UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



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

For the quarterly period ended ~~October~~April 1, ~~2016~~2017



¨	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)

NOT APPLICABLE

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

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 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ¨

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):

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 ~~October~~April 1, ~~2016, 29,039,097~~2017, 28,997,779 shares of common stock were outstanding consisting of ~~19,478,408~~21,620,225 shares of common stock ($.01 par value) and ~~9,560,689~~7,377,554 shares of Class B common stock ($.01 par value).

TABLE OF CONTENTS



			PAGE
PART I	FINANCIAL INFORMATION

	Item 1	Financial Statements:

		• Consolidated Condensed Balance Sheets as of ~~October~~April 1, ~~2016~~2017 and December 31, ~~2015~~2016	3

		• Consolidated Condensed Statements of Operations for the Three ~~and Nine~~ Months Ended ~~October~~April 1, ~~2016~~2017 and ~~October 3, 2015~~April 2, 2016	4

		• Consolidated Condensed Statements of Comprehensive Income for the Three ~~and Nine~~ Months Ended ~~October~~April 1, ~~2016~~2017 and ~~October 3, 2015~~April 2, 2016	5

		• Consolidated Condensed Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~October~~April 1, ~~2016~~2017 and ~~October 3, 2015~~April 2, 2016	6

		• Notes to Consolidated Condensed Financial Statements	7~~-17~~

	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1817 ~~– 25~~

	Item 3	Quantitative and Qualitative Disclosures about Market Risk	2523

	Item 4	Controls and Procedures	2523

PART II	OTHER INFORMATION

	Item 1	Legal Proceedings	2624

	Item 1a	Risk Factors	2624

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	2725

	Item 3	Defaults Upon Senior Securities	2725

	Item 4	Mine Safety Disclosures	2725

	Item 5	Other Information	2725

	Item 6	Exhibits	2725

SIGNATURES			2826

Part I – Financial Information

Item 1. Financial Statements

ASTRONICS CORPORATION

Consolidated Condensed Balance Sheets

~~October~~April 1, ~~2016~~2017 with Comparative Figures for December 31, ~~2015~~2016

(In thousands)


	October 1, 2016			December 31, 2015			April 1, 2017			December 31, 2016
	(Unaudited)						(Unaudited)
Current Assets:
Cash and Cash Equivalents	$	13,278		$	18,561		$	10,763		$	17,901
Accounts Receivable, Net of Allowance for Doubtful Accounts	118,888			95,277			112,781			109,415
Inventories	120,691			115,467			122,184			116,597
Prepaid Expenses and Other Current Assets	13,100			20,662			10,674			11,160
Total Current Assets	265,957			249,967			256,402			255,073
Property, Plant and Equipment, Net of Accumulated Depreciation	123,754			124,742			122,159			122,812
Other Assets	13,035			10,889			13,902			13,149
Intangible Assets, Net of Accumulated Amortization	101,037			108,276			95,529			98,103
Goodwill	115,645			115,369			115,294			115,207
Total Assets	$	619,428		$	609,243		$	603,286		$	604,344
Current Liabilities:
Current Maturities of Long-term Debt	$	2,686		$	2,579		$	2,582		$	2,636
Accounts Payable	27,493			27,138			29,506			25,070
Accrued Expenses and Other Current Liabilities	35,236			35,758			30,100			35,686
Customer Advance Payments and Deferred Revenue	27,805			38,757			20,937			23,168
Total Current Liabilities	93,220			104,232			83,125			86,560
Long-term Debt	161,305			167,210			138,914			145,484
Other Liabilities	35,532			37,576			35,147			34,851
Total Liabilities	290,057			309,018			257,186			266,895
Shareholders’ Equity:
Common Stock	296			294			297			297
Accumulated Other Comprehensive Loss	(13,318		)	(15,064		)	(14,968		)	(15,494		)
Other Shareholders’ Equity	342,393			314,995			360,771			352,646
Total Shareholders’ Equity	329,371			300,225			346,100			337,449
Total Liabilities and Shareholders’ Equity	$	619,428		$	609,243		$	603,286		$	604,344

See notes to consolidated condensed financial statements.

ASTRONICS CORPORATION

Consolidated Condensed Statements of Operations

Three ~~and Nine~~ Months Ended ~~October~~ April��1, ~~2016~~2017 With Comparative Figures for ~~2015~~2016

(Unaudited)

(In thousands, except per share data)


	Nine Months Ended				Three Months Ended				Three Months Ended
	October 1, 2016		October 3, 2015		October 1, 2016		October 3, 2015		April 1, 2017		April 2, 2016
Sales	$	479,055	$	534,939	$	155,099	$	200,145	$	152,396	$	159,530
Cost of Products Sold	356,074		385,898		116,436		140,718		114,079		120,047
Gross Profit	122,981		149,041		38,663		59,427		38,317		39,483
Selling, General and Administrative Expenses	65,246		66,213		21,138		22,297		21,693		21,884
Income from Operations	57,735		82,828		17,525		37,130		16,624		17,599
Interest Expense, Net of Interest Income	3,246		3,600		1,103		1,243		1,133		1,087
Income Before Income Taxes	54,489		79,228		16,422		35,887		15,491		16,512
Provision for Income Taxes	15,950		26,161		4,348		11,193		3,904		5,027
Net Income	$	38,539	$	53,067	$	12,074	$	24,694	$	11,587	$	11,485
Earnings Per Share:
Basic	$	1.32	$	1.82	$	0.42	$	0.84	$	0.40	$	0.39
Diluted	$	1.28	$	1.76	$	0.41	$	0.82	$	0.38	$	0.38

See notes to consolidated condensed financial statements.

ASTRONICS CORPORATION

Consolidated Condensed Statements of Comprehensive Income

Three ~~and Nine~~ Months Ended ~~October~~April 1, ~~2016~~2017 With Comparative Figures for ~~2015~~2016

(Unaudited)

(In thousands)


	Nine Months Ended					Three Months Ended					Three Months Ended
	October 1, 2016		October 3, 2015			October 1, 2016		October 3, 2015			April 1, 2017		April 2, 2016
Net Income	$	38,539	$	53,067		$	12,074	$	24,694		$	11,587	$	11,485
Other Comprehensive Income (Loss):
Other Comprehensive Income:
Foreign Currency Translation Adjustments	1,354		(3,410		)	49		(196		)	395		1,816
Retirement Liability Adjustment – Net of Tax	392		484			130		161			131		131
Other Comprehensive Income (Loss)	1,746		(2,926		)	179		(35		)
Other Comprehensive Income											526		1,947
Comprehensive Income	$	40,285	$	50,141		$	12,253	$	24,659		$	12,113	$	13,432

See notes to consolidated condensed financial statements.

ASTRONICS CORPORATION

Consolidated Condensed Statements of Cash Flows

~~Nine~~Three Months Ended ~~October~~April 1, ~~2016~~2017

With Comparative Figures for ~~2015~~2016

(Unaudited)

(In thousands)


	Nine Months Ended						Three Months Ended
	October 1, 2016			October 3, 2015			April 1, 2017			April 2, 2016
Cash Flows From Operating Activities:
Net Income	$	38,539		$	53,067		$	11,587		$	11,485
Adjustments to Reconcile Net Income to Cash Provided By Operating Activities:
Depreciation and Amortization	19,457			18,831			6,298			6,546
Provisions for Non-Cash Losses on Inventory and Receivables	1,554			1,513			535			563
Stock Compensation Expense	1,876			1,740			656			597
Deferred Tax Benefit	(3,527		)	(243		)	(516		)	(468		)
Non-cash Earnout Liability Adjustment	—			(1,576		)
Other	401			21			(291		)	119
Cash Flows from Changes in Operating Assets and Liabilities:
Accounts Receivable	(23,707		)	(29,796		)	(3,268		)	(10,384		)
Inventories	(5,113		)	(4,805		)	(5,957		)	(3,117		)
Accounts Payable	211			(1,656		)	4,397			2,755
Accrued Expenses	(786		)	5,662			(8,477		)	(8,522		)
Other Current Assets and Liabilities	(460		)	(498		)	(942		)	214
Customer Advanced Payments and Deferred Revenue	(11,281		)	(5,396		)	(2,072		)	(3,831		)
Income Taxes	6,860			5,072			4,038			4,245
Supplemental Retirement and Other Liabilities	1,126			1,238			382			341
Cash Provided By Operating Activities	25,150			43,174			6,370			543
Cash Flows From Investing Activities:
Acquisition of Business, Net of Cash Acquired	—			(52,606		)
Capital Expenditures	(9,869		)	(15,857		)	(2,767		)	(2,450		)
Other Investing Activities	(1,585		)	(2,677		)
Cash Used For Investing Activities	(11,454		)	(71,140		)	(2,767		)	(2,450		)
Cash Flows From Financing Activities:
Proceeds from Long-term Debt	20,000			55,000			—			10,000
Payments for Long-term Debt	(25,909		)	(29,008		)	(6,657		)	(7,604		)
Purchase of Outstanding Shares for Treasury	(17,446		)	—			(4,413		)	(4,261		)
Debt Acquisition Costs	(164		)	—			—			(164		)
Proceeds from Exercise of Stock Options	3,902			3,308			295			451
Acquisition Earnout Payments	—			(2		)
Income Tax Benefit from Exercise of Stock Options	529			619			—			529
Cash (Used For) Provided By Financing Activities	(19,088		)	29,917
Cash Used For Financing Activities							(10,775		)	(1,049		)
Effect of Exchange Rates on Cash	109			(715		)	34			186
(Decrease) Increase in Cash and Cash Equivalents	(5,283		)	1,236
Decrease in Cash and Cash Equivalents							(7,138		)	(2,770		)
Cash and Cash Equivalents at Beginning of Period	18,561			21,197			17,901			18,561
Cash and Cash Equivalents at End of Period	$	13,278		$	22,433		$	10,763		$	15,791

See notes to consolidated condensed financial statements.

