What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-03-05 compared with 2024-03-05 · 256 added, 258 removed, 1047 unchanged (33% of the section changed)

22 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Goodwill

Description of the Matter As of December 31, 2023, the Company’s goodwill balance was $58.2 million.

Valuation of Goodwill of the Test Systems Reporting Unit

Description of the Matter As of December 31, 2024, the Company’s goodwill balance was $58.1 million, of which $21.6 million related to the Test Systems reporting unit.

As discussed in Notes 1 and 7 of the consolidated financial statements, the Company tests goodwill for impairment at the reporting unit level on an annual basis or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

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

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

The discounted cash flow method incorporates various assumptions, the most significant being projected sales growth rates, operating margins and cash flows, EBITDA margins, the terminal growth rate, and the weighted average cost of capital.

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

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

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

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

Auditing management’s assumptions was challenging due to the estimation required in determining the fair value of the Company’s Test Systems reporting unit with goodwill.

The fair value estimate for the Test Systems reporting unit was sensitive to the significant assumptions of the projected sales growth rates and EBITDA margins.

These assumptions are affected by expectations about future market and economic conditions.

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

This included the determination of the underlying significant assumptions described above, and the completeness and accuracy of the impairment analysis.

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

We performed sensitivity analyses of significant assumptions to evaluate the changes in the fair value of the reporting units that would result from changes in the assumptions.

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

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

This included the determination of the underlying significant assumptions described above, and the completeness and accuracy of the data used in the impairment analysis.

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

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

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

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

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Description of the Matter For the year ended December 31, 2024, the Company’s sales totaled $795.4 million.

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

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

As discussed in Note 2 to the consolidated financial statements, the majority of the Company’s revenue from contracts with customers is recognized at a point in time when the customer obtains control of the product, which is generally upon delivery to the customer.

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

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

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

This included the assessment of alternative use and enforceable right to payment for purposes of determining if revenue from the contract should be recognized over time or at a point in time.

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

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

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

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

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

We performed procedures to test revenue recognition which included, among others, reading a sample of executed contracts and purchase orders to understand the contract and performing an independent assessment of alternative use and enforceable rights to payment.

We tested the completeness and accuracy of the Company’s contract summary documentation, specifically related to determination of alternative use consideration and enforceable rights to payment plus profit which determines the timing of revenue recognition.

/s/ Ernst & Young LLP

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Gundermann March 5, 2025

President & Chief Executive Officer

President and Chief Executive Officer

(Principal Executive Officer)

Burney March 4, 2024

Executive Vice President and Chief Financial Officer

Hedges March 5, 2025

Vice President and Chief Financial Officer

(Principal Financial Officer)

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Selling, General and Administrative Expenses 141,876 127,467 101,584

Net Gain on Sale of Facility — — 5,014

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

Income (Loss) from Operations 26,466 ( 6,671 ) ( 30,044 )

Net Gain on Sale of Businesses — 3,427 11,284

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

Loss on Extinguishment of Debt 10,148 — —

Other Expense (Income), Net 2,187 ( 261 ) 1,611

Interest Expense, Net of Interest Income 21,998 23,328 9,422

Loss Before Income Taxes ( 7,867 ) ( 26,311 ) ( 29,793 )

Provision for (Benefit from) Income Taxes 110 5,954 ( 1,382 )

Provision for Income Taxes 8,348 110 5,954

Net Loss $ ( 16,215 ) $ ( 26,421 ) $ ( 35,747 )

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CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands) Year Ended December 31,

Year Ended December 31,

(In thousands) 2024 2023 2022

Cash Flows from Operating Activities

Net Loss $ ( 16,215 ) $ ( 26,421 ) $ ( 35,747 )

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

Adjustments to Reconcile Net Loss to Cash from Operating Activities:

Non-cash Items:

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Equity-based Compensation Expense 8,571 7,198 6,497

Deferred Tax Expense (Benefit) 146 19 ( 441 )

Loss on Extinguishment of Debt 10,148 — —

Deferred Tax (Benefit) Expense ( 20 ) 146 19

Operating Lease Non-cash Expense 5,175 5,088 6,028

Net Gain on Sales of Assets — — ( 5,083 )

