What changed in this filing

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Item 1. Financial Statements

2024-08-05 compared with 2024-05-06 · 170 added, 130 removed, 434 unchanged (41% of the section changed)

2 unchanged sentences

Consolidated Condensed Balance Sheets

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

June 29, 2024 with Comparative Figures for December 31, 2023

(In thousands)

March 30, 2024 December 31, 2023

June 29, 2024 December 31, 2023

Current Assets:

41 unchanged sentences

Consolidated Condensed Statements of Operations

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

Three and Six Months Ended June 29, 2024 With Comparative Figures for 2023

(In thousands, except per share data)

Three Months Ended

March 30, 2024 April 1, 2023

Six Months Ended Three Months Ended

June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Sales $ 383,188 $ 330,992 $ 198,114 $ 174,454

2 unchanged sentences

Selling, General and Administrative Expenses 66,329 60,179 33,804 30,299

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

Income from Operations 9,216 26 7,550 2,396

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

1 unchanged sentence

Interest Expense, Net of Interest Income 11,615 11,390 5,856 5,920

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

(Loss) Income Before Income Taxes ( 3,270 ) ( 7,027 ) 1,259 ( 3,902 )

(Benefit from) Provision for Income Taxes ( 1,625 ) 9,387 ( 274 ) 8,097

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

Loss Per Share:

Net (Loss) Income $ ( 1,645 ) $ ( 16,414 ) $ 1,533 $ ( 11,999 )

(Loss) Earnings Per Share:

$ ( 0.05 ) $ ( 0.50 ) $ 0.04 $ ( 0.37 )

2 unchanged sentences

ASTRONICS CORPORATION

Consolidated Condensed Statements of Comprehensive Loss

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

Consolidated Condensed Statements of Comprehensive (Loss) Income

Three and Six Months Ended June 29, 2024 With Comparative Figures for 2023

(In thousands)

Three Months Ended

March 30, 2024 April 1, 2023

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

Six Months Ended Three Months Ended

June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Net (Loss) Income $ ( 1,645 ) $ ( 16,414 ) $ 1,533 $ ( 11,999 )

Other Comprehensive (Loss) Income:

Foreign Currency Translation Adjustments

( 924 ) 711 ( 168 ) 487

Retirement Liability Adjustment – Net of Tax

562 372 281 187

Total Other Comprehensive (Loss) Income ( 362 ) 1,083 113 674

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

Comprehensive (Loss) Income $ ( 2,007 ) $ ( 15,331 ) $ 1,646 $ ( 11,325 )

See notes to consolidated condensed financial statements.

1 unchanged sentence

Consolidated Condensed Statements of Cash Flows

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

Three Months Ended

Six Months Ended June 29, 2024 With Comparative Figures for 2023

Six Months Ended

(Unaudited, In thousands)

March 30, 2024 April 1, 2023

June 29, 2024 July 1, 2023

Cash Flows from Operating Activities:

30 unchanged sentences

Stock Award Activity ( 3,172 ) ( 601 )

Financing-related Costs ( 1,837 ) ( 6,388 )

Finance Lease Principal Payments ( 70 ) ( 24 )

Debt Acquisition Costs ( 809 ) ( 4,347 )

Other ( 10 ) —

Net Cash from Financing Activities 805 11,945

6 unchanged sentences

Consolidated Condensed Statements of Shareholders’ Equity

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

Three and Six Months Ended June 29, 2024 With Comparative Figures for 2023

(In thousands)

Three Months Ended

March 30, 2024 April 1, 2023

Six Months Ended Three Months Ended

June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Beginning of Period $ 314 $ 291 $ 318 $ 293

Shares Issued to Fund Bonus Obligations 2 —

Net Shares Issued to Fund Bonus Obligations 3 — 1 —

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

7 unchanged sentences

Beginning of Period 129,544 98,630 134,066 100,426

Shares Issued to Fund Bonus Obligations 2,747 —

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

Tax Withholding Related to Issuance of RSU’s ( 1,027 ) ( 603 )

Equity-based Compensation Expense and Net Exercise of Stock Options 4,642 3,993 1,840 1,594

Gross Shares Issued to Fund Bonus Obligations 6,281 — 2,107 —

Tax Withholding Related to Issuance of RSU’s and Shares for Bonus Obligations ( 3,177 ) ( 603 ) ( 723 ) —

End of Period 137,290 102,020 137,290 102,020

6 unchanged sentences

Beginning of Period 209,753 240,360 205,899 234,463

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

Net (Loss) Income ( 1,645 ) ( 16,414 ) 1,533 ( 11,999 )

