What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2024-03-05 compared with 2023-03-10 · 298 added, 370 removed, 1007 unchanged (40% of the section changed)

1 unchanged sentence

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Astronics Corporation

To the Shareholders and the Board of Directors of Astronics Corporation

Opinion on the Financial Statements

22 unchanged sentences

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 sales 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, operating margins and cash flows, the terminal growth rate 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 sales growth rate and the weighted-average cost of capital.

The fair value estimates for certain reporting units were sensitive to the significant assumptions of the sales growth rates and operating margins.

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

2 unchanged sentences

To test the estimated fair value of the Company’s reporting units, we performed audit procedures with the assistance of our valuation professionals that included, among others, assessing the methodology used, testing the significant assumptions discussed above and testing the underlying data used in the impairment analysis.

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 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 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 compared the significant assumptions used by management to current industry and economic trends, historical trends of the Company, and other relevant factors and assessed the historical accuracy of management’s estimates.

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

27 unchanged sentences

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Astronics Corporation

To the Shareholders and the Board of Directors of Astronics Corporation

Opinion on Internal Control Over Financial Reporting

30 unchanged sentences

Net Gain on Sale of Facility — — 5,014

Impairment Loss — — 87,016

Loss from Operations ( 6,671 ) ( 30,044 ) ( 28,674 )

Net Gain on Sale of Businesses 3,427 11,284 10,677

Other Expense, Net of Other Income 1,611 2,159 4,968

Other (Income) Expense, Net ( 261 ) 1,611 2,159

Interest Expense, Net of Interest Income 23,328 9,422 6,804

10 unchanged sentences

Net Loss $ ( 26,421 ) $ ( 35,747 ) $ ( 25,578 )

Other Comprehensive Income (Loss):

Other Comprehensive Income:

Foreign Currency Translation Adjustments 984 ( 1,928 ) ( 939 )

Retirement Liability Adjustment – Net of Tax ( 884 ) 6,897 2,894

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

Total Other Comprehensive Income 100 4,969 1,955

Comprehensive Loss $ ( 26,321 ) $ ( 30,778 ) $ ( 23,623 )

5 unchanged sentences

Cash and Cash Equivalents $ 4,756 $ 13,778

Restricted Cash 6,557 —

Accounts Receivable, Net of Allowance for Estimated Credit Losses 172,108 147,790

35 unchanged sentences

Retained Earnings 209,753 240,360

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

Treasury Stock, 2,832,825 Shares at December 31, 2023

3,154,691 Shares at December 31, 2022

( 80,726 ) ( 89,898 )

10 unchanged sentences

Depreciation and Amortization 26,104 27,777 29,005

Provision for Losses on Inventory and Receivables 3,415 3,942 6,079

Amortization of Deferred Financing Fees 3,023 — —

Provisions for Non-Cash Losses on Inventory and Receivables 16,003 3,415 3,942

Equity-based Compensation Expense 7,198 6,497 6,460

3 unchanged sentences

Contingent Consideration Liability Fair Value Adjustment — — ( 2,200 )

Non-cash 401K Contribution 4,512 4,199 —

Net Gain on Sale of Businesses, Before Taxes ( 11,284 ) ( 10,677 ) —

Impairment Loss — — 87,016

Accrued Litigation Claim 500 8,374 —

Equity Investment Other Than Temporary Impairment — — 3,493

Restructuring Activities — 267 1,173

Deferral of Federal Payroll Taxes — — 5,877

Non-cash Accrued 401K Contribution 5,106 4,512 4,199

Non-cash Accrued Stock Bonus Expense 4,249 — —

Net Gain on Sale of Business, Before Taxes ( 3,427 ) ( 11,284 ) ( 10,677 )

Non-cash Litigation Provision Adjustment ( 1,305 ) 500 8,374

Non-cash Deferred Liability Recovery ( 5,824 ) — —

Other 1,913 3,086 4,179

Cash Flows from Changes in Operating Assets and Liabilities:

Changes in Operating Assets and Liabilities:

Accounts Receivable ( 31,872 ) ( 41,646 ) ( 14,832 )

Inventories ( 13,283 ) ( 34,058 ) ( 5,150 )

Prepaid Expenses and Other Current Assets 261 20 ( 45 )

Accounts Payable ( 4,495 ) 27,843 8,610

Accrued Expenses 4,634 1,193 ( 5,344 )

Income Taxes Payable/Receivable 16,134 156 ( 10,440 )

Income Taxes ( 1,949 ) 16,134 156

Customer Advanced Payments and Deferred Revenue ( 4,835 ) 5,264 ( 235 )

Operating Lease Liabilities ( 4,880 ) ( 7,295 ) ( 6,036 )

Supplemental Retirement Plan and Other Liabilities ( 405 ) ( 404 ) ( 403 )

Cash Flows from Operating Activities ( 28,312 ) ( 5,530 ) 37,335

Supplemental Retirement Plan Liabilities ( 408 ) ( 405 ) ( 404 )

Other Assets and Liabilities 1,285 ( 145 ) 327

Net Cash from Operating Activities ( 23,950 ) ( 28,312 ) ( 5,530 )

Cash Flows from Investing Activities

1 unchanged sentence

Capital Expenditures ( 7,643 ) ( 7,675 ) ( 6,034 )

Other Investing Activities — — 1,662

Cash Flows from Investing Activities $ 14,386 $ 3,179 $ ( 5,797 )

Net Cash from Investing Activities $ ( 4,106 ) $ 14,386 $ 3,179

A STRONICS CORPORATION

4 unchanged sentences

Principal Payments on Long-term Debt ( 131,233 ) ( 124,825 ) ( 30,000 )

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

Stock Award and Employee Stock Purchase Plan (“ESPP”) activity 2,476 97 3,396

Proceeds from At-the-Market (“ATM”) Stock Sales 21,269 — —

Finance Lease Principal Payments ( 47 ) ( 93 ) ( 901 )

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

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

Debt Acquisition Costs ( 6,762 ) ( 2,416 ) —

Net Cash from Financing Activities 25,435 ( 1,412 ) ( 7,505 )

Effect of Exchange Rates on Cash 156 ( 641 ) ( 799 )

(Decrease) Increase in Cash and Cash Equivalents ( 15,979 ) ( 10,655 ) 8,506

Cash and Cash Equivalents at Beginning of Year 29,757 40,412 31,906

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

Decrease in Cash and Cash Equivalents and Restricted Cash ( 2,465 ) ( 15,979 ) ( 10,655 )

Cash and Cash Equivalents and Restricted Cash at Beginning of Year 13,778 29,757 40,412

Cash and Cash Equivalents and Restricted Cash at End of Year $ 11,313 $ 13,778 $ 29,757

Supplemental Disclosure of Cash Flow Information

Interest Paid $ 17,689 $ 7,605 $ 5,951

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

Non-Cash Investing Activities:

Capital Expenditures in Accounts Payable $ 490 $ — $ —

Income Taxes Paid (Refunded), Net of (Refunds) Payments $ 1,964 $ ( 9,978 ) $ ( 1,250 )

See notes to Consolidated Financial Statements.

