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 September 27, 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
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1801 Elmwood Avenue, Buffalo, New York 14207
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(Address of Principal Executive Office) (Zip Code)
716-447-9013
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(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
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(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 September 27, 1997, 4,244,986 shares of $.01 par value
common stock and 727,539 shares of $.01 par value Class B common
stock were outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
ASTRONICS CORPORATION
Consolidated Balance Sheet
September 27, 1997
With Comparative Figures for December 31, 1996
ASSETS
------
(Dollars in Thousands)
September 27, 1997 December 31,
(Unaudited) 1996
------------------ ------------
Current Assets:
Cash $ 148 $ 1,130
Accounts receivable 4,639 3,688
Inventories:
Finished goods 1,930 1,826
Work in process 858 744
Raw material 2,069 2,292
Prepaid expenses 389 578
--------- ---------
Total current assets 10,033 10,258
Property, Plant and Equipment 33,967 31,714
Less accumulated depreciation
and amortization 15,923 14,072
--------- ---------
Net property, plant and
equipment 18,044 17,642
Other Assets 1,826 1,965
--------- ---------
$ 29,903 $ 29,865
========= =========
See notes to financial statements.
<PAGE>
ASTRONICS CORPORATION
Consolidated Balance Sheet
September 27, 1997
With Comparative Figures for December 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
(Dollars in Thousands)
September 27, 1997 December 31,
(Unaudited) 1996
------------------ ------------
Current Liabilities:
Current maturities of long-term debt $ 1,645 $ 2,246
Accounts payable 2,757 2,463
Accrued expenses 1,736 1,757
Income taxes 353 937
--------- ---------
Total current liabilities 6,491 7,403
Long-Term Debt 2,969 3,798
Long-Term Obligations under
Capital Leases 1,296 1,600
Deferred Income Taxes 763 545
Supplemental Retirement Obligations 1,755 1,677
Shareholders' Equity:
Common stock, $.01 par value
Authorized 10,000,000 shares, issued
4,625,168 in 1997, 4,519,219 in 1996 46 45
Class B common stock, $.01 par value
Authorized 5,000,000 shares, issued
727,539 in 1997, 749,161 in 1996 7 7
Additional paid-in capital 2,449 2,297
Retained earnings 15,255 13,089
------- -------
17,757 15,438
Less shares in Treasury, at cost (1,128) (596)
------- -------
Total shareholders' equity 16,629 14,842
------- -------
$ 29,903 $ 29,865
======== ========
See notes to financial statements.
<PAGE>
ASTRONICS CORPORATION
Consolidated Statement of Income and Retained Earnings
Period Ended September 27, 1997
With Comparative Figures for 1996
(Dollars in Thousands)
(Unaudited)
-----------
NINE MONTHS THREE MONTHS
----------- ------------
1997 1996 1997 1996
---- ---- ---- ----
Net Sales $29,527 $28,347 $10,214 $9,095
Costs and Expenses:
Cost of products sold 20,165 20,427 6,925 6,544
Selling, general and
administrative
expenses 5,543 5,131 1,718 1,305
Interest expenses, net
of interest earned of
$14 in 1997 and $14
in 1996 349 657 114 203
_______ ______ ______ ______
Total costs and
expenses 26,057 26,215 8,757 8,052
_______ ______ ______ ______
Income before provision
for taxes on income 3,470 2,132 1,457 1,043
Provision for taxes
on income 1,304 711 520 365
_______ ______ ______ ______
Net Income 2,166 1,421 937 678
Retained Earnings:
January 1 13,089 10,447
Less stock
distribution -- (11)
_______ ______
September 27 $15,255 $11,857
======= ======
Income per Common Share $ .41 $ .27 $ .18 $ .13
======= ====== ====== =======
See notes to financial statements.
