What changed in this filing

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Item 1. Financial Statements

2020-08-04 compared with 2020-05-07 · 196 added, 158 removed, 690 unchanged (34% of the section changed)

2 unchanged sentences

Consolidated Condensed Balance Sheets

March 28, 2020 with Comparative Figures for December 31, 2019

June 27, 2020 with Comparative Figures for December 31, 2019

(In thousands)

March 28, 2020 December 31, 2019

June 27, 2020 December 31, 2019

Current Assets:

41 unchanged sentences

Consolidated Condensed Statements of Operations

Three Months Ended March 28, 2020 With Comparative Figures for 2019

Three and Six Months Ended June 27, 2020 With Comparative Figures for 2019

(In thousands, except per share data)

Three Months Ended

March 28, 2020 March 30, 2019

Six Months Ended Three Months Ended

June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Sales $ 281,278 $ 397,272 $ 123,694 $ 189,098

16 unchanged sentences

Consolidated Condensed Statements of Comprehensive (Loss) Income

Three Months Ended March 28, 2020 With Comparative Figures for 2019

Three and Six Months Ended June 27, 2020 With Comparative Figures for 2019

(In thousands)

Three Months Ended

March 28, 2020 March 30, 2019

Six Months Ended Three Months Ended

June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Net (Loss) Income $ ( 90,542 ) $ 84,872 $ ( 23,579 ) $ 6,726

3 unchanged sentences

Retirement Liability Adjustment – Net of Tax

Total Other Comprehensive Loss ( 2,089 ) ( 120 )

430 294 215 144

Total Other Comprehensive (Loss) Income ( 1,064 ) 908 1,025 1,028

Comprehensive (Loss) Income $ ( 91,606 ) $ 85,780 $ ( 22,554 ) $ 7,754

2 unchanged sentences

Consolidated Condensed Statements of Cash Flows

Three Months Ended March 28, 2020 With Comparative Figures for 2019

(In thousands)

Three Months Ended

March 28, 2020 March 30, 2019

Six Months Ended June 27, 2020 With Comparative Figures for 2019

(Unaudited, In thousands)

Six Months Ended

Cash Flows from Operating Activities:

June 27, 2020 June 29, 2019

Net (Loss) Income $ ( 90,542 ) $ 84,872

4 unchanged sentences

Deferred Tax Expense (Benefit) 1,190 ( 3,371 )

Non-cash Severance Expense 4,669 377

Operating Lease Amortization Expense 2,236 1,978

Non-cash Litigation Provision 1,450 —

Gain on Sale of Business, Before Taxes — ( 80,133 )

Equity Investment Other Than Temporary Impairment 3,493 —

Impairment Loss 87,016 —

Other 4,459 ( 1,715 )

Cash Flows from Changes in Operating Assets and Liabilities, Excluding the Effects of Divestitures:

Cash Flows from Changes in Operating Assets and Liabilities:

Accounts Receivable 43,417 5,266

11 unchanged sentences

Capital Expenditures ( 3,905 ) ( 6,917 )

Proceeds on Sale of Assets 1,600 —

Cash Flows from Investing Activities ( 2,305 ) 96,876

5 unchanged sentences

Finance Lease Principal Payments ( 939 ) ( 834 )

Financing Fees ( 360 ) —

Cash Flows from Financing Activities ( 23,997 ) ( 105,471 )

Effect of Exchange Rates on Cash ( 514 ) 23

Increase (Decrease) in Cash and Cash Equivalents 156,458 ( 656 )

Increase in Cash and Cash Equivalents 14,733 484

Cash and Cash Equivalents at Beginning of Period 31,906 16,622

3 unchanged sentences

Consolidated Condensed Statements of Shareholders' Equity

Three Months Ended March 28, 2020 With Comparative Figures for 2019

Three and Six Months Ended June 27, 2020 With Comparative Figures for 2019

(In thousands)

Three Months Ended

March 28, 2020 March 30, 2019

Six Months Ended Three Months Ended

June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Beginning of Period $ 269 $ 260 $ 271 $ 262

Net Exercise of Stock Options — 1 — 1

Class B Stock Converted to Common Stock 5 3 3 1

26 unchanged sentences

Consolidated Condensed Statements of Shareholders' Equity, Continued

Three Months Ended March 28, 2020 With Comparative Figures for 2019

Three and Six Months Ended June 27, 2020 With Comparative Figures for 2019

(In thousands)

Three Months Ended

March 28, 2020 March 30, 2019

Six Months Ended Three Months Ended

June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Beginning of Period 26,874 25,978 27,088 26,178

14 unchanged sentences

Notes to Consolidated Condensed Financial Statements

March 28, 2020

June 27, 2020

1) Basis of Presentation

6 unchanged sentences

The results of operations for any interim period are not necessarily indicative of results for the full year.

In addition, the COVID-19 pandemic could increase the volatility we experience in our financial results in future interim and annual periods.

Operating results for the three months ended March 28, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

In addition, the COVID-19 pandemic has increased the volatility we experience in our financial results in recent periods and this could continue in future interim and annual periods.

Operating results for the six months ended June 27, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.

The balance sheet at December 31, 2019 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.

16 unchanged sentences

The Airfield Lighting product line, part of the Aerospace segment, was not core to the business and represented less than 1 % of revenue.

The Company recorded a pre-tax loss on the sale of approximately $ 1.3 million.

The Company recorded a pre-tax loss on the sale of approximately $ 1.3 million in the third quarter of 2019.

On October 4, 2019, the Company acquired the stock of the primary operating subsidiaries as well as certain other assets from mass transit and defense market test solution provider, Diagnosys Test Systems Limited, for $ 7.0 million in cash, plus earn-outs estimated at a fair value of $ 2.5 million.

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This in turn has resulted in a significant reduction in airlines spending for both new aircraft and on upgrading their existing fleet with the Company’s products.

We expect this low level of investment by the airlines will continue at least through 2020, however, the ultimate impact of COVID-19 on our business results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy and the aerospace industry, which are uncertain and cannot be predicted at this time.

We expect this low level of investment by the airlines will continue at least into 2021, however, the ultimate impact of COVID-19 on our business results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic and the related length of its impact on the global economy and the aerospace industry, which are uncertain and cannot be predicted at this time.

