DURHAM, N.C., March 28, 2013 (GLOBE NEWSWIRE) -- EMRISE CORPORATION (OTCQB:EMRI), a multi-national manufacturer of defense and aerospace electronic devices and communications equipment, today announced its financial results for the fourth quarter and full year ended December 31, 2012.
Chairman and CEO Carmine T. Oliva said the Company's results in 2012 reflected continuing improvements in its operations including a further tightening of control over overhead and other costs, which resulted in a 9.9 percent year-over-year decline in operating expenses in 2012. Overall net sales from continuing operations in 2012 increased approximately 2 percent year over year to $34 million compared to $33.5 million in 2011.
Net sales of EMRISE's Electronic Devices segment in 2012 grew 9.1 percent year over year to $24 million, up from $22 million in 2011. Net sales in the Communications Equipment segment declined approximately 13 percent to $10 million, compared to $11.5 million in 2011. EMRISE's Electronic Devices segment accounted for 71 percent of the Company's overall net sales in 2012, while the Communications Equipment segment contributed 29 percent.
Oliva noted that while net sales and profitability for the 2012 fourth quarter and year increased in local currencies in each of the Company's European subsidiaries in line with management's expectations, 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.
"The small year-over-year increase in overall net sales in 2012 also reflects the impact of a $2 million decline in our U.S. Communications Equipment business unit, which offset the higher year-over-year sales of our commercial aerospace In-flight Entertainment and Connectivity (IFE&C) products and sales of network access products at our French Communications Equipment business unit," Oliva added.
The year-over-year net sales increase in the Electronic Devices segment in 2012 was driven principally by higher sales of EMRISE's commercial aerospace IFE&C and Military product lines. The Company is currently seeing a steady inflow of orders for both these product lines. The decline in net sales in the U.S. Communications business unit was driven by declining demand for legacy products and lower and delayed U.S. Government spending.
For the 2012 fourth quarter, EMRISE reported overall net sales of $9.7 million compared to $10.0 million in the prior year fourth quarter. The modest year-over-year decline in overall net sales in the 2012 fourth quarter was principally due to the large decline in the Euro during that period, the decrease in net sales in the U.S. Communications Equipment business unit and a decline in net sales in the Electronic Devices segment due to customer requested changes in delivery schedules. Net sales in the fourth quarter of 2012 increased sequentially by more than 17 percent from $8.2 million in the 2012 third quarter.
Net sales in the Electronic Devices segment during the fourth quarter of 2012 were $6.5 million, compared to $6.9 million in the prior year period. Net sales in the Company's Communication Equipment segment in the fourth quarter of 2012 were $3.1 million compared to $3.1 million in the prior year fourth quarter.
Overall gross margin in 2012 was 29.4 percent, up from 28.4 percent in 2011. The improvement in overall gross margin in 2012 was principally due to increased efficiency and greater overhead absorption resulting from higher sales in the increasingly important Electronics Devices segment, which became more important as the Company's higher-margin U.S. Communications business declined. Overall gross margin in the fourth quarter of 2012 was 31.2 percent, compared to 30.1 percent in the fourth quarter of 2011.
"We are firmly committed to our turnaround strategy," Oliva said. "Since the sale of Advanced Control Components in the Fall of 2010, we have made changes throughout our organization that have streamlined our operations and improved the performance and cost effectiveness of the Company. Today we have a solid backlog of shippable orders and the performance of our business units in England and France remains strong. We are pleased with the bookings by our Electronic Devices segment in both Commercial and Military Aerospace and our French subsidiary's success with our new products in the utilities and public and private communications network markets."
Across Europe and North Africa, sales of EMRISE's network access products from its French business unit in 2012 continued to grow and meet management's expectations. International orders for the French network access products have continued to provide a solid backlog.
