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 ~~April 1,~~September 30, 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):



Large accelerated filer	ý	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 ~~April 1,~~September 30, 2017, ~~28,997,779~~28,002,226 shares of common stock were outstanding consisting of ~~21,620,225~~21,075,592 shares of common stock ($.01 par value) and ~~7,377,554~~6,926,634 shares of Class B common stock ($.01 par value).

TABLE OF CONTENTS



			PAGE
PART I	FINANCIAL INFORMATION

	Item 1	Financial Statements:

		• Consolidated Condensed Balance Sheets as of ~~April 1,~~September 30, 2017 and December 31, 2016	3

		• Consolidated Condensed Statements of Operations for the Three and Nine Months Ended ~~April 1,~~September 30, 2017 and ~~April 2,~~October 1, 2016	4

		• Consolidated Condensed Statements of Comprehensive Income for the Three and Nine Months Ended ~~April 1,~~September 30, 2017 and ~~April 2,~~October 1, 2016	5

		• Consolidated Condensed Statements of Cash Flows for the ~~Three~~Nine Months Ended ~~April 1,~~September 30, 2017 and ~~April 2,~~October 1, 2016	6

		• Notes to Consolidated Condensed Financial Statements	7

	Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1718

	Item 3	Quantitative and Qualitative Disclosures about Market Risk	2326

	Item 4	Controls and Procedures	2326

PART II	OTHER INFORMATION

	Item 1	Legal Proceedings	2427

	Item 1a	Risk Factors	2427

	Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	2528

	Item 3	Defaults Upon Senior Securities	2528

	Item 4	Mine Safety Disclosures	2528

	Item 5	Other Information	2528

	Item 6	Exhibits	2528

SIGNATURES			2629

Part I – Financial Information

Item 1. Financial Statements

\ASTRONICS CORPORATION

Consolidated Condensed Balance Sheets

~~April 1,~~September 30, 2017 with Comparative Figures for December 31, 2016

(In thousands)


	April 1, 2017			December 31, 2016			September 30, 2017			December 31, 2016
	(Unaudited)						(Unaudited)
Current Assets:
Cash and Cash Equivalents	$	10,763		$	17,901		$	15,377		$	17,901
Accounts Receivable, Net of Allowance for Doubtful Accounts	112,781			109,415			114,985			109,415
Inventories	122,184			116,597			139,265			116,597
Prepaid Expenses and Other Current Assets	10,674			11,160			16,044			11,160
Total Current Assets	256,402			255,073			285,671			255,073
Property, Plant and Equipment, Net of Accumulated Depreciation	122,159			122,812			124,281			122,812
Other Assets	13,902			13,149			16,503			13,149
Intangible Assets, Net of Accumulated Amortization	95,529			98,103			95,055			98,103
Goodwill	115,294			115,207			119,118			115,207
Total Assets	$	603,286		$	604,344		$	640,628		$	604,344
Current Liabilities:
Current Maturities of Long-term Debt	$	2,582		$	2,636		$	2,695		$	2,636
Accounts Payable	29,506			25,070			35,876			25,070
Accrued Expenses and Other Current Liabilities	30,100			35,686			32,533			35,686
Customer Advance Payments and Deferred Revenue	20,937			23,168			21,988			23,168
Total Current Liabilities	83,125			86,560			93,092			86,560
Long-term Debt	138,914			145,484			174,652			145,484
Other Liabilities	35,147			34,851			35,554			34,851
Total Liabilities	257,186			266,895			303,298			266,895
Shareholders’ Equity:
Common Stock	297			297			297			297
Accumulated Other Comprehensive Loss	(14,968		)	(15,494		)	(11,115		)	(15,494		)
Other Shareholders’ Equity	360,771			352,646			348,148			352,646
Total Shareholders’ Equity	346,100			337,449			337,330			337,449
Total Liabilities and Shareholders’ Equity	$	603,286		$	604,344		$	640,628		$	604,344

See notes to consolidated condensed financial statements.

ASTRONICS CORPORATION

Consolidated Condensed Statements of Operations

Three and Nine Months Ended ~~April��1,~~September 30, 2017 With Comparative Figures for 2016

(Unaudited)

(In thousands, except per share data)


	Three Months Ended				Nine Months Ended				Three Months Ended
	April 1, 2017		April 2, 2016		September 30, 2017		October 1, 2016		September 30, 2017		October 1, 2016
Sales	$	152,396	$	159,530	$	453,146	$	479,055	$	149,636	$	155,099
Cost of Products Sold	114,079		120,047		348,186		356,074		117,143		116,436
Gross Profit	38,317		39,483		104,960		122,981		32,493		38,663
Selling, General and Administrative Expenses	21,693		21,884		66,504		65,246		22,410		21,138
Income from Operations	16,624		17,599		38,456		57,735		10,083		17,525
Interest Expense, Net of Interest Income	1,133		1,087		3,750		3,246		1,437		1,103
Income Before Income Taxes	15,491		16,512		34,706		54,489		8,646		16,422
Provision for Income Taxes	3,904		5,027		9,374		15,950		2,586		4,348
Net Income	$	11,587	$	11,485	$	25,332	$	38,539	$	6,060	$	12,074
Earnings Per Share:
Basic	$	0.40	$	0.39	$	0.88	$	1.32	$	0.21	$	0.42
Diluted	$	0.38	$	0.38	$	0.85	$	1.28	$	0.21	$	0.41

See notes to consolidated condensed financial statements.

ASTRONICS CORPORATION

Consolidated Condensed Statements of Comprehensive Income

Three and Nine Months Ended ~~April 1,~~September 30, 2017 With Comparative Figures for 2016

(Unaudited)

(In thousands)


	Three Months Ended				Nine Months Ended				Three Months Ended
	April 1, 2017		April 2, 2016		September 30, 2017		October 1, 2016		September 30, 2017		October 1, 2016
Net Income	$	11,587	$	11,485	$	25,332	$	38,539	$	6,060	$	12,074
Other Comprehensive Income:
Foreign Currency Translation Adjustments	395		1,816		3,987		1,354		1,496		49
Retirement Liability Adjustment – Net of Tax	131		131		392		392		130		130
Other Comprehensive Income	526		1,947		4,379		1,746		1,626		179
Comprehensive Income	$	12,113	$	13,432	$	29,711	$	40,285	$	7,686	$	12,253

See notes to consolidated condensed financial statements.

