Eltek Reports Q3 2009 Financial Results

PETACH-TIKVA, Israel--(BUSINESS WIRE)--Eltek Ltd. (NASDAQ:ELTK), the leading Israeli manufacturer of advanced flex-rigid circuitry solutions, today announced its financial results for the third quarter of 2009 and the nine-month period ended September 30, 2009.

Revenues for the third quarter ended September 30, 2009 were $9.6 million, a 13% increase from the $8.4 million revenues recorded in the second quarter of 2009. The impact of the global economy slowdown is reflected in a 22% decrease in revenues compared with the third quarter of 2008, when the Company reached record revenues of $12.3 million. Although our German subsidiary’s revenues improved in the third quarter after a major decline in the second quarter, the Company is continuing to closely monitor its operations, as it is uncertain as to when such operations will return to their former levels of activity.

Gross profit for the third quarter of 2009 was $1.4 million (15% of revenues), compared with gross profit of $1.3 million (16% of revenues) in the second quarter of 2009 and gross profit of $2.0 million (17% of revenues) in the third quarter of 2008.

Operating profit for the third quarter of 2009 was $40,000 compared with an operating loss of $118,000 in the second quarter of 2009 and an operating profit of $319,000 in the third quarter of 2008.

Net loss for the third quarter of 2009 was $73,000 or ($0.01) per fully diluted share, compared with a net loss of $183,000 or ($0.03) per fully diluted share in the second quarter of 2009 and a net loss of $21,000 or ($0.00) per fully diluted share in the third quarter of 2008.

First Nine-Months 2009:

Revenues for the first nine months of 2009 were $27.5 million, a decrease of 19% compared to revenues of $34.2 million for the first nine months of 2008.

Gross profit for the first nine months of 2009 was $4.4 million (16% of revenues) compared with gross profit of $4.8 million (14% of revenues) in the same period in 2008. Gross profit margins increased despite the decrease in revenues, mainly due to cost-cutting measures the Company has undertaken, especially in payroll and raw material consumption, and the positive impact of the higher U.S. dollar exchange rate in 2009 compared to 2008.

Operating profit for the first nine months of 2009 was $86,000 compared with an operating loss of $532,000 in the same period in 2008.

Net loss for the first nine months of 2009 was $151,000 or ($0.02) per fully diluted share, compared with a net loss of $1.2 million or ($0.17) per fully diluted share in the same period in 2008.

EBITDA:

In the third quarter ended September 30, 2009 Eltek had EBITDA of $537,000 compared with EBITDA of $411,000 in the second quarter of 2009, and $848,000 in the third quarter of 2008. In the first nine months of 2009, Eltek’s EBITDA was $1.6 million compared with EBITDA of $1.2 million in the same period in 2008.

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: "The economic crisis took a toll on our business during the past year, but we have begun to see less volatility in the market and improving conditions in the German market influencing Kubatronik Leiterplatten GmbH, the Company’s subsidiary in Germany. We believe that our recently obtained AS-9100B quality certification will strengthen our position in the avionic and aerospace markets in the US and Europe and will assist us in attracting additional new projects with new and existing customers. We have already received orders from a European avionic conglomerate for new products. Moreover, we continue to see ripening of sales efforts in the US military market with regard to the ITAR (International Traffic in Arms Regulations) approval we received earlier this year."

Amnon Shemer, CFO of Eltek, added: “During the third quarter of 2009, we continued our cost reduction plan, especially in payroll and raw material consumption. We must keep in mind that in the third quarter of 2008 the Company achieved record revenues, but although revenues were $2.8 million lower in this quarter, our net loss increased by approximately $50,000. This was achieved mainly as a result of our expense adjustments and the higher exchange rate of the dollar. In addition, we had lower finance expenses than in the comparable period mainly due to the impact of hedging transactions.”

“In the nine-month period ended September 30, 2009, we repaid approximately $1 million to our banks. Encouraged by the increase in revenues we intend to approach our banks to increase their lines of credit to us, to cushion our financial position and to better position the Company for an anticipated recovery in the economy,” Mr. Shemer concluded.

