What changed in this filing

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Item 1. Financial Statements

2024-05-06 compared with 2023-11-09 · 174 added, 231 removed, 390 unchanged (51% of the section changed)

2 unchanged sentences

Consolidated Condensed Balance Sheets

September 30, 2023 with Comparative Figures for December 31, 2022

March 30, 2024 with Comparative Figures for December 31, 2023

(In thousands)

September 30, 2023 December 31, 2022

March 30, 2024 December 31, 2023

Current Assets:

41 unchanged sentences

Consolidated Condensed Statements of Operations

Three and Nine Months Ended September 30, 2023 With Comparative Figures for 2022

Three Months Ended March 30, 2024 With Comparative Figures for 2023

(In thousands, except per share data)

Nine Months Ended Three Months Ended

September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

Three Months Ended

March 30, 2024 April 1, 2023

Sales $ 185,074 $ 156,538

2 unchanged sentences

Selling, General and Administrative Expenses 32,525 29,880

Loss from Operations ( 14,453 ) ( 26,877 ) ( 14,479 ) ( 14,314 )

Income (Loss) from Operations 1,666 ( 2,370 )

Net Gain on Sale of Business — ( 3,427 )

Other (Income) Expense, Net of Other Expense (Income) ( 562 ) 1,180 348 427

Other Expense (Income), Net 436 ( 1,288 )

Interest Expense, Net of Interest Income 5,759 5,470

Loss Before Income Taxes ( 4,529 ) ( 3,125 )

Provision for (Benefit from) Income Taxes 5,552 6,383 ( 3,835 ) ( 2,403 )

(Benefit from) Provision for Income Taxes ( 1,351 ) 1,290

Net Loss $ ( 3,178 ) $ ( 4,415 )

5 unchanged sentences

Consolidated Condensed Statements of Comprehensive Loss

Three and Nine Months Ended September 30, 2023 With Comparative Figures for 2022

Three Months Ended March 30, 2024 With Comparative Figures for 2023

(In thousands)

Nine Months Ended Three Months Ended

September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

Three Months Ended

March 30, 2024 April 1, 2023

Net Loss $ ( 3,178 ) $ ( 4,415 )

Other Comprehensive Income (Loss):

Other Comprehensive (Loss) Income:

Foreign Currency Translation Adjustments

( 117 ) ( 3,241 ) ( 828 ) ( 1,674 )

Retirement Liability Adjustment – Net of Tax

557 1,046 185 348

Total Other Comprehensive Income (Loss) 440 ( 2,195 ) ( 643 ) ( 1,326 )

Total Other Comprehensive (Loss) Income ( 475 ) 409

Comprehensive Loss $ ( 3,653 ) $ ( 4,006 )

2 unchanged sentences

Consolidated Condensed Statements of Cash Flows

Nine Months Ended September 30, 2023 With Comparative Figures for 2022

Nine Months Ended

Three Months Ended March 30, 2024 With Comparative Figures for 2023

Three Months Ended

(Unaudited, In thousands)

September 30, 2023 October 1, 2022

March 30, 2024 April 1, 2023

Cash Flows from Operating Activities:

6 unchanged sentences

Operating Lease Non-Cash Expense 1,280 1,186

Non-Cash Accrued 401K Contribution 3,773 3,300

Non-Cash 401K Contribution and Quarterly Bonus Accrual 3,454 1,208

Non-Cash Annual Stock Bonus Accrual 1,448 —

Net Gain on Sale of Business, Before Taxes — ( 3,427 )

Non-Cash Litigation Provision Adjustment ( 1,305 ) 2,000

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

10 unchanged sentences

Other Assets and Liabilities 932 ( 19 )

Net Cash Used by Operating Activities ( 22,276 ) ( 39,141 )

Net Cash from Operating Activities 2,037 ( 19,181 )

Cash Flows from Investing Activities:

1 unchanged sentence

Capital Expenditures ( 1,598 ) ( 1,573 )

Net Cash (Used) Provided by Investing Activities ( 2,610 ) 17,698

Net Cash from Investing Activities ( 1,598 ) 1,864

Cash Flows from Financing Activities:

2 unchanged sentences

Stock Award Activity 1,713 ( 602 )

Proceeds from At-the-Market Stock Sales 13,045 —

Finance Lease Principal Payments ( 53 ) ( 11 )

Debt Acquisition Costs ( 809 ) ( 4,347 )

Net Cash Provided (Used) by Financing Activities 18,779 ( 4,949 )

Net Cash from Financing Activities ( 5,042 ) 9,176

Effect of Exchange Rates on Cash ( 100 ) 80

2 unchanged sentences

Cash and Cash Equivalents and Restricted Cash at End of Period $ 6,610 $ 5,717

Supplemental Disclosure of Cash Flow Information

Non-Cash Investing Activities:

Capital Expenditures in Accounts Payable $ — $ 1,392

See notes to consolidated condensed financial statements.

