Astronics Corporation Reports 2019 First Quarter Financial Results

• Strong sales of $208.2 million, up 16.3% over 2018 first quarter
• Improved operating margin of 11.0% with income from operations of
  $22.9 million
• Fifth consecutive quarter of record Aerospace sales; up 14.5% to
  $188.5 million
• Aerospace segment operating profit improves to $25.8 million, or
  13.7% of sales
• Record Aerospace backlog of $329.2 million
• Strong bookings of $205.0 million
• Sale of semiconductor test business yields $80.1 million pre-tax
  gain

EAST AURORA, N.Y.–(BUSINESS WIRE)–Astronics Corporation (Nasdaq: ATRO), a leading supplier of advanced
technologies and products to the global aerospace and defense
industries, today reported financial results for the three months ended
March 30, 2019. Earnings per share for prior periods are adjusted for
the 3 for 20 (15%) distribution of Class B Stock for shareholders of
record on October 12, 2018.

Peter J. Gundermann, President and Chief Executive Officer, commented,
“Our Company had a strong start to the year. Activity during the first
quarter was brisk, with solid demand across our product lines as well as
expanding margins. Our Aerospace business drove our improved results,
achieving yet another record in sales and ending the quarter with a
record backlog. The strength in our first quarter numbers gives us
increased confidence that 2019 will be another solid year for the
Company.”

On February 13, 2019, the Company completed the divestiture of its
semiconductor test business within the Test Systems segment. The
transaction resulted in a pre-tax gain of $80.1 million, expected to be
approximately $58.8 million after taxes. For comparability purposes, in
addition to reporting the consolidated and segment results of operations
on a basis consistent with U.S. generally accepted accounting principles
(“GAAP”), this press release also contains certain financial information
regarding consolidated sales, operating income and net income, as well
as Test Systems segment sales and operating profit, adjusted to remove
the effects of the semiconductor business from all periods presented.
Management believes these non-GAAP measures are useful to investors in
understanding the performance of the ongoing business. The
reconciliation of GAAP measures to non-GAAP measures is contained in the
section labeled “Reconciliation to Non-GAAP Performance Measures”.

Consolidated Review

First Quarter 2019 Results (compared with the
prior-year period, unless noted otherwise)

Consolidated sales were up 16.3%, or $29.1 million, driven primarily
from growth in the Aerospace segment. Excluding sales of the
semiconductor business, adjusted consolidated sales were up 19.1%, or
$32.8 million, demonstrating growth in both the Aerospace and Test
Systems segments.

Consolidated operating income improved to $22.9 million, or 11.0% of
sales, compared with

$6.6 million, or 3.7% of sales in the prior-year period. Margin
expansion was driven by leverage gained from higher volume combined with
a reduction in expenses relative to the first quarter of 2018, more than
offsetting $10.7 million in operating losses from the three challenged
Aerospace businesses, which included a $2.0 million charge for inventory
reserves and a $1.7 million additional loss on a VVIP contract. Last
year’s first quarter was unfavorably impacted by $1.7 million in
incremental amortization related to the Telefonix acquisition in
December 2017, $1.3 million in expense related to the fair value step-up
of inventory for the acquisition and a $1.0 million litigation reserve.

Adjusted consolidated operating income was $22.0 million, or 10.7% of
adjusted consolidated sales, compared with $5.9 million, or 3.4% of
adjusted consolidated sales, in the prior-year period.

The effective tax rate for the quarter was 22.6%, compared with 16.1% in
the first quarter of 2018. The 2019 first quarter tax rate was
unfavorably impacted by the gain on the sale of the semiconductor
business.

Net income was $78.1 million, or $2.35 per diluted share, compared with
$3.3 million, or $0.10 per diluted share in the prior year. The gain on
the sale of the semiconductor test business is expected to contribute
$58.8 million after taxes. Adjusted net income, excluding the divested
semiconductor test business, was $16.1 million in the first quarter of
2019 compared with $2.8 million in the prior-year period.

Bookings were $205.0 million, for a book-to-bill ratio of 0.98:1.
Backlog at the end of the quarter was $400.2 million. Approximately
$335.5 million of backlog is expected to ship in the remainder of 2019.

Mr. Gundermann commented, “Margin improved across the business in the
first quarter, despite another substantial loss from our previously
discussed struggling Aerospace businesses. We also ended the first
quarter facing some cost challenges in our Test business as it adjusted
to lower volumes without the semiconductor business. We addressed both
of these situations with restructuring initiatives early in the second
quarter which, when combined with anticipated revenue increases, will
bring the struggling businesses closer to break-even in coming quarters.”

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

Aerospace First Quarter 2019 Results (compared
with the prior-year period, unless noted otherwise)

Aerospace segment sales increased by $23.9 million, or 14.5%, to $188.5
million.

Electrical Power & Motion sales increased by $19.9 million, or 27.3%,
due to higher sales of in-seat power and seat motion products. Sales of
Lighting & Safety products were up $7.0 million due to a general
increase in volume.

