Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days.        Yes  X      No ___

            Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [x]

            Indicate by checkmark if the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes          No   X     

            As of March 11, 2005, 7,825,506 shares were outstanding, consisting of 5,992,992 shares of Common Stock $.01 Par Value and 1,832,514 shares of Class B Stock $.01 Par Value. The aggregate market value, as of the last business day of the Company's most recently completed second fiscal quarter, of the shares of Common Stock and Class B Stock of Astronics Corporation held by non-affiliates was approximately $34,370,000 (assuming conversion of all of the outstanding Class B Stock into Common Stock and assuming the affiliates of the Registrant to be its directors, executive officers and persons known to the Registrant to beneficially own more than 10% of the outstanding capital stock of the Corporation).

Portions of the Company's Proxy Statement for the 2005 Annual Meeting of Shareholders to be held April 28, 2005 are incorporated by reference into Part III of this Report.

This Annual Report contains certain forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that involves uncertainties and risks. These statements are identified by the use of the words "believes," "expects," "intends," "anticipates" and words of similar import. Readers are cautioned not to place undue reliance on these forward looking statements as various uncertainties and risks could cause actual results to differ materially from those anticipated in these statements. These uncertainties and risks include the success of the Company with effectively executing its plans; the timeliness of product deliveries by vendors and other vendor performance issues; changes in demand for our products from the U.S. government and other customers; the acceptance by the market of new products developed; our success in cross-selling products to different customer and markets; changes in government contracts; the state of the commercial and business jet aerospace market; the Company's success at increasing the content on current and new aircraft platforms; the level of aircraft build rates; as well as other general economic conditions and other factors.

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PART I

        Astronics is a leader in advanced lighting and electronic systems for the global aerospace industry. The Company designs and manufactures its products for aircraft original equipment manufacturers (OEM's), OEM suppliers and aircraft operators around the world. The Company designs and manufactures lighting products found in the cockpit, in the cabin and on the exterior of aircraft. The Company provides its products through its wholly owned subsidiaries Luminescent Systems, Inc., Luminescent Systems Canada, Inc., collectively referred to as (LSI) and most recently through its February 2005 acquisition of Astronics Advanced Electronics Systems Corp. (AES) from a subsidiary of General Dynamics.

        Many "OEM's" have increased their reliance on their subcontractors to carry a greater share of aircraft responsibility, including system requirements, hardware design and physical and electrical interfaces. We continue to invest in technology and capabilities that will allow us to take advantage of this trend.

        Astronics' strategy for growth is to continue to develop or acquire the necessary technology to evolve into a leading aircraft lighting and electronics systems integrator, increasing the value and content we provide on a growing base of aircraft platforms.

        Astronics' products are sold worldwide to manufacturers of business jets, military, commercial transports as well as airlines and second-tier suppliers to the OEM's. During 2004 the Company's sales were divided 46% to the military market, 31% to the business jet market, 19% to the commercial transport market and 4% to other markets. Most of the Company's sales are a result of contracts or purchase orders received from customers, placed on a day-to-day basis or for single year procurements rather than long-term multi-year contract commitments. Sales by Geographic Region, Major Customer and Canadian Operations are provided in note 10 of item 8, Financial Statements and Supplementary Data in this report.

        Liquidity is discussed in item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, in the Liquidity section in this report.

        Astronics experiences considerable competition in the Aerospace market sectors we serve, principally with respect to product performance and price, from various competitors, many of which are substantially larger and have greater resources. Success in the Aerospace markets we serve depends upon product innovation, customer support, responsiveness, and cost management. Astronics continues to invest in developing the technologies and engineering support critical to competing in our Aerospace markets.

        At December 31, 2004, the Company's backlog was $27.2 million. At December 31, 2003, the Company's backlog was $18.7 million.

3

Patents

        The Company has a number of patents and has filed applications for others. While the aggregate protection of these patents is of value, the Company does not consider that the successful conduct of any material part of its business is dependent upon the protection afforded by these patents. The Company's patents and patent applications relate to electroluminescence, instrument panels, keyboard technology and various components used in their manufacture. The Company regards its expertise and techniques as proprietary and relies upon trade secret laws and contractual arrangements to protect its rights.

