AstroNova Inc (ALOT) 2012 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by and welcome to the Astro Med Inc fiscal 2012 first quarter earnings release on today, the 18th of May 2011.

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'd now like to hand the conference over to your host, Mr.

Andy Berger.

Please go ahead, sir.

Thank you, Danny.

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 2012 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 these 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 the Company's website at www.astro-medinc.com where a copy of the press release can be downloaded from the Investment section of the Company's home page.

Hosting the call today are 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.

Pizzuti.

Thank you, Andy, and good morning, everyone, and thank you for joining our quarterly conference call.

With me this morning is Joseph O'Connell, our CFO and Senior Vice President.

Albert Ondis, our Chairman, is not here today.

We are very pleased with our performance for the first quarter as announced yesterday.

As a refresher, sales improved 10.4% and represents a record for first quarter revenues at $18.860 million and new orders also reached a record for our first quarter at $19.812 million, a 13.8% increase.

Joe will provide you with the full financial details.

I would like to provide you with some of the reasons why the quarter was good and why we were optimistic about the balance of the year.

Firstly, we made many important investments last year in accordance with our rolling three-year strategic business plan.

The investments include R&D spending on new product developments, which are the life blood of the Company.

New products for all of our markets contributed, including the new Vivo!

Touch color label printer, the TMX data acquisition system, and new Grass hardware and software.

Additionally, all of our investments in ruggedized products paid off as releases against existing contracts increased.

All of our product groups were up in sales compared to last year's quarter and international sales were up over 28%.

And yes, there was a favorable impact from the weak dollar, but it was small -- a small portion of our increase.

Higher product sales of hardware and consumables were the driver -- the main driver.

You will notice that our operating margins were down somewhat from last year.

The primary reason for this is some non-recurring investments in new product development and some minor restructuring charges that will not be seen in the second quarter.

Now, for full financial details, I will turn the microphone over to Joe O'Connell.

After his presentation, I'll provide updates on our guidance for the year and then we will take your questions.

Joe?

Thank you, Everett.

Good morning, everyone.

I'm very pleased to share the financial results of Astro Med's first quarter ended April 30, 2011 for this fiscal year 2012.

The Company's net sales in the quarter, as you heard, were $18.860 million.

That is a 10.4% improvement over the prior year's first quarter sales, as well as a 5.6% increase over the previous quarter sales of $17.857 million.

Our sales through our domestic channels reached $12.574 million in revenues and represent two-thirds of the total sales for the quarter and that increased 3.3% over the prior year sales.

International shipments were $6.286 million in the quarter representing, as Everett points out, the 28.2% increase over the previous year and representing a third of the Company's total first quarter sales.

Favorable foreign exchange, as you mentioned, did contribute $192,000 but it only represents a less than 4% increase over last year's international sales.

We had much success in our sales growth from all the Company's product groups.

QuickLabel systems line of color and monochrome digital printing systems achieved sales of $10.774 million in the quarter.

That's a 6.1% increase over the prior year.

The test and measurement product group, consisting of data acquisition systems and ruggedized printers and switches, reported sales of $3.749 million in the quarter.

That's an increment of 16.8% over the prior year, And lastly, the Grass Technologies product group, consisting of neurophysiological recording instruments and consumables serving the diagnostic clinical and the research market, reported sales of $4.337 million in the first quarter.

That's also a 16.8% improvement over the prior year's Grass Technology sales.

Relative to the composition of the product lines, the Company's consumable products accounted for 52% of the total first quarter sales.

Our gross profit dollars in the quarter were $7.5 million.

That's a 9.3% improvement over the prior year and reflects a margin of 39.8%, some 40-basis points below last year's gross profit margin of 40.2%.

The primary reason for the lower margins were some higher material costs that we incurred in the first quarter.

Operating expenses in the quarter were $6.9 million.

