- Strong sales of $208.2 million, up
16.3% over 2018 first quarter
- Improved operating margin of 11.0%
with income from operations of $22.9 million
- Fifth consecutive quarter of record
Aerospace sales; up 14.5% to $188.5 million
- Aerospace segment operating profit
improves to $25.8 million, or 13.7% of sales
- Record Aerospace backlog of $329.2
million
- Strong bookings of $205.0
million
- Sale of semiconductor test business
yields $80.1 million pre-tax gain
Astronics Corporation (Nasdaq: ATRO), a leading supplier of
advanced technologies and products to the global aerospace and
defense industries, today reported financial results for the three
months ended March 30, 2019. 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 12, 2018.
Peter J. Gundermann, President and Chief Executive Officer,
commented, "Our Company had a strong start to the year. Activity
during the first quarter was brisk, with solid demand across our
product lines as well as expanding margins. Our Aerospace business
drove our improved results, achieving yet another record in sales
and ending the quarter with a record backlog. The strength in our
first quarter numbers gives us increased confidence that 2019 will
be another solid year for the Company."
On February 13, 2019, the Company completed the divestiture of
its semiconductor test business within the Test Systems segment.
The transaction resulted in a pre-tax gain of $80.1 million,
expected to be approximately $58.8 million after taxes. For
comparability purposes, in addition to reporting the consolidated
and segment results of operations on a basis consistent with U.S.
generally accepted accounting principles (“GAAP”), this press
release also contains certain financial information regarding
consolidated sales, operating income and net income, as well as
Test Systems segment sales and operating profit, adjusted to remove
the effects of the semiconductor business from all periods
presented. Management believes these non-GAAP measures are useful
to investors in understanding the performance of the ongoing
business. The reconciliation of GAAP measures to non-GAAP measures
is contained in the section labeled "Reconciliation to Non-GAAP
Performance Measures".
Three Months Ended ($ in thousands)
March
30,2019
March
31,2018
%
Change
Sales $ 208,174 $ 179,059 16.3 %
Income from
Operations $ 22,881 $ 6,632 245 % Operating margin % 11.0 % 3.7
%
Gain on Sale of Business $ 80,133 $ — —
Net Income
$ 78,146 $ 3,294 2,272 % Net Income % 37.5 % 1.8 %
Adjusted Consolidated Sales $ 204,819 $ 171,999 19.1 %
Adjusted Income from Operations $ 21,964 $ 5,920 271.0 %
Adjusted Operating margin % 10.7 % 3.4 %
Adjusted Net Income
$ 16,107 $ 2,770 481.5 %
Consolidated Review
First Quarter 2019 Results (compared with
the prior-year period, unless noted otherwise)
Consolidated sales were up 16.3%, or $29.1 million, driven
primarily from growth in the Aerospace segment. Excluding sales of
the semiconductor business, adjusted consolidated sales were up
19.1%, or $32.8 million, demonstrating growth in both the Aerospace
and Test Systems segments.
Consolidated operating income improved to $22.9 million, or
11.0% of sales, compared with
$6.6 million, or 3.7% of sales in the prior-year period. Margin
expansion was driven by leverage gained from higher volume combined
with a reduction in expenses relative to the first quarter of 2018,
more than offsetting $10.7 million in operating losses from the
three challenged Aerospace businesses, which included a $2.0
million charge for inventory reserves and a $1.7 million additional
loss on a VVIP contract. Last year’s first quarter was unfavorably
impacted by $1.7 million in incremental amortization related to the
Telefonix acquisition in December 2017, $1.3 million in expense
related to the fair value step-up of inventory for the acquisition
and a $1.0 million litigation reserve.
Adjusted consolidated operating income was $22.0 million, or
10.7% of adjusted consolidated sales, compared with $5.9 million,
or 3.4% of adjusted consolidated sales, in the prior-year
period.
The effective tax rate for the quarter was 22.6%, compared with
16.1% in the first quarter of 2018. The 2019 first quarter tax rate
was unfavorably impacted by the gain on the sale of the
semiconductor business.
