SECURITIES AND EXCHANGE COMMISSION
Washington, DC
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FORM 10-Q
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(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended July 1, 2000
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
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Commission file number 0-7087
ASTRONICS CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
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New York
(State or Other Jurisdiction of Incorporation or Organization)
16-0959303
(I.R.S. Employer Identification No.)
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1801 Elmwood Avenue
Buffalo, New York 14207
(Address of Principal Executive Office) (Zip Code)
716-447-9013
(Registrant's Telephone Number, Including Area Code)
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Securities registered pursuant to Section 12(g) of the Act:
$.01 par value Common Stock, $.01 par value Class B Stock
(Title of Class)
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 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
As of July 1, 2000, 5,032,226 shares of $.01 par value common stock and 657,012
shares of $.01 par value Class B common stock were outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ASTRONICS CORPORATION
Consolidated Balance Sheet
July 1, 2000
With Comparative Figures for December 31, 1999
(Dollars in Thousands)
July 1, 2000 December 31,
(Unaudited) 1999
--------- ----
Current Assets:
Cash .......................................... $ 621 $ 1,153
Accounts receivable ........................... 9,018 6,852
Inventories ................................... 10,443 8,721
Prepaid expenses .............................. 626 455
-------- --------
Total current assets ....................... 20,708 17,181
Property, Plant and Equipment, at cost ........... 58,921 55,956
Less accumulated depreciation
and amortization ............................ 21,437 19,787
-------- --------
Net property, plant and equipment .......... 37,484 36,169
Unexpended Industrial Revenue Bond Proceeds ...... 2,094 3,508
Other Assets ..................................... 5,173 2,994
-------- --------
$ 65,459 $ 59,852
======== =========
Current Liabilities:
Current maturities of long-term debt and
capital lease obligations ................... $ 1,006 $ 762
Accounts payable .............................. 6,556 8,560
Accrued expenses .............................. 1,865 2,416
-------- --------
Total current liabilities .................. 9,427 11,738
Long-term debt and capital lease obligations ..... 21,650 15,947
Other Liabilities ................................ 4,399 4,330
Shareholders' Equity:
Common stock, $.01 par value
Authorized 10,000,000 shares, issued
5,351,631 in 2000, 5,327,112 in 1999 ........ 54 53
Class B common stock, $.01 par value
Authorized 5,000,000 shares, issued
657,012 in 2000, 667,326 in 1999 .............. 6 7
Additional paid-in capital .................... 2,932 2,912
Retained earnings ............................. 27,853 25,727
-------- --------
30,845 28,699
Less shares in Treasury, at cost .............. 862 862
-------- --------
Total shareholders' equity ................. 29,983 27,837
-------- --------
$ 65,459 $ 59,852
======== =========
See notes to financial statements.
ASTRONICS CORPORATION
Consolidated Statement of Income and Retained Earnings
Period Ended July 1, 2000
With Comparative Figures for 1999
(Dollars in Thousands)
(Unaudited)
SIX MONTHS THREE MONTHS
---------- ------------
2000 1999 2000 1999
---- ---- ---- ----
Net Sales ........................................... $ 31,251 $ 23,458 $ 16,101 $ 11,133
Costs and Expenses:
Cost of products sold ............................ 23,665 16,560 12,041 7,834
Selling, general and administrative expenses ..... 4,260 4,040 2,171 1,903
Interest expenses, net of interest income
of $91 in 2000 and $67 in 1999 .................. 249 88 181 17
--------- --------- --------- ---------
Total costs and expenses ....................... 28,174 20,688 14,393 9,754
--------- --------- --------- ---------
Income before taxes ................................. 3,077 2,770 1,708 1,379
Provision for income taxes .......................... 951 941 590 483
--------- --------- --------- ---------
Net Income .......................................... 2,126 1,829 1,118 896
--------- --------- --------- ---------
Retained Earnings:
January 1 ........................................ 25,727 20,932
--------- ---------
July 1 ........................................... $ 26,853 $ 22,761
========= =========
Earnings per share:
Basic ............................................ $ .37 $ .33 $ .19 $ .16
========= ========= ========= =========
Diluted .......................................... $ .36 $ .31 $ .19 $ .15
========= ========= ========= =========
See notes to financial statements.