In response to the global COVID-19 pandemic, we have implemented actions to maintain our financial health and liquidity, as discussed in detail in our Form 8-K’s filed on March 31, 2020, May 6, 2020 and July 31, 2020.

In addition to these measures, we amended our revolving credit facility on May 4, 2020, as further described in Note 7.

We are also monitoring the impacts of COVID-19 on the fair value of assets.

Refer to Note 6 for a discussion of goodwill impairment charges.

Should future changes in sales, earnings and cash flows differ significantly from our expectations, long-lived assets to be held and used and goodwill could become impaired in the future.

Trade Accounts Receivable and Contract Assets

1 unchanged sentence

The Company regularly reviews the allowance by considering factors such as the age of the receivable balances, historical experience, credit quality, current economic conditions, and reasonable and supportable forecasts of future economic conditions that may affect a customer’s ability to pay.

The allowance for doubtful accounts balance was $ 3.7 million and $ 3.6 million at March 28, 2020 and December 31, 2019, respectively.

The Company‘s year-to-date bad debt expense was insignificant in the three months ended March 28, 2020 and March 30, 2019.

The allowance for doubtful accounts balance was $ 5.1 million and $ 3.6 million at June 27, 2020 and December 31, 2019, respectively.

The Company‘s bad debt expense was $ 1.6 million in the three and six months ended June 27, 2020 and insignificant in the three and six months ended June 29, 2019.

Total writeoffs charged against the allowance and total recoveries collected were insignificant in both the three month and six month ended June 27, 2020.

The Company's exposure to credit losses may increase if its customers are adversely affected by global economic recessions, disruption associated with the current COVID-19 pandemic, industry conditions, or other customer-specific factors.

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These costs are expensed when incurred and included in cost of products sold.

Research and development, design and related engineering amounted to $ 26.2 million and $ 26.7 million for the three months ended March 28, 2020 and March 30, 2019, respectively.

Research and development, design and related engineering amounted to $ 22.4 million and $ 27.7 million for the three months ended and $ 48.6 million and $ 54.4 million for the six months ended June 27, 2020 and June 29, 2019, 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 months ended March 28, 2020 and March 30, 2019.

Interest income was insignificant for the three and six months ended June 27, 2020 and June 29, 2019.

Goodwill Impairment

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

Based on our quantitative assessment, the Company recorded goodwill impairment charges associated with four Aerospace reporting units, totaling approximately $ 73.7 million within the Impairment Loss line in the Consolidated Condensed Statement of Operations in the three months ended March 28, 2020.

As a result of the qualitative factors related to the COVID-19 pandemic, as discussed above, we performed interim quantitative assessments for the reporting units which had goodwill as of March 28, 2020, and an additional quantitative assessment for our PECO reporting unit as of June 27, 2020.

Based on our quantitative assessments, the Company recorded goodwill impairment charges associated with four Aerospace reporting units, totaling approximately $ 12.6 million and $ 86.3 million within the Impairment Loss line in the Consolidated Condensed Statement of Operations in the three and six months ended June 27, 2020, respectively.

For additional information regarding the quantitative test and the related goodwill impairment see Note 6.

3 unchanged sentences

Should the carrying amount exceed undiscounted projected cash flows, an impairment loss would be recognized to the extent the carrying amount exceeds fair value.

In conjunction with the deteriorating economic conditions associated with the COVID-19 pandemic, we recorded an impairment charge to right-of-use (“ROU”) assets of approximately $ 0.7 million incurred in one reporting unit in the Aerospace segment within the Impairment Loss line in the Consolidated Condensed Statement of Operations in the three months ended March 28, 2020.

No other long-lived asset impairments were warranted based on the quantitative analysis performed.

Financial Instruments

The Company determined there were indicators of impairment over one of its investments in the second quarter of 2020 as a result of declining revenues and cash flows of the investee as well as significant uncertainties over the investee’s ability to raise additional capital or to finance its own activities.

There were no observable price changes for this investment during 2020.

We determined that the fair value of this investment was de minimus at June 27, 2020 and we recorded an impairment charge of $ 3.5 million recorded within Other Expense, Net of Other Income in the accompanying Consolidated Condensed Statement Operations.

Foreign Currency Translation

The aggregate transaction gain or loss included in operations was insignificant for the three months ended March 28, 2020 and March 30, 2019.

The aggregate foreign currency transaction gain or loss included in operations was insignificant for the three and six months ended June 27, 2020 and June 29, 2019.

Newly Adopted and Recent Accounting Pronouncements

38 unchanged sentences

The Company is currently evaluating the impact of adopting this guidance.

Planned date of adoption:

Before December 31, 2022

We consider the applicability and impact of all ASUs.

1 unchanged sentence

Revenue is recognized when, or as, the Company transfers control of promised products or services to a customer in an amount that reflects the consideration the Company expects to be entitled in exchange for transferring those products or services.

Sales shown on the Company's Consolidated Statements of Operations are from contracts with customers.

Sales shown on the Company's Consolidated Condensed Statements of Operations are from contracts with customers.

Payment terms and conditions vary by contract, although terms generally include a requirement of payment within a range from 30 to 90 days after the performance obligation has been satisfied;

4 unchanged sentences

These incremental costs include, but are not limited to, sales commissions incurred to obtain a contract with a customer.

As of March 28, 2020, the Company does not have material incremental costs on any open contracts with an original expected duration of greater than one year.

As of June 27, 2020, the Company does not have material incremental costs on any open contracts with an original expected duration of greater than one year.

The Company recognizes an asset for certain, material costs to fulfill a contract if it is determined that the costs relate directly to a contract or an anticipated contract that can be specifically identified, generate or enhance resources that will be used in satisfying performance obligations in the future, and are expected to be recovered.

3 unchanged sentences

Should future orders not materialize or it is determined the costs are no longer probable of recovery, the capitalized costs are written off.

As of March 28, 2020, the Company does not have material capitalized fulfillment costs.

As of June 27, 2020, the Company does not have material capitalized fulfillment costs.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account.

26 unchanged sentences

The Company typically recognizes revenue on a straight-line basis throughout the contract period.

On March 28, 2020, we had $ 369.4 million of remaining performance obligations, which we refer to as total backlog.

On June 27, 2020, we had $ 307.2 million of remaining performance obligations, which we refer to as total backlog.

We expect to recognize approximately $ 178.3 million of our remaining performance obligations as revenue in 2020.