ASTRONICS CORPORATION

Notes to Consolidated Condensed Financial Statements

~~October~~April 1, ~~2016~~2017

(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.

All 2016 share quantities and per share data reported have been restated to reflect the impact of the three-for-twenty Class B stock distribution to shareholders of record on October 11, 2016.

Operating Results

The results of operations for any interim period are not necessarily indicative of results for the full year. Operating results for the ~~nine~~three months ended ~~October~~April 1, ~~2016~~2017 are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2016.~~2017.

The balance sheet at December 31, ~~2015~~2016 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 for complete financial statements.

For further information, refer to the financial statements and footnotes thereto included in Astronics Corporation’s ~~2015~~2016 annual report on Form 10-K.

Description of the Business

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

We have operations in the United States (“U.S.”), Canada and France. We design and build our products through our wholly owned subsidiaries Armstrong Aerospace, Inc. (“Armstrong”); Astronics Advanced Electronic Systems Corp. (“AES”); Astronics AeroSat Corporation (“AeroSat”); Ballard Technology, Inc. (“Ballard”); Astronics DME LLC (“DME”); Luminescent Systems, Inc. (“LSI”); Luminescent Systems Canada, Inc. (“LSI Canada”); Max-Viz, Inc. (“Max-Viz”); Peco, Inc. (“Peco”); PGA Electronic s.a. (“PGA”) and Astronics Test Systems, Inc. (“ATS”). On April 3, 2017, Astronics Custom Control Concepts Inc. ("CCC") acquired all of the assets and certain liabilities of Custom Control Concepts LLC.

Cost of Products Sold, Engineering and Development and Selling, General and Administrative Expenses

Cost of products sold includes the costs to manufacture products such as direct materials and labor and manufacturing overhead as well as all engineering and development costs. The Company is engaged in a variety of engineering and design activities as well as basic research and development activities directed to the substantial improvement or new application of the Company’s existing technologies. These costs are expensed when incurred and included in cost of products sold. Research and development, design and related engineering amounted to ~~$22.2~~$22.9 million and ~~$22.5~~$23.3 million for the three months ended April 1, 2017 and ~~$67.5 million and $66.1 million for the nine months ended October 1,~~April 2, 2016, ~~and October 3, 2015,~~ respectively. Selling, general and administrative expenses include costs primarily related to our sales and marketing departments and administrative departments. Interest expense is shown net of interest income. Interest income was insignificant for the three ~~and nine~~ months ended ~~October~~April 1, ~~2016~~2017 and ~~October 3, 2015.~~April 2, 2016.

Foreign Currency Translation

The aggregate transaction gain or loss included in operations was insignificant for the three ~~and nine~~ months ended ~~October~~April 1, ~~2016~~2017 and ~~October 3, 2015.~~April 2, 2016.

Accounting Pronouncements Adopted in ~~2016~~2017

~~There have been no recent~~

On January 1, 2017, the Company adopted Accounting Standards Update (“ASU”) No. 2016-09, Improvements to Employee Share-Based Payment Accounting. Prospectively, beginning January 1, 2017, excess tax benefits/deficiencies are reflected as income tax benefit/expense in the statement of income, resulting in a $0.3 million tax benefit in the quarter ended April 1, 2017. The extent of excess tax benefits/deficiencies is subject to variation in the Company’s stock price and timing/extent of employee stock option exercises. Under previous accounting ~~pronouncements that have~~guidance, when a share-based payment award such as a stock option was granted to an employee, the fair value of the award was generally recognized over the vesting period. However, the related deduction from taxes payable was based on the award’s intrinsic value at the time of exercise, which could be either greater (creating an excess tax benefit) or less (creating a tax deficiency) than the compensation cost recognized in the financial statements. Excess tax benefits were recognized in additional paid-in capital (“APIC”) within equity, while deficiencies were first recorded to APIC to the extent previously recognized excess tax benefits exist, after which time deficiencies were recorded to income tax expense. The Company’s adoption of this ASU also resulted in associated excess tax benefits being classified as an operating activity in the same manner as other cash flows related to income taxes in the statement of cash flows prospectively beginning January 1, 2017. Based on the adoption methodology applied, the statement of cash flows classification of prior periods has not changed. As permitted by the ASU, the Company has elected to account for forfeitures as they occur. None of the other provisions in this amended guidance had ana significant impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. Under the new standard, goodwill impairment would be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying value of goodwill. This ASU eliminates existing guidance that requires an entity to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigning the fair value of a reporting unit to all of its assets and liabilities as if that reporting unit had been acquired in a business combination. This ASU is effective prospectively to annual and interim impairment tests beginning after December 15, 2019, with early adoption permitted. The adoption of ASU 2017-04 on January 1, 2017 had no impact on the financial statements as of or for the three months ended April 1, 2017, as there was no impairment analysis performed during the period.

2) Inventories

Inventories are as follows:


(In thousands)	October 1, 2016		December 31, 2015		April 1, 2017		December 31, 2016
Finished Goods	$	28,974	$	27,770	$	29,095	$	28,792
Work in Progress	24,493		23,977		27,723		20,790
Raw Material	67,224		63,720		65,366		67,015
	$	120,691	$	115,467	$	122,184	$	116,597

3) Property, Plant and Equipment

The following table summarizes Property, Plant and Equipment as follows:


(In thousands)	October 1, 2016		December 31, 2015		April 1, 2017		December 31, 2016
Land	$	11,174	$	11,145	$	11,123	$	11,112
Buildings and Improvements	79,532		78,989		79,318		79,191
Machinery and Equipment	96,573		89,514		95,653		93,683
Construction in Progress	4,580		3,282		8,964		8,182
	191,859		182,930		195,058		192,168
Less Accumulated Depreciation	68,105		58,188		72,899		69,356
	$	123,754	$	124,742	$	122,159	$	122,812

4) Intangible Assets

The following table summarizes acquired intangible assets as follows:


		October 1, 2016				December 31, 2015					April 1, 2017				December 31, 2016
(In thousands)	Weighted Average Life	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization		Weighted Average Life	Gross Carrying Amount		Accumulated Amortization		Gross Carrying Amount		Accumulated Amortization
Patents	5 Years	$	2,146	$	1,404	$	2,146	$	1,264	4 Years	$	2,146	$	1,497	$	2,146	$	1,450
Non-compete Agreement	4 Years	2,500		854		2,500		479		3 Years	2,500		1,104		2,500		979
Trade Names	7 Years	10,240		2,919		10,217		2,216		7 Years	10,199		3,387		10,189		3,153
Completed and Unpatented Technology	6 Years	24,213		8,612		24,056		6,795		6 Years	24,135		9,830		24,118		9,221
Backlog	Less than 1 Year	11,226		11,202		11,202		10,793		-	11,224		11,224		11,224		11,224
Customer Relationships	12 Years	97,253		21,550		96,472		16,770		11 Years	97,075		24,708		97,046		23,093
Total Intangible Assets	6 Years	$	147,578	$	46,541	$	146,593	$	38,317	6 Years	$	147,279	$	51,750	$	147,223	$	49,120

All acquired intangible assets other than goodwill and one trade name are being amortized. Amortization expense for acquired intangibles is summarized as follows:


	Nine Months Ended				Three Months Ended				Three Months Ended
(In thousands)	October 1, 2016		October 3, 2015		October 1, 2016		October 3, 2015		April 1, 2017		April 2, 2016
Amortization Expense	$	8,202	$	8,534	$	2,595	$	2,761	$	2,618	$	2,808

