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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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Form 10 - K
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[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 1999
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Commission file number: 0-7087
ASTRONICS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
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New York
(State or other jurisdiction of incorporation or organization)
16-0959303
(I.R.S. Employer Identification No.)
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1801 Elmwood Avenue
Buffalo, New York 14207
(Address of principal executive office)
Registrant's telephone number including area code (716) 447-9013
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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
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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 in Part III of this Form 10-K or any amendment to this
Form 10-K. (X)
As of March 3, 2000, 5,023,037 shares of Common Stock and 661,181 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 $51,868,489.
DOCUMENTS INCORPORATED BY REFERENCE.
Portions of the Company's 1999 Annual Report to Shareholders are
incorporated into Parts II and III of this Report. Portions of the Company's
Proxy Statement for the 2000 Annual Meeting of Shareholders dated March 13, 2000
are incorporated by reference into Part III of this Report.
2
PART I
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Item 1. BUSINESS
Profile
Astronics Corporation ("Astronics" or "Company"), a New York corporation
formed in 1968, is a diversified manufacturing company engaged principally in
the design, manufacture and marketing of products and processes in two business
segments: "Aerospace and Electronics" and "Specialty Packaging." The Aerospace
and Electronics segment 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.
Aerospace and Electronics
Astronics' Aerospace and Electronics segment has led the industry with
integrated lighting systems for over 20 years. The Company supplies integrated
cockpit lighting systems, external and interior cabin lighting and escape path
lighting for over 300 airlines around the world. As a premier supplier to both
military and commercial aircraft, the Company is involved with exciting cutting
edge programs that include lighting systems for Lockheed's F-22 fighter and
Embraer's newest family of commuter jets. Astronics' Aerospace and Electronics
segment has also penetrated the fast growing portable electronics market with
electroluminescent lighting designed for LCD's, remote controls, instrumentation
and communication devices.
Deliveries on Astronics' $50 million multi-year contract for cockpit
lighting upgrades of F-16 fighter jets began during 1999. These upgrades, for
which Astronics' Aerospace and Electronics segment is the prime contractor,
provide the correct instrument lighting for night vision operations. The
technology and manufacturing processes that have been developed for this project
over the last 18 months have advanced our capabilities for future growth in
other applications and markets. Approximately 34 percent of the segment's sales
are defense-related and 31 percent of sales are international.
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In accordance with Astronics' philosophy of investing in anticipation of
the market, the Aerospace and Electronics segment has doubled its manufacturing
capacity with new facilities in Lebanon, New Hampshire and East Aurora, New
York. These investments were significant, amounting to one-half of the segment's
revenue for 1999.
Specialty Packaging
Astronics' Specialty Packaging segment is a world-class provider of
paperboard folding cartons and other specialty paper products that are used for
a wide range of applications by a diverse customer base. By providing
technically superior products at a competitive price on a just in time basis,
the Company has achieved a leadership position in the markets served. In many
cases the Company is either the sole or preferred supplier to such leading
companies as Hershey Foods and Staples Office Superstores.
For over 25 years, the Specialty Packaging segment has experienced year
over year double digit growth in sales revenue. This growth rate is greater than
twice the industry average. In 1999 sales were up 9 percent and operating
earnings were at 19 percent of sales.
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
Aerospace and Electronics segment depends upon product innovation, customer
support, responsiveness, and cost management. Astronics continues to invest in
developing the tools critical to competing 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. Astronics
has invested and will continue to invest in state-of-the-art process and systems
technology.
4
Raw Materials
On February 14, 2000, a jury found Osram Sylvania, Inc. guilty of patent
infringement in the manufacturing of encapsulated phosphors used by the
Aerospace and Electronics segment in its MaxEL lamp product line. As a result of
the court decision, the Company needed to substitute another phosphor for this
product line. The Company has tested alternative formulations that meet its
needs. Therefore, the Company has not experienced a production disruption. The
cost of the alternative phosphor is similar to the previous encapsulated
phosphor.
Other 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, the Company
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 electroluminescence,
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 Company employed approximately 521 employees as of December 31, 1999,
including 299 in the Aerospace and Electronics segment, 216 in the Specialty
Packaging segment and 6 at the corporate level, compared to 531 as of December
31, 1998, including 298 in the Aerospace and Electronics segment, 226 in the
Specialty Packaging segment and 7 at the corporate level as of that date. The
Company considers its relations with its employees to be good.
5
Working Capital
Inventories and receivables are the major components of the Company's
working capital, reflective of the production cycle of the Company's products
and anticipated production required for the seasonal aspects of the Company's
packaging products and customers payments within their normal payment terms.
Financial Information about Industry Segments
Sales, income before taxes and identifiable assets, along with other
information, attributable to each of the Company's industry segments for each of
the last three years as of December 31, 1999 appear on page 17 of the Company's
Annual Report to Shareholders for the fiscal year ended December 31, 1999,
submitted herewith as an exhibit and incorporated by reference.
Order Backlog
The backlog of orders as of December 31, 1999 was approximately $40,198,000
($39,038,000 related to the Aerospace and Electronics segment and $1,160,000
related to the Specialty Packaging segment), $31,875,000 is expected to be
filled in the current fiscal year. This compares to $29,887,000 ($28,779,000
related to the Aerospace and Electronics segment and $1,108,000 related to the
Specialty Packaging segment) as of December 31, 1998.
Item 2. PROPERTIES
Corporate Headquarters
The Company's corporate office occupies approximately 2,000 square feet at
1801 Elmwood Avenue, Buffalo, NY 14207, in a building which is shared with the
Specialty Packaging segment.
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Aerospace and Electronics
The Company owns manufacturing and office facilities of approximately
115,000 square feet in the Buffalo, New York area and 80,000 square feet in
Lebanon, New Hampshire.
