PMFG Inc Reports Operating Results (10-K)

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Sep 12, 2012
PMFG Inc (PMFG, Financial) filed Annual Report for the period ended 2012-06-30.

Pmfg Inc has a market cap of $149.6 million; its shares were traded at around $6.86 with a P/E ratio of 37.9 and P/S ratio of 1.2.

Highlight of Business Operations:

Warranty expense totaled $1.0 million, $2.4 million and $3.3 million in fiscal 2012, 2011, and 2010, respectively. As a percentage of revenue, the warranty expense was 0.8%, 2.0%, and 2.8% in fiscal 2012, 2011, and 2010, respectively.

For fiscal 2012, total revenue increased $13.5 million or 11.1%, compared to fiscal 2011. Domestically, Environmental Systems revenue was down as the primary purchasers of our SCR systems await finalization of Cross-State Air Pollution Rules. That decline was offset in part by a year over year increase in Process Products led by our pressure products offerings. These two offsetting forces combined for a net decrease in domestic revenue of $3.7 million in fiscal 2012 when compared to the prior fiscal year. International revenue increased $17.3 million or 37.1%, in fiscal 2012 when compared to fiscal 2011. The acquisition of Burgess Manning GmbH contributed $8.3 million of revenue in fiscal 2012. Additional increases in international revenue were a combination of growth in Latin America, the Middle East and Asia. This growth is resulting from both an increase in demand and our strategic decision to increase our sales focus on the international markets.

For fiscal 2011, our operating expenses increased $6.6 million or 19.2% over fiscal 2010. As a percentage of revenue, these expenses were 33.4% in fiscal 2011 and 29.2% in fiscal 2010. Our sales and marketing expenses increased $0.6 million in fiscal 2011 compared to fiscal 2010 primarily due to increased commission and other selling related expenses associated with higher revenue in fiscal 2011. Our engineering and project management expenses increased $0.6 million in fiscal 2011 compared to fiscal 2010 primarily due to an increase in employee wages and benefits. General and administrative expenses increased $1.8 million in fiscal 2011 compared to fiscal 2010, primarily due to increased professional fees related to tax and information technology initiatives, legal fees, and costs related to the replacement of an executive officer. Fiscal 2011 operating expenses also included a $3.6 million impairment loss on intangibles related to design guidelines.

Process Products operating income increased by $4.9 million or 41.3% in fiscal 2012 compared to fiscal 2011. As a percentage of Process Products revenue, operating income was 14.1%, 13.3% and 18.1% in fiscal 2012, 2011 and 2010, respectively. The increase in operating income in fiscal 2012 was primarily on the strength of increased revenue in the segment. The increase in operating income as a percentage of sales during fiscal 2012 is due to growing revenue outpacing more modest increases in selling and engineering costs. Process Products operating income decreased by $4.5 million or 27.6% in fiscal 2011 compared to fiscal 2010. The decrease in operating income as a percentage of revenue during 2011 is primarily attributable to external pricing pressures of the global market and a shift in our product mix from premium separators to lower margin standard models.

Environmental Systems operating income in fiscal 2012 decreased $3.1 million compared to fiscal 2011. As a percentage of revenue, operating income decreased slightly to 18.4% for fiscal 2012 from 18.9% for fiscal 2011, primarily as a result of increased selling and engineering costs as a percentage of the reduced amount of revenue. Environmental Systems operating income decreased $0.8 million in fiscal 2011 compared to fiscal 2010. As a percentage of revenue, operating income decreased in 2011 compared to 2010, from 26.1% to 18.9%. The decrease in Environmental Systems operating income and operating income as a percentage of revenue is primarily due to increased external pricing pressures during fiscal 2011 combined with an increase in contract-related charges.

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