Amortization expense for acquired intangible assets expected for ~~2016~~2017 and for each of the next five years is summarized as follows:


(In thousands)
2016	$	10,871
2017	10,454		$	10,450
2018	10,141		10,133
2019	9,740		9,754
2020	9,206		9,198
2021	9,160		9,152
2022			8,756

5) Goodwill

The following table summarizes the changes in the carrying amount of goodwill for the ~~nine~~three months ended ~~October~~April 1, ~~2016:~~2017:


(In thousands)	December 31, 2015		Acquisition		Foreign Currency Translation		October 1, 2016		December 31, 2016		Acquisition		Foreign Currency Translation		April 1, 2017
Aerospace	$	115,369	$	—	$	276	$	115,645	$	115,207	$	—	$	87	$	115,294
Test Systems	—		—		—		—		—		—		—		—
	$	115,369	$	—	$	276	$	115,645	$	115,207	$	—	$	87	$	115,294

6) Long-term Debt and Notes Payable

The Company’s obligations under the Credit Agreement as amended are jointly and severally guaranteed by each domestic subsidiary of the Company other than a non-material subsidiary. The obligations are secured by a first priority lien on substantially all of the Company’s and the guarantors’ assets.

revolving credit facility and there remains ~~$197.9~~$218.9 million available, net of outstanding letters of credit. The credit facility allocates up to $20 million of the $350 million revolving credit line for the issuance of letters of credit, including certain existing letters of credit. At ~~October~~April 1, ~~2016,~~2017, outstanding letters of credit totaled $1.1 million.

The maximum permitted leverage ratio of funded debt to Adjusted EBITDA (as defined in the Agreement) is 3.5 to 1, increasing to 4.0 to 1 for up to two fiscal quarters following the closing of an acquisition permitted under the Agreement. The Company will pay interest on the unpaid principal amount of the facility at a rate equal to one-, three- or six-month LIBOR plus between 137.5 basis points and 225 basis points based upon the Company’s leverage ratio. The Company will also pay a commitment fee to the lenders in an amount equal to between 17.5 basis points and 35 basis points on the undrawn portion of the credit facility, based upon the Company’s leverage ratio. The Company must also maintain a minimum interest coverage ratio (Adjusted EBITDA to interest expense) of 3.0 to 1 for the term of the Agreement. The Company’s interest coverage ratio was ~~29.9~~28.6 to 1 at ~~October~~April 1, ~~2016.~~2017. The Company’s leverage ratio was ~~1.52~~1.34 to 1 at ~~October~~April 1, ~~2016.~~2017.

In the event of voluntary or involuntary bankruptcy of the Company or any subsidiary, all unpaid principal and other amounts owing under the 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, change of control, judgments over a certain amount, and cross default under other agreements give the Agent the option to declare all such amounts immediately due and payable.

7) Product Warranties

In the ordinary course of business, the Company warrants its products against defects in design, materials and workmanship typically over periods ranging from 12 to 60 months. The Company determines warranty reserves needed by product line based on experience and current facts and circumstances. Activity in the warranty accrual is summarized as follows:


	Nine Months Ended						Three Months Ended						Three Months Ended
(In thousands)	October 1, 2016			October 3, 2015			October 1, 2016			October 3, 2015			April 1, 2017			April 2, 2016
Balance at Beginning of Period	$	5,741		$	4,884		$	5,361		$	5,319		$	4,675		$	5,741
Acquisitions	—			500			—			—
Warranties Issued	1,806			1,553			600			414			467			661
Warranties Settled	(1,906		)	(2,164		)	(616		)	(737		)	(707		)	(885		)
Reassessed Warranty Exposure	(313		)	1,130			(17		)	907			(78		)	(395		)
Balance at End of Period	$	5,328		$	5,903		$	5,328		$	5,903		$	4,357		$	5,122

8) Income Taxes

The effective tax rates were approximately ~~29.3%~~25.2% and ~~33.0% for the nine months ended and 26.5% and 31.2%~~30.4% for the three months ended ~~October~~April 1, ~~2016~~2017 and ~~October 3, 2015,~~April 2, 2016, respectively. The first quarter 2017 tax rate was favorably impacted relative to the statutory rate by excess tax benefits associated with the exercise of stock options, decreases in foreign tax rates, ~~in 2016 were favorably impacted by the inclusion of~~and from the federal research and development tax ~~credit due to its permanent reinstatement in the fourth quarter of 2015.~~ credit.

9) Shareholders’ Equity

The changes in shareholders’ equity for the ~~nine~~three months ended ~~October~~April 1, ~~2016~~2017 are summarized as ~~follows as adjusted to reflect the impact of the three-for-twenty distribution of Class B Stock as discussed in Note 10:~~

follows:


				Number of Shares									Number of Shares
(Dollars and Shares in thousands)	Amount			Common Stock			Convertible Class B Stock			Amount			Common Stock			Convertible Class B Stock
Shares Authorized				40,000			15,000						40,000			15,000
Share Par Value				$	0.01		$	0.01					$	0.01		$	0.01
COMMON STOCK
Beginning of Period	$	294		19,349			10,006			$	297		21,955			7,665
Conversion of Class B Shares to Common Shares	—			509			(509		)	—			320			(320		)
Exercise of Stock Options	2			138			64			—			16			33
End of Period	$	296		19,996			9,561			$	297		22,291			7,378
ADDITIONAL PAID IN CAPITAL
Beginning of Period	$	57,827								$	64,752
Stock Compensation Expense	1,876									656
Exercise of Stock Options	4,429									295
End of Period	$	64,132								$	65,703
ACCUMULATED OTHER COMPREHENSIVE LOSS
Beginning of Period	$	(15,064	)							$	(15,494	)
Foreign Currency Translation Adjustment	1,354									395
Retirement Liability Adjustment – Net of Tax	392									131
End of Period	$	(13,318	)							$	(14,968	)
RETAINED EARNINGS
Beginning of Period	$	257,168								$	305,512
Net Income	38,539									11,587
End of Period	$	295,707								$	317,099
TREASURY STOCK
Beginning of Period	$	—		—						$	(17,618	)	(523		)
Purchase	(17,446		)	(517		)				(4,413		)	(148		)
End of Period	$	(17,446	)	(517		)				$	(22,031	)	(671		)
TOTAL SHAREHOLDERS’ EQUITY
Beginning of Period	$	300,225								$	337,449

End of Period	$	329,371		19,479			9,561			$	346,100		21,620			7,378

On February 24, 2016, the Company’s Board of Directors authorized the repurchase of up to $50 million of common stock (the “Buyback Program”). The Buyback Program allows the Company to purchase shares of its common stock in accordance with applicable securities laws on the open market or through privately negotiated transactions. The Buyback Program may be suspended or discontinued at any time. Under this program, the Company has repurchased approximately ~~517,000~~671,000 shares for ~~$17.5~~$22.0 million.

10) Earnings Per Share

Basic and diluted weighted-average shares outstanding are as follows:


	Nine Months Ended		Three Months Ended		Three Months Ended
(In thousands)	October 1, 2016	October 3, 2015	October 1, 2016	October 3, 2015	April 1, 2017	April 2, 2016
Weighted Average Shares - Basic	29,199	29,203	28,925	29,274	29,102	29,395
Net Effect of Dilutive Stock Options	937	970	883	876	1,080	964
Weighted Average Shares - Diluted	30,136	30,173	29,808	30,150	30,182	30,359

The 2016 information above ~~information~~ has been adjusted to reflect the impact of the three-for-twenty Class B stock distribution to shareholders of record on October 11, 2016.

Stock options with exercise prices greater than the average market price of the underlying common shares are excluded from the computation of diluted earnings per share because they are out-of-the-money and the effect of their inclusion would be anti-dilutive. The number of common shares covered by out-of-the-money stock options at ~~October~~April 1, ~~2016~~2017 was approximately ~~41,000~~474,000 shares.

