ý | Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
¨ | Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
New York (State or other jurisdiction of incorporation or organization) | 16-0959303 (IRS Employer Identification Number) | |
| ||
130 Commerce Way, East Aurora, New York | ||
(Address of principal executive offices) | 14052 (Zip code) |
Large accelerated filer | Accelerated filer | ¨ | ||||
Non-accelerated filer | ¨ | Smaller Reporting Company | ¨ |
PART Item 1 Item 2 Item 3 Item 4 PART II Item 1 Item 1a Item 2 Item 3 Item 4 Item 5 Item 6 PAGE 17-16172225222324242525252525261I – Financial Information
Current Assets: Cash and Cash Equivalents Accounts Receivable, Net of Allowance for Doubtful Accounts Inventories Prepaid Expenses and Other Current Assets Total Current Assets Property, Plant and Equipment, Net of Accumulated Depreciation Other Assets Intangible Assets, Net of Accumulated Amortization Goodwill Total Assets Current Liabilities: Current Maturities of Long-term Debt Accounts Payable Accrued Expenses and Other Current Liabilities Customer Advance Payments and Deferred Revenue Total Current Liabilities Long-term Debt Other Liabilities Total Liabilities Shareholders’ Equity: Common Stock Accumulated Other Comprehensive Loss Other Shareholders’ Equity Total Shareholders’ Equity Total Liabilities and Shareholders’ Equity Sales Cost of Products Sold Gross Profit Selling, General and Administrative Expenses Income from Operations Interest Expense, Net of Interest Income Income Before Income Taxes Provision for Income Taxes Net Income Earnings per share: Basic Diluted Net Income Other Comprehensive Loss: Foreign Currency Translation Adjustments Change in Accumulated Income on Derivatives – Net of Tax Retirement Liability Adjustment – Net of Tax Other Comprehensive Loss Comprehensive Income Cash Flows From Operating Activities: Net Income Adjustments to Reconcile Net Income to Cash Provided By Operating Activities: Depreciation and Amortization Provisions for Non-Cash Losses on Inventory and Receivables Stock Compensation Expense Deferred Tax Benefit Other Cash Flows from Changes in Operating Assets and Liabilities: Accounts Receivable Inventories Accounts Payable Accrued Expenses Other Current Assets and Liabilities Customer Advanced Payments and Deferred Revenue Income Taxes Supplemental Retirement and Other Liabilities Cash Provided By Operating Activities Cash Flows From Investing Activities: Acquisition of Business, Net of Cash Acquired Capital Expenditures Other Investing Activities Cash Used For Investing Activities Cash Flows From Financing Activities: Proceeds from Long-term Debt Payments for Long-term Debt Debt Acquisition Costs Acquisition Earnout Payments Proceeds from Exercise of Stock Options Income Tax Benefit from Exercise of Stock Options Cash Provided By Financing Activities Effect of Exchange Rates on Cash Increase (Decrease) in Cash and Cash Equivalents Cash and Cash Equivalents at Beginning of Period Cash and Cash Equivalents at End of Period Finished Goods Work in Progress Raw Material Land Buildings and Improvements Machinery and Equipment Construction in Progress Less Accumulated Depreciation Patents Trade Names Completed and Unpatented Technology Backlog and Customer Relationships Total Intangible Assets Amortization Expense 2015 2016 2017 2018 2019 2020 Aerospace Test Systems Balance at beginning of period Acquisitions Warranties issued Warranties settled Reassessed warranty exposure Balance at end of period Shares Authorized Share Par Value COMMON STOCK Beginning of Period Conversion of Class B Shares to Common Shares Exercise of Stock Options End of Period ADDITIONAL PAID IN CAPITAL Beginning of Period Stock Compensation Expense Exercise of Stock Options End of Period ACCUMULATED OTHER COMPREHENSIVE LOSS Beginning of Period Foreign Currency Translation Adjustment Retirement Liability Adjustment – Net of Tax End of Period RETAINED EARNINGS Beginning of Period Net Income End of Period TOTAL SHAREHOLDERS’ EQUITY Beginning of Period End of Period Weighted average shares - Basic Net effect of dilutive stock options Weighted average shares - Diluted October 3, 2015 was insignificant. Foreign Currency Translation Adjustments Retirement Liability Adjustment – Before Tax Tax Benefit Retirement Liability Adjustment – After Tax Accumulated Other Comprehensive Loss Foreign Currency Translation Adjustments Change in Accumulated Income on Derivatives: Reclassification to Interest Expense Mark to Market Adjustments for Derivatives Tax Expense Change in Accumulated Income on Derivatives Retirement Liability Adjustments: Reclassifications to General and Administrative Expense: Amortization of prior service cost Amortization of net actuarial losses Tax Benefit Retirement Liability Adjustment Other Comprehensive Loss Service cost Interest cost Amortization of prior service cost Amortization of net actuarial losses Net periodic cost Service cost Interest cost Amortization of prior service cost Amortization of net actuarial losses Net periodic cost date regarding this provision. Sales Aerospace Test Systems Less Intersegment Sales Total Consolidated Sales Operating Profit (Loss) and Margins Aerospace Test Systems Total Operating Profit Deductions from Operating Profit Interest Expense, Net of Interest Income Corporate Expenses and Other Income Before Income Taxes Aerospace Test Systems Corporate Total Assets Classification Acquisition contingent consideration April 4, 2015 Current Liabilities December 31, 2014 Current Liabilities April 4, 2015 Other Liabilities December 31, 2014 Other Liabilities Aerospace, Inc. Sales Gross Profit (sales less cost of products sold) Gross Margin Selling, General and Administrative Expenses SG&A Expenses as a Percentage of Sales Interest Expense, Net of Interest Income Effective Tax Rate Net Income prior acquisitions. The Aerospace segment is expected to generate $572 million to $616 million of revenue, and the Test Systems segment is expected to generate $118 million to $134 million. Sales Operating profit Operating Margin Total Assets Backlog Aerospace Sales by Market Commercial Transport Military Business Jet Other Aerospace Sales by Product Line Electrical Power & Motion Lighting & Safety Avionics Systems Certification Structures Other fourth quarter. Sales Less Intersegment Sales Net Sales Operating profit (loss) Operating Margin Total Assets Backlog Test Systems Sales by Market Commercial Electronics Military Long-term Debt Purchase Obligations Interest on Long-term Debt Supplemental Retirement Plan and Post Retirement Obligations Operating Leases Other Long-term Liabilities Total Contractual Obligations leases.April 4, April 4,
