(The following should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the Company's Form 10-K for the year endedDecember 31, 2019 .) OVERVIEWAstronics Corporation ("Astronics" or the "Company") is a leading supplier of advanced technologies and products to the global aerospace and defense industries. Our 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. Our Aerospace segment designs and manufactures products for the global aerospace industry. Product lines include lighting and safety systems, electrical power generation, distribution and motions systems, aircraft structures, avionics products, systems certification, and other products. Our Aerospace customers are the airframe manufacturers ("OEM") that build aircraft for the commercial, military and general aviation markets, suppliers to those OEM's, aircraft operators such as airlines, suppliers to the aircraft operators, and branches of theU.S. Department of Defense . Our Test Systems segment designs, develops, manufactures and maintains automated test systems that support the aerospace and defense, communications and mass transit test systems as well as training and simulation devices for both commercial and military applications. In the Test Systems segment,Astronics' products are sold to a global customer base including OEM's and prime government contractors for both electronics and military products. Our strategy is to increase our value by developing technologies and capabilities, either internally or through acquisition, and using those capabilities to provide innovative solutions to our targeted markets where our technology can be beneficial. Important factors affecting our growth and profitability are the ongoing impacts of the COVID-19 pandemic and the timing and extent of recovery (as discussed more fully below), the rate at which new aircraft are produced, government funding of military programs, our ability to have our products designed into new aircraft and the rates at which aircraft owners, including commercial airlines, refurbish or install upgrades to their aircraft. New aircraft build rates and aircraft owners spending on upgrades and refurbishments is cyclical and dependent on the strength of the global economy. Once designed into a new aircraft, the spare parts business is frequently retained by the Company. Future growth and profitability of the test business is dependent on developing and procuring new and follow-on business. The nature of our Test Systems business is such that it pursues large multi-year projects. There can be significant periods of time between orders in this business which may result in large fluctuations of sales and profit levels and backlog from period to period. Acquisitions and Divestitures OnFebruary 13, 2019 , the Company completed a divestiture of its semiconductor test business within the Test Systems segment. The total proceeds of the divestiture amounted to$103.8 million . The Company recorded a pre-tax gain on the sale of$80.1 million in the first quarter of 2019. The income tax expense relating to the gain was$19.7 million . OnJuly 1, 2019 , the Company acquired all of the issued and outstanding capital stock ofFreedom Communication Technologies, Inc. ("Freedom"). Freedom, located inKilgore, Texas , is a leader in wireless communication testing, primarily for the civil land mobile radio market. Freedom is included in our Test Systems segment. The total consideration for the transaction was$21.8 million , net of$0.6 million in cash acquired. OnJuly 12, 2019 , the Company sold intellectual property and certain assets associated with its Airfield Lighting product line for$1.0 million in cash. The Airfield Lighting product line, part of the Aerospace segment, was not core to the business and represented less than 1% of revenue. The Company recorded a pre-tax loss on the sale of approximately$1.3 million . OnOctober 4, 2019 , the Company acquired the stock of the primary operating subsidiaries as well as certain other assets from mass transit and defense market test solution provider,Diagnosys Test Systems Limited , for$7.0 million in cash, plus earn-outs estimated at a fair value of$2.5 million .Diagnosys Inc. and its affiliates ("Diagnosys") is included in our Test Systems segment. Diagnosys is a developer and manufacturer of comprehensive automated test equipment providing test, support, and repair of high value electronics, electro-mechanical, pneumatic and printed circuit boards focused on the global mass transit and defense markets. The terms of the acquisition allow for a potential earn-out of up to an additional$13.0 million over the three years post acquisition based on achievement of new order levels of over$72.0 million during that period. The acquired business has operations inWestford, Massachusetts as well as Ferndown,England , and an engineering center of excellence inBangalore, India . 30
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