Arotech Announces Fiscal 2006 Second Quarter and Six-Month Results; Quarterly Revenues Drop to $7.4 Million as Significant Armor Orders Deferred to Second Half of 2006 and Beginning of 2007; Company Backlog Reaches Record $42.5 Million.ANN ARBOR Ann Arbor, city (1990 pop. 109,592), seat of Washtenaw co., S Mich., on the Huron River; inc. 1851. It is a research and educational center, with a large number of government and industrial research and development firms, many in high-technology fields such as , Mich. -- Arotech Corporation (NasdaqGM: ARTX), a provider of quality defense and security products for the military, law enforcement and security markets, today reported results for the quarter and six months ended June 30, 2006. Revenues for the second quarter of 2006 were $7.4 million, a decline of $4.8 million, or 39%, from the corresponding period in 2005. The revenue shortfall was primarily attributable to the deferment deferment Delaying of an obligation. See Default, Medical student debt. Cf Forbearance. of orders for the Company's "David" vehicles by the Israeli Defense Force Noun 1. Israeli Defense Force - the ground and air and naval forces of Israel IDF military force, military group, military unit, force - a unit that is part of some military service; "he sent Caesar a force of six thousand men" ("IDF (Intermediate Distribution Frame) A wiring rack located between the MDF (main distribution frame) and the intended end user devices (telephones, routers, PCs, etc.). Cables run from the outside world to the MDF and then to the IDFs. See MDF and wiring rack. ") and deferred revenues in the Company's simulation business. The Company expects to begin to record a portion of deferred revenues in the second half of 2006. Gross Profit for the quarter was $1.3 million or 18% of revenues, compared to $3.6 million or 30% of revenues for the corresponding period in 2005. The decline is due to the overall decreased company sales and the initial costs in respect to the production of new products in the Armor Division. The Company recorded an operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. for the quarter of $3.3 million, compared to an operating loss of $4.5 million in the corresponding period in 2005. The Comparable Net Loss from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the quarter was $8.2 million or ($0.98) per share, compared to a net loss of $5.4 million or ($0.94) per share for the corresponding period in 2005. A non-cash expense Noun 1. non-cash expense - an expense (such as depreciation) that is not paid for in cash disbursal, disbursement, expense - amounts paid for goods and services that may be currently tax deductible (as opposed to capital expenditures) of $5.0 million relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the conversion of the Company's convertible notes was recorded in the second quarter of 2006 results. Backlog Backlog of orders totaled approximately $42.5 million at the end of the second quarter, up $22 million from a year earlier and up $3.6 million sequentially from the first quarter. Approximately 59% of the backlog was related to the "David" vehicle and 28% was related to the Company's simulation business. Cash Position as at June 30, 2006 Cash-on-hand and cash equivalents, restricted securities and deposits due within one year and available-for-sale marketable securities Marketable Securities Very liquid securities that can be converted into cash quickly at a reasonable price. Notes: Marketable securities are very liquid as they tend to have maturities less than one year, and the rate at which these securities can be bought or sold has stood at the end of the quarter at $4.6 million in cash, $8.3 million in restricted collateral securities COLLATERAL SECURITY, contracts. A separate obligation attached to another contract, to guaranty its performance. By this term is also meant the transfer of property or of other contracts to insure the performance of a principal engagement. and cash deposits due within one year and $38,172 in marketable securities, as compared with $6.2 million in cash and cash equivalents and $3.9 million in restricted securities and deposits due within one year and $35,984 in marketable securities as at December 31, 2005. Stockholders' Equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. stood at the end of the quarter at approximately $52.2 million. Results for the First Half, 2006 Revenues for the first six months, 2006 were $16.3 million, compared to $22.6 million for the corresponding period in 2005, a decrease of $6.3 million or 28%. Gross Profit for the first six months, 2006, was $3.6 million or 22% of revenues, compared to $7.6 million or 34% of revenues for the corresponding period in 2005. The Operating Loss for the first six months, 2006, was $6.1 million, compared to an operating loss of $6.2 million in the corresponding period in 2005. The Comparable Net Loss for the six month period was $12.4 million or ($1.67) per share, compared to a net loss of $8.1 million or ($1.37) per share for the corresponding period in 2005. The net loss for the first half of 2006 included $6.5 million in non-cash financial expenses. Management Discussion "We are obviously disappointed that revenues for the armor division will be deferred into the second half of the year and the beginning of 2007, but we hope to realize a portion of these orders in the third quarter and the ensuing en·sue intr.v. en·sued, en·su·ing, en·sues 1. To follow as a consequence or result. See Synonyms at follow. 2. To take place subsequently. quarters," said Robert S Robert, Henry Martyn 1837-1923. American army engineer and parliamentary authority. He designed the defenses for Washington, D.C., during the Civil War and later wrote Robert's Rules of Order (1876). Noun 1. . Ehrlich, Arotech Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "We remain committed to streamlining operations in each division through consolidation and cost reductions. Our primary goal remains to achieve profitability and enhance long term shareholder value. We are very encouraged by the overall demand in our simulation business and we believe the demand for the "David" vehicle will be significant in the next 12 months," added Mr. Ehrlich. Conference Call Arotech Corporation will hold a conference call to discuss its second quarter 2006 results, tomorrow, Tuesday August 15, 2006, at 9:00 a.m. ET. Those wishing to take part in the conference call should call 1-800-967-7184 or +1-719-457-2633 (international) a few minutes before the 9:00 a.m. ET start time. In addition, a