inTest Corp. (INTT, Financial) filed Quarterly Report for the period ended 2012-03-31.
Intest Corp has a market cap of $37.8 million; its shares were traded at around $3.49 with a P/E ratio of 6.3 and P/S ratio of 0.8.
Quarter Ended March 31, 2012 Compared to Quarter Ended March 31, 2011 Net Revenues. Net revenues were $10.7 million for the quarter ended March 31, 2012 compared to $11.7 million for the same period in 2011, a decrease of $973,000 or 8%. We believe the decrease in our net revenues during the first quarter of 2012 primarily reflects the factors previously discussed in the Overview. During the quarter ended March 31, 2012, our net revenues from customers in the U.S. decreased 1% and our net revenues from foreign customers decreased 13%, respectively, as compared to the same period in 2011. The impact of changes in foreign currency exchange rates on the increase in net revenues from foreign customers was less than 1%. Gross Margin. Gross margin was 43% for the first quarter of 2012 compared to 44% for the same period in 2011. The decrease in gross margin primarily reflects that our fixed operating costs were not as fully absorbed due to the lower net revenues levels during the first quarter of 2012 as compared to the same period in 2011. While our fixed operating costs declined $65,000 in absolute dollar terms during the quarter ended March 31, 2012 as compared to the same period in 2011, as a percentage of net revenues these costs increased from 16% for the quarter ended March 31, 2011 to 17% for the quarter ended March 31, 2012. The decline in the absolute dollar value of our fixed operating costs in the first quarter of 2012 as compared to the same period in 2011 primarily represents that the first quarter of 2011 had $74,000 of costs associated with the relocation of two of our domestic manufacturing operations during this period. There were no similar costs in the first quarter of 2012. To a lesser extent, we also attribute the decrease in our gross margin during the first quarter of 2012 as compared to the same period in 2011 to an increase in our charges for obsolete and excess inventory. These charges increased $63,000 in the first quarter of 2012 as compared to the same period in 2011, reflecting more items falling into our standard objective criteria primarily as a result of changes in demand for certain products made by our Mechanical and Electrical Products segments. These increases were partially offset by a slight decline in component material costs as a percentage of net revenues, reflecting changes in product and customer mix. Selling Expense. Selling expense was $1.4 million in each of the quarters ended March 31, 2012 and 2011. Increases in third-party consulting fees and salary and benefits expense were offset by a decrease in commissions, reflecting the lower net revenue levels, and lower levels of accruals for product warranty expense. Engineering and Product Development Expense. Engineering and product development expense was $924,000 for the first quarter of 2012 compared to $813,000 for the same period in 2011, an increase of $111,000 or 14%. The increase in engineering and product development expense primarily reflects higher salary and benefits expense and an increase in the use of third-party consultants. General and Administrative Expense. General and administrative expense was $2.0 million for the first quarter of 2012 compared to $1.6 million for the same period in 2011, an increase of $357,000 or 22%. During the first quarter of 2012, we
recorded $337,000 in costs associated with the acquisition of Thermonics. There were no similar costs recorded in the first quarter of 2011. In addition, amortization expense related to our intangible assets increased $114,000 during the first quarter of 2012 as compared to the same period in 2011. This amount represents amortization of the intangible assets acquired as a part of the Thermonics transaction completed on January 16, 2012. These increases were partially offset by a decrease in accruals for profit-related bonuses reflecting the loss recorded for the first quarter of 2012 as compared to earnings recorded for the first quarter of 2011. Restructuring and Other Charges. Restructuring and other charges were $359,000 for the first quarter of 2012. There were no similar charges for the first quarter of 2011. The restructuring and other charges recorded during the first quarter of 2012 represent facility closure costs related to the closure of the Sunnyvale, California facility occupied by Thermonics at the time of our acquisition of this operation, as discussed further in the Overview. Other Income. Other income was $13,000 for the first quarter of 2012 compared to $56,000 for the first quarter of 2011, a decrease of $43,000. During the first quarter of 2011, we recorded a gain on sale of property and equipment. There was no similar gain recorded during the first quarter of 2012. Income Tax Expense (Benefit). For the quarter ended March 31, 2012, we recorded an income tax benefit of $28,000 compared to income tax expense of $60,000 for the same period in 2011. On a quarterly basis, we record income tax expense or benefit based on the expected annualized effective tax rate for the various taxing jurisdictions in which we operate our businesses. During the past several years, due to our history of operating losses in both our domestic and certain of our foreign operations, we had recorded a full valuation allowance against the deferred tax assets of these operations, including net operating loss carryforwards, where we believed it was more likely than not that we would not have sufficient taxable income to utilize these assets before they expire. During the third and fourth quarters of 2011, we reversed $3.1 million of the valuation allowance which had been recorded against the deferred tax assets of these operations. The reversal of this amount of the valuation allowance was based on our current