What changed in this filing

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Item 1. Business

2025-03-05 compared with 2024-03-05 · 37 added, 42 removed, 119 unchanged (40% of the section changed)

1 unchanged sentence

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.

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

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

Our operation in Ukraine is a small engineering office and we have not experienced any significant disruption in staffing or services as a result of the Ukrainian and Russian conflict.

On January 19, 2023, the Company completed a financing transaction totaling $205 million, which refinanced its previous revolving credit facility which was scheduled to mature in November 2023.

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

The Term Loan Facility requires monthly amortization that began in April 2023 and bears interest at the Secured Overnight Financing Rate (“SOFR”) plus 8.75%.

The ABL Revolving Credit Facility bears interest at SOFR plus between 2.25% and 2.75%.

For additional information, see discussion in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 8, Long-Term Debt, of Item 8, Financial Statements and Supplementary Data, of this report.

Impact of the COVID-19 Pandemic

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

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

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

See Part I, Item 1A, Risk Factors, for an additional discussion of risk related to supply chain disruptions.

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

The grant benefit was recognized ratably over the six-month performance period as a reduction to Cost of Products Sold in proportion to the compensation expense that the award was intended to defray.

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

For additional details regarding government subsidies and grants, and their impact on consolidated results of operations and financial position, see Note 1 to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report.

On July 11, 2024, the Company completed a financing transaction that refinanced its previous credit facilities.

The refinancing consisted of an amendment and restatement of the Company’s asset-based revolving credit facility with a principal amount available to be borrowed thereunder of $200.0 million (the “ABL Revolving Credit Facility”), with amounts borrowed thereunder carrying an interest rate of SOFR plus between 2.50% to 3.00%.

The Company also entered into a $55.0 million term loan facility (the “Term Loan Facility”) at an interest rate of SOFR plus a term SOFR plus between 5.50% to 6.75%.

On November 25, 2024, the Company amended the ABL Revolving Credit Facility increasing the revolving credit line to $220.0 million with an interest rate of SOFR plus 2.75% to 3.25% (an increase of 0.25% to each such applicable margin).

On December 3, 2024, the Company issued $165.0 million aggregate principal amount of 5.500% Convertible Senior Notes (the “Convertible Notes”), which amount includes the additional notes issued pursuant to the initial purchasers’ full exercise of their option to purchase additional Convertible Notes.

The Convertible Notes will mature on March 15, 2030, unless earlier converted, redeemed or repurchased.

On December 3, 2024, the Company repaid in full all outstanding indebtedness on the Term Loan Facility.

For additional information, see discussion in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 8, Long-Term Debt, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report.

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

The total proceeds of the divestiture included two elements of contingent purchase consideration (“earnout”).

In the fourth quarter of 2021, the Company agreed to an earnout payment of $10.7 million for the calendar 2020 earnout, which was recorded in 2021 as a separate line item below operating loss and was received by the Company in early January 2022.

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

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

For further information, see Note 21 in Item 8, Financial Statements and Supplementary Data, of this report.

On October 6, 2021, the Company sold one of its Aerospace buildings for $9.2 million.

Net cash proceeds were approximately $8.8 million and a gain on sale of approximately $5.0 million was recorded.

The operation has been integrated into another facility.

Customer Bankruptcy

For further information, see Note 21, Divestiture Activities, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report.

Customer Bankruptcies

In October 2024, a customer reported within the Aerospace segment declared bankruptcy.

As a result, the Company recorded a full reserve of $1.0 million for outstanding receivables, a reserve of $1.7 million for inventory and $0.6 million for impairment of fixed assets.

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 associated assets existed prior to 2023.

As a result, the Company recorded a full reserve of $7.5 million for outstanding accounts receivable and a reserve of $3.6 million for inventory.

Products and Customers

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During 2024, this segment’s sales were divided 74% to the commercial transport market, 12% to the military aircraft market, 11% to the general aviation market and 3% to other markets.

Most of this segment’s sales are a result of contracts or purchase orders received from customers, placed on a day-to-day basis or for single year procurements rather than long-term multi-year contract commitments.

Most of this segment’s sales are a result of contracts or purchase orders received from customers, placed

on a day-to-day basis or for a single year procurement rather than long-term multi-year contract commitments.

On occasion, the Company does receive contractual commitments or blanket purchase orders from our customers covering multiple-year deliveries of hardware to our customers.

2 unchanged sentences

The nature of our Test Systems business is such that it pursues large, often multi-year, projects.

Sales by segment, geographic region, major customer and foreign operations are provided in Note 20 in Item 8, Financial Statements and Supplementary Data, of this report.

