EASI ( $42-$32) Revenues up 5%, Operating Income up 7% and Net Income up 33% --
Fourth Quarter EPS $.52 on 10.6 Million Shares in 2001 vs. $.44 on 9.5 Million Shares in 2000
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ST. LOUIS, Dec. 11 /PRNewswire/ -- Engineered Support Systems, Inc. (Nasdaq: EASI - news) reported record net income of $5.5 million, or $.52 per share on 10.5 million diluted shares outstanding, for the fourth quarter ended October 31, 2001, compared to $4.1 million, or $.44 per share on 9.5 million diluted shares outstanding, for the same period last year. Net revenues also set a quarterly record at $100.1 million, up 5% over the $95.7 million for the fourth quarter of last year, according to Michael F. Shanahan, Sr., Chairman and CEO.
Fourth quarter operating income of a record $9.6 million was 7% above the $8.9 million for the same quarter in the prior year. As a percentage of net revenues, operating income was 9.6% for the current quarter as compared to 9.3% for the fourth quarter of fiscal 2000. Earnings before interest, income taxes, depreciation and amortization (EBITDA) for the current quarter totaled $11.6 million, or 11.6% of net revenues.
Net earnings for the fourth quarter climbed 33% to a record $5.5 million (5.5% of net revenues) compared to $4.1 million (4.3% of net revenues) last year. Higher operating income, lower interest expense and a reduction of the Company's effective income tax rate contributed to the strong results. Net earnings for the fourth quarter reflect a $0.3 million ($0.03 per diluted share) benefit associated with the implementation of various income tax planning strategies during fiscal 2001.
-- Fiscal 2001 Revenues up 8%, Operating Income up 18% and Net Income up
42%
-- Fiscal 2001 EPS $1.83 Represents 27% Increase Over Prior Year
For the year ended October 31, 2001, net revenues grew by 8% to a record $390.5 million compared to $361.5 million last year. Fiscal 2001 operating income of $36.4 million and EBITDA of $46.3 million progressed by 18% and 13%, respectively, over fiscal 2000 levels. Net income for the year totaled a record $18.6 million, or $1.83 per share on 10.1 million diluted shares outstanding, compared to $13.0 million, or $1.44 per share on 9.1 million diluted shares outstanding, for fiscal 2000.
Driven by strong earnings performance, the Company generated net cash flows of $32.9 million during fiscal 2001 as compared to $18.1 million last year. Accordingly, total bank debt has been reduced by $33.1 million to $63.7 million at year-end reducing the debt-to-equity ratio to 0.58 from 1.23 during fiscal 2001.
Shanahan commented, ``We capped off an outstanding fiscal 2001 with another record quarter for revenues, operating income and net earnings. Quarterly revenues topping the $100 million mark were the highest in our history reflecting continued progress on many of the Company's key defense programs. Operating income levels remained strong while net earnings were boosted by the rapid paydown of bank debt and a reduction in borrowing rates throughout the period. It is also notable that fiscal 2001 marked the ninth consecutive year of increasing revenues, net income and earnings per share. This is a testament to our focused plan of organic growth and strategic acquisitions in the defense markets we serve.''
Business Segment Results
During the quarter, Light Military Support Equipment net revenues increased by 8.6% to $41.6 million due to higher production levels. Segment revenue growth, bolstered by higher contract profit margins, resulted in significant improvement in the segment's income from operations in the current quarter, which increased 61.2% to $5.3 million compared to $3.3 million for the same period last year. Improved contract performance was achieved on certain key Light Military programs, including Tactical Quiet Generators and the Chemical and Biological Protected Shelter (CBPS) system. For fiscal 2001, the segment's operating margin was 9.7% of net revenues, which is a profit level consistent with ongoing expectations for the Light Military Support Equipment business.
Net revenues for Heavy Military Support Equipment declined by 4.4% in the current quarter to $29.2 million primarily due to production and delivery delays experienced on the M1000 Heavy Equipment Transporter program resulting from unsatisfactory subcontractor performance. Overhead absorption rates were negatively affected by the related temporary work slow down on the program causing segment profitability to further suffer during the fourth quarter. Segment operating profit decreased to $1.9 million, or 6.5% of segment net revenues, in the current period as compared to $2.5 million, or 8.1% of segment net revenues, for the same period in the prior year. Resumption of the normal delivery schedule on the M1000 program has already occurred; accordingly, segment net revenues and operating profits are expected to return to their previous levels by the first quarter of fiscal 2002.
Electronics & Automation Systems net revenues grew by 21.5% to $22.4 million for the current quarter as compared to the same period last year. The revenue growth stemmed from the receipt of production orders on several major programs including the HPOC and Striker systems and other segment contracts over the past year. Despite higher segment net revenues, income from operations declined by 14.4% to $2.3 million in the current quarter caused by a less favorable contract mix combined with higher operating expenses for the segment than the prior year.
Reflecting growing weakness in the overall economy, net revenues for the Plastic Products segment decreased to $6.9 million in the current quarter compared to $8.4 million last year with operating income decreasing to $0.1 million from $0.5 million. The performance of the Plastics business, particularly over the past two years, is a direct result of the sluggish economy that has forced a softening in demand for injection-molded components of many consumer and industrial products. Although this is believed to be a temporary condition, the Company is currently exploring strategic alternatives for the Plastics business that could provide a more suitable return on investment.
Entered Orders and Backlog
Fiscal 2001 entered orders totaled $381.1 million, just below the $387.4 million in entered orders for the prior year. This total exceeded the Company's previous forecast of $375 million for fiscal 2001 due to the accelerated receipt of certain contract awards from military customers. This was evidenced by a 59% year-over-year increase in defense orders in the fourth quarter to $69.3 million signifying heightened demand for these products. This trend was partially offset by an overall decline in non-military orders in fiscal 2001, which were down 41% to $41.6 million for the year. Much of this decline related to the delay in the award of certain programs involving Electronics & Automation Systems orders from the United States Postal Service (USPS). Uncertainty surrounding the USPS capital spending budget and various operational concerns related to the threat of further terrorist actions involving America's postal delivery system will likely delay award of these programs well into fiscal 2002. The Company continues to investigate ways of assisting the USPS with its problems surrounding potential contamination threats.
At October 31, 2001, total contract backlog, including unfunded production options on existing contracts, totaled $973.6 million, or 7.5% higher than the total backlog of $905.4 million at October 31, 2000, while funded contract backlog stood at $291.7 million.
Shanahan continued, ``Fiscal 2001 showed strong growth for our defense business, particularly for military generators, the Striker system and various chemical and biological defense programs. Given our highly visible backlog and solid market position, we expect to enjoy continued success across the board with our various military products for the foreseeable future. We also believe that the commercial side of Engineered Support will rebound as the economy strengthens.''
In conjunction with this release, Engineered Support Systems will host a conference call, which will be simulcast over the Internet. Michael F. Shanahan, Sr., Chairman and CEO, and Gary C. Gerhardt, Vice Chairman- Administration and CFO, will host the call, which is scheduled for today, December 11, 2001 at 4:00 p.m. EST. Listeners can access the conference call live and archived over the Internet via the Company's website at engineeredsupport.com . |
