Astronics Corporation (NASDAQ: ATRO), a leading supplier of
advanced technologies and products to the global aerospace,
defense, and semiconductor industries, today reported financial
results for the three and six months ended July 1, 2017.
Earnings per share for prior periods are adjusted for the 3 for 20
(15%) distribution of Class B Stock for shareholders of record on
October 11, 2016. Results include the acquisition of Custom Control
Concepts (“CCC”) on April 3, 2017.
Three Months Ended Six
Months Ended
July 1,
2017
July 2,
2016
%
Change
July 1,
2017
July 2,
2016
%
Change
Sales $ 151,114 $ 164,426 (8.1)% $ 303,510 $ 323,956
(6.3 )%
Gross profit $ 34,150 $ 44,835 (23.8)% $ 72,467 $
84,318 (14.1 )% Gross margin 22.6 % 27.3 % 23.9 % 26.0 %
SG&A $ 22,401 $ 22,224 0.8% $ 44,094 $ 44,108 0.0 %
SG&A percent of sales 14.8 % 13.5 % 14.5 % 13.6 %
Income
from Operations $ 11,749 $ 22,611 (48.0)% $ 28,373 $ 40,210
(29.4 )% Operating margin % 7.8 % 13.8 % 9.3 % 12.4 %
Net
Income $ 7,685 $ 14,980 (48.7)% $ 19,272 $ 26,465 (27.2 )% Net
Income % 5.1 % 9.1 % 6.3 % 8.2 %
Peter J. Gundermann, President and Chief Executive Officer,
commented, "Our second quarter was disappointing as a result of
continued slippage of programs into the future, but we remain
enthusiastic with the significance of these opportunities for when
they do come to fruition. For our Aerospace segment, the lull in
power and motion sales has continued, even as quoting activity
remains robust, and our ambitions for business jet connectivity
have not materialized as quickly as we expected. Similarly,
although we have received orders for our legacy semiconductor test
solution, some significant new programs we have been pursuing in
our Test business are now taking longer than anticipated, somewhat
reducing our 2017 expectations. However, none of this impacts our
confidence in our leading market positions or strategy, and despite
current conditions we have solid prospects for 2018 and
beyond."
Consolidated Review
Second Quarter 2017 Results
Consolidated sales were down $13.3 million from the same period
last year. Aerospace segment sales of $129.5 million were down
$13.0 million and Test Systems segment sales of $21.6 million were
essentially flat, down $0.3 million.
Consolidated gross margin was 22.6% in the second quarter of
2017 compared with 27.3% in the second quarter of 2016.
Consolidated gross margin was negatively affected by lower organic
sales volumes coupled with the CCC acquisition having a
significantly lower margin profile at this point in its business
cycle, compared with the organic business. Organic Engineering and
Development (“E&D”) costs were $21.7 million in the quarter, up
from $21.4 million of E&D costs in last year’s second quarter.
As a percent of sales, organic E&D costs were 14.4% and 13.0%
in the second quarters of 2017 and 2016, respectively. CCC incurred
E&D costs of $1.2 million since its acquisition.
Selling, general and administrative (“SG&A”) expenses were
$22.4 million, or 14.8% of sales, in the second quarter of 2017
compared with $22.2 million, or 13.5% of sales, in the same period
last year.
The effective tax rate for the quarter was 27.3%, compared with
30.5% in the second quarter of 2016. The 2017 second quarter tax
rate was favorably impacted by the federal research and development
tax credit.
Net income was $7.7 million, or $0.26 cents per diluted
share.
Year-to-Date 2017 Results
Consolidated sales for the first six months of 2017 decreased by
$20.4 million, or 6.3%, to $303.5 million. Aerospace segment sales
were down $14.4 million, or 5.1% year-over-year to $266.4 million,
while Test Systems segment sales were down $6.0 million, or 13.9%
to $37.1 million.
Consolidated gross margin was 23.9% in the first six months of
2017 compared with 26.0% in the first six months of 2016.
Consolidated gross margin was negatively affected by lower organic
sales volumes coupled with CCC's lower margin profile. Organic
E&D costs were 14.7% of sales, or $44.6 million, compared with
$44.6 million, or 13.8% of sales, in the prior year’s first six
months. SG&A expenses were $44.1 million, or 14.5% of sales, in
the first six months of 2017 compared with $44.1 million, or 13.6%
of sales, in the same period last year.
