What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-10 compared with 2022-03-04 · 290 added, 361 removed, 1087 unchanged (37% of the section changed)

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Astronics Corporation (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive (loss) income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2)(collectively referred to as the “consolidated financial statements”).

We have audited the accompanying consolidated balance sheets of Astronics Corporation (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive loss, shareholders' equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

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For each reporting unit, the Company performed a quantitative test using the discounted cash flow method to estimate fair value.

The discounted cash flow method incorporates various assumptions, the most significant being projected revenue growth rates and the weighted-average cost of capital.

The discounted cash flow method incorporates various assumptions, the most significant being projected sales growth rates and the weighted-average cost of capital.

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

Auditing management’s assumptions was especially challenging due to the estimation required in determining the fair value of certain of the Company’s reporting units with goodwill.

The fair value estimates for certain reporting units were sensitive to the significant assumptions of the revenue growth rate and the weighted-average cost of capital.

These assumptions are affected by expectations about the pace of global economic recovery from the COVID-19 pandemic, which affects future market and economic conditions, particularly those in the aerospace industry.

The fair value estimates for certain reporting units were sensitive to the significant assumptions of the sales growth rate and the weighted-average cost of capital.

These assumptions are affected by expectations about future market and economic conditions, particularly those in the aerospace industry.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s goodwill impairment testing process.

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We compared the significant assumptions used by management to current industry and economic trends, historical trends of the Company, and other relevant factors.

We assessed the historical accuracy of management’s estimates, taking into consideration the effects of COVID-19, and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions.

We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions.

We also involved our valuation professionals to assist in our evaluation of the weighted-average cost of capital used in the fair value estimates.

In addition, we tested the reconciliation of the fair value of the Company’s reporting units to the market capitalization of the Company as of the annual impairment testing date.

We also assessed the appropriateness of the disclosures in the consolidated financial statements.

Revenue Recognition

Description of the Matter For the year ended December 31, 2021, the Company’s revenues totaled $444.9 million.

Description of the Matter For the year ended December 31, 2022, the Company’s sales totaled $534.9 million.

As discussed in Note 2 to the consolidated financial statements, some of the Company’s contracts with customers contain multiple performance obligations.

The majority of the Company’s revenue from contracts with customers is recognized at a point in time when the customer obtains control of the product, which is generally upon delivery and acceptance by the customer.

For contracts with customers in which the Company satisfies its promise to the customer to provide a service or a product that has no alternative use to the Company and the Company has enforceable rights to payment for progress completed to date inclusive of profit, the Company satisfies the performance obligation and recognizes revenue over time.

The Company uses costs incurred to date relative to total estimated costs at completion to measure progress.

Auditing management’s evaluation of contracts with customers was especially challenging due to the effort required to analyze the terms and conditions of the Company’s various customer contracts given that such terms and conditions are nonstandard.

This included the identification and determination of the performance obligations and the timing of revenue recognition.

For contracts with customers in which the Company satisfies its promise to the customer to provide a service or a product that has no alternative use to the Company and the Company has enforceable rights to payment for progress completed to date inclusive of profit, the Company recognizes revenue over time as it satisfies the performance obligation.

Auditing management’s evaluation of contracts with customers was especially challenging due to the judgment required to analyze the terms and conditions of the Company’s various customer contracts given that such terms and conditions are nonstandard.

This included the identification and determination of the performance obligations and assessment of whether a product has alternative use.

How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls over the Company’s revenue recognition process.

For example, we tested controls over management’s review of the terms and conditions of contracts with customers which included an analysis of the distinct performance obligations and a review of the conclusion as to whether revenue from such performance obligations should be recognized over time or at a point in time.

We also tested management’s centralized monitoring control over completeness of the contract reviews and appropriateness of the accounting conclusions.

We performed procedures to test the identification and determination of the performance obligations and the timing of revenue recognition which included reading a sample of executed contracts and purchase orders to understand the contract, performing an independent assessment of the identification of distinct performance obligations and the appropriate timing of revenue recognition, testing the mathematical accuracy of revenue recognized based on costs incurred to date relative to total estimated costs at completion and comparing our assessment to that of management.

We tested controls over management’s review of the terms and conditions of contracts with customers which included an analysis of the distinct performance obligations and a review of the conclusion as to whether revenue from such performance obligations should be recognized over time or at a point in time.

We performed procedures to test the identification and determination of the performance obligations and the timing of revenue recognition which included, among others, reading a sample of executed contracts and purchase orders to understand the contract and performing an independent assessment of the identification of distinct performance obligations and whether a product has alternative use.

We tested the completeness and accuracy of the Company’s contract summary documentation, specifically related to the identification and determination of distinct performance obligations and the timing of revenue recognition.

We also assessed the appropriateness of the disclosures in the consolidated financial statements.

/s/ Ernst & Young LLP

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In our opinion, Astronics Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive (loss) income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated March 4, 2022 expressed an unqualified opinion thereon.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2022 and 2021,the related consolidated statements of operations, comprehensive loss, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2) and our report dated March 10, 2023 expressed an unqualified opinion thereon.

Basis for Opinion

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Impairment Loss — — 87,016

(Loss) Income from Operations ( 28,674 ) ( 100,701 ) 1,701

Loss from Operations ( 30,044 ) ( 28,674 ) ( 100,701 )

Net Gain on Sale of Businesses 11,284 10,677 —

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Interest Expense, Net of Interest Income 9,422 6,804 6,741

(Loss) Income Before Income Taxes ( 26,960 ) ( 112,410 ) 68,303

(Benefit from) Provision for Income Taxes ( 1,382 ) 3,371 16,286

Net (Loss) Income $ ( 25,578 ) $ ( 115,781 ) $ 52,017

Basic (Loss) Earnings Per Share $ ( 0.82 ) $ ( 3.76 ) $ 1.62

Diluted (Loss) Earnings Per Share $ ( 0.82 ) $ ( 3.76 ) $ 1.60

Loss Before Income Taxes ( 29,793 ) ( 26,960 ) ( 112,410 )

Provision for (Benefit from) Income Taxes 5,954 ( 1,382 ) 3,371

Net Loss $ ( 35,747 ) $ ( 25,578 ) $ ( 115,781 )

Basic Loss Per Share $ ( 1.11 ) $ ( 0.82 ) $ ( 3.76 )

Diluted Loss Per Share $ ( 1.11 ) $ ( 0.82 ) $ ( 3.76 )

See notes to consolidated financial statements.

ASTRONICS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

Year Ended December 31,

(In thousands) 2022 2021 2020

Net (Loss) Income $ ( 25,578 ) $ ( 115,781 ) $ 52,017

Net Loss $ ( 35,747 ) $ ( 25,578 ) $ ( 115,781 )

Other Comprehensive Income (Loss):

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Other Comprehensive Income (Loss) 4,969 1,955 ( 822 )

Comprehensive (Loss) Income $ ( 23,623 ) $ ( 116,603 ) $ 49,718

Comprehensive Loss $ ( 30,778 ) $ ( 23,623 ) $ ( 116,603 )

See notes to consolidated financial statements.

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Current Liabilities:

Current Maturities of Long-term Debt $ 4,500 $ —

Accounts Payable 64,193 34,860

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Retained Earnings 240,360 287,225

Treasury Stock, 3,808,060 Shares at December 31, 2021 and 2020

Treasury Stock, 3,154,691 Shares at December 31, 2022, 3,808,060 Shares at December 31, 2021

( 89,898 ) ( 108,516 )

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Cash Flows from Operating Activities 2022 2021 2020

Net (Loss) Income $ ( 25,578 ) $ ( 115,781 ) $ 52,017

Adjustments to Reconcile Net (Loss) Income to Cash from Operating Activities, Excluding the Effects of Acquisitions and Divestitures:

Net Loss $ ( 35,747 ) $ ( 25,578 ) $ ( 115,781 )

Adjustments to Reconcile Net Loss to Cash Flows from Operating Activities:

Non-cash Items:

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Equity-based Compensation Expense 6,497 6,460 5,184

Deferred Tax (Benefit) Expense ( 441 ) 15,553 ( 14,385 )

Deferred Tax Expense (Benefit) 19 ( 441 ) 15,553

Operating Lease Non-cash Expense 6,028 5,198 4,500

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Cash Flows from Investing Activities

Acquisitions of Businesses, Net of Cash Acquired — — ( 28,907 )

Proceeds from Sale of Businesses and Assets 22,061 9,213 —

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Purchase of Outstanding Shares for Treasury — — ( 7,732 )

Debt Acquisition Costs — ( 360 ) —

Stock Award and Employee Stock Purchase Plan (“ESPP”) activity 97 3,396 666

Finance Lease Principal Payments ( 93 ) ( 901 ) ( 1,922 )

Financing-related Costs ( 2,416 ) — ( 360 )

Cash Flows From Financing Activities ( 1,412 ) ( 7,505 ) ( 24,576 )

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Cash and Cash Equivalents at End of Year $ 13,778 $ 29,757 $ 40,412

Supplemental Cash Flow Information:

Supplemental Disclosure of Cash Flow Information

Interest Paid $ 7,605 $ 5,951 $ 5,829

Income Taxes (Refunded) Paid, Net of Refunds ( 1,250 ) ( 1,536 ) 27,343

Income Taxes Refunded, Net of Payments $ ( 9,978 ) $ ( 1,250 ) $ ( 1,536 )

Non-Cash Investing Activities:

Capital Expenditures in Accounts Payable $ 490 $ — $ —

See notes to consolidated financial statements.

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End of Year $ 98,630 $ 92,037 $ 82,187

Accumulated Other Comprehensive Loss

Accumulated Comprehensive Loss

Beginning of Year $ ( 14,495 ) $ ( 16,450 ) $ ( 15,628 )

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Beginning of Year $ 287,225 $ 312,803 $ 428,584

Net (Loss) Income ( 25,578 ) ( 115,781 ) 52,017

Net Loss ( 35,747 ) ( 25,578 ) ( 115,781 )

Reissuance of Treasury Shares for 401K Contribution ( 11,118 ) — —

End of Year $ 240,360 $ 287,225 $ 312,803

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Purchase of Shares — — ( 7,732 )

Shares Issued to Fund 401K Obligation 18,618 — —

End of Year $ ( 89,898 ) $ ( 108,516 ) $ ( 108,516 )

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Purchase of Shares — — 282

Shares Issued to Fund 401K Obligation ( 653 ) — —

End of Year 3,155 3,808 3,808

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Astronics Corporation (“Astronics” or the “Company”) is a leading provider of advanced technologies to the global aerospace, defense and electronics industries.

Our products and services include advanced, high-performance electrical power generation, distribution and motion systems, lighting and safety systems, avionics products, systems and certification, aircraft structures and automated test systems.

Our products and services include advanced, high-performance electrical power generation, distribution and seat motion systems, lighting and safety systems, avionics products, systems and certification, aircraft structures and automated test systems.

We have principal operations in the United States (“U.S.”), Canada, France and England, as well as engineering offices in the Ukraine and India.

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Impact of the COVID-19 Pandemic

In December 2019, a novel strain of coronavirus (“COVID-19”) surfaced in Wuhan, China, and has since spread to other countries, including the United States.