That's an 11.2% increase in spending over last year and consumed some $0.37 of the sales dollars, consistent with last year's $0.37 in the prior year sales dollars.

The increase was traceable primarily to selling and marketing initiatives, as well as a number of R&D research product development programs.

Operating income in the quarter was $557,000, reflecting an operating margin of 3%.

This result is lower than the prior year's operating margin of $622,000 with a related margin of 3.6%.

Other income in the first quarter was $150,000.

That's up from the previous year's other income of $107,000 and is due primarily to interest income, as well as favorable foreign exchange.

Our federal, state tax provision in the quarter was $276,000, displaying an effective tax rate of 39%, lower than the prior year's effective tax rate of 41%.

The lower rate this year is an outgrowth of the R&D tax credit, which is available to us in the first quarter of this year.

Net income in the first quarter was $431,000, being flat with last year and providing a return on sales of 2.3%.

On an earnings per share basis, the first quarter's EPS matched the prior year's EPS at $6 per diluted share.

A quick look at the balance sheet.

The Company's cash and marketable securities balance rose 2% to $21.100 million at the end of the first quarter.

The Company generated $1.4 million in operating activities related to the first quarter.

We improved the efficiency of the Company's working capital assets and accounts receivable by reducing the days outstanding by some seven days to 47 DSOs at the end of the quarter, as well as the inventory turnover by lowering our days-on-hand balance by 11 days to 113 days at the end of the first quarter.

We spent $443,000 in capital expenditures during the quarter, primarily associated with machinery and equipment additions, IT software and hardware, as well as tools, dyes and fixtures.

Our accounts payable balances rose slightly 1%, to be exact, to $2.8 million at the end of the first quarter.

We distributed $510,000 in cash dividends to shareholders at $0.07 per share and the Company's book value per share stayed flat with the year end at $7.49.

Our employee population declined by some 20 people during the first quarter to 403 people, as we continue to be able to lower the Company's breakeven.

Our sales per employee improved by some 4% to $174,000 per employee.

Everett, that concludes a review of the first quarter financials.

Thank you, Joe, and as we stated earlier, we are confident in the balance of the year based upon the widespread acceptance of our new products, as evidenced in the first quarter.

We continue to support annual sales of $78 million to $79.5 million and earnings of $0.33 to $0.35 per diluted share.

Danny, I think we're now ready for questions.

Thank you, sir.

(Operator Instructions).

The first question comes from Joe First.

Please go ahead with your question.

Hi, good morning gentlemen.

Good morning, Joe.

You seem to be making some progress but the bottom line is that you're still only bringing down less than 2% of your sales to net income and getting a very small return on your equity.

What are you doing to try to increase these numbers?

You just keep struggling along and getting your earnings a little bit better but your return on equity and your percent of sales income is just not acceptable.

What are you doing to try to get that better?

Well, as I think we mentioned we have -- we actually have lowered the breakeven, Joe, during the quarter.

Some of that will not get -- was not obvious in the first quarter, we'll see that in the second through the fourth quarter, and that would have an impact in terms of improving the bottom line.

We continue to look at the various costs of our business to continue to try to, as you say, bring out more profitability in the bottom line with the sales increase.

You should see that in the second through the fourth quarter as we continue to see some of these programs put in place.

Okay.

And with the ruggedized printer business, I guess with Boeing starting to get their airplanes actually manufactured is that business going to pick up and the other rugged printing business?

It looks like you're starting to get more orders on that.

Yes, the release is against those existing contracts, Joe, R&D picking up for both the 787 and some of the other contracts that we have, and that certainly contributed to our good sales in the first quarter and there's more of that to come as this year progresses.

As you know, we've mentioned before, we have well over $100 million in contracts of various aircraft people.

We don't have those contracts on the books in our backlog.

Instead, we put the release orders that we get throughout the year into our backlog, so our shippable backlog is pretty solid and we have a good picture of it for the next couple of years.

Good, and then how about the new printer?

