Frequency Electronics, Inc. (“FEI” or the “Company”) (NASDAQ:FEIM)
reported revenues of $39.4 million for fiscal 2018, which ended
April 30, 2018, compared to revenues of $50.4 million for fiscal
2017. Operating loss for fiscal 2018 was $12.4 million
compared to operating loss of $7.5 million for fiscal 2017. Net
loss from continuing operations was $22.5 million or ($2.54) per
diluted share compared to a net loss of $4.9 million or ($0.56) per
diluted share for fiscal 2017. Fiscal 2018 results were
impacted by substantial non-cash and one-time charges totaling
approximately $16.8 million (details are provided below). Cash and
marketable securities rose to $14 million at year end, an increase
of $4 million year over year.
FEI’s bookings in fiscal year 2018 were
substantial at just under $50 million. Late in the year the Company
was awarded its largest contract ever, $37.1 million for
development of a next generation atomic frequency standard for the
US Air Force. The technology that FEI is developing under this
contract uniquely positions the Company to be the leading provider
of advanced atomic clocks for many future satellite platforms and
secure communication solutions. The technology is also applicable
to other platforms such as aircraft, UAVs and other government
systems requiring high precision time and frequency references. The
potential business opportunities associated with this technology
are significant and extend well beyond the immediate contract
value. FEI also secured new contracts for development of frequency
synthesizers and converters for electronic warfare applications
that, while small initially, have substantial follow-on production
potential in coming years. FEI-Zyfer had a strong fiscal year,
continuing their track record of top line growth, as they continued
to make progress implementing FEI’s technology in the secure
communications arena.
Martin Bloch, Executive Chairman of the Board of
Directors, said, ”With the recent receipt of an order to provide
timing systems for two secure satellites, along with other
previously reported awards, FEI brought the total of space
related bookings to over $50 million so far in calendar year 2018.
In our press release of March 15, 2018, we targeted $50 million for
all of calendar 2018 compared to approximately $3 million of such
orders for all of calendar year 2017. We are very pleased to
have reached this goal in only six months. For the most part,
we have been working on these contract awards and anticipating
their release for an extended period of time. These awards
relate to major long term programs with additional high revenue
opportunities for FEI. Additionally, FEI is in a very sound
financial position to address the opportunities ahead with more
than $14 million of cash and cash equivalents on hand.”
FEI CEO, Stan Sloane, added, “While the new
business horizon is the best we have ever seen, low revenues and
resulting low operating income, while anticipated, were a
disappointment. In fiscal year 2018, FEI continued to feel the
effects of previously cited delays in satellite bookings.
Consequently, we took the opportunity to focus internally and
position the Company for the future by reducing inventory,
divesting and winding down non-strategic subsidiaries,
consolidating manufacturing operations and reducing operating costs
while focusing R&D on next generation products. These efforts
have streamlined the Company and will produce a more efficient,
more effective operational framework for the future as revenue
picks up. Despite the revenue and income softness, the Company was
cash flow positive, generating $3.3 million in cash flows from
operations.”
Fiscal 2018 Selected Financial Metrics
and Other Items
- For the year ended April 30, 2018, revenues from satellite
payloads were approximately $14.2 million and 36% of consolidated
revenues compared to $22.5 million or 45% for the prior year,
- Sales revenues from non-space U.S. Government/DOD customers
were $17.6 million or 45% of consolidated revenues compared to
$19.3 million or 38% for the previous year,
- For the year ended April 30, 2018, other commercial and
industrial sales accounted for approximately $7.6 million or 19% of
consolidated revenues compared to approximately $8.6 million
or 17% for fiscal year 2017,
- Total sales for U.S. Government/DOD end-use, including revenues
on U.S. Government satellite programs, were approximately 81% of
consolidated revenues in fiscal 2018 compared to 83% in fiscal year
2017,
- Fiscal 2018 results include (1) non-cash charges of $5.6
million in inventory adjustments, (2) a non-cash income tax expense
of $11.2 million primarily related to the impact of U.S. tax reform
and the establishment of a valuation allowance against the U.S.
deferred tax assets, and
- Net positive cash flow from operations was $3.3 million in
fiscal 2018 compared to $3.5 million in the prior year.
Internal Initiatives
- In FY2018, FEI took the following actions to better position
the company for future value creation:
- We wrote-off an additional $5.6 million of inventory and
scrapped additional previously written-off inventory which will
enable us to take advantage of the associated tax benefits.
The write-offs are recorded in cost of goods sold.
- We divested our Gillam Belgium subsidiary to a European buyer.
Financial details will be provided as part of our Form-10K to be
filed on July 30, 2018.
- We are reviewing options to divest or wind down our Asian
subsidiary.
- We consolidated FEI-Elcom manufacturing into our Long Island
facility.
Investor Conference Call
As previously announced, the Company will hold a
conference call to discuss these results on Wednesday, July 25,
2018, at 4:30 PM Eastern Time. Investors and analysts may
access the call by dialing 1-877-407-9205. International
callers may dial 1-201-689-8054. Ask for the Frequency
Electronics conference call.
The archived call may be accessed by
calling 1-877-481-4010 (domestic), or 1-919-882-2331
(international), using Conference ID #13681983 through August 1,
2018 and subsequent to that through a link on the Company website
through October 25, 2018.
About Frequency Electronics
Frequency Electronics, Inc. is a world leader in
the design, development and manufacture of high precision timing,
frequency control and synchronization products for space and
terrestrial applications. Frequency’s products are used in
satellite payloads and in other commercial, government and military
systems including C4ISR and EW markets, missiles, UAVs, aircraft,
GPS, secure radios, energy exploration and wireline and wireless
communication networks. Frequency has received over 100
awards of excellence for achievements in providing high performance
electronic assemblies for over 150 space and DOD programs.
