-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L6Bc3y4qovnD7TNmCcJMLYawKf8dFbsuxH0fUQTE4GPUMZ+ipsvhtXxrg+E8pGf7 wKCmbCA4sdwEe/PKKOoIPg== 0000904802-99-000049.txt : 19990519 0000904802-99-000049.hdr.sgml : 19990519 ACCESSION NUMBER: 0000904802-99-000049 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990403 FILED AS OF DATE: 19990518 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ASTRONICS CORP CENTRAL INDEX KEY: 0000008063 STANDARD INDUSTRIAL CLASSIFICATION: PAPERBOARD CONTAINERS & BOXES [2650] IRS NUMBER: 160959303 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-07087 FILM NUMBER: 99629520 BUSINESS ADDRESS: STREET 1: 80 S DAVIS ST STREET 2: P O BOX 587 CITY: ORCHARD PARK STATE: NY ZIP: 14127 BUSINESS PHONE: 7166626640 MAIL ADDRESS: STREET 2: 1801 ELMWOOD AVE CITY: BUFFALO STATE: NY ZIP: 14207 FORMER COMPANY: FORMER CONFORMED NAME: ASTRONICS LUMINESCENT INC DATE OF NAME CHANGE: 19711209 10-Q 1 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 3, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ______________ to ________________ Commission file number 0-7087 ASTRONICS CORPORATION _________________________________________________________________ (Exact Name of Registrant as Specified in Its Charter) New York 16-0959303 _________________________________________________________________ (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 1801 Elmwood Avenue, Buffalo, New York 14207 _________________________________________________________________ (Address of Principal Executive Office) (Zip Code) 716-447-9013 _________________________________________________________________ (Registrant's Telephone Number, Including Area Code) Securities registered pursuant to Section 12(g) of the Act: $.01 par value Common Stock, $.01 par value Class B Stock _________________________________________________________________ (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] As of April 3, 1999, 4,882,210 shares of $.01 par value common stock and 688,364 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 3, 1999 With Comparative Figures for December 31, 1998 (Dollars in Thousands) April 3, 1999 December 31, (Unaudited) 1998 _____________ ____________ Current Assets: Cash $ 24 $ 523 Accounts receivable 5,913 5,435 Inventories 4,984 4,935 Prepaid expenses 858 1,229 __________ _________ Total current assets 11,779 12,122 Property, Plant and Equipment 47,296 44,090 Less accumulated depreciation and amortization 19,860 19,096 __________ _________ Net property, plant and equipment 27,436 24,994 Unexpended Industrial Revenue Bond Proceeds 2,488 4,657 Other Assets 2,013 1,934 __________ _________ $ 43,716 $ 43,707 ========== ========= Current Liabilities: Current maturities of long-term liabilities $ 447 $ 446 Accounts payable 3,726 2,939 Accrued expenses 1,232 2,085 Income taxes 505 347 __________ _________ Total current liabilities 5,910 5,817 Other Liabilities 14,141 15,160 Shareholders' Equity: Common stock, $.01 par value Authorized 10,000,000 shares, issued 5,231,397 in 1999, 5,225,001 in 1998 52 52 Class B common stock, $.01 par value Authorized 5,000,000 shares, issued 688,364 in 1999, 693,660 in 1998 7 7 - 2 - Additional paid-in capital 2,683 2,681 Retained earnings 21,865 20,932 __________ _________ 24,607 23,672 Less shares in Treasury, at cost 942 942 __________ _________ Total shareholders' equity 23,665 22,730 __________ _________ $ 43,716 $ 43,707 ========== ========= See notes to financial statements. - 3 - ASTRONICS CORPORATION Consolidated Statement of Income and Retained Earnings Period Ended April 3, 1999 With Comparative Figures for 1998 (Dollars in Thousands) (Unaudited) 1999 1998 ____ ____ Net Sales $ 12,325 $ 11,057 Costs and Expenses: Cost of products sold 8,726 7,692 Selling, general and administrative expenses 2,137 2,104 Interest expenses, net of interest income of $5 in 1999 and $0 in 1998 71 77 ________ _______ Total costs and expenses 10,934 9,873 ________ _______ Income before taxes 1,391 1,184 Provision for income taxes 458 439 ________ _______ Net Income 933 745 Retained Earnings: January 1 20,932 16,640 ________ _______ April 3 $ 21,865 $ 17,385 ======== ======== Earnings per share: Basic $ .17 $ .14 ======== ======== Diluted $ .16 $ .13 ======== ======== See notes to financial statements. - 4 - ASTRONICS CORPORATION Consolidated Statement of Cash Flows Three Months Ended April 3, 1999 With Comparative Figures for 1998 (Dollars in