Spectrum Control Inc. (SPEC) reported fiscal 2010 first-quarter results after the closing bell on Thursday. The company posted 11.8% growth in earnings to $2.4 million, or 19 cents per share, from $2.2 million, or 17 cents in the year-ago quarter. However, the result narrowly missed the Zacks Consensus Estimate by a penny.
Spectrum Control is engaged in the design, development and manufacture of custom electronic products and systems for the defense, aerospace, communications, and medical industries worldwide. On Nov 30, 2009, the company acquired Micro Networks Corp., which designs and manufactures high-performance data conversion products, custom modules, as well as filters, oscillators, and delay lines based on surface acoustic wave (SAW) technology.
Quarter in Detail
During the quarter, net sales grew by 14.4% to $37.9 million, compared to $33.1 million in the year-ago quarter. The growth was primarily driven by the acquisition of Micro Networks, which added $3.1 million in Microwave components and systems division’s sales during the quarter. Moreover, Spectrum Control’s revenues were also helped by Advanced specialty products and Power management system segments, which rose by 10.1% and 38.6% to $11.7 million and $3.9 million, respectively. However, overall sales were partially offset by a 21.4% decline in Sensors and controls division to $4.5 million.
Spectrum Control’s gross margin decreased by 150 basis points (bps) to 23.4% primarily due to certain inventory charges associated with the acquisition of Micro Networks. Selling, general and administrative expense increased by 6.0% year-over-year to $5.2 million mainly due to higher personnel related expenses. Although, operating income rose by 9.7% to $3.7 million from $3.4 million in the year-ago period mainly due to higher sales, operating margin dipped by 40 bps year-over-year to 9.8% due to lower gross margin.
Spectrum Control ended the quarter with cash and cash equivalents of approximately $4.5 million, compared to $3.5 million in the year-ago quarter. Major uses of cash during the quarter included $3 million towards repayment of short-term borrowings and $1.2 million towards capital expenditure.
Outlook & Zacks Consensus
Moving forward, Spectrum Control anticipates earnings of 22 to 23 cents per share (+22% to 28% year-over-year growth) for the second quarter of fiscal 2010 on revenues of $38.5 million to $39.5 million (+15% to 17% growth). The guidance is in-line with the Zacks Consensus Estimate of 22 cents per share, which edged up a penny in just the past week.
For the entire fiscal 2010, the Zacks Consensus Estimate has dipped by 4 cents over the past month and is currently pegged at 87 cents per share. The most accurate estimate for the fiscal is even bearish at 82 cents and indicates a potential downside of 5.8%, compared to the Zacks Consensus Estimate.
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