AstroNova Inc (ALOT) 2011 Q2 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for standing by.

Welcome to the Astro-Med, Inc.

second-quarter fiscal 2011 earnings release conference call.

At this time, all participants are in listen-only mode.

Following the presentation, we will conduct a question-and-answer session.

Instructions will be provided at that time for you to queue up for questions.

(Operator Instructions).

I would like to remind everyone that this conference call is recorded today, Wednesday, August 18, 2010, at 11 AM Eastern time.

I will now turn the conference over to Stanley Berger.

Please go ahead, sir.

Thank you, John.

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 second-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 these risks 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 company of the press release -- I'm sorry, 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, and after I make some comments about the quarter, both Joe and Everett Pizzuti will make some additional remarks.

And then we'll take your questions.

The second quarter, as you all know, I'm sure, came in at $17,753,000 which is about 8% ahead of the comparable period of the prior year and, by the way, it is at the low end of the range that we were forecasting.

While this slow pace of capital equipment purchasing continues, consumable sales are strong, and this is evidenced by the robust performance of our QuickLabel Systems brand, which is heavily based on consumables.

Test & Measurement brand and Grass brand are more dependent on capital equipment, and in those brands we see buying delays although both have a full pipeline of active sales growth forecast.

And, by the way, as airplane production increases, the very healthy backlog we have of orders for our airborne cockpit and cabin printers is going to continue to produce increasing sales.

We are very optimistic about the balance of the year despite the continuing recession, although I must add however that our QuickLabel Systems brand may be softer in the third quarter as we go through a model change in our model -- in our major color label printer.

The model change, despite our planning, will interrupt sales somewhat.

The new product being rolled out is one of a number of new products we have been developing very aggressively over the past couple of years, and those products are now being released to our sales organizations.

We strongly feel that internal growth, and combined with selective acquisitions, will lead to significant growth and we continue to look for good acquisition candidates even as we put new product ideas into development by our research and development department.

At this point, I am going to ask Everett to make some more specific comments about the quarter, and when he finishes we will ask Joe O'Connell to make his reports.

Everett?

Thank you, Albert, and good morning, everyone.

Well, as you've heard, sales in the second quarter were dominated by our QLS -- QuickLabel Systems -- with a high double-digit increase in consumables compared to the prior year, along with a good increase in color printers as well.

As a matter of fact, consumables for all three of our product groups increased in the quarter, with high double-digit growth from Grass as well.

Another highlight of the quarter was increased international sales, both from our branches as well as from our dealer network.

This, in spite of the unfavorable currency fluctuations.

Sales of our hardware for both Test & Measurement as well as Grass were down from the prior quarter as customers continue to be cautious about capital equipment spending during these recessionary times.

On a positive side, requests for quotation and demonstrations of both Test & Measurement and Grass products continue strong as our customers decide on equipment brands, but delay their outlays.

In general, the approval process for purchases of these types of products has been stretching out.

Our pipeline of pending negotiations and quotations is large and promises to bring home a steady stream of new orders as money becomes available.

We have increased sales of our ruggedized products in the second quarter as some of the new aircraft models begin to ramp up production.

We see this increasing even more in the second half of the year.

During the quarter, we also received new contracts for our ToughWriter printers, some directly with air carriers for both existing airplanes as well as new additions to their fleet.

We are looking to expand this segment of the business.

That is, selling directly to air carriers going forward.

As you may recall, up to this time, the majority of our airborne printer business has been directly with the manufacturers of the aircraft, such as Boeing and Airbus as well as their Tier 1 subcontractors.

During the quarter, we participated in several trade shows for our Grass product group, with the main one being the Big Sleep Show, 8TSS, which was in San Antonio, Texas.

Internationally we participated in EEG shows in Canada and Greece.

The general mood and expectations from these many shows is positive, as we not only get more exposure for our products, but we also learn of more budgets being approved for capital expenditures.

At each of these shows, we introduce our new TREA Ambulatory EEG, the most compact patient-worn device in the industry.

Typically a patient wears the TREA home for up to 72 hours.

When the unit is returned to the physician's office, the recording is downloaded to a PC and a diagnostic report is automatically generated with our proprietary software.

The TREA was received very well, and we expect good sales contributions in the second half of this year.

On the Test & Measurement front, we continue to make good headway with our new TMX Data Acquisition System.

We made major shipments of the product in the second quarter, and we continue to add new features to expand the markets for this system.

The TMX has both hardware and software options that expand the markets for the product.

In addition to our typical applications in aerospace and military monitoring, the TMX can be used in automotive testing, power plant troubleshooting, train and rapid transit investigations, mining, oil well logging, and many more.

As mentioned in the press release, QLS is completing the development of a major new color printer that will be introduced in the third quarter.

This product will replace our current Vivo!

printer.

Look for details of this new product in a press release in the coming weeks.

Meanwhile, we continue to sell off the current model inventory in preparation for the transition.

Additionally, we have many other models of our color printers that fulfill many of our applications.

These models include inkjet as well as thermal transfer technologies.

One of the hottest new applications for these products is for GHS labeling, to meet a new requirement for labeling chemicals.

GHS stands for Globally Harmonized System for classification and labeling of chemicals, and becomes mandatory for shipping pure chemicals into Europe as of December 1, 2010, this year.

GHS labels require color coding to meet the requirements for identification of chemicals.

QuickLabel Systems is one of the few companies in the world that has products to meet these requirements.