Thousands) (Unaudited) 1999 1998 ____ ____ Cash Flows from Operating Activities: Net income $ 933 $ 745 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 855 693 Provision for doubtful accounts 35 (30) Provision for deferred taxes 41 (16) Cash flows from changes in operating assets and liabilities: Accounts receivable (513) (749) Inventories (49) 81 Prepaid expenses 371 385 Accounts payable 788 1,436 Accrued expenses (853) (666) Income taxes 158 135 Deferred compensation 52 28 _______ ______ Net Cash provided (used) by Operating Activities $ 1,818 $2,042 _______ ______ Cash Flows from Investing Activities: Change in other assets (170) (5) Capital expenditures (3,206) (3,013) _______ ______ Net Cash provided (used) by Investing Activities $(3,376) $(3,018) _______ _______ Cash Flows from Financing Activities: New long-term debt 0 1,200 Principal payments on long-term debt and capital lease obligations (1,112) (715) Unexpended industrial revenue bond proceeds 2,169 0 Proceeds from issuance of stock 2 19 _______ _______ Net Cash provided (used) by Financing Activities $ 1,059 $ 504 _______ _______ Net increase (decrease) in Cash and Cash Equivalents (499) (472) Cash and Cash Equivalents at Beginning of Year 523 740 _______ _______ - 5 - Cash and Cash Equivalents at April 3 $ 24 $ 268 ======= ======= Disclosure of cash payments for: Interest $ 101 $ 95 Income taxes 258 322 See notes to financial statements. - 6 - ASTRONICS CORPORATION Notes to Financial Statements April 3, 1999 The accompanying unaudited statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of results for the full year. Operating results for the three-month period ended April 3, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. The balance sheet at December 31, 1998 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the financial statements and footnotes thereto included in the Company's 1998 annual report. Inventories are stated at the lower of cost or market, cost being determined in accordance with the first-in, first-out method. Inventories at April 3 are as follows: (in thousands) April 3, 1999 December 31, (Unaudited) 1998 _____________ ____________ Finished goods $ 1,423 $ 1,357 Work in progress 1,068 1,064 Raw material 2,493 2,514 ________ ________ $ 4,984 $ 4,935 Other liabilities consist of the following: (in thousands) April 3, 1999 December 31, (Unaudited) 1998 _____________ ____________ Long-Term Debt $ 10,309 $ 11,319 Long-Term Obligations under Capital Leases 687 789 Deferred Income Taxes 1,111 1,070 Deferred Compensation 2,034 1,982 ________ ________ $ 14,141 $ 15,160 ======== ======== - 7 - ASTRONICS CORPORATION Notes to Financial Statements (Continued) April 3, 1999 The Company adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," at December 31, 1998 which changes the way the Company reports information about its operating segments. The Company operates in two areas: Aerospace and Electronics, and Specialty Packaging. Operations in Aerospace and Electronics involve the design, manufacturing and marketing of state-of-the-art and advanced technological components incorporated into functional systems including instrument panels, photo reproductions and keyboard technologies. Customers are typically well known companies in the automotive, aerospace, defense, and electronics industries worldwide. Operations in Specialty Packaging involve the design, manufacturing and marketing of folding paperboard packaging for customers' delivery of their products and high quality custom imprinting of napkins, invitation and other paper products. The Company is a dominant provider of custom folding boxes in chosen markets. (in thousands) Three Months Three Months Ended April 3, 1999 Ended April 4, 1998 ___________________ ___________________ Aerospace Aerospace and Specialty and Specialty Electronics Packaging Electronics Packaging ___________ _________ ___________ _________ Sales to external customers $ 6,838 $ 5,487 $ 5,808 $ 5,249 Income before taxes 978 455 745 476 Segment assets 19,168 24,102 12,539 22,289 The Aerospace and Electronics segment is in the process of completing an 80,000 square foot facility to replace four leased facilities in its New Hampshire operation. The asset value of the land, building construction in progress, equipment, and unexpended Industrial Revenue Bond proceeds accounts for the major increase in segment assets from 1998 to 1999. A reconciliation of combined income before