Q2 2020 Bel Fuse Inc Earnings Call
Yeah.
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Good day and welcome to the Bel Fuse incorporated second quarter 2020 results Conference call Today's conference is being recorded.
At this time I would like to turn the conference over to Dan Bernstein, President and Chief Executive Officer. Please go ahead Sir.
These days.
Joining me on the call today, it's Greg <unk>, Vice President Finance, and then how cannot director of financial reporting.
Before the end the call like asking as all the safe Harbor statement when.
Thank you Dan Good morning, everybody before we started falling safe Harbor statement.
Except for historical information contained on let's call. It matters discussed on this call such as statements regarding our efforts to improve profitability impact of the closure of our power R&D facility in the district, Switzerland anticipated cost savings, resulting from restructuring and the continuing impact of belts efforts to reevaluate.
Its customer base and product portfolio are forward looking statements as described under the private Securities Litigation Reform Act of 1995 and involve risks and uncertainties actual results could differ materially from belts protection.
Among the factors that could cause actual results to differ materially from such statements are in market concern chasing our customers that continuing viability effect or is that rely on our product.
The impact of public health Crazy touches the governmental social and economic effects of Cobot 19.
The effects of business and economic condition.
Difficulties associated with integrating recently acquired company.
Capacity and supply constraints or difficulty.
Product development commercialization or technological difficulties.
Regulatory and trade environment.
Risks associated with foreign currency.
I'm certain people if you believe what was eating.
Architects happening because the company's new politics.
And competitive responses switching products.
The impact of changes to U.S. trade and tariff policy.
Factors detailed from time to time and the companies have to deal with guard.
If I just the risks and uncertainties there can be no assurance any forward looking statement will in fact proved to be correct. We undertake no obligation to update or revise any forward looking statement. You may also discuss non-GAAP results. During this call and reconciliations of GAAP results.
Non-GAAP results have been increases in our release.
I would now like to turn the call back to them or general business update.
Thank you and I get to the during our call today I hope that you and your families are staying safe during these difficult art.
Our first priority throughout this past quarter continues to be the safety of our associates around the world. We continue to provide these is going through products to our customers as of today. We are pleased to report that all our manufacturing sites.
Operating with the majority of them at or near normal production rate. However, the situation remains fluid.
Production managers around the world I've done an excellent job uninsured and ongoing compliance with local regulations related to Kobe 19.
I would once again like to take the tough comp take a moment to acknowledge our manufacturing associates in each of those factories for their dedication to our company and our customers during this period.
Turning to our results we were pleased that our efforts related to cost reductions and containment measures over the past here have translated into meaningful gross margin improvement.
Patrick like into effect recorded 2020 financial results.
Any other factors that drove this improvement are expected to provide a sustained benefit to 'em audience for the foreseeable future. Those factors include lower overhead cost from restructuring efforts a reduction a material prices related to components lower direct labor cost due to a bar favorable foreign exchange rates.
Factoring 2020, and inclusion of harder margins, who you are sales.
Further we made a concerted effort to exit customers.
And product lines that have lower margins in order to better utilize our manufacturing resources.
As a result, these and other factors.
Sales adjusted EBITDA has outlined in our release more than doubled compared to last years second quarter. Despite the lower sales volume.
Sales were down 6.2 million or four point guard present from last year's second quarter.
Acquisition a few you are in late 2019 contributed to 10.63, if the sales during the second quarter gross margin of or 39%.
Driven by sales of adopted using home workplace, excluding see you ourselves in the second quarter, we were down 16.9 million from last year's second quarter going with the current during the course or product group.
Sales before the end power products were down 7.3 million from Ratchet second quarter, largely due to reduction in sales to low margin customers.
The weakness in commercial aerospace end markets accounted for 5.6 million of this decline and sales throughout this distribution partners.
Remained lower than price prior year quarter by 2.9 million.
We get to the second half a year with very limited visibility as our second quarter ago that bookings work. So.
However, there are areas of strength as we entered the third quarter.
Recent awards for our connectivity products on T. defense programs and munitions.
Military avionics platform mobile communication programs, we go resulting in improved proving the military sales over 40% in second quarter versus last year's second quarter booking. If there is also remain healthy providing an opportunity for continued strength in shipments throughout the second half a year.
A magnetic solution group continues to see strong im sure demand for product going into communication hardware and next.
Generation network infrastructure has a associates need to accommodate increased bandwidth requirement to do a large number of people working from home.
Within the power solution protection group that was where water is a design wins or palace apart from core cost effective data later this nine tangible now let me turn awards totaled one point Sixmillion and expect to start shipping in the third quarter. We also continue to see year over year growth were related to the see a c. you are.