2015 December 31,
2014 (Unaudited) $ 22,563 $ 21,197 76,346 88,888 120,784 115,053 17,628 20,680 237,321 245,818 124,917 116,316 6,382 5,632 112,033 94,991 119,630 100,153 $ 600,283 $ 562,910 $ 2,658 $ 2,796 34,875 27,903 31,063 33,465 37,039 45,052 105,635 109,216 214,099 180,212 43,558 45,305 363,292 334,733 221 219 (15,434 ) (11,949 ) 252,204 239,907 236,991 228,177 $ 600,283 $ 562,910 October 3,
2015 December 31,
2014 (Unaudited) Current Assets: Cash and Cash Equivalents $ 22,433 $ 21,197 Accounts Receivable, Net of Allowance for Doubtful Accounts 124,663 88,888 Inventories 119,811 115,053 Prepaid Expenses and Other Current Assets 19,501 20,680 Total Current Assets 286,408 245,818 Property, Plant and Equipment, Net of Accumulated Depreciation 125,940 116,316 Other Assets 8,907 5,632 Intangible Assets, Net of Accumulated Amortization 111,196 94,991 Goodwill 115,942 100,153 Total Assets $ 648,393 $ 562,910 Current Liabilities: Current Maturities of Long-term Debt $ 2,745 $ 2,796 Accounts Payable 27,763 27,903 Accrued Expenses and Other Current Liabilities 42,076 33,465 Customer Advance Payments and Deferred Revenue 40,565 45,052 Total Current Liabilities 113,149 109,216 Long-term Debt 205,789 180,212 Other Liabilities 45,469 45,305 Total Liabilities 364,407 334,733 Shareholders’ Equity: Common Stock 255 252 Accumulated Other Comprehensive Loss (14,875 ) (11,949 ) Other Shareholders’ Equity 298,606 239,874 Total Shareholders’ Equity 283,986 228,177 Total Liabilities and Shareholders’ Equity $ 648,393 $ 562,910 April 4,October 3, 2015 With Comparative Figures for 2014 Three Months Ended April 4,
2015 March 29,
2014 $ 161,638 $ 140,951 121,476 110,946 40,162 30,005 22,619 16,378 17,543 13,627 1,246 2,323 16,297 11,304 5,614 3,797 $ 10,683 $ 7,507 $ 0.49 $ 0.35 $ 0.47 $ 0.33 Nine Months Ended Three Months Ended October 3,
2015 September 27,
2014 October 3,
2015 September 27,
2014Sales $ 534,939 $ 494,956 $ 200,145 $ 179,442 Cost of Products Sold 385,898 370,439 140,718 128,132 Gross Profit 149,041 124,517 59,427 51,310 Selling, General and Administrative Expenses 66,213 62,638 22,297 25,539 Income from Operations 82,828 61,879 37,130 25,771 Interest Expense, Net of Interest Income 3,600 7,183 1,243 2,301 Income Before Income Taxes 79,228 54,696 35,887 23,470 Provision for Income Taxes 26,161 16,965 11,193 6,390 Net Income $ 53,067 $ 37,731 $ 24,694 $ 17,080 Earnings Per Share: Basic $ 2.09 $ 1.51 $ 0.97 $ 0.68 Diluted $ 2.02 $ 1.45 $ 0.94 $ 0.65 April 4,October 3, 2015 With Comparative Figures for 2014 Three Months Ended April 4,
2015 March 29,
2014 $ 10,683 $ 7,507 (3,646 ) (386 ) — 20 161 102 (3,485 ) (264 ) $ 7,198 $ 7,243 Nine Months Ended Three Months Ended October 3,
2015 September 27,
2014 October 3,
2015 September 27,
2014Net Income $ 53,067 $ 37,731 $ 24,694 $ 17,080 Other Comprehensive (Loss) Income: Foreign Currency Translation Adjustments (3,410 ) (2,943 ) (196 ) (2,375 ) Change in Accumulated Loss on Derivatives – Net of Tax — 19 — 27 Retirement Liability Adjustment – Net of Tax 484 318 161 110 Other Comprehensive (Loss) Income (2,926 ) (2,606 ) (35 ) (2,238 ) Comprehensive Income $ 50,141 $ 35,125 $ 24,659 $ 14,842 ThreeApril 4,October 3, 2015 April 4,
2015 March 29,
2014 $ 10,683 $ 7,507 6,127 4,838 (74 ) 312 506 394 (40 ) (816 ) 110 (879 ) 18,563 (37,632 ) (3,474 ) 8,699 5,517 9,520 (4,535 ) (1,275 ) (633 ) (382 ) (8,796 ) 9,203 2,416 2,776 409 308 26,779 2,573 (52,615 ) (70,275 ) (7,059 ) (16,906 ) (300 ) — (59,974 ) (87,181 ) 40,000 58,000 (5,663 ) (405 ) — (280 ) — (53 ) 402 588 708 1,261 35,447 59,111 (886 ) (21 ) 1,366 (25,518 ) 21,197 54,635 $ 22,563 $ 29,117 October 3,
2015 September 27,
2014Cash Flows From Operating Activities: Net Income $ 53,067 $ 37,731 Adjustments to Reconcile Net Income to Cash Provided By Operating Activities: Depreciation and Amortization 18,831 21,168 Provisions for Non-Cash Losses on Inventory and Receivables 1,513 733 Stock Compensation Expense 1,740 1,304 Deferred Tax Benefit (243 ) (4,598 ) Non-Cash Earnout Liability Adjustment (1,576 ) (477 ) Other 21 (618 ) Cash Flows from Changes in Operating Assets and Liabilities: Accounts Receivable (29,796 ) (41,562 ) Inventories (4,805 ) 16,184 Accounts Payable (1,656 ) 7,923 Accrued Expenses 5,662 7,660 Other Current Assets and Liabilities (498 ) (2,461 ) Customer Advanced Payments and Deferred Revenue (5,396 ) 22,593 Income Taxes 5,072 2,048 Supplemental Retirement and Other Liabilities 1,238 921 Cash Provided By Operating Activities 43,174 68,549 Cash Flows From Investing Activities: Acquisition of Business, Net of Cash Acquired (52,606 ) (70,028 ) Capital Expenditures (15,857 ) (29,971 ) Other Investing Activities (2,677 ) — Cash Used For Investing Activities (71,140 ) (99,999 ) Cash Flows From Financing Activities: Proceeds from Long-term Debt 55,000 245,414 Payments for Long-term Debt (29,008 ) (245,761 ) Debt Acquisition Costs — (573 ) Acquisition Earnout Payments (2 ) (37 ) Proceeds from Exercise of Stock Options 3,308 1,290 Income Tax Benefit from Exercise of Stock Options 619 2,041 Cash Provided By Financing Activities 29,917 2,374 Effect of Exchange Rates on Cash (715 ) (631 ) Increase (Decrease) in Cash and Cash Equivalents 1,236 (29,707 ) Cash and Cash Equivalents at Beginning of Period 21,197 54,635 Cash and Cash Equivalents at End of Period $ 22,433 $ 24,928 April 4,month periodand nine months ended April 4,October 3, 2015 are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.developmentaldevelopment costs. The Company is engaged in a variety of engineering and design activities as well as basic research and development activities directed to the substantial improvement or new application of the Company’s existing technologies. These costs are expensed when incurred and included in cost of products sold. Research and development, design and related engineering amounted to $22.2$22.5 million and $17.2$19.1 million for the three months ended April 4,October 3, 2015 and March 29,September 27, 2014, respectively, and $66.1 million and $57.1 million for the nine months ended October 3, 2015 and September 27, 2014, respectively. Selling, general and administrative expenses include costs primarilyApril 4,October 3, 2015 and March 29,September 27, 2014.month periodand nine months ended March 29,September 27, 2014. The Company classified the cash flows from hedging transactions in the same category as the cash flows from the respective hedged items. No derivative instruments were outstanding at or for the three month periodor nine months ended April 4,October 3, 2015.periods ending April 4,three and nine months ended October 3, 2015 and March 29,September 27, 2014.(In thousands) April 4,