assessment that it is now more likely than not that we will be able to fully utilize these assets in the near future. Some of the key factors we considered in making our assessment included our profitability in both 2011 and 2010 and our level of certainty with regard to our forecasts of near term future profitability for the operations to which these assets relate. Liquidity and Capital Resources Net cash used in operations for the three months ended March 31, 2012 was $67,000 compared to $1.2 million for the same period in 2011. The decrease in net cash used in operations primarily reflects a lower level of increase in the amount of trade accounts receivable and inventories during the first quarter of 2012 as compared to the same period in 2011. This was partially offset by a net loss of $43,000 in the first quarter of 2012 compared to net earnings $1.3 million for the same period in 2011. During the first quarter of 2012, trade accounts receivable increased $574,000 and inventories increased $37,000 compared to increases of $2.6 million and $504,000, respectively, during the same period in 2011. The lower level of increase primarily reflects that the level of increase in business activity in the first quarter of 2011 as compared to the fourth quarter of 2010 was much more significant than the level of increase in business activity during the first quarter of 2012 as compared to the fourth quarter of 2011. During the first quarter of 2012, accounts payable increased $833,000 compared to an increase of $653,000 during the comparable period in 2011. Accrued wages and benefits decreased $576,000 during the first quarter of 2012 compared to a decrease of $492,000 during the same period in 2011. The decreases in accrued wages and benefits during the first quarter of both 2012 and 2011 primarily represent the payout of profit related bonuses accrued on the prior year's results. Other current liabilities increased $196,000 during the first quarter of 2012 compared to a decrease of $150,000 during the same period in 2011. The increase in 2012 primarily reflects the accrual of restructuring charges related to the closure of the former Thermonics facility. During the first quarter of 2012, we paid $3.8 million to acquire Thermonics, as discussed further in the Overview and in Note 3 to our consolidated financial statements. We have no significant commitments for capital expenditures for the balance of 2012, however, depending upon changes in market demand, we may make such purchases as we deem necessary and appropriate. As of March 31, 2012, we had cash and cash equivalents of $10.1 million. We currently expect our cash and cash equivalents and projected future cash flow to be sufficient to support our short term working capital requirements. We do not currently have any available credit facilities under which we can borrow to help fund our working capital requirements. We cannot be certain that, if needed, we would be able to obtain any credit facilities or under what terms such credit facilities would be available.
There were no off-balance sheet arrangements during the three months ended March 31, 2012 that have or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our interests.
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Intest Corp has a market cap of $37.8 million; its shares were traded at around $3.49 with a P/E ratio of 6.3 and P/S ratio of 0.8.
Highlight of Business Operations:
Our consolidated net revenues for the quarter ended March 31, 2012 decreased $973,000 or 8% as compared to the same period in 2011. For the quarter ended March 31, 2012, net revenues (net of intersegment sales) of our Mechanical Products segment decreased $2.5 million or 50%, while the net revenues (net of intersegment sales) of our Thermal and Electrical Products segments increased $757,000 or 14% and $796,000 or 60%, respectively, as compared to the same period in 2011. During the quarter ended March 31, 2012, the net revenues of our Thermal Products segment included $669,000 of net revenues attributable to Thermonics, Inc. ("Thermonics"), which we acquired on January 16, 2012 as discussed further under "Acquisition" below. Adjusted to eliminate the impact of the net revenues attributable to Thermonics, the net revenues (net of intersegment sales) of our Thermal Products segment for the first quarter of 2012 would have increased $88,000 or 2% as compared to the same period in 2011. Net revenues from customers in various industries outside of the ATE industry and those net revenues as a percentage of our total consolidated net revenues were $2.4 million or 22%, respectively, for the quarter ended March 31, 2012, compared to $4.0 million or 40%, respectively, for the quarter ended December 31, 2011, and $2.3 million or 20%, respectively, for the quarter ended March 31, 2011. Adjusted to eliminate the impact of the net revenues attributable to Thermonics, the net revenues from customers in various industries outside of the ATE industry and those net revenues as a percentage of our total consolidated net revenues were $2.4 million or 23%. During the first quarter of 2012, the level of demand experienced by our Mechanical Products segment was less than that experienced during the same period in 2011. We believe the decrease in the level of net revenues in our Mechanical Products segment reflects reduced demand within the ATE industry, which we had begun to see reflected in the level of our orders for this segment during the second quarter of 2011. This decline in demand was partially offset by increased demand from one particular major customer that had recently completed an acquisition and, as a result, had higher than typical demand for certain of our equipment as a part of the process of integrating their post-acquisition operations. This same major customer also purchases products from our Electrical Products segment and we believe this also is responsible for a portion of the increase in