Astronics Corporation (ATRO)

Q1 2010 Earnings Call

May 5, 2010 1:00 pm ET

Executives

Deborah K. Pawlowski – Investor Relations

Peter J. Gundermann – President, Chief Executive Officer & Director

David C. Burney – Chief Financial Officer, Vice President Finance, Secretary & Treasurer

Analysts

Tyler Hojo – Sidoti & Company, LLC

Scott Lewis – Lewis Capital Management

Kevin Ciabattoni – Boenning & Scattergood, Inc.

Richard Ryan – Dougherty & Company, LLC.

Presentation

Operator

Welcome to the Astronics Corporation first quarter 2010 financial results conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. (Operator Instructions) As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Deborah Pawlowski, Investor Relations for Astronics Corporation.

Deborah K. Pawlowski

We appreciate your time and interest in Astronics. Here today with me is Pete Gundermann, President and CEO of Astronics and Dave Burney, Chief Financial Officer. They will be covering the results, outlook and prospects of the company on the call and then will follow up with a question and answer period. Should you not have the release that went out this morning, it is available on the company’s website at www.Astronics.com.

As you are aware, we may make forward-looking statements during the formal presentation and the question and answer portion of this teleconference. These statements apply to future events which are subject to risks and uncertainties as well as other factors that could cause the actual results to differ materially from where we are today. These factors are outlined in our earnings release as well as in documents filed by the company with the Securities & Exchange Commission which can be found at the SEC website www.SEC.gov as well as the company’s website.

With that, let me turn it over to Peter to start the discussion.

Peter J. Gundermann

We are pretty pleased with our first quarter results. We think it provides a pretty strong start for our fiscal 2010. Revenues for the quarter were $46.9 million, that’s down quite a bit from $50 million in the first quarter last year and pretty much in line with recent quarters. $43.2 million or 92% came from our aerospace segment. For our aerospace segment, that’s the strongest shipping quarter we’ve had since the end of 2008 when we had shipments of $44 million. 2008, for those that can remember, was the tail end of the good old days it seems.

Our test system segment had revenues of $3.7 million, that’s only 8% of our total for the quarter just passed. However, on that shipment level, we were fairly profitable with a net profit of $3.4 million. That’s up from $1.4 million in the first quarter of last year. The results are basically due to pretty strong efforts at cost management over the last year and the favorable product mix. We’ll talk about each of those in due course but basically on a slightly reduced revenue level we managed to make quite a bit more money and we’re pretty pleased with that result.

Perhaps the most encouraging thing though, at least from my perspective was our bookings level. We took in orders during the quarter of $54.3 million, that’s up substantially from $30.8 million in the first quarter last year and in fact was our strongest booking quarter ever. We’ve never had bookings as high as $54.3 million before. It’s a book-to-bill ratio of 1.16. You don’t have to look back too long to remember that our fourth quarter of 2009 the immediately preceding quarter we only had bookings of $30 million. So to go from $30 million in one quarter to $54.3 million the next quarter obviously makes one’s head turn just a little bit and it encourages us for the year ahead of us but obviously throws some questions in the air about how to predict in this environment when bookings can vary so substantially one quarter to the next.

Looking at our segments briefly, our aerospace segment as I mentioned has revenues of $43.2 million, 92% of our total. Aerospace essentially contributed all of the margin. That will probably be the way it is for a little while. Here we did have a favorable product mix in the sense that some of our programs as they migrate, some of our lower margin programs are being replaced by higher margin programs, especially demand for our cabin electronics products which with the volume that we generated in the first quarter tends to have a pretty high contribution to our combined total.

It’s hard to quantify but we’re also experiencing some pretty significant production efficiencies. We again, just had a quarter of $47 million. We did that with approximately 200 less people than we had a year ago in the first quarter when we did $50 million in revenues. So in order to generate that kind of increased productivity we’ve taken some pretty substantial steps and we are very pleased to see the results roll through on our income statement like they did in the first quarter.

Again, our outlook in aerospace is pretty positive based on the quarter just achieved. Our bookings for the aerospace side alone were $50.7 million. That’s our second best aerospace booking quarter ever. Again, you have to go back to the second quarter of 2008 to find out only quarter that was higher and again, we view that as a pretty positive sign. Kind of qualitatively there seems to be kind of a ground swell of strength across the aerospace industry these days.

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