Eltek Reports Second Quarter 2011 Financial Results

Eltek Ltd. (NASDAQ: ELTK), a leading Israeli manufacturer of advanced flex-rigid circuitry solutions, announced today its financial results for the quarter ended June 30, 2011.

Second Quarter 2011:

Revenues for the quarter ended June 30, 2011 increased 29% to $11.5 million compared to revenues of $9.0 million recorded in the second quarter of 2010.

Gross profit for the second quarter of 2011 increased 63% to $2.1 million (18% of revenues) from the gross profit of $1.3 million (14% of revenues) in the second quarter of 2010. The increase in gross profit and gross profit as a percentage of revenues is primarily attributable to the increase in revenues.

Operating profit for the second quarter of 2011 was $426,000 compared to an operating loss of $203,000 in the second quarter of 2010.

Net profit for the second quarter of 2011 was $257,000, or $0.04 per fully diluted share, compared with a net loss of $509,000, or ($0.08) per fully diluted share, in the second quarter of 2010.

First six months of 2011:

Revenues for the first six months ended June 30, 2011 increased 26% to $23.4 million compared to revenues of $18.6 million recorded in the first six months of 2010.

Gross profit for the first six months of 2011 increased 97% to $4.6 million (20% of revenues) from the gross profit of $2.3 million (12% of revenues) in the first six months of 2010.

Operating profit for the first six months of 2011 was $1.3 million compared to an operating loss of $762,000 in the first six months of 2010.

Net profit for the first six months of 2011 was $1.0 million, or $0.16 per fully diluted share, compared with a net loss of $1.2 million, or ($0.13) per fully diluted share, in the first six months of 2010.

EBITDA:

In the quarter ended June 30, 2011, Eltek had EBITDA of $966,000 compared with EBITDA of $465,000 in the second quarter of 2010. In the first six months of 2011, Eltek had EBITDA of $2.3 million compared with EBITDA of $482,000 in the same period in 2010.

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. Reconciliation between the company's results on a GAAP and non-GAAP basis is provided in a table immediately following the Consolidated Statement of Operations

Management Comments:

Arieh Reichart, President and Chief Executive Officer of Eltek commented: "I am pleased to report that Eltek's revenues increased 29% in the second quarter of 2011 compared with the same period in the previous year. After almost three years of reduced capital expenditures we have resumed investment in new equipment, mainly through supplier financing, in order to strengthen our technology capabilities, increase our production capacity and enable cost reductions. During the second quarter we developed innovative applications for small medical devices that will strengthen our leading position in the medical device market. We believe that these achievements and the recently received orders for boards from a US medical devices company will enable us to establish profitability in future periods.”

Amnon Shemer, CFO of Eltek, added: “We were successful in keeping the increase in our cost of goods sold at a lower rate than the increase in revenues, and as a result our gross margins increased by 97% in the first six months of 2011 compared to 2010, and as a percentage of revenues, our gross margins increased from 12% to 20% respectively.”

“The $317,000 financial expenses recorded in the second quarter of 2010 was unusually higher than the $160,000 of financial expenses recorded in the second quarter of 2011, mainly due to the exchange rate impact on the dollar value of our European customers’ debt to us and a net loss recorded from hedging transactions in the comparable period in 2010,” Mr. Shemer concluded.

About the Eltek

Eltek is Israel's leading manufacturer of printed circuit boards, the core circuitry of most electronic devices. It specializes in the complex high-end of PCB manufacturing, i.e., HDI, multilayered 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 web 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 United States Securities and Exchange Commission.
         

Eltek Ltd.
Consolidated Statements of Operations
(In thousands US$, except per share data)
 
Three months ended Six months ended Year ended
June 30, June 30, December 31,
2011 2010 2011 2010 2010
Unaudited Unaudited Audited
 
Revenues 11,532 8,961 23,371 18,593 37,514
Costs of revenues (9,447 ) (7,680 ) (18,804 ) (16,273 ) (32,690 )
 
Gross profit 2,085 1,281 4,567 2,320 4,824
 
Selling, general and administrative expenses (1,659 ) (1,484 ) (3,264 ) (3,082 ) (6,033 )
         
Operating profit (loss) 426 (203 ) 1,303 (762 ) (1,209 )
 
Financial expenses, net (160 ) (317 ) (216 ) (486 ) (609 )
 
