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 October 2, 1999 [ ] 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 October 2, 1999, 4,999,249 shares of $.01 par value common stock and 670,274 shares of $.01 par value Class B common stock were outstanding. PART I - FINANCIAL INFORMATION Item 1. Financial Statements ____________________ ASTRONICS CORPORATION Consolidated Balance Sheet October 2, 1999 With Comparative Figures for December 31, 1998 (Dollars in Thousands) October 2, 1999 December 31, (Unaudited) 1998 _______________ ____________ Current Assets: Cash $ 554 $ 523 Accounts receivable 6,565 5,435 Inventories 8,741 4,935 Prepaid expenses 350 1,229 ________ ________ Total current assets 16,210 12,122 Property, Plant and Equipment 55,656 44,090 Less accumulated depreciation and amortization 21,531 19,096 ________ ________ Net property, plant and equipment 34,125 24,994 Unexpended Industrial Revenue Bond Proceeds 0 4,657 Other Assets 2,142 1,934 ________ ________ $ 52,477 $ 43,707 ======== ======== Current Liabilities: Current maturities of long-term liabilities $ 450 $ 446 Accounts payable 7,351 2,939 Accrued expenses 1,747 2,085 Income taxes 39 347 ________ ________ Total current liabilities 9,587 5,817 Other Liabilities 16,894 15,160 Shareholders' Equity: Common stock, $.01 par value Authorized 10,000,000 shares, issued 5,318,654 in 1999, 5,225,001 in 1998 53 52 Class B common stock, $.01 par value Authorized 5,000,000 shares, issued 670,274 in 1999, 693,660 in 1998 7 7 Additional paid-in capital 2,904 2,681 Retained earnings 23,894 20,932 ________ ________ 26,858 23,672 Less shares in Treasury, at cost 862 942 ________ ________ Total shareholders' equity 25,996 22,730 $ 52,477 $ 43,707 See notes to financial statements. ======== ======== ASTRONICS CORPORATION Consolidated Statement of Income and Retained Earnings Period Ended October 2, 1999 With Comparative Figures for 1998 (Dollars in Thousands) (Unaudited) NINE MONTHS THREE MONTHS ______________________ _______________________ 1999 1998 1999 1998 ____ ____ ____ ____ Net Sales $ 35,475 $ 33,042 $ 12,017 $ 11,689 Costs and Expenses: Cost of products sold 25,097 22,991 8,537 8,038 Selling, general and administrative expenses 5,784 5,715 1,744 1,950 Interest expenses, net of interest income of $75 in 1999 and $0 in 1998 147 301 59 121 _______ _______ _______ _______ Total costs and expenses 31,028 29,007 10,340 10,109 _______ _______ _______ _______ Income before taxes 4,447 4,035 1,677 1,580 Provision for income taxes 1,485 1,420 544 531 _______ _______ _______ _______ Net Income 2,962 2,615 1,133 1,049 ======= ======= Retained Earnings: January 1 20,932 16,640 _______ _______ October 2 $ 23,894 $ 19,255 ======= ======= Earnings per share: Basic $ .53 $ .47 $ .20 $ .19 ======= ======= ======== ====== Diluted $ .50 $ .44 $ .19 $ .18 See notes to financial statements. ASTRONICS CORPORATION Consolidated Statement of Cash Flows Nine Months Ended October 2, 1999 With Comparative Figures for 1998 (Dollars in Thousands) (Unaudited) 1999 1998 ____ ____ Cash Flows from Operating Activities: Net income $ 2,962 $ 2,615 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,647 2,228 Provision for doubtful accounts (49) 29 Provision for deferred taxes 192 8 Cash flows from changes in operating assets and liabilities: Accounts receivable (1,081) (1,175) Inventories (3,806) (568) Prepaid expenses 879 151 Accounts payable 4,412 1,014 Accrued expenses (338) (390) Income taxes (308) (155) Deferred compensation 97 93 _______ ________ Net Cash provided by Operating Activities $ 5,607 $ 3,850 _______ ________ Cash Flows from Investing Activities: Change in other assets (419) (89) Capital expenditures (11,567) (7,243) _______ ________ Net Cash used by Investing Activities $(11,986) $ (7,332) _______ ________ Cash Flows from Financing Activities: New long-term debt 1,800 4,368 Principal payments on long-term debt and capital lease obligations (351) (1,083) Unexpended industrial revenue bond proceeds 4,657 0 Proceeds from issuance of stock 304 221 _______ ________ Net Cash provided by Financing Activities $ 6,410 $ 3,506 _______ ________ Net increase in Cash and Cash Equivalents 31 24 Cash and Cash Equivalents at Beginning of Year 523 740 _______ ________ Cash and Cash Equivalents at October 2 $ 554 $ 764 ======= ======== Disclosure of cash payments for: Interest $ 189 $ 320 Income taxes 1,567 1,568 See notes to financial statements. ASTRONICS CORPORATION Notes to Financial Statements October 2, 1999 1) The accompanying unaudited statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of results for the full year. Operating results for the nine-month period ended October 2, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. The balance sheet at December 31, 1998 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto included in the Company's 1998 annual report. 