UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K/A

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 18, 2013

 

 

ASTRONICS CORPORATION

(Exact name of registrant as specified in its charter)

 

 

 

New York   0-7087   16-0959303
(State or Other Jurisdiction   (Commission   (I.R.S. Employer
of Incorporation)   File Number)   Identification No.)
130 Commerce Way  
East Aurora, New York   14052
(Address of principal executive offices)   (Zip Code)

Registrant’s telephone number, including area code: (716) 805-1599

N/A

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

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2 below)

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


Item 9.01 Financial Statements and Exhibits

The Company is filing this amendment to the 8-K/A filed on September 30, 2013 to recast the pro forma balance sheets as of December 31, 2012 and as of June 29, 2013 and Note 2 to the Notes to the Unaudited Pro Forma Combined Condensed Financial Statements. Goodwill and long-term deferred tax liabilities were increased to reflect deferred taxes on purchased intangible assets. There were no other changes made to pro forma data.

 

  (b) Pro Forma Financial Information.

The following are the Unaudited Pro Forma Combined Condensed Financial Statements of Astronics and Peco combined:

 

i. Unaudited Pro Forma Combined Condensed Balance Sheet as of December 31, 2012

 

ii. Unaudited Pro Forma Combined Condensed Balance Sheet as of June 29, 2013

 

iii. Unaudited Pro Forma Combined Condensed Statement of Income for the year ended December 31, 2012

 

iv. Unaudited Pro Forma Combined Condensed Statement of Income for the six months ended June 29, 2013

 

v. Notes to the Unaudited Pro Forma Combined Condensed Financial Statements


UNAUDITED PROFORMA COMBINED CONDENSED FINANCIAL STATEMENTS

Introduction

On July 18, 2013, Astronics Corporation (“The Company”) completed the acquisition of Peco, Inc. (“Peco”) pursuant to the Stock Purchase Agreement dated May 28, 2013 among Astronics Corporation and the shareholders named therein.

For the purpose of the unaudited pro forma combined condensed financial statements, the acquisition was assumed to have occurred as of January 1, 2012 with respect to the unaudited pro forma combined condensed statements of income and as of December 31, 2012 with respect to the unaudited pro forma combined condensed balance sheet.

The acquisition has been accounted for using the purchase method of accounting in accordance with Accounting Standards Codification (“ASC”) Topic 805 Business Combinations. The acquisition method requires: (a) identifying the acquirer; (b) determining the acquisition date; (c) recognizing and measuring the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; and (d) recognizing and measuring goodwill or a gain from a bargain purchase. Under the acquisition method of accounting, the total purchase consideration of the acquisition is allocated to the tangible and identifiable intangible assets acquired and the liabilities assumed based on their relative fair values. The excess of the purchase consideration over the net tangible and identifiable intangible assets acquired is recorded as goodwill. The purchase price allocation is preliminary, as the valuation of the intangible assets is being finalized. Accordingly, the pro forma adjustments related to the purchase price allocation and certain other adjustments are preliminary and have been made solely for the purpose of providing unaudited pro forma combined condensed financial statements. Any revisions to the purchase price allocation are not expected to have a material impact on the statements of income.

The unaudited pro forma combined condensed financial information is for informational purposes only and does not purport to represent what the Company’s actual results would have been if the acquisition had been completed as of the dates indicated above, or that may be achieved in the future. The unaudited pro forma combined condensed statements of income do not include the effects of any contemplated cost savings from operating efficiencies or synergies that may result from the acquisition.

The unaudited pro forma combined condensed financial statements, including the notes thereto, should be read in conjunction with the Company’s historical financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2012 filed on February 22, 2013.


