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8-K - 8-K - ARC Group Worldwide, Inc.f8-k.htm

EXHIBIT 99.1

 

FOR IMMEDIATE RELEASE

DATE: November 13, 2017

 

 

Picture 1

 

 

ARC Group Worldwide Reports Fiscal Year First Quarter 2018 Results

 

 

DELAND, FL., November 13, 2017—ARC Group Worldwide, Inc. (“ARC” or the “Company”) (NASDAQ: ARCW), a leading global provider of advanced manufacturing and metal 3D printing solutions, today reported its results for the period ending October 1, 2017, its fiscal first quarter 2018.

 

Quarterly Financial Summary

 

Fiscal first quarter 2018 revenue from continuing operations was $19.9 million, compared to $25.7 million for the fiscal first quarter of 2017.  The decrease in sales was primarily driven by lower MIM and plastics sales, most notably in the firearm and defense sectors.  Lower production volumes impacted the Company’s operational efficiency during the quarter, as gross profit from continuing operations was $1.4 million, compared to $4.7 million for the prior year period.

 

Selling, general and administrative expenses for the fiscal first quarter 2018 declined to $3.5 million, down from $4.9 million in the prior year period.  Expense reductions were primarily attributable to the Company’s recent cost elimination initiatives.

 

EBITDA from continuing operations for the fiscal first quarter 2018 was $0.4 million, compared to the prior year period of $1.4 million.  Net loss from continuing operations for the fiscal first quarter 2018 was $3.3 million, compared to net loss from continuing operations of $0.7 million for the prior year period.

 

Fiscal first quarter 2018 net loss was $3.6 million, compared to net income of $3.6 million for the fiscal first quarter of 2017.  Prior year results included the $4.3 million benefit associated with and from the sale of the Company’s non-core subsidiaries.

 

ARC’s interim CEO and CFO, Drew M. Kelley, commented, “Management remains focused on returning the Company to profitability, while driving cash flow and rightsizing the balance sheet.  While certain markets we service remain challenged, the Company is not taking a passive approach towards improving top and bottom line results.  Specifically, the Company recently implemented a new cost saving program which we estimate will eliminate approximately $3.3 million in expenses per year.  Notably, these cost reductions are incremental to previously announced initiatives, which are estimated to eliminate approximately $6.0 million in annual costs.  While we expect the decline in sales to be temporary, our focus on operational efficiency and cost reduction will be ongoing.  Thus, a further review of the recent operating results suggest once our combined cost reduction initiatives take hold, we can expect to achieve similar profitability and margins despite lower top line results.  Thereafter, with the eventual return of normalized revenue levels, overall profitability could exceed historic results.”

 

Mr. Kelley continued, “At the same time, our metal 3D business continues to advance, both technically and financially, recording robust sequential revenue growth and record EBITDA during the quarter.  As a result of this continued improvement, the Company is evaluating additional investment opportunities to further accelerate the pace of growth.”

 

 

1


 

GAAP to Non-GAAP Reconciliation

 

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 are 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.  Specifically, EBITDA from Continuing Operations, EBITDA Margin from Continuing Operations, Facility EBITDA from Continuing Operations, Facility EBITDA Margin from Continuing Operations, Adjusted Earnings, and Adjusted Earnings Per Share are non-GAAP financial measures.  EBITDA Margin from Continuing Operations and Facility EBITDA Margin from Continuing Operations are calculated by dividing EBITDA from Continuing Operations and Facility EBITDA from Continuing Operations, respectively, by sales.

 

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

 

 

 

 

 

 

 

 

 

 

    

 

October 1,

 

October 2,

    

For the three months ended:

 

 

2017

 

2016

 

Net (Loss) Income

 

$

(3,555)

 

$

3,607

 

Interest Expense, Net

 

 

1,012

 

 

1,107

 

Income Taxes

 

 

172

 

 

(1,331)

 

Depreciation and Amortization

 

 

2,516

 

 

2,345

 

Adjustment to Exclude Loss (Income) from Discontinued Operations

 

 

270

 

 

(4,318)

 

EBITDA from Continuing Operations

 

$

415

 

$

1,410

 

EBITDA Margin from Continuing Operations

 

 

2.1

%  

 

5.5

%  

Corporate Expenses

 

 

1,086

 

 

2,140

 

Facility EBITDA from Continuing Operations

 

$

1,501

 

$

3,550

 

Facility EBITDA Margin from Continuing Operations

 

 

7.5

%  

 

13.8

%  

 

 

 

 

 

 

 

 

Net (Loss) Income

 

$

(3,555)

 

$

3,607

 