1 unchanged sentence

Consolidated Condensed Statements of Shareholders’ Equity

Three and Nine Months Ended September 30, 2023 With Comparative Figures for 2022

Three Months Ended March 30, 2024 With Comparative Figures for 2023

(In thousands)

Nine Months Ended Three Months Ended

September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

Three Months Ended

March 30, 2024 April 1, 2023

Beginning of Period $ 314 $ 291

Issuance of Common Stock Through At-the-Market (“ATM”) Offering 8 — 8 —

Net Exercise of Stock Options, including ESPP 4 — 4 —

Shares Issued to Fund Bonus Obligations 2 —

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

7 unchanged sentences

Beginning of Period 129,544 98,630

Issuance of Common Stock Through ATM Offering, Net of Offering Costs 13,611 — 13,611 —

Shares Issued to Fund Bonus Obligations 2,747 —

Net Exercise of Stock Options, including ESPP, and Equity-based Compensation Expense 2,802 2,399

19 unchanged sentences

Consolidated Condensed Statements of Shareholders’ Equity, Continued

Three and Nine Months Ended September 30, 2023 With Comparative Figures for 2022

Three Months Ended March 30, 2024 With Comparative Figures for 2023

(In thousands)

Nine Months Ended Three Months Ended

(Shares) September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

Three Months Ended

(Shares) March 30, 2024 April 1, 2023

Beginning of Period 31,402 29,122

Issuance of Common Stock Through ATM Offering 834 — 834 —

Net Issuance from Exercise of Stock Options, including ESPP 438 20 437 —

Shares Issued to Fund Bonus Obligations 144 —

Net Issuance from Exercise of Stock Options — 1

Net Issuance of Common Stock for RSU’s 107 83

3 unchanged sentences

Beginning of Period 5,952 6,314

Net Issuance from Exercise of Stock Options — 24 — —

Class B Stock Converted to Common Stock ( 179 ) ( 67 )

7 unchanged sentences

Notes to Consolidated Condensed Financial Statements

September 30, 2023

March 30, 2024

1) Basis of Presentation

6 unchanged sentences

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

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

Operating results for the nine months ended September 30, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

In addition, the supply chain pressures and residual impacts of the COVID-19 pandemic have increased the volatility we experience in our financial results in recent periods and this could continue in future interim and annual periods.

Operating results for the three months ended March 30, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

The balance sheet on December 31, 2023, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S.

3 unchanged sentences

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

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

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

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

1 unchanged sentence

The transaction included two elements of contingent earnouts.

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

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

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.

In April 2023, the Test Systems segment implemented restructuring initiatives to align the workforce and management structure with near-term revenue expectations and operational needs.

The Company incurred $ 0.6 million in severance charges during the nine months ended September 30, 2023 recorded as selling, general and administrative expenses, of which $ 0.1 million remain unpaid as of September 30, 2023.

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 and $ 3.6 million for dedicated inventory.

The reserves are non-cash in the current quarter and year to date, as the associated assets existed prior to 2023.

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 continue to place labor and supply chain pressures on our business and we have been impacted by customer demand variability.

Although we saw a stable and growing backlog during 2022 and into 2023 in our aerospace business, supply chain-related disruptions are ongoing and continue to adversely challenge our markets.

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.

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

The Company received $ 5.2 million in the first quarter of 2022.

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

During the nine months ended October 1, 2022, the Company recognized $ 6.0 million of the award.

Restricted Cash

Under the provisions of the ABL Revolving Credit Facility (as defined and discussed below in Note 7), the Company has a lockbox arrangement with the banking institution for its accounts within the United States whereby daily lockbox receipts are contractually utilized to pay down outstanding balances on the ABL Revolving Credit Facility debt.

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

Under the provisions of the ABL Revolving Credit Facility (as defined and discussed below in Note 7), 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 Condensed Balance Sheets.

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

(In thousands) September 30, 2023 October 1, 2022

(In thousands) March 30, 2024 April 1, 2023

Cash and Cash Equivalents $ 5,308 $ 4,220

3 unchanged sentences

The allowance for estimated credit losses is based on the Company’s assessment of the collectability of customer accounts.

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

In November 2023, a non-core contract manufacturing customer filed for bankruptcy under Chapter 11, and as a result, an additional allowance for credit losses was recorded on outstanding receivables of $ 7.5 million in the three and nine months ended September 30, 2023.

The allowance for estimated credit losses balance was $ 9.2 million and $ 2.6 million at September 30, 2023 and December 31, 2022, respectively.

The Company’s bad debt expense was $ 7.5 million and $ 7.7 million during the three and nine months ended September 30, 2023, and $ 0.3 million and $ 0.4 million during the three and nine months ended October 1, 2022.

Total write-offs charged against the allowance were $ 0.4 million and $ 1.2 million in the three and nine months ended September 30, 2023, and insignificant in the three and nine months ended October 1, 2022.

