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TOROTEL SAYS CONTINUED MARKET SOFTNESS LED TO LOWER SALES AND EARNINGS FOR THE THIRD QUARTER, NINE MONTHS

 KANSAS CITY, Mo., March 8 /PRNewswire/ -- Torotel, Inc. (AMEX: TTL), a leading manufacturer of magnetic components, today announced continued delays in the awarding of military contracts resulted in decreased sales and earnings for its third quarter and nine months.
 "A few years ago, before instituting aggressive cost controls, we would have posted a loss at this level of revenues," said Alfred Marsh, president and chief executive officer. "Because we have been able to drive down our fixed costs, Torotel did a little better than breakeven for the third quarter."
 Lower Sales Decrease Earnings for Third Quarter, Nine Months
 For the three months ended Jan. 31, 1993, net sales were $2.0 million compared with $2.5 million for the same period last year, down 21.6 percent. Net earnings were $24,000, or 1 cent per share, for the latest quarter, down 89.2 percent from the prior year's $223,000, or 8 cents per share.
 For the year-to-date, net sales declined 10.1 percent to $7.0 million from the $7.8 million reported for last year's nine months. Net earnings, at $474,000, or 17 cents per share, were 29.6 percent lower than the $673,000, or 24 cents per share, seen at this time last year.
 Lower sales and fixed expenses reduced Torotel's gross margins for both periods: down 4 percent, to 34.5 percent, for the quarter, and but only 1 percent lower, to 37.0 percent, for the nine months. Before the recent industry softness, the company had been making steady progress toward its goal of a 40 percent gross margin.
 Stockholders' Equity Up Nearly 18 Percent
 Torotel continued to improve its financial condition despite the difficult operating environment. While total assets were down 12.7 percent since the end of the last fiscal year (April 30, 1992), working capital remained a solid $3.8 million. This primarily resulted from a 29.3 percent decrease in current liabilities, to $1.1 million at Jan. 31, 1993. The company's current ratio improved 4.3-to-1 for the year- to-date versus 3.6-to-1 on April 30.
 In the past 12 months, operations generated $1.3 million in cash flow. This, combined with a reduced level of borrowing and lower interest rates, led to a 56.3 percent decline in long-term debt, to $725,000 at the end of the third quarter. Stockholders' equity continued to rise as a result, up 17.7 percent in the last nine months to $3.7 million. The debt-to-equity ratio improved to .6-to-1 from 1.1-to-1 at the beginning of the fiscal year.
 Lower Sales Expected for Fourth Quarter
 In discussing the outlook for Torotel's fourth quarter, Marsh said, "Our backlog at Jan. 31 was $4.8 million. Of this amount, $800,000 is on hold and $2.2 million is scheduled for production in the first half of fiscal 1994. As a result, fourth quarter sales will be about 40 percent lower than in the same quarter last year, and earnings should approach breakeven at best."
 Pursuing Other Opportunities While Military Market Remains Soft
 "Sales of magnetic components for foreign military markets have been slow to materialize, but not from a lack of demand," explained Marsh. "Several countries want to purchase various U.S. weapons systems. However, these sales must first be approved by Congress. Prime defense contractors -- our customers -- are confident that international demand is a viable market for defense electronics. This means continued life for some programs scheduled to be shelved. The Hellfire and Maverick missile systems fall into this category. Although we will not see the volume of past years, when these systems contributed 30 percent of our annual revenues, sales will continue for the next several years.
 "With this niche and other military markets continuing soft, Torotel has been looking elsewhere for sales," Marsh continued. "At the close of fiscal 1992, we announced our expansion into complete electrical assemblies that use many magnetic components. In late August, Torotel successfully bid on the first proposal it submitted: a $1.2 million contract (including options) for power supplies. While we received this contract in January, no significant revenue will be recognized until the first and second quarters of fiscal 1994. Continued postponements of bid opening dates by the U.S. Department of Defense Contracting Office have hampered the progress we hoped to achieve by this time. However, this military niche market offers unlimited growth opportunities, and we continue to bid on other assembly contracts.
 "We also are pursuing growth in two other ways," Marsh added. "First, the same cost-effective approach that made Torotel the largest high-volume supplier of magnetic components for missile applications is starting to pay off in the commercial and industrial markets. During the past nine months, we provided prototypes and small production runs to about 30 new customers, which ultimately should result in high-volume production. While penetrating commercial markets represents a long-term project, it appears prospects for increased sales are better than ever. Second, we also are open to acquiring a company or product lines in complementary markets."
 Torotel, Inc. specializes in the design and high-volume manufacture of a broad line of precision magnetic components used in military and industrial electronic systems. These components, which include transformers, chokes and toroidal coils, are sold to original equipment manufacturers for use in such programs as avionic equipments, marine communication an navigation, telecommunications, and weapons fire control systems. The company has a base of more than 400 customers.
 TOROTEL, INC.
 Condensed Statement of Operations
 Operating Data
 (Dollars in Thousands, Except Per Share -- Unaudited)
 Periods ended Three Months Nine Months
 Jan. 31 1993 1992 1993 1992
 Net Sales $1,993 $2,542 $7,004 $7,794
 Gross Profit 687 987 2,592 2,989
 Earnings from
 Operations 62 304 621 905
 Net Earnings 24 223 474 673
 Earnings Per Share .01 .08 .17 .24
 Weighted Average
 Common and
 Common Equivalent
 Shares Outstanding 2,837 2,863 2,853 2,842
 TOROTEL, INC.
 Balance Sheet Data
 (Unaudited)
 1/31/93 4/30/92
 Working Capital $3,800 4,239
 Current Ratio 4.3:1 3.6:1
 Total Assets 5,851 6,703
 Short-Term Debt 120 122
 Long-Term Debt 725 1,659
 Total Liabilities 2,128 3,539
 Debt-to-Equity .6:1 1.1:1
 Stockholders' Equity 3,723 3,164
 For information on Torotel, Inc. by FAX, Dial 1-800-PRO-INFO, ext. 155.
 -0- 2/8/93
 /CONTACT: Al Marsh, president of Torotel, 816-761-6314; or Lynne Franklin, 312-266-7800, or Regina Ryan, 212-661-8030, both of the Financial Relations Board/
 (TTL)


CO: Torotel, Inc. ST: Missouri IN: SU: ERN

SM -- NY077 -- 4166 03/08/93 15:42 EST
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