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Astronics Corporation Reports Record Third Quarter Results

  • Achieved record quarterly sales of $200.1 million and record quarterly net income of $24.7 million
  • Record diluted earnings per share was $0.94 for the quarter
  • 2015 sales guidance tightened to $690 million to $705 million
  • Initial 2016 sales guidance established at $690 million to $750 million

EAST AURORA, N.Y., Nov. 10, 2015 (GLOBE NEWSWIRE) -- Astronics Corporation (NASDAQ:ATRO), a leading supplier of products to the global aerospace, defense, and semiconductor industries, today reported financial results for the third quarter and nine months ended October 3, 2015. Earnings per share for all periods presented are adjusted for the 3 for 20 (15%) distribution of Class B Stock for shareholders of record on October 8, 2015.

Three Months Ended Nine Months Ended
10/3/2015 9/27/2014 % Change 10/3/2015 9/27/2014 % Change
Sales $ 200,145 $ 179,442 11.5% $ 534,939 $ 494,956 8.1%
Gross profit $ 59,427 $ 51,310 15.8% $ 149,041 $ 124,517 19.7%
Gross margin 29.7% 28.6% 27.9% 25.2%
SG&A $ 22,297 $ 25,539 -12.7% $ 66,213 $ 62,638 5.7%
SG&A percent of sales 11.1% 14.2% 12.4% 12.7%
Income from Operations $ 37,130 $ 25,771 44.1% $ 82,828 $ 61,879 33.9%
Operating margin % 18.6% 14.4% 15.5% 12.5%
Net Income $ 24,694 $ 17,080 44.6% $ 53,067 $ 37,731 40.6%
Net Income % 12.3% 9.5% 9.9% 7.6%

Peter J. Gundermann, President and Chief Executive Officer, commented, "The third quarter was very strong for Astronics Corporation with new records set for sales and earnings. Sales crossed the $200 million level for the first time, and net income approached $25 million. Both our Aerospace and Test Systems segments turned in very strong performances. We are excited about the strength of the business, and look forward to a solid close to 2015 while maintaining positive momentum going into 2016."

Consolidated Review

Third Quarter 2015 Results

Consolidated sales for the third quarter of 2015 were $200.1 million, up from $179.4 million, or 11.5%, over the same period last year. The 2015 third quarter included $6.5 million in sales from Armstrong Aerospace, Inc. ("Armstrong"), acquired on January 14, 2015. Organic sales for the quarter increased $14.2 million, or 7.9%, and were achieved with increases across both the Aerospace and Test Systems segments.

Consolidated gross margin was 29.7% in the third quarter of 2015 compared with 28.6% in the third quarter of 2014. The third quarter of 2014 included $1.3 million of inventory fair value step-up expense of acquired businesses compared with $0.3 million in the third quarter of 2015. Engineering and development ("E&D") costs were $22.5 million in the third quarter of 2015, including $1.8 million for Armstrong. E&D costs in last year's third quarter were $19.1 million. As a percent of sales, E&D was 11.3% and 10.7% in the third quarters of 2015 and 2014, respectively.

Selling, general and administrative ("SG&A") expenses were $22.3 million, or 11.1% of sales, in the third quarter of 2015 compared with $25.5 million, or 14.2% of sales, in the same period last year. The third quarter of 2014 included intangible asset amortization expense related to Astronics Test Systems, Inc. ("ATS") (acquired in February 2014) of $5.3 million compared with $0.3 million in the third quarter of 2015. This decrease was partially offset by the incremental SG&A costs of Armstrong, which added approximately $1.4 million to SG&A in the third quarter of 2015, including $0.6 million of amortization expense for acquired intangible assets of that business.

Diluted earnings per share for the 2015 third quarter were $0.94 compared with $0.65 in the prior-year period, an increase of 44.6%.

Year-to-Date 2015 Results

Consolidated sales for the first nine months of 2015 increased by $40.0 million, or 8.1%, to $534.9 million, from $494.9 million for the same period last year. The acquisition of Armstrong contributed $20.3 million to consolidated sales, while consolidated organic sales increased $19.7 million, or 4.0%.