Total recoveries were insignificant in the three and nine months ended September 30, 2023 and October 1, 2022.

The Company's exposure to credit losses may increase if its customers are adversely affected by global economic recessions, disruption associated with the COVID-19 pandemic or the Russian/Ukrainian conflict, 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 and associated supply chain disruptions.

The Company regularly reviews the allowance by considering factors such as the age of the receivable balances, historical

experience, credit quality, current economic conditions, and reasonable and supportable forecasts of future economic conditions that may affect a customer’s ability to pay.

The changes in allowances for estimated credit losses for the three months ended March 30, 2024 and April 1, 2023 consisted of the following:

Three Months Ended

(In thousands) March 30, 2024 April 1, 2023

Balance at Beginning of the Period $ 9,193 $ 2,630

Bad Debt Expense, Net of Recoveries 86 ( 288 )

Write-off Charges Against the Allowance and Other Adjustments ( 683 ) ( 77 )

Balance at End of the Period $ 8,596 $ 2,265

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.

Research and Development Expenses

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

Research and development expenses amounted to $ 14.1 million and $ 12.0 million for the three months ended and $ 39.5 million and $ 36.8 million for the nine months ended September 30, 2023 and October 1, 2022, respectively.

Research and development expenses amounted to $ 13.3 million and $ 12.7 million for the three months ended March 30, 2024 and April 1, 2023, respectively.

These costs are included in cost of products sold.

2 unchanged sentences

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

The recoverability test consists of comparing the undiscounted projected cash flows

with the carrying amount.

The recoverability test consists of comparing the undiscounted projected cash flows with the carrying amount.

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 September 30, 2023 and October 1, 2022, the Company concluded that no indicators of impairment relating to intangible assets or goodwill existed and an interim test was not performed in the nine-month periods then ended.

As of March 30, 2024 and April 1, 2023, the Company concluded that no indicators of impairment relating to intangible assets or goodwill existed and an interim test was not performed in the three-month periods then ended.

Foreign Currency Translation

The aggregate foreign currency transaction gain or loss included in operations was insignificant for the three and nine months ended September 30, 2023 and October 1, 2022.

Newly Adopted Accounting Pronouncement

The aggregate foreign currency transaction gain or loss included in operations was insignificant for the three months ended March 30, 2024 and April 1, 2023.

Newly Adopted Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

Standard Description Financial Statement Effect or Other Significant Matters

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.

Recent ASUs 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.

On September 30, 2023, we had $ 604.3 million of remaining performance obligations, which we refer to as total backlog.

In conjunction with the customer bankruptcy discussed in Note 1, we have removed all outstanding backlog, approximately $ 19.9 million, related to such customer.

On March 30, 2024, we had $ 612.5 million of remaining performance obligations, which we refer to as total backlog.

We expect to recognize approximately $ 563.1 million of our remaining performance obligations as revenue over the next twelve months and the balance thereafter.

We recognized $ 9.3 million and $ 7.3 million during the three months ended and $ 22.1 million and $ 13.3 million during the nine months ended September 30, 2023 and October 1, 2022, respectively, in revenues that were included in the contract liability balance at the beginning of the period.

We recognized $ 9.2 million and $ 14.1 million during the three months ended March 30, 2024 and April 1, 2023, respectively, in revenues that were included in the contract liability balance at the beginning of the period.

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

The following table presents the beginning and ending balances of contract assets and contract liabilities during the nine months ended September 30, 2023:

The following table presents the beginning and ending balances of contract assets and contract liabilities during the three months ended March 30, 2024:

(In thousands) Contract Assets Contract Liabilities

1 unchanged sentence

$ 46,321 $ 22,888

Ending Balance, September 30, 2023

Ending Balance, March 30, 2024

$ 49,849 $ 21,092

4 unchanged sentences

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

As of September 30, 2023 and December 31, 2022, the Company capitalized $ 4.2 million and $ 2.5 million of costs, respectively.

Capitalized fulfillment costs were $ 5.1 million and $ 4.7 million on March 30, 2024 and December 31, 2023, respectively.

Amortization of fulfillment costs recognized within Cost of Products Sold was approximately $ 0.3 million for the three months ended March 30, 2024.

No amortization of fulfillment costs was recorded in 2023.

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

Nine Months Ended Three Months Ended

(In thousands) September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

Three Months Ended

(In thousands) March 30, 2024 April 1, 2023

Aerospace Segment

5 unchanged sentences

19,551 19,448

23,076 21,056 7,500 6,574

Aerospace Total 163,638 135,597

5 unchanged sentences

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

Nine Months Ended Three Months Ended

(In thousands) September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

Three Months Ended

(In thousands) March 30, 2024 April 1, 2023

Aerospace Segment

5 unchanged sentences

Systems Certification

19,832 6,656 6,535 3,985

7,485 4,600 2,914 1,551

23,076 21,056 7,500 6,574

Aerospace Total 163,638 135,597

4 unchanged sentences

( In thousands )

September 30, 2023 December 31, 2022

March 30, 2024 December 31, 2023

Finished Goods

4 unchanged sentences

$ 199,497 $ 191,801

As further described in Note 1, as a result of a non-core contract manufacturing customer declaring bankruptcy in November 2023, we recorded a $ 3.6 million reduction in inventory in the three and nine months ended September 30, 2023 to reflect the inventory carried for this customer at its net realizable value.