taxes for the three-month period is as follows: (in thousands) Three Months Ended April 3, 1999 April 4, 1998 _____________ _____________ Income before taxes from segments $1,433 $1,221 Corporate expenses, net (42) (37) _______ ______ Income before taxes $1,391 $1,184 - 8 - 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 Sales Three months Increase (Decrease) ended April 3, ___________________ _____________________ 1999 1998 1998-1999 ____ ____ _________ Net Sales: Aerospace and Electronics 55.5% 52.5% 17.7 % Specialty Packaging 44.5 47.5 4.5 % ____ ____ 100% 100% 11.5 % Cost of products sold 70.8 69.6 13.4 % Selling, general and administrative expenses 17.3 19.0 1.6 % Interest expenses, net .6 .7 (7.8)% ____ ____ 88.7% 89.3% 10.7 % Income before provision for income taxes 11.3% 10.7% 17.5 % Provision for taxes 3.7 4.0 4.3 % ____ ____ ____ Net Income 7.6% 6.7% 25.2 % ==== ==== INTRODUCTION Astronics Corporation operates in two business segments: Aerospace and Electronics; and Specialty Packaging. The Company changed the name of its Electronics Systems segment in 1997 to Aerospace and Electronics to better reflect its products and market focus. This business segment designs, manufactures and markets electroluminescent lamps and incorporates them into escape path lighting systems, aircraft cockpit lighting systems, military aircraft formation lighting, and ruggedized and avionics keyboards. - 9 - On April 24, 1998, the Company announced that the United States Air Force (USAF) had selected its Luminescent Systems Inc. subsidiary to design, develop and manufacture night vision lighting modification kits for the NVIS F-16 program. The contract with the Air Force is potentially valued in excess of $50,000,000. The initial award is for 377 F-16 aircraft to be completed in year 2000 for a revenue value in excess of $16,000,000. The USAF exercised its second option on February 10, 1999 for an additional 305 units for approximately $13,500,000. An additional 474 units, upon exercise of the government's option, would be manufactured in the following years. On March 17, 1999, The Erie County Industrial Development Agency, Buffalo, NY authorized the issuance and sale of Industrial Revenue Bonds up to $7,500,000 for Luminescent Systems, Inc. to acquire land and construct a new manufacturing facility in East Aurora, NY. On May 12, 1999, the Company acquired 14.9 acres of land and plans to construct a 70,000 square foot facility on this new property. On December 30, 1998, effective December 1, 1998, the Company renewed its Revolving Line of Credit for $10,000,000 at the bank's prime rate or LIBOR plus 100 basis points. The Company may convert up to $9,000,000 into a four-year term loan. This credit facility expires June 1, 2001. On December 30, 1998, the Company closed an Industrial Revenue tax-exempt bond with the Business Finance Authority of the State of New Hampshire for $7,250,000. The interest rate floats with tax exempt funds and is reset every seven days. These funds are being used to finance the new Lebanon, New Hampshire facility and manufacturing equipment for expanded production needs. During the Third Quarter of 1998, the Aerospace and Electronics segment started construction on a new 80,000 square foot building in Lebanon, New Hampshire. This will allow the Company to consolidate its New Hampshire operations, currently in four leased locations, into a single facility. The facility is scheduled for occupancy during the Third Quarter of 1999. During the Third Quarter of 1998, the New Hampshire operations of the Aerospace and Electronics segment received their ISO 9001 certification. In the Third Quarter of 1997, the Specialty Packaging segment received its ISO 9001 certification. - 10 - SALES The Company set a new First Quarter sales record with an increase in 1999 sales of 11.5 percent which compares to a 14.9 percent increase in 1998. Sales were $12,325,000 in 1999 compared to $11,057,000 in 1998 and $9,625,000 in 1997. Sales within the Aerospace and Electronics segment increased 17.7 percent in 1999 compared to 28.3 percent in 1998, while they were nominally the same in 1997, based on continuing operations. Sales in 1999 and 1998 have been strong in cockpit lighting, emergency egress lighting and formation lights. Sales in the Specialty Packaging segment increased 4.5 percent in 1999 compared to 3.0 percent in 1998, which compared to 14.2 percent in 1997. 