As a result of the COVID-19 pandemic, the Company received order cancellations from customers subsequent to the period ending March 28,

Of the Company’s backlog at March 28, 2020 of $ 369.4 million, $ 3.0 million is no longer expected to be recognized as revenue as a result of order cancellations received subsequent to quarter end in the Aerospace segment.

Costs in excess of billings includes unbilled amounts resulting from revenues under contracts with customers that are satisfied over time and when the cost-to-cost measurement method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer, and right to payment is not just subject to the passage of time.

5 unchanged sentences

Once the beginning contract liability balance for an individual contract has been fully recognized as revenue, any additional payments received in the period are recognized as revenue once the related costs have been incurred.

We recognized $ 8.7 million and $ 8.2 million during the three months ended March 28, 2020 and March 30, 2019, respectively, in revenues that were included in the contract liability balance at the beginning of the period.

We recognized $ 10.6 million and $ 7.8 million during the three months ended and $ 14.5 million and $ 13.2 million for the six months ended June 27, 2020 and June 29, 2019, respectively, in revenues that were included in the contract liability balance at the beginning of the period.

The Company's contract assets and contract liabilities consist primarily of costs and profits in excess of billings and billings in excess of cost and profits, respectively.

The following table presents the beginning and ending balances of contract assets and contract liabilities during the three months ended March 28, 2020:

The following table presents the beginning and ending balances of contract assets and contract liabilities during the six months ended June 27, 2020:

(In thousands) Contract Assets Contract Liabilities

Beginning Balance, January 1, 2020 $ 19,567 $ 38,758

Ending Balance, March 28, 2020

Ending Balance, June 27, 2020

$ 18,525 $ 31,640

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

Three Months Ended

(In thousands) March 28, 2020 March 30, 2019

Six Months Ended Three Months Ended

(In thousands) June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Aerospace Segment

3 unchanged sentences

30,548 37,123 15,542 17,286

10,607 13,658 5,431 7,725

Aerospace Total 243,643 362,788 102,573 174,287

1 unchanged sentence

Semiconductor

2,822 5,596 1,188 2,242

Aerospace & Defense

3 unchanged sentences

The following table presents our revenue disaggregated by Product Lines as follows:

Three Months Ended

(In thousands) March 28, 2020 March 30, 2019

Six Months Ended Three Months Ended

(In thousands) June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Aerospace Segment

5 unchanged sentences

Systems Certification

4,991 5,666 1,660 4,048

5,096 11,967 2,054 6,020

10,607 13,658 5,431 7,725

Aerospace Total 243,643 362,788 102,573 174,287

4 unchanged sentences

( In thousands )

March 28, 2020 December 31, 2019

June 27, 2020 December 31, 2019

Finished Goods

10 unchanged sentences

(In thousands)

March 28, 2020 December 31, 2019

June 27, 2020 December 31, 2019

$ 9,802 $ 9,802

12 unchanged sentences

The following table summarizes acquired intangible assets as follows:

March 28, 2020 December 31, 2019

June 27, 2020 December 31, 2019

(In thousands) Weighted

9 unchanged sentences

Amortization expense for acquired intangibles is summarized as follows:

Three Months Ended

Six Months Ended Three Months Ended

(In thousands)

March 28, 2020 March 30, 2019

June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Amortization Expense

8 unchanged sentences

2025 $ 10,996

The following table summarizes the changes in the carrying amount of goodwill for the three months ended March 28, 2020:

The following table summarizes the changes in the carrying amount of goodwill for the six months ended June 27, 2020:

(In thousands) December 31, 2019 Impairment Charges Foreign

March 28, 2020

June 27, 2020

Aerospace $ 123,038 $ ( 86,312 ) $ ( 218 ) $ 36,508

6 unchanged sentences

Beginning in the first quarter of 2020, the pandemic negatively impacted the global economy and aerospace industry, resulting in an abrupt and significant decrease of airline passenger travel.

In response, the global airlines grounded a significant portion of

their fleet and are likely to defer or cancel aircraft scheduled for delivery this year.

In response, the global airlines grounded a significant portion

of their fleet and have begun to defer or cancel aircraft scheduled for delivery this year.

Additionally, airlines have announced plans to reduce capital and discretionary spending to conserve cash in the immediate future.

1 unchanged sentence

Commercial airlines and manufacturers are focusing on conserving cash to preserve liquidity, which will have a negative impact on airframe and aftermarket sales as compared with pre-pandemic forecasts.

Management considered these qualitative factors and the impact to each reporting unit’s revenue and earnings, and determined that it is more likely than not that the fair value of several reporting units is less than its carrying value.

Management considered these qualitative factors and the impact to each reporting unit’s revenue and earnings, and determined that it was more likely than not that the fair value of several reporting units was less than its carrying value.

Therefore, we performed a quantitative test for all eight reporting units with goodwill as of March 28, 2020.

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Accordingly, goodwill impairment is measured as the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying value of goodwill.

We determined that the estimated fair value of four of the eight reporting units with goodwill significantly exceeded their respective carrying values and therefore, did not result in a goodwill impairment.

For the remaining four reporting units with goodwill, we determined that the estimated fair value was less than their respective carrying values.

As a result, we recorded non-cash goodwill impairment charges of approximately $ 73.7 million in the Aerospace segment, reported within the Impairment Loss line of the Consolidated Condensed Statements of Operations in the three months ended March 28, 2020.

We recognized full impairments of the goodwill of our Astronics Connectivity Systems and Certification (“ACSC”), PGA and Custom Control Concepts (“CCC”) reporting units, and a partial impairment of the goodwill of our PECO reporting unit.

The goodwill remaining in our PECO reporting unit after the write off is $ 32.8 million.

For the PECO reporting unit with a partial goodwill write-off, the Company performed sensitivity analyses, utilizing reasonably possible changes in the assumption for the discount rate and revenue growth rates to demonstrate the potential impacts to the estimated fair value.

During the second quarter of 2020, further commercial aircraft order reductions, delays and cancellations at a major customer of our PECO reporting unit resulted in revisions to PECO’s forecast.

We therefore performed a quantitative test for the PECO reporting unit as of June 27, 2020.

As a result of this quantitative test, we determined that the estimated fair value was less than the respective carrying value as of June 27, 2020.