Acquisition to that would make every year. In addition, our circuit protection group had a 14% increase for the quarter due to a competitor not being able to ship.
The closure of our facility in at least to Switzerland will bring our annual fixed costs down by 3 million with those savings taking place or the fourth quarter. This year.
They'll management team remains focused on bottom line growth and continue to focus on which cost for products and bell facilities, that's along with the goal of improving profitability.
Before I turn back the colder Craig I would like again $2 and take our global team the epic and able to ought to be successful and responding to this rapidly changing environment ability to lead to generate results. They did it goes much of the credit of our front line associated for making that happen under these difficult circumstances, and where that I turn the.
Call for the Craig to run through the financial uptick Craig.
Thanks, Dan.
Sales bike products segment for the second quarter or 2020 were as follows.
Our solutions and protection sales were 45.1 million up 2% from last years quarter.
Got it shouldn't be solution sales were 38.9 million a decline of 9%.
And then another solution sales were 37.2 million also down 9% from last years second quarter.
And consolidated basis gross profit margin, excluding R&D extensions.
Increased to 26.2% in this quarter of 2020, that's compared with 21% in the second quarter 20 my team.
As a result was a combination of factors.
Overhead and indirect labor costs were 4.7 million lower during the second quarter 2020.
Currently the restructuring measures implemented during late 2019.
On a reduction in the cost structure for speech connectivity solution children to along with current sales volumes within that segment.
A portion of the margin improvement in the second quarter 2020 related to lower material costs start supply cost components. Southern previously been build up you know our supply chain.
I wouldn't work for resulting in significantly lower material cost in the female come as compared to the same quarter last year.
The favorable shifting product mix and lower direct labor costs, resulting from favorable fluctuation in foreign exchange rates were also factors contributing to the margin improvement in the second quarter 20 to me as compared to the same theory Plano team.
Research and development costs were $6.1 million during the second quarter 2020, the calling them over $700000 from the second quarter or 29 team as a result of restructuring efforts implemented during the latter part of 29 team.
Or selling general and administrative expenses were $18.1 million or 14.9% Upsells.
That's compared with $19.2 million or 51% of sales in the second quarter of 29 team.
Well, we're travel expenses of $682000 or reduction of ERP costs for $391000 insurgents from other cost containment efforts outweighed the 1.9 million of incremental lets you need expenses associated with the movie acquired she loves business.
Let's see here expense also included a gain on the cash surrender value of coli policies of $1 billion in the second quarter of 2020.
Compared to a gain on these policies of $159000 and the second quarter 2019.
On a go forward basis, we would expect us to you need to between 19 and $20 million per quarter in the near term as we expect or traveling entertainment spend will be lower than normal for the remainder of the year.
Stock has resulted in income from operations of $7.5 million second quarter 2020, as compared to income from operations or $4.5 million in the second quarter of 29 team.
Other income and expense that was to an expensive three going in $2000 for the second quarter of 2020, that's compared to income of $267000. During the second quarter of 29 cheap.
Fluctuations from last year's second quarter.
Finally related to foreign exchange loss of $103000 in the second quarter 2020, as compared to a foreign exchange gain of $450000 from this quarter a formula team.
Interest expense was $1.3 million into second quarter of 2020 down slightly from the same quarter last year to the due to the lower interest rate in effect during the 2020 quarter.
We expect interest expense to be lower by approximately 600000 to $700000 into second half of the year as compared to the first half of 2020 relate to the decreases in both libel and in the Companys on its credit facility.
We had a provision for income taxes of $423000 in the second quarter of 20 to 20 compared to a provision of $421000 during last year's second quarter.
The impact of permanent differences on U.S. tax exempt activities.
It was slightly higher effective tax rate in the second quarter or 20, twond as compared to check order or 29 team.
Earnings per share for the class a common shares was earnings of 43 cents per share in the second quarter 2020, as compared with earnings of 23 cents per share in the second quarter of 29 team.
Earnings per share from class B common shares for bernie's.
46 cents per share in the second quarter or 2020 as compared with earnings of 24 cents pressure in the second quarter 20 like team.
On a non-GAAP basis, which excludes certain unusual and other nonrecurring items, you P.S. Reclass Ishares, which earnings of 43 cents per share in the second quarter 2020.
Compared with earnings of three cents per share in the second quarter of 29 team.
On the non-GAAP basis, you P. S class B shares was 46 cents computer and the second quarter 2020.
Compared with earnings of two cents per share in the second quarter 22.
Now I'd like to go through some balance sheet and cash flow items.
