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Quality Products Announces Results For the Three and Nine Months Ended June 30, 2009

Dépèche transmise le 6 août 2009 par Business Wire

COLUMBUS, Ohio--(BUSINESS WIRE)--Quality Products, Inc. (Pink Sheets: QPDC), a manufacturer and distributor of aircraft ground support equipment (“Columbus Jack & Regent Manufacturing”) and hydraulic press machine tools (“Multipress”), today reported fiscal 2009 third quarter and nine months operating results.

QUARTERLY RESULTS
Net income was $1,341,628 compared to $1,144,678 earned last year, an increase of $196,950 or 17.2%. Revenues were $6,025,236 compared to $6,378,900 last year, a decrease of $(353,664) or (5.5)%. The gross margin increased to 44.3% this year from 38.0% last year. As with most manufacturers, our margins can vary significantly depending on product mix and pricing pressures in the marketplace. Due to these factors, we consider the range of 30 – 35% to be normal for gross margins, indicating even the most recent quarter was at the high end of our expectations.

The Multipress segment continued to struggle during the quarter. Shipments decreased by $(695,636) or (58.3)% compared to last year, and gross profit decreased by $(216,707) or (50.1)%. Additionally, incoming orders remained weak as a result of the slowdown in the economy, and were down by $(1,616,998) or (81.1)% compared to last year. Historically, the visibility of future business for this segment has rarely exceeded six months, making it difficult to predict long-term trends.

The ground support equipment segment continued its outstanding performance with an increase in shipments of $341,972 or 6.6% compared to last year, and a gross profit increase of $466,574 or 23.5%. Incoming orders increased by $3,282,480 or 96.6% compared to last year. A majority of this segment’s business is with the U.S. government, so if defense spending is reduced it is likely this segment will be unfavorably impacted.

S G & A expenses decreased to 12.7% of sales in the current quarter compared to 15.6% last year. In terms of dollars, S G & A decreased by $(228,670) primarily due to lower commissions and advertising expenses. Additionally, 2008 included one-time consulting expenses for an operational efficiency improvement project.

Other income in the latest quarter includes $431,000 of royalties for our joint participation in certain military contracts.

Income tax expense increased by approximately $429,000 primarily due to higher federal income tax estimates.

Basic EPS was $0.37, up from $0.34 and diluted EPS increased to $0.37 from $0.30.

FISCAL YTD RESULTS
Net income was $3,435,631 compared to $2,941,334 earned last year, an increase of $494,297 or 16.8%. Revenues were $16,522,141 compared to $15,398,737 last year, an increase of $1,123,404,or 7.3%. Gross margins decreased to 40.2% this year from 41.4% last year. While the gross margin in the current year is very strong, it should not be considered representative of future performance. As with most manufacturers, our margins can vary significantly depending on product mix and pricing pressures in the marketplace. Due to these factors, we consider the range of 30 – 35% to be normal for gross margins.

The Multipress segment has struggled in fiscal 2009. Shipments decreased by $(153,234) or (5.0)% compared to last year. Gross profit decreased by $(132,611) or (12.0)%. Additionally, due to the slow economy, incoming orders continue to weaken. For the first nine months they were down by $(2,823,795) or (59.4)%. Historically, the visibility of future business for this segment has rarely exceeded six months, making it difficult to predict long-term trends.

The ground support equipment segment has performed very well in fiscal 2009, a surprising result in the current economy. Shipments increased by $1,276,637 or 10.4% compared to last year while gross profit increased by $397,491 or 7.5%. Even more surprising is the fact that incoming orders have remained very strong, increasing by $4,097,911 or 39.4%. However, if the U.S. government reduces defense spending, it is likely this segment will be unfavorably impacted.

S G & A expenses decreased to 15.0% of sales in 2009 compared to 16.5% in 2008. In terms of dollars, S G & A decreased by $(65,553). This difference primarily relates to one-time consulting expenses in 2008 for an operational efficiency improvement project.

2009 other income includes $1.2 million of royalties for our joint participation in certain military contracts.

Income tax expense increased by $843,759 primarily due to higher federal income tax estimates.

Basic EPS decreased to $0.94 from $0.97 and diluted EPS increased to $0.94 from $0.75.

Backlog
On August 6th, the order backlog for Multipress was approximately $245,000, in line with the previous quarter’s reported level of $292,000, but down significantly from last year’s level of $2.1 million.

The backlog for Columbus Jack was approximately $7.6 million, in line with both the previous quarter’s reported level of $7.5 million, and last year’s level of $7.4 million.

We do not provide financial estimates for future periods.

Liquidity & Cash Uses for the Nine months Ended June 30, 2009
As shown in the June 30, 2009 balance sheet, cash, short-term investments, accounts receivable and inventories totaled $10.2 million compared to $2.4 million of total liabilities. The balance outstanding under our credit lines was $0, leaving us with borrowing capacity of $3,533,000 at June 30, 2009. This was a decrease of $1,367,000 from the previous quarter’s availability due to a regularly scheduled annual reduction as specified in our loan agreements.

We generated positive operating cash flow of $6,305,454, while capital expenditures were $206,415. We used cash of $1,529,415 to purchase investments, $541,330 to repay debt, $539,567 to pay a common stock dividend, and $326,623 to repurchase shares of our common stock. Through August 6th we have repurchased 409,676 shares, or 81.9% of the 500,000 shares authorized by the Board on March 26, 2007.

