0001104659-05-038826.txt : 20050812 0001104659-05-038826.hdr.sgml : 20050812 20050812092742 ACCESSION NUMBER: 0001104659-05-038826 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050809 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050812 DATE AS OF CHANGE: 20050812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AULT INC CENTRAL INDEX KEY: 0000723639 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRONIC COMPONENTS, NEC [3679] IRS NUMBER: 410842932 STATE OF INCORPORATION: MN FISCAL YEAR END: 0530 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12611 FILM NUMBER: 051019173 BUSINESS ADDRESS: STREET 1: 7105 NORTHLAND TERRACE CITY: MINNEAPOLIS STATE: MN ZIP: 55428-1028 BUSINESS PHONE: 6125921900 MAIL ADDRESS: STREET 1: 7105 NORTHLAND TERRACE CITY: MINNEAPOLIS STATE: MN ZIP: 55428-1028 8-K 1 a05-14810_18k.htm 8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (date of earliest event reported): August 9, 2005

Ault Incorporated

(Exact name of Registrant as specified in its charter)

Minnesota	0-12611	41-0842932
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

7105 Northland Terrace
Minneapolis, MN 55428-1028		55428
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (763) 592-1900

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Conditions

The following information is being “furnished” in accordance with General Instruction B.2. of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as expressly set forth by specific reference in such filing:

On August 9, 2005, Ault Inc. held a conference call and which included a discussion of the financial results of its year ended May 29, 2005. A transcript of the conference call is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

The following exhibit is being “furnished” in accordance with General Instruction B.2. of Form 8-K and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that section, nor shall it be deemed to be incorporated by reference in any filing under the Securities Act or the Exchange Act, except as expressly set forth by specific reference in such filing:

99.1 Transcript of Conference Call dated August 9, 2005.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		AULT INCORPORATED

		By:	/s/ William J. Birmingham
		William J. Birmingham
		Interim Chief Financial Officer


Dated:	August 11, 2005

EX-99.1 2 a05-14810_1ex99d1.htm EX-99.1

Exhibit 99.1

FINAL TRANSCRIPT

Conference Call Transcript

AULT - Q4 2005 Ault Incorporated Earnings Conference Call

Event Date/Time: Aug. 09. 2005 / 9:00AM ET

Event Duration: N/A

Thomson StreetEvents

streetevents@thomson.com

617.603.7900

www.streetevents.com

CORPORATE PARTICIPANTS

Fred Green

Ault Inc - President and CEO

Bill Birmingham

Ault Inc - Interim CFO

Greg Harris

Ault Inc - VP, Business Development

CONFERENCE CALL PARTICIPANTS

Sam Bergman

Bayberry Capital - Analyst

Gene Riley

Private Investor

PRESENTATION

Operator

Good day, ladies and gentlemen, and welcome to the fourth quarter 2005 Ault Incorporated earnings conference call. My name is Gregory and I’ll be your coordinator for today.

(Operator Instructions)

I would now like to turn the presentation over to your host for today’s call, Mr. Fred Green, President and CEO. Please proceed, sir.

Fred Green - Ault Inc - President and CEO

Good morning and thanks for joining Ault’s fourth quarter fiscal year 2005 results conference call. With me today is our Interim Chief Financial Officer, Bill Birmingham, and our Vice President of Business Development, Greg Harris. We will be available to answer your questions following our opening remarks.

Before we get started, I’d like to make our usual Safe Harbor statement and remind everyone that comments made during this conference call regarding Ault’s anticipated future performance are forward-looking and therefore involve risk and uncertainties that could cause results or developments to differ significantly from those indicated in these statements.

These risks and uncertainties include, but are not limited to, market conditions in the global electronics industry, buying patterns of major customers, comparative products and technologies, the ability to control expense growth and other factors set forth in the Company’s filings with the Securities and Exchange Commission.

And now, I’ll briefly go through some of the information that we released at the close of the market, Friday, August 5. First, we reported the results of our fourth quarter and fiscal year end May 29 and the restatement of prior period results. These results reflected the sale of our Ault Korea subsidiary in May and the reclassification of the subsidiary as a discontinued operation. In addition, the Company reported that it has restated financial results for fiscal year 2004 and the first three quarters of fiscal 2005 following an investigation of accounting discrepancies related to our operations in Xianghe, China.