Our cash and cash equivalents balance at June Thirtyth 2020 was $75.3 billion decrease of 3 million from December 31st 29 team.
Our cash balance grew by 6.9 million sequentially from the March 31st Alex.
During the first half a 2020, we generated cash flows from operating activities of $16.8 million, we paid net payments up $8.2 million towards are outstanding debt balance and then just cash for capital expenditures of $3 million dividend payments of 1.6 million an interesting, it's a $2.3 million.
Accounts receivable were $73.3 million at June Thirtyth 2020, that's compared with 76.1 million at December 31st 2019.
Day sales outstanding decreased slightly to 59 days at June Thirtyth 2020, as compared to 60 days at December 31st 20 like team.
The increase in our accounts receivable balance was largely due to higher sales volume in the second quarter or 2020 as compared to the fourth quarter 20 like team.
[noise] inventories were 104.7 million.
At June Thirtyth, 2020 down 2.6 million from December 31st 29 team level.
The decline was seen in finished goods, partially offset by increases in work in process. The reduction in inventory is also partially due to the write down of excess stocks related to projects that ended.
Accounts payable were $44.8 million at June Thirtyth 2020.
$657000 from its level at December 31st 29 team, primarily due to the implementation of news supplier payment guidelines to better manage your cash reserves.
Sales total outstanding.
You bet balance was $135.2 million as of June Thirtyth 2020, net deferred financing costs, a decrease of $8.5 million since the 2019 year on balance.
It's primarily reflects the voluntary prepayment of 8.2 million.
Made during the first quarter 2020 in connection with an amendment to our credit agreement.
Book value per share, which is calculated that stockholders' equity divided by or combined a and B class. It's common stock outstanding there's $13 at 57 cents per share at June Thirtyth, 2020, onest compared with $13.69 per share at December 31st I mean like team.
And with that I'll turn the call back over to Dan Dan.
Thank you Craig at this time stay we would like they'll practical penny a questions people might have.
Thank you Sir if you would like to ask your question. Please signal by pressing star one on your telephone keypad, if you're using the speakerphone. Please make sure. Your mute function is turns off to like your signal to reach our equipment again, that's star one to ask a question.
We will take our first question from Mr. Theodore O'neill with Litchfield Hills Research. Please go ahead.
Thank you congratulations on a good quarter earnings wise.
Thank you. Thank you Yeah. Just one question here you talk in the press release about rationalizing their customer base and the product portfolio and I was wondering if you could talk about gets a little more color on that and which vertical has impacted the most by that and if that were.
Opportunities, where you could sort of.
X out of customer that also took care of the product as well or was it two separate you know and houses going on.
Thanks.
Okay, we had one major or building a product from one of the big data storage people that have the you know there's an internet company that had their own data storage and them and it was a power supply that we do or has the capability to work with second tier three care companies, which we think we could do a better job if you're.
Looking at the Amazon, Google Facebook, they tend to be overly price sensitive.
And the volumes is that.
Of course is can we can't compete in that market any longer so that was one situation. The other major situation that were getting out of which represents about 12 to 13 million.
As a modular product where you go a constant go product, where we get the manufacturing for our company and private label it and the margins are just too low, but we are working with other companies aren't doing OEM already I'm work.
Well react as is designed in a manufacturing and those opportunities really we can offer more value I think we can be competitive in those type of products, but again just thing very sensitive at this time as you know.
I think historically, where you're always looking at topline growth.
And took product in that maybe we should not just to have that goes I think at this point in time, we really want to focus on getting cash into the company and working off like that.
Great. Thanks very much.
Again that start one to ask a question. If you find your question has been answered you may removed yourself from the Q by pressing star too.
We will take our next question from June were shooting with Needham and company. Please go ahead I good morning.
Thank you good morning, and then just a follow on yes question, just an easier way to the aggregate coal as this and in terms that total revenue impact and you gave us some of it in pieces and I'm just wondering if there's a way to think about it and in totality because there's some offset.
So this is all I guess.
I think they that two big pieces as you start I didn't both one customer we walked away from again and now that the data Center company customer and I think that sales are going anywhere from 12 to 15 <unk> million annually.
Going Salt Lake.
Starting in the fourth quarter I'd, probably be another 10 to 13 million.
Okay. So those are found it hits.
There are other customers, but the volumes are not that that's substantial.
Got it doesn't matter I don't think are also looking at no individual products and in certain customer portfolios or they may not no need to meet the margin.
Oh standards that group that we're setting so the message there similarly, the everything we sell to the customer but products within that portfolio might not be suitable anymore.
Understood you called out.
