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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
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)
Registrant's telephone number, including
area code (716) 447-9013
Securities registered pursuant to Section 12(b) of the Act: None
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 twelve months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirement for the past 90 days.
Yes X No
EXHIBIT INDEX APPEARS ON PAGE 17
Page 1 of 18
As of February 28, 1997, 4,304,506 shares of Common Stock
and 746,144 shares of Class B Stock were outstanding, and the
aggregate market value of the shares of Common Stock and Class B
Stock (assuming conversion of all of the outstanding Class B
Stock into Common Stock) of Astronics Corporation held by non-
affiliates was approximately $25,503,000.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference into Part III of this Form 10-K or any amendment to
this Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the Registrant's 1996 Annual Report to
Shareholders are incorporated into Parts II and III of this
Report. Portions of the Registrant's Proxy Statement for the
1996 Annual Meeting of Shareholders dated March 14, 1997 are
incorporated by reference into Part III of this Report.
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PART I
Item 1. BUSINESS
Profile
Astronics Corporation ("Astronics", the "Company" or
"Registrant"), a New York corporation formed in 1968, is a
diversified company engaged principally in the design,
manufacture and marketing of products and processes in two
business segments: "Electronic Systems" and "Specialty
Packaging." Electronic Systems is involved in the design,
manufacture, and marketing of advanced technology products.
Major applications include specialized lighting systems and
ruggedized electro-mechanical assemblies. The Specialty
Packaging segment is predominantly a direct marketing provider of
proprietary designs of paperboard folding boxes and paper
products.
On November 29, 1995, the Company acquired the assets and
business devoted to the electroluminescent lighting business of
Loctite Luminescent Systems, Inc. of Lebanon, New Hampshire. In
conjunction with the Company's specialized lighting systems and
ruggedized electro-mechanical assemblies, these operations have
been renamed Luminescent Systems, Inc., or LSI. This acquisition
results in a strong entity in the automotive, air transport,
defense, and electronics industries. Products include aircraft
cockpit lighting systems, aircraft escape path lighting systems,
military formation lights, ruggedized keyboards for use in harsh
environments, and electroluminescent lighting systems for a
variety of display and backlighting operations.
Electronic Systems
The Company's Electronic Systems segment is involved in
the design, manufacture, and sales of technically sophisticated
systems and components for a variety of applications. Most of
these applications are based on specialty lighting requirements.
Approximately 30 percent of the segment's sales are defense-
related and 25 percent of sales are international. The Company
maintains a sales/engineering office in Belgium to support
international relationships.
The Electronic Systems segment operates manufacturing
facilities in East Aurora, NY, and Lebanon, NH.
Electroluminescent Lamps: One of the Company's core
technologies is designing and manufacturing electroluminescent
(EL) lamps. EL employs phosphors which when sandwiched between
two electrodes and exposed to alternating current, emit light.
The resultant lamps are efficient, durable, thin, and flexible
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compared to other lighting technologies, and have become a
preferred light source for many lighting applications in products
as varied as automobiles, home light fixtures, and consumer
electronics.
The Company also manufactures power conversion devices,
commonly called "inverters," to power EL lamps. EL lamps are
best driven by alternating current, but typically only direct
current is available in the end use application. Our inverters
convert DC power to AC, thereby providing power sufficient to
drive EL lamps.
The Company has been involved in EL lighting for over 25
years, and has established itself as a leader in the industry.
Moreover, its EL lighting expertise has been vital in helping it
to establish certain of its other product lines. Still, the
Company recognizes that no light source is ideal for all
applications, and has therefore developed expertise in a number
of other technologies as dictated by its business requirements,
specifically, incandescent, light-emitting diodes, and cold
cathode fluorescence. These technologies are used selectively in
the Company's various product lines, depending on what is most
appropriate for each specific application.
Escape Path Lighting: The Company manufactures emergency
escape lighting systems for use in aircraft, buildings, trains,
and ships. These systems are designed to help people find exits
in case of crashes, fire, power outages, earthquakes, and other
disasters. Customers are typically vehicle fleet operators,
manufacturers, or third party contractors. Often, the use of
these systems is dictated by governing laws and regulations.
The systems typically include a series of light elements,
a case or mounting system to hold the light elements, and a
network of logic controlled back-up battery systems to power the
light elements. The systems are typically modular in nature, but
require a significant amount of custom documentation to satisfy
regulatory requirements for each installation.
Aircraft Cockpit Lighting: The Company is a major
supplier and integrator of cockpit lighting systems for aircraft.
The Company designs and manufactures integrally illuminated
display panels and related assemblies, integrally illuminated
keyboards, floodlights, ambient light sensors, and dimmable power
supplies. Customers include aircraft manufacturers and avionics
electronics manufacturers. There is a trend in the industry
whereby aircraft manufacturers are seeking system suppliers
rather than component manufacturers, and the company is uniquely
positioned to respond to this trend.
Military Aircraft Formation Lights: The Company is the
world's dominant supplier of EL formation lights for military
aircraft. These lights are essentially EL lamps encapsulated in
- 4 -
a protective shell material, which are then mounted to the
outside skin of military aircraft. These lights provide visual
cues to pilots who are flying in close formation during night
missions. Customers include military aircraft manufacturers and
the government defense procuring activities who are responsible
for maintaining military aircraft in their fleets. The Company's
formation lights can be found on most modern western military
aircraft.
Ruggedized Keyboards: The Company manufactures a wide
range of input/output keyboards for ruggedized computer systems.
These computer systems are often used in military applications,
though not exclusively. In today's world of shrinking defense
budgets, investments continue in battlefield command, control,
and communication systems.
The Company's keyboards range from relatively simple
mechanical devices to complex systems employing various display
technologies, encoding topologies, and communication protocols.
Customers are typically large, well-known defense electronics
companies.
Specialty Packaging
The Company manufactures folding boxes primarily from
high quality solid bleached sulfate paperboard. This segment
predominantly functions as a direct marketing provider of
proprietary designs of paperboard and paper products. The
Company develops its own designs and owns the tooling technology.
This segment's products are marketed throughout North America
and, to a smaller extent, internationally. In addition, the
Company is a dominant regional provider of custom folding boxes
where, within its chosen markets, it prevails as a preferred or
sole source provider to most of its customers.
The Company also engages in high quality specialty
imprinting of wedding and party invitations, monogrammed napkins,
and related party accessories. These products are direct
marketed primarily through catalogs which are located at
stationery stores, printers, gift shops and specialty boutiques
throughout the United States.
Competitive Conditions
Astronics experiences considerable competition in its
segments, principally in the areas of product performance and
price, from various competitors, many of which are substantially
larger and have greater resources. Success in the Electronic
Systems segment depends upon product innovation, customer
support, responsiveness, and cost management. Astronics
continues to invest in developing the tools critical to competing
- 5 -
in today's worldwide markets. Success in Specialty Packaging is
dependent upon competitive pricing, innovative and responsive
customer support and short lead time delivery performance to
support this capability. Astronics has invested and will
continue to invest in process and systems technology.
Raw Materials
Materials, supplies and components are available and
purchased from a wide variety of sources, the loss of any one of
which would not materially affect the Company's operations.
Patents
The Company has a number of patents and has filed
numerous applications for others. While the aggregate protection
of these patents is of value, Registrant does not consider that
the successful conduct of any material part of its business is
dependent upon the protection afforded by these patents. The
Company's patents and patent applications relate to EL,
instrument panels, keyboard technology and various components
used in their manufacture. The Company regards its expertise and
techniques as proprietary and relies upon trade secret laws and
contractual arrangements to protect its rights.
Research Activities
The Company is engaged in a variety of research and
development activities directed to the improvement and
application of the Company's technologies. The extent of the
Company's engagement in pure research, however, is not material.
Employees
The Registrant employed approximately 393 employees as of
December 31, 1996, including 204 in the Electronic Systems
segment, 182 in the Specialty Packaging segment and 7 at the
Corporate level, compared to 437 as of December 31, 1995,
including 236 in the Electronic Systems segment, 194 in the
Specialty Packaging segment and 7 at the Corporate level as of
that date.
Working Capital
Inventories constitute a major component of the Company's
working capital, reflective of the production cycle on most of
the Company's products and anticipated production required for
- 6 -
the seasonal aspects of the Company's packaging products. A
substantial portion of the business of the Specialty Packaging
segment consists of proprietary designs of stock boxes used by
the confectionery industry, which requires the Company to
increase inventory at the beginning of its principal seasons.
Financial Information about Industry Segments
Sales, operating profit and identifiable assets
attributable to each of the Registrant's industry segments for
each year of the last three years as of December 31, 1996 appear
on page 14 of the Registrant's Annual Report to Shareholders for
the fiscal year ended December 31, 1996, submitted herewith as an
exhibit and incorporated by reference.
Order Backlog
The backlog of orders as of December 31, 1996 was
approximately $10,106,000 ($8,784,000 related to the Electronic
Systems segment and $1,322,000 related to the Specialty Packaging
segment), substantially all of which is expected to be filled in
the current fiscal year, and was $8,953,000 ($7,328,000 related
to the Electronic Systems segment and $1,625,000 related to the
Specialty Packaging segment) as of December 31, 1995.
Item 2. PROPERTIES
Corporate Headquarters
The Company's corporate office is located at 1801 Elmwood
Avenue, Buffalo, NY 14207, the sight of the largest portion of
the Specialty Packaging and Printing segment.
Electronic Systems
Registrant owns manufacturing and office facilities of
approximately 45,000 square feet in the Buffalo, New York area,
and leases approximately 42,000 square feet in Lebanon, New
Hampshire.
Specialty Packaging
Registrant owns buildings totaling approximately 437,000
square feet in the Buffalo, New York area for its manufacturing
and office facilities. Currently, about 40 percent of the
building space is under lease to others.
- 7 -
The Company believes that its physical properties are
suitable and adequate for the purpose for which they are
employed. Additions and expansions are made as needed. In
general, the productive capacity of the Registrant's physical
properties are in excess of current production requirements and
greater utilization is available.
Item 3. LEGAL PROCEEDINGS
Rodgard Corporation, formerly a wholly-owned subsidiary
of Astronics, and one of its former officers, Mason C. Winfield,
("Plaintiffs") instituted an action against Miner Enterprises,
Inc. and David G. Anderson ("Defendants") on April 10, 1984, in
the United States District Court of the Western District of New
York, seeking damages for breaches of confidentiality agreements
and seeking to be declared a co-inventor of a David G. Anderson
patent. Defendants counterclaimed for unspecified damages
alleging that the Plaintiffs breached a confidentiality provision
pursuant to a consulting agreement between Winfield and Miner.
The judge rendered a decision that neither side had a sufficient
case to enable awards. The case was appealed by Plaintiffs in
the Federal Circuit Court of Appeals.
On March 13, 1997 the Court of Appeals remanded the case
to the District Court to permit Plaintiffs to initiate discovery
related to Defendants' foreign patents. The Company intends to
commence discovery to determine the amount of damages and to
otherwise vigorously pursue this claim in District Court. The
Company is not able to estimate damages, if any.
Except for the matter described above, there are no
material pending legal proceedings, other than ordinary routine
litigation incidental to the business, to which the Registrant or
any of its subsidiaries is a party or of which any of their
property is the subject.
Item 4. SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
Not applicable.
Executive Officers of the Registrant
The following table sets forth the names and ages of all
executive officers of the Company and certain information
relative to their positions with the Company and prior employment
history during at least the past five years:
- 8 -
Position with the Company
Name Age and Prior Employment History
Kevin T. Keane 64 President, Chief Executive
Officer and Director.
John M. Yessa 57 Vice President of Finance,
Treasurer, Chief Financial
Officer and Director.
- 9 -
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Information with reference to the market price of and
dividends on the Company's Common Stock and related security
holder matters appears on pages 1 and 16 of the Company's Annual
Report to Shareholders for the fiscal year ended December 31,
1996, submitted herewith as an exhibit and incorporated herein by
reference.
Item 6. SELECTED FINANCIAL DATA
Selected Financial Data appears on page 16 of the
Registrant's Annual Report to Shareholders for the fiscal year
ended December 31, 1996, submitted herewith as an exhibit and
incorporated by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
Management's discussion and analysis of financial
condition, changes in financial condition and results of
operations appears on pages 17, 18, 19 and 20 of Registrant's
Annual Report to Shareholders for the fiscal year ended December
31, 1996, submitted herewith as an exhibit and incorporated
herein by reference.
Item 8. FINANCIAL STATEMENTS
The Financial Statements of Astronics Corporation which
are incorporated by reference into this Annual Report on
Form 10-K are described in the accompanying Index to Financial
Statements at Item 13 of this Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
- 10 -
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
The information regarding directors is contained under
the captions "Election of Directors" and "Record Date and Voting
Securities" in the Company's definitive Proxy Statement dated
March 14, 1997 and is incorporated herein by reference.
Certain information regarding executive officers is
contained under the captions "Executive Compensation" and "Record
Date and Voting Securities" in the Company's definitive Proxy
Statement dated March 14, 1997 and on the back inside cover of
the Company's Annual Report to Shareholders for the fiscal year
ended December 31, 1996, submitted herewith as an exhibit, which
are both incorporated herein by reference.
