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 April 4, 1998
[ ] 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 April 4, 1998, 4,318,464 shares of $.01 par value common stock and
715,797 shares of $.01 par value Class B common stock were outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ASTRONICS CORPORATION
Consolidated Balance Sheet
April 4, 1998
With Comparative Figures for December 31, 1997
ASSETS
(Dollars in
Thousands)
April 4, 1998 December 31,
(Unaudited) 1997
Current Assets:
Cash $ 268 $ 740
Accounts receivable 5,222 4,443
Inventories:
Finished goods 1,514 1,740
Work in process 1,022 879
Raw material 2,144 2,142
Prepaid expenses 30 415
-------- --------
Total current assets 10,200 10,359
Property, Plant and Equipment 37,786 34,773
Less accumulated depreciation
and amortization 17,244 16,613
-------- --------
Net property, plant and equipment 20,542 18,160
Other Assets 1,666 1,722
$ 32,408 $ 30,241
======== ========
See notes to financial statements.
ASTRONICS CORPORATION
Consolidated Balance Sheet
April 4, 1998
With Comparative Figures for December 31, 1997
LIABILITIES AND SHAREHOLDERS' EQUITY
(Dollars in
Thousands)
April 4, 1998 December 31,
(Unaudited) 1997
Current Liabilities:
Current maturities of long-term debt $ 594 $ 1,194
Accounts payable 4,000 2,564
Accrued expenses 1,276 1,942
Income taxes 495 360
------- -------
Total current liabilities 6,365 6,060
Long-Term Debt 3,300 2,110
Long-Term Obligations under
Capital Leases 1,090 1,194
Deferred Income Taxes 806 822
Deferred Compensation 1,885 1,857
Shareholders' Equity:
Common stock, $.01 par value
Authorized 10,000,000 shares, issued
4,660,410 in 1998, 4,642,910 in 1997 47 46
Class B common stock, $.01 par value
Authorized 5,000,000 shares, issued
715,797 in 1998, 715,797 in 1997 7 7
Additional paid-in capital 2,538 2,520
Retained earnings 17,385 16,640
_______ _______
19,977 19,213
Less shares in Treasury, at cost 1,015 1,015
Total shareholders' equity 18,962 18,198
$32,408 $30,241
======= =======
See notes to financial statements.
ASTRONICS CORPORATION
Consolidated Statement of Income and Retained Earnings
Three Months Ended April 4, 1998
With Comparative Figures for 1997
(Dollars in
Thousands)
(Unaudited)
1998 1997
Net Sales $ 11,057 $ 9,625
Costs and Expenses:
Cost of products sold 7,692 6,643
Selling, general and administrative expenses 2,104 1,873
Interest expenses, net of interest income
of $0 in 1998 and $11 in 1997 77 109
--------- ---------
Total costs and expenses 9,873 8,625
--------- ---------
Income before taxes 1,184 1,000
Provision for income taxes 439 417
--------- ---------
Net Income 745 583
Retained Earnings:
January 1 16,640 13,089
--------- ---------
April 4 $ 17,385 $ 13,672
========= =========
Earnings per share:
Basic $ .15 $ .12
========= =========
Diluted $ .14 $ .11
========= =========
See notes to financial statements.