Some of the intact to you.
Experiencing a commercial aerospace market and I got the number writers about 5.6 million in.
In the quota.
That's correct that's correct.
Yeah, I'm wondering is that I don't recall, what we said number in Q1.
You guys had that had you're.
Reddy ice now we can discuss it off line what I'm trying to do is I'm trying to I mean, it doesn't look like we're going to see a recovery anytime soon in the commercial aerospace market or maybe there's some aftermarket that you're going to gets but I'm wondering if we should think about this as kind of a EUR 20 million.
Dollar or more headwinds that you have that you're going to probably have to deal with over the next year or so.
I think Jim I think we've dealt with it we realigned our manufacturing I think that's right you know that would get so while this quarter on the aerospace though is that we know we didn't lose those sales. If you looked at yesterday's Wall Street Journal, where it make it a Boeing had statement that they're going to they won't hit their unit.
You're going to hit 31 planes in 2021, they pushed that back by year end, they get no visibility of how well they're gonna do.
So again based on that.
I was having a tough sledding for the next 18 months in the aerospace business I think were lying.
No more alignment we have to do.
To address this we know what are we know what it is how it is taking the steps already.
To cast a new sales volume, we're going to have it with these customers.
Yeah no easy.
Parents, just looking at the margins things like that.
Just to answer your question, Jim initially I in the first quarter, our commercial aerospace sales were down 3.4 million for instance, last year's first Corning.
And then in the second quarter, we thought.
Hey on ERP here keep buying at the 5.6 million that we had mentioned so overall about 9 million down versus the first six months of 29 team.
Got it and to your point, Dan I mean, it sounds like you've already a lie in the cost structure and other not only here, but in other parts of the company and I guess, that's the other question I mean, how you're doing a lot of puts and takes here a lot of moving parts to gross margins and I I'm wondering how it's nice to think about gross margins given.
Some other things you're doing areas, you're de emphasizing areas, where you've got some opportunities. It sounds like there's still some nice pipeline and defense side of the business and just generally given the overall macro environments or any way to think about gross margins in this.
I like crashing area.
Thank you I mean in nickel and in the quarter. Jim. We did you know there were some but with some favorability.
Would you kind of looked at like more of a like a one or one time impact.
But when you could get thing looking forward.
Obviously, you can't look too far forward, but we would take probably are.
More normalized margin might be in that or maybe 23, 25% range.
Ah, yes, taking out the C. One time, you know influences that yet.
John I told about the I think incremental incremental improvement over last years at least the per quarter, so, but im not quite maybe not quite as good as we show the score.
That's helpful. And then final question for me is I mean, it sounds like it a lot of the focus here is a is on a pay down debt and strengthening the balance sheet. It's all good stuff I'm just wondering.
It is easy and their name at least through the time being off the table or are you. Yeah. Just still you know looking at those areas.
Potential assets that might be out there.
What's your what's your point of view in terms of near term on that are you taking more of a you know kind of wait and see.
No I think we were still very active in the M&A area. However, as you know there's not much activity going on Oh, we do have a small oh, yeah. We are talking it too if we potentials company out there that we're looking at however, they tend to be on the smaller side more strategic fit.
However, you know if something comes across our table that make sense away. It would definitely you would look at a possibly of acquiring another company yes.
Well I still feel like Actavis weekend.
Okay. That's it for me I'll jump back into queue. Thanks, a lot.
Thanks, Jim Thanks, Jim.
We will take our next question from money guns with mutual Trust Co of America. Please go ahead.
Hi.
Yeah, good crazy here.
You're only going to right.
Smaller acquisitions.
Finally, addressing during the balance sheet stronger work, you're doing gross margin for their own things.
Music to my years, So I, just wonder express that here.
And even if they see a big acquisition, though.
I had to take a look at it so I'll try to tell you that.
Right that I understand book or at least you had aggressively.
Hello, and good for topline growth.
And ER.
For those things have been disappointments.
After two years.
Any anyhow.
It sounds to me picture.
Point 'cause it really right direction.
If you I guess, if you see something that makes sense for investors.
Nickel ore out of service.
Sure.
Yeah.
Yes, I mean, it correct about that.
Great. Thanks, Good I mean I presume.
Better than I expected next record the fairly good quarter for sure.
Appreciate the once you're done there either.
I would consider very adverse conditions.
Thank you.
It appears there no further questions at this time.
Mr Bernstein I'd like to turn the conference back over to you for any additional or closing remarks.
Thank you Steve again, we appreciate everybody joining the call today during these difficult times and we're just we're hearing a family the bat.
Looking forward to speaking here again next quarter. Thank you.