2) Inventories are stated at the lower of cost or market, cost being determined in accordance with the first-in, first-out method. Inventories are as follows: (in thousands) October 2, 1999 December 31, (Unaudited) 1998 _______________ ____________ Finished goods $1,905 $1,357 Work in progress 1,103 1,064 Raw material 5,733 2,514 ______ ______ $8,741 $4,935 ====== ====== 3) Other liabilities consist of the following: (in thousands) October 2, 1999 December 31, (Unaudited) 1998 _______________ ____________ Long-Term Debt $13,088 $11,319 Long-Term Obligations under Capital Leases 465 789 Deferred Income Taxes 1,262 1,070 Deferred Compensation 2,079 1,982 ______ ______ $16,894 $15,160 ====== ====== ASTRONICS CORPORATION Notes to Financial Statements (Continued) October 2, 1999 4) The Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," at December 31, 1998, which changes the way the Company reports information about its operating segments. The Company operates in two areas: Aerospace and Electronics, and Specialty Packaging. Operations in Aerospace and Electronics involve the design, manufacturing and marketing of state-of-the-art and advanced technological components incorporated into functional systems including instrument panels, photo reproductions and keyboard technologies. Customers are typically well-known companies in the automotive, aerospace, defense, and electronics industries worldwide. Operations in Specialty Packaging 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 provider of custom folding boxes in chosen markets. (in thousands) Nine Months Nine Months Ended October 2, 1999 Ended October 3, 1998 _____________________ _____________________ Aerospace Aerospace and Specialty and Specialty Electronics Packaging Electronics Packaging ___________ _________ ___________ _________ Sales to external customers $18,553 $16,922 $17,670 $15,372 Income before taxes 2,295 2,027 2,369 1,226 Segment assets 23,733 27,765 14,140 24,475 The Aerospace and Electronics segment has moved into a new 80,000 square foot facility, which will replace four leased facilities in its New Hampshire operation. Also, during the Quarter ended July 3, 1999, they started construction of a 70,000 square foot manufacturing facility in New York. The segment asset value changed from October 3, 1998 to October 2, 1999 as follows: (in thousands) Aerospace Specialty and Electronics Packaging _______________ _________ October 3, 1998 $14,140 $24,475 Land acquisitions 350 -- Building construction 7,600 -- Die Cutting equipment -- 2,700 Other, net 1,643 590 ______ ______ October 2, 1999 $23,733 $27,765 ASTRONICS CORPORATION Notes to Financial Statements (Continued) October 2, 1999 A reconciliation of combined income before taxes for the nine-month period is as follows: (in thousands) Nine Months Ended October 2, 1999 October 3, 1998 _______________ _______________ Income before taxes from segments $4,322 $3,595 Corporate income, net 125 440 ______ ______ Income before taxes $4,477 $4,035 ====== ====== 5) On July 1, 1999, the Company renegotiated its financial arrangements, including changing financial institutions. As a result of the changes, the Company's Revolver is a five- year program with a $12,000,000 line, with interest at the bank's prime rate, or LIBOR plus 60 basis points. At the end of five years, the Company may convert the outstanding balance to a four-year term loan. The Company also changed the letter of credit arrangement and the remarketing agreement on the Industrial Revenue Tax-Exempt Bonds issued through the Business Finance Authority of the State of New Hampshire. The new letter of credit is 50 basis points vs. 75 basis points under the previous agreement. The Company also arranged the financing for the Industrial Revenue Tax- Exempt Bonds to be issued through the County of Erie, State of New York, in connection with the construction of the Aerospace and Electronics segment's construction project in New York. It is anticipated that this will close early in the Fourth Quarter. The financial terms are similar to the New Hampshire transaction. 