On March 11, 2020, the World Health Organization classified the COVID-19 outbreak as a pandemic.

The COVID-19 pandemic had a sudden and significant impact on the global economy, and particularly in the aerospace industry, resulting in the grounding of the majority of the global commercial transportation fleet and significant cost cutting and cash preservation actions by the global airlines.

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.

This low level of investment by the airlines has continued through 2021, and while the industry is seeing some improvement on rising vaccination rates and easing travel restrictions, 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, vaccination rates and efficacy and the related length of 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 took immediate and aggressive action early in 2020 to minimize the spread of COVID-19 in our workplaces and reduce costs.

Since the early days of the pandemic, we have been following guidance from the World Health Organization and the U.S.

Center for Disease Control to protect employees and prevent the spread of the virus within all of our facilities globally.

Some of the actions implemented include:

social distancing;

appropriate personal protective equipment;

facility deep cleaning;

flexible work-from-home scheduling;

pre-shift temperature screenings, where allowed by law;

and restrictions on facility visitors and unnecessary travel.

Material actions to reduce costs included:

(1) reducing our workforce to align operations with customer demand;

(2) suspension of certain benefit programs;

and (3) delaying non-essential capital projects and minimizing discretionary spending.

At the same time, we addressed the ongoing needs of our business to continue to serve our customers.

In addition to these measures, we amended our revolving credit facility in May 2020, as further described in Note 8.

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

Refer to Note 7 for a discussion of goodwill impairment charges recorded in 2020.

No goodwill impairment charges were required in 2021.

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.

The Company qualified for government subsidies from the Canadian and French governments as a result of the COVID-19 pandemic’s impact on our foreign operations.

The spread of the COVID-19 pandemic disrupted businesses on a global scale, led to significant volatility in financial markets and affected the aviation and industrial industries.

The impacts of the pandemic have placed labor and supply chain pressures on our business and we have been impacted by customer demand variability.

Although we saw stable and growing backlog during 2022 in our aerospace business, COVID-19 related disruptions are ongoing and continue to adversely challenge our commercial transport market.

While we remain bullish about the aerospace business, we believe the recovery to pre-pandemic activity, particularly in the widebody market, will take longer than originally anticipated at the outset of the pandemic.

As economic activity continues to recover, we will continue to monitor the situation, assessing further possible implications on our operations, supply chain, liquidity, cash flow and customer orders.

In September 2021 the Company was awarded a grant of up to $ 14.7 million from the U.S.

Department of Transportation under the Aviation Manufacturing Jobs Protection Program (“AMJP”).

The Company received $ 7.4 million under the grant in 2021, $ 5.2 million in the first quarter of 2022 and $ 2.1 million in the third quarter of 2022.

The grant benefit was recognized ratably over the six-month performance period as a reduction to cost of products sold in proportion to the compensation expense that the award is intended to defray.

During the years ended December 31, 2022 and 2021, the Company recognized $ 6.0 million and $ 8.7 million of the award, respectively.

Additionally, the Company qualified for government subsidies from the Canadian and French governments as a result of the COVID-19 pandemic’s impact on our foreign operations.

The Canadian and French subsidies are income-based grants intended to reimburse the Company for certain employee wages.

The grants are recognized as income over the periods in which the Company recognizes as expenses the costs the grants are intended to defray.

In September 2021 the Company also entered into an agreement with the U.S.

Department of Transportation (“USDOT”) under the Aviation Manufacturing Jobs Protection Program (“AMJP”) for a grant of up to $ 14.7 million.

The Company received $ 7.4 million in cash under the grant in 2021.

The remaining balance due to be received of $ 7.3 million has been classified within Prepaid Expenses and Other Current Assets on the Consolidated Condensed Balance Sheets as of December 31, 2021.

The Company expects to receive a second installment of approximately $ 5.2 million in the first quarter of 2022, and a final installment in the second or third quarter of 2022 upon final confirmation from the USDOT of the Company meeting its grant commitments.

The receipt of the full award is primarily conditioned upon the Company committing to not furlough, lay off or

reduce the compensation levels of a defined group of employees during the six-month period of performance between September 2021 and March 2022.

We account for the proceeds from the grant by analogy to International Accounting Standard (“IAS 20”), Accounting for Government Grants and Disclosure of Government Assistance and its principles surrounding the recognition of grants related to income.

The grant benefit will be recognized ratably over the six-month performance period as a reduction to cost of products sold in proportion to the compensation expense that the award is intended to defray.

During the year ended December 31, 2021, the Company recognized $ 8.7 million of the award.

The unearned portion of the AMJP award of $ 6.0 million has been reported within Accrued Expenses and Other Current Liabilities in the Consolidated Balance Sheet at December 31, 2021.

The amount recognized during 2022 was immaterial.

The following table presents the COVID-19 related government assistance, including AMJP, recorded during the years ended December 31, 2022, 2021 and 2020:

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(In thousands) 2022 2021 2020

Cost of Products Sold $ 10,682 $ 2,383

Selling, General and Administrative Expenses 228 278

Reduction in Cost of Products Sold $ 6,062 $ 10,682 $ 2,383

Reduction in Selling, General and Administrative Expenses 11 228 278

Total $ 6,073 $ 10,910 $ 2,661

Restructuring Activities

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.

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

As a result, the Company executed restructuring activities in the form of workforce reduction, primarily in the second quarter of 2020, to align capacity with expected demand.

In the fourth quarter of 2019, in an effort to reduce the significant operating losses at our AeroSat business, we initiated a restructuring plan to reduce costs and minimize losses of our AeroSat antenna business.

The plan narrows the initiatives for the AeroSat business to focus primarily on near-term opportunities pertaining to business jet connectivity.

The plan has a downsized manufacturing operation remaining in New Hampshire, with significantly reduced personnel and operating expenses.

Additional restructuring activities occurred during 2021 to align the workforce to expected activities and to consolidate certain facilities.

For more information regarding these restructuring plans see Note 22.

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Acquisitions are accounted for under the acquisition method and, accordingly, the operating results for the acquired companies are included in the Consolidated Statements of Operations from the respective dates of acquisition.

For additional information on the acquired businesses, see Note 21.

Cost of Products Sold, Engineering and Development and Selling, General and Administrative Expenses

Cost of Products Sold, Research and Development and Selling, General and Administrative Expenses

Cost of products sold includes the costs to manufacture products such as direct materials and labor and manufacturing overhead as well as all engineering and developmental costs.

The Company is engaged in a variety of engineering and design activities as well as basic research and development activities directed to the substantial improvement or new application of the Company’s existing technologies.

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

Research and development, design and related engineering expenses amounted to $ 85.3 million in 2021, $ 86.8 million in 2020 and $ 108.9 million in 2019.

The Company is engaged in a variety of research and development activities directed to the substantial improvement or new application of the Company’s existing technologies.

Research and development costs are expensed as incurred and include salaries, benefits, consulting, material costs and depreciation.

Research and development expenses amounted to $ 48.3 million in 2022, $ 43.3 million in 2021 and $ 40.2 million in 2020.

These costs are included in Cost of products sold.

SG&A expenses include costs primarily related to our sales, marketing and administrative departments.

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The Company accounts for its stock options following Accounting Standards Codification (“ASC”) Topic 718, Compensation – Stock Compensation (“ASC Topic 718”).

This Topic requires all equity-based payments to employees, including grants of

employee stock options and restricted stock units (“RSU's”), to be recognized in the statement of earnings based on the grant date fair value of the award.

ASC Topic 718 requires all equity-based payments to employees, including grants of employee stock options and restricted stock units (“RSU's”), to be recognized in the statement of earnings based on the grant date fair value of the award.

For awards with graded vesting, the Company uses a straight-line method of attributing the value of stock-based compensation expense, subject to minimum levels of expense, based on vesting.

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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.

Although the Company has historically not experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade receivables and contract assets as airlines and other aerospace company’s cash flows are impacted by the COVID-19 pandemic.

Although the Company has historically not experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade receivables and contract assets as airlines and other aerospace companies’ cash flows are impacted by the COVID-19 pandemic.

We record our inventories at the lower of cost or net realizable value.

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In determining the appropriate reserve, the Company considers the age of inventory on hand, the overall inventory levels in relation to forecasted demands as well as reserving for specifically identified inventory that the Company believes is no longer salable or whose value has diminished.

Cloud Computing Arrangements

The Company incurs costs to implement cloud computing arrangements that are hosted by third party vendors.

Implementation costs associated with cloud computing arrangements are capitalized when incurred during the application development phase.

Amortization is calculated on a straight-line basis over the contractual term of the cloud computing arrangement.

Capitalized amounts related to such arrangements are recorded within other current assets and other non-current assets in the consolidated balance sheets and were insignificant as of December 31, 2022 and December 31, 2021.

Property, Plant and Equipment

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buildings, 25 - 40 years;

machinery and equipment, 4 - 10 years.

and machinery and equipment, 4 - 10 years.

Leased buildings and associated leasehold improvements are amortized over the shorter of the terms of the lease or the estimated useful lives of the assets, with the amortization of such assets included within depreciation expense.

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Depreciation expense was approximately $ 12.0 million, $ 12.7 million and $ 13.3 million in 2022, 2021 and 2020, respectively.

Deferred Financing Costs

The Company incurs debt issuance costs in connection with amending or entering into new credit facilities.

These costs are amortized as an adjustment to interest expense over term of the credit facility on a straight-line basis, which approximates the effective interest method.

The unamortized balance of deferred financing costs was $ 3.2 million at December 31, 2022 and $ 0.4 million at December 31, 2021, recorded within Other Assets on the Consolidated Balance Sheets.

On January 19, 2023, the Company completed a financing transaction, which refinanced its previous revolving credit facility which was scheduled to mature in November 2023.

The new financing consists of a $ 90 million asset-based term loan (the “Term Loan Facility”) and a $ 115 million asset-based revolving credit facility (the “ABL Revolving Credit Facility”).

In 2022, the Company incurred $ 3.6 million in debt issuance costs associated with amending its existing credit facility and entering into a new credit facility.

These costs are classified within Other Assets on the Consolidated Balance Sheets.

The Company incurred an additional $ 6.1 million in debt issuance costs upon execution of the Restated Agreement and the Term Loan Facility on January 19, 2023.

Deferred debt issuance costs associated with revolving credit facilities will be recorded within other assets and those associated with term loan facilities will be recorded as a reduction of the carrying value of the debt on the Consolidated Balance Sheets.

Long-Lived Assets

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The carrying amounts are then reduced to fair value, which is typically determined by using a discounted cash flow model.

In conjunction with the deteriorating economic conditions associated with the COVID-19 pandemic, we recorded an impairment charge to right-of-use assets of approximately $ 0.7 million incurred in one reporting unit in the Aerospace segment within the Impairment Loss line in the Consolidated Statements of Operations in 2020.

Additionally, we recorded a long-lived asset impairment charge of approximately $ 9.5 million in 2019 related to PP&E, intangible assets and right-of-use assets in

conjunction with the AeroSat restructuring.

See Note 23 for further information regarding the restructuring and impairment charges.

Assets held for sale are to be reported at lower of its carrying amount or fair value less cost to sell.