Selling, general and administrative (SG&A) expense in 2012 was $8.8 million, or 25.8 percent of net sales, compared to $9.6 million, or 28.7 percent of sales, in 2011. SG&A expenses in 2012 declined for a second consecutive year. Engineering and product development costs in 2012 were $1.3 million, or 3.7 percent of net sales, compared to $1.5 million, or 4.6 percent of net sales in 2011. This decline was the result of engineering personnel focusing on customer-specific engineering, which is captured in the cost of the related products, and a restructured engineering staff at our U.S. Communications Equipment business unit.
Loss from operations in 2012 was $55,000, a decline of approximately $1.59 million when compared to an operating loss of $1.64 million in 2011. Operating income for the 2012 fourth quarter was $495,000, compared to operating income of $394,000 in the fourth quarter of 2011.
Net income for 2012 was $94,000, or $0.01 per basic and diluted share, which was an improvement of more than $1.7 million over the net loss of $1.6 million, or a loss per basic and diluted share of $0.15, for 2011. Net loss for 2011 included $429,000 net of tax income on discontinued operations and assets held for sale. Net income in 2012 included a loss from discontinued operations of $9,000, as well as a benefit of $89,000 from the release of the provision recorded in the 2012 third quarter related to the 2005 acquisition of Pascall. Net income in 2012 also included a $275,000 gain on the extinguishment of the PEM Group debt and a $473,000 insurance settlement for a fire at the Company's French subsidiary in 2010, both of which were previously disclosed and recorded in the second quarter of 2012.
Net income for the 2012 fourth quarter was $466,000, or $0.04 per basic and diluted share, compared to net income in the fourth quarter of 2011 of $205,000, or $0.02 per basic and diluted share. Net income in 2011 included a loss net of tax from discontinued operations of $96,000. There was no income from discontinued operations recorded in the 2012 fourth quarter.
Backlog at the end of the 2012 was $22.6 million compared to $25.5 million at December 31, 2011; however, driven by strong bookings in the first quarter of this year, backlog to date in 2013, has increased to approximately $25 million.
EMRISE 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 2013 as it ships those orders to meet customer delivery schedules. The Company, however, recognizes that there is a risk that customers may seek to delay production and delivery should the strength of the world economy continue to remain uncertain.
As of December 31, 2012, approximately 94 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 6 percent of this backlog was related to the Company's Communications Equipment business, which generally delivers standard products from inventory as orders are received.
"We achieved significant quarterly reductions in losses at our U.S. Communications Equipment business unit in 2012," Oliva added. "The losses that remain, in this our only unprofitable business unit, are predominately related to severance costs associated with our restructuring of that unit. We expect that these severance losses will be eliminated by the end of the second quarter of 2013. We are committed to eliminating those residual losses and to continuing to concentrate on containing costs at the current lower levels, which we believe are appropriate for our expected level of communications product sales in the U.S.
"Of equal importance are our initiatives to produce sales in the U.S. of the network access products manufactured by our French operation and to generate sales of our entire line of communications products through our new U.S. network of independent sales representatives," Oliva said.
As of December 31, 2012, the Company's cash and equivalents was $1.5 million and restricted cash was $407,000, compared to cash and cash equivalents of $805,000 and restricted cash of $386,000 as of December 31, 2011. Total assets were $24.4 million, total debt obligations were $5.1 million and stockholders' equity was $11.1 million at the end of 2012, compared to total assets of $24.7 million, total debt obligations of $5.7 million and stockholders' equity of $10.6 million at the end of 2011.
Adjusted EBITDA for the 2012 full year was $0.4 million, or a $1.5 million improvement from the Adjusted EBITDA loss of $1.2 million in 2011 and a $2.2 million improvement from the Adjusted EBITDA loss of $1.8 million in 2010. For the 2012 fourth quarter Adjusted EBITDA was $0.6 million, compared to Adjusted EBITDA of $0.5 million in the fourth quarter of 2011.