Item 11. EXECUTIVE COMPENSATION
The information contained under the caption "Executive
Compensation" in the Company's definitive Proxy Statement dated
March 14, 1997 is incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The information required is contained under the caption
"Record Date and Voting Securities" in the Company's definitive
Proxy Statement dated March 14, 1997, and is hereby incorporated
by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of March 26, 1997, the Company knows of no
relationships or transactions required to be disclosed pursuant
to Item 404 of Regulation S-K.
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(a) The documents filed as a part of this report are
as follows:
1. Financial Statements
See Index to Financial Statements.
- 11 -
2. Financial Statement Schedules
See Index to Financial Statements and
Financial Statement Schedules on page F-1 of
this report.
3. Exhibits
Exhibit No. Description
3(a) Restated Certificate of Incorporation,
as amended; incorporated by reference to
Exhibit 3(a) of the Registrant's
December 31, 1988 Annual Report on
Form 10-K.
(b) By-Laws, as amended on August 12, 1996.
10.1 Restated Thrift and Profit Sharing
Retirement Plan; incorporated by
reference to Exhibit 10.1 of the
Registrant's December 31, 1994 Annual
Report on Form 10-KSB.
10.3 Incentive Stock Option Plan;
incorporated by reference to the
Registrant's definitive proxy statement
dated March 26, 1982.
10.4 Director Stock Option Plan; incorporated
by reference to the Registrant's
definitive proxy statement dated
March 16, 1984.
10.5 Employment Contract of Kevin T. Keane;
incorporated by reference to Exhibit
10.5 of the Registrant's registration
statement on Form S-2 (No. 33-8040).
10.7 Employment Contract of John M. Yessa;
incorporated by reference to Exhibit
10.7 of the Registrant's registration
statement on Form S-2 (No. 33-8040).
10.10 1992 Incentive Stock Option Plan;
incorporated by reference to the
Registrant's definitive proxy statement
dated March 30, 1992.
10.11 1993 Director Stock Option Plan;
incorporated by reference to the
Registrant's definitive proxy statement
dated March 19, 1993.
- 12 -
11 Computation of Per Share Earnings
13 1996 Annual Report to Shareholders.
(Except for those portions which are
expressly incorporated by reference to
the Annual Report on Form 10-K, this
exhibit is furnished for the information
of the Securities and Exchange
Commission and is not deemed to be filed
as part of this Annual Report on
Form 10-K.)
21 Subsidiaries of the Company.
23 Consent of Independent Auditors.
27 Financial Data Schedule.
(b) Reports on Form 8-K
The Company filed the following reports:
(i) Form 8-K/A dated February 6, 1996 reporting
pursuant to item 7.
(ii) Form 8-K dated November 1, 1996 reporting
pursuant to items 5 and 7.
- 13 -
ASTRONICS CORPORATION
INDEX TO FINANCIAL STATEMENTS
The financial statements, together with the report thereon of
Ernst & Young LLP dated January 16, 1997, appearing on pages 3 to
16 of the accompanying 1996 Annual Report to Shareholders are
incorporated by reference in this Form 10-K Annual Report.
Financial schedules for the years 1996, 1995 and 1994:
Page
Valuation and Qualifying Accounts F-2
- 14 -
SCHEDULE II
ASTRONICS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance at the Charged to
Beginning of Costs and Write-offs/ Balance at
Year Description Period Expense Recoveries End of Period
1996 Allowance
for Doubtful
Accounts $359 $176 $(131) $404
1995 Allowance
for Doubtful
Accounts $367 $125 $(133) $359
1994 Allowance
for Doubtful
Accounts $195 $200 $ (28) $367
- 15 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 26, 1997.
Astronics Corporation
By /s/ Kevin T. Keane By /s/ John M. Yessa
Kevin T. Keane, President John M. Yessa, Vice President-
and Chief Executive Officer Finance and Treasurer,
Principal Financial and
Accounting Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated.
Signature Title Date
/s/ Robert T. Brady Director March 26, 1997
Robert T. Brady
/s/ John B. Drenning Director March 26, 1997
John B. Drenning
/s/ Kevin T. Keane Director March 26, 1997
Kevin T. Keane
/s/ Robert J. McKenna Director March 26, 1997
Robert J. McKenna
/s/ John M. Yessa Director March 26, 1997
John M. Yessa
- 16 -
ASTRONICS CORPORATION
INDEX TO EXHIBITS
Sequential
Exhibit No. Description Page Number
3(a) Restated Certificate of Incorporation,
as amended; incorporated by reference
to exhibit 3(a) of the Registrant's
December 31, 1988 Annual Report on
Form 10-K.
(b) By-Laws, as amended on August 12, 1996. 20
10.1 Restated Thrift and Profit Sharing
Retirement Plan; incorporated by
reference to the Registrant's
December 31, 1994 Annual Report on
Form 10-KSB.
10.3 Incentive Stock Option Plan; incorporated
by reference to the Registrant's definitive
proxy statement dated March 26, 1982.
10.4 Director Stock Option Plan; incorporated
by reference to the Registrant's definitive
proxy statement dated March 16, 1984.
10.5 Employment Contract of Kevin T. Keane;
incorporated by reference to Exhibit 10.5
of the Registrant's registration statement
on Form S-2 (No. 33-8040).
10.7 Contract of John M. Yessa; incorporated
by reference to Exhibit 10.7 of the
Registrant's registration statement on
Form S-2 (No. 33-8040).
10.10 1992 Incentive Stock Option Plan;
incorporated by reference to the
Registrant's definitive proxy statement
dated March 30, 1992.
10.11 1993 Director Stock Option Plan;
incorporated by reference to the
Registrant's definitive proxy statement
dated March 19, 1993.
11 Computation of Per Share Earnings. 37
- 17 -
13 1996 Annual Report to Shareholders. 40
(Except for those portions which are expressly
incorporated by reference to the Annual Report on
Form 10-K, this exhibit is furnished for the
information of the Securities and Exchange
Commission and is not deemed to be filed as part
of this Annual Report on Form 10-K.)
21 Subsidiaries of the Registrant. 74
23 Consent of Independent Auditors. 76
27 Financial Data Schedule. 77
- 18 -
EXHIBIT 3(b)
By-Laws of Astronics, as amended
August 12, 1996
BY-LAWS
OF
ASTRONICS CORPORATION
As Amended By the Board of Directors
On August 12, 1996
ARTICLE I
MEETING OF SHAREHOLDERS
Sec. 1. ANNUAL MEETING. The annual meeting of
Shareholders shall be held not more than 180 days after the end
of the fiscal year of the corporation at such date, time and
place within or without the State of New York as shall be
established by resolution of the Board of Directors.
Sec 2. SPECIAL MEETING. Special meetings of
shareholders may be called by the Board of Directors or the
President and shall be called by the President at any time upon
the written request of two-thirds (2/3) of the Directors then
serving on the Board of Directors, or upon the written request of
shareholders owning not less than 80 percent of the outstanding
shares of each class of capital stock of the corporation entitled
to vote generally in the election of Directors as of the date on
which such request is actually received by the corporation. Such
request shall state the purpose or purposes of the proposed
meeting. Such meetings shall be held at the principal office of
the corporation or at such other place within or without the
State of New York as the Board of Directors shall designate.
Sec. 3. NOTICE OF MEETING. The Secretary shall
serve personally or by mail upon each shareholder entitled to
vote thereat a written notice of any meeting, addressed to each
such shareholder at his address as it appears on the books of the
corporation. Such notice shall state the place, date and hour of
such meeting. If the notice is of a special meeting, it shall
also state the purpose or purposes for which such meeting is
called, and by or at whose direction it is being issued. Notice
of any meeting shall be given not less than ten (10) nor more
than fifty (50) days prior to such meeting. At any meeting at
which all shareholders are present, or of which all shareholders
not present have waived in writing the giving of such notice, the
notice otherwise required may be dispensed with.
Sec. 4. QUORUM. Except as otherwise provided by the
Certificate of Incorporation, the holders of a majority of the
shares of the corporation issued and outstanding and entitled to
vote thereat, present in person or represented by proxy, shall be
necessary to and shall constitute a quorum for the transaction of
business at all meetings of shareholders, but a lesser number may
adjourn the meeting to some future time not more than twenty
(20) days later, without notice other than announcement at the
meeting, and at any such adjourned meeting at which a quorum is
present any business may be transacted that might have been
transacted at the meeting as originally noticed.
Sec. 5. VOTING. At all meetings of shareholders,
all questions, the manner of deciding which is not specifically
regulated by law, by the Certificate of Incorporation or by these
By-Laws, shall be determined by vote of a majority of the shares
present or represented at such meetings and voting on such
questions. Each shareholder of record shall be entitled to one
vote for every share of stock standing in his name on the books
of the corporation. All voting shall be viva voce, except that
any shareholder may request that the vote be by ballot, in which
case, each ballot shall state the name of the shareholder voting
and the number of shares standing in his name on the books of the
corporation, and in addition, if such ballot be cast by proxy,
the name of the proxy shall be stated. The casting of all votes
of shareholders shall be governed by the provisions of these
By-Laws, except as otherwise expressly provided by law.
Sec. 6. VOTING ON MERGERS AND SIMILAR TRANSACTIONS.
(A) The affirmative vote of the holders of not
less 80 percent of the outstanding shares of the corporation
entitled to vote thereon shall be required
(i) to adopt any agreement for the merger or
consolidation of the corporation or any "subsidiary"
(as hereinafter defined) with or into any other
"person" (as hereinafter defined) or the merger of
any other person into the corporation or any
subsidiary.
(ii) To authorize any sale, lease, exchange,
mortgage, pledge or disposition to any other person
of all or substantially all of the property and
assets of the corporation or any subsidiary, or any
part of such assets having a then fair market value
greater that 50 percent of the then fair market value
of the total assets of the corporation or such
subsidiary, or
(iii) To authorize the issuance or transfer by
the corporation or any subsidiary of any voting
securities of the corporation in exchange or payment
for the securities or property and assets (including
cash) of any other person.
(B) The provisions of this Section 6 shall not
apply to any transactions described in clauses (i), (ii) or (iii)
of Section A of this Section 6 if
(i) prior to the consummation of such
transaction, the Board of Directors of the
corporation shall have adopted a resolution approving
the written agreement pursuant to which such
transaction shall thereafter be consummated or a
written memorandum of understanding with respect to
the terms upon which such transaction shall
thereafter be consummated, or
(ii) the corporation or a subsidiary of the
corporation is, at the time such transaction is
agreed to, the beneficial owner of a majority, by
vote, of the voting interest in the other party or
parties to the transaction.
(C) For purposes of this Section 6
(i) a "security" or "securities" shall
include both equity and debt securities;
(ii) any specified person shall be deemed to
be the "beneficial owner" or to "beneficially own"
any securities (a) as to which such person or any
affiliate or associate of such person has the right,
along with others, to direct the manner of exercise
of the voting rights of such securities, whether or
not such person or any affiliate or associate of such
person has any interest in any income or distribution
with respect to such securities, or (b) which such
specified person or any of its affiliates or
associates has the right to acquire pursuant to any
agreement, or upon exercise of conversion rights,
warrants or options, or pursuant to the automatic
termination of a trust, discretionary account or
similar arrangement, or otherwise, or (c) which are
beneficially owned, within the meaning of clause (a)
and (b) hereof, by any other person with which such
specified person or any of its affiliates or
associates has any agreement, arrangement, or
relationship or understanding for the purpose of
acquiring, holding, voting, or disposing of such
securities;
(iii) a "person" is any individual,
corporation or other entity;
(iv) an "affiliate" of a specified person is
any person that directly, or indirectly through one
or more intermediaries, controls, or is controlled
by, or is under common control with such specified
person;
(v) an "associate" of a specified person is
(a) any person of which such specified person is an
executive officer, principal, member or partner or
is, directly or indirectly, the beneficial owner of 5
percent or more of any class of equity securities of
such person, (b) any person that bears to the
specified person the relationship described in sub-
clause (a) of this clause (v), (c) any trust or other
estate in which such specified person has a
substantial beneficial interest or as to which such
specified person serves as a trustee or in a similar
fiduciary capacity, (d) any relative or spouse of the
specified person, or any relative of such spouse, who
has the same home (or is a member of the same
household) as such specified person, (e) any person
which controls or is controlled by such specified
person, or (f) any other member or partner in a
partnership, limited partnership, joint venture,
syndicate or other group of which the specified
person a member or partner and which is acting
together with the specified person for the purpose of
acquiring, holding or disposing of any interest in
the corporation or a subsidiary of the corporation;
(vi) a "subsidiary" of a specified person is
any person, a majority, by vote, of the voting
interest of which is beneficially owned, directly or
indirectly, by such specified person.
The Board of Directors of the corporation shall
determine the meaning and applicability of each of the above
definitions based on information then known to it, and any
determination by the Board of Directors of the corporation
concerning such matters shall be inclusive and binding for all
purposes and with respect to all persons.
