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Astronics Corporation Reports 2016 Fourth Quarter and Full Year Financial Results

EAST AURORA, N.Y., Feb. 17, 2017 (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 twelve months ended December 31, 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   Year Ended
    12/31/16   12/31/15   % Change
    12/31/16   12/31/15   % Change
                       
Sales $ 154,068   $ 157,340     -2.1 %   $ 633,123   $ 692,279     -8.5 %
Gross profit $ 36,486   $ 38,901     -6.2 %   $ 159,467   $ 187,942     -15.2 %
  Gross margin   23.7 %   24.7 %       25.2 %   27.1 %  
SG&A $ 21,082   $ 22,928     -8.1 %   $ 86,328   $ 89,141     -3.2 %
  SG&A percent of sales   13.7 %   14.6 %       13.6 %   12.9 %  
Income from Operations $ 15,404   $ 15,973     -3.6 %   $ 73,139   $ 98,801     -26.0 %
  Operating margin %   10.0 %   10.2 %       11.6 %   14.3 %  
Net Income $ 9,885   $ 13,907     -28.9 %   $ 48,424   $ 66,974     -27.7 %
  Net Income %   6.4 %   8.8 %       7.6 %   9.7 %  

Peter J. Gundermann, President and Chief Executive Officer, commented, “The fourth quarter was somewhat softer than we anticipated primarily due to customer-driven delays in certain aerospace programs.  While we continued to invest in new products and projects, our fourth quarter income from operations remained in line with the comparator quarter.”

He continued, “We continue to see promise in our customers’ outlooks, even as bookings in the quarter were light, although relatively unchanged from the third quarter.  We are expecting that 2017 will be a stronger year for our company, though not without its challenges.  Our initial expectations are for revenue of approximately $640 million to $720 million.  This is quite a wide range that reflects the varied nature of our prospects.  The midpoint of the range provides what we believe is a reasonable expectation of about 7% growth.” 

Consolidated Review

Fourth Quarter 2016 Results

Consolidated sales were down $3.2 million, or approximately 2%, from the same period last year as stronger Test Systems segment sales helped to offset lower Aerospace segment sales.  Aerospace segment sales of $128.1 million were down $8.4 million, or about 6%, and Test Systems segment sales of $26.0 million improved $5.2 million, or about 25%. 

Consolidated gross margin was 23.7% in 2016 compared to 24.7% last year.  Engineering and Development (“E&D”) costs were $22.7 million in the quarter, down from $24.0 million of E&D costs in last year’s fourth quarter.  As a percent of sales, E&D was 14.7% and 15.3% in the fourth quarters of 2016 and 2015, respectively. 

Selling, general and administrative (“SG&A”) expenses decreased $1.8 million compared with the 2015 fourth quarter, due primarily to lower commissions and lower legal expenses. 

The effective tax rate for the quarter was 30.9%, compared with 6.2% in the fourth quarter of 2015.  The prior year’s tax rate was favorably impacted by the permanent reinstatement of the federal research and development tax credit in the fourth quarter of 2015, coupled with state research and development tax credits. 

Year-to-Date 2016 Results

Consolidated sales for 2016 decreased by $59.2 million, or 8.5%, to $633.1 million.  Aerospace segment sales were down 2.9% year-over-year to $534.0 million, while Test Systems segment sales were down 30.5% to $99.1 million.

Lower consolidated gross margin was the result of lower sales volume, partially offset by lower warranty expenses.  E&D costs were relatively unchanged at $90.2 million in 2016, compared with $90.1 million in 2015.  As a percent of sales, E&D was 14.2% and 13.0% in 2016 and 2015, respectively. 

SG&A expenses declined $2.8 million in 2016 compared with 2015.  As a percent of sales, SG&A expenses were 13.6% and 12.9% for 2016 and 2015, respectively.  Lower SG&A expenses was mostly due to reduced commissions.  SG&A expenses in 2015 benefited from a $1.8 million write-down of a contingent consideration liability related to an acquisition earn-out obligation. 

The effective tax rate for 2016 was 29.6%, compared with 28.8% in 2015. 

Mr. Gundermann commented, “2016 revenue and margins were significantly affected by a $54 million revenue decline in our semiconductor test product line and a $28 million revenue decline in our avionics and systems certification product lines.  The other parts of our business were able to partially offset these declines by growing $23 million.  We are optimistic that investments we have been making, including in the product lines that have shown declines, will reverse those trends, pointing the way to a much brighter 2017.”