How's that being accepted?

I guess you mean the Vevo Touch color printer and --

Yes.

Yes, that's very well accepted and contributed greatly to the hardware sales in the first quarter and we certainly look forward for that to continue as we go forward.

But we're continuing to add new features and enhancements to the Vevo Touch, new optional accessories, new higher software, so that'll continue to go on as the year progresses.

Okay, good.

Well, let me -- appreciate you're making some progress, but with the amount of sales you have and the equity, you've got to figure out some way to make a dollar a share or something, just to get a reasonable return on equity.

That's all I would suggest and I'll let somebody else ask questions.

Thank you very much.

Thanks, Joe.

That's certainly our goal and we hope to show you some improvement in the quarters to come.

Thank you.

Thank you.

The next question comes from Steve Busch.

Please go ahead with your question.

Hello, gentlemen.

Thanks for taking my call.

Good morning.

So just as a follow up to the last caller, which has pretty much covered my question, since last ten years we've gone from $49 million or so to $70 million, $80 million in sales -- $72 million or $73 million sales, right?

But our earnings have gone the exact opposite direction.

What's going to -- you talk about growing going forward but what's the -- can you add color to it to say how do we get to $0.40 a share like we were before, or $0.50 a share?

I just don't see how growing sales a lot without growing earnings is going to help the stock price at all, which is, obviously, what I'm interested.

And then as a follow up to that and then I'll let you answer your questions.

We've got over $20 million in cash.

We don't have a large R&D expense and I'm more worried about bad acquisitions than anything.

Obviously, you guys haven't done that so I'm not worried about it really with you, but why not pay out a $1 special dividend every time we get to this $20 million level?

And I'll take [myself] offline.

Okay, well as Joe mentioned, we are certainly trying to bring the -- and have indeed put a number of steps in place to bring the breakeven down so we can get our earnings up.

So coupled with the increased revenues that we're expecting to get in the quarters to come and a lower breakeven point, we're going to be driving that earnings per share up.

Certainly we need to get -- we have enough infrastructure in place now to support a higher sales level than we have right now, so as we continue to bring that top-line revenue growth, more of it will drop down into true earnings per share.

So you're definitely going to see some positive steps going forward in this year.

With regard to the $20 million in cash, yes, we've had that kind of a request from time to time, Steve.

Either a special dividend or increase the dividend and those things are always under consideration with the board.

Does that answer your question?

Thank you.

The next question comes from Sam Rebotsky.

Please go ahead with your question.

You had your annual meeting yesterday.

How'd that go?

The meeting went quite well, Sam.

In addition to the typical employees, we had a number of our investors from across the country from California, New York, and other parts, and so in general it was a solid meeting.

Okay.

Now did you say your projection is $0.33 to $0.35?

That's correct.

When you look at the annual report it has $0.33 to $0.37.

Is this the change, this reduction, or what's the -- could you clarify that?

I don't think we had that in the annual report.

You might want to take another look at it.

No, I have it in front of me.

The guidance really, I think there is -- it was really to -- it gave in the first quarter, Sam, was basically $0.33 to $0.35 given by Mr.

Ondis.

Right, right.

And the -- is the sales $78 million to $79 million?

That is correct, that is correct.

Okay.

$78 million to $79.5 million.

That is correct.

Yes, okay.

So was there -- somehow I guess the refinement of the range based on anything that occurred in the first quarter or --?

No, I think we're just -- I think we're still very positive that the low end is the $0.33, so that the -- upside obviously, as you say, perhaps could be at $0.35 and hopefully we're even better than that.

But I think the important thing is we're reaffirming that the range is in the $0.33 to $0.35 range.

Okay, and did we buy any stock in this current quarter?

I'm sorry?

In the first quarter, no, we did not buy any -- we did not buyback.

We still have authorization for 254,000 shares as currently board approved.

And what is the backlog currently?

It's just shy of $8 million, Sam.

