Earnings rose 22% to $.11 a share in the quarter. That figure was helped by a lower tax rate, though, which resulted mainly from higher R&D tax credits. Sales were a little below our estimate at $19.9 million. The combination of new product contributions and an improving real estate climate promises to reestablish sales growth in fiscal 2013 (June). We estimate sales will bounce up to $80 million (+13%), to provide a 76% increase in income ($.30 a share). Napco operates with a fairly high level of fixed costs, so margins have the potential to expand meaningfully on higher volume. The company also renegotiated its long term debt late in fiscal 2012. That will result in lower interest expense, as well.
The long term out look is bright. The technology platform Napco has created is likely to support a broad base of Internet based security systems. That structure also should make it relatively easy and inexpensive for the company to add features and make other improvements as the industry evolves. In 2-3 years sales could attain $100 million to provide earnings of $.50 a share or more.
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