Consolidated gross margin was 27.9% in the first nine months of 2015 compared with 25.2% in the first nine months of 2014. The first nine months of 2015 included $1.0 million of inventory step-up expense compared with $18.6 million in the first nine months of 2014. E&D costs were 12.4% of sales, or $66.1 million, which included $4.8 million for Armstrong, compared with $57.1 million, or 11.5% of sales, in the prior year's first nine months.

Selling, general and administrative ("SG&A") expenses were $66.2 million, or 12.4% of sales, in the first nine months of 2015 compared with $62.6 million, or 12.7% of sales, in the same period last year. The increase was due primarily to the incremental SG&A costs of Armstrong, which added approximately $4.1 million to SG&A in the first nine months of 2015. Organically, higher SG&A expense reflected increased headcount and compensation costs to support growth. These increases were partially offset by a decrease in amortization expense for acquired intangible assets of ATS of $4.4 million and a $1.1 million reduction in the contingent consideration liability related to prior acquisitions.

Diluted earnings per share for the first nine months of 2015 were $2.02 compared with $1.45 for the same period last year, an increase of 39.3%.

Aerospace Segment Review (refer to sales by market and segment data in accompanying tables)

Aerospace Third Quarter 2015 Results

Aerospace segment sales increased by $16.5 million, or 13.5%, when compared with the prior year's third quarter to $138.7 million. Organic Aerospace sales grew 8.2%, or $10.0 million. Sales from Armstrong added $6.5 million.

Sales growth in the third quarter of 2015 was driven by increased Electrical Power & Motion sales, which were up $9.3 million, or 15%. Sales of in-seat power products grew at an even stronger rate, helping to offset reduced sales of seat motion products in this product line. The Electrical Power & Motion product lines are sold mostly to Commercial Transport customers, with lesser sales to Business Jets and Military customers. Sales of Lighting & Safety products increased $2.9 million, as higher production rates of commercial transport customers were complemented by a number of aftermarket retrofit sales of passenger service units, or PSUs. The 2015 third quarter included $6.1 million of Systems Certification sales from Armstrong, which was acquired in January 2015. These gains offset a reduction of $2.7 million in the Avionics product category, as the Company continued to deal with component problems from a certain supplier. Sales in this product line are expected to rebound somewhat in the fourth quarter.

Aerospace operating profit for the third quarter of 2015 was $23.1 million, or 16.6% of sales, compared with $22.1 million, or 18.0% of sales, in the same period last year. Operating margins were negatively affected by increased E&D spending and lower operating margin from the Armstrong business, partially offset by operating leverage gained on increased organic sales volume. Organic Aerospace E&D costs increased $1.7 million compared with last year's third quarter. Incremental SG&A from Armstrong was $1.4 million, including $0.5 million of intangible asset amortization expense for acquired intangible assets.

Aerospace Year-to-Date 2015 Results

Aerospace segment sales increased by $47.1 million, or 12.9%, when compared with the prior year's first nine months to $413.3 million. Organic sales grew 7.3%, or $26.8 million, and sales from Armstrong added $20.3 million.

Aerospace sales growth year-to-date was driven by increased Electrical Power & Motion sales, which were up $20.2 million, or 10.7%. This product group was dominated by in-seat power products, which were up 18% through three quarters. The Lighting & Safety product line was up $8.2 million, or 7.4%, on a year-to-date basis on higher production rates of commercial transport aircraft and greater retrofit activity. Systems Certification sales were up $16.5 million due to the January acquisition of Armstrong. The other Aerospace product lines made up the remainder of the increase.

Aerospace operating profit for the first nine months of 2015 was $66.7 million, or 16.1% of sales, compared with $60.3 million, or 16.5% of sales, in the same period last year. Operating leverage gained on increased volume for the organic business was partially offset by higher organic E&D costs of approximately $3.9 million. Aerospace SG&A expense increased $5.4 million in the first nine months of 2015 as compared with the corresponding period in 2014. Incremental SG&A from Armstrong was $4.1 million, including $1.6 million of intangible asset amortization expense for acquired intangible assets. The first nine months of 2014 included inventory step-up costs of $2.6 million that reduced normal operating margins for that period.

