Astronics Corporation (NASDAQ: ATRO), a leading provider of
advanced technologies for the global aerospace, defense and
semiconductor industries, today reported financial results for the
three and twelve months ended December 31, 2017. Results
include the acquisitions of Custom Control Concepts (“CCC”) on
April 3, 2017 and Telefonix on December 1, 2017 (collectively, the
"Acquired Businesses").
Three Months Ended Year Ended
December 31, 2017 December 31,
2016 % Change
December 31, 2017 December 31,
2016 % Change
Sales $ 171,318 $ 154,068 11.2 % $ 624,464 $ 633,123 (1.4 )%
Gross profit $ 32,153 $ 36,486 (11.9 )% $ 137,113 $ 159,467
(14.0 )% Gross margin 18.8 % 23.7 % 22.0 % 25.2 %
Impairment
loss $ 16,237 — $ 16,237 —
SG&A $ 24,012 $ 21,082
13.9 % $ 90,516 $ 86,328 4.9 % SG&A percent of sales 14.0 %
13.7 % 14.5 % 13.6 %
Income (Loss) from Operations $ (8,096
) $ 15,404 (152.6 )% $ 30,360 $ 73,139 (58.5 )% Operating margin %
(4.7 )% 10.0 % 4.9 % 11.6 %
Net (Loss) Income $ (5,653 ) $
9,885 (157.2 )% $ 19,679 $ 48,424 (59.4 )% Net Income % (3.3 )% 6.4
% 3.2 % 7.6 %
Peter J. Gundermann, President and Chief Executive Officer,
commented, "There were many moving parts in our fourth quarter.
Quarterly revenue was our highest of the year, up 13% over the
average of the first three quarters. Had we not been challenged by
a combination of program and award delays, our top line would have
been substantially stronger. These delays had the effect of sliding
revenue from 2017 into 2018. And, as previously announced, we
booked an impairment charge of $16.2 million associated with
goodwill from the Armstrong Aerospace acquisition we made three
years ago."
He continued, “The best news, however, was bookings of $237
million, our highest level ever, leaving us at year-end with a
backlog of $394 million, another record. This sets us up very well
for 2018."
Consolidated Review
Fourth Quarter 2017 Results
Consolidated sales were up $17.2 million, or 11%, from the same
period last year. Organic revenue was $162.8 million, up 6%
compared with the same prior year period. The 2017 fourth quarter
included $8.5 million in sales from Acquired Businesses.
Aerospace segment sales of $139.6 million were up $11.5 million and
Test Systems segment sales of $31.8 million were up $5.7
million.
Consolidated gross margin was 18.8% in the fourth quarter of
2017 compared with 23.7% in the fourth quarter of 2016.
Consolidated gross margin was negatively affected by the CCC
acquisition having a significantly lower margin profile at this
point in its business cycle compared with the organic business.
Organic Engineering & Development ("E&D") costs were $22.5
million in the quarter, compared with $22.7 million in last year’s
fourth quarter. As a percent of sales, organic E&D costs were
13.8% and 14.7% in the fourth quarters of 2017 and 2016,
respectively. The Acquired Businesses incurred E&D costs of
$2.9 million in the fourth quarter.
Selling, general and administrative (“SG&A”) expenses were
$24.0 million, or 14.0% of sales, in the fourth quarter of 2017
compared with $21.1 million, or 13.7% of sales, in the same period
last year. The increase was due primarily to the incremental
SG&A costs of the Acquired Businesses which totaled $2.4
million, including $1.4 million of intangible asset amortization
expense.
As previously announced, the Company recorded an impairment
charge of approximately $16.2 million associated to the Armstrong
Aerospace reporting unit in the fourth quarter. The impairment loss
was incurred in the Aerospace segment.
The effective tax rate for the quarter was 41.8%, compared with
30.9% in the fourth quarter of 2016. The 2017 fourth quarter tax
rate was unfavorably impacted by the $1.3 million estimated
transition tax on the deemed repatriation of foreign earnings
resulting from the U.S. Tax Cuts and Jobs Act ("the Act"), enacted
in December 2017. This unfavorable impact was offset by the impact
of the U.S. federal R&D tax credit, a reduction in foreign
taxes due to a change in foreign tax rates enacted in December
2017, and the revaluation of the deferred tax balances as a result
of a reduction in the Federal tax rate from the Act ($0.9
million).