2015 December 31,
2014 $ 33,021 $ 28,763 25,134 28,488 62,629 57,802 $ 120,784 $ 115,053 (In thousands) October 3,
2015 December 31,
2014Finished Goods $ 32,208 $ 28,763 Work in Progress 25,030 28,488 Raw Material 62,573 57,802 $ 119,811 $ 115,053 (In thousands) April 4,
2015 December 31,
2014 $ 11,258 $ 10,008 76,314 74,755 79,126 73,062 7,447 4,757 174,145 162,582 49,228 46,266 $ 124,917 $ 116,316 (In thousands) October 3,
2015 December 31,
2014Land $ 11,171 $ 10,008 Buildings and Improvements 78,209 74,755 Machinery and Equipment 86,088 73,062 Construction in Progress 5,644 4,757 181,112 162,582 Less Accumulated Depreciation 55,172 46,266 $ 125,940 $ 116,316 April 4, 2015 December 31, 2014 (In thousands) Weighted
Average Life Gross Carrying
Amount Accumulated
Amortization Gross Carrying
Amount Accumulated
Amortization 6 Years $ 2,146 $ 1,124 $ 2,146 $ 1,077 9 Years 8,217 1,472 8,304 1,288 7 Years 17,957 4,852 18,107 4,396 12 Years 113,539 22,378 93,448 20,253 8 Years $ 141,859 $ 29,826 $ 122,005 $ 27,014 October 3, 2015 December 31, 2014 (In thousands) Patents 6 Years $ 2,146 $ 1,217 $ 2,146 $ 1,077 Non-compete Agreement 5 Years 2,500 354 — — Trade Names 8 Years 10,237 1,982 8,304 1,288 Completed and Unpatented Technology 7 Years 24,092 6,190 18,107 4,396 Backlog and Customer Relationships 12 Years 107,739 25,775 93,448 20,253 Total Intangible Assets 7 Years $ 146,714 $ 35,518 $ 122,005 $ 27,014 Three Months Ended (In thousands) April 4,
2015 March 29,
2014 $ 2,852 $ 2,467 Nine Months Ended Three Months Ended (In thousands) October 3,
2015 September 27,
2014 October 3,
2015 September 27,
2014Amortization Expense $ 8,534 $ 12,673 $ 2,761 $ 7,769 (In thousands) $ 11,100 10,710 10,293 9,980 9,579 9,524 (In thousands) 2015 $ 11,341 2016 10,762 2017 10,336 2018 10,023 2019 9,622 2020 9,088 (In thousands) December 31,
2014 Acquisition Foreign
Currency
Translation April 4,
2015 $ 100,153 $ 20,325 $ (848 ) $ 119,630 — — — — $ 100,153 $ 20,325 $ (848 ) $ 119,630 (In thousands) December 31,
2014 Acquisition October 3,
2015Aerospace $ 100,153 $ 16,567 $ (778 ) $ 115,942 Test Systems — — — — $ 100,153 $ 16,567 $ (778 ) $ 115,942 0.25%25 and 0.50% per annum50 basis points on the unused portion of the total revolving credit commitment, based on the Company’s leverage ratio.April 4,October 3, 2015 there was $200.0$193.0 million outstanding on the revolving credit facility and there remains approximately $148.9$155.9 million available, net of outstanding letters of credit. The credit facility allocates up to $20 million of the $350 million revolving credit line for the issuance of letters of credit, including certain existing letters of credit. At April 4,October 3, 2015, outstanding letters of credit totaled $1.1 million.two2 fiscal quarters following the closing of an acquisition permitted under the Agreement. The Company will pay interest on the unpaid principal amount of the facility at a rate equal to one-, three- or six-month LIBOR plus between 137.5 basis points and 225 basis points based upon the Company’s leverage ratio. The Company will also pay a commitment fee to the Lenderslenders in an amount equal to between 17.5 basis points and 35 basis points on the undrawn portion of the credit facility, based upon the Company’s leverage ratio. The fixed charge coverage ratio under the Original Facility has been replaced with a minimum interest coverage ratio (Adjusted EBITDA to interest expense) of 3.0 to 1 for the term of the Agreement. The Company’s interest coverage ratio was 22.839.6 to 1 at April 4,October 3, 2015. The Company’s leverage ratio was 1.5 to 1 at April 4,October 3, 2015.twelve12 to sixty60 months. The Company determines warranty reserves needed by product line based on experience and current facts and circumstances. Activity in the warranty accrual is summarized as follows: Three Months Ended (In thousands) April 4,
2015 March 29,
2014 $ 4,884 $ 2,796 500 790 738 329 (726 ) (334 ) 76 156 $ 5,472 $ 3,737 Nine Months Ended Three Months Ended (In thousands) October 3,
2015 September 27,
2014 October 3,
2015 September 27,
2014Balance at Beginning of Period $ 4,884 $ 2,796 $ 5,319 $ 3,925 Acquisitions 500 564 — (226 ) Warranties Issued 1,553 2,842 414 1,966 Warranties Settled (2,164 ) (1,323 ) (737 ) (520 ) Reassessed Warranty Exposure 1,130 271 907 5 Balance at End of Period $ 5,903 $ 5,150 $ 5,903 $ 5,150 April 4,October 3, 2015 or December 31, 2014, nor were any penalties or interest costs included in expense for the three month periods ending April 4,or nine months ended October 3, 2015 and March 29,September 27, 2014. The years under which we conducted our evaluation coincided with the tax years currently still subject to examination by major federal and state tax jurisdictions, those being 2012 through 2014 for federal purposes and 2011 through 2014 for state purposes.April 4,October 3, 2015 and March 29,September 27, 2014, were approximately 34.4% and 33.6%, respectively. The effective tax rate for the third quarter and first quartersnine months of 2015 and 2014 were lower than the federal statutory rate due to the domestic production activity deduction, domestic research and development tax credits and lower effective tax rates on foreign income.threenine months ended April 4,October 3, 2015 are summarized as follows: Number of Shares (Dollars and Shares in thousands) Amount Common
Stock Convertible
Class B Stock 40,000 10,000 $ 0.01 $ 0.01 $ 219 16,608 5,322 — 411 (411 ) 2 68 81 $ 221 17,087 4,992 $ 49,659 506 1,108 $ 51,273 $ (11,949 ) (3,646 ) 161 $ (15,434 ) $ 190,248 10,683 $ 200,931 $ 228,177 $ 236,991 Number of Shares (Dollars and Shares in thousands) Amount Shares Authorized 40,000 10,000 Share Par Value $ 0.01 $ 0.01 COMMON STOCK Beginning of Period $ 252 16,608 8,651 Conversion of Class B Shares to Common Shares — 623 (623 ) Exercise of Stock Options 3 165 108 End of Period $ 255 17,396 8,136 ADDITIONAL PAID IN CAPITAL Beginning of Period $ 49,626 Stock Compensation Expense 1,740 Exercise of Stock Options 3,925 End of Period $ 55,291 ACCUMULATED OTHER COMPREHENSIVE LOSS Beginning of Period $ (11,949 ) Foreign Currency Translation Adjustment (3,410 ) Retirement Liability Adjustment – Net of Tax 484 End of Period $ (14,875 ) RETAINED EARNINGS Beginning of Period $ 190,248 Net Income 53,067 End of Period $ 243,315 TOTAL SHAREHOLDERS’ EQUITY Beginning of Period $ 228,177 End of Period $ 283,986 Three Months Ended (In thousands) April 4,
