Filed Pursuant to Rule 433

 

Free Writing Prospectus

 

Registration No. 333-200666

 

February 5, 2015

 

FOR IMMEDIATE RELEASE

 

DATE: FEBRUARY 5, 2015

 

 

 

 

 

ARC REPORTS SECOND QUARTER FISCAL YEAR 2015 FINANCIAL RESULTS

 

For the quarter ended December 28, 2014, compared to the quarter ended December 29, 2013:

 

·                  Sales of $27.1 Million, An Increase of 35.9%;

·                  Gross Profit of $6.4 Million, In-line With the Prior Year Period; and

·                  Adjusted EBITDA of $3.8 Million, In-line With the Prior Year Period.

 

DELAND, FL., February 5, 2015/PRNewswire/—ARC Group Worldwide, Inc. (“ARC”) (NASDAQ: ARCW), a leading global provider of advanced manufacturing and 3D printing solutions, today reported its second quarter fiscal year 2015 (December 28, 2014) financial results.

 

Second Quarter Operating Results

 

Second quarter fiscal year 2015 revenue was $27.1 million, an increase of 35.9% compared to the prior year period.  The year-over-year increase was largely the result of acquisitions completed during the fourth quarter of fiscal year 2014.  Sequentially, weakness in the firearms industry offset metal injection molding (“MIM”) revenue gains in other sectors, as well as record quarterly revenue at Tekna Seal and robust sales growth at 3D Material Technologies and Kecy.  Quarterly revenue results at the Company’s Hungarian operations were also impacted by the decline of the Euro versus the US dollar.  In January 2015, the Company entered into currency contracts to partially mitigate potential further Euro depreciation.

 

Gross Profit for the period was $6.4 million, an increase of 0.9% compared to the prior year period.  Adjusted EBITDA was $3.8 million, an increase of 0.3% compared to the prior year period.  Sequentially, Adjusted EBITDA margins were 14.1%, versus 14.2% and 9.6% in the prior two quarters since the Kecy acquisition.  Overall, while the Company continues to execute on its integration and cost reduction strategies, margins during the quarter were impacted by several factors, including: (i.) a reduction in inventory levels at AFT to improve working capital efficiency; (ii.) changes in the Company’s direct workforce versus contract labor staffing levels; (iii.) continued investment into 3DMT’s proprietary Additive Manufacturing technology and services; and (iv.) continued investment in the Company’s sales and marketing efforts.

 

Last quarter, the Company began the implementation of an extensive margin enhancement program throughout each of its operating units.  ARC expects to realize improved operational efficiencies and margins from these strategic initiatives, particularly as revenue returns to normalized levels.  Separately, recent indications from firearm customers, defense industry conferences, and other sector metrics, including FBI background checks, have suggested the firearm market has begun to

 

1



 

stabilize and is poised for a potential rebound.

 

Jason Young, Chairman and CEO, commented, “ARC remains in a transitional phase following our acquisitive prior fiscal year, and while we have faced modest short term weakness due to the slowdown in the firearms market, we remain optimistic about the long term prospects of our approach to advanced manufacturing through the strategic combination of additive and subtractive processes.  We believe our platform is differentiated, and offers our customers unique and comprehensive solutions to their manufacturing needs.  We also believe that as we fully integrate our offerings, we will be able to improve our margins and expand our revenue over time.  In the short run, some of our efforts require investment and productivity improvements, but long-term we believe we are developing proprietary technology that will give our customers innovative and compelling advantages.”