The Company invests significant resources in research and
development and strategic acquisitions world-wide to expand its
capabilities and markets.
Frequency’s Mission Statement: Our mission is to
provide precision time and low phase noise frequency generation
systems from 1 Hz to 46 GHz for space and other challenging
environments.
Subsidiaries and Affiliates: FEI-Zyfer provides
GPS and secure timing ("SAASM") capabilities for critical military
and commercial applications; FEI-Elcom Tech provides sub-systems
for Electronic Warfare (“EW”) related systems and added resources
for state-of-the-art RF microwave products; Frequency's
Morion affiliate supplies high-quality, cost effective oscillators
and components. Additional information is available on the
Company’s website: www.frequencyelectronics.com
Safe Harbor Statement under the Private
Securities Litigation Reform Act of 1995:
The Statements in this press release regarding
the future constitute "forward-looking" statements pursuant to the
safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Forward-looking statements inherently involve
risks and uncertainties that could cause actual results to differ
materially from the forward-looking statements. Factors that
would cause or contribute to such differences include, but are not
limited to, inability to integrate operations and personnel,
actions by significant customers or competitors, general domestic
and international economic conditions, consumer spending trends,
reliance on key customers, continued acceptance of the Company's
products in the marketplace, competitive factors, new products and
technological changes, product prices and raw material costs,
dependence upon third-party vendors, competitive developments,
changes in manufacturing and transportation costs, the availability
of capital, and other risks detailed in the Company's periodic
report filings with the Securities and Exchange Commission.
By making these forward-looking statements, the Company undertakes
no obligation to update these statements for revisions or changes
after the date of this release.
Contact information: Stanton Sloane, President, Chief Executive
Officer, Steven Bernstein, Chief Financial Officer
Martin Bloch, Executive Chairman of the
BoardTelephone: (516) 794-4500
WEBSITE:
www.frequencyelectronics.com
Frequency Electronics, Inc. and
SubsidiariesCondensed Consolidated Statements of
Operations
|
Year Ended |
|
April 30, |
|
2018 |
|
2017 |
|
(unaudited) |
|
(unaudited) |
|
(in thousands except per share data) |
|
|
|
|
|
|
|
|
Revenues |
$ |
39,407 |
|
|
$ |
50,351 |
|
Cost of revenues |
|
34,244 |
|
|
|
39,102 |
|
Gross
profit |
|
5,163 |
|
|
|
11,249 |
|
Selling and
Administrative |
|
10,608 |
|
|
|
11,898 |
|
Research and
Development |
|
6,950 |
|
|
|
6,876 |
|
Loss from
operations |
|
(12,395 |
) |
|
|
(7,525 |
) |
Interest and Other,
Net |
|
1,120 |
|
|
|
486 |
|
Loss before Income
Taxes |
|
(11,275 |
) |
|
|
(7,039 |
) |
Income Tax (Benefit)
Provision |
|
11,176 |
|
|
|
(2,115 |
) |
Net Loss from
continuing operations |
|
(22,451 |
) |
|
|
(4,924 |
) |
(Loss) Income from
discontinued operations, net of tax |
|
(967 |
) |
|
|
103 |
|
Loss on sale of
discontinued operations |
|
(359 |
) |
|
|
- |
|
Total (loss) Income
from discontinued operations |
|
(1,326 |
) |
|
|
103 |
|
Net
Loss |
$ |
(23,777 |
) |
|
$ |
(4,821 |
) |
|
|
|
Net (loss) Income per
Share: |
|
|
Basic and
diluted loss from continued operations |
$ |
(2.54 |
) |
|
$ |
(0.56 |
) |
Basic and
diluted (loss) earnings from discontinued operations |
$ |
(0.15 |
) |
|
$ |
0.01 |
|
Basic and
diluted loss per share |
$ |
(2.69 |
) |
|
$ |
(0.55 |
) |
|
|
|
|
|
|
|
|
|
Average Shares
Outstanding: |
|
|
Basic and
diluted |
|
8,841 |
|
|
|
8,787 |
|
|
|
|
Frequency Electronics, Inc. and
SubsidiariesCondensed Consolidated Balance
Sheets
|
April 30, |
|
April 30, |
|
2018 |
|
2017 |
|
(unaudited) |
|
(unaudited) |
|
|
|
|
|
|
|
(in thousands) |
ASSETS |
|
|
|
|
|
Cash
& Marketable Securities |
$ |
14,018 |
|
$ |
9,978 |
Accounts Receivable |
|
4,268 |
|
|
10,986 |
Costs
and Estimated Earnings |
|
|
in Excess of Billings, net |
|
5,094 |
|
|
7,964 |
Inventories |
|
26,186 |
|
|
29,051 |
Other
Current Assets |
|
2,509 |
|
|
3,711 |
Current Assets Held for Sale |
|
- |
|
|
8,165 |
Property, Plant & Equipment |
|
14,127 |
|
|
14,813 |
Other
Assets |
|
17,382 |
|
|
28,082 |
Non-Current Assets Held for Sale |
|
- |
|
|
569 |
|
$ |
83,584 |
|
$ |
113,319 |
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’
EQUITY |
Current Liabilities |
$ |
5,257 |
|
$ |
5,862 |
Current Liabilities Held for Sale |
|
- |
|
|
2,249 |
Other
Long-term Obligations |
|
15,065 |
|
|
14,661 |
Non-Current Liabilities Held for Sale |
|
- |
|
|
1,215 |
Stockholders’ Equity |
|
63,262 |
|
|
89,332 |
|
$ |
83,584 |
|
$ |
113,319 |
Frequency Electronics (NASDAQ:FEIM)
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Frequency Electronics (NASDAQ:FEIM)
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