New Threads Only:  Add to Google Reader or Homepage
New Threads & Replies:  Add to Google Reader or Homepage
Forums are for serious investors only. GuruFocus Forum Rules.

Forum List » Business News and Headlines
SEC Filings, Earing Reports, Press Releases
New Topic Search
Goto Thread: PreviousNext
Goto: Forum ListMessage ListNew TopicSearchLog In
Innotrac Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: November 13, 2012 05:06PM

Innotrac Corp. (INOC) filed Quarterly Report for the period ended 2012-09-30. Innotrac Corporation has a market cap of $26.7 million; its shares were traded at around $2.05 with a P/E ratio of 51.3 and P/S ratio of 0.3.



Highlight of Business Operations:

Cost of Service Revenues. Cost of service revenues increased 28.4% to $10.4 million for the three months ended September 30, 2012, compared to $8.1 million for the three months ended September 30, 2011. Cost of service revenues as a percent of service revenues increased slightly to 46.9% from 45.8% mainly due to a higher usage of temporary labor in the third quarter of 2012 when compared to the third quarter of 2011 in response to new customer activity using a higher percentage of temporary labor as the Company gauges its long term staffing needs for such new customer activity. Freight Expense. The Company s freight expense increased 86.7% to $3.5 million for the three months ended September 30, 2012 compared to $1.9 million for the three months ended September 30, 2011 due to the increase in freight revenue as discussed above. Selling, General and Administrative Expenses. S,G&A expenses for the three months ended September 30, 2012 increased to $9.7 million compared to $9.2 million for the same period in 2011. S,G&A expenses as a percent of total revenues decreased to 37.7% from 47.1% for the comparable three months ended September 30, 2012 and 2011, respectively. The increase in S,G&A expenses primarily resulted from a $164,000 increase in facility and facility management costs due to the addition of several new clients and a $324,000 net increase in all other S,G&A costs, which includes increased sales commissions related to new clients, recruitment costs for open positions and adjustments to the Company s worker s compensation claims reserve. S,G&A expenses as a percentage of total revenue decreased due to the service revenue increases being achieved with lesser increases in supporting SG&A expenses. Interest Expense. Interest expense for the three months ended September 30, 2012 and 2011 was $90,000 and $44,000, respectively. Interest expense related to capital leases increased to $25,000 during the three months ended September 30, 2012 compared to $3,000 during the same quarter in 2011. Interest expense related to the new Equipment Loan was $19,000 for the three months ended September 30, 2012. Income Taxes. The Company s effective tax rate for the three months ended September 30, 2012 and 2011 was 0%. A valuation allowance continues to be recorded against the Company s net deferred tax assets as historical losses have created uncertainty about the realization of tax benefits in future years. Income taxes associated with the profits from the three months ended September 30, 2012 and losses from the three months ended September 30, 2011 were offset by a respective corresponding decrease and increase of the valuation allowance resulting in an effective tax rate of 0% for the three months ended in the respective periods. Nine Months Ended September 30, 2012 Compared to Nine Months Ended September 30, 2011 Service Revenues. Net service revenues increased 24.0% to $63.9 million for the nine months ended September 30, 2012 from $51.5 million for the nine months ended September 30, 2011. This increase was attributable to i) a $13.6 million increase in revenue from our eCommerce clients due to the addition of several new clients and increases in volumes from existing clients, and ii) a $537,000 increase in revenue from our direct marketing clients due to the addition of a new client and increases in volumes from existing clients, offset by a $1.7 million decrease in revenue from our modems and telecommunications clients due to a decrease in volume. Freight Revenues. The Company s freight revenues increased 17.8% to $9.0 million for the nine months ended September 30, 2012 from $7.6 million for the nine months ended September 30, 2011. The $1.4 million increase in freight revenues is primarily attributable to increased volumes from a new direct marketing client and other existing direct marketing and ecommerce clients which use our freight accounts partially offset by two of our direct marketing clients transitioning all or a portion of their freight usage from Company owned freight accounts to their own freight account during the first half of 2011. Changes between reporting periods in freight revenue do not have a material impact on our operating profitability due to pricing practices for direct freight costs.