Aerospace backlog at the end of the 2015 third quarter was $227.3 million and the book-to-bill ratio for the period was 0.94.

Mr. Gundermann commented, "Our Aerospace segment had its second best quarter ever, only after this year's first quarter. Aerospace sales were up 13.5% year-over-year and 8.2% organically. Our Electrical Power & Motion led the way with sales up 15% for the quarter. We continue to see positive developments across the business that we feel point to a promising future. Our customers continue to respond positively to our product offerings and our level of collaboration with them continues to be very high."

Test Systems Segment Review (refer to sales by market and segment data in accompanying tables)

Test Systems Third Quarter 2015 Results

Sales in the third quarter of 2015 increased $4.2 million, or 7.4%, to $61.4 million compared with sales of $57.2 million 2014. Sales to the Semiconductor market increased $1.0 million compared with the same period in 2014 and Aerospace & Defense sales increased $3.2 million.

Operating profit was $17.0 million, or 27.6% of sales, compared with $5.7 million, or 10.0% of sales, in last year's third quarter, due in part to operating leverage on the sales increase. Amortization expense associated with acquisitions was $0.3 million in the 2015 third quarter. Last year's third quarter included non-recurring purchase accounting related inventory step-up costs of $1.0 million that reduced normal operating margins for that period, $5.3 million in amortization expense related to the ATS acquisition, and $1.7 million associated with work force reductions as we realigned segment personnel. E&D costs were approximately $3.2 million in the third quarter of 2015 and $3.3 million in the prior-year period.

Test Systems Year-to-Date 2015 Results

Sales in the first nine months of 2015 decreased 5.5% to $121.7 million compared with sales of $128.8 million for the same period in 2014, due to lower sales to the Semiconductor market. Sales to the Semiconductor market decreased $20.1 million compared with the same period in 2014, which was partially offset by increased sales of $13.0 million to the Aerospace & Defense market.

Operating profit was $24.6 million, or 20.2% of sales, compared with $8.0 million, or 6.2% of sales, in the first nine months of 2014. The acquisition of ATS added approximately $1.6 million in SG&A expense in the first nine months of 2015. The first nine months of 2014 included non-recurring purchase accounting related inventory step-up costs of $16.0 million, and $1.7 million of charges related to work force reductions as the Company realigned segment personnel which impacted operating margin. Additionally, amortization expense in the first nine months of 2014 related to the ATS acquisition was approximately $5.4 million compared with $1.0 million in the first nine months of 2015. E&D costs were approximately $8.8 million in the first nine months of 2015, and
$8.5 million in the prior-year period.

Mr. Gundermann commented, "Our Test Systems segment turned in record results in the quarter, with sales up 7.4% compared with the third quarter of 2014. Sales were down 5.5% year-to-date, however, and we expect the final quarter to be off the pace from the third quarter as dictated by customer delivery requirements. We see many encouraging signs in the market, however, and expect our Test Systems segment to continue its strong performance in 2016."

Backlog at the end of the third quarter for Test Systems was $69.7 million.

Forecast

Consolidated sales in 2015 are forecasted to be in the range of $690 million to $705 million. Approximately $553 million to $564 million of revenue is expected from the Aerospace segment. Test Systems segment revenue for 2015 is expected to be approximately $137 million to $141 million.

Consolidated backlog at October 3, 2015 was $297.0 million, of which $147.9 million is expected to ship in 2015.

Capital expenditures were $15.9 million through the first three quarters of 2015 and are expected to be in the range of $20 million to $25 million for the year. E&D spending is expected to continue at about the level it has been running the last three quarters.

The Company is establishing initial revenue guidance for 2016 of $690 million to $750 million. The Aerospace segment is expected to generate $572 million to $616 million of revenue, and the Test Systems segment is expected to generate $118 million to $134 million.

Mr. Gundermann commented, "We expect 2016 to be another very good year for Astronics Corporation, though we will see a mix change. Growth of our larger Aerospace segment of approximately six to ten percent will more than offset an estimated ten percent decline in revenue for the Test Systems segment. Taken together, we are looking forward to another very good year."