Net income was $78.1 million, or $2.35 per diluted share,
compared with $3.3 million, or $0.10 per diluted share in the prior
year. The gain on the sale of the semiconductor test business is
expected to contribute $58.8 million after taxes. Adjusted net
income, excluding the divested semiconductor test business, was
$16.1 million in the first quarter of 2019 compared with $2.8
million in the prior-year period.
Bookings were $205.0 million, for a book-to-bill ratio of
0.98:1. Backlog at the end of the quarter was $400.2 million.
Approximately $335.5 million of backlog is expected to ship in the
remainder of 2019.
Mr. Gundermann commented, “Margin improved across the business
in the first quarter, despite another substantial loss from our
previously discussed struggling Aerospace businesses. We also ended
the first quarter facing some cost challenges in our Test business
as it adjusted to lower volumes without the semiconductor business.
We addressed both of these situations with restructuring
initiatives early in the second quarter which, when combined with
anticipated revenue increases, will bring the struggling businesses
closer to break-even in coming quarters.”
Aerospace Segment Review (refer to sales by market and
segment data in accompanying tables)
Aerospace First Quarter 2019 Results
(compared with the prior-year period, unless noted
otherwise)
Aerospace segment sales increased by $23.9 million, or 14.5%, to
$188.5 million.
Electrical Power & Motion sales increased by $19.9 million,
or 27.3%, due to higher sales of in-seat power and seat motion
products. Sales of Lighting & Safety products were up $7.0
million due to a general increase in volume.
Aerospace operating profit was $25.8 million, or 13.7% of sales,
compared with $13.1 million, or 8.0% of sales, in the same period
last year. Aerospace operating profit benefited from the
contribution margin on higher sales and improved sales mix, coupled
with lower amortization expense related to the intangible assets
acquired as part of the Telefonix acquisition in 2017. Operating
profit was negatively affected by the challenged businesses, which
collectively turned in an operating loss of $10.7 million for the
quarter. The $10.7 million operating loss included a
$2.0 million inventory reserve and a $1.7 million additional
loss on a development contract. We restructured one of the
“struggling three” companies early in the second quarter, a move
designed to reduce its fixed costs by approximately $3.5
million.
Aerospace bookings in the first quarter of 2019 were $191.7
million, for a book-to-bill ratio of 1.02:1. Backlog was $329.2
million at the end of the first quarter of 2019.
Test Systems Segment Review (refer to sales by market and
segment data in accompanying tables)
Test Systems First Quarter 2019 Results
(compared with the prior-year period, unless noted
otherwise)
Test Segment sales increased $5.2 million to $19.7 million
compared with $14.5 million in the prior-year period. An $8.9
million increase in sales to the Aerospace & Defense market was
offset by a $3.7 million decrease in sales to the Semiconductor
market. Adjusted Test Systems segment sales, excluding the
semiconductor test business from both periods, were $16.3 million,
up more than double from $7.4 million in the prior year.
Operating profit for the segment was $2.2 million, or 11.1% of
sales, compared with an operating loss of $1.9 million in last
year’s first quarter. Adjusted operating profit for the segment
was
$1.3 million, or 7.8% of adjusted sales, compared with an
operating loss of $2.6 million in the prior-year period. Higher
margin was driven by the increase in volume.
Bookings for the Test Systems segment in the quarter were $13.3
million, for a book-to-bill ratio of 0.68:1 for the quarter.
Backlog was $70.9 million at the end of the first quarter of
2019.
Mr. Gundermann commented, “There has been significant change in
our Test segment, starting with the sale of the semiconductor test
business followed by the resizing of the organization early in the
second quarter. We are realigning the business to focus more
effectively on our traditional A&D market, positioning the
business for long-term success.”
2019 Outlook
Astronics reiterated its expectations for 2019 with consolidated
annual sales to be in the range of $760 million to $805 million, of
which $710 million to $745 million is expected from the Aerospace
segment and $50 million to $60 million is expected from the Test
segment.