2015 March 29,
2014 22,011 21,544 795 1,108 22,806 22,652 The above information has been adjusted to reflect the impact of the one-for-five distribution of Class B Stock for shareholders of record on September 5, 2014. Nine Months Ended Three Months Ended (In thousands) October 3,
2015 September 27,
2014 October 3,
2015 September 27,
2014Weighted Average Shares - Basic 25,394 24,910 25,456 25,011 Net Effect of Dilutive Stock Options 843 1,147 761 1,068 Weighted Average Shares - Diluted 26,237 26,057 26,217 26,079 were insignificant at April 4, 2015.(In thousands) April 4,
2015 December 31,
2014 $ (7,000 ) $ (3,354 ) (12,975 ) (13,223 ) 4,541 4,628 (8,434 ) (8,595 ) $ (15,434 ) $ (11,949 ) (In thousands) October 3,
2015 December 31,
2014Foreign Currency Translation Adjustments $ (6,764 ) $ (3,354 ) Retirement Liability Adjustment – Before Tax (12,477 ) (13,223 ) Tax Benefit 4,366 4,628 Retirement Liability Adjustment – After Tax (8,111 ) (8,595 ) Accumulated Other Comprehensive Loss $ (14,875 ) $ (11,949 ) Three Months Ended (In thousands) April 4,
2015 March 29,
2014 $ (3,646 ) $ (386 ) — 15 — 14 — (9 ) — 20 130 136 118 27 (87 ) (61 ) 161 102 $ (3,485 ) $ (264 ) Nine Months Ended Three Months Ended (In thousands) October 3,
2015 September 27,
2014 October 3,
2015 September 27,
2014Foreign Currency Translation Adjustments $ (3,410 ) $ (2,943 ) $ (196 ) $ (2,375 ) Change in Accumulated Income on Derivatives: Reclassification to Interest Expense — 45 — 11 Mark to Market Adjustments for Derivatives — (15 ) — 31 Tax Expense — (11 ) — (15 ) Change in Accumulated Income on Derivatives — 19 — 27 Retirement Liability Adjustments: Reclassifications to General and Administrative Expense: Amortization of Prior Service Cost 390 408 130 136 Amortization of Net Actuarial Losses 356 80 119 27 Tax Benefit (262 ) (170 ) (88 ) (53 ) Retirement Liability Adjustment 484 318 161 110 Other Comprehensive Loss $ (2,926 ) $ (2,606 ) $ (35 ) $ (2,238 ) Three Months Ended (In thousands) April 4,
2015 March 29,
2014 $ 48 $ 62 211 188 124 130 112 27 $ 495 $ 407 Nine Months Ended Three Months Ended (In thousands) October 3,
2015 September 27,
2014 October 3,
2015 September 27,
2014Service Cost $ 145 $ 187 $ 49 $ 62 Interest Cost 633 565 211 188 Amortization of Prior Service Cost 371 390 123 130 Amortization of Net Actuarial Losses 336 80 113 27 Net Periodic Cost $ 1,485 $ 1,222 $ 496 $ 407 Three Months Ended (In thousands) April 4,
2015 March 29,
2014 $ 2 $ 1 10 8 6 6 6 — $ 24 $ 15 Nine Months Ended Three Months Ended (In thousands) October 3,
2015 September 27,
2014 October 3,
2015 September 27,
2014Service Cost $ 3 $ 3 $ 1 $ 1 Interest Cost 30 24 10 8 Amortization of Prior Service Cost 19 18 7 6 Amortization of Net Actuarial Losses 20 — 6 — Net Periodic Cost $ 72 $ 45 $ 24 $ 15 twothree major customers, each in excess of 10% of consolidated sales. The loss of eitherany of these customers would significantly, negatively impact our sales and earnings.twothree customers represented 24%21%, 16% and 15%13% of consolidated sales for the nine months ended October 3, 2015 and 19%, 25% and 12% for the three months ended April 4,October 3, 2015. Sales to these customers were in the Aerospace segment.and Test Systems segments. Accounts receivable from these customers at April 4,October 3, 2015 was approximately $21.2$58.9 million.twothree customers in the Aerospace segmentand Test Systems segments that represented 17%, 20% and 15%14% of consolidated sales for the nine months ended September 27, 2014 and 17%, 25% and 13% of consolidated sales for the three months ended March 29,September 27, 2014.However, ifOn July 15, 2015, Lufthansa providesadvised AES of their intention to enforce the required bank guarantees specified inaccounting provisions of the decision, the Company may be requiredwhich require AES to offer a recall of products which are in the distribution channels in Germany, and provide certain financial information regarding sales of the infringing product to enable Lufthansa to make an estimate of requested damages. AES is currently evaluating the information requirements. Additionally, if Lufthansa provides the additional required bank guarantees specified in the decision, the Company may be required to cease distribution of infringing products in Germany (if any). No such bank guarantees haveguarantee has been issued to date.April 4,October 3, 2015.April 4,October 3, 2015.April 4,October 3, 2015 and March 29,September 27, 2014 and a reconciliation of segment operating profit to income before income taxes. Operating profit is net sales less cost of products sold and other operating expenses excluding interest and corporate expenses. Cost of products sold and other operating expenses are directly identifiable to the respective segment. Three Months Ended (Dollars in thousands) April 4,
2015 March 29,
2014 $ 142,352 $ 122,372 19,341 18,689 (55 ) (110 ) 19,286 18,579 $ 161,638 $ 140,951 $ 23,402 $ 17,490 16.4 % 14.3 % (2,225 ) (1,695 ) (11.5 )% (9.1 )% 21,177 15,795 13.1 % 11.2 % 1,246 2,323 3,634 2,168 $ 16,297 $ 11,304 Nine Months Ended Three Months Ended (Dollars in thousands) October 3,
2015�� September 27,
2014 October 3,
2015 September 27,
2014Sales Aerospace $ 413,250 $ 366,128 $ 138,728 $ 122,233 Test Systems 121,744 129,065 61,417 57,209 Less Intersegment Sales (55 ) (237 ) — — 121,689 128,828 61,417 57,209 Total Consolidated Sales $ 534,939 $ 494,956 $ 200,145 $ 179,442 Operating Profit and Margins Aerospace $ 66,728 $ 60,308 $ 23,055 $ 22,057 16.1 % 16.5 % 16.6 % 18.0 % Test Systems 24,618 8,034 16,980 5,699 20.2 % 6.2 % 27.6 % 10.0 % Total Operating Profit 91,346 68,342 40,035 27,756 17.1 % 13.8 % 20.0 % 15.5 % Deductions from Operating Profit Interest Expense, Net of Interest Income 3,600 7,183 1,243 2,301 Corporate Expenses and Other 8,518 6,463 2,905 1,985 Income Before Income Taxes $ 79,228 $ 54,696 $ 35,887 $ 23,470 (In thousands) April 4,
2015 December 31,
2014 $ 512,777 $ 468,481 64,413 69,247 23,093 25,182 $ 600,283 $ 562,910 (In thousands) October 3,