As a result, we recorded non-cash goodwill impairment charges in the Aerospace segment of approximately $ 12.6 million and $ 86.3 million within the Impairment Loss line of the Consolidated Condensed Statements of Operations in the three and six months ended June 27, 2020, respectively.

The goodwill remaining in our PECO reporting unit after the impairments is $ 20.2 million.

For the PECO reporting unit, the Company performed sensitivity analyses, utilizing reasonably possible changes in the assumption for the discount rate and revenue growth rates to demonstrate the potential impacts to the estimated fair value.

In isolation, a 100 basis point increase to the discount rate or a 100 basis point decrease to the normalized revenue growth rate, would result in incremental impairment charges of $ 7.6 million or $ 3.5 million, respectively.

There is greater risk of future impairments in the reporting unit with partial impairment as any further deterioration in its performance compared to forecast, as well as any changes in economic forecasts and expected recovery in the aerospace industry, may require the Company to complete additional interim impairment tests in future quarters and could result in the reporting unit’s fair value again falling below carrying value in subsequent quarters.

There is greater risk of future impairments in the PECO reporting unit as any further deterioration in its performance compared to forecast, changes in order volumes or delivery schedules at its major customer, as well as any changes in economic forecasts and expected recovery in the aerospace industry, may require the Company to complete additional interim impairment tests in future quarters and could result in the reporting unit’s fair value again falling below carrying value in subsequent quarters.

Further, if the composition of the reporting unit’s assets and liabilities were to change and result in an increase in the reporting unit’s carrying value, it could lead to additional impairment testing and further impairment losses.

2 unchanged sentences

The maturity date of the loans under the Agreement is February 16, 2023.

At March 28, 2020, there was $ 333.0 million outstanding on the revolving credit facility and there remained $ 165.5 million available, net of outstanding letters of credit and bank guarantees.

The credit facility allocates up to $ 20 million of the $ 500 million revolving credit line for the issuance of letters of credit, including certain existing letters of credit.

At March 28, 2020, outstanding letters of credit and bank guarantees totaled $ 1.5 million.

The maximum permitted leverage ratio of funded debt, net of cash to Adjusted EBITDA (as defined in the Agreement) was 3.75 to 1, increasing to 4.50 to 1 for up to four fiscal quarters following the closing of an acquisition permitted under the Agreement, subject to limitations.

The Company was in compliance with its financial covenant at March 28, 2020.

The Company paid interest on the unpaid principal amount of the facility at a rate equal to one-, three- or six-month LIBOR plus between 1.00 % and 1.50 % based upon the Company’s leverage ratio.

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The maximum net leverage ratio will be 6.00 to 1 for the third quarter of 2021, 5.50 to 1 for the fourth quarter of 2021, 4.50 to 1 for the first quarter of 2022, and return to 3.75 to 1 for each quarter thereafter.

During the suspension period, the amended facility requires the Company to maintain minimum liquidity, defined as unrestricted cash plus the unused revolving credit commitments, of $ 180 million at all times, and a minimum interest coverage ratio of 1.75 x on a quarterly basis, except for the first quarter of 2021, which is set at 1.50 x.

At June 27, 2020, there was $ 173.0 million outstanding on the revolving credit facility and there remained $ 200.5 million available subject to the minimum liquidity covenant discussed below, net of outstanding letters of credit and bank guarantees.

The credit facility allocates up to $ 20 million of the $ 375 million revolving credit line for the issuance of letters of credit, including certain existing letters of credit.

At June 27, 2020, outstanding letters of credit and bank guarantees totaled $ 1.5 million.

Through the third quarter of 2021, the Amended Facility requires the Company to maintain minimum liquidity, defined as unrestricted cash plus the unused revolving credit commitments, of $ 180 million at all times, and a minimum interest coverage ratio of 1.75 x on a quarterly basis, except for the first quarter of 2021, which is set at 1.50 x.

The Company was in compliance with its financial covenants at June 27, 2020.

During the suspension period, the Company will pay interest on the unpaid principal amount of the Amended Facility at a rate equal to one-, three- or six-month LIBOR (which shall be at least 1.00 %) plus 2.25 %.

The Company will also pay a commitment fee to the lenders in an amount equal to 0.35 % on the undrawn portion of the credit facility.

The Company will also pay a commitment fee to the lenders in an amount equal to 0.35 % on the undrawn portion of the Amended Facility.

After the suspension period, the Company will pay interest on the unpaid principal amount of the Amended Facility at a rate equal to one-, three- or six-month LIBOR (which shall be at least 1.00 %) plus between 1.00 % to 2.25 % based upon the Company’s leverage ratio.

The Company will also pay a commitment fee to the lenders in an amount equal to 0.10 % to 0.35 % on the undrawn portion of the credit facility, based upon the Company’s leverage ratio.

The Company will also pay a commitment fee to the lenders in an amount equal to 0.10 % to 0.35 % on the undrawn portion of the Amended Facility, based upon the Company’s leverage ratio.

The Amended Facility provides for the payment of a consent fee of 15 basis points of the commitment for each consenting lender.

The amended facility also temporarily restricts certain activities, including acquisitions and share repurchases, and requires mandatory repayments during the suspension period when the Company’s cash balance exceeds $ 100 million.

We expect to make a mandatory repayment in the second quarter of 2020 under this requirement.

The Company’s obligations under the Credit Agreement as amended are jointly and severally guaranteed by each domestic subsidiary of the Company other than non-material subsidiaries.

The Amended Facility also temporarily restricts certain activities, including acquisitions and share repurchases, and requires mandatory prepayments during the suspension period when the Company’s cash balance exceeds $ 100 million.

During the three months ended June 27, 2020, subsequent to the execution of the Amended Facility, the Company made prepayments approximating $ 160 million.

The Company’s obligations under the Amended Facility are jointly and severally guaranteed by each domestic subsidiary of the Company other than non-material subsidiaries.

The obligations are secured by a first priority lien on substantially all of the Company’s and the guarantors’ assets.

In the event of voluntary or involuntary bankruptcy of the Company or any subsidiary, all unpaid principal and other amounts owing under the Credit Agreement automatically become due and payable.

In the event of voluntary or involuntary bankruptcy of the Company or any subsidiary, all unpaid principal and other amounts owing under the Amended Facility 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.

