Astronics (ATRO) - 2024 Q4 - Annual Report

Financial Performance - The company's consolidated sales for 2024 were $795.4 million, an increase of$106.2 million or 15.4% compared to $689.2 million in 2023[176]. - The net loss for 2024 was$16.2 million, or $0.46 per diluted share, compared to a net loss of$26.4 million, or $0.80 per diluted share in 2023[183]. - The company incurred net losses of$16.2 million, $26.4 million, and$35.7 million for the years ended December 31, 2024, 2023, and 2022, respectively, indicating ongoing financial challenges[85]. - Cash provided by operating activities totaled $30.6 million in 2024, compared to a cash outflow of$23.9 million in 2023[207]. - Cash used for investing activities was $8.4 million in 2024, up from$4.1 million in 2023[209]. - Cash used for financing activities totaled $14.5 million in 2024, compared to cash provided of$25.4 million in 2023[211]. - The company has working capital of $270.0 million in 2024, an increase from$246.4 million in 2023[205]. Sales and Revenue - The Aerospace segment generated approximately $524.6 million in sales, accounting for 65.9$88.0 million, representing 11.1% of consolidated sales in 2024[159]. - The general aviation market contributed $74.3 million in sales, which is about 9.3$88.7 million in sales, making up 11.2% of consolidated sales in 2024[163]. Backlog and Bookings - The consolidated backlog as of December 31, 2024, was $599.2 million, an increase from$586.6 million in 2023, driven by recovering demand from commercial transport and general aviation customers[34]. - Bookings for the Aerospace segment totaled $732.7 million in 2024, resulting in a book-to-bill ratio of 1.04:1, while the Test Systems segment had bookings of$75.4 million, leading to a book-to-bill ratio of 0.85:1[191][196]. - The Aerospace segment's backlog at the end of 2024 was $537.6 million, compared to$511.5 million at the end of 2023[191]. Expenses and Costs - Research and development expenses amounted to $52.1 million in 2024, down from$53.5 million in 2023 and up from $48.3 million in 2022[37]. - The company has experienced significant price inflation in labor and materials, which has adversely affected its business and financial condition[74]. - Labor, medical, and workers' compensation costs have increased substantially and are expected to continue rising, impacting future profitability[73]. - Fixed-price contracts represented almost all of the company's sales for the year ended December 31, 2024, which exposes the company to potential losses due to cost overruns[78]. Debt and Financing - The company completed a refinancing transaction on July 11, 2024, with a$200.0 million asset-based revolving credit facility and a $55.0 million term loan facility[16]. - The ABL Revolving Credit Facility was amended on November 25, 2024, increasing the revolving credit line to$220.0 million[17]. - The company issued $165 million in 5.500$175.0 million of debt outstanding as of December 31, 2024, which could adversely affect operational and financial flexibility[93]. - Future interest payments under the ABL Revolving Credit Facilities and Convertible Notes are estimated at approximately $49.9 million[201]. Market Risks and Challenges - The company faces cyclical market risks that could lead to fluctuations in operating results due to economic conditions, including potential impacts from global health crises[54]. - The commercial airline industry is highly cyclical, with factors such as fuel price increases and passenger demand directly affecting the company's sales and profits[56]. - The company is dependent on government contracts, which are subject to annual congressional appropriations, making future funding levels unpredictable[60]. - The market for the company's Test Systems products is concentrated with a limited number of significant customers, which may impair growth opportunities[58]. - The company faces challenges including supply chain pressures, material availability, and labor costs, which could impact profitability[144]. Legal and Regulatory Issues - The company is currently involved in legal proceedings with Lufthansa Technik AG, with a judgment quantifying damages at$11.9 million related to patent infringement[103]. - The company is involved in legal proceedings related to patent infringement, with probable losses anticipated based on current rulings[129]. - Regulatory compliance costs may increase due to new or more stringent governmental regulations, impacting the company's financial condition[83]. - The company is subject to extensive regulation and audit by the Defense Contract Audit Agency, which could materially affect financial results if inaccuracies are found[112]. Cybersecurity and Intellectual Property - Cybersecurity threats pose significant risks, with potential impacts on sensitive information and overall business operations[66]. - The company has a cybersecurity strategy that includes annual security assessments and collaboration with industry-leading partners to enhance security measures[121]. - The company relies on intellectual property protections, and any failure to defend these rights could adversely affect its competitive position and financial condition[70]. Employee and Management - As of December 31, 2024, the company employed approximately 2,500 full-time employees, with about 2,000 in the U.S. and 500 outside the U.S.[39]. - The company recognizes the importance of retaining its management team and technical personnel, as their loss could adversely affect business operations[115]. Future Outlook - The company expects aircraft build rates to improve during 2025 and 2026, driven by increased production of the 737 MAX and A-320[156]. - The company plans to evaluate acquisition opportunities in the future, supported by cash flow from operations and available capacity under the ABL Revolving Credit Facility[210]. - The company expects annualized savings of approximately $4 million to$5 million from restructuring initiatives implemented in the fourth quarter of 2024, starting in the first quarter of 2025[195].