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Elecsys Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: September 6, 2011 09:37AM
Elecsys Corp. (ESYS) filed Quarterly Report for the period ended 2011-07-31. Elecsys Corp. has a market cap of $19.25 million; its shares were traded at around $5.08 with a P/E ratio of 22.09 and P/S ratio of 0.82.
Highlight of Business Operations:
Sales of our wireless remote monitoring and secure industrial communication solutions were approximately $1,733,000 for the three-month period ended July 31, 2011, which was an increase of $395,000, or 29.5%, from $1,338,000 during the three-month period ended July 31, 2010. The overall increase in sales of remote monitoring equipment and services was driven by the increase in customer orders received and shipped due to our continued focus on sales, marketing, and new product development as well as an increase in our recurring data management services. Data management services revenue continues to grow as a function of the growing population of monitoring units deployed in the field. Overall, data management services revenue totaled approximately $193,000, an increase of $39,000, or 25.3%, from data management services revenue of $154,000 reported in the comparable period of the prior fiscal year. We are experiencing strong interest and demand for our WatchdogCP, SensorCast and Director solutions and expect similar potential from new products being developed. We expect that sales of our wireless remote monitoring and secure industrial communication solutions will continue to increase over the next few quarters.
Total consolidated backlog at July 31, 2011 was approximately $5,779,000, an increase of $21,000, or 0.4%, from a total backlog of $5,758,000 on April 30, 2011 and a decrease of approximately $416,000, or 6.7%, from a total backlog of $6,195,000 on July 31, 2010. EDMS orders typically specify several deliveries scheduled over a defined and extended period of time. Typically, orders for our proprietary products are completed and shipped to the customer soon after the order is received. Certain larger proprietary product orders may have specific deliveries scheduled over a longer period of time. We anticipate that the amount of our total backlog relative to our revenues will fluctuate as our mix of proprietary products and EDMS sales varies.
Gross margin for the proprietary products business segment was approximately 51.8% of sales, or $1,223,000, for the three-month period ended July 31, 2011 as compared to 52.8% of sales, or $1,130,000, for the three-month period ended July 31, 2010. The gross margin for the EDMS business segment was $781,000, or 23.6% of sales, compared to $615,000, or 20.2% of sales, for the prior year period. The increase of $166,000 was the result of the increase in EDMS sales volumes from new and existing customers during the period and the related effect on production efficiency.
Financial expense, including interest, was $57,000 and $84,000 for the three-month periods ended July 31, 2011 and 2010, respectively. The decrease of $27,000 resulted from lower total outstanding borrowings compared to the previous fiscal year period. During the three-month period ended July 31, 2011, there were no additional borrowings on the operating line of credit and the Company made payments of $500,000 that lowered the total amount outstanding to $1,450,000. As of July 31, 2011, there was $3,247,000 outstanding in long-term borrowings compared to $3,371,000 at July 31, 2010. These long-term borrowings represent the Industrial Revenue Bonds related to the Company s headquarters and production facility. We plan to continue making regular payments on our operating line of credit to lower the total amount of outstanding borrowings, but we may utilize the operating line of credit to fund increases in production activity when necessary.
Operating activities. Our consolidated working capital decreased approximately $337,000 during the three-month period ended July 31, 2011. The decrease was primarily due to a reduction in current assets partially offset by a slight decrease in current liabilities. Cash generated from operating activities as a result of a reduction in working capital was used in the purchase of equipment and payment of debt. Operating cash receipts totaled approximately $6,102,000 and $5,319,000 during the three-month periods ended July 31, 2011 and 2010, respectively. The increase is primarily the result of the increase in sales and profitability for the current period in combination with a slight reduction in receivables as compared to the prior year. Total cash disbursements for operations, which include purchases of inventory and operating expenses, were approximately $5,459,000 for the three-month period ended July 31, 2011 and $4,884,000 for the three-month period ended July 31, 2010.
Financing activities. As of July 31, 2011, we had a $6,000,000 operating line of credit that provided us and our wholly-owned subsidiary with short-term financing for our 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, 2012. As of July 31, 2011, there were $1,450,000 borrowings outstanding on the operating line of credit. The total amount of borrowing base for the line of credit as of July 31, 2011 was approximately $4,500,000, with $3,050,000 available. 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, 2011) plus/minus 0.5% and has an interest rate floor of 3.50%. The loan agreement has various covenants, including a financial covenant pertaining to the maintenance of total tangible net worth and a required debt service coverage ratio. The interest rate actually assessed is determined by our debt-to-tangible net worth ratio and the rate of 3.50% for the period was the lowest rate allowed under the terms of the operating line of credit. For the three-month period ended July 31, 2011 there were no additional borrowings on the operating line of credit. Total payments on the line of credit were $500,000 for the period while payments on long-term debt totaled approximately $33,000. Effective September 1, 2011, the 5-year adjustable interest rate was reset to 1.89% for the next five years on our outstanding industrial revenue bonds. For the three-month period ended July 31, 2010, financing activities included $231,000 of cash used in payment of long-term and line of credit debt along with $2,000 of proceeds from the exercise of stock options.
Stocks Discussed: ESYS,