Consolidated backlog at March 30, 2019 was $400.2 million.
Approximately 84% of the backlog is expected to ship in 2019.
The effective tax rate for 2019, excluding the impact of the
gain on the sale of the semiconductor business, is expected to be
in the range of 18% to 22%.
Capital equipment spending in 2019 is expected to be between $22
million to $28 million.
Mr. Gundermann concluded, “We had a solid first quarter and, as
a result, we are maintaining our sales forecast for the year. The
forecast at the midpoint implies growth of around 10% over 2018
after adjusting for the divestiture of the semiconductor test
business. We expect the second quarter to be somewhat lighter than
the first, with the third and fourth quarters strengthening again.
The second quarter will also see a charge of approximately $2
million related to the recent restructuring initiatives that have
been implemented. These initiatives collectively will result in
approximately
$7 million of annual savings, split evenly between our two
segments.”
First Quarter 2019 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 13689830. The telephonic
replay will be available from 2:00 p.m. on the day of the call
through Wednesday, May 22, 2019. A transcript will also be posted
to the Company’s Web site once available.
About Astronics
Corporation
Astronics Corporation (Nasdaq: ATRO) is a leading supplier of
advanced technologies and products to the global aerospace and
defense 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 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 progress
being made with the three operations having losses, the
continuation of the trend in growth with passenger power and
connectivity on airplanes, the ability of the Company to advance
its Test business, the ability to achieve at or near breakeven
performance in the Test business, the Company’s ability to deliver
a solid 2019, the ability to win new projects in the Test business
and margins to expand with growth, the success of the Company
achieving its sales expectations, 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.
FINANCIAL TABLES FOLLOW
ASTRONICS CORPORATION CONSOLIDATED INCOME STATEMENT
DATA (Unaudited, $ in thousands except per share data)
Three Months Ended 3/30/2019
3/31/2018 Sales $ 208,174 $
179,059 Cost of products sold 156,097 141,927 Gross profit
52,077 37,132
Gross margin 25.0 % 20.7
% Selling, general and administrative 29,196 30,500
SG&A % of sales 14.0 % 17.0
% Income from operations 22,881 6,632
Operating
margin 11.0 % 3.7 % Gain on
sale of business 80,133 — Other expense, net of other income 215
375 Interest expense, net 1,804 2,331 Income before tax 100,995
3,926 Income tax expense 22,849 632
Net income $
78,146 $ 3,294 Net income % of sales
37.5 % 1.8 % *Basic
earnings per share: $ 2.40 $ 0.10 *Diluted earnings per share: $
2.35 $ 0.10
*Weighted average diluted shares
outstanding (in thousands)
33,214 33,014 Capital expenditures $ 3,474 $ 4,346
Depreciation and amortization $ 8,076 $ 9,841
*Prior-year 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 12, 2018.
SEGMENT DATA (Unaudited, $ in thousands)
Three Months Ended
3/30/2019 3/31/2018 Sales Aerospace $ 188,501
$ 164,600 Test Systems 19,724 14,459 Less inter-segment (51)
— Total Test Systems 19,673 14,459
Total consolidated sales
208,174 179,059
Segment operating profit and margins
Aerospace 25,768 13,115 13.7 % 8.0 % Test Systems 2,185 (1,929)
11.1 % (13.3) %
Total segment operating profit 27,953 11,186
Gain on sale of business 80,133 — Interest expense 1,804
2,331 Corporate expenses and other 5,287 4,929
Income before
taxes $ 100,995 $ 3,926
Reconciliation to Non-GAAP Performance Measures
The Company’s press release contains financial information
regarding consolidated sales, operating income and net income, as
well as Test Systems segment sales and operating profit, as
adjusted to remove the effects of the semiconductor business from
all periods presented. Each of these adjusted balances are non-GAAP
performance measures. Management believes these non-GAAP measures
are useful to investors in understanding the performance of the
ongoing business.