11) Accumulated Other Comprehensive Loss and Other Comprehensive Loss

The components of accumulated other comprehensive loss are as follows:


(In thousands)	October 1, 2016			December 31, 2015			April 1, 2017			December 31, 2016
Foreign Currency Translation Adjustments	$	(6,617	)	$	(7,971	)	$	(8,202	)	$	(8,597	)
Retirement Liability Adjustment – Before Tax	(10,310		)	(10,912		)	(10,409		)	(10,611		)
Tax Benefit	3,609			3,819			3,643			3,714
Retirement Liability Adjustment – After Tax	(6,701		)	(7,093		)	(6,766		)	(6,897		)
Accumulated Other Comprehensive Loss	$	(13,318	)	$	(15,064	)	$	(14,968	)	$	(15,494	)

The components of other comprehensive income ~~(loss)~~ are as follows:


	Nine Months Ended						Three Months Ended						Three Months Ended
(In thousands)	October 1, 2016			October 3, 2015			October 1, 2016			October 3, 2015			April 1, 2017			April 2, 2016
Foreign Currency Translation Adjustments	$	1,354		$	(3,410	)	$	49		$	(196	)	$	395		$	1,816
Retirement Liability Adjustments:
Reclassifications to General and Administrative Expense:
Amortization of Prior Service Cost	329			390			110			130			101			110
Amortization of Net Actuarial Losses	273			356			90			119			101			91
Tax Benefit	(210		)	(262		)	(70		)	(88		)	(71		)	(70		)
Retirement Liability Adjustment	392			484			130			161			131			131
Other Comprehensive Income (Loss)	$	1,746		$	(2,926	)	$	179		$	(35	)
Other Comprehensive Income													$	526		$	1,947

12) Supplemental Retirement Plan and Related Post Retirement Benefits

The Company has two non-qualified supplemental retirement defined benefit plans (“SERP” and “SERP II”) for certain executive officers. The following table sets forth information regarding the net periodic pension cost for the plans.


	Nine Months Ended				Three Months Ended				Three Months Ended
(In thousands)	October 1, 2016		October 3, 2015		October 1, 2016		October 3, 2015		April 1, 2017		April 2, 2016
Service Cost	$	130	$	145	$	43	$	49	$	46	$	44
Interest Cost	675		633		225		211		224		225
Amortization of Prior Service Cost	310		371		103		123		97		104
Amortization of Net Actuarial Losses	257		336		86		113		93		86
Net Periodic Cost	$	1,372	$	1,485	$	457	$	496	$	460	$	459

Participants in the SERP are entitled to paid medical, dental and long-term care insurance benefits upon retirement under the plan. The following table sets forth information regarding the net periodic cost recognized for those benefits:


	Nine Months Ended				Three Months Ended				Three Months Ended
(In thousands)	October 1, 2016		October 3, 2015		October 1, 2016		October 3, 2015		April 1, 2017		April 2, 2016
Service Cost	$	4	$	3	$	1	$	1	$	2	$	1
Interest Cost	30		30		10		10		10		11
Amortization of Prior Service Cost	19		19		7		7		4		6
Amortization of Net Actuarial Losses	16		20		4		6		8		5
Net Periodic Cost	$	69	$	72	$	22	$	24	$	24	$	23

13) Sales to Major Customers

The Company has a significant concentration of business with two major customers, each in excess of 10% of consolidated sales. The loss of either of these customers would significantly, negatively impact our sales and earnings.

Sales to these two customers represented ~~21%~~24% and ~~15%~~18% of consolidated sales for the ~~nine months ended and 21% and 15% for the~~ three months ~~ended October~~April 1, ~~2016.~~2017. Sales to these customers were in the Aerospace segment. Accounts receivable from these customers at ~~October~~April 1, ~~2016~~2017 was approximately ~~$35.9~~$39.8 million. Sales to these two customers represented ~~21%~~22% and ~~13%~~15% of consolidated sales for the ~~nine months ended October 3, 2015 and 19% and 12% for the~~ three months ended ~~October 3, 2015.~~April 2, 2016.

14) Legal Proceedings

The Company is subject to various legal proceedings, claims, and litigation arising in the ordinary course of business. While the outcome of these matters is currently not determinable, we do not expect these matters will have a material adverse effect on our business, financial position, results of operations, or cash flows. However, the results of these matters cannot be predicted with certainty. Should the Company fail to prevail in any legal matter or should several legal matters be resolved against the Company in the same reporting period, then the financial results of that particular reporting period could be materially adversely affected.

On December 29, 2010, Lufthansa Technik AG (“Lufthansa”) filed a Statement of Claim in the Regional State Court of Mannheim, Germany. Lufthansa’s claim asserts that our subsidiary, AES sold, marketed and brought into use in Germany a power supply system ~~which~~that infringes upon a German patent held by Lufthansa. The relief sought by Lufthansa includes requiring AES to stop selling and marketing the allegedly infringing power supply system, a recall of allegedly infringing products sold to commercial customers since November 26, 2003 and compensation for damages. The claim does not specify an estimate of damages and a damages claim will be made by Lufthansa only if it receives a favorable ruling on the determination of infringement. ~~The value of the dispute has been set by the Court to be €2 million. This is an estimate of the commercial value of the matter.~~

of requested damages. Additionally, if Lufthansa provides the required bank guarantee specified in the decision, the Company may be required to offer a recall of products ~~which~~that are in the distribution channels in Germany. No such bank guarantee has been issued to date. As of April 1, 2017, there are no products in the distribution channels in Germany.

The Company appealed to the Higher Regional Court of Karlsruhe. On November 15, 2016, the Court issued its ruling and upheld the lower court’s decision. The Company has submitted a petition to grant AES leave for appeal to the Federal Supreme Court. The Company believes it has valid defenses to refute the decision. ~~The appeal was heard on October 12, 2016 at the Higher Regional Court of Karlsruhe.~~ Should ~~that ruling be unfavorable, the Company may choose to appeal to~~ the Federal Supreme ~~Court. The enforcement of~~Court decide to hear the ~~accounting provision of~~case, the ~~decision, as discussed above, has no impact on the appeals process. As a result, we do not currently have sufficient information~~appeal process is estimated to ~~provide an~~extend up to two years. We estimate of AES’s potential exposure related to this ~~matter.~~matter to be approximately $1 million to $3 million. As loss exposure is ~~neither~~not probable ~~nor estimable~~ at this time, the Company has not recorded any liability with respect to this litigation as of ~~October~~April 1, ~~2016. The Court is scheduled to issue its decision on November 9, 2016.~~2017.

On November 26, 2014, Lufthansa filed a complaint in the United States District for the Western District of Washington. Lufthansa’s complaint in this action alleges that AES manufactures, uses, sells and offers for sale a power supply system ~~which~~that infringes upon a U.S. patent held by Lufthansa. The patent at issue in the U.S. action is based on technology similar to that involved in the German action. On April 25, 2016, the Court issued its ruling on claim construction, holding that the sole independent claim in the patent is indefinite, rendering all claims in the patent indefinite. Based on this ruling, AES filed a motion for summary judgment on the grounds that the Court’s ruling that the patent is indefinite renders the patent invalid and unenforceable. On July 20, 2016, the U.S. District Court granted the motion for summary judgment and issued an order dismissing all claims against AES with prejudice. Lufthansa has filed an appeal with the United States Court of Appeals for the Federal Circuit. The Company believes that it has valid defenses to Lufthansa’s claims and will vigorously contest the appeal. As loss exposure is neither probable nor estimable at this time, the Companyhas not recorded any liability with respect to this litigation as of ~~October~~April 1, ~~2016.~~2017.

15) Segment Information

Below are the sales and operating profit by segment for the three ~~and nine~~ months ended ~~October~~April 1, ~~2016~~2017 and ~~October 3, 2015~~April 2, 2016 and a reconciliation of segment operating profit to income before income taxes. Operating profit is net sales less cost of products sold and other operating expenses excluding interest and corporate expenses. Cost of products sold and other operating expenses are directly identifiable to the respective segment.


	Nine Months Ended						Three Months Ended						Three Months Ended
(Dollars in thousands)	October 1, 2016			October 3, 2015			October 1, 2016			October 3, 2015			April 1, 2017			April 2, 2016
Sales
Aerospace	$	406,356		$	413,250		$	125,179		$	138,728		$	136,827		$	138,649
Less Intersegment Sales	(367		)	—			—			—			—			(340		)
Total Aerospace Sales	405,989			413,250			125,179			138,728			136,827			138,309

Test Systems	$	73,066		$	121,744		$	29,920		$	61,417
Less Intersegment Sales	—			(55		)	—			—
Total Test Systems Sales	73,066			121,689			29,920			61,417			15,569			21,221
Total Consolidated Sales	$	479,055		$	534,939		$	155,099		$	200,145		$	152,396		$	159,530
Operating Profit and Margins
Aerospace	$	61,099		$	66,728		$	17,557		$	23,055		$	19,754		$	18,691
	15.0		%	16.1		%	14.0		%	16.6		%	14.4		%	13.5		%
Test Systems	6,524			24,618			3,240			16,980			318			2,210
	8.9		%	20.2		%	10.8		%	27.6		%	2.0		%	10.4		%
Total Operating Profit	67,623			91,346			20,797			40,035			20,072			20,901
	14.1		%	17.1		%	13.4		%	20.0		%	13.2		%	13.1		%
Deductions from Operating Profit
Interest Expense, Net of Interest Income	3,246			3,600			1,103			1,243			1,133			1,087
Corporate Expenses and Other	9,888			8,518			3,272			2,905			3,448			3,302
Income Before Income Taxes	$	54,489		$	79,228		$	16,422		$	35,887		$	15,491		$	16,512

Total Assets:


(In thousands)	October 1, 2016		December 31, 2015		April 1, 2017		December 31, 2016
Aerospace	$	510,064	$	510,884	$	511,105	$	500,892
Test Systems	88,457		64,934		74,138		76,575
Corporate	20,907		33,425		18,043		26,877
Total Assets	$	619,428	$	609,243	$	603,286	$	604,344

16) Fair Value

A fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. Fair value is based upon an exit price model. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and involves consideration of factors specific to the asset or liability.