2017 Results
Consolidated sales for 2017 decreased by $8.7 million, or 1.4%,
to $624.5 million. Aerospace segment sales of $534.6 million were
consistent with 2016 sales of $534.0 million, while Test Systems
segment sales were down 9.3% to $89.9 million. Sales from the
Acquired Businesses contributed $15.5 million for 2017.
Consolidated gross margin was 22.0% in 2017 compared with 25.2%
in 2016. Lower consolidated gross margin was the result of lower
sales volume. E&D costs increased 6.8% to $95.0 million in 2017
primarily due to the Acquired Businesses, compared with $88.9
million in 2016. The incremental E&D costs of Acquired
Businesses totaled $5.7 million. As a percent of sales, E&D was
15.2% and 14.0% in 2017 and 2016, respectively.
SG&A expenses increased $4.2 million in 2017 compared with
2016. As a percent of sales, SG&A expenses were 14.5% and 13.6%
for 2017 and 2016, respectively. The increase was due primarily to
the incremental SG&A costs of the Acquired Businesses which
added $4.6 million, including $1.8 million of intangible asset
amortization expense.
The effective tax rate for 2017 was 21.3%, compared with 29.6%
in 2016. The 2017 tax rate was favorably impacted by the U.S.
federal R&D tax credit, a reduction in foreign taxes due to a
change in foreign tax rates enacted in December 2017, and the
revaluation of the deferred tax balances as a result of the Act
($0.9 million). These favorable impacts were offset by the $1.3
million estimated transition tax on the deemed repatriation of
foreign earnings resulting from the Act.
Mr. Gundermann commented, "2017 was certainly a challenging year
for our company, with organic revenue flat or down slightly in both
of our segments compared with 2016. But during this two-year
period, our employee headcount increased by approximately 160
people, in addition to another 300 by acquisition in December. This
put considerable pressure on our margins. Nevertheless, we are
building a company designed to achieve bigger and better things,
and we believe our efforts are bearing fruit. The best of evidence
for this is our consolidated bookings in 2017 of $729 million, far
in excess of our $624 million in revenue."
Aerospace Segment Review (refer to sales by market and
segment data in accompanying tables)
Aerospace Fourth Quarter 2017
Results
Aerospace segment sales increased by $11.5 million, or 9.0%,
when compared with the prior year’s fourth quarter to $139.6
million. The Acquired Businesses contributed $8.5 million in sales
in the 2017 fourth quarter.
Electrical Power & Motion sales decreased $4.0 million, or
5.7%, due to lower sales of cabin power products due to a
combination of lower volume and pricing. Lighting & Safety
sales increased by $1.0 million primarily due to higher lighting
sales partially offset by lower sales of passenger service units.
Avionics sales were up $12.5 million as a result of $2.4 million
increase in antennae and other avionics sales combined with the
Acquired Businesses which contributed $8.0 million to sales in this
product line. Structures sales increased by $0.6 million and
Systems Certification sales increased by $1.0 million on higher
project activity.
Aerospace segment operating loss for the fourth quarter of 2017
was $7.9 million compared with an operating profit of $16.9
million, or 13.2% of sales, in the same period last year. The
Aerospace operating profit was negatively impacted by a $16.2
million impairment loss relating to Armstrong Aerospace and a $5.7
million operating loss from the CCC acquisition. Gross margin was
negatively affected by the CCC acquisition having a significantly
lower margin profile at this point in its business cycle compared
with the organic business. Organic Aerospace E&D costs were
$19.9 million compared with $20.2 million in the same period last
year. The Acquired Businesses incurred E&D costs of $2.9
million.
Aerospace bookings in the fourth quarter of 2017 were $179.3
million, for a book-to-bill ratio of 1.3:1 for the quarter. Backlog
was $298.6 million at the end of the fourth quarter of 2017.
Aerospace 2017 Results
Aerospace segment sales increased by $0.6 million, or 0.1%, to
$534.6 million, when compared with the prior year primarily due to
the addition of the Acquired Businesses which added $15.5
million.
