Digital Imaging
The Digital Imaging segment’s fourth quarter 2017 net sales were $199.7 million, compared with $110.9 million, an increase of 80.1%. Operating income was $34.8 million for the fourth quarter of 2017, compared with $15.3 million, an increase of 127.5%.
The fourth quarter 2017 net sales included $74.5 million in incremental sales from the e2v acquisition. The fourth quarter 2017 net sales also reflected higher sales of machine vision cameras for industrial applications, geospatial hardware and software and X-ray detectors for life sciences applications. The increase in operating income in the fourth quarter of 2017 reflected the impact of higher sales, favorable product mix and incremental operating profit from e2v.
Aerospace and Defense Electronics
The Aerospace and Defense Electronics segment’s fourth quarter 2017 net sales were $180.4 million, compared with $151.8 million, an increase of 18.8%. Operating income was $36.9 million for the fourth quarter of 2017, compared with $28.5 million, an increase of 29.5%.
The fourth quarter 2017 net sales reflected $22.9 million of higher sales of microwave and interconnect systems and higher sales of $6.1 million of avionics products and electronic relays, partially offset by $0.4 million of lower sales of electronic manufacturing services products. The higher sales of microwave and interconnect systems included $15.5 million in sales from e2v. The increase in operating income in the fourth quarter of 2017 reflected the impact of higher sales and favorable product mix.
Engineered Systems
The Engineered Systems segment’s fourth quarter 2017 net sales were $69.5 million, compared with $65.6 million, an increase of 5.9%. Operating income was $9.7 million for the fourth quarter of 2017, compared with $9.9 million, a decrease of 2.0%.
The fourth quarter 2017 net sales reflected higher sales of $4.2 million of engineered products and services and $0.7 million of energy systems products, partially offset by lower sales of $1.0 million of turbine engines. The higher sales of engineered products and services primarily reflected greater marine manufacturing and missile defense programs. The decrease in operating income in the fourth quarter of 2017 primarily reflected lower margins for engineered products and services and energy systems products.
Additional Financial Information
Cash Flow
Cash provided by operating activities was $126.4 million for the fourth quarter of 2017, compared with $66.3 million. The higher cash provided by operating activities in the fourth quarter of 2017 reflected the impact of higher operating income, cash flow from e2v and lower income tax payments. At December 31, 2017, cash totaled $70.9 million and total debt, including capital lease obligations, was $1,072.9 million. The company reduced total debt by $240.2 million since the e2v acquisition at the end of the first quarter 2017. At December 31, 2017, $165.0 million was outstanding under the $750.0 million credit facility. The company received $6.2 million from the exercise of stock options in the fourth quarter of 2017, compared with $9.4 million. Capital expenditures for the fourth quarter of 2017 were $18.0 million, compared with $16.7 million. Depreciation and amortization expense for the fourth quarter of 2017 was $25.6 million, compared with $21.7 million.
| Free Cash Flow (a) | Fourth Quarter | Total Year | ||||||||||||||||||||||||||
| (in millions, brackets indicate use of funds) | 2017 | 2016 | 2017 | 2016 | ||||||||||||||||||||||||
| Cash provided by operating activities | $ | 126.4 | $ | 66.3 | $ | 374.7 | $ | 317.0 | ||||||||||||||||||||
| Capital expenditures for property, plant and equipment | (18.0 | ) | (16.7 | ) | (58.5 | ) | (61.6 | ) | ||||||||||||||||||||
| Facility purchase pursuant to 1031 like-kind exchange | — | (26.0 | ) | — | (26.0 | ) | ||||||||||||||||||||||
| Total capital expenditures | (18.0 | ) | (42.7 | ) | (58.5 | ) | (87.6 | ) | ||||||||||||||||||||
| Free cash flow | 108.4 | 23.6 | 316.2 | 229.4 | ||||||||||||||||||||||||
| Restricted cash utilized for 1031 like-kind exchange facility purchase | — | 19.5 | — | 19.5 | ||||||||||||||||||||||||
| Adjusted free cash flow | $ | 108.4 | $ | 43.1 | $ | 316.2 | $ | 248.9 | ||||||||||||||||||||
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| (a) | The company defines free cash flow as cash provided by operating activities (a measure prescribed by generally accepted accounting principles) less capital expenditures for property, plant and equipment. Adjusted free cash flow reflects utilization of restricted cash from the sale of a former operating facility which funded, in part, the facility purchase pursuant to a 1031 like-kind exchange. The company believes that this supplemental non-GAAP information is useful to assist management and the investment community in analyzing the company’s ability to generate cash flow. | ||
