The fourth quarter 2018 net sales primarily reflected higher sales of X-ray detectors and generators for life sciences applications and MEMS products. The increase in operating income in the fourth quarter of 2018 reflected the impact of higher sales, partially offset by unfavorable product mix. Operating income in the fourth quarter of 2017 included a $1.1 million reduction to estimated pretax charges recorded in 2017 related to the acquisition of e2v.
Aerospace and Defense Electronics
The Aerospace and Defense Electronics segment’s fourth quarter 2018 net sales were $178.3 million, compared with $173.4 million, an increase of 2.8%. Operating income was $36.5 million for the fourth quarter of 2018, compared with $34.1 million, an increase of 7.0%.
The fourth quarter 2018 net sales reflected $13.2 million of higher sales of defense electronics, partially offset by $8.3 million of lower sales of aerospace electronics. The increase in operating income in the fourth quarter of 2018 reflected the impact of favorable product mix.
Engineered Systems
The Engineered Systems segment’s fourth quarter 2018 net sales were $80.8 million compared with $69.5 million, an increase of 16.3%. Operating income was $8.8 million for the fourth quarter of 2018, compared with $8.3 million, an increase of 6.0%.
The fourth quarter 2018 net sales reflected higher sales of $14.6 million of engineered products and services, partially offset by lower sales of $2.9 million of turbine engines. The higher sales of engineered products and services primarily reflected increased nuclear, marine and aviation manufacturing programs and increased sales related to missile defense. Sales of turbine engines reflected lower sales of cruise missile engines. Operating income in the fourth quarter of 2018 increased primarily due to higher sales of engineered products and services.
Additional Financial Information
Cash Flow
Cash provided by operating activities was $125.5 million for the fourth quarter of 2018, compared with $126.4 million. The cash provided by operating activities in the fourth quarter of 2018 reflected the impact of higher operating income, offset by higher income tax payments. At December 30, 2018, cash totaled $142.5 million and total debt, including capital lease obligations, was $750.6 million, compared with $1,072.9 million at December 31, 2017. At December 30, 2018, $29.0 million was outstanding under the $750.0 million credit facility. During the fourth quarter of 2018, the company repaid $114.0 million in term loans. The company received $1.1 million from the exercise of stock options in the fourth quarter of 2018, compared with $6.2 million. Capital expenditures for the fourth quarter of 2018 were $18.7 million, compared with $18.0 million. Depreciation and amortization expense for the fourth quarter of 2018 was $29.3 million, compared with $25.6 million. In December 2018, the company announced the pending acquisition of the Scientific Imaging businesses of Roper Technologies for $225.0 million in cash. The transaction is expected to close in the first quarter of 2019.
| Free Cash Flow (a) | Fourth Quarter | Total Year | |||||||||||||||||
| (in millions, brackets indicate use of funds) | 2018 | 2017 | 2018 | 2017 | |||||||||||||||
| Cash provided by operating activities | $ | 125.5 | $ | 126.4 | $ | 446.9 | $ | 374.7 | |||||||||||
| Capital expenditures for property, plant and equipment | (18.7 | ) | (18.0 | ) | (86.8 | ) | (58.5 | ) | |||||||||||
| Free cash flow | $ | 106.8 | $ | 108.4 | $ | 360.1 | $ | 316.2 | |||||||||||
| (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. 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. |
