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 June 30, 2018.
Results for the quarter and the first six months of 2018 include
the results of Telefonix PDT, which was acquired on December 1,
2017 and Custom Control Concepts (“CCC”), which was acquired on
April 3, 2017.
Three Months Ended Six
Months Ended
June 30,
2018
July 1,
2017
%
Change
June 30,
2018
July 1,
2017
%
Change
Sales $ 208,606 $ 151,114 38.0 % $ 387,665 $ 303,510
27.7 %
Gross profit $ 49,572 $ 34,150 45.2 % $ 86,704 $
72,467 19.6 % Gross margin 23.8 % 22.6 % 22.4 % 23.9 %
SG&A $ 29,443 $ 22,091 33.3 % $ 59,943 $ 43,474 37.9 %
SG&A percent of sales 14.1 % 14.6 % 15.5 % 14.3 %
Income
from Operations $ 20,129 $ 12,059 66.9 % $ 26,761 $ 28,993 (7.7
)% Operating margin % 9.6 % 8.0 % 6.9 % 9.6 %
Net Income $
14,025 $ 7,685 82.5 % $ 17,319 $ 19,272 (10.1 )% Net Income % 6.7 %
5.1 % 4.5 % 6.3 %
Peter J. Gundermann, President and Chief Executive Officer,
commented, "We had record consolidated sales in the quarter of
$208.6 million with both segments delivering solid results. Our
Aerospace segment surpassed its previous quarterly sales record
with the contribution of Telefonix, and our Test segment produced
its best quarter in three years.”
He continued, “The strong top line expanded margins to levels
more representative of our business. We are confident in our
outlook for 2018, as opportunities and operating performance should
make it a very good year for Astronics."
Consolidated Review
Second Quarter 2018 Results
Consolidated sales were up 38%, or $57.5 million, from the same
period last year, including $26.9 million in sales from the
Telefonix PDT acquisition. Organic revenue was $181.7 million, up
20% compared with the same prior year period driven by 97% growth
in Test and 7.5% organic growth in the Aerospace segment.
Consolidated gross margin was 23.8% compared with 22.6% in the
prior-year period. Consolidated gross margin benefited from higher
organic sales and the acquisition’s contribution in gross profit.
This was partially offset by a $1.5 million program charge
recognized due to the revision of estimated costs to complete a
long-term contract assumed with the acquisition of the CCC
business.
Consolidated Engineering and Development ("E&D") costs were
$28.9 million. Organic Engineering and Development ("E&D")
costs were $25.3 million, compared with $23.0 million in last
year’s second quarter. As a percent of organic sales, organic
E&D costs were 13.9% and 15.2% in the second quarters of 2018
and 2017, respectively.
Selling, general and administrative (“SG&A”) expenses were
up $7.4 million to $29.4 million, or 14.1% of sales, compared with
$22.1 million, or 14.6% of sales, in the same period last year. The
acquisition contributed $5.1 million to SG&A, including $2.2
million of intangible asset amortization expense. Consolidated
intangible asset amortization expense was $4.9 million compared
with $2.7 million in the prior year. Consolidated intangible asset
amortization expense is expected to be $4.3 million in both the
third and fourth quarters of 2018.
The effective tax rate for the quarter was 18.4%, compared with
27.3% in the second quarter of 2017. The 2018 second quarter tax
rate was favorably impacted by the decrease in the Federal
statutory tax rate partially offset by the elimination of the
domestic production activities deduction resulting from the Tax
Cuts and Jobs Act.
Net income was $14.0 million, or $0.49 per diluted share,
compared with $7.7 million, or $0.26 per diluted share in the prior
year.
Bookings were up 18% to $186.9 million, for a book-to-bill ratio
of 0.90:1. Backlog at the end of the quarter was $376.9 million.
Approximately 82% of backlog is expected to ship in 2018.
Year-to-Date 2018 Results
Consolidated sales for the first six months of 2018 increased by
$84.2 million, or 27.7%, including $52.0 million in acquired
revenue. Aerospace segment sales were up $64.4 million to $330.8
million. Organic Aerospace sales were up 4.7%. The Test segment
sales were up $19.7 million, or 53.1% to $56.9 million.
Consolidated gross margin was 22.4% in the first six months of
2018 compared with 23.9% in the first six months of 2017.