The Company follows a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value.

On a Recurring Basis:

A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The financial liabilities carried at fair value measured on a recurring basis consisted of contingent consideration related to ~~certain~~a prior ~~acquisitions,~~acquisition, valued at zero at ~~October 1, 2016 and~~ December 31, ~~2015,~~2016, determined using Level 3 inputs. This arrangement has expired and as of April 1, 2017 there are no financial liabilities carried at fair value measured on a recurring basis. There were no financial assets carried at fair value measured on a recurring basis at December 31, 2016 or April 1, 2017.

On a Non-recurring Basis:

The Company estimates the fair value of reporting units, utilizing unobservable Level 3 inputs. Level 3 inputs require significant management judgment due to the absence of quoted market prices or observable inputs for assets of a similar nature. The Company utilizes a discounted cash flow analysis to estimate the fair value of reporting units utilizing unobservable inputs. The fair value measurement of the reporting unit under the step-one and step-two analysis of the quantitative goodwill impairment test are classified as Level 3 inputs.

Intangible assets that are amortized 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. For the Company’s indefinite-lived intangible asset, the impairment test consists of comparing the fair value, determined using the relief from royalty method, with its carrying amount. An impairment loss would be recognized for the carrying amount in excess of its fair value.

Due to their short-term nature, the carrying value of cash and equivalents, accounts receivable, accounts payable, and notes payable approximate fair value. The carrying value of the Company’s variable rate long-term debt instruments also approximates fair value due to the variable rate feature of these instruments. As of ~~October~~April 1, ~~2016,~~2017, the Company concluded that no indicators of impairment relating to intangible assets or goodwill existed and an interim test was not performed.

17) Recent Accounting Pronouncements

In ~~March 2016,~~May 2014, the Financial Accounting Standards Board ("(“FASB”) issued ~~Accounting Standards Update (“ASU”) 2016-09,~~ ~~Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~ (“ASU 2016-09”) which simplifies several aspects of the accounting for employee share-based payment transactions. The guidance makes several modifications to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. In addition, ASU 2016-09 clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. The Company is currently assessing how the adoption of this standard will impact the financial statements.

~~In February 2016, the FASB issued ASU 2016-02,~~ ~~Leases~~ (“ASU 2016-02”) which requires the lease rights and obligations arising from lease contracts, including existing and new arrangements, to be recognized as assets and liabilities on the balance sheet. The standard also requires additional disclosures by lessees and contains targeted changes to accounting by lessors. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. The guidance is required to be adopted at the earliest period presented using a modified retrospective approach. The Company is currently assessing the impact on the financial statements.

transactions. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The Company will adopt the new standard on January 1, 2018, using the modified retrospective transition method.

The adoption of this amendment may require us to accelerate the recognition of revenue as compared to current standards, for certain customers, in cases where we produce products unique to those customers; and for which we would have an enforceable right of payment for production completed to date. The Company has identified its revenue streams, reviewed the initial impacts of adopting the new standard on those revenue streams, and appointed a project management leader. The Company continues to evaluate the quantitative and qualitative impacts of the standard.

In February 2016, the FASB issued ASU No. 2016 - 02, Leases. The new standard is effective for reporting periods beginning after December 15, 2018. Early adoption is permitted. The standard will require lessees to report most leases as assets and liabilities on the balance sheet, while lessor accounting will remain substantially unchanged. The standard requires a modified retrospective transition approach for existing leases, whereby the new rules will be applied to the earliest year presented. The adoption of the standard is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity in practice in how certain cash receipts and payments are presented and classified in the statement of cash flows. The standard provides guidance in a number of situations including, among others, settlement of zero-coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The ASU also provides guidance for classifying cash receipts and payments that have aspects of more than one class of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The standard requires application using a retrospective transition method. This ASU is not expected to have a material impact on the Company’s consolidated results of operations and financial condition.

In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, which narrows the existing definition of a business and provides a framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business. The ASU requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities (collectively, the set) is not a business. To be considered a business, the set would need to include an input and a substantive process that together significantly contribute to the ability to create outputs. The standard also narrows the definition of outputs. The definition of a business affects areas of accounting such as acquisitions, disposals and goodwill. Under the new guidance, fewer acquired sets are expected to be considered businesses. This ASU is effective for fiscal years beginning after December 15, 2017 on a prospective basis with early adoption permitted. The Company would apply this guidance to applicable transactions after the adoption date.

In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits(Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires employers to include only the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses. The other components of net benefit cost, including amortization of prior service cost/credit and net actuarial gains/losses, and settlement and curtailment effects, are to be included in non-operating expenses. The ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. The effective date for adoption of this guidance begins on January 1, 2018, with early adoption permitted. The Company is currently evaluating the ~~impacts of adoption and~~effect that this standard will have on the ~~implementation approach to be used.~~consolidated financial statements.

18) ~~Acquisitions~~Subsequent Events

~~Armstrong Aerospace,~~Custom Control Concepts LLC

On April 3, 2017, Astronics Custom Control Concepts Inc.

~~On January 14, 2015,~~, a wholly owned subsidiary of the Company ~~purchased 100%~~acquired substantially all the assets and certain liabilities of ~~the equity of Armstrong for $52.6 million~~ ~~in cash. Armstrong,~~Custom Control Concepts LLC (“CCC”), located in ~~Itasca, Illinois,~~Kent, Washington. CCC is a ~~leading~~ provider of ~~engineering, design~~cabin management and ~~certification solutions for commercial aircraft, specializing in connectivity,~~ in-flight entertainment ~~and electrical power systems. Armstrong is included in our Aerospace segment. This~~systems for a range of aircraft. The total consideration for the transaction was ~~not considered material to the Company’s financial position or results of operations.~~approximately $11 million in cash. All of the goodwill and

purchased intangible assets are expected to be deductible for tax purposes over 15 years. The purchase price allocation for this acquisition has not been finalized. CCC will be included in our Aerospace segment.



Item 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(The following should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Form 10-K for the year ended December 31, ~~2015.~~2016.)

OVERVIEW

Our Aerospace segment designs and manufactures products for the global aerospace industry. Product lines include lighting & safety systems, electrical power generation, distribution and motion systems, aircraft structures, avionics products, systems certification and other products. Our Aerospace customers are the airframe manufacturers ("OEM") that build aircraft for the commercial, military and general aviation markets, suppliers to those OEM’s, aircraft operators such as airlines and branches of the U.S. Department of Defense as well as the Federal Aviation Administration and airport operators. Our Test Systems segment designs, develops, manufactures and maintains automated test systems that support the semiconductor, aerospace, communications and weapons test systems as well as training and simulation devices for both commercial and military applications. In the Test Systems segment, Astronics’ products are sold to a global customer base including OEM's and prime government contractors for both electronics and military products.

Our strategy is to increase our value by developing technologies and capabilities either internally or through acquisition, and using those capabilities to provide innovative solutions to the aerospace and defense, semiconductor and other markets where our technology can be beneficial.

Important factors affecting our growth and profitability are the rate at which new aircraft are produced, government funding of military programs, our ability to have our products designed into new aircraft and the rates at which aircraft owners, including commercial airlines, refurbish or install upgrades to their aircraft. New aircraft build rates and aircraft owners spending on upgrades and refurbishments is cyclical and dependent on the strength of the global economy. Once designed into a new aircraft, the spare parts business is frequently retained by the Company. Future growth and profitability of the Test Systems business is dependent on developing and procuring new and follow-on business in commercial electronics and semiconductor markets as well as with the military. The nature of our Test Systems business is such that it pursues large multi-year projects. There can be significant periods of time between orders in this business which may result in large fluctuations of sales and profit levels and backlog from period to period.

ACQUISITIONS

On ~~January 14, 2015,~~April 3, 2017, Astronics Custom Control Concepts Inc., a wholly owned subsidiary of the Company ~~purchased 100%~~acquired substantially all the assets and certain liabilities of Custom Control Concepts LLC (“CCC”), located in Kent, Washington. CCC is a provider of cabin management and in-flight entertainment (IFE) systems for a range of aircraft. The total consideration for the ~~equity of Armstrong Aerospace, Inc. (“Armstrong”) for $52.6~~transaction was approximately $11 million in cash. Specializing in connectivity, in-flight entertainment, and electrical power systems, Armstrong is a leading provider of engineering design and certification solutions for commercial aircraft, and is located in Itasca, Illinois. Armstrong isCCC will be included in our Aerospace segment.