[laughter].
This concludes todays call. Thank you for your participation you may now disconnect.
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Mhm.
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Good day and welcome to the Gulf use incorporated second quarter 2020 results Conference call. Today's conference is being recorded at this time I would like to drink conference over to David Bernstein, President and Chief Executive Officer. Please go ahead Sir.
Thank you Steve.
Joining me on the goal today, it's Greg brokers, all Vice President Finance.
Okay director of financial reporting.
In the goal I guess when the gold the safe Harbor statement when.
Thank you Dan good morning, everybody.
Let me start I'd like to read the following safe Harbor statements.
Except for historical information contained on lets call.
As discussed on the call such statements regarding our efforts to improve profitability.
Packed with the closure of our power R&D facility in eastern Switzerland, anticipated cost savings, resulting from restructuring and the continuing impacting sales efforts to reevaluated customer base and product portfolio.
Forward looking statement I described under the private Securities Litigation Reform Act of 1995 and involve risks and uncertainties.
Actual results could differ materially adults protection.
Among the factors that could cause actual results could differ materially from such statements are the market can guarantee chasing our customers that continuing viability effect or is that rely enterprise.
The impact of public health Crazy touching the governmental social and economic effects of Cobot 19.
Yeah, that's a big net economic condition.
Yes, the cold EEZE associated with integrating recently acquired companies.
Happening supply constraints or get the Colby.
I think development and commercialization or technological difficulties.
Like it to join trade environment.
Risks associated with foreign currency.
<unk> people people people people.
Architects Huffman public company Newpark.
And can probably give with blockage movie product.
The impact the changes do you watch trade it until probably keep.
Factors detailed from time to time and the companies have to deal with <unk>.
Sure.
If I get the risks and uncertainties. After you know what's your any forward looking statement will impact would be cool, we undertake no obligation to update or revise any forward looking statement.
You May also discuss non-GAAP results during the call and reconciliations of GAAP results non-GAAP results have been accretable not really.
I would now like to join the call back to Dan One general business update.
Thank you one objective during our call today I hope that you and your family. This thing said during these difficult on.
Well first party throughout this past quarter continues to be to take your Barr associates around the world.
We continue to provide even central products, who our customers out there today. We are pleased to report that all manufacturing sites.
Right.
The majority of them at or near normal production right.
However, the situation remains fluid.
Our production managers around the world done an excellent job and I'm sure and ongoing compliance with local regulations related Kobe 19.
I would once again like to take a tough comp take a moment.
No drug manufacturing so scared.
Each adult factory for their dedication to our company and our customers during its Perry.
Turning to our result, we were pleased to other efforts related to cost reduction it could dream it make it over the past yeah, that's translated into meaningful gross margin improvement.
Oh, just like you know stuck recorded 2021 after result.
Many of the factors that drove this improvement expected the volume of sustained benefit to Walmart instead of the seeable future. Those factors include lower overhead cost from restructuring effort.
Doctrine material prices related to component lower direct labor costs due to the bar favorable foreign exchange rates in effect during 2020 and inclusion of harder bargain to you our field.
Further we made a concerted effort to exit cost convert.
And product line and have lower margin in order to better utilize our manufacturing resources.
As a result, these and other factors sales adjusted EBITDA that long and probably more than doubled compared to last years second quarter. Despite the lower sales volume.
Sales were down 6.2 million or 4.9% last years second quarter.
Acquisition actually you are in late 2019 contribute.
To conform featuring a detailed during the second quarter gross margin along with 39%.
Driven by three other adopted using old workplace, excluding for you our children a second quarter were down 16.9 billion from last years second quarter, but good going with the quarantine across all product group.
Well before the end power products were down 7.3, they'll get the last year second quarter was due to reductions out for low margin customers.
The weakness in commercial aerospace end markets accounted for 5.6 million of this decline that's yet to want to distribution partners.
Remained lower than price prior year quarter by 2.9 million.
We got to the second half a year with very limited visibility as our second quarter build it booking works all.
However, there are areas of state has reacted a third quarter recent awards for our connectivity products on T. defense programs and the mission.
Military avionics platform mobile communication programs, we go resulting in improved proving the military sales over 40% second quarter versus last years second quarter booking is here to adults, who remain healthy providing an opportunity to continue strength and shipments throughout the second half a year.
A magnetic solutions group continued to see stronger strong demand for product going into communication hallway and next.
Generation network infrastructure has it shows you need good comedy increased bandwidth required to do a large number of people working from home.
