TechPrecision Corporation (TechPrecision) has reported net sales of $38.1 million for fiscal year 2009, up 19.8%, compared with the net sales of $31.8 million in the previous year. It also reported a net income of $5.9 million, or $0.23 per diluted share, for fiscal year 2009, up 68.6%, compared with the net income of $3.5 million, or $0.12 per diluted share, in the previous year.

Fourth Quarter Results

For the three months ended March 31, 2009, sales decreased to $4.3 million or 53.9%, from $9.3 million in the fourth quarter of fiscal 2008. Since the company’s products are manufactured pursuant to contracts which are based on the capital budget of its customers and potential customers, the decrease in sales reflects the result of the downturn in the economy and the alternative energy industry, and the related lack of credit availability to customers. Starting in December 2008, the company’s largest customer significantly reduced its monthly delivery requirements, which carried into the fourth fiscal quarter.

“At the end of what had been a very successful year, our fourth quarter results declined based on the recent downturn in demand for alternative energy capital equipment,” said Louis Winoski, interim chief executive officer of TechPrecision Corporation. “We believe the slowdown is temporary but based on customer feedback expect it could take several quarters before production levels resume. In light of these developments, our management team has intensified our efforts to further diversify our customer base and has made swift adjustments to our cost structure to preserve a solid financial position. Our new management team is working very proactively to win new long-term production programs to return TechPrecision on a growth path,” added Winoski.

Cost of sales for the quarter ended March 31, 2009 decreased by $3.5 million to $3.2 million, a decrease of 52.6%, from $6.7 million for quarter ended March 31, 2008. Gross margin was 25.8% in the fourth fiscal quarter of 2009 compared to a gross margin of 27.8% in the fourth fiscal quarter of 2008. The gross margin decline was largely attributable to decreased revenue from the company’s solar customer and the accompanying decline in capacity utilization.

Selling, administrative and other expenses for quarter ended March 31, 2009 were $755,000 as compared to $456,000 for quarter ended March 31, 2008, reflecting increased professional fees and marketing costs.

The company had an income tax credit of $0.6 million in the three months ended March 31, 2009 as compared to an expense of $1.1 million in the three months ended March 31, 2008. The tax credit in the March 2009 quarter was due to provisions of the American Recovery and Reinvestment Act relating to depreciation on assets placed in service during the fourth quarter, tax refunds, and revisions in estimates of effective tax rates on an annualized basis during the fourth quarter.

As a result of the factors described above, TechPrecision’s net income was $0.9 million ($0.06 per share basic and $0.04 per share diluted) for the quarter ended March 31, 2009 as compared to $0.9 million ($0.07 per share basic and $0.03 per share diluted) for the quarter ended March 31, 2008.

Financial Condition

At March 31, 2009, TechPrecision had working capital of $11.2 million as compared with working capital of $6.4 million at March 31, 2008, an increase of $4.8 million reflecting the company’s increased level of business. The cash flow from operations was $9.3 million for year ended March 31, 2009 as compared to $2.5 million for the year ended March 31, 2008. The increase in operating cash flow was due to the net effect of an increase in net profits, collections of outstanding accounts receivables, and decrease in costs incurred on uncompleted contracts. As of March 31, 2009, the company had $10.5 million in cash and equivalents. Stockholder’s equity increased to $10.1 million, up from $4.2 million on March 31, 2008.

Business Outlook

TechPrecision provides elements of a proprietary product for a customer in the alternative energy industry and has a track record of providing key components to the nuclear energy industry as well. The alternative energy industry has experienced rapid growth in recent years; however, this growth trend has recently reversed. Accordingly, the near-term demand for products in alternative energy, including both solar and nuclear, is uncertain. Although the company believes that over the long term, the alternative energy segment will expand, it is addressing the current reduced demand in the alternative energy segment by diversifying into other industries.

The reduced level of business from the company’s largest customer has affected TechPrecision’s sales, gross profit and net income in the March 31, 2009 quarter, and the company expects these factors to continue to affect it in its fiscal year ended March 31, 2010.

The company is one of a few participants in the US with the certifications to manufacture commercial nuclear equipment. Although it did not have significant revenue from this segment during fiscal 2009, TechPrecision is actively working on producing prototypes for components for next generation nuclear plants, and the company believes that it is well positioned to benefit from any nuclear renaissance in US. The company is finalizing an exclusive supply contract with a medical customer to manufacture critical components for a next-generation, lower cost proton beam therapy machine designed to be used to treat cancer. Subject to the device obtaining final FDA approval, the company believes that this program could generate a very sizable new revenue stream for TechPrecision over the next several years.

“While we were disappointed with our results this quarter, we were able to move quickly to resize our business to maintain our positive cash flow,” stated Winoski. Our balance sheet remains solid and we are actively pursuing new opportunities that play to our core competencies in winning long-term, high volume production programs in multiple industries. We are confident that TechPrecision will emerge from this downturn stronger than ever.”

As of March 31, 2009, the company had a backlog of orders totaling around $38.6 million of which $28.5 million represented orders from its largest customer. This compared to $40.0 million at the end of the December 31, 2008 quarter, and $33.4 million for the period ended March 31, 2008. Subsequent to March 31, 2009, the largest customer canceled a portion of their orders reducing the total backlog to $21.8 million. Post the cancellation, the remaining GT Solar backlog of around $11.7 million includes around $3.4 million of open product purchase orders and around $8.3 million of material buyback. The backlog includes orders in excess of one million from each of five customers totaling more than $8.3 million in addition to the largest customer. The company expects to deliver the backlog during the years ended March 31, 2010 and March 31, 2011.