Adjustment to Exclude Loss (Income) from Discontinued Operations, Net of Tax

 

 

270

 

 

(4,318)

 

Reorganization/Transaction Expenses

 

 

329

 

 

1,088

 

Adjusted Earnings

 

$

(2,956)

 

$

377

 

Adjusted Earnings Per Share

 

$

(0.16)

 

$

0.02

 

Weighted Average Common Shares Outstanding

 

 

18,194,091

 

 

18,123,883

 

 

 

 

 

 

 

 

 

 

EBITDA from Continuing Operations excludes interest expense, net and income taxes as these items are associated with our capitalization and tax structures.  EBITDA from Continuing Operations also excludes depreciation and amortization expense as these non-cash expenses reflect the impact of prior capital expenditure decisions, which may not be indicative of future capital expenditure requirements.  EBITDA from Continuing Operations excludes the (income) or loss associated with discontinued operations.

 

Facility EBITDA from Continuing Operations consists of EBITDA from our operating segments.  We believe this is a meaningful measurement of the operating performance of our manufacturing facilities.  Corporate expenses primarily consist of costs not allocated to our manufacturing facilities, such as compensation related costs for employees assigned to corporate, board of directors fees and expenses, professional fees, insurance costs, and marketing costs.

 

Adjusted Earnings removes the impact of reorganization/transaction related expenses and the impact of discontinued operations.  Reorganization expenses are primarily labor and labor related costs associated with the termination of employees.  Transaction expenses are primarily professional fees related to the refinancing of debt and the sale of non-core assets.

 

2


 

About ARC Group Worldwide, Inc.

ARC Group Worldwide, Inc. is a global advanced manufacturing and metal 3D printing service provider focused on accelerating speed to market for its customers.  ARC provides a holistic set of precision manufacturing solutions, from design and prototyping through full run production.  These solutions include metal injection molding, metal 3D printing, metal stamping, plastic injection molding, clean room injection molding, thixomolding, and rapid and conformal tooling.  Further, ARC utilizes technology to improve automation in manufacturing through robotics, software and process automation, and lean manufacturing to improve efficiency.

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, 2017, as well as other documents ARC files from time to time with the Securities and Exchange Commission.

 

 

PHONE: (303) 467-5236

Email: InvestorRelations@arcw.com

3


 

ARC Group Worldwide, Inc.

Consolidated Statements of Operations

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

 

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

 

 

October 1,

 

October 2,

 

 

 

    

2017

    

2016

    

 

Sales

 

$

19,950

 

$

25,712

 

 

Cost of sales

 

 

18,528

 

 

21,034

 

 

Gross profit

 

 

1,422

 

 

4,678

 

 

Selling, general and administrative

 

 

3,486

 

 

4,857

 

 

Loss from operations

 

 

(2,064)

 

 

(179)

 

 

Other expense, net

 

 

(37)

 

 

(33)

 

 

Interest expense, net

 

 

(1,012)

 

 

(1,107)

 

 

Loss on extinguishment of debt

 

 

 —

 

 

(723)

 

 

Loss before income taxes

 

 

(3,113)

 

 

(2,042)

 

 

Income tax (expense) benefit

 

 

(172)

 

 

1,331

 

 

Net loss from continuing operations

 

 

(3,285)

 

 

(711)

 

 

(Loss) gain on sale of subsidiaries and income (loss) from discontinued operations, net of tax

 

 

(270)

 

 

4,318

 

 

Net (loss) income

 

 

(3,555)

 

 

3,607

 

 

Net income attributable to non-controlling interest

 

 

 

 

 

 

 

 

Continuing operations

 

 

 —

 

 

(22)

 

 

Discontinued operations

 

 

 —

 

 

(4)

 

 

Net income attributable to non-controlling interest

 

 

 —

 

 

(26)

 

 

Net (loss) income attributable to ARC Group Worldwide, Inc.

 

$

(3,555)

 

$

3,581

 

 

 

 

 

 

 

 

 

 

 

Net (loss) income per common share, basic and diluted:

 

 

 

 

 

 

 

 

Continuing operations

 

$

(0.18)

 

$

(0.04)

 

 

Discontinued operations

 

$

(0.02)

 

$

0.24

 

 

Attributable to ARC Group Worldwide, Inc.

 

$

(0.20)

 

$

0.20

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

Basic and diluted

 

 

18,194,091

 

 

18,123,883

 

 

 

4


 

ARC Group Worldwide, Inc.