3 unchanged sentences

Activity in the warranty accrual is summarized as follows:

Three Months Ended

(In thousands) March 28, 2020 March 30, 2019

Six Months Ended Three Months Ended

(In thousands) June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Balance at Beginning of Period $ 7,660 $ 5,027 $ 7,122 $ 4,829

11 unchanged sentences

The following is a summary of the Company's ROU assets and liabilities:

(In thousands) March 28, 2020 December 31, 2019

(In thousands) June 27, 2020 December 31, 2019

Operating Leases:

11 unchanged sentences

Short-term Finance Lease Liabilities — Included in Accrued Expenses and Other Current Liabilities

$ 2,001 $ 1,922

Long-term Finance Lease Liabilities — Included in Other Liabilities

1 unchanged sentence

The following is a summary of the Company's total lease costs:

Three Months Ended

(In thousands) March 28, 2020 March 30, 2019

Six Months Ended Three Months Ended

(In thousands) June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Finance Lease Cost:

Amortization of ROU Assets $ 255 $ 255

Amortization of Right-of-Use Assets $ 510 $ 510 $ 255 $ 255

Interest on Lease Liabilities 120 167 57 81

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10) Income Taxes

The effective tax rates were approximately 3.3 % and 22.6 % for the three months ended March 28, 2020 and March 30, 2019, respectively.

The 2020 tax rate was impacted by permanently non-deductible goodwill impairments and a Federal valuation allowance recorded during the three months ended March 28, 2020 of approximately $ 7.0 million.

The effective tax rates were approximately 3.4 % and 22.7 % for the six months ended and 3.6 % and 23.8 % for the three months ended June 27, 2020 and June 29, 2019, respectively.

The 2020 tax rate was impacted by permanently non-deductible goodwill impairments totaling $ 60.8 million and a Federal valuation allowance recorded during the six months ended June 27, 2020 of approximately $ 7.5 million.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the economic uncertainty resulting from the COVID-19 pandemic.

1 unchanged sentence

Some of the key changes include eliminating the 80% of taxable income limitation by allowing corporate entities to fully utilize net operating losses (“NOL”) to offset taxable income in 2018, 2019 and 2020, allowing NOLs originating in 2018, 2019 and 2020 to be carried back five years and retroactively clarifying the immediate recovery of qualified improvement property costs rather than over a 39-year recovery period.

During the three months ended March 28, 2020, the Company recorded a $ 0.7 million benefit relating to the NOL carryback provisions and the technical correction for qualified improvement property provided for in the CARES Act.

During the six months ended June 27, 2020, the Company recorded a $ 0.5 million benefit relating to the NOL carryback provisions and the technical correction for qualified improvement property provided for in the CARES Act.

The Company will continue to monitor additional guidance issued and assess the impact that various provisions will have on its business.

As a result of the COVID-19 pandemic and its adverse effects on the global economy and aerospace industry that began to take shape in the first quarter of fiscal 2020, the Company is now forecasting to generate a taxable loss in 2020 which can be carried back under the CARES Act to recover previously paid income taxes.

After consideration of deferred tax liabilities that reverse in 2021 and beyond, the Company must rely on future taxable income in 2021 and beyond for purposes of asserting that the Company’s remaining U.S.

After consideration of deferred tax liabilities that reverse

in 2021 and beyond, the Company must rely on future taxable income in 2021 and beyond for purposes of asserting that the Company’s remaining U.S.

Federal deferred tax assets are realizable on a more-likely-than-not basis as required under ASC 740.

Losses in recent periods and projected losses, combined with the significant uncertainty brought about by the COVID-19 pandemic, is collectively considered significant negative evidence under ASC 740 when assessing whether an entity can use projected income as a basis for concluding that deferred tax assets are realizable on a more-likely-than-not basis.

Accordingly, during the three months ended March 28, 2020, the Company determined that a portion of its deferred tax assets are not expected to be realizable in the future.

As a result, the Company recorded a partial valuation allowance of approximately $ 7.0 million during the three months ended March 28, 2020 against its U.S.

Accordingly, during the six months ended June 27, 2020, the Company determined that a portion of its deferred tax assets are not expected to be realizable in the future.

As a result, the Company recorded a partial valuation allowance of approximately $ 7.5 million during the six months ended June 27, 2020 against its U.S.

Federal deferred tax assets.

1 unchanged sentence

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

Three Months Ended

Six Months Ended Three Months Ended

(In thousands)

March 28, 2020 March 30, 2019

June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Weighted Average Shares - Basic

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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 was approximately 785,000 shares as of

March 28, 2020 and 154,000 shares as of March 30, 2019.

Further, due to our net loss in the three month period ended March 28, 2020, the assumed exercise of stock compensation had an antidilutive effect and therefore was excluded from the computation of diluted loss per share.

The number of instruments not included in the computation of diluted loss per share was 440,211 as of March 28, 2020.

The number of common shares covered by out-of-the-money stock options was approximately 872,000 shares as of June 27, 2020 and 18,000 shares as of June 29, 2019.

Further, due to our net loss in the six month period ended June 27, 2020, the assumed exercise of stock compensation had an antidilutive effect and therefore was excluded from the computation of diluted loss per share.

12) Shareholders' Equity

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The components of accumulated other comprehensive loss are as follows:

(In thousands) March 28, 2020 December 31, 2019

(In thousands) June 27, 2020 December 31, 2019

Foreign Currency Translation Adjustments $ ( 8,536 ) $ ( 7,042 )

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

Three Months Ended

(In thousands) March 28, 2020 March 30, 2019

Six Months Ended Three Months Ended

(In thousands) June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Foreign Currency Translation Adjustments $ ( 1,494 ) $ 614 $ 810 $ 884

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Amortization of Prior Service Cost

201 201 100 100

Amortization of Net Actuarial Losses

344 171 173 86

( 115 ) ( 78 ) ( 58 ) ( 42 )

Retirement Liability Adjustment 430 294 215 144

Other Comprehensive Loss $ ( 2,089 ) $ ( 120 )

Other Comprehensive (Loss) Income $ ( 1,064 ) $ 908 $ 1,025 $ 1,028

13) Supplemental Retirement Plan and Related Post Retirement Benefits

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The following table sets forth information regarding the net periodic pension cost for the plans.

