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Frequency Electronics Inc. (FEIM) filed Quarterly Report for the period ended 2011-07-31.
Frequency Electronics Inc. has a market cap of $86.1 million; its shares were traded at around $10.4 with a P/E ratio of 37.2 and P/S ratio of 1.6.
This is the annual revenues and earnings per share of FEIM over the last 10 years. For detailed 10-year financial data and charts, go to 10-Year Financials of FEIM.
Highlight of Business Operations:
The 31% increase in consolidated revenues for the three months ended July 31, 2011 compared to the same period of fiscal year 2011, was generated primarily from satellite payload programs as a result of recent contract bookings in the FEI-NY segment. In the fiscal year 2012 period, revenues from commercial and U.S. Government satellite programs accounted for approximately 40% of consolidated revenues compared to approximately 30% for the same period of fiscal year 2011. Revenues on these contracts are recognized primarily under the percentage of completion method. Increased network infrastructure revenues generated by the FEI-Zyfer segment were partially offset by declines in that business area in the Gillam-FEI segment. Network infrastructure revenues were less than 30% of consolidated revenues for the three months ended July 31, 2011 compared to approximately 30% for the same period of fiscal year 2011. In the fiscal year 2012 quarter, revenues from the U.S. Government/DOD business area, which are recorded in the FEI-NY and FEI-Zyfer segments, were approximately the same dollar amount as the same period of fiscal year 2011, accounting for approximately 20% and 25%, respectively, of consolidated revenues.
For the three months ended July 31, 2010, consolidated revenues decreased by 3% from the fiscal year 2010 quarter due primarily from lower levels of network infrastructure revenues generated by the FEI-Zyfer segment. These lower network infrastructure revenues in fiscal year 2011 were partially offset by increased revenues from the FEI-NY and Gillam-FEI segments and the Company s other two major market areas: satellite payloads and non-satellite U.S. Government/DOD. Revenues from satellite payload programs increased modestly while U.S. Government/DOD non-space revenues increased by more than 20% compared to the same period of fiscal year 2010. Revenues from Gillam-FEI s non-telecommunication product line accounted for an increase in fiscal year 2011 revenues in that segment. During the remainder of fiscal year 2012, the Company expects to realize increased revenues from both U.S. Government and commercial satellite payload programs as compared to the previous fiscal year. Similarly, the Company expects to realize continued sales growth in U.S. Government/DOD non-space programs and from wireline telecommunication infrastructure products.
The improvement in gross margin for the three months ended July 31, 2011 compared to the same period a year ago reflects the 31% increase in revenue recorded in the first quarter of fiscal year 2012. The different mix of programs on which the Company is working in the fiscal year 2012 period accounted for the small decline in the gross margin rate compared to the three months ended July 31, 2010. Of the Company s three segments, the FEI-NY segment experienced the largest gross margin rate improvement as the higher volume of business covered more of that segment s fixed costs. The gross margin rates recorded in the fiscal year 2012 and 2011 periods approach the Company s targeted rate of 40%. The Company anticipates that its gross margin rates for the remainder of fiscal year 2012 will reach or exceed its target rate.
For the three months ended July 31, 2011 and 2010, selling and administrative expenses were 20% and 23%, respectively, of consolidated revenues. The increase in expenses in the fiscal year 2012 quarter compared to the same period of fiscal year 2011 is due to increased incentive compensation expenses resulting from greater profitability as well as increased stock-based compensation and deferred compensation expenses. For the remainder of fiscal year 2012, the Company expects selling and administrative expenses to be incurred at approximately the same rate and should meet the Company s target of 20% of revenues or less.
Research and development expenditures represent investments intended to keep the Company s products at the leading edge of time and frequency technology and enhance competitiveness for future revenues. Research and development spending for the three-month periods ended July 31, 2011 and 2010, was 8% and 10% of revenues, respectively, compared to the Company s target of 10% of revenues. R&D spending in fiscal year 2012 continued to facilitate development of new satellite payload products from DC to Ka Band, development and improvement of miniaturized rubidium atomic clocks, development of new GPS-based synchronization products and further enhancement of the capabilities of its line of low g-sensitivity and ruggedized rubidium oscillators. In addition, the Company continues to conduct development activities on customer-funded programs the cost of which appears in cost of revenues, thus reducing the level of internal research and development spending. The Company will continue to devote significant resources to develop new products, enhance existing products and implement efficient manufacturing processes. For the remainder of fiscal year 2012, the Company anticipates that internal research and development spending will be less than 10% of revenues. Internally generated cash and cash reserves are adequate to fund these development efforts.
The 31% increase in revenues created a significant increase in gross margin while operating expenses were moderately higher, thus enabling the Company to record a 126% improvement in operating profit for the three-months ended July 31, 2011, compared to the same period of fiscal year 2011. The Company anticipates that at the current increased level of business and having implemented certain operational efficiencies, that it can sustain operating profit in excess of 10% of revenues. The Company anticipates that it will generate operating profit for the full fiscal year 2012.
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