TechPrecision Corporation Reports Second Quarter Fiscal Year 2011 Results

WESTMINSTER, Mass., Nov. 11, 2010 /PRNewswire-FirstCall/ -- TechPrecision Corporation (OTC Bulletin Board: TPCS) ("TechPrecision", or "the Company"), a leading manufacturer of large-scale, high-precision machined metal fabrications with customers in the alternative energy, medical, nuclear, defense, aerospace and other commercial industries, today reported financial results for the second quarter of fiscal year 2011, period ended September 30, 2010.

Second Quarter of Fiscal 2011 Highlights

• Revenue for the second quarter totaled $8.4 million, compared to operating revenue of $6.2 million during the second quarter last year and increased sequentially by $2.2 million or 36.2% over Company's first quarter fiscal 2011 revenue of $6.15 million.
• During the second quarter of last year, the Company completed an $8.9 million non-recurring transfer of inventory to its largest customer which increased total second quarter reported revenue to $15.1 million in the prior year, comprised of $6.2 million in operating revenue plus, $8.9 million of non-recurring inventory transfer.  
• Gross profit margin was 30.8% for the second quarter compared with 17.5% for the second quarter last year, while gross margin for the first quarter of fiscal 2011 was 37.6%.
• TechPrecision's backlog at the end of the second quarter of 2011 totaled $26.4 million and subsequently increased to $31 million as of November 1, 2010.
• Operating income during the second quarter was $1.5 million vs. $2 million in the prior year and $1.3 million during the quarter ended June 30, 2010.  
• Income before income taxes was $1.4 million compared to $1.9 million a year ago and $1.2 million during the first quarter of this fiscal year
• Net income was $0.8 million vs. $1.3 million in the prior year and $0.8 million in the first quarter of fiscal 2011.  
• Net income per common share was $0.06 basic and $0.04 diluted, versus $0.09 basic and $0.06 diluted for the second fiscal quarter of the previous year.
• Net income per common share for the six month period ended September 30, 2010 was $0.12 basic and $0.08 diluted versus $0.09 basic and $0.06 diluted for the comparable six month period ending September 30, 2009.

Second Quarter Results

The table below summarizes key components of the Company's net sales for the three month periods ended September 30, 2010 and 2009:

Net sales during the second quarter last year included an $8.9 million non-recurring material transfer to GT Solar that was triggered by that customer's April 2009 cancellation of open purchase orders. This non-recurring material transfer represented 59.3% of the $15.1 million in total net sales for the second quarter last year.  On a recurring basis, sales increased $2.2 million or 35.5% over the prior year to $8.4 million from $6.2 million while total sales, including the $8.9 million material transfer, decreased by $6.7 million or 44.4% to $8.4.

Cost of sales for the quarter ended September 30, 2010 decreased by $6.7 million to $5.8 million, a decrease of 53.5%, from $12.5 million for the quarter ended September 30, 2009. The decrease in the cost of sales was principally due to the impact of the non-recurring transfer of inventory to GT Solar as part of its April 2009 order cancellation.  Gross margin was 30.8% in the second fiscal quarter of 2011 compared to a gross margin of 17.5% in the second fiscal quarter of 2010. The gross margin improvement was attributable to higher capacity utilization during the current year and the lower margin inventory transfer that impacted the prior year's second quarter.  The gross profit margin during the first quarter of this year was 37.6%.  The lower margin during the second quarter compared with the first quarter is attributable to the resumption of material sales to the Company's largest customer along with higher material sales to other customers during the second quarter when compared to the first quarter of this fiscal year.  Generally material sales carry a lower margin than the Company receives on its fabrication and machining services.  

Operating expenses for the quarter ended September 30, 2010 increased to $1.1 million from $668,286 for quarter ended September 30, 2009, reflecting an increase of $453,125 or 68%.  The components of this increase were $175,280 in increased payroll and related costs, an increase in professional fees of $56,683 and increased selling, general and administrative expenses of $221,162 over the previous year's spending.  The increase in payroll and related costs is due to higher headcount in the executive and business development functions as well as a return to full staffing levels at the Company's subsidiary, during the current year.  Increased selling, general and administrative costs were driven by additional consulting fees associated with the Company's CEO and Board of Directors search initiatives and accounting and consulting fees associated with the investigation of a strategic opportunity.  

Net income was $855,628 or $0.06 per share basic and $0.04 per share diluted for the quarter ended September 30, 2010 as compared to $1.3 million or $0.09 per share basic and $0.06 per share diluted for the quarter ended September 30, 2009.  The $8.9 million non-recurring inventory transfer during the second quarter last year impacts year to year comparability.  