Sales by segment, geographic region, major customer and foreign operations are provided in Note 20, Segments, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report.

We have a significant concentration of business with one major customer, The Boeing Company (“Boeing”).

3 unchanged sentences

Practices as to Maintaining Working Capital

Liquidity is discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the Liquidity and Capital Resources section of this report.

Liquidity is discussed under the heading “ Liquidity and Capital Resources ”, in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this report.

Competitive Conditions

14 unchanged sentences

The inspection, maintenance and repair procedures for the various types of aircraft and equipment are prescribed by regulatory authorities and can be performed only by certified repair facilities utilizing certified technicians.

Certification and conformance is required

prior to installation of a part on an aircraft.

Certification and conformance is required prior to installation of a part on an aircraft.

Our operations may in the future be subject to new and more stringent regulatory requirements.

11 unchanged sentences

The increase in backlog is driven primarily by recovering demand from our commercial transport and general aviation customers, with increased OEM build rates and increased spending by commercial airlines on fleet improvements.

Backlog in the Aerospace segment was $517.2 million at December 31, 2023, of which $474.5 million is expected to be recognized as revenue in 2024.

The backlog in each of the periods presented excludes backlog associated with the customer bankruptcies referred to previously.

Backlog in the Aerospace segment was $537.6 million at December 31, 2024.

Backlog in the Test Systems segment was $61.7 million at December 31, 2024.

The Test Systems segment expects to recognize $52.1 million of this backlog as revenue in 2024.

We have a number of patents.

7 unchanged sentences

These costs are included in Cost of Products Sold.

Government Subsidies

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 $7.3 million under the grant in 2022.

The grant benefit was recognized ratably over the six-month performance period as a reduction to Cost of Products Sold in proportion to the compensation expense that the award was intended to defray.

During the year ended December 31, 2022, the Company recognized $6.0 million of the award.

Human Capital Resources

Human Capital Management and Corporate Culture

As of December 31, 2023, we employed approximately 2,500 employees, of whom approximately 2,000 were employed in the United States and approximately 500 were employed outside of the United States.

As of December 31, 2024, we employed approximately 2,500 full-time employees, of whom approximately 2,000 were employed in the United States and approximately 500 were employed outside of the United States.

We have approximately 120 non-exempt production employees at PECO who are subject to collective bargaining agreements.

29 unchanged sentences

We are proud to have received numerous awards, recognizing both product quality as well as the ability to provide an excellent work environment.

Diversity and Inclusion

The Company believes that diversity and inclusion is critical for the attraction and retention of top talent, and employs policies and procedures to recruit women and minority talent as well as policies to ensure pay equality.

The Company believes that inclusion is important to attract and retain top talent.

Astronics has an Equal Employment Opportunity Policy whereby the Company commits to providing equal employment opportunity and affirmative action plans for all qualified employees and applicants without regard to race, color, sex, sexual orientation, gender identity, religion, national origin, disability, veteran status, age, marital status, pregnancy, genetic information or other legally protected status.

15 unchanged sentences

Elected Officer

President, Chief Executive Officer and Director of the Company 2001

Executive Vice President, Treasurer and Chief Financial Officer of the Company 2003

President, Chief Executive Officer and Director of Astronics Corporation 2001

Former Executive Vice President, Treasurer and Chief Financial Officer of Astronics Corporation 2003

Vice President, Treasurer and Chief Financial Officer of Astronics Corporation 2014

President, Aerospace Segment and Executive Vice President of Astronics Corporation 2010

Luminescent Systems Inc.

President and Executive Vice President of Astronics Corporation 2010

Age 64 President of Astronics Test Systems, Inc.

and Executive Vice President of Astronics Corporation 2019

Age 63 Astronics Connectivity Systems & Certification Corp.

President and Executive Vice President of Astronics Corporation 2019

The principal occupation and employment for Messrs.

Gundermann, Burney, Kramer, Kuehn, Mulato and Peabody for over five years have been with the Company in their respective current roles.

Gundermann, Burney, Peabody and Mulato for over five years have been with the Company in their respective current roles.

Burney retired from his position as Executive Vice President, Treasurer and Chief Financial Officer of the Company on January 3, 2025.

Effective January 4, 2025 and as previously disclosed by the Company, Nancy L.

Hedges, previously the Company’s Controller, became the Company’s Vice President, Treasurer and Chief Financial Officer.

Hedges now serves as the Company’s principal financial officer and continues in her role as the Company’s principal accounting officer.

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

What changed 10-K

Item 1. Business