The discrepancies were discovered during our year-end audit activities. Once these discrepancies were known, our audit committee authorized a separate team to investigate the discrepancies, calculate the financial impact and determine the corrective action. The Company determined that these discrepancies involved issues concerning inventory and inadequate reconciliation of the inter-company accounts. The inventory discrepancies resulted in an adjustment of $1,221,000, consisting primarily of the following. $268,000 due to loss incurred in a warehouse fire

during fiscal year 2004. The raw material loss was improperly recorded. $463,000 due to two instances where finished goods were relieved incorrectly at the completion of jobs. $154,000 due to accumulated scrap and loss that was not recorded. $121,000 due to low-value tubes (ph) that should have been expensed instead of capitalized. $127,000 in obsolete materials and $77,000 in material add vendors (ph) our own hand (ph) that had not been included in the inventory’s physical counts.

The inter-company account discrepancies included a $220,000 adjustment between Ault Xianghe and Ault Shanghai and a $147,000 adjustment between Ault Xianghe and Ault Minneapolis. The total adjustments at Ault Xianghe were $1,588,000. The Company also increased the reserves at Ault - the inventory reserves at Ault Shanghai by $300,000 and bad debt reserves by $134,000 for total adjustments in Shanghai of $434,000. The Company determined that these discrepancies were due in part to the experience level of its accounting staff at both Ault Xianghe and Shanghai, as well as material weaknesses in its disclosure controls and procedures.

The corrective action plan includes the transfer from our discontinued Korean operations of a seasoned accountant with experience in Asian operations who will be headquartered in Minneapolis and will be the primary liaison with our China operations. Also, the hiring of a seasoned China-based controller to coordinate all financial reporting, monthly fiscal - physical inventory accounts and verifications and also be a part of our weekly conference calls with all of our operations to improve communications.

We believe all issues have been identified and corrective actions have begun. To correct the accounting errors discovered in this investigation, the Company restated its previously reported financial statements for fiscal 2004 year ending May 30, 2004 and quarters ending August 29, 2004, November 28, 2004 and February 27, 2005 for fiscal year 2005. The Company will also amend appropriate filings with the SEC to include restated financial statements. The May 19, 2005 sale of Ault Korea to JEC Korea Company Limited, a Korean manufacturer of power supplies, required that this subsidiary’s results be reclassified as a discontinued operation. As such, the Company’s previous financial statements have been adjusted to reflect this accounting treatment.

Net sales for the fourth quarter of fiscal 2005 (ph) were $9,714,000 compared to restated net sales of $9,562,000 in the fourth quarter of fiscal 2004. The company reported sales of $37,216,000 for fiscal 2005 compared to restated sales of $35,361,000 for fiscal 2004, an increase of approximately 5% year over year. Our results for the fourth quarter met our expectations without the restatements and adjustments. North America and European markets showed modest gains, while the China market has not shown the growth that we had expected.

And now, I’ll turn the call over to Bill Birmingham, our interim CFO, for some additional detail on our recently reported results. Bill?

Bill Birmingham - Ault Inc - Interim CFO

Thanks, Fred. Net sales were $9,714,000 for the fourth quarter of fiscal year 2005, up approximately 2% from restated net sales of $9,562,000 in the fourth quarter of fiscal 2004. Gross profit was $2,223,000 compared to restated gross profit of $2,467,000 from the previous year. Operating expenses were $3,360,000 in the fourth quarter of fiscal 2005 compared to restated operating expenses of $2,763,000 in the fourth quarter of fiscal 2004. For the fourth quarter of fiscal 2005, we recorded a net loss applicable to common stock of $3,830,000 or $0.80 per diluted share compared to a restated net loss to common stock of $404,000 or $0.09 per diluted share for the same period last fiscal year.

For the 12 months ended May 29, 2005, sales were $37,216,000, a 5% increase over restated net sales for fiscal 2004. Total year gross profit was $10,139,000 or an increase of approximately 24% over last year restated gross profit. Operating expenses of $12 million were favorable to last year by approximately $1.2 million, primarily due to exit costs in fiscal year 2004, totaling over $2 million. For the 12 months ended May 29, 2005, we had a net loss of $5,130,000 or $1.08 per diluted share compared to a restated net loss of $5,546,000 or $1.19 per diluted share for fiscal 2004.

