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Elecsys Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: September 7, 2010 10:15AM
Elecsys Corp. (ESYS) filed Quarterly Report for the period ended 2010-07-31.
Highlight of Business Operations:
Total consolidated backlog at July 31, 2010 was approximately $6,195,000, an increase of $153,000, or 2.5%, from a total backlog of $6,042,000 on April 30, 2010 and an increase of approximately $2,031,000, or 48.8%, from a total backlog of $4,164,000 on July 31, 2009. The increase in the backlog is the result of increases in orders from current and new customers of our electronic design and manufacturing services as well as orders for our proprietary products. EDMS orders typically specify several shipments and services provided over a period of time or delivery schedule. Orders for our proprietary products are usually completed and shipped to the customer soon after the order is received. Certain larger proprietary product orders have specific deliveries scheduled through November 2011 or may not yet be scheduled for delivery due to uncertain field installation and deployment schedules and similar related factors. These product orders, with future or unscheduled delivery dates, are included in the calculation of consolidated backlog.
Selling, general and administrative (“SG&A”) expenses decreased $155,000, or 9.4%, to $1,499,000 for the three-month period ended July 31, 2010 from $1,654,000 in the three-month period ended July 31, 2009. SG&A expenses were 28.9% of sales for the fiscal first quarter of 2011 as compared to 45.7% of sales for the comparable period for fiscal 2010. Corporate administrative expenses decreased approximately $69,000 from the comparable period of the prior year mainly due to a reduction in professional fees for investor relations efforts and a slight reduction in equity compensation expenses. Operating expenses decreased approximately $86,000 during the first fiscal quarter as compared to the prior year comparable period. During the previous fiscal year s three-month
Financial expenses, including interest expense, were $84,000 and $113,000 for the three-month periods ended July 31, 2010 and 2009, respectively. The decrease of $29,000 was primarily the result of an overall decrease in the total outstanding borrowings compared to the previous fiscal year period as well as the impact of a reduction in the interest rate paid on the line of credit due to the refinancing in late October 2009. During the three-month period ended July 31, 2010, we made $200,000 in payments on the operating line of credit that lowered the total amount outstanding to $3,500,000. As of July 31, 2010, there was $3,241,000 outstanding in long-term borrowings compared to $3,364,000 at July 31, 2009. These long-term borrowings represent the Industrial Revenue Bonds related to the Company s headquarters and production facility. We plan to utilize the operating line of credit when necessary over the next few quarters to fund the increases in our production activity, but we also plan to make regular payments on our operating line of credit so that the amount of outstanding borrowings will remain stable or decrease.
Income tax expense was approximately $55,000 for the three-month period ended July 31, 2010. An income tax benefit was recorded for the three-month period ended July 31, 2009 of approximately $241,000. The $296,000 change in income taxes was the result of the change from a loss before income taxes for the prior year period to income that was reported for thecurrent three-month period ended. Income taxes are based on a 39% blended tax rate for both federal and state taxes.As a result of the above factors, net income was $107,000, or $0.03 per diluted share, for the three-month period ended July 31, 2010 as compared to a net loss of $396,000, or $0.12 per diluted share, reported for the three-month period ended July 31, 2009.
Operating activities. Our consolidated working capital increased approximately $43,000 for the three-month period ended July 31, 2010. The increase was the result of an overall increase in current assets offset with a slightly lower increase in current liabilities. The increase in current assets was due to reductions in accounts receivable from collections and income taxes receivable offset by an increase in inventories and deferred taxes. The increase in current liabilities was due to an increase in accounts payable and the current portion of long-term debt. Operating cash receipts totaled approximately $5,319,000 and $4,579,000 during the three-month periods ended July 31, 2010 and 2009, respectively. The increase is the result of the increase in sales for the current period in combination with the reduction in receivables as compared to the prior year. Total cash disbursements for operations which include purchases of inventory and operating expenses, were approximately $4,884,000 for the three-month period ended July 31, 2010 and $3,998,000 for the three-month period ended July 31, 2009. The Company utilizes its line of credit when necessary in order to pay suppliers and meet operating cash requirements.
Financing activities. As of July 31, 2010, the Company had a $6,000,000 operating line of credit that provided the Company and its subsidiary with short-term financing for their working capital requirements. The line of credit s borrowing capacity is calculated as a specified percentage of accounts receivable and inventory on a monthly basis and expires on October 30, 2011. The total amount of borrowing base for the line of credit as of July 31, 2010 was calculated as approximately $4,415,000. It is secured by accounts receivable and inventory and accrues interest at a performance-based rate that is based on the prime rate (3.25% at July 31, 2010) plus/minus 0.5% and has an interest rate floor of 3.50%. The interest rate actually assessed is determined by the Company s debt-to-tangible net worth ratio and was 3.5% on July 31, 2010. The line of credit contains various covenants, including a financial covenant pertaining to the total amount of tangible net worth. For the three-month period ended July 31, 2010 therewere no borrowings on the operating line of credit. Total payments on the line of credit were $200,000 for the period while payments on long-term debt totaled approximately $31,000. For the three-month period ended July 31, 2009, financing activities included $129,000 of cash used in payment of long-term and line of credit debt. As of July 31, 2010, there were $3,500,000 borrowings outstanding on the operating line of credit.Although there can be no assurances, we believe that existing cash, the cash expected to be generated from operations, amounts available under our line of credit, and amounts available from trade credit, will be sufficient to finance our anticipated working capital needs, our capital expenditures, and our scheduled debt repayment for the foreseeable future.