ASTRONICS CORPORATION
Consolidated Statement of Cash Flows
Six Months Ended July 1, 2000
With Comparative Figures for 1999
(Dollars in Thousands)
(Unaudited)
2000 1999
---- ----
Cash Flows from Operating Activities:
Net income .......................................... $ 2,126 $ 1,829
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ..................... 1,962 1,714
Other ............................................. 218 157
Cash flows from changes in operating
assets and liabilities, excluding
effects of acquisitions:
Accounts receivable ............................. (1,213) (413)
Inventories ..................................... (951) (1,722)
Prepaid expenses ................................ (106) 1,040
Accounts payable ................................ (2,344) 3,828
Accrued expenses ................................ (693) (1,047)
--------- --------
Net Cash provided by Operating Activities ........... $ (1,001) $ 5,386
--------- --------
Cash Flows from Investing Activities:
Change in other assets .............................. (593) (260)
Capital expenditures ................................ (2,704) (9,587)
Net payment for businesses acquired ................. (3,616) --
--------- --------
Net Cash provided (used) by Investing Activities .... $ (6,913) $(9,847)
--------- --------
Cash Flows from Financing Activities:
New long-term debt ................................. 6,200 700
Principal payments on long-term debt and capital
lease obligations ............................... (252) (223)
Unexpended industrial revenue bond proceeds ......... 1,415 4,138
Proceeds from issuance of stock ..................... 19 9
--------- --------
Net Cash provided by Financing Activities ........... $ 7,382 $ 4,624
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Net increase (decrease) in Cash and Cash Equivalents ... (532) 163
Cash and Cash Equivalents at Beginning of Year ......... 1,153 523
--------- --------
Cash and Cash Equivalents at July 1 .................... $ 621 $ 686
========= =======
Disclosure of cash payments for:
Interest ............................................ $ 313 $ 183
Income taxes ........................................ 905 1,164
See notes to financial statements.
ASTRONICS CORPORATION
Notes to Financial Statements
July 1, 2000
1) The accompanying unaudited statements have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. The results of
operations for any interim period are not necessarily indicative of results
for the full year. Operating results for the six-month period ended July 1,
2000 are not necessarily indicative of the results that may be expected for
the year ended December 31, 2000.
The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date, but does not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements.
For further information, refer to the financial statements and footnotes
thereto included in the Company's 1999 annual report.
2) Inventories are stated at the lower of cost or market, cost being
determined in accordance with the first-in, first-out method. Inventories
are as follows:
(in thousands)
July 1, 2000 December 31,
(Unaudited) 1999
----------- ------------
Finished Goods $ 2,494 $ 1,936
Work in Progress 2,466 1,476
Raw Material 5,483 5,309
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$ 10,443 $ 8,721
======== ========
3) The Company operates in two areas: Aerospace and Electronics, and Specialty
Packaging. Astronics' Aerospace and Electronics segment designs and
manufactures special lighting systems for aircraft cockpits, cabins, and
exterior environments. The segment also manufactures electroluminescent
(EL) lamps used to backlight liquid crystal displays, which are commonly
used in portable telephones, watches, pagers, and personal digital
assistants (PDAs). Astronics' Specialty Packaging segment involves the
design, manufacturing and marketing of folding paperboard packaging for
customers' delivery of their products and high quality custom imprinting of
napkins, invitation and other paper products. The Company is a dominant
provider of custom folding boxes in chosen markets.
(in thousands)
Six Months Six Months
Ended July 1, 2000 Ended July 3, 1999
----------------------- ------------------------
Aerospace Aerospace
and Specialty and Specialty
Electronics Packaging Electronics Packaging
----------- --------- ----------- ---------
Sales to external customers $ 19,962 $ 11,289 $ 13,075 $ 10,383
Income before taxes 1,937 1,213 1,859 803
July 1, 2000 December 31, 1999
------------ -----------------
Segment assets 36,538 26,988 30,831 26,445
The Aerospace and Electronics segment acquired two businesses during the Second
Quarter with assets of $4,645,000, accounting for a significant portion of the
increase in segment assets. These businesses integrate with the F-16 program.