2015 Aerospace $ 531,136 $ 468,481 Test Systems 87,909 69,247 Corporate 29,348 25,182 Total Assets $ 648,393 $ 562,910 April 4,October 3, 2015 and December 31, 2014:(In thousands) Total Level 1 Level 2 Level 3 $ (1,578 ) — — $ (1,578 ) — — — — $ (173 ) — — $ (173 ) $ (1,651 ) — — $ (1,651 ) (In thousands) Classification Total Level 1 Level 2 Level 3 Acquisition contingent consideration October 3, 2015 Current Liabilities $ — — — $ — December 31, 2014 Current Liabilities — — — — October 3, 2015 Other Liabilities $ (175 ) — — $ (175 ) December 31, 2014 Other Liabilities $ (1,651 ) — — $ (1,651 ) three month periodnine months ended April 4,October 3, 2015 is primarily due to accretion, which is classifiedfair value adjustments of $1.6 million, resulting from the re-evaluation of the probability of the achievement of the contingent consideration targets. This adjustment was recorded within interest expenseSG&A expenses in the consolidated condensed statement of operations.April 4,October 3, 2015, the fair value of goodwill and intangible assets classified using Level 3 inputs are comprised of the Armstrong goodwill and intangible assets acquired on January 14, 2015, which are currently valued based on management’s best estimates. When the accounting for the acquisition is finalized, these intangible assets will be valued using discounted cash flow methodology.April 4,October 3, 2015, the Company concluded that no indicators of impairment relating to intangible assets or goodwill existed and an interim test was not performed.ThisOn July 9, 2015, the FASB voted to defer the effective date by one year to December 15, 2017 for interim and annual reporting periods beginning after that date and permitted early adoption of the standard, but not before the original effective date of December 15, 2016. Therefore, this authoritative guidance will be effective as of the Company’s first quarter of fiscal 2017. However, the FASB has proposed a deferral of the effective date of the new revenue standard by one year.2018. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements and disclosures.In April 2015, the FASB issued authoritative guidance regarding customer’s accounting for fees paid in a cloud computing arrangement. The authoritative guidance provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the guidance requires the software license element of the arrangement to be accounted for consistent with other software license agreements. This authoritative guidance will be effective as of the Company’s first quarter of fiscal 2016, with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements. approximately $52.6 million in cash. Armstrong, located in Itasca, Illinois, is a leading provider of engineering, design and certification solutions for commercial aircraft, specializing in connectivity, in-flight entertainment, and electrical power systems. Armstrong will beis included in our Aerospace segment. This transaction was not considered material to the Company’s financial position or results of operations.approximately $69.4 million in cash, including a net working capital adjustment of approximately $16.4 million. Located in Irvine, California, ATS is a leading provider of highly-engineered automated test systems, subsystems and instruments for the semiconductor, commercial electronics, commercial aerospace and defense industries. ATS provides fully customized testing systems and support services for these markets. It also designs and manufactures test equipment under the test instrument brands known as Racal and Talon. The acquisition strengthens our service offerings and expertise in the test market. This subsidiary is included in our Test Systems segment. The purchase price allocation for this acquisition has been finalized. Purchased intangible assets are deductible for tax purposes.commercial electronics,and aerospace communications and weapons test systems as well as training and simulation devices for both commercial and military applications.& defense markets. In the Test Systems Segment,segment, Astronics’ products are sold to a global customer base including OEMsOEM's and prime government contractors for both commercial electronicssemiconductor and militaryaerospace & defense products. approximately $52.6 million in cash. Specializing in connectivity, in-flight entertainment, and electrical power systems, Armstrong is a leading provider of engineering design and certification solutions for commercial aircraft, and is located in Itasca, Illinois. Armstrong is included in our Aerospace segment.approximately $69.4 million in cash. The addition of ATS complements products and technologies that the Test Systems segment offers. Three Months Ended (Dollars in thousands) April 4,
2015 March 29,
2014 $ 161,638 $ 140,951 $ 40,162 $ 30,005 24.8 % 21.3 % $ 22,619 $ 16,378 14.0 % 11.6 % $ 1,246 $ 2,323 34.4 % 33.6 % $ 10,683 $ 7,507 Nine Months Ended Three Months Ended (Dollars in thousands) October 3,
2015 September 27,
2014 October 3,
2015 September 27,
2014Sales $ 534,939 $ 494,956 $ 200,145 $ 179,442 Gross Profit (sales less cost of products sold) $ 149,041 $ 124,517 $ 59,427 $ 51,310 Gross Margin 27.9 % 25.2 % 29.7 % 28.6 % Selling, General and Administrative Expenses $ 66,213 $ 62,638 $ 22,297 $ 25,539 SG&A Expenses as a Percentage of Sales 12.4 % 12.7 % 11.1 % 14.2 % Interest Expense, Net of Interest Income $ 3,600 $ 7,183 $ 1,243 $ 2,301 Effective Tax Rate 33.0 % 31.0 % 31.2 % 27.2 % Net Income $ 53,067 $ 37,731 $ 24,694 $ 17,080 firstthird quarter of 2015 increased 14.7% to $161.6were $200.1 million, compared with $141.0 million for the same period last year. Aerospace segment sales increased $19.9 million to $142.4 million and Test Systems segment sales increased $0.7 million to $19.3 million. First quarter 2014 sales reflect four weeks of activity for ATS, which was acquired on February 28, 2014. The 2015 first quarter included incremental sales of $6.6 millionup from Armstrong acquired on January 14, 2015 (see Notes to Consolidated Condensed Financial Statements, Note 18), while organic sales increased $14.0 million, or 9.9% to $155.0 million.Consolidated cost of products sold increased $10.6 million to $121.5 million in the first quarter of 2015 from $110.9$179.4 million for the same period last year. The increase was primarily due to2015 third quarter included $6.5 million in sales from Armstrong Aerospace, Inc. (“Armstrong”), acquired on January 14, 2015. Organic sales for the incrementalquarter increased $14.2 million, or 7.9%, and were achieved with increases across both the Aerospace and Test Systems segments.associated with Armstrongincreased $12.6 million to $140.7 million in the third quarter of $4.92015 from $128.1 million