ASTRONICS CORP — Interim / Quarterly Report 2001

May 7, 2001

10-Q 1 astronics10q.htm FORM 10-Q Form 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, DC

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 March 31, 2001

[ ] 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 Incorporation or Organization)	(I.R.S. Employer 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 March 31, 2001, 5,381,477 shares of $.01 par value common stock and 1,022,647 shares of $.01 par value Class B common stock were outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

ASTRONICS CORPORATION Consolidated Balance Sheet March 31, 2001 With Comparative Figures for December 31, 2000

(Dollars in Thousands) March 31, 2001 December 31, (Unaudited) 2000 ----------- ---- Current Assets: Cash $ 1,773 $ 45 Accounts receivable 11,141 12,837 Inventories 11,277 10,521 Prepaid expenses 561 512 ------ ------ Total current assets 24,752 23,915 Property, Plant and Equipment, at cost 57,735 57,447 Less accumulated depreciation and amortization 22,215 21,231 ------ ------ Net property, plant and equipment 35,520 36,216 Unexpended Industrial Revenue Bond Proceeds 1,101 1,701 Other Assets 5,088 5,188 ------ ------ $ 66,461 $67,020 ====== ====== Current Liabilities: Current maturities of long-term debt $ 936 $ 1,276 Accounts payable 5,669 5,583 Accrued expenses 1,845 2,908 Income taxes 486 427 ------ ------ Total current liabilities 8,936 10,194 Long-term debt 17,105 17,746 Other Liabilities 4,981 4,890 Shareholders' Equity: Common stock, $.01 par value Authorized 10,000,000 shares, issued 5,670,938 in 2001, 5,434,403 in 2000 57 54 Class B common stock, $.01 par value Authorized 5,000,000 shares, issued 1,051,446 in 2001, 1,190,753 in 2000 10 12 Additional paid-in capital 3,150 3,100 Accumulated other comprehensive income (loss) (1) 7 Retained earnings 33,015 31,809 ------ ------ 36,231 34,982 Less shares in Treasury, at cost 792 792 ------ ------ Total shareholders' equity 35,439 34,190 $ 66,461 $67,020 ====== ======

See notes to financial statements.

ASTRONICS CORPORATION Consolidated Statement of Income and Retained Earnings Period Ended March 31, 2001 With Comparative Figures for 2000

(Dollars in Thousands) (Unaudited) 2001 2000 ---- ---- Sales $20,356 $15,447 Less: Freight charges 433 297 ------ ------ Net Sales 19,923 15,150 Costs and Expenses: Cost of products sold 15,255 11,624 Selling, general and administrative expenses 2,673 2,089 Interest expenses, net of interest income of $46 in 2001 and $53 in 2000 156 68 Total costs and expenses 18,084 13,781 ------ ------ Income before taxes 1,839 1,369 Provision for income taxes 633 361 Net Income 1,206 1,008 Retained Earnings: January 1 31,809 25,727 ------ ------ March 31 $33,015 $26,735 ====== ====== Earnings per share: Basic $ .19 $ .16 === === Diluted $ .18 $ .15 === ===

See notes to financial statements.

ASTRONICS CORPORATION Consolidated Statement of Cash Flows Three Months Ended March 31, 2001 With Comparative Figures for 2000

(Dollars in Thousands) (Unaudited) 2001 2000 ---- ---- Cash Flows from Operating Activities: Net income $ 1,206 $ 1,008 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,106 959 Other 91 132 Cash flows from changes in operating assets and liabilities, excluding effects of acquisitions: Accounts receivable 1,696 (829) Inventories (756) (623) Prepaid expenses (49) (301) Accounts payable 86 (1,550) Accrued expenses (1,063) (728) Income taxes 59 238 Net Cash provided by Operating Activities $ 2,376 $ (1,694) ------ ------ Cash Flows from Investing Activities: Change in other assets (42) (101) Capital expenditures (267) (1,401) Net Cash provided (used) by Investing Activities $ (309) $ (1,502) ----- ------ Cash Flows from Financing Activities: New long-term debt 150 1,700 Principal payments on long-term debt and capital lease obligations (1,140) (107) Unexpended industrial revenue bond proceeds 600 891 Proceeds from issuance of stock 51 19 Net Cash provided by Financing Activities $ (339) $ 2,503 ---- ----- Net increase (decrease) in Cash and Cash Equivalents 1,728 (693) Cash and Cash Equivalents at Beginning of Year 45 1,153 Cash and Cash Equivalents at March 31 $ 1,773 $ 460 ===== === Disclosure of cash payments for: Interest $ 245 $ 123 Income taxes 588 86

See notes to financial statements.