Consolidated gross margin benefited from higher organic sales and
the gross profit contribution of Telefonix PDT. Expense related to
the fair value step-up of acquired inventory was $1.3 million and
was fully expensed in the first quarter. Consolidated gross margin
was negatively impacted by the lower margin profile of CCC due to
low volume and a $3.6 million program charge due to the revision of
estimated costs associated with the long-term contract, as
previously discussed. Organic E&D costs were 14.8% of organic
sales, or $49.6 million, compared with $45.8 million, or 15.1% of
sales, in the prior year’s first six months. Acquisitions
contributed E&D costs of $8.1 million in the first six months
of 2018.
SG&A expenses were $59.9 million, or 15.5% of sales, in the
first six months of 2018 compared with $43.5 million, or 14.3% of
sales, in the same period last year. Acquisitions contributed $12.3
million to SG&A, including $5.5 million of intangible asset
amortization expense. Also contributing to higher SG&A was a
$1.0 million litigation reserve recorded in the first quarter of
2018 for an ongoing matter. Corporate expenses increased by $2.4
million due to increased headcount, legal and accounting costs.
The effective tax rate for the first six months of 2018 was
18.0%, compared with 26.0% in the first six months of 2017. The tax
rate was favorably impacted by the decrease in the Federal
statutory rate partially offset by the elimination of the domestic
production activities deduction resulting from the Tax Cuts and
Jobs Act, as well as the change in foreign tax rates in the first
six months of 2017.
Net income for the first half of 2018 totaled $17.3 million, or
$0.60 per diluted share.
Aerospace Segment Review (refer to sales by market and
segment data in accompanying tables)
Aerospace Second Quarter 2018
Results
Aerospace segment sales increased by $36.7 million, or 28.3%, to
$166.2 million, when compared with the prior year’s second quarter.
Organic sales increased $9.8 million, or 7.5%, while Telefonix PDT
contributed $26.9 million in sales in the 2018 second quarter.
Avionics sales were up $25.3 million, due to the addition of
Telefonix PDT, which contributed $23.9 million. Electrical Power
& Motion sales increased by $5.0 million, or 8.1%, due to
higher sales of in-seat power and seat motion products. System
Certification sales increased by $2.1 million on higher project
activity. Sales of other products were up $2.1 million, due
primarily to the acquisition.
Aerospace operating profit for the second quarter of 2018 was
$18.2 million, or 11.0% of sales, compared with $14.0 million, or
10.8% of sales, in the same period last year. Organic Aerospace
E&D costs were $22.7 million compared with $21.0 million in the
same period last year. The acquisition added $3.6 million in
E&D costs.
Aerospace operating profit benefited from higher organic sales
and the addition of Telefonix PDT. This was partially offset by a
$1.5 million program charge related to the aforementioned CCC
long-term contract. Intangible asset amortization expense for
Telefonix PDT was $2.2 million in the second quarter.
Aerospace orders in the second quarter of 2018 were up 18% to
$158.9 million compared with the prior year period. The
book-to-bill ratio was 0.96:1 for the quarter. Backlog was $298.6
million at the end of the second quarter of 2018.
Aerospace Year-to-Date 2018
Results
Aerospace segment sales increased by $64.4 million, or 24.2%, to
$330.8 million when compared with the prior year’s first six
months.
Avionics sales increased by $49.2 million to $69.3 million
driven primarily by the acquisition, which contributed $43.7
million in Avionics sales. Electrical Power & Motion sales
increased $5.3 million, or 3.9%, and Systems Certifications sales
increased $4.7 million, both for similar reasons as in the quarter.
Sales of other products were up $4.6 million to $13.7 million, due
primarily to the Telefonix PDT acquisition.
Aerospace operating profit was $31.3 million, or 9.5% of sales,
compared with $33.7 million, or 12.7% of sales, in the same period
last year. Aerospace operating profit in the first six months of
2018 was negatively impacted by purchase accounting expenses and a
$1.0 million litigation reserve, which are expected to decrease or
not recur through the remainder of 2018. As is typical during the
first few quarters following an acquisition, non-cash costs were
higher than what is expected over the long-term, as short-lived
intangible assets are amortized and the fair value step-up costs
relating to the acquired inventory is expensed. Intangible asset
amortization expense for the acquisitions was $5.7 million in the
first six months and fair value inventory step-up expense of $1.3
million was recorded in the first quarter. Aerospace operating
profit was also negatively impacted by the $3.6 million program
charge related to the CCC long-term contract previously
discussed.