Consolidated Balance Sheets

(in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

October 1, 2017

    

June 30, 2017

 

ASSETS

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash

 

$

397

 

$

593

 

Accounts receivable, net

 

 

12,278

 

 

10,488

 

Inventories, net

 

 

14,457

 

 

14,369

 

Prepaid expenses and other current assets

 

 

2,685

 

 

3,152

 

Current assets of discontinued operations

 

 

 —

 

 

1,452

 

Total current assets

 

 

29,817

 

 

30,054

 

Property and equipment, net

 

 

40,567

 

 

41,349

 

Goodwill

 

 

6,412

 

 

6,412

 

Intangible assets, net

 

 

18,783

 

 

19,624

 

Other

 

 

298

 

 

291

 

Long-term assets of discontinued operations

 

 

 —

 

 

1,893

 

Total assets

 

$

95,877

 

$

99,623

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

9,735

 

$

8,681

 

Accrued expenses and other current liabilities

 

 

3,216

 

 

3,273

 

Deferred revenue

 

 

1,167

 

 

1,165

 

Bank borrowings, current portion of long-term debt

 

 

1,733

 

 

1,701

 

Capital lease obligations, current portion

 

 

1,490

 

 

1,470

 

Accrued escrow obligations, current portion

 

 

1,212

 

 

1,212

 

Current liabilities of discontinued operations

 

 

 —

 

 

283

 

Total current liabilities

 

 

18,553

 

 

17,785

 

Long-term debt, net of current portion

 

 

42,309

 

 

42,822

 

Capital lease obligations, net of current portion

 

 

1,602

 

 

1,888

 

Accrued escrow obligations, net of current portion

 

 

942

 

 

1,184

 

Other long-term liabilities

 

 

917

 

 

1,017

 

Long-term liabilities of discontinued operations

 

 

 —

 

 

260

 

Total liabilities

 

 

64,323

 

 

64,956

 

 

 

 

 

 

 

 

 

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; 18,240,297 shares issued and 18,231,896 shares issued and outstanding at October 1, 2017, and 18,180,027 shares issued and 18,171,626 shares issued and outstanding at June 30, 2017

 

 

10

 

 

10

 

Treasury stock, at cost; 8,401 shares at October 1, 2017 and June 30, 2017

 

 

(94)

 

 

(94)

 

Additional paid-in capital

 

 

31,503

 

 

31,109

 

Retained earnings

 

 

 —

 

 

3,569

 

Accumulated other comprehensive income

 

 

135

 

 

73

 

Total equity

 

 

31,554

 

 

34,667

 

Total liabilities and equity

 

$

95,877

 

$

99,623

 

 

5


 

ARC Group Worldwide, Inc.

Consolidated Statements of Cash Flows

(in thousands)

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

    

October 1, 2017

    

October 2, 2016

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net (loss) income

 

$

(3,555)

 

$

3,607

 

Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

 

2,516

 

 

2,374

 

Share-based compensation expense

 

 

287

 

 

312

 

Loss (gain) on sale of subsidiaries

 

 

109

 

 

(5,722)

 

Bad debt expense and other

 

 

83

 

 

13

 

Deferred income taxes

 

 

 —

 

 

(888)

 

Changes in working capital:

 

 

 

 

 

 

 

Accounts receivable

 

 

(1,645)

 

 

(1,379)

 

Inventory

 

 

(253)

 

 

(2,414)

 

Prepaid expenses and other assets

 

 

546

 

 

870

 

Accounts payable

 

 

820

 

 

1,990

 

Accrued expenses and other current liabilities

 

 

(437)

 

 

1,701

 

Deferred revenue

 

 

 3

 

 

(37)

 

Net cash (used in) provided by operating activities

 

 

(1,526)

 

 

427

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(957)

 

 

(1,329)

 

Proceeds from sale of subsidiary

 

 

3,000

 

 

10,500

 

Net cash provided by investing activities

 

 

2,043

 

 

9,171

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

Proceeds from debt issuance

 

 

27,073

 

 

32,112

 

Repayments of long-term debt and capital lease obligations

 

 

(28,073)

 

 

(41,487)

 

Issuance of common stock under employee stock purchase plan

 

 

92

 

 

 —

 

Net cash used in financing activities

 

 

(908)

 

 

(9,375)

 

Effect of exchange rates on cash

 

 

195

 

 

18

 

Net (decrease) increase in cash

 

 

(196)

 

 

241

 

Cash, beginning of period

 

 

593

 

 

3,620

 

Cash, end of period

 

$

397

 

$

3,861

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

Cash paid for interest

 

$

955

 

$

1,007

 

Cash paid for income taxes, net of refunds

 

$

27

 

$

(927)

 

 

6