Electrical Power & Motion sales decreased $24.2 million, or
8.4%, for similar reasons as discussed in the quarter. Systems
Certifications sales decreased $2.2 million and other products
decreased $1.0 million from lower project activity earlier in the
year. These declines were offset by increased Avionics sales, up
$21.2 million of which $15.0 million was from the Acquired
Businesses, and $5.3 million was from increased sales of databus
and in-flight entertainment systems. Structures sales increased by
$5.0 million.
Aerospace operating profit for 2017 was $38.9 million, or 7.3%
of sales, compared with $78.0 million, or 14.6% of sales, in the
same period last year. Aerospace operating profit was negatively
impacted by lower sales volume and market pricing pressures
primarily related to cabin power products, coupled with the $16.2
million impairment at Armstrong and an operating loss of $8.4
million from CCC. E&D costs for Aerospace were $85.3 million
(inclusive of $5.6 million related to the Acquired Businesses) and
$78.5 million in 2017 and 2016, respectively.
Mr. Gundermann commented, "Our Aerospace segment had record
bookings in the fourth quarter of $179 million, for a book-to-bill
ratio of 1.3:1. This allowed us to enter 2018 with a record
Aerospace backlog of $299 million, providing a sound base for the
year."
Test Systems Segment Review (refer to sales by market and
segment data in accompanying tables)
Test Systems Fourth Quarter 2017
Results
Sales in the fourth quarter of 2017 increased approximately $5.7
million to $31.8 million compared with the same period in 2016, an
increase of 22.0%. Sales to the Semiconductor market increased $9.6
million compared with the same period in 2016, which was offset by
decreased sales of $3.8 million to the Aerospace & Defense
market.
Operating profit was $4.5 million, or 14.2% of sales, compared
with $2.0 million, or 7.6% of sales, in last year’s fourth quarter.
This is primarily due to increased sales volumes. E&D costs
were $2.6 million, up slightly from $2.5 million in the fourth
quarter of 2016.
Orders for the Test Systems segment in the quarter were $57.7
million, up $34.6 million, or 150%, over the prior-year period, for
a book-to-bill ratio of 1.8:1 for the quarter. Backlog was $95.1
million at the end of the fourth quarter of 2017.
Test Systems 2017 Results
Sales in 2017 decreased 9.3% to $89.9 million compared with
sales of $99.1 million for 2016, due to lower shipments to both the
Semiconductor and Aerospace & Defense markets. Sales to the
Semiconductor market decreased $5.9 million and sales to the
Aerospace & Defense market decreased $3.3 million compared with
the same period in 2016.
Operating profit was $7.4 million, or 8.2% of sales, compared
with $8.5 million, or 8.6% of sales, in 2016. This is primarily due
to decreased sales volume. E&D costs were $9.7 million in 2017,
compared with $10.4 million in 2016.
Mr. Gundermann commented, "Our Test business continues to make
progress establishing its technologies in its chosen markets. While
2017 was disappointing with revenue of $90 million, bookings for
the year were $146.1 million for a book-to-bill of 1.6:1, pointing
to a much stronger 2018."
Outlook
As previously reported, consolidated sales in 2018 are expected
to be in the range of $745 million to $815 million. Approximately
$630 million to $680 million of revenue is expected from the
Aerospace segment. Test Systems segment revenue for 2018 is
expected to be approximately $115 million to $135 million.
Consolidated backlog at December 31, 2017 was $393.7 million, a
record level, of which approximately $346.7 million is expected to
ship in 2018.
Mr. Gundermann commented, “We believe 2018 will be an excellent
year for our company, with many of the recent headwinds we have
faced turning to tailwinds. The mid-point of our consolidated
revenue range calls for growth of 25%, with our Aerospace segment
being up about 22% and our Test segment being up 39%. We are
pursuing a number of high-value awards that will heavily influence
our plans, which we will refine as soon as possible.”
The effective tax rate for 2018 is expected to be approximately
18% to 22%.
Capital equipment spending in 2018 is expected to be in the
range of $24 million to $28 million. E&D spending in 2018 is
expected to be in the range of $110 million to $115 million
including the Acquired Businesses, which represents approximately
14.4% of sales at the mid-point of the expected sales range.