ASTRONICS CORPORATION

Notes to Financial Statements March 31, 2001

1) The accompanying unaudited statements have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. The results of operations for any interim period are not necessarily indicative of results for the full year. Operating results for the three-month period ended March 31, 2001 are not necessarily indicative of the results that may be expected for the year ended December 31, 2001.

The balance sheet at December 31, 2000 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 2000 annual report.

2) Inventories are stated at the lower of cost or market, cost being determined in accordance with the first-in, first-out method. Inventories are as follows:

(in thousands)	March 31, 2001 (Unaudited)	December 31, 2000
Finished Goods	$ 2,557	$ 2,740
Work in Progress	2,498	1,564
Raw Material	6,222	6,217
	$11,277	$10,521

3) The Company operates in two business segments: The Aerospace-Electronics segment concentrates on the design and manufacture of specialized lighting and control systems for aircraft. These systems typically encompass the electrical circuitry, lighting and control fixtures as well as the light elements. System components include power supplies, battery-based backup systems, dimmers, keyboards, control panels and specialized lighting fixtures. The systems are typically used in aircraft cockpits (avionics systems), cabins (escape path systems), and exteriors (position lighting systems). Customers include well-known aircraft manufacturers, operators and avionics companies. The Aerospace-Electronics segment also manufactures electroluminescent lamps used primarily to backlight liquid crystal displays in a wide array of consumer electronics applications, including watches, pagers, cell phones and personal digital assistants.

Astronics Printing-Packaging segment is the dominant North American manufacturer of stock folding cartons for small to medium size confectionary store operators. Custom folding cartons are also manufactured for a wide range of industrial and consumer products companies. This segment also custom prints invitations, napkins and accessories for all social and business events. Printed office products include business cards, post cards and presentation folders. The Company is a dominant provider of custom folding boxes in chosen markets.

(in thousands)	Three Months Ended March 31, 2001 — Aerospace and Electronics	Printing and Packaging	Three Months Ended April 1, 2000 — Aerospace and Electronics	Printing and Packaging
Net sales to external customers	$12,964	$6,959	$ 9,426	$5,724
Income before taxes	1,311	484	734	735
	March 31, 2001		December 31, 2000
Segment assets	$36,996	$25,642	$38,653	$26,455

A reconciliation of combined income before taxes for the three-month period is as follows:

(in thousands)	Three Months Ended
	March 31, 2001	April 1, 2000
Income before taxes from segments	$ 1,795	$ 1,469
Corporate expenses, net	44	(100)
Income before taxes	$ 1,839	$ 1,369

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 Three months ended March 31, ---------------------------- 2001 2000 ---- ---- Net Sales: Aerospace and Electronics 65.1% 62.2% Printing and Packaging 34.9 37.8 ----- ----- 100.0% 100.0% Cost of products sold 76.6 76.7 Selling, general and administrative expenses 13.4 13.8 Interest expenses, net .8 .5 ----- ----- 90.8% 91.0% Income before provision for income taxes 9.2% 9.0% Provision for taxes 3.2 2.4 ----- ----- Net Income 6.0% 6.6% ===== =====

