Innovative Solutions and Support Inc. (ISSC, Financial) filed Quarterly Report for the period ended 2012-03-31.
Innovative Solu has a market cap of $67.8 million; its shares were traded at around $3.72 with and P/S ratio of 2.6.
Cost of sales. Cost of sales increased $0.8 million or 27%, to $3.7 million, or 54% of net sales in the three months ended March 31, 2012 from $2.9 million, or 43% of net sales in the three months ended March 31, 2011. The increase was primarily the result of change in sales mix and the decrease in product sales volume. Despite the decreased sales volume, product cost of sales in the three months ended March 31, 2012 was lower as a percent of sales at 41% compared to 43% for the three months ended March 31, 2011, because of operational cost reductions during the second quarter. The change in product mix with an increased proportion of lower margin revenues generated from EMD contracts resulted in a lower gross profit percentage when compared to the same period in the prior year.
Net sales. Net sales decreased $1.8 million or 13.0% to $11.5 million for the six months ended March 31, 2012 from $13.3 million in the six months ended March 31, 2011. For the six months ended March 31, 2012, product sales decreased $3.9 million, offset, in part, by an increase of $2.1 million in EMD sales, from the same period in the prior year. The decrease in product sales was primarily the result of lower shipments to customers who have slowed or delayed their respective retrofit programs, while the increase in EMD sales was primarily the result of new customer funded design and EMD projects. For the six months ended March 31, 2012 and 2011, the Company recognized equal amounts of revenue and cost of $0.7 million and $0, respectively, related to certain contracts for which, at the time of recognition, a zero margin approach to applying the percentage of completion method was used in accordance with the guidance of Financial Accounting Standards Board Accounting Standards Codification Topic 605-35, Construction-Type and Production-Type Contracts.
The Company generated cash from operating activities of $1.2 million for the six months ended March 31, 2012 compared to $1.6 million for the six months ended March 31, 2011. The decrease in cash generated was due primarily to a reduction in net income ($0.8 million) and taxes payable ($0.4 million) and to increases in accounts receivable ($0.4 million) and inventories ($1.0 million), partially offset by an increase in accounts payable and accrued expenses ($0.6 million) and deferred revenue ($1.9 million) for the six months ended March 31, 2012. The increased use of cash in accounts receivables is due primarily to delayed payment of accounts receivables from American Airlines Inc. (AAI). The temporary increase in inventories offset by increases in accounts payable and accrued expenses is due to purchases made during the first six months of the year to meet the requirements of certain EMD contracts. The increase in deferred revenues is a result of billings to certain EMD customers in accordance with applicable contract terms that have not yet been recognized as revenues under the percentage-of-completion method of accounting. The increase in cash provided by operating activities during the six months ended March 31, 2011 was primarily due to decreases in inventory and increases to accounts payable and deferred revenue of $0.1 million, $0.2 million, and $0.2 million, respectively.
As of March 31, 2012 and September 30, 2011, the backlog was $25.6 million and $27.5 million, respectively. The $1.9 million decrease in backlog was the result of $9.5 million in new business orders offset by $11.5 million of recognized revenue. Air Data products backlog as of March 31, 2012 increased $0.1 million from September 30, 2011, while FPDS backlog as of March 31, 2012 decreased $2.0 million from September 30, 2011. As of March 31, 2012, approximately 55% of the Companys backlog is not expected to be filled within the next twelve months. To the extent new business orders do not continue to equal or exceed revenue recognized in the future from the Companys existing backlog, future operating results may be impacted negatively.
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Innovative Solu has a market cap of $67.8 million; its shares were traded at around $3.72 with and P/S ratio of 2.6.
Highlight of Business Operations:
For the three months ended March 31, 2011, four customers, Eclipse Aerospace, L3, FedEx, and Icelandair, accounted for 27%, 20%, 16% and 14% of net sales, respectively. For the six months ended March 31, 2011, four customers, Eclipse Aerospace, Icelandair, FedEx and L3, accounted for 19%, 15%, 15% and 13% of net sales, respectively.Cost of sales. Cost of sales increased $0.8 million or 27%, to $3.7 million, or 54% of net sales in the three months ended March 31, 2012 from $2.9 million, or 43% of net sales in the three months ended March 31, 2011. The increase was primarily the result of change in sales mix and the decrease in product sales volume. Despite the decreased sales volume, product cost of sales in the three months ended March 31, 2012 was lower as a percent of sales at 41% compared to 43% for the three months ended March 31, 2011, because of operational cost reductions during the second quarter. The change in product mix with an increased proportion of lower margin revenues generated from EMD contracts resulted in a lower gross profit percentage when compared to the same period in the prior year.
Net sales. Net sales decreased $1.8 million or 13.0% to $11.5 million for the six months ended March 31, 2012 from $13.3 million in the six months ended March 31, 2011. For the six months ended March 31, 2012, product sales decreased $3.9 million, offset, in part, by an increase of $2.1 million in EMD sales, from the same period in the prior year. The decrease in product sales was primarily the result of lower shipments to customers who have slowed or delayed their respective retrofit programs, while the increase in EMD sales was primarily the result of new customer funded design and EMD projects. For the six months ended March 31, 2012 and 2011, the Company recognized equal amounts of revenue and cost of $0.7 million and $0, respectively, related to certain contracts for which, at the time of recognition, a zero margin approach to applying the percentage of completion method was used in accordance with the guidance of Financial Accounting Standards Board Accounting Standards Codification Topic 605-35, Construction-Type and Production-Type Contracts.
The Company generated cash from operating activities of $1.2 million for the six months ended March 31, 2012 compared to $1.6 million for the six months ended March 31, 2011. The decrease in cash generated was due primarily to a reduction in net income ($0.8 million) and taxes payable ($0.4 million) and to increases in accounts receivable ($0.4 million) and inventories ($1.0 million), partially offset by an increase in accounts payable and accrued expenses ($0.6 million) and deferred revenue ($1.9 million) for the six months ended March 31, 2012. The increased use of cash in accounts receivables is due primarily to delayed payment of accounts receivables from American Airlines Inc. (AAI). The temporary increase in inventories offset by increases in accounts payable and accrued expenses is due to purchases made during the first six months of the year to meet the requirements of certain EMD contracts. The increase in deferred revenues is a result of billings to certain EMD customers in accordance with applicable contract terms that have not yet been recognized as revenues under the percentage-of-completion method of accounting. The increase in cash provided by operating activities during the six months ended March 31, 2011 was primarily due to decreases in inventory and increases to accounts payable and deferred revenue of $0.1 million, $0.2 million, and $0.2 million, respectively.
As of March 31, 2012 and September 30, 2011, the backlog was $25.6 million and $27.5 million, respectively. The $1.9 million decrease in backlog was the result of $9.5 million in new business orders offset by $11.5 million of recognized revenue. Air Data products backlog as of March 31, 2012 increased $0.1 million from September 30, 2011, while FPDS backlog as of March 31, 2012 decreased $2.0 million from September 30, 2011. As of March 31, 2012, approximately 55% of the Companys backlog is not expected to be filled within the next twelve months. To the extent new business orders do not continue to equal or exceed revenue recognized in the future from the Companys existing backlog, future operating results may be impacted negatively.
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