ASTRONICS CORPORATION

Consolidated Condensed Statements of Cash Flows

~~Three~~Nine Months Ended ~~April 1,~~September 30, 2017

With Comparative Figures for 2016

(Unaudited)

(In thousands)


	Three Months Ended						Nine Months Ended
	April 1, 2017			April 2, 2016			September 30, 2017			October 1, 2016
Cash Flows From Operating Activities:
Net Income	$	11,587		$	11,485		$	25,332		$	38,539
Adjustments to Reconcile Net Income to Cash Provided By Operating Activities:
Depreciation and Amortization	6,298			6,546			19,269			19,457
Provisions for Non-Cash Losses on Inventory and Receivables	535			563			943			1,554
Stock Compensation Expense	656			597			2,203			1,876
Deferred Tax Benefit	(516		)	(468		)	(920		)	(3,527		)
Other	(291		)	119			(657		)	401
Cash Flows from Changes in Operating Assets and Liabilities:
Accounts Receivable	(3,268		)	(10,384		)	(1,515		)	(23,707		)
Inventories	(5,957		)	(3,117		)	(18,480		)	(5,113		)
Accounts Payable	4,397			2,755			8,267			211
Accrued Expenses	(8,477		)	(8,522		)	(5,483		)	(786		)
Other Current Assets and Liabilities	(942		)	214			(4,556		)	(460		)
Customer Advanced Payments and Deferred Revenue	(2,072		)	(3,831		)	(2,336		)	(11,281		)
Income Taxes	4,038			4,245			(883		)	6,860
Supplemental Retirement and Other Liabilities	382			341			1,129			1,126
Cash Provided By Operating Activities	6,370			543			22,313			25,150
Cash Flows From Investing Activities:
Acquisition of Business, Net of Cash Acquired							(10,199		)	—
Capital Expenditures	(2,767		)	(2,450		)	(9,715		)	(9,869		)
Other Investing Activities							(2,070		)	(1,585		)
Cash Used For Investing Activities	(2,767		)	(2,450		)	(21,984		)	(11,454		)
Cash Flows From Financing Activities:
Proceeds from Long-term Debt	—			10,000			42,000			20,000
Payments for Long-term Debt	(6,657		)	(7,604		)	(13,031		)	(25,909		)
Purchase of Outstanding Shares for Treasury	(4,413		)	(4,261		)	(32,382		)	(17,446		)
Debt Acquisition Costs	—			(164		)	—			(164		)
Proceeds from Exercise of Stock Options	295			451			349			3,902
Income Tax Benefit from Exercise of Stock Options	—			529			—			529
Cash Used For Financing Activities	(10,775		)	(1,049		)	(3,064		)	(19,088		)
Effect of Exchange Rates on Cash	34			186			211			109
Decrease in Cash and Cash Equivalents	(7,138		)	(2,770		)	(2,524		)	(5,283		)
Cash and Cash Equivalents at Beginning of Period	17,901			18,561			17,901			18,561
Cash and Cash Equivalents at End of Period	$	10,763		$	15,791		$	15,377		$	13,278

See notes to consolidated condensed financial statements.

ASTRONICS CORPORATION

Notes to Consolidated Condensed Financial Statements

~~April 1,~~September 30, 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 ~~three~~nine months ended ~~April 1,~~September 30, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.

The balance sheet at December 31, 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 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, automated test 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 ~~$22.9~~$23.7 million and ~~$23.3~~$21.6 million for the three months ended ~~April 1,~~and $69.5 million and $66.2 million for the nine months ended September 30, 2017 and ~~April 2,~~October 1, 2016, 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 ~~April 1,~~September 30, 2017 and ~~April 2,~~October 1, 2016.

Foreign Currency Translation

The aggregate transaction gain or loss included in operations was insignificant for the three and nine months ended ~~April 1,~~September 30, 2017 and ~~April 2,~~October 1, 2016.

Accounting Pronouncements Adopted in 2017

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 infor the ~~quarter~~nine months ended ~~April 1,~~September 30, 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 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,~~existed, 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 a 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 or nine months ended ~~April 1,~~September 30, 2017, as there was no impairment analysis performed during the period.

2) Inventories

Inventories are as follows:


(In thousands)	April 1, 2017		December 31, 2016		September 30, 2017		December 31, 2016
Finished Goods	$	29,095	$	28,792	$	36,850	$	28,792
Work in Progress	27,723		20,790		32,997		20,790
Raw Material	65,366		67,015		69,418		67,015
	$	122,184	$	116,597	$	139,265	$	116,597

3) Property, Plant and Equipment

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


(In thousands)	April 1, 2017		December 31, 2016		September 30, 2017		December 31, 2016
Land	$	11,123	$	11,112	$	11,223	$	11,112
Buildings and Improvements	79,318		79,191		81,361		79,191
Machinery and Equipment	95,653		93,683		102,386		93,683
Construction in Progress	8,964		8,182		9,334		8,182
	195,058		192,168		204,304		192,168
Less Accumulated Depreciation	72,899		69,356		80,023		69,356
	$	122,159	$	122,812	$	124,281	$	122,812

4) Intangible Assets

The following table summarizes acquired intangible assets as follows:


