ASTRONICS CORP — Regulatory Filings 2005

Apr 21, 2005

8-K/A 1 form_8ka2.htm FORM 8-K/A - AMENDMENT NO. 2 Form 8-K/A div.Section1 {page:Section1;}

SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K/A

(Amendment No. 2)

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 3, 2005

ASTRONICS CORPORATION

(Exact name of registrant as specified in its charter)

New York	0-7087	16-0959303
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

130 Commerce Way, East Aurora, New York	14052
(Address of principal executive offices)	(Zip Code)

Registrant's Telephone Number, Including Area Code: (716) 805-1599

N/A (Former name or former address, if changed since last report)

Item 2.01 Acquisition or Disposition of Assets

As previously reported on February 3, 2005 Astronics Corporation (the "Company") completed the acquisition of substantially all of the net assets of the Airborne Electronic Systems business unit from a subsidiary of General Dynamics Corporation.

On February 7, 2005 the Company filed a current report on Form 8-K disclosing the acquisition but omitted the financial statements of the acquired business and the pro forma financial information required by Item 7 of Form 8-K, as permitted by applicable rules and regulations. On April 19, 2005, the Company filed a current report Form 8-K/A amending the Form 8-K filed on February 7, 2005 to include the information required by Item 7 of Form 8-K.

This current report on Form 8-K/A (Amendment No. 2) amends the current report on Form 8-K/A filed on April 19, 2005 to correct the report of the independent registered public accounting firm filed as part of Item 9.01 (a) of Form 8-K and correct other immaterial errors.

Item 9.01 Financial Statements, Pro Forma Financial Information and Exhibits

The following financial statements and pro forma financial information are filed as a part of this report.

(a)	Financial Statements of Businesses Acquired
	(i)	Audited
Financial Statements for the years ended December 31, 2004 and 2003
(b)	Pro
Forma Financial Information
	(i)	Unaudited Pro Forma
Condensed Combined Statement of Operations for the year ended December 31,
2004
	(ii)	Unaudited Pro
Forma Condensed Combined Balance Sheet as of December 31, 2004
	(iii)	Notes to the
Unaudited Pro Forma condensed Combined Financial Statements

Item 9.01 (a) Financial Statements of Business Acquired

FINANCIAL STATEMENTS
AIRBORNE ELECTRONIC SYSTEMS
(A Division of General Dynamics OTS (Aerospace), Inc.)
DECEMBER 31, 2004

Report of Independent Registered Public Accounting Firm

To the Board of Directors of Astronics Corporation

We have audited the accompanying statements of financial position of Airborne Electronic Systems (a division of General Dynamics OTS (Aerospace), Inc.) as of December 31, 2004 and 2003, and the related statements of operations and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards as established by the Auditing Standards Board (United States) and in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Airborne Electronic Systems as of December 31, 2004 and 2003, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

Malin, Bergquist & Company, LLP

Erie, Pennsylvania March 18, 2005

1

AIRBORNE ELECTRONIC SYSTEMS (A Division of General Dynamics OTS (Aerospace), Inc.) STATEMENTS OF FINANCIAL POSITION As of December 31, 2004 and 2003 (in thousands) — ASSETS	2004	2003
CURRENT ASSETS
Cash	$ 298	$ 783
Accounts receivable, net of allowances for
doubtful accounts of $100	5,347	4,193
Contracts in progress	2,086	1,296
Inventories	6,067	4,835
Prepaid and other current assets	496	571
Total current
assets	14,294	11,678
PROPERTY, PLANT AND EQUIPMENT	4,229	4,182
DEPOSITS AND OTHER ASSETS	450	386
Total assets	$ 18,973	$ 16,246
LIABILITIES AND
DIVISION EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses	$ 1,942	$ 2,039
Accrued payroll and employee expenses	1,058	1,203
Other current liabilities	1,116	350
Loss reserve on contracts in progress	2,924	-
Total current
liabilities	7,040	3,592
OTHER
LIABILITIES	621	777
Total
liabilities	7,661	4,369
DIVISION EQUITY	11,312	11,877
Total
liabilities and division equity	$ 18,973	$ 16,246
See
Notes to Financial Statements.		2