increased costfor the same period last year, due largely to the incremental costs of products sold associated withon increased organic sales volumes and increased engineering and development (“E&D”) costs. E&D costs were $22.2volumes. The acquisition of Armstrong resulted in an incremental $5.8 million in the first quarter of 2015, compared to $17.2 million in last year’s first quarter . The increase in E&D costs were largely attributable to the incremental E&D costs of ATS ($1.9 million) and Armstrong ($1.3 million). Costcost of products sold in the firstthird quarter of 2015. Engineering and development (“E&D”) costs were $22.5 million in the third quarter of 2015, including $1.8 million for Armstrong. E&D costs in last year’s third quarter were $19.1 million. As a percent of sales, E&D was 11.3% and 10.7% in the third quarters of 2015 and 2014, respectively. The third quarter of 2014 included approximately $8.7$1.3 million related toof inventory fair value step-up expense asof acquired businesses compared to $0.6with $0.3 million in the firstthird quarter of 2015. Consolidated cost of products sold as a percentage of sales was 75.2%70.3% in the firstthird quarter of 2015 compared with 78.7%71.4% in the firstthird quarter of 2014.$22.6$22.3 million, or 14.0%11.1% of sales, in the third quarter of 2015 compared with $25.5 million, or 14.2% of sales, in the same period last year. The third quarter of 2014 included intangible asset amortization expense related to Astronics Test Systems, Inc. (acquired in February 2014) of $5.3 million, compared with $0.3 million in the third quarter of 2015. This decrease was partially offset by the incremental SG&A costs of Armstrong, which added approximately $1.4 million to SG&A in the third quarter of 2015, including $0.5 million of amortization expense for acquired intangible assets of that business.quarternine months of 2015 compared with $16.4$62.6 million, or 11.6%12.7% of sales, in the same period last year. The increase was due primarily to the incremental SG&A costs of ATS and Armstrong, which added $3.1approximately $4.1 million to SG&A in the first quarternine months of 2015, including $0.8 million2015. Organically, higher SG&A expense reflected increased headcount and compensation costs to support growth. These increases were partially offset by a decrease of amortization expense for acquired intangible assets of those businesses. Additionally, higher SG&A expense reflects increased headcountATS of $4.4 million, and compensation costsa $1.1 million reduction in the contingent consideration liability related to support growth.34.4%approximately 33.0% and 33.6%31.0% for the nine months and 31.2% and 27.2% for the three months ended April 4,October 3, 2015 and March 29,September 27, 2014, respectively. The effective tax rate for the third quarter and first quartersnine months of 2015 and 2014 were lower than the federal statutory rate due to the domestic production activity deduction, domestic research and development tax credits and lower effective tax rates on foreign income.April 4,October 3, 2015, the earnings per share increase, as compared to the respective periodperiods in the prior year,is due primarily to the increasein net income. Earnings per share for all prior periods presented have been calculated reflecting the effect of the one-for-five Class B share distribution for shareholders of record on September 5, 2014.$680$690 million and $740$705 million. Approximately $550$553 million to $580$564 million of forecasted 2015 revenue is expected from the Aerospace segment, while approximately $130$137 million to $160$141 million of the forecasted revenue is expected from the Test Systems segment.April 4,October 3, 2015 was $378.5$297.0 million, of which approximately $314.1$147.9 million is expected to ship in 2015.$27$25 million. E&D costs are estimated to be in the range$75$690 million to $80$750 million. Three Months Ended (In thousands) April 4,
2015 March 29,
2014 $ 142,352 $ 122,372 $ 23,402 $ 17,490 16.4 % 14.3 % April 4,
2015 December 31,
2014 $ 512,777 $ 468,481 $ 233,955 $ 223,769 Three Months Ended (In thousands) April 4,2015 March 29,
2014 $ 120,194 $ 99,287 9,258 8,958 8,092 9,866 4,808 4,261 $ 142,352 $ 122,372 Three Months Ended (In thousands) April 4,
2015 March 29,2014 $ 69,570 $ 65,833 42,077 35,091 17,367 12,752 4,574 — 3,956 3,638 4,808 5,058 $ 142,352 $ 122,372 Nine Months Ended Three Months Ended (In thousands) October 3, 2015 September 27, 2014 October 3, 2015 September 27, 2014 Sales $ 413,250 $ 366,128 $ 138,728 $ 122,233 Operating Profit $ 66,728 $ 60,308 $ 23,055 $ 22,057 Operating Margin 16.1 % 16.5 % 16.6 % 18.0 % Aerospace Sales by Market (In thousands) Commercial Transport $ 342,839 $ 293,051 $ 115,016 $ 97,260 Military 31,929 31,589 12,102 10,279 Business Jet 25,196 28,740 8,043 10,565 Other 13,286 12,748 3,567 4,129 $ 413,250 $ 366,128 $ 138,728 $ 122,233 Aerospace Sales by Product Line (In thousands) Electrical Power & Motion $ 208,578 $ 188,368 $ 71,164 $ 61,885 Lighting & Safety 119,949 111,702 39,965 37,104 Avionics 41,628 40,601 12,598 15,351 Systems Certification 16,465 — 6,120 — Structures 12,418 10,868 4,388 3,526 Other 14,212 14,589 4,493 4,367 $ 413,250 $ 366,128 $ 138,728 $ 122,233 (In thousands) October 3, 2015 December 31, 2014 Total Assets $ 531,136 $ 468,481 Backlog $ 227,343 $ 223,769 $19.9$16.5 million, or 16.3%13.5%, when compared with the prior year’s firstthird quarter to $142.4$138.7 million. Organic Aerospace sales grew 10.9%8.2%, or $13.3 million, and sales$10.0 million. Sales from Armstrong added $6.6$6.5 million.theoffset reduced sales of seat motion products in this product line. The Electrical Power & Motion product lines are sold mostly to Commercial Transport market increased $20.9 million, of which $6.6 million was relatedcustomers, with lesser sales to the acquisition of Armstrong, primarily comprised of Systems Certification sales. The remaining increase primarily related to higher organic salesBusiness Jets and Military customers. Sales of Lighting & Safety Avionics and Electrical Power & Motion products. Organic Lighting and Safety product sales to theproducts increased $2.9 million, as higher production rates of Commercial Transport market increasedcustomers were complemented by $5.4 million. Organica number of aftermarket retrofit sales of passenger service units, or PSUs. The 2015 third quarter included $6.1 million of Systems Certification sales from Armstrong, which was acquired in January 2015. These gains