SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal quarter ended March 29, 1997 [ ] 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 March 29, 1997, 4,304,813 shares of $.01 par value common stock and 745,837 shares of $.01 par value Class B common stock were outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements -------------------- ASTRONICS CORPORATION Consolidated Balance Sheet March 29, 1997 With Comparative Figures for December 31, 1996 ASSETS ------ (Dollars in Thousands) March 29, 1997 December 31, (Unaudited) 1996 -------------- ------------ Current Assets: Cash $ 1,249 $ 1,130 Accounts receivable 3,683 3,688 Inventories: Finished goods 1,891 1,826 Work in process 720 744 Raw material 2,096 2,292 Prepaid expenses 450 578 --------- --------- Total current assets 10,089 10,258 Property, Plant and Equipment 31,873 31,714 Less accumulated depreciation and amortization 14,669 14,072 --------- --------- Net property, plant and equipment 17,204 17,642 Other Assets 1,933 1,965 --------- --------- $ 29,226 $ 29,865 ========= ========= See notes to financial statements. ASTRONICS CORPORATION Consolidated Balance Sheet March 29, 1997 With Comparative Figures for December 31, 1996 LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ (Dollars in Thousands) March 29, 1997 December 31, (Unaudited) 1996 -------------- ------------ Current Liabilities: Current maturities of long-term debt $ 2,246 $ 2,246 Accounts payable 2,629 2,463 Accrued expenses 1,203 1,757 Income taxes 377 937 --------- --------- Total current liabilities 6,455 7,403 Long-Term Debt 3,389 3,798 Long-Term Obligations under Capital Leases 1,499 1,600 Deferred Income Taxes 595 545 Supplemental Retirement Obligations 1,714 1,677 Shareholders' Equity: Common stock, $.01 par value Authorized 10,000,000 shares, issued 4,603,120 in 1997, 4,519,219 in 1996 46 45 Class B common stock, $.01 par value Authorized 5,000,000 shares, issued 745,837 in 1997, 749,161 in 1996 7 7 Additional paid-in capital 2,445 2,297 Retained earnings 13,672 13,089 ------- ------- 16,170 15,438 Less shares in Treasury, at cost (596) (596) ------- ------- Total shareholders' equity 15,574 14,842 ------- ------- $ 29,226 $ 29,865 ======== ======== See notes to financial statements. ASTRONICS CORPORATION Consolidated Statement of Income and Retained Earnings Three Months Ended March 29, 1997 With Comparative Figures for 1996 (Dollars in Thousands) (Unaudited) 1997 1996 ---- ---- Net Sales $ 9,625 $ 9,569 Costs and Expenses: Cost of products sold 6,643 6,848 Selling, general and administrative expenses 1,873 1,952 Interest expenses, net of interest earned of $11 in 1997 and $4 in 1996 109 231 -------- ------- Total costs and expenses 8,625 9,031 -------- ------- Income before provision for taxes on income 1,000 538 Provision for taxes on income 417 172 ------- ------- Net Income 583 366 Retained Earnings: January 1 13,089 10,447 ------- ------- March 29 $13,672 $10,813 ======= ======= Income per Common Share $ .11 $ .07 ======= ======= See notes to financial statements. ASTRONICS CORPORATION Consolidated Statement of Cash Flows Three Months Ended March 29, 1997 With Comparative Figures for 1996 (Dollars in Thousands) (Unaudited) 1997 1996 ---- ---- Cash Flows from Operating Activities: Net income $ 583 $ 366 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 665 596 Provision for doubtful accounts (77) 141 Provision for deferred taxes 50 52 Cash flows from changes in operating assets and liabilities: Accounts receivable 82 242 Inventories 155 (137) Prepaid expenses 128 434 Accounts payable 166 184 Accrued expenses (554) (330) Income taxes payable (560) (22) ------- ------- Net Cash provided (used) by Operating Activities: $ 638 $ 1,526 ------- ------- Cash Flows from Investing Activities: Change in other assets (36) (57) Capital expenditures (159) (1,677) ------- ------- Net Cash provided (used) by Investing Activities $ (195) $(1,734) ------- ------- Cash Flows from Financing Activities: New long-term debt 281 473 Principal payments on long-term debt and capital lease obligations (760) (565) Proceeds from issuance of stock 149 45 ------- ------- Net Cash provided (used) by Financing Activities $ (324) $ (47) ------- ------- Net increase (decrease) in Cash and Cash Equivalents 119 (255) Cash and Cash Equivalents at Beginning of Year 1,130 772 ------- ------- Cash and Cash Equivalents at March 29 $ 1,249 $ 517 ======= ======= Disclosure of cash payments for: Interest $ 129 $ 237 Income taxes 926 141 See notes to financial statements. ASTRONICS CORPORATION Notes to Financial Statements March 29, 1997 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, 1996. 