Astronics (US:ATRO)2020-02-26 21:17Financial Data and Key Metrics Changes - Fourth quarter consolidated sales decreased by $4.5 million to $198.4 million, reflecting a $10.3 million decline due to the divested semiconductor test business, partially offset by $9.9 million from acquisitions [23][28] - Aerospace segment sales decreased by 1.8% to $172.1 million, primarily due to a $4.1 million decline in the avionics product line [25][29] - GAAP loss from operations for the fourth quarter was $36.9 million, influenced by $46.7 million in restructuring and impairment charges [24][28] Business Line Data and Key Metrics Changes - Aerospace bookings in Q4 were $140 million, significantly lower than recent history [10] - The test segment saw adjusted sales rise from $15.5 million in Q4 2018 to $24.4 million in Q4 2019, driven by acquisitions [27] - The three struggling businesses in the aerospace segment reported a combined operating loss of $5.1 million in Q4, down from an average of $9 million in the first three quarters [13][26] Market Data and Key Metrics Changes - Full year aerospace segment sales increased by $17 million to $692.6 million, a 2.5% increase compared to the prior year [29] - The test segment's adjusted sales for 2019 were $70.4 million, up 62.3% from $43.4 million in 2018, with organic sales increasing by $14.1 million [30] Company Strategy and Development Direction - The company is focusing on managing costs related to the 737 MAX production pause and is restructuring its operations to adapt to current challenges [11][12] - The company has paused share buybacks to conserve cash amid uncertainties surrounding the 737 MAX and the impact of the Coronavirus [32] - The company is optimistic about the test segment's growth, expecting a 20% organic growth in 2020 [20][34] Management's Comments on Operating Environment and Future Outlook - Management expressed uncertainty regarding the timeline for the 737 MAX return to service and its impact on operations, indicating that clarity is needed before issuing guidance [33][34] - The company anticipates first quarter revenue to be between $155 million and $165 million, with expectations for stronger performance in the second half of the year [34] - Management noted that the legal and warranty costs have increased, impacting margins, but they expect to manage these costs moving forward [25][60] Other Important Information - The company took a legal reserve of $20.6 million related to ongoing litigation in Germany, which is expected to continue into 2021 [18][19] - The restructuring of the AeroSat business has led to a significant reduction in headcount and a focus on a single business initiative [15] Q&A Session Summary Question: What is the impact of the 50-person reduction related to the 737? - Management indicated that there was not much of a restructuring charge associated with those reductions, and cost savings would not be evident in Q4 [36][37] Question: When will the aftermarket return for the 737? - Management expressed uncertainty about the timeline for the aftermarket return, noting that it depends on how quickly airlines resume normal operations [39][40] Question: How much legal and warranty expense was there outside of the reserve? - The combined legal and warranty expense was about $4 million in the quarter, with warranty expenses being about two-thirds of that total [44][45] Question: What are the expectations for MAX production restart? - Management noted ongoing discussions with Boeing but did not have firm guidance on when production might restart [46][47] Question: How is the competitive landscape for AeroSat? - Management indicated optimism regarding partnerships and product improvements, but acknowledged the competitive nature of the market [68][70]