        The Company is engaged in a variety of research and development activities directed to the substantial improvement or new application of the Company's technologies. The extent of the Company's engagement in basic research, however, is not material.

        The Company's continuing operations employed approximately 424 employees as of December 31, 2004. The Company considers its relations with its employees to be good.

        The Company files its financial information and other materials required by the SEC electronically with the SEC. These materials can be accessed electronically via the Internet at www.SEC.gov. Such materials and other information about the Company are also available through the Company's website at www.astronics.com.

        The Company owns manufacturing and office facilities of approximately 70,000 square feet in the Buffalo, New York area and 80,000 square feet in Lebanon, New Hampshire. Montreal, Quebec, Canada operations are in leased facilities of approximately 15,000 square feet. The lease expires in 2006.

        On February 3, 2005, the Company acquired substantially all of the assets of the General Dynamics - Airborne Electronic Systems (AES) business unit from a subsidiary of General Dynamics. This business leases 55,000 square feet of space, located in Redmond, Washington. The lease expires in 2008.

        There are no material pending legal proceedings, other than routine litigation incidental to the business, to which the Registrant or any of its subsidiaries is a party or of which any of their property is the subject.

Not applicable

4

PART II

        The table below sets forth the range of prices for the Company's Common Stock, traded on the Nasdaq National Market System, for each quarterly period during the last two years. The approximate number of shareholders of record as of February 22, 2005, was 795 for Common Stock and 819 for Class B Stock.

        The Company has not paid any cash dividends in the three-year period ended December 31, 2004. It has no plans to pay dividends as it plans to retain all cash from operations as a source of capital to finance growth in the business. There are no restrictions, however on the Company's ability to pay dividends.

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ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        Astronics Corporation, through its subsidiaries Luminescent Systems Inc. and Luminescent Systems Canada Inc. and most recently with the February 2005 acquisition of Astronics Advanced Electronic Systems Corp., designs and manufacturers lighting components, subsystems and electrical power generation, control, and distribution systems for aircraft. We serve the three primary markets for aircraft which are the military, commercial transport and the business jet markets. Astronics strives to offer comprehensive lighting and electrical systems for aircraft making the Company unique in our ability to serve our customers. In 2004, sales to the military accounted for 46% of total sales. Sales to the commercial transport market and the business jet market were 19% and 31%, respectively.

        Astronics' growth is dependent, amongst other things, upon our ability to be designed into new aircraft and the rate at which aircraft are produced. Once designed into a new aircraft, the spare parts business is typically retained by the Company. Astronics' strategy is to increase the amount of content on aircraft platforms, evolving the Company from our historic role of a components supplier to a turn key provider of complete systems. We also depend on aircraft operators for certain of our sales, including commercial airlines.

        In 2004, Astronics committed significant resources for the design of products for next generation aircraft which in many cases will not enter production until 2006 or beyond. We were selected to develop exterior lighting products for the Cessna Mustang, Eclipse 500, Raytheon Hawker Horizon and continued to invest heavily in developing the exterior lighting for the F-35 Joint Strike Fighter. We were selected to design and develop Cockpit display systems for several new or upgraded aircraft. These efforts resulted in a substantial increase to our engineering expenses which are presented in our statement of operations in the cost of products sold line and discussed in the following Results of Operations, Expenses section.

        We continue to look for opportunities to capitalize on our core competencies and expand our existing business in addition to growing through strategic acquisitions. On February 3, 2005, we acquired substantially all of the assets and liabilities of a business formerly known as General Dynamics Airborne Electronics Systems located in Redmond, Washington. The products and capabilities of Astronics Advanced Electronic Systems (AES) are logical extensions of our own, effectively broadening our product offerings and increasing our growth opportunities. We acquired the business for $13.0 million in cash at closing with an additional purchase consideration of up to $4.0 million based on 2005 revenue. We used a combination of available cash and line of credit to fund the acquisition.

        For 2005, we expect revenues will grow and earnings will improve as the year develops. We are experiencing increased order rates as the business jet and commercial airline markets strengthen and firm respectively. In addition, we expect AES to be accretive to our earnings, particularly in the second half of the year as several programs currently in our backlog enter production, increasing our sales volume.