Reissuance of Treasury Shares for 401K Contribution ( 1,330 ) ( 2,248 ) ( 654 ) ( 766 )

8 unchanged sentences

Consolidated Condensed Statements of Shareholders’ Equity, Continued

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

Three and Six Months Ended June 29, 2024 With Comparative Figures for 2023

(In thousands)

Three Months Ended

(Shares) March 30, 2024 April 1, 2023

Six Months Ended Three Months Ended

(Shares) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Beginning of Period 31,402 29,122 31,832 29,273

Shares Issued to Fund Bonus Obligations 144 —

Net Shares Issued to Fund Bonus Obligations 218 — 74 —

Net Issuance from Exercise of Stock Options — 1 — —

13 unchanged sentences

Notes to Consolidated Condensed Financial Statements

March 30, 2024

June 29, 2024

1) Basis of Presentation

7 unchanged sentences

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.

Operating results for the six months ended June 29, 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 seat 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 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.

7 unchanged sentences

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) March 30, 2024 April 1, 2023

(In thousands) June 29, 2024 July 1, 2023

Cash and Cash Equivalents $ 2,857 $ 3,472

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.

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

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 and six months ended June 29, 2024 and July 1, 2023 consisted of the following:

Six Months Ended Three Months Ended

(In thousands) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Balance at Beginning of the Period $ 9,193 $ 2,630 $ 8,596 $ 2,265

3 unchanged sentences

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.

As a result, the Company recorded a full reserve in the fourth quarter of 2023 of $ 7.5 million for outstanding accounts receivable, which was subsequently written off in the second quarter of 2024.

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 $ 13.3 million and $ 12.7 million for the three months ended March 30, 2024 and April 1, 2023, respectively.

Research and development expenses amounted to $ 14.2 million and $ 12.7 million for the three months ended and $ 27.5 million and $ 25.4 million for the six months ended June 29, 2024 and July 1, 2023, respectively.

These costs are included in cost of products sold.

4 unchanged sentences

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 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.

As of June 29, 2024 and July 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 six-month periods then ended.

Foreign Currency Translation

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.

The aggregate foreign currency transaction gain or loss included in operations was insignificant for the three and six months ended June 29, 2024 and July 1, 2023.

Newly Adopted Accounting Pronouncements

15 unchanged sentences

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 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 $ 9.2 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.

On June 29, 2024, we had $ 633.4 million of outstanding performance obligations, which we refer to as total backlog.

We expect to recognize approximately $ 561.5 million of our outstanding performance obligations as revenue over the next twelve months and the balance thereafter.

We recognized $ 9.0 million and $ 10.6 million during the three months ended and $ 15.2 million and $ 19.5 million during the six months ended June 29, 2024 and July 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 three months ended March 30, 2024:

The following table presents the beginning and ending balances of contract assets and contract liabilities during the six months ended June 29, 2024:

(In thousands) Contract Assets Contract Liabilities

1 unchanged sentence

$ 46,321 $ 22,888

Ending Balance, March 30, 2024

Ending Balance, June 29, 2024

$ 53,291 $ 18,448

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, partially offset by a $ 3.5 million revision of estimated costs to complete certain long-term mass transit Test contracts.

The revision resulted in reduced revenue recognized during the three and six months ended June 29, 2024 due to lower estimates of the percentage of work completed on the programs.

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

The Company recognizes an asset for certain, material costs to fulfill a contract if it is determined that the costs relate directly to a contract or an anticipated contract that can be specifically identified, generate or enhance resources that will be used in satisfying performance obligations in the future, and are expected to be recovered.

3 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.

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.

Capitalized fulfillment costs were $ 3.0 million and $ 4.7 million on June 29, 2024 and December 31, 2023, respectively.

Amortization of fulfillment costs recognized within Cost of Products Sold was

approximately $ 2.7 million and $ 3.0 million for the three and six months ended June 29, 2024.

No amortization of fulfillment costs was recorded in 2023.