 

GAAP to Non-GAAP Reconciliation

 

EBITDA, Adjusted EBITDA, EBITDA margin, and Adjusted EBITDA margin are non-GAAP financial measures.  EBITDA margin and Adjusted EBITDA margin are calculated by dividing EBITDA and Adjusted EBITDA, respectively, by sales.  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 (dollars in thousands):

 

For the three months ended:

 

December 28,
2014

 

September 28,
2014

 

June 30,
2014

 

December 29,
2013

 

Net (Loss) Income (GAAP)

 

$

(2

)

$

232

 

$

209

 

$

1,575

 

Plus: Interest Expense, Net

 

1,213

 

921

 

618

 

294

 

Plus: Income Taxes

 

237

 

153

 

(7

)

690

 

Plus: Depreciation and Amortization

 

2,355

 

2,311

 

1,681

 

892

 

EBITDA (Non-GAAP)

 

$

3,803

 

$

3,617

 

2,501

 

$

3,451

 

EBITDA Margin (Non-GAAP)

 

14.0

%

12.6

%

10.6

%

17.3

%

Plus: Merger Expense

 

$

11

 

$

176

 

$

342

 

$

 

Plus: Other Non-Recurring Expenses

 

 

286

 

 

 

Plus: Reorganization expenses

 

 

 

 

351

 

Less: Gain on Early Extinguishment of Debt

 

 

 

(578

)

 

Adjusted EBITDA (Non-GAAP)

 

$

3,814

 

$

4,079

 

$

2,265

 

$

3,802

 

Adjusted EBITDA Margin (Non-GAAP)

 

14.1

%

14.2

%

9.6

%

19.1

%

 

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.  Reorganization expenses are primarily labor and labor related costs association with the termination of employees.

 

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.

 

The Company has filed a registration statement (including a preliminary prospectus and issuer free writing prospectuses) with the U.S. Securities and Exchange Commission (“SEC”) for the offering of common stock to which this presentation relates.  Before you invest, you should read the prospectus in that registration statement, the issuer free writing prospectuses and other documents the Company has filed with the SEC for more complete information about the Company and this offering.  You may obtain these documents free of charge by visiting the SEC online

 

2



 

database (EDGAR) on the SEC’s website at www.sec.gov.  The Company’s registration statement on Form S-1 containing the preliminary prospectus, dated January 20, 2015, is available at the following link:

 

http://www.sec.gov/Archives/edgar/data/826326/000104746915000280/a2222688zs-1a.htm

 

Alternatively, you may obtain a copy of the prospectus and any other publicly available documents from the Company by calling (303) 467-5236 or from Brean Capital by calling (212) 702-6500.

 

About ARC Group Worldwide, Inc.

 

ARC Group Worldwide, Inc. is a leading global advanced manufacturing and 3D printing service provider. With its business 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 www.ArcGroupWorldwide.com, or its operating subsidiaries at www.3DMaterialTechnologies.com, www.AFTmim.com, www.AFTmimHU.com, www.ARCmim.com, www.ArcWireless.net, www.ATCmold.com, www.FloMet.com, www.GeneralFlange.com, www.Injectamax.com, www.kecycorporation.com, www.TeknaSeal.com, and www.ThixoWorks.com.

 

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 additional factors that may affect future results, please see filings made by ARC with the Securities and Exchange Commission (“SEC”), including its registration statement on Form S-1, as amended, 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

 

 

 

For the three months ended

 

For the six months ended

 

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

 

December 28,
2014

 

December 29,
2013

 

December 28,
2014

 

December 29,
2013

 

Sales

 

$

27,106

 

$

19,942

 

$

55,804

 

$

38,342

 

Cost of sales

 

20,719

 

13,610

 

42,434

 

26,387

 

Gross profit

 

6,387

 

6,332

 

13,370

 

11,955

 

Selling, general and administrative

 

4,919

 

3,780

 

10,418

 

7,502

 

Merger expense

 

11

 

 

187

 

 

Income from operations

 

1,457

 

2,552

 

2,765

 

4,453

 

Other (expense) income, net

 

(9

)

7

 

(11

)

7

 

Interest expense, net

 

(1,213

)

(294

)

(2,134

)

(499

)

Income before income taxes

 

235

 

2,265

 

620

 

3,961

 

Income tax expense

 

(237

)

(690

)

(390

)

(1,076

)

Net (loss) income

 

(2

)

1,575

 

230

 

2,885

 

Less: Net income attributable to non-controlling interest

 

(58

)

(61

)

(114

)

(117

)

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

 

$

(60

)

$

1,514

 

$

116

 

$

2,768

 

Net income per common share:

 

 

 

 

 

 

 

 

 

Basic and diluted income per share

 

$

 

$

0.10

 

$

0.01

 

$

0.19

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic and diluted

 

14,673,205

 

14,693,285

 

14,673,205

 

14,506,817

 

 

4



 

ARC Group Worldwide, Inc.