4 unchanged sentences

Beginning of Year $ 291 $ 289 $ 278

Issuance of Common Stock Through At-the-Market Offering 14 — —

Net Exercise of Stock Options, including ESPP 4 — 5

Net Issuance of Common Stock for Restricted Stock Units (“RSU’s”) 1 1 —

Net Issuance of Common Stock for Restricted Stock Units (“RSUs”) 1 1 1

Class B Stock Converted to Common Stock 4 1 5

2 unchanged sentences

Beginning of Year $ 63 $ 64 $ 69

Net Exercise of Stock Options — — 1

Class B Stock Converted to Common Stock ( 4 ) ( 1 ) ( 5 )

2 unchanged sentences

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

Issuance of Common Stock Through ATM Offering, Net of Offering Costs 21,246 — —

Net Exercise of Stock Options, including ESPP, and Equity-based Compensation Expense 10,309 6,897 10,029

Tax Withholding Related to Issuance of RSU’s ( 304 ) ( 179 ) —

Tax Withholding Related to Issuance of RSUs ( 641 ) ( 304 ) ( 179 )

End of Year $ 129,544 $ 98,630 $ 92,037

11 unchanged sentences

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

Purchase of Shares — — ( 7,732 )

Shares Issued to Fund 401K Obligation 9,172 18,618 —

7 unchanged sentences

Beginning of Year 29,122 28,911 27,825

Net Issuance of Common Stock for RSU’s 106 70 45

Issuance of Common Stock Through ATM Offering 1,334 — —

Net Issuance from Exercise of Stock Options, including ESPP 437 20 485

Net Issuance of Common Stock for RSUs 147 106 70

Class B Stock Converted to Common Stock 362 85 531

8 unchanged sentences

Beginning of Year 3,155 3,808 3,808

Purchase of Shares — — 282

Shares Issued to Fund 401K Obligation ( 322 ) ( 653 ) —

6 unchanged sentences

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.

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

The Company has two reportable segments, Aerospace and Test Systems.

1 unchanged sentence

Our Test Systems segment designs, develops, manufactures and maintains automated test systems that support the aerospace and defense, communications and mass transit industries as well as training and simulation devices for both commercial and military applications.

See Notes 21 and 22 for details of our acquisition and divestiture activities in 2022, 2021 and 2020.

See Note 21 for details of our divestiture related activities in 2023, 2022 and 2021.

There was no acquisition activity in 2023, 2022 or 2021.

Impact of the COVID-19 Pandemic

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

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.

Our business continues to face varying levels of supply chain pressures from the residual impacts of the COVID-19 pandemic.

Domestic air travel has recovered from the impact of the COVID-19 pandemic, and international travel utilizing primarily widebody aircraft is close to pre-pandemic levels.

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.

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

The Company received $ 7.3 million and $ 7.4 million under the grant in 2022 and 2021, respectively.

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.

2 unchanged sentences

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.

The amount recognized during 2022 was immaterial.

The grants are recognized as income over the periods in which the Company recognizes as expenses the costs the grants are intended to defray, primarily during 2021 with an immaterial amount recognized during 2022.

The following table presents the COVID-19 related government assistance, including AMJP, recorded during the years ended December 31, 2023, 2022 and 2021:

4 unchanged sentences

Total $ — $ 6,073 $ 10,910

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 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.

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.

Principles of Consolidation

1 unchanged sentence

All intercompany transactions and balances have been eliminated.

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.

The Company accounts for its acquisitions under ASC Topic 805, Business Combinations and Reorganizations (“ASC Topic 805”).

ASC Topic 805 provides guidance on how the acquirer recognizes and measures the consideration transferred, identifiable assets acquired, liabilities assumed, non-controlling interests, and goodwill acquired in a business combination.

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

There were no acquisitions in 2023, 2022 or 2021.

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

8 unchanged sentences

Shipping and Handling

Shipping and handling costs are included in Costs of products sold.

Shipping and handling costs are included in Cost of Products Sold.

Equity-Based Compensation

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

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.

ASC Topic 718 requires all equity-based payments to employees, including grants of employee stock options and restricted stock units (“RSUs”), 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.

4 unchanged sentences

All highly liquid instruments with a maturity of three months or less at the time of purchase are considered cash equivalents.

Restricted Cash

Under the provisions of the ABL Revolving Credit Facility (as defined and discussed below in Note 8), the Company has a cash dominion arrangement with the banking institution for its accounts within the United States whereby daily cash receipts are contractually utilized to pay down outstanding balances on the ABL Revolving Credit Facility.

Account balances that have not yet been applied to the ABL Revolving Credit Facility are classified as restricted cash in the accompanying Consolidated Balance Sheets.

The following table provides a reconciliation of cash and restricted cash included in Consolidated Balance Sheets to the amounts included in the Consolidated Statements of Cash Flows.

(In thousands) 2023 2022

Cash and Cash Equivalents $ 4,756 $ 13,778

Restricted Cash 6,557 —

Total Cash and Restricted Cash Shown in Statements of Cash Flows $ 11,313 $ 13,778

Accounts Receivable and Allowance for Estimated Credit Losses

4 unchanged sentences

Balances are written off when determined to be uncollectible.

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 companies’ cash flows are impacted by the COVID-19 pandemic.

Although the Company has historically not experienced significant credit losses, the Company’s exposure to credit losses may increase if its customers are adversely affected by global economic recessions, industry conditions, or other customer-specific factors.

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

20 unchanged sentences

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.

Debt issuance amortization expense was approximately $ 3.0 million, $ 0.8 million and $ 0.4 million in 2023, 2022 and 2021, respectively.

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.

The Company incurred $ 8.8 million in debt issuance costs related to the new facilities, allocated between the ABL Revolving Credit Facility and the Term Loan Facility.

Unamortized deferred debt issuance costs associated with the ABL Revolving Credit Facility ($ 2.0 million as of December 31, 2023) are recorded within Other Assets and those associated with the Term Loan Facility ($ 4.3 million as of December 31, 2023) are recorded as a reduction of the carrying value of the debt on the Consolidated Balance Sheets.

The unamortized balance of deferred financing costs on our previous credit facility of $ 3.2 million is recorded within Other Assets on the Consolidated Balance Sheet at December 31, 2022.

Long-Lived Assets

15 unchanged sentences

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 2023, 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

4 unchanged sentences

Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable and long-term debt.

The Company’s financial instruments consist primarily of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and long-term debt.

The Company performs periodic credit evaluations of its customers’ financial condition and generally does not require collateral.

The Company does not hold or issue financial instruments for trading purposes.

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

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

The carrying value of the Company’s variable rate long-term debt instruments also approximates fair value due to the variable rate feature of these instruments.

2 unchanged sentences

For investments requiring equity method accounting, we recognize our share of the investee’s earnings or losses within Other Expense, Net of Other Income in the Consolidated Statements of Operations.

Such amounts were immaterial in 2022, 2021 and 2020.

For investments not requiring equity method accounting, if the investment has no readily determinable fair value, we have elected the practicability exception of ASU 2016-01, under which the investment is measured at cost, less impairment, plus or minus observable price changes from orderly transactions of an identical or similar investment of the same issuer.

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.

We recognized income of $ 1.8 million associated with the reversal of a liability related to an equity investment, as we will no longer be required to make an associated payment.