A reconciliation of combined income before taxes for the six-month period is as
follows:
(in thousands)
Three Months Ended
July 1, 2000 July 3, 1999
------------ ------------
Income before taxes from segments $3,150 $2,662
Corporate expenses, net (73) 108
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Income before taxes $3,077 $2,770
ASTRONICS CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following table sets forth as a percent of net sales certain items reflected
in the financial data and the percentage increase (decrease) of such items as
compared to the prior period.
Percent of Net Sales Period-to-Period
Six months ended July 1, Increase (Decrease)
-------------------------- -------------------
2000 1999 1999-2000
---- ---- ---------
Net Sales:
Aerospace and Electronics 63.9% 55.7% 52.7 %
Specialty Packaging 36.1 44.3 8.7 %
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100.0% 100.0% 33.2 %
Cost of products sold 75.8 70.6 42.9 %
Selling, general and
administrative expenses 13.6 17.2 5.4 %
Interest expenses, net .8 .4 183.0%
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90.2% 88.2% 36.2 %
Income before provision
for income taxes 9.8% 11.8% 11.1 %
Provision for taxes 3.0 4.0 1.1 %
----- -----
Net Income 6.8% 7.8% 16.2 %
===== =====
INTRODUCTION AND RECENT DEVELOPMENTS
Astronics Corporation operates in two business segments: Aerospace and
Electronics, and Specialty Packaging.
On June 8, 2000, Astronics announced that the United States Air Force exercised
an option for additional kits under the Company's F-16 night vision modification
contract.
In May 2000, the Aerospace and Electronics segment acquired cockpit indicator
technology for the F-16 program and CRL Technologies ("CRL") in Quebec, Canada.
CRL designs and manufactures lighted keyboards on avionics equipment and in
aircraft cockpits. Total cash invested for both these acquisitions was
$3,616,000.
On March 7, 2000, the Company announced that its Specialty Packaging business
had received a three-year contract totaling $15,000,000 from the Tyco Healthcare
Companies. Its MOD-PAC subsidiary has been selected as one of only five
preferred suppliers for the entire nationwide organization.
SALES
Sales set a new record for Second Quarter, and for the six-month period ended
July 1, 2000. Sales increased for the Quarter by 44.6 percent in 2000, and 8.1
percent in 1999. Sales for the first half of 2000 increased 33.2 percent,
compared to 9.9 percent in the first half of 1999. The three-year comparative
sales for the first six months of the year can be seen in this table:
2000 1999 1998
---- ---- ----
Aerospace and Electronics $19,962 $13,075 $11,669
Specialty Packaging 11,289 10,383 9,684
------- ------- -------
$31,251 $23,458 $21,353
Sales in the Aerospace and Electronics business segment increased 52.7 percent
in the first half of 2000, compared to a 12.0 percent increase for 1999. Sales
in 2000 have increased mainly as a result of the F-16 program which began
shipments in the Third Quarter of 1999.
Sales in the Specialty Packaging segment increased 8.7 percent in the first half
of 2000 compared to a 7.2 percent increase for 1999. New e-commerce based
initiatives accounted for one fourth of the increase in 2000. Meanwhile, this
segment continues to expand its market share through focus on customer service
with on-time deliveries, high quality products and short turnaround times.
BACKLOG
The Company's backlog increased 6.4 percent over the Second Quarter of 1999 to a
new record of $46,000,000. The backlog is composed of $43,600,000 in the
Aerospace and Electronics segment and $2,400,000 in the Specialty Packaging
segment.