Aerospace operating profit was $25.8 million, or 13.7% of sales,
compared with $13.1 million, or 8.0% of sales, in the same period last
year. Aerospace operating profit benefited from the contribution margin
on higher sales and improved sales mix, coupled with lower amortization
expense related to the intangible assets acquired as part of the
Telefonix acquisition in 2017. Operating profit was negatively affected
by the challenged businesses, which collectively turned in an operating
loss of $10.7 million for the quarter. The $10.7 million operating loss
included a

$2.0 million inventory reserve and a $1.7 million additional loss on a
development contract. We restructured one of the “struggling three”
companies early in the second quarter, a move designed to reduce its
fixed costs by approximately $3.5 million.

Aerospace bookings in the first quarter of 2019 were $191.7 million, for
a book-to-bill ratio of 1.02:1. Backlog was $329.2 million at the end of
the first quarter of 2019.

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

Test Systems First Quarter 2019 Results
(compared with the prior-year period, unless noted otherwise)

Test Segment sales increased $5.2 million to $19.7 million compared with
$14.5 million in the prior-year period. An $8.9 million increase in
sales to the Aerospace & Defense market was offset by a $3.7 million
decrease in sales to the Semiconductor market. Adjusted Test Systems
segment sales, excluding the semiconductor test business from both
periods, were $16.3 million, up more than double from $7.4 million in
the prior year.

Operating profit for the segment was $2.2 million, or 11.1% of sales,
compared with an operating loss of $1.9 million in last year’s first
quarter. Adjusted operating profit for the segment was

$1.3 million, or 7.8% of adjusted sales, compared with an operating loss
of $2.6 million in the prior-year period. Higher margin was driven by
the increase in volume.

Bookings for the Test Systems segment in the quarter were $13.3 million,
for a book-to-bill ratio of 0.68:1 for the quarter. Backlog was $70.9
million at the end of the first quarter of 2019.

Mr. Gundermann commented, “There has been significant change in our Test
segment, starting with the sale of the semiconductor test business
followed by the resizing of the organization early in the second
quarter. We are realigning the business to focus more effectively on our
traditional A&D market, positioning the business for long-term success.”

2019 Outlook

Astronics reiterated its expectations for 2019 with consolidated annual
sales to be in the range of $760 million to $805 million, of which $710
million to $745 million is expected from the Aerospace segment and $50
million to $60 million is expected from the Test segment.

Consolidated backlog at March 30, 2019 was $400.2 million. Approximately
84% of the backlog is expected to ship in 2019.

The effective tax rate for 2019, excluding the impact of the gain on the
sale of the semiconductor business, is expected to be in the range of
18% to 22%.

Capital equipment spending in 2019 is expected to be between $22 million
to $28 million.

Mr. Gundermann concluded, “We had a solid first quarter and, as a
result, we are maintaining our sales forecast for the year. The forecast
at the midpoint implies growth of around 10% over 2018 after adjusting
for the divestiture of the semiconductor test business. We expect the
second quarter to be somewhat lighter than the first, with the third and
fourth quarters strengthening again. The second quarter will also see a
charge of approximately $2 million related to the recent restructuring
initiatives that have been implemented. These initiatives collectively
will result in approximately

$7 million of annual savings, split evenly between our two segments.”

First Quarter 2019 Webcast and Conference Call

The Company will host a teleconference today at 11:00 a.m. ET. During
the teleconference, management 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) 493-6784.
The listen-only audio webcast can be monitored at www.astronics.com.
To listen to the archived call, dial (412) 317-6671 and enter replay pin
number 13689830. The telephonic replay will be available from 2:00 p.m.
on the day of the call through Wednesday, May 22, 2019. 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 and defense
industries. Astronics’ products and services include advanced,
high-performance electrical power generation and distribution systems,
seat motion solutions, lighting and 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.
Through its wholly owned subsidiaries, Astronics 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 progress being made with the three operations having losses, the
continuation of the trend in growth with passenger power and
connectivity on airplanes, the ability of the Company to advance its
Test business, the ability to achieve at or near breakeven performance
in the Test business, the Company’s ability to deliver a solid 2019, the
ability to win new projects in the Test business and margins to expand
with growth, the success of the Company achieving its sales
expectations, the state of the aerospace and defense 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

*Prior-year 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 12, 2018.

Reconciliation to Non-GAAP Performance Measures

The Company’s press release contains financial information regarding
consolidated sales, operating income and net income, as well as Test
Systems segment sales and operating profit, as adjusted to remove the
effects of the semiconductor business from all periods presented. Each
of these adjusted balances are non-GAAP performance measures. Management
believes these non-GAAP measures are useful to investors in
understanding the performance of the ongoing business.

• The non-GAAP adjustment eliminates all semiconductor test sales and
  associated direct costs from all periods presented. There are
  significant indirect costs, overheads, and other general and
  administrative costs that are not included in the non-GAAP adjustment,
  as such functions benefited all operations and products within the
  Test Systems segment and have not been eliminated as a result of the
  divestiture. The non-GAAP adjustment to net income for the three-month
  period ended March 30, 2019 also eliminates the impact of the gain on
  the sale of the semiconductor business, net of tax at the forecasted
  consolidated tax rate for 2019.

Contacts

Company:
David C. Burney, Chief Financial Officer
Phone:
(716) 805-1599, ext. 159
Email: [email protected]

Investor Relations:
Deborah K. Pawlowski, Kei Advisors LLC
Phone:
(716) 843-3908
Email: [email protected]