Numerex Issues Corrected Third Quarter 2009 Financial Results
Correction Does Not Affect Previously Reported Cash Position, Revenues or Adjusted EBITDA
- Press Release
- Source: Numerex Corp.
- On 7:10 am EST, Monday November 9, 2009
ATLANTA, Nov. 9 /PRNewswire-FirstCall/ -- Numerex Corp (Nasdaq: NMRX - News), a leading single source provider of secure machine-to-machine (M2M) products and services, today issued a correction to its financial results for its third quarter ended September 30, 2009, which were announced on November 5, 2009. The correction does not affect prior reporting periods or require an accounting restatement.
Related Quotes
| Symbol | Price | Change |
|---|---|---|
| NMRX | 4.35 | +0.05 |
As previously reported, during the third quarter ended September 30, 2009, the Company utilized cash to retire an aggregate of $3.0 million of its non convertible secured term notes and converted $2.0 million of its convertible secured term notes to 448,467 shares of its Class A Common Stock. The convertible debt retired had an original conversion price of $10.37 per share compared to an average revised conversion price of $4.46 per share.
Under generally accepted accounting principles, specifically, ASC 470-20 (formerly Financial Accounting Standard 84), an adjustment to the conversion price of the convertible note should have been accounted for as an inducement to convert the note, even though there was no economic incentive offered. The fair value of the shares provided approximated the carrying value of the outstanding note.
As a result, the Company is required to report an additional $1.3 million non-cash adjustment to interest expense for its third quarter ended September 30, 2009. The Company also expects to report a $1.2 million non-cash adjustment during the fourth quarter associated with the recent retirement of its remaining structured debt. These amounts represent the incremental number of shares issued multiplied by the share price on the settlement date.
This is a non-cash adjustment and has no impact on the Company's base business. In particular, it does not change either historical operating earnings or forward looking statements for the fourth quarter of 2009. As a result of this correction, GAAP pre-tax net loss is now $2.2 million, compared to a GAAP pre-tax net income of $202,000 in the third quarter of 2008. GAAP pre-tax basic/diluted loss per share was ($0.15) for the quarter ended September 30, 2009, compared with earnings per share of $0.01 in the same period last year.
Adjusted EBITDA, which excludes stock-based compensation expense and legal fees associated with litigation, remains unchanged at $0.8 million for the quarter ended September 30, 2009 following the correction, compared to $1.9 million in the same period last year. Non-GAAP basic/diluted loss per share remains unchanged at ($0.02) for the quarter ended September 30, 2009 compared to net income per share of $0.05 in the same period last year. A reconciliation of GAAP to non-GAAP results has been provided in the financial statement tables included in this press release.
ABOUT NUMEREX
Numerex Corp. (NASDAQ: NMRX) is the single source machine-to-machine (M2M) product and service provider to some of the world's largest organizations delivering the foundational components of device, network, and application, used by its customers in the development of their M2M solutions. Customers typically subscribe to Numerex network and application services that are delivered through its hosted platforms. The Company's offerings and expertise enable its customers to efficiently build reliable and secure solutions that are used to monitor and manage assets remotely whenever and wherever needed, while simplifying and speeding up development and deployment. Numerex DNA(TM) offerings include hardware Devices, Network services, and software Applications that are delivered through its Numerex FAST(TM) (Foundation Application Software Technology) platform. Numerex is the first M2M service provider in North America to carry the ISO 27001 information security certification. "Machines Trust Us(TM)" represents the Company's focus on M2M data security, service reliability, and round-the-clock support of its customers' M2M solutions. For additional information, please visit www.numerex.com.
This press release contains, and other statements may contain, forward-looking statements with respect to Numerex future financial or business performance, conditions or strategies and other financial and business matters, including expectations regarding growth trends and activities in the wireless data business. Forward-looking statements are typically identified by words or phrases such as "believe," "expect," "anticipate," "intend," "estimate," "assume," "strategy," "plan," "outlook," "outcome," "continue," "remain," "trend," and variations of such words and similar expressions, or future or conditional verbs such as "will," "would," "should," "could," "may," or similar expressions. Numerex cautions that these forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. These forward-looking statements speak only as of the date of this press release, and Numerex assumes no duty to update forward-looking statements. Actual results could differ materially from those anticipated in these forward-looking statements and future results could differ materially from historical performance.