Cost of service revenues. Cost of service revenues increased 29.0% to $30.3 million for the nine months ended September 30, 2012, compared to $23.5 million for the nine months ended September 30, 2011. Cost of service revenues as a percent of service revenues increased slightly to 47.5% from 45.6% mainly due to a higher usage of temporary labor during the nine months ended September 30, 2012 when compared to the same period in 2011 in response to a change in the mix of revenues by client and new customer activity using a higher percentage of temporary labor as the Company gauges its long term staffing needs for such new customer activity. Freight Expense. The Company s freight expense increased 14.3% to $8.6 million for the nine months ended September 30, 2012 compared to $7.6 million for the nine months ended September 30, 2011 due to the decrease in freight revenue as discussed above. Selling, General and Administrative Expenses. S,G&A expenses for the nine months ended September 30, 2012 increased to $28.9 million, or 39.7% of total revenues, compared to $27.2 million, or 46.0% of total revenues, for the same period in 2011. The increase in S,G&A expenses primarily resulted from a $806,000 increase in facility and facility management costs due to the addition of several new clients, a $429,000 increase in information technology costs due to costs related to new client implementations and a $507,000 net increase in all other S,G & A costs, which includes increased sales commissions related to new clients and adjustments to the Company s worker s compensation claims reserve. S,G&A expenses as a percentage of total revenue decreased due to the service revenue increases being achieved with lesser increases in supporting SG&A expenses. Interest Expense. Interest expense for the nine months ended September 30, 2012 and September 30, 2011 was $212,000 and $138,000, respectively. The average daily amount of debt outstanding on the Credit Facility remained flat at $278,000 during the nine months ended September 30, 2012 compared to $304,000 during the same period in 2011. Interest expense related to capital leases increased to $52,000 during the nine months ended September 30, 2012 compared to $14,000 during the same period in 2011. Interest expense related to the new Equipment Loan was $20,000 for the nine months ended September 30, 2012. Income Taxes. The Company s effective tax rate for the nine months ended September 30, 2012 and 2011 was 0%. A valuation allowance continues to be recorded against the Company s net deferred tax assets as historical losses have created uncertainty about the realization of tax benefits in future years. Income taxes associated with the profits from the nine months ended September 30, 2012 and losses from the nine months ended September 30, 2011 were offset by a respective corresponding decrease and increase of the valuation allowance resulting in an effective tax rate of 0% for the nine months ended in the respective periods.

For both the three months ended September 30, 2012 and September 30, 2011, we recorded less than $1,000 of interest expense on the Credit Facility, at a weighted average interest rate of 3.27% for the three months ended September 30, 2012 and a weighted average interest rate of 3.23% for the three months ended September 30, 2011. The rate of interest being charged on the Credit Facility at September 30, 2012 was 3.21%. The Company also incurred unused Credit Facility fees of approximately $23,000 and $27,000 for the three months ended September 30, 2012 and 2011 respectively, which unused Credit Facility fees are included in the total interest expense of $90,000 and $44,000 for the three months ended September 30, 2012 and 2011 respectively. For the nine months ended September 30, 2012, we recorded interest expense of $7,000 on the Credit Facility at a weighted average interest rate of 3.28%. For the nine months ended September 30, 2011, we recorded interest expense of $7,000 on the Credit Facility at a weighted average rate of 3.14%. The Company also incurred unused revolving credit facility fees of approximately $75,000 and $69,000 for the nine months ended September 30, 2012 and 2011, respectively. Additionally, the Company reported total interest expense of $212,000 and $138,000 the nine months ended September 30, 2012 and 2011, respectively. For the nine months ended September 30, 2012, the Company generated positive cash from operating activities of $1.7 million compared to $4.7 million cash from its operating activities in the same period of 2011. The $3.0 million decrease for the nine months ended September 30, 2012 from the same period in 2011 was due to the net change in all operating assets and liabilities using $3.1 million of cash during the nine months ended September 30, 2012 compared to providing $4.0 million during the same period in 2011, offset by the Company generating a net income of $2.0 million for the nine months ended September 30, 2012 compared to generating a net loss of $1.8 million in the same period in 2011. The $7.1 million decrease in cash provided by operating assets and liabilities for the nine months ended September 30, 2012 compared to 2011 resulted mainly from the combined effect of i) $5.2 million decrease in cash provided by accounts receivable for the nine months ended September 30, 2012 compared to the same period in 2011 due to higher growth in revenue during 2012 compared to revenue growth in 2011, ii) $2.6 million greater decreases in inventory occurring in 2011 than in 2012 as a result of the end of an inventory buyback program in 2011 for a single client discussed below, and iii.) $1.0 million greater increase in prepaid and other long-term assets and greater decrease in long-term liabilities related to the impact of straight lining rent expense for our facilities and prepaid maintenance items, offset by a $1.7 million decrease in cash used in accounts payable and accrued expenses in 2012 compared to 2011. The $1.7 million decrease in cash used for accounts payable and accrued expenses was primarily due to an overall increase in vendor payables balance outstanding as of September 30, 2012 due to an increase in temporary employees and amounts due other suppliers to support the increased volume in 2012.

