ASTRONICS CORP 10-Q

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, 2019.) OVERVIEW Astronics Corporation (“Astronics” or the “Company”) is a leading supplier of advanced technologies and products to the global aerospace and defense industries. Our products and services include advanced, high-performance electrical power generation and distribution systems, seat motion solutions, lighting and safety systems, avionics products, aircraft structures, systems certification, and automated test systems. Our Aerospace segment designs and manufactures products for the global aerospace industry. Product lines include lighting and safety systems, electrical power generation, distribution and motions 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, suppliers to the aircraft operators, and branches of the U.S. Department of Defense. Our Test Systems segment designs, develops, manufactures and maintains automated test systems that support the aerospace and defense, communications and mass transit 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 our targeted markets where our technology can be beneficial. Important factors affecting our growth and profitability are the ongoing impacts of the COVID-19 pandemic and the timing and extent of recovery (as discussed more fully below), 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 business is dependent on developing and procuring new and follow-on business. 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 and Divestitures On February 13, 2019, the Company completed a divestiture of its semiconductor test business within the Test Systems segment. The total proceeds of the divestiture amounted to $103.8 million. The Company recorded a pre-tax gain on the sale of $80.1 million in the first quarter of 2019. The income tax expense relating to the gain was $19.7 million. On July 1, 2019, the Company acquired all of the issued and outstanding capital stock of Freedom Communication Technologies, Inc. (“Freedom”). Freedom, located in Kilgore, Texas, is a leader in wireless communication testing, primarily for the civil land mobile radio market. Freedom is included in our Test Systems segment. The total consideration for the transaction was $21.8 million, net of $0.6 million in cash acquired. On July 12, 2019, the Company sold intellectual property and certain assets associated with its Airfield Lighting product line for $1.0 million in cash. The Airfield Lighting product line, part of the Aerospace segment, represented less than 1% of revenue. The Company recorded a pre-tax loss on the sale of approximately $1.3 million. 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. Diagnosys Inc. and its affiliates (“Diagnosys”) is included in our Test Systems segment. Diagnosys is a developer and manufacturer of comprehensive automated test equipment providing test, support, and repair of high value electronics, electro-mechanical, pneumatic and printed circuit boards focused on the global mass transit and defense markets. 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 $72.0 million during that period. The acquired business has operations in Westford, Massachusetts as well as Ferndown, England, and an engineering center of excellence in Bangalore, India. 29 Table of Contents CONSOLIDATED RESULTS OF OPERATIONS AND OUTLOOK Six Months Ended Three Months Ended ($ in thousands) June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019 Sales $ 281,278 $ 397,272 $ 123,694 $ 189,098 Gross Profit (sales less cost of products sold) $ 62,552 $ 92,440 $ 26,833 $ 40,363 Gross Margin 22.2 % 23.3 % 21.7 % 21.3 % Selling, General and Administrative Expenses $ 61,771 $ 58,986 $ 32,904 $ 29,790 SG&A Expenses as a Percentage of Sales 22.0 % 14.8 % 26.6 % 15.8 % Impairment Loss $ 87,016 $ — $ 12,608 $ — Gain on Sale of Business $ — $ 80,133 $ — $ — Interest Expense, Net of Interest Income $ 3,316 $ 3,029 $ 1,983 $ 1,225 Effective Tax Rate 3.4 % 22.7 % 3.6 % 23.8 % Net (Loss) Income $ (90,542) $ 84,872 $ (23,579) $ 6,726 Financial results reflect the divestiture of the Test Systems’ semiconductor business on February 13, 2019, and the acquisitions of Freedom acquired in July 2019, and Diagnosys acquired in October 2019 (collectively, the “Acquired Businesses”). A discussion by segment can be found at “Segment Results of Operations and Outlook” in this MD&A. CONSOLIDATED SECOND QUARTER RESULTS Consolidated sales were down $65.4 million compared to the second quarter of 2019. Aerospace sales were down $71.7 million. Test System sales increased $6.3 million. The Acquired Businesses contributed $2.5 million in sales in the second quarter of 2020. Consolidated cost of products sold in the second quarter of 2020 was $96.9 million, compared with $148.7 million in the prior-year period. The decrease was primarily due to lower sales volume. Selling, general and administrative (“SG&A”) expenses were $32.9 million in the second quarter of 2020 compared with $29.8 million in the prior-year period. The Company incurred $4.9 million in restructuring-related