The following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance: our inability to reposition our platform to capture greater recurring service revenues; the risks that a substantial portion of Orbit One's revenues are derived from government contracts that may be terminated by the government at any time; variations in quarterly operating results; delays in the development, introduction, integration and marketing of new wireless services; customer acceptance of services; economic conditions resulting in decreased demand for our products and services; the risk that our strategic alliances and partnerships will not yield substantial revenues; changes in financial and capital markets; the inability to attain revenue and earnings growth in our wireless data business; changes in interest rates; inflation; the introduction, withdrawal, success and timing of business initiatives and strategies; competitive conditions; the inability to realize revenue enhancements; and extent and timing of technological changes. Numerex SEC reports identify additional factors that can affect forward-looking statements.
Numerex Corp.
Condensed Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)
Three Months
Ended
September 30,
2009 2008 Change %Change
-------------------------------------
Net sales:
Hardware $3,977 $11,632 $(7,655) (66%)
Service 7,572 7,345 227 3%
-------------------------------------
Total net sales 11,549 18,977 (7,428) (39%)
Cost of hardware sales 3,449 9,663 (6,214) (64%)
Cost of services 2,995 2,634 361 14%
-------------------------------------
Gross Profit 5,105 6,680 (1,575 (24%)
Selling, general, and administrative
expenses 3,907 4,697 (790) (17%)
Research and development expenses 584 473 111 23%
Bad Debt Expense 102 209 (107) (51%)
Depreciation and amortization 879 773 106 14%
-------------------------------------
Operating earnings (loss) (367) 528 (895) (170%)
Interest expense (1,781) (331) (1,450) 438%
Other income 0 5 (5) (100%)
Earnings (loss) before tax (2,148) 202 (2,350) (1163%)
Provision (benefit) for income tax 31 125 (94) (75%)
-------------------------------------
Net earnings (loss) $(2,179) $77 $(2,256) (2930%)
=====================================
Basic earnings (loss) per
common share $(0.15) $0.01
Diluted earnings (loss) per
common share $(0.15) $0.01
Number of shares used in per share
calculation
Basic 14,360 13,742
Diluted 14,360 13,986
Nine Months
Ended
September 30,
2009 2008 Change %Change
-------------------------------------
Net sales:
Hardware $14,557 $35,745 $(21,188) (59%)
Service 22,259 21,112 1,147 5%
-------------------------------------
Total net sales 36,816 56,857 (20,041) (35%)
Cost of hardware sales 12,611 30,838 (18,227) (59%)
Cost of services 8,117 6,755 1,362 20%
-------------------------------------
Gross Profit 16,088 19,264 (3,176) (16%)
Selling, general, and administrative
expenses 13,565 14,672 (1,107) (8%)
Research and development expenses 1,743 1,488 255 17%
Bad Debt Expense 393 420 (27) (6%)
Depreciation and amortization 2,516 2,289 227 10%
-------------------------------------
Operating earnings (loss) (2,129) 395 (2,524) (639%)
Interest expense (2,471) (1,141) (1,330) 117%
Other income 1 2 (1) (50%)
-------------------------------------
Earnings (loss) before tax (4,599) (744) (3,855) 518%
Provision (benefit) for income tax 96 (421) 517 (123%)
-------------------------------------
Net earnings (loss) $(4,695) $(323) $(4,372) 1354%
=====================================
Basic earnings (loss) per
common share $(0.33) $(0.02)
Diluted earnings (loss) per
common share $(0.33) $(0.02)
Number of shares used in per share
calculation
Basic 14,228 13,735
Diluted 14,228 13,735
Numerex Corp.