		April 1, 2017				December 31, 2016					September 30, 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	4 Years	$	2,146	$	1,497	$	2,146	$	1,450	4 Years	$	2,146	$	1,590	$	2,146	$	1,450
Non-compete Agreement	3 Years	2,500		1,104		2,500		979		3 Years	2,500		1,354		2,500		979
Trade Names	7 Years	10,199		3,387		10,189		3,153		7 Years	10,480		3,866		10,189		3,153
Completed and Unpatented Technology	6 Years	24,135		9,830		24,118		9,221		5 Years	26,094		11,147		24,118		9,221
Backlog	-	11,224		11,224		11,224		11,224		Less than 1 Year	11,524		11,424		11,224		11,224
Customer Relationships	11 Years	97,075		24,708		97,046		23,093		11 Years	99,831		28,139		97,046		23,093
Total Intangible Assets	6 Years	$	147,279	$	51,750	$	147,223	$	49,120	5 Years	$	152,575	$	57,520	$	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:


	Three Months Ended				Nine Months Ended				Three Months Ended
(In thousands)	April 1, 2017		April 2, 2016		September 30, 2017		October 1, 2016		September 30, 2017		October 1, 2016
Amortization Expense	$	2,618	$	2,808	$	8,269	$	8,202	$	2,929	$	2,595

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


(In thousands)
2017	$	10,450	$	11,089
2018	10,133		10,593
2019	9,754		10,214
2020	9,198		9,658
2021	9,152		9,612
2022	8,756		9,216

5) Goodwill

The following table summarizes the changes in the carrying amount of goodwill for the ~~three~~nine months ended ~~April 1,~~September 30, 2017:


(In thousands)	December 31, 2016		Acquisition		Foreign Currency Translation		April 1, 2017		December 31, 2016		Acquisition		Foreign Currency Translation		September 30, 2017
Aerospace	$	115,207	$	—	$	87	$	115,294	$	115,207	$	3,067	$	844	$	119,118
Test Systems	—		—		—		—		—		—		—		—
	$	115,207	$	—	$	87	$	115,294	$	115,207	$	3,067	$	844	$	119,118

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.

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~~he Credit Agreement ~~to add a new lender and extend the maturity date of the credit facility from September 26, 2019 to~~expires on January 13, 2021. At ~~April 1,~~September 30, 2017, there was ~~$130.0~~$167.0 million outstanding ~~on the~~

on the revolving credit facility and there remains ~~$218.9~~$181.9 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 ~~April 1,~~September 30, 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’s leverage ratio was 2.12 to 1 at September 30, 2017. 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 ~~28.6~~20.2 to 1 at ~~April 1, 2017. The Company’s leverage ratio was 1.34 to 1 at April 1,~~September 30, 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:


	Three Months Ended						Nine Months Ended						Three Months Ended
(In thousands)	April 1, 2017			April 2, 2016			September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016
Balance at Beginning of Period	$	4,675		$	5,741		$	4,675		$	5,741		$	4,637		$	5,361
Acquisitions							359			—			—			—
Warranties Issued	467			661			1,315			1,806			483			600
Warranties Settled	(707		)	(885		)	(1,832		)	(1,906		)	(608		)	(616		)
Reassessed Warranty Exposure	(78		)	(395		)	101			(313		)	106			(17		)
Balance at End of Period	$	4,357		$	5,122		$	4,618		$	5,328		$	4,618		$	5,328

8) Income Taxes

The effective tax rates were approximately ~~25.2%~~27.0% and ~~30.4%~~29.3% for the nine months ended and 29.9% and 26.5% for the three months ended ~~April 1,~~September 30, 2017 and ~~April 2,~~October 1, 2016, respectively. The ~~first quarter~~ 2017 tax ~~rate was~~rates were favorably impacted relative to the statutory rate by excess tax benefits associated with the exercise of stock options, decreases in foreign tax rates, and from the federal research and development tax credit.

9) Shareholders’ Equity

The changes in shareholders’ equity for the ~~three~~nine months ended ~~April 1,~~September 30, 2017 are summarized as 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	$	297		21,955			7,665			$	297		21,955			7,665
Conversion of Class B Shares to Common Shares	—			320			(320		)	—			777			(777		)
Exercise of Stock Options	—			16			33			—			18			39
End of Period	$	297		22,291			7,378			$	297		22,750			6,927
ADDITIONAL PAID IN CAPITAL
Beginning of Period	$	64,752								$	64,752
Stock Compensation Expense	656									2,203
Exercise of Stock Options	295									349
End of Period	$	65,703								$	67,304
ACCUMULATED OTHER COMPREHENSIVE LOSS
Beginning of Period	$	(15,494	)							$	(15,494	)
Foreign Currency Translation Adjustment	395									3,987
Retirement Liability Adjustment – Net of Tax	131									392
End of Period	$	(14,968	)							$	(11,115	)
RETAINED EARNINGS
Beginning of Period	$	305,512								$	305,512
Net Income	11,587									25,332
End of Period	$	317,099								$	330,844
TREASURY STOCK
Beginning of Period	$	(17,618	)	(523		)				$	(17,618	)	(523		)
Purchase	(4,413		)	(148		)				(32,382		)	(1,152		)
End of Period	$	(22,031	)	(671		)				$	(50,000	)	(1,675		)
TOTAL SHAREHOLDERS’ EQUITY
Beginning of Period	$	337,449								$	337,449

End of Period	$	346,100		21,620			7,378			$	337,330		21,075			6,927

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~~allowed 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 ~~671,000~~1,675,000 shares ~~for $22.0~~and has completed the program, which authorized repurchases up to $50.0 million.

10) Earnings Per Share

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


	Three Months Ended		Nine Months Ended		Three Months Ended
(In thousands)	April 1, 2017	April 2, 2016	September 30, 2017	October 1, 2016	September 30, 2017	October 1, 2016
Weighted Average Shares - Basic	29,102	29,395	28,779	29,199	28,322	28,925
Net Effect of Dilutive Stock Options	1,080	964	978	937	678	883
Weighted Average Shares - Diluted	30,182	30,359	29,757	30,136	29,000	29,808

The 2016 information above 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 ~~April 1,~~September 30, 2017 was approximately ~~474,000~~356,000 shares.