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

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

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

Non-cash 401K Contribution and Quarterly Bonus Accrual 3,454 6,549 4,512

Non-cash Annual Stock Bonus Accrual — 2,806 —

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

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CONSOLIDATED STATEMENTS OF CASH FLOWS, CONTINUED

(In thousands) Year Ended December 31,

Year Ended December 31,

(In thousands) 2024 2023 2022

Cash Flows from Financing Activities

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

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

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

Financing-Related Costs ( 12,150 ) ( 6,762 ) ( 2,416 )

Financing Extinguishment Costs ( 4,496 ) — —

Other ( 145 ) ( 47 ) ( 93 )

Net Cash from Financing Activities ( 14,530 ) 25,435 ( 1,412 )

Effect of Exchange Rates on Cash ( 493 ) 156 ( 641 )

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

Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash 7,115 ( 2,465 ) ( 15,979 )

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

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Interest Paid $ 19,238 $ 17,689 $ 7,605

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

Income Taxes Paid, Net of Refunds $ 3,537 $ 1,964 $ ( 9,978 )

See notes to Consolidated Financial Statements.

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

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

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

Equity-based Compensation Expense and Net Exercise of Stock Options, including ESPP 11,544 10,309 6,897

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

Tax Withholding Related to Issuance of RSUs and Shares for Bonus Obligations ( 3,220 ) ( 641 ) ( 304 )

End of Year $ 144,149 $ 129,544 $ 98,630

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Net Issuance from Exercise of Stock Options, including ESPP 220 437 20

Net Issuance to Fund Bonus Obligations 218 — —

Net Issuance of Common Stock for RSUs 165 147 106

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Beginning of Year 5,952 6,314 6,375

Net Issuance of Restricted Stock — — 4

Net Issuance from Exercise of Stock Options — — 24

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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.

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

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

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

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

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

Impact of the COVID-19 Pandemic

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

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

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

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

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

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

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

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

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

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

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

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

Year Ended December 31,

(In thousands) 2023 2022 2021

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

Reduction in Selling, General and Administrative Expenses — 11 228

Total $ — $ 6,073 $ 10,910

Principles of Consolidation

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All intercompany transactions and balances have been eliminated.

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

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

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

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Interest income was insignificant for the years ended December 31, 2024, 2023 and 2022.

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.

There was no additional expense reduction recognized in 2024 or 2023.

Shipping and Handling

1 unchanged sentence

Equity-Based Compensation

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

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

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

ASC Topic 718 requires all equity-based payments to employees, including grants of employee stock options and RSUs, to be recognized in the statement of earnings based on the grant date fair value of the award.

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

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Restricted Cash

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

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

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

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Total Cash and Restricted Cash Shown in Statements of Cash Flows $ 18,428 $ 11,313

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 a reserve of $ 3.6 million for inventory.

The associated assets existed prior to 2023.

Accounts Receivable and Allowance for Estimated Credit Losses

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Property, Plant and Equipment

Property, plant and equipment are recorded at cost less accumulated depreciation.

Depreciation of property, plant and equipment (“PP&E”) is computed using the straight-line method for financial reporting purposes and using accelerated methods for income tax purposes.

Property, plant and equipment (“PP&E”) are recorded at cost less accumulated depreciation.

Depreciation of property, plant and equipment is computed using the straight-line method for financial reporting purposes and using accelerated methods for income tax purposes.

Estimated useful lives of the assets are as follows:

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

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

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

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

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

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

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

This amortization expense is included in interest expense in the Company’s Consolidated Statements of Operations.

Upon early termination or modification of a credit facility, all or a portion of unamortized fees related to such facility may be accelerated into interest expense or loss on debt extinguishment.

See Note 8, Long-Term Debt, for details of our deferred financing costs.

Long-Lived Assets

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These estimates are based upon available market data and operating cash flows of the assets held for sale.

During the fourth quarter of 2021, we sold a facility resulting in a gain of $ 5.0 million.

Refer to Note 21.

The Company tests goodwill at the reporting unit level on an annual basis or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

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We use the discounted cash flow method to estimate the fair value of our reporting units.

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Acquired identifiable intangible assets are recorded at fair value and are amortized over their estimated useful lives.

Acquired intangible assets with an indefinite life are not amortized, but are reviewed for impairment at least annually or more frequently whenever events or changes in circumstances indicate that the carrying amounts of those assets are below their estimated fair values.

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

below their estimated fair values.

Impairment is tested under ASC Topic 350, Intangibles - Goodwill and Other, as amended by ASU 2012-2.

The 2024, 2023 and 2022 assessments indicated no impairment to the intangible assets in any of the Company’s reporting units and no impairment charges were recognized.