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

Three Months Ended

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

Six Months Ended Three Months Ended

(In thousands) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Aerospace Segment

5 unchanged sentences

38,566 44,463 19,015 25,015

10,326 15,576 4,748 7,704

Aerospace Total 340,581 293,979 176,943 158,382

5 unchanged sentences

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

Three Months Ended

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

Six Months Ended Three Months Ended

(In thousands) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Aerospace Segment

5 unchanged sentences

Systems Certification

7,812 13,297 3,364 7,620

6,185 4,571 3,078 2,271

10,326 15,576 4,748 7,704

Aerospace Total 340,581 293,979 176,943 158,382

4 unchanged sentences

( In thousands )

March 30, 2024 December 31, 2023

June 29, 2024 December 31, 2023

Finished Goods

7 unchanged sentences

(In thousands)

March 30, 2024 December 31, 2023

June 29, 2024 December 31, 2023

$ 8,579 $ 8,606

10 unchanged sentences

The following table summarizes acquired intangible assets as follows:

March 30, 2024 December 31, 2023

June 29, 2024 December 31, 2023

(In thousands) Weighted

9 unchanged sentences

Amortization expense for acquired intangibles is summarized as follows:

Three Months Ended

Six Months Ended Three Months Ended

(In thousands)

March 30, 2024 April 1, 2023

June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Amortization Expense

4 unchanged sentences

2025 $ 10,935

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

The following table summarizes the changes in the carrying amount of goodwill for the six months ended June 29, 2024:

(In thousands) December 31, 2023 Foreign

March 30, 2024

June 29, 2024

Aerospace $ 36,575 $ ( 67 ) $ 36,508

2 unchanged sentences

7) Long-term Debt and Notes Payable

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 Company's long-term debt at June 29, 2024 and December 31, 2023 consisted of borrowings under its Sixth Amended and Restated Credit Agreement (the “ABL Revolving Credit Facility”) which was entered into on January 19, 2023.

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 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 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.

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

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

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

Under the provisions of the ABL Revolving Credit Facility, the Company has a cash dominion arrangement with the lead banking institution whereby eligible daily cash receipts are contractually utilized to pay down outstanding borrowings 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 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 was also required to maintain minimum excess availability of $ 10 million for the quarter ended June 29, 2024.

On June 29, 2024, there was $ 97.4 million outstanding on the ABL Revolving Credit Facility and there remained $ 17.3 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, 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 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.

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

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

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

The Company was required to 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 was paid in June 2024.

Amortization of the principal under the Term Loan Facility began 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.

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 $ 48.0 million in the second quarter of 2024, increasing thereafter.

Mandatory prepayment of a portion of excess cash flow, as defined by the Term Loan Facility, was 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 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.

The Company was subject to a minimum fixed charge coverage ratio of 1.10 to 1.00.

Further, the Company was 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 June 29, 2024.

The Company amended its existing ABL Revolving Credit Facility on July 11, 2024 by entering into the Seventh Amended and Restated Credit Agreement (the “Restated ABL Agreement”).

The Restated ABL Agreement increased the maximum aggregate amount that the Company can borrow pursuant to the revolving credit line thereunder to $ 200 million from $ 115 million, with borrowings subject to a borrowing base determined primarily by inventory, accounts receivable, machinery and equipment and real estate.

The Restated ABL Agreement extended the scheduled maturity date for the credit facility from January 19, 2026 to July 11, 2027.

Under the terms of the Restated ABL Agreement, the Company will now pay interest on the unpaid principal amount of the credit facility at a rate equal to SOFR plus a term SOFR adjustment in the amount of 0.10 % per annum (which collectively shall be at least 1.00 %) plus an applicable margin ranging from 2.50 % to 3.00 % determined based upon the Company’s excess availability (as defined in the Restated ABL Agreement).

The Company will pay a quarterly commitment fee under the Restated ABL Agreement on undrawn revolving credit commitments in an amount equal to 0.25 % or 0.375 % based on the Company’s average excess availability under the credit facility.

The Company also entered into a $ 55 million Term Loan Facility (the “Revised Term Loan Facility”) on July 11, 2024.

The Revised Term Loan Facility is secured primarily by the Company’s intellectual property and equity interests of the Company’s subsidiaries.

The maturity date of the Revised Term Loan Facility is July 11, 2027.

The Company will pay interest under the Revised Term Loan Facility at a rate equal to SOFR plus a term SOFR adjustment in the amount of 0.10 % per annum (which collectively shall be at least 1.00 %) plus an applicable margin ranging from 5.50 % to 6.75 % determined based upon the Company’s consolidated leverage ratio (as defined in the Revised Term Loan Facility).

The Company will pay a commitment

fee to the lenders under the Revised Term Loan Facility in the amount of 2.0 % of the total aggregate commitment.

The Company is required to repay the principal amount of the term loans under the Revised Term Loan Facility in quarterly installments on the last day of each fiscal quarter in an amount equal to $ 137,500 .

The principal amount of the Revised Term Loan Facility will amortize at a rate of 1.00 % (or approximately $ 550,000 ) per year.

