Eltek Announces Third Quarter 2007 Financial Results
Thursday November 22, 7:12 am ET
PETACH-TIKVA, Israel--(BUSINESS WIRE)--Eltek Ltd., (Nasdaq:ELTK - News) the leading Israeli manufacturer of advanced flex-rigid circuitry solutions, today announced its financial results for the third quarter of 2007.
ADVERTISEMENT
Third-Quarter 2007:
Eltek reported revenues for the three months ended September 30, 2007 of $8.8 million compared with $8.6 million for the second quarter of 2007 and $10.0 million for the third quarter of 2006. The year-over-year decrease in revenues is attributable to reduced sales to the Company’s previous largest customer, who notified the Company towards the end of the second quarter that it was terminating production for its principal product as such product reached the end of its lifecycle. Revenues from that customer were $840,000 in the three months ended June 30, 2007 and $2.8 million in the three months ended September 30, 2006. Excluding sales associated with that customer, third quarter revenues increased by $1.3 million compared to the same quarter in 2006, and increased by $700,000 on a sequential basis. While the Company expects that its revenues will continue to be impacted by the loss of sales to that customer in the fourth quarter, it expects a sequential increase in revenues and improved operating results in the quarter.
The Company incurred a loss in the third quarter of $223,000, or ($0.03) per fully diluted share compared with net income of $482,000, or $0.07 per fully diluted share, for the same quarter in 2006. The loss is mainly attributable to the aforementioned reduction in sales.
Nine-Months Ended September 30, 2007:
Revenues for the nine-month period ended September 30, 2007 were $27.6 million compared with revenues of $28.9 million for the comparable period in 2006. Excluding sales relating to the discontinued customer product, revenues in the nine-month period ended September 30, 2007 increased by $2.7 million compare to the same period in 2006.
Net income for the nine-month period ended September 30, 2007 was $171,000, or $0.03 per fully diluted share, compared with a net income of $1.6 million or $0.23 per fully diluted share for the same period in 2006. The reduction in net income is mainly attributable to the reduction in sales and the negative impact of the devaluation of the U.S. dollar against the NIS.
EBITDA:
In the third quarter of 2007, Eltek had EBITDA of $163,000 compared to EBITDA of $1.2 million in the third quarter of 2006. In the first nine months of 2007, Eltek had EBITDA of $2.0 million compared with EBITDA of $3.7 million in the same period in 2006. The reduction in EBITDA is mainly attributable to the reasons described above.
ELTEK uses EBITDA as a non-GAAP financial performance measurement. EBITDA is calculated by adding back to net income interest, taxes, depreciation and amortization. EBITDA is provided to investors to complement results provided in accordance with GAAP, as management believes the measure helps illustrate underlying operating trends in the Company's business and uses the measure to establish internal budgets and goals, manage the business and evaluate performance. EBITDA should not be considered in isolation or as a substitute for comparable measures calculated and presented in accordance with GAAP.
Effective January 1, 2007, The Company's consolidated financial statements have been prepared in accordance with U.S. GAAP, and the Company's reporting currency has been changed from NIS to U.S. dollars. The financial statements for all years (or periods) presented are translated into the reporting currency using the current rate method. Under this method, the income statement and the cash flow statement items for each year (or period) are translated into the reporting currency using the rates in effect at the date of the transactions, and assets and liabilities are translated using the exchange rate at the end of that year (or period), except for equity accounts which are translated using historical exchange rates. All resulting exchange differences, which do not affect the Company's earnings, are reported in the accumulated other comprehensive income as a separate component of shareholders’ equity. In the case of a change in reporting currency, this method of translation results in the financial statements of prior years (or periods) presented for comparison being translated as if the reporting currency used in the current year (or period) had been used for at least all periods shown. The Company believes that presenting the financial statements in U.S. dollars and under US-GAAP delivers more meaningful and relevant financial information to its shareholders.
Management Comments:
“Excluding sales associated with the discontinued customer product, in Q3 we managed to grow our revenues both on a sequential and year-over-year basis,” said Arieh Reichart, President and Chief Executive Officer of Eltek. “This achievement reflects our continued success in gaining new tier-one customers, as well as our strengthened position within our diverse high-end customer base. Furthermore, many of our new serial production engagements are still in the early stages, and represent significant opportunities for future expansion.”
Mr. Reichart continued, “Our recently expanded marketing efforts are progressing very well. Combined with ramped–up production capacity and improved production processes and efficiencies, we feel that we are poised to exploit and operationally leverage the tremendous long-term growth opportunities in the global high-end PCBs market.”
“Looking into the fourth quarter of 2007, we currently expect a sequential revenues growth and an improvement in operational results. We also expect continuation of the trend of year–over–year revenues growth, excluding the impact of sales to the above–mentioned large customer,” he concluded.
Amnon Shemer, CFO of Eltek added "The devaluation of the U.S. dollar against the NIS continued to have a negative impact on our operating margins, as the average exchange rate between the NIS and the U.S. dollar in the third quarter of 2007 was 4.3% lower than that of the third quarter of 2006. On the other hand, we recorded an income of $349,000 from hedging transactions that we performed in order to reduce the negative impact of the devaluation of the U.S. dollar against the NIS on our operating margins.”