ASTRONICS CORPORATION
Consolidated Statement of Cash Flows
Three Months Ended April 4, 1998
With Comparative Figures for 1997
(Dollars in Thousands)
(Unaudited)
1998 1997
Cash Flows from Operating Activities:
Net income $ 745 $ 583
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 693 665
Provision for doubtful accounts (30) (77)
Provision for deferred taxes (16) 50
Cash flows from changes in
operating assets and liabilities:
Accounts receivable (749) 82
Inventories 81 155
Prepaid expenses 385 128
Accounts payable 1,436 166
Accrued expenses (666) (554)
Income taxes 135 (560)
Deferred compensation 28 37
------- -------
Net Cash provided (used) by
Operating Activities: $ 2,042 $ 675
------- -------
Cash Flows from Investing Activities:
Change in other assets (5) (36)
Capital expenditures (3,013) (159)
------- -------
Net Cash provided (used) by
Investing Activities $(3,018) $ (195)
------- -------
Cash Flows from Financing Activities:
New long-term debt 1,200 250
Principal payments on long-term
debt and capital lease obligations (715) (760)
Proceeds from issuance of stock 19 149
------- -------
Net Cash provided (used) by
Financing Activities $ 504 $ (361)
------- -------
Net increase (decrease) in Cash
and Cash Equivalents (472) 119
Cash and Cash Equivalents at
Beginning of Year 740 1,130
------- -------
Cash and Cash Equivalents at April 4 $ 268 $ 1,249
======= =======
Disclosure of cash payments for:
Interest $ 95 $ 129
Income taxes 322 926
See notes to financial statements.
ASTRONICS CORPORATION
Notes to Financial Statements
April 4, 1998
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, 1997.
ASTRONICS CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The following table sets forth as a percent of net sales certain items
reflected in the financial data and the percentage increase (decrease) of
such items as compared to the prior period.
Percent of Net Sales Period-to-Period
Three months ended April 4, Increase (Decrease)
--------------------------- -------------------
1998 1997 1997-1998
---- ---- ---------
Net Sales:
Aerospace and Electronics 52.5% 47.1% 28.2 %
Specialty Packaging 47.5 52.9 3.0 %
------ ------
100.0% 100.0% 14.9 %
Cost of products sold 69.6 69.0 16.2 %
Selling, general and
administrative expenses 19.0 19.5 10.9 %
Interest expenses, net .7 1.1 (29.4)%
------ ------
89.3% 89.6% 14.5 %
Income before provision
for income taxes 10.7% 10.4% 18.4 %
Provision for taxes 4.0 4.3 5.3 %
------ -------
Net Income 6.7% 6.1% 27.8 %
====== ======
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. The Company 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 April 24, 1998, the Company announced the United States Air Force had
selected its Luminescent Systems Inc. subsidiary to design, develop and
manufacture night vision lighting modification kits for the F-16 NVIS
program. The contract with the Air Force is potentially valued in excess of
$50,000,000. Initially, 377 F-16 aircraft will be completed by the end of
1999 for a value in excess of $16,000,000. An additional 779 units, under
exercise of the government's option, would be manufactured in the following
two years.
On July 1, 1997, the Company renegotiated the interest rate terms on 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. No other terms
or conditions were changed in the agreement,
On October 30, 1996, effective September 30, 1996, Astronics Corporation
sold its Rodgard Division, a manufacturer of thick walled elastomeric
products. Sales for the nine months of 1996 totaled $1,494,000, and sales
for the year ended December 31, 1995 were $2,568,000.
SALES
The Company set a new First Quarter sales record with an increase in sales
of 14.9 percent over the record established in 1997. Sales were
$11,057,000 compared to $9,625,000 in 1997 and $9,569,000 in 1996. Sales
from continuing operations [eliminating the Rodgard Division sales for
1996] for the First Quarter of 1997 showed growth of 6.7 percent. In 1996,
sales increased 32.4 percent from 1995 sales of $7,226,000.
Sales within the Aerospace and Electronics segment increased 28.3 percent
in 1998, while they were nominally the same in 1997, based on continuing
operations. In 1996, sales increased 70.7 percent, substantially the result
of the November 1995 acquisition. The Company's order activity has
increased in 1998.
Sales in the Specialty Packaging segment increased nominally (3.0 percent)
in 1998, compared to 14.2 percent in 1997 and 5.4 percent in 1996. The
Company continues to expand its market share through focus on customer
service with on-time deliveries, high quality products and short turnaround
times. Price increases have been nominal, but the pressure to reduce
pricing continues to moderate.