the net revenues of our Electrical Products segment during the first quarter of 2012 as compared to the same period in 2011. We also attribute the increase in the net revenues of our Electrical Products segment to a significant increase in demand from one particular major OEM customer. We believe the relatively unchanged level of net revenues of our Thermal Products segment (when adjusted to eliminate the impact of the acquisition of Thermonics) primarily reflects that this segment has historically lagged our other two product segments in regard to experiencing the impact of both increases and decreases in the levels of demand within the ATE industry. In addition, approximately 40-60% of this segment's sales are to customers in various industries outside the ATE industry where we have experienced recent strength in demand. Total orders for the quarter ended March 31, 2012 were $12.9 million compared to $8.1 million for the quarter ended December 31, 2011 and $13.1 million for the quarter ended March 31, 2011. Orders for the first quarter of 2012 include $553,000 attributable to Thermonics. For the quarter ended March 31, 2012, orders for our Thermal, Mechanical and Electrical Products segments were $5.3 million, $3.8 million and $3.8 million, respectively, compared to $6.1 million, $1.1 million and $864,000 for the quarter ended December 31, 2011, respectively, and $5.8 million, $5.6 million and $1.7 million for the quarter ended March 31, 2011, respectively. Orders from customers in various industries outside of the ATE industry and those orders as a percentage of our total consolidated orders were $1.7 million or 13%, respectively, for the quarter ended March 31, 2012, compared to $3.1 million or 38%, respectively, for the quarter ended December 31, 2011, and $2.3 million or 17%, respectively, for the quarter ended March 31, 2011.We cannot be certain what the level of our orders or net revenues will be in any future period for any of our product segments. Backlog At March 31, 2012, our backlog of unfilled orders for all products was approximately $7.0 million, of which approximately $674,000 is attributable to Thermonics, compared with approximately $4.0 million at December 31, 2011 and $7.5 million at March 31, 2011. Our backlog includes customer orders which we have accepted, substantially all of which we expect to deliver in 2012. While backlog is calculated on the basis of firm purchase orders, a customer may cancel an order or accelerate or postpone currently scheduled delivery dates. Our backlog may be affected by the tendency of customers to rely on short lead times available from suppliers, including us, in periods of depressed demand. In periods of increased demand, there is a tendency towards longer lead times that has the effect of increasing backlog. As a result, our backlog at a particular date is not necessarily indicative of sales for any future period.Quarter Ended March 31, 2012 Compared to Quarter Ended March 31, 2011 Net Revenues. Net revenues were $10.7 million for the quarter ended March 31, 2012 compared to $11.7 million for the same period in 2011, a decrease of $973,000 or 8%. We believe the decrease in our net revenues during the first quarter of 2012 primarily reflects the factors previously discussed in the Overview. During the quarter ended March 31, 2012, our net revenues from customers in the U.S. decreased 1% and our net revenues from foreign customers decreased 13%, respectively, as compared to the same period in 2011. The impact of changes in foreign currency exchange rates on the increase in net revenues from foreign customers was less than 1%. Gross Margin. Gross margin was 43% for the first quarter of 2012 compared to 44% for the same period in 2011. The decrease in gross margin primarily reflects that our fixed operating costs were not as fully absorbed due to the lower net revenues levels during the first quarter of 2012 as compared to the same period in 2011. While our fixed operating costs declined $65,000 in absolute dollar terms during the quarter ended March 31, 2012 as compared to the same period in 2011, as a percentage of net revenues these costs increased from 16% for the quarter ended March 31, 2011 to 17% for the quarter ended March 31, 2012. The decline in the absolute dollar value of our fixed operating costs in the first quarter of 2012 as compared to the same period in 2011 primarily represents that the first quarter of 2011 had $74,000 of costs associated with the relocation of two of our domestic manufacturing operations during this period. There were no similar costs in the first quarter of 2012. To a lesser extent, we also attribute the decrease in our gross margin during the first quarter of 2012 as compared to the same period in 2011 to an increase in our charges for obsolete and excess inventory. These charges increased $63,000 in the first quarter of 2012 as compared to the same period in 2011, reflecting more items falling into our standard objective criteria primarily as a result of changes in demand for certain products made by our Mechanical and Electrical Products segments. These increases were partially offset by a slight decline in component material costs as a percentage of net revenues, reflecting changes in product and customer mix. Selling Expense. Selling expense was $1.4 million in each of the quarters ended March 31, 2012 and 2011. Increases in third-party consulting fees and salary and benefits expense were offset by a decrease in commissions, reflecting the lower net revenue levels, and lower levels of accruals for product warranty expense. Engineering and Product Development Expense. Engineering and product development expense was $924,000 for the first quarter of 2012 compared to $813,000 for the same period in 2011, an increase of $111,000 or 14%. The increase in engineering and product development expense primarily reflects higher salary and benefits expense and an increase in the use of third-party consultants. General and Administrative Expense. General and administrative expense was $2.0 million for the first quarter of 2012 compared to $1.6 million for the same period in 2011, an increase of $357,000 or 22%. During the first quarter of 2012, we