CONSOLIDATED RESULTS OF OPERATIONS AND OUTLOOK


	Nine Months Ended						Three Months Ended						Three Months Ended
(Dollars in thousands)	October 1, 2016			October 3, 2015			October 1, 2016			October 3, 2015			April 1, 2017			April 2, 2016
Sales	$	479,055		$	534,939		$	155,099		$	200,145		$	152,396		$	159,530
Gross Profit (sales less cost of products sold)	$	122,981		$	149,041		$	38,663		$	59,427		$	38,317		$	39,483
Gross Margin	25.7		%	27.9		%	24.9		%	29.7		%	25.1		%	24.7		%
Selling, General and Administrative Expenses	$	65,246		$	66,213		$	21,138		$	22,297		$	21,693		$	21,884
SG&A Expenses as a Percentage of Sales	13.6		%	12.4		%	13.6		%	11.1		%	14.2		%	13.7		%
Interest Expense, Net of Interest Income	$	3,246		$	3,600		$	1,103		$	1,243		$	1,133		$	1,087
Effective Tax Rate	29.3		%	33.0		%	26.5		%	31.2		%	25.2		%	30.4		%
Net Income	$	38,539		$	53,067		$	12,074		$	24,694		$	11,587		$	11,485

A discussion by segment can be found at “Segment Results of Operations and Outlook” in this MD&A.

CONSOLIDATED ~~THIRD~~FIRST QUARTER RESULTS

Consolidated sales were down ~~$45.0~~$7.1 million from the same period last year. Aerospace segment sales of ~~$125.2~~$136.8 million were down ~~$13.5~~$1.5 million and Test Systems segment sales of ~~$29.9~~$15.6 million were down ~~$31.5~~$5.7 million.

Consolidated cost of products sold in the ~~third~~first quarter of 2017 decreased ~~$24.3~~$5.9 million to ~~$116.4~~$114.1 million ~~from $140.7~~compared with $120.0 million ~~for~~in the ~~same period last year, primarily due to~~first quarter of 2016. The decrease was the result of lower sales ~~volume.~~volume coupled with improved operational efficiencies and product mix. Engineering and ~~development~~Development (“E&D”) costs were ~~$22.2~~$22.9 million in the ~~third~~ quarter, ~~of 2016,~~ down slightly from ~~$22.5~~$23.3 million of E&D costs in last year’s ~~third~~first quarter. As a percent of sales, E&D was ~~14.3%~~15.0% and ~~11.3%~~14.6% in the ~~third~~first quarters of ~~2016~~2017 and ~~2015,~~2016, respectively.

Selling, general and administrative (“SG&A”) expenses ~~decreased $1.2 million compared with the 2015 third quarter, due primarily to lower commissions on lower sales volumes in the third quarter of 2016 compared with 2015.~~

The effective tax rate for the third quarter was 26.5%, compared with 31.2% in the third quarter of 2015. The tax rate in the third quarter of 2016 was favorably impacted by the permanent reinstatement of the federal research and development tax credit in the fourth quarter of 2015.

~~Net income for the 2016 third quarter was $12.1 million compared with $24.7 million in the prior-year period. Diluted earnings per share for the 2016 third quarter~~ were ~~$0.41 compared with $0.82 in the prior-year period.~~

~~CONSOLIDATED YEAR-TO-DATE RESULTS~~

~~Consolidated sales for the first nine months of 2016 decreased by $55.9~~$21.7 million, or ~~10.4%, to $479.1 million. Aerospace segment sales were down 1.8% year-over-year to $406.0 million, while Test Systems segment sales were down 40.0% to $73.1 million.~~

Consolidated costs of products sold decreased $29.8 million to $356.1 million from $385.9 million in the first nine months of 2015. The decrease was the result of lower sales volume. E&D costs were $67.5 million in the first nine months of 2016, up slightly from $66.1 million of E&D costs in the first nine months of 2015. As a percent of sales, E&D was 14.1% and 12.4% in the first nine months of 2016 and 2015, respectively.

~~SG&A expenses were $65.2 million, or 13.6%~~14.2% of sales, in the first ~~nine months~~quarter of ~~2016~~2017 compared with ~~$66.2~~$21.9 million, or ~~12.4%~~13.7% of sales, in the same period last year. The first nine months of 2015 benefited from a $1.6 million reduction to the contingent consideration liability related to prior acquisitions. Lower SG&A expenses were due primarily to reduced commissions resulting from lower volumes.

The effective tax rate for the ~~first nine months of 2016~~quarter was ~~29.3%~~25.2%, compared with ~~33.0%~~30.4% in the first ~~nine months~~quarter of ~~2015.~~2016. The first quarter 2017 tax rate ~~in the first nine months of 2016~~ was favorably impacted by excess tax benefits associated with the ~~permanent reinstatement~~exercise of stock options. With the ~~federal research and development~~implementation of Accounting Standards Update No. 2016-09 on January 1, 2017, excess tax ~~credit in~~benefits are now recognized as income tax benefit upon exercise. The effective tax rate for the ~~fourth~~first quarter of ~~2015.~~ 2017 also benefited from decreases in foreign tax rates.

Net income for the quarter was $11.6 million, compared to $11.5 million in the first ~~nine months of 2016 totaled $38.5 million, or $1.28 per diluted share.~~

~~During the third~~ quarter ~~the Company repurchased approximately 157,000 shares at an aggregate cost of $5.3 million under its share repurchase program. Since the inception~~ of the ~~program~~prior year. Diluted earnings per share was $0.38 cents in ~~February 2016,~~ the ~~Company has repurchased approximately 517,000 shares at an aggregate cost~~first quarters of ~~$17.5 million.~~2017 and 2016.

CONSOLIDATED OUTLOOK

Consolidated sales in ~~2016~~2017 are forecasted to be in the range of $635 million to ~~$645 million.~~$690 million, which represents a decline from the high end of the previous range. Approximately ~~$539~~$545 million to ~~$545~~$580 million of revenue is expected from the Aerospace ~~segment. Expectations for~~segment and $90 million to $110 million from the Test Systems ~~segment revenue in 2016 remains relatively unchanged at approximately $96 million to $100 million.~~segment.

Consolidated backlog at ~~October~~April 1, ~~2016~~2017 was ~~$275.2~~$252.7 million, of which ~~$121.9~~approximately $218.7 million is expected to ship in ~~2016.~~2017.

~~The~~Assuming no change in the federal statutory rate, the effective tax rate for ~~2016~~2017 is expected to be ~~approximately 29%~~in the range of 28% to 31%.

Capital equipment spending in ~~2016~~2017 is ~~planned~~expected to be in the range of ~~$15~~$21 million to ~~$17~~$25 million.

E&D costs are expected to be ~~similar~~in the range of $93 million to ~~2015.~~$95 million excluding the engineering costs from the acquired Custom Control Concepts business.

SEGMENT RESULTS OF OPERATIONS AND OUTLOOK

Operating profit, as presented below, is sales less cost of products sold and other operating expenses, excluding interest expense and other corporate expenses. Cost of products sold and other operating expenses are directly identifiable to the respective segment. Operating profit is reconciled to earnings before income taxes in Note 15 of the Notes to Consolidated Condensed Financial Statements included in this report.