4) Property, Plant and Equipment

1 unchanged sentence

(In thousands)

September 30, 2023 December 31, 2022

March 30, 2024 December 31, 2023

$ 8,585 $ 8,606

10 unchanged sentences

The following table summarizes acquired intangible assets as follows:

September 30, 2023 December 31, 2022

March 30, 2024 December 31, 2023

(In thousands) Weighted

9 unchanged sentences

Amortization expense for acquired intangibles is summarized as follows:

Nine Months Ended Three Months Ended

Three Months Ended

(In thousands)

September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

March 30, 2024 April 1, 2023

Amortization Expense

4 unchanged sentences

2025 $ 10,935

The following table summarizes the changes in the carrying amount of goodwill for the nine months ended September 30, 2023:

The following table summarizes the changes in the carrying amount of goodwill for the three months ended March 30, 2024:

(In thousands) December 31, 2023 Foreign

September 30, 2023

March 30, 2024

Aerospace $ 36,575 $ ( 54 ) $ 36,521

2 unchanged sentences

7) Long-term Debt and Notes Payable

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

The maturity date of the loans under the Agreement was November 30, 2023.

On December 31, 2022, there was $ 164.0 million outstanding on the Agreement and there remained $ 6.0 million available.

The Company amended the Agreement 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.

1 unchanged sentence

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 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.

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 the ABL Revolving Credit facility to extend the temporary limit of $ 120 million until January 31, 2024.

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

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 March 27, 2024, the Company executed an amendment to the ABL Revolving Credit Facility, extending a temporary increase to the maximum aggregate amount that the Company can borrow under the revolving credit line by $ 5 million from $ 115 million to $ 120 million until May 15, 2024, at which time the limit is to return 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 Condensed 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 30, 2024, and $ 10 million thereafter.

On September 30, 2023, there was $ 86.0 million outstanding on the ABL Revolving Credit Facility and there remained $ 33.7 million available, net of outstanding letters of credit.

The Company also entered into a $ 90 million asset-based credit agreement (the “Term Loan Facility”) on January 19, 2023.

On March 30, 2024, there was $ 83.4 million outstanding on the ABL Revolving Credit Facility and there remained $ 36.3 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 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 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 which was paid on June 20, 2023, and $ 0.9 million of which will be paid 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, increased to 0.542 % per month for the period July 1, 2023 through September 1, 2023, and increased to 0.833 % thereafter.

Total scheduled principal payments of approximately $ 9.0 million are payable over the next twelve months and as such, have been classified as current in the accompanying Consolidated Condensed Balance Sheet as of September 30, 2023.

The weighted-average interest rate on current maturities of long-debt is 14.1 %.

The remaining balance of $ 78.8 million on September 30, 2023, is recorded as long-term in the accompanying Consolidated Condensed Balance Sheet.

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 $ 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.

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

In addition, 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.

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 which was paid on the closing date, $ 1.8 million which was paid in June 2023 and $ 0.9 million, 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 over the next twelve months and as such, have been classified as current in the accompanying Consolidated Condensed Balance Sheet as of March 30, 2024.

The interest rate on current maturities of long-debt is variable at SOFR plus 8.75 % and was 14.2 % at March 30, 2024.

The remaining balance of $ 74.3 million as of March 30, 2024, is recorded as long-term in the accompanying Consolidated Condensed Balance Sheet.

Pursuant to the ABL Revolving Credit Facility and the Term Loan Facility, as amended in March 2024, the Company was required to comply with a minimum trailing four quarter Adjusted EBITDA, as defined in the amended ABL Revolving Credit Facility and Term Loan Facility Agreements, of $ 45.3 million in the Company’s first quarter of 2024, increasing to $ 48.0 million in the second quarter of 2024, $ 67.1 million in the third quarter of 2024 and $ 70 million thereafter.

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 were 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 restrictions on additional indebtedness, share repurchases and dividend payments, and a limitation on capital expenditures.

The Company is in compliance with all covenant requirements as of September 30, 2023.

The Company incurred $ 8.6 million in incremental debt issuance costs related to the new facilities, allocated between the ABL Revolving Credit Facility and the Term Loan Facility.

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.

The Company was in compliance with debt covenants under the ABL Revolving Credit Facility and Term Loan Facility as of and for the quarter ended March 30, 2024.

The Company incurred $ 0.8 million in incremental debt issuance costs related to the new facilities during the three months ended March 30, 2024, 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.