BACKLOG
The Company's backlog increased 35.2 percent in the First Quarter of 1998
to a new all time record of $14,600,000. This compares to $10,800,000 at
December 31, 1997. The backlog at the end of the First Quarter of 1996 was
$10,500,000. The backlog is composed of $13,400,000 in the Aerospace and
Electronics segment and $1,200,000 in the Specialty Packaging segment.
EXPENSES
Cost of products sold increased slightly in 1998 to 69.8 percent of sales
compared to 69.0 percent in 1997 and 71.6 percent of sales in 1996. The
increase in 1998 reflects higher employee costs, 30.8 percent, compared to
28.0 percent in 1997 and 27.9 percent in 1996. The increased costs are for
additional personnel supporting the technical aspects of the businesses.
The decrease in overall product costs in 1997 resulted from improved
productivity, reduced tooling and transition costs. Material costs were
nominally the same in 1998, 20.2 percent of sales, as in 1997. This
compares to 23.6 percent in 1996. As a percent of sales, the Company
experienced higher rental and repair costs, while it experienced lower
depreciation and supply expenses. The remaining general categories
increased/decreased less than one percentage point of sales. The net
results of the above produced gross profits of $3,365,000 in 1998,
$2,982,000 in 1997, and $2,721,000 in 1996.
Selling, general and administrative expenses continued to decrease as a
percentage of sales: 19.0 percent in 1998, 19.5 percent in 1997, and 20.4
percent in 1996. The majority of these costs are for employee services
(58.0 percent), marketing expenses (13.1 percent), and operating supplies
(13.9 percent). The percent of total selling, general and administrative
costs is for 1998, but similar percentages were experienced in the prior
years. The Company has a policy that it reserves all trade receivables over
120 days (150 days in 1996), or earlier if there are substantial questions.
During this quarter, the Company expensed $40,000 for doubtful accounts,
compared to a reduction in expenses in 1997 of $60,000, and an expense of
$163,000 in 1996. Operating income increased to $1,261,000, or 11.4
percent of sales, in 1998, compared to $1,109,000 in 1997, or 11.5 percent
of sales, and compared to $769,000, or 8.0 percent in 1996.
INTEREST
Interest costs, net, decreased in 1998 by $32,000 to $77,000. In 1997
interest costs decreased compared to an increase in 1996. The 1998 and
1997 decrease in borrowings reflect the strong cash flow which allows
steady reduction of indebtedness. The 1996 increase reflected the financing
of the November 1995 acquisition. As a percent of sales, net interest
costs were .7 percent of sales in 1998, 1.1 percent of sales in 1997, and
2.4 percent of sales in 1996. While the Company increased its borrowing
for the acquisition in 1995, and for working capital in late 1995 and early
in 1996, 1997 and 1998, it has steadily reduced prior debt as scheduled.
The revolving line of credit is priced at LIBOR plus 100 basis points.
Gross interest expense was $77,000 in 1998, $120,000 in 1997, and $235,000
in 1996.
SUMMARY
As a result of the increase in sales of 14.9 percent, with overall costs
increasing at a slightly slower pace (14.5 percent), the Company reported
income before taxes of $1,184,000, or 10.7 percent of sales in 1998,
compared to $1,000,000 or 10.4 percent of sales in 1997, and $538,000, or
5.6 percent of sales in 1996.
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. Normally, the First Quarter's tax provision is higher as
all minimum taxes are accrued during this period. The 1998 provision is
$439,000, or 4.0 percent of sales, compared to the 1997 tax provision of
$417,000, or 4.3 percent of sales, which compares to $172,000, or 1.8
percent of sales, in 1996. The 1996 provision reflected favorable changes
in the New York State tax law for the First Quarter of 1996 and for the
1995 year.
NET INCOME
Net income for the First Quarter of 1998 established a new record for the
quarter: $745,000, or $.14 per diluted share, compared to $583,000, or
$.11 per diluted share in 1997, which compared to $366,000, or $.07 per
diluted share in 1996.