Other Information
Quality Products currently has 70 employees, down from 73 in the previous report.

Columbus Jack will occasionally be a joint participant in certain military contracts which are awarded in the name of the other participating entity. As such, we will not recognize revenues associated with those contracts, but instead will recognize our share of the contract profits as miscellaneous income.

For more information on products and services please visit: www.columbusjack.com, www.multipress.com, and www.regentgse.com.

This press release, other than the historical information, consists of "forward-looking statements" (as defined in the Private Securities Litigation Reform Act of 1995), which are identified by the use of words such as "believes", "expects", "projects", and similar expressions. While these statements reflect the Company's current beliefs and are based on assumptions that the Company believes are reasonable, they are subject to uncertainties and risks that could cause actual results to differ materially from anticipated results.

     
QUALITY PRODUCTS, INC.
 
 
CONSOLIDATED BALANCE SHEET (UNAUDITED)

JUNE 30, 2009

 

 
ASSETS
 
CURRENT ASSETS:
Cash $ 3,307,587
Short-term Investments 893,106

Accounts receivable, less allowance for doubtful accounts of $55,328

1,846,512

Inventories, less reserve of $449,814 4,189,605
Deferred taxes, current 930,161
Prepaid expenses and other current assets   163,185  
Total current assets   11,330,156  
 
PROPERTY AND EQUIPMENT, less accumulated depreciation of $1,377,025

1,147,852

 
INVESTMENTS, non-current 2,548,087
 
DEFERRED TAXES, non-current 53,531
 

INTANGIBLE ASSETS, less accumulated amortization of $1,332,888

1,025,548

 

GOODWILL, Less accumulated amortization of $19,174

2,723,247

 
TOTAL ASSETS $ 18,828,421  
 
 
LIABILITIES AND STOCKHOLDERS' EQUITY
 
CURRENT LIABILITIES:
 
Current portion of notes payable $ 243,750
Accounts payable 898,508
Accrued payroll and payroll related expenses 413,238
Other accrued expenses and current liabilities 315,256
Taxes payable 265,588
Customer deposits   117,695  
Total current liabilities   2,254,035  
 
PENSION OBLIGATION 164,053
 
LONG-TERM DEBT:

Notes payable, net of current portion

  73,125  
 
TOTAL LIABILITIES   2,491,213  
 
 
STOCKHOLDERS' EQUITY:
 
Convertible preferred stock, Series A -
Convertible preferred stock, Series B -
Common stock 29
Additional paid-in capital 21,090,183
Accumulated other comprehensive loss (119,588 )
Accumulated deficit   (4,633,416 )
Total stockholders' equity   16,337,208  
 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 18,828,421  
 
           
QUALITY PRODUCTS, INC.
 
 
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND NINE MONTHS ENDED JUNE 30, 2009 AND 2008
 

Three Months

Nine months

(UNAUDITED)

(UNAUDITED)

 

2009

2008

2009

2008

NET SALES $ 6,025,236 $ 6,378,900 $ 16,522,141 $ 15,398,737
 
COST OF GOODS SOLD   3,353,886     3,957,384     9,879,444     9,021,082  
 
GROSS PROFIT 2,671,350 2,421,516 6,642,697 6,377,655
 
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES  

767,228

   

995,898

   

2,481,306

   

2,546,859

 
 
INCOME FROM OPERATIONS

1,904,122

1,425,618

4,161,391

3,830,796

 
OTHER INCOME:
Interest expense (11,710 ) (27,528 ) (33,311 ) (88,680 )
Interest income 11,219 3,823 38,471 3,823
Miscellaneous other income  

443,817

   

258,450

   

1,268,545

   

351,101

 
Other income, net   443,326     234,745     1,273,705     266,244  
 
INCOME BEFORE
PROVISION FOR INCOME TAXES

2,347,448

1,660,363

5,435,096

4,097,040

 
PROVISION FOR

INCOME TAXES

 

1,005,820

   

515,685

   

1,999,465

   

1,155,706

 
 
NET INCOME $ 1,341,628   $ 1,144,678   $ 3,435,631   $ 2,941,334  
 
UNREALIZED GAIN
ON INVESTMENTS   96,225     --     45,002     --  
 
COMPREHENSIVE INCOME $ 1,437,853   $ 1,144,678   $ 3,480,633   $ 2,941,334  
 
BASIC INCOME PER SHARE:

$

.37

 

$

.34

 

$

.94

 

$

.97

 
 
DILUTED INCOME PER SHARE:

$

.37

 

$

.30

 

$

.94

 

$

.75

 
 
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic 3,618,818 3,337,324 3,651,237 2,952,042
Diluted 3,618,818 3,859,710 3,651,237 3,898,083
 
       
QUALITY PRODUCTS, INC.
 
 
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED JUNE 30, 2009 AND 2008
 

2009

2008

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,435,631 $ 2,941,334

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 340,939 462,478
Inventory reserve 1,070 107,538
Bad Debt Expense -- 9,019
Deferred taxes 1,740,506 910,150
Pension expense 26,448 --
Provision for warranty liability 31,669 43,427
Loss on disposal of assets 9,146 657
Loss on sale of investments 1,719 --

Changes in operating assets and liabilities:

 

Accounts receivable 338,312 (764,484 )
Inventories 868,646 (1,671,55

Business Wire

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