Somewhat offsetting these costs were the operating leverage
realized from higher organic sales. E&D costs for Aerospace
were $52.2 million and $41.3 million in the first six months of
2018 and 2017, respectively. Acquisitions contributed $8.1 million
in 2018 to Aerospace E&D expenses.
Mr. Gundermann commented, “Our Aerospace business is on very
firm footing and our product offering is well suited for the
advancing evolution of the connected aircraft which is developing
demand for our products. Our Telefonix acquisition is contributing
strongly, and has a critical role in our strategy involving
connectivity. We expect the positive trends will continue, and that
we will see more quarterly sales records established yet in
2018.”
Test Systems Segment Review (refer to sales by market and
segment data in accompanying tables)
Test Systems Second Quarter 2018
Results
Sales in the second quarter of 2018 increased approximately
$20.8 million to $42.4 million, almost doubling compared with the
same period in 2017. A $24.3 million increase in sales to the
Semiconductor market was offset by a $3.5 million decrease in sales
to the Aerospace & Defense market when compared with the
prior-year period.
Operating profit for the segment was $6.2 million, or 14.7% of
sales, compared with $1.4 million, or 6.6% of sales, in last year’s
second quarter. Higher margin was driven by the increase in volume
and favorable sales mix compared with the same period last year.
E&D costs were $2.6 million, up from $2.0 million in the second
quarter of 2017.
Orders for the Test Systems segment in the quarter were $28.1
million, for a book-to-bill ratio of 0.66:1 for the quarter.
Backlog was $78.3 million at the end of the second quarter of
2018.
Test Systems Year-to-Date 2018
Results
Sales in the first six months of 2018 increased 53.1% to $56.9
million compared with sales of $37.1 million for the same period in
2017. The growth was driven by a$26.8 million increase in higher
sales to the Semiconductor market. This was somewhat offset by a
decrease in Aerospace & Defense sales of $7.0 million.
Operating profit increased $2.5 million to $4.3 million, or 7.6%
of sales, as a result of increased volume and improved product mix.
E&D costs were $5.6 million in the first six months of 2018
compared with $4.5 million in the prior year period.
Mr. Gundermann commented, “Our Test business is delivering on
its strong backlog and the second quarter was the best performance
realized in recent years. We expect the third quarter to see more
of the same, setting up a strong second half to the year.”
2018 Outlook
The outlook for 2018 remains unchanged with consolidated sales
forecasted to be in the range of $765 million to $815 million, with
$650 million to $680 million expected from the Aerospace segment
and $115 million to $135 million from the Test segment.
Consolidated backlog at June 30, 2018 was $376.9 million.
Approximately 82% of backlog is expected to ship in 2018.
The effective tax rate for 2018 is expected to be in the range
of 18% to 21%.
Expectations for capital equipment spending in 2018 are
unchanged from a range of $24 million to $28 million.
E&D costs for 2018 continue are expected to be in the range
of $110 million to $115 million.
Mr. Gundermann concluded, “We believe we are on track for a
strong second half to 2018. The mid-points of our predicted revenue
range for the year suggest 26% consolidated sales growth over our
2017 total. Aerospace would see growth of 24%, while Test would see
growth of 39%. As we work towards these targets we will also
continue to improve our margins. The progress should be impressive
in the last two quarters of the year.”
Second Quarter 2018 Webcast and Conference Call
The Company will host a teleconference today at 11:00 a.m. ET.
