Spectrum Control, Inc. (SPEC)
F2Q10 (Qtr End 05/31/10) Earnings Call Transcript
June 23, 2010 4:45 pm ET
Dick Southworth – President & CEO
John Freeman – SVP & CFO
Ted Kuntz – Needham & Company
Fred Buonocore – CJS Securities
Gerard Heffernan – Lord Abbett & Company
Previous Statements by SPEC
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Greetings, ladies and gentlemen, and welcome to Spectrum Control Inc. 2010 second quarter conference call. Representing the Company today, we have Dick Southworth, President and Chief Executive Officer and Jack Freeman, Senior Vice President and Chief Financial Officer.
A discussion of the company’s operating performance for the second quarter ended May 31, 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, Kim. Thank you for joining us today and we welcome you to Spectrum Control’s 2010 Second Quarter Conference Call. I will briefly review some of the key operating and financial highlights for the period. After which Jack Freeman will review our financial performance in more detail. We will then be happy to take any questions that you may have after that.
For the second quarter of 2010, we reported net income of $3.3 million or $0.25 per diluted share on sales of $39.7 million. For the comparable period of 2009, we had net income of $2.2 million or $0.18 per share on sales of $33.6 million.
For the first half of 2010, we generated net income of $5.7 million or $0.44 per diluted share on sales of $77.6 million. And for the same period last year, we had net income of $4.4 million or $0.35 per share on sales of $66.7 million.
We are very pleased to report the current quarter financial results and they had exceeded our previous guidance. During the second quarter of 2010, total customer orders received amounted to $45.7 million. That’s an increase of $9.6 million or 27% from the comparable quarter of last year and up 29% from the first quarter of this year.
This record level of customer orders reflects the continued strength of our military and defense business, combined with a partial rebound of our commercial business as general economic conditions continue to improve. With this strong customer order rate, our book-to-bill ratio in the current quarter was 1.15 to 1.00 with all four of our major operating segments generating a positive book-to-bill.
During the current quarter, we also achieved record revenues of $39.7 million, primarily driven by the improvement in our commercial markets and the impact of our acquisition late last year of Micro Networks.
Just as importantly, our operating margins improved significantly during the current quarter, as we leveraged our fixed manufacturing cost over greater sales volume and continued to successfully integrate the operations of Micro Networks into our Microwave Components and Systems business. As a result, our quarterly earnings grew to $0.25 per share. That’s an increase of 39% from the same period last year and up 32% from the first quarter of this year.
With our strong second quarter operating performance and growing demand for virtually all of our product capabilities and custom solutions, we are very optimistic about the remainder of fiscal 2010.
Now these are just some of the highlights and the accomplishments of the second quarter. At this point, I’d like to introduce Jack Freeman, our Chief Financial Officer and ask Jack to review our second quarter results in much greater detail. And when Jack has completed his presentation, I will conclude with some final comments and we will open the floor to questions. Jack?
Thanks, Dick. Our consolidated net sales were $39.7 million in the second quarter of fiscal 2010. That’s an increase of $6.1 million or 18% from the comparable period last year. This increase reflects $3.1 million of Micro Networks product shipments and increased demand for our products used in communications equipments and other commercial applications, as general economic conditions continue to improve.
Excluding the impact of our current period Micro Networks product sales of $3.1 million, sales of our microwave products were relatively comparable to the same quarter of last year.
However, demand remains strong for our Microwave products, which are used in numerous military and defense programs, including applications in secure communications, radar systems and counter measures for improvised explosive devices.
Total customer orders for our Microwave products were $21.7 million in the second quarter of fiscal 2010. That’s up $5.9 million or 37% from a year ago.