On the heels of a second-quarter earnings report that saw net income increase more than 26-fold, the head of Universal Security Instruments Inc. said the company could be poised to move its stock off the over-the-counter bulletin board onto a major exchange where its exposure would be much greater.
The Owings Mills-based maker of smoke alarms and carbon monoxide detectors set up a three-point strategy nine months ago to boost sales and earnings, and so far it's been quite effective.
"We came out with a plan and said we were going to aggressively build our market share, increase our operational efficiency and fully leverage the opportunities presented by our Hong Kong joint venture," said company President Harvey Grossblatt.
Fiscal second-quarter earnings, for the three months that ended Sept. 30, showed the plan appears to be working. Net income rose from $23,500 to $630,000 and revenue jumped from $2.65 million to $4 million. None of the rise was attributable to acquisitions or other unusual items, Grossblatt said.
"It's all based on strategy, it had nothing to do with new products," he said. "It was just executing what we said we could do."
A year ago, the company's shares were trading at just under $1.50. They closed Friday at $9.25.
The company's sales could be poised for even more growth as awareness rises about the dangers of carbon monoxide poisoning. New York recently passed a law requiring that carbon monoxide detectors be installed in all homes sold after Nov. 30. It is the fourth state to require detectors.
A family of four in New Jersey died in their sleep last month after a blocked chimney caused their home to fill with the gas. Industry estimates say that only one-fourth or fewer of homes have carbon monoxide detectors.
"This is the time of the year when these tragedies happen, so I do think it gets publicized, and then we have an opportunity to catch people's attention," said Ken Giles, spokesman for the U.S. Consumer Products Safety Commission. "It would be great if CO alarms would grow to be as popular as smoke alarms [estimated to be in 90 percent of all homes], and I think in the long run that will probably happen."
Universal's products, sold mainly at smaller retailers such as Menards and at stores that cater to contractors, are made in China through a Hong Kong-based joint venture. Half is owned by Universal and the other half is owned by a Chinese family.
The company is in the process of looking for an underwriter in Hong Kong and then plans to do an initial public offering and put the venture on the Hong Kong Stock Exchange.
Grossblatt is also hoping Universal's shares can soon move to a bigger board, such as the American Stock Exchange. So far, the company hasn't met the listing requirements for the bigger boards.
The Amex, for example, requires shareholder equity of $4 million (Universal's was at $3.7 million at the end of its last fiscal year) and pretax income of $750,000 (Universal's net income for fiscal year 2001 was $262,000).