“In the first nine months of 2007 we invested $2.0 million in machinery and infrastructure for further capacity ramp-up. We are just beginning to experience the positive impact on our production processes and efficiencies and expect to realize more benefits in 2008 and onwards,” Mr. Shemer concluded.
About the Company
Eltek is Israel's leading manufacturers of printed circuit boards (“PCB”), the core circuitry of most electronic devices. It specializes in the complex high-end of PCB manufacturing, i.e., HDI, multi-layered and flex-rigid boards. Eltek's technologically advanced circuitry solutions are used in today's increasingly sophisticated and compact electronic products. For more information, visit Eltek's internet site at www.eltekglobal.com.
Forward Looking Statement:
Certain matters discussed in this news release are forward-looking statements that involve a number of risks and uncertainties including, but not limited to statements regarding expected results in future quarters, risks in product and technology development and rapid technological change, product demand, the impact of competitive products and pricing, market acceptance, the sales cycle, changing economic conditions and other risk factors detailed in the Company's Annual Report on Form 20-F and other filings with the U.S. Securities and Exchange Commission.
Eltek ltd.
Consolidated Statements of Operations
(In thousands US$, except per share data)
Year ended December 31, Nine months ended September 30, Three months ended September 30,
2006 2006 2007 2006 2007
Audited Unaudited Unaudited Unaudited Unaudited
Revenues 39,045 28,902 27,587 10,046 8,771
Costs or revenues (30,557 ) (22,877 ) (22,885 ) (7,939 ) (7,675 )
Gross profit 8,488 6,025 4,702 2,107 1,096
Research and development Expenses, net (154 ) (109 ) (100 ) (42 ) (17 )
Selling, general and administrative expenses (5,580 ) (3,936 ) (4,305 ) (1,468 ) (1,468 )
Amortization of goodwill (473 ) 0 0 0 0
Operating income (loss) 2,281 1,980 297 597 (389 )
Financial income (expenses), net (538 ) (397 ) (115 ) (120 ) 165
Income before other income (loss), net 1,743 1,583 182 477 (224 )
Other income, net 5 7 5 0 1
Income (loss) before tax expenses 1,748 1,590 187 477 (223 )
Taxes on income (158 ) 0 0 0 0
Income (loss) after taxes on income 1,590 1,590 187 477 (223 )
Minority interests 60 (2 ) (16 ) 5 0
Net income (loss) for the period 1,650 1,588 171 482 (223 )
Basic earnings (loss) per 1 ordinary share 0.29 0.28 0.03 0.09 (0.03 )
Diluted earnings (loss) per 1 ordinary share 0.24 0.23 0.03 0.07 (0.03 )
Weighted average shares used to compute basic net earnings per share (in thousands)
5,617 5,615 6,124 5,624 6,610
Weighted average shares used to compute diluted net earnings per share (in thousands)
6,954 6,920 6,624 6,928 6,622
Eltek ltd.
Consolidated Statements of Operations
(In thousands US$)
December 31, September 30,
2006 2006 2007
Audited Unaudited Unaudited
Assets
Current assets
Cash and cash equivalents 2,030 1,576 1,725
Receivables: Trade 7,707 7,573 8,504
Other 261 247 518
Inventories 3,766 3,882 4,373
Prepaid expenses 192 375 261
Total current assets 13,956 13,653 15,381
Deferred taxes - 162 0
Severance benefits 1,106 1,147 1,231
Property and equipment, net 8,143 7,723 9,569
Goodwill 903 1,349 972
Total assets 24,108 24,034 27,153
Liabilities and Shareholder's equity
Current liabilities
Short-term credit and current maturities of long-term debts 2,776 3,548 4,354
Trade payables 5,941 6,625 6,505
Other liabilities and accrued expenses 3,114 2,845 3,217
Convertible note 436 425 -
Total current liabilities 12,267 13,443 14,076
Long-term liabilities
Long term debt, excluding current maturities 3,068 1,803 3,199
Employee severance benefits 1,187 1,348 1,314
Total liabilities 16,522 16,594 18,589
Minority interests 311 371 352
Shareholders' equity
Ordinary shares, NIS 0.6 par value authorized 50,000,000 shares, issued and outstanding 6,609,807 as of September 30, 2007, 5,624,011 as of September 30, 2006 and 5,624,011 as of December 31, 2006 1,236 1,236 1,384
Additional paid-in capital 14,152 14,152 14,328
Cumulative translation adjustment related to change in reporting currency 1,671 1,566 2,067
Cumulative foreign currency translation adjustments 416 377 462
Capital reserve 695 695 695
Accumulated deficit (10,895 ) (10,957 ) (10,724 )
Total shareholders equity 7,275 7,069 8,212
Total liabilities and shareholders equity 24,108 24,034 27,153
Non-GAAP Earnings Reconcilliations Year ended December 31,
Nine months ended
September 30,
Three months ended
September 30,
2006 2006 2007 2006 2007
Audited Unaudited Unaudited Unaudited Unaudited
GAAP net income (loss) 1,650 1,588 171 482 (223 )
Add back items:
Financial expenses (income), net 538 397 115 120 (165 )
Tax expenses 158 0 0 0 0
Amortization of goodwill 473 0 0 0 0
Depreciation 2,330 1,673 1,710 564 551
Adjusted EBITDA 5,149 3,658 1,996 1,166 163