Fourth Quarter 2017 Webcast and Conference Call
The Company will host a teleconference today at 5:00 p.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)
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 13676642. The telephonic
replay will be available from 8:00 p.m. ET on the day of the call
through Monday, March 5, 2018. A transcript will also be posted to
the Company’s website once available.
About Astronics
Corporation
Astronics Corporation (NASDAQ: ATRO) serves the world’s
aerospace, defense and semiconductor 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, military branches,
completion centers and Fortune 500 manufacturing organizations rely
on the collaborative spirit and innovation of Astronics.
For more information on Astronics and its solutions, visit
Astronics.com.
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 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 Year Ended 12/31/2017
12/31/2016 12/31/2017
12/31/2016 Sales $ 171,318
$ 154,068 $ 624,464 $
633,123 Cost of products sold 139,165 117,582
487,351 473,656 Gross profit
32,153 36,486 137,113 159,467
Gross margin 18.8
% 23.7 % 22.0 % 25.2
% Impairment Loss 16,237 — 16,237 — Selling, general
and administrative 24,012 21,082 90,516 86,328
SG&A % of
sales 14.0 % 13.7 %
14.5 % 13.6 % (Loss) Income from
operations (8,096 ) 15,404 30,360 73,139
Operating margin
(4.7 )% 10.0 % 4.9 %
11.6 % Interest expense, net 1,619
1,108 5,369 4,354 (Loss)
Income before tax (9,715 ) 14,296 24,991 68,785 Income tax expense
(benefit) (4,062 ) 4,411 5,312
20,361
Net (Loss) income $ (5,653
) $ 9,885 $
19,679 $ 48,424 Net
(Loss) income % of sales (3.3 )% 6.4
% 3.2 % 7.6 %
Basic earnings per share: $ (0.20 ) $ 0.34 $ 0.69 $ 1.66 Diluted
earnings per share: $ (0.20 ) $ 0.33 $ 0.67 $ 1.61 Weighted
average diluted shares
outstanding (in thousands)
28,015 29,742 29,320 30,032 Capital expenditures $ 3,763 $
3,168 $ 13,478 13,037 Depreciation and amortization $ 7,794 $ 6,333
$ 27,063 $ 25,790
ASTRONICS CORPORATION
CONSOLIDATED
BALANCE SHEET DATA
($ in thousands) (unaudited)
12/31/2017
12/31/2016
ASSETS
Cash and cash equivalents $ 17,914 $ 17,901 Accounts receivable and
uncompleted contracts 132,633 109,415 Inventories 150,196 116,597
Other current assets 14,586 11,160 Property, plant and equipment,
net 125,830 122,812 Other long-term assets 15,659 13,149 Intangible
assets, net 153,493 98,103 Goodwill 125,645 115,207
Total
assets $ 735,956 $
604,344
LIABILITIES AND
SHAREHOLDERS' EQUITY
Current maturities of long term debt $ 2,689 $ 2,636 Accounts
payable and accrued expenses 80,595 60,756 Customer advances and
deferred revenue 19,607 23,168 Long-term debt 269,078 145,484 Other
liabilities 34,060 34,851 Shareholders' equity 329,927
337,449
Total liabilities and shareholders' equity $
735,956 $ 604,344
ASTRONICS CORPORATION
Segment
Data
(Unaudited, $ in thousands)
Three Months Ended
Year Ended 12/31/2017 12/31/2016
12/31/2017 12/31/2016 Sales
Aerospace $ 139,687 $ 128,052 $ 534,724 $ 534,408 Less
Inter-segment (121 ) — (121 ) (367 )
Total Aerospace 139,566 128,052 534,603 534,041 Total Test
Systems 31,752 26,016 89,861
99,082