(Unaudited, $ in thousands)
Consolidated Three Months
Ended 3/30/2019 3/31/2018 Sales
Consolidated sales $ 208,174 $ 179,059 Non-GAAP Adjustment - Remove
effect of semiconductor business* (3,355) (7,060)
Adjusted
Consolidated Sales $ 204,819 $ 171,999
Income from
Operations Consolidated income from operations $ 22,881 $ 6,632
Non-GAAP Adjustment - Remove effect of
semiconductorbusiness*
(917) (712)
Adjusted Income from Operations $ 21,964 $ 5,920
10.7 % 3.4 %
Net Income Consolidated net income $ 78,146 $
3,294
Non-GAAP Adjustment - Remove effect of
semiconductorbusiness*
(62,039) (524)
Adjusted Net Income $ 16,107 $ 2,770
Test Segment Test Segment Sales Test
Segment Sales $ 19,673 $ 14,459
Non-GAAP Adjustment - Remove effect of
semiconductorbusiness*
(3,355) (7,060)
Adjusted Test Segment Sales $ 16,318 $ 7,399
Income from Test Segment Operations Income from Test
Segment operations $ 2,185 $ (1,929)
Non-GAAP Adjustment - Remove effect of
semiconductorbusiness*
(917) (712)
Adjusted Income from Test Segment Operations $
1,268 $ (2,641) 7.8 % (35.7) %
- The non-GAAP adjustment eliminates all
semiconductor test sales and associated direct costs from all
periods presented. There are significant indirect costs, overheads,
and other general and administrative costs that are not included in
the non-GAAP adjustment, as such functions benefited all operations
and products within the Test Systems segment and have not been
eliminated as a result of the divestiture. The non-GAAP adjustment
to net income for the three-month period ended March 30, 2019 also
eliminates the impact of the gain on the sale of the semiconductor
business, net of tax at the forecasted consolidated tax rate for
2019.
ASTRONICS CORPORATION CONSOLIDATED BALANCE
SHEET DATA ($ in thousands) (unaudited)
3/30/2019 12/31/2018 ASSETS Cash
and cash equivalents $ 15,966 $ 16,622 Accounts receivable and
uncompleted contracts 188,564 182,308 Inventories 139,090 138,685
Other current assets 17,796 17,198 Assets held for sale — 19,358
Property, plant and equipment, net 117,307 120,862 Other long-term
assets 47,811 21,272 Intangible assets, net 129,133 133,383
Goodwill 124,854 124,952
Total assets $
780,521 $ 774,640 LIABILITIES
AND SHAREHOLDERS' EQUITY Current maturities of long-term
debt $ 112 $ 1,870 Accounts payable and accrued expenses 116,922
98,436 Customer advances and deferred revenue 30,937 26,880
Liabilities held for sale — 906 Long-term debt 115,194 232,112
Other liabilities 51,353 27,811 Shareholders' equity 466,003
386,625
Total liabilities and shareholders' equity $
780,521 $ 774,640 ASTRONICS
CORPORATION CONSOLIDATED CASH FLOWS DATA
(Unaudited, $ in thousands)
Three Months
Ended 3/30/2019 3/31/2018 Cash flows
from operating activities: Net income $ 78,146 $ 3,294
Adjustments to reconcile net income to
cash provided by (used for) operatingactivities:
Depreciation and amortization 8,076 9,841 Provisions for non-cash
losses on inventory and receivables 2,498 564 Equity-based
compensation expense 1,193 931 Deferred tax benefit (3,398) (1,128)
Gain on sale of business (80,133) — Other 252 (467) Cash flows from
changes in operating assets and liabilities: Accounts receivable
(6,414) (20,868) Inventories (5,943) (18,204) Accounts payable
(2,032) 19,418 Accrued expenses (9,283) (3,194) Other current
