SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10 - KSB
(Mark One)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ________________ to _____________________
Commission file number 0-7087
ASTRONICS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
New York 16-0959303
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1801 Elmwood Avenue
Buffalo, New York 14207
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (716) 447-9013
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
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 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
Page 1 of 50 EXHIBIT INDEX APPEARS ON PAGE 14
As of March 8, 1996, 3,082,979 shares of Common Stock and
763,759 shares of Class B Stock were outstanding, and the
aggregate market value of the shares of Common Stock and Class B
Stock (assuming conversion of all of the outstanding Class B
Stock into Common Stock) of Astronics Corporation held by non-
affiliates was approximately $19,234,000.
Check if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B contained in this form,
and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. (X)
State issuer's revenues for its most recent fiscal year.
$28,536,000.
Portions of the 1995 Annual Report to Shareholders of the
Registrant are incorporated in Parts II and III of this Report.
Portions of the Proxy Statement of the Registrant dated March 22,
1996 are incorporated in Part III of this Report.
PART I
Item 1. BUSINESS
Profile
Astronics Corporation ("Astronics", "Company", or
"Registrant"), a New York corporation formed in 1968, is a
diversified company engaged principally in the design,
manufacture and marketing of products and processes in two
business segments: "Electronic Systems" and "Specialty Packaging
and Printing." Electronic Systems is involved in the design,
manufacture, and marketing of advanced technology products. The
Specialty Packaging and Printing segment is predominantly a
direct marketing provider of proprietary designs of paperboard
folding boxes and paper products.
On November 29, 1995, the Company acquired the assets and
business devoted to the electroluminescent lighting business of
Loctite Luminescent Systems, Inc. of Lebanon, New Hampshire. In
conjunction with the Company's present electroluminescent and
ruggedized keyboard systems business, these operations have been
renamed Luminescent Systems, Inc., or LSI. This acquisition
results in a stronger entity in the most sophisticated arena of
defense related fixed and rotary wing aircraft formation
lighting, interior cockpit lighting and keyboard systems. Also,
this business provides product expansion opportunities into new
commercial and consumer markets.
Electronic Systems
The Company's Electronic Systems are components of varying
complexities for use in a variety of applications. The Company's
products devoted to image illumination and display rely
extensively on a light form known as electroluminescence ("EL"),
a technology in which the Company has been engaged since its
formation. The Company's EL technology is devoted to providing
aircraft instrument panel lighting, formation lighting for
aerospace applications, liquid crystal display backlighting,
automotive, commercial, and consumer lamps. Since EL may be used
in a backlighting format, precise and graphic artwork can be
placed over an EL lamp to provide rapid and clear discernment on
instrument panels such as those used in aircraft. The Company's
products have application in the commercial EL instrument panel
industry. In military applications, the Company has specialized
in instrument panels that are compatible with night vision,
infra-red goggles. EL lamps have other military as well as
commercial applications, since they are thin, light in weight,
immune to vibration and shock, and often designed to exceed the
life of the application.
The Company's standard and encoded electronic keyboard
systems are primarily for computers and are used as components in
sophisticated military and commercial products, which are
typically subjected to unusually rigorous applications under the
harshest of environmental conditions. These keyboard systems are
frequently designed to be environmentally secure, hermetically
sealed, and often include high quality subcomponents which
provide long life and high performance. This technology is
typically used in microprocessor encoded keyboards, handheld
keyboard terminals and flat panel display systems.
The Company also engages in the design and development of
large, thick-walled polyester elastomer and other polymer
products and systems. Polyester elastomers have performance
characteristics which combine those of rubber and plastics.
Products from this polymer technology are often designed to
withstand harsh, high compressive loads and wide temperature
range environments, whereas rubber or plastics may not comparably
perform. This product line includes development and production
of an insert (commonly referred to as a "Run-Flat") that can be
mounted on motor vehicle rims within tires to enable a vehicle to
continue operating for several miles at highway speeds with a
flat tire.
Electronic Systems are sold primarily throughout North
America, with increasing international sales. Owing to the
nature of these products and the wide variety of customer
applications, there are no areas of geographic significance to
the Company's operations. Sales are through the Company's sales
force as well as manufacturers' representatives. Less than 15
percent of total Astronics' sales are defense related.
Specialty Packaging and Printing
The Company manufactures folding boxes primarily from high
quality solid bleached sulfate paperboard. This segment
predominantly functions as a direct marketing provider of
proprietary designs of paperboard and paper products. The
Company develops its own designs and owns the tooling technology.
This segment's products are marketed throughout North America
and, to a smaller extent, internationally. In addition, the
Company is a dominant regional provider of custom folding boxes
where, within its chosen markets, it prevails as a preferred or
sole source provider to most of its customers.
The Company also engages in high quality specialty
imprinting of wedding and party invitations, monogrammed napkins,
and related party accessories. These products are direct
marketed primarily through catalogs which are located at
stationery stores, printers, gift shops and specialty boutiques
throughout the United States.
Competitive Conditions
Astronics experiences considerable competition in its
segments, principally in the areas of product performance and
price, from various competitors, many of which are substantially
larger and have greater resources. Success in the Electronic
Systems segment depends upon product innovation, customer
support, responsiveness, and cost management. Astronics
continues to invest in developing the tools critical to competing
in today's worldwide markets. Success in Specialty Packaging and
Printing is dependent upon competitive pricing, innovative and
responsive customer support and short lead time delivery
performance to support this capability. Astronics has invested
and will continue to invest in process and systems technology.
Raw Materials
Materials, supplies and components are available and
purchased from a wide variety of sources, the loss of any one of
which would not materially affect the Company's operations.
Patents
The Company has a number of patents and has filed numerous
applications for others. While the aggregate protection of these
patents is of value, Registrant 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 EL,
instrument panels, elastomer applications, 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.
Research Activities
The Company is engaged in a variety of research and
development activities directed to the improvement and
application of the Company's EL and flexible membrane
technologies and, to a lesser extent, its elastomer products.
The extent of the Company's engagement in pure research, however,
is not material.
Employees
The Registrant employed approximately 437 employees as of
December 31, 1995, including 236 in the Electronic Systems
segment, 194 in the Specialty Packaging and Printing segment and
7 at the Corporate level, compared to 283 as of December 31,
1994, including 101 in the Electronic Systems segment, 174 in the
Specialty Packaging and Printing segment and 8 at the Corporate
level as of that date.
Working Capital
Inventories constitute a major component of the Company's
working capital, reflective of the extended production cycle on
most of the Company's products and anticipatory production
required for the seasonal aspects of the Company's packaging
products. A substantial portion of the business of the Specialty
Packaging and Printing segment consists of proprietary designs of
stock boxes used by the confectionery industry, which requires
the Company to increase inventory levels approximately 3-6 months
prior to its principal seasons.
Financial Information about Industry Segments
Sales, operating profit and identifiable assets attributable
to each of the Registrant's industry segments for each year in
the three years ended December 31, 1995 appear on page 12 of the
Registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 1995, submitted herewith as an exhibit and
incorporated by reference.
Order Backlog
The backlog of orders as of December 31, 1995 was
approximately $8,953,000 ($7,328,000 related to the Electronic
Systems segment and $1,625,000 related to the Specialty Packaging
and Printing segment), substantially all of which is expected to
be filled in the current fiscal year, and was $6,700,000
($4,700,000 related to the Electronic Systems segment and
$2,000,000 related to the Specialty Packaging and Printing
segment) as of December 31, 1994.
Item 2. PROPERTIES
Corporate Headquarters
In February 1995, the Company relocated its corporate office
to 1801 Elmwood Avenue, Buffalo, NY 14207, the sight of the
largest portion of the Specialty Packaging and Printing segment.