Three Months Ended

(In thousands) March 28, 2020 March 30, 2019

Six Months Ended Three Months Ended

(In thousands) June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Service Cost $ 111 $ 91 $ 56 $ 46

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The following table sets forth information regarding the net periodic cost recognized for those benefits:

Three Months Ended

(In thousands) March 28, 2020 March 30, 2019

Six Months Ended Three Months Ended

(In thousands) June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Service Cost $ 7 $ 7 $ 3 $ 4

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Net Periodic Cost $ 52 $ 59 $ 26 $ 30

The service cost component of net periodic benefit costs above is recorded in Selling, General and Administrative Expenses within the Consolidated Condensed Statements of Operations, while the remaining components are recorded to Other Expense, Net of Other Income.

14) Sales to Major Customers

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The loss of either of these customers would significantly, negatively impact our sales and earnings.

Sales to these two customers represented 17 % and 9 % of consolidated sales for the three months ended March 28, 2020.

Sales to these two customers represented 14 % and 9 % of consolidated sales for the six months ended and 11 % and 8 % for the three months ended June 27, 2020.

Sales to these customers were primarily in the Aerospace segment.

Accounts receivable from these customers at March 28, 2020 was approximately $ 30.1 million.

Sales to these two customers represented 13 % and 14 % of consolidated sales for the three months ended March 30, 2019.

Accounts receivable from these customers at June 27, 2020 was approximately $ 19.6 million.

Sales to these two customers represented 13 % and 14 % of consolidated sales for the six months ended and 14 % and 13 % for the three months ended June 29, 2019.

15) Legal Proceedings

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According to this ruling, Lufthansa was awarded damages in the amount of approximately $ 3.2 million plus interest.

Inclusive of interest, this equates to approximately $ 4.5 million through December 31, 2019.

Interest will continue to accrue at a statutory rate until final payment to Lufthansa.

In February 2020, and again in April 2020, we received notice that Lufthansa’s intention is to provide a security and to enforce payment on the first instance judgment.

If Lufthansa provides a security deposit or a bank guarantee in a sufficient amount, as they have stated is their intention, the Company will be required to remit the payment.

Based on this information, we believe payment for damages and interest on the direct sales claim will be required in 2020.

AES has appealed this decision and the appeal is currently pending before the Higher Regional Court of Karlsruhe.

If the first instance judgment is later reversed on appeal, the Company could

reclaim any amounts that were previously paid to Lufthansa as far as the payments exceed the amount awarded by the appellate court, but there can be no assurances that we will be successful on such appeal.

Prior to 2019, the Company had accrued $ 1.0 million related to this matter.

As a result of the judgment on direct sales into Germany, the Company has reflected an incremental reserve of $ 3.5 million in its December 31, 2019 financial statements related to this matter, for a total reserve of $ 4.5 million.

Interest accrues at a rate of 5 % above the European Central Bank rate until final payment to Lufthansa.

Inclusive of accrued interest, the reserve for the direct claim is $ 4.7 million at March 28, 2020.

As a result of the judgment on direct sales into Germany, the Company reflected an incremental reserve of $ 3.5 million in its December 31, 2019 financial statements related to this matter.

Payment of the first instance judgment was made during the three months ended June 27, 2020 of approximately $ 4.7 million, inclusive of interest.

AES has appealed this decision and the appeal is currently pending before the Higher Regional Court of Karlsruhe.

If the first instance judgment is later reversed on appeal, the Company could reclaim any amounts that were previously paid to Lufthansa as far as the payments exceed the amount awarded by the appellate court, but there can be no assurances that we will be successful on such appeal.

On December 29, 2017, Lufthansa filed another infringement action against AES in the Regional State Court of Mannheim claiming that sales by AES to its international customers have infringed Lufthansa's patent if AES's customers later shipped the products to Germany (referred to as “indirect sales”).

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AES and Lufthansa both appealed this decision and the appeal is currently pending before the Higher Regional Court of Karlsruhe.

In its appeal, Lufthansa extended its action by requesting an additional finding that AES shall be held liable for all damages that Lufthansa incurred due to an alleged incorrect accounting of its past sales.

In its appeal, Lufthansa extended its action by requesting an additional finding that AES shall be held liable for all damages that Lufthansa incurred due to an alleged incorrect

accounting of its past sales.

No amount was quantified in Lufthansa's additional motion.

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Based on the information available currently, we estimate that the resulting damages would be approximately $ 11.6 million plus approximately $ 4.5 million of accrued interest at the end of 2019, for a total of approximately $ 16.1 million at December 31, 2019.

Similar to the direct sales claim, interest will accrue at a rate of 5 % above the European Central Bank rate until final payment to Lufthansa.

Inclusive of accrued interest, the reserve for the indirect claim is approximately $ 16.2 million at March 28, 2020.

Based upon the determination of the damages in the direct sales claim discussed above, in the March 28, 2020 consolidated financial statements, we have reflected a total accrual (inclusive of interest through December 31, 2019) of $ 4.7 million related to the direct sales claim, and $ 16.2 million related to the indirect sales claim as management’s best estimate of the total exposure related to these matters that is probable and that can be reasonably estimated at this time.

Interest accrued for the three months ended March 28, 2020 was approximately $ 0.3 million and is recorded within Selling, General and Administrative Expense in the Company’s Consolidated Statement of Operations.

We estimate that payment for the damages and related interest of the direct sales claim will be paid before December 31, 2020, therefore the liability related to this matter, totaling $ 4.7 million, is classified within Other Accrued Expenses (current) in the Consolidated Balance Sheet at December 31, 2019.

In connection with the indirect sales claims, we currently believe it is unlikely that the appeals process will be completed and the damages and related interest will be paid before December 31, 2020.

Therefore the liability related to this matter, totaling $ 16.2 million, is classified within Other Liabilities (non-current) in the Consolidated Balance Sheet at March 28, 2020.

Interest will accrue at a rate of 5 % above the European Central Bank rate until final payment to Lufthansa.

Inclusive of accrued interest, the reserve for the indirect claim is approximately $ 16.4 million at June 27, 2020.

Based upon the determination of the damages in the direct sales claim discussed above, in the June 27, 2020 consolidated financial statements, we have reflected a total accrual (inclusive of interest through June 27, 2020) of $ 16.4 million related to the indirect sales claim as management’s best estimate of the total exposure related to these matters that is probable and that can be reasonably estimated at this time.

