Astronics Announces Third-Quarter Results
Monday, November 02, 2020 | Comments

Astronics reported financial results for the three and nine months ended September 26. Financial results reflect the divestiture of the test Systems division’s semiconductor business on February 13, 2019, and the acquisitions of Freedom Communications Technologies in July 2019 and the primary operating subsidiaries of Diagnosys Test Systems in October 2019.

“The third quarter was challenging for our company, as our core aerospace markets continue to be affected by the COVID-19 pandemic,” said Astronics President and CEO Peter J. Gundermann. “The indications of airline recovery that were apparent in late summer did not continue into the fall as we had hoped. There are some bright spots, and we think the worst is now behind us. We expect market conditions to steadily improve going forward, beginning in the fourth quarter.”

Third quarter revenue was $106.5 million, 40% below the same period last year. The company incurred a net loss of $5.3 million and adjusted earnings before interest taxes depreciation and amortization (EBITDA) of negative $0.1 million, or 0.1% of sales.

The company continued to review its business prospects with its broad range of customers and partners to assess potential outcomes of demand for its products. The company’s largest market, commercial aerospace, remains weak. General aviation is down also but shows some signs of resilience. Defense and Government markets have remained strong through the pandemic.

The company benefited in the third quarter from the extensive restructuring efforts taken during the second quarter to address the impacts of the global pandemic. In addition to the restructuring, the company has significantly reduced operating costs with the goal of staying cash-positive for the year while maintaining positive adjusted EBITDA.

The company amended its lending facility with its banks in the second quarter, resulting in a temporary suspension of its maximum leverage covenant, replaced by an interest coverage covenant through the second quarter of 2021, and a minimum liquidity covenant through the third quarter of 2021.

“COVID-19 has certainly thrown us a curve ball and forced us to change our business,” Gundermann said. “Our team has responded well and continues to perform for our customers. The pandemic is ongoing, but if our 2020 revenue declines to $500 million, as we expect, we still should remain cash positive for the year with adjusted EBITDA of approximately 5% to 7% of sales.”

Considering the expected demand from these revenue streams, the company’s current backlog and results through the first nine months of 2020, Astronics’ scenario analysis implies full-year 2020 sales will be at, or slightly above, $500 million.

The company believes that its revised lending agreement, along with the actions it has taken, positions it well to operate through the COVID-19 pandemic and its economic impacts. Year-to-date cash flow from operations totaled $31.5 million. Operating cash flows were used to reduce long-term debt by $20 million during 2020. The company was compliant with its debt covenants as of the end of the third quarter.

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