A spike in acquisition-related inventory expenses led to a 12 percent drop in Astronics Corp.’s first-quarter profits, even though the four companies the East Aurora firm has purchased during the past year helped boost its sales by 91 percent.
Astronics executives blamed the lower profits entirely on an $8.7 million expense the company absorbed during the quarter to account for the value of inventory it acquired through the acquisitions. That expense cut Astronics’ profits by 30 cents per share and wiped out what otherwise would have been a nearly 50 percent increase in its earnings per share.
Peter Gundermann, Astronics’ president and chief executive officer, described the first-quarter as a strong one, with sales from the company’s existing businesses rising by 11 percent.
The company also said it is hiking its sales forecast for this year by about 5 percent, to between $625 million and $660 million, up from its earlier guidance of $585 million to $640 million, mainly because of a 34 percent increase in order bookings during the first quarter.
“That gave us a record backlog as we entered the second quarter and put us in a good position” for the rest of the year, Gundermann said in a statement.
Astronics said its profits dipped to $7.5 million, or 40 cents per share, from $8.6 million, or 47 cents per share, a year earlier, as the inventory write-up cost the company $8.7 million before taxes.
The company’s sales jumped to $141 million from $74 million, with acquisitions contributing $59 million toward the increase.
Astronics’ aerospace business, which accounts for 87 percent of the company’s revenues, increased its sales by 71 percent to $122 million, mainly because of three acquisitions made over the past year. Sales at Astronics’ existing aerospace operations grew by 13 percent.
Despite the steep increase in sales, operating profits at the aerospace business grew by 22 percent to $17.5 million as the company increased its research and development spending by $1.3 million and the inventory write-up increased the unit’s expenses.
The company’s test systems business lost $1.7 million during the quarter, up from a loss of $1.5 million a year ago, mainly because the unit absorbed almost three-quarters of the inventory write-up expense. Test systems sales soared to $18.6 million from $2.3 million a year ago, with almost all of the increase coming from its February acquisition of EADS North America’s Test and Services Division.