offset a reduction of $2.7 million in the Avionics productsproduct lines, as the Company continued to deal with component problems from a certain supplier. Sales in this product line are expected to rebound somewhat in the Commercial Transport market increased by $5.0 million. Organic sales of Electrical Power & Motion products to the Commercial Transport market increased approximately $3.5 million.Sales to the Business Jet market decreased $1.8 million when compared with last year’s first quarter, due to lower organic sales of avionics and lighting products to this market.firstthird quarter of 2015 was $23.4$23.1 million, or 16.4%16.6% of sales, compared with $17.5$22.1 million, or 14.3%18.0% of sales, in the same period last year. Approximately $0.6 million inOperating margins were negatively affected by increased E&D spending and lower operating profit was related tomargin from the Armstrong which was acquired in January 2015. Armstrong inventory step-up expense was $0.6 in the first quarter of 2015. Operating profit in the first quarter of 2014 included expense of $2.4 million associated with inventory step-up, primarily related to AeroSat and PGA, which were acquired in the fourth quarter of 2013. Operatingbusiness, partially offset by operating leverage gained on volume for theincreased organic business was partially offset by approximately $1.9 million of higher organicsales volumes. Organic Aerospace E&D costs. Aerospace SG&A expensecosts increased $2.6$1.7 million in the first quarter of 2015 as compared with 2014. The increaselast year’s third quarter. Incremental SG&A from Armstrong was due primarily to the incremental SG&A of Armstrong which added $1.2$1.4 million, including $0.4$0.5 million of purchased intangible asset amortization expense for acquired intangible assets.Outlook– SG&A expense increased $5.4 million in the first nine months of 2015 as compared with the corresponding period in 2014. Incremental SG&A from Armstrong was $4.1 million, including $1.6 million of purchased intangible asset amortization expense for acquired intangible assets. The first nine months of 2014 included inventory step-up costs of $2.6 million that reduced normal operating margins for that period.$550$553 million to $580$564 million. The Aerospace segment’s backlog at the end of the firstthird quarter of 2015 was $234.0$227.3 million with approximately $209.5$128.8 million expected to be shipped over the remaining part of 2015 and $219.8$210.3 million is expected to ship over the next 12 months. Three Months Ended (In thousands) April 4,
2015 March 29,
2014 $ 19,341 $ 18,689 (55 ) (110 ) $ 19,286 $ 18,579 $ (2,225 ) $ (1,695 ) (11.5 )% (9.1 )% April 4,
2015 December 31,
2014 $ 64,413 $ 69,247 $ 144,514 $ 146,964 Three Months Ended (In thousands) April 4,
2015 March 29,
2014 $ 4,752 $ 14,337 14,534 4,242 $ 19,286 $ 18,579 Nine Months Ended Three Months Ended (In thousands) October 3, 2015 September 27, 2014 October 3, 2015 September 27, 2014 Sales $ 121,744 $ 129,065 $ 61,417 $ 57,209 Less Intersegment Sales (55 ) (237 ) — — Net Sales $ 121,689 $ 128,828 $ 61,417 $ 57,209 Operating profit (loss) $ 24,618 $ 8,034 $ 16,980 $ 5,699 Operating Margin 20.2 % 6.2 % 27.6 % 10.0 % Test Systems Sales by Market (In thousands) Semiconductor $ 86,224 $ 106,384 $ 49,966 $ 48,927 Aerospace & Defense 35,465 22,444 11,451 8,282 $ 121,689 $ 128,828 $ 61,417 $ 57,209 (In thousands) October 3, 2015 December 31, 2014 Total Assets $ 87,909 $ 69,247 Backlog $ 69,705 $ 146,964 first quarter increased $0.7$4.2 million, or 7.4%, to $19.3$61.4 million compared with sales of $18.6$57.2 million 2014. Sales to the Semiconductor market increased $1.0 million compared with the same period in 2014 and Aerospace & Defense sales increased $3.2 million.2014. During 2014, ATS completed delivery of unitsdue to lower sales to the Semiconductor market. Sales to the Semiconductor market decreased $20.1 million compared with its primary customerthe same period in the Commercial Electronics market and will begin delivery on a follow on order in the second or third quarter of this year. The decrease in the Commercial Electronics market2014, which was partially offset by increased sales of $13.0 million to the Military market, primarily resulting from incrementalAerospace & Defense market.attributable tocompared with $8.0 million, or 6.2% of sales, in the first nine months of 2014. The acquisition of ATS. Operating loss forATS added approximately $1.6 million in SG&A expense in the first quarternine months of 2015 was $2.22015. The first nine months of 2014 included non-recurring purchase accounting related inventory step-up costs of $16.0 million, compared with an operating loss ofand $1.7 million of charges related to work force reductions as the Company realigned segment personnel which impacted operating margin. Additionally, amortization expense in the same period last year, primarily as a resultfirst nine months of $0.3 million of incremental amortization expense2014 related to the ATS intangible assetsacquisition was approximately $5.4 million compared with $1.0 million in the first quarternine months of 2015. E&D costs were approximately $8.8 million in the first nine months of 2015, as compared toand $8.5 million in the first quarter of 2014.Outlook for Test Systems – prior-year period.$130$137 million to $160$141 million. The Test Systems segment’s backlog at the end of the firstsecond quarter of 2015 was $144.5$69.7 million with approximately $104.6$19.1 million expected to be shipped over the remaining part of 2015 and approximately $112.6$52.6 million scheduled to ship over the next 12 months. By the end of 2014, we delivered the final unit under our initial contract with our major customer. We received a follow-on order from this customer, and expect to begin delivery of the associated units in the second or third quarter of 2015.$26.8$43.2 million for the first threenine months of 2015, as compared with $2.6$68.5 million during the same period in 2014. Cash flow from operating activities increaseddecreased primarily due to higher net income as adjusted for non-cash expenses and by the impact of decreasesincreases in net operating assets for the first threenine months of 2015 when compared with the first threenine months of 2014.