For the nine months ended September 30, 2012, the Company generated positive cash from operating activities of $1.7 million compared to $4.7 million cash from its operating activities in the same period of 2011. The $3.0 million decrease for the nine months ended September 30, 2012 from the same period in 2011 was due to the net change in all operating assets and liabilities using $3.1 million of cash during the nine months ended September 30, 2012 compared to providing $4.0 million during the same period in 2011, offset by the Company generating a net income of $2.0 million for the nine months ended September 30, 2012 compared to generating a net loss of $1.8 million in the same period in 2011. The $7.1 million decrease in cash provided by operating assets and liabilities for the nine months ended September 30, 2012 compared to 2011 resulted mainly from the combined effect of i) $5.2 million decrease in cash provided by accounts receivable for the nine months ended September 30, 2012 compared to the same period in 2011 due to higher growth in revenue during 2012 compared to revenue growth in 2011, ii) $2.6 million greater decreases in inventory occurring in 2011 than in 2012 as a result of the end of an inventory buyback program in 2011 for a single client discussed below, and iii.) $1.0 million greater increase in prepaid and other long-term assets and greater decrease in long-term liabilities related to the impact of straight lining rent expense for our facilities and prepaid maintenance items, offset by a $1.7 million decrease in cash used in accounts payable and accrued expenses in 2012 compared to 2011. The $1.7 million decrease in cash used for accounts payable and accrued expenses was primarily due to an overall increase in vendor payables balance outstanding as of September 30, 2012 due to an increase in temporary employees and amounts due other suppliers to support the increased volume in 2012.

We only purchase inventory for two customers under contract terms that provide that the risk of inventory obsolescence remain with our customers. During 2010, one of our customers for whom we purchased inventory decided to discontinue a specific business program and liquidate the inventory supporting that program. The inventory buyback requirement is defined as the cost of that inventory, so upon buyback, there is no resulting revenue recorded in our operating results, consistent with past reporting by the Company. In the last week of March 2011, we shipped $2.9 million of inventory under normal payment terms and in mid May 2011, the resulting accounts receivable was collected from the customer. During the nine month periods ended September 30, 2012 and 2011, net cash used in investing activities consisted mainly of capital expenditures and were $4.7 million and $1.5 million respectively. The $4.7 million of investing activities for the nine months September 30, 2012 includes i) $3.2 million of purchased equipment for the build out of our new fulfillment center in Groveport, Ohio and ii) $1.5 million for all other capital expenditures. The $1.5 million of investing activities for the nine months ended September 30, 2011 was mainly capital expenditures for all facilities which is comparable to the $1.5 million spent in 2012 for capital expenditures excluding the Groveport facility. As of September 30, 2012, the initial build out of the Groveport, Ohio facility was materially completed with the build out of the remaining 200,000 square feet of space planned for after 2012 as new business needs dictate.

Read the The complete Report



Stocks Discussed: INOC,
Rate this post:




Sorry, only registered users may post in this forum.

Please Login if you have an account or Create a Free Account if you don't




Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial