Henry Bros. hit by slowdown (like everyone else)

 - 
08/13/2009
Not that anyone needs more evidence that the first two quarters of this year were particularly bad, Henry Bros. announced its first half results today. The report is predictable, but still somewhat encouraging. While revenue is down - and that's caused them to amend down projections from $80 million to $70 million for 2009 - the company maintained slight profitability and hasn't given back all of the gains it made in 2008. Some bits and pieces:
Revenue - Revenue for the three months ended June 30, 2009 was $13,971,980, representing a decrease of $1,151,971 or 7.6%, as compared to revenue of $15,123,951 for the three months ended June 30, 2008. Revenue was down in all of the Company's integration regions in the second quarter of 2009 versus the same quarter in the prior year, with the exception of Colorado, which was up 57.7%. The New Jersey region had the greatest decrease, as a result of the winding down of large projects that were not replaced by similar projects due to competitive margin pressure. These declines are due principally to the protracted credit freeze and economic downturn which is having a significant negative impact on construction markets and capital spending patterns of commercial businesses. Partially offsetting these declines was an increase in revenue resulting from the L-3 Contract.
The bolding is mine. Essentially, Henry Bros. is saying they could have increased their revenue with some bunk jobs but decided to let other people have the low-margin fruit. This could be an example of the low-bidding I've heard decried in the last 18 months as companies of all stripes become more desperate for work of any kind. In the long run, this is a dangerous practice (NetVersant is held up as example number one of why not to do this).
Cost of Revenue - Cost of revenue for the three months ended June 30, 2009 was $10,081,872 as compared to $11,282,000 for the three months ended June 30, 2008. The gross profit margin for the three months ended June 30, 2009 was 27.8% as compared to 25.4% for the three months ended June 30, 2008. Our Arizona and Mid-Atlantic operations had lower quarter over quarter gross profit margin dollars due to their respective decline in revenues. While revenues and gross profit dollars were down in our New Jersey / New York operation, margins improved as we closed out several of the jobs with large public agencies in the New York Metropolitan area referenced above in "Revenue". Also contributing to the increase in gross profit was the profit recognized under the L-3 Contract.
No surprise that Arizona is getting creamed. Also, those gross margins aren't the best, by any stretch. I've heard a number of integrators say 30 or above is where they'd like to sit. Still, there is some net profit there (theoretically).
Net Income - As a result of the above noted factors our net income was $55,253 for the three months ended June 30, 2009 compared to net income of $337,261 for the three months ended June 30, 2008. This resulted in diluted earnings per share of $0.01 on weighted average diluted common shares outstanding of 6,064,742 for the three months ended June 30, 2009, as compared to diluted earnings per share of $0.06 on weighted average diluted common shares outstanding of 5,976,008 for the three month period ended June 30, 2008.
It's pretty tough to show income of just $55,253 when you brought in $14 million. Ouch. Diluted over $6 million shares? Ouchier.