Electronic Systems
Registrant owns manufacturing and office facilities of
approximately 45,000 square feet in the Buffalo, New York area,
and leases approximately 42,000 square feet in Lebanon, New
Hampshire.
Specialty Packaging and Printing
Registrant owns buildings totaling approximately 390,000
square feet in the Buffalo, New York metropolitan area for its
manufacturing and office facilities. Currently, about 45 percent
of the building space is under lease to others. In addition, it
owns approximately 25,000 square feet for additional specialty
printing operations in Blasdell, another location in the Buffalo,
New York area.
The physical properties of the Registrant are suitable and
adequate for the purpose for which they are employed. Additions
and expansions are made as needed. In general, the productive
capacity of the Registrant's physical properties are in excess of
current production requirements and greater utilization is
available.
Item 3. LEGAL PROCEEDINGS
Rodgard Corporation, a division of Astronics, and one of its
former officers, Mason C. Winfield, instituted an action against
Miner Enterprises, Inc. and David G. Anderson on April 10, 1984,
in the United States District Court of the Western District of
New York, seeking damages for breaches of confidentiality
agreements and seeking to be declared a co-inventor of a David G.
Anderson patent. Defendants counterclaimed for unspecified
damages alleging that the plaintiffs breached a confidentiality
provision pursuant to a consulting agreement between Winfield and
Miner. The judge rendered a decision that neither side has a
sufficient case to enable awards. The case has been filed for
appeal by plaintiffs in the Second Circuit Court of Appeals. A
decision is expected in 1996.
Except for the matter described above, there are no material
pending legal proceedings, other than ordinary 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.
Item 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
Not applicable.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Information with reference to the market price of and
dividends on the Company's Common Stock and related security
holder matters appears on pages 1 and 13 of the Company's Annual
Report to Shareholders for the fiscal year ended December 31,
1995, submitted herewith as an exhibit and incorporated by
reference.
Item 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
Management's discussion and analysis of financial condition,
changes in financial condition and results of operations appears
on pages 14, 15 and 16 of Registrant's Annual Report to
Shareholders for the fiscal year ended December 31, 1995,
submitted herewith as an exhibit and incorporated by reference.
Item 7. FINANCIAL STATEMENTS
The Financial Statements of Astronics Corporation which are
incorporated by reference in this Form 10-KSB Annual Report are
described in the accompanying Index to Financial Statements at
Item 13 of this Report.
Item 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
Item 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
The information regarding directors is contained under the
captions "Election of Directors" and "Record Date and Voting
Securities" in the Company's definitive Proxy Statement dated
March 22, 1996 and is incorporated herein by reference.
Certain information regarding executive officers is
contained under the captions "Executive Compensation" and "Record
Date and Voting Securities" in the Company's definitive Proxy
Statement dated March 22, 1996 and on the back inside cover of
the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1995, submitted herewith as an exhibit, which
are both incorporated herein by reference.
Executive Officers of the Registrant
The following table sets forth the names and ages of all
executive officers of the Company and certain information
relative to their positions with the Company and prior employment
history during at least the past five years:
Position with the Company
Name Age and Prior Employment History
Kevin T. Keane 63 President, Chief Executive
Officer and Director
John M. Yessa 56 Vice President of Finance,
Treasurer, Chief Financial
Officer and Director
Richard E. Hauck 63 Group Vice President
Item 10. EXECUTIVE COMPENSATION
The information contained under the caption "Executive
Compensation" in the Company's definitive Proxy Statement dated
March 22, 1996 is incorporated herein by reference.
Item 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The information required is contained under the caption
"Record Date and Voting Securities" in the Company's definitive
Proxy Statement dated March 22, 1996, and is hereby incorporated
by reference.
Item 12. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS
The information contained under the caption "Certain
Relationships and Related Transactions" in the Company's
definitive Proxy Statement dated March 22, 1996, is herein
incorporated by reference.
Item 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(a) The documents filed as a part of this report are as
follows:
1. Financial Statements
See Index to Financial Statements.
2. Financial Statement Schedules
See Index to Financial Statements and Financial
Statement Schedules on page F-1 of this report.
3. Exhibits
Exhibit No. Description
3(a) Restated Certificate of Incorporation,
as amended; incorporated by reference to
exhibit 3(a) of the Registrant's
December 31, 1988 Annual Report on Form
10-K.
(b) By-Laws, as amended; incorporated by
reference to exhibit 3(b) of the
Registrant's December 31, 1988 Annual
Report on Form 10-K.
10.1 Restated Thrift and Profit Sharing
Retirement Plan; incorporated by
reference to exhibit 10.1 of the
Registrant's December 31, 1994 Annual
Report on Form 10-KSB.
10.3 Incentive Stock Option Plan;
incorporated by reference to the
Registrant's definitive proxy statement
dated March 26, 1982.
10.4 Director Stock Option Plan; incorporated
by reference to the Registrant's
definitive proxy statement dated
March 16, 1984.
10.5 Employment Contract of Kevin T. Keane;
incorporated by reference to Exhibit
10.5 of the Registrant's registration
statement on Form S-2 (No. 33-8040).
10.7 Employment Contract of John M. Yessa;
incorporated by reference to Exhibit
10.7 of the Registrant's registration
statement on Form S-2 (No. 33-8040).
10.10 1992 Incentive Stock Option Plan;
incorporated by reference to the
Registrant's definitive proxy statement
dated March 30, 1992.
10.11 1993 Director Stock Option Plan;
incorporated by reference to the
Registrant's definitive proxy statement
dated March 19, 1993.
13 1995 Annual Report to Shareholders filed
herewith.
22 Subsidiaries of the Registrant filed
herewith.
24 Consent of Accountants.
(b) Reports on Form 8-K
Item 2 Form 8-K filed December 14, 1995.
ASTRONICS CORPORATION
INDEX TO FINANCIAL STATEMENTS
The financial statements, together with the report thereon of
Ernst & Young LLP dated January 18, 1996, appearing on pages 3 to
14 of the accompanying 1995 Annual Report to Shareholders are
incorporated by reference in this Form 10-KSB Annual Report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 27, 1996.
Astronics Corporation
Kevin T. Keane John M. Yessa
By By
Kevin T. Keane, President John M. Yessa, Vice
and Chief Executive Officer President-Finance
and Treasurer, Principal
Financial and Accounting
Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Signature Title Date
Guy P. Berner
Director March 27, 1996
Guy P. Berner
Robert T. Brady
Director March 27, 1996
Robert T. Brady
John b. Drenning
Director March 27, 1996
John B. Drenning
Kevin T. Keane
Director March 27, 1996
Kevin T. Keane
John M. Yessa
Director March 27, 1996
John M. Yessa
ASTRONICS CORPORATION
INDEX TO EXHIBITS
Sequential
Exhibit No. Description Page Number
3(a) Restated Certificate of Incorporation,
as amended; incorporated by reference
to exhibit 3(a) of the Registrant's
December 31, 1988 Annual Report on
Form 10-K.
(b) By-Laws, as amended; incorporated by
reference to the Registrant's
December 31, 1988 Annual Report on
Form 10-K.
10.1 Restated Thrift and Profit Sharing
Retirement Plan; incorporated by
reference to the Registrant's
December 31, 1994 Annual Report on
Form 10-KSB.
10.3 Incentive Stock Option Plan;
incorporated by reference to the
Registrant's definitive proxy
statement dated March 26, 1982.
10.4 Director Stock Option Plan;
incorporated by reference to the
Registrant's definitive proxy
statement dated March 16, 1984.