recorded $337,000 in costs associated with the acquisition of Thermonics. There were no similar costs recorded in the first quarter of 2011. In addition, amortization expense related to our intangible assets increased $114,000 during the first quarter of 2012 as compared to the same period in 2011. This amount represents amortization of the intangible assets acquired as a part of the Thermonics transaction completed on January 16, 2012. These increases were partially offset by a decrease in accruals for profit-related bonuses reflecting the loss recorded for the first quarter of 2012 as compared to earnings recorded for the first quarter of 2011. Restructuring and Other Charges. Restructuring and other charges were $359,000 for the first quarter of 2012. There were no similar charges for the first quarter of 2011. The restructuring and other charges recorded during the first quarter of 2012 represent facility closure costs related to the closure of the Sunnyvale, California facility occupied by Thermonics at the time of our acquisition of this operation, as discussed further in the Overview. Other Income. Other income was $13,000 for the first quarter of 2012 compared to $56,000 for the first quarter of 2011, a decrease of $43,000. During the first quarter of 2011, we recorded a gain on sale of property and equipment. There was no similar gain recorded during the first quarter of 2012. Income Tax Expense (Benefit). For the quarter ended March 31, 2012, we recorded an income tax benefit of $28,000 compared to income tax expense of $60,000 for the same period in 2011. On a quarterly basis, we record income tax expense or benefit based on the expected annualized effective tax rate for the various taxing jurisdictions in which we operate our businesses. During the past several years, due to our history of operating losses in both our domestic and certain of our foreign operations, we had recorded a full valuation allowance against the deferred tax assets of these operations, including net operating loss carryforwards, where we believed it was more likely than not that we would not have sufficient taxable income to utilize these assets before they expire. During the third and fourth quarters of 2011, we reversed $3.1 million of the valuation allowance which had been recorded against the deferred tax assets of these operations. The reversal of this amount of the valuation allowance was based on our current assessment that it is now more likely than not that we will be able to fully utilize these assets in the near future. Some of the key factors we considered in making our assessment included our profitability in both 2011 and 2010 and our level of certainty with regard to our forecasts of near term future profitability for the operations to which these assets relate. Liquidity and Capital Resources Net cash used in operations for the three months ended March 31, 2012 was $67,000 compared to $1.2 million for the same period in 2011. The decrease in net cash used in operations primarily reflects a lower level of increase in the amount of trade accounts receivable and inventories during the first quarter of 2012 as compared to the same period in 2011. This was partially offset by a net loss of $43,000 in the first quarter of 2012 compared to net earnings $1.3 million for the same period in 2011. During the first quarter of 2012, trade accounts receivable increased $574,000 and inventories increased $37,000 compared to increases of $2.6 million and $504,000, respectively, during the same period in 2011. The lower level of increase primarily reflects that the level of increase in business activity in the first quarter of 2011 as compared to the fourth quarter of 2010 was much more significant than the level of increase in business activity during the first quarter of 2012 as compared to the fourth quarter of 2011. During the first quarter of 2012, accounts payable increased $833,000 compared to an increase of $653,000 during the comparable period in 2011. Accrued wages and benefits decreased $576,000 during the first quarter of 2012 compared to a decrease of $492,000 during the same period in 2011. The decreases in accrued wages and benefits during the first quarter of both 2012 and 2011 primarily represent the payout of profit related bonuses accrued on the prior year's results. Other current liabilities increased $196,000 during the first quarter of 2012 compared to a decrease of $150,000 during the same period in 2011. The increase in 2012 primarily reflects the accrual of restructuring charges related to the closure of the former Thermonics facility. During the first quarter of 2012, we paid $3.8 million to acquire Thermonics, as discussed further in the Overview and in Note 3 to our consolidated financial statements. We have no significant commitments for capital expenditures for the balance of 2012, however, depending upon changes in market demand, we may make such purchases as we deem necessary and appropriate. As of March 31, 2012, we had cash and cash equivalents of $10.1 million. We currently expect our cash and cash equivalents and projected future cash flow to be sufficient to support our short term working capital requirements. We do not currently have any available credit facilities under which we can borrow to help fund our working capital requirements. We cannot be certain that, if needed, we would be able to obtain any credit facilities or under what terms such credit facilities would be available.
There were no off-balance sheet arrangements during the three months ended March 31, 2012 that have or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our interests.
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