding approximately five hundred basis points of margin on a sequential basis.  While ARC continues to invest in sales resources and technology, we still aim to improve EBITDA margins over time as well.  Technology is a big differentiator in our business model and a key driver to future growth, so our considerable investment in technology and world class sales platform should pay off in the long run.”

 

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GAAP to Non-GAAP Reconciliation

 

Adjusted Earnings, Adjusted EPS and Adjusted EBITDA are non-GAAP financial measures.  Adjusted Earnings represents the results of operations net of unusual expenses incurred during the period.  We have provided this non-GAAP financial information to aid in better understanding the company’s performance absent these charges.  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 (in thousands, except for share and per share amounts):

 

For the three months ended:

 

September 28,
2014

 

September 29,
2013

 

Net Income Attributable to ARC Group Worldwide, Inc. (GAAP)

 

$

176

 

$

1,254

 

Plus: Merger Expenses

 

176

 

 

Plus: Other Non-Recurring Expenses

 

286

 

 

Plus: Share-Based Compensation

 

 

701

 

Adjusted Earnings (Non-GAAP)

 

$

638

 

$

1,955

 

Plus: Interest Expense, Net

 

921

 

205

 

Plus: Income Taxes

 

153

 

386

 

Plus: Depreciation and Amortization

 

2,311

 

898

 

Adjusted EBITDA (Non-GAAP)

 

$

4,023

 

$

3,444

 

Weighted Average Common Shares

 

14,673,205

 

14,320,350

 

Adjusted Basic and Diluted Earnings Per Share (Non-GAAP)

 

$

0.04

 

$

0.14

 

 

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.  Share-based compensation consists of a non-recurring stock grant made to our Chief Executive Officer in fiscal 2014.

 

Adjusted EBITDA excludes interest expense, net and income taxes because these items are associated with our capitalization and tax structures.  Adjusted 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.

 

Plant-level EBITDA consists of net income from each of our operating facilities, but excludes corporate expenses.  We adjust the plant net income to exclude interest expense, net, income taxes and depreciation and amortization expense.  We have provided this non-GAAP financial measure to aid in better understanding the Company’s plant-level operating performance.

 

Fourth quarter fiscal year 2014 pro-forma gross margin was calculated by combining the Company’s historical fourth quarter gross profit with the fourth quarter gross profit of companies acquired for the period during the fourth quarter prior to their acquisition.  We believe this is a useful non-GAAP measure to provide a better understanding of the Company’s sequential run-rate, gross margin performance.

 

About ARC Group Worldwide, Inc.

 

ARC Group Worldwide, Inc. is a leading global advanced manufacturing and 3D printing service provider.  Founded in 1987, 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 (“MIM”), ARC has significant expertise in 3D printing and imaging, materials science, advanced tooling, automation, machining, stamping, plastic injection molding, lean manufacturing, and robotics.  For more information about ARC Group Worldwide, Inc. please visit ARC Group Worldwide or its operating subsidiaries at 3D Material

 

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Technologies, Advanced Forming Technology., Advanced Forming Technology - Hungary, ARCMIM, ARC Wireless, Advance Tooling Concepts, FloMet, General Flange & Forge, Injectamax, Kecy Metal Technologies, Tekna Seal, and Thixoforming.

 

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IMPORTANT INFORMATION

 

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 additional factors that may affect future results, please see filings made by ARC with the Securities and Exchange Commission (“SEC”), including its Form 10-K for the fiscal year ended June 30, 2014 and Form 10-Q for the period ended September 28, 2014, as well as current reports on Form 8-K filed from time-to-time with the SEC.

 

CONTACT: Drew M. Kelley

 

PHONE: (303) 467-5236

 

Email: InvestorRelations@ArcGroupWorldwide.com

 

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ARC Group Worldwide, Inc.

Unaudited Condensed Consolidated Statements of Operations

(in thousands, except for share and per share amounts)

 

 

 

For the three months ended

 

 

 

September 28,
2014

 

September 29,
2013

 

Sales

 

$

28,698

 

$

18,400

 

Cost of sales

 

21,715

 

12,729

 

Gross profit

 

6,983

 

5,671

 

Selling, general and administrative

 

5,499

 

3,770

 

Merger expenses

 

176

 

 

Income from operations

 

1,308

 

1,901

 

Other income (expense), net

 

(2

)

 

Interest expense, net

 

(921

)

(205

)

Income before income taxes

 

385

 

1,696

 

Income tax expense

 

(153

)

(386

)

Net income

 

232

 

1,310

 

Less: Net income attributable to non-controlling interest

 

(56

)

(56

)

Net income attributable to ARC Group Worldwide, Inc.