10.5 Employment Contract of Kevin T.
Keane; incorporated by reference
to Exhibit 10.5 of the Registrant's
registration statement on Form S-2
(No. 33-8040).
10.7 Employment Contract of John M.
Yessa; incorporated by reference to
Exhibit 10.7 of the Registrant's
registration statement on Form S-2
(No. 33-8040).
10.10 1992 Incentive Stock Option Plan;
incorporated by reference to the
Registrant's definitive proxy
statement dated March 30, 1992.
10.11 1993 Director Stock Option Plan;
incorporated by reference to the
Registrant's definitive proxy
statement dated March_19, 1993.
13 1995 Annual Report to Shareholders
filed herewith.
22 Subsidiaries of the Registrant
filed herewith.
24 Consent of Accountants.
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
Corporate Profile
General
Astronics Corporation was incorporated in 1968. In February,
1995, it relocated its corporate office to 1801 Elmwood Avenue,
Buffalo, NY 14207 (716/447-9013). The Company's Common Stock is
traded on the Nasdaq National Market System.
The diversified nature of the Company's product lines is the
result of the acquisition of several businesses since 1971.
Astronics' strategy is to act as a holding company, overseeing
its diversified operations. Astronics wants its businesses to be
either the leader or the dominant regional provider in the
industries in which they compete.
The corporate operational structure is decentralized such that
its various subsidiaries are relatively self-sufficient and run
their own operations.
Specialty Packaging and Printing
The Specialty Packaging and Printing segment is predominately a
direct marketing provider of proprietary designs of paperboard
and paper products. The Company develops its own designs and owns
the tooling technology. The majority portion of this business
segment is marketed throughout North America and, to a small
extent, internationally.
In addition, the Company is a dominant regional provider of
custom folding boxes where, within its chosen markets, it
prevails as a preferred or sole source provider to most of its
customers.
Success in this segment is dependent upon competitive pricing,
innovative and responsive customer support and short lead time
delivery performance. To support this capability, Astronics has
invested and will continue to invest in process and systems
technology.
This segment is approximately 60 percent of Astronics' revenues,
none of which are defense related.
Electronic Systems
The Electronic Systems segment is involved in the design,
manufacture, and marketing of advanced technology products. Major
product lines include electroluminescent products,
high-reliability keyboards, and molded elastomeric devices.
Proprietary design and manufacturing technologies are basic to
all of the segment's operations. Astronics owns critical patents
covering the technology.
Customers are typically well-known companies in the automotive,
aerospace, defense, and electronics industries. Major
applications include aircraft crewstations, formation lighting,
emergency egress lighting, electroluminescent backlighting,
keyboards for computer systems used in harsh environmental
conditions, and tire inserts known as runflats used on security
vehicles worldwide.
Success in this segment depends upon product innovation, customer
support, responsiveness, and cost management. Astronics continues
to invest in developing the tools critical to competing in
today's worldwide markets.
The segment is approximately 40 percent of Astronics' revenues.
An estimated 30 percent of the segment's sales are defense
related.
Financial Highlights
Selected Historical Financial Data
(Dollars in thousands, except per share data)
Income Book
Net (Loss) Value Stock Market
Net Income Per Dividends Per Price
Year Sales (Loss) Per Share Dividends Per Share Equity Share High Low
1986 17,146 942 .25 184 .05 8,421 2.19 5.47 3.74
1987 17,530 94* .02* 233 .06 8,426 2.16 5.47 2.17
1988 21,883 20 .01 265 .07 8,123 2.09 3.63 2.33
1989 22,145 (1,996) (.51) - - 6,127 1.58 3.75 1.00
1990 23,564 376 .10 - - 6,440 1.68 2.13 0.75
1991 23,540 1,248 .33 - - 7,770 1.98 3.25 1.00
1992 23,740 316** .08** - - 8,174 2.05 4.13 1.88
1993 23,957 1,188*** .30*** 41 .01 9,414 2.33 3.25 2.00
1994 24,944 1,306 .33 - - 10,334 2.65 3.13 1.88
1995 28,536 1,760 .46 - - 11,726 3.06 3.88 2.00
* Includes cumulative effect of a change in accounting principle of $423 ($.11 per
share)
** Includes cumulative effect of a change in accounting principle of $140 ($.04 per
share)
*** Includes extraordinary expense item net of income taxes of $307 ($.08 per share)
Message to Shareholders
We are pleased to report record sales and earnings for 1995.
This achievement reflects the growing capacity and performance
levels of our operations, which have been developed as a result
of extensive investments into refocusing and developing our
product lines, production capabilities and market initiatives.
Shipments in 1995 increased 14 percent over 1994 to $28,536,000,
establishing a new record for sales. These results have been
aided by a business environment that has continued to improve
during the year, a trend that first became apparent two years ago
during the second half of 1993. The Third Quarter of 1995
experienced some sales softening with continuing downward
pressure on pricing, although our sales growth increased 2
percent for the Quarter compared to the previous year. In the
other three quarters, sales enjoyed more than an 18 percent
increase, similar to the pace realized during the last quarter of
1994.
At the end of November 1995, we completed the acquisition of the
electroluminescent operations of Loctite Corporation. In
conjunction with our present electroluminescent and ruggedized
keyboard systems business, we have renamed these operations as
Luminescent Systems Inc., or LSI in its shortened form.
This acquisition provides a business that ideally folds into our
present operations. The result is a stronger entity which is in a
position of dominance in the most sophisticated arena of defense
related fixed and rotary wing aircraft formation lighting,
interior cockpit lighting and keyboard systems. Also, the
business provides product expansion opportunities into new
commercial and consumer markets. The Electronic Systems segment
of Astronics' business will approximately double within the next
year. In 1995, this segment enjoyed a 26 percent growth in sales.
The Customized Printing and Packaging segment also enjoyed a
strong year of growth. After review, we have renamed this as the
Specialty Packaging and Printing segment. The reason has been the
recognition of the business shift from being a regional custom
folding box manufacturer to predominantly being a direct
marketing provider of proprietary designs of paperboard and paper
products. In 1995, this proprietary initiative represents more
than 60 percent of this segment's business and it should continue
to grow at a higher rate than the regional business. The total
segment's business is growing at more than twice the pace of the
paperboard industry at large.
Probably the most revealing perspective on this business area is
a comparison to the paperboard packaging industry in the United
States over a prolonged period of years. The chart below shows
this segment's sales growth as compared to its industry since
Astronics first entered this business in 1973. It represents a
twenty two year Astronics history of growing more than twice as
fast as the total market.
[CHART]
The Company's record earnings for 1995 were $.46 per share, an
increase of 35 percent over the record earnings of the prior
year. As a result of good margins, as well as gains in
productivity, operating income for the year increased 36 percent
on a sales gain of 14 percent.
Return on Shareholders' equity was 17 percent compared to a
return of 14 percent for each of the prior two years. With gains
in competitive market positions and improvements in productivity,
we are optimistic that this level and/or higher levels of returns
are available on a long term basis.
In 1995, a record $1.47 cash flow per share was generated from
earnings, depreciation, amortization, continuing reduction of
inventories and other unneeded assets. This strong performance
enabled the Company to invest $6,000,000 in capital expenditures.
Another $6,300,000 was spent for our latest acquisition,
supported by bank financing. During 1996, we anticipate investing
another $4,000,000 for further facility and technology
expansions.
This process has enabled the company to accelerate its technology
shifts into state of the art capabilities, which is importantly
improving our ability to respond to increasing customer demands
and opportunities.