        We ended the year with a backlog of $27.2 million of which $22.1 million is expected to be delivered during 2005. Additionally, as of the acquisition date, February 3, 2005, AES had a backlog of $46 million of which $18 million is expected to be delivered in 2005. Included in the AES backlog of $46 million are two significant orders - an order to provide power conditioning units for the Tactical Tomahawk missile program and an order to provide power distribution modules to a leading provider of in- flight entertainment systems. These orders total $32 million and are expected to be delivered over a 3 to 7-year period beginning in the second half of 2005. See additional discussion in the following section, 2005 Acquisition. Provided that the economy maintains its strength we anticipate that new aircraft build rates will increase over the next several years providing increased opportunities to grow revenue and profits. We expect discretionary spending by the airlines will continue at the rates we have seen over the past year. We expect that the military market will continue to offer opportunities for us to increase the value of the content that we provide on a growing base of aircraft platforms.

        Challenges facing us include improving shareholder value through increased profitability. Increasing profitability is dependent on many things such as increased build rates for existing aircraft, successful certification of new aircraft such as the Cessna Mustang and Eclipse 500 business jets, continued government funding of defense programs such as the F-35 Joint Strike Fighter and V-22 Osprey and the Company's ability to obtain production contracts for parts we currently supply or have been selected to design and develop for these programs. In addition we are faced with increasing costs for health care and corporate governance, particularly those required by Sarbanes-Oxley legislation. Finally, many of our newer development programs are based on new and unproven technology. We are challenged to develop the technology on a schedule that is consistent with specific aircraft development programs. We will continue to address these challenges by working to improve operating efficiencies and focusing on executing on the growth opportunities currently in front of us.

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2005 ACQUISITION

        On February 3, 2005, the Company acquired substantially all of the assets of the General Dynamics - Airborne Electronic Systems (AES) business unit from a subsidiary of General Dynamics. Astronics acquired the business for $13.0 million in cash at closing with an additional purchase consideration of up to $4.0 million based on 2005 revenue. The Company borrowed $7 million on its line of credit and used $6 million of cash on hand to finance the purchase. For the year ended December 31, 2004 AES had an unaudited net loss of approximately $5 million on sales of $ 26 million. The loss was primarily a result of costs relating to a development program that included significant termination fees negotiated by the parent and charged to AES. AES produces a wide range of products related to electrical power generation, control, and distribution on military, commercial, and business aircraft. Audited financial statements for AES for 2004 and 2003 and pro-forma combined financial information for Astronics and AES will be available and included in a Form 8-K filing expected to be filed in April 2005.

        Our financial statements and accompanying notes are prepared in accordance with accounting principles generally accepted in the United States. The preparation of the Company's financial statements requires management to make estimates, assumptions and judgments that affect the amounts reported. These estimates, assumptions and judgments are affected by management's application of accounting policies, which are discussed in Note 1 of item 8, Financial Statements and Supplementary Data of this report. The critical accounting policies have been reviewed with the audit committee of our board of directors.

        Revenue is recognized when the risks and rewards of ownership and title are transferred to the customer, principally as units are delivered or as service obligations are satisfied. The Company manufactures most of its products on a build to order basis and ships products upon completion or shortly thereafter. There are no contracts that allow for a right of return. A trade receivable is recorded at the value of the sale.

        The Company records a valuation allowance to account for potentially uncollectible accounts receivable. The allowance is determined based on Management's knowledge of the business and specific customers and review and analysis of accounts receivable agings. At December 31, 2004, the Company's allowance for doubtful accounts for accounts receivable was $0.3 million, or 4% of gross accounts receivable. At December 31, 2003, the Company's allowance for doubtful accounts was $0.3 million, or 7% of gross accounts receivable. In addition, at December 31, 2004, the Company fully reserved the balance of a non-current note receivable in the amount of $0.6 million. At December 31, 2003, the note was included in Other Assets for $0.5 million, net of $0.1 million reserve.

        The Company records valuation reserves to provide for slow moving or obsolete inventory or to reduce inventory to the lower of cost or market value. In determining the appropriate reserve, Management considers overall inventory levels in relation to forecasted demands. At December 31, 2004, the Company's reserve for inventory valuation was $0.7 million, or 10% of gross inventory, an increase of $0.2 million from $0.5 million at December 31, 2003 which also represented 10% of gross inventories.

