Cyalume Technologies Holdings, Inc. - FORM 8-K - EX-99.2

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8-K - Cyalume Technologies Holdings, Inc.	v194143_8k.htm
EX-99.1 - Cyalume Technologies Holdings, Inc.	v194143_ex99-1.htm

Exhibit 99.2

FOR IMMEDIATE RELEASE:

Cyalume Technologies Holdings Announces Results for the Second Quarter of 2010

WEST SPRINGFIELD, Mass., August 11, 2010 – Cyalume Technologies Holdings, Inc. (OTCBB: CYLU) today announced results for the three months ending June 30, 2010, reporting a 18% increase in revenues to $9.4 million from revenues of $8.0 million for the second quarter of 2009. Adjusted net income, which is net income and amortization, increased 168% to $1.5 million from $0.6 million for the second quarter of 2009. Adjusted EBITDA, which is earnings before interest, taxes, depreciation, amortization, non-cash stock-based compensation, foreign currency gains and losses, and certain one-time gains or expenses, increased 107% to $2.7 million for the second quarter of 2010 compared to $1.3 million for the second quarter of 2009.

For the six months ending June 30, 2010, revenues increased 25% to $18.3 million from revenues of $14.6 million for the same period in 2009. Adjusted net income increased 103% to $2.1 million in 2010 from $1.0 million in 2009. Adjusted EBITDA increased 137% to $5.0 million in 2010 compared to $2.1 million in 2009.

Adjusted net income and adjusted EBITDA are important measures because they present a view of our performance on an ongoing basis without regard to capital structures, capital investment cycles and corresponding ages of related assets among comparable companies. Comparable GAAP amounts and a reconciliation to GAAP are later contained in this release.

Derek Dunaway, Cyalume’s President and CEO, said “Our second quarter and six month results continue to show improvement in both revenue and adjusted EBITDA. Our core Military Chemical business has stabilized and we expect to see a significant improvement in the second half of 2010. The chemiluminescent ammunition and international chemical light businesses continue to demonstrate substantial year over year growth. The combination of our revenue growth and our focus on cost controls are yielding improved margins."

Forward-Looking Statements

This press release and accompanying investor conference call include forward-looking statements concerning sales and operating earnings. These forward-looking statements are based upon management’s expectations and beliefs concerning future events. Forward-looking statements are necessarily subject to risks, uncertainties and other factors, many of which are outside the control of the Company and which could cause actual results to differ materially from such statements. These risks and uncertainties include, but are not limited to: the effect of regional and global economic and industrial market conditions including our expectations concerning their impact on the markets we serve; the effect of conditions in the financial and credit markets and their impact on the Company and our customers and suppliers; the impact of the Company’s cost reduction initiatives; the Company’s ability to execute its business plan to meet its sales, operating income, cash flow and capital expenditure guidance; the impact on the Company’s gross profit margins as a result of changes in product mix; the Company’s vulnerability to industry conditions and competition; the effect of any interruption in the Company’s supply of raw materials or a substantial increase in the price of raw materials; ongoing capital expenditures and investment in research and development; compliance with any changes in government regulations and environmental and health and safety laws; the effect on the Company’s international operations of unexpected changes in legal and regulatory requirements, export restrictions, currency controls, tariffs and other trade barriers, difficulties in staffing and managing foreign operations, political and economic instability, difficulty in accounts receivable collection and potentially adverse tax consequences; the effect of foreign currency exchange rates on the Company’s non-U.S. sales; reliance for a significant portion of the Company’s total revenues on a limited number of large organizations and the continuity of business relationships with major customers; the loss of key personnel; and, the nature and extent of military operations being conducted by customers.

Actual results and events may differ significantly from those projected in the forward-looking statements. Reference is made to Cyalume’s filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31, 2009, its quarterly reports on Form 10-Q, and other periodic filings, for a description of the foregoing and other factors that could cause actual results to differ materially from those in the forward-looking statements. Any forward-looking statement speaks only as of the date on which such statement is made, and the Company undertakes no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise.

Investor Conference Call

A live Internet broadcast of the Company’s conference call discussing the second quarter results can be accessed via the investor relations page on the Cyalume web site (www.cyalume.com) on Thursday, August 12, 2010, at 11:00 a.m. Eastern time. To participate, please dial 877-312-7507, or 253-237-1164 and ask for the "Cyalume Technologies Conference Call, ID No. 90976546.” A simultaneous webcast will also be at: http://investor.cyalume.com/eventdetail.cfm?eventid=84449. In addition, a replay of the conference call will be available shortly after the call on the Investor Relations page of the Company website at: http://investor.cyalume.com/index.cfm.