As we position our strategies to maximize our vision of the
future, we are continually striving to focus on strengthening our
core competencies that give us our competitive advantages: long
term customers, an increasingly global initiative, technology,
unmatched physical assets, financial strength, and human
resources. Our significant level of investment in the business
is one of the important processes that enables us to maintain and
accelerate this broad initiative.
As we contemplated our latest acquisition, we negotiated a new
bank debt structure which involves a revolving $11,000,000 line
of credit. We continue to be financially on track: long term
debt was 83 percent of equity and, with the inclusion of all long
term capital lease obligations, total debt was 100 percent of
equity. It is worthy to note that with the absence of the
acquisition, year end long term debt would have been 28 percent
of equity and 45 percent of all long term obligations, as
projected in last year's message to shareholders.
The new year looks as though it will be healthy. The latest
acquisition, coupled with internal growth, should produce strong
expansion in 1996. As we continue to gain strength and build on
our foundations, our opportunities grow. We look forward to these
challenges with constant excitement and anticipation.
Consolidated Statement of Income
(in thousands, except per share amounts)
Year ended December 31,
1995 1994 1993
Net Sales $28,536 $24,944 $23,957
Cost and Expenses
Cost of products sold 19,970 17,531 16,234
Selling, general and
administrative expenses 5,148 4,898 4,482
Interest expense, net of
interest income of $102,
$141 and $95 479 527 773
------ ------ ------
25,597 22,956 21,489
------ ------ ------
Income before taxes and
extraordinary item 2,939 1,988 2,468
Provision for income taxes 1,179 682 973
------ ------ ------
Income before extraordinary item 1,760 1,306 1,495
Extraordinary item, loss on
redemption of Subordinated
Debentures, net of income
taxes of $204 -- -- --
------- ------- -------
Net Income $ 1,760 $ 1,306 $ 1,188
======= ======= =======
Earnings per Share
Earnings before extraordinary
item $ .46 $ .33 $ .38
Extraordinary item -- -- (.08)
-------
Earnings per Share $ .46 $ .33 $ .30
======= ======= =======
Fully dilutive $ .42 $ .33 $ .30
======= ======= =======
See notes to financial statements.
Consolidated Balance Sheet
(in thousands)
Assets
December 31,
1995 1994
Current Assets
Cash and cash equivalents $ 772 $ 3,520
Accounts receivable, net of
allowance for doubtful
accounts of $359 in 1995 and
$367 in 1994 4,874 2,950
Inventories 6,300 4,185
Prepaid expenses 646 659
-------- --------
Total Current Assets 12,592 11,314
Property, Plant and Equipment, at cost
Land 330 340
Buildings 8,189 7,911
Machinery and equipment 20,269 15,384
Furniture and fixtures 1,699 1,509
Electronic equipment 494 --
Leasehold improvements 153 84
-------- --------
31,134 25,228
Less accumulated depreciation and
amortization 14,858 14,051
======== ========
Net Property, Plant and Equipment 16,276 11,177
Other Assets 1,947 1,296
-------- --------
$ 30,815 $ 23,787
======== ========
See notes to financial statements.
Liabilities and Shareholders' Equity
December 31,
1995 1994
Current Liabilities
Current maturities of long-term
liabilities $ 2,266 $ 2,230
Accounts payable 2,524 1,599
Accrued expenses 1,449 1,208
Income taxes 252 242
-------- --------
Total Current Liabilities 6,491 5,279
Long-Term Debt 9,713 4,771
Long-Term Obligations Under
Capital Leases 2,010 2,228
Deferred Income Taxes 875 1,175
Shareholders' Equity
Common Stock, $.01 par value
Authorized 10,000,000 shares,
issued 3,301,751 in 1995;
3,232,157 in 1994 33 32
Class B Stock, $.01 par value
Authorized 5,000,000 shares,
issued 814,908 in 1995;
850,102 in 1994 8 9
Additional paid-in capital 2,046 2,068
Retained earnings 10,447 8,687
-------- --------
12,534 10,796
Less shares in Treasury, at cost 808 462
-------- --------
Total Shareholders' Equity 11,726 10,334
-------- --------
$ 30,815 $ 23,787
======== ========
Consolidated Statement of Cash Flows
(in thousands) Year ended December 31,
1995 1994 1993
Cash Flows from Operating Activities
Net income $ 1,760 $ 1,306 $ 1,188
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 2,575 2,541 2,486
Provision for doubtful accounts (8) 172 (7)
Gain on sale of assets (50) (320) --
Provision for deferred taxes (300) (196) 108
Cash flows from changes in
operating assets and
liabilities, net of the
effect of acquired business:
Accounts receivable 169 (616) 202
Inventories 565 709 515
Prepaid expenses 51 (428) (28)
Accounts payable 615 312 (261)
Accrued expenses 235 (116) 308
Income taxes 10 65 176
-------- ------- --------
Net Cash provided by Operating
Activities 5,622 3,429 4,687
-------- ------- --------
Cash Flows from Investing Activities
Proceeds from sales of assets 60 564 --
Change in other assets (429) (11) (448)
Capital expenditures (6,101) (1,588) (3,344)
Net payment for assets of
company acquired (6,292) -- --
-------- ------- --------
Net Cash used by Investing
Activities (12,762) (1,035) (3,792)
-------- ------- --------
Cash Flows from Financing Activities
New long-term debt 6,990 -- 8,400
Principal payments on long-term
debt and capital lease
obligations (2,230) (1,984) (9,901)
Proceeds from issuance of stock 193 93 19
Purchase of stock for Treasury (561) (479) 73
-------- -------- --------
Net Cash provided (used) by
Financing Activities 4,392 (2,370) (1,409)
-------- -------- --------
Net (decrease) increase in cash
and cash equivalents (2,748) 24 (514)
Cash and Cash Equivalents at
Beginning of Year 3,520 3,496 4,010
-------- -------- --------
Cash and Cash Equivalents at
End of Year $ 772 $ 3,520 $ 3,496
======== ======== ========
Disclosure of Cash Payments for:
Interest $ 551 $ 677 $ 911
Income taxes 1,468 819 453
See notes to financial statements
Consolidated Statement of Shareholders' Equity
(dollars and shares in thousands)
Common Stock Class B Stock Treasury
Shares Par Shares Par Stock Paid-In Retained
Issued Value Issued Value Shares Cost Capital Earnings
Balance at December 31, 1992 3,032 $ 30 1,043 $ 10 85 $ 137 $ 2,037 $ 6,234
Net Income for 1993 1,188
Dividend Declared ($.01 per share) (41)
Treasury Stock Sold (46) (73)
Exercise of Stock Options 4 1 3 19
Class B Stock converted to
Common Stock 152 1 (152) (1)
----- ---- ------ ----- ---- ------ ------- --------
Balance at December 31, 1993 3,188 32 894 9 39 64 2,056 7,381
Net Income for 1994 1,306
Treasury Stock Sold (46) (81) 12
Treasury Stock Purchased 194 479
Class B Stock converted to
Common Stock 44 -- 44 --
----- ---- ------ ----- ----- ----- ------- --------
Balance at December 31, 1994 3,232 32 850 9 187 462 2,068 8,687
Net Income for 1995 1,760
Treasury Stock Sold (82) (215) (76)
Treasury Stock Purchased 197 561
Exercise of Stock Options 35 54
Class B Stock converted to
Common Stock 35 1 (35) (1)
---- ----- ------- -------
Balance at December 31, 1995 3,302 $ 33 815 $ 8 302 $808 $ 2,046 $10,447
See notes to financial statements.