severance charges in the second quarter of 2020, primarily in the Aerospace segment, compared to $2.2 million in the prior-year period, primarily in the Test Systems segment. Further, non-cash goodwill impairment charges of $12.6 million in the Aerospace segment were recognized in the current quarter due to reduced expectations of future operating results due to further commercial aircraft order reductions, delays and cancellations at a major customer of our PECO reporting unit. Other Expense, Net of Other Income includes a $3.5 million impairment of an equity investment. The effective tax rate for the quarter was 3.6%, compared with 23.8% in the second quarter of 2019. The 2020 tax rate was impacted by permanently non-deductible goodwill impairment of $12.6 million which no tax benefit has been recognized, and a Federal valuation allowance recorded during the three months ended June 27, 2020 of approximately $0.5 million. Net loss was $23.6 million, or $(0.77) per diluted share, compared with net income of $6.7 million, or $0.20 per diluted share in the prior year. The impact of the impairment loss was $(0.41) per diluted share. Bookings were $61.5 million, for a book-to-bill ratio of 0.50:1. Backlog at the end of the quarter was $307.2 million. Approximately $178.3 million of backlog is expected to ship in the remainder of 2020. CONSOLIDATED YEAR-TO-DATE RESULTS Consolidated sales were down $116.0 million compared to the first half of 2019. Aerospace sales were down $119.1 million. Test System sales increased $3.2 million. The Acquired Businesses contributed $6.0 million in sales in the first half of 2020. Consolidated cost of products sold in the first half of 2020 was $218.7 million, compared with $304.8 million in the prior-year period. The decrease was primarily due to lower sales volume. SG&A expenses were $61.8 million in the first half of 2020 compared with $59.0 million the prior-year period. The Company incurred $5.4 million in restructuring-related severance charges in the first half of 2020, primarily in the Aerospace segment, compared to $2.2 million in the prior-year period, primarily in the Test Systems segment. Further, non-cash goodwill and long- 30 Table of Contents lived asset impairment charges of $87.0 million in the Aerospace segment were recognized in the current year due to reduced expectations of future operating results due to the COVID-19 pandemic, which has significantly impacted the global economy, and particularly the aerospace industry. The Company 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. Total goodwill impairment losses were $86.3 million in the six months ended June 27, 2020. The effective tax rate for the first half of was 3.4%, compared with 22.7% in the first half of 2019. The 2020 tax rate was impacted by permanently non-deductible goodwill impairments of $60.8 million and a Federal valuation allowance recorded during the six months ended June 27, 2020 of approximately $7.5 million. Net loss was $90.5 million, or $(2.94) per diluted share, compared with net income of $84.9 million, or $2.56 per diluted share in the prior year. The after tax impact of the goodwill and long-lived asset impairment losses was $81.4 million, or $(2.64) per diluted share. Impact of COVID-19 and Operational Adjustments As previously disclosed, we face risks related to outbreaks of infectious diseases, including the ongoing COVID-19 pandemic. The challenges posed by the COVID-19 pandemic on the global economy increased significantly as the first half of 2020 progressed. COVID-19 has caused disruption and volatility in the global capital markets, and has authored an economic slowdown. In response to COVID-19, national and local governments around the world have instituted certain measures, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing. Although our operations have been deemed essential and we follow the COVID-19 guidelines from the Centers for Disease Control (“CDC”) concerning the health and safety of our personnel, these measures have resulted in attenuating activity and, in some cases, required temporary closures of certain of our facilities, among other impacts. The duration of these measures is unknown, may be extended and additional measures may be imposed. In response to the global COVID-19 pandemic, we have implemented actions to maintain the health of our employees as well as our financial health and liquidity. These actions include: • Implementing social distancing measures, the use of masks, restricting visitors and unnecessary travel, and working from home whenever possible; • Workforce reduction activities to align capacity with expected demand, reducing headcount by approximately 20% to approximately 2,300 employees currently; • Eliminated consultants and temporary labor where possible; • Implemented significant cost conservation measures; • Suspending cash bonus plans and wage adjustments; • Amended our revolving credit facility on May 4, 2020, as further described in the “Liquidity and Capital Resources” section