AstroNova Inc (ALOT) 2011 Q1 法說會逐字稿

Ladies and gentlemen, welcome to the Astro-Med first quarter fiscal 2011 earnings release call on the 19th of May, 2010.

Throughout today's presentation.

all participants will be in a listen-only mode.

After the presentation, there will be an opportunity to ask questions.

(Operator Instructions) I will now hand the call over to Mr.

Stanley Berger.

Please go ahead, sir.

Thank you, Sophie.

On behalf of the management of Astro-Med, we are extremely pleased that you have taken the time to participate in our conference call.

Thank you for joining us to discuss the Company's fiscal 2011 first quarter financial results and business outlook.

Before I introduce management, I would like to remind everyone that certain statements made during the course of this conference call, especially those that state management's intentions, hopes, beliefs, expectations or predictions for the future are forward-looking statements.

During this conference call we may make forward-looking statements within the meaning of the Securities Exchange Act of 1934.

These statements are based on the Company's present expectations and beliefs concerning future events and are necessarily based on certain assumptions which are subject to risks and uncertainties.

Actual results may differ materially from those discussed here.

More information on the risk factors is included in the Company's filings with the Securities and Exchange Commission.

By now you should have received a copy of the news release which was issued yesterday.

If you have not received a copy, please go to our website at www.astro-medinc.com where a copy of the press release can be downloaded from the investing section of our home page.

Hosting the call today are Albert Ondis, Chairman and Chief Executive Officer, Everett Pizzuti, President and Chief Operating Officer, and Joe O'Connell, Senior Vice President, Treasurer and Chief Financial Officer.

At this time, I will turn the call over to Mr.

Ondis.

Albert?

Thank you, Stan.

I am going to make some comments about the quarter which ended on May 1, and then both Everett Pizzuti and Joe O'Connell will make additional comments, and then we'll take your questions.

I would like to begin by saying how pleased I am with the first quarter results.

As you know, if you have seen our press release, our sales amounted to $17.077 million, which is a 16% increase in revenue over the first quarter of the prior year.

And we had earnings per share of $0.06 compared to a $0.03 per share loss in the prior year.

New orders are ramping up as well and in fact, they're up by about 23% over the comparable period of last year.

In previous calls, we have frequently emphasized that our strategy for growth is based on our ongoing three-year strategic planning process, which by the way, is being continued even as I speak.

And our three-year strategic plan calls for growth by internal development and growth by careful and selective acquisitions.

While yesterday at our annual meeting, growth by internal development was in full swing as our up and coming younger executives displayed and extensively demonstrated our newest product.

For example, the TMX from our Test and Measurement brand, our new TW5 cockpit printer from our Ruggedized brand, powerful new software products from our QuickLabel brand and from our Grass Technologies brand, the new S12X stimulator.

Everett will be telling you more about these products shortly, and we certainly invite your questions later on as well.

With these major new product launches, the momentum for growth is building, and our confidence for the balance of the year is rising steadily.

We're particularly pleased to note that orders for our higher profit margin products, which included data recorders and our other systems, of those products, sales incoming orders for those products growing while at the same time, our consumables business continues to be as strong as it was in the first quarter.

I will leave these positive thoughts in your mind and will now ask Everett Pizzuti to add his remarks.

Everett?

Thank you, Albert, and good morning, everyone.

I am going to go through a few of the highlights of the first quarter, a couple of which Albert already mentioned.

These included, of course, new order bookings which were 23% over the prior year's quarter and sales of over 16% from the first quarter of last year.

We made first shipments of our -- both of our new Grass model S12X and the new T&M model, TMX.

And finally, we appointed three new Vice Presidents during the quarter.

With respect to the bookings improvements, we're pleased that all product groups are ahead of last year with QuickLabel leading the way.

Many ask whether we feel the effects of the great recession are behind us, and the answer is no, but we certainly see signs of great encouragement.

For example, back in the third quarter of 2008, the first signs of the impending recession were seen by the dramatic reduction in our consumables sales of labels, ribbons, inks and other supplies.

Now in the first quarter of this new year, we see QLS consumable sales continuing to ramp up at over 28% over last year.

And on the hardware side, we see favorable signs from Test & Measurement and Grass, as well as the QuickLabel color printers.

Now, during the first quarter, we booked and shipped very first Grass model S12X Cortical Stimulators and the very first Test & Measurement model TMX data acquisitions systems.

The S12X is a modern replacement for the original S12 that Grass sold for many years until the product was discontinued due to obsolescence of parts.