Interest accrued for the six months ended June 27, 2020 was approximately $ 0.3 million and is recorded within Selling, General and Administrative Expense in the Company’s Consolidated Statement of Operations.

In connection with the indirect sales claims, we currently believe it is unlikely that the appeals process will be completed and the damages and related interest will be paid before July 3, 2021.

Therefore the liability related to this matter, totaling $ 16.4 million, is classified within Other Liabilities (non-current) in the Consolidated Balance Sheet at June 27, 2020.

In December 2017, Lufthansa filed patent infringement cases in the United Kingdom (“UK”) and in France against AES.

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In those cases, Lufthansa accuses AES of having manufactured, used, sold and offered for sale a power supply system, and offered and supplied parts for a power supply system that infringed upon a Lufthansa patent in those respective countries.

In the UK matter, LHT has also brought proceeding against two of AES’s customers in relation to acts done by them with AES supplied parts and a combined trial has been scheduled for June 2020 to address the issues of infringement and validity.

The France and UK claims are separate and apart from the claims in Germany and validity and infringement of the Lufthansa patent will first need to be determined by the courts in these countries, whose laws differ from those in Germany.

Also the principles of calculating damages in German patent infringement proceedings differ substantially from the calculation methods in the UK and France.

Therefore the Company has assessed this separate from the German claims.

However, it is reasonably possible that additional damages and interest could be incurred if the courts in France and the UK were to rule in favor of Lufthansa, but at this time we cannot reasonably estimate the range of loss.

As loss exposure is neither probable nor estimable at this time, the Company has not recorded any liability with respect to these matters as of March 28, 2020.

In the French matter, there will be a hearing on the validity of the patent on October 8, 2020.

In the UK matter, a trial took place in June 2020 to address the issues of infringement and validity of the patent.

Judgment on those issues was rendered on June 22, 2020.

The court held the UK patent valid and 3 out of 4 asserted claims infringed.

Although the court has found the patent valid and some claims infringed, Lufthansa has yet to set out its case for monetary relief, which would need to be determined at a separate trial and would require extensive data gathering and analysis which has not yet commenced.

Additionally, AES intends to seek permission to appeal the first instance UK findings.

For this reason, while exposure in the UK matter is reasonably possible and such exposure could be material to the consolidated financial statements, it is not yet estimable, and thus, no liability has been recorded with respect to this matter at June 27, 2020.

Separate from any such damages Lufthansa may seek in connection with the UK infringement decision discussed above, as a result of the first instance judgement in their favor, Lufthansa will be entitled to reimbursement from AES of a proportion of its legal expenditures in the UK case.

An interim reimbursement to Lufthansa will likely be payable in August 2020.

Accordingly, we have recorded a liability of approximately $ 1.5 million in our consolidated balance sheet, within Accrued Expenses and Other Current Liabilities, as of June 27, 2020.

The associated expense has been recorded in the Consolidated Condensed Statement of Operations in the three- and six-month periods ended June 27, 2020 within Selling, General & Administrative Expenses.

If the first instance decision is reversed on appeal, AES would be entitled to seek the return of such amounts from Lufthansa, as well as reimbursement of AES’s legal fees.

Each of the German, France and UK claims are separate and distinct.

Validity and infringement of the Lufthansa patent in each country is a matter for the courts in each of these countries, whose laws differ from each other.

In addition, the principles of calculating damages in each jurisdiction differ substantially.

Therefore, the Company has assessed each matter separately and cannot apply the same calculation methodology as in the German direct and indirect matters.

However, it is reasonably possible that additional damages and interest could be incurred if the court in France was to rule in favor of Lufthansa, or if any appeal in the UK matter is unsuccessful, but at this time we cannot reasonably estimate the range of loss.

As loss exposure is not estimable at this time, the Company has not recorded any liability with respect to either of the matters as of June 27, 2020, except for the legal fee reimbursement in the UK case discussed above.

On November 26, 2014, Lufthansa filed a complaint in the United States District for the Western District of Washington.

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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.

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.

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16) Segment Information

Below are the sales and operating profit by segment for the three months ended March 28, 2020 and March 30, 2019 and a reconciliation of segment operating profit to income before income taxes.

Below are the sales and operating profit by segment for the three and six months ended June 27, 2020 and June 29, 2019 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

(In thousands) March 28, 2020 March 30, 2019

Six Months Ended Three Months Ended

(In thousands) June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019

Aerospace $ 243,734 $ 362,793 $ 102,597 $ 174,292

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Total Consolidated Sales $ 281,278 $ 397,272 $ 123,694 $ 189,098

Operating (Loss) Profit and Margins

Segment Measure of Operating (Loss) Profit and Margins

$ ( 80,235 ) $ 40,160 $ ( 17,090 ) $ 14,392

( 32.9 ) % 11.1 % ( 16.7 ) % 8.3 %

Total Operating (Loss) Profit ( 62,423 ) 27,953

3,334 2,091 2,612 ( 94 )

Additions/Deductions from Operating (Loss) Profit

8.9 % 6.1 % 12.4 % ( 0.6 ) %

Total Segment Measure of Operating (Loss) Profit ( 76,901 ) 42,251 ( 14,478 ) 14,298

( 27.3 ) % 10.6 % ( 11.7 ) % 7.6 %

Additions/Deductions from Segment Measure of Operating (Loss) Profit

Gain on Sale of Business — 80,133 — —

Interest Expense, Net of Interest Income

3,316 3,029 1,983 1,225

Corporate Expenses and Other

13,511 9,530 7,990 4,243

(Loss) Income Before Income Taxes $ ( 93,728 ) $ 109,825 $ ( 24,451 ) $ 8,830

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(In thousands)

March 28, 2020 December 31, 2019

June 27, 2020 December 31, 2019

$ 501,536 $ 629,371

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The fair value assigned to the earn-out is determined using the real options method, which requires Level 3 inputs such as new order forecasts, discount rate, volatility factors, and other market variables to assess the probability of Diagnosys achieving certain order levels over the period.

There were no other financial assets or liabilities carried at fair value measured on a recurring basis at December 31, 2019 or March 28, 2020.

Of the severance charges recorded, $ 2.1 million and $ 2.4 million in the three and six months ended June 27, 2020, respectively, qualify as one-time termination benefit arrangements and were initially measured at fair value using level 3 inputs.