11) Accumulated Other Comprehensive Loss and Other Comprehensive ~~Loss~~Income

The components of accumulated other comprehensive loss are as follows:


(In thousands)	April 1, 2017			December 31, 2016			September 30, 2017			December 31, 2016
Foreign Currency Translation Adjustments	$	(8,202	)	$	(8,597	)	$	(4,610	)	$	(8,597	)
Retirement Liability Adjustment – Before Tax	(10,409		)	(10,611		)	(10,008		)	(10,611		)
Tax Benefit	3,643			3,714			3,503			3,714
Retirement Liability Adjustment – After Tax	(6,766		)	(6,897		)	(6,505		)	(6,897		)
Accumulated Other Comprehensive Loss	$	(14,968	)	$	(15,494	)	$	(11,115	)	$	(15,494	)

The components of other comprehensive income are as follows:


	Three Months Ended						Nine Months Ended						Three Months Ended
(In thousands)	April 1, 2017			April 2, 2016			September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016
Foreign Currency Translation Adjustments	$	395		$	1,816		$	3,987		$	1,354		$	1,496		$	49
Retirement Liability Adjustments:
Reclassifications to General and Administrative Expense:
Amortization of Prior Service Cost	101			110			303			329			101			110
Amortization of Net Actuarial Losses	101			91			300			273			100			90
Tax Benefit	(71		)	(70		)	(211		)	(210		)	(71		)	(70		)
Retirement Liability Adjustment	131			131			392			392			130			130
Other Comprehensive Income	$	526		$	1,947		$	4,379		$	1,746		$	1,626		$	179

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.


	Three Months Ended				Nine Months Ended				Three Months Ended
(In thousands)	April 1, 2017		April 2, 2016		September 30, 2017		October 1, 2016		September 30, 2017		October 1, 2016
Service Cost	$	46	$	44	$	138	$	130	$	46	$	43
Interest Cost	224		225		672		675		224		225
Amortization of Prior Service Cost	97		104		291		310		97		103
Amortization of Net Actuarial Losses	93		86		279		257		93		86
Net Periodic Cost	$	460	$	459	$	1,380	$	1,372	$	460	$	457

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:


	Three Months Ended				Nine Months Ended				Three Months Ended
(In thousands)	April 1, 2017		April 2, 2016		September 30, 2017		October 1, 2016		September 30, 2017		October 1, 2016
Service Cost	$	2	$	1	$	6	$	4	$	2	$	1
Interest Cost	10		11		30		30		10		10
Amortization of Prior Service Cost	4		6		12		19		4		7
Amortization of Net Actuarial Losses	8		5		21		16		7		4
Net Periodic Cost	$	24	$	23	$	69	$	69	$	23	$	22

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 ~~24%~~20% and ~~18%~~17% of consolidated sales for the nine months ended and 20% and 17% for the three months ~~April 1,~~ended September 30, 2017. Sales to these customers were in the Aerospace segment. Accounts receivable from these customers at ~~April 1,~~September 30, 2017 was approximately ~~$39.8~~$29.9 million. Sales to these two customers represented ~~22%~~21% and 15% of consolidated sales for the nine months ended and 21% and 15% for the three months ended ~~April 2,~~October 1, 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 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~~would be ~~made~~pursued by Lufthansa ~~only if it receives a favorable ruling on the determination of infringement.~~in separate court proceedings.

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 that are in the distribution channels in Germany. No such bank guarantee has been issued to date. As of ~~April 1,~~September 30, 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. Should the Federal Supreme Court decide to hear the case, the appeal process is estimated to extend up to two years. We estimate AES’s potential exposure related to this matter to be approximately $1 million to $3 million. As loss exposure is not probable at this time, the Company has not recorded any liability with respect to this litigation as of ~~April 1,~~September 30, 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 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~~appealed the District Court's decision to the United States Court of Appeals for the Federal Circuit. ~~The Company believes~~On October 19, 2017, the Federal Circuit affirmed the district court’s decision, holding that the sole independent claim of the patent is indefinite, rending all claims on the patent indefinite. Lufthansa has until November 20, 2017, to ask for rehearing or rehearing en banc. If it does not file such a petition, it has ~~valid defenses~~until January 18, 2018, to ~~Lufthansa’s claims and will vigorously contest~~file a petition for writ of certiorari with the ~~appeal.~~U.S. Supreme Court. As loss exposure is neither probable nor estimable at this time, the Company has not recorded any liability with respect to this litigation as of ~~April 1,~~September 30, 2017.

15) Segment Information

Below are the sales and operating profit by segment for the ~~three~~nine months ended ~~April 1,~~September 30, 2017 and ~~April 2,~~October 1, 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.


	Three Months Ended						Nine Months Ended						Three Months Ended
(Dollars in thousands)	April 1, 2017			April 2, 2016			September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016
Sales
Aerospace	$	136,827		$	138,649		$	395,037		$	406,356		$	128,663		$	125,179
Less Intersegment Sales	—			(340		)	—			(367		)	—			—
Total Aerospace Sales	136,827			138,309			395,037			405,989			128,663			125,179
Total Test Systems Sales	15,569			21,221			58,109			73,066			20,973			29,920
Total Consolidated Sales	$	152,396		$	159,530		$	453,146		$	479,055		$	149,636		$	155,099
Operating Profit and Margins
Aerospace	$	19,754		$	18,691		$	46,753		$	61,099		$	13,015		$	17,557
	14.4		%	13.5		%	11.8		%	15.0		%	10.1		%	14.0		%
Test Systems	318			2,210			2,843			6,524			1,093			3,240
	2.0		%	10.4		%	4.9		%	8.9		%	5.2		%	10.8		%
Total Operating Profit	20,072			20,901			49,596			67,623			14,108			20,797
	13.2		%	13.1		%	10.9		%	14.1		%	9.4		%	13.4		%
Deductions from Operating Profit
Interest Expense, Net of Interest Income	1,133			1,087			3,750			3,246			1,437			1,103
Corporate Expenses and Other	3,448			3,302			11,140			9,888			4,025			3,272
Income Before Income Taxes	$	15,491		$	16,512		$	34,706		$	54,489		$	8,646		$	16,422

Total Assets:


(In thousands)	April 1, 2017		December 31, 2016		September 30, 2017		December 31, 2016
Aerospace	$	511,105	$	500,892	$	523,563	$	500,892
Test Systems	74,138		76,575		85,848		76,575
Corporate	18,043		26,877		31,217		26,877
Total Assets	$	603,286	$	604,344	$	640,628	$	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 a prior acquisition, valued at zero at December 31, 2016, determined using Level 3 inputs. This arrangement has expired and as of ~~April 1,~~September 30, 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,~~September 30, 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.

