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Author has a degree in Engineering and is an avid investor in the market. Experience in industrial materials and structures. In college studied atomic & nuclear physics as well as material engineering. Eastern European
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  • Getting ready for Monster Earnings by LGL Group 0 comments
    Nov 3, 2010 4:54 PM | about stocks: LGL, CTXS, EQIX, FFIV, SNDK, ACOM, AAPL, IBM, HPQ, DELL, LOGM, CSCO, INTC, NVDA, RDWR, QCOM, ININ, RAX, CML, LVS
    (NYSEMKT:LGL) ($24.70) is -$10/shr off 52week highs at $34.71, but there was a good reason it went to $34.71 and that reason is that the company sits on record backlog and based on what that backlog did to earnings last qtr, the move to $34.71 was fully justified. Now why am I getting ready for Monster Earnings? Well LGL Group is down -$10/shr since its 52wk high and with only a week left before LGL Group reports again I am getting ready for another Monster Qtr.

    Highlights from last QTR:

    Foreign Sales Increased By 52.7% <------ "China Growth"

    "Increase in demand was also reflected in foreign sales, primarily to Asia, which grew 52.7% to approximately $5,357,000 for the quarter ended June 30, 2010, compared to approximately $3,509,000 for the comparable period in 2009. The Company opened a new sales office in Shanghai, China during the first quarter of 2010 as part of its efforts to attract and service new customers in that region."

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    "Revenue growth was primarily due to increased demand from existing customers for existing products in our Telecom, Military, Instrumentation, Space and Avionics market segments," according to Greg Anderson, LGL's President and Chief Executive Officer. "The revenue growth also resulted from the expansion of the Company's product portfolio through the introduction of new lines of cavity filters and double-oven oscillators, which entered into production during the first half of 2010. The introduction of these new product lines represents a technical advancement of the Company's existing product offerings and expands our ability to offer our customers a broad array of highly-engineered frequency control solutions."

    Foreign Sales Increase By 52.7%

    Increase in demand was also reflected in foreign sales, primarily to Asia, which grew 52.7% to approximately $5,357,000 for the quarter ended June 30, 2010, compared to approximately $3,509,000 for the comparable period in 2009. The Company opened a new sales office in Shanghai, China during the first quarter of 2010 as part of its efforts to attract and service new customers in that region.

    The Company also achieved improved gross margins, which grew to 36.3% for the three months ended June 30, 2010, which is a 16.4 percentage point increase compared to the comparable period in 2009. This improvement led directly to improved net income, which rose to approximately $2,177,000 and $3,243,000 for the three and six months ended June 30, 2010, respectively. Basic and diluted earnings per share rose to $0.97 and $1.44 for the three and six months ended June 30, 2010, respectively, as compared to losses per share of ($0.43) and ($0.89), for the comparable periods in 2009, respectively.

    Improvements in gross margin and in net income are due primarily to the increases in revenues compared to the comparable periods in 2009, which improved gross margin by spreading fixed infrastructure costs over a larger revenue base, and the Company's implementation of its plan to effect permanent structural cost reductions in overhead expenses. Mr. Anderson noted, "These improvements result directly from the work of our new leadership team with the guidance of the internal operating committee that was formed in early 2009. While the operating committee's work has come to an end, the new leadership team remains focused on the implementation of additional value-creating measures that will allow the Company to sustain ongoing improvement in its operating metrics."

    Working capital increased to $8,862,000 as of June 30, 2010, compared to $5,466,000 as of December 31, 2009. The increase in working capital was primarily due to increases in accounts receivable and inventory balances, offset by increases in accounts payable and accrued commissions expenses, which are the result of increased production activity commensurate with the increase in revenues. The Company recently negotiated a renewal of its revolving credit facility with First National Bank of Omaha, effectively extending its maturity date to June 30, 2011. The Company also has a term loan with RBC Bank, which matures on October 1, 2010. Mr. Anderson said, "While the Company's capital structure continues to improve as we generate cash from operations, the Company is pursuing various options to increase its capital flexibility, including, the renewal or extension of the RBC term loan, the replacement of the facility with another financing partner, or the procurement of equity funding."

    "We enter the second half of 2010 pleased that the execution of the Company's initiatives by the new leadership team has met the mandate of the Board of Directors prescribed in late 2008 to return the Company to profitability," said Marc Gabelli, LGL's Chairman of the Board. He continued saying, "We seek to drive further improvements in shareholder value through structural cost discipline and an opportunistic approach to growth opportunities in the marketplace."

    Order Backlog Reaches Record Level for Fourth Consecutive Quarter

    "For the fourth consecutive quarter, our order backlog grew to a record level, ending the period at approximately $14,373,000, compared with a backlog of approximately $13,958,000 as of December 31, 2009 -- a 3.0% increase," according to Mr. Anderson. "The growth in backlog keeps the Company well-positioned for continued solid results during the remainder of 2010," Mr. Anderson said.


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