AIRBORNE ELECTRONIC SYSTEMS (A Division of General Dynamics OTS (Aerospace), Inc.) STATEMENTS OF OPERATIONS Years Ended December 31, 2004 and 2003 (in thousands)	2004		2003
Sales	$	25,562	$	28,311
Cost
of sales		16,158		19,268
Provision for estimated loss on uncompleted contract		9,822		-
Gross profit (loss)	(	418)		9,043
Selling, general
and administrative expenses		5,621		4,690
Research and
development expense		2,136		2,059
Operating profit (loss)	(	8,175)		2,294
Other
income		253		120
Income (loss) before income taxes	(	7,922)		2,414
Income taxes
benefit (expense)		2,774	(	845)
Net
(loss) income	(	5,148)	$	1,569
Division equity
at beginning of year		11,877		14,640
Transfers from
(to) General Dynamics		4,583	(	4,332)
Division equity at end of year	$	11,312	$	11,877
See Notes to Financial Statements.				3

| AIRBORNE
ELECTRONIC SYSTEMS (A Division of
General Dynamics OTS (Aerospace), Inc.) STATEMENTS OF CASH
FLOWS Years Ended
December 31, 2004 and 2003 (in thousands) | 2004 | | 2003 | |
| --- | --- | --- | --- | --- |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | |
| Net income (loss) | ($ | 5,148) | $ | 1,569 |
| Adjustments to
reconcile net income to net cash provided by operating activities: | | | | |
| Depreciation and
amortization | | 1,476 | | 1,437 |
| Loss (gain) on
disposal of fixed assets | | 22 | ( | 1) |
| Deferred income taxes | | - | | 494 |
| Loss reserve | | 2,924 | | - |
| Cash flows from
changes in operating assets and liabilities: | | | | |
| Accounts receivable | ( | 1,154) | | 1,636 |
| Contracts in progress | ( | 790) | | 602 |
| Inventories | ( | 1,232) | | 956 |
| Prepaid assets | | 75 | ( | 284) |
| Deposits and other
assets | ( | 64) | ( | 14) |
| Accounts payable and
accrued expense | ( | 97) | | 262 |
| Accrued payroll and
employee expenses | ( | 145) | ( | 19) |
| Other current
liabilities | | 766 | ( | 457) |
| Other liabilities | ( | 156) | ( | 156) |
| Net cash provided by (used in)
operating activities | ( | 3,523) | | 6,025 |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | |
| Capital expenditures | ( | 1,545) | ( | 1,358) |
| Proceeds from sale of
assets | | - | | 1 |
| Net cash used in investing
activities | ( | 1,545) | ( | 1,357) |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | |
| Transfers from (to)
General Dynamics | | 4,583 | ( | 4,332) |
| Net increase
(decrease) in cash | ( | 485) | | 336 |
| Cash at beginning of year | | 783 | | 447 |
| Cash at end of year | $ | 298 | $ | 783 |
| See Notes to
Financial Statements | | | | 4 |

NOTES TO FINANCIAL STATEMENTS
Note 1.	Organization and Summary of Significant Accounting
Policies
	Organization
	Airborne Electronic Systems (AES) is a division of General Dynamics OTS
(Aerospace), Inc. (Parent). Airborne Electronic Systems is located in
Redmond, Washington. AES is not a separate corporation, and there is no
common stock or paid in capital.
	AES
is a system supplier of intelligent electrical power generation,
distribution and control systems for aircraft. The business has served the
aerospace and defense industry for more than 40 years. AES is a major
supplier of cabin power systems to the commercial airlines market.
Additionally, AES provides power conditioning units for various aircraft
platforms including commercial, military, business jets and tactical missile
systems. Sales to foreign customers represent 42% and 46% of total revenue
in 2004 and 2003 respectively and are denominated in U.S. dollars.
	The
statement of operations includes all revenues and costs directly
attributable to the Company, including costs for certain functions and
services performed by centralized General Dynamics Corporation organizations
and directly charged to or allocated to the Company. Specific identifiable
costs and expenses incurred by the Parent on behalf of the Company are
recognized in the financial statements within costs and expenses. Overhead
costs and expenses incurred by the parent that are not specifically
identifiable to the Company are allocated by the Parent to the Company and
have been recorded within the accompanying financial statements as selling,
general and administrative expenses.
	Revenue
recognition
	AES
recognizes sales when the product is delivered or the service is performed
as well as by percentage of completion for certain contracts. In 2004 84% of
AES sales were recognized as products were delivered or services performed.
	Revenue representing 16% of 2004 sales was accounted for using percentage of
completion, cost-to-cost method of accounting in accordance with AICPA
Statement of Position 81-1 (SOP 81-1), "Accounting for Performance of
Construction-Type and Certain Production-Type Contracts." AES applies
earnings rates to all contract costs, to determine sales and operating
earnings. The percentage- of-completion method of accounting involves the
use of various estimating techniques to project costs at completion, and in
some cases includes estimates of recoveries asserted against the customer
for changes in specifications. These estimates involve various assumptions
and projections relative to the outcome of future events over a period of
time, including future labor productivity and availability, the nature and
complexity of the work to be performed, availability of materials, the
impact of delayed performance, availability and timing of funding from the
customer, and the timing of product deliveries. These estimates are based on
the Company's best judgment. AES reviews earnings rates periodically to
assess revisions in contract values and estimated costs at completion. Based
on these assessments, any changes in earnings rates are made prospectively.
	AES
charges any anticipated losses on contracts and programs to earnings when
identified. Such losses encompass all costs allocable to the contracts. AES
recorded estimated losses for an uncompleted contract as of December 31,
2004 equal to $2,924,000. The loss recognized in 2004 for this uncompleted
contract was $9,822,000.

