RF
Industries' Third Quarter Sales Increase 8% to a Record $4.7 Million; Net
Income is $0.11 Per Diluted Share
RF INDUSTRIES LTD
RFIL
| 9/11/2008 7:30:02 AM
Nine Months Sales Up 20%; Company
Declares $0.03 Per Share Quarterly Dividend
RF Industries, Ltd. (NASDAQ:RFIL) today announced record sales for the third
quarter ended July 31, 2008.
Third Quarter Results
For the quarter ended July 31, 2008, sales increased 8% to a record
$4,668,000 compared to $4,313,000 in the same quarter last year. Net income was
$400,000, or $0.11 per diluted share, compared to $434,000, or $0.12 per
diluted share, in the same quarter last year. Third quarter net income for 2008
was affected, in part, by the doubling of RFI's
engineering expenses to develop next generation wireless products.
"Record sales and improved margins benefited from higher sales and a
favorable product mix at the RF Connector and Cable Assembly Segment, a 105%
sales gain at Bioconnect and a 59% sales increase at Aviel. These strong sales and associated margin
improvements have continued into the current quarter, with each of these three
businesses on track to achieve record annual sales," said Howard Hill, RFI's President and CEO.
"RF Connector and Cable Assembly segment record results were partially
offset by lower RF Wireless sales in the quarter, due to contract award delays
from defense and public safety customers. Although it is difficult to predict
the timing of receipt for wireless infrastructure and military contracts, we
still expect excellent sales performance from this business segment for fiscal
2008.
"Record sales helped boost overall gross margins to 50% of sales,
compared to 48% of sales in the third quarter last year. The strong pace of
business and cash flow enabled us to increase hardware and software development
expenses for our next generation of wireless transceivers. These third quarter
engineering expenses increased to $279,000, more than double engineering
expenses of $117,000 in the same period last year. We believe this investment
in technology and software is necessary to support Neulink's
continued growth and enable RadioMobile to increase
its penetration of the market for mobile wireless applications," said
Hill.
Hill added that third quarter operating results were not only affected by
higher engineering expenses, but by increased selling and general expenses of
$80,000 related to Sarbanes-Oxley compliance and acquisition-related accounting
and legal expenses.
RFI's Board of Directors, upon review of the
Company's current business environment and financial position, declared a
regular quarterly dividend of $0.03 per common share, payable on October 15,
2008 to shareholders of record as of September 30, 2008. RFI's
Board periodically reviews the dividend policy in light of the Company's
performance and cash requirements.
Nine Month Results
For the nine months ended July 31, 2008, sales increased 20% to $13,002,000
compared to $10,848,000 for the same period last year. Net income increased 73%
to $1,114,000, or $0.30 per diluted share, compared to $645,000, or $0.17 per
diluted share, in the same period last year.
Non-GAAP net income, excluding non-cash stock-based compensation expense,
was $1,454,000, or $0.39 per diluted share, compared to $1,042,000, or $0.28
per diluted share, for the same nine month period last year.
Gross margin improved to 50% of sales in the first nine months, compared to
45% of sales for the same period last year, led by higher sales and a favorable
product mix at RF Connector and Cable Assembly, a 63% sales gain at Bioconnect and a 44% increase in sales at Aviel. Engineering expenses for the first nine months of fiscal
2008 increased $425,000, or 121%, to $776,000 compared to $350,000 for the same
period last year, to accelerate the development of next generation wireless
products scheduled for introduction late in calendar 2008.
"For the nine months ended July 31, 2008, we have expanded inventory by
$1,135,000, compared to October 31, 2007 inventory, in order to meet record
sales at RF Connector and Cable Assembly, Bioconnect
and Aviel. This increased inventory is also necessary
to service RFI's expanding customer base and meet
projected fourth quarter sales. Also in the nine months to date, we spent an
additional $223,000 for new equipment and tooling to increase capacity, improve
manufacturing efficiency and meet growing demand at Aviel
and Bioconnect. To meet Aviel's
continuing growth, we plan additional capital expenditures of $160,000 in our
current fourth quarter ending October 31, 2008," said Hill.