Sec. 7. ORDER OF BUSINESS. The order of business at
all meetings of the shareholders shall be as follows:
1. Roll Call.
2. Proof of notice of meeting or waiver of notice.
3. Reading of minutes of preceding meeting.
4. Reports of Officers.
5. Reports of Committees.
6. Announcement of Inspectors of Election, if
applicable.
7. Election of Directors, if applicable.
8. Unfinished business.
9. New business.
Sec. 8. BUSINESS TRANSACTED. At the annual meeting,
Directors shall be elected and such other business may be
transacted as is properly brought before the meeting. No
business, other than that specified in the notice of any special
meeting, shall be transacted at such meeting unless all
shareholders entitled to notice thereof consent to the
transaction of such business.
Sec. 9. PROXIES. Every shareholder having a right
to vote at any meeting or to express consent or dissent shall be
entitled to authorize another person or persons to vote for him
by proxy. No proxy shall be valid unless it shall be in writing
and signed by the shareholder or his attorney in fact, and
specify the meeting or meetings at which such proxy may be
exercised. Unless a proxy shall state that it is irrevocable as
permitted by law, it shall be revocable at the pleasure of the
person executing it. No proxy shall be valid after the
expiration of eleven (11) months from the date thereof.
Sec. 10. CLOSING RECORD BOOKS. Unless otherwise
provided by law, by the Certificate of Incorporation, or these
By-Laws, the Board of Directors may fix a date not more than
fifty (50) days nor less than ten (10) days before the date
appointed for any meeting of shareholders or the date fixed for
the payment of any dividend or other distribution allowed by law,
as the record date for the determination of the shareholders
entitled to notice of and to vote at such meeting, or entitled to
receive such dividend or other distribution.
If no record date is fixed as provided in this
section, then the close of business on the day next preceding the
day on which notice of the meeting is mailed, or the close of
business on the day on which the resolution is adopted, as the
case may be, shall be the record date for determination of
shareholders entitled to notice of such meeting, or to receive
such distribution.
When any determination is made as provided in this
section, such determination shall apply to any adjournment of any
meeting except where a new record date is fixed by the Board of
Directors for such adjourned meeting.
Sec. 11. ACTION WITHOUT MEETING. Whenever
shareholders are required or permitted to take any action by
vote, such action may be taken without a meeting, on written
consent, setting forth the action so taken, signed by the holders
of all outstanding shares entitled to vote thereon. However,
this section shall not be construed to alter or modify any
provision of law or of the Certificate of Incorporation under
which the written consent of the holders of less than all
outstanding shares is sufficient for corporate action.
ARTICLE II
DIRECTORS
Sec. 1. NUMBER. The affairs and business of this
corporation shall be managed by a Board of Directors composed of
not less than three (3) nor more than nine (9) persons,
twenty-one years of age, or more, who need not be shareholders,
except that when all the shares of the corporation are owned
beneficially and of record by less than three shareholders, the
number of directors may be less than three, but not less than the
number of shareholders. The Board shall include such number of
Directors, within the maximum and minimum as set forth above, as
shall be determined from time to time by resolution adopted by a
vote of a majority of the entire Board. In the event of any such
increase in the number of Directors, within such limits, the
vacancy or vacancies so resulting shall be filled by a vote of a
majority of the Directors then in office.
Sec. 2. HOW ELECTED. The Directors of the
corporation shall be elected at the annual meeting of
shareholders and the number of persons, corresponding to the
number of directors to be elected, who shall receive a plurality
of the votes cast, shall be elected Directors of the corporation
and shall constitute the Board of Directors.
Sec. 3. TERM OF OFFICE. The term of office of each
Director shall be until the next annual meeting of shareholders,
and thereafter until his successor has been elected and has
qualified.
Sec. 4. DUTIES. The Board of Directors shall have
the control and general management of the affairs and business of
the corporation. Such Directors shall in all cases act as a
Board, regularly convened, and they may, by majority vote, adopt
such rules and regulations for the conduct of their meetings and
the management of the corporation as they may deem proper, not
inconsistent with any provisions of law, the Certificate of
Incorporation or these By-Laws.
Sec. 5. DIRECTORS' MEETINGS. Regular meetings of
the Board of Directors shall be held immediately following the
annual meeting of shareholders, and at such other times as the
Board may determine by resolution. Special meetings of the Board
may be called by the President at any time and shall be called by
the President or the Secretary upon the written request of two
directors. Meetings of the Board shall be held at such time and
place within or without the State of New York as may be
determined by the Board.
Sec. 6. NOTICE OF MEETING. The Secretary shall
serve personally or by mail upon each Director a written notice
of all meetings of the Board of Directors, other than the regular
annual meeting or any regular meeting held in accordance with a
resolution establishing such meetings duly adopted by the Board
at its regular annual meeting. Such notice shall be addressed to
each Director at his address as shown on the records of the
Secretary and shall specify the place, date and time of such
meeting. Such notice shall be delivered personally or by mail or
by telegram, at least three (3) days before the date of such
meeting, including the day of mailing. At any meeting at which
all Directors are present, or of which all Directors not present
have waived in writing the giving of such notice, any notice
otherwise required shall be dispensed with and any business may
be transacted which could have been transacted if the same were
specified in such notice.
Sec. 7. QUORUM. At any meeting of the Board of
Directors, a majority of the entire Board shall be necessary to
and constitute a quorum for the transaction of business unless
otherwise provided by law or by the Certificate of Incorporation;
but if a quorum is not present, a lesser number may adjourn the
meeting to another time and place not more than ten (10) days
later, without notice other than announcement at the meeting. At
any such adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at
the meeting as originally called.
Sec. 8. VOTING. At all meetings of the Board of
Directors, each Director shall have one (1) vote irrespective of
the number of shares of stock that he may hold. Unless otherwise
provided by law or by the Certificate of Incorporation, the act
of a majority of the Directors present at a meeting at which a
quorum is present shall be the act of the Board.
Sec. 9. VACANCIES. Vacancies in the Board of
Directors occurring during terms of office, whether occurring
upon removal with or without cause, or otherwise, shall be filled
for the remainder of the term by the vote of a majority of the
Directors then in office, although less than a quorum.
Sec. 10. REMOVAL OF DIRECTORS. All or any of the
Directors may be removed, (a) either with or without cause, at
any time by a majority vote of the shareholders entitled to vote
for the election of Directors at a special meeting called for
that purpose and (b) with cause, by the Board, by majority vote
of all Directors then in office.
Sec. 11. COMMITTEES. The Board of Directors, by
resolution adopted by a majority of the entire Board, may
designate from among its members, one or more committees, each
consisting of at least three (3) Directors, each of which, to the
extent provided in such resolution, shall have all the authority
of the Board. Any such committees shall report to the Board when
and as required.
Sec. 12. COMPENSATION. The Board of Directors may
determine, from time to time, the amount of compensation plus
expenses of attendance, to be allowed Directors, other than
officers, for their attendance at any meeting of the Board or of
its committees.
Sec. 13. RESIGNATION. Any Director may resign at
any time by written notice to the Board, the President or the
Secretary. Unless an effective date is specified in such notice,
it shall become effective upon receipt by the Board or such
officer, and no action on such resignation shall be necessary to
make it effective.
Sec. 14. NOMINATIONS FOR THE BOARD. Nominations for
the election of Directors may be made by the Board of Directors
or a committee designated by the Board of Directors or by a
shareholder entitled to vote in the election of Directors. A
shareholder entitled to vote in the election of Directors,
however, may make such a nomination only if written notice of the
shareholder's intent to do so has been given, either by personal
delivery or by United States mail, postage prepaid, to the
Secretary of the corporation and received by the corporation (a)
with respect to an election to be held at an annual meeting of
shareholders, not later than sixty (60) nor more than ninety (90)
days prior to the first anniversary of the preceding year's
annual meeting (or, if the date of the annual meeting is changed
by more than twenty (20) days from such anniversary date, within
ten (10) days after the date the corporation mails or otherwise
give notice of the date of such meeting), and (b) with respect to
an election to be held at a special meeting of shareholders
called for that purpose, not later than the close of business on
the tenth (10th) day following the date on which notice of the
special meeting was first mailed to the shareholders of the
corporation.
Each shareholder's notice of intent to make a
nomination shall set forth: (i) the name(s) and address(es) of
the shareholder who intends to make the nomination and of the
person or persons to be nominated; (ii) a representation that the
shareholder (a) is a holder of record of stock of the corporation
entitled to vote at such meeting, (b) will continue to hold such
stock through the date on which the meeting is held, and (c)
intends to appear in person or by proxy at the meeting to
nominate the person or persons specified in the notice; (iii) a
description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the nomination
is to be made by the shareholder; (iv) such other information
regarding each nominee proposed by such shareholder as would be
required to be included in a proxy statement filed pursuant to
Regulation 14A promulgated under Section 14 of the Securities
Exchange Act of 1934, as amended, as now in effect or hereafter
modified, had the nominee been nominated by the Board of
Directors; and (v) consent of each nominee to serve as a director
or the corporation if so elected. The corporation may require
any proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the
qualifications of such person to serve as a director.
No person shall be eligible for election as a
director unless nominated (i) by a shareholder in accordance with
the foregoing procedure or (ii) by the Board of Directors or a
committee designated by the Board of Directors.
Sec. 15. ACTION WITHOUT A MEETING. Any action
required or permitted to be taken by the Board of Directors or
any committee of the Board of Directors may be taken without a
meeting if all members of the Board or the committee consent in
writing to the adoption of a resolution authorizing the action.
The resolution and the written consents shall be filed with the
minutes of the proceedings of the Board or the committee.
Sec. 16. MEETINGS BY CONFERENCE TELEPHONE. Any one
or more members of the Board of Directors or any committee of the
Board of Directors may participate in a meeting of the Board or
of the committee by means of a conference telephone or similar
communications equipment allowing all participants to hear each
other at the same time. Participation by such means shall
constitute presence in person at the meeting.
ARTICLE III
EXECUTIVE COMMITTEE
Sec. 1. APPOINTMENT. The Board of Directors may, by
resolution of a majority of the entire Board, designate not less
than three (3) nor more than five (5) Directors who shall
constitute the Executive Committee. Vacancies in the Executive
Committee may be filled by similar resolution at any meeting of
the Board.
Sec. 2. DUTIES. The Executive Committee shall
advise and aid the officers of the corporation in all matters
concerning the corporation's interest and the management of the
corporation's business, and when the Board of Directors is not in
session the Executive Committee shall have and may exercise all
the powers and authority of the Board with reference to the
conduct of the business of the corporation, except as such
exercise may be restricted by law, or by resolution of the Board.
The Executive Committee, unless otherwise provided by
the Board, shall fix the salary or compensation of each officer
whether or not such officer be a Director, but shall not
determine the compensation of any member of the Executive
Committee.
Sec. 3. MEETINGS. Regular meetings of the Executive
Committee may be held without call or notice at such times and
places as the Executive Committee from time to time may fix in
advance. Other meetings of the Executive Committee may be called
by any member thereof either by oral, telegraphic or written
notice not later than the day prior to the date set for such
meeting. Such notice shall state the date, time and place of the
meeting and, if by telegram or in writing, shall be addressed to
each member at his address as shown on the records of the
Secretary. Upon request by any member, the Secretary shall give
the required notice calling the meeting.
Sec. 4. QUORUM. At any meeting of the Executive
Committee, three members shall constitute a quorum. Any action
of the Executive Committee, to be effective, must be authorized
by affirmative vote of a majority of the members thereof present,
and in any event, shall require not less than three affirmative
votes.
Sec. 5. MINUTES. The Secretary shall keep the
minutes of the meetings of the Executive Committee and cause them
to be recorded in a book kept at his office for that purpose.
These minutes shall be presented to the Board of Directors from
time to time for their information.
ARTICLE IV
OFFICERS
Sec. 1. NUMBER. The officers of the corporation
shall be a president, one or more vice presidents (the number of
such vice presidents to be determined by the Board of Directors),
a secretary and treasurer. The Board may also elect or appoint a
Chairman of the Board and shall appoint such other officers,
assistant officers, agents and employees as it shall deem
necessary, who shall have such authority and shall perform such
duties as shall be prescribed by the Board from time to time.
Any two or more offices may be held by the same person, except
the offices of President and Secretary.
Sec. 2. ELECTION. All officers of the corporation
shall be elected annually by the Board of Directors at its
meeting held immediately following the annual meeting of
shareholders, and shall hold office until the meeting of the
Board immediately following the next annual meeting of
shareholders. The President shall be elected from the members of
the Board.
Sec. 3. DUTIES OF OFFICERS. The duties and powers
of the officers of the corporation shall be as follows:
CHAIRMAN OF THE BOARD
The Chairman of the Board, if appointed by the Board
of Directors, shall preside at all meetings of shareholders and
of the Board, and shall have and perform such other powers and
duties as may from time to time be assigned by the Board,
including the specified duties of any other officer.
PRESIDENT
The President shall be the Chief Executive Officer of
the corporation; in the absence of the Chairman of the Board, or
if there be no Chairman, he shall preside at all meetings of
shareholders and directors; he shall be ex officio a member of
all standing committees, shall have general and active management
and control of the Board of Directors, and shall see that all
orders and resolutions of the Board are carried into effect.