<PAGE>
ASTRONICS CORPORATION
Consolidated Statement of Cash Flows
Nine Months Ended September 27, 1997
With Comparative Figures for 1996
(Dollars in Thousands)
(Unaudited)
1997 1996
__________ __________
Cash Flows from Operating Activities:
Net income $ 2,166 $ 1,421
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 2,042 1,901
Provision for doubtful accounts (221) 65
Provision for deferred taxes 218 95
Cash flows from changes in operating
assets and liabilities:
Accounts receivable (730) 263
Inventories 5 822
Prepaid expenses 189 88
Accounts payable 294 173
Accrued expenses (21) 232
Income taxes payable (584) (16)
Supplemental retirement obligations 78 0
___________ __________
Net Cash provided (used) by
Operating Activities: $ 3,436 $ 5,044
___________ __________
Cash Flows from Investing Activities:
Proceeds from sale of assets 0 219
Change in other assets (53) (201)
Capital expenditures (2,252) (3,289)
___________ __________
Net Cash provided (used) by
Investing Activities $ (2,305) $ (3,271)
Cash Flows from Financing Activities:
Principal payments on long-term
debt and capital lease obligations (1,734) (2,131)
Proceeds from issuance of stock 153 68
Fractional shares on distribution 0 (2)
Purchase of Treasury Stock (532) 0
___________ _________
Net Cash provided (used) by
Financing Activities $ (2,113) $ (2,065)
___________ _________
Net increase (decrease) in Cash
and Cash Equivalents (982) (292)
Cash and Cash Equivalents at
Beginning of Year 1,130 772
___________ _________
<PAGE>
Cash and Cash Equivalents at
September 27 $ 148 $ 480
========== =========
Disclosure of cash payments for:
Interest $ 375 $ 687
Income taxes 1,668 897
See notes to financial statements.
<PAGE>
ASTRONICS CORPORATION
Notes to Financial Statements
September 27, 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.
<PAGE>
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
Nine Months Ended Increase
September 27, (Decrease)
1997 1996 1996-1997
Net Sales:
Electronic Systems 50.2% 55.5% (5.6)%
Specialty Packaging 49.8 44.5 16.4%
______ ______
100.0% 100.0% 4.2%
Cost of products sold 68.3 72.1 (1.3)%
Selling, general and
administrative expenses 18.8 18.1 8.0%
Interest expenses, net 1.2 2.3 (46.9)%
______ ______
88.3% 92.5% (.6)%
Income before provision
for income taxes 11.7% 7.5% 62.8%
Provision for taxes 4.4 2.5 83.4%
_______ ______
Net Income 7.3% 5.0% 52.4%
======= ======
INTRODUCTION Astronics Corporation operates in two business segments:
Aerospace and Electronics, and Specialty Packaging.
The Company has renamed its Electronics Systems segment to
Aerospace and Electronics, as it believes that it better
represents its product and marketing focus. The Company
manufactures electroluminescent lamps and incorporates them
into escape path lighting systems, aircraft cockpit lighting
systems, military aircraft formation lights and ruggedized
and avionics keyboards.
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 $1,491,000, and sales for the year
ended December 31, 1995, were $2,568,000.
<PAGE>
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 Aerospace and Electronics
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
will implement this new standard with its 1997 annual report
to shareholders. The Company's basic earnings per share
will increase about ten percent.
On July 1, 1997, the Company renegotiated the interest rate
terms of its Revolving Line of Credit. Under the new terms,
the company's interest rate is LIBOR plus 100 basis points
or the bank's prime rate.
In the Third Quarter of 1997, the Specialty Packaging
segment received its ISO 9001 certification. The Aerospace
and Electronics segment anticipates its ISO 9001
certification within the near future.
SALES The Company established a new sales record for the Third
Quarter, as well as for any quarter in its history and for
the trailing twelve months. The new record for sales for
the Third Quarter is $10,214,000, and for the trailing
twelve months the record is $39,551,000. Based on the
trailing twelve months, the Company has recorded a new sales
record for 13 consecutive quarters. Year-to-date sales are
$29,527,000, compared to $28,347,00 for the first nine
months of 1996. The sales increase for the quarter was 12.3
percent, for the nine months the gain was 4.2 percent and
for the trailing twelve months, the gain is 6.4 percent.
When sales reflect the on-going businesses (eliminating the
sales of the Rodgard Division, which was sold in 1996) the
gain for the quarter is 17.6 percent, for the nine months it
is 9.1 percent, and for the trailing twelve months it is
12.4 percent.