        As of December 31, 2004, the Company had a net deferred tax asset of $1.1 million. These assets relate principally to liabilities or asset valuation reserves that result in timing difference between generally acceptable accounting principles recognition and treatment for income tax purposes, as well as a state investment tax credit carryforward. Based upon current state tax regulations and allocation formulas, in order to fully utilize the state investment tax credits, the Company will have to generate average annual taxable income of approximately $2.6 million during the carryforward period through 2019. Based on historical earnings and current projections of future taxable income a valuation allowance is not required.

        The Company's goodwill is the result of the excess of purchase price over net assets acquired from acquisitions. As of December 31, 2004, the Company had $2.6 million of goodwill. The Company tests goodwill for impairment at least annually, during the fourth quarter, and whenever events occur or circumstances change that indicate there may be impairment.

7

 The process of evaluating the Company's goodwill for impairment is subjective and requires significant estimates. These estimates include judgments about future cash flows that are dependent on internal forecasts, long-term growth rates and estimates of the weighted average cost of capital used to discount projected cash flows. Based on the discounted projected cash flows, management has concluded that there is no impairment of the Company's goodwill.

        The Company maintains a supplemental retirement plan for certain executives. The accounting for this plan is based in part on certain assumptions that may be highly uncertain and may have a material impact on the financial statements if different reasonable assumptions had been used. The assumptions for increases in compensation and the discount rate for determining the cost recognized in 2004 were 5% and 6%, respectively. The discount rate used for the projected benefit obligation as of December 31, 2004 was 5.75%. The assumption for compensation increases takes a long-term view of inflation and performance based salary adjustments based on the Company's approach to executive compensation. For determining the discount rate the Company considers long-term interest rates for high-grade corporate bonds.

        Sales for 2004 increased by $1.5 million to $34.7 million, up from $33.2 million in 2003, an increase of 4.6%. The increase is the result of an increase in sales to the business jet market of $2.5 million, an increase in sales to the commercial transport market of $0.1 million and an increase in other sales of $0.2 million offset partially by a $1.3 million decrease in sales to the military market. The increase in sales to the business jet market is primarily a result of increased production rates for new aircraft. The decrease of sales to the military is the result of lower demand for spare parts by the U.S. government.

        Sales for 2003 decreased by $9.7 million to $33.2 million, down from $42.9 million in 2002, a decrease of 22.6%. The decrease is the result of the culmination in early 2003 of the Company's F-16 night vision retrofit program which accounted for sales of $0.7 million in 2003 and $10.1 million in 2002. In the first quarter of 2003, the Company concluded the program that began in 1999 to retrofit over 1,000 F-16 aircraft operated by the U.S. Air Force to be night vision goggle compatible. Excluding the F-16 program from both periods, sales in 2003 were $32.5 million, relatively flat when compared with $32.8 million in 2002.

        Over 60% of the Company's revenue is dependent on aircraft production rates. As a result, the Company's revenues are influenced by increases and decreases in aircraft production. Revenues are also impacted by the Company's success in introducing new products, success in competing for new programs, ability to successfully qualify new products and continued governmental appropriations for aerospace programs.

        Cost of sales as a percentage of sales increased seven percentage points to 86.7% in 2004 from 79.7% in 2003. Spending for engineering, related primarily to new product development increased by $2.2 million to $5.8 million in 2004 as compared with $3.6 million in 2003. This increase in spending was due to the Company's pursuit of exterior lighting, cabin lighting and higher value added cockpit lighting opportunities. It is our intention to continue investing in capabilities and technologies as needed that allow us to execute our strategy to increase the ship set content and value we provide on aircraft in all markets we serve. We expect spending on these activities to continue at, or slightly above, the 2004 rate through the first half of 2005 decreasing in the second half of the year. The rate of spending on these activities, however, will largely be driven by opportunities that the market presents.

        Cost of sales as a percentage of sales increased eight percentage points to 79.7% in 2003 from 71.5% in 2002. Spending for engineering and development increased by $0.9 million to $3.6 million in 2003 as compared with $2.7 million in 2002. This increase in spending was due to the Company's pursuit of exterior lighting, cabin lighting and higher value added cockpit lighting opportunities. Direct labor as a percentage of sales increased by two percentage points as a result of product mix changes . The remaining increase of cost of sales as a percentage of sales was caused by lower sales volume without a corresponding reduction in manufacturing overhead costs.