Third Quarter 2015 Webcast and Conference Call

The Company will host a teleconference today at 11:00 AM 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 (858) 384-5517 and enter conference ID number 13621124. The telephonic replay will be available from 2:00 p.m. on the day of the call through Tuesday, November 17, 2015. 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 products to the global aerospace, defense, consumer electronics and semiconductor industries. Astronics' products include advanced, high-performance electrical power generation & distribution systems, lighting & safety systems, avionics products, aircraft structures, engineering design and 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. Astronics Corporation, through its wholly-owned subsidiaries, 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 state of the aerospace, defense, 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 Nine Months Ended
10/3/2015 9/27/2014 10/3/2015 9/27/2014
Sales $ 200,145 $ 179,442 $ 534,939 $ 494,956
Cost of products sold 140,718 128,132 385,898 370,439
Gross profit 59,427 51,310 149,041 124,517
Gross margin 29.7% 28.6% 27.9% 25.2%
Selling, general and administrative 22,297 25,539 66,213 62,638
SG&A % of sales 11.1% 14.2% 12.4% 12.7%
Income from operations 37,130 25,771 82,828 61,879
Operating margin 18.6% 14.4% 15.5% 12.5%
Interest expense, net 1,243 2,301 3,600 7,183
Income before tax 35,887 23,470 79,228 54,696
Income tax expense 11,193 6,390 26,161 16,965
Net income $ 24,694 $ 17,080 $ 53,067 $ 37,731
Net income % of sales 12.3% 9.5% 9.9% 7.6%
*Basic earnings per share: $ 0.97 $ 0.68 $ 2.09 $ 1.51
*Diluted earnings per share: $ 0.94 $ 0.65 $ 2.02 $ 1.45
*Weighted average diluted shares outstanding (in thousands) 26,217 26,079 26,237 26,057
Capital expenditures $ 3,580 $ 6,880 $ 15,857 $ 29,971
Depreciation and amortization $ 6,286 $ 10,859 $ 18,831 $ 21,168

*All 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 8, 2015.