Sales are divided evenly between the two segments, with
Aerospace and Electronics sales representing 50.2 percent
and Specialty Packaging having 49.8 percent. The sales for
the first nine months of 1997 represent a net sales growth
of 4.2 percent. Sales in the Aerospace and Electronics
segment are down 5.6 percent in total, but they have
increased 4.2 percent when only continuing operations are
considered. The Specialty Packaging segment has increased
sales 16.4 percent. The increased sales are the result of
the increased capability of the Company to deliver quality
products within a short period of time. The Company
continues to expand capacity at rate that allows responsive
support of its customers.
<PAGE>
BACKLOG The backlog for the Company at September 27, 1997, was
$11,098,000, an increase of $992,000 since December 31,
1996. This compares to the September 28, 1996 backlog of
$10,236,000. The backlog consists of $9,214,000 in the
Aerospace and Electronics segment and $1,884,000 in the
Specialty Packaging segment.
EXPENSES Cost of products sold decreased as a percentage of sales
during the first nine months of 1997 to 68.3 percent,
compared to 72.1 percent of sales in 1996, and compared to
70.0 percent in 1995. The decreased costs came from
improved productivity which has resulted in reduced material
usage costs, product mix changes, and from the substantial
completion of process change costs relating to tooling and
supply costs. Material costs decreased to 20.0 percent in
1997, compared to 25.3 percent in 1996, and 25.0 percent in
1995. Employee costs, as a percentage of sales, increased
in 1997 to 28.5 percent compared to 26.4 percent in 1996,
and 23.4 percent in 1995. The increase in employee costs in
1997 over the 1996 and 1995 expense levels is the increased
manufacturing of parts previously purchased from outside
vendors and the additional personnel supporting the
technical aspects of the business, mainly in the Aerospace
and Electronic segment. The Company has completed a
significant portion of its retooling for new equipment in
the Specialty Packaging area. It has also finished the
majority of the transition changes with the facility and
operations of the business acquired in 1995. The remaining
general categories increased less than one percentage point
of sales. This resulted in an increase in gross profit of
18.2 percent to $9,362,000 in 1997. In 1996, gross profit
increased 33.7 percent to $7,920,000, compared to $5,925,000
in 1995.
Selling, general and administrative expenses increased as a
percentage of sales in 1997, when compared to 1996. In
1997, these costs were 18.8 percent of sales, compared to
18.1 percent in 1996, and 20.7 percent in 1995. The
majority of these costs are for employee services, marketing
expenses, and operating supplies. None of the areas
increased a full percentage point when 1997 costs are
compared to 1996. 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 the
first nine months of 1997, the company expensed $53,000,
compared to an expense of $105,000 in 1996, and $253,000 in
1995. Operating income increased to $3,819,000 in 1997, or
12.9 percent of sales, compared to $2,789,000, or 9.8
percent of sales in 1996, and compared to $1,852,000, or 9.4
percent of sales in 1995.
INTEREST Interest costs, net, decreased for the first nine months of
1997 to $349,000, or 1.2 percent of sales, compared to
$657,000, or 2.3 percent of sales in 1996, which compared to
$319,000 in 1995, or 1.6 percent of sales. The 1997
decrease reflects the strong cash flow experienced in 1997
and 1996, which enabled the accelerated reduction of the
revolving line of credit. The 1996 increase reflected the
<PAGE>
financing of the November 1995 acquisition. While the
Company increased its borrowing for the acquisition in 1995,
and for working capital in late 1995 and early in both 1996
and 1997, it has steadily reduced prior debt as scheduled
and paid back the borrowings from the early portion of the
year. The revolving line of credit was priced at LIBOR plus
125 basis points through June 30, 1997. Effective, July 1,
1997, the pricing is LIBOR plus 100 basis points. Gross
interest expense was $363,000 in 1997, $671,000 in 1996, and
$416,000 in 1995. The Company has less than one year
remaining on a five-year term loan, which is reflected on
the Balance Sheet as a declining amount payable under
current maturities of long-term debt.
SUMMARY The Company earned, when taking all of the above into
consideration, for the first nine months of 1997 before
provision for taxes, $3,470,000, or 11.8 percent of sales,
compared to $2,132,000, or 7.5 percent of sales in 1996, and
$1,533,000, or 7.8 percent in 1995 on sales.
TAXES The Company's tax provision takes into account the federal
and state taxes for which it is liable. The Company has
nearly depleted its tax credits available for the Aerospace
and Electronics business in New York State. This will
result in slightly higher state taxes in future quarters.