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 to a new record at the end of the First Quarter of 1999 to $40,977,000 compared to the First Quarter 1998 backlog of $14,600,000. This compares to $29,887,000 at December 31, 1998. The backlog at the end of the First Quarter of 1997 was $10,500,000. The backlog is composed of $39,660,000 in the Aerospace and Electronics segment and $1,317,000 in the Specialty Packaging segment. EXPENSES Cost of products sold increased 13.4 percent in 1999, compared to sales growth of 11.5 percent. As a percent of sales, these costs increased slightly in 1999 to 70.8 percent of sales compared to 69.6 percent of sales in 1998 and 69.0 percent in 1997. Material costs were nominally the same in 1999, 1998, and 1997 at 20.6 percent of sales, 20.2 percent of sales and 20.2 percent of sales, respectively. Employee costs have remained steady in 1999 and 1998, while they were slightly lower in 1997. As a percent of sales, they were 30.8 percent, 30.8 percent, and 28.0 percent, respectively. As a percent of sales, supply costs increased in 1999 to 7.3 percent, compared to 6.4 percent in 1998 and 8.5 percent in 1997. This reflects timing of purchases and the cost of bringing certain outsourced operations in house. Depreciation, as a percent of sales, also increased. As a percent of sales, depreciation for the First Quarter of 1999, 1998 and 1997 was 5.7 percent, 5.2 percent, and 5.6 percent, respectively. The remaining general categories - 11 - increased/decreased less than one percentage point of sales. The net results of the above produced gross profits of $3,599,000 in 1999, $3,365,000 in 1998, and $2,982,000 in 1997. Selling, general and administrative expenses continued to decrease as a percentage of sales: 17.3 percent in 1999, 19.0 percent in 1998 and 19.5 percent in 1997. The majority of these costs are for employee services, marketing expenses and operating supplies. Operating income increased to $1,462,000, or 11.9 percent of sales, in 1999, compared to $1,261,000, or 11.4 percent of sales, in 1998, and compared to $1,109,000 in 1997, or 11.5 percent of sales. INTEREST Interest costs, net, decreased. In 1999, the expense was $71,000, or .6 percent of sales, compared to $77,000, or .7 percent of sales in 1998, and $109,000, or 1.1 percent of sales in 1997. The decrease in borrowings reflect the strong cash flow which allows steady reduction of indebtedness. The interest costs on the December 1998 bonds is being capitalized as part of the cost of the facility. As the project is completed, the interest costs will be expensed, probably starting in the Third Quarter. INCOME BEFORE TAXES As a result of the increase in sales of 11.5 percent in 1999 and 14.9 percent in 1998, and with overall costs increasing at a slightly slower pace, the Company reported income before taxes $1,391,000, or 11.3 percent in 1999, compared to $1,184,000, or 10.7 percent of sales in 1998, compared to $1,000,000 or 10.4 percent of sales in 1997. TAXES The Company's tax provision takes into account the federal and state taxes for which it is liable. The Company records its tax expense under the FASB 109 guidelines. As of January 1, 1999, the Company established Astronics Foreign Sales Corporation, which reduces its taxes on sales made to customers in foreign countries. Normally, the First Quarter's tax provision is higher as all minimum taxes are accrued during this period. The 1999 provision for taxes is $458,000, or 3.7 percent of sales, compared to the 1998 provision of $439,000, or 4.0 percent of sales. The First Quarter of 1999 benefitted from the establishment of the Foreign Sales Corporation and a revision of the 1998 tax provision. - 12 - NET INCOME Net income for the First Quarter of 1999 established a new record for the quarter: $933,000, or $.16 per diluted share, compared to $745,000, or $.13 per diluted share, earned in 1998, and compared to $583,000, or $.10 per diluted share in 1997. LIQUIDITY Cash flow from operating activities was $1,818,000 in 1999 compared to $2,042,000 in 1998, and compared to $675,000 in 1997. The Company invested $3,206,000 in capital expenditures in 1999 compared to $3,013,000 in 1998, and compared to $159,000 in the First Quarter of 1997. The Company reduced its indebtedness by $1,112,000 in the First Quarter of 1999, compared to $715,000 in the First Quarter of 1998, while in 1998 it borrowed $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 