Within the Palestinian depicts a group that we were awarded a desire with more palatable like <unk> cool cost effective data later this non tangible nami toward awards totaled 1.6 million expected start shipping in the third quarter. We also continued year over year growth were later this year or you are.
Acquisition to that would make every year and they did you not sure that concludes that a 14% increase for the quarter due to a competitor not being able to ship.
The closure of our facility.
Switzerland will bring our annual fixed costs down by 3 million the goes grading taking place by the fourth quarter. This year.
A bell management team remains focused on bottom line growth and continue to focus on which calls for products and Bell facility, that's along with the goal improving profitability.
Before I turn back the called the Craig I would like again $2 and thank our global team the epic Finagle gotta be flexible and responding to this rapidly changing environment ability to be generate result, they did it goes much of the credit loss on one associates and they didn't have the under these difficult circumstances.
I'll turn the call the Craig to run through the financial uptick Craig.
Interesting.
Shale garlic segment for the second quarter or 2020 works falls.
Our solutions of construction sales were 45.1, though up 2% from last year's quarter.
And that shouldn't be occasion sales were 38.9 million declined about <unk>.
Another teenage sales were 47.2 billion also downside pressure from last year's second quarter.
The consolidated basis gross profit margin, excluding R&D extensions.
Increased to 26.2% in this quarter or 20, Twond, that's compared with 21% in the second quarter 20 about team.
As it was all the combination of factors.
Overhead and indirect labor costs were 4.7 million lower wearing the second quarter 2020, ordinarily restructuring measures implemented globally 20, like gain and a reduction in the cost structure for speech connectivity solution segment to along with curtailed volumes within that segment.
A portion of the margin improvement in the second quarter 2020, we wanted to lower material costs, a stock supply cost components. Southern previously been build up you know our supply chain that wouldn't work for resulted in significantly lower material cost that you nailed <unk> compared to the same quarter last year.
The favorable shifting product mix and lower direct labor costs, resulting from favorable fluctuation in foreign exchange rates were also factors contributing to the margin improvement in the second quarter 2020, that's considered the same theory point in June.
Research and development costs were $6.1 million during the second quarter 2020, the quality of over 700000, all those from the second quarter 20 like gene.
The result of restructuring up which implemented during the latter part of 29.
Or selling general and administrative extensions were $18.1 billion or from 2.9% Upsells.
That's compared with $19.2 billion were 51% of sales in the second quarter or.
<unk>.
Well, we travel expenses of $680000 reduction of ERP costs for $391000 and savings from other cost containment efforts outweighed the 1.9 million incremental that's you know expenses associated with the newly acquired she log business.
Lets cheating expense also included a gain on the cash surrender value, Oh, we policies or $1 million into second quarter 2020.
Fair to a gain on these policies of $109000 in the second quarter 22.
On a go forward basis, we would expect us to you need to run between 19 and $20 million per quarter in the near term.
As we expect our problems in that same expand will be lower than normal for the remainder of the here.
Doctors, who told me an income from operations of $7.5 million second quarter of 2020.
As compared to income from operations or $4.5 million then the second quarter 20 don't you.
Other income and expense that was too and it's that's sort of fleet in $2000 for the second quarter 2020 Hudson their acute income of $267000. During the second quarter of 20 like cheap.
Fluctuations from last year's second quarter.
Largely related to foreign exchange loss of $103000 and the second quarter 20, Twond, that's compared to a foreign exchange gain of $450000 from this quarter are performing about <unk>.
Interest expense was $1.3 million into second quarter of 2020 down slightly from the same quarter last year through the due to the lower interest rate and the product during the 2020 core.
We expect interest expense to be lower by approximately 600000 to settlement thousand dollars in the second half the year as compared to the first half a point or 28 to the decreases in both local and in the company's Oh its credit facility.
You had a provision for income taxes of $423000 in the second quarter of 20 to 20.
George will provision for and $21000 during last year's second quarter.
The impact of permanent differences on U.S. tax exempt activities.
It was slightly higher effective tax rate in the second quarter 20, twond as compared to check or 29 gene.
Well you can share class a common shares was orderings were 43 cents per share in the second quarter 2020.
As compared with earnings of 23 cents per share in the second quarter 20 like gene.
Earnings per share class B common shares from earnings of 46 cents per share in the second quarter 2020, as compared with earnings of 24 cents per share in the second quarter 20 that team.
On a non-GAAP basis, which excludes certain unusual and other nonrecurring items you picked up the class a shares.
The 43 cents per share in the second quarter 2020.
Compared with earnings of three cents per share in the second quarter 20 like gene.
On a non-GAAP basis GPS for class B shares was 46 cents picture and the second quarter 2020, as compared with earnings of three cents for sure and then second quarter point.