This amount is included in Other Expense, Net of Other Income in the Consolidated Statement of Operations as of December 31, 2023.

Our ownership percentage in this company was diluted during 2023, thus our equity investment was converted to the cost method.

Deferred Tax Asset Valuation Allowance

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 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 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.

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.

After considering the losses in recent periods and cumulative pre-tax losses in the three-year period ending with the current year, the Company determined that projections of future taxable income could not be relied upon as a source of income to realize its deferred tax assets.

However, the Company is relying on a significant portion of its existing deferred tax liabilities for the realizability of deferred tax assets.

As a result, the Company has valuation allowances against its deferred tax assets of

approximately $ 65.6 million, $ 57.4 million, and $ 43.5 million during the years ended December 31, 2023, 2022 and 2021, respectively, for the portion of deferred tax asset not realizable by the Company’s existing deferred tax liabilities.

Use of Estimates

15 unchanged sentences

Management continually assesses the adequacy of estimated loss contingencies and, if necessary, adjusts the amounts recorded as better information becomes known.

The Company accounts for its acquisitions under ASC Topic 805, Business Combinations and Reorganizations (“ASC Topic 805”).

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

Newly Adopted and Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

Standard Description Financial Statement Effect or Other Significant Matters

Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative This ASU amends the disclosure or presentation requirements related to various subtopics in the FASB Accounting Standards Codification.

The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited.

The Company will monitor the removal of various requirements from the current regulations in order to determine when to adopt the related amendments, but does not anticipate the adoption of the new guidance will have a material impact on the Company’s Consolidated Financial Statements.

Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosure

The standard includes updates to the disclosure requirements for a public entity’s reportable segments and provides more detailed information about a reportable segment’s expenses.

The new standard is effective for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024, with retrospective application required.

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

We expect adoption to result in additional disclosures in the notes to our Consolidated Financial Statements.

Income Taxes (Topic 740), Improvements to Income Tax Disclosures

The amendments in this update require enhanced disclosures within the annual rate reconciliation, including new requirements to present reconciling items on a gross basis in specified categories, disclosure of both percentages and dollar amounts, and disaggregation of the reconciling items by nature when they meet a quantitative threshold.

The update also includes enhanced disclosure requirements for income taxes paid.

The new standard is effective for annual periods beginning after December 15, 2024;

early adoption is permitted.

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

We expect adoption to result in additional disclosures in the notes to our Consolidated Financial Statements.

We consider the applicability and impact of all ASUs.

ASUs not listed above were assessed and determined to be either not applicable, or had and are expected to have minimal impact on our financial statements an d related disclosures.

ASUs not listed above were assessed and determined to be either not applicable or had or are expected to have minimal impact on our financial statements and related disclosures.

NOTE 2 — REVENUE

3 unchanged sentences

or in certain cases, up-front deposits.

In circumstances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that the Company's contracts generally do not include a significant financing component.

In circumstances where the timing of revenue recognition differs from the timing of receipt of consideration, the Company has determined that the Company’s contracts generally do not include a significant financing component.

Taxes collected from customers, which are subsequently remitted to governmental authorities, are excluded from sales.

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.

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

The Company has elected the practical expedient available under ASC 340-40-25-4 to immediately expense the incremental cost of obtaining a contract when the expected benefit of those costs is less than one year.

As of December 31, 2023 and 2022, the Company did not have material incremental costs on any open contracts with an original expected duration of greater than one year.

3 unchanged sentences

Capitalized fulfillment costs are included in Inventories in the accompanying Consolidated Balance Sheets.

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, 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.

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

The Company has capitalized $ 4.7 million and $ 2.5 million of costs as of December 31, 2023 and 2022, respectively.

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.

13 unchanged sentences

The effect of modifications has been reflected when identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction price.

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 promised product, which is generally upon delivery and acceptance by the customer.

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 promised product.

In general, the customer has obtained control when they have legal title, significant risks and rewards of ownership of the asset, and the Company has a present right to payment for the product.

These contracts may provide credits or incentives, which may be accounted for as variable consideration.

9 unchanged sentences

The Company recognizes revenue over time during the term of the agreement as the customer is simultaneously receiving and consuming the benefits provided throughout the Company’s performance.

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

The Company typically recognizes revenue over time using a cost-to-cost method, where revenues are recognized proportionally as costs are incurred, or on a straight-line basis throughout the contract period.

On December 31, 2023, we had $ 592.3 million of remaining performance obligations, which we refer to as total backlog.

1 unchanged sentence

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

Amounts may not exceed their net realizable value.

Amounts may not exceed their net

realizable value.

Costs in excess of billings are classified as current assets, within Accounts Receivable, Net of Allowance for Estimated Credit Losses on our Consolidated Balance Sheets.

12 unchanged sentences

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

The decrease in contract liabilities reflects the net impact of revenue recognized in excess of new customer advances or deferred revenues recorded, as well as a $ 5.8 million reversal of a deferred revenue liability assumed with an acquisition and associated with a customer program within our Test Systems Segment which is no longer expected to occur, resulting in revenue recognized during the year ended December 31, 2023.

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

3 unchanged sentences

$ 432,199 $ 314,564 $ 201,990

Military Aircraft

61,617 54,534 70,312

4 unchanged sentences

Test Systems Segment

Semiconductor

Aerospace & Defense

Government & Defense

84,376 73,698 79,670

24 unchanged sentences

Total Receivables, Net $ 172,108 $ 147,790

In November 2023, a non-core contract manufacturing customer reported within the Aerospace segment filed for bankruptcy under Chapter 11.

As a result, the Company recorded a full reserve of $ 7.5 million for outstanding accounts receivable.

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:

16 unchanged sentences

At December 31, 2022, the Company’s reserve for inventory valuation was $ 36.8 million, or 16.4 % of gross inventory.

In November 2023, a non-core contract manufacturing customer reported within the Aerospace segment filed for bankruptcy under Chapter 11.

As a result, the Company recorded a full reserve of $ 3.6 million for dedicated inventory.

NOTE 5 — PROPERTY, PLANT AND EQUIPMENT

25 unchanged sentences

2025 $ 10,935

NOTE 7 — GOODWILL

14 unchanged sentences

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 2023, 2022 and 2021.

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

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

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

We determined that the estimated fair value of four of the eight reporting units with goodwill significantly exceeded their respective carrying values and did not result in a goodwill impairment for these four reporting units as of March 28, 2020.

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

We recognized full impairments of the goodwill of our Astronics Connectivity Systems and Certification (“ACSC”), PGA and Custom Control Concepts (“CCC”) reporting units, and a partial impairment of the goodwill of our PECO reporting unit as of March 28, 2020.

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

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

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

As a result 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 Statement of Operations.

NOTE 8 — LONG-TERM DEBT

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 Company amended the 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.

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.

Under the terms of the ABL Revolving Credit Facility, the Company pays 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 must 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.

On June 28, 2023, the Company amended the ABL Revolving Credit Facility, temporarily increasing the maximum aggregate amount that the Company can borrow under the revolving credit line by $ 5 million from $ 115 million to $ 120 million until October 31, 2023, at which time the limit was to return to $ 115 million.

