Business Context and Reporting Period
Company: Astronics Corporation
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Fiscal quarter and six months ended June 30, 2001
Business Segments: Aerospace-Electronics (specialized lighting and control systems for aircraft; electroluminescent lamps) and Printing-Packaging (custom folding cartons and printed office products).
Key Financial Metrics
| Metric | Six Months Ended June 30, 2001 | Six Months Ended June 30, 2000 | Three Months Ended June 30, 2001 | Three Months Ended June 30, 2000 |
|---|---|---|---|---|
| Net Sales ($000s) | $41,867 | $31,251 | $21,944 | $16,101 |
| Net Income ($000s) | $2,685 | $2,126 | $1,479 | $1,118 |
| Earnings Per Share (Diluted) | $0.40 | $0.32 | $0.22 | $0.17 |
| Gross Profit Margin | 23.5% | 24.2% | 23.6% | 25.2% |
| EBIT Margin | 10.9% | 10.6% | 11.7% | 11.3% |
| Cash from Operations ($000s) | $3,802 | $(1,001) | N/A | N/A |
| Total Debt ($000s) | $17,621 | N/A | N/A | N/A |
| Cash and Equivalents ($000s) | $2,236 | $621 | N/A | N/A |
Note: Total Debt includes current maturities of long-term debt ($1,164) and long-term debt ($16,457) as of June 30, 2001.
Material Changes vs. Prior Period
- Revenue Growth: Net sales increased 34% year-over-year for the six-month period and 36% for the quarter. Aerospace-Electronics sales rose 43% in the quarter, driven by the F-16 program and the full inclusion of the Montreal acquisition. Printing-Packaging sales increased 23.6% for the quarter.
- Profitability: Net income increased 26% year-over-year for the six-month period. While gross profit margins declined slightly (1.6% for the quarter) due to rising costs in energy, freight, and healthcare, EBIT margins improved to 10.9% for the six-month period.
- Cash Flow: Operating cash flow turned significantly positive, generating $3.8 million in the first half of 2001 compared to a use of $1.0 million in the same period in 2000.
- Balance Sheet: Cash balances increased from $45,000 at year-end 2000 to $2,236,000 at June 30, 2001. Total debt decreased slightly due to scheduled repayments.
Guidance, Outlook, and Risks
- Backlog: Total backlog stands at $42 million ($40 million Aerospace-Electronics; $2 million Printing-Packaging). Approximately $21 million of the Aerospace backlog is scheduled to ship by year-end 2001.
- Liquidity: The company maintains a $12 million revolving line of credit, with $3.4 million utilized as of June 30, 2001. Management believes current cash and credit availability are adequate for 2001 requirements.
- Market Risk: Interest rate risk exists on approximately $17.5 million of floating-rate debt. A 1% change in rates would impact annual net income by less than $100,000. Currency risk is minimal as most sales are in U.S. dollars.
- Accounting Changes: New FASB standards (No. 141 and 142) regarding goodwill will be effective in 2002. This is expected to increase net income by approximately $170,000 annually by eliminating goodwill amortization, though impairment testing will be required.
- Cost Pressures: Management notes difficulty in passing through increased costs for energy, freight, and healthcare to customers in the current economic environment.
Investor Verification Checklist
- Verify the sustainability of the F-16 program production levels driving Aerospace-Electronics growth.
- Monitor gross margin trends given the stated inability to fully pass through rising operational costs.
- Confirm the timing of the $21 million Aerospace backlog shipments scheduled for the remainder of 2001.
- Review the impact of the new goodwill accounting standards (FAS 142) on 2002 earnings and potential impairment charges.
- Assess the utilization of the $12 million revolving credit line against future capital expenditure commitments of approximately $3.5 million.