atro-20220402

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☒			Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended April 2, 2022


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 0-7087

ASTRONICS CORPORATION

(Exact name of registrant as specified in its charter)


New York (State or other jurisdiction of incorporation or organization)			16-0959303 (IRS Employer Identification Number)

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

(716) 805-1599

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $.01 par value per share	ATRO	NASDAQ Stock Market

NOT APPLICABLE

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

Table of Contents

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “large accelerated filer”, an “accelerated filer”, a “non-accelerated filer” and a “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer

☐

Accelerated filer

☒

Emerging growth company

☐

Non-accelerated filer

☐

Smaller Reporting Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)

of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

As of May 2, 2022, 31,889,644 shares of common stock were outstanding consisting of 25,557,155 shares of common stock ($.01 par value) and 6,332,489 shares of Class B common stock ($.01 par value).

Table of Contents

TABLE OF CONTENTS

PAGE

PART I

FINANCIAL INFORMATION

Item 1

Financial Statements:

•

Consolidated Condensed Balance Sheets as of April 2, 202 2 and December 31, 20 21

•

Consolidated Condensed Statements of Operations for the Three Months Ended April 2, 202 2 and April 3 , 20 21

•

Consolidated Condensed Statements of Comprehensive Loss for the Three Months Ended April 2, 202 2 and April 3, 2021

•

Consolidated Condensed Statements of Cash Flows for the Three Months Ended April 2, 202 2 and April 3 , 202 1

•

Consolidated Condensed Statements of Shareholders' Equity for the Three Months Ended A pril 2, 202 2 and April 3 , 202 1

•

Notes to Consolidated Condensed Financial Statements

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3

Quantitative and Qualitative Disclosures about Market Risk

Item 4

Controls and Procedures

PART II

OTHER INFORMATION

Item 1

Legal Proceedings

Item 1a

Risk Factors

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3

Defaults Upon Senior Securities

Item 4

Mine Safety Disclosures

Item 5

Item 6

Part I – Financial Information

Item 1. Financial Statements

ASTRONICS CORPORATION

Consolidated Condensed Balance Sheets

April 2, 2022 with Comparative Figures for December 31, 2021

(Unaudited)

(In thousands)


	April 2, 2022		December 31, 2021

Current Assets:
Cash and Cash Equivalents	$	24,015	$	29,757
Accounts Receivable, Net of Allowance for Estimated Credit Losses	117,495		107,439
Inventories	166,088		157,576
Prepaid Expenses and Other Current Assets	18,331		45,089

Total Current Assets	325,929		339,861
Property, Plant and Equipment, Net of Accumulated Depreciation	93,028		95,236
Operating Right-of-Use Assets	14,736		16,169
Other Assets	5,961		5,270
Intangible Assets, Net of Accumulated Amortization	90,504		94,320
Goodwill	58,313		58,282
Total Assets	$	588,471	$	609,138
Current Liabilities:

Accounts Payable	$	43,400	$	34,860
Current Operating Lease Liabilities	6,095		6,778
Accrued Expenses and Other Current Liabilities	44,492		49,619
Customer Advance Payments and Deferred Revenue	27,198		27,356

Total Current Liabilities	121,185		118,613
Long-term Debt	137,000		163,000
Long-term Operating Lease Liabilities	10,964		12,018
Other Liabilities	59,240		58,903
Total Liabilities	328,389		352,534
Shareholders’ Equity:
Common Stock	354		353
Accumulated Other Comprehensive Loss	(14,325)		(14,495)
Other Shareholders’ Equity	274,053		270,746
Total Shareholders’ Equity	260,082		256,604
Total Liabilities and Shareholders’ Equity	$	588,471	$	609,138

See notes to consolidated condensed financial statements.

Table of Contents

ASTRONICS CORPORATION

Consolidated Condensed Statements of Operations

Three Months Ended April 2, 2022 With Comparative Figures for 2021

(Unaudited)

(In thousands, except per share data)


	Three Months Ended
		April 2, 2022		April 3, 2021
Sales		$	116,176	$	105,857
Cost of Products Sold		96,243		91,584
Gross Profit		19,933		14,273

Selling, General and Administrative Expenses		24,100		23,785

Loss from Operations		(4,167)		(9,512)
Net Gain on Sale of Business		(11,284)		—
Other Expense, Net of Other Income		462		534
Interest Expense, Net of Interest Income		1,631		1,758
Income (Loss) Before Income Taxes		5,024		(11,804)
Provision for Income Taxes		8,125		105
Net Loss		$	(3,101)	$	(11,909)
Loss Per Share:
Basic		$	(0.10)	$	(0.39)
Diluted		$	(0.10)	$	(0.39)

See notes to consolidated condensed financial statements.