below; • Suspending share repurchases; • Reducing capital spending to $8 million from an initial plan of $20 to $25 million; and • Restrictions on marketing, trade shows, travel and discretionary spending for the remainder of the year. These reductions collectively are substantial, lowering our cost structure by an estimated $55 million to $60 million for the year, beginning in the second quarter. Analysis of Impact on Demand by Markets The Company continues to monitor demand from three revenue streams to analyze the potential impact of the pandemic to its business. The three revenue streams are (1) new airplane production and OE demand, (2) the aftermarket for commercial transport aircraft, and (3) defense and other government markets. An estimated 55% of sales in 2019, or about $425 million, was driven by the production of new airplanes in the commercial transport and business jet markets. For Astronics, the commercial transport market is the more significant of the two. Major manufacturers in both markets have revised their production plans downward given the pandemic, typically on the order of 35% to 45%, which is somewhat more than initial reductions announced earlier in the COVID-19 crisis. This number is significantly complicated by the 737 MAX, which was one of the Company’s largest production programs in 2019 and remains grounded. 31 Table of Contents Another 25% of sales in 2019, or about $195 million, was to the aftermarket for commercial transport aircraft. These sales were primarily for inflight entertainment/connectivity and passenger power systems (“IFE”) that were sold to airlines and aircraft leasing companies. This market is holding up better than initially anticipated. The current run rate has been about 50% of last year’s demand level. Approximately 20% of Astronics’ revenue in 2019, or about $145 million, was to the defense or other government markets. This was comprised of the majority of the Test business and certain military aircraft programs. Demand in these end markets has not been affected by the pandemic and instead shows relative strength. Additionally, Astronics has initiated efforts to develop new revenue streams that are technically attractive and complementary to existing engineering and manufacturing skill sets. These initiatives are expected to contribute up to $20 million in revenue in the second half of 2020. Evaluating the demand from these revenue streams, and considering first half actual results, Astronics expects a significant decline in 2020 sales, perhaps to the range of $500 million to $525 million . Outlook As discussed above, the Company believes that, given its assumptions on the economic impacts of COVID-19 on its revenue streams in its Aerospace business, consolidated revenue could be in the range of $500 million to $525 million. Given the fluidity of the situation with the pandemic and local, state, and national government responses, other outcomes, both positive and negative, are very possible. Management believes it has structured the Company to be cash positive at this level Capital expenditures for 2020 are expected to be approximately $8 million, reduced from initial plans of $20 million to $25 million for the year. The reduction reflects the change in tooling and equipment capacity requirements for certain programs that were either postponed or cancelled, as well as the deferral or cancellation of discretionary investments. Consolidated backlog at June 27, 2020 was $307.2 million. Approximately 58% of the backlog is expected to ship in 2020. The effective tax benefit rate for 2020 is expected to be in the range of 2% to 6%. 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 specifically on the markets we are active in, which is uncertain and cannot be predicted at this time. See Part II, Item 1A, Risk Factors, for an additional discussion of risk related to COVID-19. 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 16 of the Notes to Consolidated Condensed Financial Statements included in this report. 32 Table of Contents AEROSPACE SEGMENT Six Months Ended Three Months Ended (In thousands) June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019 Sales $ 243,734 $ 362,793 $ 102,597 $ 174,292 Less Intersegment Sales (91) (5) (24) (5) Total Aerospace Sales $ 243,643 $ 362,788 $ 102,573 $ 174,287 Operating (Loss) Profit $ (80,235) $ 40,160 $ (17,090) $ 14,392 Operating Margin (32.9) % 11.1 % (16.7) % 8.3 % Aerospace Sales by Market (In thousands) Commercial Transport $ 170,323 $ 271,509 $ 67,548 $ 129,731 Military 32,165 40,498 14,052 19,545 Business Jet 30,548 37,123 15,542 17,286 Other 10,607 13,658 5,431 7,725 $ 243,643 $ 362,788 $ 102,573 $ 174,287 Aerospace Sales by Product Line (In thousands) Electrical Power & Motion $ 116,019 $ 176,579 $ 46,563 $ 84,042 Lighting & Safety 65,653 95,375 27,731 46,770 Avionics 41,277 59,543 19,134 25,682 Systems Certification 4,991 5,666 1,660 4,048 Structures 5,096 11,967 2,054 6,020 Other 10,607 13,658 5,431 7,725 $ 243,643 $ 362,788 $ 102,573 $ 174,287 (In thousands) June 27, 