At July 31, 2008, RFI reported cash and cash equivalents and investments in
available-for-sale-securities of $8,247,000, working capital of $15,576,000, a 11.6 to 1 current ratio, no long-term debt and
stockholders' equity of $16,115,000, or $4.87 book value per share.
About RF Industries
The RF Connectors and Cable Assembly segment designs and distributes radio frequency
(RF) coaxial connectors and cable assemblies used for Wi-Fi,
PCS, radio, test instruments, computer networks and antenna devices. This
business segment includes Aviel Electronics, which
provides custom microwave and RF Connector solutions to aerospace, OEM and
Government agencies; Worswick, which provides coaxial
connectors and cable assemblies primarily to retail and local multi-media and
communications systems customers; and Bioconnect,
which designs, manufactures and distributes specialized electrical cabling and
interconnect products to the medical monitoring market. The RF Wireless segment
includes Neulink, which designs and markets wireless
digital data transmission products for industrial monitoring, wide area
networks, GPS tracking and locations systems, and RadioMobile,
an OEM provider of End-to-End mobile wireless network solutions for public
safety, emergency medical, transportation and industrial customers.
Use of Non-GAAP Financial Measures
RF Industries reports all financial information required in accordance with
generally accepted accounting principles (GAAP). To supplement the RF
Industries unaudited net income and earnings per
share information that is presented in accordance with GAAP, RF Industries has
presented non-GAAP net income and earnings per share information by excluding
the GAAP non-cash option related expenses. The presentation of this non-GAAP
financial information is not intended to be considered in isolation from, as a
substitute for, or superior to, the net income or earnings per share
information presented in the financial statements. RF Industries believes that
this non-GAAP financial information, when taken together with the corresponding
GAAP financial information, provides meaningful supplemental information regarding
the performance of RF Industries by excluding certain items that may not be
indicative of the company's business, operating results or future outlook.
The statements contained in this release which are not historical facts may
be deemed to contain forward-looking statements with respect to future events,
the occurrence of which involve risks and uncertainties, including, without
limitation, a decrease in the demand for the Company's products as a result of
changes in the telecommunications or wireless products markets, increased
competition, the effects of recently completed or future acquisitions of other
businesses, and other uncertainties detailed in the Company's Securities and
Exchange Commission filings. All forward-looking statements are based upon
information available to the Company on the date they are published and the
Company undertakes no obligation to publicly update or revise any
forward-looking statements to reflect events or new information after the date
of this release.
RF INDUSTRIES, LTD.
CONDENSED STATEMENTS OF INCOME
(in thousands, except per share and share amounts) (unaudited)
Three Months Ended Nine months Ended
July 31, July 31,
2008 2007 2008 2007
Net sales $ 4,668 $ 4,313 $ 13,002 $ 10,848
Cost of sales 2,352 2,264 6,454 6,016
Gross profit 2,316 2,049 6,548 4,832
Operating expenses:
Engineering 279 117 776 350
Selling and general 1,381 1,126 4,043 3,407
Total operating expenses 1,660 1,243 4,819 3,757
Operating income 656 806 1,729 1,075
Interest income 41 90 179 287
Income before provision for income taxes 697 896 1,908 1,362
Provision for income taxes 297 462 794 717
Net income $ 400 $ 434 $ 1,114 $ 645
Earnings per share
Basic $ 0.12 $ 0.13 $ 0.34 $ 0.20
Diluted $ 0.11 $ 0.12 $ 0.30 $ 0.17
Weighted average shares outstanding
Basic 3,298,345 3,248,058 3,294,219 3,265,739
Diluted 3,741,111 3,693,613 3,720,346 3,766,200
Dividends paid $ 99 $ 65 $ 295 $ 131
RF INDUSTRIES, LTD.