ASTRONICS CORPORATION

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

(in thousands)

 

As of December 31, 2012  
                   Pro Forma          Pro Forma  
     Astronics      Peco, Inc.      Adjustments          Combined  

ASSETS

             

Current Assets:

             

Cash and Cash Equivalents

   $ 7,380       $ 4,552       $ 26,737      B, C, D, E    $ 38,669   

Accounts Receivable, net

     45,473         6,319         —             51,792   

Inventories

     48,624         12,005         4,960      G      65,589   

Prepaid Expenses and Other Current Assets

     6,533         1,548         (2,260   B, G, J      5,821   

Assets from Discontinued Operations

     —           2,763         (2,763   A      —     
  

 

 

    

 

 

    

 

 

      

 

 

 

Total current assets

     108,010         27,187         26,674           161,871   

Property, Plant and Equipment, net

     53,537         3,232         1,956      H      58,725   

Deferred Income Tax Assets

     9,019            (9,019   H, I      —     

Other Assets

     2,977         2,825         (109   B, C      5,693   

Purchased Intangible Assets, net

     16,523            68,800      I      85,323   

Goodwill

     21,923            71,779      I      93,702   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total Assets

   $ 211,989       $ 33,244       $ 160,081         $ 405,314   
  

 

 

    

 

 

    

 

 

      

 

 

 

 

(Continued on next page)


ASTRONICS CORPORATION

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

(in thousands)

(Continued from previous page)

 

As of December 31, 2012  
                  Pro Forma          Pro Forma  
     Astronics     Peco, Inc.      Adjustments          Combined  

LIABILITIES AND STOCKHOLDERS’ EQUITY

         

Current Liabilities:

         

Current Maturities of Long-term Debt

   $ 9,268      $ —         $ 1,322      C,D    $ 10,590   

Accounts Payable

     10,592        3,267         —             13,859   

Accrued Expenses

     15,634        3,257         (1,870   B, H, J      17,021   

Customer Advanced Payments and Deferred Revenue

     12,286        —           —             12,286   

Other Current Liabilities

     188        —           —             188   

Liabilities from Discontinued Operations

     —          242         (242   A      —     
  

 

 

   

 

 

    

 

 

      

 

 

 

Total current liabilities

     47,968        6,766         (790        53,944   

Long–term Debt

     20,715        —           168,100      C, D      188,815   

Other Long-term Liabilities

     18,172        1,664         17,654      B, I      37,490   
  

 

 

   

 

 

    

 

 

      

 

 

 

Total Liabilities

     86,855        8,430         184,964           280,249   
  

 

 

   

 

 

    

 

 

      

 

 

 

Stockholders’ Equity:

            

Common Stock*

     174        561         (561   F      174   

Accumulated Other Comprehensive Loss

     (4,783     —                (4,783

Other Shareholders’ Equity

     129,743        24,253         (24,322   A, C. F      129,674   
  

 

 

   

 

 

    

 

 

      

 

 

 

Total Stockholders’ Equity

     125,134        24,814         (24,833        125,065   
  

 

 

   

 

 

    

 

 

      

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 211,989      $ 33,244       $ 160,081         $ 405,314   
  

 

 

   

 

 

    

 

 

      

 

 

 

See Notes to Unaudited Pro Forma Combined Condensed Financial Statements

 

* The above information on common stock has been adjusted to reflect the impact of the twenty percent distribution of Class B Stock for shareholders of record on October 10, 2013.


ASTRONICS CORPORATION

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

(in thousands)

 

June 29, 2013  
                   Pro Forma          Pro Forma  
     Astronics      Peco, Inc.      Adjustments          Combined  

ASSETS

             

Current Assets:

             

Cash and Cash Equivalents

   $ 16,535       $ 5,843       $ 25,446      B, C, D, E    $ 47,824   

Accounts Receivable, net

     42,819         9,172         —             51,991   

Inventories

     53,108         10,853         4,960      G      68,921   

Prepaid Expenses and Other Current Assets

     6,068         2,477         (2,345   B, G, J      6,200   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total current assets

