AstroNova Inc (ALOT) 2012 Q2 法說會逐字稿

Good day, ladies and gentlemen.

Thank you for standing by.

Welcome to the Astro-Med, Inc.

fiscal 2012 second-quarter earnings release conference call.

During today's presentation all parties will be in a listen only mode.

Following the presentation the conference will be open for questions.

(Operator Instructions).

This conference is being recorded today, Wednesday, August 24, 2012 (sic - see press release).

I would now like to turn the call over to Mr.

Stanley Berger.

Go ahead sir.

Thank you, Joan.

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 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 will 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 risk and uncertainty.

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 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 Everett Pizzuti, President and CEO, and Joe O'Connell, Senior Vice President, Treasurer and CFO.

Now I will turn the call over to Mr.

Pizzuti.

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

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

As publicly announced yesterday, we achieved an all-time high for quarterly sales at $20.3 million.

And what is particularly pleasing is that we achieved solid double-digit increases in revenues and earnings, with sales from all of our product groups up double digits.

And in total domestic sales were up over 13%, with our international sales up over 17%.

Our profitability improved over the prior year with our operating margins nearly doubling, reflecting some of the actions that we have undertaken to generate more profits as the Company continues to grow.

Joe O'Connell will provide the full financial details behind this growth in a few moments.

Meanwhile, I want to take a moment to express our sadness for the passing of Albert Ondis, the Founder of Astro-Med, on July 1 of this year.

As the new CEO of the Company I am reviewing all of our goals, objectives, staffing and strategies with the objective of making whatever changes that are needed to continue the global growth of Astro-Med to new levels of sales, revenues and profitability.

In addition, to the general objectives of growth by both organically and through acquisition, we are challenging all of our operations to improve the performance of the Company.

This includes in-depth review of products, markets, operating expenses and associated staffing.

Specifically in the area of corporate governance, we're happy to announce today the appointment of Mitch Quain to our Board of Directors.

Mitch brings us a tremendous background in manufacturing and financial experience to help direct Astro-Med to our new goal.

Our plans are to add an additional outside Board member as well.

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

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

Joe.

Thank you, Everett.

Good morning everyone.

I am very pleased to share with you Astro-Med's second-quarter and six-month financial results for the current fiscal year 2012.

As you heard from Everett, and perhaps maybe read in the press release, Astro-Med did achieve a record sales in the second quarter.

Our revenues reached $20.3 million, representing a 14.5% improvement over the previous year's second quarter and approximately 8% increase over the first quarter sales of fiscal 2012.

The Company experienced healthy sales growth from both the domestic customers as well as the international customer base.

Domestic sales were $14.3 million.

That is a 13% increase from the prior year's second quarter domestic volume, while international shipments at $6.1 million, and representing 30% of our total sales, increased 17.7% over last year's comparable quarter.

Favorable foreign exchange rates accounted for about half of the international growth.

The second quarter's double-digit sales growth was shared by all the product groups, as you have heard.

The QuickLabel Systems line of digital color and monochrome printers and consumables at $11.2 million were up 11.2% from last year.

Our Test & Measurement Product Group of ruggedized printers and switches and data recorders reported sales of $4.5 million in the quarter.

That is up 23.7% from the prior year, as demand for the Avionic printers was especially strong in the quarter.

Lastly, the Company's Grass Technologies product group line of neurophysiological recording instruments, software and supplies reported sales of $4.6 million, and an increment of 14.6% over the previous year.

Our gross profits in the second quarter were up $7.9 million.

That is a 12.5% improvement over the prior year's second-quarter gross profit and reflect a margin of 38.9%.

That is some 70 basis points below last year's margin of 39.6%.

Product mix, higher raw material costs and manufacturing cost accounted for the lower margins.

Operating expenses rose 3.1% over the previous year to $6.7 million, and represents approximately $0.33 of the second quarter sales dollar.

That is an improvement over the first quarter, which was $0.37 to the sales dollar, and last year's comparable second quarter, which was $0.36 of the sales dollar.

This year's increased spending was over the previous year was confined to sales personnel and research and development and outside testing.

Operating income in the quarter was $1.2 million, more than double last year's second-quarter operating income of $548,000, and generated operating margin, as you heard, of 6% against last year's operating margin of 3.1%.

Other income of $297,000 was achieved in the second quarter with the amount dominated by the recovery of $300,000 in insurance proceeds on a key man life insurance policy.