The effective tax rate for the first six months of 2017 was
26.0%, compared with 30.5% in the first six months of 2016. The tax
rate in the first six months of 2017 was favorably impacted by
excess tax benefits associated with employee share-based
compensation, decreases in foreign tax rates, and the federal
research and development tax credit.
Net income for the first half of 2017 totaled $19.3 million, or
$0.64 per diluted share.
During the second quarter, the Company repurchased approximately
302,000 shares at an aggregate cost of $9.1 million under its share
repurchase program. Since the inception of the program in February
2016, the Company has repurchased approximately 973,000 shares at
an aggregate cost of $31.1 million.
Aerospace Segment Review (refer to sales by market and
segment data in accompanying tables)
Aerospace Second Quarter 2017
Results
Aerospace segment sales decreased by $13.0 million, or 9.1%,
when compared with the prior year’s second quarter to $129.5
million. CCC contributed $3.5 million in sales in the 2017 second
quarter.
Electrical Power & Motion sales decreased $13.0 million, or
17.2%, due to lower sales of in-seat and cabin power products.
Systems Certification sales decreased by $2.6 million on lower
project activity. Avionics sales were up $1.6 million and included
the CCC acquisition which more than offset lower antennae
sales.
Aerospace operating profit for the second quarter of 2017 was
$14.0 million, or 10.8% of sales, compared with $24.9 million, or
17.4% of sales, in the same period last year. Aerospace operating
profit was negatively impacted by lower organic sales, $0.9 million
operating loss from the CCC acquisition and increased organic
E&D costs. Organic Aerospace E&D costs were $19.8 million
compared with $19.0 million in the same period last year. CCC
incurred E&D costs of $1.2 million during the quarter.
Aerospace orders in the second quarter of 2017 were $134.8
million, for a book-to-bill ratio of 1.04 for the quarter. Backlog
was $215.6 million at the end of the second quarter of 2017.
Aerospace Year-to-Date 2017
Results
Aerospace segment sales decreased by $14.4 million, or 5.1%,
when compared with the prior year’s first six months to $266.4
million.
Electrical Power & Motion sales decreased $15.9 million, or
10.5%, and Systems Certifications sales decreased $5.0 million,
both for similar reasons as in the quarter. These declines were
partially offset by $3.3 million higher Avionics sales related to
the CCC acquisition, as well as a $2.7 million increase in sales of
Lighting and Safety products.
Aerospace operating profit for the first six months of 2017 was
$33.7 million, or 12.7% of sales, compared with $43.5 million, or
15.5% of sales, in the same period last year. Aerospace operating
profit was negatively impacted by lower sales volumes and the
operating loss from the acquired CCC business. E&D costs for
Aerospace were $41.3 million (inclusive of $1.2 million related to
the acquired CCC business) and $39.4 million in the first six
months of 2017 and 2016, respectively. Aerospace SG&A expense
remained consistent at $31.1 million in the first six months of
2017 as compared with 2016.
Mr. Gundermann commented, “We continue to enjoy leading market
positions for key product areas in our Aerospace segment. However,
our results have been impacted by program timing, comparatively
slower wide body retrofit and new build activity, combined with
delayed decisions regarding passenger entertainment options.
Quoting activity remains very healthy however, and we consider our
prospects substantial and wide-ranging. Even so, it looks
increasingly like these issues will continue to pose a challenge
for our Aerospace business for the remainder of 2017, though
feedback from the market suggests that 2018 could be quite
strong.”
Test Systems Segment Review (refer to sales by market and
segment data in accompanying tables)
Test Systems Second Quarter 2017
Results
Sales in the second quarter of 2017 decreased approximately $0.3
million to $21.6 million compared with the same period in 2016, a
decrease of 1.6%. Sales to the Semiconductor market decreased $2.8
million and sales to the Aerospace and Defense market increased
$2.5 million compared with the same period in 2016.
Operating profit was $1.4 million, or 6.6% of sales, compared
with $1.1 million, or 4.9% of sales, in last year’s second quarter.
E&D costs were $2.0 million, down from $2.4 million in the
second quarter of 2016. Test Systems SG&A expense decreased to
$2.9 million in the second quarter of 2017 compared with $3.2
million in the same period last year.