During the teleconference, management 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)
493-6784. The listen-only audio webcast can be monitored at
www.astronics.com. To listen to the archived call, dial (412)
317-6671 and enter replay pin number 13679520. The telephonic
replay will be available from 2:00 p.m. on the day of the call
through Friday, August 10, 2018. 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 6/30/2018
7/1/2017 6/30/2018
7/1/2017 Sales $ 208,606
$ 151,114 $ 387,665
$ 303,510 Cost of products sold 159,034
116,964 300,961 231,043
Gross profit 49,572 34,150 86,704 72,467
Gross margin
23.8 % 22.6 % 22.4 %
23.9 % Selling, general and administrative
29,443 22,091 59,943 43,474
SG&A % of sales 14.1
% 14.6 % 15.5 %
14.3 % Income from operations 20,129
12,059 26,761 28,993
Operating margin 9.6 %
8.0 % 6.9 % 9.6 %
Other expense, net of other income 463 310 838 620 Interest
expense, net 2,484 1,180 4,815
2,313 Income before tax 17,182 10,569 21,108
26,060 Income tax expense 3,157 2,884
3,789 6,788
Net income $
14,025 $ 7,685
$ 17,319 $ 19,272
Net income % of sales 6.7 % 5.1
% 4.5 % 6.3 %
*Basic earnings per share: $ 0.50 $ 0.27 $ 0.62 $ 0.66 *Diluted
earnings per share: $ 0.49 $ 0.26 $ 0.60 $ 0.64 *Weighted
average diluted shares
outstanding (in thousands)
28,802 30,089 28,755 30,135 Capital expenditures $ 4,148 $
2,983 $ 8,495 $ 5,750 Depreciation and amortization $ 8,743 $ 6,289
$ 18,584 $ 12,587
ASTRONICS CORPORATION
CONSOLIDATED
BALANCE SHEET DATA
($ in thousands) (unaudited)
6/30/2018 12/31/2017
ASSETS
Cash and cash equivalents $ 10,608 $ 17,914 Accounts receivable and
uncompleted contracts 169,496 132,633 Inventories 159,479 150,196
Other current assets 13,912 14,586 Property, plant and equipment,
net 124,696 125,830 Other long-term assets 18,451 15,659 Intangible
assets, net 142,544 153,493 Goodwill 125,237 125,645
Total assets $ 764,423 $
735,956
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current maturities of long term debt $ 2,190 $ 2,689 Accounts
payable and accrued expenses 88,170 80,595 Customer advances and
deferred revenue 25,429 19,607 Long-term debt 263,155 269,078 Other
liabilities 34,189 34,060 Shareholders' equity 351,290
329,927
Total liabilities and shareholders' equity
$ 764,423 $ 735,956
SEGMENT
DATA
(Unaudited, $ in thousands)
Three Months Ended Six Months Ended 6/30/2018
7/1/2017 6/30/2018
7/1/2017 Sales Aerospace
$ 166,257 $ 129,547 $ 330,857 $ 266,374 Less Inter-segment (53 )
— (53 ) —
Total Aerospace 166,204 129,547 330,804 266,374 Test Systems
42,402 21,567 56,861
37,136
Total consolidated sales
208,606 151,114 387,665
303,510 Operating profit and
margins Aerospace 18,200 13,984 31,315 33,738 11.0 % 10.8 % 9.5 %
12.7 % Test Systems 6,247 1,432 4,318 1,750 14.7 %
6.6 % 7.6 % 4.7 %
Total operating
profit 24,447 15,416 35,633 35,488 Interest
expense 2,484 1,180 4,815 2,313 Corporate expenses and other 4,781
3,667 9,710
7,115
Income before taxes $ 17,182
$ 10,569 $ 21,108
$ 26,060
ASTRONICS CORPORATION
CONSOLIDATED CASH FLOWS DATA (Unaudited, $ in thousands)
Six Months Ended June
30, 2018 July 1, 2017 Cash Flows From
Operating Activities: Net Income $ 17,319 $ 19,272 Adjustments
to Reconcile Net Income to Cash Provided By Operating Activities:
Depreciation and Amortization 18,584 12,587 Provisions for Non-Cash
Losses on Inventory and Receivables 1,484 918 Stock Compensation
Expense 1,637 1,456 Deferred Tax Benefit (516 ) (536 ) Other (431 )
(804 ) Cash Flows from Changes in Operating Assets and Liabilities:
Accounts Receivable (33,303 ) (7,076 ) Inventories (19,426 )
(10,453 ) Accounts Payable 7,981 3,349 Accrued Expenses 53 (7,106 )
Other Current Assets and Liabilities (404 ) (2,668 ) Customer
Advanced Payments and Deferred Revenue 14,425 (4,143 ) Income Taxes