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 Three months ended March 29, Increase (Decrease) --------------------------- ------------------ - - 1997 1996 1996-1997 ---- ---- --------- Net Sales: Electronic Systems 47.1% 53.1% (11.3)% Specialty Packaging 52.9 46.9 14.2 % ------ ------ 100.0% 100.0% .6 % Cost of products sold 69.0 71.6 (3.0)% Selling, general and administrative expenses 19.5 20.4 (4.1)% Interest expenses, net 1.1 2.4 (52.8)% ------ ------ 89.6% 94.4% (4.5)% Income before provision for income taxes 10.4% 5.6% 85.9% Provision for taxes 4.3 1.8 142.4% ------ ------- Net Income 6.7% 3.8% 59.3% ====== ====== INTRODUCTION Astronics Corporation operates in two business segments: Electronic Systems and Specialty Packaging. On October 30, 1996, effective September 30, 1996, Astronics Corporation sold its Rodgard Division, a manufacturer of thick walled elastomeric products. Sales for the nine months of 1996 totaled $1,494,000, and sales for the 1995 year were $2,568,000. On November 29, 1995, The Company acquired the business and assets of Loctite Luminescent Systems, Inc., in Lebanon, NH. This business complements the electroluminescent business already performed by the Company's Electronic Systems segment. The newly acquired business and the existing enterprise were combined in a single business unit under the name of Luminescent Systems, Inc. The Company operates plants in New Hampshire and New York. During the First Quarter a new accounting pronouncement was issued for the calculation of earnings per share. This is FASB Statement No. 128, Earnings per Share. The Company is still studying the statement and how it applies to its financial reporting. While the Company has not finalized its application, it believes this will have a favorable impact on earnings per share between five and ten percent. SALES A new record for sales was set as sales increased slightly in the First Quarter of 1997 to $9,625,000 from $9,569,000 for the same period of 1996. In 1996, sales increased 32.4 percent from 1995 sales of $7,226,000. Sales from continuing operations, eliminating the Rodgard Division sales for 1996, for the First Quarter of 1997 compared to 1996 shows growth of 6.7 percent. Sales within the Electronic Systems segment, based on continuing operations, were nominally the same. The Company continues to work on the development contracts that it received in 1996, with anticipation that some will be completed in 1997, resulting in additional billings and the beginning of follow-on production. In 1996, sales increased 70.7 percent, substantially the result of the November, 1995 acquisition. Sales in the Specialty Packaging segment increased 14.2 percent in 1997 compared to 1996. This compares to an increase of 5.4 percent in 1996. The Company continues to expand its market share through focus on customer service with on time deliveries, high quality and short turnaround times. Price increases have been nominal, but the pressure to reduce pricing has moderated. BACKLOG The backlog for the Company at the end of the First Quarter of 1997 was $10,511,000, an increase of $405,000 since December 31, 1996. This compares to $11,061,000 at end of the First Quarter of 1996. The backlog is composed of $8,990,000 in the Electronic Systems segment and $1,521,000 in the Specialty Packaging segment. EXPENSES Cost of products sold decreased as a percentage of sales to 69.0 percent in 1997, compared to 71.6 percent of sales in 1996, and compared to 70.3 percent in 1995. The decrease results from improved productivity, reduced tooling and transition costs. Material costs decreased to 20.2 percent in 1997, compared to 23.6 percent in 1996, and 26.7 percent in 1995. Employee costs were nominally the same in 1997 as in 1996 at 28.0 percent of sales. This compared to 23.1 percent in 1995. The increase over the 1995 level is in the additional personnel costs supporting the technical aspects of the business, mainly in the Electronic Systems Segment. The Company has completed a significant portion of its retooling for new equipment in the Specialty Packaging area. It has also made the majority of the transition changes with the facility and operations of the business acquired in 1995. The remaining general categories increased less than .5 percentage points of sales. This resulted in an increase in gross profit of 9.6 percent to $2,982,000. In 1996, gross profit increased 26.9 percent to $2,721,000 Selling, general and administrative expenses continued to decrease as a percentage of sales: 19.5 percent in 1997, 20.4 percent in 1996, and 21.0 percent in 1995. The majority of these costs are for employee services (57.4 percent), marketing expenses (14.6 percent), and operating supplies (11.9 percent). The Company has a policy that it reserves all trade receivables over 120 days (150 days in 1996), or earlier if there are substantial questions. During this quarter, the company reduced reserves by $77,000, compared to an increase of $141,000 in 1996. Operating income increased to $1,109,000 in 1997, or 11.5 percent of sales, compared to $769,000, or 8.0 percent in 1996, and compared to $627,000, or 8.7 percent in 1995. INTEREST Interest costs, net, decreased in 1997 by the same amount as it increased in 1996, $122,000. The 1997 decrease reflects the strong cash flow experienced in 1996 which allowed for the accelerated reduction of the revolving line of credit. The 1996 increase reflected the