There were no other financial assets or liabilities carried at fair value measured on a recurring basis at December 31, 2019 or June 27, 2020.

On a Non-recurring Basis:

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The inputs underlying the fair value measurement of the reporting unit under the step-one analysis of the quantitative goodwill impairment test are classified as Level 3 inputs.

As further discussed in Note 6, on March 28, 2020, we performed interim quantitative assessments for the reporting units which had goodwill.

Based on our quantitative assessment, the Company recorded non-cash goodwill impairment charges associated with four Aerospace reporting units, totaling approximately $ 73.7 million in the March 28, 2020 within the Impairment Loss line in the Consolidated Condensed Statement of Operations.

The impairment loss was calculated as the difference between the fair value of the goodwill reporting unit (which was calculated using level 3 inputs) and the carrying value of the unit.

As further discussed in Note 6, we performed interim quantitative assessments for the reporting units which had goodwill as of March 28, 2020 and an additional interim quantitative assessment for the PECO reporting unit as of June 27, 2020.

Based on our quantitative assessments, the Company recorded non-cash goodwill impairment charges associated with four Aerospace reporting units, totaling approximately $ 12.6 million and $ 86.3 million within the Impairment Loss line in the Consolidated Condensed Statement of Operations in the three and six months ended June 27, 2020, respectively.

The impairment loss was calculated as the difference between the fair value of the reporting unit (which was calculated using level 3 inputs) and the carrying value of the reporting unit.

Long-lived assets are evaluated for recoverability whenever adverse effects or changes in circumstances indicate that the carrying value may not be recoverable.

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Should the carrying amount exceed undiscounted projected cash flows, an impairment loss would be recognized to the extent the carrying amount exceeds fair value.

In conjunction with the deteriorating economic conditions associated with the COVID-19 pandemic, we recorded an impairment charge to ROU assets of approximately $ 0.7 million incurred in the Aerospace segment within the Impairment Loss line in the Consolidated Condensed Statement of Operations in the three months ended March 28, 2020.

From time to time, the Company makes long-term, strategic equity investments in companies to promote business and strategic objectives.

These investments are included in Other Assets on the Consolidated Condensed Balance Sheets.

One of the investments incurred a full impairment charge which accounts for $ 3.5 million recorded within the Other Expense, Net of Other Income line in the accompanying Consolidated Condensed Statement of Operations for the three and six months ended June 27, 2020.

This is a level 3 measurement as there were no observable price changes during the year.

The Freedom and Diagnosys intangible assets were valued using a discounted cash flow methodology, as of their respective acquisitions dates, and are classified as Level 3 inputs.

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The terms of the acquisition allow for a potential earn-out of up to an additional $ 13.0 million over the three years post-acquisition based on achievement of new order levels of over $ 72.0 million during that period.

The acquired business has operations in Westford, Massachusetts as well as Ferndown, England, and an engineering

center of excellence in Bangalore, India.

The acquired business has operations in Westford, Massachusetts as well as Ferndown, England, and an engineering center of excellence in Bangalore, India.

Diagnosys is included in our Test Systems segment.

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The total consideration for the transaction was $ 21.8 million, net of $ 0.6 million in cash acquired.

The purchase price allocation for this acquisition has not yet been finalized.

Purchased intangible assets and goodwill are not expected to be deductible for tax purpose.

The purchase price allocation for this acquisition has been finalized.

Purchased intangible assets and goodwill are not deductible for tax purposes.

This transaction was not considered material to the Company’s financial position or results of operations.

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Impairments and restructuring charges were recorded in 2019 as a result of the restructuring plan.

The Company incurred $ 0.3 million in additional restructuring charges associated with severance during the three months ended March 28, 2020.

The Company incurred $ 0.1 million and $ 0.4 million in additional restructuring charges associated with severance at AeroSat during the three and six months ended June 27, 2020.

In the second quarter of 2020, the COVID-19 pandemic has significantly impacted the global economy, and particularly the aerospace industry, resulting in reduced expectations of the Company’s future operating results.

As a result, the Company executed restructuring activities in the form of workforce reduction to align capacity with expected demand.

Additional restructuring charges of $ 4.8 million and $ 5.0 million in severance expense associated primarily with the Aerospace segment was recorded in the three and six months ended June 27, 2020.

The following table reconciles the beginning and ending liability for restructuring charges relating to the Company’s restructuring plan described above:

Restructuring Charges in the

three months ended March 28, 2020

(In thousands) Accrual as of December 31, 2019 Cost of Products Sold Selling, General and Administrative Cash Paid Accrual as of March 28, 2020

six months ended June 27, 2020

(In thousands) Accrual as of December 31, 2019 Cost of Products Sold Selling, General and Administrative Cash Paid Accrual as of

June 27, 2020

Accrued Expenses and Other Current Liabilities $ 613 $ 280 $ 5,129 $ ( 1,236 ) $ 4,786

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$ 5,190 $ 280 $ 5,129 $ ( 1,236 ) $ 9,363

The charge to Accrued Expenses and Other Current Liabilities is comprised of employee termination benefits expected to be paid in 2020 as well as the current portions of payments to be made under non-cancelable inventory purchase commitments.

The charge to Other Liabilities represents the non-current portions of payments to be made under non-cancelable inventory purchase commitments.

The charge to Accrued Expenses and Other Current Liabilities is comprised of employee termination benefits expected to be paid within the next 12 months as well as the current portions of payments to be made under AeroSat’s non-cancelable inventory purchase commitments.

The charge to Other Liabilities represents the non-current portions of payments to be made under AeroSat’s non-cancelable inventory purchase commitments.

The non-cancelable purchase commitments are for inventory in the future which is not expected to be purchased prior to the expiration date of such agreements as a result of the restructuring plan.

20) Subsequent Events

In addition to these measures, we amended our revolving credit facility on May 4, 2020, as further described in Note 7.

We are also monitoring the impacts of COVID-19 on the fair value of assets.

We do not currently anticipate any material impairments on assets as a result of COVID-19 beyond the goodwill impairment charges previously discussed in Note 6.

However, should future changes in sales, earnings and cash flows differ significantly from our expectations, long-lived assets to be held and used and goodwill could become impaired in the future.

As a result of the COVID-19 pandemic, the Company received order cancellations from customers subsequent to the period ending March 28, 2020.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements