NAPCO Security Technologies(NSSC) - 2020 Q4 - Annual Report

Financial Performance - Net sales for the fiscal year ended June 30, 2020, were $101.4 million, a decrease from $102.9 million in 2019, primarily due to a 34% decline in hardware sales in Q4 2020 attributed to the COVID-19 pandemic[94] - Net income for the fiscal year ended June 30, 2020, was $8.5 million, down from $12.2 million in 2019, reflecting the impact of COVID-19, partially offset by growth in recurring revenue[94] - Net sales for fiscal 2020 decreased by $1,573,000 to $101,359,000, a decline of 1.5% compared to fiscal 2019[127] - Gross profit for fiscal 2020 was $43,592,000, representing 43.0% of net sales, compared to $43,890,000 or 42.6% in fiscal 2019[129] - Net income for fiscal 2020 decreased by $3,703,000 to $8,520,000 compared to $12,223,000 in fiscal 2019[135] Revenue and Expenses - Sales returns, rebates, and allowances were 9% of gross sales for the fiscal year ended June 30, 2020, compared to 8% in 2019[104] - Selling, general and administrative expenses increased by $458,000 to $23,670,000, with a percentage of net sales rising to 23.4% from 22.6%[131] - Research and Development expenses remained relatively constant at $7,257,000 in fiscal 2020 compared to $7,212,000 in fiscal 2019[130] - The Company's provision for income taxes increased by $1,062,000 to $2,284,000, with an effective tax rate rising to 21% from 9%[134] Assets and Liabilities - As of June 30, 2020, the Company had cash and cash equivalents of $18,248,000 and an unused balance of $11,000,000 under its Revolving Credit Facility[117] - Working capital increased by $19,963,000 to $61,046,000 at June 30, 2020, compared to $51,083,000 at June 30, 2019[122] - Accounts Receivable decreased by $3,038,000 to $22,932,000 as of June 30, 2020, primarily due to decreased hardware sales[123] - Inventories increased by $6,917,000 to $41,755,000 as of June 30, 2020, driven by the buildup of new products[124] Impairment and Accounting Changes - The company recorded an impairment charge of $1.852 million for its Marks USA trade-name during Q4 of fiscal 2020, reclassifying the asset to a long-lived asset with a remaining useful life of 20 years[110] - The company adopted a new lease accounting standard effective July 1, 2019, resulting in the recording of an operating right-of-use asset and lease liabilities of approximately $7.7 million[116] Market Conditions and Strategy - The company has experienced significant growth in recurring service revenues from wireless communication services for intrusion and fire alarm systems[92] - The company is focused on developing innovative technology and next-generation security solutions, including the StarLink and iSecure product lines[93] - The company anticipates that economic conditions may adversely affect revenue, profit, and cash flow levels in future periods[95] - The company’s fiscal year runs from July 1 to June 30, with sales historically peaking in the fourth quarter[96] Customer Concentration - One customer accounted for 24% of accounts receivable as of June 30, 2020, while another customer represented 10% of accounts receivable[105]