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Article Excerpt
OPERATOR: Good morning, ladies and gentlemen, and welcome to the Henry Brothers' third quarter 2008 conference call. At this time all participants have been placed on a listen-only mode. The floor will be open for questions following today's presentation. It is now my pleasure to introduce your host for today's call, Ms. Erika Kay of KSA Strategic Communications. Ms. Kay, you may begin.
ERIKA KAY, IR, KCSA STRATEGIC COMMUNICATIONS: Thank you. Again, welcome to Henry Brothers Electronics' third quarter 2008 conference call. Representing the Company today are Jim Henry, Chief Executive Officer; John Hopkins, Chief Financial Officer; and Brian Reach, President and Chief Operating Officer.
Before I turn the call over to Jim for opening remarks, I would like to read the following Safe Harbor statement. Certain statements in this conference call constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as amended. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained under the heading of risk factors listed in the Company's filing with US Securities and Exchange Commission.
Henry Brothers Electronics does not assume any obligation to update the forward-looking information.
With that, I would like to turn the call over to Jim Henry, the Company's Chief Executive Officer. Jim?
JIM HENRY, CEO, HENRY BROS. ELECTRONICS, INC.: Thank you, Erika, and I would like to welcome everyone to our third-quarter 2008 conference call and thank you all for joining us today. I would like to start with our view on what is clearly a very challenging marketplace, followed by comments on the quarterly and year-to-date results and our ability to operate in this environment. I will then turn the call over to John Hopkins, who will provide us with detailed review of our financial results.
As you're all aware, the financial markets have been extremely volatile, and many companies have seen their access to credit become severely limited, crippling their ability to grow. At Henry Brothers we continue to have sufficient access to working capital and remain disciplined in our cost management. We should also note that, except for certain customers in our banking vertical markets representing less than 2% of consolidated revenue, we had no exposure to any of the financial instruments or institutions that have been plagued by this historic global economic crisis.
The continued confidence in our business model, driven by the improvements we continue to make in our business processes and our profitability, has allowed us to double our credit line during this past quarter. With a backdrop of the most significant credit crisis ever, we amended our revolving credit agreement with TD Bank and increased our line of credit from $4 million to $8 million while extending the term of the agreement to June 30, 2010. The additional line of credit afforded to us by TD Bank NA, provides us with greater liquidity and working capital to finance our growth.
However, we acknowledge that all ships dip with a lower tide, and have taken strategic steps to continue our growth in a difficult market. In the third quarter we initiated an expansion of our sales force across all regions as both an offensive and defensive move, given the current market conditions. Although we expect to see demand softening in the new business construction and regional banking vertical markets, the government's desire to stimulate the economy with infrastructure projects may, in fact, lead to new opportunities.
While we also anticipate the market to become more competitive in a weakening economy, we will continue with our process improvement measures to challenge such rate competition.
Finally, the diversity and size of projects we're working on that are not fully included in our backlog at present, such as the Tactical Video Capture System, or TVCS project, gives us a basis for our enthusiastic view for the future.
The third quarter 2008 saw a 23% decrease in our revenues compared to 2007. And, while obviously disappointing, I do not believe that these results speak to the progress that we continue to make in the quality of the revenue. Our project estimating process improvement, which commenced early in 2007, continues to improve the actual versus estimated results. It is important to note that our revenue shortfall during the quarter primarily resided in our New Jersey region and is a result of job bookings being delayed at the time that other larger projects were winding down. This point is supported by the backlog increase in New Jersey exceeding the revenue decrease in the quarter. As I have stated on previous calls, because of the nature of our business can be somewhat lumpy and projects can occasionally slip into future periods, both on the booking and implementation side of the business it would be prudent for our investors to view our business on a year-to-date or annualized basis and not just on a quarterly basis.
While we did not see continued growth in our top line during the quarter, we're witnessing a continued increase in our gross profit margin. In the third quarter our gross profit margins were 28.5%, an increase of 30% from the gross profit margin of 21.9% in the third quarter of 2007. As mentioned earlier, the estimating process improvements initiated last year have contributed to this margin improvement.
However, moves of this magnitude can only be made -- can only be the result of our ability to manage projects and close them out more favorably than originally planned. Thus, the current quarter's gross profit margin is at the higher...
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