Total consolidated sales 171,318
154,068 624,464 633,123
Operating (loss) profit and margins Aerospace (7,865 )
16,867 38,888 77,966 (5.6 )% 13.2 % 7.3 % 14.6 % Test Systems 4,516
1,983 7,359 8,507 14.2 % 7.6 % 8.2 % 8.6 %
Total operating (loss) profit (3,349 ) 18,850 46,247 86,473
Interest expense 1,619 1,108 5,369 4,354 Corporate
expenses and other 4,747 3,446 15,887
13,334
(Loss) Income before taxes $
(9,715 ) $ 14,296 $ 24,991 $
68,785
ASTRONICS CORPORATION
SALES BY
MARKET
(Unaudited, $ in thousands)
Three
Months Ended Year Ended
12/31/2017
12/31/2016 % change
12/31/2017
12/31/2016 % change
2017 YTD Aerospace Segment Commercial
Transport $ 107,624 $ 104,378 3.1 % $ 414,523 $ 435,552 -4.8 % 66.4
% Military 14,974 14,624 2.4 % 61,270 54,556 12.3 % 9.8 % Business
Jet 12,454 5,042 147.0 % 41,298 25,407 62.5 % 6.6 % Other 4,514
4,008 12.6 % 17,512 18,526 -5.5 %
2.8 %
Aerospace Total 139,566 128,052 9.0 % 534,603
534,041 0.1 % 85.6 %
Test Systems Segment
Semiconductor 13,655 4,076 235.0 % 31,999 37,939 -15.7 % 5.1 %
Aerospace & Defense 18,097 21,940 -17.5 % 57,862
61,143 -5.4 % 9.3 %
Test Systems Total
31,752 26,016 22.0 % 89,861 99,082 -9.3
% 14.4 %
Total $ 171,318 $
154,068 11.2 % $ 624,464 $ 633,123 -1.4
%
ASTRONICS CORPORATION
SALES BY PRODUCT
LINE
(Unaudited, $ in thousands)
Three Months
Ended Year Ended
12/31/2017
12/31/2016 % change
12/31/2017
12/31/2016 % change
2017 YTD Aerospace Segment
Electrical Power & Motion $ 65,273 $ 69,250 -5.7 % $ 264,286 $
288,465 -8.4 % 42.3 % Lighting & Safety 36,346 35,351 2.8 %
158,663 156,871 1.1 % 25.4 % Avionics 22,536 10,077 123.6 % 53,960
32,761 64.7 % 8.6 % Systems Certification 4,927 3,954 24.6 % 14,333
16,531 -13.3 % 2.3 % Structures 5,970 5,412 10.3 % 25,849 20,887
23.8 % 4.1 % Other 4,514 4,008 12.6 % 17,512
18,526 -5.5 % 2.8 %
Aerospace Total 139,566
128,052 9.0 % 534,603 534,041 0.1 % 85.6 %
Test
Systems 31,752 26,016 22.0 % 89,861 99,082
-9.3 % 14.4 %
Total $ 171,318 $
154,068 11.2 % $ 624,464 $ 633,123 -1.4
%
ASTRONICS CORPORATION
ORDER AND BACKLOG
TREND
(Unaudited, $ in thousands)
Q1 2017 Q2 2017
Q3 2017
Q4
2017
Trailing Twelve
Months
04/01/2017 7/1/2017 9/30/2017
12/31/2017 12/31/2017 Sales
Aerospace $ 136,827 $ 129,547 $ 128,663 $ 139,566 $ 534,603 Test
Systems 15,569 21,567 20,973 31,752
89,861
Total Sales $ 152,396 $
151,114 $ 149,636 $
171,318 $ 624,464
Bookings Aerospace $ 122,836 $ 134,822 $ 146,178 $ 179,340 $
583,176 Test Systems 24,236 23,944 40,161
57,719 146,060
Total Bookings $ 147,072
$ 158,766 $ 186,339
$ 237,059 $ 729,236
Backlog* Aerospace $ 205,155 $ 215,647 $ 233,162 $
298,604 Test Systems 47,554 49,931 69,119
95,086
Total Backlog $ 252,709
$ 265,578 $ 302,281
$ 393,690 N/A
Book:Bill Ratio Aerospace 0.90 1.04 1.14 1.28 1.09 Test
Systems 1.56 1.11 1.91 1.82 1.63
Total Book:Bill 0.97 1.05
1.25 1.38 1.17
* During the second and fourth quarters, acquisitions added
backlog of approximately $5.2 million and $25.7 million,
respectively, for the Aerospace segment.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20180226006550/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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