5

| Advertising |
| --- |
| AES
expenses advertising costs as incurred which amounted to $200,000 and
$137,000 for the years ended December 31, 2004 and 2003, respectively. |
| Other income |

| Other income consisted primarily
of the following: (in thousands) | 2004 | | 2003 |
| --- | --- | --- | --- |
| Royalty Income | $ | 275 | $ 119 |
| Gain (loss) on sale of fixed assets | ( | 22) | 1 |
| | $ | 253 | $ 120 |

| Cash |
| --- |
| Cash includes
two zero balance checking accounts. Cash balances are swept daily to the
Parents' accounts. When cash is reduced, receivables from the Parent are
increased. When cash is needed for operating expenses, wire transfers are
received from the Parent and the receivable from the Parent is reduced.
Balances of cash at December 31, 2004 and 2003 represent deposits in transit
less checks outstanding. |
| Accounts
receivable and contracts in progress |
| Accounts receivable represent only amounts billed and currently due from
customers. Recoverable costs and accrued profit related to long-term
contracts and programs on which revenue has been recognized, but billings
have not yet been presented to the customer (unbilled receivables) are
included in contracts in progress. |
| AES
performs periodic credit evaluations of its customers' financial condition
and generally does not require collateral. After collection efforts have
been exhausted, uncollected balances are charged off to the allowance. |
| Inventories |
| Inventories are stated at the lower of cost of market, cost being determined
by the first-in, first out method. |

6

| Organization and Summary of Significant Accounting
Policies (Continued) | |
| --- | --- |
| Property, plant and equipment, net | |
| Property, plant and equipment are carried at historical cost, net of
accumulated depreciation and amortization. AES assets are depreciated
primarily using the straight-line method over the estimated useful lives of
the assets. Estimated lives of machinery and equipment range from three to
seven years. Leasehold improvements are amortized over the lease term. | |
| Research and development | |
| Research and
development (R&D) are charged to expense when incurred. | |
| Warranty costs | |
| AES provides product warranties
to its customers for certain products. Estimated warranty costs are recorded
in the period in which the related products are delivered. The warranty
reserve recorded at each balance sheet date is estimated based on the term
of warranty coverage provided and recent history of warranty payments. The
estimated warranty obligation has been recorded at $200,000 as of December
31, 2004 and 2003. Warranty expense was $166,000 and $168,000 in 2004 and 2003, respectively. | |
| Fair value of financial instruments | |
| AES' financial instruments
include cash, accounts receivable, accounts payable. AES
estimates the fair value of these financial instruments as follows: | |
| • | Cash, accounts
receivable and accounts payable: fair value approximates carrying value
due to the short-term nature of these instruments. |
| Use of estimates | |
| The preparation of financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Actual
results could differ from those estimates. | |
| Debt and interest | |
| The parent has not allocated any
portion of its debt or related interest cost to the Company, and no portion
of the Parent's debt is specifically related to the operations of the
Company. Accordingly, the Company's financial statements include no charges
for interest expense. | |