VICE PRESIDENT
The Vice President, or if there by more than one, the
Vice Presidents in order of their seniority or in any other order
determined by the Board, shall, in the absence or disability of
the President, perform the duties and exercise the powers of
President, and shall generally assist the President and perform
such other duties as the Board of Directors or the President
shall prescribe.
SECRETARY
The Secretary shall attend all meetings of the Board
and all meetings of shareholders, and record all votes and the
minutes of all proceedings in a book to be kept for that purpose,
and shall perform like duties for standing committees when
required. He shall give or cause to be given notice of all
meetings of shareholders and special meetings of the Board, and
shall perform such other duties as may be prescribed by the Board
of Directors or President, under whose supervision he shall act.
He shall keep in safe custody the seal of the corporation and,
when authorized by the Board, affix same to any instrument
requiring it, and when so affixed, it shall be attested by his
signature or the signature of the Treasurer, or Assistant
Secretary or Assistant Treasurer. He shall keep in safe custody
the certificate books and shareholder records and such other
books and records as the Board may direct, and shall perform all
other duties incident to the office of Secretary.
ASSISTANT SECRETARY
The Assistant Secretaries, if any, in order of their
seniority or any other order determined by the Board, shall in
the absence or disability of the Secretary, perform the duties
and exercise the powers of the Secretary, and shall perform such
other duties as the Board of Directors or the Secretary shall
prescribe.
TREASURER
The Treasurer shall have care and custody of the
corporate funds and other valuable effects, including securities,
and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation, and shall
deposit all moneys and other valuable effects in the name and the
credit of the corporation in such depositories as may be
designated by the Board. The Treasurer shall disburse funds of
the corporation as may be ordered by the Board, taking proper
vouchers for such disbursements, and shall render to the
President and Directors at the regular meeting of the Board, or
whenever they may request it, an account of all his transactions
as Treasurer and of the financial condition of the corporation.
If required by the Board, the Treasurer shall give the
corporation a bond for such term in such sum and with such surety
or sureties as shall be satisfactory to the Board for the
faithful performance of the duties of his office and for the
restoration to the corporation in the case of his death,
resignation, retirement or removal from office, of all books,
papers, vouchers, money and other property of whatever kind in
his possession or under his control belonging to the corporation.
ASSISTANT TREASURER
The Assistant Treasurers, if any, in order of their
seniority or in any other order determined by the Board, shall in
the absence or disability of the Treasurer, perform the duties
and exercise the power of Treasurer, and shall perform such other
duties as the Board of Directors or the Treasurer shall
prescribe.
CONTROLLER
The Controller, if any, shall maintain adequate
records of all assets, liabilities and transactions of the
corporation and shall have adequate audits thereof currently and
regularly made. In conjunction with other officers, he shall
initiate and enforce measures and procedures whereby the business
of the corporation shall be conducted with maximum safety,
efficiency and economy. He shall attend all meetings of the
Board and shall report to the President or the Board, as the
Board of Directors may prescribe. His duties and powers shall
extend to all subsidiary corporations and, so far as the
President may deem applicable, to all affiliated corporations.
ASSISTANT CONTROLLER
The Assistant Controller, of if there be more than
one, the Assistant Controllers in order of their seniority or any
other order determined by the Board, shall in the absence or
disability of the Controller, perform the duties and exercise the
powers of Controller, and shall perform such other duties as the
Board of Directors or the Controller shall prescribe.
Sec. 4. BOND. The Treasurer shall, if required by
the Board of Directors, give to the corporation such security for
the faithful performance of his duties as the Board may direct.
Sec. 5. VACANCIES, HOW FILLED. All vacancies in any
office shall be filled by the Board of Directors without undue
delay at its next regular meeting or at a meeting specially
called for that purpose.
Sec. 6. COMPENSATION OF OFFICERS. The officers
shall receive such salary or compensation as may be determined by
the Executive Committee, if any, unless otherwise provided by the
Board of Directors. If an Executive Committee is not appointed,
the Board shall determine such salary or compensation. The fact
that any officer is a director shall not preclude him from
receiving a salary or from voting upon any resolution
establishing the same.
Sec. 7. REMOVAL OF OFFICERS. The Board of Directors
may remove any officer at any time, with or without cause, by a
majority vote of the entire Board.
Sec. 8. REPAYMENT OF DISALLOWED COMPENSATION. Any
pay-ments made to an officer by way of salary, commission, bonus,
interest, rent, or entertainment expense incurred by such
officer, which shall be disallowed in whole or in part as a
deductible expense of the corporation by the Internal Revenue
Service, shall be reimbursed by such officer to the full extent
of such disallowance. The Board shall be responsible for
enforcing repayment of each such amount disallowed and, subject
to the determination of the Board, proportionate amounts may be
withheld from future compensation payments to such officer until
amounts repayable have been repaid in full. The Board shall
determine whether repayment of any such amounts is to be made
over a period of one or more years, but any such repayment shall
be made over no longer a period than five years.
ARTICLE V
CORPORATE SEAL
Sec. 1. FORM. The Board of Directors shall adopt a
corporate seal which shall be circular in form and shall have
inscribed thereon the name of the corporation, the year of its
incorporation, the words "Corporate Seal, New York" and such
other matters as the Board may consider proper.
ARTICLE VI
SHARE CERTIFICATES
Sec. 1. FORM; SIGNATURE. The certificates for
shares of the corporation shall be in such form as the Board of
Directors may determine from time to time. Such certificates
shall be signed by the President or Vice President and the
Secretary or Treasurer and shall be sealed with the seal of the
corporation. Such seal may be a facsimile, engraved or printed.
Where any such certificate is signed by a transfer agent or
registered by a registrar, other than the corporation itself,
tile signatures of any such President, Vice President, Secretary
or Treasurer upon such certificate may be facsimiles, engraved or
printed. In case any such officer who has signed or whose
facsimile signature has been placed upon such certificate shall
have ceased to be such before such certificate is issued, it may
be issued by the corporation with the same effect as if he were
such officer and had not ceased to be such at the date of its
issue.
Every certificate of stock issued by the corporation
shall plainly state upon the face thereof: That the corporation
is formed under the laws of the State of New York; the name of
the registered holder; the number, kind and class of shares, and
the designation of the series, if any, which it represents; and
the par value of each share represented by such certificate or a
statement that such shares are without par value.
Each series of certificates shall be consecutively
numbered. The name of the person owning the shares represented
thereby, with the number of such shares and the date of issue,
shall be entered on the corporation's books as well as on the
face of such certificate.
Sec. 2. TRANSFERS OF CERTIFICATES. Certificates for
shares of the corporation shall be transferable on the books of
the corporation, by the holder thereof in person or by his
attorney, upon surrender for cancellation of such certificates,
and proper evidence of succession, assignment or authority to
transfer.
Sec. 3. LOST, STOLEN OR DESTROYED STOCK
CERTIFICATES. No certificate for shares of stock of the
corporation shall be issued in place of any certificate alleged
to have been lost, stolen or destroyed, except upon production of
evidence of the loss, theft or destruction, and upon
indemnification of the corporation and its agents to the extent
and in the manner the Board of Directors may from time to time
prescribe.
Sec. 4. REGULATIONS. The Board of Directors shall
have the power and authority to make such rules and regulations
as it may deem expedient, concerning the issue, transfer and
registration of certificates for shares of the corporation.
Sec. 5. TRANSFER AGENT AND REGISTRAR. The Board of
Directors may appoint one or more transfer agents or transfer
clerks and/or one or more registrars of transfers, and may
require all stock certificates to bear the signature of a
transfer agent or transfer clerk and/or a registrar of transfers.
The Board may at any time terminate the appointment of any
transfer agent or transfer clerk or any registrar of transfers.
Sec. 6. OWNER OF CERTIFICATE. The holder of record
of any certificate for shares of the corporation shall be deemed
the holder in fact thereof and the corporation shall not be bound
to recognize any equitable or legal claim to or interest in such
certificate on the part of any other persons, whether or not it
shall have actual or other notice thereof, except as otherwise
expressly provided by law.
ARTICLE VII
DIVIDENDS
Sec. 1. WHEN DECLARED. The Board of Directors may
declare dividends in cash, in property, or in the shares of the
corporation, from the surplus profits of the corporation
whenever, in its opinion, the conditions of the corporation's
affairs will render it expedient for such dividends to be
declared.
Sec. 2. PAYMENT. The Board of Directors, in
declaring any dividend, may determine the shareholders entitled
to receive such dividend by fixing a record date for the
determination of shareholders and making any such dividend
payable only those persons who are shareholders of record as of
such date. The Board may also determine the date when payment of
any such dividend is to be made.
ARTICLE VIII
CONTRACTS, BILLS, NOTES, DEPOSITORIES
Sec. 1. BILLS, NOTES, ETC. All bills payable,
notes, checks, drafts, warrants or other negotiable instruments
shall be made in the name of the corporation, and shall be signed
and countersigned by such officer or officers of the corporation
as shall be designated by resolution of the Board of Directors.
No officer or agent of the corporation, either singly or jointly
with others, shall have the power to make any bill payable, note,
check, draft or warrant or other negotiable instrument, or
endorse the same in the name of the corporation or contract or
cause to be contracted any debt or liability in the name or in
behalf of the corporation, except as herein expressly prescribed
and provided.
Sec. 2. CONTRACTS. The Board of Directors may
authorize any officer or officers, agent or agents, to enter into
any contract or execute and deliver any instrument in the name of
and on behalf of the corporation, and such authority may be
general and continuing or may be confined to specific instances.
Sec. 3. DEPOSITORIES. The Board of Directors shall
designate the trust company, or trust companies, bank or banks,
in which shall be deposited the money or securities of the
corporation.
ARTICLE IX
OFFICES
Sec. 1. PRINCIPAL OFFICE. The principal office of
the corporation shall be in the City of Buffalo, County of Erie
and State of New York, and the exact address of such office may
be determined, and changed, from time to time by resolution of
the Board of Directors.
Sec. 2. OTHER OFFICES. The corporation may have
such other offices or places of business at such other places
within or without the State of New York as the Board of Directors
from time to time may determine, or the business of the
corporation may require.
ARTICLE X
FISCAL YEAR
Sec. 1. FISCAL YEAR. Unless otherwise fixed by
resolution of the Board of Directors, the fiscal year of the
corporation shall begin on the 1st day of January and end on the
last day of December.
ARTICLE XI
INSPECTORS OF ELECTION
Sec. 1. APPOINTMENT. The Board of Directors, prior to
the annual meeting of shareholders in each year, shall appoint one
or more inspectors of election to act at such annual meeting and at
all other meetings of shareholders held during the ensuing year.
In the event of the failure of the Board to make any such
appointments, or if any inspector of election shall for any reason
fail to attend and act at such meeting, an inspector of election or
inspectors of election, as the case may be, may be appointed by the
chairman of the meeting at which such inspectors are to act.
ARTICLE XII
AMENDMENTS
Sec. 1. BY SHAREHOLDERS. These By-Laws may be
amended, repealed or adopted by the affirmative vote of the holders
of a majority of the shares at the time entitled to vote for the
election of directors, at any meeting for which the notice of
meeting specifies such amendments, alterations, changes or action
proposed to be taken with regard to these By-Laws. When so
provided in the Certificate of Incorporation, or these By-Laws, the
affirmative vote required to effect any such action shall be such
vote, greater or lesser than a majority, as may be so provided.
The provisions set forth in Article I - Sections 2 and 6 of these
By-Laws may not be altered, amended or repealed in any respect
unless such alteration, amendment or repeal is approved by an
affirmative vote of holders of not less than 80 percent of the
outstanding shares of the corporation entitled to vote thereon.
Sec. 2. BY DIRECTORS. These By-Laws may also be
amended, repealed or adopted at any regular or special meeting of
the Board of Directors, by the affirmative vote of a majority of
the entire Board. If any By-Law regulating an impending election
of directors is amended, repealed or adopted by the Board, there
shall be set forth in the notice of the next meeting of
shareholders for the election of directors, the By-Law so amended,
repealed or adopted, together with a concise statement of the
changes made. Any By-Law amended, repealed or adopted by the Board
may be amended or repealed by the shareholders at any annual
meeting, or at any special meeting called for that purpose, by the
affirmative vote of the holders of a majority of the shares at the
time entitled to vote for the election of directors.
