PECO II, Inc. a communications industry power systems and services provider, reported results for the first quarter ended March 31, 2009. The company reported net sales of $7.5 million in the first quarter of 2009, compared with $9.0 million in the first quarter of 2008, a 17 percent decrease. The company reported a net loss of $1.6 million, or $0.57 per diluted share (on a post-split basis), for the first quarter of 2009, compared with a net loss of $1.4 million, or $0.51 per diluted share (on a post-split basis), for the first quarter of 2008. EBITDA was a loss of $1.2 million in the first quarter of 2009, compared with an EBITDA loss of $0.9 million for the first quarter of 2008.
The $0.2 million increase in net loss for the first quarter of 2009 compared with the first quarter of 2008 was primarily driven by reduced gross margin, partially offset by reduced operating expenses. The gross margin reduction was driven by reduced product sales of $1.9 million, slightly offset by the increase in service sales of $0.3 million.
Cash provided by operating activities in the first quarter of 2009 was $627,000. While this included a net loss and decreases in accounts payable, it was offset by non-cash charges and decreases in accounts receivable and inventory.
Bookings increased during the first quarter of 2009, resulting in an increased sales backlog of $5.0 million. The first-quarter backlog was a 98 percent increase from the $2.5 million at the end of the fourth quarter of 2008. This increase was driven by strong services bookings related to a new services contract won in the fourth quarter of 2008 with a major service provider. The bookings-to-billings ratio reflects customer orders received as compared with the same period's billings and is an indication of future periods. For the first quarter of 2009, the ratio was 1.33 to 1.
John Heindel, PECO II Chairman and CEO stated, "The first-quarter financial performance reflects the impact of the weak economic conditions that began to impact the industry in the fourth quarter of 2008. Due to the weak quarter, the company had a weak fourth-quarter backlog as it entered 2009. January 2009 product bookings continued at significantly reduced levels, with product bookings 43 percent below January 2008 levels. While February and March product bookings increased over January, they were down 10 percent from 2008 levels. The weak product bookings were partially offset by strong services bookings which were up 67% versus the first quarter of 2008. The strong services bookings growth resulted from a significant service provider contract award made in the fourth quarter of 2008. Given the weak economic environment, the company took aggressive cost action by reducing the workforce by 25 and managing out-of-pocket expenses resulting in a $0.2 million reduction of our operating expenses in the first quarter of 2009. These cost-cutting actions are expected to result in savings of $1.2 million on an annualized basis."
Heindel added that during the period, the company continued to expand the versatility of its Quantum™ Power System by developing a distribution panel for use in large applications. The Quantum Consolidated System provides up to 24 load distribution positions for one to four Quantum power shelves. Applications for the new product include cell sites, small central offices and controlled environment vaults. A new outside plant cabinet, the SC1037, was introduced for use in wireless backhaul and fiber termination applications. The SC1037 incorporates PECO’s Quantum and MPS power systems into the configurations. The company also developed an enhanced version of its 827E Inverter System. The 24V input system now provides 30A of 120Vac output in a 23-inch shelf, a 50% increase in output power.