"We have expanded our relationship with a large customer in the solar energy sector and established a relationship with a new tier 1 clean tech customer, and this progress is reflected in our improving financial results," said Mr. James Molinaro, CEO of TechPrecision Corporation. "Excluding the non-recurring inventory transfer, we increased revenue by more than 35% and maintained our backlog at approximately $25 million for the second consecutive quarter. We also signed an agreement with Powerline Inc., adding sales personnel to market our services in Eastern Pennsylvania, Delaware, Maryland, Eastern New York and New Jersey. We believe this initiative, coupled with our existing relationships with customers in expanding market verticals, will help us to more effectively utilize Ranor's capacity and leverage its high-precision fabrication and machining expertise."

"To meet increasing demand for solar components in Asia, and China in particular, and to create a second growth platform for TechPrecision, we launched a wholly owned subsidiary in Wuxi, China," Mr. Molinaro continued. "We are meeting the needs of our solar energy customer to source, fabricate and machine components in Asia, and this initiative resulted in a $2.9 million purchase order shortly after we launched the subsidiary. By adding this China-based capability to the TechPrecision organization, we will exploit synergies both in the U.S. and China to grow our revenue. This is the culmination of our strategy to perform the sophisticated prototyping and initial manufacturing in the U.S., but to also provide manufacturing in lower-cost regions when our customers require it."

Financial Condition

At September 30, 2010, TechPrecision had working capital of $14.6 million as compared with working capital of $13.3 million at March 31, 2010, an increase of $1.3 million.  Cash provided by operations was $1.1 million for the six months ended September 30, 2010 as compared to cash used by operations of $1.4 million for the six months ended September 30, 2009. The increase in operating cash flow was due to the net effect of an increase in net profits, increase in costs incurred on uncompleted contracts and increases in accounts payable and deferred revenue during the six months ended September 30, 2010. As of September 30, 2010, the Company had $9.2 million in cash and equivalents. Stockholder's equity increased to $13.8 million from $12.1 million on March 31, 2010, an increase of $1.7 million.

Business Outlook

"We expect to continue to generate year-over-year increases in our quarterly revenue, excluding last year's one-time inventory transfer which impacted this quarter, and improve the overall fundamentals of our business," said Jim Molinaro, CEO of TechPrecision. "In the near-term, we are focused on scaling up our new venture in China, and assisting the sales representatives from Powerline in building out additional business. These two initiatives should help us to maintain an approximate one-to-one book to bill ratio, creating additional longer-term revenue momentum to help us fully utilize our manufacturing capacity and ultimately creating value for shareholders."

Teleconference Information  

The Company will hold a conference call at 4:30 p.m. Eastern (U.S.) time on Thursday, November 11, 2010. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time:  1-877-941-1427.  International callers should dial +1-480-629-9664.  When prompted by the operator, mention Conference Passcode 4378617.

If you are unable to participate in the call at this time, a replay will be available for one week starting on Thursday, November 11, 2010 at 7:30 p.m. Eastern Time. To access the replay, dial 1-877-870-5176 or 1-858-384-5517. When prompted, enter Conference Passcode 4378617.

The call will also be available live by webcast at TechPrecision Corporation's website, www.techprecision.com, and will also be available over the Internet and accessible at http://viavid.net/dce.aspx?sid=00007C99.

About TechPrecision Corporation

TechPrecision Corporation, through its wholly-owned subsidiary Ranor, Inc., manufactures metal fabricated and machined precision components and equipment. These products are used in a variety of markets including: alternative energy, medical, nuclear, defense, industrial, and aerospace to name a few. TechPrecision's goal is to be an end-to-end service provider to its customers by furnishing customized and integrated "turn-key" solutions for completed products requiring custom fabrication and machining, assembly, inspection and testing.  To learn more about the Company, please visit the corporate website at http://www.techprecision.com.  Information on the Company's website or any other website does not constitute a part of this press release.

Safe Harbor Statement

This release contains certain "forward-looking statements" relating to the business of the Company and its subsidiary companies. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes, expects" or similar expressions. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to be materially different from those described herein as anticipated, believed, estimated or expected. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the Company's ability to generate business from long-term contracts rather than individual purchase orders, its dependence upon a limited number of customers, its ability to successfully bid on projects, and other risks discussed in the company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (www.sec.gov). All forward-looking statements attributable to the Company or to persons acting on its behalf are expressly qualified in their entirety by these factors other than as required under the securities laws. The Company does not assume a duty to update these forward-looking statements.

-- Financial tables follow --

SOURCE TechPrecision Corporation

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