Notes to Financial Statements
Note 1
Summary of Significant Accounting Principles and Practices
Principles of Consolidation The consolidated financial
statements include the accounts of the Company and its
wholly-owned subsidiaries. All intercompany transactions and
balances have been eliminated.
Revenue Recognition Revenue is recognized on the accrual basis,
i.e., at the time of shipment of goods. There are no significant
contracts allowing for right of return. The Company performs
periodic credit evaluations of its customers' financial condition
and generally does not require collateral.
Inventories Inventories are stated at the lower of cost or
market, cost being determined in accordance with the first-in,
first-out method. Inventories at December 31 are as follows:
(in thousands)
1995 1994
Finished goods $2,454 $1,556
Work in process 1,081 815
Raw material 2,765 1,814
------ ------
$6,300 $4,185
====== ======
Property, Plant and Equipment Depreciation of property, plant
and equipment is computed on the straight-line method for
financial reporting purposes and on accelerated methods for
income tax purposes. Estimated useful lives of the assets are as
follows: buildings, 13-40 years; machinery and equipment, 3-13
years; furniture and fixtures, 4-13 years; and electronic
equipment, 4 years. Leasehold improvements are amortized over the
terms of the lease or the lives of the assets, whichever is
shorter.
The cost of properties sold or otherwise disposed of and the
accumulated depreciation thereon are eliminated from the
accounts, and the resulting gain or loss, as well as maintenance
and repair expenses, are reflected in income. Renewals and
betterments are capitalized.
Property, plant and equipment includes assets currently under
lease to others with a cost, net of accumulated depreciation, of
$219,000 and $748,000 at December 31, 1995 and 1994,
respectively.
Goodwill Included in other assets, the excess of purchase price
over the fair value of net tangible assets acquired, net of
accumulated amortization, amounted to $1,200,000 and $891,000 at
December 31, 1995 and 1994, respectively. Accumulated
amortization amounted to $217,000 and $188,000 at December 31,
1995 and 1994, respectively. These assets are amortized over
15-40 years on a straight-line basis, starting in the year of
acquisition.
Income Taxes The Company files a consolidated federal income
tax return. Deferred taxes are computed under Statement of
Financial Accounting Standards No. 109, "Accounting for Income
Taxes."
Deferred Thrift and Profit Sharing Plan The Company has a
trusteed Deferred Thrift and Profit Sharing Plan for the benefit
of its eligible full-time employees.
Earnings Per Share Earnings per share computations are based
upon the weighted average number of shares outstanding of
3,831,326 in 1995, 3,972,411 in 1994, and 4,001,782 in 1993.
Cash Equivalents The Company considers all highly-liquid
investments in debt securities with original maturities of three
months or less as cash equivalents.
Class B Stock Class B Stock is identical to Common Stock,
except Class B Stock has ten votes per share, is automatically
converted to Common Stock when sold or traded, and cannot receive
dividends unless an equal or greater amount is declared on Common
Stock.
Use of Estimates The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Note 2
Acquisition On November 29, 1995, Astronics Corporation
acquired for $6,292,000 the assets and business devoted to the
electroluminescent lighting business of Loctite Luminescent
Systems, Inc. of Lebanon, New Hampshire.
The acquisition has been accounted for as a purchase, and the
purchase price has been allocated to the tangible assets acquired
in proportion to their estimated fair value at the acquisition
date. The excess of the purchase price over the fair market value
of net assets has been recorded as goodwill. The results of
operation have been included in the consolidated statement of
operations and retained earnings from the date of acquisition
through December 31, 1995.
Summarized below are unaudited pro forma combined results of
operations for the years ended December 31, 1995 and 1994
assuming the acquisition occurred at the beginning of 1994:
(in thousands, except per share data)
1995 1994
Sales $39,200 $36,314
Income $ 1,996 $ 1,532
Earnings per share $.52 $.39
The unaudited pro forma combined results of operations are not
necessarily indicative of the results of operations that would
have occurred had the two companies actually combined during the
periods presented or of future results of operations of the
combined companies.
Note 3
Notes Payable The Company has an unsecured line of credit of
$11,000,000, which provides for interest at bank prime or LIBOR
plus 125 basis points. The line is available for three years and
automatically converts into a four year term loan at not more
than $9,000,000. At December 31, 1995, $6,778,000 was
outstanding. The Company had an unsecured line of credit for
$5,000,000 at bank prime at December 31, 1994, of which the
entire line was available.
Note 4
Subordinated Debentures In April, 1993, the Company redeemed
the Subordinated Debentures due September 1, 1996, Series 10 1/4%
at 101 percent. During fiscal 1993, the Company expensed $424,000
of unamortized expense and $87,000 of premiums paid on the
redemption of the Subordinated Debentures. The cost of the
redemption of the Subordinated Debentures, net of income taxes,
has been reflected in the Consolidated Statement of Income as an
extraordinary item.
Note 5
Long-Term Debt Long-term debt consists of the following:
(in thousands)
1995 1994
Mortgage payable in installments
through 2003 with interest at
11.00% $ 47 $ 51
Term loan payable in installments
through 1998 with interest at
6.96% 4,350 6,150
Revolver loan with interest
at LIBOR plus 125 basis points 6,778 --
Urban Development Action Grant
financing payable in monthly
installments through 2006, with
interest at 3% 374 404
------- -------
11,549 6,605
Less current maturities 1,836 1,834
------- -------
$ 9,713 $ 4,771
======= =======
The mortgage payable and grant are secured by certain property,
plant and equipment. The unsecured term loan, among other
requirements, imposes certain covenants with which the Company
must maintain compliance.
Estimated principal maturities of long-term debt over the next
five years are as follows: $1,836,000; $1,837,000; $789,000;
$1,395,000, and $1,397,000.
Note 6
Long-Term Obligations Under Capital Leases The County of Erie,
State of New York, has issued Industrial Revenue Development
Bonds in connection with the acquisition of certain land,
production facilities and equipment. These bear interest at
various floating rates, either seven to ten percent, or 75
percent of the bank's prime rate. The Company also leases certain
other equipment under capital leases from six to ten percent
interest.
The following is a schedule by years of future minimum lease
payments under the capital leases, together with the present
value of the net minimum lease payments as of December 31, 1995:
(in thousands)
Capital
Period Lease
1996 $ 594
1997 551
1998 520
1999 492
2000 429
2001-2004 497
-------
Net minimum lease payments $ 3,083
Amounts representing interest 643
-------
Present value of net
minimum lease payments $ 2,440
=======
Amounts related to the capital leases included in the Balance
Sheet are summarized as follows:
(in thousands)
1995 1994
Property, Plant and Equipment
Land $ 125 $ 125
Buildings 2,592 2,592
Machinery and Equipment 2,438 2,499
Electronic Equipment 140 --
------- -------
5,295 5,216
Less accumulated amortization 3,702 3,771
------- -------
$ 1,593 $ 1,445
Debt:
Current $ 430 $ 396
Long-term 2,110 2,228
------- -------
$ 2,540 $ 2,624
======= =======
Quarter ended
Dec. 31, Sept.30, July 1, Apr. 1 Dec. 31, Oct. 1, July 2, Apr. 2,
1995 1995 1995 1995 1994 1994 1994 1994
Net Sales $8,820 $6,266 $6,224 $7,226 $7,442 $6,137 $5,257 $6,108
====== ====== ====== ====== ====== ====== ====== ======
Gross Profit $2,641 $1,890 $1,890 $2,145 $2,450 $2,008 $1,392 $1,563
====== ====== ====== ====== ====== ====== ====== ======
Income before tax $1,406 $ 740 $ 275 $ 518 $1,042 $ 600 $ 277 $ 69
====== ====== ====== ====== ====== ====== ====== ======
Net Income $ 845 $ 467 $ 172 $ 276 $ 728 $ 413 $ 129 $ 36
====== ====== ====== ====== ====== ====== ====== ======
Net income per share $ .22 $ .12 $ .05 $ .07 $ .19 $ .10 $ .03 $ .01
====== ====== ====== ====== ====== ====== ====== ======
Note 12
Operations in Different Industries The Company operates in two
areas: Electronic Systems and Specialty Packaging and Printing.
