LGL Group fourth quarter 2011 results:
Ian Gilson, CFA
Fourth quarter revenue was below our forecast with both segments
showing continued weakness. Operating margins declined but less so
than prior periods when revenue dropped. Backlog was down but
showed encouraging signs as the sequential quarterly change was
less than the second to third quarterly change.
The decrease in revenue over the last six months was due to reduced
order activity for both segments. The decline in gross margins were
mainly due to fixed expense coverage over a smaller revenue
base. The uncertainty between budget, appropriations and spending
in the government sector may have a continued impact on
revenue. Weakness in the global macroeconomic
environment may continue to be be a near term problem. Cisco
Systems has reported flat revenue and flat gross profit over the
last four quarters but expects some growth in the second half of
2012. Cisco is LGL's largest customer.
The Company's backlog decreased from $9.1 million to $7.4 million,
a modest decline when compared to prior quarters.
remains cautious regarding its outlook for repeat orders in the
first half of 2012 as major electronic manufacturing service
companies and original equipment manufacturer's report mixed market
conditions. The Company believes its customer positions
remain strong across its target market segments.
Likewise, LGL expects to see growth in revenue and earnings over
the next two years through the expansion of its product portfolio
through continued investment in product development and possibly by
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