Supplemental Sales Information
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
Net Sales: 2009 2008 Change 2009 2008 Change
----------------------------------------------------
Wireless Data
Communications
Hardware $3,793 $10,235 $(6,442) $14,075 $33,098 $(19,023)
Service 7,002 6,486 516 20,144 18,831 1,313
----------------------------------------------------
Sub-total 10,795 16,721 (5,926) 34,219 51,929 (17,710)
Digital Multimedia,
Networking and Wireline
Security
Hardware 184 1,397 (1,213) 482 2,647 (2,165)
Service 570 859 (289) 2,115 2,281 (166)
----------------------------------------------------
Sub-total 754 2,256 (1,502) 2,597 4,928 (2,331)
Total
Hardware 3,977 11,632 (7,655) 14,557 35,745 (21,188)
Service 7,572 7,345 227 22,259 21,112 1,147
----------------------------------------------------
Total net
sales 11,549 18,977 (7,428) 36,816 56,857 (20,041)
====================================================
Numerex Corp.
Condensed Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, 2009 September 30, 2009
Non- Non-
GAAP Adjust- GAAP GAAP Adjust- GAAP
Results ments Results Results ments Results
--------------------------------------------------
Net sales:
Hardware $3,977 $3,977 $14,557 $14,557
Service 7,572 7,572 22,259 22,259
--------------------------------------------------
Total net sales 11,549 11,549 36,816 36,816
Cost of hardware
sales 3,449 3,449 12,611 12,611
Cost of services 2,995 2,995 8,117 8,117
--------------------------------------------------
Gross Profit 5,105 - 5,105 16,088 - 16,088
44.2% 44.2% 43.7% 43.7%
Selling, general,
and administrative
expenses 3,907 (278) 3,629 13,565 (2,411) 11,154
Research and
development
expenses 584 584 1,743 1,743
Bad debt expense 102 102 393 393
--------------------------------------------------
Earnings (loss)
before interest,
depreciation and
amortization 512 278 790 387 2,411 2,798
Depreciation and
amortization 879 - 879 2,516 - 2,516
--------------------------------------------------
Operating earnings
(loss) (367) 278 (89) (2,129) 2,411 282
Interest expense (1,781) 1,576 (205) (2,471) 1,576 (895)
Other income - - 1 1
--------------------------------------------------
Earnings (loss)
before tax (2,148) 1,854 (294) (4,599) 3,987 (612)
Provision for
income tax 31 - 31 96 - 96
--------------------------------------------------
Net earnings
(loss) $(2,179) $1,854 $(325) $(4,695) $3,987 $(708)
==================================================
Basic earnings
(loss) per common
share $(0.15) $(0.02) $(0.33) $(0.05)
Diluted earnings
(loss) per common
share $(0.15) $(0.02) $(0.33) $(0.05)
Number of shares
used in per
share calculation
Basic 14,360 14,360 14,228 14,228
Diluted 14,360 14,360 14,228 14,228
(a) These Unaudited non-GAAP Consolidated Statements of Operations are
for informational purposes only and are not presented in accordance with
GAAP. The adjustments necessary to provide a direct reconciliation of the
non-GAAP to the GAAP basis consolidated Statement of Operations exclude
stock option expense and legal fees associated with litigation. Interest
expense excludes GAAP costs and non-cash costs of debt extinguishment.
Numerex Corp.