Orders for the Test Systems segment in the quarter were $23.9
million, for a book-to-bill ratio of 1.11 for the quarter. Backlog
was $49.9 million at the end of the second quarter of 2017.
Test Systems Year-to-Date 2017
Results
Sales in the first six months of 2017 decreased 13.9% to $37.1
million compared with sales of $43.1 million for the same period in
2016, due to lower sales to the Semiconductor market. Sales to the
Semiconductor market decreased $5.3 million compared with the same
period in 2016.
Operating profit was $1.8 million, or 4.7% of sales, compared
with $3.3 million, or 7.6% of sales, in the first six months of
2016. E&D costs were $4.5 million in the first six months of
2017 compared with $5.3 million in the prior year period. SG&A
costs declined to $5.9 million in the first six months of 2017
compared with $6.4 million in the same period in 2016.
Mr. Gundermann commented, “We continue to work towards a set of
promising programs in both sides of our Test business, but program
schedule delays have hurt our 2017 prospects. Still, we expect
substantial awards in the second half of 2017 setting up for a
solid 2018.”
2017 Outlook
Consolidated sales in 2017 are forecasted to be in the range of
$625 million to $645 million, which represents a decline from the
previous guidance. Approximately $535 million to $550 million of
revenue is expected from the Aerospace segment. Expected revenue
for the Test Systems segment was tightened to a range of $90
million to $95 million.
Consolidated backlog at July 1, 2017 was $265.6 million, of
which approximately $204.6 million is expected to ship in 2017.
The effective tax rate for 2017 is expected to be in the range
of 28% to 31%.
Capital equipment spending in 2017 is expected to be in the
range of $21 million to $25 million.
E&D costs are expected to be in the range of $96 million to
$99 million including CCC.
Mr. Gundermann concluded, “Our product positions continue to be
strong and we enjoy solid relationships with our customers.
However, our 2017 expectations have weakened based on feedback from
customers regarding timing with anticipated demand. We still expect
the second half of the year to be stronger than the first half, but
not as strong as we had originally envisioned. The program delays
which have moved revenue expectations out of 2017 help build
confidence in a stronger 2018. Our focus is to optimize our 2017
results while executing on those opportunities for the future,
providing a path to continued growth.”
Second Quarter 2017 Webcast and Conference Call
The Company will host a teleconference today at 11:00 a.m. ET.
During the teleconference, Peter J. Gundermann, President and CEO,
and David C. Burney, Executive Vice President and CFO, will review
the financial and operating results for the period and discuss
Astronics’ corporate strategy and outlook. A question-and-answer
session will follow.
The Astronics conference call can be accessed by calling (201)
689-8562. The listen-only audio webcast can be monitored at
www.astronics.com. To listen to the archived call, dial (412)
317-6671 and enter conference ID number 13666375. The telephonic
replay will be available from 2:00 p.m. on the day of the call
through Wednesday, August 9, 2017. A transcript will also be posted
to the Company’s Web site once available.
About Astronics
CorporationAstronics Corporation (NASDAQ: ATRO) is a
leading supplier of advanced technologies and products to the
global aerospace, defense and semiconductor industries. Astronics’
products and services include advanced, high-performance electrical
power generation and distribution systems, seat motion solutions,
lighting and safety systems, avionics products, aircraft
structures, systems certification and automated test systems.
Astronics’ strategy is to increase its value by developing
technologies and capabilities, either internally or through
acquisition, and using those capabilities to provide innovative
solutions to its targeted markets and other markets where its
technology can be beneficial. Through its wholly owned
subsidiaries, Astronics has a reputation for high-quality designs,
exceptional responsiveness, strong brand recognition and
best-in-class manufacturing practices. The Company routinely posts
news and other important information on its website at
www.astronics.com.
For more information on Astronics and its products, visit its
Web site at www.astronics.com.