At September 30, 2017, the fair value of goodwill and intangible assets classified using Level 3 inputs are comprised of the CCC goodwill and intangible assets acquired on April 3, 2017, which are currently valued based on management’s best estimates. When the accounting for the acquisition is finalized, these intangible assets will be valued using discounted cash flow methodology.

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 ~~April 1,~~September 30, 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 May 2014, the Financial Accounting Standards Board (“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: 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.

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 effect that this standard will have on the consolidated financial statements.

18) ~~Subsequent Events~~Acquisitions

Custom Control Concepts LLC

On April 3, 2017, Astronics Custom Control Concepts Inc., a wholly owned subsidiary of the Company 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 systems for a range of aircraft. The total consideration for the transaction was approximately ~~$11~~$10.2 million, net of $0.5 million in ~~cash.~~cash acquired. 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~~is included in our Aerospace segment.

Telefonix, Incorporated

Subsequent to the end of the third quarter, on October 26, 2017, the Company, through a wholly owned acquisition subsidiary, entered into an agreement to purchase substantially all of the assets of Telefonix, Incorporated and a related company, Product Development Technologies, LLC. Under the terms of the Agreement, the total consideration for the transaction will be approximately $104.0 million in cash.



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, 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

Custom Control Concepts LLC

On April 3, 2017, Astronics Custom Control Concepts Inc., a wholly owned subsidiary of the Company 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 transaction was approximately ~~$11~~$10.2 million, net of $0.5 million in ~~cash.~~cash acquired. CCC ~~will be~~is included in our Aerospace segment.

Telefonix, Incorporated

CONSOLIDATED RESULTS OF OPERATIONS AND OUTLOOK


	Three Months Ended						Nine Months Ended						Three Months Ended
(Dollars in thousands)	April 1, 2017			April 2, 2016			September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016
Sales	$	152,396		$	159,530		$	453,146		$	479,055		$	149,636		$	155,099
Gross Profit (sales less cost of products sold)	$	38,317		$	39,483		$	104,960		$	122,981		$	32,493		$	38,663
Gross Margin	25.1		%	24.7		%	23.2		%	25.7		%	21.7		%	24.9		%
Selling, General and Administrative Expenses	$	21,693		$	21,884		$	66,504		$	65,246		$	22,410		$	21,138
SG&A Expenses as a Percentage of Sales	14.2		%	13.7		%	14.7		%	13.6		%	15.0		%	13.6		%
Interest Expense, Net of Interest Income	$	1,133		$	1,087		$	3,750		$	3,246		$	1,437		$	1,103
Effective Tax Rate	25.2		%	30.4		%	27.0		%	29.3		%	29.9		%	26.5		%
Net Income	$	11,587		$	11,485		$	25,332		$	38,539		$	6,060		$	12,074

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

CONSOLIDATED ~~FIRST~~THIRD QUARTER RESULTS

Consolidated sales were down ~~$7.1~~$5.5 million from the same period last year. Aerospace segment sales of ~~$136.8~~$128.7 million were ~~down $1.5~~up $3.5 million and Test Systems segment sales of ~~$15.6~~$21.0 million were down ~~$5.7~~$9.0 million.

Consolidated cost of products sold in the ~~first~~third quarter of 2017 ~~decreased $5.9~~increased $0.7 million to ~~$114.1~~$117.1 million compared with ~~$120.0~~$116.4 million in the ~~first~~third quarter of 2016. The ~~decrease~~increase was the result of the additional cost of products sold by Custom Control Concepts ("CCC") offset by lower organic sales ~~volume coupled with improved operational efficiencies and product mix.~~volumes. Organic Engineering and Development (“("E~~&D”~~&D") costs were ~~$22.9~~$22.2 million in the quarter, ~~down slightly from $23.3~~compared with $21.6 million ~~of E&D costs~~ in last year’s ~~first~~third quarter. As a percent of sales, organic E&D ~~was 15.0%~~costs were 14.8% and ~~14.6%~~13.9% in the ~~first~~third quarters of 2017 and 2016, respectively. CCC incurred E&D costs of $1.5 million in the third quarter.

Selling, general and administrative (“SG&A”) expenses were ~~$21.7~~$22.4 million, or ~~14.2%~~15.0% of sales, in the ~~first~~third quarter of 2017 compared with ~~$21.9~~$21.1 million, or ~~13.7%~~13.6% of sales, in the same period last year.

The effective tax rate for the quarter was ~~25.2%~~29.9%, compared with ~~30.4%~~26.5% in the ~~first~~third quarter of 2016. The ~~first~~2017 third quarter ~~2017~~ tax rate was unfavorably impacted by additional state income tax expense when compared with the third quarter of 2016.

Net income was $6.1 million, or $0.21 per diluted share compared with $12.1 million or $0.41 per diluted share in the prior year.

CONSOLIDATED YEAR-TO-DATE RESULTS

Consolidated sales for the first nine months of 2017 decreased by $25.9 million, or 5.4%, to $453.1 million. Aerospace segment sales were down $11.0 million, or 2.7%, year-over-year to $395.0 million, while Test Systems segment sales were down $15.0 million, or 20.5%, to $58.1 million.