$60.0$71.1 million for the first threenine months of 2015 compared with $87.2$100.0 million used in the same period of 2014. Cash used for the acquisition of Armstrong in January 2015 was $52.6 million. Cash used for capital expenditures of $7.1 million related primarily to the modifications of the new buildings in Clackamas, Oregon.was $15.9 million. The Company expects capital spending in 2015 to be in the range of $20 million to $27$25 million.Armstrong and principal payments against our outstanding balance on the senior facility. In January 2015, we borrowed $40.0 million to fund the acquisition of Armstrong. Through the end of the first quarter of 2015 we made principal payments of $5.7 million, primarily from funds generated by operations. In the first quarter of 2014, we made principal payments of $0.4 million.April 4,October 3, 2015, the Company was in compliance with all of the covenants pursuant to the credit facility. Our interest coverage ratio was 22.839.6 to 1 and the leverage ratio was 1.5 to 1 at April 4,October 3, 2015.April 4,October 3, 2015 was $378.5$297.0 million compared with $370.7 million at December 31, 2014 and $362.4$301.4 million at March 29,September 27, 2014.April 4,October 3, 2015: Payments Due by Period (In thousands) Total 2015 2016-2017 2018-2019 After 2019 $ 216,757 $ 1,934 $ 5,286 $ 204,505 $ 5,032 132,894 127,463 4,994 437 — 19,028 4,105 7,955 6,637 �� 331 21,880 303 807 804 19,966 9,163 2,214 3,858 2,962 129 1,891 21 1,772 26 72 $ 401,613 $ 136,040 $ 24,672 $ 215,371 $ 25,530 Payments Due by Period (In thousands) Total 2015 2016-2017 2018-2019 After 2019 Long-term Debt $ 208,534 $ 639 $ 5,351 $ 197,579 $ 4,965 Purchase Obligations 94,013 63,535 29,972 506 — Interest on Long-term Debt 19,147 3,697 8,238 6,881 331 Supplemental Retirement Plan and Post Retirement Obligations 22,481 101 807 804 20,769 Operating Leases 8,938 1,329 4,267 3,194 148 Other Long-term Liabilities 310 17 195 26 72 Total Contractual Obligations $ 353,423 $ 69,318 $ 48,830 $ 208,990 $ 26,285 leases for our AES, AeroSat, Ballard, DME, Max-Viz, Peco and Luminescent Systems Canada.ThisOn July 9, 2015, the FASB voted to defer the effective date by one year to December 15, 2017 for interim and annual reporting periods beginning after that date and permitted early adoption of the standard, but not before the original effective date of December 15, 2016. Therefore, this authoritative guidance will be effective as of the Company’s first quarter of fiscal 2017. However, the FASB has proposed a deferral of the effective date of the new revenue standard by one year.2018. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements and disclosures.In April 2015, the FASB issued authoritative guidance regarding customer’s accounting for fees paid in a cloud computing arrangement. The authoritative guidance provides guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, the guidance requires the software license element of the arrangement to be accounted for consistent with other software license agreements. This authoritative guidance will be effective as of the Company’s first quarter of fiscal 2016, with early adoption permitted. The Company is currently evaluating the impact that adoption of this guidance will have on its consolidated financial statements.
a) The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of April 4,October 3, 2015. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of April 4,October 3, 2015.
b) | Changes in Internal Control over Financial Reporting - There have been no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. |
date regarding this provision.Astronics Advanced Electronic Systems Corp. (“AES”)AES sold, marketed and brought into use in Germany a power supply system which infringes upon a German patent held by Lufthansa. The relief sought by Lufthansa includes requiring AES to stop selling and marketing the allegedly infringing power supply system, a recall of allegedly infringing products sold to commercial customers since November 26, 2003 and compensation for damages. The claim does not specify an estimate of damages and a damages claim will be made by Lufthansa only if it receives a favorable ruling on the determination of infringement.However, ifOn July 15, 2015, Lufthansa providesadvised AES of their intention to enforce the required bank guarantees specified inaccounting provisions of the decision, the Company may be requiredwhich require AES to offer a recall of products which are in the distribution channels in Germany, and provide certain financial information regarding sales of the infringing product to enable Lufthansa to make an estimate of requested damages. AES is currently evaluating the information requirements. Additionally, if Lufthansa provides the additional required bank guarantees specified in the decision, the Company may be required to cease distribution of infringing products in Germany (if any). No such bank guarantees haveguarantee has been issued to date. has appealed and believes it has valid defenses to refute the decision. The appeal process is estimated to extend up to two years. The enforcement of the accounting provision of the decision, as discussed above, has no impact on the appeals process. As a result, we do not currently have sufficient information to provide an estimate of AES’s potential exposure related to this matter. As loss exposure is neither probable nor estimable at this time, the Company has not recorded any liability with respect to this litigation as of April 4,October 3, 2015.April 4,October 3, 2015.
(a) Total number (c) Total number of January 1, 2015 – January 31, 2015 February 1, 2015 – February 28, 2015 March 1, 2015 – April 4, 2015 Total (c)The following table summarizes the Company’s purchases of its common stock for the quarter ended April 4, 2015:Period
of shares
Purchased (b)
Average
Price Paid
per Share
shares Purchased
as part of Publicly
Announced Plans
or Programs (d)
Maximum Number
of Shares that May
Yet Be Purchased
Under the Plans or
Programs 1,856 $ 55.27 — — 1,066 56.06 — — 2,405 70.79 — — 5,327 $ 60.71 — — In connection with the exercise
/s/ Exhibit 31.1 Section 302 Certification - Chief Executive Officer Exhibit 31.2 Section 302 Certification - Chief Financial Officer Exhibit 32. Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Exhibit 101.1* Instance Document Exhibit 101.2* Schema Document Exhibit 101.3* Calculation Linkbase Document Exhibit 101.4* Labels Linkbase Document Exhibit 101.5* Presentation Linkbase Document Exhibit 101.6* Definition Linkbase Document * Submitted electronically herewith. ASTRONICS CORPORATION(Registrant)ASTRONICS CORPORATION (Registrant) Date: November 10, 2015 May 13, 2015By: David C. BurneyDavid C. Burney 26