Message #11 From:
NewsBot Date: August 14, 2006 06:00:00 AM
ARCS News ARC Wireless Solutions Reports Second Quarter Results
WHEAT RIDGE, Colo.--(BUSINESS WIRE)--Aug. 14, 2006--ARC Wireless Solutions, Inc. ("ARC") (OTCBB:ARCS) today announced operating results for the second quarter ended June 30, 2006 that includes results for both continuing and discontinued operations. As announced on August 2, 2006, the Company has entered into an agreement, subject to approval by its shareholders, to sell Winncom Technologies Corp. ("Winncom"), its wholly owned subsidiary, to an Irish company for $17 million in cash. As a result, for accounting purposes the operations of Winncom are classified as discontinued operations. Pursuant to U.S. securities law, the Company may not discuss the details of the potential sale of Winncom prior to the filing and mailing of a proxy statement to its shareholders. The Company intends to file the proxy statement with the Securities and Exchange Commission during the next two weeks. The proxy statement will include a description of the background of the potential sale, the purchaser, and the expected use of proceeds.
Revenues, including both continuing and discontinued operations for the three months ended June 30, 2006, were $17,753,000 compared to $8,108,000 for the three months ended June 30, 2005. Revenues, including both continuing and discontinued operations for the six months ended June 30, 2006, were $29,535,000 compared to $16,184,000 for the same period last year. The 83% increase in revenues for the six months ended June 30, 2006 compared to six months ended June 30, 2005 is primarily due to Winncom's international sales pursuant to its contract with Kazakhtelecom, which accounted for 63% of the increase.
Net income for the three months ended June 30, 2006, including both continuing and discontinued operations, was $50,000 compared to $207,000 for the three months ended June 30, 2005. Net income for the six months ended June 30, 2006, including both continuing and discontinued operations, was $80,000 compared to $106,000 for the six months ended June 30, 2005.
Gross profit, including the continuing and discontinued operations, was 11.7% and 22.6% for the three months ended June 30, 2006 and June 30, 2005, respectively, and 12.7% and 20.1% for the six months ended June 30, 2006 and June 30, 2005, respectively. The decrease in gross profit percentage is primarily due to Winncom's lower margin on its international business and a decrease in margin at the Wireless Communications Solutions Division due to significant increases in component costs.
Total revenues for discontinued operations for the three months ended June 30, 2006 were $15,959,000 as compared to $6,417,000 for the three months ended June 30, 2005. Total revenues for discontinued operations for the six months ended June 30, 2006 were $26,162,000 as compared to $13,407,000 for the six months ended June 30, 2005. The 95% increase in revenues for the six months ended June 30, 2006 as compared to the six months ended June 30, 2005 is primarily due to Winncom's international sales pursuant to its contract with Kazakhtelecom.
Net income for discontinued operations for the three months ended June 30, 2006 was $486,000 as compared to $132,000 for the three months ended June 30, 2005. Net income for discontinued operations for the six months ended June 30, 2006 was $795,000 as compared to $246,000 for the six months ended June 30, 2005. The increase in net income is primarily due to the increase in Winncom's international sales pursuant to its contract with Kazakhtelecom.
Gross profit for discontinued operations was 10.4% and 16.7% for the three months ended June 30, 2006 and June 30, 2005, respectively as compared to 11.2% and 15.9% for the six months ended June 30, 2006 and June 30, 2005, respectively. The decrease in gross profit percentage is primarily due to Winncom's lower margin on the Kazakhtelecom contract.
Net sales from continuing operations for the three months ended June 30, 2006 was $1,824,000 as compared to $1,691,000 for the three months ended June 30, 2005. Net sales from continuing operations for the six months ended June 30, 2006 was $3,373,000 as compared to $2,777,000 for the six months ended June 30, 2005. The increase in sales is primarily due to the introduction of several new products and new customers of the Wireless Communications Solutions Division.