Safe Harbor StatementThis
news release contains forward-looking statements as defined by the
Securities Exchange Act of 1934. One can identify these
forward-looking statements by the use of the words “expect,”
“anticipate,” “plan,” “may,” “will,” “estimate” or other similar
expressions. Because such statements apply to future events, they
are subject to risks and uncertainties that could cause actual
results to differ materially from those contemplated by the
statements. Important factors that could cause actual results to
differ materially from what may be stated here include the state of
the aerospace, defense, consumer electronics and semiconductor
industries, the market acceptance of newly developed products,
internal production capabilities, the timing of orders received,
the status of customer certification processes and delivery
schedules, the demand for and market acceptance of new or existing
aircraft which contain the Company’s products, the need for new and
advanced test and simulation equipment, customer preferences and
other factors which are described in filings by Astronics with the
Securities and Exchange Commission. The Company assumes no
obligation to update forward-looking information in this news
release whether to reflect changed assumptions, the occurrence of
unanticipated events or changes in future operating results,
financial conditions or prospects, or otherwise.
FINANCIAL TABLES FOLLOW
ASTRONICS CORPORATION
CONSOLIDATED
INCOME STATEMENT DATA
(Unaudited, $ in thousands except per share data)
Three Months Ended Six Months Ended 7/1/2017
7/2/2016 7/1/2017
7/2/2016 Sales $ 151,114
$ 164,426 $ 303,510
$ 323,956 Cost of products sold 116,964
119,591 231,043 239,638
Gross profit 34,150 44,835 72,467 84,318
Gross margin
22.6 % 27.3 % 23.9 %
26.0 % Selling, general and administrative
22,401 22,224 44,094 44,108
SG&A % of sales 14.8
% 13.5 % 14.5 %
13.6 % Income from operations 11,749
22,611 28,373 40,210
Operating margin 7.8 %
13.8 % 9.3 % 12.4 %
Interest expense, net 1,180 1,056
2,313 2,143 Income before tax
10,569 21,555 26,060 38,067 Income tax expense 2,884
6,575 6,788 11,602
Net
income $ 7,685 $
14,980 $ 19,272
$ 26,465 Net income % of sales
5.1 % 9.1 % 6.3 %
8.2 % *Basic earnings per share: $ 0.27
$ 0.51 $ 0.66 $ 0.90 *Diluted earnings per share: $ 0.26 $ 0.50 $
0.64 $ 0.87
*Weighted average diluted shares
outstanding (in thousands)
30,089 30,226 30,135 30,290 Capital expenditures $ 2,983 $
3,726 $ 5,750 $ 6,176 Depreciation and amortization $ 6,289 $ 6,600
$ 12,587 $ 13,146
*July 2, 2016 share quantities and per-share data have been
restated to reflect the impact of the fifteen percent Class B stock
distribution to shareholders of record on October 11, 2016.
ASTRONICS CORPORATION
CONSOLIDATED
BALANCE SHEET DATA
($ in thousands) (unaudited)
7/1/2017 12/31/2016
ASSETS
Cash and cash equivalents $ 8,268 $ 17,901 Accounts receivable and
uncompleted contracts 120,380 109,415 Inventories 134,423 116,597
Other current assets 14,444 11,160 Property, plant and equipment,
net 122,646 122,812 Other long-term assets 15,738 13,149 Intangible
assets, net 94,364 98,103 Goodwill 117,565 115,207
Total assets $ 627,828
$ 604,344
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current maturities of long term debt $ 2,651 $ 2,636 Accounts
payable and accrued expenses 61,344 60,756 Customer advances and
deferred revenue 20,095 23,168 Long-term debt 160,315 145,484 Other
liabilities 35,700 34,851 Shareholders' equity 347,723
337,449
Total liabilities and shareholders' equity
$ 627,828 $
