Business Context and Reporting Period
Astronics Corporation filed this Form 8-K on August 16, 2017, to disclose a material weakness in its internal control over financial reporting. The filing addresses control deficiencies identified as of December 31, 2016, and continuing through April 1, 2017, and July 1, 2017.
Key Financial Metrics
This filing does not provide specific financial metrics such as revenue, profit, cash flow, margins, debt, or liquidity. The document focuses exclusively on internal control matters.
Material Changes
Management identified a material weakness concerning the design of information technology change controls over a report writing application. Additionally, deficiencies were found in review controls over the financial statement consolidation process. These issues aggregate to a material weakness over the financial statement close process. Management does not expect adjustments to any previously issued financial statements as a result of these deficiencies.
Outlook, Risks, and Management Commentary
- Remediation Plan: The Company has begun implementing changes to the design and application of new controls and expects to complete remediation by December 31, 2017.
- Effectiveness Conclusion: Management concluded that internal control over financial reporting was not effective at December 31, 2016, and disclosure controls were not effective at December 31, 2016, or April 1, 2017.
- Reporting Amendments: The Company plans to amend its Annual Report on Form 10-K for the fiscal year ended December 31, 2016, and its Quarterly Report on Form 10-Q for the period ended April 1, 2017, to reflect the material weakness. The 10-Q for the period ended July 1, 2017, will also reflect the continued existence of the material weakness.
- Auditor Impact: Ernst & Young LLP's auditor's report on internal control over financial reporting will be revised to state that controls were not effective at December 31, 2016.
Investor Verification Checklist
- Verify the upcoming amendments to the 2016 Form 10-K and the Q1 2017 Form 10-Q regarding the material weakness disclosure.
- Monitor the progress of remediation efforts to ensure completion by the stated deadline of December 31, 2017.
- Review the revised auditor's report from Ernst & Young LLP once issued.
- Confirm that no restatements of previously issued financial statements are required, as currently indicated by management.