The Company is required to pay a call premium of $ 3.2 million in conjunction with the repayment of the original Term Loan Facility.

Total payments of $ 1.3 million are payable over the next twelve months, including the annual amortization of the Revised Term Loan Facility and the final monthly $ 0.8 million payment due under the Term Loan Facility prior to its termination, and as such, have been classified as current in the accompanying Consolidated Condensed Balance Sheet as of June 29, 2024.

The interest rate on current maturities of long-debt is variable at SOFR plus 8.75 % and was 14.2 % at June 29, 2024 and December 31, 2023.

The remaining balance of $ 79.7 million under the Term Loan Facility as of June 29, 2024, is recorded as long-term in the accompanying Consolidated Condensed Balance Sheet.

The Company incurred $ 1.7 million in incremental debt issuance costs during the six months ended June 29, 2024, allocated between the original and Restated ABL Revolving Credit Facilities and the original and Revised Term Loan Facilities.

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 ($ 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.

Unamortized deferred debt issuance costs associated with the ABL Revolving Credit Facility ($ 1.8 million as of June 29, 2024) are recorded within Other Assets and those associated with the Term Loan Facility ($ 4.5 million as of June 29, 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 under the Restated ABL Agreement and the Revised Term Loan Facility and the assets of such subsidiaries also secure the obligations under the Restated Agreement and the Term Loan Facility.

Pursuant to the Restated ABL Agreement and the Revised Term Loan Facility, the Company is subject to a minimum fixed charge coverage ratio of 1.10 to 1.00.

The Company is also required to maintain minimum excess availability of the greater of 10% of the borrowing base under the Restated Agreement, or $ 15.0 million.

In the event of voluntary or involuntary bankruptcy of the Company or any subsidiary, all unpaid principal and other amounts owing under the credit facilities automatically become due and payable.

8 unchanged sentences

Activity in the warranty accrual is summarized as follows:

Three Months Ended

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

Six Months Ended Three Months Ended

(In thousands) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Balance at Beginning of Period $ 9,751 $ 8,009 $ 10,522 $ 7,401

4 unchanged sentences

9) Income Taxes

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

The effective tax rates were approximately ( 21.8 )% and ( 207.5 )% for the three months ended and 49.7 % and ( 133.6 )% for the six months ended June 29, 2024 and July 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.

5 unchanged sentences

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:

Three Months Ended

Six Months Ended Three Months Ended

(In thousands)

March 30, 2024 April 1, 2023

June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Weighted Average Shares - Basic 34,936 32,560 35,007 32,614

2 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 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.

The Company incurred a net loss for the six months ended June 29, 2024 and the three and six months ended July 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 1,072,000 shares as of June 29, 2024 and 1,114,000 shares as of July 1, 2023.

11) Shareholders' Equity

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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 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.

During the six month periods ended June 29, 2024 and July 1, 2023, the Company reissued 139,000 and 164,000 treasury shares, respectively, associated with the funding of employer 401K contributions and recorded the difference between the average cost and the reissuance price, $ 1.3 million and $ 2.2 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.

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.

During the three and six months ended June 29, 2024, the Company did not sell any shares

of our common stock under the ATM Program.

As of June 29, 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) March 30, 2024 December 31, 2023

(In thousands) June 29, 2024 December 31, 2023

Foreign Currency Translation Adjustments $ ( 7,275 ) $ ( 6,351 )

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

Three Months Ended

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

Six Months Ended Three Months Ended

(In thousands) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Foreign Currency Translation Adjustments $ ( 924 ) $ 711 $ ( 168 ) $ 487

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Amortization of Prior Service Cost

193 193 96 98

Amortization of Net Actuarial Losses

369 179 185 89

Retirement Liability Adjustment 562 372 281 187

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

Three Months Ended

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

Six Months Ended Three Months Ended

(In thousands) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Service Cost $ — $ 53 $ — $ 27

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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 months ended March 30, 2024 and April 1, 2023, is immaterial.

The net periodic cost for both plans for the three and six months ended June 29, 2024 and July 1, 2023, 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 Expense (Income), Net.

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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 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.

In the three and six months ended June 29, 2024 and July 1, 2023, the Company had one customer over 10% of consolidated sales.

Sales to The Boeing Company (“Boeing”) accounted for 11.7 % and 11.2 % of sales in the three and six months ended June 29, 2024 and 11.5 % and 10.9 % in the three and six months ended July 1, 2023, respectively.

Accounts receivable from Boeing on June 29, 2024 were approximately $ 23.2 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.