     118,530         28,345         28,061           174,936   

Property, Plant and Equipment, net

     54,741         3,475         1,956      H      60,172   

Deferred Income Tax Assets

     8,635         —           (8,635   H, I      —     

Other Assets

     3,162         2,172         (109   B, C      5,225   

Purchased Intangible Assets, net

     15,588         —           68,800      I      84,388   

Goodwill

     21,781         —           69,213      I      90,994   
  

 

 

    

 

 

    

 

 

      

 

 

 

Total Assets

   $ 222,437       $ 33,992       $ 159,286         $ 415,715   
  

 

 

    

 

 

    

 

 

      

 

 

 

 

(Continued on next page)


ASTRONICS CORPORATION

UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

(in thousands)

(Continued from previous page)

 

June 29, 2013  
                  Pro Forma          Pro Forma  
     Astronics     Peco, Inc.      Adjustments          Combined  

LIABILITIES AND STOCKHOLDERS’ EQUITY

            

Current Liabilities:

            

Current Maturities of Long-term Debt

   $ 10,254      $ —         $ 1,322      C,D    $ 11,576   

Accounts Payable

     15,043        3,173         —             18,216   

Accrued Expenses

     14,328        2,850         (1,765   B, H, J      15,413   

Customer Advanced Payments and Deferred Revenue

     9,924        —           —             9,924   
  

 

 

   

 

 

    

 

 

      

 

 

 

Total current liabilities

     49,549        6,023         (443        55,129   

Long–term Debt

     15,221        —           168,100      C, D      183,321   

Other Long-term Liabilities

     18,010        1,629         18,038      B, I      37,677   
  

 

 

   

 

 

    

 

 

      

 

 

 

Total Liabilities

     82,780        7,652         185,695           276,127   
  

 

 

   

 

 

    

 

 

      

 

 

 

Stockholders’ Equity:

            

Common Stock*

     174        561         (561   F      174   

Accumulated Other Comprehensive Loss

     (4,923     —           —             (4,923

Other Shareholders’ Equity

     144,406        25,779         (25,848   A, C. F      144,337   
  

 

 

   

 

 

    

 

 

      

 

 

 

Total Stockholders’ Equity

     139,657        26,340         (26,409        139,588   
  

 

 

   

 

 

    

 

 

      

 

 

 

Total Liabilities and Stockholders’ Equity

   $ 222,437      $ 33,992       $ 159,286         $ 415,715   
  

 

 

   

 

 

    

 

 

      

 

 

 

See Notes to Unaudited Pro Forma Combined Condensed Financial Statements

 

* The above information on common stock has been adjusted to reflect the impact of the twenty percent distribution of Class B Stock for shareholders of record on October 10, 2013.


ASTRONICS CORPORATION

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME

(in thousands, except per share data)

For The Year Ended

December 31, 2012

 

                  Pro Forma          Pro Forma  
     Astronics      Peco, Inc.     Adjustments          Combined  

Sales

   $ 266,446       $ 77,787        —           $ 344,233   

Cost of products sold

     197,004         53,411        2,440      P, Q, S      252,855   
  

 

 

    

 

 

   

 

 

      

 

 

 

Gross profit

     69,442         24,376        (2,440        91,378   

Selling, general and administrative expenses

     36,817         7,392        3,805      O, P, Q, R, S      48,014   
  

 

 

    

 

 

   

 

 

      

 

 

 

Income from operations

     32,625         16,984        (6,245        43,364   

Interest expense, net of interest income

     1,042         12        7,109      K, L, M, N      8,163   

Other (Income) expenses, net

     —           (4     4      Q      —     
  

 

 

    

 

 

   

 

 

      

 

 

 

Income before provision for income taxes

     31,583         16,976        (13,358        35,201   

Provision for income taxes

     9,709         —          1,266      T      10,975   
  

 

 

    

 

 

   

 

 

      

 

 

 

Net Income

   $ 21,874       $ 16,976        (14,624      $ 24,226   
  

 