Now I'd like to go through some balance sheet and cash flow items.
Our cash and cash equivalents balance at June Thirtyth 2020 was $75.3 billion decrease of 3 million from December 31st 20 like team.
Our cash balance grew by 6.9 million sequentially from the March 31st well.
During the first half the 2020, we generated cash flows from operating activities of $16.8 million, we've made that payments up $8.2 million towards their outstanding debt balance and you just cash for capital expenditures of $3 million dividend payments of 1.6 million, an interest payments of $2.3 million.
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Accounts receivable were $73.3 million at June 30, 2020.
That's compared with 76.1 million at December 31st 20 like team.
Day sales outstanding decreased slightly to 59 days at June Thirtyth 2028, what's compared to 60 days at December 31st 20 that team.
Increase on our accounts receivable balance was largely due to higher sales volumes second quarter 2020, as compared to the fourth quarter 20 like team.
[noise] inventories were 104.7 million.
At June Thirtyth, 2020 down 2.6 million from December 31st 20 liking level.
The decline was seen in finished goods, partially offset by increases in work in process reduction in inventory. It's also partially due to the write down of excess stocks related to projects that ended.
Accounts payable were $44.8 million acute believe 20 twond.
$657000 from its level.
During the first 20 Doctor.
Merely due to the implementation of news supplier payment guidelines to better manage your cash reserves.
So total outstanding debt balance was $135.2 million as of June Thirtyth 2020, net deferred financing costs decreased $8.5 million since the 20 like junior on balance.
It's primarily reflects the voluntary prepayment of 8.2 million.
Made during the first quarter 2020 in connection with an amendment to more credit agreement.
Book value per share, which is calculated that stockholders' equity divided by our combined a and B class a common stock outstanding there's $13 at 57 cents per share at June Thirtyth 20 Twond.
As compared to $13.69 per share at December 31st I'd like to.
And with that I'll turn the call back over the dead.
Thank you Craig at this time, Steve we would like build up the call Penny a question people might have.
Thank you Sir if you would like to ask your question. Please signal by pressing star one on your telephone keypad, if youre using the speakerphone. Please make sure. Your mute function is turned off to like or signal to reach our equipment again, that's star one to ask a question.
We will take our first question for Mr. Theodore O'neill with this field Hills research. Please go ahead.
Thank you congratulations on a good quarter earnings wise.
Thank you Yeah. Just one question here talk in the press release about rationalizing their customer base when the product portfolio and I was wondering if you could talk about gets a little more color on that and which vertical has impacted the most by that and if there were.
Attunitys, where you could sort of.
X out a customer that also took care of the product as well there was a two separate you know and Dallas is going on.
Thanks.
Okay, we had one major or building a product one of the big data storage people that you know, there's an internet company that had their own data storage and them and it was a power supply that we do.
Has the capability to work with second tier three tier companies, which we think we do a better job if you're looking at the Amazon Google Facebook they tend to be overly price sensitive.
And the volumes just.
The Clark is can we can't compete in that market any longer so that was one situation. The other major situation that were getting out of which represents about 12 to 13 million.
As a modular product we go a cost him go product, where we get the manufacturing for our company and private label it and the margins like there's two low but we are working with other companies aren't doing OEM already I'm work.
Well react as is designed in a manufacturing and those opportunities where we can offer more value I think we can be competitive it goes back a product, but again just thing very sensitive at this time it you know.
I think historically, we've always looking at topline growth and took product in that maybe we sure enough. It's good to have that goes I think at this point in time.
He was focused on getting cash into the company and working off like that.
Great. Thanks very much.
Again, that's start one to ask a question. If you find your question has been answered you may removed yourself from the Q by pressing star too.
We will take our next question from June were shooting with Needham and company. Please go ahead and good morning.
Thank you. Good morning job then just a follow up yes question, just an easier way to the aggregate all of this and in terms of total revenue in Cat I mean, you gave us some of it in pieces and I'm just wondering if there's a way to think about it and in totality because there's some offsets are there.
Well I guess.
I think the kids that he is and stuff I think both one customer we walked away from again and that was a data center company customer I think that sales are going anywhere from 12 to 15 million annually.
Going forward.
Starting in the fourth quarter I'd, probably be another 10 to 13 million.
Okay.
Got it hits there are other customers, but the volumes are not that that's substantial.
Got it that's not all deal I think we're also looking at no individual products and and certain customer portfolios, where they may not no need to meet the margin.
Ill standards that were but we're setting so let's say or would you ever them yourself customer, but the products within the portfolio might not be suitable anymore.