ARTICLE XIII
INDEMNIFICATION
Sec. 1. INDEMNIFICATION. To the extent permitted by
law:
(a) The corporation shall indemnify any person made
a party to any action or proceeding by or in the right of the
corporation to procure a judgment in its favor, by reason of the
fact that he, his testator or intestate, is or was a director or
officer or employee of the corporation, against the reasonable
expenses, including attorneys' fees, actually and necessarily
incurred by him in connection with the defense of such action or
proceeding, or in connection with any appeal therein, except in
relation to matters as to which such person is adjudged to have
breached his duty to the corporation; and
(b) The corporation shall indemnify any person
made, or threatened to be made, a party to any action or proceeding
other than one by or in the right of the corporation to procure a
judgment in its favor, whether civil or criminal, including an
action by or in the right of any other corporation of any kind or
type, domestic or foreign, which any director or officer or
employee of the corporation served in any capacity at the request
of the corporation, by reason of the fact that he, his testator or
intestate, was a director or officer or employee of the
corporation, or served such other corporation in any capacity,
against judgments, fines, amounts paid in settlement and reasonable
expenses, including attorneys' fees, actually and necessarily
incurred as a result of such action or proceeding, or any appeal
therein, if such person acted in the best interest of the
corporation, and in criminal actions or proceedings, in addition
had no reasonable cause to believe that his conduct was unlawful.
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
(in thousands, except for
per share data)
1996 1995 1994
Primary
Average shares outstanding 4,835 4,789 4,966
Net effect of dilutive stock
options based on the treasury
stock method using average
market price 367 -- --
_____ _____ _____
Total 5,202 4,789 4,966
===== ===== =====
Net income $2,657 $1,760 $1,306
====== ====== ======
Per share amount $ 0.51 $ 0.37 $ 0.26
====== ====== ======
Fully Diluted
Average shares outstanding 4,835 4,789 4,966
Net effect of dilutive stock
options based on the treasury
stock method using year-end
market price 402 314 --
_____ _____ _____
Total 5,237 5,103 4,966
===== ===== =====
Net income $2,657 $1,760 $1,306
====== ====== ======
Per share amount $ 0.51 $ 0.34 $ 0.26
====== ====== ======
EXHIBIT 13
ANNUAL REPORT TO SHAREHOLDERS
Corporate Profile
A Brief Description of Astronics Corporation
General
Astronics Corporation was incorporated in 1968. The Company's
Common Stock is traded on the Nasdaq National Market tier of The
Nasdaq Stock Market under the symbol: ATRO.
The diversified nature of the Company's two segments are the result
of the acquisition of several businesses since 1971. Astronics'
strategy is to act as a holding company, overseeing its diversified
operations. Astronics wants its businesses to be either the leader
or the dominant regional provider in the industries in which they
compete.
The corporate operational structure is decentralized such that its
various subsidiaries are relatively self-sufficient and run their
own operations.
Electronic Systems
The Electronic Systems segment is involved in the design,
manufacture, and marketing of advanced technology products. Major
applications include specialized lighting systems and ruggedized
electro-mechanical assemblies. Proprietary design and
manufacturing techniques are basic to the segment's operations.
Astronics owns critical patents covering the technologies.
Customers are typically well-known companies in the automotive,
aerospace, air transport, defense, and electronics industries.
Products include aircraft cockpit lighting systems, aircraft escape
path lighting systems, military aircraft formation lights,
ruggedized keyboards for use in harsh environments, and electro-
luminescent lighting systems for a variety of display and
backlighting applications.
Success in this segment depends upon technical product innovation,
customer support, responsiveness, and cost management. Astronics
continues to invest in developing the tools critical to competing
in today's worldwide markets.
The segment operates facilities in East Aurora, NY, and Lebanon,
NH, with a sales and engineering office in Belgium. Approximately
30 percent of the segment's sales are defense-related, and 25
percent comes from foreign customers. The Electronic Systems
segment generates approximately 50 percent of Astronics' revenue.
Specialty Packaging
The Specialty Packaging segment is predominantly a direct marketing
provider of proprietary designs of paperboard and paper products.
The Company develops its own designs and owns the tooling
technology.
The Company is a dominant regional provider of custom folding boxes
where, within its chosen markets, it prevails as a preferred or
sole source provider to most of its customers.
Success in this segment is dependent upon competitive pricing,
innovative and responsive customer support and short lead time
delivery performance. To support this capability, Astronics has
invested and will continue to invest in process and systems
technology.
This segment operates facilities in Western New York. The
Specialty Packaging segment is approximately 50 percent of
Astronics' revenues, none of which are defense related.
Financial Highlights
Selected Historical Financial Data
(Dollars in thousands, except per share data)
Income BookStock Market
Net (Loss) Value Price
Income Per Dividends Per____________
Year Net Sales (Loss) Share Dividends Per Share Equity ShareHigh Low
____________________________________________________________________________________________________
1987 $17,530 $ 94* $.01* $233 $.05 $8,426$1.73$4.38$1.74
1988 21,883 20 .00 265 .06 8,123 1.67 2.90 1.86
1989 22,145 (1,996) (.41) --- --- 6,127 1.26 3.00 .80
1990 23,564 376 .08 --- --- 6,440 1.34 1.70 .60
1991 25,540 1,248 .26 --- --- 7,770 1.57 2.60 .80
1992 23,740 316** .06** --- --- 8,174 1.64 3.30 1.50
1993 23,957 1,188*** .24*** 41 .01 9,414 1.86 2.60 1.60
1994 24,944 1,306 .26 --- --- 10,334 2.13 2.50 1.50
1995 28,536 1,760 .37 --- --- 11,726 2.46 3.10 1.60
1996 38,371 2,657 .51 --- --- 14,842 2.99 5.75 2.80
____________________________________________________________________________________________________
* Includes cumulative effect of a change in accounting principle of $423 ($.09 per share)
** Includes cumulative effect of a change in accounting principle of $140 ($.03 per share)
*** Includes extraordinary expense item net of income taxes of $307 ($.06 per share)
Message To Shareholders
To our shareholders,
The year 1996 was our strongest ever with sales, earnings, return
on equity, cash flow and the stock price all increasing
significantly.
Sales were up 34 percent, earnings were up 51 percent, return on
beginning equity rose to 23 percent, cash flow from operations
increased 44 percent, and the stock price almost doubled.
This progress reflects operational gains although the year
benefited from a major acquisition for the Electronic Systems
segment that was completed in November of 1995.
In October of 1996, the Rodgard Division, a small business unit in
the Electronics segment, was sold. This allows for a clearer focus
on the long term opportunities for growth.
We ended the year with a strong backlog and a growing business
base. The electronics business continues to expand in its product
opportunities and now maintains dominant market positions within a
number of areas.
The Specialty Packaging segment also had a strong year and is
growing at more than double the pace of its industry. This product
area continues to expand as the business is repositioned
increasingly on a direct marketing basis with high quality products
and unusual order response time capabilities.
Over the last year we have engaged in the process of ISO 9001
registration for most of our business units. We anticipate
completing this during mid year in the Specialty Packaging segment
and in one of the Electronic Systems segment locations in 1998.
ISO, a quality process, is increasingly important to our business
initiatives as we expand to more diverse markets, both domestically
and internationally.
Earnings for the year were $.51 vs. $.37 for 1995. The strong
earnings boosted the return on shareholders' equity to 23 percent
from 17 percent in 1995 and 14 percent in the two prior years.
Cash flow in 1996 increased to record levels, reflecting increased
earnings and reductions in receivables and inventories, amounted to
over $8,000,000 for the year and enabled the company to invest
$4,000,000 in processes and equipment and also retire approximately
$6,000,000 of debt. At year end, debt was reduced to less than 27
percent of capitalization.
As we look into 1997, we continue to have high confidence levels
for the future. As I said in last year's annual report, "we are
positioning our strategies to maximize our vision of the future,
and are continually striving to focus on strengthening our core
competencies that give us our competitive advantages: long term
customers, an increasingly global initiative, technology, unmatched
physical assets, financial strength, and human resources. Our
significant level of investment in the business is one of the
important processes that enables us to maintain and accelerate this
broad initiative."
The new year looks to be healthy although competitive for us. We
are prepared to meet our opportunities and we foresee more growth
and increasing earnings, although at a more modest rate. This
should result in a solid year.
Kevin T. Keane
President and Chief Executive Officer
Buffalo, New York
January 16, 1997
Consolidated Statement of Income
(in thousands, except per share amounts)
Year ended December 31,
1996 1995 1994
---- ---- ----
Net Sales $38,371 $28,536 $24,944
Cost and Expenses
Cost of products sold 27,333 19,970 17,531
Selling, general and
administrative expenses 7,959 5,148 4,898
Interest expense, net of
interest income of
$23, $102 and $141 813 479 527
Gain on sale of assets (1,757) - -
_______ _______ _______
34,348 25,597 22,956
_______ _______ _______
Income before taxes 4,023 2,939 1,988
Provision for income taxes 1,366 1,179 682
_______ _______ _______
Net Income $ 2,657 $ 1,760 $ 1,306
======= ======= =======
Earnings per Share
Earnings per Share $ .51 $ .37 $ .26
======= ======= =======
Fully dilutive $ .51 $ .34 $ .26
======= ======= =======
See notes to financial statements.
Consolidated Balance Sheet
(in thousands)
Assets December 31,
1996 1995
____ ____
Current Assets
Cash and cash equivalents $ 1,130 $ 772
Accounts receivable, net of
allowance for doubtful accounts
of $404 in 1996 and $359 in 1995 3,688 4,874
Inventories 4,862 6,300
Prepaid expenses 578 646
------- -------
Total Current Assets 10,258 12,592
Property, Plant and Equipment, at cost
Land 326 330
Buildings 9,017 8,189
Machinery and equipment 19,833 20,269
Furniture and fixtures 1,693 1,699
Electronic equipment 684 494
Leasehold improvements 161 153
------- -------
31,714 31,134
Less accumulated depreciation
and amortization 14,072 14,858
------- -------
Net Property, Plant and Equipment 17,642 16,276
Other Assets 1,965 1,947
------- -------
$29,865 $30,815
======= =======
See notes to financial statements.
Liabilities and Shareholders' Equity December 31,
1996 1995
---- ----
Current Liabilities
Current maturities of long-term
liabilities $ 2,246 $ 2,266
Accounts payable 2,463 2,524
Accrued expenses 1,757 1,449
Income taxes 937 252
------- ------
Total Current Liabilities 7,403 6,491
Long-Term Debt 3,798 9,713
Long-Term Obligations Under Capital Leases 1,600 2,010
Deferred Income Taxes 545 875
Supplemental Retirement Obligations 1,677 -
Shareholders' Equity
Common Stock, $.01 par value
Authorized 10,000,000 shares, issued
4,519,219 in 1996; 3,301,751 in 1995 45 33
Class B Stock, $.01 par value
Authorized 5,000,000 shares, issued
749,161 in 1996; 814,908 in 1995 7 8
Additional paid-in capital 2,297 2,046
Retained earnings 13,089 10,447
------- -------
15,438 12,534
Less shares in Treasury, at cost 596 808
------- -------
Total Shareholders' Equity 14,842 11,726
------- -------
$29,865 $30,815
======= =======
Consolidated Statement of Cash Flows
(in thousands)
Year ended December 31,
1996 1995 1994
---- ---- ----
Cash Flows from Operating Activities
Net income $2,657 $1,760 $1,306
Adjustments to reconcile net income
to net cashprovided by operating
activities:
Depreciation and amortization 2,631 2,575 2,541
Provision for doubtful accounts 45 (8) 172
Gain on sale of assets (1,757) (50) (320)
Provision for deferred taxes (330) (300) (196)
Cash flows from changes in operating
assets and liabilities, net of the
effect of acquired or sold business:
Accounts receivable 1,141 169 (616)
Inventories 1,354 565 709
Prepaid expenses 68 51 (428)
Accounts payable (61) 615 312
Accrued expenses 308 235 (116)
Income taxes 685 10 65
Supplemental retirement obligations 1,339 - -
------ ----- -----
Net Cash provided by Operating Activities 8,080 5,622 3,429
------ ----- -----
Cash Flows from Investing Activities
Proceeds from sale of assets 219 60 564
Change in other assets (281) (429) (11)
Capital expenditures (4,025) (6,101) (1,588)
Net payment for assets of company acquired - (6,292) -
Proceeds from sale of division 2,250 - -
------ ------ ------
Net Cash used by Investing Activities (1,837) (12,762) (1,035)
------ ------ -----
Cash Flows from Financing Activities
New long-term debt - 6,990 -
Principal payments on long-term debt and
capital lease obligations (6,345) (2,230) (1,984)
Proceeds from issuance of stock 464 193 93
Fractional shares paid on stock
distribution (4) - -
Purchase of stock for treasury - (561) (479)
------ ------ ------
Net Cash provided (used) by
Financing Activities (5,885) 4,392 (2,370)
Net increase (decrease) in cash and ------ ------ ------
cash equivalents 358 (2,748) 24
Cash and Cash Equivalents at
Beginning of Year 772 3,520 3,496
------ ------ ------
Cash and Cash Equivalents at End of Year $1,130 $ 772 $3,520
====== ====== ======
Disclosure of Cash Payments for:
Interest $ 869 $ 551 $ 677
Income taxes 1,017 1,468 819
See notes to financial statements
Consolidated Statement of Shareholders' Equity
(dollars and shares in thousands)
Common Stock Class B Stock Treasury
------------ ------------- Stock
Shares Par Shares Par ------------- Paid-In Retained
Issued Value Issued Value Shares Cost Capital Earnings
------ ----- ------ ----- ------ ---- ------- --------
Balance at December 31, 1993 3,188 $32 894 $9 39 $64 $2,056 $7,381
Net Income for 1994 1,306
Treasury Stock Sold (46) (81) 12
Treasury Stock Purchased 194 479
Class B Stock converted
to Common Stock 44 - (44) -
----- ----- ---- ---- ------ ------
Balance at December 31, 1994 3,232 32 850 9 187 462 2,068 8,687
Net Income for 1995 1,760
Treasury Stock Sold (82) (215) (76)
Treasury Stock Purchased 197 561
Exercise of Stock Options 35 54
Class B Stock converted to
Common Stock 35 1 (35) (1)
----- ---- ----- ----- ---- ---- ------ ------
Balance at December 31, 1995 3,302 33 815 8 302 808 2,046 10,447
Net Income for 1996 2,657
Stock Distribution 1,040 10 75 (15)
Treasury Stock Sold (79) (212) (41)
Exercise of Stock Options 98 1 13 - 292
Class B Stock converted to
Common Stock 79 1 (79) (1)
----- ---- ----- ----- ---- ---- ------ -------
Balance at December 31, 1996 4,519 $45 749 $7 298 $596 $2,297 $13,089
===== ==== ===== ===== ==== ==== ====== =======
See notes to financial statements.
