Spectrum Control Inc. (SPEC)
F3Q2010 Earnings Call Transcript
September 23, 2010 4:45 pm ET
Dick Southworth – President & CEO
Jack Freeman – SVP & CFO
Fred Buonocore – CJS Securities
Ted Kundtz – Needham & Company
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Greetings and welcome to Spectrum Control Inc. 2010 third quarter conference call. Representing the Company today, we have Mr. Dick Southworth, President and Chief Executive Officer and Mr. Jack Freeman, Senior Vice President and Chief Financial Officer.
A discussion of the Company’s operating performance for the third quarter ended August 31st, 2010 should take about 20 minutes. They will then try to answer as many questions as reasonably possible. We expect to conclude this conference call at approximately 5.30 P.M. Eastern Time.
As a reminder, the following discussion will include certain forward-looking statements, which reflects management’s current views with respect to future market conditions and operating performance. These forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from historical results or those anticipated. These risks and uncertainties are described in detail in the Company’s most recent quarterly and annual SEC filings.
The words “believe,” “expect,” “anticipate,” and similar expressions identify forward-looking statements. Listeners are cautioned not to place undue reliance on these forward-looking statements. Such forward-looking statements speak only as of the date on which they are made and the Company does not undertake any obligation to update any forward-looking statements to reflect events or circumstances after the date of this call.
I would now like to introduce Mr. Dick Southworth, President and Chief Executive Officer of Spectrum Control.
Thank you, Manny [ph] and we would like to welcome to Spectrum Control’s 2010 third quarter conference call. I will briefly review some key operating and financial highlights for the period after which Jack Freeman will review our financial performance in more detail. We will be happy then to take any questions that you may have.
For the third quarter of 2010 we reported net income of $3.9 million or $0.30 per share on sales of $43.6 million. Now, for the comparable period 2009 we had net income of $2 million or $0.16 per share on sales of $31.5 million.
And for the first nine months of 2010, we generated a net income of $9.6 million or $0.73 per share on sales of $121.2 million. And for the same period last year, we had a net income of $6.4 million or $0.50 per share on sales of $98.2 million.
We are very pleased to report that our Company achieved record financial performance in the current quarter, and exceeding our previous guidance. During the third quarter of, total customer orders received amounted to $42.3 million, an increase of $9.9 million or 30% from the comparable quarter of last year. With this current quarter performance, our year-to-date customer orders reached $123.2 million, up 23% from the same period last year, and reflecting a positive current year book-to-bill ratio of 1.02 to 1.00. This significant increase in our customer order rate reflects the continued strength of our military and defense business, combined with a partial rebound of our commercial business as general economic conditions have improved. With this strong customer order rate, we achieved record revenues of $43.6 million in the current quarter, with all four of our major businesses generating increased shipments compared to a year ago.
Just as importantly, our operating margins continued to improve during the current quarter, as we leveraged our fixed manufacturing costs over greater sales volume and continued to successfully integrate and consolidate our recent business acquisitions. As a result, our quarterly earnings grew to a record $0.30 per share, an increase of 88% from the same period last year and up 20% from the second quarter of this year.
Now, these are just some of the highlights and accomplishments for this quarter and at this point I would like to introduce Jack Freeman, our Chief Financial Officer and ask Jack to review our third quarter results in greater detail. When he has completed his presentation, I will conclude with some final comments and we will open the floor to any questions you may have. Jack?
Thanks, Dick. In June of this year, we acquired substantially all of the assets and assumed certain liabilities of Sage Laboratories, Inc. Sage Labs, based in Hudson, New Hampshire, designs and manufactures custom RF and microwave products including filters, diplexers, multiplexers, hybrids, and digital frequency discriminators. A majority of Sage Labs' components and subsystems are used in defense and aerospace applications, including radar systems, military aircraft, and missile defense systems.
We believe that Sage Labs’ product offerings and Suspended Substrate Stripline technology are natural complements to our Microwave Components and Systems business.
During the current quarter, we successfully integrated the acquired operations with our existing microwave business, with Sage Labs generating $2.7 million of product sales. In addition to the impact of Sage Labs, our microwave sales in the current quarter included $2.9 million of Micro Networks product sales, another strategic acquisition that we consummated late last fiscal year.
In the third quarter of fiscal 2010, our consolidated sales were $43.6 million, that’s an increase of $12.1 million or 39% from the same period last year. In addition to the $5.6 million aggregate impact of our acquisitions of Sage Labs and Micro Networks, sales of our products used in commercial applications grew $4.2 million compared to a year ago and our military and defense product sales increased $2.3 million. This organic sales growth reflects, we think, the improvement in general economic conditions, as well as the overall strength of our particular military and defense markets.