2020 December 31, 2019 Total Assets $ 501,536 $ 629,371 Backlog $ 226,364 $ 275,754 AEROSPACE SECOND QUARTER RESULTS Aerospace segment sales decreased $71.7 million, or 41.1%, to $102.6 million. Sales were negatively affected by the continued grounding of the 737 MAX and the OEM’s decision to reduce production rates, along with the spread of the COVID-19 virus throughout the second quarter. Electrical Power and Motion sales were down $37.5 million compared with the prior-year period. Lighting & Safety sales decreased $19.0 million. Additionally, Avionics sales were down $6.5 million compared with the prior-year period. Aerospace segment operating loss was $17.1 million compared with operating profit of $14.4 million the same period last year. Aerospace operating profit was impacted by goodwill impairment charges of $12.6 million and restructuring-related severance charges of $4.6 million, as previously discussed. Operating leverage lost on reduced sales also significantly impacted operating results. AEROSPACE YEAR-TO-DATE RESULTS Aerospace segment sales decreased $119.1 million, or 32.8%, to $243.6 million. Sales were negatively affected by the continued grounding of the 737 MAX and the OEM’s decision to reduce production rates, along with the spread of the COVID-19 virus beginning in the later part of the first quarter. Electrical Power and Motion sales were down $60.6 million compared with the prior-year period. Lighting & Safety sales decreased $29.7 million. Additionally, Avionics sales were down $18.3 million compared with the prior-year period. 33 Table of Contents Aerospace segment operating loss was $80.2 million compared with operating profit of $40.2 million the same period last year. Aerospace operating profit was impacted by impairment charges of $87.0 million, of which $86.3 million was related to goodwill, as previously discussed. Restructuring-related severance charges of $5.1 million and leverage lost on reduced sales also significantly impacted operating results. AEROSPACE OUTLOOK Aerospace bookings in the second quarter of 2020 were $43.3 million, for a book-to-bill ratio of 0.42:1. The Aerospace segment’s backlog at the end of the second quarter of 2020 was $226.4 million with approximately $147.9 million expected to be shipped over the remaining part of 2020 and $185.9 million is expected to ship over the next 12 months. TEST SYSTEMS SEGMENT Six Months Ended Three Months Ended (In thousands) June 27, 2020 June 29, 2019 June 27, 2020 June 29, 2019 Sales $ 37,985 $ 34,649 $ 21,432 $ 14,925 Less Intersegment Sales (350) (165) (311) (114) Net Sales $ 37,635 $ 34,484 $ 21,121 $ 14,811 Operating profit $ 3,334 $ 2,091 $ 2,612 $ (94) Operating Margin 8.9 % 6.1 % 12.4 % (0.6) % Test Systems Sales by Market (In thousands) Semiconductor $ 2,822 $ 5,596 $ 1,188 $ 2,242 Aerospace & Defense 34,813 28,888 19,933 12,569 $ 37,635 $ 34,484 $ 21,121 $ 14,811 (In thousands) June 27, 2020 December 31, 2019 Total Assets $ 104,392 $ 110,994 Backlog $ 80,822 $ 83,837 TEST SYSTEMS SECOND QUARTER RESULTS Test Segment sales were $21.1 million, up $6.3 million compared to the prior-year period. The Acquired Businesses contributed $2.5 million in sales in the second quarter of 2020. Test Systems operating profit was $2.6 million, or 12.4% of sales, compared with last year’s essentially breakeven second quarter. Operating profit for the second quarter of 2019 was impacted by restructuring-related severance charges of $2.0 million. TEST SYSTEMS YEAR-TO-DATE RESULTS Test Segment sales were $37.6 million, up $3.2 million compared to the prior-year period. The Acquired Businesses contributed $6.0 million in sales in the first half of 2020, while Semiconductor sales decreased $2.8 million due to the sales of the semiconductor business which was divested on February 13, 2019. Test Systems operating profit was $3.3 million, or 8.9% of sales, compared with operating profit of $2.1 million in the prior-year period. Operating profit in the prior-year period was impacted by restructuring-related severance charges of $2.0 million. TEST SYSTEMS OUTLOOK Bookings for the Test Systems segment in the quarter were $18.2 million, for a book-to-bill ratio of 0.86:1 for the quarter. The Test Systems segment’s backlog at the end of the second quarter of 2020 was $80.8 million, with approximately $30.3 million expected to be shipped over the remaining part of 2020 and approximately $55.3 million scheduled to ship over the next 12 months. 