Understood you called out.
Some of the impact that you.
Experienced in the commercial aerospace Walker I got the number right, it's about <unk> point Sixmillion and.
In the quarter.
That's correct that's correct.
Yeah, I'm wondering is that I don't recall what was the number in in Q1.
You guys have that you're.
Ready I thought we can discuss it off line what I'm trying to do is and try to I mean, it doesn't look like we're gonna see.
Recovery anytime soon in the commercial aerospace market or maybe there's some aftermarket that you're going to get but I'm wondering if we should think about this as kind of a EUR 20 million a dollar or more headwinds that you have that you're going to probably have to deal with over the next year.
So.
I think Jim I think we've dealt with it we realigned our manufacturing I think that's right yeah.
Yeah, we did so well this quarter on the aerospace, though is that we know we didn't lose those sales if you looked at USAID Wall Street Journal.
They do a Boeing had statement that they're going to it won't hit it initially going to hit 31 planes in 2021, they pushed that back by year end, they get no visibility of how well they're going to do.
So again based on that.
It's going to be tough sledding for the next 18 months in the aerospace business I think were lying.
No more alignment we have to do.
To address this.
So what you know we know what it is heavily into taking the steps already.
To craft, a new sales volumes were going to have it with these customers.
Yes no.
Parents, just looking at the margins things like that.
Just to answer your question Jim initially.
The first quarter, our commercial aerospace sales were down 3.4 million versus last year's first quarter.
And then in the second quarter, we thought.
Hey on ERP Air declined 5.6 million that we've had mentioned so overall about 9 million down first the first six months of 29 team.
Got it and to your point Gan on it it sounds like you've already online the cost structure and other not all year, but in other parts of the company and I guess, what's the other question I mean, how they'll love puts and takes here a lot of moving parts. The gross margins and I'm wondering how we'd like to think about gross margins given.
Some other things you're doing areas, you're de emphasizing areas, where you've got some opportunities. It sounds like there's still some nice pipeline or defense side of the business and just generally given the overall macro environment. So anyway to think about gross margins analysts.
I like Crazy very Atlas.
Thank you.
In the will end up in the quarter. Jim. We did you know there were some a little some favorability, although we would try to look at more of a look at Warner onetime impact.
But I think looking looking forward.
Obviously, we can't look to four forward, but we would take probably are.
More normalized margin might be in that or maybe 23, 25% bridge.
Taking out these onetime.
Influences.
Okay.
Incremental incremental improvement over last year's leased the per quarter. So, but you know look what maybe not quite as good as we saw this quarter.
That's helpful. And then final question for me is I mean, it sounds like it a lot of the focus here is a is on.
Paying down debt and strengthening the balance sheet.
All good stuff I'm just wondering.
<unk> is M&A at least through the time being off the table or are you just.
Just still you know looking at those areas.
Potential assets that might be out there.
What's your what's your point of view in terms of near term on that are you taking more of a you know kind of wait and shape.
No I think we were still very active in the M&A area. However, as you know there's not much activity going on.
We do have a small oh, we are talking it too if we cant Joe's company out there that we're looking at however, they tend to be on a smaller side more strategic fit.
However, you know if something comes across our table that make sense. It would definitely you would look at a possibly of acquiring another company yes.
I still being as active as weekend.
Okay. That's it for me I'll jump back into queue. Thanks, a lot.
Thanks, Jim Thanks, Jim.
We will take our next question from Lenny Dunn with mutual Trust Cole of America.
Please go ahead.
Yeah.
Or.
All right.
Sure.
You're already.
Right.
Acquisition.
<unk> okay.
Okay.
During the balance sheet stronger.
Gross margins are offerings.
So I just wonder express.
But even if we do see a big acquisition, though.
I have to take a look at it so I'll try to tell you that.
Right got I understand the book or at least given out aggressively.
And your topline growth.
Sure.
We're supposed to have them disappointments.
A few years.
No.
It sounds to me.
Point, because every week direction.
I guess, if you see so.
Yes.
Michael Allison.
Sure.
Yeah.
Yes, I mean, it correct about that.
Good morning, I thought for numbers were better than I expected next record a fairly good quarter.
I appreciate.
What you've done there.
What I would consider grocery anchors condition.
Thank you.
It appears there were no for the questions at this time.
Mr Bernstein I'd like to turn the conference back over to you for any additional or closing remarks.
Thank you Steve again, we appreciate everybody joining the call today during these difficult time and we're just we're hearing a family the Bath.
And looking forward to speaking here again next quarter. Thank you.
This concludes todays call. Thank you for your participation you may now disconnect.