(189 ) (1,028 ) Supplemental Retirement and Other Liabilities 896
758 Cash Provided By Operating Activities 8,110
4,526
Cash Flows From Investing Activities:
Acquisition of Business, Net of Cash Acquired — (10,223 ) Capital
Expenditures (8,495 ) (5,750 ) Other Investing Activities —
186 Cash Used For Investing Activities (8,495 ) (15,787 )
Cash Flows From Financing Activities: Proceeds from
Long-term Debt 30,015 22,000 Payments for Long-term Debt (36,416 )
(7,341 ) Purchase of Outstanding Shares for Treasury — (13,524 )
Debt Acquisition Costs (516 ) — Proceeds from Exercise of Stock
Options 281 317 Cash (Used For) Provided By Financing
Activities (6,636 ) 1,452 Effect of Exchange Rates on Cash
(285 ) 176 Decrease in Cash and Cash Equivalents (7,306 )
(9,633 ) Cash and Cash Equivalents at Beginning of Period 17,914
17,901 Cash and Cash Equivalents at End of Period $
10,608 $ 8,268
ASTRONICS
CORPORATION
SALES BY
MARKET
(Unaudited, $ in thousands)
Three Months
Ended
Six Months
Ended
6/30/2018
7/1/2017
%
change
6/30/2018
7/1/2017
%
change
2018
YTD
Aerospace Segment Commercial Transport $ 132,797 $ 98,355
35.0 % $ 265,847 $ 208,079 27.8 % 68.7 % Military 16,270 15,785 3.1
% 30,285 30,931 -2.1 % 7.8 % Business Jet 10,338 10,716 -3.5 %
21,002 18,251 15.1 % 5.4 % Other 6,799 4,691
44.9 % 13,670 9,113 50.0 %
3.5 %
Aerospace Total 166,204 129,547 28.3 %
330,804 266,374 24.2 % 85.3 %
Test Systems Segment
Semiconductor 31,405 7,080 343.6 % 38,465 11,711 228.5 % 9.9 %
Aerospace & Defense 10,997 14,487
-24.1 % 18,396 25,425 -27.6 %
4.7 %
Test Systems Total 42,402 21,567
96.6 % 56,861 37,136 53.1
% 14.7 %
Total $ 208,606
$ 151,114 38.0 % $ 387,665 $ 303,510
27.7 %
SALES BY PRODUCT
LINE
(Unaudited, $ in thousands)
Three Months
Ended
Six Months
Ended
6/30/2018
7/1/2017
%
change
6/30/2018
7/1/2017
%
change
2018
YTD
Aerospace Segment Electrical Power & Motion $
67,643 $ 62,597 8.1 % $ 140,321 $ 135,040 3.9 % 36.2 % Lighting
& Safety 44,121 42,646 3.5 % 85,763 85,316 0.5 % 22.1 %
Avionics 36,272 10,940 231.6 % 69,295 20,076 245.2 % 17.9 % Systems
Certification 4,872 2,793 74.4 % 9,655 4,952 95.0 % 2.5 %
Structures 6,497 5,880 10.5 % 12,100 11,877 1.9 % 3.1 % Other 6,799
4,691 44.9 % 13,670 9,113
50.0 % 3.5 %
Aerospace Total
166,204 129,547 28.3 % 330,804 266,374 24.2 % 85.3 %
Test
Systems 42,402 21,567 96.6 % 56,861
37,136 53.1 % 14.7 %
Total $ 208,606 $ 151,114
38.0 % $ 387,665 $ 303,510 27.7 %
ASTRONICS CORPORATION
ORDER AND BACKLOG
TREND
(Unaudited, $ in thousands)
Q32017
Q42017
Q12018
Q22018
TrailingTwelveMonths
09/30/2017 12/31/2017
3/31/2018 6/30/2018
6/30/2018 Sales Aerospace $ 128,663 $ 139,566 $
164,600 $ 166,204 $ 599,033 Test Systems 20,973
31,752 14,459 42,402
109,586
Total Sales $ 149,636
$ 171,318 $ 179,059
$ 208,606 $
708,619
Bookings Aerospace $ 146,178 $ 179,340 $ 180,883 $ 158,870 $
665,271 Test Systems 40,161 57,719
15,280 28,060 141,220
Total
Bookings $ 186,339 $
237,059 $ 196,163
$ 186,930 $ 806,491
Backlog* Aerospace $ 233,162 $ 298,604 $ 305,977 $
298,643 Test Systems 69,119 95,086
92,635 78,293
Total
Backlog $ 302,281 $
393,690 $ 398,612
$ 376,936 N/A
Book:Bill Ratio Aerospace 1.14 1.28 1.10 0.96 1.11 Test
Systems 1.91 1.82 1.06
0.66 1.29
Total Book:Bill 1.25
1.38 1.10
0.90 1.14
* During the fourth quarter of 2017, the
Telefonix PDT acquisition added backlog of approximately $25.7
million for the Aerospace segment. In the first quarter of 2018,
the implementation of new required revenue recognition accounting
rules resulted in a reduction to backlog of $8.9 million and $3.3
million for the Aerospace and Test Systems segments,
respectively.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180803005113/en/
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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