SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-QSB (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, 1995 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 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 Incorporation or Organization) Identification No.) 1801 Elmwood Avenue, Buffalo, New York 14207 _________________________________________________________________ (Address of Principal Executive Office) (Zip Code) 716-447-9013 _________________________________________________________________ (Registrant's Telephone Number, Including Area Code) 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, 1995, 2,956,337 shares of $.01 par value common stock and 834,005 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, 1995 With Comparative Figures for December 31, 1994 ASSETS (Dollars in Thousands) July 1, 1995 December 31, (Unaudited) 1994 Current Assets: Cash $ 2,473 $ 3,520 Accounts receivable 2,530 2,950 Inventories: Finished goods 1,613 1,556 Work in process 645 815 Raw material 1,667 1,814 Prepaid expenses 200 659 _______ ________ Total current assets 9,128 11,314 Property, Plant and Equipment 25,785 25,228 Less accumulated depreciation and amortization 13,907 14,051 _______ ________ Net property, plant and equipment 11,878 11,177 Other Assets 1,144 1,296 _______ ________ $22,150 $23,787 ======= ======== See notes to financial statements. ASTRONICS CORPORATION Consolidated Balance Sheet July 1, 1995 With Comparative Figures for December 31, 1994 LIABILITIES AND SHAREHOLDERS' EQUITY (Dollars in Thousands) July 1,1995 December 31, (Unaudited) 1994 ___________ ____________ Current Liabilities: Current maturities of long-term debt $ 2,244 $ 2,230 Accounts payable 1,763 1,599 Accrued expenses 954 1,208 Income taxes (36) 242 _______ _______ Total current liabilities 4,925 5,279 Long-Term Debt 3,853 4,771 Long-Term Obligation under Capital Leases 2,019 2,228 Deferred Income Taxes 865 1,175 Shareholders' Equity: Common stock, $.01 par value Authorized 10,000,000 shares, issued 3,254,454 in 1995, 3,232,157 in 1994 33 32 Class B common stock, $.01 par value Authorized 5,000,000 shares, issued 834,005 in 1995, 850,102 in 1994 8 9 Additional paid-in capital 2,077 2,068 Retained earnings 9,135 8,687 Treasury stock, at cost (765) (462) _______ _______ Total shareholders' equity 10,488 10,334 _______ _______ $22,150 $23,787 ======= ======= See notes to financial statements. ASTRONICS CORPORATION Consolidated Statement of Income and Retained Earnings Period Ended July 1, 1995 With Comparative Figures for 1994 (Dollars in Thousands) (Unaudited) SIX MONTHS THREE MONTHS 1995 1994 1995 1994 Net Sales $13,450 $11,365 $ 6,224 $5,257 Costs and Expenses: Cost of products sold 9,415 8,410 4,334 3,865 Selling, general and administrative expenses 3,028 2,626 1,510 1,281 Interest expenses, net of interest earned of $73 in 1995 and $61 in 1994 214 284 105 135 Gain on sale of equipment - (301) - (301) ______ ______ ______ _____ Total costs and expenses 12,657 11,019 5,949 4,980 ______ ______ ______ _____ Income before provision for taxes on income 793 346 275 277 Provision for taxes on income 345 181 103 148 ______ ______ ______ _____ Net Income $ 448 $ 165 $ 172 $ 129 ====== ===== Retained Earnings: January 1 8,687 7,381 ______ ______ July 1 $ 9,135 $ 7,546 ====== ====== Income per Common Share: $ .12 $ .04 $ .05 $ .03 ====== ====== ====== ===== See notes to financial statements. ASTRONICS CORPORATION Consolidated Statement of Cash Flows Six Months Ended July 1, 1995 With Comparative Figures for 1994 (Dollars in Thousands) (Unaudited) 1995 1994 Cash Flows from Operating Activities Net income $ 448 $ 165 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,444 1,276 Provision for doubtful accounts 291 23 Provision for deferred taxes (310) (19) Cash flows from changes in operating assets and liabilities: Accounts receivable 129 324 Inventories 260 577 Prepaid expenses 459 123 Accounts payable 163 8 Accrued expenses (254) (253) Income taxes payable (278) (15) ______ ______ Net Cash provided by Operating Activities $ 2,352 $ 2,209 ______ ______ Cash Flows from Investing Activities Proceeds from sale of assets 10 226 Change in other assets - (26) Capital expenditures (2,003) (541) ______ ______ Net Cash used by Investing Activities $(1,993) $ (341) Cash Flows from Financing Activities Principal payments on long-term debt and capital lease obligations (1,112) (877) Proceeds from issuance of stock 9 - Purchase of Treasury Stock (303) (103) ______ _______ Net Cash used by Financing Activities $(1,406) $ (980) ______ _______ Net increase in cash and cash equivalents (1,047) 888 Cash and Cash Equivalents, January 1 3,520 3,496 Cash and Cash Equivalents, July 1 $ 2,473 $ 4,384 ====== ======= Disclosure of cash payments for: Interest $ 294 $ 357 Income taxes 933 122 See notes to financial statements. ASTRONICS CORPORATION Notes to Financial Statements July 1, 1995 1) The interim financial statements are unaudited, but, in the opinion of management, reflect all adjustments necessary for a fair presentation of results for such periods. The results of operations for any interim period are not necessarily indicative of results for the full year. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Company's annual report for the year ended December 31, 1994. ASTRONICS CORPORATION Item 2. Management's Discussion and Analysis of the 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) 1995 1994 1994-1995 Net Sales: Electronic Systems 44.0% 38.6% 35.0% Customized Printing and Packaging 56.0 61.4 7.9% _____ _____ 100.0% 100.0% 18.4% Cost of products sold 70.0 74.0 12.0% Selling, general and administrative expenses 22.5 23.1 15.3% Interest expense, net 1.6 2.5 (24.6%) Gain on sale of equipment - (2.6) - _____ _____ 94.1% 97.0% 14.9% Income before provision for income taxes 5.9% 3.0% 129.2% Provision for taxes 2.6 1.6 90.6% _____ _____ Net Income 3.3% 1.4% 171.5% ===== ===== SALES Sales for the first six months of 1995 increased 18.4 percent compared to a decrease of 4.4 percent in 1994, and an increase of 6.7 in 1993. Sales were $13,450,000, $11,365,000, and $11,890,000 in the first half of 1995, 1994, and 1993, respectively. The trailing twelve months sales are up 15.4 percent, compared to a decline in sales of 4.3 for the prior twelve months. Sales in the Electronic Systems segment increased in the first half of 1995 by 35.0 percent, compared to a decrease of 12.2 percent in 1994, and an increase of 26.1 percent in the 1993. The growth of sales in 1995 is from increased shipments to the defense aerospace industry and to the international market for runflats. In 1994, sales decreased as shipments were slow to the defense aerospace industry. The net sales increase from 1993 to 1995 is 18.5 percent. Sales in the Customized Printing and Packaging segment increased in the first half of 1995 by 7.9 percent, compared to 1.3 percent in 1994, and a decrease of 4.0 percent in the 1993. The growth of sales in the Customized Printing and Packaging segment is from increased business in the imprinting and invitation area. This segment has experienced heavy pressure from competitive pricing resulting in lower revenue per unit. The net sales increase from 1993 to 1995 is 9.2 percent. EXPENSES Cost of products sold increased 12.0 percent in 1995, 3.4 percent in 1994, and 3.1 percent in 1993. In 1995 and 1993, sales increased by a larger percent than costs, while in 1994 costs increased while sales decreased. Costs are increasing in several areas; for example, purchases of board, corrugated, and plastics. The Company is unable to pass on these increases as pricing adjustments in most cases. The offset to these increased costs is the Company's investment in technology, processes, and equipment, which have reduced costs. In 1994, the company relocated the Massachusetts portion of the Electronic Systems segment and combined it with the East Aurora, NY, operations. Raw material costs, as a percent of sales were 25.7 percent, 27.4 percent, and 25.1 percent in 1995, 1994, and 1993, respectively. These costs are affected by product mix changes, changes in inventory levels, and manufacturing efficiency. Overall, the increased benefits from investments in technology, processes and equipment have reduced material usage through lower scrap rates. Employee costs, as a percent of sales were 23.3 percent, 24.6 percent, and 26.4 percent in 1995, 1994, and 1993, respectively. This area is also affected by product mix. The benefits of the investments referred to above also have reduced employee costs. The cost side of these investments is reflected in increasing depreciation costs, which as a percent of sales, were 9.1 percent, 7.8 percent, and 6.5 percent in 1995, 1994, and 1993, respectively. Other cost areas have not experienced dramatic changes. Combined selling, general and administrative costs were 22.5 percent, 23.1 percent, and 19.6 percent of sales in 1995, 1994, and 1993, respectively. The largest portion of these is employee costs which were 11.4 percent, 11.5 percent and 10.2 percent in 1995, 1994, and 1993, respectively. In 1995, the Company recorded a provision for doubtful accounts of $305,000, or 2.3 percent of sales. In prior years this was less than .5 percent. All other areas of expenses are stable. Interest costs, net, were $214,000, or 1.6 percent of sales in 1995, $284,000, or 2.5 percent in 1994, and $442,000, or 3.7 percent in 1993. The Company refinanced its subordinated debentures on April 30, 1993, at a fixed cost of 6.96 percent over five years. The subordinated debentures carried a 10.25 percent rate. This, combined with normal reductions in indebtedness, accounts for lower interest costs. In 1994, the Company was able to sell equipment that was no longer necessary as a result of the 1993 and 1994 capital expenditure programs. The net gain from the sale of this equipment was $301,000. The largest piece of equipment was a five color printing press. The combined effect of the above items resulted in income before taxes, of $793,000, or 5.9 percent of sales in 1995, $346,000, or 3.0 percent of sales in 1994, and $990,000, or 8.3 percent of sales in 1993. TAXES The provision for taxes for 1995 is $345,000 or 2.6 percent of sales, compared to $181,000, or 1.6 percent in 1994, and $434,000, or 3.7 percent of sales. EXTRAORDINARY ITEM In April 1993, the Company refinanced its 10.25 percent, September 1, 1996, subordinated debentures 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 is $448,000, or $.12 per share in 1995, $165,000, or $.04 per share in 1994, and $249,000, or $.06 per share in 1993. LIQUIDITY The Company's cash decreased in the first six months of 1995 by $1,047,000 compared to an increased of $888,000 at July 2, 1994. In the first half of 1995, the Company invested $2,003,000 in capital expenditures compared to $541,000 in the same period of 1994. The Company anticipates capital expenditures of approximately $6,000,000 for the year. The Company also purchased 111,000 shares of Treasury Stock for $303,000, compared to 41,000 shares at a cost of $103,000 in 1994. The Company has a $5,000,000 line of credit available for additional working capital needs. The Company feels that its cash flow from internal operations and the line of credit are adequate to meet the Company's operational and investment plans for 1995. They believe they will be using the line of credit by the Fourth Quarter of 1995. BACKLOG The Company's backlog at the end of the Second Quarter was $5,500,000, down from $6,700,000 at December 31, 1994. It was $6,500,000, at July 2, 1994, compared to $7,100,000 at July 3, 1993. The July 1,1995, backlog is $4,100,000 in the Electronic Systems segment and $1,400,000 in the Customized Printing and Packaging segment. COMMITMENTS The Company plans to make capital investments of approximately $6,000,000 for investments in technology, processes and equipment in 1995. As of July 1, 1995, approximately $5,500,000 had been spent or committed. Also, the Company has authorized the repurchase of an additional 250,000 shares of its common stock at various times when the market conditions warrant. 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 affect its financial condition. OUTLOOK Sales have increased at an 18 percent rate for the first half of 1995, a growth rate that is not expected to be maintained. Earnings for the first half of 1995 are up 171 percent, compared to net income for the first half of 1994, which was affected by the one-time transition costs of combining the Massachusetts and New York defense/electronics aerospace operations in East Aurora, NY. While the Company believes earnings will continue to grow, they should more closely reflect the sales growth. PART II - OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Securities Holders. At the Company's Annual Meeting of Shareholders held on April 28, 1995, the nominees to the Board of Directors were re-elected based upon the following results: Nominee For Withheld Guy P. Berner 7,341,461 1,028,749 Robert T. Brady 7,383,498 986,712 John B. Drenning 7,341,461 1,028,749 Kevin T. Keane 7,385,701 984,509 John M. Yessa 7,385,851 984,359 In addition, Ernst & Young LLP was ratified to continue as auditors based upon the following votes: For, 7,899,622; Against 156,839; Abstain, 313,749. There were no broker non-votes. Item 5. Other Information. As reported in its March 21, 1995 proxy statement, registrant made an equity investment of $200,000 in a newly-formed French company engaged in the printing business in which Robert S. Keane is a principal. Robert S. Keane is the son of Kevin T. Keane, an officer and director of registrant. Registrant thereafter determined to liquidate the investment and accepted the offer of Kevin T. Keane to acquire the same at registrant's cost, a transaction which was concluded during registrant's second quarter. Item 6. Exhibits and 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 15, 1995 ASTRONICS CORPORATION John M. Yessa By___________________________ (Signature) John M. Yessa Vice President-Finance and Treasurer