| NET SALES | Net sales set a new record for the First Quarter and
2001. Net sales increased for the Quarter by 31.5% in 2001 compared to the First
Quarter 2000. |
| --- | --- |
| | Net sales in the Aerospace and Electronics
segment increased 38% for the First Quarter 2001, compared to the First Quarter
2000. This increase resulted mainly from the F-16 program, which began shipments
in the Third Quarter of 1999. F-16 sales for the First Quarter 2001 were
$5,100,000 compared to $3,400,000 for the First Quarter 2000. In May 2000, we
acquired our Montreal operation which added $960,000 in sales for the First
Quarter 2001. |
| | Sales in the Printing and Packaging segment
increased 21.6% for the First Quarter of 2001. New e-commerce based initiatives
for short run commercial printing accounted for 60% of the increase in 2001. The
balance came from our custom product line as this segment continues to expand
its market share through focus on customer service with on-time deliveries, high
quality products and short turnaround times. |
| BACKLOG | The Companys backlog at March 31, 2001 was
$46,200,000. The backlog is composed of $44,100,000 in the Aerospace and
Electronics segment and $2,100,000 in the Printing and Packaging segment.
Approximately $29,000,000 of the Aerospace and Electronics backlog is scheduled
to ship over the balance of 2001. Virtually all of the Printing and Packaging
backlog will ship in the next 90 days. |
| EXPENSES | Cost of products sold remained stable at
76.6% of sales in 2001 compared to 76.7% of sales in 2000. |
| | Gross profit margins in our Aerospace and
Electronics segment improved to 23.7% in the First Quarter 2001 from 19.7% in
the First Quarter 2000 as a result of production efficiencies in the F-16
program. In the Printing and Packaging segment margins slipped to 23% in the
First Quarter 2001 from 29.3% in the First Quarter of 2000 in part due to
product mix. In addition, training costs were incurred for new employees as this
segment expanded its capability to meet anticipated demand for short-run
commercial printing. |
| | Selling, general and administrative expenses
decreased slightly as a percentage of sales: 13.4% in 2001 and 13.8% in 2000.
The majority of these costs are for employee services, marketing expenses and
operating supplies. |
| | Earnings before interest and taxes for the
First Quarter of 2001 were $1,995,000, or 10.0% of sales, compared to
$1,437,000, or 9.5% of sales, in 2000. |
| INTEREST | Net interest expense continued to be less
than 1% of sales: 0.8% of sales for the 2001 and 0.5% of sales for the 2000
First Quarters, respectively. |
| INCOME BEFORE TAXES | Income before taxes for the 2001
First Quarter was 9.2% of sales compared to 2000's 9.0% of sales. |
| TAXES | The Company's tax provision as a percent of
sales increased in 2001 as a percent of sales compared to 2000. The 2000's First
Quarter's effective tax rate was reduced by favorable adjustments from estimated
provisions. |
| NET INCOME | Net income for the First Quarter of 2001
established a new record for the Quarter: $1,206,000, or $.18 per diluted share.
This breaks the record set in 2000 of $1,008,000, or $.15 per diluted
share. |
| LIQUIDITY | Cash provided by operating activities was
$2,376,000 during the First Quarter of 2001, which is roughly equal to net
income plus depreciation and amortization. On a net basis there was little
change in working capital components from year end levels. |
| | The Company's capital expenditures were down by
$1,098,000 from 2000 levels, reflecting the timing of facilities acquisitions.
Financing activities in 2001 reflect scheduled debt repayments and reduction in
the usage of the Company's revolving line of credit for operating and investment
needs. |
| | The Company has a $12,000,000 revolving line of
credit, of which it had utilized $3,400,000 at March 31, 2001, compared to
$4,133,000 at December 31, 2000. The Company believes that cash balances at
March 31, 2001, cash flow from operations and availability on the revolving line
of credit are adequate to meet the Company's operational and investment plans
for 2001. |
| COMMITMENTS | At March 31, 2001, the Company had
outstanding commitments for capital investments of approximately $3,500,000. 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 have a
material adverse affect on its financial condition. |

PART II - OTHER INFORMATION

Item 1. Legal Proceedings .

None.

Item 2. Changes in Securities and Use of Proceeds .

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 26, 2001, the nominees to the Board of Directors were re-elected based on the following results:

Nominees	Votes For	Votes Withholding Authority
Robert T. Brady	13,337,013	725,762
John B. Drenning	13,294,303	768,472
Peter J. Gundermann	13,337,013	725,762
Daniel G. Keane	13,331,348	728,817
Kevin T. Keane	13,331,513	731,262
Robert J. McKenna	13,336,873	725,902

The selection of Ernst & Young LLP as the Registrant's auditors was approved by the following vote: 13,631,999 in favor; 16,346 against; and 406,886 abstentions.

The proposed 2001 Stock Option Plan was approved by the following vote: 10,137,777 in favor; 1,706,993 against; and 63,233 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 7, 2001
/s/ C. Anthony Rider (Signature) C. Anthony Rider Vice President-Finance and Treasurer (Principal Financial Officer)