We completed fiscal 2005 with cash of $2,191,000, up from restated cash of $837,000 in the previous year. The company plans to file appropriate amended filings with the Securities and Exchange Commission. I’ll now turn the call back to Fred.

Fred Green - Ault Inc - President and CEO

To elaborate on current business and sales conditions through the past quarter and going forward, I will turn the call over to Greg Harris, our vice president of business development. Greg?

Greg Harris - Ault Inc - VP, Business Development

Thanks, Fred. I’d like to spend a few minutes updating you on two markets - Power over Ethernet and the medical equipment market - because they represent good growth opportunities for Ault as we begin fiscal year 2006. Ault has traditionally been a major power supply partner to the OEM in the datacom market. One of the growth applications in the market is the Power over Ethernet. Power over Ethernet is designed to supply power to any device on a local area network. Power over Ethernet, called PoE, is anticipated to grow at a rate of 22% over the next four years according to a recent report issued by the Darnell Group.

PoE has a broad range of applications. Truly, any organization has a wide local area network as a prospect for all band (ph) solutions. Among the most popular applications are IP phones, security cameras, RFID tag readers, PDAs, access control systems and smart signs, just to name a few. As the market demand increases, Ault will introduce new products to support the needs of all of our OEMs. In multiport solutions currently in development to serve the needs of the small home office segment, SOHO. Our next generation single port solution is also in the sample stages to key customers. This product is a second generation cost-reduced product and will be available in two versions - compliant and non-compliant to the industry standard.

Another market segment that continues to be strong for Ault is the medical equipment market. North America and Europe are growing at rates around 12% according to the Darnell Group. While the medical device market in China is approaching 15% growth annually, based on data from Cannon Communications. In fiscal 2005, 24.3% of OEM revenue was from medical customers. We anticipate that this percentage will increase in fiscal 2006 as current OEM customers have major product launches and/or ramp-ups with Ault power supplies scheduled during this time period.

Lastly, in fiscal year 2005, this recent sale accounted for over 37% of our total revenue. The distribution sales channel provides many feet on the street and the customer base we need to increase sales and turn up new opportunities at all buying levels. Overall, opportunities in bookings are steadily rising. With the forecast we have and the previous history of our major accounts, we feel confident that we can achieve double-digit growth in fiscal year 2006.

I’ll now turn the call back over to Fred.

Fred Green - Ault Inc - President and CEO

Thanks, Greg. We completed many of the strategic initiatives we had planned for fiscal 2005. These initiatives included the transition of all U.S. manufacturing to our facility in Xianghe, China, the sale of our Korean subsidiary, the sale of our facility in Minneapolis and other operating cost reductions. As a result of these initiatives, we enter fiscal 2006 with cash and cash equivalents of $2,191,000 and total debt under $300,000.

Of course, we are disappointed that the areas leading to the restatements of our financials recurred. To reiterate, we are implementing improved controls and procedures related to the issues uncovered during the investigation. On the positive side, we emerged with no long-term debt, a strong customer base and a reduced cost structure. (inaudible) and closure of opportunities are both strong and we are now positioned to return to profitability in the 2006 fiscal year. This concludes our prepared remarks. Thanks for joining our fourth quarter fiscal year 2005 conference call. We will now take your questions. Operator, will you please poll for questions?

QUESTION AND ANSWER

Operator

(Operator Instructions)

And your first question comes from the line of Sam Bergman of Bayberry Capital. Please proceed.

Sam Bergman - Bayberry Capital - Analyst

Good morning, Fred. How are you?

Fred Green - Ault Inc - President and CEO

Good, Sam.

Sam Bergman - Bayberry Capital - Analyst

Of course, I was disappointed at the results, but that’s all behind us right now. Can you give us a little update on where things are at beginning in the first quarter? Do you expect profitability in the first quarter of this year or not?

Fred Green - Ault Inc - President and CEO

We should be very close to profitability.

Sam Bergman - Bayberry Capital - Analyst

When is the several ramp-ups in medical and other areas happening?

Fred Green - Ault Inc - President and CEO

We start shipping those products mid-August and the ramp goes up from there.

Sam Bergman - Bayberry Capital - Analyst

All right. Was there a delay in that particular ramp?

Greg Harris - Ault Inc - VP, Business Development

The delay was a combination of customer and Ault working through issues to get the product to market and getting the product to market in a way that customers want to achieve the market growth they anticipate.