Consolidated cost of products sold in nine months ended 2017 decreased $7.9 million to $348.2 million compared with $356.1 million in the same period of 2016. The decrease was a result of lower organic sales volumes offset by CCC's additional costs of products sold. Organic E&D costs were 14.7% of sales, or $66.8 million, compared with $66.2 million, or 13.8% of sales, in the prior year’s first nine months. SG&A expenses were $66.5 million, or 14.7% of sales, in the first nine months of 2017 compared with $65.2 million, or 13.6% of sales, in the same period last year.

The effective tax rate for the first nine months of 2017 was 27.0%, compared with 29.3% in the first nine months of 2016. The tax rate in the first nine months of 2017 was favorably impacted by excess tax benefits ~~associated with~~as a result of a new U.S. GAAP accounting standard impacting the ~~exercise~~tax accounting treatment of stock options. With the implementation of Accounting Standards Update No. 2016-09 on January 1, 2017, excess tax benefits are now recognized as income tax benefit upon exercise. The effective tax rate for the first quarter of 2017 also benefited fromemployee share-based compensation, decreases in foreign tax ~~rates.~~rates, and the federal research and development tax credit.

Net income for the first half of 2017 totaled $25.3 million, or $0.85 per diluted share.

During the third quarter, ~~was $11.6~~the Company repurchased approximately 702,000 shares at an aggregate cost of $18.9 million ~~compared to $11.5 million in~~under its share repurchase program. Since the ~~first quarter~~inception of the ~~prior year. Diluted earnings per share was $0.38 cents~~program in February 2016, the ~~first quarters of 2017~~Company has repurchased approximately 1,675,000 shares and ~~2016.~~has completed the program, which authorized repurchases up to $50.0 million.

CONSOLIDATED OUTLOOK

Fourth quarter sales are forecasted to be in the range of $169 million to $183 million, with $139 million to $150 million expected from the Aerospace segment and $30 million to $33 million from the Test segment.

Consolidated annual sales in 2017 are forecasted to be in the range of ~~$635~~$622 million to ~~$690 million, which represents a decline from the high end of the previous range.~~$636 million. Approximately ~~$545~~$534 million to ~~$580~~$545 million of revenue is expected from the Aerospace segment and ~~$90~~$88 million to ~~$110~~$91 million from the Test Systems segment. The Company issued its initial revenue outlook for 2018 of $675 million to $750 million. The Aerospace segment is expected to have 2018 revenue of $570 million to $630 million. The Test segment is expected to generate $105 million to $120 million in revenue in 2018. These estimates are without effect of the new revenue recognition rules that will be effective January 1, 2018.

Consolidated backlog at ~~April 1,~~September 30, 2017 was ~~$252.7~~$302.3 million, of which approximately ~~$218.7~~$148.5 million is expected to ship in 2017.

~~Assuming no change in the federal statutory rate, the~~The effective tax rate for 2017 is expected to be in the range of 28% to ~~31%~~30%.

Capital equipment spending in 2017 is expected to be in the range of ~~$21~~$17 million to ~~$25~~$19 million.

E&D costs are expected to be in the range of ~~$93~~$96 million to ~~$95~~$97 million ~~excluding~~including the engineering costs from ~~the acquired Custom Control Concepts business.~~

CCC.

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


	Three Months Ended						Nine Months Ended						Three Months Ended
(In thousands)	April 1, 2017			April 2, 2016			September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016
Sales
Aerospace	$	136,827		$	138,649		$	395,037		$	406,356		$	128,663		$	125,179
Less Intersegment Sales	—			(340		)	—			(367		)	—			—
Total Aerospace Sales	$	136,827		$	138,309		$	395,037		$	405,989		$	128,663		$	125,179
Operating Profit	$	19,754		$	18,691		$	46,753		$	61,099		$	13,015		$	17,557
Operating Margin	14.4		%	13.5		%	11.8		%	15.0		%	10.1		%	14.0		%

Aerospace Sales by Market
(In thousands)
Commercial Transport	$	109,723		$	113,396		$	306,898		$	331,174		$	98,821		$	101,355
Military	15,146			12,280			46,297			39,932			15,365			13,679
Business Jet	7,536			6,525			28,844			20,365			10,592			6,133
Other	4,422			6,108			12,998			14,518			3,885			4,012
	$	136,827		$	138,309		$	395,037		$	405,989		$	128,663		$	125,179
Aerospace Sales by Product Line
(In thousands)
Electrical Power & Motion	$	72,444		$	75,392		$	199,014		$	219,215		$	63,972		$	68,259
Lighting & Safety	42,670			40,566			122,317			121,520			37,001			38,975
Avionics	9,136			7,474			31,424			22,684			11,348			5,866
Systems Certification	2,159			4,606			9,405			12,577			4,454			2,580
Structures	5,996			4,163			19,879			15,475			8,003			5,487
Other	4,422			6,108			12,998			14,518			3,885			4,012
	$	136,827		$	138,309		$	395,037		$	405,989		$	128,663		$	125,179


(In thousands)	April 1, 2017		December 31, 2016		September 30, 2017		December 31, 2016
Total Assets	$	511,105	$	500,892	$	523,563	$	500,892
Backlog	$	205,155	$	219,146	$	233,162	$	219,146

AEROSPACE ~~FIRST~~THIRD QUARTER RESULTS

Aerospace segment sales ~~decreased~~increased by ~~$1.5~~$3.5 million, or ~~1.1%~~2.8%, when compared with the prior year’s ~~first~~third quarter to ~~$136.8~~$128.7 million. CCC contributed $3.5 million in sales in the 2017 third quarter.

