Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
EVI > SEC Filings for EVI > Form 10-Q on 13-Nov-2012All Recent SEC Filings

Show all filings for ENVIROSTAR, INC.

Form 10-Q for ENVIROSTAR, INC.


13-Nov-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations.

Overview

Total revenues for the first quarter of fiscal 2013 increased by 3.3% over the same period of fiscal 2012, however, lower margins caused a decrease of 35.0% in net earnings for the first quarter of fiscal 2013 when compared to the same period of fiscal 2012. A 3.6% increase in equipment sales in the first quarter of fiscal 2013 when compared to the same period in 2012 was offset by a 2.6% decrease in spare parts sales in the first quarter of fiscal 2013 when compared to the same period in 2012. Spare parts carry higher margins than equipment sales. Selling, general and administrative expenses, which included a reorganized sales and support staff that was completed in fiscal 2012, remained stable, increasing by .7% in the first quarter of fiscal 2013 from the same period of fiscal 2012. Foreign shipments increased by 48.4 % when comparing the first quarter of fiscal 2013 to the first quarter of fiscal 2012.

During the first quarter of fiscal 2013, the Company received a number of large orders for shipment during fiscal 2013. These orders have increased the Company's backlog to historic levels and customer deposits associated with these orders have increased our cash by $3,870,059 to $10,397,999

Inventories increased by 8.4%, during the first quarter of fiscal 2013 when compared to the same period in 2012 to support the increased orders.

Liquidity and Capital Resources

During the first quarter of fiscal 2013, cash increased by $3,870,059 compared
to a decrease of $115,855 during the same period of fiscal 2012. The following
summarizes the Company's Consolidated Statement of Cash Flows.

                                      Three Months Ended September 30,
                                        2012                    2011
                                     (Unaudited)            (Unaudited)
Net cash provided (used) by:
Operating activities              $       3,893,599       $       (115,855 )
Investing activities                        (23,540 )                    -
Net increase (decrease) in cash   $       3,870,059       $       (115,855 )

For the three months ended September 30, 2012, operating activities provided cash of $3,893,599 compared to $115,855 of cash used during the same period of fiscal 2012. The increase in cash is primarily attributed to an increase of $3,928,877 in customer deposits associated with a number of large orders received by the Company during the first quarter of fiscal 2013. In addition, $1,716,995 of cash was provided by an increase in accounts payable and accrued expenses, representing equipment received and shipped but not yet paid for. Additional cash was provided by the Company's net earnings of $151,839 and non-cash expenses for depreciation and amortization of $14,771. Offsetting these increases in cash was an increase in accounts and trade notes receivables which used cash of $1,025,202 reflecting heavy shipments in September 2012, which were not yet due for payment. Other assets used cash of $539,078 mostly for prepayments to vendors for specialized equipment on order. In addition, cash of $254,056 was used to decrease accrued employee expenses as year-end bonuses were paid out during the first quarter of fiscal 2013. An increase in inventories used cash of $199,460 to support current orders. Also, $103,855 of cash was provided by an increase in income taxes payable as tax deposits were made after the quarter ended. Other factors affecting cash in the normal course of business was a benefit of $8,671 for deferred income taxes, an $8,730 decrease in leases and mortgages receivables and a decrease of $5,001 in unearned income.

-12-

Table of Contents

For the three months ended September 30, 2011, operating activities used cash of $115,855 compared to $880,876 of cash provided during the same period of fiscal 2011. The cash used by operating activities in the fiscal 2012 period was primarily due to an increase of $789,433 in accounts and trade notes receivable caused by heavy shipments in September 2011 that had not been paid for by September 30, 2011. This use of cash was largely offset by an increase of $763,453 in customer deposits as orders increased during the period. Cash of $321,670 was used in the first quarter of fiscal 2012 as a result of a decrease in accrued employee expenses as year-end accrued bonuses were paid out during the first quarter of fiscal 2012. In addition, inventories increased by $183,326 to support the current level of orders. These uses of cash were partially offset predominantly by cash provided by the Company's net income of $233,498 and non cash expenses for depreciation and amortization of $12,545, an increase in accounts payable and accrued expenses of $115,866 and an increase in income taxes payable of $64,885.

Investing activities used cash of $23,540 during the first quarter of fiscal 2013 for capital expenditures. There were no expenditures for investing activities during the first quarter of fiscal 2012.