Operations in Electronic Systems involve the design,
manufacturing and marketing of state-of-the-art and advanced
technological components incorporated into functional systems
including instrument panels, photo reproductions, keyboard
technologies, and durable, high load bearing situations.
Customers are typically well-known companies in the automotive,
aerospace, defense, and electronics industries worldwide.
Operations in Specialty Packaging and Printing involve the
design, manufacturing and marketing of folding paperboard
packaging for customers' delivery of their products and high
quality custom imprinting of napkins, invitations and other paper
products. The Company is a dominant regional provider of custom
folding boxes in chosen markets.
Corporate assets consist mainly of cash, cash equivalents and
furniture and equipment.
(in thousands)
Income Depreciation
Operating Before Capital and
Sales Profit Taxes* Assets Expenditures Amortization
1995: Electronic Systems $11,530 $1,557 $ $12,082 $ 234 $1,219
Specialty Packaging
and Printing 17,006 2,955 17,603 5,817 1,306
Operating Profit $ 4,512
Interest Expense (479)
Corporate (1,094) 1,130 50 50
------- ------ ------- ------- ------- ------
$28,536 $4,512 $ 2,939 $30,815 $ 6,101 $2,575
======= ======= ======= ======= ======= ======
1994: Electronic Systems $ 9,126 $ 901 $ 7,349 $ 147 $ 973
Specialty Packaging
and Printing 15,818 2,779 12,598 1,442 1,137
Operating Profit $ 3,680
Interest Expense (527)
Corporate (1,165) 3,840 (1) 431
------- ------ ------- ------- ------- ------
$24,944 $3,680 $ 1,988 $23,787 $ 1,588 $2,541
======= ======= ======= ======= ======= ======
1993: Electronic Systems $ 9,162 $1,178 $ 8,532 $ 255 $1,065
Specialty Packaging
and Printing 14,795 3,076 11,985 3,014 915
Operating Profit $ 4,254
Interest Expense (773)
Corporate (1,013) 4,269 75 506
------- ------ ------- ------- ------- ------
$23,957 $4,254 $ 2,468 $24,786 $ 3,344 $2,486
*Income before taxes and extraordinary item
Note 13
Supplemental Cash Flow Information During the year ended
December 31, 1995, the Company purchased substantially all the
assets of Loctite Luminescent Systems, Inc. This transaction
resulted in non-cash increases in the following accounts:
(in thousands)
Accounts receivable $2,093
Inventories 2,680
Prepaid expenses 38
Other assets 498
Property, plant and equipment 1,299
Accounts payable (310)
Accrued expenses (6)
Statement of Management Responsibility for Financial Statements:
The financial statements and accompanying information were
prepared by and are the responsibility of Astronics' management.
The statements were prepared in conformity with generally
accepted accounting principles and, as such, include amounts that
are based on management's best estimates and judgments.
The Company's internal control systems are designed to provide
reliable financial information for the preparation of financial
statements, to safeguard assets against loss or unauthorized use
and to ensure that transactions are executed consistent with
Company policies and procedures. Management believes that
existing internal accounting control systems are achieving their
objectives and that they provide reasonable assurance concerning
the accuracy of the financial statements.
Oversight of management's financial reporting and internal
accounting control responsibilities is exercised by the Board of
Directors, through an Audit Committee which consists solely of
outside directors. The Committee meets periodically with
management and the independent accountants to ensure that each is
meeting its responsibilities and to discuss matters concerning
auditing, internal accounting control and financial reporting.
Kevin T. Keane John M. Yessa
President and Vice President-Finance,
Chief Executive Treasurer and Chief
Officer Financial Officer
Stock Price
The following table sets forth the range of closing prices for
the Company's Common Stock, traded on the Nasdaq National Market
Exchange, for each quarterly period during the last two years.
The approximate number of shareholders of record as of March 8,
1996 was 918.
1995 1994
First $2.00 - $2.88 $2.50 - $3.13
Second 2.50 - 3.25 2.38 - 2.88
Third 2.94 - 3.31 2.00 - 2.63
Fourth 2.94 - 3.88 1.88 - 2.25
Five-Year Comparison of Selected Financial Data
(in thousands, except per share data)
1995 1994 1993 1992 1991
For the year:
Sales $28,536 $24,944 $23,957 $23,740 $25,540
Income before extraordinary
item and change in
accounting principle 1,760 1,306 1,495 456 1,248
Net income 1,760 1,306 1,188 316 1,248
Per share:
Income before extraordinary
item and change in
accounting principle .46 .33 .38 .12 .33
Net income .46 .33 .30 .08 .33
Dividends -- -- -- -- --
Shares used in computation
of earnings per share 3,831 3,972 4,002 3,945 3,821
At end of year:
Total assets $30,815 $23,787 $24,786 $24,675 $25,318
Net investment in property,
plant and equipment 16,276 11,177 11,744 10,254 10,713
Working capital 6,101 6,035 6,377 9,353 9,090
Long-term debt 9,713 4,771 6,627 516 564
Long-term obligations under
capital leases 2,010 2,228 2,624 2,997 3,395
Subordinated debentures -- -- -- 8.755 9.177
Shareholders' equity 11,726 10,334 9,414 8,174 7,770
Report of Independent Auditors
To the Shareholders and Board of Directors of Astronics
Corporation
We have audited the accompanying consolidated balance sheets of
Astronics Corporation as of December 31, 1995 and 1994, and the
related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended
December 31, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes 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 consolidated
financial position of Astronics Corporation at December 31, 1995
and 1994, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Buffalo, New York
January 18, 1996
Management's Discussion and Analysis
Results of Operation:
The following table sets forth an income statement with
percentage of net sales and the percentage increase (decrease) of
such items as compared to the prior period.
(dollars in thousands) 1995 1994 1993 Period to Period
$ % $ % $ % 1994-95 1993-94
Net sales
Electronic Systems $11,530 40.4 $ 9,126 36.6 $ 9,162 38.2 26.3% (.4%)
Specialty Packaging and
Printing 17,006 59.6 15,818 63.4 14,795 61.8 7.5% 6.9%
------- ----- ------- ----- ------- -----
28,536 100.0 24,944 100.0 23,957 100.0 14.4% 4.1%
Cost of goods sold 19,970 70.0 17,531 70.3 16,234 67.8 13.9% 8.0%
Selling, general and
administrative
expenses 5,148 18.0 4,898 19.6 4,482 18.7 5.1% 9.3%
------- ----- ------- ----- ------- -----
Operating income 3,418 12.0 2,515 10.1 3,241 13.5 35.9% (22.4%)
Other deductions:
Interest expense, net 479 1.7 527 2.1 773 3.2 (9.1%) (31.8%)
------- ----- ------- ----- ------- -----
Income before taxes,
extraordinary item 2,939 10.3 1,988 8.0 2,468 10.3 47.8% (19.5%)
Provision for taxes 1,179 4.1 682 2.7 973 4.1 72.9% (29.1%)
Income before
extraordinary item 1,760 6.2 1,306 5.3 1,495 6.2 34.8% (12.6%)
Extraordinary item -- -- -- -- 307 1.3 -- --
------- ----- ------- ----- ------- ----- ----- ------
Net income $1,760 6.2 $ 1,306 5.3 $ 1,188 4.9 34.8% 9.9%
Sales
Astronics Corporation operates in two business segments:
Specialized Packaging and Printing and Electronic Systems. The
Company renamed its Specialized Packaging and Printing segment in
recognition of the business shift from being a regional custom
folding box manufacturer to being predominantly a direct
marketing provider of proprietary designed paperboard and paper
products.