The S12 is used by neurosurgeons around the world in the treatment of epilepsy, and we are now seeing requests and orders from around the world as we continue to promote the new S12X.

In fact, in the first quarter just ended, we shipped S12Xs to China, Canada, Dominican Republic and Saudi Arabia, as well as in the US.

As we mentioned previously, this product has a list price of around $25,000 and it leads us into long-term epilepsy monitoring centers where we can sell additional EEG equipment, often worth $100,000 or more.

The TMX data acquisition system also has an average selling price of $25,000 and is aimed at a wide range of customers for applications in monitoring and troubleshooting power stations, mass transit systems, the development of new aircraft, automotive testing and industrial factory production systems.

At the present time, we have over $2 million in quotations and negotiations outstanding covering potential business for the TMX for this year alone.

The TMX is the kind of product that is sold not only one or two per order, but also 10 or more per order.

The design of the TMX lends itself to adding more features and functionality this year and next as we expand its applications to markets around the world.

One of the questions we are often asked by our shareholders and investors is, what are your plans for succession?

And our response is, we have a deep staff of highly motivated, young, energetic and bright managers who are capable of taking on more responsibility.

We promoted three of these managers to a position of Vice President early in the first quarter.

Tom Carl is now Vice President and Worldwide Sales Manager for Test & Measurement systems.

Eileen Millar is Vice President and Operations Manager of our Grass Technologies manufacturing plant in Rockland, Mass, and Eric Pizzuti is Vice President and Worldwide Sales Manager of QuickLabel systems.

On the R&D front, we continue to develop new products for all of our markets and expect to introduce one or two more new products in the second half of this year.

One is a new ToughWriter called the TW5 which is the smallest, lightest and fully featured printer on the market.

Another new product is an ambulatory EEG recorder that is also the smallest patient worn recorder in the industry.

Both of those products should be going into production in the second half of this year.

And finally, with regard to label manufacturing, our new Asheboro, North Carolina facility is now integrated into our corporate ERP program.

We completed the expansion of our West Warwick-based label manufacturing plant, and by the way, yesterday at the end of the annual meeting, we toured investors through that new facility.

We have leased new space in ordered equipment for the new label manufacturing plants in Montreal and Frankfort, and we expect both of these new locations to be operating by the end of the second quarter.

So in summary, we remain encouraged that our growth will continue as this new year progresses.

That's my report, Albert.

Thank you, Everett.

Now it is time for Joseph O'Connell to give us overlook -- look over at our financials.

Joe?

Thank you, Albert.

Good morning, everyone.

I am very pleased to report Astro-Med's financial results for the first quarter of fiscal 2011.

As you heard, the Company's sales in the first quarter were $17.077 million, and also as you heard, that represents a nice double-digit, ie 16% improvement over the prior year's first quarter sales of $14.677 million, as well as a 5% increase over the fourth quarter sales of last year of $16.280 million.

Favorable foreign exchange contributed about $250,000 in revenues to the first quarter sales.

Sales through our domestic channels in the quarter were $12.175 million.

That represents our domestic business 71% of our total sales and improved on the prior year's first quarter domestic sales by 17%.

Shipments to our international customers were $4.902 million in the quarter, which represents international as 29% of our total sales revenue, and that increased by some 14% over the prior year's international sales in the first quarter.

So in both channels, we have got double-digit increases.

If we profile the sales results by product group, the Company achieved growth in two of the three product groups, specifically QuickLabel systems dominated the results with revenues in the quarter of $10.153 million.

That's a 36% improvement over the prior year's QuickLabel sales in the first quarter.

Both our hardware line of printers, as well as the consumable lines of media products reported increases over the prior first quarter.

Relative to the -- with the consumables lines dominating the increase with a strong double-digit growth rate, sales revenues from the Company's North Carolina acquisition, as Everett mentioned, made a nice positive contribution to the Company's overall sales of consumable media products.

The Grass Technology sales in the quarter were $3.714 million, representing a 6% increase over the prior year.

Here the Company's hardware line of diagnostic systems for the clinical markets and the related consumable electrode lines account for the growth rate.

Our Test & Measurement revenues in the quarter were $3.210 million.

That's a decrease of 13% from the prior year's first quarter.

Here the temporary deferrals of some anticipated capital purchases by customers in the quarter impacted the first quarter sales volume.

Our gross profit dollars in the quarter were $6.865 million.

That's an improvement over the prior year's gross profits of some 18% and reflects a margin of 40.2%.

That's some 60 basis points ahead of the prior year's margin of 39.6%.

