"I am. pleased by the progress that we are making in transforming the company from its technology development and demonstration roots to its future in quality engineering design and production. I am also very satisfied with the improvements that we have made so far in cost control and lining up new contract opportunities. I am confident of this company's future and our long-term value to our investors."
So said Dana Marshall, new CEO of Ionatron
Let's break his statements down into their component parts, and see how well the numbers back them up.
Transforming . to design and production
In this statement, Marshall implies that Ionatron is preparing to leave its roots as a money-losing R&D shop, and begin the stage of its corporate life in which it makes sales and earns profits for its investors. That had better work, because in Q3, sales dropped 76% from their Q3 2005 levels -- a deterioration from the overall year-to-date trend of a 32% drop. (As for to the inventory drop we were hoping to see, it didn't happen; instead, inventories roughly doubled in size, year over year.)
Profits-wise, the firm's net loss for the quarter expanded 825% to $3.7 million. Granted, the quarterly comparison looks worse because Ionatron booked a one-time $800,000 gain in last year's Q3, and a $619,000 charge this year. The year-to-date results, however, also looked ugly; losses expanded by 240% on both the firmwide and per-share levels.
In part, Marshall's assertion stands up here, but in much greater part, it does not. Against the 76% drop in revenues noted above, Ionatron sort of "controlled" selling & marketing costs, reducing them slightly, though not nearly as much as revenues declined. Meanwhile, both general & administrative and research & development spending spiked sharply in Q3, quadrupling even as revenues declined to a quarter of their year-ago level. Result: overall operating costs rose 277%. Is that "control?" I think not.
So recently arrived to Ionatron, you can't really blame Marshall for the performance this quarter. But you can blame the General Dynamics
What did we expect to see out of Ionatron last quarter, and what did it produce? Find out in:
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Fool contributor Rich Smith does not own shares of any company named above.