Astronics Reports Financial Results
Tuesday, November 05, 2019 | Comments

Astronics, which purchased Freedom Communication Technologies earlier this year, reported financial results for the three and nine months ended Sept. 28. Financial results include the divestiture of the test systems’ semiconductor business in February.

"As expected, third-quarter revenue was light, due in part to the continued grounding of the 737 MAX and the resulting capacity challenge affecting the global airline industry,” said Peter J. Gundermann, president and CEO. “Beyond this, we faced some headwinds that impacted our bottom line significantly. The headwinds included continued losses from the three struggling businesses discussed in previous quarters, higher tariff costs, a non-cash loss on the sale of the airfield lighting product line, and an increased reserve for a legal proceeding in Europe.

"We are implementing a number of strategic initiatives to alleviate several headwinds and to set up for a successful 2020. We are consolidating operations, rearranging supply chains and pushing development programs to completion. We expect our actions will begin to show positively in the first quarter and become even more evident as the year progresses."

Test segment sales decreased to $19.3 million as a result of the divestiture of the semiconductor business. Adjusted test systems segment sales, excluding the semiconductor test business from both periods, were up $7.6 million, or 80%, to $17.1 million. Freedom Communication Technologies contributed $3 million in sales in the third quarter.

The test segment operating profit was $2.1 million, or 10.7% of sales, compared with operating profit of $5.8 million, or 13.5% of sales, in last year’s third quarter. Adjusted for the sale of the semiconductor business, the test segment had operating income of $100,000 compared with an operating loss of $4.5 million in the prior-year period. Operating income in 2019 included the results of the acquired FCT business.

“It has been a year of transition for our test business,” said Gundermann. “We sold the semiconductor portion in February and added Freedom Communications Technologies in July and, most recently, added Diagnosys in October. The two acquisitions complement our offerings in expanding markets: radio test for Freedom and transit test for Diagnosys. These are niche markets where we believe we can be successful in the immediate future.”

The company expects fourth-quarter sales to be $175 million to $195 million, which will result in consolidated sales for 2019 to be in the range of $750 million to $770 million. Of the total, $680 million to $690 million is expected from the aerospace segment and $70 million to $80 million is expected from the test segment.

Consolidated backlog at Sept. 28 was $379.4 million. About 46% of the backlog is expected to ship in 2019. The effective tax rate for 2019 is expected to be in the range of 21% to 25%, which reflects the higher tax rate on the gain on the sale of the semiconductor business. Capital equipment spending in 2019 is expected to be between $14 million to $19 million.

The company is initiating revenue guidance for 2020, expecting consolidated sales in the range of $770 million to $820 million. The aerospace segment is expected to generate $690 million to $730 million, and the test segment is expected to see sales of $80 million to $90 million. The midpoint of revenue guidance for 2020 is $795 million, a 5% increase over the midpoint of revenue guidance for 2019.

The effective tax rate for 2020 is expected to be in the range of 18% to 22%.

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