 

$

176

 

$

1,254

 

 

 

 

 

 

 

Net income per common share:

 

 

 

 

 

Basic and diluted income per share

 

$

0.01

 

$

0.09

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

Basic and diluted

 

14,673,205

 

14,320,350

 

 

5



 

ARC Group Worldwide, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except for share and per share amounts)

 

 

 

September 28,
2014

 

June 30, 2014

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

7,312

 

$

9,384

 

Accounts receivable, net

 

15,595

 

15,337

 

Inventories, net

 

16,299

 

15,231

 

Prepaid and other current assets

 

3,771

 

2,606

 

Total current assets

 

42,977

 

42,558

 

Property and equipment, net

 

46,270

 

45,268

 

Goodwill

 

15,689

 

16,357

 

Intangible assets, net

 

29,957

 

30,825

 

Other

 

802

 

1,381

 

Total assets

 

$

135,695

 

$

136,389

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

6,956

 

$

9,430

 

Accrued expenses

 

5,387

 

5,905

 

Deferred revenue

 

852

 

1,016

 

Bank borrowings, current portion of long-term debt

 

17,902

 

14,419

 

Capital lease obligations, current portion

 

1,133

 

1,124

 

Accrued escrow obligation

 

1,691

 

2,400

 

Total current liabilities

 

33,921

 

34,294

 

Long-term debt, net of current portion

 

62,483

 

62,757

 

Capital lease obligations, net of current portion

 

4,437

 

4,723

 

Accrued escrow obligation

 

2,600

 

2,600

 

Other

 

681

 

674

 

Total liabilities

 

104,122

 

105,048

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock, $0.001 par value, 2,000,000 authorized, no shares issued and outstanding

 

 

 

Common stock, $0.0005 par value, 250,000,000 shares authorized; 15,088,522 shares issued and 15,080,121 shares outstanding at September 28, 2014 and June 30, 2014

 

3

 

3

 

Treasury stock, at cost; 8,401 shares at September 28, 2014 and June 30, 2014

 

(94

)

(94

)

Additional paid-in capital

 

14,293

 

14,293

 

Retained earnings

 

16,319

 

16,143

 

ARC Group Worldwide, Inc. total stockholder equity

 

30,521

 

30,345

 

Non-controlling interest

 

1,052

 

996

 

Total stockholders’ equity

 

31,573

 

31,341

 

Total liabilities and stockholders’ equity

 

$

135,695

 

$

136,389

 

 

6



 

ARC Group Worldwide, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(in thousands)

 

 

 

For the three months ended

 

 

 

September 28,
2014

 

September 29,
2013

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

232

 

$

1,310

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

2,311

 

898

 

Non-cash stock based compensation expense

 

 

701

 

Amortization of debt discount

 

 

105

 

Bad debt expense and other

 

29

 

48

 

Deferred income taxes

 

23

 

 

Changes in working capital, net of assets acquired and liabilities assumed in business combinations:

 

 

 

 

 

Accounts receivable

 

(277

)

362

 

Inventory

 

(1,068

)

(256

)

Prepaid expenses and other assets

 

(600

)

(456

)

Accounts payable

 

(2,474

)

162

 

Other accrued expenses

 

(558

)

383

 

Deferred revenue

 

(164

)

(391

)

Net cash provided by (used in) operating activities

 

(2,546

)

2,866

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchase of plant and equipment

 

(2,457

)

(371

)

Net cash used in investing activities

 

(2,457

)

(371

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from debt issuance

 

3,500

 

 

Repayments of long-term debt and capital lease obligations

 

(569

)

(1,758

)

Net cash provided by (used in) financing activities

 

2,931

 

(1,758

)

Net increase (decrease) in cash and cash equivalents

 

(2,072

)

737

 

Cash and cash equivalents, beginning of period

 

9,384

 

3,601

 

Cash and cash equivalents, end of period

 

$

7,312

 

$

4,338

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

Cash paid for interest

 

$

843

 

$

100

 

Cash paid for income taxes

 

$

25

 

$

 

Non-cash investing and financing activities:

 

 

 

 

 

Equity exchanges for membership interests

 

$

 

$

312

 

Termination of note receivable from related party

 

$

 

$

272

 

 

7