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

Aerospace Fourth Quarter 2017 Results

Aerospace segment sales increased by $11.5 million, or 9.0%, when compared with the prior year’s fourth quarter to $139.6 million. The Acquired Businesses contributed $8.5 million in sales in the 2017 fourth quarter.

Electrical Power & Motion sales decreased $4.0 million, or 5.7%, due to lower sales of cabin power products due to a combination of lower volume and pricing. Lighting & Safety sales increased by $1.0 million primarily due to higher lighting sales partially offset by lower sales of passenger service units. Avionics sales were up $12.5 million as a result of $2.4 million increase in antennae and other avionics sales combined with the Acquired Businesses which contributed $8.0 million to sales in this product line. Structures sales increased by $0.6 million and Systems Certification sales increased by $1.0 million on higher project activity.

Aerospace segment operating loss for the fourth quarter of 2017 was $7.9 million compared with an operating profit of $16.9 million, or 13.2% of sales, in the same period last year. The Aerospace operating profit was negatively impacted by a $16.2 million impairment loss relating to Armstrong Aerospace and a $5.7 million operating loss from the CCC acquisition. Gross margin was negatively affected by the CCC acquisition having a significantly lower margin profile at this point in its business cycle compared with the organic business. Organic Aerospace E&D costs were $19.9 million compared with $20.2 million in the same period last year. The Acquired Businesses incurred E&D costs of $2.9 million.

Aerospace bookings in the fourth quarter of 2017 were $179.3 million, for a book-to-bill ratio of 1.3:1 for the quarter. Backlog was $298.6 million at the end of the fourth quarter of 2017.

Aerospace 2017 Results

Aerospace segment sales increased by $0.6 million, or 0.1%, to $534.6 million, when compared with the prior year primarily due to the addition of the Acquired Businesses which added $15.5 million.

Electrical Power & Motion sales decreased $24.2 million, or 8.4%, for similar reasons as discussed in the quarter. Systems Certifications sales decreased $2.2 million and other products decreased $1.0 million from lower project activity earlier in the year. These declines were offset by increased Avionics sales, up $21.2 million of which $15.0 million was from the Acquired Businesses, and $5.3 million was from increased sales of databus and in-flight entertainment systems. Structures sales increased by $5.0 million.

Aerospace operating profit for 2017 was $38.9 million, or 7.3% of sales, compared with $78.0 million, or 14.6% of sales, in the same period last year. Aerospace operating profit was negatively impacted by lower sales volume and market pricing pressures primarily related to cabin power products, coupled with the $16.2 million impairment at Armstrong and an operating loss of $8.4 million from CCC. E&D costs for Aerospace were $85.3 million (inclusive of $5.6 million related to the Acquired Businesses) and $78.5 million in 2017 and 2016, respectively.

Mr. Gundermann commented, "Our Aerospace segment had record bookings in the fourth quarter of $179 million, for a book-to-bill ratio of 1.3:1. This allowed us to enter 2018 with a record Aerospace backlog of $299 million, providing a sound base for the year."

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

Test Systems Fourth Quarter 2017 Results

Sales in the fourth quarter of 2017 increased approximately $5.7 million to $31.8 million compared with the same period in 2016, an increase of 22.0%. Sales to the Semiconductor market increased $9.6 million compared with the same period in 2016, which was offset by decreased sales of $3.8 million to the Aerospace & Defense market.

Operating profit was $4.5 million, or 14.2% of sales, compared with $2.0 million, or 7.6% of sales, in last year’s fourth quarter. This is primarily due to increased sales volumes. E&D costs were $2.6 million, up slightly from $2.5 million in the fourth quarter of 2016.

Orders for the Test Systems segment in the quarter were $57.7 million, up $34.6 million, or 150%, over the prior-year period, for a book-to-bill ratio of 1.8:1 for the quarter. Backlog was $95.1 million at the end of the fourth quarter of 2017.

Test Systems 2017 Results

Sales in 2017 decreased 9.3% to $89.9 million compared with sales of $99.1 million for 2016, due to lower shipments to both the Semiconductor and Aerospace & Defense markets. Sales to the Semiconductor market decreased $5.9 million and sales to the Aerospace & Defense market decreased $3.3 million compared with the same period in 2016.

Operating profit was $7.4 million, or 8.2% of sales, compared with $8.5 million, or 8.6% of sales, in 2016. This is primarily due to decreased sales volume. E&D costs were $9.7 million in 2017, compared with $10.4 million in 2016.

Mr. Gundermann commented, "Our Test business continues to make progress establishing its technologies in its chosen markets. While 2017 was disappointing with revenue of $90 million, bookings for the year were $146.1 million for a book-to-bill of 1.6:1, pointing to a much stronger 2018."