About Cyalume Technologies

Cyalume Technologies is the world leader in the chemiluminescent industry providing dependable light for uses by militaries, police, fire and other public safety organizations in the U.S., NATO countries and the Middle East. Cyalume’s chemical lights are depended on in emergencies such as blackouts, industrial accidents, acts of terrorism and natural disasters. The Company offers a full complement of military grade Cyalume® brand, industrial grade SnapLight® brand and consumer grade SafetyBright® brand emergency lighting solutions which are manufactured and distributed at its plants in West Springfield, MA and Aix-en-Provence, France.

Cyalume Technologies Holdings, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except shares and per share information)

(Unaudited)

	For the Three			For the Three
	Months Ended			Months Ended
	June 30,			June 30,
	2010			2009
Revenues	$	9,404		$	7,959
Cost of goods sold		4,610			4,575
Gross profit		4,794			3,384

Other expenses (income):
Sales and marketing		776			746
General and administrative		1,253			1,377
Research and development		351			415
Interest expense, net		635			625
Interest expense – related party		16			15
Amortization of intangible assets		456			739
Other, net		(81	)		19
Total other expenses, net		3,406			3,936

Income (loss) before income taxes		1,388			(552	)
Provision for (benefit from) income taxes		357			(57	)
Net income (loss)	$	1,031		$	(495	)

Net income (loss) per common share:
Basic	$	0.07			(0.03	)
Diluted	$	0.07			(0.03	)

Weighted average shares used to compute net income (loss) per common share:
Basic		15,458,737			15,333,160
Diluted		15,505,764			15,333,160

Source: Financial statements from Form 10-Q, filed August 11, 2010.

Cyalume Technologies Holdings, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except shares and per share information)

(Unaudited)

	For the Six			For the Six
	Months Ended			Months Ended
	June 30,			June 30,
	2010			2009
Revenues	$	18,289		$	14,583
Cost of goods sold		9,212			8,436
Gross profit		9,077			6,147

Other expenses (income):
Sales and marketing		1,564			1,531
General and administrative		2,766			2,602
Research and development		733			808
Interest expense, net		1,300			1,252
Interest expense – related party		32			29
Amortization of intangible assets		912			1,734
Other, net		(91	)		63
Total other expenses, net		7,216			8,019

Income (loss) before income taxes		1,861			(1,872	)
Provision for (benefit from) income taxes		669			(604	)
Net income (loss)	$	1,192		$	(1,268	)

Net income (loss) per common share:
Basic	$	0.08			(0.08	)
Diluted	$	0.08			(0.08	)

Weighted average shares used to compute net income (loss) per common share:
Basic		15,443,234			14,956,448
Diluted		15,513,433			14,956,448

Source: Financial statements from Form 10-Q, filed August 11, 2010.

Cyalume Technologies Holdings, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except shares and per share information)

	June 30,
	2010 (unaudited)			December 31, 2009
Assets
Current assets:
Cash	$	2,580		$	2,003
Accounts receivable, net of allowance for doubtful accounts of $25 and $239 at June 30, 2010 and December 31, 2009, respectively		3,145			3,319
Inventories, net		8,839			9,320
Income taxes refundable		—			294
Deferred income taxes		459			682
Prepaid expenses and other current assets		413			382
Total current assets		15,436			16,000

Property, plant and equipment, net		8,632			8,384
Goodwill		51,244			51,244
Other intangible assets, net		21,498			22,548
Other noncurrent assets		113			67
Total assets	$	96,923		$	98,243


Liabilities and Stockholders’ Equity
Current liabilities:
Lines of credit	$	2,700		$	3,200
Current portion of notes payable		8,468			6,940
Accounts payable		2,818			3,222
Accrued expenses and other current liabilities		2,377			2,069
Advance due to related parties		9			9
Income taxes payable		313			—
Total current liabilities		16,685			15,440

Notes payable, net of current portion		15,469			18,874
Notes payable due to related parties		1,097			1,065
Deferred income taxes		6,997			7,105
Derivatives		310			69
Asset retirement obligation, net of current portion		162			158
Total liabilities		40,720			42,711