Unamortized deferred debt issuance costs associated with the ABL Revolving Credit Facility ($ 2.2 million as of September 30, 2023) are recorded within other assets and those associated with the Term Loan Facility ($ 4.8 million as of September 30, 2023) are recorded as a reduction of the carrying value of the debt on the Consolidated Condensed Balance Sheet.

Unamortized deferred debt issuance costs associated with the ABL Revolving Credit Facility ($ 1.8 million as of March 30, 2024) are recorded within Other Assets and those associated with the Term Loan Facility ($ 4.5 million as of March 30, 2024) are recorded as a reduction of the carrying value of the debt on the Consolidated Condensed Balance Sheet.

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

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Other events of default, such as failure to make payments as they become due and breach of financial and other covenants, change of control, cross default under other material debt agreements, and a going concern qualification for any reason other than loan maturity date give the agent the option to declare all such amounts immediately due and payable.

The Company expects its sales growth, reductions in working capital and availability under its ABL Revolving Credit Facility will provide sufficient cash flows to fund operations.

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

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

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

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Activity in the warranty accrual is summarized as follows:

Nine Months Ended Three Months Ended

(In thousands) September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

Three Months Ended

(In thousands) March 30, 2024 April 1, 2023

Balance at Beginning of Period $ 9,751 $ 8,009

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Balance at End of Period $ 10,522 $ 7,401

During the nine months ended September 30, 2023, the Company entered into an operating lease and recorded a right-of-use asset and corresponding liabilities of $ 12.7 million.

The lease will require annual payments between $ 1.6 million and $ 1.9 million into 2033.

Associated lease costs are $ 1.7 million per year.

Other leasing activity during the year was insignificant.

9) Income Taxes

The effective tax rates were approximately 18.4 % and 13.9 % for the three months ended and ( 19.9 )% and ( 28.3 )% for the nine months ended September 30, 2023 and October 1, 2022, respectively.

The effective tax rates were approximately 29.8 % and ( 41.3 )% for the three months ended March 30, 2024 and April 1, 2023, respectively.

Beginning with the 2022 tax year, certain research and development costs are required to be capitalized and amortized over sixty months for income tax purposes.

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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, are 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 its 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 and 2021, the Company determined that a portion of its deferred tax assets were not expected to be realizable in the future and the Company continues to maintain the valuation allowance against its deferred tax assets as of September 30, 2023.

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 its 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, 2023 and 2022, the Company determined that a portion of its deferred tax assets were not expected to be realizable in the future and the Company continues to maintain the valuation allowance against its deferred tax assets as of March 30, 2024.

10) Earnings Per Share

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

Nine Months Ended Three Months Ended

Three Months Ended

(In thousands)

September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

March 30, 2024 April 1, 2023

Weighted Average Shares - Basic 34,863 32,505

Net Effect of Dilutive Stock Options — — — —

Net Effect of Dilutive Stock Awards — —

Weighted Average Shares - Diluted 34,863 32,505

Stock options with exercise prices greater than the average market price of the underlying common shares are excluded from the computation of diluted earnings per share because they are out-of-the-money and the effect of their inclusion would be anti-dilutive.

The number of common shares covered by out-of-the-money stock options was approximately 594,000 shares as of September 30, 2023 and 1,106,000 shares as of October 1, 2022.

Further, due to our net loss in the three and nine-month periods ended September 30, 2023 and October 1, 2022, the assumed exercise of stock compensation had an anti-dilutive effect and therefore was excluded from the computation of diluted loss per share.

Currently, the Company expects to fund its discretionary 401K contribution for the quarter ended September 30, 2023, with treasury stock in lieu of cash.

The earnings per share calculation for the quarter ended September 30, 2023, is inclusive of the approximately 0.1 million in shares outstanding for the equivalent shares needed to fulfill the obligation using the closing share price as of September 30, 2023.

The Company incurred a net loss for the three months ended March 30, 2024 and April 1, 2023, 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 anti-dilutive.

The number of common shares excluded from the computation was approximately 1,043,000 shares as of March 30, 2024 and 962,000 shares as of April 1, 2023.

Currently, the Company expects to fund its discretionary 401K contribution and quarterly bonus obligation for the quarter ended March 30, 2024, with treasury stock in lieu of cash.

The earnings per share calculation for the quarter ended March 30, 2024, is inclusive of the approximately 0.1 million in shares outstanding for the equivalent shares needed to fulfill the 401K contribution obligation and 0.1 million in shares outstanding for the equivalent shares needed to fulfill the quarterly bonus obligation using the closing share price as of March 30, 2024.

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

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The difference between the average cost of the treasury shares and the reissuance price is included in Retained earnings.

During the nine month periods ended September 30, 2023 and October 1, 2022, the Company reissued 242,000 and 545,000 treasury shares, respectively, associated with the funding of employer 401K contributions and recorded the difference between the average cost and the reissuance price, $ 3.1 million and $ 9.2 million, respectively, as a reduction to Retained earnings.