About the Company

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.
Unaudited Consolidated Statements of Operations
(In thousands US$, except per share data)
		Three months ended				Nine months ended
		September 30,				September 30,
		2009		2008		2009		2008
Revenues		9,552		12,310		27,471		34,156
Costs of revenues		(8,126)		(10,262)		(23,080)		(29,368)
Gross profit		1,426		2,048		4,391		4,788
Research and development income, net		0		100		0		100
Selling, general and administrative expenses		(1,386)		(1,829)		(4,305)		(5,420)
Impairment loss on goodwill		0		0		0		0
Operating profit (loss)		40		319		86		(532)
Financial expenses, net		(115)		(307)		(259)		(603)
Other income, net		0		1		4		1
Profit (loss) before income tax expenses		(75)		13		(169)		(1,134)
Income tax (expenses), net		15		0		(29)		0
Net profit (loss)		(60)		13		(198)		(1,134)
Net profit (loss) attributable to non controlling interest		(13)		(34)		47		(22)
Net loss attributable to shareholders		(73)		(21)		(151)		(1,156)
Earnings (loss) per share
Basic net loss per ordinary share		(0.01)		(0.00)		(0.02)		(0.17)
Diluted net loss per ordinary share		(0.01)		(0.00)		(0.02)		(0.17)
Weighted average number of ordinary shares used to compute basic net loss per ordinary share (in thousands)		6,610		6,610		6,610		6,610
Weighted average number of ordinary shares used to compute diluted net loss per ordinary share (in thousands)		6,610		6,610		6,610		6,610

Eltek Ltd.
Unaudited Consolidated Balance Sheets
(In thousands US$)
		September 30,				December 31,
		2009		2008		2008
Assets
Current assets
Cash and cash equivalents		2,080		1,519		1,556
Receivables: Trade, net of provision for doubtful accounts		7,708		9,604		7,248
Other		367		324		229
Inventories		3,785		4,426		4,429
Prepaid expenses		228		353		181
Total current assets		14,168		16,226		13,643
Assets held for employees' severance benefits		1,416		1,362		1,166
Fixed assets, less accumulated depreciation		9,241		11,507		10,090
Goodwill		582		1,002		554
Total assets		25,407		30,097		25,453
Liabilities and Shareholder's equity
Current liabilities
Short-term credit and current maturities of long-term debts		6,013		6,515		5,898
Accounts payable: Trade		4,946		6,559		5,381
Related parties		599		696		561
Other		3,669		3,751		3,684
Total current liabilities		15,227		17,521		15,524
Long-term liabilities
Long term debt, excluding current maturities		2,847		2,978		2,607
Employee severance benefits		1,439		1,635		1,363
Total long-term liabilities		4,286		4,613		3,970
Equity
Ordinary shares, NIS 0.6 par value authorized 50,000,000 shares, issued and outstanding 6,610,107 as of September 30, 2009, 6,610,107 as of September 30, 2008 and 6,610,107 as of December 31, 2008		1,384		1,384		1,384
Additional paid-in capital		14,328		14,328		14,328
Cumulative translation adjustment related to change in reporting currency		2,659		3,362		2,596
Cumulative foreign currency translation adjustments		325		178		268
Capital reserve		695		695		695
Accumulated deficit		(13,793)		(12,352)		(13,642)
Shareholders' equity		5,598		7,595		5,629
Non controlling interest		296		368		330
Total equity		5,894		7,963		5,958
Total liabilities and shareholders' equity		25,407		30,097		25,453

Non-GAAP EBITDA Reconcilliations		Three months ended				Nine months ended				Year ended
		September 30,				September 30,				December 31,
		2009		2008		2009		2008		2008
GAAP net loss		(73)		(21)		(151)		(1,156)		(2,446)
Add back items:
Financial expenses, net		115		307		259		603		826
Tax expenses (income)		(15)		0		29		0		0
Impairment loss on goodwill		0		0		0		0		379
Depreciation		510		563		1,458		1,705		2,224
Adjusted EBITDA		537		848		1,595		1,152		983