Filing Summary
Entity and period: The supplied filing is EnviroStar, Inc.’s Form 10-Q for the quarter ended March 31, 2012, covering fiscal 2012’s third quarter and first nine months. This does not match the request metadata identifying EVI Industries, Inc. and “2011 Q3”; verify the intended issuer and period.
Financial Results
| Metric | Three months ended March 31, 2012 | Three months ended March 31, 2011 | Nine months ended March 31, 2012 | Nine months ended March 31, 2011 |
|---|---|---|---|---|
| Total revenue | $5.119 million | $4.765 million | $16.410 million | $14.883 million |
| Operating income | $114,233 | $142,971 | $510,509 | $477,211 |
| Net earnings | $73,684 | $91,841 | $322,578 | $305,907 |
| Basic and diluted EPS | $0.01 | $0.01 | $0.05 | $0.04 |
- Quarterly revenue rose 7.4%; nine-month revenue rose 10.3%. Net sales increased 6.9% and 10.8%, respectively.
- Operating margin was approximately 2.2% for the quarter versus 3.0% a year earlier, and 3.1% for the nine-month period versus 3.2%. Net margin was approximately 1.4% and 2.0%, respectively, compared with 1.9% and 2.1%.
- Cash and cash equivalents were $6.829 million at March 31, 2012, versus $6.907 million at June 30, 2011. Current assets were $11.775 million and current liabilities $3.992 million; the current ratio was approximately 3.0.
- No borrowings were outstanding under the $2.25 million revolving credit facility. Total liabilities were $3.992 million; the filing reports no funded debt balance.
- Operating cash flow was $279,379 for the nine months, down from $1.343 million. Capital expenditures used $6,115; a $351,686 dividend payment brought cash down by $78,422 overall.
Changes and Management Commentary
- Nine-month earnings rose 5.4%, but quarterly earnings declined 19.8%. Management attributed the quarterly decline primarily to higher expenses to reorganize license operations in Mexico.
- Commercial laundry, dry-cleaning equipment and boiler segment revenue increased to $16.256 million for nine months from $14.773 million. License and franchise segment revenue was $153,418 versus $109,587; its operating income declined to $34,098 from $87,252.
- Equipment and parts shipments increased 14.0% and 7.3%, respectively, over the first nine months. Management said orders were trending higher, customer deposits and backlog were increasing, and inventories might rise during fiscal 2013 to support orders.
- SG&A increased 10.0% for nine months and 11.8% for the quarter, mainly due to payroll, sales commissions, added staff and Mexico license-operation reorganization. Cost of sales as a share of net sales was 76.6% for both comparative nine-month periods; quarterly ratio edged up to 76.6% from 76.4%.
Outlook, Risks and Other Matters
- No numerical earnings or revenue guidance is provided. Management expected available cash and operating cash flow to fund operations and anticipated capital expenditures for at least 12 months and meet longer-term liquidity needs.
- The credit facility is secured by substantially all company and subsidiary assets, includes financial ratios and restrictive covenants, and was reported in compliance at March 31, 2012. It includes a $1 million letter-of-credit subfacility and a $250,000 foreign-exchange subfacility.
- Risks cited include economic and industry conditions, competition and margins, inventory availability and cost, currency movements, regulation, execution of business plans, and access to capital. Export customers pay in U.S. dollars; no foreign-exchange contracts were outstanding at March 31, 2012.
- The company leases warehouse and office space from a trust connected to principal shareholders and directors; nine-month rent expense was approximately $89,400. The lease runs through October 31, 2014.
- The company declared and paid a $0.05-per-share dividend totaling $351,686. Potential federal and state tax examinations covered tax years 2008–2011. Management reported effective disclosure controls and no material change in internal control over financial reporting.
Facts for Investors to Verify
- Confirm that EnviroStar’s March 31, 2012 filing, rather than an EVI Industries filing or another fiscal period, is the intended source.
- Assess whether higher orders and backlog convert into shipments, revenue and cash, given the substantial receivables increase and lower operating cash flow.
- Track the financial effect and execution of the Mexico license-operation reorganization, particularly the decline in license-segment operating income.
- Review the credit facility’s covenants, collateral and availability, and the related-party lease terms.
- Reconcile the cover-page outstanding share count of 7,033,732 with the balance-sheet share disclosure, which describes 7,065,500 issued and outstanding shares including treasury shares.