During the three month periods ended March 30, 2024 and April 1, 2023, the Company reissued 71,000 and 95,000 treasury shares, respectively, associated with the funding of employer 401K contributions and recorded the difference between the average cost and the reissuance price, $ 0.7 million and $ 1.5 million, respectively, as a reduction to Retained earnings.

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”).

Under the terms of the Equity Distribution Agreement and subject to the instructions of the Company, the Sales Agents may sell shares of Common Stock by any lawful method deemed to be an “at-the-market offering” defined by Rule 415(a)(4) of the Securities Act of 1933, as amended, including without limitation sales made directly on the Nasdaq Global Select Market, on any other existing trading market for the shares of Common Stock, to or through a market maker or in negotiated transactions.

The timing and volume of any sales of shares of Common Stock under the ATM Program will depend on a variety of factors to be determined by the Company.

Sales may be made at market prices prevailing at the time of the sale, at prices related to prevailing market prices, or at negotiated prices and, as a result, sales prices may vary.

Under the terms of the Equity Distribution Agreement, the Sales Agents are entitled to compensation at a fixed commission rate of 1.5 % of the gross proceeds from the sale of shares of Common Stock under the ATM Program.

During the three and nine months ended September 30, 2023, the Company sold 834,228 shares of our common stock under the ATM Program.

The Company generated $ 13.9 million in aggregate gross proceeds from sales under the ATM Program at an average sale price of $ 16.70 per share.

Aggregate net proceeds from the ATM Program were $ 13.6 million after deducting related expenses, including commissions to the Sales Agents and issuance costs.

Of this amount, $ 13.1 million in net cash proceeds were received in the three and nine months ended September 30, 2023, with the remainder received in October 2023.

The Company currently is obligated to use the net proceeds from any sale of shares of Common Stock pursuant to the ATM Program to pay down the outstanding principal amount of, and any unpaid interest on, the ABL Revolving Credit Facility.

However, any principal amount paid down on our ABL Revolving Credit Facility using the proceeds of the ATM Program will be, subject to compliance with the requirements and conditions set forth in the ABL Revolving Credit Facility, available to be reborrowed by the Company and used for, among other items, working capital and general corporate purposes.

If the outstanding principal amount balance of the ABL Revolving Credit Facility has been reduced to zero, then the Company intends to use the net proceeds of the ATM Program for general corporate purposes.

As of September 30, 2023, the Company had remaining capacity under the ATM Program to sell shares of Common Stock having an aggregate offering price up to approximately $ 16.1 million.

Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss

During the three months ended March 30, 2024, the Company did not sell any shares of our common stock under the ATM Program.

As of March 30, 2024, 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.

Comprehensive (Loss) Income and Accumulated Other Comprehensive Loss

The components of accumulated other comprehensive loss are as follows:

(In thousands) September 30, 2023 December 31, 2022

(In thousands) March 30, 2024 December 31, 2023

Foreign Currency Translation Adjustments $ ( 7,107 ) $ ( 6,351 )

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Accumulated Other Comprehensive Loss $ ( 9,901 ) $ ( 9,426 )

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

Nine Months Ended Three Months Ended

(In thousands) September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

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

Three Months Ended

(In thousands) March 30, 2024 April 1, 2023

Foreign Currency Translation Adjustments $ ( 756 ) $ 224

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Amortization of Prior Service Cost

288 302 95 101

Amortization of Net Actuarial Losses

269 744 90 247

Retirement Liability Adjustment 281 185

Other Comprehensive Income (Loss) $ 440 $ ( 2,195 ) $ ( 643 ) $ ( 1,326 )

Other Comprehensive (Loss) Income $ ( 475 ) $ 409

12) Supplemental Retirement Plan and Related Post Retirement Benefits

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

Nine Months Ended Three Months Ended

(In thousands) September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

Three Months Ended

(In thousands) March 30, 2024 April 1, 2023

Service Cost $ — $ 26

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

The net periodic cost for both plans for the three and nine months ended September 30, 2023 and October 1, 2022, is immaterial.

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

The net periodic cost for both plans for the three months ended March 30, 2024 and April 1, 2023, is immaterial.

13) Sales to Major Customers

The loss of major customers or a significant reduction in business with a major customer would significantly, and negatively impact our sales and earnings.

In the three and nine months ended September 30, 2023, the Company had one customer over 10% of consolidated sales.

Sales to The Boeing Company (“Boeing”) accounted for 11.6 % and 11.1 % of sales in the three and nine months ended September 30, 2023.

Accounts receivable from Boeing on September 30, 2023 were approximately $ 17.8 million.

In the three and nine months ended October 1, 2022, the Company had no customers over 10% of consolidated sales.

In the three months ended March 30, 2024 and April 1, 2023, the Company had one customer over 10% of consolidated sales.

Sales to The Boeing Company (“Boeing”) accounted for 10.7 % and 10.2 % of sales in the three months ended March 30, 2024 and April 1, 2023, respectively.