Table of Contents

ASTRONICS CORPORATION

Consolidated Condensed Statements of Comprehensive Loss

Three Months Ended April 2, 2022 With Comparative Figures for 2021

(Unaudited)

(In thousands)


	Three Months Ended
		April 2, 2022		April 3, 2021
Net Loss		$	(3,101)	$	(11,909)
Other Comprehensive Income (Loss):
Foreign Currency Translation Adjustments		(181)		(637)
Retirement Liability Adjustment – Net of Tax		351		434
Total Other Comprehensive Income (Loss)		170		(203)
Comprehensive Loss		$	(2,931)	$	(12,112)

See notes to consolidated condensed financial statements.

Table of Contents

ASTRONICS CORPORATION

Consolidated Condensed Statements of Cash Flows

Three Months Ended April 2, 2022 With Comparative Figures for 2021


(Unaudited, In thousands)	Three Months Ended
	April 2, 2022		April 3, 2021
Cash Flows from Operating Activities:
Net Loss	$	(3,101)	$	(11,909)
Adjustments to Reconcile Net Loss to Cash Flows from Operating Activities:
Depreciation and Amortization	7,088		7,453
Provisions for Non-Cash Losses on Inventory and Receivables	175		1,269
Equity-based Compensation Expense	2,101		2,097
Non-Cash Accrued 401K Contribution	1,011		—
Deferred Tax Benefit	—		(51)

Operating Lease Non-Cash Expense	1,424		1,185

Net Gain on Sale of Business, Before Taxes	(11,284)		—



Other	513		1,315
Cash Flows from Changes in Operating Assets and Liabilities:
Accounts Receivable	(10,024)		(6,010)
Inventories	(9,015)		430
Accounts Payable	8,625		(4,171)
Accrued Expenses	(1,380)		(685)
Other Current Assets and Liabilities	(363)		961
Customer Advance Payments and Deferred Revenue	(113)		2,915
Income Taxes	16,492		(246)
Operating Lease Liabilities	(1,724)		(1,307)
Supplemental Retirement Plan and Other Liabilities	(109)		(109)
Cash Flows from Operating Activities	316		(6,863)
Cash Flows from Investing Activities:

Proceeds from Sale of Businesses	21,961		—
Capital Expenditures	(1,160)		(1,905)

Cash Flows from Investing Activities	20,801		(1,905)
Cash Flows from Financing Activities:
Proceeds from Long-term Debt	17,925		—
Principal Payments on Long-term Debt	(43,925)		—


Stock Award Activity	108		(52)


Finance Lease Principal Payments	(23)		(501)
Debt Acquisition Costs	(771)		—
Cash Flows from Financing Activities	(26,686)		(553)
Effect of Exchange Rates on Cash	(173)		(362)
Decrease in Cash and Cash Equivalents	(5,742)		(9,683)
Cash and Cash Equivalents at Beginning of Period	29,757		40,412
Cash and Cash Equivalents at End of Period	$	24,015	$	30,729

See notes to consolidated condensed financial statements.

Table of Contents

ASTRONICS CORPORATION

Consolidated Condensed Statements of Shareholders' Equity

Three Months Ended April 2, 2022 With Comparative Figures for 2021

(Unaudited)

(In thousands)


	Three Months Ended
		April 2, 2022		April 3, 2021
Common Stock
Beginning of Period		$	289	$	278


Net Issuance of Common Stock for Restricted Stock Units (“RSU’s”)		1		—

Class B Stock Converted to Common Stock		—		1
End of Period		290		279
Convertible Class B Stock
Beginning of Period		64		69


Class B Stock Converted to Common Stock		—		(1)
End of Period		64		68
Additional Paid in Capital
Beginning of Period		92,037		82,187


Net Exercise of Stock Options and Equity-based Compensation Expense		2,501		2,045
Tax Withholding Related to Issuance of RSU’s		(293)		—
End of Period		94,245		84,232
Accumulated Comprehensive Loss
Beginning of Period		(14,495)		(16,450)

Foreign Currency Translation Adjustments		(181)		(637)

Retirement Liability Adjustment – Net of Taxes		351		434
End of Period		(14,325)		(16,653)
Retained Earnings
Beginning of Period		287,225		312,803


Net Loss		(3,101)		(11,909)
Reissuance of Treasury Shares for 401K Contribution		(5,077)		—


End of Period		279,047		300,894
Treasury Stock
Beginning of Period		(108,516)		(108,516)

Shares Issued to Fund 401K Obligation		9,277		—

End of Period		(99,239)		(108,516)
Total Shareholders’ Equity		$	260,082	$	260,304

See notes to consolidated condensed financial statements.