Notes to Financial Statements
Note 1
Summary of Significant Accounting Principles and Practices
Principles of Consolidation. The consolidated financial statements
include the accounts of the Company and its wholly-owned
subsidiaries. All intercompany transactions and balances have been
eliminated.
Revenue Recognition. Revenue is recognized on the accrual basis,
i.e., at the time of shipment of goods. There are no significant
contracts allowing for right of return. The Company performs
periodic credit evaluations of its customers' financial condition
and generally does not require collateral.
Inventories. Inventories are stated at the lower of cost or
market, cost being determined in accordance with the first-in,
first-out method. Inventories at December 31 are as follows:
(in thousands)
1996 1995
---- ----
Finished goods $1,826 $2,454
Work in process 744 1,081
Raw material 2,292 2,765
------ ------
$4,862 $6,300
====== ======
Property, Plant and Equipment. Depreciation of property, plant and
equipment is computed on the straight-line method for financial
reporting purposes and on accelerated methods for income tax
purposes. Estimated useful lives of the assets are as follows:
buildings, 13-40 years; machinery and equipment, 3-13 years;
furniture and fixtures, 4-13 years; and electronic equipment, 4
years. Leasehold improvements are amortized over the terms of the
lease or the lives of the assets, whichever is shorter.
The cost of properties sold or otherwise disposed of and the
accumulated depreciation thereon are eliminated from the accounts,
and the resulting gain or loss, as well as maintenance and repair
expenses, are reflected in income. Renewals and betterments are
capitalized.
Goodwill. Included in other assets, the excess of purchase price
over the fair value of net tangible assets acquired, net of
accumulated amortization, amounted to $1,149,000 and $1,200,000 at
December 31, 1996 and 1995, respectively. Accumulated amortization
amounted to $268,000 and $217,000 at December 31, 1996 and 1995,
respectively. These assets are amortized over 15-40 years on a
straight-line basis, starting in the year of acquisition.
Income Taxes. The Company files a consolidated federal income tax
return. Deferred taxes are computed under Statement of Financial
Accounting Standards No. 109, "Accounting for Income taxes."
Deferred Thrift and Profit Sharing Plan. The Company has a
trusteed Deferred Thrift and Profit Sharing Plan for the benefit of
its eligible full-time employees.
Earnings Per Share. Earnings per share computations are based upon
the weighted average number of shares outstanding, including
unexercised stock options, of 5,201,593 in 1996, 4,789,158 in 1995,
and 4,965,514 in 1994.
Cash Equivalents. The Company considers all highly-liquid
investments in debt securities with original maturities of three
months or less as cash equivalents.
Class B Stock. Class B Stock is identical to Common Stock, except
Class B Stock has ten votes per share, is automatically converted
to Common Stock when sold or traded, and cannot receive dividends
unless an equal or greater amount is declared on Common Stock.
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.
Note 2
Acquisition. On November 29, 1995, Astronics Corporation acquired
for $6,292,000 the assets and business devoted to the
electroluminescent lighting business of Loctite Luminescent
Systems, Inc. of Lebanon, New Hampshire.
The acquisition has been accounted for as a purchase, and the
purchase price has been allocated to the tangible assets acquired
in proportion to their estimated fair value at the acquisition
date. The excess of the purchase price over the fair market value
of net assets has been recorded as goodwill. The results of
operation have been included in the consolidated statement of
operations and retained earnings from the date of acquisition.
Note 3
Notes payable. The Company has an unsecured revolving line of
credit of $11,000,000, which provides for interest at bank prime or
LIBOR plus 125 basis points. The line is available for three years
and automatically converts into a four year term loan at not more
than $9,000,000. At December 31, 1996 and 1995, $2,700,000 and
$6,778,000, respectively, was outstanding.
Note 4
Long-Term Debt. Long-term debt consists of the following:
(in thousands)
1996 1995
---- ----
Mortgage payable in
installments through 2003
with interest at 11.00% $ 43 $ 47
Term loan payable in
installments through 1998
with interest at 6.96% 2,550 4,350
Revolver loan with interest
at LIBOR plus 125 basis points 2,700 6,778
Urban Development Action Grant
financing payable in monthly
installments through 2006,
with interest at 3% 342 374
------ ------
5,635 11,549
Less current maturities 1,837 1,836
------ ------
$3,798 $9,713
====== ======
The mortgage payable and grant are secured by certain property,
plant and equipment. The unsecured term loan, among other
requirements, imposes certain covenants with which the Company must
maintain compliance.
Estimated principal maturities of long-term debt over the next five
years are as follows: $1,837,000; $789,000; $715,000; $717,000,
and $719,000.
Note 5
Long-Term Obligations Under Capital Leases. The County of Erie,
State of New York, has issued Industrial Revenue Development Bonds
in connection with the acquisition of certain land, production
facilities and equipment. These bear interest at various floating
rates, either seven to ten percent, or 75 percent of the bank's
prime rate. The Company also leases certain other equipment under
capital leases with interest rates between six and ten percent.
The following is a schedule by years of future minimum lease
payments under the capital leases, together with the present value
of the net minimum lease payments as of December 31, 1996:
(in thousands)
Capital
Period Lease
------ -------
1997 $ 551
1998 520
1999 492
2000 429
2001 177
2002-2004 319
------
Net minimum lease payments 2,488
Amounts representing interest 479
------
Present value of net
minimum lease payments $2,009
======
Amounts related to the capital leases included in the Balance Sheet
are summarized as follows:
(in thousands)
1996 1995
---- ----
Property, Plant and Equipment
Land $ 125 $ 125
Buildings 2,592 2,592
Machinery and Equipment 2,438 2,438
Electronic Equipment 140 140
------ ------
5,295 5,295
Less accumulated depreciation 3,863 3,702
------ ------
$1,432 $1,593
====== ======
Debt:
Current $ 409 $ 430
Long-term 1,600 2,010
------ ------
$2,009 $2,440
====== ======
The Company subleases a portion of these facilities from which they
anticipate future total minimum rentals of $468,000.
Note 6
Stock Option and Purchase Plans. In October 1995, the Financial
Accounting Standards Board Issued Statement of Financial Accounting
Standards (SFAS) No. 123 "Accounting for Stock-Based Compensation",
which is effective for the Company's 1996 fiscal year. The
statement encourages but does not require financial reporting to
reflect compensation expense for grants of stock, stock options and
other equity instruments to employees based on the fair market
value of the underlying stock. The Company intends to continue
using the measurement prescribed by APB Opinion No. 25 which does
not recognize compensation expense if the exercise price of the
stock option equals the market price of the underlying stock on the
date of grant. SFAS 123 requires companies that chose not to adopt
the new fair value accounting rules to disclose proforma net income
and earnings per share under the new method. If the accounting
provisions of the new statement had been adopted at the beginning
of 1995, the net effect on the 1995 and 1996 earnings would have
been immaterial. Depending on the future use of stock options, the
impact of the accounting provisions in future years may become
material and would be disclosed at that time.
The Company established the 1982 and 1992 Incentive Stock Option
Plans for the purpose of attracting and retaining executive
officers and key employees, and to align management's interest with
those of the shareholders. Generally, the options must be
exercised within ten years from the grant date and, under the 1992
Plan, the options vest ratably over a five year period. The
exercise price for the options is equal to the fair market value at
the date of grant. The Company had options outstanding for 193,750
shares and 198,750 under the 1982 and 1992 Plans, respectively. At
December 31, 1996 options available for future issuance under the
1992 Plan are 109,250 shares.
The Company established the 1984 and the 1993 Directors Stock
Option Plan for the purpose of attracting and retaining the
services of experienced and knowledgeable outside directors, and to
align their interest with those of the shareholders. The options
must be exercised within ten years from the grant date. The
exercise price for the option is equal to the fair market value at
the date of grant. The Company had options outstanding for 96,983
shares and 45,000 under the 1984 and 1993 Plans, respectively. At
December 31, 1996 options available for future issuance under the
1993 Plan are 17,500 shares.
The Company established the Employee Stock Purchase Plan to
encourage employees to invest in the Company. Each option is for
one year, but may be canceled by the employee at any time during
that year. The purchase price of the option is 85 percent of the
market price on the date of grant. The employee pays for the
option through a weekly payroll deduction. At December 31, 1996
employees had outstanding options to purchase 42,750 shares at
$4.39 per share on September 30, 1997.
1996 1995
Weighted Weighted
average average
exercised exercised
Options price Options price*
Outstanding at the
beginning of the year 540,849 $2.33 612,719 $2.05
Options granted 95,714 $4.71 133,500 $2.93
Stock distribution 129,247 $(.47) - -
Options exercised (175,582) $1.55 (131,045) $1.58
Options expired (12,995) $2.61 (74,325) $2.41
Outstanding at the
end of the year 577,233 $2.07 540,849 $2.33
======= =======
Exercisable at
December 31 413,487 $1.66 374,849 $2.20
======= =======
Exercise prices for options outstanding as of December 31, 1996
range from $1.05 to $5.36. The weighted average remaining
contractual life of these options is 4.8 years.
*1995 does not reflect restatement for the September 30, 1996 stock
distribution.
Note 7
Income Taxes The provision for income taxes consists of the
following:
(in thousands)
1996 1995 1994
---- ---- ----
Currently payable
Federal $1,614 $1,412 $ 803
State 82 67 75
Deferred to future years (330) (300) (196)
------ ------ ------
$1,366 $1,179 $ 682
====== ====== ======
The effective tax rates of 34.0% in 1996, 40.1% in 1995, and
34.3% in 1994, which differ from the statutory federal income
tax, are a result of the following:
1996 1995 1994
---- ---- ----
Statutory federal income
tax rate 34.0% 34.0% 34.0%
Tax exempt items, net .6% .6% .9%
State income tax, net of
federal income tax benefit 1.8% 1.5% 2.5%
Other (2.4%) 4.0% (3.1%)
----- ------ -----
34.0% 40.1% 34.3%
===== ====== =====
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used
for income tax purposes. Significant components of the Company's
deferred tax liabilities and assets as of December 31, 1996 are
as follows:
(in thousands)
Total Federal State
----- ------- -----
Long-term deferred tax
liabilities:
Tax depreciation over book
depreciation $1,730 $1,493 $ 237
------ ------ ------
Net long-term deferred tax
liability 1,730 1,493 237
------ ------ ------
Long-term deferred assets:
State net operating loss
carryforwards 118 -- 118
State investment tax credit
carryforwards 800 -- 800
Other-net 1,067 948 119
------ ------ ------
Total long-term deferred
tax assets 1,985 948 1,037
Valuation allowance for
deferred tax assets
related to state net
operating losses and
investment tax credit
carryforward ($687
in 1995) (800) -- (800)
------ ------ ------
Net long-term deferred
tax asset 1,185 948 237
------ ------ ------
Net long-term deferred
tax liability $ 545 $ 545 $ --
====== ====== ======
At December 31, 1996, the Company had state net operating loss
carryforwards of $2,185,000 for income tax purposes expiring
through 2010 and state investment tax credit carryforwards of
$800,000 expiring through 2006. The state carryforwards are
subject to separate tax return limitations.
Note 8
Deferred Thrift and Profit Sharing Plan and Supplement Retirement
Obligations The Company has a trusteed Deferred Thrift and Profit
Sharing Plan for the benefit of its eligible full-time employees.
The profit sharing plan provides for annual contributions based on
percentages of pre-tax income. In addition, employees may
contribute up to ten percent of their salary to the thrift plan.
The plan may be amended or terminated at any time. Total charges
to income for the plan
were $548,000, $438,000, and $419,000, in 1996, 1995, and 1994,
respectively. In 1996 the Company formalized a Supplement
Retirement Benefit for senior officers. The obligations are
unfunded with payment to senior officers over a ten year period
after retirement.
Note 9
Stock Distribution On September 30, 1996, the Company made a 25
percent stock distribution. A total of 1,040,358 additional shares
were issued. All shares were new shares and historical per share
information has been restated to reflect this distribution.
