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PCB | November 22, 2007

Eltek posts loss in Q3

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.

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.

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.

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