604,344 ASTRONICS CORPORATION
Segment
Data
(Unaudited, $ in thousands)
Three Months Ended Six
Months Ended 7/1/2017 7/2/2016
7/1/2017 7/2/2016 Sales
Aerospace $ 129,547 $
142,528 $ 266,374 $ 281,177 Less Inter-segment —
(27 ) — (367 ) Total
Aerospace 129,547 142,501 266,374 280,810 Total Test Systems
21,567 21,925 37,136
43,146
Total consolidated sales
151,114 164,426 303,510
323,956 Operating profit and
margins Aerospace 13,984 24,851 33,738 43,542 10.8 % 17.4 % 12.7 %
15.5 % Test Systems 1,432 1,074 1,750 3,284 6.6 % 4.9
% 4.7 % 7.6 %
Total operating
profit 15,416 25,925 35,488 46,826 Interest
expense 1,180 1,056 2,313 2,143 Corporate expenses and other 3,667
3,314 7,115
6,616
Income before taxes $ 10,569
$ 21,555 $ 26,060
$ 38,067
ASTRONICS CORPORATION
SALES BY
MARKET
(Unaudited, $ in thousands)
Three Months
Ended
Six Months
Ended
7/1/2017
7/2/2016
%
change
7/1/2017
7/2/2016
%
change
2017
YTD
Aerospace Segment Commercial Transport $ 98,355 $ 116,423
-15.5 % $ 208,079 $ 229,818 -9.5 % 68.5 % Military 15,785 13,973
13.0 % 30,931 26,254 17.8 % 10.2 % Business Jet 10,716 7,707 39.0 %
18,251 14,232 28.2 % 6.0 % Other 4,691 4,398
6.7 % 9,113 10,506 -13.3 %
3.0 %
Aerospace Total 129,547 142,501 -9.1 %
266,374 280,810 -5.1 % 87.7 %
Test Systems Segment
Semiconductor 7,080 9,848 -28.1 % 11,711 16,985 -31.1 % 3.9 %
Aerospace & Defense 14,487 12,077
20.0 % 25,425 26,161 -2.8 %
8.4 %
Test Systems Total 21,567 21,925
-1.6 % 37,136 43,146
-13.9 % 12.3 %
Total $ 151,114
$ 164,426 -8.1 % $ 303,510
$ 323,956 -6.3 %
ASTRONICS CORPORATION
SALES BY PRODUCT
LINE
(Unaudited, $ in thousands)
Three Months
Ended
Six Months
Ended
7/1/2017
7/2/2016
%
change
7/1/2017
7/2/2016
%
change
2017
YTD
Aerospace Segment Electrical Power & Motion $
62,597 $ 75,564 -17.2 % $ 135,040 $ 150,957 -10.5 % 44.6 % Lighting
& Safety 42,646 41,979 1.6 % 85,316 82,544 3.4 % 28.1 %
Avionics 10,940 9,344 17.1 % 20,076 16,818 19.4 % 6.6 % Systems
Certification 2,793 5,391 -48.2 % 4,952 9,997 -50.5 % 1.6 %
Structures 5,880 5,825 0.9 % 11,877 9,988 18.9 % 3.9 % Other 4,691
4,398 6.7 % 9,113 10,506
-13.3 % 3.0 %
Aerospace Total
129,547 142,501 -9.1 % 266,374 280,810 -5.1 % 87.7 %
Test
Systems 21,567 21,925 -1.6 % 37,136
43,146 -13.9 % 12.3 %
Total $ 151,114 $ 164,426
-8.1 % $ 303,510 $ 323,956
-6.3 %
ASTRONICS CORPORATION
ORDER AND BACKLOG
TREND
(Unaudited, $ in thousands)
Q32016
Q42016
Q12017
Q22017
TrailingTwelveMonths
10/01/2016 12/31/2016
4/1/2017 7/1/2017
7/1/2017 Sales Aerospace $ 125,179 $ 128,052 $
136,827 $ 129,547 $ 519,605 Test Systems 29,920
26,016 15,569 21,567
93,072
Total Sales $ 155,099
$ 154,068 $
152,396 $ 151,114
$ 612,677 Bookings
Aerospace $ 122,821 $ 113,756 $ 122,836 $ 134,822 $ 494,235 Test
Systems 13,694 23,118 24,236
23,944 84,992
Total Bookings $
136,515 $ 136,874
$ 147,072 $
158,766 $ 579,227
Backlog* Aerospace $ 233,442 $ 219,146 $ 205,155 $ 215,647
Test Systems 41,785 38,887 47,554
49,931
Total Backlog
$ 275,227 $
258,033 $ 252,709
$ 265,578
N/A Book:Bill Ratio Aerospace 0.98 0.89 0.90
1.04 0.95 Test Systems 0.46 0.89 1.56
1.11 0.91
Total Book:Bill
0.88 0.89 0.97
1.05 0.95
* During the second quarter, acquisitions added
backlog of approximately $5.2 million for the Aerospace
segment.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170802005365/en/
Company:Astronics CorporationDavid C. Burney,
716-805-1599, ext. 159Chief Financial
Officerdavid.burney@astronics.comorInvestor Relations:Kei
Advisors LLCDeborah K. Pawlowski,
716-843-3908dpawlowski@keiadvisors.com
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