Financial Instruments

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

The fair value of the Convertible Senior Notes due 2030 (the “Convertibles Notes”) was approximately $ 176.9 million as of December 31, 2024 based on quoted prices for these instruments in active markets, and is classified as a Level 1 measurement within the fair value hierarchy.

From time to time, the Company makes long-term, strategic equity investments in companies to promote business and strategic objectives.

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

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

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

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

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

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

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

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

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

As a result, the Company has valuation allowances against its deferred tax assets of approximately $ 78.7 million, $ 65.6 million, and $ 57.4 million during the years ended December 31, 2024, 2023 and 2022, respectively, for the portion of deferred tax asset not realizable by the Company’s existing deferred tax liabilities.

Use of Estimates

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

Newly Adopted and Recent Accounting Pronouncements

Recent Accounting Pronouncements Not Yet Adopted

Recent Accounting Pronouncements

Recent Accounting Pronouncements Adopted

Standard Description Financial Statement Effect or Other Significant Matters

Disclosure Improvements:

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

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

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

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

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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.

The adoption resulted in additional disclosures in the notes to our Consolidated Financial Statements.

The standard does not change how the Company identifies its operating or reportable segments, and did not impact the Company’s consolidated financial condition, results of operations or cash flows.

Recent Accounting Pronouncements Not Yet Adopted

Standard Description Financial Statement Effect or Other Significant Matters

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

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

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

The new standard is effective for fiscal 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.

The Company is currently reviewing the guidance and evaluating the impact on our Consolidated Financial Statements and related disclosures.

Income Statement - Reporting Comprehensive Income-Expense Disaggregation Disclosures (Topic 220), Disaggregation of Income Statement Expenses This standard requires disclosure of specified information about certain cost and expenses at each interim and annual reporting period.

This includes disclosure of the amounts of purchases of inventory, employee compensation, depreciation and intangible asset for each relevant expense caption on the income statement, as well as the total amount of selling expenses.

Additionally, the amendments require disclosing a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated.

The provisions of the standard are effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027.

Early adoption is permitted.

The amendments may be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to all prior periods presented in the financial statements.

The Company is currently reviewing the guidance and evaluating the impact on our Consolidated Financial Statements and related disclosures.

2024-04 -Debt - Debt with Conversion and Other Options (Subtopic 470-20):

Induced Conversions of Convertible Debt Instruments The amendments in this update clarify the requirements for determining whether certain settlements of convertible debt instruments should be accounted for as an induced conversion or an extinguishment.

The new standard is effective for annual reporting periods beginning after December 15, 2025, and interim reporting periods within those annual reporting periods.

Early adoption is permitted.

The Company is currently reviewing the guidance and evaluating the impact on our Consolidated Financial Statements and related disclosures.

We consider the applicability and impact of all ASUs.

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

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

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

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

The Company has capitalized $ 8.3 million a nd $ 4.7 million of costs as of December 31, 2024 and 2023, respectively.

Amortization of fulfillment costs recognized within Cost of Products Sold was $ 3.1 million in 2024 .

No amortization of fulfillment costs was recorded in 2023 or 2022 .

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account.

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Once the beginning contract liability balance for an individual contract has been fully recognized as revenue, any additional payments received in the period are recognized as revenue once the related costs have been incurred.

We recognized $ 27.6 million and $ 14.8 million during the year ended December 31, 2023 and 2022, 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 of costs and profits in excess of billings and billings in excess of cost and profits, respectively.

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:

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$ 54,171 $ 28,171

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

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

The 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 which was recorded in the second quarter of 2024.

The revision resulted in reduced revenue recognized during 2024 due to lower estimates of the percentage of work completed on the programs.

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

We recognized $ 16.8 million and $ 27.6 million during the year ended December 31, 2024 and 2023, respectively, in revenues that were included in the contract liability balance at the beginning of the period.

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

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Total Receivables, Net $ 191,446 $ 172,108

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

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

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

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

(In thousands)

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Balance at December 31, 2024

As further described in Note 1, Summary of Significant Accounting Principles and Practices, the Company recorded a $ 1.0 million and $ 7.5 million reserve for outstanding receivables for customer bankruptcies within the Aerospace segment in 2024 and 2023, respectively.

The reserve associated with the customer bankruptcy in 2023 was subsequently written off in 2024.

NOTE 4 — INVENTORIES

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At December 31, 2023, the Company’s reserve for inventory valuation was $ 38.5 million, or 16.7 % of gross inventory.