During the fourth quarter, the Company repurchased approximately 5,700 shares at an aggregate cost of $0.2 million under its share repurchase program.  Since the inception of the program in February 2016, the Company has repurchased approximately 523,000 shares at an aggregate cost of $17.6 million

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

Aerospace Fourth Quarter 2016 Results

Aerospace segment sales decreased by $8.4 million, or 6.2%, when compared with the prior year’s fourth quarter to $128.1 million.

The majority of the reduction in Aerospace sales was with Avionics products.  Avionics declined $4.4 million, largely due to lower sales of satellite antenna systems.  Electrical Power & Motion sales declined $1.9 million, on lower sales of products to the military market.  Additionally, Lighting & Safety was down $1.8 million on lower aftermarket sales. 

Aerospace operating profit for the fourth quarter of 2016 was $16.9 million, or 13.2% of sales, compared with 13.5% of sales in the same period last year.  Aerospace E&D costs were $20.2 million in the quarter compared with $20.6 million in the same period last year.

Aerospace orders in the fourth quarter of 2016 were $113.8 million, compared with orders of $121.8 million in the 2015 fourth quarter.  The Aerospace segment book to bill ratio for the quarter was 0.89.  Backlog was $219.1 million at the end of the fourth quarter of 2016.

Aerospace Year-to-Date 2016 Results

Aerospace segment sales decreased by $15.7 million, or 2.9%, when compared with the prior year to $534.0 million due to lower Avionics sales that was offset by growth in other product categories. 

Electrical Power & Motion sales increased $8.7 million, or 3.1%, largely driven by higher sales of in-seat power products and seat motion products, which were up $7.0 million and $4.3 million, respectively.  Sales of Structures products were up $4.5 million.  These increases were offset by a $23.4 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 $4.8 million decrease in System Certification sales.

Aerospace operating profit for 2016 was $78.0 million, or 14.6% of sales, compared with $85.1 million, or 15.5% of sales, in the same period last year.  The decrease in operating profit was the result of lower sales volume, coupled with slightly higher E&D costs and a general increase in operating costs.  E&D costs for Aerospace were $78.5 million and $77.9 million in 2016 and 2015, respectively.  Aerospace SG&A expense decreased slightly to $60.0 million in 2016, compared with $60.1 million in 2015.

Mr. Gundermann noted, “Our avionics and system certification product lines suffered a $28 million decline in revenue in 2016 while the rest of the business grew enough to compensate for almost half of it.  We have new products in avionics that are generating solid enthusiasm in the market, making us optimistic that 2017 will be a year of growth as the products enter the market.” 

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

Test Systems Fourth Quarter 2016 Results

Test Systems sales in the fourth quarter of 2016 increased approximately $5.2 million to $26.0 million compared with the same period in 2015, an increase of 24.8%.  Sales to the Aerospace & Defense market increased $7.0 million compared with the same period in 2015, which was offset by decreased sales of $1.8 million to the Semiconductor market.

Operating profit was $2.0 million, or 7.6% of sales, compared with $0.9 million, or 4.4% of sales, in last year’s fourth quarter.  E&D costs decreased from $3.4 million in the fourth quarter of 2015 to $2.5 million in the fourth quarter of 2016. 

Orders for the Test Systems segment in the quarter were $23.1 million, up $10.3 million, or 79.8%, over the prior year period.  Backlog was $38.9 million at the end of the fourth quarter of 2016.

Test Systems Year-to-Date 2016 Results

Sales in 2016 decreased 30.5% to $99.1 million compared with sales of $142.5 million for 2015, due to lower shipments to the Semiconductor market.  Sales to the Semiconductor market decreased $54.2 million compared with the same period in 2015, which was partially offset by increased sales of $10.7 million to the Aerospace & Defense market.

Operating profit was $8.5 million, or 8.6% of sales, compared with $25.5 million, or 17.9% of sales, in 2015.  E&D costs were $11.7 million in 2016 compared with $12.2 million in the prior year.

Mr. Gundermann commented, “We obviously struggled with lower Semiconductor sales in 2016.  While we do not yet have the orders, we are hopeful that 2017 will mark a turnaround in that business.  We have multiple development programs underway with enthusiastic customers, and anticipate good success in due course.  Meanwhile, our Aerospace & Defense business posted solid growth of 21% in 2016, and we expect more of the same in 2017.”