AEROSPACE SEGMENT


	Nine Months Ended						Three Months Ended						Three Months Ended
(In thousands)	October 1, 2016			October 3, 2015			October 1, 2016			October 3, 2015			April 1, 2017			April 2, 2016
Sales
Aerospace	$	406,356		$	413,250		$	125,179		$	138,728		$	136,827		$	138,649
Less Intersegment Sales	(367		)	—			—			—			—			(340		)
Total Aerospace Sales	$	405,989		$	413,250		$	125,179		$	138,728		$	136,827		$	138,309
Operating Profit	$	61,099		$	66,728		$	17,557		$	23,055		$	19,754		$	18,691
Operating Margin	15.0		%	16.1		%	14.0		%	16.6		%	14.4		%	13.5		%

Aerospace Sales by Market
(In thousands)
Commercial Transport	$	331,174		$	342,839		$	101,355		$	115,016		$	109,723		$	113,396
Military	39,932			31,929			13,679			12,102			15,146			12,280
Business Jet	20,365			25,196			6,133			8,043			7,536			6,525
Other	14,518			13,286			4,012			3,567			4,422			6,108
	$	405,989		$	413,250		$	125,179		$	138,728		$	136,827		$	138,309
Aerospace Sales by Product Line
(In thousands)
Electrical Power & Motion	$	219,215		$	208,578		$	68,259		$	71,164		$	72,444		$	75,392
Lighting & Safety	121,520			119,949			38,975			39,965			42,670			40,566
Avionics	22,684			41,628			5,866			12,598			9,136			7,474
Systems Certification	12,577			16,465			2,580			6,120			2,159			4,606
Structures	15,475			12,418			5,487			4,388			5,996			4,163
Other	14,518			14,212			4,012			4,493			4,422			6,108
	$	405,989		$	413,250		$	125,179		$	138,728		$	136,827		$	138,309


(In thousands)	October 1, 2016		December 31, 2015		April 1, 2017		December 31, 2016
Total Assets	$	510,064	$	510,884	$	511,105	$	500,892
Backlog	$	233,443	$	212,651	$	205,155	$	219,146

AEROSPACE ~~THIRD~~FIRST QUARTER RESULTS

Aerospace segment sales decreased by ~~$13.5~~$1.5 million, or ~~9.8%~~1.1%, when compared with the prior year’s ~~third~~first quarter to ~~$125.2~~$136.8 million.

~~The majority of the reduction in Aerospace~~Electrical Power & Motion sales ~~was with Avionics products. Avionics declined $6.7~~decreased $2.9 million, or 3.9%, largely ~~due to~~driven by lower sales of ~~satellite antenna systems, which have new products in the certification process,~~in-seat and ~~in-flight entertainment/~~cabin ~~management systems for VVIP aircraft, which has been impacted by the decline in the global oil and gas industry, primarily in the Middle East. Additionally,~~power products. Systems Certification sales ~~declined $3.5~~decreased by $2.4 million on lower project activity. ~~Electrical Power & Motion sales declined $2.9 million, as lower sales of in-seat power products~~These decreases were partially offset by ~~an improvement~~a $2.1 million increase in sales of ~~seat motion products.~~Lighting & Safety products and a $1.7 million increase in Avionics products sales.

Aerospace operating profit for the ~~third~~first quarter of ~~2016~~2017 was ~~$17.6~~$19.8 million, or ~~14.0%~~14.4% of sales, compared with ~~$23.1~~$18.7 million, or ~~16.6%~~13.5% of sales, in the same period last year. ~~The decrease in operating profit was the result of lower volumes.~~ Aerospace E&D costs ~~were $18.9 million in the quarter~~remained consistent when compared with ~~$19.3 million in~~ the same period last ~~year.~~year at $20.3 million.

Aerospace orders in the ~~third~~first quarter of ~~2016~~2017 were $122.8 million. Backlog was $205.2 million ~~compared with orders~~at the end of ~~$129.8 million in the 2015 third quarter. The Aerospace segment book to bill ratio for the quarter was 0.98.~~

~~AEROSPACE YEAR-TO-DATE RESULTS~~

~~Aerospace segment sales decreased by $7.3 million, or 1.8%, when compared with the prior year’s first nine months to $406.0 million.~~

Electrical Power & Motion sales grew $10.6 million, or 5.1%, largely driven by higher sales of in-seat power products and seat motion products, which were up $7.2 million and $4.9 million, respectively. Sales of Structures products were up $3.1 million and Lighting & Safety products were up $1.6 million. These increases were offset by an $18.9 million decline in Avionics products, which was largely due to lower sales of satellite antenna systems and lower VVIP in-flight entertainment/cabin management systems, and a $3.9 million decrease in System Certification sales.

~~Aerospace operating profit for~~ the first ~~nine months~~quarter of 2016 was $61.1 million, or 15.0% of sales, compared with $66.7 million, or 16.1% of sales, in the same period last year. The decrease in operating profit was the result of lower volume, coupled with higher E&D costs and a general increase in operating costs. E&D costs for Aerospace were $58.3 million and $57.3 million in the first nine months of 2016 and 2015, respectively. Aerospace SG&A expense increased $1.1 million in the first nine months of 2016 as compared with 2015. The first nine months of 2015 included inventory step-up costs of $1.0 million that reduced normal operating margins for that period.2017.

AEROSPACE OUTLOOK

We expect ~~2016~~2017 sales for our Aerospace segment to be in the range of ~~$539~~$545 million to ~~$545~~$580 million. The Aerospace segment’s backlog at the end of the ~~third~~first quarter of ~~2016~~2017 was ~~$233.4~~$205.2 million with approximately ~~$104.3~~$179.7 million expected to be shipped over the remaining part of ~~2016~~2017 and ~~$206.4~~$188.5 million is expected to ship over the next 12 months.

TEST SYSTEMS SEGMENT


	Nine Months Ended						Three Months Ended						Three Months Ended
(In thousands)	October 1, 2016			October 3, 2015			October 1, 2016			October 3, 2015			April 1, 2017			April 2, 2016
Sales	$	73,066		$	121,744		$	29,920		$	61,417		$	15,569		$	21,221
Less Intersegment Sales	—			(55		)	—			—
Net Sales	$	73,066		$	121,689		$	29,920		$	61,417
Operating profit (loss)	$	6,524		$	24,618		$	3,240		$	16,980		$	318		$	2,210
Operating Margin	8.9		%	20.2		%	10.8		%	27.6		%	2.0		%	10.4		%

Test Systems Sales by Market
(In thousands)
Semiconductor	$	33,863		$	86,224		$	16,878		$	49,966		$	4,631		$	7,137
Aerospace & Defense	39,203			35,465			13,042			11,451			10,938			14,084
	$	73,066		$	121,689		$	29,920		$	61,417		$	15,569		$	21,221


(In thousands)	October 1, 2016		December 31, 2015		April 1, 2017		December 31, 2016
Total Assets	$	88,457	$	64,934	$	74,138	$	76,575
Backlog	$	41,784	$	61,713	$	47,554	$	38,887

TEST SYSTEMS ~~THIRD~~FIRST QUARTER RESULTS

Sales in the ~~third~~first quarter of ~~2016~~2017 decreased approximately ~~$31.5~~$5.7 million to ~~$29.9~~$15.6 million compared with the same period in ~~2015,~~2016, a decrease of ~~51.3%~~26.6%. Sales to the Semiconductor market decreased ~~$33.1~~$2.5 million and sales to the Aerospace and Defense market decreased $3.2 million compared with the same period in ~~2015, which was partially offset by increased sales of $1.6 million to the Aerospace & Defense market.~~2016.

Operating profit was ~~$3.2~~$0.3 million, or ~~10.8%~~2.0% of sales, compared with ~~$17.0~~$2.2 million, or ~~27.6%~~10.4% of sales, in last year’s ~~third~~first quarter. The decrease in operating profit was the result of lower volumes. E&D costs ~~remained relatively consistent at $3.3~~were $2.5 million, ~~and $3.2~~down from $3.0 million in the ~~third quarters~~first quarter of ~~2016 and 2015, respectively.~~2016.

Orders for the Test Systems segment in the quarter were ~~$13.7~~$24.2 million, ~~down $1.7~~for a book-to-bill ratio of 1.56 for the quarter. Backlog was $47.6 million ~~or 10.8%, over~~at the ~~prior year period.~~

~~TEST SYSTEMS YEAR-TO-DATE RESULTS~~

~~Sales in~~end of the first ~~nine months~~quarter of 2016 decreased 40.0% to $73.1 million compared with sales of $121.7 million for the same period in 2015, due to lower shipments to the Semiconductor market. Sales to the Semiconductor market decreased $52.3 million compared with the same period in 2015, which was partially offset by increased sales of $3.7 million to the Aerospace & Defense market.

Operating profit was $6.5 million, or 8.9% of sales, compared with $24.6 million, or 20.2% of sales, in the first nine months of 2015. E&D costs were $9.2 million in the first nine months of 2016 compared with $8.8 million in the prior year period.2017.

TEST SYSTEMS OUTLOOK

We expect sales for the Test Systems segment for ~~2016~~2017 to be in the range of ~~$96~~$90 million to ~~$100~~$110 million. The Test Systems segment’s backlog at the end of the ~~third~~first quarter of ~~2016~~2017 was ~~$41.8~~$47.6 million with approximately ~~$17.6~~$39.1 million expected to be shipped over the remaining part of ~~2016~~2017 and approximately ~~$36.1~~$42.6 million scheduled to ship over the next 12 months.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities:

Cash provided by operating activities totaled ~~$25.2~~$6.4 million for the first ~~nine~~three months of ~~2016,~~2017, as compared with ~~$43.2~~$0.5 million during the same period in ~~2015.~~2016. Cash flow from operating activities increased compared with the same period of 2016 primarily due to the impact of ~~decreases~~lower increases in ~~net income and~~ net operating assets for the first ~~nine~~three months of ~~2016~~2017 when compared with the first ~~nine~~three months of ~~2015.~~2016.