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 reserve for the German indirect claim and interest was approximately $ 17.3 million on June 29, 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 March 30, 2024 and December 31, 2023.

Therefore, the liability related to this matter is classified within Other Liabilities (non-current) in the Consolidated Condensed Balance Sheets on June 29, 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 $ 7.3 million and $ 7.4 million as of March 30, 2024 and December 31, 2023, 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 June 29, 2024 and December 31, 2023, respectively.

This variance is due to currency fluctuation and interest accrued.

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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.

Therefore, the liability related to these matters is classified within Accrued Expenses and Other Current Liabilities in the Consolidated Condensed Balance Sheets on June 29, 2024.

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

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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.

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 June 29, 2024 or December 31, 2023.

There were no other significant developments in any of these matters during the six months ended June 29, 2024.

A liability for reimbursement of Lufthansa’s legal expenses associated with the UK matter was approximately $ 0.7 million on June 29, 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 June 29, 2024 and December 31, 2023.

On March 23, 2020, Teradyne, Inc.

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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.

Teradyne’s opening brief on its appeal was filed on April 9, 2024.

ATS’s answering brief was filed on June 10, 2024.

Teradyne’s reply brief is due August 7, 2024.

No amounts have been accrued for this matter in the June 29, 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 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.

Below are the sales and operating profit by segment for the three and six months ended June 29, 2024 and July 1, 2023, and a reconciliation of segment operating profit to (loss) income 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.

Three Months Ended

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

Six Months Ended Three Months Ended

(In thousands) June 29, 2024 July 1, 2023 June 29, 2024 July 1, 2023

Aerospace $ 340,623 $ 294,101 $ 176,948 $ 158,386

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( 8,415 ) ( 6,740 ) ( 5,336 ) ( 6,143 )

( 19.8 ) % ( 18.2 ) % ( 25.2 ) % ( 38.2 ) %

Total Segment Measure of Operating Profit 22,962 11,066 13,944 7,576

Deductions from Segment Measure of Operating Profit:

6.0 % 3.3 % 7.0 % 4.3 %

(Additions to) Deductions from Segment Measure of Operating Profit:

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

Interest Expense, Net of Interest Income

11,615 11,390 5,856 5,920

Corporate Expenses and Other

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

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.

14,617 10,130 6,829 5,558

(Loss) Income Before Income Taxes $ ( 3,270 ) $ ( 7,027 ) $ 1,259 $ ( 3,902 )

During the six months ended July 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 six months ended July 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.

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(In thousands)

March 30, 2024 December 31, 2023

June 29, 2024 December 31, 2023

$ 504,462 $ 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 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.

There were no financial assets or liabilities carried at fair value measured on a recurring basis on June 29, 2024 or December 31, 2023.

There were no non-recurring fair value measurements performed in the six months ended June 29, 2024 and July 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

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.

The Company amended its existing ABL Revolving Credit Facility on July 11, 2024 by entering into the Seventh Amended and Restated Credit Agreement.

The Restated Agreement increased the maximum aggregate amount that the Company can borrow pursuant to the revolving credit line thereunder to $ 200 million from $ 115 million.

The Restated Agreement extended the scheduled maturity date for the credit facility from January 19, 2026 to July 11, 2027.

The Company also entered into a $ 55 million Term Loan Facility on July 11, 2024.

The Revised Term Loan Facility has a maturity date of July 11, 2027.

The Company repaid in full all outstanding indebtedness under the Term Loan Credit Agreement dated as of January 19, 2023.

The payoff amount of approximately $ 84.5 million consisted of a repayment of the principal amount of approximately $ 80.3 million, plus accrued but unpaid interest, fees and expenses, including a call premium of 4.00 % (or approximately $ 3.2 million) which satisfied all of the Company’s indebtedness obligations thereunder.

The Company funded the repayment of its obligations under the previous agreement with borrowings under the Restated Agreement and the Revised Term Loan Facility.

In the third quarter of 2024, the Company expects to record a loss on extinguishment of the debt of approximately $ 7.0 million below Income from Operations and a write-off of deferred financing costs of approximately $ 0.5 million related to the exiting ABL lender in Interest Expense within the Consolidated Condensed Statements of Operations.

The Company incurred approximately $ 3.9 million in incremental debt issuance costs related to the new facilities, allocated between the Restated Agreement and the Revised Term Loan Facility.

All costs will amortize to interest expense over the term of the respective agreement.

Additional information regarding the Revised ABL and Term Loan credit facilities can be found in Note 7.

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