Thursday, August 18, 2011

Conrad Industries Announces Second Quarter 2011 Results ($CNRD)

Micro cap value idea Conrad Industries (CNRD) recently released its second quarter results. Revenue and net income were both up substantially year-over-year:

Revenue for the second quarter of 2011 increased $21.6 million, or 58.0%, to $58.8 million compared to $37.2 million for the second quarter of 2010, while revenue for the first six months of 2011 reflected an increase of $56.1 million, or 85.2%, compared to the same period in the prior year.
There had been some concern about how the company's Louisiana shipyards would be effected by the flooding earlier this year.
During the second quarter of 2011 we were affected by rising water levels along the Mississippi and Atchafalaya Rivers. The primary adverse impact was the temporary suspension of operations at our Morgan City shipyard which is located on the Atchafalaya River outside the protection of the levee system. In order to minimize the impact of the imminent flooding and decrease the amount of down time, we constructed our own levee system to protect our Morgan City shipyard. This resulted in no property and equipment damage and also allowed us to return to full operation with minimal clean-up, months sooner than otherwise. We relocated all of our production and support personnel and many of our projects to our other shipyards and continued operations at a minimally reduced level for approximately forty-five days. We resumed limited operations at our Morgan City shipyard during middle of June and were fully operational at this yard by July. All of our other yards remained fully operational. Due to the efforts of our people to plan for protection and move projects to other facilities, there was only a minimal impact on our profitability and no material adverse effect on our Company. Additionally, we were able to keep our people working and we were able to meet the delivery deadlines committed to customers.
Very impressive. The flooding was terrible this spring and the company didn't miss a beat. They have been able to book enough new work to keep the backlog up, as well:
Our backlog was $88.7 million at June 30, 2011, $89.5 million at December 31, 2010 and $41.0 million at June 30, 2010.
The good performance has resulted in a cash buildup:
Our working capital position was $61.6 million at June 30, 2011 compared to $52.9 million at December 31, 2010. The increase in working capital during 2011 was primarily a result of net income earned during the year. Management is currently engaged in a detailed business planning process to identify potential uses of the Company’s cash.
It would be nice if they would disclose more detail about the potential uses of cash that are being considered. The company has been buying back more stock, although still at a glacial pace:
We purchased 38,075 shares during the third quarter of 2010 at an average price of $7 per share. During March 2011, our board authorized a 10b5-1 stock purchase plan, in an attempt to increase the amount of stock we repurchase pursuant to the share repurchase program. During the second quarter of 2011, we have purchased 16,209 shares at an average price of $13 per share.
Another big use of cash is apparently going to be a land purchase:
In July 2011, we entered into a contract to purchase 50 acres of property adjoining our Conrad Deepwater facility for approximately $5.5 million which is subject to customary closing conditions.
No disclosure about what this land is needed for. Are they planning to expand? I was not under the impression that they were capacity constrained.

By the way, value blogger Frank Voisin also follows Conrad and agrees that their performance has been impressive recently.