7

NOTES TO FINANCIAL STATEMENTS
	Recent
Accounting Pronouncements
	In
November 2004, the FASB issued SFAS No. 151 "Inventory Costs, an amendment
of ARB No. 43, Chapter 4." The amendments made by this statement clarify
that abnormal amounts of idle facility expense, freight, handling costs and
wasted materials (spoilage) should be recognized as current-period charges
and require the allocation of fixed production overheads to inventory based
on the normal capacity of the production facilities. The provisions of this
statement are effective for inventory costs incurred during fiscal years
beginning after June 15, 2005. Earlier application is permitted for
inventory costs incurred during fiscal years beginning after November 2004.
The Company believes the adoption of this standard will not have a material
impact on its results of operations or financial position.
Note 2.	Contracts in Progress
	Contracts in progress represent costs and accrued profit
and consisted of the following:

(in thousands)
	December 31,
	2004		2003
Contract costs and estimated profits	$	27,530	$ 26,072
Less advances and progress payments		28,368	24,776
	($	838)	$ 1,296

| These
costs and estimated earnings are included in the accompanying balance sheets
under the following captions: | | | |
| --- | --- | --- | --- |
| (in thousands) | | | |
| | December 31, | | |
| | 2004 | | 2003 |
| Contracts in
progress - costs and estimated earnings in excess of billings on uncompleted contracts | $ | 2,086 | $ 1,296 |
| Estimated loss
accrued on uncompleted contracts | ( | 2,924) | - |
| | ( | $ 838) | $ 1,296 |

8

NOTES TO FINANCIAL STATEMENTS
Note 3.	Inventories Inventories consisted of the following: (in thousands)
		December 31,
		2004		2003
	Finished goods	$	1,607	$	1,160
	Work in progress		1,834		1,134
	Purchased sub assemblies and materials		6,345		7,656
	Reserve for slow-moving and excess inventory	(	3,719)	(	5,115)
		$	6,067	$	4,835

Note 4.
	December 31,
	2004		2003
Machinery and equipment	$	9,258	$	6,988
Leasehold improvements		237		54
Construction in process		253		1,300
	$	9,748	$	8,342
Less accumulated
depreciation and amortization	(	5,519)	(	4,160)
	$	4,229	$	4,182

Note 5.
	December 31,
	2004	2003
Customer
deposits	$ 766	$ -
Estimated
warranty liability	200	200
Estimated
employee health self-insurance liability	150	150
	$ 1,116	$ 350

9

| Sales
by Geographic Region and Major Customers The following table summarizes AES sales by geographic region: (in thousands) | | |
| --- | --- | --- |
| | Year Ended December 31, | |
| | 2004 | 2003 |
| North America | $ 14,889 | $ 15,426 |
| Other | 10,673 | 12,885 |
| | $ 25,562 | $ 28,311 |

| | In 2004 and
2003, approximately 10% and 30%, respectively, of the Company's sales were
to one customer. |
| --- | --- |
| Note 7. | Related Party
Transactions |
| | The Parent advances funds to
AES as needed and as discussed in Note 1, cash balances are swept daily to
the Parent. The net transfer of funds from (to) the Parent was $4,583,000
and ($4,332,000) in 2004 and 2003, respectively. Also, the Parent performs
various services including corporate support on behalf of AES. The Parent
bills AES for these services as performed. Total expenses charged by the
Parent for such services equaled $1,069,000 and $373,000 in the years ended
December 31, 2004 and 2003, respectively. |
| | Purchases of product support
from the Parent equaled $183,000 in 2004. There were no purchases of product
support in 2003. Sales of product and product support to the Parent or a
subsidiary of the Parent equaled $1,317,000 and $1,796,000 in 2004 and 2003,
respectively. |
| | AES also participated in
defined contribution retirement plans of the Parent in which most employees
are eligible to participate. The expense to AES for these plans was $461,000
and $508,000 in 2004 and 2003, respectively. The liability to the Parent
under these plans at December 31, 2004 and 2003 was $337,000 and $289,000,
respectively. |
| Note 8. | Income Taxes |
| | AES does not file separate
income tax returns and does not make cash payments to governmental entities
for income taxes. AES results are consolidated with GD and included in GD's
consolidated tax filings. However, for income tax reporting purposes, these
financial statements present income tax expense and deferred tax assets and
liabilities on a "separate return basis," as if AES were filing its own
income tax returns |