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If the carrying value of the reporting unit exceeds its fair value, the shortfall up to the carrying value of the goodwill represents the amount of goodwill impairment.

The 2021 assessment indicated no impairment to the carrying value of goodwill in any of the Company’s reporting units and no impairment charge was recognized.

See Note 7 for further information regarding the goodwill impairment charges in 2020 and 2019.

The 2022 and 2021 assessments indicated no impairment to the carrying value of goodwill in any of the Company’s reporting units and no impairment charges were recognized.

See Note 7 for further information regarding the goodwill impairment charge in 2020.

Intangible Assets

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Impairment is tested under ASC Topic 350, Intangibles - Goodwill and Other, as amended by Accounting Standards Update (“ASU”) 2012-2.

In 2019, the undiscounted cash flows of the AeroSat reporting unit were determined to be insufficient to recover the carrying value of the long-lived assets.

The Company recorded a full impairment charge of approximately $ 6.2 million in the December 31, 2019 Consolidated Statements of Operations associated with intangible assets of the AeroSat reporting unit in conjunction with restructuring activities.

Financial Instruments

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In 2020, the Company determined there were indicators of impairment over one of its investments as a result of the investee’s deteriorating operating performance and limited access to capital.

We determined that the fair value of this investment was de minimis and a full impairment charge of $ 3.5 million was recorded within Other Expense, Net of Other Income in the

accompanying Consolidated Statement Operations for the year ended December 31, 2020.

A full impairment charge of $ 5.0 million for an additional investment was recorded in 2019.

We determined that the fair value of this investment was de minimis and a full impairment charge of $ 3.5 million was recorded within Other Expense, Net of Other Income in the accompanying Consolidated Statement Operations for the year ended December 31, 2020.

Deferred Tax Asset Valuation Allowance

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 generated a significant taxable loss for the year ended December 31, 2020, which can be carried back under the CARES Act to recover previously paid income taxes.

As a result of the on-going COVID-19 pandemic, the Company generated a significant tax loss for the year ended December 31, 2020, which was carried back under the CARES Act to recover previously paid income taxes.

The Company records a valuation allowance against the deferred tax assets if and to the extent it is more likely than not that the Company will not recover the deferred tax assets.

In evaluating the need for a valuation allowance, the Company weights all relevant positive and negative evidence, and considers among other factors, historical financial performance, projected future taxable income, scheduled reversals of deferred tax liabilities, the overall business environment, and tax planning strategies.

Losses in recent periods and cumulative pre-tax losses in the three-year period ending with the current year, 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.

Losses in recent periods and cumulative pre-tax losses in the three years period ending with the current year, 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.

For purposes of assessing the recoverability of deferred tax assets, the Company determined that it could not include future projected earnings in the analysis due to recent history of losses and therefore had insufficient objective positive evidence that the Company will generate sufficient future taxable income to overcome the negative evidence of cumulative losses.

Accordingly, during the years ended December 31, 2022, 2021, and 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 valuation allowance against its U.S.

federal deferred tax assets of approximately $ 6.0 million and $ 23.3 million during the years ended December 31, 2021 and 2020 respectively.

In addition, during the year ended December 31, 2021, the Company recorded a valuation allowance against certain foreign deferred tax assets of approximately $ 1.3 million.

As a result, the Company recorded a provision for valuation allowances against its U.S.

federal deferred tax assets of approximately $ 11.9 million, $ 6.0 million, and $ 23.3 million during the years ended December 31, 2022, 2021 and 2020 respectively.

In addition, during the year ended December 31, 2022 and 2021, the Company recorded a valuation allowance against certain foreign deferred tax assets of approximately $ 0.4 million and $ 1.3 million, respectively.

Use of Estimates

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ASC Topic 805 also expands required disclosures surrounding the nature and financial effects of business combinations.

See Note 21 regarding the acquisitions in 2019.

Newly Adopted and Recent Accounting Pronouncements

Recent Accounting Pronouncements Adopted

Standard Description Financial Statement Effect or Other Significant Matters

Compensation - Retirement Benefits - Defined Benefit Plans - General (Subtopic 715-20)

The standard includes updates to the disclosure requirements for defined benefit plans including several additions, deletions and modifications to the disclosure requirements.

The provisions of this ASU are effective for years beginning after December 15, 2020, with early adoption permitted.

This ASU did not have a significant impact on our consolidated financial statements, as it only includes changes to disclosure requirements.

Date of adoption:

Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes

The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and improve consistent application by clarifying and amending existing guidance.

The amendments of this standard are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued, with the amendments to be applied on a respective, modified retrospective or prospective basis, depending on the specific amendment.

This ASU simplified the accounting for income taxes by, among other things, eliminating certain existing exceptions related to the general approach in ASC 740 relating to franchise taxes, reducing complexity in the interim-period accounting for year-to-date loss limitations and changes in tax laws, and clarifying the accounting for transactions outside of business combination that result in a step-up in the tax basis of goodwill.

As we do not have material activity associated with items such as franchise taxes or the types of transactions described above, we did not have any significant impact from relevant loss limitations and are not currently addressing enacted tax law changes for which this ASU applies.

This ASU did not have a material impact on its consolidated results of operations and financial condition.

Date of adoption:

Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance

This ASU is a new topic issued to increase the transparency for government assistance transactions and disclosures due to a lack of specific authoritative guidance in GAAP.

This ASU requires disclosures about government assistance in the notes to the financial statements that will provide comparable and transparent information to investors and other financial statement users to enable them to understand an entity’s financial results and prospects of future cash flows.

This ASU is effective for annual periods beginning after December 15, 2021, with early adoption permitted.

This ASU did not have a significant impact on our consolidated financial statements, as it only includes changes to disclosure requirements.

Date of adoption:

Recent Accounting Pronouncements Not Yet Adopted

Standard Description Financial Statement Effect or Other Significant Matters

2021-08 Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers

This amendment requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Topic 606, Revenue from Contracts with Customers , as if it had originated the contracts.

Under the current business combinations guidance, such assets and liabilities are recognized by the acquirer at fair value on the acquisition date.

The standard will not impact acquired contract assets or liabilities from business combinations occurring prior to the adoption date.

This ASU is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

The impact of adoption on the Company's consolidated financial statements will be prospective only and depend on the magnitude of future business acquisitions.

Planned date of adoption:

We consider the applicability and impact of all ASUs.

8 unchanged sentences

The Company recognizes an asset for the incremental, material costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year and the costs are expected to be recovered.

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

As of December 31, 2021, the Company does not have material incremental costs on any open contracts with an original expected duration of greater than one year.

These incremental costs

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

As of December 31, 2022 and 2021, the Company did 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.

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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 December 31, 2021 and 2020, the Company did not have material capitalized fulfillment costs.

As of December 31, 2022, the Company has capitalized $ 2.5 million of costs.

As of December 31, 2021, the Company did no t 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.

37 unchanged sentences

The Company's contract assets and contract liabilities consist 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

The following table presents the beginning and ending balances of contract assets and contract liabilities:

(In thousands) Contract Assets Contract Liabilities

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The increase in contract assets reflects the net impact of new revenue recognized in excess of billings exceeding billing of previously unbilled revenue during the period.

The decrease in contract liabilities reflects the net impact of revenue recognized in excess of additional customer advances or deferred revenues recorded.

The increase in contract liabilities reflects the net impact of additional customer advances or deferred revenues recorded in excess of revenue recognized.

The following table presents our revenue disaggregated by Market Segments as of December 31 as follows:

4 unchanged sentences

54,534 70,312 67,944

General Aviation

63,395 56,673 60,437

3 unchanged sentences

Semiconductor

— 3,483 9,692

Aerospace & Defense

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Total Receivables, Net $ 147,790 $ 107,439

The following table provides a roll-forward of the allowance for estimated credit losses that is deducted from accounts receivable to present the net amount expected to be collected at December 31:

The following table provides a rollforward of the allowance for estimated credit losses that is deducted from accounts receivable to present the net amount expected to be collected at December 31:

(In thousands)

25 unchanged sentences

Total Property, Plant and Equipment, Net $ 90,658 $ 95,236

There was a $ 2.3 million impairment of property, plant and equipment in the year ended December 31, 2019, classified within Impairment Loss in the Consolidated Statement of Operations, as more fully discussed in Note 23.

NOTE 6 — INTANGIBLE ASSETS

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Amortization expense for intangibles was $ 14.9 million, $ 15.4 million and $ 17.1 million for 2022, 2021 and 2020, respectively.

During 2019 there was a $ 6.2 million impairment of intangible assets in conjunction with the AeroSat restructuring.

The amount is classified within Impairment Loss in the Consolidated Statements of Operations.

Based upon acquired intangible assets at December 31, 2022, amortization expense for each of the next five years is estimated to be:

3 unchanged sentences

2025 $ 10,935

NOTE 7 — GOODWILL

3 unchanged sentences

$ 36,648 $ 21,634 $ 58,282

Acquisitions and Divestitures — ( 298 ) ( 298 )

Impairment Charge ( 86,312 ) — ( 86,312 )

Foreign Currency Translations and Other — — —

7 unchanged sentences

Goodwill, Net $ 36,534 $ 21,635 $ 58,169

The Company’s four reporting units with goodwill as of the first day of our fourth quarter of 2021 were subject to the annual goodwill impairment test.

Based on our quantitative assessments of our reporting units performed during our annual goodwill impairment test, the Company concluded that no impairment to the carrying value of goodwill in any of the Company’s reporting units was indicated and no impairment charge was recognized.

The Company’s four reporting units with goodwill as of the first day of our fourth quarters of 2022 and 2021 were subject to the annual goodwill impairment test.

Based on our quantitative assessments of our reporting units performed during our annual goodwill impairment tests, the Company concluded that no impairment to the carrying value of goodwill in any of the Company’s reporting units was indicated and no impairment charges were recognized in 2022 and 2021.

Beginning in the first quarter of 2020, the COVID-19 pandemic negatively impacted the global economy and aerospace industry.

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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 of our interim goodwill impairment tests, we recorded non-cash goodwill impairment charges in the Aerospace segment of approximately $ 86.3 million within the Impairment Loss line of the December 31, 2020 Consolidated Statements of Operations.

In the year ending December 31, 2019, we performed quantitative assessments for the reporting units which had goodwill as of the first day of the fourth quarter, prior to the initiation of the antenna business restructuring activities.

Based on our quantitative assessment, the Company recorded a full impairment charge of approximately $ 1.6 million associated with the AeroSat reporting unit.

The impairment loss was incurred in the Aerospace segment and is reported within the Impairment Loss line of the December 31, 2019 Consolidated Statements of Operations.

NOTE 8 — LONG-TERM DEBT

The Company's long-term debt at December 31, 2021 and 2020 consists of borrowings under its Fifth Amended and Restated Credit Agreement (the “Agreement”), which provides for a $ 500 million revolving credit line with the option to increase the line by up to $ 150 million.

The maximum 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.

In May 2020, the Company executed an amendment to the Agreement (the “Amended Facility”), which reduced the revolving credit line from $ 500 million to $ 375 million.

The Amended Facility suspended the application of the leverage ratio up through and including the second quarter of 2021 (the “suspension period”).

The maximum net leverage ratio is set at 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 December 31, 2020, there was $ 173.0 million outstanding under the revolving credit facility, none of which is due prior to the expiration date.