Forecast

Consolidated sales in 2017 are forecasted to be in the range of $640 million to $720 million. Approximately $560 million to $600 million of revenue is expected from the Aerospace segment. Test Systems segment revenue for 2017 is expected to be approximately $80 million to $120 million

Consolidated backlog at December 31, 2016 was $258.0 million, of which approximately $230.4 million is expected to ship in 2017.

Mr. Gundermann commented, “We continue to view the future optimistically.  Our Aerospace business continues to benefit from an impressive range of leading edge capabilities, and our Test business continues to introduce new technologies that are being well-received by the industry.  We expect that our Aerospace business will drive over 80% of our revenues in 2017, and that our Test business will show a solid rebound, driven particularly by continued innovation in the semiconductor market.  Those details will become clearer as the year progresses.”

The effective tax rate for 2017 is expected to be approximately 29% to 31%.

Capital equipment spending in 2017 is expected to be in the range of $17 million to $22 million.  E&D costs are estimated to continue at roughly the same rate as 2016. 

Fourth 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 13652862.  The telephonic replay will be available from 2:00 p.m. on the day of the call through Friday, February 24, 2017.  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   Year Ended
  12/31/2016 12/31/2015   12/31/2016 12/31/2015
Sales $ 154,068    $ 157,340      $ 633,123   $ 692,279  
Cost of products sold   117,582     118,439       473,656     504,337  
Gross profit   36,486     38,901       159,467     187,942  
Gross margin   23.7 %   24.7 %     25.2 %   27.1 %
           
Selling, general and administrative   21,082     22,928       86,328     89,141  
  SG&A % of sales   13.7 %   14.6 %     13.6 %   12.9 %
Income from operations   15,404     15,973       73,139     98,801  
Operating margin   10.0 %   10.2 %     11.6 %   14.3 %
Interest expense, net   1,108     1,151       4,354     4,751  
Income before tax   14,296     14,822       68,785     94,050  
Income tax expense   4,411     915       20,361     27,076  
Net income $ 9,885   $ 13,907     $ 48,424   $ 66,974  
Net income % of sales   6.4 %   8.8 %     7.6 %   9.7 %
           
           
*Basic earnings per share: $   0.34   $   0.47     $   1.66   $   2.29  
*Diluted earnings per share: $   0.33   $   0.46     $   1.61   $   2.22  
           
*Weighted average diluted shares
  outstanding (in thousands)
  29,742     30,230       30,032     30,179  
           
Capital expenditures $   3,168   $   2,784     $   13,037   $ 18,641  
Depreciation and amortization $   6,333   $   6,478     $   25,790   $ 25,309  

*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)
12/31/2016
12/31/2015
ASSETS    
Cash and cash equivalents $  17,901 $   18,561
Accounts receivable and uncompleted contracts   109,415   95,277
Inventories   116,597   115,467
Other current assets   11,160   20,662
Property, plant and equipment, net   122,812   124,742
Other long-term assets   13,149   10,889
Intangible assets, net   98,103   108,276
Goodwill   115,207   115,369
  Total assets $   604,344  $   609,243
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current maturities of long term debt $  2,636 $   2,579
Accounts payable and accrued expenses   60,756   62,896
Customer advances and deferred revenue   23,168   38,757
Long-term debt   145,484   167,210
Other liabilities   34,851   37,576
Shareholders' equity   337,449   300,225
  Total liabilities and shareholders' equity $   604,344 $   609,243


ASTRONICS CORPORATION
Segment Data
(Unaudited, $ in thousands)
  Three Months Ended Year Ended
    12/31/2016   12/31/2015   12/31/2016   12/31/2015
Sales                
  Aerospace $   128,052   $ $ 136,488     $ 534,408     $ 549,738  
  Less Inter-segment     -       -       (367 )     -  
  Total Aerospace     128,052       136,488       534,041       549,738  
                 
  Test Systems     26,016       20,852       99,082       142,541  
Total sales     154,068       157,340       633,123       692,279  
                 
Operating profit and margins                
  Aerospace     16,867       18,375       77,966       85,103  
      13.2 %     13.5 %     14.6 %     15.5 %
  Test Systems     1,983       911       8,507       25,529  
      7.6 %     4.4 %     8.6 %     17.9 %
Total operating profit     18,850       19,286       86,473       110,632  
      12.2 %     12.3 %     13.7 %     16.0 %
                 