Electrical Power & Motion sales decreased ~~$2.9~~$4.3 million, or ~~3.9%~~6.3%, ~~largely driven by~~due to lower sales of in-seat and cabin power ~~products.~~products due to a combination of lower volume and pricing. Lighting & Safety sales decreased by $2.0 million primarily due to lower passenger service unit sales. Avionics sales were up $5.5 million as a result of $2.0 million increase in antennae and other avionics sales combined with the CCC acquisition. Structures sales increased by $2.5 million and Systems Certification sales ~~decreased~~increased by ~~$2.4~~$1.9 million on ~~lower~~higher project activity. ~~These decreases were partially offset by a $2.1 million increase in sales of Lighting & Safety products and a $1.7 million increase in Avionics products sales.~~

Aerospace operating profit for the ~~first~~third quarter of 2017 was ~~$19.8~~$13.0 million, or ~~14.4%~~10.1% of sales, compared with ~~$18.7~~$17.6 million, or ~~13.5%~~14.0% of sales, in the same period last year. Aerospace operating profit was negatively impacted by market pricing pressures primarily relating to cabin power products, a $1.8 million operating loss from the CCC acquisition and slightly higher E&D costs. Organic Aerospace E&D costs ~~remained consistent when~~were $19.6 million compared with $18.9 million in the same period last ~~year at $20.3 million.~~

year. CCC incurred E&D costs of $1.5 million during the quarter.

Aerospace orders in the ~~first~~third quarter of 2017 were ~~$122.8 million.~~$146.2 million, for a book-to-bill ratio of 1.14:1 for the quarter. Backlog was ~~$205.2~~$233.2 million at the end of the ~~first~~third quarter of 2017.

AEROSPACE YEAR-TO-DATE RESULTS

Aerospace segment sales decreased by $11.0 million, or 2.7%, to $395.0 million, when compared with the prior year’s first nine months.

Electrical Power & Motion sales decreased $20.2 million, or 9.2%, for similar reasons as discussed in the quarter and Systems Certifications sales decreased $3.2 million from lower project activity earlier in the year. These declines were partially offset by increased Avionics sales, up $8.7 million of which $7.0 million was from the CCC acquisition and $1.7 million from other avionics products. Structures sales increased by $4.4 million.

Aerospace operating profit for the first nine months of 2017 was $46.8 million, or 11.8% of sales, compared with $61.1 million, or 15.0% of sales, in the same period last year. Aerospace operating profit was negatively impacted by lower sales volumes and market pricing pressures, coupled with the operating loss from the acquired CCC business. E&D costs for Aerospace were $62.5 million (inclusive of $2.7 million related to the acquired CCC business) and $58.3 million in the first nine months of 2017 and 2016, respectively. Aerospace SG&A expense was $46.9 million in the first nine months of 2017 as compared with $45.5 million in the same period in 2016.

AEROSPACE OUTLOOK

We expect 2017 sales for our Aerospace segment to be in the range of ~~$545~~$534 million to ~~$580~~$545 million. The Aerospace segment’s backlog at the end of the ~~first~~third quarter of 2017 was ~~$205.2~~$233.2 million with approximately ~~$179.7~~$124.8 million expected to be shipped over the remaining part of 2017 and ~~$188.5~~$212.1 million is expected to ship over the next 12 months.

TEST SYSTEMS SEGMENT


	Three Months Ended						Nine Months Ended						Three Months Ended
(In thousands)	April 1, 2017			April 2, 2016			September 30, 2017			October 1, 2016			September 30, 2017			October 1, 2016
Sales	$	15,569		$	21,221		$	58,109		$	73,066		$	20,973		$	29,920
Operating profit (loss)	$	318		$	2,210		$	2,843		$	6,524		$	1,093		$	3,240
Operating Margin	2.0		%	10.4		%	4.9		%	8.9		%	5.2		%	10.8		%

Test Systems Sales by Market
(In thousands)
Semiconductor	$	4,631		$	7,137		$	18,343		$	33,863		$	6,632		$	16,878
Aerospace & Defense	10,938			14,084			39,766			39,203			14,341			13,042
	$	15,569		$	21,221		$	58,109		$	73,066		$	20,973		$	29,920


(In thousands)	April 1, 2017		December 31, 2016		September 30, 2017		December 31, 2016
Total Assets	$	74,138	$	76,575	$	85,848	$	76,575
Backlog	$	47,554	$	38,887	$	69,119	$	38,887

TEST SYSTEMS ~~FIRST~~THIRD QUARTER RESULTS

Sales in the ~~first~~third quarter of 2017 decreased approximately ~~$5.7~~$9.0 million to ~~$15.6~~$21.0 million compared with the same period in 2016, a decrease of ~~26.6%~~29.9%. The $10.2 million decline in sales to the Semiconductor market were somewhat offset by a $1.3 million increase in sales to the Aerospace & Defense market when compared with the prior-year period.

Operating profit was $1.1 million, or 5.2% of sales, compared with $3.2 million, or 10.8% of sales, in last year’s third quarter. E&D costs were $2.6 million, down slightly from $2.7 million in the third quarter of 2016. Test Systems SG&A expense decreased to $2.6 million in the third quarter of 2017 compared with $3.4 million in the same period last year.

Orders for the Test Systems segment in the quarter were $40.2 million, for a book-to-bill ratio of 1.91:1 for the quarter. Backlog was $69.1 million at the end of the third quarter of 2017.

TEST SYSTEMS YEAR-TO-DATE RESULTS

Sales in the first nine months of 2017 decreased 20.5% to $58.1 million compared with sales of $73.1 million for the same period in 2016, due to lower sales to the Semiconductor market. Sales to the Semiconductor market decreased ~~$2.5 million and sales to the Aerospace and Defense market decreased $3.2~~$15.5 million compared with the same period in 2016.

Operating profit was ~~$0.3~~$2.8 million, or ~~2.0%~~4.9% of sales, compared with ~~$2.2~~$6.5 million, or ~~10.4%~~8.9% of sales, in ~~last year’s~~the first ~~quarter. The decrease in operating profit was the result~~nine months of ~~lower volumes.~~2016. E&D costs were ~~$2.5 million, down from $3.0~~$7.0 million in the first ~~quarter~~nine months of ~~2016.~~

~~Orders for the Test Systems segment~~2017 compared with $7.9 million in the ~~quarter were $24.2~~same period in the prior year. SG&A costs declined to $8.4 million ~~for a book-to-bill ratio of 1.56 for the quarter. Backlog was $47.6 million at the end of~~in the first ~~quarter~~nine months of ~~2017.~~2017 compared with $9.8 million in the same period in 2016.

