Frequency Electronics Inc. (NASDAQ:FEIM) Q4 2020 Earnings Conference Call - Final Transcript
Jul 16, 2020 • 04:30 pm ET
Greetings. Welcome to the Frequency Electronics Fiscal Year 2020 Fourth Quarter and Year-End Earnings Release Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.
Any statements made by the Company during this conference call regarding the future constitute forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements inherently involve uncertainties that could cause actual results to differ materially from forward-looking statements. Factors would cause or contribute to such differences are included in the Company's press releases and are further detailed in the Company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this conference call.
It is now my pleasure to introduce your host, Stanton Sloane, President and CEO.
Thank you, Sherri. Welcome, everyone. Thank you for joining us today. I hope everyone is faring well during the pandemic. We have now reported fiscal year 2020 results.
I'll just say it was a difficult year, and I'm glad to put it behind us. A combination of issues impacted us last fiscal year, some of which we have previously discussed. Late in the year, we had added impacts related to COVID-19, legal expense and reserve for a note that was due to us. Backlog for 2020 was down approximately $1 million. However, we did book a significant contract earlier this month, which we announced on July 1.
Let me comment on COVID-19 issues, which impacted us mostly in Q4. While we had little impact to our operations in New York, we did experience delays in award of new contracts, which we attribute to government and prime contractor administrative process delays. We also had impacts from vendors in our supply chain, either being unable to deliver critical materials on time or having quality issues, which resulted from some of their key personnel being out due to direct or indirect COVID-19 impacts. Unfortunately, when this happens, it results in increased cost to us for either additional processing or for rework of materials. When there are delays, it affects revenue recognition, gross margin and, obviously, operating income, which is reflected in these financials. More importantly, however, we have lost no employees to the pandemic. As an essential industry, most of our employees have been here at work through the duration, and their health and safety is, of course, of paramount importance.
In Q4, we continue to work through the programs that have had higher development-related costs, which we have previously discussed. Of those three problem programs, one is completed now, one is nearing completion with initial products delivered and working extremely well, and one is in the acceptance test cycle. In summary, we should have all three of these behind us in about three months.
Let me shift gears here and talk about the future a bit. I'm sure you all saw the announcement on July 1 of a significant