a $10,000,000 revolving line of credit available for additional working capital needs, of which it had utilized $2,800,000 at the end of the First Quarter of 1999, $3,000,000 at the end of the First Quarter of 1998, and $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 1999. COMMITMENTS The Company has outstanding commitments for capital investments of approximately $5,400,000 at the end of the First Quarter of 1999, compared to $2,400,000 at the end of the First Quarter of 1998, and compared to $2,000,000 at the end of the First Quarter of 1997. The Company has outstanding approximately $1,500,000 to complete the New Hampshire manufacturing facility and $2,800,000 for two new die cutters. The balance of the commitments are in the normal course of business. 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. - 13 - 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 not have programmers writing code internally. During 1998 and 1997, the Company installed upgrades to some of its systems that are Year 2000 compliant and switched software for other functions that are Year 2000 compliant. All operating systems are now Year 2000 compliant, except for the Human Resources system and a voice mail system. The Human Resource system will be replaced in the Third Quarter of 1999. The voice mail system software upgrade will also be implemented in the Third Quarter. The Company has tested various systems and will continue to test applications it runs, as well as those it interfaces with including customers, vendors, and other outside sources. The Company believes it is ready for Year 2000 except for the above-mentioned programs. The total invested for software upgrades to date is approximately $150,000 and the Company's budget for additional upgrades and new software in 1999 is approximately $40,000. The Company has interfaced with the suppliers of production, engineering and administrative equipment that have embedded chips in their products. The Company is seeking full assurances that these are either Year 2000 compliant, have no date sensitivity, or that necessary upgrades will be available by June 30, 1999. The risk that the Company faces is in their suppliers of utilities, mainly electric, natural gas, and telecommunication. These vendors have stated that they have or will test their systems before the end of the Second Quarter. They have stated that they do not anticipate any problems. Another area of risk is that several key pieces of manufacturing equipment are made in Europe, where companies reportedly are slowly addressing the Year 2000 issues. The Company plans to have assurance from these suppliers that they have adequate parts in U.S.A. warehouses with Year 2000 compliant delivery systems. If assurances are not adequate, the Company will increase its inventory of vital spare parts. The Company has no other specific contingency plans. - 14 - 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 29, 1999, the nominees to the Board of Directors were re- elected based on the following results: Votes Withholding Nominees Votes For Authority ________ _________ _________________ Robert T. Brady 9,214,429 453,812 John B. Drenning 9,214,429 453,812 Kevin T. Keane 9,214,292 453,949 Robert J. McKenna 9,214,429 453,812 John M. Yessa 9,214,429 453,812 The selection of Ernst & Young LLP as the Registrant's auditors was approved by the following vote: 9,468,936 in favor; 11,146 against; and 188,159 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. - 15 - 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 17, 1999 ASTRONICS CORPORATION ______________________________ /s/ John M. Yessa ______________________________ (Signature) John M. Yessa Vice President-Finance and Treasurer - 16 - EXHIBIT 11 COMPUTATION OF PER SHARE EARNINGS (in thousands, except for per share data) Quarter Ended April 3 1999 1998 ____ ____ Net income $ 933 $ 745 ====== ====== Basic earnings per share weighted average shares 5,570 5,526 Net effect of dilutive stock options 398 364 ______ ______ Diluted earnings per share weighted average shares 5,968 5,890 ====== ====== Basic earnings per share $ .17 $ .14 ====== ====== Diluted earnings per share $ .16 $ .13 ====== ====== - 17 - EX-27 2
5 3-MOS DEC-31-1999 APR-03-1999 24 0 6,124 211 4,984 11,779 47,296 19,860 43,716 5,910 0 0 0 59 23,606 43,716 12,325 12,325 8,726 10,863 0 0 71 1,391 458 0 0 0 0 933 .17 .16
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