There were no financing activities during the first quarters of fiscal 2013 and 2012.

Effective November 1, 2012, the Company's existing $2,250,000 revolving line of credit facility was extended to November 1, 2013. The Company's obligations under the credit facility are guaranteed by the Company's subsidiaries and collateralized by substantially all of the Company's and its subsidiaries' assets. No amounts were outstanding under this facility at September 30, 2012 or June 30, 2012, nor were there any amounts outstanding at any time during fiscal 2012 or the first quarter of fiscal 2013.

The Company believes that its existing cash, cash equivalents and net cash from operations will be sufficient to fund its operations and anticipated capital expenditures for at least the next twelve months and to meet its long-term liquidity needs.

Off-Balance Sheet Financing

The Company has no off-balance sheet financing arrangements within the meaning
of Item 303(a)(4) of Regulation S-K.

Results of Operations

Revenues

                                                                             Three Months Ended September 30,
                                                                                 2012              2011
                                                                              (Unaudited)      (Unaudited)          %
Net sales                                                                    $   6,458,651     $  6,234,500       +3.6%
Development fees, franchise and license fees, commissions and other income          54,463           73,371       -25.8 %
Total revenues                                                               $   6,513,114     $  6,307,871       +3.3%

Net sales for the three month period ended September 30, 2012 increased by $224,151 (3.6%) from the same period of fiscal 2012. The increase in sales was primarily attributed to an improvement in equipment sales, which increased by 3.6%. This increase was offset by a 2.6% decrease in spare parts sales. However, foreign sales continued their improvement increasing by 48.4% during the first quarter of fiscal 2013.

Revenues of development fees, franchise and license fees, commissions and other income decreased by $18,908 (25.8%) primarily due to a reduction in commissions paid to the Company by other distributors.

-13-

Table of Contents

Operating expenses

                                                  Three Months Ended September 30,
                                                      2012                  2011
                                                  (Unaudited)           (Unaudited)
As a percentage of net sales:
Cost of sales                                            79.2 %                 76.8 %
As a percentage of revenues:
Selling, general and administrative expenses             17.7 %                 18.2 %
Total expenses                                           96.3 %                 94.1 %

Costs of goods sold, expressed as a percentage of sales, increased to 79.2% in the first quarter of fiscal 2013 from 76.8% for the same period of fiscal 2012. The increase was due mainly to shipments of large equipment orders which normally carry lower margins and a slight reduction in spare parts shipments which generally carry higher margins.

Selling, general and administrative expenses increased by $7,779 (.7%) in the first quarter of fiscal 2013 over the first quarter of fiscal 2012, but as a percentage of revenues improved to 17.7% from 18.2% for the same comparable periods. The improvement as a percentage of revenues, despite a slight increase in dollar amount, was due to the absorption of selling, general and administrative expenses over higher revenues.

Interest income increased by $722 (18.6%) in the first quarter of fiscal 2013 from the same period of fiscal 2012, primarily due to slightly higher interest rates.

The Company's effective income tax rate for the first quarter of fiscal 2013 increased to 38.5% from 37.9% for the same period of fiscal 2012. The slight variation reflects changes in permanent and temporary adjustments to taxable income.

Inflation

Inflation has not had a significant effect on the Company's operations during any of the reported periods.

Transactions with Related Parties

The Company leases warehouse and office space under an operating lease from the Sheila Steiner Revocable Trust. The trustees of this trust are Sheila Steiner, her husband, William K. Steiner, and her son, Michael S. Steiner. William K. Steiner, is Chairman of the Board of Directors and a director of the Company, and Michael S. Steiner, is President and a director of the Company. Michael Steiner, individually, is also a principal shareholder of the Company.

The lease was for an original three year term which commenced on November 1, 2005, with two three-year renewal options in favor of the Company. The Company has exercised the second renewal option, extending the lease until October 31, 2014. The lease provides for annual rent increases commencing November 1, 2006 of 3% over the rent in the prior year. The Company bears the cost of real estate taxes, utilities, maintenance, non-structural repairs and insurance. The Company believes that the terms of the lease are comparable to terms that would be obtained from an unaffiliated third party for similar property in a similar locale. Rental expense under this lease was approximately $30,200 and $29,300 in the first three months of fiscal 2013 and 2012, respectively.