replay option will be available from Tuesday, August 15, 2006 at 11:00 a.m. ET until Saturday, August 19, 2006 at 11:59 p.m. ET. The replay telephone number is 1-888-203-1112 (US) and +1-719-457-0820 (international). The replay pass code is 1779174. About Arotech Corporation Arotech Corporation is a leading provider of quality defense and security products for the military, law enforcement and homeland security Noun 1. Homeland Security - the federal department that administers all matters relating to homeland security Department of Homeland Security executive department - a federal department in the executive branch of the government of the United States markets, including multimedia interactive simulators/trainers, lightweight armoring armoring (ärˑ·m  ·ring),n and advanced zinc-air and lithium batteries Lithium batteries are primary batteries that have lithium metal or lithium compounds as an anode. Depending on the design and chemical compounds used lithium cells can produce voltages from 1.5V to about 3V, twice the voltage of an ordinary zinc-carbon battery or alkaline cell. and chargers. Arotech operates through three major business divisions: Armor, Simulation and Training and Battery and Power Systems. Arotech is incorporated in Delaware, with corporate offices in Ann Arbor, Michigan  “Ann Arbor” redirects here. For other uses, see Ann Arbor (disambiguation). Ann Arbor is a city in the U.S. state of Michigan and the county seat of Washtenaw County. , and research, development and production subsidiaries in Alabama, Michigan and Israel. Except for the historical information herein, the matters discussed in this news release include forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , as defined in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995, including the results of our restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). program. Forward-looking statements reflect management's current knowledge, assumptions, judgment and expectations regarding future performance or events. Although management believes that the expectations reflected in such statements are reasonable, readers are cautioned not to place undue reliance on these forward-looking statements, as they are subject to various risks and uncertainties that may cause actual results to vary materially. These risks and uncertainties include, but are not limited to, risks relating to: product and technology development; the uncertainty of the market for Arotech's products; changing economic conditions; delay, cancellation or non-renewal, in whole or in part, of contracts or of purchase orders; dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. resulting from issuances of Arotech's common stock upon conversion or payment of its outstanding convertible debt, which would be increasingly dilutive if and to the extent that the market price of Arotech's stock decreases; and other risk factors detailed in Arotech's most recent Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended December 31, 2005, as amended a·mend v. a·mend·ed, a·mend·ing, a·mends v.tr. 1. To change for the better; improve: amended the earlier proposal so as to make it more comprehensive. 2. , and other filings with the Securities and Exchange Commission. Arotech assumes no obligation to update the information in this release. Reference to the Company's website above does not constitute incorporation of any of the information thereon there·on adv. 1. On or upon this, that, or it. 2. Archaic Following that immediately; thereupon. Adv. 1. thereon - on that; "text and commentary thereon" on it, on that into this press release.
AROTECH CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Six months ended June 30, Three months ended June 30,
------------------------- ---------------------------
2006 2005 2006 2005
------------- ------------ ------------ -----------
Revenues $ 16,310,747 $22,624,355 $ 7,414,335 $12,236,910
Cost of revenues 12,742,129 14,981,150 6,089,377 8,609,276
------------- ------------ ------------ ------------
Gross profit 3,568,618 7,643,205 1,324,958 3,627,634
Operating expenses:
Research and
development 520,629 898,504 216,017 483,826
Selling and
marketing 1,748,132 2,222,692 848,864 1,063,873
General and
administrative 6,240,808 6,720,816 3,138,272 3,364,406
Amortization of
intangible assets 970,885 1,646,241 460,193 823,153
Impairment of
goodwill and
other intangible
assets 204,059 2,389,129 - 2,389,129
------------- ------------ ------------ ------------
Total operating
costs and expenses 9,684,513 13,877,382 4,663,346 8,124,387
------------- ------------ ------------ ------------
Operating loss (6,115,895) (6,234,177) (3,338,388) (4,496,753)
Other income 35,988 - 18,482 -
Financial expenses,
net (6,458,796) (1,306,466) (4,997,660) (837,608)
------------- ------------ ------------ ------------
Loss before
minority interest
in (loss) earnings
of subsidiaries,
earnings from
affiliated company
and tax expenses (12,538,703) (7,540,643) (8,317,566) (5,334,315)
Income tax expenses (54,053) (267,218) (14,081) (49,954)
Minority interest
in (loss) earnings
of subsidiaries 25,943 (71,153) 16,754 (38,199)
Earnings from
affiliated company 138,030 - 99,558 -
------------- ------------ ------------ ------------
Loss from
continuing
operations (12,428,783) (7,879,014) (8,215,335) (5,422,514)
Loss from
discontinued
operations - (200,000) - (200,000)
------------- ------------ ------------ ------------
Net loss (12,428,783) (8,079,014) (8,215,335) (5,622,514)
Deemed dividend to
certain
shareholders (434,185) - (116,978) -
------------- ------------ ------------ ------------
Net loss
attributable to
common
shareholders $(12,862,968) $(8,079,014) $(8,332,313) $(5,622,514)
============= ============ ============ ============
Basic and diluted
net loss per share
from continuing
operations $ (1.67) $ (1.37) $ (0.98) $ (0.94)
============= ============ ============ ============
Basic and diluted
net loss per
share from
discontinued
operation $ 0.00 $ (0.03) $ 0.00 $ (0.03)
============= ============ ============ ============
Basic and diluted
net loss per
share(1) $ (1.73) $ (1.41) $ (0.99) $ (0.97)
============= ============ ============ ============
Weighted average
number of shares
used in computing
basic and diluted
net loss per
share 7,438,333 5,745,826 8,384,433 5,770,009
============= ============ ============ ============
(1) Includes $434,185 and $116,978 deemed dividend in the calculation
of the loss per share for the respective six-months ended 6/30/06
and three-months ended 6/30/06.
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