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Wegener Corp. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: December 1, 2011 01:02PM
Wegener Corp. (WGNR) filed Annual Report for the period ended 2011-09-02. Wegener Corp has a market cap of $0.39 million; its shares were traded at around $0 with and P/S ratio of 0.04.
Highlight of Business Operations:We sell to a variety of domestic and international customers on an open-unsecured account basis. These customers principally operate in the cable television, broadcast, business music, private network and data communications industries. Sales to Muzak LLC and SSL Digital S.A. de C.V. accounted for approximately 24.6% and 17.7% of revenues in fiscal 2011. Sales to Muzak LLC and Corporation of the Presiding Bishop of The Church of Jesus Christ of Latter-Day Saints accounted for approximately 22.8% and 10.7% of revenues in fiscal 2010, respectively. At September 2, 2011, four customers accounted for approximately 28.1%, 15.5%, 14.0% and 10.1%, respectively, of our accounts receivable. At September 3, 2010, four customers accounted for approximately 24.1%, 18.1%, 14.1% and 10.7%, respectively, of our accounts receivable. Sales to a relatively small number of major customers have typically comprised a majority of our revenues. This trend is expected to continue in fiscal 2012 and beyond. The loss of one or more of these customers would likely have, at least in the near term, a material adverse effect on our results of operations.
Our fiscal 2011 revenues increased $189,000, or 2.1%, to $9,110,000 from $8,921,000 in fiscal 2010. Our net loss for fiscal 2011 was $(1,466,000) or $(0.11) per share compared to a net loss of $(2, 313,000) or $(0.18) per share for fiscal 2010.
Gross profit as a percent of sales was 34.8% in fiscal 2011 compared to 29.9% in fiscal 2010. Gross profit margin dollars increased $498,000, or 18.7%, to $3,167,000 in fiscal 2011 from $2,669,000 in fiscal 2010. Fiscal 2011 gross margin percentages and dollars benefited from a recovery of inventory reserve provisions in the amount of $269,500 resulting from the sale of fully reserved inventory. Warranty provisions charged to cost of revenues were $112,000 in fiscal 2011 and $50,000 in fiscal 2010. Profit margins in fiscal 2011 and 2010 included inventory reserve charges of $110,000 and $90,000, respectively, to provide for slow-moving and excess inventory primarily associated with first generation digital products. Capitalized software amortization expenses included in cost of revenues in fiscal 2011 were $874,000, compared to $850,000 in fiscal 2010. Capitalized software amortization expenses in fiscal 2012 are expected to approximate fiscal 2011 expenses.
Selling, general, and administrative (SG&A) expenses decreased $327,000, or 9.7%, to $3,035,000 in fiscal 2011 from $3,362,000 in fiscal 2010. As a percentage of revenues, SG&A expenses were 33.3% of revenues in fiscal 2011 and 37.7% in fiscal 2010. Corporate SG&A expenses in fiscal 2011 increased $91,000, or 17.1%, to $622,000 from $531,000 in fiscal 2010. Corporate SG&A expenses in fiscal 2011 included non-cash share-based compensation expenses of approximately $111,000 for stock option and restricted stock awards compared to none in the same period of fiscal 2010. WCI s SG&A expenses decreased $417,000, or 14.7%, to $2,414,000 in fiscal 2011 from $2,831,000 in fiscal 2010. WCI s SG&A severance expenses in fiscal 2011 decreased $147,000 to $24,000 from $171,000 in the same period of fiscal 2010. Additional decreases in SG&A expenses in fiscal 2011 included (i) salaries and related payroll costs of $192,000 due to a reduction in headcount; (ii) general overhead costs of $63,000 due to the cost reduction efforts of overhead expenses; and (iii) professional fees of $80,000. These decreases were offset by an increase in bad debt provisions of $53,000.
Research and development expenditures, including capitalized software development costs, were $2,130,000 or 22.1% of revenues in fiscal 2011 and $1,996,000 or 22.4% of revenues in fiscal 2010. During the first quarter of fiscal 2011, to increase engineering capacity, the 10% reduction in company-wide paid working hours was eliminated for engineering personnel. The increase in expenditures during fiscal 2011 compared to fiscal 2010 was related to the increase in working hours which was partially offset by a reduction in average head count in fiscal 2011 compared to the same period in fiscal 2010. Software development costs totaling $899,000 and $848,000 were capitalized during fiscal 2011 and 2010, respectively. The increases in capitalized software costs in fiscal 2011 compared to fiscal 2010 were primarily due to the increase in working hours. Research and development expenses, excluding capitalized software development costs, were $1,232,000 or 13.5% of revenues in fiscal 2011 and $1,148,000 or 12.9% of revenues in fiscal 2010. Subsequent to September 2, 2011, we added one additional engineer. We currently anticipate adding two additional engineering staff to accomplish research and development activities scheduled during fiscal 2012 and beyond. Should additional engineering resources be required in fiscal 2012, we believe engineering consulting services would be sufficiently available.
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