Commitments and contingencies		—			—

Stockholders' equity:
Preferred stock, $0.001 par value; 1,000,000 shares authorized, no shares issued or outstanding		—			—
Common stock, $0.001 par value; 50,000,000 shares authorized; 15,684,070 and 15,405,570 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively		16			15
Additional paid-in capital		88,526			87,926
Accumulated deficit		(31,201	)		(32,393	)
Accumulated other comprehensive loss		(1,138	)		(16	)
Total stockholders’ equity		56,203			55,532
Total liabilities and stockholders' equity	$	96,923		$	98,243

Source: Financial statements from Form 10-Q, filed August 11, 2010.

Cyalume Technologies Holdings, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands, except shares)

(Unaudited)

	For the Six			For the Six
	Months Ended			Months Ended
	June 30,			June 30,
	2010			2009
Cash flows from operating activities:
Net income (loss)	$	1,192		$	(1,268	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation of property, plant and equipment		329			320
Amortization		1,065			2,420
Provision for deferred income taxes		313			(869	)
Stock-based compensation expense		601			-
Other non-cash expenses		130			503
Changes in operating assets and liabilities:
Accounts receivable		34			(1,127	)
Inventories		187			(166	)
Prepaid expenses and other current assets		(70	)		(101	)
Accounts payable and accrued liabilities		(15	)		229
Income taxes payable		615			532
Accrued interest on notes payable to related parties		—			(2	)
Net cash provided by operating activities		4,381			471

Cash flows from investing activities:
Purchases of long-lived assets		(1,003	)		(283	)
Net cash used in investing activities		(1,003	)		(283	)

Cash flows from financing activities:
Payments for common stock subject to redemption		—			(1,123	)
Net repayment of line of credit		(500	)		(200	)
Repayment of long-term notes payable		(2,081	)		(1,646	)
Payments to reacquire and retire common stock		—			(263	)
Refund (payment) of debt issue costs		(50	)		10
Proceeds from exercises of warrants		—			27
Net cash used in financing activities		(2,631	)		(3,195	)

Effect of exchange rate changes on cash		(170	)		57
Net increase (decrease) in cash		577			(2,950	)
Cash, beginning of period		2,003			3,952
Cash, end of period	$	2,580		$	1,002

Source: Financial statements from Form 10-Q, filed August 11, 2010.

Results of Operations — Adjusted Basis

Adjusted net income is an alternative view of performance used by management and we believe that investors' understanding of our performance is enhanced by disclosing this information. We define adjusted net income as the net income of Cyalume excluding amortization expense. The adjusted net income measure is not, and should not be viewed as, a substitute for U.S. GAAP net income. Adjusted net income is an important internal measurement for us. We measure the performance of the overall Company on this basis. The following are examples of how we use adjusted net income:

*	Senior management receives a monthly analysis of our operating results that is prepared on an adjusted net income basis;

*	Our annual budget is prepared on an adjusted net income basis

*	Certain annual compensation computations, including certain annual cash bonuses, are calculated in part on an adjusted net income basis.

Despite the importance of this measure to management in goal setting and performance measurement, we stress that adjusted net income is a non-GAAP financial measure that has no standardized meaning under U.S. GAAP and therefore, has limits in its usefulness to investors. Due to its non-standardized definition, adjusted net income (unlike U.S. GAAP net income) may not be comparable with the calculation of similar measures for other companies. Adjusted net income is presented solely to permit investors to more fully understand how management assesses our performance.

Cyalume Technologies Holdings, Inc.

Reconciliation of Net Income (Loss) to Adjusted Net Income

(Unaudited, in thousands)

	For the Three		For the Three
	Months Ended		Months Ended
	June 30,		June 30,
	2010		2009
Net income (loss)	$	1,031	$	(495	)

Amortization of intangible assets and inventory step-up		456		1,049
Adjusted net income	$	1,487	$	554

	For the Six		For the Six
	Months Ended		Months Ended
	June 30,		June 30,
	2010		2009
Net income (loss)	$	1,192	$	(1,268	)

Amortization of intangible assets and inventory step-up		912		2,306
Adjusted net income	$	2,104	$	1,038

Adjusted EBITDA (a Non-GAAP Financial Measure)

