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Astronics Corporation Reports 2016 Third Quarter Financial Results

EAST AURORA, N.Y., Nov. 08, 2016 (GLOBE NEWSWIRE) -- 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 nine months ended October 1, 2016. Earnings per share for all periods are adjusted for the 3 for 20 (15%) distribution of Class B Stock for shareholders of record on October 11, 2016.

Three Months Ended Nine Months Ended
October 1,
2016
October 3,
2015
% Change October 1,
2016
October 3,
2015
% Change
Sales$ 155,099 $ 200,145 -22.5% $ 479,055 $ 534,939 -10.4%
Gross profit$ 38,663 $ 59,427 -34.9% $ 122,981 $ 149,041 -17.5%
Gross margin 24.9% 29.7% 25.7% 27.9%
SG&A$ 21,138 $ 22,297 -5.2% $ 65,246 $ 66,213 -1.5%
SG&A percent of sales 13.6% 11.1% 13.6% 12.4%
Income from Operations$ 17,525 $ 37,130 -52.8% $ 57,735 $ 82,828 -30.3%
Operating margin % 11.3% 18.6% 12.1% 15.5%
Net Income$ 12,074 $ 24,694 -51.1% $ 38,539 $ 53,067 -27.4%
Net Income % 7.8% 12.3% 8.0% 9.9%

Peter J. Gundermann, President and Chief Executive Officer, commented “Third quarter results were obviously disappointing. While our Test segment continued to manage with lower volume, as it has all year, our Aerospace segment, on the heels of a very strong second quarter, experienced a drop-off of volume, margins and bookings. And, all this is reported in the shadows of our highest level of consolidated revenue and profits in the comparator quarter of 2015.”

He continued, “Despite the apparent weakness in our third quarter results, we do not see any major changes in our markets that impact our solid, long-term outlook, although we have adjusted expectations for the short term. We continue to believe we have excellent prospects based on organizational and technical performance, and we expect to expand beyond our records of success in the near future.”

Consolidated Review

Third Quarter 2016 Results

Consolidated sales were down $45.0 million from the same period last year. Aerospace segment sales of $125.2 million were down $13.5 million and Test Systems segment sales of $29.9 million were down $31.5 million.

Lower consolidated gross margin was the result of lower volume. Engineering and Development (“E&D”) costs were $22.2 million in the quarter, down slightly from $22.5 million of E&D costs in last year’s third quarter. As a percent of sales, E&D was 14.3% and 11.3% in the third quarters of 2016 and 2015, respectively.

Selling, general and administrative (“SG&A”) expenses decreased $1.2 million compared with the 2015 third quarter, due primarily to lower commissions on lower sales volumes in the third quarter of 2016 compared with 2015.

The effective tax rate for the quarter was 26.5%, compared with 31.2% in the third quarter of 2015. The third quarter 2016 tax rate was favorably impacted by the permanent reinstatement of the federal research and development tax credit in the fourth quarter of 2015.

Net income was $12.1 million, or $.41 per diluted share.

Year-to-Date 2016 Results

Consolidated sales for the first nine months of 2016 decreased by $55.9 million, or 10.4%, to $479.1 million. Aerospace segment sales were down 1.8% year-over-year to $406.0 million, while Test Systems segment sales were down 40.0% to $73.1 million.

Lower consolidated gross margin was the result of lower volume, partially offset by improved operational efficiencies. Engineering and Development (“E&D”) costs were $67.5 million in the first nine months of 2016, up slightly from $66.1 million of E&D costs in the same period last year. As a percent of sales, E&D was 14.1% and 12.4% in the first nine months of 2016 and 2015, respectively.

SG&A expenses were $65.2 million, or 13.6% of sales, in the first nine months of 2016 compared with $66.2 million, or 12.4% of sales, in the same period last year. The first nine months of 2015 benefited from a $1.6 million reduction to the contingent consideration liability related to prior acquisitions. The decline in SG&A expenses was due primarily to reduced commissions resulting from lower volumes.

The effective tax rate for the first nine months of 2016 was 29.3%, compared with 33.0% in the first nine months of 2015. The tax rate in the first nine months of 2016 was favorably impacted by the permanent reinstatement of the federal research and development tax credit in the fourth quarter of 2015.

Net income for the first nine months of 2016 totaled $38.5 million, or $1.28 per diluted share.

