The LGL Group (LGL) Q4 2011 earnings summary

Executive summary

• FY2011 revenue fell 23.5% to $35.682M as Telecom and MISA demand weakened; gross margin contracted 4.8 percentage points to 30.2%.

• Net income was $382K, down from $9.423M in FY2010; Q4 2011 recorded a $296K net loss.

Financial highlights

• Operating income declined to $674K from $6.759M, reflecting lower sales, weaker gross margin and $519K higher engineering, selling and administrative costs.

• FY2011 EPS was $0.15 versus $4.19 in FY2010; FY2010 earnings benefited from recognition of tax benefits on loss carryforwards and temporary differences.

• Operating cash flow was $2.321M versus $5.503M; cash and cash equivalents ended the year at $13.709M, up from $4.147M.

Outlook and guidance

• Backlog was $8.634M at year-end, down 19.6% YoY; substantially the entire backlog was expected to be filled in 2012, subject to cancellations and timing changes.

• Existing cash, operating cash generation and available revolving credit were expected to cover working capital and capex needs for the next 12 months.

• Management projected covenant compliance through Dec. 2012, contingent on a negotiated amendment; completion was not assured.