Specialty Packaging
The Company owns buildings totaling approximately 437,000 square feet in
the Buffalo, New York area for its manufacturing and office facilities.
Currently, about 25 percent of the building space is under lease to others.
The Company believes that its properties are suitable and adequate for the
purpose for which they are employed. Additions and expansions are made as
needed. In general, the capacity of the Company's properties are in excess of
its current requirements.
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 in a consulting agreement between Winfield and Miner.
The Court determined that neither side had a sufficient case to enable awards.
The case was appealed by the Plaintiffs to the Federal 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. After discovery, the District Court granted the Defendants' motion to
dismiss the claims which had been remanded. The Company again appealed to the
Court of Appeals. On October 5, 1999, the Court of Appeals affirmed, without
opinion, the dismissal of all claims in the case, thus concluding the
litigation.
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Except for the matter described above, there are no material pending legal
proceedings, other than 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 Company
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:
Position with the Company
Name Age and Prior Employment History
- ---- --- ----------------------------
Kevin T. Keane 67 Chairman of the Board, President,
Chief Executive Officer and Director.
John M. Yessa 60 Vice President of Finance, Treasurer,
Chief Financial Officer and Director.
8
PART II
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Item 5. MARKET FOR THE COMPANY'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Information with respect to the market price of and dividends on the
Company's Common Stock and related shareholder matters appears on the inside
cover and page 19 of the Company's Annual Report to Shareholders for the fiscal
year ended December 31, 1999, submitted herewith as an exhibit and incorporated
by reference.
Item 6. SELECTED FINANCIAL DATA
Selected Financial Data appears on page 19 of the Company's Annual Report
to Shareholders for the fiscal year ended December 31, 1999, submitted herewith
as an exhibit and incorporated by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition, changes in
financial condition and results of operations appears on pages 20, 21, 22 and 23
of the Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1999, submitted herewith as an exhibit and incorporated by
reference.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk disclosures appears on page 23 of the Company's Annual Report
to Shareholders for the fiscal year ended December 31, 1999, submitted herewith
as an exhibit and incorporated by reference.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Financial Statements of Astronics Corporation which are incorporated by
reference in this Annual Report on Form 10-K are described in the accompanying
Index to Financial Statements at Item 14 of this Report.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
10
PART III
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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 13, 2000 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 13, 2000 and on the back inside
cover of the Company's Annual Report to Shareholders for the fiscal year ended
December 31, 1999, 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 13, 2000 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 13,
2000, and is hereby incorporated by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As of March 13, 2000, the Company knows of no relationships required to be
disclosed pursuant to Item 404 of Regulation S-K.
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PART IV
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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
2. Financial Statement Schedules
See Index to Financial Statements and Financial Statement
Schedules
All other consolidated financial schedules are omitted
because they are inapplicable, not required, or the
information is included elsewhere in the consolidated
financial statements or the notes thereto.
3. Exhibits
Exhibit No. Description
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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; incorporated by reference to
exhibit 3(b) of the Registrant's December 31, 1996
Annual Report on Form 10-K.
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).
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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.
10.12 1997 Director Stock Option Plan; incorporated by
reference to the Registrant's definitive proxy
statement dated March 14, 1997.
10.13 Non-Qualified Supplemental Retirement Plan;
filed herewith.
13 1999 Annual Report to Shareholders; filed herewith.
(Except for those portions which are expressly
incorporated by reference in this 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; filed herewith.
23 Consent of Independent Auditors; filed herewith.
27 Financial Data Schedule; filed herewith.
(b) Reports on Form 8-K
None
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ASTRONICS CORPORATION
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
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The financial statements, together with the report thereon of Ernst & Young LLP
dated January 20, 1999, appearing on pages 6 to 18 of the accompanying 1999
Annual Report to Shareholders are incorporated by reference in this Annual
Report on Form 10-K.
Financial schedules for the years 1999, 1998 and 1997:
Page
----
Valuation and Qualifying Accounts F-2
F-1
14
SCHEDULE II
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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
- ---- ----------- ------- ------- ---------- -------------
1999 Allowance for Doubtful Accounts $238 $ (55) $ (5) $178
1998 Allowance for Doubtful Accounts $227 $ 74 $ (63) $238
1997 Allowance for Doubtful Accounts $404 $ 111 $ (288) $227
F-2
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SIGNATURES
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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 24, 2000.
Astronics Corporation
By /s/ Kevin T. Keane By /s/ John M. Yessa
------------------------------- -------------------------------------
Kevin T. Keane, President John M. Yessa, Vice President-Finance
and Chief Executive Officer 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 24, 2000
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Robert T. Brady
/s/ John B. Drenning Director March 24, 2000
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John B. Drenning
/s/ Kevin T. Keane Director March 24, 2000
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Kevin T. Keane
/s/ Robert J. McKenna Director March 24, 2000
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Robert J. McKenna
/s/ John M. Yessa Director March 24, 2000
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John M. Yessa
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ASTRONICS CORPORATION
INDEX TO EXHIBITS
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Exhibit No. Description
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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; incorporated by reference to
the Registrant's December 31, 1996 Annual Report
on Form 10-K.
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 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.
10.12 1997 Director Stock Option Plan; incorporated by
reference to the Registrant's definitive proxy
statement dated March 14, 1997.
10.13 Non-Qualified Supplemental Retirement Plan;
filed herewith.
17
13 1999 Annual Report to Shareholders; filed herewith.
(Except for those portions which are expressly
incorporated by reference in 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; filed herewith.
23 Consent of Independent Auditors; filed herewith.
27 Financial Data Schedule; filed herewith.
18