Envirostar Inc. has a market cap of $10.48 million; its shares were traded at around $1.49 with a P/E ratio of 16.56 and P/S ratio of 0.53.
Highlight of Business Operations:For the six month period ended December 31, 2010, cash increased by $937,410 compared to an increase of $386,617 during the same period of fiscal 2010. The following summarizes the Company s Consolidated Statements of Cash Flows:
For the six month period ended December 31, 2010, operating activities provided cash of $939,336 compared to $397,948 of cash provided during the same period of fiscal 2010. The cash provided by operating activities in the first half of fiscal 2011 was primarily due to an increase of $801,667 in customer deposits as incoming orders increased during the six month period. Cash was also provided by the Company s net income of $214,066, supplemented by non-cash expenses for depreciation and amortization of $30,363, bad debts of $10,929 and a $22,684 provision for deferred taxes. Additional cash was generated by an increase of $408,795 in accounts payable and accrued expenses due to new purchases of inventory not yet paid for, offset by a decrease of $305,024 in accrued employee expenses as year end accrued bonuses and sales commissions were paid during the first quarter. Cash was reduced by $47,754 associated with an increase in inventories and a $51,568 reduction in the inventory reserve. This reserve was placed against returned inventory in prior years which the Company resold during the first quarter of fiscal 2011. An additional reduction in cash of $92,422 was due to an increase in accounts and trade notes receivable and a $12,369 increase in lease and mortgage receivables as the Company continues to finance some small leasing contracts.
For the six month period ended December 31, 2009, operating activities provided cash of $397,948 compared to $1,320,187 of cash provided during the same period of fiscal 2009. The cash provided by operating activities in the first half of fiscal 2010 was primarily due to a reduction of $638,968 in inventories, due to heavy shipments during the second quarter. These inventories were not immediately replaced in order to be in line with incoming orders. Cash was also provided by the Company s net earnings of $150,273 and non-cash expenses for depreciation and amortization of $45,954. Additional
cash was provided by a decrease in accounts receivable of $267,015, other assets of $77,339, and refundable income taxes and income taxes payable aggregating $72,929. These increases in cash were partially offset by a $598,455 reduction in customer deposits as new orders lagged behind shipments during the period. Cash was also used by a reduction in accrued employee expenses of $175,068 and accrued expenses of $52,335. These changes were the result of normal business activities. The collection of a $35,000 account receivable resulted in a reversal of a previously recognized bad debt expense.
Revenues for the six month period ended December 31, 2010 increased by $368,328 (3.8%) from the same period of fiscal 2010. However, for the second quarter of fiscal 2011, revenues decreased by $857,452 (14.0%) from the same period of fiscal 2010. The Company was able to ship a good part of its backlog during the second quarter of fiscal 2010, which adversely effected the comparison to the second quarter of fiscal 2011. The economy, although improving, remains a factor effecting the Company s sales. For the six and three month periods ended December 31, 2010, drycleaning equipment sales declined by 59.0% and 48.3%, respectively, compared to the similar periods of fiscal 2010. Drycleaning equipment sales continue to contract as fewer drycleaning establishments and plants are opened. Laundry equipment sales followed the same pattern, declining by 5.6% and 33.6% for the first six and three month periods of fiscal 2011 compared to the same periods last year. However, laundry equipment is an expanding product line and improvements are anticipated during the balance of the fiscal year. Boiler sales increased by 176.5% and 178.6% for the first six and three month periods, respectively, when compared to similar periods of fiscal 2010. The increase is attributable to a new line of boilers that the Company introduced in late fiscal 2009. Spare parts sales increased by 3.3% for the six months, but were basically flat for the second quarter of 2011 compared to last year s comparable periods. Revenues from development fees, franchise and license fees, commission and other income increased by $132,796 (142.1%) in the six month period of fiscal 2011 due principally to a substantial commission received during the first quarter of the fiscal year on a sale by another distributor for an installation made in the Company s territory. Royalty and license fee income were similar to the same periods of fiscal 2010.
Interest income increased by $5,446 (82.3%) and $2,653 (85.1%) for the six and three month periods of fiscal 2011, respectively, from the same periods of fiscal 2010 due to the investment of some of the Company s cash under equipment leases and mortgages.
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