At December 31, 2021, there was $ 163.0 million outstanding on the revolving credit facility and there remained $ 210.9 million available subject to the minimum liquidity covenant discussed below, net of outstanding letters of credit.

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 December 31, 2021, outstanding letters of credit totaled $ 1.1 million.

Through the third quarter of 2021, the Amended Facility required the Company to maintain minimum liquidity, defined as unrestricted cash plus the unused revolving credit commitments, of $ 180.0 million at all times.

Through the second quarter of 2021, the Company was required to maintain a minimum interest coverage ratio of 1.75 x on a quarterly basis, except for the first quarter of 2021, which was set at 1.50 x.

The Company was in compliance with its financial covenants at December 31, 2021.

During the suspension period, the Company paid 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 paid 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 pays 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’s interest rate under the Amended Facility is 3.25 % at December 31, 2021.

The Company also pays 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 provided for the payment of a consent fee of 15 basis points of the commitment for each consenting lender.

The Amended Facility required mandatory prepayments during the suspension period when the Company’s cash balance exceeded $ 100 million.

During the year ended December 31, 2020, subsequent to the execution of the Amended Facility, the Company made prepayments approximating $ 165.0 million.

On March 1, 2022, the Company executed an amendment to the Amended Facility, which reduced the revolving credit line from $ 375 million to $ 225 million and extended the maturity date of the loans under the facility from February 16, 2023 to May 30, 2023.

Interest will be payable on the unpaid principal amount of the facility at a rate equal to the Secured Overnight Financing Rate (“SOFR”, which shall be at least 1.00 %), plus between 1.50 % to 3.25 % 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 0.40 % on the undrawn portion of the Amended Facility, based upon the Company’s leverage ratio.

The amendment provided for the payment of a consent fee of 10 basis points of the commitment for each consenting lender.

The amendment will require the Company to maintain minimum liquidity, defined as unrestricted cash plus the unused revolving credit commitments, of $ 35 million.

The maximum net leverage ratio is set at 4.75 to 1 for the first and second quarters of 2022 and 3.75 to 1 thereafter, and the definition of Adjusted EBITDA has been modified to exclude income from earnout payments and asset sales.

The Amended Facility also temporarily restricts certain activities, including dividend payments, acquisitions and share repurchases, through the third quarter of 2022.

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.

While we expect to be able to refinance, replace or extend the maturity date of our credit facility before it matures, we cannot be sure that we will be able to obtain such debt refinancing on commercially reasonable terms or at all.

The extent to which we will be able to effect such refinancing, replacement or maturity extension on terms that are favorable to us or at all is dependent on a number of highly uncertain factors, including then-prevailing credit and other market conditions, economic conditions, particularly in the aerospace and defense markets, disruptions or volatility caused by factors such as COVID-19, regional conflicts, inflation, and supply chain disruptions.

In addition, rising interest rates could limit our ability to refinance our existing credit facility when it matures or cause us to pay higher interest rates upon refinancing.

As the Company’s long-term debt approaches maturity, if the Company is unable to refinance, replace or extend the maturity on its credit facility, the Company’s liquidity, results of operations, and financial condition could be materially adversely impacted.

The Company's long-term debt at December 31, 2022 and 2021 consisted of borrowings under its Fifth Amended and Restated Credit Agreement (the “Agreement”).

On March 1, 2022, the Company executed an amendment to the Agreement, which reduced the revolving credit line from $ 375 million to $ 225 million and extended the maturity date of the loans under the facility from February 16, 2023 to May 30, 2023.

On August 9, 2022, the Company executed a further amendment to the Agreement, which reduced the revolving credit line from $ 225 million to $ 190 million until September 12, 2022 with further reductions to $ 180 million effective September 12, 2022 and $ 170 million effective October 11, 2022.

The amendment extended the maturity date of the loans under the facility from May 30, 2023 to August 31, 2023.

On October 21, 2022, the Company executed an additional amendment to the Agreement, under which the lenders waived enforcement of their rights against the Company arising from the Company’s failure to comply with the maximum net leverage ratio and minimum liquidity covenants, each as of September 30, 2022.

The amendment increased the revolving credit line to $ 180 million as of October 21, 2022, with a reduction to $ 170 million effective November 21, 2022.

Another amendment to the Agreement was executed on November 14, 2022 (the “Amended Facility”), which extended the maturity date of the loans under the facility from August 31, 2023 to November 30, 2023.

Under the Amended Facility, the revolving credit line was set at $ 180 million, with a reduction to $ 170 million effective December 21, 2022.

The amendment required the Company to maintain minimum liquidity, defined as unrestricted cash plus the unused revolving credit commitments ($ 10 million as of November 30, 2022 and December 31, 2022).

The Amended Facility required the Company to comply with a minimum Adjusted EBITDA covenant on a trailing twelve month basis.

The amendment eliminated the net leverage ratio covenant for the remaining term of the agreement.

Each amendment executed in 2022 required payment of a consent fee of 5 to 10 basis points of the commitment for each consenting lender.

At December 31, 2022, there was $ 164.0 million outstanding on the Amended Facility and there remained $ 6.0 million available subject to the minimum liquidity covenant discussed above.

The credit facility allocated up to $ 20 million of the $ 170 million revolving credit line for the issuance of letters of credit.

Interest on the debt outstanding at December 31, 2022 was payable on the unpaid principal amount of the facility at a rate equal to the Secured Overnight Financing Rate (“SOFR”, which is required to be at least 1.00 %), plus 5.50 % with an increase to a rate equal to SOFR (which is required to be at least 1.00 %), plus 8.50 % effective January 17, 2023.

The Company also was required to pay a commitment fee to the lenders in an amount equal to 0.40 % on the undrawn portion of the Amended Facility.

The Company amended its existing revolving credit facility on January 19, 2023 by entering into the Sixth Amended and Restated Credit Agreement (the “ABL Revolving Credit Facility”).

The ABL Revolving Credit Facility set the maximum aggregate amount that the Company can borrow under the revolving credit line at $ 115 million, with borrowings subject to a borrowing base determined primarily by certain domestic inventory and accounts receivable.

The maturity date of borrowings under the ABL Revolving Credit Facility is January 19, 2026.

Under the terms of the ABL Revolving Credit Facility, the Company will now pay interest on the unpaid principal amount of the facility at a rate equal to SOFR (which is required to be at least 1.00 %) plus 2.25 % to 2.75 %.

The Company will pay a quarterly commitment fee under the ABL Revolving Credit Facility in an amount equal to 0.25 % or 0.375 % based on the Company’s average excess availability.

Under the provisions of the ABL Revolving Credit Facility, the Company has a cash dominion arrangement with the lead banking institution whereby eligible daily cash receipts are contractually utilized to pay down outstanding borrowings.

Eligible cash receipts that have not yet been applied to outstanding debt balance will be classified as restricted cash in the accompanying consolidated balance sheets.

The Company also entered into a $ 90 million asset-based Term Loan Facility on January 19, 2023.

The Term Loan Facility is secured primarily by fixed assets, real estate and intellectual property.

The maturity date of the Term Loan Facility is the earlier of the stated maturity date of the ABL Revolving Credit Facility or January 19, 2027, provided the ABL Revolving Credit Facility is extended beyond that date.

The Company will pay interest under the Term Loan Facility at a rate equal to SOFR (which is required to be at least 2.50 %) plus 8.75 %.

The Company will pay a commitment fee under the Term Loan Facility of 5 % of the total aggregate commitment, or $ 4.5 million, $ 1.8 million which was paid on the closing date, $ 1.8 million of which will be paid on June 19, 2023 and $ 0.9 million of which will be paid on the date that the financial statements and compliance certificate for the fiscal quarter of the Company ending on or about March 31, 2024 are required to be delivered under the Term Loan Facility.

Amortization of the principal under the Term Loan Facility will begin in April with a monthly amortization rate of 0.292 % of the outstanding term loan principal balance for the period April 1, 2023 through June 1, 2023, increasing to 0.542 % per month for the period July 1, 2023 through September 1, 2023 then increasing to 0.833 % thereafter.

Total scheduled principal payments of $ 4.5 million are payable in 2023 and as such, have been classified as current in the accompanying consolidated balance sheet as of December 31, 2022.

The weighted-average interest rate on current maturities of long-debt is 13.60 %.

Pursuant to the ABL Revolving Credit Facility and the Term Loan Facility, the Company is required to comply with a minimum trailing four quarter EBITDA of $ 14.7 million for the Company’s first quarter of 2023, $ 23.3 million in the second quarter, $ 39.2 million in the third quarter, $ 51.7 million in the fourth quarter, $ 57.6 million in the first quarter of 2024, $ 65.2 million in the second quarter of 2024 and $ 70 million thereafter.

In addition, mandatory prepayment of a portion of excess cash flow, as defined by the Term Loan Facility, is payable towards the principle amount outstanding at the end of 2023.

Any voluntary prepayments made are subject to a prepayment fee, as defined by the Term Loan Facility.

The Company is also required to maintain minimum liquidity of $ 20 million through the date of delivery of the compliance certificate for the quarter ended March 31, 2024, and $ 10 million thereafter.

Beginning with the first quarter of 2024, the Company is subject to a minimum fixed charge coverage ratio of 1.10 to 1.00.

Further, the Company is subject to excess cash flow repayment provisions, restrictions on additional indebtedness, share repurchases and dividend payments, and a limitation on capital expenditures.

Upon execution of the amendment to its ABL Revolving Credit Facility and the Term Loan Facility on January 19, 2023, the Company incurred an additional $ 6.1 million in debt issuance costs, allocated between the ABL Revolving Credit Facility and the Term Loan Facility.

Deferred debt issuance costs associated with the ABL Revolving Credit Facility will be recorded within other assets and those associated with the Term Loan Facility will be recorded as a reduction of the carrying value of the debt on the Consolidated Balance Sheets.

Certain of the Company’s subsidiaries are borrowers or guarantors under the ABL Revolving Credit Facility and the Term Loan Facility.

In the event of voluntary or involuntary bankruptcy of the Company or any subsidiary, all unpaid principal and other amounts owing under the credit facilities 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, cross default under other material debt agreements, and a going concern qualification for any reason other than loan maturity date give the agent the option to declare all such amounts immediately due and payable.

The Company expects its sales growth and reductions in working capital will provide sufficient cash flows to fund operations.

However, the Company may also evaluate various actions and alternatives to enhance its profitability and cash generation from operating activities, which could include manufacturing efficiency initiatives, cost-reduction measures, working with vendors and suppliers to reduce lead times and expedite shipment of critical components, and working with customers to expedite receivable collections.

Our ability to maintain sufficient liquidity and comply with financial debt covenants is highly dependent upon achieving expected operating results.

Failure to achieve expected operating results could have a material adverse effect on our liquidity, our ability to obtain financing or access our existing financing, and our operations in the future and could allow our debt holders to demand payment of all outstanding amounts.

Refer to Item 1A, Risk Factors, for further discussion.