Okay, so that increase from the January 31, is that attributable to new business or anything that we didn't ship that we wanted to ship, or how do --?

Yes.

No, it's mainly new business -- primarily new business.

We typically ship just about everything we can ship every month, every quarter, so the bulk of that is new business, either releases against the contracts that I mentioned earlier, but simply new orders for our equipment and consumables.

Do we see the Boeing business picking up, are they open to receive our product?

Yes, they are.

If you're talking about for the 787, yes.

Yes, they're beginning to take printers because don't forget they're going to be making their first deliveries of the 787 in the third quarter and they need to have our printers long before that takes place, so we are shipping 787 printers.

As Steve said and referred to the acquisitions I guess you have not made any bad acquisitions because you haven't been making acquisitions other than a little bolt-on, so to say.

Are you seeing things or are you just -- everything is too expensive or could you talk about what you're seeing or are you looking at things?

Yes, there are always one of two targets in front of us, either things we've gone after or things that people have brought to us.

Right now there are a couple of small targets that are of interest to us and we're continuing to study them and our decisions are not simply made on price but on how well they fit in with exactly what we're doing now, our markets, our manufacturing capabilities,.

And so if those things are all in synch, then we take a closer look.

And so as I say, we have one or two targets that we're looking at right now.

Okay, okay.

All right.

So everything else is going according to your plan?

You've reduced -- do you expect to reduce any more employees or you're pretty much at range now that you need to be?

Well, we continue to look at the cost structure.

I don't think we're ever finished in terms of making sure that we got the right cost structure for the business to be able to, as you say, realize the earnings on a bottom-line basis, so that becomes an ongoing process for us to continue to challenge whether it's appropriate or not.

And in order to get these higher earnings numbers, what do you have to do to get to higher earnings?

Is it cost structure, is it higher prices for the product or it's just more sales?

What is -- what do you see as the -- that's going to give you a shot to break through to achieve the earnings you'\ were doing before?

Well, I think that Everett mentioned that one of the things is really the growth.

We've really got -- the top line can provide a terrific opportunity to absorb a lot of the fixed costs that we have in our factory to be able to go ahead and reach the earnings improvement.

But I think in concept with us continuing to go and challenge the cost of our business, all parts of the business, I think those two factors are going to really be the primary drivers for us to be able to improve the earnings on the bottom line and that continues to be the goal that we have as management in terms to try to grow the business.

I hope you achieve your goals.

Good luck.

Give my best to Albert.

Thank you.

Thank you, Sam.

Thank you.

The next question comes from Dennis Scannell.

Please go ahead with your question.

Yes, good morning, gentlemen.

Good morning, Dennis.

Good morning, Dennis.

Just a quick question.

There was some comments on some non-recurring expenses, I think on the sales and marketing side and maybe even some restructuring costs.

Can you give us a sense of how large those were?

Yes, I think order of magnitude that's probably -- if I add up all the beans probably around $225,000.

Okay, and --

And it was -- most of that was really related to a development effort in terms of we have new products under development that most of that is related to that.

The severance, a piece of that was relatively a smaller piece of the total.

Oh, okay.

So on an ongoing basis we wouldn't expect to have that $225,000, but we're --?

That's correct, that is right, and on non-recurring, that is correct.

And then -- and in terms of the savings on the headcount side, can you quantify that, that would be, I think, incremental to that?

It should be.

We think that we're probably looking at on an annualized basis maybe -- order of magnitude maybe about $500,000.

Okay, that's great.

Terrific, thank you.

That was it for me.

Okay, thank you, Dennis.

(Operator instructions).

We do not appear to have any further questions.

Please continue with any points you wish to raise.

Okay, thank you very much for attending this mornings call and we'll talk to you again next quarter, in August.

Thank you very much and bye-bye.

Bye now.

Ladies and gentlemen, this concludes today's presentation.

Thank you for your participation and you may now disconnect.