Astronics Corp. (ATRO) filed Quarterly Report for the period ended 2009-10-03.
Astronics Corporation is a manufacturer of specialized lighting and electronics for the cockpit, cabin and exteriors of military, commercial transport and private business jet aircraft. A major lighting and electronics supplier to the aircraft industry, its strategy is to expand from a components and subsystems supplier to an aircraft lighting systems integrator, increasing the value and content it provides to various aircraft platforms. Luminescent Systems Inc. is Astronics' primary operating subsidiary which produces its aerospace and defense products. Astronics Corp. has a market cap of $90.1 million; its shares were traded at around $8.36 with a P/E ratio of 8.6 and P/S ratio of 0.5.
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On January 30, 2009, the Company acquired 100% of the common stock of DME. The purchase price was approximately $50 million, comprised of approximately $40.7 million in cash, 500,000 shares of the Company’s common stock held as treasury shares, valued at $3.6 million, or $7.17 per share, a $5.0 million subordinated note payable to the former shareholders plus an additional contingent $2.0 million subordinated note payable, subject to meeting revenue performance criteria in 2009. The $2.0 million note will not be paid should DME fail to attain the agreed upon 2009 calendar year revenue performance. At October 3, 2009, the Company believes the probability of achieving this revenue target is remote, as such the Company has valued the note at zero, its estimated fair value. DME is a designer and manufacturer of military test training and simulation equipment and aviation safety products. The aviation safety products are included in the Aerospace segment. The test training and simulation equipment products comprise the Test Systems segment.
Consolidated sales for the third quarter of 2009 increased $8.2 million or 20.4% to $48.6 million compared to $40.4 million for the same period last year. The acquisition of DME in January of 2009 added $14.1 million to the 2009 third quarter sales. Excluding DME revenue, organic revenue for the quarter decreased by $5.9 million or 14.5% from $40.4 million to $34.5 million. The lower organic sales were offset by the addition of the DME sales totaling $14.1 million. The lower organic sales were a result of reduced demand for our products caused by reduced business jet build rates and reduced spending by global airlines for cabin upgrades that include our cabin electronic products somewhat offset by increased sales to the military aircraft market for a variety of programs. During the third quarter of 2008 the Company had sales to the now bankrupt Eclipse Aviation totaling $1.5 million. There were no sales to Eclipse Aviation Corporation in the third quarter of 2009.
The 2009 third quarter and 2009 year to date other (income) expense includes income of $0.1 million and $1.0 million respectively, relating to a fair market value adjustment to the contingent $2.0 million subordinated note payable to the former DME shareholders. This adjustment reduced the carrying value of the note to zero, its estimated fair market value as of the end of the third quarter of 2009. The estimated fair value is based on the Company’s estimate at the end of the third quarter of the probability that DME will meet the revenue performance criteria required by the note. This adjustment to the estimate, net of tax increased net income by $0.1 million or $0.01 per diluted earnings per share for the three months ended October 3, 2009 and $0.7 million or $0.06 per diluted earnings per share for the nine months ended October 3, 2009.
Net income for the third quarter of 2009 was $2.5 million or $0.23 per diluted share, an increase of $0.1 million from $2.4 million, or $0.22 per diluted share in the third quarter of 2008. Year to date net income was $5.9 million or $0.53 per diluted share, a decrease of $4.2 million from $10.1 million or $0.95 per diluted share. The earnings per share decrease is due to a combination of the decrease in net income and the issuance of 500,000 shares of treasury stock related to the acquisition of DME on January 30, 2009.
During the third quarter of 2009, Aerospace Segment sales were $39.0 million, a decrease of $1.4 million, or 3.5%, from $40.4 million in the 2008 quarter. Organic sales decreased by $5.9 million or 14.5% to $34.5 million from $40.4 million. Sales to the military aerospace market increased $1.6 million, or 21.8%, and sales to the FAA/airport market, which is part of the acquired DME business, were $2.6 million in the third quarter of 2009. Sales to the commercial transport market declined $3.5 million, or 13.7%, and business jet market sales were off $2.1 million, or 29.9%, compared with the 2008 quarter. Sales to the business jet market from the DME acquisition during the 2009 third quarter totaled $0.5 million. Sales to the commercial transport market from the DME acquisition during the 2009 third quarter totaled $1.3 million. Sales for our business jet and commercial transport markets have been negatively impacted by reduced business jet production rates and reduced spending by commercial airlines for cabin upgrades that utilize Astronics cabin electronics products. Additionally, the third quarter of 2008 included sales to the now bankrupt Eclipse Aviation Corporation totaling $1.5 million. There were no sales to Eclipse Aviation in the third quarter of 2009.
For the year to date 2009 Aerospace Segment sales were $119.0 million, a decrease of $10.3 million, or 8.0%, from $129.3 million. Sales to the military market increased $5.3 million, or 22.0%, and sales to the FAA/airport market, which is part of the acquired DME business, were $6.0 million. Sales to the commercial transport market declined $11.8 million, or 15.1%, and business jet market sales were off $9.8 million, or 36.8%, compared with 2008. Sales for our business jet and commercial transport markets have been negatively impacted by reduced business jet production rates and reduced spending by commercial airlines for cabin upgrades that utilize Astronics cabin electronics products. Additionally, year to date 2008 included sales to the now bankrupt Eclipse Aviation Corporation totaling $8.4 million. Sales to Eclipse in 2009 were not significant.
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