On November 29, 1995, the Company acquired the business and
assets of Loctite Luminescent Systems, Inc., in Lebanon, NH. This
business compliments the electroluminescent business already
performed by the Company's Electronics Systems segment. After the
acquisition, the Company changed the name of its subsidiary, E-L
FlexKey Technologies, Inc., to Luminescent Systems, Inc. and is
maintaining operations in New Hampshire and New York. Previously,
during the first quarter of 1994, two operating units of the
Electronic Systems segments, E-L Products Company and Flex-Key
Corporation, were merged into a new operating entity known as E-L
FlexKey Technologies, Inc., with operations combined in the East
Aurora, NY, facilities of E-L Products.
Consolidated sales for Astronics for the year ended December 31,
1995, were $28,536,000 - a new record. This is an increase of
14.4 percent over the sales for the year ended December 31, 1994,
of $24,944,000, which was an increase of 4.1 percent over the
sales for the year ended December 31, 1993, of $23,957,000. The
sales for 1993 were an increase of .9 percent over the 1992
fiscal year sales. The sales gain in 1995 of 14.4 percent is 10.3
percent from internal growth and 4.1 percent resulting from the
acquisition.
Sales in the Electronics Systems segment increased 15.2 percent
from on-going business and 11.1 percent from the acquisition in
November, 1995, which combined for sales growth of 26.3 percent
for the year. In 1994, sales were nominally the same as in 1993,
$9,126,000 and $9,162,000, respectively. The 1993 shipments
represented an increase of 10.5 percent over 1992. Sales in this
segment are mainly to the aerospace and defense electronics
businesses. The November acquisition expands the aerospace market
with the addition of the commercial aviation market to the
previous general aviation market. The defense industry, as a
whole, has been downsizing as a result of the end of the cold
war, and more recently as a result of the budget negotiations in
Washington. There are fewer newly funded defense programs. These
items affect sales growth in the Electronic Systems segment.
Sales have increased at the international level, mainly in Europe
and the Middle East. Also, the Company sees opportunities in
entering the systems integration areas in which its individual
products currently compete. Pricing is normally through the bid
process and based on customer specifications. Sales made to the
defense industry are not subject to renegotiation of
profits clauses.
Sales in the Specialized Packaging and Printing segment increased
by 7.5 percent in 1995 to $17,006,000, compared to an increase of
6.9 percent in 1994 to $15,818,000, and compared to decrease of
4.2 percent in 1993 sales of $14,795,000. Sales in this segment
are represented by the design and manufacture of specialized
folding cartons and the specialty imprinting of boxes, napkins,
invitations, etc. Sales increases resulted from a better economy
and growth within the market niche in which the company operates.
Excess capacity in the regional folding carton industry has
resulted in increased competition, placing heavy pressure on
pricing throughout the year. Prices increased at a lower rate
than costs, resulting in a greater increase in the number of
units shipped than in sales value, for the second
year in a row.
Expenses
Cost of goods sold increased by 13.9 percent during 1995, while
sales were increasing 14.4 percent. In 1994, costs increased 8.0
percent compared to a sales increase of 4.1 percent. Material
costs dropped substantially in 1995 to 25.6 percent of selling
price, compared to 28.2 percent in 1994. In 1993, material costs
were 25.3 percent of sales. A major factor in the 1995 decrease
was the product mix change as Electronics Systems increased its
portion of total sales from 36.6 percent to 40.4 percent, or a
gain of 26.3 percent. The purchase costs of electronic components
were steady or slightly lower, while the costs for machined
parts, plastics and board increased during the year. Employee
costs increased slightly to 23.4 percent of sales in 1995,
compared to 23.1 percent of sales in 1994, and 25.0 percent in
1993. Employee costs decreased in 1994 as productivity increased,
reflecting the Company's investment in technologies, processes
and equipment. Sales per employee increased each year. As part of
the consolidation of the E-L Products and Flex-Key businesses in
1994, the company recorded transition costs of $446,000, or 1.8
percent of sales. Supply costs, maintenance costs, and
depreciation increased in 1995, as the Company continued to make
transitions in its equipment, technology and processes. While
these will continue in 1996, they should be a smaller percent of
sales. Other costs were nominally the same in each year. In
total, cost of goods sold was 70.0 percent of sales in 1995, 70.3
percent in 1994, and 67.8 percent in 1993. Gross profit was
$8,566,000, or 30.0 percent of sales in 1995, $7,413,000 in 1994,
or 29.7 percent of sales, to $7,723,000, or 32.2 percent in 1993.
Selling, general and administrative costs increased 5.1 percent
in 1995 compared to an increase of 9.3 percent in 1994 and a 2.4
percent increase in 1993. Ten percent of these costs relate to
employees. Professional services expenses decreased in 1995 after
increasing in 1994. The Company increased its provision for
doubtful accounts in 1995 and 1994 as its policy to reserve
uncollected receivables was tightened in both years. The current
policy is for 100 percent reserving of all accounts over 150 days
old as well as reserving accounts that are having financial
difficulties. Marketing costs went down as the company continues
to refocus its method of reaching the market. Other expense areas
were nominally the same in each year. These items resulted in
operating income of $3,418,000, or 12.0 percent of sales in 1995,
$2,515,000, or 10.1 percent of sales in 1994, and $3,241,000, or
13.5 percent of sales in 1993.
Interest
Interest costs, net of interest earned on temporary investments,
decreased in 1995 to $479,000, or 1.7 percent of sales, compared
to $527,000, or 2.1 percent of sales in 1994, and $773,000, or
3.2 percent in 1993. Income earned from temporary investments
results from the excess funds the Company has to make overnight
investments. These funds decreased in 1995 with the heavy capital
expenditure program and the acquisition made in November. The
temporary investments earned $102,000 in 1995, $141,000 in 1994,
and $95,000 in 1993. Total interest expense was $581,000 in 1995,
$668,000 in 1994, and $868,000 in 1993. The Company reduced its
long-term obligations by $2,230,000 in 1995, $1,984,000 in 1994,
and $1,501,000 in 1993. The majority of the Company's
indebtedness is at fixed rates or as a percentage of the bank's
stated prime rate. The financing used for the acquisition is
priced at LIBOR plus 125 points.
Income Before Taxes
Income before taxes was $2,939,000, or 10.3 percent of sales in
1995, $1,988,000, or 8.0 percent of sales in 1994, and
$2,468,000, or 10.3 percent of sales in 1993.
Taxes
The 1995 provision for taxes is $1,179,000, or 4.1 percent of
sales. This compares to $682,000, or 2.7 percent of sales in
1994, and $973,000, or 4.1 percent of sales in 1993. At December
31, 1995, deferred income taxes decreased by $300,000, compared
to a decrease of $196,000 in 1994, thus increasing the amount of
taxes currently payable. In 1993, deferred income tax increased
by $108,000.
Net Income Before Extraordinary Item
Net income, before an extraordinary item (refinancing costs) was
$1,760,000 or 6.2 percent of sales in 1995, $1,306,000, or 5.2
percent of sales in 1994, and $1,495,000, or 6.2 percent of sales
in 1993.