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 Nine Months Period-to-Period ended October 2, Increase (Decrease) ____________________ ___________________ 1999 1998 1998-1999 ____ ____ _________ Net Sales: Aerospace and Electronics 52.3% 53.5% 5.0 % Specialty Packaging 47.7 46.5 10.1 % _____ _____ 100.0% 100.0% 7.4 % Cost of products sold 70.8 69.6 9.2 % Selling, general and administrative expenses 16.3 17.3 1.2 % Interest expenses, net .4 .9 (51.2)% _____ _____ 87.5% 87.8% 7.0 % Income before provision for income taxes 12.5% 12.2% 10.2 % Provision for taxes 4.2 4.3 4.6 % _____ _____ Net Income 8.3% 7.9% 13.3 % ===== ===== INTRODUCTION Astronics Corporation operates in two business segments: Aerospace and Electronics; and Specialty Packaging. The Company changed the name of its Electronics Systems segment in 1997 to Aerospace and Electronics to better reflect its products and market focus. This business segment designs, manufactures and markets electroluminescent lamps and incorporates them into escape path lighting systems, aircraft cockpit lighting systems, military aircraft formation lighting, and ruggedized and avionics keyboards. On October 27, 1999, the Company closed an Industrial Revenue Tax-Exempt Bond with the Erie County Industrial Development Agency of Erie County, State of New York for $7,000,000. The interest rate floats with tax exempt funds and is reset every seven days. These funds are being used to finance the new East Aurora, New York manufacturing facility and production equipment for expanded customer needs. Late in the Third Quarter of 1999, the Company started shipments on the NVIS F-16 (night vision lighting modification kits) program. The Company expects these shipments to increase, and, by the end of 1999, to be at the scheduled annualized rate. The Company has $29,000,000 in backlog and it expects the United States Air Force to exercise additional production options in the future. On July 1, 1999, the Company established a $12,000,000 five-year revolving line of credit at the bank's prime rate or LIBOR plus 60 basis points. The revolver can be converted to a four- year term loan at the end of five years. The Aerospace and Electronics segment completed their move into the new manufacturing facility in Lebanon, New Hampshire during October 1999. Basic construction on the new 80,000 square foot building was completed late in the Second Quarter, with the installation of equipment and systems completed in the Third Quarter. This allows the Company to consolidate its New Hampshire operations, previously in four leased locations, into a single facility. On May 12, 1999, the Company's Aerospace and Electronics segment acquired 14.9 acres of land in East Aurora, New York, and has started construction of a 70,000 square foot manufacturing facility on this new property. The Company plans to close a tax-exempt bond transaction early in the Fourth Quarter to finance this project. The Company anticipates completion of the construction and installation of equipment and systems during the First Quarter of 2000, and the acquisition of equipment over the next 24 months. On March 17, 1999, The Erie County Industrial Development Agency, Buffalo, NY authorized the issuance and sale of tax-exempt Industrial Revenue Bonds up to $7,500,000 for Luminescent Systems, Inc. to acquire land and construct a new manufacturing facility in East Aurora, NY. On April 24, 1998, the Company announced that the United States Air Force (USAF) had selected its Luminescent Systems Inc. subsidiary to design, develop and manufacture night vision lighting modification kits for the NVIS F-16 program. The contract with the Air Force is potentially valued in excess of $50,000,000. The initial award is for 377 F-16 aircraft to be completed in year 2000 for a revenue value in excess of $16,000,000. The USAF exercised its second option on February 10, 1999 for an additional 305 units for approximately $13,500,000. An additional 474 units, upon exercise of the government's option, would be manufactured in the following years. On December 30, 1998, the Company closed an Industrial Revenue Tax-Exempt Bond with the Business Finance Authority of the State of New Hampshire for $7,250,000. The interest rate floats with tax-exempt funds and is reset every seven days. These funds are being used to finance the new Lebanon, New Hampshire facility and manufacturing equipment for