Cyalume defines Adjusted EBITDA as net income before interest expense, income taxes, depreciation, amortization, foreign currency gains or losses and one time income or expense items. Management uses Adjusted EBITDA for establishing internal budgets, goals and certain performance bonuses. Internal financial reports including those provided to the Board of Directors, focus on Adjusted EBITDA. Since Adjusted EBITDA is not necessarily an indicator of overall cash flows of Cyalume, management reviews capital budgets and cash flow forecasts in parallel with Adjusted EBITDA analysis. Because Adjusted EBITDA eliminates interest expense, income taxes and depreciation, amortization and one-time income or expense items, Cyalume considers this financial measure an important indicator of Cyalume's liquidity, operational strength and performance. Investors may find Adjusted EBITDA useful as it illustrates underlying operating trends in Cyalume's business.

In addition, components of Adjusted EBITDA are a key component in the determination of our compliance with certain covenants under our credit agreements. Adjusted EBITDA is not a measure of financial performance under GAAP. Adjusted EBITDA should not be considered in isolation, or as a substitute for net income, cash flows, or other consolidated income or cash flow data presented in accordance with GAAP or as a measure of our liquidity or financial condition. Because Adjusted EBITDA is not a measure determined in accordance with GAAP and is thus susceptible to varying calculations, Adjusted EBITDA as discussed may not be comparable to other similarly titled measures of other companies.

The use of Adjusted EBITDA as a supplemental liquidity measure is useful as it assists management in understanding and evaluating the Company's capacity, excluding the impact of interest, taxes, and non-cash depreciation and amortization charges, for servicing debt and other cash needs, prior to our consideration of the impacts of other potential sources and uses of cash, such as working capital items. Investors may find it useful for these purposes as well. Adjusted EBITDA should not be considered an alternative to, or more meaningful than, net cash provided by operating activities, as determined in accordance with GAAP, since it omits the impact of interest, taxes and changes in working capital that use or provide cash (such as receivables, payables and inventories) as well as the sources or uses of cash associated with changes in other balance sheet items (such as long-term loss accruals and deferred items). Because Adjusted EBITDA excludes depreciation and amortization, Adjusted EBITDA does not reflect any cash requirements for the replacement of the assets being depreciated and amortized, which assets will often have to be replaced in the future. Further, Adjusted EBITDA, because it also does not reflect the impact of debt service, income taxes, cash dividends, capital expenditures and other cash commitments, does not represent how much discretionary cash we have available for other purposes. Nonetheless, Adjusted EBITDA is a key measure expected by and useful to our investors, rating agencies and the banking community in the analysis of a Company's ability to service debt, fund capital expenditures and otherwise meet cash needs, respectively. Cyalume also evaluates Adjusted EBITDA because it is clear that movements in these non-GAAP measures impact the Company's ability to attract financing. Adjusted EBITDA, as calculated, may not be comparable to similarly titled measures reported by other companies.

Cyalume Technologies Holdings, Inc.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

(Unaudited, in thousands)

	For the Three		For the Three
	Months Ended		Months Ended
	June 30,		June 30,
	2010		2009
Net income (loss)	$	1,031	$	(495	)

Adjustments to arrive at EBITDA:

Interest, net		651		640
Provision for (benefit from) income taxes		357		(57	)
Depreciation		165		162
Amortization		456		739
EBITDA		2,660		989

Adjustments to arrive at adjusted EBITDA:

Inventory step-up		-		310
Other one-time (income) expense (1)		71		19

Adjusted EBITDA	$	2,731	$	1,318

Cyalume Technologies Holdings, Inc.

Reconciliation of Net Income (Loss) to Adjusted EBITDA

(Unaudited, in thousands)

	For the Six		For the Six
	Months Ended		Months Ended
	June 30,		June 30,
	2010		2009
Net income (loss)	$	1,192	$	(1,268	)

Adjustments to arrive at EBITDA:

Interest, net		1,332		1,281
Provision for (benefit from) income taxes		669		(604	)
Depreciation		329		302
Amortization		912		1,734
EBITDA		4,434		1,463

Adjustments to arrive at adjusted EBITDA:

Inventory step-up		-		572
Other one-time (income) expense (1)		537		63

Adjusted EBITDA	$	4,971	$	2,098

(1)

Non-cash stock-based compensation and foreign exchange (gains)/losses

Company Contact:

Derek Dunaway

President and Chief Executive Officer

Cyalume Technologies Holdings, Inc.

(413) 858-2500

ddunaway@cyalume.com

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