During the third quarter, the Company repurchased approximately 157,000 shares at an aggregate cost of $5.3 million under its share repurchase program. Since the inception of the program in February 2016, the Company has repurchased approximately 517,000 shares at an aggregate cost of $17.5 million.

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

Aerospace Third Quarter 2016 Results

Aerospace segment sales decreased by $13.5 million, or 9.8%, when compared with the prior year’s third quarter to $125.2 million.

The majority of the reduction in Aerospace sales was with Avionics products. Avionics declined $6.7 million, largely due to lower sales of satellite antenna systems, which have new products in the certification process, and in-flight entertainment/cabin management systems for VVIP aircraft, which has been impacted by the decline in the global oil and gas industry, primarily in the Middle East. Additionally, Systems Certification sales declined $3.5 million on lower project activity. Electrical Power & Motion sales declined $2.9 million, as lower sales of in-seat power products were partially offset by an improvement in sales of seat motion products.

Aerospace operating profit for the third quarter of 2016 was $17.6 million, or 14.0% of sales, compared with $23.1 million, or 16.6% of sales, in the same period last year. The decrease in operating profit was the result of lower volumes. Aerospace E&D costs were $18.9 million in the quarter compared with $19.3 million in the same period last year.

Aerospace orders in the third quarter of 2016 were $122.8 million, compared with orders of $129.8 million in the 2015 third quarter. The Aerospace segment book to bill ratio for the quarter was 0.98. Backlog was $233.4 million at the end of the third quarter of 2016.

Mr. Gundermann commented, “We had record Aerospace sales, operating profit, and bookings in the trailing second quarter. To follow it up with our third quarter results is disappointing, but we believe the results are more due to timing and circumstances rather than any fundamental changes in our markets, our competitive advantages or our leadership position with our products.”

Aerospace Year-to-Date 2016 Results

Aerospace segment sales decreased by $7.3 million, or 1.8%, when compared with the prior year’s first nine months to $406.0 million.

Electrical Power & Motion sales grew $10.6 million, or 5.1%, largely driven by higher sales of in-seat power products and seat motion products, which were up $7.2 million and $4.9 million, respectively. Sales of Structures products were up $3.1 million and Lighting & Safety products were up $1.6 million. These increases were offset by an $18.9 million decline in Avionics products, which was largely due to lower sales of satellite antenna systems and lower VVIP in-flight entertainment/cabin management systems, and a $3.9 million decrease in System Certification sales.

Aerospace operating profit for the first nine months of 2016 was $61.1 million, or 15.0% of sales, compared with $66.7 million, or 16.1% of sales, in the same period last year. The decrease in operating profit was the result of lower volume, coupled with higher E&D costs and a general increase in operating costs. E&D costs for Aerospace were $58.3 million and $57.3 million in the first nine months of 2016 and 2015, respectively. Aerospace SG&A expense increased $1.1 million in the first nine months of 2016 as compared with 2015. The first nine months of 2015 included inventory step-up costs of $1.0 million that reduced normal operating margins for that period.

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

Test Systems Third Quarter 2016 Results

Sales in the third quarter of 2016 decreased approximately $31.5 million to $29.9 million compared with the same period in 2015, a decrease of 51.3%. Sales to the Semiconductor market decreased $33.1 million compared with the same period in 2015, which was partially offset by increased sales of $1.6 million to the Aerospace & Defense market.

Operating profit was $3.2 million, or 10.8% of sales, compared with $17.0 million or 27.6% of sales in last year’s third quarter. E&D costs remained relatively consistent at $3.3 million and $3.2 million in the third quarters of 2016 and 2015, respectively.

Orders for the Test Systems segment in the quarter were $13.7 million, down $1.7 million, or 10.8%, over the prior year period. Backlog was $41.8 million at the end of the third quarter of 2016.

Test Systems Year-to-Date 2016 Results

Sales in the first nine months of 2016 decreased 40.0% to $73.1 million compared with sales of $121.7 million for the same period in 2015, due to lower shipments to the Semiconductor market. Sales to the Semiconductor market decreased $52.3 million compared with the same period in 2015, which was partially offset by increased sales of $3.7 million to the Aerospace & Defense market.

Operating profit was $6.5 million, or 8.9% of sales, compared with $24.6 million, or 20.2% of sales, in the first nine months of 2015. E&D costs were $9.2 million in the first nine months of 2016 compared with $8.8 million in the prior year period.

