Astronics Corporation — 2022 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2022. This is an annual filing; fourth-quarter results are identified separately where relevant. Astronics supplies aerospace, defense and electronics technologies through its Aerospace and Test Systems segments.
Financial performance and position
| Metric | 2022 | 2021 |
|---|---|---|
| Sales | $534.9 million | $444.9 million |
| Gross profit / margin | $71.5 million / 13.4% | $65.4 million / 14.7% |
| Operating loss | $30.0 million | $28.7 million |
| Net loss | $35.7 million | $25.6 million |
| Diluted loss per share | $1.11 | $0.82 |
| Cash from operations | $(28.3) million | $(5.5) million |
| Cash and cash equivalents at year-end | $13.8 million | $29.8 million |
| Debt at year-end | $164.0 million | $163.0 million |
| Working capital | $213.7 million | $221.2 million |
- Sales rose 20.2%, led by Aerospace growth, but gross margin declined amid labor and materials inflation, supply-chain workarounds and higher R&D spending. SG&A was $101.6 million, or 19.0% of sales.
- Aerospace sales increased 26.3% to $461.2 million; its operating loss narrowed to $1.9 million from $8.6 million. Test Systems sales fell to $73.7 million from $79.7 million, and its operating loss widened to $8.1 million from $3.8 million.
- Operating cash outflow increased mainly because receivables and inventory grew to support higher demand and longer component lead times. Investing activities generated $14.4 million, including semiconductor-business earnout receipts; capital expenditures were $7.7 million.
- Year-end debt was variable-rate. Interest expense rose to $9.4 million from $6.8 million. The company reported $13.8 million cash and $6.0 million of borrowing availability under its year-end facility, subject to its liquidity covenant.
- Fourth-quarter sales were $158.2 million versus $116.1 million a year earlier; fourth-quarter net loss was $6.8 million versus net income of $1.6 million.
Material changes and unusual items
- Backlog increased to $571.4 million from $415.7 million. 2022 bookings were $690.6 million.
- 2022 results included an $11.3 million gain from an earnout on the 2019 semiconductor test-business divestiture. A further $3.4 million 2022 earnout was reported by the buyer in February 2023; Astronics was reviewing the calculation and expected to recognize and receive it in 2023.
- 2022 included $6.0 million of AMJP grant benefit recorded as a reduction in cost of products sold. The comparable 2021 benefit was $8.7 million. The 2021 results also included a $5.0 million facility-sale gain.
- A $13.2 million valuation allowance against deferred tax assets was a significant factor in the 2022 effective tax rate of negative 20.0%, despite the pretax loss.
- Management reported a prior covenant noncompliance as of September 30, 2022; lenders waived enforcement. The company amended and extended its credit facility multiple times during 2022.
Outlook, risks and contingencies
- Management forecast 2023 revenue of $640 million to $680 million, implying approximately 20%–27% growth over 2022. It expected first-quarter revenue of $140 million to $150 million, followed by quarterly revenue of $160 million to $185 million. Management cited record backlog, improving supply predictability and recovering demand, while warning that supply-chain cooperation remains important.
- Management expected 2023 cash taxes of $12 million to $14 million and capital expenditures of $17 million to $20 million. It expected positive operating cash flow for full-year 2023.
- On January 19, 2023, Astronics refinanced with a $115 million asset-based revolver maturing in 2026 and a $90 million asset-based term loan. The term loan bears interest at SOFR plus 8.75%; the revolver at SOFR plus 2.25%–2.75%. The financing includes escalating minimum EBITDA tests, minimum liquidity requirements, repayment provisions and other restrictions. Management said covenant compliance would be challenging to monitor, though it expected to remain compliant.
- Management identified COVID-19 recovery, especially widebody aircraft activity, supply constraints, inflation and labor availability as key uncertainties. Other risks include fixed-price contract cost overruns, customer concentration, government funding and contract termination, interest rates, and compliance with debt covenants. Boeing represented 11.0% of 2022 sales.
- German and UK patent litigation with Lufthansa Technik remains material. At year-end, recorded liabilities included $17.8 million for German matters and $7.0 million for the UK matter, plus $0.7 million current for UK legal-cost reimbursement. Outcomes and damages could differ from estimates. A separate Teradyne case remained pending; no loss was accrued because exposure was not considered probable or estimable.
- The U.S. Army selected Astronics Test Systems for a radio-test program, with contract terms still being finalized. The company preliminarily estimated approximately $200 million of sales over seven years; the expected contract award was not yet final.
Key facts for investors to verify
- Progress on 2023 revenue conversion, backlog delivery and bookings, including whether supply constraints and cost inflation ease as forecast.
- Operating cash generation and working-capital trends, particularly receivables and inventory, against management’s positive-cash-flow expectation.
- Compliance with the new financing’s EBITDA and liquidity covenants, available borrowing capacity, and the effective cost of variable-rate debt.
- Developments in Lufthansa litigation and whether final damages materially differ from recorded reserves.
- Final terms, timing and economics of the U.S. Army program, and confirmation of the reported $3.4 million divestiture earnout.