NOTE 9 — WARRANTY

4 unchanged sentences

Balance at Beginning of the Year $ 8,183 $ 7,018 $ 7,660

Warranty Liabilities Divested or Acquired — — ( 80 )

Warranties Issued 3,407 6,083 1,725

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We have concluded that when an agreement grants us the right to substantially all of the economic benefits associated with an identified asset, and we are able to direct the use of that asset throughout the term of the agreement, we have a lease.

We lease certain office equipment under finance leases, and we lease certain production facilities, office equipment and vehicles under operating leases.

We lease certain office equipment under finance leases, and we lease certain production facilities, office equipment and vehicles under operating

Some of our leases include options to extend or terminate the leases and these options have been included in the relevant lease term to the extent that they are reasonably certain to be exercised.

If the lease arrangement also contains non-lease components, the Company elected the practical expedient not to separate any combined lease and non-lease components for all lease contracts.

For our real estate leases, the remaining fixed minimum rental

payments used in the calculation of the new lease liability, include fixed payments and variable payments (if the variable payments are based on an index), over the remaining lease term.

For our real estate leases, the remaining fixed minimum rental payments used in the calculation of the new lease liability, include fixed payments and variable payments (if the variable payments are based on an index), over the remaining lease term.

Variable lease payments based on indices have been included in the related right-of-use assets and lease liabilities on our Consolidated Balance Sheets, while variable lease payments based on usage of the underlying asset have been excluded, as they do not represent present rights or obligations.

5 unchanged sentences

Any new additional operating and financing lease liabilities and corresponding right-of-use (“ROU”) assets are based on the present value of the remaining minimum rental payments.

The Company's operating lease liability increased approximately $ 3.0 million as a result of acquiring ROU assets from new leases entered into during the year ended December 31, 2022.

In determining the incremental borrowing rate, we have considered borrowing data for secured debt obtained from our lending institution.

23 unchanged sentences

Operating Lease Cost 6,627 5,881

Impairment Charge of Operating Lease ROU Asset — 691

Variable Lease Cost 1,757 1,546

12 unchanged sentences

(a) whether its expired or existing contracts are or contain leases, (b) the lease classification for any expired or existing leases, and (c) initial direct costs for any existing leases.

The weighted-average remaining term for the Company's operating and financing leases are approximately 5 years and less than 1 year, respectively.

The weighted-average discount rates for the Company's operating and financing leases are approximately 3.3 % and 1.3 %, respectively.

The weighted-average remaining term for the Company's operating and financing leases are approximately 4 years and 3 years, respectively.

The weighted-average discount rates for the Company's operating and financing leases are each approximately 3.6 %.

The following is a summary of the Company's maturity of lease liabilities:

1 unchanged sentence

2023 $ 4,876 $ 32

2024 3,879 32

2025 3,310 18

2026 1,216 14

Thereafter 1,298 —

2 unchanged sentences

Total Lease Liability $ 14,383 $ 96

These amounts exclude annual operating lease payments of $ 1.5 million per year through 2031, which represents legal binding lease payments for leases signed, but not yet commenced.

These amounts exclude annual operating lease payments of approximately $ 1.7 million per year through 2033, which represents legal binding lease payments for leases signed, but not yet commenced.

NOTE 11 — INCOME TAXES

1 unchanged sentence

Deferred tax assets are reduced, if deemed necessary, by a valuation allowance for the amount of tax benefits which are not more likely than not to be realized.

Investment tax credits are recognized on the flow through method.

The provision for (benefit from) income taxes at December 31 consists of the following:

21 unchanged sentences

Change in Valuation Allowance ( 44.6 ) % ( 29.8 ) % ( 19.2 ) %

Net GILTI and FDII Tax Benefit — % — % ( 1.2 ) %

Net GILTI and FDII Tax Expense 1.8 % — % — %

Foreign Tax Credit for Dividend Withholding ( 1.5 ) % 1.7 % — %

14 unchanged sentences

ASC 606 Revenue Recognition 197 1,817

Research & Development Costs 19,892 —

Lease Liabilities 3,201 4,178

16 unchanged sentences

Net Deferred Tax Liabilities $ ( 1,158 ) $ ( 1,148 )

The Company records a valuation allowance against the deferred tax assets if and to the extent it is more likely than not that the Company will not recover the deferred tax assets.

In evaluating the need for a valuation allowance, the Company weighs all relevant positive and negative evidence, and considers among other factors, historical financial performance, projected future taxable income, scheduled reversals of deferred tax liabilities, the overall business environment, and tax planning strategies.

Losses in recent periods and cumulative pre-tax losses in the three year period ending with the current year, 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.

For purposes of assessing the recoverability of deferred tax assets, the Company determined that it could not include future projected earnings in the analysis due to the recent history of losses and therefore had insufficient objective positive evidence that the Company will generate sufficient future taxable income to overcome the negative evidence of cumulative losses.

Accordingly, during the years ended December 31, 2022, 2021, and 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 provision for valuation allowances against its U.S.

federal deferred tax assets of approximately $ 11.9 million, $ 6.0 million, and $ 23.3 million during the years ended December 31, 2022, 2021 and 2020, respectively.

In addition, during the years ended December 31, 2022 and 2021, the Company recorded a valuation allowance against certain foreign deferred tax assets of approximately $ 0.4 million and $ 1.3 million, respectively.

Beginning January 1, 2022, the Tax Cuts and Jobs Act (TCJA) of 2017 eliminated the option to deduct research and development expenditures in the current year and now requires taxpayers to capitalize and amortize research and development costs pursuant to Internal Revenue Code (“IRC”) Section 174.

The capitalized expenses are amortized over a 5-year period for domestic expenses and a 15-year period for foreign expenses.

As a result of this provision of the TCJA, deferred tax assets related to capitalized research expenses increased by approximately $ 19.9 million during the year ended December 31, 2022.

Given the recent history of losses, the Company determined that it could not include future projected income as a source of taxable income to realize this deferred tax asset in the future.

As a result, a valuation allowance has been recorded.

At December 31, 2022, gross federal net operating losses, amounted to approximately $ 3.1 million.

In the current year, the Company generated approximately $ 15.8 million of net operating losses, which can be carried forward indefinitely, limited annually to 80% of taxable income.

In the current year, the Company generated approximately $ 51.5 million of taxable income, net of utilized net operating losses of approximately $ 25.7 million.

The remaining prior year carry forward net operating losses of approximately $ 3.1 million can be carried forward and are subject to annual limitations under Internal Revenue Code Section 382.

Of these net operating losses, $ 5.9 million expire in 2037 and 2038 and the remaining $ 0.4 million will carryforward indefinitely.

Given that the Company does not have a source of future taxable income to realize these net operating losses, a valuation allowance has been recorded on them.

Of these net operating losses, $ 2.7 million expire in 2038 and the remaining $ 0.4 million will carryforward indefinitely.

Given the recent history of losses, the Company determined that it could not include future projected income as a source of taxable income to realize this deferred tax asset in the future.

As a result, a valuation allowance has been recorded.

At December 31, 2022, gross state net operating loss carryforwards amounted to approximately $ 134.1 million.

These state net operating loss carryforwards begin to expire at various dates from 2022 through 2042.

Due to the uncertainty as to the Company’s ability to generate sufficient taxable income in certain states in the future and to utilize certain of the Company’s state operating loss carryforwards before they expire, the Company has recorded a valuation allowance on $ 134.6 million of them.

The remaining $ 2.6 million of net operating loss carryforwards are more likely than not to be realized.

Due to the uncertainty as to the Company’s ability to generate sufficient taxable income in certain states in the future along with the recent history of losses resulting in the Company excluding future projected income as a source of taxable income to realize certain of these state net operating losses in the future, a valuation allowance has been recorded.

At December 31, 2022, state income tax credit carryforwards amounted to approximately $ 1.1 million and begin to expire at various dates from 2022 to 2037.

Due to the uncertainty as to the Company’s ability to generate sufficient taxable income in certain states in the future, the Company has recorded a valuation allowance on these credits.

At December 31, 2021, the estimated federal R&D tax credit for the current year amounted to approximately $ 2.6 million which the Company can carry forward through 2041.

In addition, the Company has approximately $ 0.7 million of foreign tax

credits that it can carry forward through 2031.

Given that the Company does not have a source of future taxable income to realize these tax attributes, a valuation allowance has been recorded on these credits.

At December 31, 2022, the Company has approximately $ 0.2 million of foreign tax credits that it can carry forward through 2031.

Given the recent history of losses, the Company determined that it could not include future projected income as a source of taxable income to realize this deferred tax asset in the future.

As a result, a valuation allowance has been recorded.

During the year ended December 31, 2020, the Company determined that a revised state filing position could be taken which would reduce the taxable income apportioned for state income tax purposes and recorded a state income tax receivable of approximately $ 3.0 million as a component of Prepaid Expenses and Other Current Assets.

The Company has filed amended state income tax returns for tax years 2015 and 2016 and intends to file amended state income tax returns for tax years 2017 through 2019 in order to claim these refunds.

During the year ended December 31, 2018, the Company determined that a revised state filing position could be taken which would reduce the taxable income apportioned for state income tax purposes and amended state income tax returns were filed for the open tax years of 2014 through 2017 to reflect this revised tax position.

The Company is also claiming the benefit of the revised filing position for 2018 and subsequent tax years.

The statute of limitations expired on various dates in 2020 and 2021 for the amended returns for tax years 2014 through 2016, and approximately $ 0.8 million and approximately $ 0.5 million of the unrecognized tax benefit was recognized during 2020 and 2021, respectively.

Absent a state tax audit notice related to the refund claim, the statute of limitations will expire in December 2022 for the amended return for tax year 2017, at which time approximately $ 0.5 million of the unrecognized tax benefit is expected to be recognized.

The statute of limitations will expire in years 2022 through 2025 for tax years 2018 through 2021, respectively.

The Company has analyzed its filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions.

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Penalties, if any, would be recorded as operating expenses.

During the year ended December 31, 2020, reserves for uncertain tax positions were recorded in association with a revised state income tax filing positions pursuant to ASC Topic 740-10.

A reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties that, if recognized, would impact the effective tax rate, is as follows:

A reconciliation of the total amounts of unrecognized tax benefits, excluding interest and penalties, is as follows:

(in thousands) 2022 2021 2020

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The years under which we conducted our evaluation coincided with the tax years currently still subject to examination by major federal and state tax jurisdictions, those being 2019 through 2022 for federal purposes and 2017 through 2022 for state purposes.

Pretax (loss) income from the Company’s foreign subsidiaries amounted to $( 3.3 ) million, $( 7.0 ) million and $ 12.2 million for 2021, 2020 and 2019, respectively.

Pretax income (loss) from the Company’s foreign subsidiaries amounted to approximately $ 0.1 million, $( 3.3 ) million and $( 7.0 ) million for 2022, 2021 and 2020, respectively.

The balance of pretax earnings or loss for each of those years were domestic.

On December 29, 2021, Luminescent Systems Canada, Inc.

(“LSI Canada”) declared a one-time dividend in the amount of $ 16.5 million to its U.S.

LSI Canada remitted non-resident Canadian withholding tax on this dividend in the amount of approximately $ 0.8 million.

No additional provision for U.S.

federal or foreign taxes has been made as the remaining foreign subsidiaries’ undistributed earnings (approximately $ 3.0 million at December 31, 2021) are considered to be permanently reinvested.