10

| The provision
(benefit) for income tax for the years ended December 31, 2004 and 2003 is
as follows: |
| --- |
| ( in thousands) |

Current	2004 — ($	2,774)	2003 — $ 351
Deferred	(	372)	494
Changes in valuation allowance		372	-
Total	($	2,774)	$ 845

Current and deferred tax expense relates primarily to federal taxes. Deferred income taxes are recognized using the liability method and reflect the tax impact of temporary differences between the amount of assets and liabilities for financial purposes and such amounts as measured by tax laws and regulations. Deferred tax asset and (liability) components consisted of the following as of December 31, 2004 and 2003: ( in thousands)

	2004		2003
Deferred tax assets:
Inventory and other allowances	$	2,360	$	1,825
Accrued expenses		546		627
Total deferred tax assets		2,906		2,452
Valuation allowance	(	2,617)	(	2,244)
Net deferred tax assets	$	289	$	208
Deferred tax liabilities:
Fixed assets	($	105)	($	70)
Other	(	184)	(	138)
Total deferred tax liabilities	($	289)	($	208)
Net deferred tax	$	-	$	-
AES provided for a valuation allowance of its
deferred tax assets as of December 31, 2004 and 2003, based on its
assessment of the likelihood of realization of the deferred tax assets. The
valuation allowance was increased in 2004 by $372,000. The allowance did not
change in 2003.

11

Note 9	Leases
	AES leases its facilities under an operating
lease expiring March 31, 2008. The lease requires monthly rentals of $64,000
through September 30, 2005 and $67,000 per month thereafter. Rent expense
for the years ending December 31, 2004 and 2003 amounted to $943,000 and
$1,289,000 respectively. Future minimum payments under the lease for the
years ending December 31, are as follows:
	(in thousands)
	2005	$773
	2006	805
	2007	805
	2008	201
Note
10.	Subsequent Event
	On February 3, 2005, AES assets and liabilities
were sold to Astronics Corporation of East Aurora, New York.

12

Item 9.01 (b) Pro Forma Financial Information

Astronics Corporation Unaudited Pro Forma Condensed Combined Financial statements

Introduction

On February 3, 2005, Astronics Corporation (the company), through its wholly owned subsidiary, Astronics Acquisition Corp. ("AAC"), and General Dynamics OTS (Aerospace), Inc. ("Seller") entered into an Asset Purchase Agreement (the "Purchase Agreement") providing for the acquisition by AAC from the Seller of substantially all of the assets and liabilities of Seller's airborne electronics systems business (AES). AES produces a wide range of products related to electrical power generation, control, and distribution on military, commercial, and business aircraft. AES supplies power conditioning units for both the Advanced Tactical Tomahawk and the Taurus Missile programs. AES is also a major supplier of cabin power systems to commercial airlines, which allow passengers to run their personal electronic devices with aircraft power. These systems are marketed under the trade name EmPower®, and can be found on airlines around the world. In the business jet market, AES is the selected supplier for the complete electrical distribution system for the Eclipse 500 business jet. AES leases its office and production facility located in Redmond, Washington. The net assets acquired primarily include receivables, inventories, property, plant and equipment and other intangible assets, net of liabilities.

The purchase price was $13.0 million in cash paid at closing, plus a potential earn-out of up to an aggregate of $4.0 million based upon the 2005 revenue of the acquired business as defined in the asset purchase agreement, as follows: $4 million if revenue exceeds $35 million, $3 million if revenue exceeds $34 million, $2 million if revenue exceeds $33 million, $1 million if revenue exceeds $32 million, no amount of additional consideration will be paid if revenue is less than $32 million. As defined in the agreement revenues include all revenue for the calendar year 2005 as well as certain adjustments for specific programs that will utilize percentage of completion revenue recognition which differs from Astronics revenue recognition policy. The Company expects these adjustments will result in increasing the revenue as determined for the earn out calculation by an estimated $3 million as compared with its reported revenue for 2005.

In connection with the funding of the Acquisition, the Company drew down $7.0 million from its existing credit agreement with HSBC Bank USA (the "Credit Agreement"). The terms of the Credit Agreement are set forth in that certain Credit Agreement dated February 20, 2003 between the Company and HSBC Bank USA. Following this draw, approximately $7.0 million is currently outstanding under the Credit Agreement and approximately $1.0 million is available for future borrowings. Currently, the Company is paying interest on its outstanding borrowings under the Credit Agreement at a variable rate of approximately 5%.