Mr. Gundermann commented, “As anticipated, our Test segment continued to experience lower volume in its Semiconductor business. Our Aerospace & Defense test offerings, on the other hand, are up 10% year to date. We expect the Aerospace & Defense market to continue its growth into 2017 and anticipate improvement in the Semiconductor business as we expand our capabilities and customers.”

Forecast

Consolidated sales in 2016 are forecasted to be in the range of $635 million to $645 million, which represents a decline from the previous range which was $655 million to $685 million. Approximately $539 million to $545 million of revenue is expected from the Aerospace segment. Expectations for Test Systems segment revenue in 2016 remains relatively unchanged at approximately $96 million to $100 million.

Consolidated backlog at October 1, 2016 was $275.2 million, of which approximately $121.9 million is expected to ship in 2016.

Mr. Gundermann commented, “We are disappointed to drop our revenue forecast for 2016, but view it as necessary given the weakness in bookings we have experienced. We remain confident, however, in our product offerings and market prospects, and continue to work diligently to execute our plans for maintaining market leadership and innovate with new offerings.”

The effective tax rate for 2016 is expected to be approximately 29% to 31%.

Capital equipment spending in 2016 is expected to be in the range of $15 million to $17 million.

E&D costs are on track to be similar to 2015, as originally expected.

Mr. Gundermann continued, “Our planning processes are well under way for 2017. Early indications are that Aerospace revenue will grow in the mid-single digit range. We expect our strong performing product lines to continue their success, along with substantial improvement in certain under-performing product areas. With the improvements anticipated in the Test segment, we expect the combination to result in a very solid year of growth.”

Third Quarter 2016 Webcast and Conference Call

The Company will host a teleconference today at 11:00 a.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) 689-8562. The listen-only audio webcast can be monitored at www.astronics.com. To listen to the archived call, dial (412) 317-6671 and enter conference ID number 13646063. The telephonic replay will be available from 2:00 p.m. on the day of the call through Wednesday, November 15, 2016. 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, defense, electronics and semiconductor industries. Astronics’ products and services include advanced, high-performance electrical power generation, distribution and motion systems, lighting & 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. 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, 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 Nine Months Ended
10/1/201610/3/2015 10/1/201610/3/2015
Sales$155,099 $200,145 $479,055 $534,939
Cost of products sold 116,436 140,718 356,074 385,898
Gross profit 38,663 59,427 122,981 149,041
Gross margin 24.9% 29.7% 25.7% 27.9%
Selling, general and administrative 21,138 22,297 65,246 66,213
SG&A % of sales 13.6% 11.1% 13.6% 12.4%
Income from operations 17,525 37,130 57,735 82,828
Operating margin 11.3% 18.6% 12.1% 15.5%
Interest expense, net 1,103 1,243 3,246 3,600
Income before tax 16,422 35,887 54,489 79,228
Income tax expense 4,348 11,193 15,950 26,161
Net income$12,074 $24,694 $38,539 $53,067
Net income % of sales 7.8% 12.3% 8.0% 9.9%
*Basic earnings per share:$0.42 $0.84 $1.32 $1.82
*Diluted earnings per share:$0.41 $0.82 $1.28 $1.76
*Weighted average diluted shares outstanding (in thousands) 29,808 30,150 30,136 30,173
Capital expenditures$3,693 $3,580 $9,869 $15,857
Depreciation and amortization$6,311 $6,286 $19,457 $18,831

*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 11, 2016.

ASTRONICS CORPORATION
CONSOLIDATED BALANCE SHEET DATA
($ in thousands)
(unaudited)
10/1/2016
12/31/2015
ASSETS
Cash and cash equivalents$13,278 $18,561
Accounts receivable and uncompleted contracts 118,888 95,277
Inventories 120,691 115,467
Other current assets 13,100 20,662
Property, plant and equipment, net 123,754 124,742
Other long-term assets 13,035 10,889
Intangible assets, net 101,037 108,276
Goodwill 115,645 115,369
Total assets$ 619,428 $ 609,243
LIABILITIES AND SHAREHOLDERS' EQUITY
Current maturities of long term debt$2,686 $2,579
Accounts payable and accrued expenses 62,729 62,896
Customer advances and deferred revenue 27,805 38,757
Long-term debt 161,305 167,210
Other liabilities 35,532 37,576
Shareholders' equity 329,371 300,225
Total liabilities and shareholders' equity$ 619,428 $ 609,243