assets and liabilities (2,860) (3,474) Customer advanced payments
and deferred revenue 4,055 10,482 Income taxes 26,824 1,303
Supplemental retirement and other liabilities 373 448 Cash provided
by (used for) operating activities 11,354 (1,054)
Cash flows
from investing activities: Proceeds on sale of business 103,793
— Capital expenditures (3,474) (4,346) Cash provided by (used for)
investing activities 100,319 (4,346)
Cash flows from financing
activities: Proceeds from long-term debt 10,000 15,000 Payments
for long-term debt (122,026) (10,705) Debt acquisition costs —
(516) Proceeds from exercise of stock options 159 160 Other
Financing Activities (395) — Cash (used for) provided by financing
activities (112,262) 3,939 Effect of exchange rates on cash (67)
(66) Decrease in cash and cash equivalents (656) (1,527) Cash and
cash equivalents at beginning of period 16,622 17,914 Cash and cash
equivalents at end of period $ 15,966 $ 16,387
ASTRONICS
CORPORATION SALES BY MARKET (Unaudited, $
in thousands)
Three Months Ended
3/30/2019 3/31/2018
% Change % of Sales
Aerospace Segment Commercial Transport $ 141,778 $ 133,050
6.6 % 68.1 % Military 20,953 14,015 49.5 % 10.1 % Business Jet
19,837 10,664 86.0 % 9.5 % Other 5,933 6,871 (13.7) % 2.9 %
Aerospace Total 188,501 164,600 14.5 % 90.6 %
Test
Systems Segment Semiconductor 3,354 7,060 (52.5) % 1.6 %
Aerospace & Defense 16,319 7,399 120.6 % 7.8 %
Test Systems
Total 19,673 14,459 36.1 % 9.4 %
Total $ 208,174
$ 179,059 16.3 %
SALES BY PRODUCT LINE
(Unaudited, $ in thousands)
Three Months
Ended 3/30/2019
3/31/2018 % Change
% of Sales Aerospace Segment Electrical
Power & Motion $ 92,537 $ 72,678 27.3 % 44.4 % Lighting &
Safety 48,605 41,642 16.7 % 23.3 % Avionics 33,861 33,023 2.5 %
16.3 % Systems Certification 1,618 4,783 (66.2) % 0.8 % Structures
5,947 5,603 6.1 % 2.9 % Other 5,933 6,871 (13.7) % 2.9 %
Aerospace Total 188,501 164,600 14.5 % 90.6 %
Test
Systems Segment 19,673 14,459 36.1 % 9.4 %
Total
$ 208,174 $ 179,059 16.3 %
ASTRONICS CORPORATION
ORDER AND BACKLOG
TREND
(Unaudited, $ in thousands)
Q2 2018 Q3 2018 Q4 2018
Q1 2019
Trailing Twelve Months
6/30/2018 9/29/2018 12/31/2018
3/30/2019 3/30/2019 Sales Aerospace $ 166,204
$ 169,579 $ 175,242 $ 188,501 $ 699,526 Test Systems 42,402 43,095
27,675 19,673 132,845
Total Sales $ 208,606
$ 212,674 $ 202,917 $
208,174 $ 832,371 Bookings
Aerospace $ 158,870 $ 196,671 $ 175,554 $ 191,701 $ 722,796 Test
Systems 28,060 37,137 44,810 13,282 123,289
Total Bookings
$ 186,930 $ 233,808 $
220,364 $ 204,983 $ 846,085
Backlog* Aerospace $ 298,643 $ 325,735 $ 326,047 $
329,247 Test Systems 78,293 72,335 89,470 70,904
Total
Backlog $ 376,936 $ 398,070
$ 415,517 $ 400,151 N/A
Book:Bill Ratio Aerospace 0.96 1.16 1.00 1.02 1.03 Test
Systems 0.66 0.86 1.62 0.68 0.93
Total Book:Bill 0.90
1.10 1.09 0.98 1.02 (*) During
the first quarter of 2019, Test Systems segment backlog of
approximately $12.2 million was disposed of in the divestiture of
the semiconductor business.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190508005282/en/
Company:David C. Burney, Chief Financial OfficerPhone:
(716) 805-1599, ext. 159Email: david.burney@astronics.com
Investor Relations:Deborah K. Pawlowski, Kei Advisors
LLCPhone: (716) 843-3908Email: dpawlowski@keiadvisors.com
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