ASTRONICS CORPORATION
CONSOLIDATED BALANCE SHEET DATA
(in thousands)
10/3/2015 12/31/2014
(Unaudited)
ASSETS
Cash and cash equivalents $ 22,433 $ 21,197
Accounts receivable and uncompleted contracts 124,663 88,888
Inventories 119,811 115,053
Other current assets 19,501 20,680
Property, plant and equipment, net 125,940 116,316
Other long-term assets 8,907 5,632
Intangible assets, net 111,196 94,991
Goodwill 115,942 100,153
Total assets $ 648,393 $ 562,910
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long term debt $ 2,745 $ 2,796
Accounts payable and accrued expenses 69,839 61,368
Customer advances and deferred revenue 40,565 45,052
Long-term debt 205,789 180,212
Other liabilities 45,469 45,305
Shareholders' equity 283,986 228,177
Total liabilities and shareholders' equity $ 648,393 $ 562,910
ASTRONICS CORPORATION
SEGMENT DATA
(Unaudited, $ in thousands
Three Months Ended Nine Months Ended
10/3/2015 9/27/2014 10/3/2015 9/27/2014
Sales
Aerospace $ 138,728 $ 122,233 $ 413,250 $ 366,128
Test Systems 61,417 57,209 121,744 129,065
Less Inter-segment -- -- (55) (237)
Total sales 200,145 179,442 534,939 494,956
Operating profit and margins
Aerospace 23,055 22,057 66,728 60,308
16.6% 18.0% 16.1% 16.5%
Test Systems 16,980 5,699 24,618 8,034
27.6% 10.0% 20.2% 6.2%
Total operating profit 40,035 27,756 91,346 68,342
20.0% 15.5% 17.1% 13.8%
Interest expense 1,243 2,301 3,600 7,183
Corporate expenses and other 2,905 1,985 8,518 6,463
Income before taxes $ 35,887 $ 23,470 $ 79,228 $ 54,696
17.9% 13.1% 14.8% 11.1%
ASTRONICS CORPORATION
SALES BY MARKET
(Unaudited, $ in thousands)
Three Months Ended Nine Months Ended
10/3/2015 9/27/2014 % change 10/3/2015 9/27/2014 % change 2015 YTD
Aerospace Segment
Commercial Transport $115,016 $97,260 18.3% $342,839 $293,051 17.0% 64.1%
Military 12,102 10,279 17.7% 31,929 31,589 1.1% 6.0%
Business Jet 8,043 10,565 -23.9% 25,196 28,740 -12.3% 4.7%
Other 3,567 4,129 -13.6% 13,286 12,748 4.2% 2.5%
Aerospace Total 138,728 122,233 13.5% 413,250 366,128 12.9% 77.3%
Test Systems Segment
Semiconductor 49,966 48,927 2.1% 86,224 106,384 -19.0% 16.1%
Aerospace & Defense 11,451 8,282 38.3% 35,465 22,444 58.0% 6.6%
61,417 57,209 7.4% 121,689 128,828 -5.5% 22.7%
Total $ 200,145 $ 179,442 11.5% $ 534,939 $ 494,956 8.1% 100.0%
ASTRONICS CORPORATION
SALES BY PRODUCT LINE
(Unaudited, $ in thousands)
Three Months Ended Nine Months Ended
10/3/2015 9/27/2014 % change 10/3/2015 9/27/2014 % change 2015 YTD
Aerospace Segment
Electrical Power & Motion 71,164 61,885 15.0% $ 208,578 $ 188,368 10.7% 39.0%
Lighting & Safety 39,965 37,104 7.7% 119,949 111,702 7.4% 22.4%
Avionics 12,598 15,351 -17.9% 41,628 40,601 2.5% 7.8%
Systems Certification 6,120 -- -- 16,465 -- -- 3.1%
Structures 4,388 3,526 24.4% 12,418 10,868 14.3% 2.3%
Other 4,493 4,367 2.9% 14,212 14,589 -2.6% 2.7%
Aerospace Total 138,728 122,233 13.5% 413,250 366,128 12.9% 77.3%
Test Systems 61,417 57,209 7.4% 121,689 128,828 -5.5% 22.7%
Total $ 200,145 $ 179,442 11.5% $ 534,939 $ 494,956 8.1% 100.0%
ASTRONICS CORPORATION
ORDER AND BACKLOG TREND
(Unaudited, $ in thousands)
Q4
2014
Q1
2015
Q2
2015
Q3
2015
Twelve
Months
12/31/2014 4/4/2015 7/4/2015 10/3/2015 10/3/2015
Sales
Aerospace $ 128,619 $ 142,352 $ 132,170 $ 138,728 $ 541,869
Test Systems 37,464 19,286 40,986 61,417 159,153
Total Sales $ 166,083 $ 161,638 $ 173,156 $ 200,145 $ 701,022
Bookings
Aerospace $ 130,588 $ 141,113 $ 134,478 $ 129,807 $ 535,988
Test Systems 104,782 16,836 12,242 15,352 149,212
Total Bookings $ 235,370 $ 157,949 $ 146,720 $ 145,159 $ 685,200
Backlog*
Aerospace $ 223,769 $ 233,955 $ 236,264 $ 227,345 N/A
Test Systems 146,964 144,514 115,770 69,705 N/A
Total Backlog $ 370,733 $ 378,469 $ 352,034 $ 297,048 N/A
Book:Bill Ratio
Aerospace 1.02 0.99 1.02 0.94 0.99
Test Systems 2.80 0.87 0.30 0.25 0.94
Total Book:Bill 1.42 0.98 0.85 0.73 0.98

* On January 14, 2015, Astronics Corporation acquired Armstrong Aerospace, Inc. which included a backlog of approximately $11.4 million for the Aerospace segment.

CONTACT: For more information, contact: Company: David C. Burney, Chief Financial Officer Phone: (716) 805-1599, ext. 159 Email: david.burney@astronics.com Investor Relations: Deborah K. Pawlowski, Kei Advisors LLC Phone: (716) 843-3908 Email: dpawlowski@keiadvisors.com

Source:Astronics Corporation