What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2020-10-30 compared with 2020-08-04 · 108 added, 91 removed, 199 unchanged (50% of the section changed)

26 unchanged sentences

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 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.

6 unchanged sentences

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

Nine Months Ended Three Months Ended

($ in thousands) September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019

Sales $ 387,784 $ 574,290 $ 106,506 $ 177,018

4 unchanged sentences

Impairment Loss $ 87,016 $ — $ — $ —

Gain on Sale of Business $ — $ 80,133 $ — $ —

Net (Gain) Loss on Sale of Businesses $ — $ (78,801) $ — $ 1,332

Interest Expense, Net of Interest Income $ 5,091 $ 4,576 $ 1,775 $ 1,547

3 unchanged sentences

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.

CONSOLIDATED THIRD QUARTER RESULTS

Consolidated sales were down $70.5 million compared with the third quarter of 2019.

Aerospace sales were down $75.2 million.

Test System sales increased $4.6 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.

Diagnosys contributed $3.1 million in sales in the third quarter of 2020.

Consolidated cost of products sold in the third quarter of 2020 was $91.3 million, compared with $140.2 million in the prior-year period.

The decrease was primarily due to lower volume resulting from continued delays in the recertification of the 737 MAX and the impacts of the COVID-19 pandemic on the global economy and, particularly, the aerospace industry.

Selling, general and administrative (“SG&A”) expenses were $24.2 million in the third quarter of 2020 compared with $31.7 million in the prior-year period.

Contributing to the decrease in SG&A in 2020 were workforce reduction activities and cost conservation measures including suspending cash bonus plans and wage adjustments.

The third quarter of 2019 included an additional $1.7 million legal reserve for a long-term patent dispute.

The effective tax rate for the quarter was 52.8%, compared with 31.3% in the third quarter of 2019.

The 2020 tax rate was impacted by a tax benefit related to a revised state income tax filing position that was recorded during the three months ended September 26, 2020 of approximately $3.1 million.

The 2019 third quarter tax rate was unfavorably impacted by the gain on the sale of the semiconductor business.

Net loss was $5.3 million, or $(0.17) per diluted share, compared with net income of $1.2 million, or $0.04 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.

Bookings were $81.6 million, rebounding somewhat from the second quarter.

The book-to-bill ratio was 0.77:1.

Backlog at the end of the quarter was $282.2 million.

Approximately $178.3 million of backlog is expected to ship in the remainder of 2020.

Approximately $115.5 million, or 41%, of backlog is expected to be recognized as revenue over the remainder of 2020.

CONSOLIDATED YEAR-TO-DATE RESULTS

Consolidated sales were down $116.0 million compared to the first half of 2019.

Consolidated sales were down $186.5 million compared with the prior-year period.

Aerospace sales were down $194.3 million.

Test System sales increased $7.8 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 Acquired Businesses contributed an incremental $8.4 million in sales in 2020.

Consolidated cost of products sold was $310.1 million, compared with $445.1 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-

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.

Consolidated cost of products sold in the first nine months of 2019 included tariffs of $6.8 million, inventory charges of $3.6 million and program charges of $3.5 million.

SG&A expenses were $85.9 million compared with $90.7 million the prior-year period.

Contributing to the decrease in SG&A in 2020 were workforce reduction activities and cost conservation measures including suspending cash bonus plans and wage adjustments, though these savings were partially offset by associated severance charges of $5.6 million.

The prior-year period included an additional $1.7 million legal reserve for a long-term patent dispute.

Further, non-cash goodwill and long-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.

During the first quarter, the Company recognized full impairments of the goodwill of Astronics Connectivity Systems and Certification (“CSC”), PGA and Custom Control Concepts (“CCC”) reporting units, and a partial impairment of the goodwill of the PECO reporting unit.

During the second quarter of 2020, an additional partial impairment of the PECO reporting unit was recorded.

No impairment charges were recorded in the third quarter.

The effective tax rate was 8.7%, compared with 22.9% in the prior-year period.

The 2020 tax rate was impacted by permanently non-deductible goodwill impairments of $60.8 million, a Federal valuation allowance of approximately $7.5 million, and a tax benefit related to a revised state income tax filing position of approximately $3.1 million recorded during the nine months ended September 26, 2020.

The 2019 tax rate was unfavorably impacted by the gain on the sale of the semiconductor business.

Net loss was $95.8 million, or $(3.11) per diluted share, compared with net income of $86.1 million, or $2.61 per diluted share, in the prior year.

2 unchanged sentences

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.

The challenges posed by the COVID-19 pandemic on the global economy increased significantly as 2020 has progressed.

COVID-19 has caused disruption and volatility in the global capital markets, and has authored an economic slowdown.

15 unchanged sentences

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.

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 .