expanded production needs. During the Third Quarter of 1998, the New Hampshire operations of the Aerospace and Electronics segment received their ISO 9001 certification. In the Third Quarter of 1997, the Specialty Packaging segment received its ISO 9001 certification. SALES The Company reported record sales for the Third Quarter, for the first nine months of the year, and for the trailing twelve months. Sales increased 2.8 percent for the quarter to $12,017,000, compared to a 14.5 percent gain for the same quarter in 1998 (sales were $11,689,000), which was up from 1997 Third Quarter sales of $10,214,000. The sales were lower than anticipated as the Company was delayed in starting shipments on the NVIS F-16 contract. The year-to-date sales are $35,475,000, a 7.4 percent increase in 1999, compared to $33,042,000, which were 11.9 percent ahead of 1997 sales of $29,527,000. Sales for the first nine months of 1999 were 52.3 percent in the Aerospace and Electronics segment, compared to 53.5 percent in 1998 and 50.2 percent in 1997. Specialty Packaging accounted for 47.7 percent of 1999 sales compared to 46.5 percent in 1998, which compared to 49.8 percent in 1997. The Aerospace and Electronics segment's sales have increased 5.0 percent for the first nine months of 1999, compared to 19.2 percent for the first nine months of 1998, which compared to an increase of 4.3 percent in 1997. The segment's sales were negatively affected by the delay in shipments of the NVIS F-16 program. The total contract remains in place, and the Company expects it to be fulfilled over the next three years. Shipments in 1999 were strongest in escape path lighting systems product line, compared to 1998 when sales were especially strong in three product lines: 1) military aircraft formation lights, 2) escape path lighting systems, and 3) cockpit lighting systems. The Company's order activity remains solid. Pricing for comparable products is nominally the same this year as last year. The Specialty Packaging segment sales increased 10.1 percent for the first nine months of 1999, compared to 4.6 percent in 1998, which compared to a 16.4 percent increase in 1997. In 1998, customers' management of their inventories affected the timing of sales. This reflected the just-in-time philosophy that is prevalent in today's business world. During 1999, the Company's sales have been strong in the custom packaging market resulting from expansion of product capabilities. The Company continues to expand its overall market share in its chosen market niche through focus on customer service with on-time deliveries, high quality products and short turnaround times. Pricing remains nominally the same for similar products. BACKLOG The Company's backlog increased 93.4 percent in 1999 to $42,852,000, compared to 99.6 percent in 1998, which was the previous Third Quarter all time record, of $22,153,000. This compares to $10,800,000 at December 31, 1997. The backlog is composed of $40,977,000 in the Aerospace and Electronics segment and $1,875,000 in the Specialty Packaging segment. EXPENSES The cost of products sold increased 9.2 percent in 1999 compared to a sales gain of 7.4 percent. In 1998, cost of products sold increased 14.0 percent. As a percentage of sales, cost of goods sold was 70.8 percent in 1999, 69.6 percent in 1998 and 68.3 percent in 1997. The increase in 1999 reflects increased costs for employees, manufacturing supplies and depreciation. The increase in 1998 reflected higher material and employee costs. Material costs were 19.8 percent of sales in 1999, 20.6 percent of sales in 1998, and 20.0 percent of sales in 1997. The material cost changes over these three years relates to product mix changes. The increase in employee costs reflect additional personnel supporting the technical aspects of the businesses. These costs were 29.8 percent of sales in 1999, 29.1 percent of sales in 1998, compared to 28.5 percent of sales in 1997. The decrease in overall product costs in 1997 resulted from improved productivity and the reduction of tooling and supply costs in technology transitions. As a percent of sales, the Company experienced higher rental and repair costs in 1998, as another facility was leased in the Aerospace and Electronics segment to meet production needs. The remaining expense categories increased at a lower rate than the sales growth. Actual Gross Profit dollars increased to $10,378,000 in 1999, compared to $10,051,000 in 1998, and $9,362,000 in 1997. Selling, general and administrative expenses are more permanent in nature, and less related to sales volume. These expenses continued to decrease as a percentage of sales: 16.3 percent in 1999, 17.3 percent in 1998, and 18.8 percent in 1997. The majority of these costs are for employee services. Net Operating Profit has increased in total dollars: $4,594,000, or 12.9 percent of sales in 1999, $4,336,000, or 13.1 percent of sales in 1998, compared to $3,819,000, or 12.9 percent of sales in 1997. INTEREST Interest costs, net, decreased in 1999 to $147,000 compared to $301,000 in 1998, and $349,000, in 1997. The continual decrease in total indebtedness reflects the strong positive cash flow that has allowed steady reduction of indebtedness. As a percent of sales, net interest costs were .4 percent in 1999, .9 percent in 1998, and 1.2 percent of sales in 1997. Under accounting rules, the interest on the 1998 Industrial Revenue Bond has been capitalized during the construction period. As this project becomes complete (October 30, 1999), the Company will experience higher interest costs, as these costs will be reflected in the income statement. The Company is currently investing daily excess cash in overnight commercial paper. As working capital notes become due, the excess cash is being used to reduce outstanding loans on the revolving line of credit. In 1998, the Company did not invest available overnight funds, but elected to use them to offset bank fees; therefore, no interest was earned in 1998. The revolving line of credit is priced at LIBOR plus 60 basis points, as of July 1, 1999. Previously, the pricing was LIBOR plus 100 basis points. Gross interest expense was $222,000 in 1999, $301,000 in 1998, and $363,000 in 1997. INCOME BEFORE TAXES As a result of the continuing increases in sales at a greater rate than total expenses, income before taxes increased to 12.5 percent of sales in 1999, compared to 12.2 percent of sales in 1998, and compared to 11.8 percent of sales in 1997. The Company reported income before taxes of $4,447,000 for the first nine months of 1999, compared to $4,035,000 in 1998, which compared to $3,470,000 in 1997. TAXES The Company's tax provision takes into account the federal and state taxes for which it is liable. The Company records its tax expense under the FASB 109 guidelines. The 1999 tax provision is 4.2 percent of sales, which is at a lower effective tax rate than experienced in previous years. This reflects the Company's establishment of a foreign sales corporation to reflect its growing international business. The 1998 provision for taxes was 4.3 percent of sales, compared to 4.4 percent of sales in 1997. The tax expense also reflects the adjustment in 1998 and in 1997 for the previous year's tax accrual to actual tax expenses on the returns as filed with government agencies. The company experienced more favorable deductions and state allocation ratios than initially anticipated, which resulted in lower actual taxes. NET INCOME Net income for the first nine months of 1999 established a new record: $2,962,000, or $.50 per diluted share, compared to $2,615,000, or $.44 per diluted share in 1998, and compared to $2,166,000, or $.37 per diluted share in 1997. The 1998 and 1997 per share earnings have been restated to reflect the 10 percent share distribution made in the fall of 1998. LIQUIDITY Cash flow from operating activities was $5,607,000 in 1999, compared to $3,850,000 in 1998, and compared to $3,436,000 in 1997. The Company experienced a $1,081,000 increase in receivables since January 1, 1999 and an increase in inventory of $3,806,000. Much of the increase in inventories reflects the higher level of F-16 inventory that has been accumulated in anticipation of shipments, which started late in the Third Quarter. The receivable increase appears to be a timing issue, as the Company's provision for doubtful accounts is favorable for the first nine months of 1999. Receivables increased $1,175,000 during the same period last year, while inventories increased $568,000. Accounts payable increased $4,412,000 reflecting special terms on payment for Die Cutting equipment that are delayed until January 2000, for $2,400,000, and for delayed payment terms on F-16 inventory component purchases of approximately $1,000,000. The Company has invested $11,567,000 in land, construction in progress on new buildings, and new equipment in 1999. This compares to $7,243,000 