The following unaudited proforma condensed combined financial statements give effect to the acquisition of AES assuming the transaction took place on January 1, 2004 for the condensed combined statement of operations and as of December 31, 2004 for the condensed combined balance sheet. The pro forma adjustments are described in the accompanying notes to the unaudited pro forma condensed combined financial statements. Such unaudited pro forma condensed combined financial statements should be read in conjunction with the Company's consolidated financial statements and notes set forth in the report on Form 10-K for the year ended December 31, 2004.

Under the purchase method of accounting, the purchase price is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based on their respective fair market values, with the excess recorded as goodwill. These unaudited pro forma condensed combined financial statements reflect preliminary estimates of fair

market value of the assets acquired and liabilities assumed and the related allocations of purchase price. The Company is currently reviewing the preliminary estimates of the fair market value of assets acquired and liabilities assumed in the acquisition, including preliminary valuations of intangible assets and property, plant and equipment. The final determination of the fair market value of assets acquired and liabilities assumed and final allocation of the purchase price may differ from the amounts assumed in these unaudited pro forma condensed combined financial statements, and there can be no assurance that any adjustments will not be material.

The unaudited pro forma condensed combined financial statements are provided for illustrative purposes only and do not purport to represent what the actual consolidated results of operations or the consolidated financial position of the Company would have been had the acquisition been consummated on January 1, 2004 or December 31, 2004 nor are they necessarily indicative of future consolidated results of operations or financial position.

ASTRONICS CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 2004
(in thousands,
except per share data)	ASTRONICS	ADVANCED ELECTRONIC SYSTEMS	PRO FORMA ADJUSTMENTS		PRO FORMA COMBINED
Sales	$ 34,696	$ 25,562	$	$	60,258
Cost and Expenses
Cost of products
sold	30,087	16,158	2	(2)	46,247
Provision for
loss on uncompleted contract		9,822			9,822
Research and
development		2,136			2,136
Selling, general
and administrative expenses (4)	5,477	5,621			11,098
Interest expense,
net of interest income of	282		388	(3)	670
Loss on sale of
assets (other income)	32	(253)			(221)
Total Costs and Expenses	35,878	33,484	390		69,752
(Loss) before income taxes	(1,182)	(7,922)	(390)		(9,494)
(Benefit) for Income Taxes	(448)	(2,774)	(133)	(9)	(3,355)
Net (Loss)	$ (734)	$ (5,148)	$ (257)	$	(6,139)
(LOSS) PER SHARE
Basic	$ (.09)			$	(.79)
Diluted	$ (.09)			$	(.79)
WEIGHTED AVERAGE SHARES
Basic	7,766				7,766
Diluted	7,766				7,766

ASTRONICS CORPORATION
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET DECEMBER 31, 2004
(in thousands,
except per share data)	ASTRONICS	ADVANCED ELECTRONIC SYSTEMS	PRO FORMA ADJUSTMENTS		PROFORMA COMBINED
ASSETS
Current
Assets:
Cash and Cash
Equivalents	$ 8,476	$ 298	$ (6,300)	(5)$	2,474
Short-term
Investments	1,000				1,000
Accounts
Receivable	5,880	5,347			11,227
Contracts in
progress		2,086			2,086
Inventories	7,110	6,067	300	(8)	13,477
Prepaid Expenses	560	496			1,056
Prepaid Income
Taxes	796				796
Deferred Taxes	660				660
Total Current
Assets	24,482	14,294	(6,000)		32,776
Property, Plant
and Equipment, net:	15,221	4,229	1,688	(7)	21,138
Deferred Income
Taxes	488				488
Goodwill	2,615				2,615
Other Assets	2,430	450			2,880
Total
Assets	$ 45,236	$ 18,973	$ (4,312)	$	59,897
LIABILITIES AND SHAREHOLDERS' EQUITY
Current
Liabilities:
Current
Maturities of Long-term Debt	$ 908	$	$	$	908
Note payable to
bank			7,000	(5)	7,000
Current
Liabilities of Discontinued Operations	533				533
Accounts Payable	2,551	1,942			4,493
Loss reserve on
contracts in progress		2,924			2,924
Accrued Payroll
and Employee Benefits	1,309	1,058			2,367
Other Accrued
Expenses	1,077	1,116			2,193
Total Current
Liabilities	6,378	7,040	7,000		20,418
Long-term
Debt	11,154				11,154
Supplemental
Retirement Plan and Other Benefits	4,543				4,543
Other
Liabilities	501	621			1,122
Shareholders' Equity	22,660	11,312	(11,312)	(6)	22,660
Total
Liabilities and Shareholders' Equity	$ 45,236	$ 18,973	$ (4,312)	$	59,897

ASTRONICS CORPORATION NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (Dollars in thousands)

| 1. | The unaudited pro forma condensed combined
statement of operations does not reflect the impact of the one-time
adjustment to cost of sales to write-off the estimated purchase accounting
adjustment for capitalization of estimated manufacturing profit in inventory
acquired. See note 8. |
| --- | --- |
| 2. | To reflect the estimated change in
depreciation arising from fair market value (FMV) adjustments to AES
property, plant and equipment: |

	Year ended December 31, 2004
Estimated depreciation after FMV
adjustments	$1,500
Historical depreciation	1,498
Estimated increase	$2

| | The estimated depreciation after FMV
adjustments was based on expected useful lives of machinery and equipment
2-5 years. |
| --- | --- |
| 3. | To record incremental interest expense
associated with the debt financing used to pay for a portion of the
acquisition of AES and the decrease in interest income associated with the
use of cash financing to pay for a portion of the acquisition : |

	Year ended December 31, 2004
Interest expense on $7,000
borrowings (a)	$325
Interest income on $6,300 cash
used for purchase of AES (b)	63
Incremental net interest expense	$388

| | (a) | The interest rate on the debt is variable and
is determined based upon LIBOR plus an applicable margin. The applicable
margin at December 31, 2004 was 1.75%. The same margin would be applicable
including the increased leverage from the transaction. For determining the
adjustment to interest expense in the unaudited pro forma condensed combined
statement of operations the current one - month LIBOR rate was used with an
applicable margin of 1.75% resulting in an interest rate of 4.64%. |
| --- | --- | --- |
| | (b) | The interest rate used to determine the
adjustment to interest income in the unaudited pro forma condensed combined
statement of operations was 1.0%, an estimate of current money market
account interest rates. |
| 4. | The selling, general and
administrative expenses for AES include $1.1 million of allocated Parent
corporate overhead. These costs include allocated executive management
salary and benefits, corporate legal, audit, treasury, benefits
administration and other corporate support. | |
| 5. | To record indebtedness incurred
and cash on hand used to finance the AES acquisition. The Company borrowed
$7.0 million against its bank line of credit and used $6.3 million from its
available cash on hand. | |
| 6. | To eliminate the equity of AES. | |
| 7. | To reflect preliminary
adjustments to fair market value based on preliminary valuation studies. The
Company has not made a final determination as to the fair market value of
identifiable intangible assets such as patents, trademarks or customer lists
or property, plant and equipment. The final determination of fair market
value of the assets acquired and the final allocation of the purchase price
may differ from the preliminary allocations presented in these unaudited pro
forma condensed combined financial statements, and there can be no assurance
that any adjustments will not be material. | |

| Purchase price
paid as: | |
| --- | --- |
| Proceeds from Bank Line of Credit | $ 7,000 |
| Use of Cash on hand | 6,300 |
| Total purchase
consideration | $ 13,300 |
| Allocated to: | |
| Historical value of AES net assets | $11,312 |
| Fair value adjustments to assets
and liabilities: | |
| Inventory | 300 |
| Property, plant and equipment (a) | 2,400 |
| Estimated fair
value of assets acquired | $ 14,012 |
| Excess estimated
fair market value of net assets over purchase price. (b) | $ 712 |
| Net preliminary
proforma increase to property, plant and equipment after allocation of
excess of fair market value over purchase price to non current assets(a-b) | $1,688 |

| 8. | To reflect the estimated purchase accounting
adjustment for capitalization of estimated manufacturing profit in inventory
acquired. |
| --- | --- |
| 9. | Tax effects of the above pro forma
adjustments at a marginal tax rate of 34%. |

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf of the undersigned hereunto duly authorized.

/s/ David C. Burney
Name:	David C. Burney
Title:	Vice President Finance and Chief
Financial Officer