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 Company has recategorized the three revenue streams it uses to monitor demand and analyze the impact of the pandemic to its business.

These are (1) the commercial aircraft market, which includes OEM line fit and airline aftermarket business, (2) the defense and other government markets, and (3) general aviation.

In 2019, about 70% of the Company’s business, or $540 million, was generated in the commercial aircraft market.

Approximately two-thirds of this came from new aircraft production primarily at Boeing and Airbus, and the remaining one-third came from aftermarket business with airlines and leasing companies.

Airframe manufacturers have adjusted to current market conditions by reducing planned production rates for new aircraft by 30% to 50%, excluding the 737 MAX, which is still awaiting recertification.

Driven by the production rate reductions, the

Company is also experiencing a slow-down in orders related to destocking in the supply chain.

Astronics is most affected by the 737 MAX program for which it does not anticipate significant deliveries until the second half of 2021.

The aftermarket remains weak with travel restrictions and quarantine rules dampening demand for airline travel.

The airlines have adjusted in part by delaying planned fleet upgrades involving the Company’s products, which primarily involve passenger entertainment and connectivity.

Though some planning activity is occurring, the Company expects the aftermarket to remain depressed until aircraft utilization and load factors increase, which many expect to occur measurably over current rates in 2021.

The second demand stream is Government and Defense.

Approximately 20% of Astronics’ revenue in 2019, or $145 million, was to the defense or other government markets.

This includes certain military aircraft programs and the majority of the Test business.

This demand stream remains stable and has been largely unaffected by the pandemic.

An example of strength in this area is the new Test program the Company announced earlier this week for the Metro Atlanta Rapid Transit Authority (MARTA), to help with the operation and maintenance of new rail cars being procured from Stadler Rail A.G.

The third revenue stream is General Aviation (“GA”), which accounted for the remaining 10% of Astronics’ business in 2019.

Most of GA revenue is line fit, driven by the manufacture of new aircraft, although there is some amount of aftermarket business as well.

The outlook for GA is mixed.

Most manufacturers reduced production rates as the pandemic took hold, but aircraft utilization has been high, especially in North America.

If this utilization drives new orders, production rates could recover in the coming year or two.

Additionally, Astronics has pursued business opportunities from other markets, taking advantage of its technical design expertise and manufacturing capabilities, which are currently underutilized.

These opportunities can be meaningful, and some are directly related to the fight against COVID-19, such as the Xenex® program announced.

Astronics is providing manufacturing support to Xenex for the production of its unique LightStrike robots, which use patented pulsed xenon ultraviolet (UV) light disinfection technology to neutralize SARS-CoV-2, the virus that causes COVID-19.

These initiatives are expected to contribute approximately $20 million in revenue in 2020, possibly ramping higher in 2021.

Considering the expected demand from these revenue streams, our current backlog and results through the first nine months of 2020, Astronics’ scenario analysis implies full year 2020 sales will be at, or slightly above, $500 million.

As discussed previously, the Company believes that, given its assumptions on the economic impacts of COVID-19 on its revenue streams in its Aerospace business and its current backlog, consolidated revenue should be at, or slightly above, $500 million for 2020.

Given the fluidity of the pandemic as well as government responses, other outcomes, both positive and negative, are possible.

Management expects the Company to be cash positive for the year at this revenue level with adjusted EBITDA margins for the year of approximately 5% to 7%.

The Company plans to use excess free cash flow from operations to reduce outstanding debt.

Capital expenditures for 2020 are expected to be approximately $8 million.

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.

Consolidated backlog at September 26, 2020 was $282.2 million.

Approximately 41% of the backlog is expected to be recognized as revenue in 2020.

The effective tax benefit rate for 2020 is expected to be in the range of 6% to 10%.

3 unchanged sentences

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.

Cost of products sold and other operating expenses are directly identifiable to the respective

Operating profit is reconciled to earnings before income taxes in Note 16 of the Notes to Consolidated Condensed Financial Statements included in this report.

AEROSPACE SEGMENT

Six Months Ended Three Months Ended

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

Nine Months Ended Three Months Ended

(In thousands) September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019

Sales $ 326,282 $ 520,495 $ 82,548 $ 157,702

Less Intersegment Sales

(91) (5) (24) (5)

Total Aerospace Sales

18 unchanged sentences

$ 326,191 $ 520,490 $ 82,548 $ 157,702

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

(In thousands) September 26, 2020 December 31, 2019

$ 490,927 $ 629,371

$ 208,772 $ 275,754

AEROSPACE SECOND QUARTER RESULTS

AEROSPACE THIRD QUARTER RESULTS

Aerospace segment sales decreased $75.2 million, or 47.7%, to $82.5 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.