ASTRONICS CORPORATION
Segment Data
(Unaudited, $ in thousands)
Three Months EndedNine Months Ended
10/1/2016 10/3/2015 10/1/2016 10/3/2015
Sales
Aerospace$ 125,179 $ 138,728 $406,356 $413,250
Less Inter-segment - - (367) -
Total Aerospace 125,179 138,728 405,989 413,250
Test Systems 29,920 61,417 73,066 121,744
Less Inter-segment - - - (55)
Total Test Systems 29,920 61,417 73,066 121,689
Total sales 155,099 200,145 479,055 534,939
Operating profit and margins
Aerospace 17,557 23,055 61,099 66,728
14.0% 16.6% 15.0% 16.1%
Test Systems 3,240 16,980 6,524 24,618
10.8% 27.6% 8.9% 20.2%
Total operating profit 20,797 40,035 67,623 91,346
Interest expense 1,103 1,243 3,246 3,600
Corporate expenses and other 3,272 2,905 9,888 8,518
Income before taxes$ 16,422 $ 35,887 $ 54,489 $ 79,228


ASTRONICS CORPORATION
SALES BY MARKET
(Unaudited, $ in thousands)
Three Months Ended Nine Months Ended
10/1/201610/3/2015% change 10/1/201610/3/2015% change2016 YTD
Aerospace Segment
Commercial Transport$101,355 $115,016 -11.9% $331,174 $342,839 -3.4% 69.1%
Military 13,679 12,102 13.0% 39,932 31,929 25.1% 8.3%
Business Jet 6,133 8,043 -23.7% 20,365 25,196 -19.2% 4.3%
Other 4,012 3,567 12.5% 14,518 13,286 9.3% 3.0%
Aerospace Total 125,179 138,728 -9.8% 405,989 413,250 -1.8% 84.7%
Test Systems Segment
Semiconductor 16,878 49,966 -66.2% 33,863 86,224 -60.7% 7.1%
Aerospace & Defense 13,042 11,451 13.9% 39,203 35,465 10.5% 8.2%
Test Systems Total 29,920 61,417 -51.3% 73,066 121,689 -40.0% 15.3%
Total$155,099 $200,145 -22.5% $479,055 $534,939 -10.4%


ASTRONICS CORPORATION
SALES BY PRODUCT LINE
(Unaudited, $ in thousands)
Three Months Ended Nine Months Ended
10/1/201610/3/2015% change 10/1/201610/3/2015% change2016 YTD
Aerospace Segment
Electrical Power & Motion$68,259 $71,164 -4.1% $219,215 $208,578 5.1% 45.8%
Lighting & Safety 38,975 39,965 -2.5% 121,520 119,949 1.3% 25.4%
Avionics 5,866 12,598 -53.4% 22,684 41,628 -45.5% 4.7%
Systems Certification 2,580 6,120 -57.8% 12,577 16,465 -23.6% 2.6%
Structures 5,487 4,388 25.0% 15,475 12,418 24.6% 3.2%
Other 4,012 4,493 -10.7% 14,518 14,212 2.2% 3.0%
Aerospace Total 125,179 138,728 -9.8% 405,989 413,250 -1.8% 84.7%
Test Systems 29,920 61,417 -51.3% 73,066 121,689 -40.0% 15.3%
Total$155,099 $200,145 -22.5% $479,055 $534,939 -10.4%


ASTRONICS CORPORATION
ORDER AND BACKLOG TREND
(Unaudited, $ in thousands)
Q4
2015
Q1
2016
Q2
2016
Q3
2016
Trailing
Twelve
12/31/2015 4/2/2016 7/2/2016 10/1/2016 Months
Sales
Aerospace $136,488$138,309$142,501$125,179$542,477
Test Systems 20,852 21,221 21,925 29,920 93,918
Total Sales $157,340$159,530$164,426$155,099$636,395
Bookings
Aerospace $121,796$140,427$163,532$122,821$548,576
Test Systems 12,860 21,503 17,941 13,694 65,998
Total Bookings $134,656$161,930$181,473$136,515$614,574
Backlog
Aerospace $212,651$214,769$235,800$233,442
Test Systems 61,713 61,995 58,011 41,785
Total Backlog $274,364$276,764$293,811$275,227 N/A
Book:Bill Ratio
Aerospace 0.89 1.02 1.15 0.98 1.01
Test Systems 0.62 1.01 0.82 0.46 0.70
Total Book:Bill 0.86 1.02 1.10 0.88 0.97


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