Note 10
Accrued Expenses Accrued expenses consist of the following:
(in thousands)
1996 1995
Accrued payroll and employee ---- ----
benefits $ 590 $ 499
Accrued profit sharing 616 481
Other accrued liabilities 551 469
------- -------
$ 1,757 $ 1,449
======= =======
Note 11
Selected Quarterly Financial Information
(unaudited) (in thousands, except per share data)
Quarter ended
-------------
Dec. 31, Sept. 28, June 29, Mar. 30, Dec. 31, Sept. 30, July 1, Apr. 1,
1996 1996 1996 1996 1995 1995 1995 1995
---- ---- ---- ---- ---- ---- ---- ----
Net Sales $10,024 $9,095 $9,683 $9,569 $8,820 $6,266 $6,224 $7,226
====== ====== ====== ====== ====== ====== ====== ======
Gross Profit $3,118 $2,551 $2,648 $2,721 $2,641 $1,890 $1,890 $2,145
====== ====== ====== ====== ====== ====== ====== ======
Income before tax $1,891 $1,043 $ 551 $ 538 $1,406 $ 740 $ 275 $ 518
====== ====== ====== ====== ====== ====== ====== ======
Net Income $1,236 $ 678 $ 377 $ 366 $ 845 $ 467 $ 172 $ 276
====== ====== ====== ====== ====== ====== ====== ======
Net income per share $ .24 $ .13 $ .07 $ .07 $ .18 $ .10 $ .03 $ .06
====== ====== ====== ====== ====== ====== ====== ======
Note 12
Supplemental Cash Flow Information During the year ended
December 31, 1996, the Company sold substantially all the assets of
the Rodgard Division. During the year ended December 31, 1995, the
Company purchased substantially all the
assets of Loctite Luminescent Systems, Inc. These transactions
resulted in non-cash increases in the following accounts:
(in thousands)
1996 1995
---- ----
Accounts receivable - $2,093
Inventories (84) 2,680
Prepaid expenses - 38
Other assets - 498
Property, plant and equipment - 1,299
Accounts payable - (310)
Accrued expenses (6)
Supplemental retirement benefit (338) -
Note 13
Operations in Different Industries The Company operates in two
areas: Electronic Systems and Specialty Packaging. The
Electronics Systems segment is involved in the design, manufacture,
and marketing of advanced technology products. Major applications
include specialized lighting systems and ruggedized electro-
mechanical assemblies. Proprietary design and manufacturing
techniques are basic to the segment's operations. Astronics owns
critical patents covering the technologies. The Specialty
Packaging segment manufactures and predominantly direct markets
proprietary designs of paperboard and paper products. The Company
develops its own designs and owns the tooling technology.
Corporate assets consist mainly of cash, cash equivalents and
furniture and equipment.
(in thousands)
Income Depreciation
Operating Before Capital and
Sales Profit Taxes Assets Expenditures Amortization
----- --------- ------ ------ ------------ ------------
1996: Electronic Systems $19,718 $2,173 $ 8,077 $ 254 $ 799
Specialty Packaging 18,653 3,258 20,295 3,761 1,753
Operating Profit $ 5,431
Interest Expense (813)
Gain on sale
of assets 1,757
Corporate (2,352) 1,493 10 79
------- ------ ------- ------- ------- ------
$38,371 $5,431 $ 4,023 $29,865 $ 4,025 $2,631
======= ======= ======= ======= ======= ======
1995: Electronic Systems $11,530 $1,557 $12,082 $ 234 $1,219
Specialty Packaging 17,006 2,955 17,603 5,817 1,306
Operating Profit $ 4,512
Interest Expense (479)
Corporate (1,094) 1,130 50 50
------- ------ ------- ------- ------- ------
$28,536 $4,512 $ 2,939 $30,815 $ 6,101 $2,575
======= ======= ======= ======= ======= ======
1994: Electronic Systems $ 9,126 $ 901 $ 7,349 $ 147 $ 973
Specialty Packaging 15,818 2,779 12,598 1,442 1,137
Operating Profit $ 3,680
Interest Expense (527)
Corporate (1,165) 3,840 (1) 431
------- ------ ------- ------- ------- ------
$24,944 $3,680 $ 1,988 $23,787 $ 1,588 $2,541
======= ====== ======= ======= ======= ======
Report of Independent Auditors
To the Shareholders and Board of Directors of Astronics
Corporation
We have audited the accompanying consolidated balance sheets of
Astronics Corporation as of December 31, 1996 and 1995, and the
related consolidated statements of income, shareholders' equity,
and cash flows for each of the three years in the period ended
December 31, 1996. 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. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes 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 consolidated
financial position of Astronics Corporation at December 31, 1996
and 1995, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Buffalo, New York
January 16, 1997
Statement of Management Responsibility for Financial Statements:
The financial statements and accompanying information were
prepared by and are the responsibility of Astronics' management.
The statements were prepared in conformity with generally
accepted accounting principles and, as such, include amounts that
are based on management's best estimates and judgments.
The Company's internal control systems are designed to provide
reliable financial information for the preparation of financial
statements, to safeguard assets against loss or unauthorized use
and to ensure that transactions are executed consistent with
Company policies and procedures. Management believes that
existing internal accounting control systems are achieving their
objectives and that they provide reasonable assurance concerning
the accuracy of the financial statements.
Oversight of management's financial reporting and internal
accounting control responsibilities is exercised by the Board of
Directors, through an Audit Committee which consists solely of
outside directors. The Committee meets periodically with
management and the independent accountants to ensure that each is
meeting its responsibilities and to discuss matters concerning
auditing, internal accounting control and financial reporting.
Kevin T. Keane John M. Yessa
President and Vice President-Finance,
Chief Executive Treasurer and Chief
Officer Financial Officer
Stock Price
The following table sets forth the range of closing prices for
the Company's Common Stock, traded on the Nasdaq National Market
tier of The Nasdaq Stock Market for each quarterly period during
the last two years. The approximate number of shareholders of
record as of February 25, 1997 was 976.
1996 1995
---- ----
First $2.80 - $4.65 $1.60 - $2.30
Second 3.70 - 5.60 2.00 - 2.60
Third 4.40 - 5.60 2.35 - 2.65
Fourth 4.63 - 5.75 2.35 - 3.10
Five-Year Comparison of Selected Financial Data
(in thousands, except per share data)
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
For the year:
Sales $38,371 $28,536 $24,944 $23,957 $23,740
Income before extraordinary
item and change in
accounting principle 2,657 1,760 1,306 1,495 456
Net income 2,657 1,760 1,306 1,188 316
Per share:
Income before extraordinary
item and change in
accounting principle .51 .37 .26 .30 .10
Net income .51 .37 .26 .24 .06
Dividends -- -- -- .01 --
Shares used in computation
of earnings per share 5,224 4,789 4,966 5,002 4,932
At end of year:
Total assets $29,865 $30,815 $23,787 $24,786 $24,675
Net investment in property,
plant and equipment 17,642 16,276 11,177 11,744 10,254
Working capital 2,855 6,101 6,035 6,377 9,353
Long-term debt 3,798 9,713 4,771 6,627 516
Long-term obligations under
capital leases 1,600 2,010 2,228 2,624 2,997
Subordinated debentures -- -- -- -- 8,755
Shareholders' equity 14,842 11,726 10,334 9,414 8,174
Astronics Corporation
Management's Discussion and Analysis
Results of Operation:
The following table sets forth an income statement with percentage of net sales and the percentage
increase (decrease) of such items as compared to the prior period.
1996 1995 1994 Period to Period
--------------------------------------------- 1995-96 1994-95
(dollars in thousands) $ % $ % $ % ------- -------
Net sales
Electronic Systems $19,718 51.4 $11,530 40.4 $ 9,126 36.6 71.0% 26.3%
Specialty Packaging 18,653 48.6 17,006 59.6 15,818 63.4 9.7% 7.5%
------- ---- ------- ---- ------- ----
38,371 100.0 28,536 100.0 24,944 100.0 34.5% 14.4%
Cost of goods sold 27,333 71.2 19,970 70.0 17,531 70.3 36.9% 13.9%
Selling, general and
administrative expenses 7,959 20.8 5,148 18.0 4,898 19.6 54.6% 5.1%
Gain on sale of assets (1,757) (4.6) - - - - 100.0% -
------- ----- ------ ---- ----- ----
4,836 12.6 3,418 12.0 2,515 10.0 41.5% 35.9%
Other deductions:
Interest expense, net 813 2.1 479 1.7 527 2.1 69.7% (9.1%)
------ ----- ----- ----- ------ ----
Income before taxes 4,023 10.5 2,939 10.3 1,988 8.0 36.9% 47.8%
Provision for taxes 1,366 3.6 1,179 4.1 682 2.7 15.9% 72.9%
------ ----- ----- ----- ------ ----
Net income $2,657 6.9 $1,760 6.2 $1,306 5.3 51.0% 34.8%
====== ==== ====== ==== ====== ====
Introduction
Astronics Corporation operates in two business segments:
Electronic Systems and Specialty Packaging. The Company renamed
its Specialty Packaging segment in recognition of the business
shift from a regional custom folding box manufacturer to a direct
marketing manufacturer of proprietary paperboard and paper
products.
On October 30, 1996, effective September 30, 1996, Astronics
Corporation sold its Rodgard Division, a manufacturer of thick
walled elastomeric products. Sales for nine months of 1996 totaled
$1,494,000, sales for 1995 were $2,568,000 and sales for 1994 were
$1,345,000.
On November 29, 1995, the Company acquired the business and assets
of Loctite Luminescent Systems, Inc., in Lebanon, NH. This
business complements the electroluminescent business already
performed by the Company's Electronics Systems segment. After the
acquisition, the Company changed the name of its subsidiary, E-L
FlexKey Technologies, Inc., to Luminescent Systems, Inc. and is
maintaining operations in New Hampshire and New York. Previously,
during the first quarter of 1994, two operating units of the
Electronic Systems segment, E-L Products Company and Flex-Key
Corporation, were merged into a new operating entity known as E-L
FlexKey Technologies, Inc., with operations combined in the East
Aurora, NY, facilities of E-L Products.
On September 30, 1996 the Company issued a 25 percent share
distribution to shareholders of record. Per share data used in
this discussion have been restated.
Sales
Astronics Corporation experienced sales growth of 34.5 percent in
1996 as consolidated sales set a new record. Sales for the fiscal
year ended December 31, 1996 were $38,371,000, compared to
$28,536,000, the previous record established in the year ended
December 31, 1995. Sales in 1995 increased 14.4 percent over the
sales for the year ended December 31, 1994, of $24,944,000. The
sales in 1994 were 4.1 percent greater than those of the previous
year.
Sales in the Electronics Systems segment increased 71.0 percent in
1996, mainly from the November 1995 acquisition. The segment
increased its market share in avionics panels, and sold off the
thick walled elastomeric products area. In 1996, sales were
$19,718,000. In 1995, this segment's sales were $11,530,000, an
increase of 26.3 percent for the year over 1994 sales of
$9,126,000. Sales in 1994 and 1993 were nominally the same. Sales
in this segment are primarily to the aerospace and defense
electronics businesses. The November 1995 acquisition expanded
penetration into the aerospace field with the addition of
commercial aviation to the previously served general aviation
market, as well as increasing global customers. The Company has
experienced success in marketing its products for new aircraft
being produced, both in the commercial and private aircraft
markets. Several of these programs are in the developmental
stages; thus their benefits in sales are in the future. Also, the
Company is working on opportunities in systems integration in which
its individual products currently compete. Pricing is normally
through the bid process and based on customer specifications.
Sales made to the defense industry are not subject to renegotiation
of profits clauses.
Sales in the Specialty Packaging segment increased by 9.7 percent
to $18,653,000, compared to $17,006,000 in 1995. The 1995 sales
increased 7.5 percent from 1994 sales of $15,818,000. In 1994,
sales increased 6.9 percent. Sales in this segment are represented
by the design and manufacture of specialized folding cartons and
the specialty imprinting of boxes, napkins, invitations, etc.
Sales increases resulted from growth of market share within the
market niche in which the company operates. The paper-board
industry has excess capacity with only nominal tonnage growth in
sales. Therefore, pricing is a major factor in obtaining new
business and maintaining current business. As a result of the
investments in technology, equipment and processes, this segment
has been able to reduce costs to offset pricing pressures.
Contrary to the industry, this segment has increased tonnage and
unit output in each of the years. Also, the Company has increased
its geographical market through competitive pricing.