It is not practicable to determine the amount of outside basis differences related to the investment in foreign subsidiaries and other taxes that would be payable if these amounts were repatriated to the U.S.

While the Tax Cuts and Jobs Act provides for a territorial tax system, beginning in 2018, it includes the foreign-derived intangible income (“FDII”) and global intangible low taxed income (“GILTI”) provisions.

The Company elected to account for GILTI tax in the period in which it is incurred, and includes in its U.S.

income tax return foreign subsidiary earnings from its Controlled Foreign Corporations (“CFCs”) in excess of an allowable return on the foreign subsidiary’s tangible assets.

The Company does not expect to incur any GILTI tax expense during the year ended December, 31, 2021 as the Company is in a net tested loss position.

The FDII provisions allow for a deduction equal to a percentage of the foreign-derived intangible income of a domestic corporation.

As a result of these provisions, net, the Company recorded no tax benefit during the year ended December 31, 2021, a tax benefit of less than $ 0.1 million during the year ended December 31, 2020, and a tax benefit of approximately $ 0.8 million during the year ended December 31, 2019.

Historically, we have asserted that the unremitted earnings of our foreign subsidiaries were indefinitely reinvested.

However, as of December 31, 2022, we determined that we can no longer assert indefinite reinvestment on approximately $ 3.4 million of the unremitted earnings of Luminescent Systems Canada Inc.

As a result, we have recorded a deferred tax liability of approximately $ 0.2 million at December 31, 2022, related to local country withholding taxes that are expected to be incurred upon ultimate repatriation of such earnings.

All other foreign unremitted earnings, which total approximately $ 11.3 million, continue to be indefinitely reinvested.

We continue to be permanently reinvested in outside basis differences other than unremitted earnings as we have no plans to liquidate or sell any foreign subsidiaries.

In addition, we have not provided deferred taxes on any outside basis differences of our domestic subsidiaries as we have the ability and intent to recover these basis differences in a tax-free manner.

It is not practicable to determine the amount of unrecognized deferred tax related to these basis differences.

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.

The CARES Act includes many measures to assist companies,

including temporary changes to income and non-income based laws, some of which were enacted as part of the Tax Cuts and Jobs Act of 2017 (“TCJA”).

The CARES Act includes many measures to assist companies, including temporary changes to income and non-income based laws, some of which were enacted as part of the Tax Cuts and Jobs Act of 2017 (“TCJA”).

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

During the years ended December 31, 2021 and 2020, the Company recorded a tax benefit relating to the NOL carryback provisions and the technical correction for qualified improvement property provided for in the CARES Act of approximately $ 0.3 million and $ 1.5 million respectively.

The Company records a valuation allowance against the deferred tax assets if and to the extent it is more likely than not that the Company will not recover the deferred tax assets.

Accordingly, during the years ended December 31, 2021 and 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 provision for valuation allowances against its U.S.

federal deferred tax assets of approximately $ 6.0 million and $ 23.3 million during the years ended December 31, 2021 and 2020 respectively.

In addition, during the year ended December 31, 2021, the Company recorded a valuation allowance against certain foreign deferred tax assets of approximately $ 1.3 million.

No tax benefit was recorded for the year ending December 31, 2022.

The Inflation Reduction Act of 2022 (IRA) was signed into law on August 16, 2022.

Key provisions under the IRA include a 15% corporate alternative minimum tax imposed on certain large corporations and the extension and expansion of clean energy tax incentives.

There were no impacts related to the IRA recorded for the year ending December 31, 2022.

NOTE 12 — PROFIT SHARING/401K PLAN

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Total charges to income before income taxes for these plans were approximately $ 4.7 million, $ 4.3 million and $ 3.3 million in 2022, 2021 and 2020, respectively.

The Company expects to fund substantially all of the 2021 401K contributions with treasury stock in lieu of cash in the first quarter of 2022.

The Company has funded the 2021 and 2022 contributions to date with treasury stock in lieu of cash and will fund the remaining 2022 contribution with treasury stock in the first quarter of 2023.

NOTE 13 — RETIREMENT PLANS AND RELATED POST RETIREMENT BENEFITS

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Interest Cost 834 764

Actuarial (Gain) Loss ( 1,838 ) 4,472

Actuarial Gain ( 4,917 ) ( 1,838 )

Benefits Paid ( 348 ) ( 348 )

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Future Average Compensation Increases 2.00 % - 3.00 %

The Company expects the benefits to be paid in each of the next two years to be $ 0.3 million, $ 0.6 million in each of the following three years, and $ 7.9 million in the aggregate for the next five years after that.

2.00 % - 3.00 %

The Company expects the benefits to be paid in the next year to be $ 0.3 million, each of the next three years to be $ 0.6 million, $ 1.0 million in the year following, and $ 10.5 million in the aggregate for the next five years after that.

This also is the expected Company contribution to the plans.

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The measurement date for determining the plan obligation and cost is December 31.

The accumulated postretirement benefit obligation is $ 1.1 million for the years ended December 31, 2021 and 2020.

The plan is recognized in the accompanying Consolidated Balance Sheets as a current accrued pension liability of $ 0.1 million and a long-term accrued pension liability of $ 1.0 million.

The accumulated postretirement benefit obligation is $ 0.8 million and $ 1.1 million for the years ended December 31, 2022 and 2021, respectively.

The plan is recognized in the accompanying Consolidated Balance Sheets as a current accrued pension liability of $ 0.1 million and a long-

term accrued pension liability of $ 0.7 million.

The net periodic cost for the years ended December 31, 2022, 2021 and 2020 is immaterial.

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The measurement date for determining the plan obligation and cost is December 31.

The unfunded liability is $ 0.3 million for the years ended December 31, 2021 and 2020.

The plan is recognized in the accompanying Consolidated Balance Sheets as a long-term liability.

The defined benefit plan has an overfunded asset of $ 0.1 million and an unfunded liability of $ 0.3 million for the years ended December 31, 2022 and 2021, respectively.

The plan is recognized in the accompanying Consolidated Balance Sheets as a long-term asset and long-term liability, respectively.

The net periodic cost for the years ended December 31, 2022, 2021 and 2020 is immaterial.

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The Company’s Board of Directors from time to time authorizes the repurchase of common stock, which allows the Company to purchase shares of its common stock in accordance with applicable securities laws on the open market or through privately negotiated transactions.

In the years ended 2019 and 2020, the Company repurchased 1,851,000 and 282,000 shares, at an aggregate cost of $ 50.8 million and $ 7.7 million, respectively.

The Company has the capacity under the currently authorized program to repurchase an additional $ 41.5 million.

The 10b5-1 plan associated with the program was terminated on February 3, 2020.

Under its current credit agreement, and as described further in Note 8, the Company is currently restricted from further stock repurchases.

In the year ended December 31, 2020, the Company repurchased 282,000 shares, at an aggregate cost of $ 7.7 million.

The Company has the capacity under the currently authorized program to repurchase additional shares of its common stock with a maximum dollar value of $ 41.5 million.

The Company’s Rule 10b5-1 plan associated with the program was terminated on February 3, 2020.

Under its current credit agreement, and as described further in Note 8, the Company is restricted from further stock repurchases under this program.

Reserved Common Stock

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Class B Stock is identical to Common Stock, except Class B Stock has ten votes per share, is automatically converted to Common Stock on a one -for-one basis when sold or transferred other than via gift, devise or bequest and cannot receive dividends unless an equal or greater amount of dividends is declared on Common Stock.

Comprehensive (Loss) Income and Accumulated Other Comprehensive Loss

Comprehensive Loss and Accumulated Other Comprehensive Loss

Comprehensive income or loss consists of net income or loss and the after-tax impact of retirement liability adjustments.

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Retirement Liability Adjustment 6,897 2,894 ( 3,396 )

Tax Benefit — — 641

Retirement Liability Adjustment 2,894 ( 3,396 ) ( 2,413 )

Other Comprehensive Income (Loss) $ 4,969 $ 1,955 $ ( 822 )

In 2022, 2021 and 2020, no tax benefit was recognized as the Company had recorded a full valuation allowance.

NOTE 15 — EARNINGS (LOSS) PER SHARE

Earnings (loss) per share computations are based upon the following table:

NOTE 15 — LOSS PER SHARE

Loss per share computations are based upon the following table:

(In thousands, except per share data) 2022 2021 2020

Net (Loss) Income $ ( 25,578 ) $ ( 115,781 ) $ 52,017

Net Loss $ ( 35,747 ) $ ( 25,578 ) $ ( 115,781 )

Basic Earnings Weighted Average Shares 32,164 31,061 30,795

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Diluted Earnings Weighted Average Shares 32,164 31,061 30,795

Basic (Loss) Earnings Per Share $ ( 0.82 ) $ ( 3.76 ) $ 1.62

Diluted (Loss) Earnings Per Share $ ( 0.82 ) $ ( 3.76 ) $ 1.60

Basic Loss Per Share $ ( 1.11 ) $ ( 0.82 ) $ ( 3.76 )

Diluted Loss Per Share $ ( 1.11 ) $ ( 0.82 ) $ ( 3.76 )

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 excluded from the computation was approximately 1.4 million for the year ended December 31, 2022, 1.2 million for the year ended December 31, 2021, and 0.8 million for the year ended December 31, 2020.

The Company expects to fund substantially all of the 2021 401K contributions with treasury stock in lieu of cash in the first quarter of 2022.

The earnings per share computation for the year ended December 31, 2021 is inclusive of approximately 0.4 million in shares outstanding for the equivalent shares needed to fulfill the 401K obligation using the closing share price as of December 31, 2021.

The Company has funded substantially all of its 2021 and 2022 401K contributions, and will fund the remaining 2022 401K contributions outstanding, with treasury stock in lieu of cash.

The earnings per share computation for the years ended December 31, 2022 and 2021 are is inclusive of approximately 0.1 million and 0.4 million in shares outstanding for the equivalent shares needed to fulfill the respective period’s 401K obligation using the closing share price as of December 31, 2022 and 2021, respectively.

Actual shares issued may differ based on the share price on the settlement date.

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The Company’s practice has been to issue new shares upon the exercise of the options.

The Company established Incentive Stock Option Plans for the purpose of attracting and retaining executive officers and key employees, and to align management’s interest with those of the shareholders.

The Company established its Incentive Stock Option Plans for the purpose of attracting and retaining executive officers and key employees, and to align management’s interest with those of the shareholders.

At December 31, 2022, the Company had options outstanding for 521,973 shares under the plans.

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During 2017, the Company established the Long Term Incentive Plan for the purpose of attracting and retaining directors, executive officers and key employees, and to align management's interest with those of the shareholders.

The Plan contemplates the use of a mix of equity award types.

The Long Term Incentive Plan contemplates the use of a mix of equity award types.

For stock options, the exercise price is equal to the share price on the date of grant.

Upon inception, the remaining options available for future grant under the 2011 Incentive Stock Option Plan and the Directors Stock Option Plans were rolled in the Long Term Incentive Plan, and no further grants may be made out of those plans.

At December 31, 2021, the Company had stock options and RSU's outstanding of 1,211,283 shares under the Long Term Incentive Plan, and there were 1,790,581 shares available for future grant under this plan.