Investing Activities:

Cash used for investing activities, comprised entirely of capital expenditures, was ~~$11.5~~$2.8 million for the first ~~nine~~three months of ~~2016~~2017 compared with ~~$71.1~~$2.5 million used in the same period of ~~2015. Cash used for capital expenditures was $9.9 million in the first nine months of 2016 compared with $15.9 million in the prior year period.~~2016. The Company expects capital spending in ~~2016~~2017 to be in the range of ~~$15~~$21 million to ~~$17 million. Cash used for the acquisition of Armstrong in January 2015 was $52.6~~$25 million.

Financing Activities:

The primary financing activities in ~~2016~~2017 relate to ~~borrowings and~~ payments on our senior credit facility to fund operations, and purchases of treasury stock as part of the buyback program announced on February 24, 2016, under which the Board of Directors authorized the repurchase of up to $50 million of common stock.

The Company's Credit Agreement consists of a $350 million revolving credit line with the option to increase the line by up to $150 million. On January 13, 2016, the Company amended the Agreement to add a new lender and extend the maturity date of the credit facility from September 26, 2019 to January 13, 2021. At ~~October~~April 1, ~~2016~~2017 there was ~~$151.0~~$130.0 million outstanding on the revolving credit facility and there remains ~~$197.9~~$218.9 million available, net of outstanding letters of credit. The credit facility allocates up to $20 million of the $350 million revolving credit line for the issuance of letters of credit, including certain existing letters of credit. At ~~October~~April 1, ~~2016,~~2017, outstanding letters of credit totaled $1.1 million.

2017.

BACKLOG

The Company’s backlog at ~~October~~April 1, ~~2016~~2017 was ~~$275.2~~$252.7 million compared with ~~$274.4~~$258.0 million at December 31, ~~2015~~2016 and ~~$297.0~~$276.8 million at ~~October 3, 2015.~~April 2, 2016.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The Company's contractual obligations and commercial commitments have not changed materially from those disclosed in the Company's Form 10-K for the year ended December 31, ~~2015.~~2016.

MARKET RISK

The Company believes that there have been no material changes in the current year regarding the market risk information for its exposure to interest rate fluctuations. Although the majority of our sales, expenses and cash flows are transacted in U.S. dollars, we have exposure to changes in foreign currency exchange rates related to the Euro and the Canadian dollar. The Company believes that the impact of changes in foreign currency exchange rates in ~~2016~~2017 have not been significant.

CRITICAL ACCOUNTING POLICIES

Refer to the Company’s annual report on Form 10-K for the year ended December 31, ~~2015~~2016 for a complete discussion of the Company’s critical accounting policies.

RECENT ACCOUNTING PRONOUNCEMENTS

In ~~March 2016,~~May 2014, the Financial Accounting Standards Board ("(“FASB”) issued Accounting Standards Update (“ASU”) ~~2016-09,~~ ~~Compensation-Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~ (“ASU 2016-09”) which simplifies several aspects of the accounting for employee share-based payment transactions. The guidance makes several modifications to the accounting for forfeitures, employer tax withholding on share-based compensation and the financial statement presentation of excess tax benefits or deficiencies. In addition, ASU 2016-09 clarifies the statement of cash flows presentation for certain components of share-based awards. The standard is effective for interim and annual reporting periods beginning after December 15, 2016, although early adoption is permitted. The Company is currently assessing how the adoption of this standard will impact the financial statements.

~~In May 2014, the FASB issued ASU~~No. 2014-9, Revenue from Contracts with Customers. This new standard is effective for reporting periods beginning after December 15, 2017, pursuant to the issuance of ASU 2015-14, Revenue from Contracts with ~~Customers (Topic 606):~~Customers: Deferral of Effective Date issued in August 2015. The comprehensive new standard will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The Company will adopt the new standard on January 1, 2018, using the modified retrospective transition method.

In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, which narrows the existing definition of a business and provides a framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business. The ASU requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities (collectively, the set) is not a business. To be considered a business, the set would need to include an input and a substantive process that together significantly contribute to the ability to create outputs. The standard also narrows the definition of outputs. The definition of a business affects areas of accounting such as acquisitions, disposals and goodwill. Under the new guidance, fewer acquired sets are expected to be considered businesses. This ASU is effective for

fiscal years beginning after December 15, 2017 on a prospective basis with early adoption permitted. The Company would apply this guidance to applicable transactions after the adoption date.

In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires employers to include only the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses. The other components of net benefit cost, including amortization of prior service cost/credit and net actuarial gains/losses, and settlement and curtailment effects, are to be included in non-operating expenses. The ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. The effective date for adoption of this guidance begins on January 1, 2018, with early adoption permitted. The Company is currently evaluating the ~~impacts of adoption and~~effect that this standard will have on the ~~implementation approach to be used.~~consolidated financial statements.

FORWARD-LOOKING STATEMENTS

Information included in this report that does not consist of historical facts, including statements accompanied by or containing words such as “may,” “will,” “should,” “believes,” “expects,” “expected,” “intends,” “plans,” “projects,” “approximate,” “estimates,” “predicts,” “potential,” “outlook,” “forecast,” “anticipates,” “presume” and “assume,” are forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and are subject to several factors, risks and uncertainties, the impact or occurrence of which could cause actual results to differ materially from the expected results described in the forward-looking statements. Certain of these factors, risks and uncertainties are discussed in the sections of this report entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” New factors, risks and uncertainties may emerge from time to time that may affect the forward-looking statements made herein. Given these factors, risks and uncertainties, investors should not place undue reliance on forward-looking statements as predictive of future results. We disclaim any obligation to update the forward-looking statements made in this report.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

See Market Risk in Item 2, above.

Item 4. Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of ~~October~~April 1, ~~2016.~~2017. Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of ~~October~~April 1, ~~2016.~~2017.


b)	Changes in Internal Control over Financial Reporting - There have been no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

On February 6, 2015, the Regional State Court of Mannheim, Germany rendered its decision that the patent was infringed. The judgment does not require AES to recall products ~~which~~that are already installed in aircraft or have been sold to other end users. On July 15, 2015, Lufthansa advised AES of their intention to enforce the accounting provisions of the decision, which required AES to provide certain financial information regarding sales of the infringing product to enable Lufthansa to make an estimate of requested damages. Additionally, if Lufthansa provides the required bank guarantee specified in the decision, the Company may be required to offer a recall of products ~~which~~that are in the distribution channels in Germany. No such bank guarantee has been issued to date. As of April 1, 2017 there are no products in the distribution channels in Germany.

Other than this proceeding, we are not party to any significant pending legal proceedings that management believes will result in material adverse effect on our financial condition or results of operations.

Item 1a1a. Risk Factors

In addition to other information set forth in this report, you should carefully consider the factors discussed in Part 1, Item 1A. “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, ~~2015,~~2016, which could materially affect our business, financial condition or results of operations. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or results of operations.

Item 2. Unregistered sales of equity securities and use of proceeds

(c) The following table summarizes our purchases of our common stock for the quarter ended ~~October~~April 1, ~~2016.~~2017.


Period	(a) Total Number of Shares Purchased	(b) Average Price Paid Per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Dollar Value of Shares that may yet be Purchased Under the Program (1)	(a) Total Number of Shares Purchased	(b) Average Price Paid Per Share	(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Maximum Dollar Value of Shares that may yet be Purchased Under the Program (1)
July 3, 2016 - October 1, 2016	157,287	$33.64	517,401	$32,554,000
January 29, 2017 - February 25, 2017 (2)					5,164	$34.06	—	$—
February 26, 2017 - March 31, 2017					148,069	$29.81	148,069	$27,969,000

(1) On February 24, 2016, the Company’s Board of Directors authorized the repurchase of up to $50 million of common stock.

(2) Shares transferred to us by employees in connection with the exercise of stock options.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits



Exhibit 31.1		Section 302 Certification - Chief Executive Officer

Exhibit 31.2		Section 302 Certification - Chief Financial Officer

Exhibit 32.		Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Exhibit 101.1*		Instance Document

Exhibit 101.2*		Schema Document

Exhibit 101.3*		Calculation Linkbase Document

Exhibit 101.4*		Labels Linkbase Document

Exhibit 101.5*		Presentation Linkbase Document

Exhibit 101.6*		Definition Linkbase Document



*	Submitted electronically herewith.

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
		(Registrant)
Date:	~~November 8, 2016~~May 5, 2017	By:	/s/ David C. Burney
			David C. Burney Executive Vice President and Chief Financial Officer (Principal Financial Officer)

2826

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