Astronics Corp. chief executive Peter Gundermann is glad to put a challenging and difficult 2004 behind him.
But he's looking forward to being able to reap some of the sales that Astronics is on the verge of making because of the nearly $6 million the East Aurora aircraft lighting and electronics systems manufacturer spent on engineering and development work last year.
"Those were all investments in the future. That's the way to think about it," Gundermann told Astronics' shareholders Thursday during the company's annual meeting. "When these programs move into production, the impact they will have on us will be significant."
While those investments caused Astronics to lose money in 2004 for the first time in 15 years, some of the programs now are beginning to move into production and are expected to generate about $10 million in sales during the second half of this year.
"A company like ours has to be willing to make those investments and take those chances to generate this type of return," Gundermann said.
With its February acquisition of its Astronics Advanced Electronic Systems business helping the company more than double its first-quarter profits, Gundermann said second-half sales are expected to rise as Astronics starts shipments on night vision cockpit lighting equipment for the South Korean F-16 fleet.
Astronics AES also is expected to begin work during the second half on a four-year contract worth $18 million to make power conditioning units for the Tactical Tomahawk missile and another $13 million deal spread over seven years to make power management systems for a Panasonic Avionics Systems.
As a result, Astronics expects its sales to double this year to around $70 million from just under $35 million last year. The Astronics AES business is on a pace for about $30 million in sales this year, slightly better than initially expected, while Astronics' existing business had a 21 percent jump in revenues during the first quarter.
Those growing sales should make it easier to shoulder the company's development costs, which are expected to remain around $6 million, reducing those expenses to a "more tolerable" 12 percent of sales from the current 17 percent, Gundermann said.
The Astronics AES deal also reshaped the company's business mix, giving it a much bigger exposure to the commercial aviation market and reducing its dependence on military sales, with each now accounting for about 40 percent of its revenues. Business jets provide the remaining 20 percent of Astronics' revenues.
"I look at this as having a balanced approach -- and I think that's a good thing," Gundermann said.