Sales were negatively affected by the continued grounding of the 737 MAX, overall lower build rates for commercial transport and general aviation aircraft and a weak commercial aircraft aftermarket as the airlines reduced spending due to the global COVID-19 pandemic.

Electrical Power and Motion sales were down $45.9 million compared with the prior-year period.

1 unchanged sentence

Additionally, Avionics sales were down $3.8 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 segment operating loss was $6.3 million compared with operating profit of $8.8 million for the same period last year.

Operating leverage lost on reduced sales drove the operating loss.

AEROSPACE YEAR-TO-DATE RESULTS

Aerospace segment sales decreased $194.3 million, or 37.3%, to $326.2 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.

Sales were negatively affected for the same reasons noted for the quarter.

Electrical Power and Motion sales were down $106.5 million compared with the prior-year period.

5 unchanged sentences

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.

Aerospace bookings in the third quarter of 2020 were $65.0 million, for a book-to-bill ratio of 0.79:1.

The Aerospace segment’s backlog at the end of the third quarter of 2020 was $208.8 million with approximately $96.8 million expected to be recognized as revenue over the remaining part of 2020 and $175.1 million scheduled 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

Nine Months Ended Three Months Ended

(In thousands) September 26, 2020 September 28, 2019 September 26, 2020 September 28, 2019

Sales $ 62,391 $ 53,995 $ 24,406 $ 19,346

9 unchanged sentences

(In thousands)

June 27, 2020 December 31, 2019

September 26, 2020 December 31, 2019

$ 102,087 $ 110,994

Backlog $ 73,466 $ 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 THIRD QUARTER RESULTS

Test Systems segment sales were $24.0 million, up $4.6 million compared to the prior-year period.

Excluding sales from the divested semiconductor test business, the Test Systems segment achieved its second highest quarterly sales in the segment’s history.

Diagnosys contributed $3.1 million in sales in the third quarter of 2020.

Test Systems operating profit was $0.9 million, or 3.9% of sales, compared with $2.1 million, or 10.7% of sales, in the third quarter of 2019.

Operating profit in the current year was negatively impacted legal expenses and inventory reserves totaling $1.3 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 segment sales were $61.6 million, up $7.8 million compared with the prior-year period.

The Acquired Businesses contributed an incremental $8.4 million in sales.

Sales related to the Semiconductor business, which was sold in early 2019, decreased $4.4 million.

Test Systems operating profit was $4.3 million, or 6.9% of sales, compared with operating profit of $4.2 million in the prior-year period.

Operating profit in the current year was negatively impacted legal expenses and inventory reserves totaling $1.3 million.

Operating profit in the prior-year period was impacted by restructuring-related severance charges of $2.0 million.

1 unchanged sentence

Bookings for the Test Systems segment in the quarter were $16.6 million, for a book-to-bill ratio of 0.69:1 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.

The Test Systems segment’s backlog at the end of the third quarter of 2020 was $73.5 million, with approximately $18.7 million expected to be recognized as revenue over the remaining part 2020 and approximately $55.3 million scheduled over the next 12 months.

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.

Cash provided by operating activities totaled $31.5 million for the first nine months of 2020, as compared with $30.2 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 nine 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 nine 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.

Cash used for investing activities was $4.0 million for the first nine months of 2020 compared with $74.2 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, coupled with a decrease in capital expenditures in the first nine months of 2020 compared with 2019 partially offset by the purchase of FCT for $21.8 million in the first nine months of 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 primary financing activities in the first nine months of 2020 related to net payments on our senior credit facility of $20.0 million and repurchase of approximately 282,000 shares at an aggregate cost of $7.7 million.

The primary financing activities in the first nine months of 2019 related to a repurchase of approximately 1,824,000 shares at an aggregate cost of $50.0 million under our share purchase program, coupled with net payments on our senior credit facility of $47.0 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.

9 unchanged sentences

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.

At September 26, 2020, there was $168.0 million outstanding on the revolving credit facility and there remained $205.7 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.

At September 26, 2020, outstanding letters of credit and bank guarantees totaled $1.3 million.

Through the second quarter of 2021, the Company is required to maintain 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 September 26, 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%.

2 unchanged sentences

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 provided 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 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.

During the nine months ended September 26, 2020, subsequent to the execution of the Amended Facility, the Company made prepayments approximating $165 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.

2 unchanged sentences

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.

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.

The Company’s backlog at September 26, 2020 was $282.2 million compared with $359.6 million at December 31, 2019 and $379.4 million at September 28, 2019.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The following table represents contractual obligations as of June 27, 2020:

The following table represents contractual obligations as of September 26, 2020:

Payments Due by Period

9 unchanged sentences

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.

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 September 26, 2020.

Actual future borrowings and rates may differ from these estimates.

21 unchanged sentences

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 2. Management’s Discussion and Analysis