On October 31, 2023, the Company executed a second amendment to extend the temporary limit of $ 120 million until January 31, 2024, at which time the limit returned to $ 115 million.

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 and any cash balances subject to the dominion arrangement collateralize the outstanding borrowings under the ABL Revolving Credit Facility.

Eligible cash balances that have not yet been applied to outstanding debt balances are classified as restricted cash in the accompanying Consolidated Balance Sheets.

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.

On December 31, 2023, there was $ 87.0 million outstanding on the ABL Revolving Credit Facility and there remained $ 32.7 million available, net of outstanding letters of credit (though subject to the minimum liquidity requirement).

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.

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, if the ABL Revolving Credit Facility is extended beyond that date.

The Company pays 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 must pay a commitment fee under the Term Loan Facility of 5 % of the total aggregate commitment, or $ 4.5 million, $ 1.8 million of which was paid on the closing date, $ 1.8 million of which was paid on June 19, 2023 and $ 0.9 million of which is due in the second quarter of 2024.

Amortization of the principal under the Term Loan Facility began 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, 0.542 % per month for the period July 1, 2023 through September 1, 2023 and 0.833 % monthly thereafter.

Total scheduled principal payments of $ 9.0 million are payable in 2024 and as such, have been classified as current in the accompanying Consolidated Balance Sheets as of December 31, 2023.

The interest rate on current maturities of long-term debt is variable at SOFR plus 8.75 %, and was 14.2 % at December 31, 2023.

The remaining balance of $ 76.5 million as of December 31, 2023, is recorded as long-term in the accompanying Consolidated Balance Sheets.

Pursuant to the ABL Revolving Credit Facility and the Term Loan Facility, the Company was required to comply with a minimum trailing four quarter Adjusted EBITDA, as defined in the ABL Revolving Credit Facility and Term Loan Facility Agreements, of $ 51.7 million in the Company’s fourth quarter of 2023, increasing to $ 57.6 million in the first quarter of 2024, $ 65.2 million in the second quarter of 2024 and $ 70 million thereafter.

The non-cash accounts receivable reserve associated with the customer bankruptcy recorded in 2023 was not required to be included in the calculation of EBITDA pursuant to our ABL Revolving Credit Facility and the Term Loan Facility.

Mandatory prepayment of a portion of excess cash flow, as defined by the Term Loan Facility, is payable towards the principal amount outstanding on an annual basis.

No such amounts are payable for the year ended December 31, 2023.

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

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.

The Company was in compliance with debt covenants under the ABL Revolving Credit Facility and Term Loan Facility as of and for the year ended December 31, 2023.

The Company incurred $ 8.8 million in incremental debt issuance costs related to the new facilities, allocated between the ABL Revolving Credit Facility and the Term Loan Facility.

All costs are amortized to interest expense over the term of the respective agreement.

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

19 unchanged sentences

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

We lease certain

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

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.

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.

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

For our real estate leases, the payments used in the calculation of a 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 and are expensed in the period they are incurred, as they do not represent present rights or obligations.

Variable lease components for leases relate primarily to common area maintenance charges and other separately billed lessor services, sales and real estate taxes.

Variable lease costs are expensed in the period they are incurred.

We have also elected to adopt the practical expedient under ASC 842 to not separate lease and non-lease components in contracts where the base lease payment contains both.

In this situation, these lease agreements are accounted for as a single lease component for all classes of underlying assets.

While we do have real estate leases with options to purchase the facility at a market value at the date of exercise, these are not included in the calculation of the lease liability, as these options are not expected to be exercised.

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.

1 unchanged sentence

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

The following is a summary of the Company's ROU assets and liabilities at December 31:

The following is a summary of the Company’s ROU assets and lease liabilities at December 31:

(In thousands) 2023 2022

21 unchanged sentences

Operating Lease Cost 6,352 6,627

Impairment Charge of Operating Lease ROU Asset 53 —

Variable Lease Cost 2,240 1,757

10 unchanged sentences

short-term leases) were excluded from the Company’s calculation of its lease liability and ROU asset.

Furthermore, as permitted by ASC 842, the Company elected to apply the package of practical expedients, which allows companies not to reassess:

(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 8 years and 2 years, respectively.

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

The weighted-average discount rates for the Company’s operating and financing leases are approximately 5.7 % and 5.8 %, respectively.

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

3 unchanged sentences

2026 4,303 20

2026 1,216 14

Thereafter 13,183 —

2 unchanged sentences

Total Lease Liability $ 29,445 $ 201

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

17 unchanged sentences

Stock Compensation Expense ( 1.4 ) % ( 2.2 ) % ( 2.1 ) %

Non Deductible Goodwill Impairment — % — % ( 10.2 ) %

Contingent Consideration Liability Fair Value Adjustment — % — % 1.7 %

4 unchanged sentences

Change in Valuation Allowance ( 26.1 ) % ( 44.6 ) % ( 29.8 ) %

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

Net GILTI and FDII Tax (Benefit) Expense ( 1.0 ) % 1.8 % — %

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

Tax Rate Change on 2020 Federal Net Operating Loss Carryback — % 0.9 % 1.3 %

Tax Rate Change on 2020 Federal Net Operating Loss (NOL) Carryback — % — % 0.9 %

Other ( 0.6 ) % ( 0.1 ) % 0.1 %

16 unchanged sentences

Total Gross Deferred Tax Assets 80,844 69,532

Valuation Allowance for Federal and State Deferred Tax Assets and Tax Credit Carryforwards, Net of Federal Tax ( 57,369 ) ( 43,519 )

Valuation Allowance ( 65,640 ) ( 57,369 )

Deferred Tax Assets 15,204 12,163

14 unchanged sentences

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.

However, the Company is relying on a significant portion of its existing deferred tax liabilities for the realizability of deferred tax assets.

As a result, the Company has valuation allowances against its deferred tax assets of approximately $ 65.6 million, $ 57.4 million, and $ 43.5 million during the years ended December 31, 2023, 2022 and 2021, respectively, for the portion of deferred tax asset not realizable by the Company’s existing deferred tax liabilities.

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 $ 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.

As a result of this provision of the TCJA, deferred tax assets related to capitalized research expenses increased by approximately $ 5.8 million and $ 19.9 million during the years ended December 31, 2023 and 2022, respectively.

The Company maintains a full valuation allowance against this deferred tax asset.

At December 31, 2023, gross federal net operating losses amounted to approximately $ 1.9 million, which are subject to annual limitations under Internal Revenue Code Section 382.

Of these net operating losses, $ 1.5 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.

The Company maintains a full valuation allowance against this deferred tax asset.

At December 31, 2023, gross state net operating loss carryforwards amounted to approximately $ 138.6 million.

These state net operating loss carryforwards begin to expire at various dates from 2023 through 2043.

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.

The Company maintains a full valuation allowance against this deferred tax asset.

At December 31, 2023, state income tax credit carryforwards amounted to approximately $ 0.9 million and begin to expire at various dates from 2023 to 2040.

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.

Additionally, the Company has approximately $ 0.2 million of foreign tax credits that it can carry forward through 2027 and approximately $ 0.5 million of research and development tax credits that it can carry forward through 2043.

The Company maintains a full valuation allowance against these credits.

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.

