Knobias Clip Report (03-04-2008)
Submitted By Knobias ClipReport
STEN: Increases Revenue Guidance; Expects Profitability in the Quarter
Tuesday saw the continuation of the downward spiral in the market. Subprime fears, oil prices, dollar deterioration, possible bank failings, economic slowdown, consumers hurting, etc. were all blamed as reasons for the decline.
While most names on traders’ screens were red, one small cap name was firmly encased in green. STEN Corporation (STEN) is a diversified business, primarily focused on its financing business through STEN Financial Corporation. The Company’s STENCOR subsidiary is a contract manufacturing and distribution business based in Jacksonville, Texas.
The Company announced on Monday that based upon results through February 2008, revenue for the second quarter ending March 31, 2008 is expected to exceed $4.2 million, more than double the $2.1 million in revenue in the Company generated in the first quarter of fiscal 2008. The Company also stated that it expects to be profitable in the current quarter. For the fiscal year ending September 30, 2008, the Company’s outlook is for total revenue to exceed $15.0 million, which is more than triple last year’s total revenue from continuing operations of $4.6 million. The Company’s business plan currently indicates that it will operate profitably for the balance of the fiscal year ending September 30, 2008.
Following the announcement, shares rallied from the $1.50 area to highs in the $5.50 area before consolidating in the $4.80’s. Since August, shares had fallen from the $4’s to the $1.50 area before the two day rally.
In February, the Company reported earnings for the first thirteen week period of fiscal 2007 ended December 30, 2007. The Company reported a net loss of $801,584 or 35c per diluted share for the thirteen weeks ended December 30, 2007. Sales from continuing operations for the thirteen week period ended December 30, 2007 were $2,054,541 an increase of $1,409,853 from $644,688 for the thirteen week period ended December 31, 2006.
The Company’s Stencor business accounted for $328,066 in sales and the STEN Financial unit contributed $1,726,475 in sales for the period ended December 30, 2007. The loss in the first quarter of fiscal 2008 was principally the result of charges incurred as a result of one of the company’s auto-dealer customers ceasing operations in the of the fourth quarter of fiscal 2007 resulting in losses associated with financing related inventory and an additional losses associated with the installment contracts that were acquired from this dealer prior to its ceasing operations. In addition, the Company recorded a $142,180 noncash charge for the write-off of an original issue discount associated with repayment of debt during the quarter.
Commenting on the results, Kenneth Brimmer, CEO, noted, “We made significant strides forward during the quarter in our finance businesses. The securing of a new senior credit arrangement to support the finance and auto sales businesses is an important accomplishment. In addition, the current level of orders at our Stencor business unit is improving after a couple of years of declines and we expect that the improved production volumes will have a favorable impact on our results in future periods.”
Obviously, the strides had a greater impact than originally thought with the increased revenue guidance and expectancy of profitability. With that in mind, investors would be wise to watch.
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