EXPENSES
Cost of products sold increased to 75.8 percent of sales in the first half of
2000 compared to 70.6 percent of sales in the first half of 1999. The major
increase was in material costs, which increased to 32.45 percent of sales in
2000 compared to 19.37 percent in 1999. This increase reflects the higher
material content on F-16 sales. To date, a substantial portion of material for
the sales of F-16 modification kits is outsourced, thereby driving up the
material costs. The Company is in the process of producing more of the parts
internally, which will reduce material costs starting in the second half of
2000. Employee costs as a percentage of sales were lower in 2000, reflecting
dilution from the high purchased material content of the F-16 shipments.
Employee costs in 2000 were 25.6 percent of sales, compared to 30.6 percent of
sales in 1999. Supply costs, facility costs and depreciation as a percent of
sales were likewise diluted to 17.7 percent in 2000, compared to 20.6 percent in
1999.
Cost of products in total and by component for 1999 were comparable to 1998
levels.
Selling, general and administrative expenses continued to decrease as a
percentage of sales: 13.6 percent in 2000, 17.2 percent in 1999, and 17.6
percent in 1998. The major factor in 2000 is the substantial sales increase
which required very modest additional selling, general, and administrative
costs. The majority of these costs are for employee services, marketing expenses
and operating supplies.
Operating income for the Second Quarter of 2000 was $1,889,000, or 11.7 percent
of sales, compared to $1,396,000, or 12.5 percent of sales, in 1999. The
operating margin for the six-month period in 2000 was 10.6 percent of sales
compared to 12.2 percent for 1999. The trend in operating margin in 2000 is
improving as a result of higher sales and improving gross margins with
relatively stable selling, general and administrative costs.
INTEREST
Interest costs, net, increased in 2000 due to increased levels of borrowings for
facilities, equipment, working capital and acquisitions.
INCOME BEFORE TAXES
Income before taxes was 9.8 percent of sales compared to 1999's 11.8 percent of
sales. For the Second Quarter, income before taxes was 10.6 percent of sales
compared to 12.4 percent for 1999.
TAXES
The Company's tax provision as a percent of sales decreased in 2000 as a percent
of sales compared to 1999, reflecting the lower pretax margins as well as a
lower effective tax rate as a result of favorable adjustments from estimated
provisions recorded mainly in the First Quarter of 2000.
NET INCOME
Net income for the Second Quarter of 2000 established a new record for the
quarter: $1,118,000, or $.19 per diluted share. This breaks the record set in
1999 of $896,000, or $.15 per diluted share.
LIQUIDITY
Cash flow from operating activities was a negative $1,001,000 during the six
months of 2000 and is slightly down from the First Quarter negative levels of
$1,694,000. This reflects payments made to vendors on which the Company received
extended terms until the First Quarter of 2000. The Company's capital
expenditures were down sharply from 1999 levels, reflecting the timing of
facilities acquisitions. This was offset somewhat by $3,616,000 expended for
acquisitions. Financing activities in 2000 reflect the increased usage of the
Company's revolving line of credit for operating and investment needs.
The Company has a $12,000,000 revolving line of credit, of which it had utilized
$7,600,000 at July 1, 2000, compared to $4,500,000 at July 3, 1999. The Company
believes that cash balances at July 1, 2000, cash flow from operations and
availability on the revolving line of credit are adequate to meet the Company's
operational and investment plans for 2000.
COMMITMENTS
At July 1, 2000, the Company had outstanding commitments for capital investments
of approximately $900,000. The Company has commitments for items that it
purchases in the normal on-going affairs of the business. The Company is not
aware of any obligations in excess of normal market conditions, nor of any
long-term commitments that would have a material adverse affect on its financial
condition.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
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None.
Item 2. Changes in Securities.
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None.
Item 3. Defaults Upon Senior Securities.
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None.
Item 4. Submission of Matters to a Vote of Securities Holders.
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None.
Item 5. Other Information.
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None.
Item 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits
Exhibit 11. Computation of Per Share Earnings.
Exhibit 27. Financial Data Schedule.
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: August 11, 2000
ASTRONICS CORPORATION
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/s/ C. Anthony Rider
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(Signature)
C. Anthony Rider
Vice President-Finance,Treasurer
and Principal Financial Officer