Should the Company need to accrue a liability for uncertain tax benefits, any interest associated with that liability would be recorded as interest expense.

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

Should the Company need to accrue a liability for uncertain tax benefits, any interest and penalties associated with that liability would be recorded as income tax expense.

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

2 unchanged sentences

Decreases as a Result of Tax Positions Taken in Prior Years ( 343 ) ( 969 ) ( 478 )

Increases as a Result of Tax Positions Taken in the Current Year — — 100

Balance at End of the Year $ 100 $ 443 $ 1,412

4 unchanged sentences

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.

However, for the years ended December 31, 2023 and 2022, we determined that we can no longer assert indefinite reinvestment on

approximately $ 1.9 million and $ 3.4 million of the unremitted earnings of Luminescent Systems Canada Inc, respectively.

As a result, we have recorded a deferred tax liability of approximately $ 0.1 million and $ 0.2 million at December 31, 2023 and 2022, respectively, 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 $ 13.6 million, continue to be indefinitely reinvested.

5 unchanged sentences

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.

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

During the year ended December 31, 2021, 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.

No tax benefit was recorded for the years ending December 31, 2023 and 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.

There were no impacts related to the IRA recorded for the years ending December 31, 2023 and 2022.

Under an Organization for Economic Co-operation and Development Inclusive Framework, countries that agreed to enact a two-pillar solution aim to address the challenges arising from the digitalization of the world economy (Pillar Two).

Pillar Two sets out global minimum Effective Tax Rate (ETR) rules to ensure that large multinational businesses with consolidated revenue over €750 million are subject to a minimum ETR of 15% on income arising in low-tax jurisdictions.

Rules under Pillar Two are expected to be enacted beginning January 1, 2024.

The Company will continue to monitor the impact of Pillar Two;

however, the Pillar Two is currently not applicable as the Company does not meet the threshold of having consolidated revenue over €750 million.

NOTE 12 — PROFIT SHARING/401K PLAN

The Company offers eligible domestic full-time employees participation in certain profit sharing/401K plans.

The plans provide for a discretionary annual company contribution.

In addition, employees may contribute a portion of their salary to the plans which, under certain of the profit sharing/401K plans, is partially matched by the Company.

In response to the impact of the COVID-19 pandemic, both the discretionary Company contribution and the match were temporarily suspended beginning in the second quarter of 2020.

The discretionary Company contribution and, where applicable, the matching contribution, were reinstated in the fourth quarter of 2021.

The plans may be amended or terminated at any time.

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 offers eligible domestic full-time employees participation in a safe harbor 401K plan.

The plan provides for an annual company contribution.

In addition, employees may contribute a portion of their salary to the plan.

In response to the impact of the COVID-19 pandemic, Company contributions were temporarily suspended beginning in the second quarter of 2020.

The Company contributions were reinstated in the fourth quarter of 2021.

The plan may be amended or terminated at any time.

Total charges to income before income taxes for this plan was approximately $ 5.3 million, $ 4.7 million and $ 4.3 million in 2023, 2022 and 2021, respectively.

The Company has funded the 2022 and 2023 contributions to date with treasury stock in lieu of cash and will fund the remaining 2023 contribution with treasury stock in the first quarter of 2024.

6 unchanged sentences

These amounts will be subsequently recognized as net periodic pension cost pursuant to the Company’s historical policy for amortizing such amounts.

Further, actuarial gains and losses that arise in subsequent periods and are not recognized as net periodic pension cost in the same periods will be recognized as a component of AOCI.

Further, actuarial gains and losses that arise in subsequent periods and are not recognized as net periodic pension cost in the

same periods will be recognized as a component of AOCI.

Those amounts will be subsequently recognized as a component of net periodic pension cost on the same basis as the amounts recognized in AOCI.

7 unchanged sentences

Interest Cost 1,302 834

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

Actuarial Loss (Gain) 1,529 ( 4,917 )

Benefits Paid ( 348 ) ( 348 )

End of the Year — December 31 $ 28,798 $ 26,210

In 2022, the net actuarial gain of $ 4.9 million is due principally to the increase of 225 basis points in the discount rate used to measure the benefit obligation as of December 31, 2022 compared to the prior year.

In 2023, the net actuarial loss of $ 1.5 million is due to the change in the salary scale and the decrease of 21 basis points in the discount rate used to measure the benefit obligation as of December 31, 2023 compared to the prior year.

The assumptions used to calculate the projected benefit obligation as of December 31 are as follows:

1 unchanged sentence

Future Average Compensation Increases 3.00 % 2.00 % - 3.00 %

2.00 % - 3.00 %

The plans are unfunded at December 31, 2023 and are recognized in the accompanying Consolidated Balance Sheets as a current accrued pension liability of $ 0.3 million and a long-term accrued pension liability of $ 28.4 million.

This also is the expected future contribution to the plan, since the plan is unfunded.

The service cost component of net periodic benefit cost is included in SG&A expenses, and all other net periodic benefit costs components (such as interest cost, prior service cost amortization and actuarial gain/loss amortization) are reported outside of operating income, within Other Expense, Net of Other Income in the accompanying Consolidated Statements of Operations.

The service cost component of net periodic benefit cost is included in SG&A expenses, and all other net periodic benefit costs components (such as interest cost, prior service cost amortization and actuarial gain/loss amortization) are reported outside of operating income, within Other (Income) Expense, Net in the accompanying Consolidated Statements of Operations.

The following table summarizes the components of the net periodic cost for the years ended December 31:

11 unchanged sentences

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.

Participants in SERP are entitled to paid medical, dental and long-term care insurance benefits upon retirement under the plan.

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

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.

The Company also has a defined benefit plan related to its subsidiary in France.

2.00 % - 3.00 %

Benefit payments expected in each of the next five years are as follows:

2024 - $ 0.7 million, 2025 - $ 0.6 million, 2026 - $ 0.6 million, 2027 - $ 0.9 million, and 2028 - $ 1.9 million.

Benefits expected to be paid in the aggregate between 2029 and 2033 are $ 11.1 million.

Given that the plans are unfunded, these amounts are what the Company expects to contribute to the plans in each respective year.

Participants in the SERP are entitled to paid medical, dental and long-term care insurance benefits upon retirement under the plan.

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

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.

The accumulated postretirement benefit obligation is $ 0.8 million at December 31, 2023 and 2022.

The plan is recognized in the accompanying Consolidated Balance Sheets as a current accrued pension liability of less than $ 0.1 million and a long-term accrued pension liability of $ 0.8 million.

The net periodic cost for the years ended December 31, 2023, 2022 and 2021 was not material.

The Company is a participating employer in a trustee-managed multiemployer defined benefit pension plan for employees who participate in collective bargaining agreements.

7 unchanged sentences

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 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.

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

At-the-Market Equity Offering

On August 8, 2023, the Company initiated an at-the-market equity offering program (the “ATM Program”) for the sale from time to time of shares of the Company’s common stock, par value $ 0.01 per share (“Common Stock”) having an aggregate offering price of up to $ 30.0 million.

Shares of Common Stock under the ATM Program are offered using Wells Fargo Securities, LLC and HSBC Securities (USA) Inc., as sales agents (the “Sales Agents” and each a “Sales Agent”), pursuant to the equity distribution agreement, dated August 8, 2023, by and among the Company and the Sales Agents (the “Equity Distribution Agreement”).