Product mix and lower manufacturing costs account for the improvement in our margins.

Operating expenses in the quarter were $6.243 million which consumed some $0.365 of the first quarter sales dollars and lower by 0.5% from last year's spending in the same categories.

As a result, our Company's achieved income from operations of $622,000 in the quarter.

That's a $1.1 million improvement over the prior year's operating loss of $460,000 and allows us to represent an operating margin of 3.6%.

Other income in the quarter was $107,000 which ran some 3% ahead of the prior year, primarily related to interest income on a successful litigation settlement that we reported earlier.

Income taxes were $299,000 in the quarter, representing an effective tax rate of 41% and compares to the effective tax rate of the prior year of 36%.

The Company, as you heard, earned some $430,000 of net income if the first quarter.

It is a sharp improvement from last year's net loss of $231,000 and provided a return on sales of 2.5%.

On an earnings per share basis, the first quarter's net income represents, as you heard, some $0.06 per diluted share and compares favorably to last year's $0.03 loss per share that we achieved.

Quickly looking at the balance sheet, our assets at the end of the first quarter were $64.272 million.

For the most part, comparable with the year end balances.

Our cash and marketable securities were also comparable with the year end at $23.674 million, and our accounts receivable balances did rise 2% from the year end to $9.365 million, but we actually improved on our day sales outstanding, dropping two days off the DSO at the end of the year to 47 day sales outstanding.

Inventory balances also rose during the quarter by approximately 7% to $12.861 million, but here also we improved in terms of our efficiency and turnover, dropping a day in terms of the days on hand.

Fixed assets at the end of the first quarter were $11.827 million.

Our capital expenditures during the quarter were $236,000, a good portion of which, as you heard about, is the completion of the expansion of our manufacturing facility, our media manufacturing facility here in West Warwick, additional investments in information technology, as well as machinery and equipment.

However, in the case of the total spending of capital expenditures, still below our depreciation that we booked in the first quarter of $382,000.

During the quarter, we paid dividends of $504,000, representing an 18.6% increase over the prior year's dividends paid at the rate of $0.07 per share per quarter.

Our book value at the end of the first quarter was some $7.37, and our population -- our employee population at the end of the first quarter was some 418 folks, an increase of 43 people primarily related to the acquisition of the North Carolina facility.

Lastly, our sales per employee at the end of the first quarter was some $167,000.

That's a slight decrease from the average sales per employee that we had at the end of last year.

Albert, that completes the financial review.

Thank you very much, Joe, and Everett as well.

Sophie, I think we're ready to take questions now.

Thank you, sir.

(Operator Instructions) The first question is from Dave Busch from Southpaw Investments.

Please go ahead, sir.

Hi guys, another great quarter.

Hi, how are you, Dave.

Steve, actually.

Everybody always says that.

So Test & Measurement orders were delayed, Joe said, and would you expect that to be more of an abnormal boost current quarter, or future quarters going forward, we'll recoup some of those sales?

Some of them, Steve, were the result of delays in Ruggedized products because some of the airlines have been delayed.

As you know, the Boeing 787, which carries a couple of our printers per has been delayed a little bit more, so we expect those sales to take shape in the third and fourth quarters of this year for sure.

Okay.

So you probably have a little more in those quarters, you wouldn't expect -- it will just be -- you are going to mention probably then that it was sales from delayed orders?

That's right.

The orders were on hand, but we weren't able to ship them because of the delays in our customers' contracts.

Now, are your -- to the extent -- what extent do your new products that are lighter, et cetera, that Albert was talking about, I think -- what extent are they simply replacing old sales, or are they higher margin?

Well, for example, the ToughWriter 5, which we mentioned is smaller and lighter and more compact, yet has lots of important features, it will help us to expand our market somewhat into the -- we have been talking a lot about the business jet market, and so the ToughWriter 5 was originally designed for that market in particular.

But it is important on all new aircraft because every ounce, every pound helps in the conservation of the high priced fuel.

So that was the original intent of the ToughWriter 5 and in fact, during the quarter we did receive a new contract for printers for use in a business jet.

And of course the TMX, which is another one of the new products is both a replacement for older machines, but it is also opening some new applications in new markets.

For example, this machine is a very high speed data recorder, which is something that we claimed about the predecessor machines.

But in addition to the features of the older machines, it also has the capability of high speed video, so that trouble shooting complicated particularly mechanical devices where you want to see what is taking place in real time, you have the additional power of video capture, which opens up a wide range of new applications in our Test & Measurement field.