Table of Contents

ASTRONICS CORPORATION

Consolidated Condensed Statements of Shareholders' Equity, Continued

Three Months Ended April 2, 2022 With Comparative Figures for 2021

(Unaudited)

(In thousands)


	Three Months Ended
(Shares)		April 2, 2022	April 3, 2021
Common Stock
Beginning of Period		28,911	27,825

Net Issuance from Exercise of Stock Options		20	19
Net Issuance of Common Stock for RSU’s		42	—
Class B Stock Converted to Common Stock		36	53
End of Period		29,009	27,897
Convertible Class B Stock
Beginning of Period		6,375	6,877
Net Issuance from Exercise of Stock Options		24	13

Class B Stock Converted to Common Stock		(36)	(53)
End of Period		6,363	6,837
Treasury Stock
Beginning of Period		3,808	3,808

Shares Issued to Fund 401K Obligation		(325)	—

End of Period		3,483	3,808

See notes to consolidated condensed financial statements.

Table of Contents

ASTRONICS CORPORATION

Notes to Consolidated Condensed Financial Statements

April 2, 2022

(Unaudited)

1) Basis of Presentation

The accompanying unaudited statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included.

Operating Results

The results of operations for any interim period are not necessarily indicative of results for the full year. In addition, the COVID-19 pandemic has increased the volatility we experience in our financial results in recent periods and this could continue in future interim and annual periods. Operating results for the three months ended April 2, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

The balance sheet at December 31, 2021 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements.

For further information, refer to the financial statements and footnotes thereto included in Astronics Corporation’s 2021 annual report on Form 10-K.

Description of the Business

Astronics Corporation (“Astronics” or the “Company”) is a leading provider of advanced technologies to the global aerospace, defense and electronics industries. Our products and services include advanced, high-performance electrical power generation, distribution and motion systems, lighting and safety systems, avionics products, systems and certification, aircraft structures and automated test systems.

We have principal operations in the United States (“U.S.”), Canada, France and England, as well as engineering offices in the Ukraine and India.

On February 13, 2019, the Company completed a divestiture of its semiconductor test business within the Test Systems segment. The transaction included two elements of contingent earnouts. In December 2021, the Company agreed to a payment of $10.7 million for the calendar 2020 earnout, which was recorded in the fourth quarter of 2021 and was received by the Company in early January 2022. In March 2022, the Company agreed with the earnout calculation for the calendar 2021 earnout in the amount of $11.3 million. The Company recorded the gain and received the payment in the first quarter of 2022.

Impact of the COVID-19 Pandemic

On March 11, 2020, the World Health Organization classified the COVID-19 outbreak as a pandemic. The spread of the COVID-19 pandemic disrupted businesses on a global scale, led to significant volatility in financial markets and affected the aviation and industrial industries. Substantially all of our operations and production activities have, to-date, remained operational. However, the impacts of the pandemic have placed labor and supply chain pressures on our business and we have been impacted by customer demand variability. Although we saw stable and growing backlog during the first half of 2022 in our aerospace business, COVID-19 related disruptions are ongoing and continue to adversely challenge our commercial transport market. While we remain bullish about the aerospace business, we believe the recovery to pre-pandemic activity, particularly in the widebody market, will take longer than originally anticipated at the outset of the pandemic. As economic activity continues to recover, we will continue to monitor the situation, assessing further possible implications on our operations, supply chain, liquidity, cash flow and customer orders.

The Company qualified for government subsidies from the Canadian and French governments as a result of the COVID-19 pandemic’s impact on our foreign operations. The Canadian and French subsidies are income-based grants intended to reimburse the Company for certain employee wages. The grants are recognized as income over the periods in which the Company recognizes as expenses the costs the grants are intended to defray. The amount recognized in the first quarter of 2022 was immaterial.

Table of Contents

In September 2021 the Company was awarded a grant of up to $14.7 million from the U.S. Department of Transportation (“USDOT”) under the Aviation Manufacturing Jobs Protection Program (“AMJP”). The Company received $7.4 million under the grant in 2021 and $5.2 million in the first quarter of 2022. The Company expects to receive the remainder in 2022. The receipt of the full award is primarily conditioned upon the Company committing to not furlough, lay off or reduce the compensation levels of a defined group of employees during the six-month period of performance between September 2021 and March 2022. The grant benefit is being recognized ratably over the six-month performance period as a reduction to cost of products sold in proportion to the compensation expense that the award is intended to defray. During the quarter ended April 2, 2022, the Company recognized $6.0 million of the award.