        Selling, general and administrative expenses were $5.5 million in both 2004 and 2003. During 2004, a $0.5 million increase in the provision for doubtful accounts caused primarily by the write off of a note receivable the Company held relating to the sale in 2001 of a former production facility was offset by a reduction in professional services, labor, overall spending and a reduction in the loss from foreign currency exchange.

8

        Selling, general and administrative expenses decreased $0.1 million to $5.5 million in 2003 from $5.6 million in 2002 primarily as a result of a decrease in the bad debt provision of $0.3 million as compared with 2002 which was offset by an increase in the loss from foreign currency exchange of $0.3 million.

        Income from Continuing Operations Before Taxes in 2004 decreased by $2.2 million to a loss of $1.2 million from a profit of $1.0 million in 2003. This decrease is a result of the increase in engineering costs referred to in preceding paragraphs.

        Income from Continuing Operations Before Taxes in 2003 decreased to $1.0 million from $6.4 million in 2002, a decrease of $5.4 million. This decrease is a result of the decline in sales and increase in engineering costs.

        The effective tax rate was 37.9% in 2004, 12.3 percentage points higher than the effective tax rate of 25.5% in 2003. The increase is primarily due to recognition in 2003 of research and development tax credits from prior years which reduced the effective tax rate for that year. We expect our effective tax rate for future years to be closer to the statutory rates in effect at those times.

        The effective tax rate was 25.5% in 2003, 11.4 percentage points lower than the effective tax rate of 36.9% in 2002. The decrease is primarily due to recognition of research and development tax credits from prior years.

Long-Term Debt - See item 8, Financial Statements and Supplementary Data, Note 3, Long-Term Debt in this report. The above balance does not include $7 million that was borrowed in 2005 to finance the AES acquisition.

Operating Leases - Operating lease obligations are primarily related to equipment leased by our discontinued Electroluminescent Lamp Business Group and facility leases for our Canadian operations.

Unconditional Purchase Obligations - are comprised of the Company's commitments for goods and services and capital equipment in the normal course of business.

Pension and Other Post Retirement Obligations - are comprised of the Company's Supplemental Retirement Plan and related Post Retirement Obligations, which are discussed in item 8, Financial Statements and Supplementary Data, Note 8 of this report.

The above table excludes contractual obligations related to our 2005 acquisition of AES. While AES does not have any long-term debt, they do have operating leases and a supplemental pension benefit plan for one individual.

        Cash flow from operating activities was $0.1 million in 2004 compared with $2.1 million in 2003. The decrease of $2.0 million as compared with 2003 is mainly a result of a decrease in income from continuing operations of $1.5 million to a loss of $0.7 million in 2004 from income in 2003 of $0.8 million and an increase in investment in working capital components.

        Cash flow from operating activities was $2.1 million in 2003 compared with $5.6 million in 2002. The decrease of $3.5 million is mainly a result of a decrease in income from continuing operations of $3.2 million to $.8 million in 2003 from $4.0 million in 2002.

        Cash used for investing activities was $2.4 million in 2004 compared with $0.7 million in 2003, a $1.7 million increase. The increase was a result of increased capital expenditure activity of $0.7 million from $0.4 million in 2003 to $1.1 million in 2004 and a $1.0 million increase in short-term investments.

9

The increase in capital expenditures was primarily to increase manufacturing capacity. Cash used for investing activities in 2003 and 2002 was $0.7 million.

        Pursuant to the March 14, 2003 spin-off of its wholly owned subsidiary, MOD-PAC CORP., the Company received a one-time dividend that resulted in net cash proceeds totaling $4.8 million in 2003.

        The Company's cash flows from operations are primarily dependent on its sales, profit margins and the timing of collections of receivables and payments to suppliers. Sales are influenced significantly by the build rates of new aircraft, which amongst other things are subject to general economic conditions, government appropriations and airline passenger travel. Over time, sales will also be impacted by the Company's success in executing its strategy to increase ship set content and obtain production orders for programs currently in the development stage. A significant change in new aircraft build rates could be expected to impact the Company's profits and cash flow. A significant change in government procurement and funding and the overall health of the worldwide airline industry could be expected to impact the Company's profits and cash flow as well. In 2004, the Company incurred significant costs relating to programs that are in the design phase requiring significant investment in engineering and testing costs without providing significant revenues. As compared with 2003 these costs increased by over $2.0 million. These costs are expected to continue through the first half of 2005 before beginning to decrease as the design phase of these efforts conclude.