And similarly of course, the S12X, which is a replacement for the S12, but the S12 is a product we have not sold in about 10 years, so this S12X, it's a brain stimulator, is opening up a whole new segment of business for us that is we think is going to not only provide revenue of itself, but will also provide an opening into some major new business segments that we would otherwise not have access to.

So the net result of all of this is truly expanded business, not just replacement.

That's what I wanted to hear.

Looks good.

I'll just give two more quick questions, I'll hop off.

Printer label business.

How early did you see the downturn in the recession coming from the printer labels?

Was it all of a sudden or you had kind of a head start?

It was sudden.

It was very, very, very sudden, and it began in October of '07.

We were stunned by the suddenness of the downturn, but it turned up about -- began to head north again just a few months later, and it led the process of recovery by quite a few months.

So you meant October '08, right?

Yes.

So --

I am sorry, I beg your pardon, '08, not '07, right.

That's what I figured.

So finally, in your press release, you mentioned going forward with your costly new product development -- I forget the exact quote.

Would you say that your costs are still -- you're still going to be generating positive cash flow, you're not going to be -- have such costs that you're going to go into a negative cash flow situation?

We will definitely continue to that positive cash flow.

Perfect.

Thank you very much.

Another great quarter.

You guys are doing a good job.

Thank you very much, Steve.

Thank you.

(Operator Instructions) The next question comes from George Melas from MKH Management.

Please go ahead.

Good morning, gentlemen.

Very nice quarter.

Good morning, George.

Could you tell us, just provide a little bit more color on the growth you've had at QuickLabel?

Maybe tell us about how much the North Carolina operation contributed to that and sort of give us better mix of the growth in hardware and consumables, and maybe on the hardware what is -- where is the growth coming from on the hardware side?

The good news, George, it is actually at double-digit.

We mentioned about 36% overall.

North Carolina contributed about, a little over $1.4 million I think to that contribution, but our business case of the consumables was actually up both cases, by itself up over almost 15% to 16% by itself.

So it was a matter of strength in our regular business as well as having the added contribution from the Asheboro facility.

We're pleased to see that on the hardware end of it, of course the Vivos continues to move as well as the Zeos.

So the nice thing about that is, of course we have seen the double-digit increases, especially on the consumables where the hardware at this point is still single digit as people are still a little reluctant to go ahead and make the capital purchase, but we are pleased.

We are showing improvement year-over-year.

Okay, great.

And under hardware side, is there a new product coming up?

I think you were trying to develop a product that was somewhat lower cost, and I am wondering what is the progress on that?

We announced yesterday that later this summer, we will be launching a new printer product.

We aren't describing exactly what it is, but it will be a significant new color printer product, and our goal is to reduce the cost of the product, and to try to expand the market by selling at lower prices, if that is possible.

So we are very actively developing new printer products for our QuickLabel systems brands.

Great.

And I think you guys mentioned that you've had a new business jet customer.

Can you say who it is or is that -- or are you not quite able to do that?

Yes.

We're -- we cannot mention the name, and that's why I didn't mention who it was, but it certainly is a major player in the business jet market, but we are prevented from disclosing any details of that contract.

Okay.

Very good.

And when would you get some shipments on that?

When would that start?

Do you have a sense?

That would start next year, late next year.

So late calendar 2011.

Right.

Okay, great.

And maybe could you talk a little bit about now that you have appointed -- Everett, you talked about appointing those three people to head each one of the divisions.

How different is the operation?

How different is the Company run now that you have people that have responsibilities over the whole -- the entire -- each one of those divisions?

Right, well, we're flowing down more and more of the responsibilities that we have been handling ourselves directly to these new managers.

And each of these three sales managers, Vice Presidents I should say, plus another manager all made presentations yesterday at our annual shareholders meeting, so that a lot of the outsiders could get a good look at them as well.

And they did a very fine job in describing the products of the various divisions and what their responsibilities are.

So they're up and coming, and as I say, we have an in-depth roster, if you will, of excellent management people to take over if and when we should ever pass the torch.

Okay, very good.

Thank you.

(Operator Instructions) There appear to be no further questions at this time, sir.

Please continue.

Well, we thank you very much for participating in today's meeting.

I realize it has only been 60 days since our last teleconference, and we will be meeting with you again by telephone in August.

I hope between now and August that you will come and visit us and any case, enjoy a good summer.

Thank you very much.

Bye now.

This concludes today's Astro-Med conference call.

Thank you for participating.

You may now disconnect.