financing of the November 1995 acquisition. As a percent of sales, net interest costs were 1.1 percent of sales in 1997, 2.4 percent in 1996, and 1.5 percent in 1995. While the Company increased its borrowing for the acquisition in 1995, and for working capital in late 1995 and early 1996 and 1997, it has steadily reduced prior debt as scheduled. The revolving line of credit is priced at LIBOR plus 125 basis points. Gross interest expense was $120,000 in 1997, $235,000 in 1996, and $148,000 in 1995. SUMMARY When the above is combined, the Company earned, before provision for taxes, $1,000,000, or 10.4 percent in 1997, $538,000, or 5.6 percent in 1996, and $518,000, or 7.2 percent in 1995 on sales. TAXES The Company's tax provision takes into account the federal and state taxes for which it is liable. Normally, the First Quarter's tax provision is higher as all minimum taxes are accrued during this period. The 1997 tax provision is $417,000, compared to $172,000 in 1996, and 242,000 in 1995. The 1996 provision reflected favorable changes in the New York State tax law for the First Quarter of 1996 and for the 1995 year. The tax provision, as a percentage of sales, is 4.3 percent in 1997, 1.8 percent in 1996, and 3.4 in 1995. The Company records its tax expense under the FASB 109 guidelines. NET INCOME Net income for the First Quarter of 1996 set a new record for the quarter: $583,000, or $.11 per share, which compared to $366,000, or $.07 per share in 1996, and $276,000, or $.06 per share in 1995. LIQUIDITY The Company's working capital increased in the First Quarter of 1997 by $779,000 compared to a decrease in 1996 of $756,000 and of $1,382,000 in the First Quarter of 1995. The Company's investment in new equipment was $159,000 in the First Quarter of 1997, compared to $1,677,000 in 1996, and to $1,543,000 in 1995. The Company reduced its indebtedness by $760,000 in the First Quarter of 1997, compared to $565,000 in 1996, and to $557,000 in 1995. Also, the Company borrowed an additional $250,000 in the First Quarter of 1997, and $473,000 in 1996 towards working capital needs. The Company has an $11,000,000 revolving line of credit available for additional working capital needs, of which it had utilized $2,750,000 at the end of the First Quarter of 1997, compared to $7,250,000 at the same time in 1996. The Company feels that its beginning cash balance, the cash flow from internal operations and the available balance of the revolving line of credit are adequate to meet the Company's operational and investment plans for 1997. COMMITMENTS The Company has outstanding commitments for capital investments of approximately $2,000,000 at the end of the First Quarter of 1997. An investment of approximately $1,600,000, initially scheduled for installation in the First Quarter of 1997, was delayed until the Second Quarter. During the Second Quarter, the Company will repurchase its shares owned by ATRO Companies Profit Sharing/401(k) Plan for approximately $500,000. 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 affect its financial condition. 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 annual meeting of shareholders held on April 18, 1997, the nominees to the Board of Directors were re- elected based on the following results: Votes Withholding Nominees Votes For Authority -------- --------- ----------------- Robert T. Brady 8,194,633 171,061 John B. Drenning 8,193,633 172,061 Kevin T. Keane 8,193,767 171,927 Robert J. McKenna 8,193,893 171,801 John M. Yessa 8,194,633 171,061 The 1997 Director Stock Option Plan was approved by 7,857,669 in favor and 459,766 votes against, with 48,259 abstentions. The selection of Ernst & Young LLP as the Registrant's auditors was approved by the following vote: 8,339,509 in favor; 8,431 against; and 17,754 abstentions. Under applicable New York law and the Company's charter documents, abstentions and non-votes have no effect. Item 5. Other Information. ----------------- None. Item 6. Exhibits and Reports on Form 8-K. -------------------------------- Exhibit 11. Computation of Per Share Earnings. 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: May 13, 1997 ASTRONICS CORPORATION --------------------------------- /S/ John M. Yessa John M. Yessa Vice President-Finance and Treasurer EXHIBIT 11 ---------- COMPUTATION OF PER SHARE EARNINGS (in thousands, except for per share data) Quarter Ended March 29 1997 1996 1995 ---- ---- ---- Primary Average shares outstanding 5,022 4,786 4,852 Net effect of dilutive stock options based on the treasury stock method using average market price 340 333 -- ----- ----- ----- Total 5,362 5,119 4,852 ===== ===== ===== Net income $ 583 $ 366 $ 276 ===== ===== ===== Per share amount $ .11 $ .07 $ .06 ===== ===== ===== Fully Diluted Average shares outstanding 5,022 4,786 4,852 Net effect of dilutive stock options based on the treasury stock method using quarter-end market price 345 354 -- ----- ----- ----- Total 5,368 5,140 4,852 ===== ===== ===== Net income $ 583 $ 366 $ 276 ===== ===== ===== Per share amount $ .11 $0.07 $0.06