Arotech Prepared to Sell Armor Subsidiaries
Ken Nagy, CFA
Arotech Corporation (ARTX) is a defense and security products and services company, engaged in three business areas: interactive simulation for military, law enforcement and commercial markets; batteries and charging systems for the military; and high-level armoring for military and nonmilitary air and ground vehicles.
On December 29, 2011, Arotech Corporation, a provider of defense and security products, filed a Form 8K with the Securities and Exchange Commission in regards to Costs associated with Exit or Disposal activities.
The firm has seen delays hurt the top-line in the past, as the decrease in revenues for the three months ended June 30, 2011 was due to delays in armor orders which Arotech had noted and forewarned about in previously released statements. Nevertheless, the delayed armor orders were shipped in the 2011 second half.
The Company stated that in order to focus on its more profitable and growth oriented divisions, it has committed to a plan to sell its subsidiary MDT Armor Corporation and its Israeli subsidiary M.D.T. Protective Industries, Ltd.
Arotech further stated that it is currently engaged in preliminary discussions with potential purchasers but will continue to operate the division until it is able to sell it, which the Company anticipates will happen within the next twelve months.
Still, for accounting purposes, Arotech will reflect the operations of the Division as being discontinued and its assets as held for sale.
This accounting change will result in a one-time, pre-tax charge of approximately $2.4 million that will be incurred in the fourth quarter 2011.The pretax charge of $2.4 million reflects a write-down of goodwill and intangibles of $1.8 million, a joint venture investment of $269,000 and costs associated with change of control provisions and other non-statutory severance expenses of $300,000.
Along the same lines nearly all the pretax charges are considered non-cash expenses.
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