At December 31, 2022, the Company had stock options and RSU's outstanding that covered 1,369,810 shares under the Long Term Incentive Plan, and there were 1,226,057 shares available for future grant under this plan.

Stock compensation expense recognized during the period is based on the value of the portion of share-based payment awards that is ultimately expected to vest during the period.

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The expected term of stock options is based on vesting schedules, expected exercise patterns and contractual terms.

A summary of the Company’s stock option activity and related information for the years ended December 31 is as follows:

A summary of the Company’s stock option activity and related information for the year ended December 31 is as follows:

(Aggregate intrinsic value in thousands) Options Weighted

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Exercisable at December 31 687,682 $ 27.35 $ —

The aggregate intrinsic value in the preceding table represents the total pretax option holder’s intrinsic value, based on the Company’s closing stock price of Common Stock which would have been received by the option holders had all option holders exercised their options as of that date.

The Company’s closing stock price of Common Stock was $ 12.00 , $ 13.23 and $ 27.95 as of December 31, 2021, 2020 and 2019, respectively.

The aggregate intrinsic value in the preceding table represents the total pretax option holder’s intrinsic value, based on the closing stock price of the Company’s Common Stock which would have been received by the option holders had all option holders exercised their options as of that date.

The closing stock price of the Company’s Common Stock was $ 10.30 , $ 12.00 and $ 13.23 as of December 31, 2022, 2021 and 2020, respectively.

As the stock price of $ 10.30 was below the weighted average exercise price, intrinsic value is zero.

The weighted average fair value of options vested during 2022, 2021 and 2020 was $ 12.89 , $ 14.58 and $ 14.77 , respectively.

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A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

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 an earnout estimated at a fair value of $ 2.5 million at the time of acquisition.

The purchase consideration included an earnout estimated at a fair value of $ 2.5 million at the time of acquisition.

The terms of the Diagnosys acquisition allow for a potential earnout 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 fair value of this contingent consideration was estimated at $ 2.2 million at December 31, 2020.

The fair value assigned to the earnout was 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.

Based on actual and forecasted new orders, the fair value was zero as of December 31, 2021, with the contingent consideration liability fair value adjustment of $ 2.2 million recorded within the Selling, General and Administrative line in the Consolidated Condensed Statements of Operations in the year ended December 31, 2021.

No amounts have been paid or are payable related to this earnout.

There were no other financial assets or liabilities carried at fair value measured on a recurring basis at December 31, 2022 or 2021.

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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.

There were no impairment charges to goodwill in any of the Company’s reporting units in 2021.

There were no impairment charges to goodwill in any of the Company’s reporting units in 2022 or 2021.

As further discussed in Note 7, we performed interim quantitative assessments for the reporting units which had goodwill as of March 28, 2020.

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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.

In 2019, we performed quantitative assessments for the reporting units which had goodwill as of the first day of the fourth quarter, prior to the initiation of the AeroSat restructuring activities.

Based on our quantitative assessment, the Company recorded a full impairment charge of approximately $ 1.6 million within the Impairment Loss line in the Consolidated Statements of Operations in the year ended December 31, 2019.

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.

As of December 31, 2021, the Company concluded that no indicators of impairment relating to long-lived assets existed.

As of December 31, 2022 and 2021, the Company concluded that no indicators of impairment relating to long-lived assets existed.

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 Statements of Operations for the year ended December 31, 2020.

In conjunction with the restructuring of AeroSat in 2019, the Company recorded impairment charges to long-lived assets including intangible assets, property, plant and equipment and ROU assets of approximately $ 9.5 million in the Consolidated Statements of Operations for the year ended December 31, 2019.

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 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 Statements of Operations for the year ended December 31, 2020.

A full impairment charge of $ 5.0 million for an additional investment was recorded in 2019.

No such impairment was recorded in 2021.

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 Statements of Operations for the year ended December 31, 2020.

No such impairment was recorded in 2022 or 2021.

These are Level 3 measurements as there were no observable price changes during the year.

The Freedom and Diagnosys intangible assets acquired in 2019 were valued using a discounted cash flow methodology, as of their respective acquisitions dates, and are classified as Level 3 inputs.

Of the severance charges recorded, $ 0.6 million, $ 2.6 million and $ 2.8 million in 2021, 2020 and 2019, respectively, qualify as one-time termination benefit arrangements and were initially measured at fair value using level 3 inputs.

Of the severance charges recorded, $ 0.6 million and $ 2.6 million in 2021 and 2020, respectively, qualify as one-time termination benefit arrangements and were initially measured at fair value using level 3 inputs.

Due to their short-term nature, the carrying value of cash and equivalents, accounts receivable and accounts payable approximate fair value.

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Loss Before Income Taxes $ ( 7,208 ) $ ( 151 )

Net Income (Loss) $ 1,604 $ ( 19,985 )

Basic Earnings (Loss) Per Share $ 0.05 $ ( 0.65 )

Diluted Earnings (Loss) Per Share $ 0.05 $ ( 0.65 )

Net (Loss) Income $ ( 6,779 ) $ 1,604

Basic (Loss) Earnings Per Share $ ( 0.21 ) $ 0.05

Diluted (Loss) Earnings Per Share $ ( 0.21 ) $ 0.05

A former customer filed a lawsuit alleging damages associated with defective product in 2019.

Mediation of the matter was held in November 2022.

The Company agreed to make a payment of $ 2.0 million to settle the matter in the third quarter of 2022.

The Company was indemnified by other parties for approximately $ 1.5 million and recorded a gain as an offset to Selling, General and Administrative expense in the fourth quarter of 2022.

The Company has also experienced material and labor inflation throughout 2022 which also impacts the comparability against the fourth quarter of 2021.

In the fourth quarter of 2021, a portion of the AMJP grant received of $ 7.6 million was recognized as an offset to cost of products sold.

This benefit was offset by a legal accrual recorded of $ 8.4 million relating to an adverse ruling of an on-going patent infringement case.

This benefit was offset by a legal accrual recorded of $ 8.4 million relating to an adverse ruling of an ongoing patent infringement case.

In addition, the Company agreed to an earnout, shown above, with the buyer of the former semiconductor test business as more fully described in Note 21 and sold one of its Aerospace facilities, resulting in $ 5.0 million gain on sale discussed in Note 22.

The Company also reinstituted its 401K employer contribution in the fourth quarter of 2021, and recorded expense of $ 4.3 million in that period.

In the fourth quarter of 2021, after completion of the tax returns for the year ended December 31, 2020, the Company recorded a current federal tax benefit of approximately $ 1.7 million related to additional net operating loss and R&D tax credits that will be carried back to prior tax years in order to claim a refund.

In the fourth quarter of 2020, the Company recorded a partial valuation allowance of $ 14.1 million against its U.S.

federal deferred tax assets .

NOTE 19 — LEGAL PROCEEDINGS

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With this decision, the above mentioned proceedings are complete.

In July 2017, Lufthansa filed an action in the Regional State Court of Mannheim for payment of damages caused by the AES’s direct sales of the product into Germany.

In July 2017, Lufthansa filed an action in the Regional State Court of Mannheim for payment of damages caused by AES’s direct sales of the product into Germany.

A first instance decision in this matter was handed down on December 6, 2019.

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In 2020, AES made payment of $ 4.7 million, inclusive of interest, in satisfaction of the first instance judgment.

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

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

An oral hearing has been scheduled by the appellate court for April 12, 2023.

A decision is expected on the appeals of both parties in the second quarter of 2023.

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

Further, if Lufthansa is successful on their appeal, additional damages may be awarded to them.

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.

An oral hearing is scheduled for June 14, 2023, with a decision expected approximately one month later.

In its appeal, Lufthansa requested an additional finding that AES shall be held liable for all damages (in an unspecified amount) caused by AES’s alleged incorrect accounting of its past sales.

On April 28, 2020, Lufthansa asked AES to provide the accounting on indirect sales (as defined above) and the sale of individual parts and an affidavit confirming the accuracy of the September 2015 accounting of direct sales.

AES completed and delivered the final accounting on January 29, 2021.

If the December 6, 2019 decision of the Regional State Court of Mannheim is confirmed on appeal, AES would be responsible for payment of damages for indirect sales of patent-infringing EmPower in-seat power supply systems in the period from December 29, 2007 to May 22, 2018.

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

Approximately $ 0.6 million was recorded within Selling, General and

Administrative Expenses in the Company’s Consolidated Statements of Operations in both 2020 and 2021 for additional interest accrued during such periods.

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, 2022.

Approximately $ 0.6 million was recorded within Selling, General and Administrative Expenses in the Company’s Consolidated Statements of Operations in each of 2022, 2021 and 2020, respectively, for additional interest accrued during such periods.

In connection with the indirect sales claims, we currently believe it is unlikely that the appeals process will be completed and any damages and related interest will be paid before December 31, 2023.

Therefore, the liability related to this matter, totaling $ 17.8 million and $ 17.3 million, is classified within Other Liabilities (non-current) in the Consolidated Balance Sheets at December 31, 2022 and 2021, respectively.

This amount may be adjusted depending on the decision of the court on the direct sales damages appeal referred to previously.

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

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Lufthansa has appealed this judgment.

The appeal hearing is scheduled for December 8, 2022.

The appeal hearing took place on December 8, 2022 and on February 24, 2023, the court

upheld the first instance judgment in favor of AES.

As loss exposure is not probable and estimable at this time, the Company has not recorded any liability with respect to the French matter as of December 31, 2022 or 2021.

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That election has not yet been made by Lufthansa and there is currently no date set for it to make this election.

However, as we have concluded a loss is probable and reasonably estimable based upon the information currently available to AES, we have estimated damages of approximately $ 6.2 million, plus accrued interest of approximately $ 1.1 million, for AES and its indemnified customers.

However, as we concluded a loss was probable and reasonably estimable based upon the information available to AES, we estimated damages of approximately $ 6.2 million, plus accrued interest of approximately $ 1.1 million, for AES and its indemnified customers.

Interest will accrue until final payment to Lufthansa.

Approximately $ 7.3 million is reflected for this matter as a liability in the Consolidated Balance Sheet as of December 31, 2021, and has been recorded within Selling, General & Administrative Expenses in the accompanying Consolidated Statement of Operations for the year then ended.

Approximately $ 7.3 million was reflected for this matter as a liability in the Consolidated Balance Sheet as of December 31, 2021, and was recorded within Selling, General & Administrative Expenses in the accompanying Consolidated Statement of Operations for the year then ended.

This amount is subject to change as additional data is received and evaluated, and as additional information regarding the damages methodology is claimed by Lufthansa in advance of the damages trial.

We currently believe it is unlikely that the UK damages claim will be completed and the damages and related interest will be paid before December 31, 2022.

Therefore, the liability related to this matter, totaling $ 7.3 million, is classified within Other Liabilities (non-current) in the Consolidated Balance Sheets at December 31, 2021.

The damages trial is scheduled to be heard starting in October 2024, with payment likely due in late 2024 or early 2025.

Therefore, the liability related to this matter, totaling $ 7.0 million and $ 7.3 million, is classified within Other Liabilities (non-current) in the Consolidated Balance Sheets at December 31, 2022 and 2021, respectively.

The variance is due to currency fluctuation.