Interest expense     1,108       1,151       4,354       4,751  
Corporate expenses and other     3,446       3,313       13,334       11,831  
Income before taxes $ $   14,296   $ $ 14,822     $ 68,785   $ $ 94,050  


ASTRONICS CORPORATION
SALES BY MARKET
(Unaudited, $ in thousands)
         
  Three Months Ended   Year Ended  
  12/31/2016  
12/31/2015
  % change
  12/31/2016  
12/31/2015
  % change
  2016 YTD
Aerospace Segment                
Commercial Transport $   104,378   $   112,730   -7.4 %   $   435,552   $   455,569   -4.4 %   68.8 %
Military   14,624     11,366   28.7 %     54,556     43,295   26.0 %   8.6 %
Business Jet   5,042     7,600   -33.7 %     25,407     32,796   -22.5 %   4.0 %
Other   4,008     4,792   -16.4 %     18,526     18,078   2.5 %   2.9 %
Aerospace Total   128,052     136,488   -6.2 %     534,041     549,738   -2.9 %   84.3 %
                 
Test Systems Segment                
Semiconductor   4,076     5,912   -31.1 %     37,939     92,136   -58.8 %   6.0 %
Aerospace & Defense   21,940     14,940   46.9 %     61,143     50,405   21.3 %   9.7 %
Test Systems Total   26,016     20,852   24.8 %     99,082     142,541   -30.5 %   15.7 %
                 
Total $   154,068   $   157,340   -2.1 %   $   633,123   $   692,279   -8.5 %  


ASTRONICS CORPORATION
SALES BY PRODUCT LINE
(Unaudited, $ in thousands)
         
  Three Months Ended   Year Ended  
  12/31/2016   12/31/2015   % change
  12/31/2016   12/31/2015   % change
  2016 YTD
                 
Aerospace Segment                
  Electrical Power & Motion $   69,250   $   71,173   -2.7 %   $   288,465   $   279,752   3.1 %   45.5 %
  Lighting & Safety    35,351     37,194   -5.0 %     156,871     157,143   -0.2 %   24.8 %
  Avionics    10,077     14,521   -30.6 %     32,761     56,150   -41.7 %   5.2 %
  Systems Certification    3,954     4,853   -18.5 %     16,531     21,317   -22.5 %   2.6 %
  Structures    5,412     3,955   36.8 %     20,887     16,372   27.6 %   3.3 %
  Other    4,008     4,792   -16.4 %     18,526     19,004   -2.5 %   2.9 %
Aerospace Total   128,052     136,488   -6.2 %     534,041     549,738   -2.9 %   84.3 %
                 
Test Systems   26,016     20,852   24.8 %     99,082     142,541   -30.5 %   15.7 %
                 
Total $   154,068   $   157,340   -2.1 %   $   633,123   $   692,279   -8.5 %  


ASTRONICS CORPORATION
ORDER AND BACKLOG TREND
(Unaudited, $ in thousands)
          Q1
2016
  Q2
2016
  Q3
2016
  Q4
2016
  Twelve
Months
          4/2/16   7/2/16   10/1/16   12/31/16   12/31/16
Sales                          
  Aerospace       $ 138,309 $ 142,501 $ 125,179 $ 128,052 $ 534,041
  Test Systems         21,221   21,925   29,920   26,016   99,082
Total Sales       $ 159,530 $ 164,426 $ 155,099 $ 154,068 $ 633,123
                           
Bookings                          
  Aerospace       $ 140,427 $ 163,532 $ 122,821 $ 113,756 $ 540,536
  Test Systems         21,503   17,941   13,694   23,118   76,256
Total Bookings       $ 161,930 $ 181,473 $ 136,515 $ 136,874 $ 616,792
                           
Backlog                          
  Aerospace       $ 214,769 $ 235,800 $ 233,442 $ 219,146   N/A
  Test Systems         61,995   58,011   41,785   38,887   N/A
Total Backlog       $ 276,764 $ 293,811 $ 275,227 $ 258,033   N/A
                           
Book:Bill Ratio                          
  Aerospace         1.02   1.15   0.98   0.89   1.01
  Test Systems         1.01   0.82   0.46   0.89   0.77
Total Book:Bill         1.02   1.10   0.88   0.89   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 

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