2009 First Quarter American Electric Technologies’ highlights (in 000):
Technical Products and Services (TP&S):
The TP&S segment revenues increased $391 from $9,266 for the first quarter of 2008 to $9,657 for the first quarter of 2009. The 4.2% increase in revenues for this segment reflects consistent demand for the company’s products and services. Manufacturing revenues reflected a higher proportion of power conversion systems than the prior year quarter.
Gross profits for the TP&S segment for the first quarter of 2009 were $2,237, an increase of $1,049 over the prior year level of $1,188 due mainly to the revenue mix impact noted above.
The backlog for the TP&S segment was around $10.1 as of March 31, 2009, a decline of around $4.3 million since December 31, 2008. There is a high degree of uncertainty regarding the demand level for the segment’s products and services during the second half of the fiscal year.
Electrical & Instrumentation Construction (E&I):
The E&I segment reported sales of $4,986 in the first quarter of 2009, a decline of $751 over the initial quarter of 2008. The primary reason for the reduced sales was the $2,463 decline occasioned by the planned withdrawal from the new school contracting business.
Gross profits for the E&I segment during the first quarter of 2009 were a negative $88, a $638 decline from the prior year. The reduced gross profit is largely attributable to the reduction in sales noted above.
The backlog for the E&I segment was around $4.8 million as of March 31, 2009, a decrease of $2.3 million since the beginning of the year. The substantial decline in backlog is largely attributable to completion of most of the work in the new school construction market that the company plans to finalize in the near future and weakening conditions in many of the segment’s markets.
American Access Technologies:
The American Access segment sales declined $639 to $1,335 from the comparable prior year reporting period primarily due to a reduction in sales to the zone cabling and value added manufacturing markets. Sales of custom fabrication products partially offset these declines. Gross profits declined by 412 due to the decline in sales and a reduced gross profit percentage due to a higher proportion of manufacturing overheads.
The company expects the segment’s run rate to return to 2008 levels during the second quarter.
Joint Venture Activities:
The company’s total equity in the income of the company’s joint ventures equaled $704, an increase of 114% over the prior year period as the company’s Chinese and Singapore ventures contributed $ 551 and $153 respectively. Each of the traditional markets they serve are showing weakness in conjunction with the overall global demand decline but they are pursuing alternative markets to augment their sales. The Chinese joint venture, BOMAY recently paid a dividend in the amount of $1,400.
The company generated operating cash flow during the first quarter of 2009 of around $914, arising from operating earnings and improved overall working capital performance. This represents a slight improvement from the prior year results. The company recently reduced the company’s borrowings under the company’s revolving credit facility to $3,000.
Outlook for 2009:
The planning horizon is exceedingly short due to uncertainty in many of the traditional markets the company serve. The company’s current backlog in these businesses should support the existing run rate through the second quarter. The company will adjust the company’s cost structures in those businesses in the event the company expects a decline in run rates later in the year. The company is developing products for the wind energy business that the company expects will result in revenue during 2009 and the company continues to develop the company’s portable data center construction capabilities.
The company’s joint ventures reported strong first quarter 2009 earnings. The company believes however that their traditional energy markets will also be negatively impacted by global conditions so alternative markets for their products are being pursued. The Company continues to believe that opportunities for alternative energy products, both in the United States and China will remain promising and accordingly, the recent product development initiatives for these markets will continue. Inflationary pressure on raw materials and components has substantially moderated recently in the face of the turmoil in the global financial and commodity markets.
Art Dauber, American Electric Technologies’ chairman and chief executive officer reported “We are pleased with our results in the first quarter as our cost reduction efforts started last year enabled us to increase our EPS in a difficult market environment. However the outlook for the company’s traditional oil & gas customers looks very difficult in the second half of the year. As a result, we are accelerating the company’s efforts in the renewable energy, data center and Brazilian markets.”