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 was entitled to reimbursement from AES of a proportion of its legal expenditures in the UK case.

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As a result of the appeal decision, Lufthansa will be entitled to reimbursement from AES of a larger proportion of its first instance legal expenditures, as well as a portion of its legal expenditures associated with the appeal.

We have recorded an estimated liability of approximately $ 1.0 million in our Consolidated Balance Sheet at December 31, 2021.

We recorded an estimated liability of approximately $ 1.1 million in our Consolidated Balance Sheet at December 31, 2021.

The associated expense is recorded within Selling, General & Administrative Expenses in the Consolidated Statement of Operations for the year then ended.

It is likely that such amount will be payable within the next twelve months, and as such, the liability has been classified as a current liability in the accompanying Consolidated Balance Sheets within Other Accrued Expenses at December 31, 2021.

A payment of $ 0.3 million was made in 2022.

It is likely the remaining amount will be payable within the next twelve months, and as such, the liability of $ 0.7 million has been classified as a current liability in the accompanying Consolidated Balance Sheets within Other Accrued Expenses at December 31, 2022.

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

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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.

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 appellate court in France was to rule in favor of Lufthansa, or if damages in the UK matter are calculated on a different basis than our estimate or using information not currently available.

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On November 6, 2020, the Court dismissed the Company from the case, and also dismissed a number of claims, though the patent and copyright infringement claims remain.

The case is currently in discovery.

The case proceeded to discovery.

In addition, on December 21, 2020, ATS filed a petition for inter partes review (“IPR”) with the US Patent Trial and Appeal Board (“PTAB”), seeking to invalidate the subject patent, and on July 21, 2021, the PTAB instituted IPR.

ATS requested and, on August 26, 2021, the District Court granted, a stay of litigation during the IPR proceeding.

The parties are currently engaged in IPR briefing before the PTAB and oral argument before the PTAB is scheduled for April 21, 2022.

A decision on the IPR is expected in July 2022.

The parties are waiting to learn whether the PTAB will institute the proceeding.

Oral arguments on the IPR were held on April 21, 2022.

The PTAB issued its decision on July 20, 2022, in which it invalidated all of Teradyne’s patent claims.

Teradyne will not appeal the decision.

The stay of litigation was lifted with respect to the remaining claims in August 2022 and discovery has resumed.

Trial is scheduled for December 5, 2023.

No amounts have been accrued for this matter in the December 31, 2022 or 2021 financial statements, as loss exposure was neither probable nor estimable at such times.

In 2019, a former customer filed a lawsuit alleging damages associated with defective product.

Mediation of the matter was held in November 2022.

The Company agreed to make a payment of $ 2.0 million to settle the matter in the third quarter of 2022.

The Company was indemnified by other parties for approximately $ 1.5 million and recorded a gain as an offset to Selling, General and Administrative expense in the fourth quarter of 2022.

Other than these proceedings, we are not party to any significant pending legal proceedings that management believes will result in a material adverse effect on our financial condition or results of operations.

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Total Consolidated Sales $ 534,894 $ 444,908 $ 502,587

Operating (Loss) Profit and Margins:

Operating Loss and Margins:

Aerospace $ ( 1,883 ) $ ( 8,614 ) $ ( 89,833 )

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( 11.0 ) % ( 4.7 ) % 6.6 %

Total Operating (Loss) Profit $ ( 12,379 ) $ ( 84,284 ) $ 21,151

Total Operating Loss $ ( 10,001 ) $ ( 12,379 ) $ ( 84,284 )

( 1.9 ) % ( 2.8 ) % ( 16.8 ) %

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Corporate and Other Expenses, Net ( 21,654 ) ( 18,454 ) ( 21,385 )

(Loss) Income before Income Taxes $ ( 26,960 ) $ ( 112,410 ) $ 68,303

Loss before Income Taxes $ ( 29,793 ) $ ( 26,960 ) $ ( 112,410 )

Depreciation and Amortization:

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Total Capital Expenditures $ 7,675 $ 6,034 $ 7,459

Operating (loss) profit is sales less cost of products sold and other operating expenses, excluding interest expense and other corporate expenses.

Operating loss 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 (loss) profit in the Aerospace segment in 2020 and 2019 included goodwill impairment and restructuring charges, discussed in Note 7 and Note 23, respectively.

Operating loss in the Aerospace segment in 2020 included goodwill impairment and restructuring charges, discussed in Note 7 and Note 22, respectively.

The following table summarizes the Company’s sales into the following geographic regions for the years ended December 31:

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Sales recorded by the Company’s foreign operations were $ 50.0 million, $ 36.6 million and $ 52.3 million in 2022, 2021 and 2020, respectively.

Net loss from these locations was $ 3.8 million and $ 6.6 million in 2021 and 2020, respectively, and net income was $ 8.6 million in 2019.

Net loss was $ 0.2 million, $ 3.8 million and $ 6.6 million in 2022, 2021 and 2020, respectively.

Net assets held outside of the U.S.

total $ 36.6 million and $ 40.5 million at December 31, 2022 and 2021, respectively.

The exchange gain included in determining net income was insignificant in 2021 and 2020, and the exchange loss was insignificant in 2019.

The exchange gain (loss) included in determining net (loss) income was insignificant in 2022, 2021 and 2020.

Cumulative translation adjustments amounted to $ 7.3 million and $ 5.4 million at December 31, 2022 and 2021, respectively.

The Company had a significant concentration of business in 2021 with The Boeing Company (“Boeing”), and had a significant concentration with both Boeing and Panasonic Aviation Corporation (“Panasonic”) in prior years.

The Company had a significant concentration of business in 2022 and 2021 with The Boeing Company (“Boeing”), and had a significant concentration with Panasonic Aviation Corporation (“Panasonic”) in 2020.

Sales to Boeing and Panasonic are primarily in the Aerospace segment.

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Boeing $ 16,860 $ 14,545

* Sales to Panasonic represented less than 10% of total consolidated sales in 2021.

NOTE 21 — ACQUISITIONS

Diagnosys Inc.

and its affiliates

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

No earnout is expected to be payable based on actual and expected order levels.

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.

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 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.

Freedom Communication Technologies, Inc.

On July 1, 2019, the Company acquired all of the issued and outstanding capital stock of Freedom Communication Technologies, Inc.

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.

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.

Panasonic * *

* Sales represented less than 10% of total consolidated sales in during the given period.

NOTE 21 — DIVESTITURE ACTIVITIES

Semiconductor Test Business

On February 13, 2019, the Company completed the divestiture of its semiconductor business within the Test Systems segment.

The business was not core to the future of the Test Systems segment.

The total proceeds received for the sale amounted to $ 103.8 million.

The Company recorded a pre-tax gain on the sale of approximately $ 80.1 million in the first quarter of 2019.

The income tax expense relating to the gain was $ 19.7 million.

The transaction also includes two elements of contingent earnouts.

On February 13, 2019, the Company completed a divestiture of its semiconductor business within the Test Systems segment.

The total proceeds of the divestiture included two elements of contingent earnouts.

The “First Earnout” is calculated based on a multiple of all future sales of existing and certain future derivative products to existing and future customers in each annual period from 2019 through 2022.

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The Company agreed to an earnout payment of $ 10.7 million for the calendar 2020 earnout, which was recorded in the fourth quarter of 2021 as Other Income and was paid to the Company in early January 2022.

In March 2022, the Company agreed with the earnout calculation for the calendar 2021 earnout in the amount of $ 11.3 million.

The Company recorded the gain and received the payment in the first quarter of 2022.

On February 14, 2023, the Company was notified by the purchaser that they have calculated $ 3.4 million as being payable for the calendar 2022 earnout.

We are in the process of reviewing the calculation, and expect to record the additional gain on the sale, and receive the payment, in the first quarter of 2023.

Airfield Lighting Product Line

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, 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.

This amount is reported in the Consolidated Statements of Operations in Net Gain on Sales of Businesses in the year ended December 31, 2019.

We are not eligible for any further earnout payments related to this divestiture.

Other Disposal Activity

On October 6, 2021, as part of a planned consolidation effort, the Company sold one of its Aerospace facilities for $ 9.2 million.

On October 6, 2021, as part of a planned consolidation effort, the Company sold one of its Aerospace buildings for $ 9.2 million.

Net cash proceeds were approximately $ 8.8 million.

A gain on sale of approximately $ 5.0 million was recorded in the Consolidated Statements of Operations in Net Gain on Sale of Facility in the year ended December 31, 2021.

The operation has been integrated into another facility.

In 2020, the Company sold certain facilities within the Aerospace segment for $ 1.5 million in cash.

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Goodwill Impairment

The 2021 goodwill impairment test resulted in no impairment to the carrying value of goodwill in any of the Company’s reporting units and no impairment charge was recognized in 2021.

See Note 7 for discussion of the $ 86.3 million and $ 1.6 million of goodwill impairments charges in 2020 and 2019, respectively, within the Aerospace segment.

The 2022 and 2021 goodwill impairment tests resulted in no impairment to the carrying value of goodwill in any of the Company’s reporting units and no impairment charges were recognized in 2022 or 2021.

See Note 7 for discussion of the $ 86.3 million of goodwill impairment charges in 2020, respectively, within the Aerospace segment.

Such amounts are reported within the Impairment Loss line of the Consolidated Statements of Operations in the respective year.

Restructuring Activities

The plan narrows the initiatives for the AeroSat business to focus primarily on near-term opportunities pertaining to business jet connectivity.

The plan has a downsized manufacturing operation remaining in New Hampshire, with significantly reduced personnel and operating expenses.

As a result of the restructuring plan, the Company’s total non-cash asset write-downs and impairment charges recorded in the fourth quarter of 2019 (including the goodwill impairment described above and a $ 9.5 million impairment of long-lived assets) amounted to $ 23.6 million.

Restructuring charges of $ 5.2 million comprised of employee termination benefits and non-cancelable inventory purchase commitments in the future for inventory which is not expected to be purchased prior to the expiration date of such agreements as a result of the restructuring plan were also recorded in 2019.

The Company incurred an impairment charge to ROU assets of approximately $ 0.7 million during 2020.

The Company incurred an impairment charge to ROU assets of approximately $ 0.7 million during 2020 related to its AeroSat subsidiary, which had been restructured in 2019.

Additional charges of $ 0.2 million and $ 0.4 million associated with restructuring at AeroSat were recorded during 2021 and 2020, respectively.

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Additional restructuring charges of $ 0.6 million occurred during 2021 to align the workforce to expected activities and to consolidate certain facilities.

$ 0.3 million of current year severance expense was related with the Aerospace segment and $ 0.3 million was related with the Test Systems segment.

Severance expense during 2021 included $ 0.3 million related with the Aerospace segment and $ 0.3 million related with the Test Systems segment.

Restructuring-related severance charges and other charges were insignificant in 2022.

Any future restructuring actions will depend upon market conditions, customer actions and other factors.

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One of the investments became impaired in 2020 which resulted in an impairment charge of $ 3.5 million recorded within the Other Expense, Net of Other Income line in the accompanying Consolidated Statements of Operations for the year ended December 31, 2020.

A full impairment charge of $ 5.0 million for an additional investment was recorded in 2019.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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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-K

Item 8. Financial Statements and Supplementary Data