TEST SYSTEMS OUTLOOK

We expect sales for the Test Systems segment for 2017 to be in the range of ~~$90~~$88 million to ~~$110~~$91 million. The Test Systems segment’s backlog at the end of the ~~first~~third quarter of 2017 was ~~$47.6~~$69.1 million with approximately ~~$39.1~~$23.7 million expected to be shipped over the remaining part of 2017 and approximately ~~$42.6~~$58.1 million scheduled to ship over the next 12 months.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities:

Cash provided by operating activities totaled ~~$6.4~~$22.3 million for the first ~~three~~nine months of 2017, as compared with ~~$0.5~~$25.2 million during the same period in 2016. Cash flow from operating activities ~~increased~~decreased compared with the same period of 2016 primarily due to the impact of lower net income and lower increases in net operating assets for the first ~~three~~nine months of 2017 when compared with the first ~~three~~nine months of 2016.

Investing Activities:

Cash used for investing activities ~~comprised entirely~~included $10.2 million for the acquisition of CCC, as well as capital expenditures, ~~was $2.8~~which were $9.7 million for the first ~~three~~nine months of 2017 compared with ~~$2.5~~$9.9 million used in the same period of 2016. The Company expects capital spending in 2017 to be in the range of ~~$21~~$17 million to ~~$25~~$19 million.

Financing Activities:

The primary financing activities in 2017 relate to ~~payments~~net borrowings on our senior credit facility to fund ~~operations,~~the acquisition of CCC 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.~~program.

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. The Credit Agreement expires January 13, 2021. On January 13, 2016, ~~the Company amended the Agreement to add a new lender and extend the maturity date of the credit facility from~~At September ~~26, 2019 to January 13, 2021. At April 1,~~30, 2017 there was ~~$130.0~~$167.0 million outstanding on the revolving credit facility and there remains ~~$218.9~~$181.9 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 ~~April 1,~~September 30, 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’s leverage ratio was 2.12 to 1 at September 30, 2017. 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 ~~28.6~~20.2 to 1 at ~~April 1,~~September 30, 2017. ~~The Company’s leverage ratio was 1.34 to 1 at April 1, 2017.~~

BACKLOG

The Company’s backlog at ~~April 1,~~September 30, 2017 was ~~$252.7~~$302.3 million compared with $258.0 million at December 31, 2016 and ~~$276.8~~$275.2 million at ~~April 2,~~October 1, 2016.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The ~~Company's~~following table represents contractual obligations as of September 30, 2017:



	Payments Due by Period
(In thousands)	Total		2017		2018-2019		2019-2020			After 2020
Long-term Debt	$	177,345	$	682	$	4,595	$	171,172		$	896
Purchase Obligations	118,478		67,634		50,427		417			—
Interest on Long-term Debt	16,212		1,267		9,868		5,065			12
Supplemental Retirement Plan and Post Retirement Obligations	22,243		104		826		811			20,502
Operating Leases	6,083		864		4,829		371		—	19
Other Long-term Liabilities	203		17		95		29			62
Total Contractual Obligations	$	340,564	$	70,568	$	70,640	$	177,865		$	21,491

Notes to Contractual Obligations Table

Purchase Obligations — Purchase obligations are comprised of the Company’s commitments for goods and ~~commercial commitments have not changed materially from those disclosed~~services in the normal course of business.

Long-Term Debt — See Part 1 Financial Information, Item 1 Financial Statements, Note 6, Long-Term Debt and Notes Payable included in this report.

Operating Leases — Operating lease obligations are primarily related to the Company's ~~Form 10-K~~facility leases.

On October 26, 2017, we entered into an agreement to purchase substantially all of the assets of Telefonix, Incorporated and a related company, Product Development Technologies, LLC, for ~~the year ended December 31, 2016.~~approximately $104 million in cash. The table above excludes any obligations or commitments related to this pending acquisition.

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 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, 2016 for a complete discussion of the Company’s critical accounting policies.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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: 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.

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~~Evaluation of ~~the Company’s Chief Executive Officer~~Disclosure Controls and Chief Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of April 1, 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 April 1, 2017.Procedures

We have established disclosure controls and procedures that are designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) by others within our organization to allow timely decisions regarding required disclosure. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2017. Based on this evaluation, as a result of the material weakness in our internal control over financial reporting described below, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of September 30, 2017.

Notwithstanding the material weakness discussed below, our management, including our Chief Executive Officer and Chief Financial Officer, has concluded that the consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

During the quarter ended July 1, 2017, management discovered a material weakness in the design of information technology change controls over a report writing application. Additionally, management identified deficiencies in certain review controls over the financial statement consolidation process, which when aggregated along with the information technology change controls matter described above, aggregated to a material weakness over the financial statement close process as of December 31, 2016. Management does not expect adjustments to any previously issued financial statements as a result of these deficiencies.

The Company is implementing changes to the design and application of new controls and is making significant changes to the design of existing controls over information technology as well as controls related to the financial statement consolidation process. The Company has made progress towards remediation of the material weakness as of the date of this filing and expects to complete remediation by December 31, 2017. We will continue the process of enhancing our controls as well as continue to test their effectiveness over the remainder of 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.

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2017 that 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 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 that are in the distribution channels in Germany. No such bank guarantee has been issued to date. As of ~~April 1,~~September 30, 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 1a. 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, 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 ~~April 1,~~September 30, 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)
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



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)
July 2, 2017 - July 29, 2017	90,135	$30.29	90,135	$16,128,000
July 30, 2017 - August 26, 2017	588,402	$26.38	588,402	$606,000
August 27, 2017 - September 30, 2017 (2)	23,229	$26.09	23,229	$—

(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 Company has repurchased approximately 1,675,000 shares and has completed the ~~exercise of stock options.~~program.

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:	~~May 5,~~November 9, 2017	By:	/s/ David C. Burney
			David C. Burney Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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