 

    

 

 

   

 

 

      

 

 

 

Basic net income per share*

   $ 1.28              $ 1.41   

Diluted net income per share*

   $ 1.20              $ 1.33   

Shares used to compute basic per share amounts*

     17,143                17,143   

Shares used to compute diluted per share amounts*

     18,157                18,157   

See Notes to Unaudited Pro Forma Combined Condensed Financial Statements

 

* The above basic and diluted earnings per share and the information on the number of shares used to compute basic and diluted earnings per share, has been adjusted to reflect the impact of the twenty percent distribution of Class B Stock for shareholders of record on October 10, 2013.


ASTRONICS CORPORATION

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME

(in thousands, except per share data)

For The Six Months Ended Ended

June 29, 2013

 

                   Pro Forma          Pro Forma  
     Astronics      Peco, Inc.      Adjustments          Combined  

Sales

   $ 144,800       $ 42,397       $ —           $ 187,197   

Cost of products sold

     105,900         29,152         1,297      P, Q, S      136,349   
  

 

 

    

 

 

    

 

 

      

 

 

 

Gross profit

     38,900         13,245         (1,297        50,848   

Selling, general and administrative expenses

     19,858         4,514         670      O, P, Q, R, S      25,042   

Income from operations

     19,042         8,731         (1,967        25,806   
  

 

 

    

 

 

    

 

 

      

 

 

 

Interest expense, net of interest income

     480         —           3,460      K, L, M, N      3,940   

Other expenses, net

     —           118         (118   Q      —     
  

 

 

    

 

 

    

 

 

      

 

 

 

Income before provision for income taxes

     18,562         8,613         (5,309        21,866   

Provision for income taxes

     4,840         —           1,156      T      5,996   
  

 

 

    

 

 

    

 

 

      

 

 

 

Net Income

   $ 13,722       $ 8,613       $ (6,465      $ 15,870   
  

 

 

    

 

 

    

 

 

      

 

 

 

Basic net income per share*

   $ 0.79               $ 0.91   

Diluted net income per share*

   $ 0.75               $ 0.87   

Shares used to compute basic per share amounts*

     17,402                 17,402   

Shares used to compute diluted per share amounts*

     18,209                 18,209   

See Notes to Unaudited Pro Forma Combined Condensed Financial Statements

 

* The above basic and diluted earnings per share and the information on the number of shares used to compute basic and diluted earnings per share, has been adjusted to reflect the impact of the twenty percent distribution of Class B Stock for shareholders of record on October 10, 2013.


ASTRONICS CORPORATION

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

1. BASIS OF PRO FORMA PRESENTATION

On July 18, 2013, Astronics Corporation (the “Company”) completed the acquisition of Peco, Inc. (“Peco”) pursuant to the Stock Purchase Agreement dated May 28, 2013 among Astronics Corporation and the shareholders named therein.

The unaudited pro forma combined condensed balance sheet as of December 31, 2012 is based on the historical financial statements of the Company and the Consolidated Financial Statements of Peco, Inc. & Subsidiary after giving effect to the acquisition adjustments. The unaudited pro forma combined condensed balance sheet as of December 31, 2012 is presented as if the acquisition had occurred on December 31, 2012.

The unaudited pro forma combined condensed balance sheet as of June 29, 2013 is based on the historical financial statements of the Company and the internal financial statements of Peco, Inc. after giving effect to the acquisition adjustments. The unaudited pro forma combined condensed balance sheet as of June 29, 2013 is presented as if the acquisition had occurred on June 29, 2013.

The unaudited pro forma combined condensed statements of income for the year ended December 31, 2012 and for the six months ended June 29, 2013 is based on the historical financial statements of the Company and Peco for the respective periods then ended after giving effect to the acquisition adjustments. The unaudited pro forma combined condensed statements of income are presented as if the acquisition had occurred on January 1, 2012.