Sales for GHS applications are beginning to ramp up from customers around the world.

On the research and development front, we are taking actions to pick up the pace of new product introductions.

Products that will take us to new levels of growth.

In addition to our present engineering staff, we in addition to adding, I should say, to our present engineering staff, we are also looking to outsource development to hasten the introduction of important new products that are the lifeblood of our growth.

With regard to acquisitions, we continue to search for targets that will fit within our present technical, manufacturing, and marketing expertise.

Companies that would tuck right in with our existing product groups.

Albert?

Thank you very much.

Thank you very much, Everett.

And now for a report by the CFO.

Joe?

Thank you, Albert.

Good morning, everyone.

I am very pleased to share with you this morning Astro-Med's financial results for the fiscal second quarter ended July 31, 2010, and the financial results for the first six months of our fiscal 2011.

As you heard, the sales revenues in the second quarter were $17,753,000, representing a 4% improvement over the first quarter sales as well as the 8.1% better than the prior year sales in the second quarter.

Sales through our domestic channels were $12.6 million, representing a 7.5% increase over the previous year's domestic sales in the second quarter.

International shipments were [$5.2 million] in the quarter, accounting for 29% of the company's total sales and exceeded last year's second-quarter sales volume by some 9.8%.

Foreign currency exchange losses did temper that growth by approximately $227,000.

We profiled the quarter sales by product group.

As you heard, the QuickLabel Systems had second quarter in a row at $10 million.

A very strong performance with a 24% increase over the prior year and, as you heard, with double-digit sales growth both in terms of the hardware printer line, as well as the consumable line.

Sales on our Grass Technologies product group were $4 million in the quarter.

That's an improvement over the first quarter sales by slightly -- but unfortunately it is still 8.2% behind the prior year sales of Grass Technologies in the second quarter.

The Test & Measurement product group of data acquisition and ruggedized products posted sales of $3.6 million in the quarter.

That is an improvement over the first-quarter sales of $3.2 million.

However, still behind the previous year's second-quarter sales of $3.9 million.

The sales shortfall there was just limited to data acquisition as the ruggedized product line reported double-digit growth rate over the prior year sales.

The second-quarter sales generated gross profit dollars of $7,024,000.

That reflects a gross profit margin of 39.6% to the quarter.

This margin is lower than the prior year's second-quarter gross profit margin of 42.3%, outgrowth more [of it] related to product mix and manufacturing cost.

Operating expenses spending in the secondary accounts of selling, R&D, and G&A rose 6.8% from the previous year to $6.5 million.

Increased spending was confined primarily to selling and marketing initiatives.

The Company earned $548,000 in the operating income in the quarter, providing an operating margin of 3.1% on sales.

On a comparative basis, the prior year's operating income was $886,000 with a 5.4% margin on sales.

Our federal and tax -- our federal state tax provision in the second quarter was $224,000, which represents an effective tax rate for the year of 41%.

Astro-Med earned $323,000 in net income for the second quarter equating to $0.04 per diluted share.

This quarter's net income was lower than the prior year's second-quarter net income of $585,000 with an earnings per diluted share of $0.08.

At the halfway mark for fiscal 2011, the Company's sales are at $34.8 million.

That is a 12% increase over the prior year's first six months.

Our gross profit dollars were $13.9 million, up 9% over the previous years and realizing a gross profit margin of 39.9%.

Operating expenses of selling, R&D, and G&A were $12.7 million for the first two quarters, representing a 3% increase over the prior year.

The operating income for our six-month period is $1.2 million with a margin on sales of 3.4%.

This year's results is (sic) a sharp improvement over the previous year's operating income of $426,000 with a corresponding margin of 1.4%.

This year, the Company has earned $753,000 in net income for the first six months of fiscal 2011, with a resulting earnings per diluted share of $0.10.

For the prior year, year-over-year period, net income was $354,000 or $0.05 per diluted share.

Just a quick look at the balance sheet.

Our cash and marketable securities stood at $21.9 million at the end of the second quarter.

That is a 1.8% decrease from the year-end balance, primarily related to capital expenditures as we expanded our manufacturing capabilities here in West Warwick, as well as investments in machinery and equipment.

Accounts receivables rose 10% to $950,000 to $10.1 million at the end of the quarter, representing some 50 days sales outstanding, just slightly up over the year-end DSO of 49 days.

Inventories increased 13% to $13.6 million, representing a turnover of 2.8 times or 130 days of inventory on hand.

During the first six months, we paid $1 million in dividends at the rate of $0.07 per share per quarter or $0.14 per share for the two quarters ended.

Our shareholders equity remained virtually flat with the year end at $53.7 million or some $7.32 per share.

And our employee population at the end of the second quarter remained flat with the year-end balance of 424 employees.

Albert, that covers the financial review.

Thank you, Joe.

Before we take questions, I want to give our revised guidance for the year.

For the year, we believe revenues will run between $69 million and $71 million and earnings per share will range between $0.24 and $.28 per share.

We are now ready for questions, John.

(Operator Instructions).

Mr.

Berger, we have no questions at this time.

Please continue.

Okay it there are no questions we will ask you to return to visit with us when we report our third quarter, which will be in mid October.

Thank you very much for hearing us out today and we will be talking to you soon.

Ladies and gentlemen, this concludes the conference call for today.

Thank you for participating.

Please disconnect your lines.