-14-

Table of Contents

Critical Accounting Policies

The accounting policies that the Company has identified as critical to its business operations and to an understanding of the Company's results of operations remain unchanged from those described in the Management's Discussion an Analysis of Financial Condition and Results of Operations section of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2012. The Company makes estimates and assumptions that affect the reported amount of assets and liabilities, contingent assets and liabilities, and the reported amounts of revenues and expenses during the reported period. Therefore, there can be no assurance that the actual results will not differ from those estimates.

Recently Adopted Accounting Guidance

In January 2010, the FASB issued ASU 2010-06, "Fair Value Measurements and Disclosures (ASC 820): Improving Disclosures about Fair Value Measurements" ("ASU 2010-06"). ASU 2010-06 amends ASC Topic 820 and clarifies and provides additional disclosure requirements on the transfers of assets and liabilities between Level 1 (quoted prices in active market for identical assets or liabilities) and Level 2 (significant other observable inputs) of the fair value measurement hierarchy, including the reasons for and the timing of the transfers. Additionally, the guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). ASU 2010-06 became effective for the Company beginning July 1, 2010, except for the gross presentation of the Level 3 roll forward, which was required for annual reporting periods beginning July 1, 2011 and for interim reporting periods thereafter. Early application was permitted and comparative disclosures were not required in the period of initial adoption. The adoption of ASU 2010-06 did not have a material impact on the Company's consolidated financial statements.

In July 2010, the FASB issued ASU 2010-20, "Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Loss" ("ASU 2010-20"). ASU 2010-20 amends ASC 310, "Receivables" to enhance disclosures about the credit quality of financing receivables and the allowance for credit losses by requiring an entity to provide a greater level of disaggregated information and to disclose credit quality indicators, past due information, and modifications of its financing receivables. ASU 2010-20 is effective for interim or annual fiscal years for the Company beginning January 1, 2011. The Company's adoption of ASU 2010-20 did not have a material impact on its consolidated financial statements.

In April 2011, the FASB issued ASU 2011-02, "Receivables (Topic 310): A Creditor's Determination of Whether a Restructuring Is a Troubled Debt Restructuring" ("ASU 2011-02"). ASU 2011-02 provides additional guidance clarifying when the restructuring of a receivable should be considered a troubled debt restructuring. The additional guidance provided by ASU 2011-02 is for determining whether a creditor has granted a concession and whether the debtor is experiencing financial difficulty. ASU 2011-02 also ends the deferral of activity-based disclosures related to troubled debt restructurings. The Company adopted ASU 2011-02 in the third quarter of 2011. The adoption of ASU 2011-02 did not impact the Company's consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, "Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs" ("ASU 2011-04"). ASU 2011-04 amends ASC 820, providing a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 changes certain fair value measurement principles, clarifies the application of existing fair value measurement and expands the ASC 820 disclosure requirements, particularly for Level 3 fair value measurements. ASU 2011-04 is effective for interim and annual periods beginning after December 15, 2011. The adoption of ASU 2011-04 did not have a material impact on the Company's consolidated financial statements.

-15-

Table of Contents

Forward Looking Statements

Certain statements in this Report are "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this Report, words such as "may," "should," "seek," "believe," "expect," anticipate," "estimate," "project," "intend," "strategy" and similar expressions are intended to identify forward looking statements regarding events, conditions and financial trends that may affect the Company's future plans, operations, business strategies, operating results and financial position. Forward-looking statements are subject to a number of known and unknown risks and uncertainties that may cause actual results, trends, performance or achievements of the Company, or industry trends and results, to differ materially from the future results, trends, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, among others:
general economic and business conditions in the United States and other countries in which the Company's customers and suppliers are located; industry conditions and trends; technology changes; competition and other factors which may affect prices which the Company may charge for its products and its profit margins; the availability and cost of the inventory purchased by the Company; the relative value of the United States dollar to currencies in the countries in which the Company's customers, suppliers and competitors are located; changes in, or the failure to comply with, government regulation, principally environmental regulations; the Company's ability to implement changes in its business strategies and development plans; and the availability, terms and deployment of debt and equity capital if needed for expansion. These and certain other factors are discussed in this Report and from time to time in other Company reports filed with the Securities and Exchange Commission. The Company does not assume an obligation to update the factors discussed in this Report or such other reports.

-16-

Table of Contents

  Add EVI to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for EVI - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.