The 1997 tax provision for the first nine months is
$1,304,000, or 4.4 percent of sales, compared to $711,000,
or 2.5 percent of sales in 1996, and $618,000, or 3.1
percent of sales in 1995. The 1996 provision reflected
favorable changes in the New York State tax law for both
1996 and 1995. The Company records its tax expense under the
FASB 109 guidelines.
NET INCOME Net income for the Third Quarter and for the nine months
ended September 27, 1997 are new records as well as for the
trailing twelve months. Net earnings for the first nine
months are $2,166,000, or $.41 per share in 1997, which
compare to $1,421,000, or $.27 per share in 1996, and
$915,000, or $.19 per share in 1995. This is the 14th
consecutive quarter in which the company has increased
earnings on a trailing twelve-month basis. The earnings for
the twelve month period in 1997 are $3,402,000, or $.65 per
share, compared to $2,266,000, or $.45 per share in 1996,
and compared to $1,643,000, or $.34 per share in 1995.
LIQUIDITY The Company's working capital increased in the first nine
months of 1997 by $563,000 compared to a decrease in 1996 of
$1,894,000 and a decrease of $2,054,000 in the first nine
months of 1995. The Company's investment in new equipment,
processes and facilities was $2,252,000 in the first nine
months of 1997, compared to $3,289,000 in 1996, and to
$2,705,000 in 1995. The Company reduced its indebtedness by
$1,734,000 in the first nine months of 1997, compared to
$2,131,000 in 1996, and to $1,670,000 in 1995. During the
Second Quarter, the Company repurchased its shares owned by
ATRO Companies Profit Sharing/401(k) Plan for $532,000. The
Company has an $11,000,000 revolving line of credit
available for additional working capital needs, of which it
<PAGE>
had utilized $2,650,000 at the end of the first nine months
of 1997, compared to $6,350,000 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 $4,000,000 at September 27,
1997. This is for further expansion of capacity in the
Specialty Packaging segment with installation scheduled for
the First Quarter of 1998. 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.
OTHER The Company believes that it is addressing the year 2000
computer issues. The costs of necessary changes are
immaterial and are being expensed as incurred. The Company
does not believe that it will experience a negative effect
from these issues in the future.
<PAGE>
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.
<PAGE>
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 11, 1997
ASTRONICS CORPORATION
----------------------------------------
/s/ John M. Yessa
----------------------------------------
John M. Yessa
Vice President-Finance and Treasurer
<PAGE>
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
(in thousands, except for per share data)
Quarter Ended Sepember 27
1997 1996 1995
---- ---- ----
Primary
Average shares outstanding 4,991 4,808 4,788
Net effect of dilutive
stock options based on
the treasury stock method
using average market price 326 385 -
------ ------ ------
Total 5,317 5,193 4,788
====== ====== ======
Net income $2,166 $1,421 $ 915
====== ====== ======
Per share amount $ .41 $ .27 $ .19
====== ====== ======
Fully Diluted
Average shares outstanding 4,991 4,808 4,788
Net effect of dilutive
stock options based on
the treasury stock method
using quarter-end market
price 365 431 -
------ ------ ------
Total 5,356 5,239 4,788
====== ====== ======
Net income $2,166 $1,421 $ 915
====== ====== ======
Per share amount $ .40 $ .27 $ .19
====== ====== ======
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-27-1997
<CASH> 148
<SECURITIES> 0
<RECEIVABLES> 4,822
<ALLOWANCES> 183
<INVENTORY> 4,857
<CURRENT-ASSETS> 10,033
<PP&E> 33,967
<DEPRECIATION> 15,923
<TOTAL-ASSETS> 29,903
<CURRENT-LIABILITIES> 6,491
<BONDS> 0
0
0
<COMMON> 53
<OTHER-SE> 16,576
<TOTAL-LIABILITY-AND-EQUITY> 29,903
<SALES> 29,527
<TOTAL-REVENUES> 29,527
<CGS> 20,165
<TOTAL-COSTS> 25,708
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 349
<INCOME-PRETAX> 3,470
<INCOME-TAX> 1,304
<INCOME-CONTINUING> 2,166
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,166
<EPS-PRIMARY> .41
<EPS-DILUTED> .40
</TABLE>