Expenses
The Company experienced a higher growth in cost of goods sold, 36.9
percent, than in the growth of sales, 34.5 percent. Cost of goods
sold increased partially as a result of a major shift in product
mix (Electronic Systems went from 40.4 percent of sales in 1995 to
51.4 percent in 1996), from the cost of integrating the November
1995 acquisition into the total Electronic Systems business, and
the continued investment in processes in the Specialty Packaging
segment. In 1995, cost of goods increased 13.9 percent and in 1994
they increased 8.0 percent. Material costs continued to decrease,
but nominally in 1996. In 1996, material was 25.2 percent of
sales, in 1995 it was 25.6 percent of sales, and in 1994 it was
28.2 percent of sales. Product mix changes, the reduction of
production cycle times, and the improvement in material utilization
have been the major factors in the change in material usage. The
costs of raw materials, over the three year period, used in
production have been relatively stable, with electronic components
decreasing in costs. Employee costs increased in the last two
years of Electronic Systems has grown in the percent of overall
sales. Electronic Systems, being technical in nature, has a higher
requirement for engineering and technical support, which increases
the indirect labor content of costs. In 1996, employee costs were
26.4 percent of sales, compared to 23.4 percent of sales in 1995,
compared to 23.1 percent of sales in 1994. Sales per employee
increased each year. As part of the consolidation of the E-L
Products and Flex-Key businesses in 1994, the company recorded
transition costs of $446,000, or 1.8 percent of sales.
Rental costs increased in 1996 as the Lebanon, NH facility is
leased. Conversely, depreciation costs, as a percent of sales,
decreased as an offset to rental costs. While supply costs and
depreciation increased in 1995 as a percent of sales, they
decreased in 1996. Maintenance costs continued to increase in 1996
as the Company continued to make transitions in its equipment,
technology and processes. Other costs were nominally the same in
each year. In total, cost of goods sold was 71.2 percent of sales
in 1996. 70.0 percent in 1995, and 70.3 percent in 1994. Gross
profit was $11,038,000, or 28.8 percent of sales in 1996,
$8,566,000, or 30.0 percent of sales in 1995, and $7,413,000 in
1994, or 29.7 percent of sales.
Selling, general and administrative costs increased 54.6 percent in
1996, compared to 1995 when these costs increased 5.1 percent, and
compared to an increase of 9.3 percent in 1994. Two major changes
occurred in the costs for 1996: the cost of the sales staffing
structure for the Electronic Systems segment and the formalization
of a Supplemental Retirement Program for senior officers. The
sales staffing for Electronics Systems now includes direct sales
personnel, both in the United States and Europe, compared to sales
representatives used in the past. The formalization of the
Supplemental Retirement Program is a one time charge of
approximately $1,100,000. As a result of the above, employee costs
were 13.4 percent of sales in 1996, 10.7 percent in 1995, and 10.6
percent in 1994. Professional services expenses decreased in both
1996 and 1995 as a percent of sales, after increasing in 1994. The
Company increased its provision for doubtful accounts in each year
as its policy to reserve uncollected receivables was tightened.
The current policy is for 100 percent reserving of all accounts
over 120 days old as well as reserving accounts that are having
financial difficulties. Marketing costs, including advertising,
decreased as the company continues to refocus its method of
reaching the market. Other expense areas were nominally the same
as a percent of sales in each year.
In October, 1996, the Company sold its Rodgard Division for cash of
$2,250,000. The Company retained the facility used by this
Division, and is leasing it to the new owners of the business. The
net gain on this transaction was $1,757,000. The Company also
recorded as expense in the same period an additional contribution
to the employees' Profit Sharing Plan, the write-down of inventory
in the Electronic Systems segment, the additional reserves to bring
receivables to 120 days or less, and the formalization of the
Supplemental Retirement Program. The net effect of the gain and
the recording of additional expenses is approximately $100,000
after taxes, or $.02 per share.
When the above expenses have been considered compared to the sales,
we find income before other deductions of $4,836,000, or 12.6
percent of sales in 1996, $3,418,000, or 12.0 percent of sales in
1995, and $2,515,000, or 10.1 percent of sales in 1994.
Interest
Interest costs, net of interest earned on temporary investments,
increased in 1996 to $813,000, or 2.1 percent of sales after
decreasing in 1995 to $479,000, or 1.7 percent of sales. In 1994,
net interest costs were $527,000, or 2.1 percent of sales. Income
earned from temporary investments results from the excess funds the
Company has to make overnight investments. These funds decreased
in 1996 as the Company borrowed to finance the November, 1995,
acquisition. In 1995, excess funds decreased as they were utilized
in the capital expenditure program. The temporary investments
earned $23,000 in 1996, $102,000 in 1995, and $141,000 in 1994.
Total interest expense was $836,000 in 1996, $581,000 in 1995, and
$668,000 in 1994. In 1996, the Company reduced its long-term
indebtedness by $6,345,000, of which $4,079,000 was in excess of
scheduled indebtedness payments. The Company reduced its long-term
obligations by $2,230,000 in 1995, and $1,984,000 in 1994. The
majority of the Company's indebtedness is at fixed rates or as a
percentage of the bank's stated prime rate. The Company's
revolving line of credit is priced at LIBOR plus 125 points, or the
bank's stated prime rate.
Income Before Taxes
Income before taxes increased in 1996 to $4,023,000, or 10.5
percent of sales, compared to $2,939,000, or 10.3 percent of sales
in 1995, and $1,988,000, or 8.0 percent of sales in 1994.
Taxes
The 1996 provision for taxes is $1,366,000, or 3.6 percent of sales
compared to the 1995 provision for taxes of $1,179,000, or 4.1
percent of sales. In 1994, the provision was $682,000, or 2.7
percent of sales. The effective tax rate in 1996 was 34.0 percent
compared to 40.1 percent in 1995 and 34.3 percent in 1994. The
Company was able to utilize state tax carryforwards and other
benefits to a greater extent in 1996 than in 1995. The Company's
actual 1995 federal income tax liability was lower than originally
estimated. At December 31, 1996, deferred income taxes decreased
by $330,000, while in 1995 they decreased by $300,000, compared to
a decrease of $196,000 in 1994, thus increasing the amount of taxes
currently payable in each year. Based on regulations for
depositing of tax estimates, the Company has a larger current tax
liability at December 31, 1996 than at December 31, 1995.
Net Income
Net income for 1996 was $2,657,000, or $.51 per share, a new record
for the Company. The previous record was established in 1995 when
net income was $1,760,000, or $.37 per share. In 1994, the Company
earned $1,306,000, or $.26 per share.
Liquidity
The Company's cash increased in 1996 to $1,130,000. In 1995, cash
decreased by $2,748,000, compared to an increase of $24,000 in
1994. During this three year period, the Company invested
$11,714,000 in property, plant and equipment, paid $6,292,000 for
the assets of another business and reduced long-term indebtedness
by $10,559,000. In 1995 and 1994 the Company purchased Treasury
Stock totaling $1,040,000 in acquiring 391,000 shares of its stock.
In 1995, the Company borrowed $6,990,000 which it used for the
acquisition of the business and assets of Loctite Luminescent
Systems, Inc. ($6,292,000) and general working capital needs.
Credit Line
The Company maintains an unsecured revolving line of credit of
$11,000,000 at the bank's prime rate, or LIBOR plus 125 basis
points. At the end of three years, up to $9,000,000 of this
borrowing can be converted to a four year term loan. The Company
believes its internal generation of cash and its ability to utilize
the line of credit that is available ($8,300,000 at December 31,
1996) is adequate to finance its plans for continued investment in
technology, processes and equipment, the reduction of indebtedness,
and the purchase of Treasury Stock.
Dividend
The Company declared a $.01 per share dividend in December, 1993,
and paid this in February, 1994. No dividend has been declared
since that date. The Company believes that its current investment
programs (investments in technology, processes and equipment, the
reduction of debt, and the purchase of Treasury Stock) are
important uses of cash and in the best long-term interest of its
shareholders.
Backlog
The Company's backlog at December 31, 1996 was $10,106,000,
compared to $8,953,000 at December 31, 1995, and compared to
$6,700,000 at December 31, 1994. The Electronics System segment
had $8,784,000 in backlog at December 31, 1996, $7,328,000 at
December 31, 1995, and $4,700,000 at December 31, 1994. The
Specialty Packaging segment had backlog of $1,322,000 at
December 31, 1996, $1,625,000 at December 31, 1995, and $2,000,000
at December 31, 1994. The Company is committed to two major
efforts: on time delivery of products to our customers, and the
reduction of the manufacturing cycle time after an order is
received. These programs have enabled the Company to reduce its
inventories and improve the delivery of products to its customers.
Commitments
The Company had capital investment commitments of approximately
$2,000,000 outstanding at each year ended December 31, 1996, 1995
and 1994. Of these commitments, $1,600,000 were delivered and
installed in January, 1996, and 1995. In March 1997, $1,600,000 is
scheduled for delivery and installation. The Company also had
normal outstanding purchase orders for raw materials and supplies
necessary to carry on the business. The Company is not aware of
any commitments in excess of today's market value nor in excess of
quantities that will be used in normal production. The Company is
not aware of any contingent liabilities not provided for in its
financial statements.
Astronics Corporation
Directors and Officers of Astronics Corporation
CHARLES H. BIDDLECOM
Vice President-Marketing, MOD-PAC CORP.
ROBERT T. BRADY
Director, Astronics Corporation Chairman of the Board,
President and Chief Executive Officer, Moog, Inc.
DONALD E. DERRICK
Vice President, Luminescent Systems, Inc.
JOHN B. DRENNING
Secretary, Director, Astronics Corporation, Partner
in the law firm Phillips, Lytle, Hitchcock, Blaine & Huber
DONNA L. ECKMAN
Vice President, Krepe-Kraft, Inc.
LEO T. ECKMAN
President, Krepe-Kraft, Inc.
PETER J. GUNDERMANN
President, Luminescent Systems, Inc.
DANIEL G. KEANE
Vice President, MOD-PAC CORP.
KEVIN T. KEANE
President and Chief Executive Officer,
Director, Astronics Corporation
JAMES S. KRAMER
Vice President, Luminescent Systems, Inc.
ROBERT J. McKENNA
Director, Astronics Corporation Chairman of the Board,
President and Chief Executive Officer,
Acme Electric Corporation
JOHN M. YESSA
Vice President-Finance and Treasurer,
Chief Financial Officer, Director, Astronics Corporation
Transfer Agent and Registrar
American Stock Transfer and Trust Company
New York, New York
Attorneys
Phillips, Lytle, Hitchcock, Blaine & Huber
Buffalo, New York
Stock Exchange Listing
The Company's stock trades on the Nasdaq National Market tier of
The Nasdaq Stock Market under the symbol ATRO.
Independent Accountants
Ernst & Young LLP
Buffalo, New York
Annual Meeting
April 18, 1997 - 10:00 A.M.
Orchard Park Country Club
S-4777 South Buffalo Street
Orchard Park, New York
Form 10-K Annual Report
The Company's Form 10-K Annual Report to the Securities and
Exchange Commission provides certain additional information and
will be available in April. A copy of this report may be obtained
upon request to Shareholder Relations, Astronics Corporation,
1801 Elmwood Avenue, Buffalo, NY 14207.
Shareholder Administration
Please direct inquiries relating to shareholder accounting records
and stock transfers to:
American Stock Transfer & Trust Company
40 Wall Street
New York, NY 10005
Please report change of address promptly to ensure timely receipt
of Company communications. Please mail a signed and dated letter
or postcard stating the name in which the stock is registered, and
the previous and current addresses, to the above address.
Press Releases
In an effort to provide efficient and cost-effective communications
to our shareholders, we are mailing copies of all Press Releases
directly to our shareholders of record on the day of the release.
These Press Releases will carry appropriate financial data, when
applicable. The Press Release dates for the 1997 quarterly results
are:
First Quarter April 18, 1997
Second Quarter July 22, 1997
Third Quarter October 20, 1997
Fourth Quarter January 27, 1998
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
ASTRONICS CORPORATION
SUBSIDIARIES OF THE REGISTRANT
Ownership State of
Subsidiary Percentage
Incorporation
Krepe-Kraft, Inc. 100% New York
Luminescent Systems, Inc. 100% New York
MOD-PAC CORP 100% New York
EXHIBIT 24
CONSENT OF INDEPENDENT AUDITORS
Consent and Report of Independent Auditors
Board of Directors
Astronics Corporation
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of Astronics Corporation of our report dated January
16, 1997, included in the 1996 Annual Report to Shareholders of
Astronics Corporation.
Our audits also included the financial statement schedule of
Astronics Corporation listed in Item 14(a). This schedule is the
responsibility of the Company's management. Our responsibility is
to express an opinion based on our audits. In our opinion, the
financial statement schedule referred to above, when considered in
relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set
forth therein.
We also consent to the incorporation by reference in Registration
Statement (Form S-8 No. 2-93090) pertaining to the Employee Stock
Purchase Plan of Astronics Corporation of our reports dated
January 16, 1997, with respect to the consolidated financial
statements and schedule of Astronics Corporation incorporated by
reference or included in the Annual Report (Form 10-K) for the year
ended December 31, 1996.
We also consent to the incorporation by reference in Registration
Statement (Form S-8 No. 33-65141) filed with the Securities and
Exchange Commission for the registration of 732,132 shares of
Astronics Corporation common stock of our reports dated January 16,
1997, with respect to the consolidated financial statements and
schedule incorporated by reference or included in the Annual Report
(Form 10-K) for the year ended December 31, 1996.
ERNST & YOUNG LLP
Buffalo, New York
January 16, 1997