in 1998. The Company reduced its indebtedness in 1999 by $351,000, compared to $1,083,000 in 1998. The Company borrowed an additional $1,800,000 in 1999 to temporarily finance the new East Aurora, New York, manufacturing facility while the long-term financing was being finalized. This financing was completed on October 27, 1999. In 1998 the Company borrowed $4,368,000 for similar needs as in 1999, with the New Hampshire financing being completed on December 30, 1998. In May 1998, the Company made the final installment on a five-year term loan. The Company has a $12,000,000 revolving line of credit available for additional working capital needs, of which it had utilized $5,600,000 at October 2, 1999, compared to $4,969,000 at the end of the Third Quarter of 1998, and compared to $2,500,000 at the end of the Third Quarter of 1997. 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 1999 and 2000, after the financing of the land and building project in New York is completed. COMMITMENTS The Company has outstanding commitments for capital investments of approximately $340,000 at October 2, 1999 [this excludes the project in the next paragraph], compared to $1,200,000 at the end of the Third Quarter of 1998, and $4,000,000 at September 28, 1997. During the Second Quarter of 1997, the Company repurchased its shares of common stock owned by ATRO Companies Profit Sharing/401(k) Plan for $532,000. The Company has commitments for items that it purchases in the normal ongoing 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. The Company is currently constructing a 70,000 square foot manufacturing facility in East Aurora, New York. They have purchased approximately 15 acres of land and have committed to the construction of a new facility for the Aerospace and Electronics business unit. The estimated costs, excluding land that has been purchased, are $6,000,000 for the manufacturing facility and $2,500,000 for manufacturing equipment. The building construction should be completed in early 2000, with the equipment being purchased over the next 24 months. The Company acquired the land in May and started actual construction of the facility in June. The Company owns its current facility in East Aurora, New York. YEAR 2000 The Company employs several different computer systems for financial, engineering, manufacturing and administrative purposes. The Company purchases these systems, both hardware and software. Therefore, it does not have programmers writing code internally. In the last year, the Company has been able to install Year 2000 compliant upgrades to its systems. At the end of the Third Quarter, the Company believes it is ready for the Year 2000. The Company will continue to verify and test systems. The Company has addressed the Year 2000 issue by identifying software usage by equipment, or application. Then the Company classified each usage on a critical, non-critical basis to determine priority. Once this was accomplished, an individual was assigned responsibility to resolve each issue. A testing procedure was developed to allow the Company to verify that the solutions met the Year 2000 issues. The Company also obtained letters or reports from major and critical suppliers as to their ability to meet the Year 2000 issues. At this time, the Company is not aware of any vendors reporting Year 2000 issues that would affect the continuous operations of the business. However, we can offer no assurances that our vendors will in fact be Year 2000 compliant. The total invested for software upgrades was approximately $200,000. The Company continues to monitor this area. 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. _____________________________________________________ None 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: November 10, 1999 ASTRONICS CORPORATION _________________________________ /s/ John M. Yessa _________________________________ (Signature) John M. Yessa Vice President-Finance and Treasurer EXHIBIT 11 COMPUTATION OF PER SHARE EARNINGS (in thousands, except for per share data) Quarter Ended October 2 1999 1998 ____ ____ Net income $ 2,962 $ 2,615 ======== ======== Basic earnings per share weighted average shares 5,584 5,534 Net effect of dilutive stock options 388 395 ________ ________ Diluted earnings per share weighted average shares 5,972 5,929 ======== ======== Basic earnings per share $ .53 $ .47 ======== ======== Diluted earnings per share $ .50 $ .44 ======== ========