During the year ended December 31, 2023, the Company sold 1,334,228 shares of our Common Stock under the ATM Program.

The Company generated $ 21.8 million in aggregate gross proceeds from sales under the ATM Program at an average sale price of $ 16.31 per share of Common Stock.

Aggregate net proceeds from the ATM Program were $ 21.3 million after deducting related expenses, including commissions to the Sales Agents and issuance costs.

As of December 31, 2023, the Company had remaining capacity under the ATM Program to sell shares of Common Stock having an aggregate offering price up to approximately $ 8.2 million.

Reserved Common Stock

11 unchanged sentences

Accumulated Other Comprehensive Loss $ ( 9,426 ) $ ( 9,526 )

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

In 2023, 2022 and 2021, no tax benefit was recognized as the Company had recorded a full valuation allowance on the deferred tax asset associated with the retirement liability.

The components of other comprehensive income are as follows:

(In thousands) 2023 2022 2021

1 unchanged sentence

Retirement Liability Adjustment ( 884 ) 6,897 2,894

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.

Other Comprehensive Income $ 100 $ 4,969 $ 1,955

NOTE 15 — LOSS PER SHARE

8 unchanged sentences

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 incurred a net loss for the years ended December 31, 2023, 2022, and 2021, therefore all outstanding stock options and unvested restricted stock units are excluded from the computation of diluted loss per share because the effect of their inclusion would be antidilutive.

The number of common shares excluded from the computation was approximately 0.8 million shares for the year ended December 31, 2023, 1.4 million shares for the year ended December 31, 2022, and 1.4 million shares for the year ended December 31, 2021.

The Company has funded substantially all of its 2022 and 2023 401K contributions, and will fund the remaining 2023 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.

The earnings per share computations for the years ended December 31, 2023 and 2022 are each inclusive of approximately 0.1 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, 2023 and 2022.

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

3 unchanged sentences

The exercise price of stock options, determined by a committee of the Board of Directors, is equal to the fair market value of the Common Stock on the grant date.

Options become exercisable over periods not exceeding ten years , and must be exercised within 10 years from the grant date.

Options become exercisable over periods not exceeding ten years , and must be exercised within ten years from the grant date.

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

6 unchanged sentences

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, 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.

made out of those plans.

At December 31, 2023, the Company had stock options and RSUs outstanding that covered 1,445,256 shares under the Long Term Incentive Plan, and there were 835,076 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.

Vesting requirements vary for directors, officers and key employees.

In general, options or RSU’s granted to outside directors vest six months from the date of grant and options granted to officers and key employees straight line vest over a three - to five-year period from the date of grant.

RSU’s granted to officers and key employees generally cliff vest three years from the date of grant.

The following table provides compensation expense information based on the fair value of stock options and RSU's for the years ended December 31 as follows:

In general, options or RSUs granted to outside directors vest six months from the date of grant and options granted to officers and key employees straight line vest over a three - to five-year period from the date of grant.

RSUs granted to officers and key employees generally cliff vest three years from the date of grant.

The following table provides compensation expense information based on the fair value of stock options and RSUs for the years ended December 31 as follows:

(In thousands) 2023 2022 2021

4 unchanged sentences

Stock Options

No options were granted during the year ending December 31, 2020.

2023 2022 2021

4 unchanged sentences

3.48 % - 3.62 %

0.45 % - 1.52 %

Dividend Yield — %

11 unchanged sentences

Options Exercised ( 6,570 ) $ 12.64 $ —

Options Forfeited ( 112,100 ) $ 13.33 $ —

Options Forfeited / Expired ( 84,564 ) $ 28.23 $ —

Outstanding at December 31 1,410,984 $ 19.47 $ —

23 unchanged sentences

The fair value of each RSU granted is equal to the fair market value of the Company’s Common Stock on the date of grant.

The RSU’s granted to employees generally cliff vest three years from the date of grant, while RSU’s granted to directors cliff vest six months from the date of grant.

There were 314,264 RSU’s granted in 2022 at a weighted-average price of $ 13.56 , of which 129,422 awards were vested and issued during 2022.

Forfeitures during the year were 25,781 .

Included in total equity-based compensation expense for the year ended December 31, 2022 was $ 3.5 million related to RSU’s.

The RSUs granted to employees generally cliff vest three years from the date of grant, while RSUs granted to directors cliff vest six months from the date of grant.

RSU Shares Weighted

Grant Date Fair Value

Unvested at January 1 578,214 $ 15.85

Granted 293,704 $ 14.79

Vested ( 190,135 ) $ 17.81

Forfeited ( 28,123 ) $ 16.75

Unvested at December 31 653,660 $ 14.77

Included in total equity-based compensation expense for the year ended December 31, 2023 was $ 4.0 million related to RSUs.

At December 31, 2023, total compensation costs related to non-vested awards not yet recognized amounts to $ 3.5 million and will be recognized over a weighted average period of approximately 2 years.

Employee Stock Purchase Plan

In addition to the stock options and RSU's discussed above, the Company has established the Employee Stock Purchase Plan to encourage employees to invest in Astronics Corporation.

The plan provides employees the opportunity to invest up to the IRS annual maximum of approximately $ 25,000 in Astronics common stock at a price equal to 85 % of the fair market value of the Astronics common stock, determined each October 1.

In addition to the stock options and RSUs discussed above, the Company has established the Employee Stock Purchase Plan to encourage employees to invest in the Company.

The plan provides employees the opportunity to invest up to the IRS annual maximum of approximately $ 25,000 in the Company’s common stock at a price equal to 85 % of the fair market value of the Company’s common stock, determined each October 1.

Employees are allowed to enroll annually.

27 unchanged sentences

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.

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 SG&A expenses in the Consolidated Statements of Operations in the year ended December 31, 2021.

The earnout period has expired and no amounts were 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, 2023 or 2022.

On a Non-recurring Basis:

In accordance with the provisions of ASC Topic 350, Intangibles – Goodwill and Other, the Company estimates the fair value of reporting units, utilizing unobservable Level 3 inputs.

Level 3 inputs require significant management judgment due to the absence of quoted market prices or observable inputs for assets of a similar nature.

The Company utilizes a discounted cash flow method to estimate the fair value of reporting units utilizing unobservable inputs.

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 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.

Based on our quantitative assessments, the Company recorded non-cash goodwill impairment charges associated with four Aerospace reporting units, totaling approximately $ 86.3 million within the Impairment Loss line in the Consolidated Statements of Operations in the year ended December 31, 2020.

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

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

1 unchanged sentence

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, 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.

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.

No such impairment was recorded in 2022 or 2021.

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

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.

There were no impairment charges related to long-lived assets in 2023, 2022 or 2021 and no long-lived assets are required to be measured at fair value for purposes of the long-lived asset recoverability test.

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

The carrying value of the Company’s variable rate long-term debt instruments also approximates fair value due to the variable rate feature of these instruments.

6 unchanged sentences

Gross Profit (Sales Less Cost of Products Sold) $ 39,973 $ 21,510

Net Gain on Sale of Facility $ — $ 5,014

Earnout on Previous Sale of Business $ — $ 10,677

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

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 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.