Profit (loss) before other income, net 266 (520 ) 1,087 (1,248 ) (1,818 )
 
Other income, net 9   2   9   0   2  
 
Profit (loss) before income tax expenses 275 (518 ) 1,096 (1,248 ) (1,816 )
 
Income tax expenses, net (3 ) (5 ) (23 ) (11 ) (19 )
 
Net Profit (loss) 272 (523 ) 1,073 (1,259 ) (1,835 )
 
Net profit (loss) attributable to noncontrolling interest (15 ) 14   (28 ) 68   113  
 
Net Profit (loss) attributable to Eltek shareholders 257   (509 ) 1,045   (1,191 ) (1,722 )
 
Earning per share
 
Basic and diluted net loss per ordinary share 0.04   (0.08 ) 0.16   (0.13 ) (0.26 )
 

Weighted average number of ordinary shares used to compute basic and diluted net loss per ordinary share (in thousands)
6,610   6,610   6,610   6,610   6,610  
 
     

Eltek Ltd.
Consolidated Balance Sheets
(In thousands US$)
 
June 30, December 31,
2011 2010 2010
Unaudited Audited
Assets
 
Current assets
Cash and cash equivalents 1,865 1,134 1,513

Receivables:

Trade, net of provision for doubtful accounts
8,945 7,527 7,490
Other 226 221 172
Inventories 5,005 3,989 4,282
Prepaid expenses 294   161   143  
 
Total current assets 16,335   13,032   13,600  
 
Assets held for employees' severance benefits 423   1,428   1,545  
 
Fixed assets, less accumulated depreciation 8,000   8,096   8,162  
 
Goodwill 575   488   530  
 
Total assets 25,333   23,044   23,837  
 
 
Liabilities and Shareholder's equity
 
Current liabilities
Short-term credit and current maturities of long-term debts (*) 7,615 7,828 6,862

Accounts payable:

Trade
5,884 5,765 6,087
Related parties 963 840 742
Other 5,691   3,506   3,973  
 
Total current liabilities 20,153   17,939   17,664  
 
Long-term liabilities
Long term debt, excluding current maturities 55 73 1,253
Employee severance benefits 584   1,456   1,596  
 
Total long-term liabilities 639   1,529   2,849  
 
Equity
Ordinary shares, NIS 0.6 par value authorized 50,000,000 shares, issued and outstanding 6,610,107 as of June 30, 2011, 6,610,107 as of June 30, 2010 and 6,610,107 as of December 31, 2010 1,384 1,384 1,384
Additional paid-in capital 14,328 14,328 14,328
Cumulative foreign currency translation adjustments 3,204 2,680 2,986
Capital reserve 695 695 695
Accumulated deficit (15,289 ) (15,712 ) (16,244 )
Shareholders' equity 4,322 3,375 3,149
Non controlling interest 219   201   175  
Total equity 4,541   3,576   3,324  
Total liabilities and shareholders' equity 25,333   23,044   23,837  
 

(*) As of December 31, 2010, the Company was not in compliance with certain of its financial covenants in respect of its credit facilities and long-term debt with its banks. However, in May 2011, one of the banks modified the covenant terms, reducing the requirements to a new compliance level effective from the December 31, 2010, while another bank granted the Company a waiver. The Company has initiated discussions with this bank in order to modify the financial covenants and to agree on terms which the Company believes it will be able to meet. As a result of the uncertainty regarding the successful completion of these discussions and of returning to compliance at December 31, 2011, the accounting standards require the Company to continue to classify its long-term bank debt as short short term debt at June 30, 2011 and until an agreement on new covenant terms is reached, and compliance with such new terms is anticipated.
           

Eltek Ltd.
Unaudited Non-GAAP EBITDA Reconciliations
For the period ended June 30, 2011
(In thousands US$, except per share data)
 
Non-GAAP EBITDA Reconciliations Three months ended Six months ended
June 30, June 30,
2011 2010 2011 2010
 
GAAP net Gain (loss) 257 (509 ) 1,045 (1,191 )

Add back items:
 
Financial expenses, net 160 317 216 486
Income tax (benefit) expense 3 5 23 11
Depreciation 546 651   1,059 1,175  
Adjusted EBITDA 966 465 2,343 482

Copyright Business Wire 2010

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