2. PURCHASE PRICE ALLOCATION

The purchase price was approximately $136 million in cash payments.

The allocation of the purchase price paid for Peco is based on preliminary estimated fair values of the assets acquired and liabilities assumed of Peco as of July 18, 2013. The allocation of the purchase price is preliminary as the valuation of both the tangible and identifiable intangible assets is being finalized. While the final amounts allocated to assets and liabilities could change from the information presented in the unaudited pro forma combined condensed financial statements, the Company does not expect changes to be material.

Following is a reconciliation of the net tangible assets acquired (in thousands):

 

Net equity per historical audited Peco, Inc. & Subsidiary consolidated financial statements as of 12/31/12

   $ 24,814   

Adjustment for removal of Peco Aerospace Fasteners accumulated deficit

     (2,521

Adjustment for the estimated fair value of manufacturing profit in work in process and finished goods inventory

     4,960   

Adjustment for the fair value of property, plant and equipment

     1,956   

Adjustments for the fair value of other assets and liabilities

     (400

Adjustments for Peco cash and other assets and liabilities not acquired at date of purchase

     (3,696

Adjustments for deferred taxes to purchased intangibles and other assets and liability book to tax basis differences.

     (29,692
  

 

 

 

Net tangible assets at 12/31/12

   $ (4,579
  

 

 

 


The preliminary allocation of purchase price based on estimated fair values (in thousands):

 

Net tangible assets

      $ (4,579

Identifiable purchased intangible assets:

     

Trademark

   $ 4,200      

Technology

     3,300      

Backlog

     3,100      

Customer relationships

     58,200         68,800   
  

 

 

    

Goodwill

        71,779   
     

 

 

 

Total purchase price

      $ 136,000   
     

 

 

 

Intangible assets

The fair value of identifiable intangible assets of $68.8 million has been allocated to the following asset categories (in thousands):

 

     Preliminary     

First

12 Months

     Amortization    Estimated
     Value      Amortization      Method    Useful Life

Trademark

   $ 4,200       $ 420       Straight Line    10 Years

Technology

     3,300         330       Straight Line    10 Years

Backlog

     3,100         2,066       Straight Line    1.5 Years

Customer relationships

     58,200         3,759       Straight Line    11 to 17 Years
  

 

 

    

 

 

       
   $ 68,800       $ 6,575         
  

 

 

    

 

 

       

3. PRO FORMA ADJUSTMENTS

The unaudited pro forma combined condensed balance sheet and unaudited combined condensed statements of income gives effect to the following adjustments:

 

A

    -      To reflect the adjustment removing the assets, liabilities and deficit of Peco Aerospace Fasteners which is included in the December 31, 2012 Peco Inc. and Subsidiary consolidated financial statements but which was not purchased by Astronics.

B

    -      To reflect the adjustment removing Peco’s cash and environmental assets and liabilities not acquired as part of the acquisition.

C

    -      To reflect the issuance of both senior and subordinated debt related to the acquisition and the incurrence of related debt origination costs.

D

    -      To reflect the repayment of amounts outstanding on the term loan, the revolving line of credit and a note payable in Canada.

E

    -      To reflect the net cash used for the acquisition.

F

    -      To reflect the removal Peco’s historical equity excluding cash and certain assets and liabilities at the date of purchase.

G

    -      To reflect the estimated purchase accounting adjustment for capitalization of estimated manufacturing profit in inventory acquired. The unaudited pro forma combined condensed statement of income does not reflect the impact of the one-time adjustment to cost of products sold during the periods when this inventory will be sold.

H

    -      To reflect the fair value of property, plant and equipment acquired and deferred taxes.

I

    -      Reflect the fair value of the purchased intangible assets and goodwill resulting from the acquisition and the related deferred taxes.

J

    -      Adjust the fair value of other assets and liabilities and the related deferred taxes.

K

    -      To reflect the interest expense on the new term debt calculated using an average interest rate of 4.0%.