Condensed Consolidated Balance Sheets

 

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

 

December 28, 2014

 

June 30, 2014

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

3,859

 

$

9,384

 

Accounts receivable, net

 

15,679

 

15,337

 

Inventories, net

 

16,432

 

15,231

 

Prepaid and other current assets

 

4,058

 

2,606

 

Total current assets

 

40,028

 

42,558

 

Property and equipment, net

 

45,772

 

45,268

 

Goodwill

 

14,764

 

16,357

 

Intangible assets, net

 

29,089

 

30,825

 

Other

 

2,019

 

1,381

 

Total assets

 

$

131,672

 

$

136,389

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

$

6,485

 

$

9,430

 

Accrued expenses

 

5,623

 

5,905

 

Deferred revenue

 

1,290

 

1,016

 

Bank borrowings, current portion of long-term debt

 

13,120

 

14,419

 

Capital lease obligations, current portion

 

1,140

 

1,124

 

Accrued escrow obligation

 

4,291

 

2,400

 

Total current liabilities

 

31,949

 

34,294

 

Long-term debt, net of current portion

 

62,807

 

62,757

 

Capital lease obligations, net of current portion

 

4,240

 

4,723

 

Accrued escrow obligation

 

 

2,600

 

Other

 

1,276

 

674

 

Total liabilities

 

100,272

 

105,048

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

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 December 28, 2014 and June 30, 2014

 

3

 

3

 

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

 

(94

)

(94

)

Additional paid-in capital

 

14,122

 

14,293

 

Retained earnings

 

16,259

 

16,143

 

ARC Group Worldwide, Inc. total stockholder equity

 

30,290

 

30,345

 

Non-controlling interest

 

1,110

 

996

 

Total stockholders’ equity

 

31,400

 

31,341

 

Total liabilities and stockholders’ equity

 

$

131,672

 

$

136,389

 

 

5



 

ARC Group Worldwide, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

 

 

 

For the six months ended

 

(in thousands)

 

December 28, 2014

 

December 29, 2013

 

Cash flows from operating activities:

 

 

 

 

 

Net income

 

$

230

 

$

2,885

 

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

 

 

 

 

 

Depreciation and amortization

 

4,666

 

1,790

 

Non-cash stock based compensation expense

 

 

779

 

Amortization of debt discount

 

 

211

 

Bad debt expense and other

 

(56

)

59

 

Deferred income taxes

 

12

 

 

Changes in working capital

 

 

 

 

 

Accounts receivable

 

(309

)

526

 

Inventory

 

(1,200

)

(936

)

Prepaid expenses and other assets

 

(1,502

)

(200

)

Accounts payable

 

(2,944

)

30

 

Other accrued expenses

 

604

 

978

 

Deferred revenue

 

274

 

(92

)

Net cash (used in) provided by operating activities

 

(225

)

6,030

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

Purchase of plant and equipment

 

(3,446

)

(892

)

Net cash used in investing activities

 

(3,446

)

(892

)

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

Proceeds from debt issuance

 

23,500

 

 

Repayments of long-term debt and capital lease obligations

 

(25,216

)

(3,112

)

Stock issuance costs

 

(138

)

 

Repurchase of shares

 

 

(93

)

Net cash used in financing activities

 

(1,854

)

(3,205

)

Net (decrease) increase in cash and cash equivalents

 

(5,525

)

1,933

 

Cash and cash equivalents, beginning of period

 

9,384

 

3,601

 

Cash and cash equivalents, end of period

 

$

3,859

 

$

5,534

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

Cash paid for interest

 

$

1,587

 

$

288

 

Cash paid for income taxes

 

$

20

 

$

 

Non-cash investing and financing activities:

 

 

 

 

 

Termination of note receivable from related party

 

$

 

$

272

 

 

6