NON-GAAP CONDENSED STATEMENTS OF INCOME
(in thousands, except per share and share amounts)(unaudited)
Three Months Ended Nine Months Ended
July 31, July 31,
2008 2007 2008 2007
Net sales $ 4,668 $ 4,313 $ 13,002 $ 10,848
Cost of sales 2,330 2,238 6,388 5,938
Gross profit 2,338 2,075 6,614 4,910
Operating expenses:
Engineering 279 117 776 350
Selling and general 1,266 969 3,704 3,042
Total operating expenses 1,545 1,086 4,480 3,392
Non-GAAP Operating income 793 989 2,134 1,518
Interest income 41 90 179 287
Non-GAAP Income before provision for income taxes 834 1,079 2,313 1,805
Provision for income taxes 319 480 859 763
Non-GAAP Net income $ 515 $ 599 $ 1,454 $ 1,042
Non-GAAP Earnings per share
Basic $ 0.16 $ 0.18 $ 0.44 $ 0.32
Diluted $ 0.14 $ 0.16 $ 0.39 $ 0.28
Weighted average shares outstanding
Basic 3,298,345 3,248,058 3,294,219 3,265,739
Diluted 3,741,111 3,693,613 3,720,346 3,766,200
AnitemizedreconciliationbetweennetearningsonaGAAPbasisandnon-GAAPbasis:
GAAP Net income $ 400 $ 434 $ 1,114 $ 645
Stock-based compensation 137 183 405 443
Income tax effect (22 ) (18 ) (65 ) (46 )
Total non-GAAP adjustments to net income 115 165 340 397
Non-GAAP Net Income $ 515 $ 599 $ 1,454 $ 1,042
Use of Non-GAAP Financial Information
In addition to the reasons stated above, which are generally applicable to
each of the items RF Industries excludes from its non-GAAP financial measures,
RF Industries believes it is appropriate to exclude certain item for the
following reasons:
Stock-Based Compensation. When evaluating the
performance of its consolidated results, RF Industries does not consider
stock-based compensation charges. Likewise, the RF Industries management team
excludes stock-based compensation expense from its operating plans. In
contrast, the RF Industries management team is held accountable for cash-based
compensation and such amounts are included in its operating plans. Further,
when considering the impact of equity award grants, RF Industries places a
greater emphasis on overall stockholder dilution rather than the accounting
charges associated with such grants.
RF Industries believes it is useful to provide a non-GAAP financial measure
that excludes stock-based compensation in order to better understand the
long-term performance of its business. In addition, given its adoption of SFAS
123R, "Share-Based Payment," beginning in its fiscal year 2007, RF
Industries believes that a non-GAAP financial measure that excludes stock-based
compensation will facilitate the comparison of its year-over-year results.
RF INDUSTRIES, LTD.
CONDENSED BALANCE SHEETS
(in thousands, except per share and share amounts) (Unaudited)
July 31, October 31,
2008 2007
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,822 $ 3,401
Investments in available-for-sale securities 6,425 4,532
Trade accounts receivable, net 2,008 1,900
Inventories 6,090 4,955
Other current assets 297 241
Income tax receivable 57 --
Deferred tax assets 345 322
TOTAL CURRENT ASSETS 17,044 15,351
Property and equipment, net 405 256
Goodwill 309 309
Amortizable intangible asset, net 64 115
Note receivable from stockholder 67 67
Other assets 28 30
TOTAL ASSETS $ 17,917 $ 16,128
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 255 $ 205
Accrued expenses 1,213 697
Income taxes payable -- 168
TOTAL CURRENT LIABILITIES 1,468 1,070
Deferred tax liabilities 83 70
Other long-term liabilities 251 47
TOTAL LIABILITIES 1,802 1,187
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock - authorized 10,000,000 shares of $0.01 par value; 33 33
3,307,889 and 3,285,969 shares issued and outstanding
Additional paid-in capital 6,219 5,700
Retained earnings 9,863 9,208
TOTAL STOCKHOLDERS' EQUITY 16,115 14,941
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 17,917 $ 16,128
SOURCE: RF Industries, Ltd.
Investor Contact: Neil Berkman Associates, (310)
826-5051 info@berkmanassociates.com or Company Contact: Howard Hill, President,
(858) 549-6340 rfi@rfindustries.com
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