The Company's effective tax rate in the quarter was 31%, lower than the -- last year's effective tax rate of 41% -- this quarter's lower tax rate being traceable to the tax-free status of the insurance income.

The Company earned $1,046,000 in net income for the second quarter and achieved a GAAP-based earnings per share of $0.14 per deluded share.

On a non-GAAP basis, and excluding the one-time benefit of the insurance proceeds, net income for the quarter was $746,000 or $0.10 per diluted share.

On a comparative basis the previous year's -- on a comparative basis for the previous year the non-GAAP net income is up 131% over the prior-year income of $323,000, and a $0.06 improvement on an earnings per share basis against last year's reported $0.44 for the second quarter.

Prior to profiling the balance sheet a quick review -- a recap, rather, of the operations at the halfway mark of fiscal 2012 is as follows.

Our net sales for the six-month period, the $39.2 million.

That is $4.4 million up over last year, representing a 12.5% increase in sales volume.

All three segments have contributed to this year's growth, with QuickLabel Systems up approximately 9%; Test & Measurement up about 21%; and Grass Technologies up 15.6%.

Our gross profits are up 11% over last year at $15.4 million, providing a margin of 39.3% against last year's 39.9%.

Operating expenses for the first six months are up $7.1 million to $13.6 million, consuming $0.35 of the sales dollars, an improvement over the prior-year's spending level of $0.37 on the sales dollar.

The Company's operating income is up 52.1% this year at $1.8 million, and reflects the margin of 4.5% against the prior-year's margin of 3.4%.

Net income on a GAAP basis for the six-month period is $1.5 million, equivalent to an earnings per share of $0.20 per diluted share.

On a non-GAAP basis it is $0.16 per diluted share.

During the previous year the first six months, net income was $753,000 or an earnings per share [of about] $0.10 per diluted share.

Relative to the balance sheet, Astro-Med's financial position remained healthy at the end of the first half.

Cash and marketable securities were at $20.2 million.

Our accounts receivable balances rose 12.5% from year-end to $12.5 million at the end of the second quarter, or some 55 days sales outstanding.

Inventories declined almost 4% to $13.9 million, reflecting 101 days upon hand.

The Company has spent $631,000 in capital expenditures so far this year related to machinery and equipment, information technologies, tools and dies.

Astro-Med has also paid $1 million in cash dividends for the first two quarters at the rate of $0.07 per share per quarter.

The Company's book value also improved at the end of the second quarter to $7.54 per share.

That is up from year-end $7.32 per share.

Lastly, our sales per employee have also improved by some 10% to $182,000 per employee against last year's rate of $165,000 per employee.

That covers the financial review of the second quarter.

Everett.

Thank you, Joe.

We continue to be confident in the balance of the year, with strong contributions from all of our products and markets, and especially our color printers, our aircraft printers and our medical diagnostic products for EEG and sleep.

We certainly faced the challenge of the global economic environment, but feel that both our unique products, as well as our strong distribution channels around the world, position us well to achieve our goals.

As stated in our press release, we are affirming our guidance of sales from $78 million to $79.5 million, and EPS from $0.35 to $0.38.

This does not include the one-time insurance benefit of $0.04 that we had recognized in the second quarter.

And now, Joe, we are ready to take any questions.

Ladies and gentlemen, we will now begin the question and answer session.

(Operator Instructions).

Joshua Zable, WJB Capital.

Congrats guys on a great quarter here, and thanks for taking my questions.

I just wanted to -- more color into the Grass business, if you don't mind.

Obviously, pretty nice growth there, 15%.

I know you commented sort of EEG and sleep.

I was wondering if you could give us color sort of, A., on which business is -- I know, obviously, they're overlapping, but if there is anything in particular driving that business, the strength in the business?

And talk about your end market there.

Obviously, a lot of questions about health care and whatnot.

Any color it would be helpful.

Thank you guys very much.

What is driving the business is the fact that we have gradually been improving our products.

One of the main ingredients of all of the Grass modalities is the software.

And we have spent a lot of time and money on improving that software to the point where it is equal to or better than anything out on the market.

That coupled with the excellent hardware that Grass has always been famous for gives us probably the best offering on the market.

With that in mind, we have introduced a couple of smaller products during the quarter.

We introduced an ambulatory EEG device.

And that, along with these fine new products, has driven our sales in both -- in all modalities, EEG, sleep and even long-term epilepsy monitoring.