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.

Income (Loss) Before Income Taxes $ 1,534 $ ( 7,208 )

Net Income (Loss) $ 6,976 $ ( 6,779 )

Basic Earnings (Loss) Per Share $ 0.20 $ ( 0.21 )

Diluted Earnings (Loss) Per Share $ 0.20 $ ( 0.21 )

Non-cash stock bonus expense increased $ 4.2 million in the fourth quarter of 2023 compared to zero in the prior year, $ 1.5 million was recorded to Cost of Products Sold and $ 2.8 million was recorded as SG&A expense.

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

Mediation of the matter was held in November 2022 and the Company was indemnified by other parties for approximately $ 1.5 million and recorded a gain as an offset to SG&A expense in the fourth quarter of 2022.

These increases in SG&A were more than offset by increased gross profit compared to the prior year fourth quarter resulting from the higher sales volume.

NOTE 19 — LEGAL PROCEEDINGS

2 unchanged sentences

Lufthansa sought an order requiring AES to stop selling and marketing the allegedly infringing power supply system, a recall of allegedly infringing products sold to commercial customers in Germany since November 26, 2003, and compensation for damages related to direct sales of the allegedly infringing power supply system in Germany (referred to as “direct sales”).

AES modified the outlet units at the end of 2014 and the overwhelming majority of the modified outlet units sold from 2015 do not infringe the patent of Lufthansa.

In February 2015, the Regional State Court of Mannheim, Germany held that the patent was infringed.

8 unchanged sentences

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

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

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

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

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 July 12, 2023, the Higher Regional Court of Karlsruhe in Germany reduced the Company’s liability for direct damages on appeal from approximately $ 3.2 million plus interest to approximately $ 2.8 million plus interest.

Additionally, in its judgment, the Court reduced the interest rate on damages from 5 % (as held by the Regional Court of Mannheim) to 4 %.

Accordingly, the Company reclaimed overpaid damages and interest from LHT in the amount of approximately $ 1.2 million.

This was recorded as an offset to Selling, General and Administrative expenses in the third quarter of 2023, upon receipt of the refund.

Both Lufthansa and AES have filed requests with the German Federal Supreme Court to be granted leave to file appeals against this decision.

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”).

5 unchanged sentences

This means that AES is not liable for damages based on the sale of modified outlet units that removed the infringing feature.

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.

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.

AES modified the outlet units at the end of 2014 and substantially all of the modified outlet units sold from 2015 do not infringe the patent of Lufthansa.

As a result, the period for which AES is liable for damages in connection with indirect sales into Germany substantially finished at the end of 2014.

AES and Lufthansa both appealed this decision.

On July 12, 2023, the Higher Regional Court of Karlsruhe essentially upheld the first instance ruling.

According to the Higher Regional Court of Karlsruhe ruling, AES is 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.

However, because the outlet units were modified at the end of 2014, the period for which AES is liable for damages in connection with indirect sales into Germany substantially finished at the end of 2014.

Both Lufthansa and AES have filed requests with the German Federal Supreme Court to be granted leave to file appeals against this decision.

After the accounting, Lufthansa is expected to enforce its claim for damages in separate court proceedings.

These proceedings would most likely be tried before the Mannheim Court again, which makes it probable that the Mannheim court will determine the damages for the indirect sales on the basis of the same principles as in the direct sales proceedings (unless the latter ruling of the Mannheim court is reversed on appeal).

Based on the information available and the determination of the damages in the direct sales claim discussed above, we estimated that the Company’s total exposure related to these matters that was probable and that could be reasonably estimated at December 31, 2019 was approximately $ 11.6 million plus approximately $ 4.5 million of accrued interest, for a total of approximately $ 16.1 million.

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 each of 2022, 2021 and 2020, respectively, for additional interest accrued during such periods.

These proceedings would most likely be tried before the Mannheim Court again, which makes it probable that the Mannheim Court will determine the damages for the indirect sales based on the same principles as in the direct sales proceedings (unless the latter ruling of the Mannheim Court is reversed on appeal).

Based on the information available and the determination of the damages in the direct sales claim discussed above, we estimated that the Company’s total exposure related to these matters that was probable and that could be reasonably estimated at December 31, 2019, was approximately $ 11.6 million plus accrued interest.

Accrued interest on the indirect damages reserve was estimated using the same interest rate as the direct damages.

Given the reduction in the direct damages interest rate as discussed above, we recorded a reduction to the indirect damages reserve of $ 1.3 million in the year ended December 31, 2023, as an offset to Selling, General and Administrative Expenses.

Approximately $ 0.7 million, $ 0.6 million and $ 0.6 million was recorded within Selling, General and Administrative Expenses in the Company’s Consolidated Statements of Operations for each of 2023, 2022 and 2021, 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, 2024.

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.

Therefore, the liability related to this matter (inclusive of accrued interest), totaling $ 17.1 million and $ 17.8 million, is classified within other liabilities (non-current) in the Consolidated Balance Sheets at December 31, 2023 and 2022, respectively.

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

3 unchanged sentences

In the normal course of its supply arrangements, AES has indemnified its customers from liability arising from such matters, and as such will bear responsibility for any monetary damages arising from such claims.

In the French matter, there was a hearing on the validity of the patent in October 2020.

On December 4, 2020, the Court held the French patent invalid for all asserted claims.

1 unchanged sentence

Lufthansa has appealed this judgment.

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.

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.

Lufthansa lodged an appeal before the French Supreme Court;

the French Supreme Court will review the Court of Appeal of Paris reasoning around the nullification of one of the claims of the patent.

AES filed a brief with the French Supreme Court on January 22, 2024 in response to Lufthansa’s appeal and awaits guidance on further briefing or a decision from the Court.

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, 2023 or 2022.

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

On June 22, 2020, the Court held the UK patent valid and 3 out of 4 asserted claims infringed.

In the UK matter, the Court held the UK patent valid and 3 out of 4 asserted claims infringed in June 2020.

In contrast to the decisions in Germany, the UK Court found that the modified components infringed a valid claim of the patent, and accordingly, the period for which AES or its customers would be liable for damages in connection with direct sales into the UK extends until the expiration of the patent in May 2018.

AES appealed the ruling, and the appeal hearing took place on November 2, 2021.

On January 14, 2022, the Court dismissed the appeal on all grounds.

Lufthansa has yet to plead its case for monetary compensation, which would be determined at a separate trial, expected to be held in the latter half of 2023.

The case for damages will require extensive data gathering and analysis which has not yet been completed.

This analysis will include evaluating whether any units sold into the UK were subsequently shipped into Germany, where they would be subject to the indirect sales claim discussed above.

If this is the case, damages may be assessed in either the UK, or in the indirect sales matter in Germany, but not in both matters.

Under English law, Lufthansa has the option of pursuing a claim in relation to the defendants’ profits from their infringing activities or pursuing a claim in relation to Lufthansa's own lost profits.

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 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.

While AES appealed the ruling, the Court dismissed the appeal on all grounds.

The damages trial is scheduled for October 2024.

The case for monetary compensation will require extensive data gathering and analysis which is ongoing.

