Napco Security Systems Inc. has a market cap of $31.13 million; its shares were traded at around $1.63 with and P/S ratio of 0.46.
Highlight of Business Operations:In March 2009, the Company began a Restructuring Plan consisting of a series of actions to consolidate its Sales, Production and Warehousing operations of Marks and those in Europe and the Middle East into the Corporate Headquarters in Amityville, NY and its production facility in the Dominican Republic. The majority of these initiatives have been completed by June 30, 2010, while certain remaining Production-related actions are expected to be completed by December 31, 2010. Accordingly, the Company recognized restructuring costs of $1,274,000 in the fiscal year ended June 30, 2009. Of this amount, $210,000 relates to Workforce Reductions communicated in March 2009 and $1,064,000 to Business Exits and related costs associated with inventory and lease impairments related to the closure of the Marks, European and Middle East facilities. As of September 30, 2010, $1,138,000 of the $1,274,000 in restructuring costs has been incurred and $136,000 remains in accrued expenses.
Sales for the three months ended September 30, 2010 increased by approximately 6% to $15,327,000 as compared to $14,465,000 for the same period a year ago. The increase in sales for the three months ended September 30, 2010 was primarily due to increased sales in the Company s door-locking products ($1,069,000) as partially offset by decreases in the Company s intrusion and access control products ($207,000).
Net loss decreased by $684,000 to a net loss of $1,134,000 or $(0.06) per diluted share for the three months ended September 30, 2010 as compared to a net loss of $1,818,000 or $(0.10) per diluted share for the same period a year ago. The change for the three months ended September 30, 2010 was primarily due to the items as described above.
During the three months ended September 30, 2010 the Company utilized all of its cash from operations ($174,000) and a portion of its cash on hand ($811,000) to repay outstanding debt ($893,000) and purchase property, plant and equipment ($92,000). The Company believes its current working capital, cash flows from operations and its revolving credit agreement will be sufficient to fund the Company s operations through the next twelve months.
As of September 30, 2010, long-term debt consisted of a revolving credit loan facility of $11,100,000 as well as a term loan with a remaining balance of $17,856,000. The term loan is being repaid in 19 quarterly installments of $893,000 each which commenced in December 2008, and a final payment of $8,033,000 due in August 2013. The revolving line of credit expires in August 2012 and any outstanding borrowings are to be repaid or refinanced on or before that time. As of September 30, 2010 and June 30, 2010, the Company was not in compliance with several of the financial covenants in the existing facilities. In October 2010, the Company received the appropriate waivers from its banks as part of the restatement of these facilities as further described below. Because the closing and final waivers occurred after the filing date of the Form 10-K for the year ended June 30, 2010, the Company classified this debt as current in the financial statements for the year ended June 30, 2010.
On October 28, 2010, the Company entered into a Second Amended and Restated Credit Agreement Dated as of October 28, 2010 among the Company, as the Borrower, Capital One, N.A., as a Lender and HSBC Bank USA, National Association as Lender, Administrative Agent and Collateral Agent (the “Second Amended Agreement”). The Second Amended Agreement amended and restated the previous term loan and revolving credit facility and provides for a term loan of $16,070,000 and a revolving credit facility of $11,100,000. Prior to closing on October 28, 2010, $11,100,000 was outstanding under the existing revolving credit facility and $17,856,000 was outstanding under the existing term loan. The Second Amended Agreement provides for the same expiration dates and repayment schedule as stated above except for an accelerated payment of $1,786,000, which was paid at closing and represents the payments previously scheduled for December 31, 2010 and March 31, 2011 under the Term Loan. The post-closing balance of the Term Loan on October 28, 2010 is $16,070,000 and the balance outstanding under the Revolving Credit Facility remained at $11,100,000. The Second Amended Agreement also provides for a LIBOR interest rate option of LIBOR plus 4.5% in addition to the existing prime option of prime plus 4.0% and financial covenants that better reflect the Company s current financial condition. In addition, the Second Amended Agreement contains waivers for non-compliance with certain covenants in the previous facilities. The Company s obligations under the Second Amended Agreement continue to be secured by the Company's headquarters in Amityville, New York, certain other assets and the common stock of the Company's wholly-owned subsidiaries.
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