And So we're quite confident of our position going forward, because of the great acclaim that our products have achieved throughout the world.

And these achievements are not just in the US, but they're also internationally in Europe as well as in Asia.

Great.

Then just looking forward, again, you alluded to sort of being confident going forward.

Just talking to your customers as far as their spending these days, and sort of looking forward, you obviously have some new products coming out.

Does it seem like the momentum is continuing through this quarter so far, obviously, without giving out -- anything away or is there any pause in the spend?

Thank you, guys.

I would have to say in general the level of momentum is about the same.

We are getting good inquiries.

We're doing a fair number of quotations and proposals, which would result in contracts in the coming weeks and months.

So on that basis we can say it looks like it is going to continue.

Great, very helpful, congrats again, guys.

Thanks a lot.

Joe Furst, Furst Associates.

Good morning, gentlemen.

Congratulations on your progress in the quarter.

You're starting to make some decent progress.

Can you expand a little bit on the ruggedized printer business in the airlines?

I know you have this multimillion dollar backlog over the next few years.

What has been going on with that in the last quarter or so?

That has been going very well, Joe.

As you know, we have been saying that we have over $100 million in contracts, but of course, we don't book those contracts until we get release orders.

And the release orders have been coming in very steadily, and so as they come in we book them as new orders.

And of course, we are also getting good releases now to ship these things, as some of the aircraft that we are -- new aircraft that we were initially in begin to go into production.

So we are now, yes, shipping quite a few printers for the A380.

We are shipping printers for the 787 and a number of other contacts that we have, some of which we can announce, some of which are confidential.

So we're very happy with the progress of the ruggedized products, and they're growing high double-digits so far this year.

Thank you.

And how about the TiVo area in the specialized printing and printing area?

I know you were very high on this new machine and so on.

How is that going and what is the outlook look like there?

Was that the Vivo!?

Is that what (multiple speakers)?

Yes, the Vivo!

I'm sorry.

The Vivo!.

Yes, the Vivo!

continues to do well.

We have shipped lots of Vivo!'s in the second quarter, and we expect that trend to continue.

It is a very -- it is a well-accepted product, and of course, that is what drives our consumable business.

So the more Vivo!'s we can put in there in the field, the more that consumable business for labels and inks and toners will continue to grow.

So we're very pleased with the progress of our color label printers and we see that continuing.

Thank you.

Steve Busch, Southpaw Investments.

Great quarter.

So my question was kind of answered, but just to follow up on the ruggedized products and the cockpit printers.

So of your $100 million backlog in this quarter that just ended, has that been drawn down significantly or did it get added onto?

Do you break out that going forward?

We have added additional contracts over the past couple of quarters.

We haven't announced them publicly anymore because most of these new contracts are -- have confidentiality clauses.

But we are well over $100 million in contracts on hand.

And as I say, the pace of the releases against those contracts is what is giving us these nice sales.

Right.

So you've got the 787 Boeing, just -- I think just received an order for 100 planes for a smaller regional jet.

And I think just got the contract for a military tanker, correct?

Do your printers go into those?

Well, we go into quite a few.

As I say, I can't mention all of them, but certainly we go into a lot of the Boeing models from the 787, 777, 747.

We're in most of the Boeing models, and likewise we are in several of the Airbus models starting with the A380 and down to the 330 and the 320 Series.

So our printers are on all of those aircraft.

So should you see the pace of the growth rate for these sales increasing intensely over to the next nine months, a year, much more than even just this past quarter?

Yes, it is progressively -- the cockpit printers have been growing more than the prior quarter as these contracts -- as these planes go into production, and as the airlines refurbish planes.

You're always -- currently you're seeing some announcements about various airlines purchasing upgrades for their aircraft.

So a lot of our printers go into these upgrades.

So it is not just the new aircraft, but now we're also dealing with upgrades to existing aircraft.

That's great.

Joe, could you comment on what the free cash flow was for the quarter, the dollar amount?

It was down about $400,000.

About $400,000?

Yes.

Okay, perfect.

Thank you very much.

Great job, guys.

(Operator Instructions).

Gentleman, it appears there are no further questions at this time.

I will turn it back to you for any comments.

All right.

Well, thank you very much everyone for attending, and we will talk to you again sometime in November.

Bye-bye now.

Bye now.

Ladies and gentlemen, that does conclude your call for today.

Thank you for your participation and for using ACT Conferencing.

You may now disconnect.