The net loss from continuing operations for the three months ended June 30, 2006 was $436,000 as compared to net income of $75,000 for the three months ended June 30, 2005. The net loss from continuing operations for the six months ended June 30, 2006 was $715,000 as compared to $140,000 for the six months ended June 30, 2005. The decrease in net income from continuing operations is due primarily to a decrease in gross profit from 45% to 22% for the three months ended June 30, 2005 and June 30, 2006, respectively and 40% to 24% for the six months ended June 30, 2005 and June 30, 2006, respectively. The decrease in gross profit is mainly due to the significant increase in commodity costs of raw materials used in the production of the antenna products, the costs associated with transitioning our manufacturing to China and the domestic overhead costs associated with the introduction and subsequent manufacturing of several new products. As previously announced, the Company has formed a subsidiary in Hong Kong and will begin manufacturing many of its antenna products in China. This transition is anticipated to be fully operational in the third quarter of 2006 and is expected to have a significant impact on the Wireless Communications Solutions Division's gross margin.
"2006 has been an active and eventful year so far for the Company," stated Randall P. Marx, ARC's Chief Executive Officer. "We have announced the proposed sale of Winncom for $17 million in cash and have opened an office in Hong Kong to better accommodate our manufacturing transition to China. As excited as we are about improving antenna sales and increasing our customer base, we are equally disappointed in the drop in gross margin. As mentioned above, we anticipate the margins to significantly improve as a result of moving the major portion of our manufacturing process to China. Additionally, the antenna division has made a significant investment in both its sales and engineering staff as well and has begun lowering the manufacturing and operations overhead of its domestic operations."
"With respect to Winncom, the Company is preparing a proxy statement to be filed with the Securities and Exchange Commission that will subsequently be mailed to all of its shareholders concerning the stockholder meeting at which the transaction will be voted upon. The proxy statement will include notice of the date and time of the meeting, as well as a full description of the proposed Winncom sale," Mr. Marx added.
ARC Wireless Solutions, Inc. is involved in selective design, manufacturing and marketing, as well as distributing and servicing, of a broad range of wireless components and network products and accessories. The Company develops, manufactures and markets proprietary products, including base station antennas (for cellphone towers) and other antennas, through its Wireless Communications Solutions Division; it is a value added distributor of Wi-Fi(R) and other wireless networking products through its Winncom Technologies Corp. subsidiary; it designs, manufactures and distributes cable assemblies for cable, satellite and other markets through its Starworks Wireless Inc. subsidiary; and, it negotiates and manages its contract manufacturing relationships through its ARC Wireless Hong Kong, Ltd. subsidiary. The Company's products and systems are marketed through the Company's internal sales force, OEMs, numerous reseller distribution channels, retail, and the Internet. ARC Wireless Solutions, Inc., together with its Wireless Communications Solutions Division and its Starworks Wireless subsidiary, is headquartered in Wheat Ridge, Colorado. The Company's Winncom Technologies Corp. subsidiary is located in Solon, Ohio. The Company's China subsidiary is located in Kowloon, Hong Kong. For more information about the Company and its products, please visit our web sites at www.arcwireless.net, www.antennas.com, www.winncom.com. The Company has entered into an agreement, subject to approval by its shareholders, to sell Winncom Technologies Corp., its wholly owned subsidiary, to an Irish company for $17 million in cash.
This is not a solicitation to buy or sell securities and does not purport to be an analysis of the Company's financial position. This Release contains forward-looking statements within the meaning of the Securities Exchange Act of 1934. Although the Company believes that the expectations reflected in the forward-looking statements and assumptions upon which forward-looking statements are based are reasonable, it can give no assurance that such expectations and assumptions will prove to have been correct. See the Company's most recent Quarterly Report on Form 10-Q and Annual Report on Form 10-K for additional statements concerning important factors, such as demand for products, manufacturing costs, and competition, that could cause actual results to differ materially from the Company's expectations.