EMRISE plans to file its Annual Report on Form 10-K for the year ended December 31, 2012 with the Securities and Exchange Commission (SEC) today, March 28, 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) on Thursday, March 28, 2013 to discuss the Company's financial results for its fourth quarter and year ended December 31, 2012. 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 the Company's expectations that the losses that remain at the U.S. Communications business, including the remaining charges for severance associated with the completion of its restructuring of that unit earlier this year, will be eliminated by the end of the second quarter of 2013; its initiatives can produce sales in the U.S. of the network access products manufactured by its French operation and generate sales of the Company's entire line of communications products through its new U.S. network of independent sales representatives; 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; 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 Form 10-Q for the third quarter ended September 30, 2012, its recent Current Reports on Form 8-K, and other EMRISE filings with the SEC.
| EMRISE CORPORATION |
Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss)
(in thousands, except per share amounts)
| Year Ended |
|Net sales||$ 34,047||$ 33,531|
|Cost of sales||24,041||24,007|
|Selling, general and administrative||8,794||9,618|
|Engineering and product development||1,267||1,549|
|Total operating expenses||10,061||11,167|
|Loss from operations||(55)||(1,643)|
|Other income/ (expense):|
|Gain on early extinguishment of debt||275||—|
|Total other income/ (expense), net||472||(317)|
|Income/(Loss) before income taxes||417||(1,960)|
|Income tax provision||314||88|
|Income/(Loss) from continuing operations||103||(2,048)|
|Income from discontinued operations||(9)||668|
|Income tax provision on discontinued operations||--||239|
|Income from discontinued operations||(9)||429|
|Net income/(loss)||$ 94||$ (1,619)|
|Weighted average shares outstanding|
|Basic and diluted||10,688||10,672|
|Income/(Loss) per share:|
|Basic and diluted|
|Continuing operations||$ 0.01||$ (0.19)|
|Discontinued operations||$ --||$ 0.04|
|Net income/(loss)||$ 0.01||$ (0.15)|
| EMRISE CORPORATION |
Condensed Consolidated Balance Sheets
(in thousands, except per share amounts)
|December 31, 2012||December 31, 2011|
|Cash and cash equivalents||$ 1,519||$ 805|
|Accounts receivable, net of allowances for doubtful accounts of $75 at December 31, 2012 and $123 at December 31, 2011||6,784||6,334|
|Deferred income taxes||128||24|
|Prepaid and other current assets||1,138||1,008|
|Current assets of assets held for sale||--||345|
|Total current assets||16,824||16,920|
|Property, plant and equipment, net||973||957|
|Intangible assets other than goodwill, net||584||838|
|Deferred tax assets||59||227|
|Total assets||$ 24,398||$ 24,668|
|LIABILITIES AND STOCKHOLDERS' EQUITY|
|Accounts payable||$ 2,970||$ 3,445|
|Lines of credit||1,122||468|
|Current portion of long-term debt||942||1,658|
|Income taxes payable||307||298|
|Other current liabilities||274||269|
|Current liabilities of assets held for sale||--||13|
|Total current liabilities||9,374||9,702|
|Deferred income taxes||--||89|
|Commitments and contingencies||—||—|
|Preferred stock, $0.01 par value. Authorized 10,000,000 shares, no shares issued or outstanding||—||—|
|Common stock, $0.0033 par value. Authorized 75,000,000 shares; 10,698,337 and 10,683,337 shares issued and outstanding at December 31, 2012 and 2011, respectively||128||128|
|Additional paid-in capital||44,177||44,162|
|Accumulated other comprehensive loss||(1,678)||(2,066)|
|Total stockholders' equity||11,095||10,598|
|Total liabilities and stockholders' equity||$ 24,398||$ 24,668|
| Reconciliation of Adjusted EBITDA to Net Loss |
(Unaudited, in thousands)
|Net Loss as reported||$ 94||$ (1,619)||(3,421)|
|Depreciation and amortization||413||390||460|
|Interest expense, net||325||338||1,854|
|Gain on extinguishment of debt||(275)||--||(295)|
|Income tax provision||314||88||583|
|Income from discontinued operations||(9)||429||1,145|
|Adjusted EBITDA||$ 373||$ (1,159)||(1,845)|
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.