- Unaudited revenue of approximately $198 million for fourth
quarter 2019 exceeded guidance
- 2020 revenue guidance withdrawn due to uncertainty related to
737 MAX
- New VVIP IFE platform “Avenir” successfully launched
- Expects restructuring charges related to antenna business of
$29 million to $35 million in fourth quarter 2019
- Estimating intellectual property damages of an additional $18
million in fourth quarter; Company has filed appeal and is
vigorously defending position
- Temporarily pausing stock buyback initiatives
Astronics Corporation (Nasdaq: ATRO), a leading provider of
advanced technologies for global aerospace, defense, and other
mission critical industries, today provided an update on various
projects and events impacting 2019 results and expectations for
2020.
Fourth Quarter Revenue and 2020 Guidance
The Company ended 2019 with unaudited preliminary revenue of
approximately $198 million in the fourth quarter, slightly
exceeding the high end of guidance that was issued on November 5,
2019. Preliminary bookings were
$156 million in the fourth quarter and preliminary backlog at
year-end was $359 million. Bookings were negatively impacted by
uncertainty in the market, which the Company believes is related to
the ongoing 737 MAX grounding. In addition, the Company cancelled
orders of approximately $7 million related to the restructuring and
refocusing of its antenna business. Unaudited preliminary revenue
for the full year totaled approximately $773 million.
Given the uncertain 2020 production schedule for the 737 MAX and
timing of its return to service, along with the related impact on
aftermarket spending by commercial airlines, the Company is
rescinding its initial 2020 revenue guidance issued in November
2019. Astronics expects to issue revised revenue guidance as the
outlook becomes clearer.
Peter Gundermann, Astronics Chairman and CEO, said, “The ongoing
737 MAX grounding affects our business both because of the
production pause and because it leaves many of our airline
customers short of capacity. This makes them reluctant to take
planes out of service to install the types of products they buy
from us. The situation is likely to persist until the 737 MAX
returns to service. We will publish revenue expectations when we
have more insight on the situation. In the meantime, we have taken
actions to align our cost structure, anticipating a lower level of
production and an extended disruption in the market.”
Astronics has line fit content of approximately $95 thousand on
each 737 MAX as well as buyer furnished equipment, such as
passenger power and connectivity hardware, that varies depending on
aircraft configuration.
Completed Development of Avenir VVIP Inflight Entertainment
and Connectivity Solution (“IFEC”)
Late in the fourth quarter, the Company delivered a functional
Avenir shipset to its launch customer, completing the design and
development phase of the Avenir platform for the VVIP inflight
entertainment and connectivity (“IFEC”) market. This effort has
required significant financial investment by the Company’s Custom
Control Concepts (“CCC”) operating unit for the last two years.
While the program will require limited additional refinement during
launch, the substantial levels of investment are completed. The
Company expects that CCC will be profitable in the second half of
2020 and substantially breakeven for the year.
The best-in-class Avenir solution provides significant increases
in bandwidth and speed for IFEC applications both on and off the
aircraft. Astronics is now actively promoting the Avenir system and
recently secured an additional undisclosed customer.
Restructuring and Refocusing the Antenna Operation
Astronics has made significant progress with the restructuring
of its antenna business. The plan narrows the initiatives for the
business to focus primarily on near-term opportunities pertaining
to business jet connectivity. As a result of the narrowed focus,
the Company anticipates total restructuring charges of
approximately $29 million to
$35 million that will be recorded in the fourth quarter of 2019.
Approximately $29 million of the charge will be non-cash, including
the write-down of goodwill, intangible assets, fixed assets,
inventory and other assets associated with the refocusing of the
business activity. The emerging plan has a downsized manufacturing
operation remaining in New Hampshire, with significantly reduced
personnel and operating expenses. After restructuring, breakeven
for the business will be approximately $10 million in revenue.
Mr. Gundermann commented, “We are putting an end to the high
level of losses we have incurred in our antenna business the last
few years. Simplifying the business and focusing more narrowly on
the business jet market gives us the best chance of success. There
remains some level of risk with our plan, but we have begun to
lower annual fixed cost by about $11 million by reducing operating
and R&D costs, while leaving the business positioned to pursue
our best near-term opportunity.”
Intellectual Property Dispute
Late in the fourth quarter, the Company received an unfavorable
ruling from a German court regarding the scope and calculation of
damages in its long-running patent infringement suit. As a result,
the Company estimates that an additional $18 million in damages
will be recorded in the fourth quarter of 2019. The ruling pertains
to shipments of in-seat power systems the Company directly or
indirectly made into Germany between 2007 and 2014. Astronics
believes the court’s ruling in this matter is deficient and has
initiated an appeal that will likely extend resolution into late
2021.
The dispute was previously argued and resolved in the Company’s
favor in the United States. Cases are now beginning in the United
Kingdom and France. Astronics does not expect these cases to be
resolved during 2020.
Pause in Stock Buyback Program
To conserve cash, the Company is cancelling its 10b5-1 trading
plan for its share buyback program and is temporarily postponing
initiatives related to stock buybacks until market conditions are
clearer, especially the circumstances surrounding the 737 MAX. The
Board authorized a $50 million share buyback program in September
2019, which remains in place. Under the plan, Astronics has
repurchased approximately 310 thousand shares through Friday,
January 31, 2020 at an average price of $27.47
Mr. Gundermann concluded, “While external factors are providing
new challenges for 2020, we believe we have taken the steps to
improve the operating performance of the business by addressing the
losses incurred by our challenged operating units. We expect to
face challenging market conditions until the 737 MAX situation
improves, but we will continue to work on promising innovation and
growth prospects in the meantime, maximizing our performance in the
near term while pursuing growth and stronger earnings in the long
term.”
About Astronics Corporation
Astronics Corporation (Nasdaq: ATRO) serves the world’s
aerospace, defense, and other mission critical industries with
proven, innovative technology solutions. Astronics works
side-by-side with customers, integrating its array of power,
connectivity, lighting, structures, interiors and test technologies
to solve complex challenges. For 50 years, Astronics has delivered
creative, customer-focused solutions with exceptional
responsiveness. Today, global airframe manufacturers, airlines,
militaries, completion centers and Fortune 500 companies rely on
the collaborative spirit and innovation of Astronics.
For more information on Astronics and its solutions, visit
Astronics.com, where information is frequently updated.
Safe Harbor Statement
This 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 ability
to grow the business and achieve profitability, the success of the
capital allocation strategy, the state of the aerospace and defense
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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200203005223/en/
Company David Burney, CFO Astronics Corporation T:
716.805.1599 x 159 david.burney@astronics.com
Investors Deborah K. Pawlowski Kei Advisors LLC T:
716.843.3908 dpawlowski@keiadvisors.com
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