Accounts receivable from Boeing on March 30, 2024 were approximately $ 17.6 million.

14) Legal Proceedings

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Additional information about these legal proceedings can be found in Note 19 “Legal Proceedings” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

On July 12, 2023, the Higher Regional Court of Karlsruhe in Germany (the “German Court”) reduced the Company’s liability for direct damages.

Additionally, accrued interest on direct damages had previously been assessed at 5 %.

As part of the July 12, 2023 ruling, the German Court reduced that interest rate to 4 %.

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

We recorded this gain in the third quarter of 2023 as an offset to Selling, General and Administrative Expenses upon receipt of the refund.

The reserve for the German indirect claim and interest was approximately $ 17.8 million on December 31, 2022 and $ 16.9 million on September 30, 2023.

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 nine months ended September 30, 2023, which was recorded as an offset to Selling, General and Administrative Expenses.

The reserve for the German indirect claim and interest was approximately $ 17.2 million on March 30, 2024 and $ 17.1 million on December 31, 2023.

The Company currently believes it is unlikely that the damages in the indirect proceedings and related interest will be paid within the next twelve months.

Therefore, the liability related to these matters is classified within Other Liabilities (non-current) in the Consolidated Condensed Balance Sheets on September 30, 2023 and December 31, 2022.

In the matter before the UK High Court of Justice, as previously disclosed, Lufthansa has pleaded its case for monetary compensation, which will be determined at a separate trial, which is now set to take place in October 2024.

Therefore, the liability related to these matters is classified within Other Liabilities (non-current) in the Consolidated Condensed Balance Sheets on March 30, 2024 and December 31, 2023.

In the matter before the UK High Court of Justice, as previously disclosed, Lufthansa has pleaded its case for monetary compensation, which will be determined at a separate trial.

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

We have estimated damages and accrued interest for AES and its indemnified customers of approximately $ 7.1 million and $ 7.0 million as of September 30, 2023 and December 31, 2022, respectively.

We have estimated damages and accrued interest for AES and its indemnified customers

of approximately $ 7.3 million and $ 7.4 million as of March 30, 2024 and December 31, 2023, respectively.

This variance is due to currency fluctuation and interest accrued.

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This amount is subject to change as additional data is received and evaluated, and as additional information regarding the nature of its claim is put forward 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 Company currently believes it is unlikely that the appeals process will be completed or the damages and related interest will be paid within the next twelve months.

Therefore, the liability related to these matters is classified within Other Liabilities (non-current) in the Consolidated Condensed Balance Sheets on September 30, 2023 and December 31, 2022.

As previously disclosed, in 2020, Lufthansa filed a patent infringement action on December 29, 2017, before the Paris Court of First Instance.

The Court held the French patent invalid for all asserted claims.

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

Therefore, the liability related to these matters is classified within Accrued Expenses and Other Current Liabilities in the Consolidated Condensed Balance Sheets on March 30, 2024.

The liability related to these matters was classified within Other Liabilities (non-current) on December 31, 2023.

As previously disclosed, on December 4, 2020, the Court held the French patent invalid for all asserted claims.

There can consequently be no finding of infringement on first instance.

Lufthansa has appealed this judgment.

The appeal hearing took place on December 8, 2022, and on February 24, 2023, the Paris Court of Appeal upheld the first instance judgment in favor of AES.

On March 20, 2023, Lufthansa lodged an appeal before the French Supreme Court.

In September 2023, the French Supreme Court determined it will review the Paris Court of Appeal’s reasoning around the nullification of a certain claim of the subject patent.

The Company’s brief supporting the decision of the Paris Court of Appeal is due on January 22, 2024.

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 September 30, 2023 or December 31, 2022.

There were no other significant developments in any of these matters during the nine months ended September 30, 2023.

A liability for reimbursement of Lufthansa’s legal expenses associated with the UK matter was approximately $ 0.7 million on September 30, 2023 and December 31, 2022, which is expected to be paid within the next twelve months and, as such, is

classified in Accrued Expenses and Other Current Liabilities in the accompanying Consolidated Condensed Balance Sheet as of September 30, 2023.

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 March 30, 2024 or December 31, 2023.

There were no other significant developments in any of these matters during the three months ended March 30, 2024.

A liability for reimbursement of Lufthansa’s legal expenses associated with the UK matter was approximately $ 0.7 million on March 30, 2024 and December 31, 2023, which is expected to be paid within the next twelve months and, as such, is classified in Accrued Expenses and Other Current Liabilities in the accompanying Consolidated Condensed Balance Sheet as of March 30, 2024 and December 31, 2023.

On March 23, 2020, Teradyne, Inc.

filed a complaint against the Company and its subsidiary, Astronics Test Systems (“ATS”) (together, “the Defendants”) in the United States District Court for the Central District of California alleging patent infringement of its digital instruments providing over-voltage detection and protection and copyright infringement of test equipment software, specifically emulating software using Teradyne’s declarations, and certain other related claims.