Condensed Consolidated Statement of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, 2008 September 30, 2008
Non- Non-
GAAP Adjust- GAAP GAAP Adjust- GAAP
Results ments Results Results ments Results
------------------------------------------------------
Net sales:
Hardware $11,632 $11,632 $35,745 $35,745
Service 7,345 7,345 21,112 21,112
------------------------------------------------------
Total net sales 18,977 18,977 56,857 56,857
Cost of hardware
sales 9,663 9,663 30,838 30,838
Cost of services 2,634 2,634 6,755 6,755
------------------------------------------------------
Gross Profit 6,680 - 6,680 19,264 - 19,264
35.20% 35.20% 33.90% 33.90%
Selling, general, and
administrative
expenses 4,697 (600) 4,097 14,672 (1,715) 12,957
Research and
development expenses 473 473 1,488 1,488
Bad debt expense 209 209 420 420
------------------------------------------------------
Earnings before interest,
depreciation and
amortization 1,301 600 1,901 2,684 1,715 4,399
Depreciation and
amortization 773 773 2,289 2,289
------------------------------------------------------
Operating earnings
(loss) 528 600 1,128 395 1,715 2,110
Interest expense (331) (331) (1,141) (1,141)
Other income 5 5 2 2
------------------------------------------------------
Earnings (loss)
before tax 202 600 802 (744) 1,715 971
Provision (benefit)
for income tax 125 125 (421) 546 125
------------------------------------------------------
Net earnings (loss) $77 $600 $677 ($323) $1,169 $846
======================================================
Basic earnings (loss)
per common share $0.01 $0.05 ($0.02) $0.06
Diluted earnings (loss)
per common share $0.01 $0.05 ($0.02) $0.06
Number of shares used
in per share
calculation
Basic 13,742 13,742 13,735 13,735
Diluted 13,742 13,742 13,735 13,735
(a) These Unaudited non-GAAP Consolidated Statements of Operations are
for informational purposes only and are not presented in accordance with
GAAP. The adjustments necessary to provide a direct reconciliation of the
non-GAAP to the GAAP basis consolidated Statement of Operations exclude
stock option expense and legal fees associated with litigation.
NUMEREX CORP.
CONDENSED CONSOLIDATED BALANCE SHEET
(In thousands, except share information)
September 30, December 31,
2009 2008
(unaudited)
--------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $5,876 $8,917
Short term investments - -
Accounts receivable, less allowance
for doubtful accounts of $393 at
September 30, 2009 and $1,010 at
December 31, 2008: 5,280 9,159
Inventory 7,034 8,506
Prepaid expenses and other current assets 1,683 1,508
Deferred tax asset current - -
TOTAL CURRENT ASSETS 19,873 28,090
--------------------------
Property and equipment, net 1,749 1,765
Goodwill, net 23,787 23,771
Other intangibles, net 5,161 5,796
Software, net 2,813 2,796
Other assets 189 288
Deferred tax asset long term - -
--------------------------
TOTAL ASSETS $53,572 $62,506
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $5,653 $7,289
Other current liabilities 2,097 2,943
Note payable, current 3,072 2,568
Deferred revenues 1,765 1,134
Obligations under capital leases,
current portion 23 29
--------------------------
TOTAL CURRENT LIABILITIES 12,610 13,963
LONG TERM LIABILITIES
Note payable 834 7,629
Obligations under capital leases
and other long term liabilities 420 520
--------------------------
TOTAL LONG TERM LIABILITIES 1,254 8,149
COMMITMENTS AND CONTINGENCIES - -
SHAREHOLDERS' EQUITY
Preferred stock - no par value;
authorized 3,000,000; none issued - -
Class A common stock - no par value;
authorized 30,000,000; issued 15,856,090
shares at September 30, 2009 and
15,372,611 shares at December 31, 2008;
outstanding 14,630,281 shares at
September 30, 2009 and 14,163,518
shares at December 31, 2008 54,187 50,801
Additional paid-in-capital 5,361 4,587
Treasury stock, at cost, 1,225,809
shares on September 30, 2009 and
1,185,809 on December 31, 2008 (5,213) (5,053)
Class B common stock - no par value;
authorized 5,000,000; none issued - -
Accumulated other comprehensive
income(loss) 1 (8)
Retained deficit (14,628) (9,933)
--------------------------
TOTAL SHAREHOLDERS' EQUITY 39,708 40,394
--------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $53,572 $62,506
==========================
Numerex Corp. Contact:
Alan Catherall
770 485-2527
Investor Relations Contact:
Seth Potter
646 277-1230
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