34 Table of Contents LIQUIDITY AND CAPITAL RESOURCES Operating Activities: Cash provided by operating activities totaled $41.5 million for the first six months of 2020, as compared with $9.1 million cash provided by operating activities during the same period in 2019. Cash flow from operating activities increased compared with the same period of 2019 primarily due to the change in net operating assets compared with the prior period as well as the net non-cash effect on net income of the goodwill impairment loss in the first six months of 2020 compared to the net non-cash effect on net income of the gain from sale of the semiconductor business in the first six months of 2019. Investing Activities: Cash used for investing activities was $2.3 million for the first six months of 2020 compared with $96.9 million in cash provided by investing activities in the same period of 2019. The change compared to the prior-year period was a result of the $103.8 million in proceeds from the divestiture of the semiconductor business in 2019, slightly offset with a decrease in capital expenditures in the first half of 2020 compared with 2019. The Company expects capital spending in 2020 to be approximately $8 million. Financing Activities: The primary financing activities in the first six months of 2020 related to net payments on our senior credit facility of $15.0 million. The primary financing activities in the first six months of 2019 related to net payments on our senior credit facility of $105.0 million. The Company's Fifth Amended and Restated Credit Agreement (the “Agreement”) provided for a $500 million revolving credit line with the option to increase the line by up to $150 million. The maturity date of the loans under the Agreement is February 16, 2023. 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 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. The Company also paid a commitment fee to the lenders in an amount equal to between 0.10% and 0.20% on the undrawn portion of the credit facility, based upon the Company’s leverage ratio. 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 was projected to exceed its maximum permitted leverage ratio in the fourth quarter of 2020. Accordingly, on May 4, 2020, the Company executed an amendment to the Agreement (the “Amended Facility”), which reduced the revolving credit line from $500 million to $375 million. There remains the option to increase the line by up to $150 million. The Amended Facility suspends the application of the leverage ratio up through and including the second quarter of 2021 (the “suspension period”). 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. 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 1.75x on a quarterly basis, except for the first quarter of 2021, which is set at 1.50x. 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 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 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. 35 Table of Contents 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 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. BACKLOG The Company’s backlog at June 27, 2020 was $307.2 million compared with $359.6 million at December 31, 2019 and $379.7 million at June 29, 2019. CONTRACTUAL OBLIGATIONS AND COMMITMENTS The following table represents contractual obligations as of June 27, 2020: Payments Due by Period (In thousands) Total 2020 2021-2022 2023-2024 After 2024 Long-term Debt $ 173,224 $ 224 $ — $ 173,000 $ — Interest on Long-term Debt 16,554 3,165 12,659 730 — Purchase Obligations 104,265 82,230 21,718 171 146 Supplemental Retirement Plan and Post Retirement Obligations 27,449 202 753 973 25,521 Lease Obligations 31,041 3,763 13,930 7,056 6,292 Other Liabilities 5,232 3,445 732 672 383 Total Contractual Obligations $ 357,765 $ 93,029 $ 49,792 $ 182,602 $ 32,342 Notes to Contractual Obligations Table Long-Term Debt — See Part 1 Financial Information, Item 1 Financial Statements, Note 7, Long-Term Debt and Notes Payable included in this report. Interest on Long-term Debt — Future interest payments have been calculated using the applicable interest rate of each debt facility based on actual borrowings as of June 27, 2020. Actual future borrowings and rates may differ from these estimates. Purchase Obligations — Purchase obligations are comprised of the Company’s commitments for goods and services in the normal course of business. Lease Obligations — Financing and operating lease obligations are primarily related to the Company's facility leases and interest. Other Liabilities — Table excludes the $16.4 million accrual recorded as management's best estimate of damages related to Lufthansa’s indirect sales claim in Germany, as discussed in Part 1 Financial Information, Item 1 Financial Statements, Note 15, Legal Proceedings, as this will not become a contractual obligation until the appeals process is complete and amount of damages has been finalized. 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 2020 have not been significant. 36 Table of Contents CRITICAL ACCOUNTING POLICIES Refer to Note 2 of the Notes to Consolidated Condensed Financial Statements included in this report for the Company’s critical accounting policies with respect to revenue recognition. For a complete discussion of the Company’s other critical accounting policies, refer to the Company’s annual report on Form 10-K for the year ended December 31, 2019. RECENT ACCOUNTING PRONOUNCEMENTS Refer to Note 1 of the Notes to Consolidated Condensed Financial Statements included in this report. 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.