            The Company's cash required for capital equipment purchases for the last three years ranged between $0.4 million and $1.1 million. Our expectation for 2005 is that capital equipment expenditures will increase to over $2.5 million, including capital expenditures for our newly acquired AES operation. This expected increase is primarily a result of forecasted machinery and equipment purchases to increase our production capacity.

        The Company's cash needs for debt service for 2005 are not expected to change significantly from 2004 levels. For its February 2005 acquisition of AES the Company borrowed $7 million through the use of its line of credit. The Company may decide to convert all or a portion of the line of credit balance to a term note. The impact of this line of credit balance on cash needs in 2005 will depend on the repayment terms selected.

        On March 18, 2005 the Company received an amended agreement from HSBC Bank USA to increase its available revolving credit facility to $11 million. The amendment also extends the revolving credit facility through June 30, 2006. The amendment is subject to ratification by the Company's board of directors. At December 31, 2004, the Company was in breach of certain covenants pursuant to its credit facility with HSBC Bank USA. Specifically the Company was required to maintain a debt service coverage ratio of no less than 1.25 to 1 calculated as net income plus depreciation divided by current maturities of long term debt. The debt service coverage ratio increases to 2.5 to 1 for 2005. In addition the Company is required to maintain an interest coverage ratio of not less than 4 to 1 calculated as income before tax plus interest, depreciation and amortization divided by interest expense. These covenants are measured on an annual basis at December 31. The Company has received written waivers from HSBC Bank USA for these covenant violations at December 31, 2004. In connection with the amended credit facility an additional covenant requiring a minimum income before tax plus interest, depreciation and amortization was established for the year to date periods ending June 30, 2005 and September 30, 2005. The Company believes it will be compliant with its covenants at future measurement dates.

        Future capital requirements depend on numerous factors, including expansion of existing product lines and introduction of new product lines. Management believes that cash, together with the Company's cash flow from operations and current borrowing arrangements will provide for these necessary capital expenditures.

        The Company's ability to maintain sufficient liquidity is highly dependent upon achieving expected operating results. The Company has successfully negotiated new credit facilities with its lender in order to provide more operating flexibility than it previously had. However, failure to achieve expected operating results could have a material adverse effect on our liquidity and our operations in the future.

        The Company's cash needs for working capital, capital equipment and debt service during 2005 and the foreseeable future, are expected to be met by cash flows from operations, its current cash balance and if necessary utilization of its amended available credit arrangements.

        On September 26, 2002, the Company announced the spin-off of its wholly owned subsidiary MOD-PAC CORP., which operated the Printing and Packaging business segment. That transaction was effective March 14, 2003 and was accomplished by a tax free distribution of the stock of MOD-PAC CORP. to the shareholders of Astronics Corporation. As such, the net assets and equity of MOD-PAC CORP. were removed from the balance sheet of Astronics resulting in a reduction of the Company's retained earnings and related net assets of $21.0 million.

10

In December of 2002, the Company announced the discontinuance of its Electroluminescent Lamp Business Group, whose business had involved sales of micro-encapsulated electroluminescent lamps to customers in the consumer electronics industry. The operations of MOD-PAC CORP., through the spin-off date, and the operations of the Electroluminescent Lamp Business Group have been reported as discontinued operations in the financial statements of the Company. During 2004, there was no income or loss from discontinued operations. During 2003, income from discontinued operations attributable to MOD-PAC CORP. was $.4 million, and the Electroluminescent Lamp Business Group had a loss of $.04 million. The business activity for the Electroluminescent Lamp Business Group was concluded during 2003. Remaining obligations include minimum lease payments totaling $0.5 million for production equipment operating leases (see contractual obligations table above). The minimum lease payments were recorded in 2002 and were included in the recorded loss of $0.7 million from the discontinued operation. The net effect on future earnings as a result of discontinued operations is not expected to be significant. See the discussion in item 8 ,Financial Statements and Supplementary Data, Note 2, Discontinued Operations in this report for additional discussion.

        Management believes that it should retain the capital generated from operating activities for investment in advancing technologies, acquisitions and debt retirement. Accordingly, there are no plans to institute a cash dividend program.

        At December 31, 2004, the Company's backlog was $27.2 million compared with $18.7 million at December 31, 2003.

        See the discussion in item 8, Financial Statements and Supplementary Data, Note 2, Discontinued Operations and Note 4 Related-Party Transactions in this report.

        On December 16, 2004, the Financial Accounting Standards Board (FASB) issued FASB Statement No. 123 (revised 2004), Share-Based Payment, which is a revision of FASB Statement No. 123, Accounting for Stock-Based Compensation. Statement 123(R) supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95, Statement of Cash Flows. Generally, the approach in Statement 123(R) is similar to the approach described in Statement 123. However, Statement 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the income statement based on their fair values. Pro forma disclosure is no longer an alternative.

        Statement 123(R) must be adopted as of the third quarter of 2005, which is when the Company expects to adopt it.

        As permitted by Statement 123, the company currently accounts for share-based payments to employees using Opinion 25's intrinsic value method and, as such, generally recognizes no compensation cost for employee stock options. Accordingly, the adoption of Statement 123(R)'s fair value method will impact the results of operations, although it will have no impact on overall financial position. The impact of adoption of Statement 123(R) cannot be predicted at this time because it will depend on levels of share-based payments granted in the future. However, had the Company adopted Statement 123(R) in prior periods, the impact of that standard would have approximated the impact of Statement 123 as described in item 8, Financial Statements and Supplementary Data, Note 1, Summary of Significant Accounting Principles and Practices, Stock Based Compensation in this report, disclosure of pro forma net (loss) income and (loss) earnings per share.

        In November 2004, the FASB issued SFAS No. 151 "Inventory Costs, an amendment of ARB No. 43, Chapter 4." The amendments made by this statement clarify that abnormal amounts of idle facility expense, freight, handling costs and wasted materials (spoilage) should be recognized as current-period charges and require the allocation of fixed production overheads to inventory based on the normal capacity of the production facilities. The provisions of this statement are effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Earlier application is permitted for inventory costs incurred during fiscal years beginning after November 2004. The Company believes the adoption of this standard will not have a material impact on its results of operations or financial position.

        In October 2004, President Bush signed the American Job Creation Act of 2004, which contains provisions related to the distribution of the earnings of foreign subsidiaries and provides a tax deduction on qualified production activities, as defined in the Act. Although preliminary guidance has been issued by the IRS, the Company is still evaluating the effect that this new tax legislation will have on its results of operations and financial condition. Therefore, while the impact of the provisions could be significant, the Company is not able at this time to determine the impact, if any, of future repatriations and the amount of available future tax deductions.

        The Company has limited exposure to fluctuation in Canadian currency exchange rates to the U.S. dollar. Nearly all of the Company's consolidated sales, expenses and cash flows are transacted in U.S. dollars. Net assets held in, or measured in, Canadian dollars amounted to $1.0 million at December 31, 2004. Annual expenses of approximately $5.0 million are denominated in Canadian dollars. A 10% change in the value of the U.S. dollar versus the Canadian dollar would impact net income by approximately $0.3 million. Risk due to fluctuation in interest rates is a function of the Company's floating rate debt obligations, which total approximately $12.0 million at December 31, 2004. To offset this exposure, the Company entered into an interest rate swap on its New York Industrial Revenue Bond which effectively fixes the rate at 4.09% on this $4.7 million obligation through December 2005. As a result, a change of 1% in interest rates would impact annual net income by less than $.05 million.

11

ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        We have audited the accompanying consolidated balance sheets of Astronics Corporation as of December 31, 2004 and 2003, and the related consolidated statement of operations, statement of shareholders' equity, and statement of cash flows for each of the three years in the period ended December 31, 2004. Our audits also included the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Astronics Corporation at December 31, 2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.

                                                                                                                                                                Ernst & Young LLP

Buffalo, New York
January 28, 2005, except for Note 12
as to which the date is February 3, 2005
and Note 3 as to which the date is March 18, 2005

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ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

See notes to financial statements.

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ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

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ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)

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ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (Continued)