Extraordinary Item
In 1993, the Company refinanced its 10.25 percent, September 1,
1996, subordinated debenture through a five-year unsecured loan
at 6.96 percent. The Company paid a one percent premium on the
bonds redeemed and wrote off the balance of the deferred
financing costs incurred with the original issuance of the 10.25
percent debentures. These costs, net of taxes, were $307,000, or
$.08 per share, and are identified as an extraordinary charge in
1993.
Net Income
Net income for 1995 was $1,760,000, or $.46 per share - a new
record. In 1994, the Company earned $1,306,000, or $.33 per
share. This compares to $1,188,000, or $.30 per share in 1993.
Liquidity
The Company's cash in 1995 decreased by $2,748,000, compared to
an increase of $24,000 in 1994, which compares to a decrease of
$514,000 in 1993. During this three year period, the Company
invested $11,033,000 in property, plant and equipment ($6,101,000
in 1995, $1,588,000 in 1994, and $3,344,000 in 1993) and reduced
long-term indebtedness by $5,715,000 ($2,230,000 in 1995,
$1,984,000 in 1994, and $1,501,000 in 1993). In 1995 and 1994 the
Company purchased Treasury Stock totaling $1,040,000 in acquiring
391,000 shares of its stock. In 1993, the Company refinanced its
10.25 percent, September 1, 1996, subordinated debenture with a
five year term loan payable monthly with interest fixed at a 6.96
percent rate. In 1995, the Company borrowed $6,990,000 which it
used for the acquisition of the business and assets of Loctite
Luminescent Systems, Inc. ($6,292,000) and general working
capital needs.
Credit Line
The Company maintains an unsecured line of credit of $11,000,000
at the bank's prime rate, or LIBOR plus 125 basis points. At the
end of three years, up to $9,000,000 of this borrowing can be
converted to a four year term loan. The Company believes its
internal generation of cash and its ability to utilize the line
of credit that is available, is adequate to finance its plans for
continued investment in technology, processes and equipment, the
reduction of indebtedness, and the purchase of Treasury Stock.
Dividend
The Company declared a $.01 dividend in December, 1993, and paid
this in February, 1994. No dividend has been declared since that
date. The Company believes that its current investment programs
(investments in technology, processes and equipment, the
reduction of debt, and the purchase of Treasury Stock) are
important uses of cash and in the best interest of its
shareholders.
Backlog
The Company's backlog at December 31, 1995, was $8,953,000,
compared to $6,700,000 at December 31, 1994, and $6,900,000 at
December 31, 1993. The Electronics System segment had $7,328,000
in backlog at December 31, 1995, $4,700,000 at December 31, 1994,
and $5,000,000 at December 31, 1993. The Specialized Packaging
and Printing segment had backlog of $1,625,000 at December 31,
1995, $2,000,000 at December 31, 1994, and $1,900,000 at December
31, 1993. The Company is committed to two major efforts: on time
delivery of products to our customers, and the reduction of the
manufacturing cycle time after an order is received. These
programs have enabled the Company to reduce its inventories and
improve the delivery of products to its customers.
Commitments
The Company had capital investment commitments of approximately
$2,000,000 outstanding at each of December 31, 1995 and 1994. Of
these commitments, $1,600,000 were delivered and installed in
January, 1996 and 1995. The Company also had normal outstanding
purchase orders for raw materials and supplies necessary to carry
on the business. The Company is not aware of any commitments in
excess of today's market value nor in excess of quantities that
will be used in normal production. The Company is not aware of
any contingent liabilities not provided for in its financial
statements.
Directors and Officers of Astronics Corporation
and Officers of Subsidiaries
GUY P. BERNER
Director, Astronics Corporation, Investment Advisor
CHARLES H. BIDDLECOM
Vice President-Marketing, MOD-PAC CORP
ROBERT T. BRADY
Director, Astronics Corporation
Chairman of the Board, President
and Chief Executive Officer, Moog Inc.
DONALD E. DERRICK
Vice President, Luminescent Systems, Inc.
JOHN B. DRENNING
Secretary, Director, Astronics Corporation, Partner
in the law firm Phillips, Lytle, Hitchcock, Blaine & Huber
DONNA L. ECKMAN
Vice President, Krepe-Kraft, Inc.
LEO T. ECKMAN
President, Krepe-Kraft, Inc.
PETER J. GUNDERMANN
President, Luminesecnt Systems, Inc.
RICHARD E. HAUCK
Group Vice President, Astronics Corporation
KEVIN T. KEANE
President and Chief Executive Officer,
Director, Astronics Corporation
JAMES S. KRAMER,
Vice President, Luminescent Systems, Inc.
JOHN M. YESSA
Vice President-Finance and Treasurer,
Chief Financial Officer, Director, Astronics Corporation
Transfer Agent and Registrar
American Stock Transfer and Trust Company
New York, New York
Attorneys
Phillips, Lytle, Hitchcock, Blaine & Huber
Buffalo, New York
Stock Exchange Listing
The Company's stock trades on the Nasdaq National Market
Exchange under the symbol ATRO.
Independent Accountants
Ernst & Young LLP
Buffalo, New York
Annual Meeting
April 26, 1996 - 10:00 A.M.
Orchard Park Country Club,
S-4777 South Buffalo Street,
Orchard Park, New York
Form 10-KSB Annual Report
The Company's Form 10-KSB Annual Report to the Securities and
Exchange Commission provides certain additional information and
will be available in April. A copy of this report may be obtained
upon request to Shareholder Relations, Astronics Corporation,
1801 Elmwood Avenue, Buffalo, NY 14207.
Shareholder Administration
Please direct inquiries relating to shareholder accounting
records and stock transfers to:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Please report change of address promptly to ensure timely receipt
of Company communications. Please mail a signed and dated letter
or postcard stating the name in which the stock is registered,
and the previous and current addresses, to the above address.
Press Releases
In an effort to provide efficient and cost-effective
communications to our shareholders, we are mailing copies of all
Press Releases directly to our shareholders of record on the day
of the release. These Press Releases will carry appropriate
financial data, when applicable. The Press Release dates for 1996
quarterly results are:
First Quarter April 23, 1996
Second Quarter July 30, 1996
Third Quarter October 29, 1996
Fourth Quarter January 28, 1997
EXHIBIT 22
SUBSIDIARIES OF THE REGISTRANT
ASTRONICS CORPORATION
SUBSIDIARIES OF THE REGISTRANT
Ownership State of
Subsidiary Percentage Incorporation
MOD-PAC CORP 100% New York
Luminescent Systems, Inc.* 100% New York
Krepe-Kraft, Inc. 100% New York
___________________
* formerly E-L FlexKey Technologies, Inc.
EXHIBIT 24
CONSENT OF ACCOUNTANTS
Consent and Report of Independent Auditors
Board of Directors
Astronics Corporation
We consent to the incorporation by reference in this Annual
Report (Form 10-KSB) of Astronics Corporation of our report dated
January 18, 1996, included in the 1995 Annual Report to
Shareholders of Astronics Corporation.
We also consent to the incorporation by reference in Registration
Statement (Form S-8 No. 2-93090) pertaining to the Employee Stock
Purchase Plan of Astronics Corporation of our report dated
January 20, 1995, with respect to the financial statements
incorporated herein by reference.
We also consent to the incorporation by reference in Registration
Statement (Form S-8 No. 33-65141) filed with the Securities and
Exchange Commission for the registration of 732,132 shares of its
common stock of our report dated January 18, 1996, with respect
to the financial statements incorporated herein by reference.
ERNST & YOUNG LLP
Buffalo, New York
January 18, 1996