The following table presents the COVID-19 related government assistance, including AMJP, recorded during the three months ended April 2, 2022:


	Three Months Ended
(In thousands)		April 2, 2022		April 3, 2021
Cost of Products Sold		$	6,085	$	545
Selling, General and Administrative Expenses		14		68
Total		$	6,099	$	613

Trade Accounts Receivable and Contract Assets

The allowance for estimated credit losses is based on the Company’s assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering factors such as the age of the receivable balances, historical experience, credit quality, current economic conditions, and reasonable and supportable forecasts of future economic conditions that may affect a customer’s ability to pay. The allowance for estimated credit losses balance was $2.9 million and $3.2 million at April 2, 2022 and December 31, 2021, respectively. The Company’s bad debt included insignificant expense during the three months ended April 2, 2022, and expense of $0.3 million in the three months ended April 3, 2021. Total write offs charged against the allowance were $0.1 million in the three months ended April 2, 2022, and insignificant in the three months ended April 3, 2021. Total recoveries were $0.2 million and insignificant in the three months ended April 2, 2022 and April 3, 2021, respectively.

The Company's exposure to credit losses may increase if its customers are adversely affected by global economic recessions, disruption associated with the current COVID-19 pandemic, industry conditions, or other customer-specific factors. Although the Company has historically not experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade receivables and contract assets as airlines and other aerospace companies’ cash flows are impacted by the COVID-19 pandemic.

Research and Development Expenses

Research and development costs are expensed as incurred and include salaries, benefits, consulting, material costs and depreciation. Research and development expenses amounted to $12.2 million and $10.3 million for the three-month periods ended April 2, 2022 and April 3, 2021, respectively. These costs are included in Cost of products sold.

Goodwill Impairment

The Company tests goodwill at the reporting unit level on an annual basis or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

As of April 2, 2022, the Company concluded that no indicators of impairment relating to intangible assets or goodwill existed and an interim test was not performed in the three months then ended.

Valuation of Long-Lived Assets

Long-lived assets are evaluated for recoverability whenever adverse effects or changes in circumstances indicate that the carrying value may not be recoverable. The recoverability test consists of comparing the undiscounted projected cash flows with the carrying amount. Should the carrying amount exceed undiscounted projected cash flows, an impairment loss would be recognized to the extent the carrying amount exceeds fair value. As of April 2, 2022 and for the three month period then ended, the Company concluded that no indicators of impairment relating to long-lived assets existed.

Table of Contents

Foreign Currency Translation

The aggregate foreign currency transaction gain or loss included in operations was insignificant for the three months ended April 2, 2022 and April 3, 2021.

Recent Accounting Pronouncement

Recent Accounting Pronouncement Adopted


Standard	Description	Financial Statement Effect or Other Significant Matters
ASU No. 2021-08 Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers	This amendment requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Topic 606, Revenue from Contracts with Customers, as if it had originated the contracts. Under the current business combinations guidance, such assets and liabilities are recognized by the acquirer at fair value on the acquisition date. The standard will not impact acquired contract assets or liabilities from business combinations occurring prior to the adoption date.	This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The impact of adoption on the Company's consolidated financial statements will be prospective only and depend on the magnitude of future business acquisitions. Date of adoption: Q1 2022

We consider the applicability and impact of all ASUs. ASUs not listed above were assessed and determined to be either not applicable, or had or are expected to have minimal impact on our financial statements and related disclosures.

2) Revenue

On April 2, 2022, we had $475.1 million of remaining performance obligations, which we refer to as total backlog. We expect to recognize approximately $364.3 million of our remaining performance obligations as revenue in the remainder of 2022.

We recognized $6.0 million and $8.3 million during the three months ended April 2, 2022 and April 3, 2021, respectively, in revenues that were included in the contract liability balance at the beginning of the period.

The Company's contract assets and contract liabilities consist primarily of costs and profits in excess of billings and billings in excess of cost and profits, respectively. The following table presents the beginning and ending balances of contract assets and contract liabilities during the three months ended April 2, 2022:


(In thousands)	Contract Assets		Contract Liabilities
Beginning Balance, January 1, 2022	$	25,941	$	28,495
Ending Balance, April 2, 2022	$	29,841	$	28,214

Table of Contents

The following table presents our revenue disaggregated by Market Segments as follows:


	Three Months Ended
(In thousands)		April 2, 2022		April 3, 2021
Aerospace Segment
Commercial Transport		$	64,089	$	38,208
Military		14,976

SEC Form 10-Q filed by Astronics Corporation