LIQUIDITY
Cash flow from operating activities increased by $2,042,000 in 1998,
compared to $675,000 in 1997. The Company invested $3,013,000 in new
equipment in 1998, compared to $159,000 in the First Quarter of 1997. The
Company reduced its indebtedness by $715,000 in the First Quarter while
borrowing $1,200,000 for working capital. This compared to a reduction in
indebtedness of $760,000 in the First Quarter of 1997, when the Company
borrowed $250,000 for working capital purposes. The Company has an
$11,000,000 revolving line of credit available for additional working
capital needs, of which it had utilized $3,000,000 at the end of the First
Quarter of 1998 compared to $2,750,000 at the end of the First 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 1998.
COMMITMENTS
The Company has outstanding commitments for capital investments of
approximately $2,400,000 at the end of the First Quarter of 1998 compared
to $2,000,000 at the end of the First Quarter of 1997. An investment of
approximately $1,600,000, initially scheduled for installation in the First
Quarter of 1997, was delayed until the Second Quarter. During the Second
Quarter 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 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.
The Company is also in the initial stages of planning the addition of a new
facility for the New Hampshire operations of the Aerospace and Electronics
segment. The initial plans are for approximately 80,000 square feet of
building along with additional manufacturing equipment. The estimated
costs are $7,000,000 for the project, which would be completed in mid-1999.
Currently, the Company leases three buildings for its production,
engineering, marketing and administrative purposes. The Business Authority
of New Hampshire has induced the Company for the issuance of $7,250,000 in
tax exempt Industrial Revenue Bonds.
YEAR 2000
The Company employs several different computer systems for financial,
engineering and manufacturing purposes. The Company purchases these
systems, both hardware and software. Therefore, it does have programmers
writing code internally. In the last year, the Company was able to install
upgrades to some of its systems that are Year 2000 compliant. Other
systems will be upgraded in 1998 or in 1999, which the vendors have
promised to be Year 2000 compliant. In the case of some software, the
Company is installing a totally new software package that meets the Year
2000 issue as well as other desired improvements. At this time, the
Company is not aware of any vendor's schedule that would affect the
continuous operations of the business. The total invested for software
upgrades to date is approximately $50,000, and the Company anticipates
another $100,000 being spent for upgrades and new software in 1998. The
Company continues to monitor this area. Also, the Company is seeking
assurances of Year 2000 compliance by its key suppliers.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Securities Holders.
At the annual meeting of shareholders held on April 23, 1998, the
nominees to the Board of Directors were re-elected based on the
following results:
Votes Withholding
Nominees Votes For Authority
Robert T. Brady 9,034,363 261,087
John B. Drenning 9,190,280 105,170
Kevin T. Keane 9,236,603 58,847
Robert J. McKenna 9,240,159 55,291
John M. Yessa 9,240,159 55,291
The increase by 250,000 shares of the Company's $.01 par value
common stock available for issuance under the Company's Employee
Stock Purchase Plan was approved by the following vote: 8,774,201
in favor; 497,339 against; and 23,910 abstentions.
The selection of Ernst & Young LLP as the Registrant's auditors
was approved by the following vote: 9,246,743 in favor; 37,914
against; and 10,793 abstentions.
Under applicable New York law and the Company's charter
documents, abstentions and non-votes have no effect.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
Exhibit 11. Computation of Per Share Earnings.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATED: May 18, 1998
ASTRONICS CORPORATION
/S/John M. Yessa
John M. Yessa
Vice President-Finance and Treasurer
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
(in thousands, except for per share data)
Quarter Ended April 4
1998 1997 1996
Net income $ 745 $ 583 $ 366
====== ====== ======
Basic earnings per share
weighted average shares 5,025 5,022 4,786
Net effect of dilutive
stock options 331 345 354
______ ______ ______
Diluted earnings per share
weighted average shares 5,356 5,368 5,140
====== ====== ======
Basic earnings per share
$ .15 $ .12 $ .08
====== ====== ======
Diluted earnings per share $ .14 $ .11 $ .07
====== ====== ======