L

    -      To reflect the removal of interest expense on the retired term debt and Canadian debt and repaid amounts outstanding on the revolving line of credit.


M

    -      To reflect the removal of interest expense from Peco.

N

    -      To reflect the amortization of new debt origination on costs as interest expense.

O

    -      To reflect the estimated amortization expense of finite lived purchased intangible assets.

P

    -      Reclassification of engineering and development expenses to cost of goods sold to conform to Astronics reporting.

Q

    -      Reclassification of other expenses to Cost of goods sold and selling, general and administrative expense to conform to Astronics reporting.

R

    -      To reflect the elimination of acquisition transaction costs considered to be a one-time expense.

S

    -      To reflect the elimination of net compensation costs and other expenses considered to be non-recurring expenses. These compensation costs relate to executives that terminated their employment upon the sale of Peco and will not be replaced.

T

    -      To reflect the recognition of income taxes at a 35% effective rate, on the pretax income of Peco as adjusted for the income statement pro forma adjustments.

4. VARIABLE RATE DEBT

The Company amended its existing credit facility by entering into a Third Amended and Restated Credit Agreement ( the “Credit Agreement”), dated as of July18, 2013. The Credit Agreement provides for a $75 million five-year revolving credit facility and a $190 million five-year term loan, both maturing on June 30, 2018. The amended facilities carry an interest rate ranging from 225 basis points to 350 basis points above LIBOR, depending on the Company’s leverage ratio as defined in the Credit Agreement. Principal installments are payable on the term loan in varying percentages quarterly through March 31, 2018 with a balloon payment at maturity and with mandatory prepayments being required in certain circumstances. The credit facility is secured by substantially all of the Company’s assets.

In addition, the Company is required to pay a commitment fee of between 25 basis points and 50 basis points quarterly on the unused portion of the revolving credit facility, based on the Company’s leverage ratio under the Credit Agreement.

A one eighth percent (1/8%) variance in the interest rate would impact the 2012 pro forma annual interest expense by approximately $0.2 million.

The proceeds of the term loan were used to finance the Peco acquisition, pay off $7.0 million outstanding under the existing term loan, $7.0 million outstanding under the existing revolving credit facility and $0.5 million of other term debt and to pay transaction expenses and are available for general corporate purposes including for potential additional funding of a make-whole payment to the Peco Sellers arising from an election under IRS Code Section 338 (h)(10). This election will allow the Company to deduct the amortization of acquired goodwill and other intangible assets from its taxable income. The additional income tax to the Peco Sellers that is associated with the election, which will be determined by year-end, would require additional consideration to be paid to the Peco Sellers.

Covenants have not been modified. The maximum permitted Leverage Ratio continues to be 3.75 to 1 as of the end of each fiscal quarter through March 31, 2015 and 3.50 to 1 for each fiscal quarter ending thereafter. The covenant for minimum fixed charge coverage as defined in the Credit Agreement is to be not less than 1.25 to 1 as of each fiscal quarter end.

In the event of voluntary or involuntary bankruptcy of the Company or any subsidiary, all unpaid principal and other amounts owing under the Credit Agreement automatically become due and payable. Other events of default, such as failure to make payments as they become due and breach of financial and other covenants, give the Agent the option to declare all such amounts immediately due and payable.


5. PRO FORMA COMBINED NET INCOME PER SHARE

The pro forma basic and diluted net income per share amounts presented are based upon the weighted average number of common shares outstanding during the periods presented. The basic and diluted earnings per share and the information on the number of shares used to compute basic and diluted earnings per share, has been adjusted to reflect the impact of the twenty percent distribution of Class B Stock for shareholders of record on October 10, 2013.


SIGNATURES

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

 

    ASTRONICS CORPORATION
Date: October 9, 2013     By:  

/s/ David C. Burney

      David C. Burney
      Vice President Finance, Chief Financial Officer