Astronics Corp. shares tumbled Thursday after the East Aurora aircraft lighting and electronics manufacturer's third-quarter profits plunged 41 percent.
Astronics blamed the lower earnings on higher engineering and development costs, along with increased manufacturing expenses, while executives said a drop in third-quarter orders was due to the financial struggles of a customer that makes business jets.
"This should not be interpreted as a sign that the market is tanking," said Peter Gundermann, Astronics' president and chief executive officer.
"We don't feel that way at all," he said. "It's not a situation where customers are canceling orders because of general economic conditions."
Astronics profits fell to $2.4 million, or 22 cents per share, from $4.1 million, or 38 cents per share, a year earlier. Sales rose 7 percent to $40.4 million from $37.7 million as revenues grew from Astronics' cabin electronics systems and its military sales, offsetting a drop in business from the products it makes for Eclipse Aviation's business jets.
Astronics said it expects sales to rise by about 11 percent this year to around $175 million, or toward the lower end of its earlier estimates.
Astronics shares, which have lost two-thirds of their value this year as the company's once rapid sales growth has cooled, fell $0.38 to $12.80.
The company did not offer a sales or earnings forecast for 2008, but Gundermann said he is not expecting the slowing economy to quickly lead to lower aircraft production rates. "Our indications from our customers are that we can expect more of the same, at least for the foreseeable future," he said.
Analysts peppered Astronics executives during a conference call about the company's relationship with Eclipse, a struggling business jet manufacturer that has cut production forecasts for its six-passenger Eclipse 500 jet as it has cut its work force by more than a third.
"It sounds like Eclipse is really going to struggle to stay alive," said Michael Ciarmoli, an analyst at Boenning & Scattergood.
Eclipse's struggles led to a $3.6 million drop in Astronics' order third-quarter order bookings, which slid by 8 percent to $30.8 million from $33.3 million a year ago. Eclipse, which did slightly more than $8 million in business with Astronics this year, also owes the company about $2 million.
"We're holding them to pretty tight credit terms, where for every dollar we ship to them, they pay us about $2," Gundermann said. "So we're nibbling away" at Eclipse's bill.
At the same time, Astronics' earnings continue to be hurt by the company's increased spending on engineering and development projects associated with new aircraft that are being developed. Engineering and development spending rose 46 percent in the third-quarter to $5.7 million.
"It's really critical, when these new programs come to market, to get on them," Gundermann said. "You can't get on them once they're developed."