This analysis includes evaluating whether any units sold into the UK were subsequently shipped into

Germany, where they would be subject to the indirect sales claim discussed above.

If this is the case, compensation may be assessed in either the UK, or in the indirect sales matter in Germany, but not in both matters.

Lufthansa has elected to pursue a claim in relation to the defendants’ profits from their infringing activities.

We have estimated compensation of approximately $ 6.2 million, plus accrued interest, for AES and its indemnified customers.

Interest will accrue until final payment to Lufthansa.

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.

A reserve of $ 7.3 million was recorded within Selling, General & Administrative expenses in the accompanying Consolidated Statement of Operations for the year ended December 31, 2021.

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.

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

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

Therefore, the liability related to this matter, totaling $ 7.4 million and $ 7.0 million, is classified within other liabilities (non-current) in the Consolidated Balance Sheets at December 31, 2023 and 2022, respectively.

1 unchanged sentence

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.

An interim reimbursement of approximately $ 1.3 million was paid to Lufthansa in August 2020.

The associated expense was recorded in the Consolidated Statements of Operations in the year ended December 31, 2020 within Selling, General & Administrative Expenses.

An interim reimbursement was paid to Lufthansa in August 2020.

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

We recorded an estimated liability of approximately $ 1.0 million in our Consolidated Balance Sheets 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.

9 unchanged sentences

The Defendants moved to dismiss certain claims from the case.

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.

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 remained.

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.

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.

Teradyne did not appeal the decision.

On June 5, 2023, the parties attended a court-ordered mediation but did not reach a settlement.

After the mediation, Teradyne agreed to drop its remaining state law claims in exchange for ATS dropping one of its defenses, leaving only its copyright claim.

On December 7, 2023, the District Court granted ATS’s motion for summary judgment on its affirmative defense of fair use.

The Court subsequently entered final judgment in favor of ATS on December 14, 2023.

Teradyne filed a Notice of Appeal to the Ninth Circuit Court of Appeals on January 12, 2024.

Teradyne’s opening brief on its appeal is currently scheduled to be due on April 9, 2024 with ATS’s answering brief due on May 9, 2024, though those dates may be extended.

No amounts have been accrued for this matter in the December 31, 2023 or 2022 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.

Accrued legal fees were $ 7.9 million as of December 31, 2023 and were insignificant as of December 31, 2022.

NOTE 20 — SEGMENTS

8 unchanged sentences

Total Consolidated Sales $ 689,206 $ 534,894 $ 444,908

Operating Loss and Margins:

Operating Income (Loss) and Margins:

Aerospace $ 24,629 $ ( 1,883 ) $ ( 8,614 )

2 unchanged sentences

( 10.4 ) % ( 11.0 ) % ( 4.7 ) %

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

Total Operating Income (Loss) $ 15,884 $ ( 10,001 ) $ ( 12,379 )

2.3 % ( 1.9 ) % ( 2.8 ) %

18 unchanged sentences

Total Capital Expenditures $ 7,643 $ 7,675 $ 6,034

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

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

During the year ended December 31, 2023, a $ 3.6 million inventory reserve and a $ 7.5 million allowance for estimated credit losses associated with a bankrupt customer was recorded as an expense, negatively impacting Aerospace Operating Income.

During the year ended December 31, 2023, $ 5.8 million was recognized in sales related to the reversal of a deferred revenue liability assumed with an acquisition and associated with a customer program within our Test Systems Segment which is no longer expected to occur, which also benefits Test Systems’ operating loss for the year.

Corporate expenses and other for the year ended December 31, 2023, includes income of $ 1.8 million associated with the reversal of a liability related to an equity

investment, as we are no longer required to make the associated payment.

This amount is included in Other Income, Net.

In the year ended December 31, 2022, $ 6.0 million of the AMJP grant was recognized as an offset to the cost of products sold in the Aerospace segment.

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

15 unchanged sentences

Sales recorded by the Company’s foreign operations were $ 69.3 million, $ 50.0 million and $ 36.6 million in 2023, 2022 and 2021, respectively.

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

Net income (loss) from foreign operations was $ 5.3 million, $( 0.2 ) million and $( 3.8 ) million in 2023, 2022 and 2021, respectively.

Net assets held outside of the U.S.

total $ 39.1 million and $ 36.6 million at December 31, 2023 and 2022, respectively.

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

The exchange gain (loss) included in determining net income (loss) was insignificant in 2023, 2022 and 2021.

Cumulative translation adjustments amounted to $ 6.4 million and $ 7.3 million at December 31, 2023 and 2022, respectively.

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.

The following is information relating to the activity with those customers:

The Company has a significant concentration of business with The Boeing Company (“Boeing”).

Sales to Boeing are primarily in the Aerospace segment.

The following is information relating to the activity with this customer:

2023 2022 2021

1 unchanged sentence

Boeing 11.0 % 11.0 % 10.0 %

Panasonic * * 11.1 %

(In thousands) 2023 2022

1 unchanged sentence

Boeing $ 17,314 $ 16,860

Panasonic * *

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

NOTE 21 — DIVESTITURE ACTIVITIES

9 unchanged sentences

Due to the degree of uncertainty associated with estimating the future sales levels of the divested business and its underlying programs, and the lack of reliable predictive market information, the Company has elected an accounting policy to recognize such earnout proceeds, if received, as additional gain on sale when such proceeds are realized or realizable.

We consider the proceeds realizable when we have received communication from the purchaser of its calculation of the earnout and the parties reach agreement on the calculation.

We consider the proceeds realizable when we have received

communication from the purchaser of its calculation of the earnout and the parties reach agreement on the calculation.

No amounts were payable to the Company under either earnout for the calendar 2019 earnout.

2 unchanged sentences

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.

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

In March 2023, the Company agreed with the final earnout calculation for the calendar 2022 earnout for $ 3.4 million.

The Company recorded the gain and received the payment in the first quarter of 2023.

Other Disposal Activity

1 unchanged sentence

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.

A gain on sale of approximately $ 5.0 million was recorded in the Consolidated Statements of Operations as a 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.

The net gain on the sale was insignificant.

NOTE 22 — IMPAIRMENTS, RESTRUCTURING AND OTHER CHARGES

Goodwill Impairment

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 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.

All such charges were included in the Aerospace segment.

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.

Accordingly, restructuring charges of $ 4.9 million in severance expense associated primarily with the Aerospace segment were recorded in 2020.

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

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.

The above restructuring and impairment charges are presented in the Consolidated Statements of Operations for the years ended December 31 as follows:

(In thousands) 2022 2021 2020

Cost of Products Sold $ — $ 221 $ 280

Selling, General and Administrative Expenses 195 577 5,047

Impairment Loss — — 87,016

Total Restructuring and Impairment Charges $ 195 $ 798 $ 92,343

The following table reconciles the beginning and ending liability for restructuring charges:

(In thousands) 2022 2021 2020

Balance as of January 1 $ 2,400 $ 5,631 $ 5,190

Restructuring Charges Recognized 195 798 5,327

Cash Paid ( 2,595 ) ( 4,029 ) ( 4,886 )

Balance as of December 31 $ — $ 2,400 $ 5,631

Financial Instrument Impairment

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 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.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

1 unchanged sentence

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