Napco Security Systems Inc. Reports Operating Results (10-K)
Napco Security Systems, Inc. has a market cap of $105.2 million; its shares were traded at around $5.45 with a P/E ratio of 63.60 and P/S ratio of 1.50.
Highlight of Business Operations:In addition, the Company records an inventory obsolescence reserve, which represents any excess of the cost of the inventory over its estimated market value, based on various product sales projections. This reserve is calculated using an estimated obsolescence percentage applied to the inventory based on age, historical trends, requirements to support forecasted sales, and the ability to find alternate applications of its raw materials and to convert finished product into alternate versions of the same product to better match customer demand. In addition, and as necessary, the Company may establish specific reserves for future known or anticipated events. There is inherent professional judgment and subjectivity made by both production and engineering members of management in determining the estimated obsolescence percentage. For the fiscal years 2013 and 2012, net charges and balances in these reserves amounted to $354,000 and $3,392,000; and $504,000 and $3,038,000, respectively.
Inventories. Inventories, which include both current and non-current portions, decreased by $1,375,000 to $21,907,000 at June 30, 2013 as compared to $23,282,000 at June 30, 2012. The decrease was due primarily to the Company s improved production planning and forecasting, an increase to the obsolescence reserve of $354,000 as well as the increase in sales for the quarter ended June 30, 2013 as described above.
Net sales in fiscal 2013 increased by $458,000 to $71,386,000 as compared to $70,928,000 in fiscal 2012. The increase in net sales was primarily due to increased sales of the Company s Marks brand door-locking products ($2,265,000), access control products ($1,137,000) and Alarm Lock brand door-locking products ($443,000) and was partially offset by decreases in the Company s intrusion products ($3,476,000). The decrease in intrusion products was due primarily to decreased sales to a large intrusion customer as well as a slight overall decrease in demand during the earlier quarters in fiscal 2013.
The Company's gross profit increased by $572,000 to $21,724,000 or 30.4% of net sales in fiscal 2013 as compared to $21,152,000 or 29.8% of net sales in fiscal 2012. Gross profit and gross profit as a percentage of net sales was primarily affected by a positive shift in product mix in fiscal 2013.
Selling, general and administrative expenses as a percentage of net sales increased to 25.1% in fiscal 2013 from 24.4% in fiscal 2012. Selling, general and administrative expenses for fiscal 2013 increased by $587,000 to $17,928,000 as compared to $17,341,000 in fiscal 2012. The increases in dollars and as a percentage of sales resulted primarily from increases in selling wages and commissions as well as increased advertising and tradeshow expenditures. The Company increased expenditures in these areas in order to generate higher sales.
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