The Defendants moved to dismiss certain claims from the case.

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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.

Discovery has been completed.

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.

The parties are currently engaged in summary judgment briefing with a hearing on the motions scheduled for December 4, 2023.

If the case is not disposed of on summary judgment, a trial will be held in 2024, though no trial date is currently set.

No amounts have been accrued for this matter in the September 30, 2023, or December 31, 2022 financial statements, as loss exposure was neither probable nor estimable at such times.

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 was filed on April 9, 2024 with ATS’s answering brief due on May 9, 2024, though that may be extended.

No amounts have been accrued for this matter in the March 30, 2024, or December 31, 2023 financial statements, as loss exposure was neither probable nor estimable at such times.

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.

15) Segment Information

Below are the sales and operating profit (loss) by segment for the three and nine months ended September 30, 2023 and October 1, 2022, and a reconciliation of segment operating profit (loss) to loss before income taxes.

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

Below are the sales and operating profit by segment for the three months ended March 30, 2024 and April 1, 2023, and a reconciliation of segment operating profit to loss before income taxes.

Operating profit is net sales less cost of products sold and other operating expenses excluding interest and corporate expenses.

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

Nine Months Ended Three Months Ended

(In thousands) September 30, 2023 October 1, 2022 September 30, 2023 October 1, 2022

Three Months Ended

(In thousands) March 30, 2024 April 1, 2023

Aerospace $ 163,675 $ 135,715

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Total Consolidated Sales $ 185,074 $ 156,538

Segment Measure of Operating Profit (Loss) and Margins

$ 10,342 $ ( 7,085 ) $ ( 7,464 ) $ ( 6,859 )

2.4 % ( 2.2 ) % ( 5.3 ) % ( 6.1 ) %

Segment Measure of Operating Profit and Margins

$ 12,097 $ 4,087

( 3,079 ) ( 597 )

Total Segment Measure of Operating Profit (Loss) 1,821 ( 11,210 ) ( 9,245 ) ( 9,171 )

( 14.4 ) % ( 2.9 ) %

Deductions from Segment Measure of Operating Profit (Loss):

Total Segment Measure of Operating Profit 9,018 3,490

Deductions from Segment Measure of Operating Profit:

Net Gain on Sale of Business — ( 3,427 )

Interest Expense, Net of Interest Income

17,381 5,812 5,991 2,519

Corporate Expenses and Other

15,712 16,847 5,582 5,570

Loss Before Income Taxes $ ( 4,529 ) $ ( 3,125 )

During the the three and nine months ended September 30, 2023, $ 3.6 million reduction to inventory and $ 7.5 million of allowance for estimated credit losses associated with a bankrupt customer was recorded to Aerospace Operating Profit (Loss).

See Note 1 for further discussion.

During the nine months ended September 30, 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 operating loss for the period.

Absent that benefit, Test Systems’ operating loss was $ 14.3 million.

Corporate expenses and other for the nine months ended September 30, 2023, includes 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 the associated payment.

This amount is included in Other Income, Net of Other Expense in the Consolidated Condensed Statement of Operations.

In the nine months ended October 1, 2022, $ 6.0 million of the AMJP grant was recognized as an offset to the cost of products sold in the Aerospace segment.

During the three months ended April 1, 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 period.

Corporate expenses and other for the three months ended April 1, 2023, includes 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 the associated payment.

This amount is included in Other Expense (Income), Net in the Consolidated Condensed Statement of Operations.

Total Assets:

(In thousands)

September 30, 2023 December 31, 2022

March 30, 2024 December 31, 2023

$ 490,506 $ 493,660

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16) Fair Value

There were no financial assets or liabilities carried at fair value measured on a recurring basis on September 30, 2023 or December 31, 2022.

There were no non-recurring fair value measurements performed in the nine months ended September 30, 2023 and October 1, 2022.

There were no financial assets or liabilities carried at fair value measured on a recurring basis on March 30, 2024 or December 31, 2023.

There were no non-recurring fair value measurements performed in the three months ended March 30, 2024 and April 1, 2023.

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

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17) Subsequent Events

The Company was notified on November 6, 2023, that a non-core contract manufacturing customer within the Aerospace Segment filed for bankruptcy under Chapter 11.

As a result, an allowance for estimated credit losses of $ 7.5 million for outstanding receivables was recorded to Selling, General and Administrative Expenses, and a $ 3.6 million reduction in the carrying value of inventory was recorded to Cost of Products Sold within the Consolidated Condensed Statement of Operations for the three and nine months ended September 30, 2023.

Shortly after the quarter ended, the Test Systems segment implemented restructuring initiatives to align the workforce and management structure with near-term revenue expectations and operational needs.

These initiatives are expected to provide annualized savings of approximately $ 4 million, beginning with the third quarter.

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

What changed 10-Q

Item 1. Financial Statements