Astronics Corporation to Restate Financial Statements
March 06 2007 - 7:00AM
Business Wire
Astronics Corporation (NASDAQ: ATRO), a leading manufacturer of
advanced, high performance lighting, electronics and electrical
power systems for the global aerospace industry, announced today
that it will restate financial results for fiscal 2005 and the
first three quarters of 2006 due to the timing of revenue
recognition arising from a specific arrangement with an individual
customer. The Company is in the process of calculating the
financial effect of the restatement, but expects that approximately
$1.0 million of revenue and related profit previously recognized in
fiscal 2005 will move to 2006, and approximately $2.5 million of
revenue and related profit the Company expected to recognize in
fiscal 2006 will move to 2007. The Company expects to release
restated financial statements for the periods in question before
March 16, 2007. Reported revenue for 2006 is anticipated to be in
the range of $110 million to $111 million. The matter pertains to a
business arrangement between its Astronics Advanced Electronic
Systems subsidiary and a prominent customer. The arrangement was
requested by this customer and established prior to Astronics�
acquisition of Astronics AES in February of 2005. This customer
regularly and routinely orders custom products from Astronics under
long-term agreements and standard purchase orders. Astronics then
builds the product and, when completed, issues the customer an
invoice. Typically, the customer then requests that Astronics store
the product in Astronics� facility before issuing the shipping
instructions. Both Astronics and the customer consider title to the
product, along with all risks associated with ownership, to have
passed when the product was invoiced. The customer has a solid
history of paying invoices in accordance with normal business
terms. This arrangement differs from Astronics� usual practice
because the product, once completed and invoiced, is held at
Astronics� facility for some period of time instead of being
shipped immediately. Because the parts remain in Astronics�
facility, the transactions are classified as a �bill and hold�
arrangement by the SEC, which has developed specific guidelines to
determine when revenue should be recognized in such instances.
These guidelines, as detailed in SEC Staff Accounting Bulletin
(SAB) 104, require that in order for revenue to be recognized when
the product is manufactured and invoiced the following criteria
must be met: The risk of ownership must pass to the buyer; The
customer must have made a fixed commitment to purchase the goods;
The buyer, not the seller, must have requested the transaction be
on a bill and hold basis, and the buyer must have a substantial
business purpose for doing so; There must be a fixed schedule for
delivery of the goods that is consistent with the buyer�s business
purpose; The seller must not have retained any specific performance
obligations such that the earnings process is not complete; The
ordered goods must be segregated from the seller�s inventory and
not available to fill other orders; The product must be complete
and ready for shipment. During 2005 and 2006, Astronics believed
that all of the conditions were satisfied with the bill and hold
arrangement with its customer. However, during its 2006 year-end
audit, Astronics became aware that its understanding of the
requirement for a �fixed delivery schedule� was not consistent with
the SEC�s expectation. Astronics previously believed this guideline
could be satisfied by the confirming representation from its
customer along with empirical observation. Astronics has
subsequently learned that for the purposes of bill and hold
arrangements, a firm delivery schedule is deemed not to have
existed unless both the buyer and seller were aware of specific
final delivery dates at the point in time when the manufacture of
the product was completed and the product was placed in storage.
This requirement, which is not described in SAB 104, was not
obvious to Astronics, so the company did not know the specific
shipping plans for each product when the products were invoiced.
For this reason, the Company has determined that revenue associated
with this customer and its arrangement should not have been
recognized upon invoice. Rather, revenue should have been
recognized when the customer gave the company shipping instructions
and the product physically left the facility. Astronics will
restate its financial statements accordingly, and will recognize
revenue for this customer going forward when the product physically
leaves its facility. The company has no other bill and hold
arrangements with any other customers. The Company�s previously
issued consolidated financial statements, specifically those in the
Company�s Annual Report on form 10-K for the year ended December
31, 2005 and in the Company�s Quarterly reports on form 10-Q for
the quarters ended April 1, 2006, July 1, 2006 and September 30,
2006 should no longer be relied upon. ABOUT ASTRONICS CORPORATION
Astronics Corporation is a leader in advanced, high performance
lighting, electrical generation, control and distribution systems
for the global aerospace industry. Its strategy is to expand the
value and content it provides to various aircraft platforms through
product development and acquisition. Astronics Corporation, and its
wholly-owned subsidiaries Astronics Advanced Electronic Systems and
Luminescent Systems Inc., have a reputation for high quality
designs, exceptional responsiveness, strong brand recognition and
best-in-class manufacturing practices. For more information on
Astronics and its products, visit its website at www.Astronics.com.
Safe Harbor Statement This press release contains forward-looking
statements as defined by the Securities Exchange Act of 1934. One
can identify these forward-looking statements by the use of the
words �expect,� �anticipate,� �plan,� �may,� �will,� �estimate� or
other similar expression. Because such statements apply to future
events, they are subject to risks and uncertainties that could
cause the actual results to differ materially from those
contemplated by the statements. Important factors that could cause
actual results to differ materially include the Company�s the state
of the aerospace industry, competition, customer preferences and
other factors which are described in filings by Astronics with the
Securities and Exchange Commission. The Company assumes no
obligation to update forward-looking information in this press
release whether to reflect changed assumptions, the occurrence of
unanticipated events or changes in future operating results,
financial conditions or prospects, or otherwise.
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