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

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

As further described in Note 1, Summary of Significant Accounting Principles and Practices, the Company recorded a $ 1.7 million and $ 3.6 million reduction in inventory for customer bankruptcies within the Aerospace segment in 2024 and 2023, respectively.

NOTE 5 — PROPERTY, PLANT AND EQUIPMENT

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2025 $ 10,935

NOTE 7 — GOODWILL

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NOTE 8 — LONG-TERM DEBT

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Company amended its asset-based revolving credit facility (the “ABL Revolving Credit Facility”) on July 11, 2024, by entering into the Seventh Amended and Restated Credit Agreement, which set the maximum aggregate amount that the Company can borrow pursuant to the revolving credit line at $ 200.0 million, with borrowings subject to a borrowing base determined primarily by inventory, accounts receivable, machinery and equipment and real estate.

The Company also entered into a $ 55.0 million Term Loan Facility on July 11, 2024.

The Company repaid in full all outstanding indebtedness under the previous term loan dated 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 % 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 ABL Revolving Credit Facility and the Term Loan Facility.

On November 25, 2024, the Company entered into a second amendment to the ABL Revolving Credit Facility which increased the maximum aggregate amount that the Company can borrow pursuant to the ABL Revolving Credit Facility to $ 220.0 million from $ 200.0 million.

The maturity date of borrowings under the ABL Revolving Credit Facility remains July 11, 2027.

The Company and the applicable lenders also agreed in a separate first amendment to increase the amount of unsecured indebtedness the Company is permitted to incur under the ABL Revolving Credit Facility, subject to completion of the Convertible Notes offering (discussed below).

Under the terms of the ABL Revolving Credit Facility, the Company pays interest on the unpaid principal amount of the ABL Revolving 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 2.75 % to 3.25 % determined based upon the Company’s Excess Availability (as defined in the ABL Revolving Credit Facility).

The Company is required to pay a quarterly commitment fee under the ABL Revolving Credit Facility 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 ABL Revolving Credit Facility.

On December 31, 2024, there was $ 10.0 million outstanding on the ABL Revolving Credit Facility and there remained $ 209.7 million available for future borrowings, net of outstanding letters of credit, before our minimum excess availability requirement discussed below.

Pursuant to the ABL Revolving Credit 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 ABL Revolving Credit Facility, or $ 15.0 million.

As of December 31, 2024, the Company was in compliance with these covenants.

On December 3, 2024, the Company issued $ 165.0 million aggregate principal amount of the Convertible Notes, which amount includes the additional Convertible Notes issued pursuant to the initial purchasers’ full exercise of their option to purchase additional Convertible Notes.

The Convertible Notes bear interest at a rate of 5.500 % per annum, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2025.

The Convertible Notes will mature on

March 15, 2030, unless earlier converted, redeemed or repurchased.

The initial conversion rate is 43.6814 shares of common stock per $1,000 principal amount of Convertible Notes, which represent the initial conversion price of $ 22.89 per share.

The Convertible Notes are convertible at the option of the holders at any time on or after December 15, 2029, until the close of business on the second scheduled trading day immediately preceding the maturity date.

Upon conversion, the Company will satisfy its conversion obligations by paying and/or delivering, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election.

Beginning March 20, 2028, if the Company’s stock price has been at least 130 % of the conversion price for a specified period of time, the Convertible Notes may be called at the option of the issuer.

Under the same conditions, the Company can elect to redeem the Convertible Notes for cash.

After the first quarter of 2025, if the Company’s stock price has been at least 130 % of the conversion price for 20 of 30 trading days ending on and including the last trading day of the immediately preceding quarter, the Convertible Notes may be called at the option of the holder.

The fair value of the Convertible Notes was approximately $ 176.9 million as of December 31, 2024 based on quoted prices for these instruments in active markets, and is classified as a Level 1 measurement within the fair value hierarchy.

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

The Term Loan Facility payoff consisted of a repayment of a principal amount of approximately $ 54.9 million, plus accrued but unpaid interest, fees and expenses, including a call premium of 3.00 % which satisfied all of the Company’s indebtedness obligations thereunder.

The Company funded the repayment of its obligations under the Term Loan Facility with a portion of the proceeds received from the issuance and sale of the Convertible Notes.

Scheduled principal payments of $ 9.0 million were payable under the Term Loan Facility and were classified as current in the accompanying Consolidated Balance Sheets as of December 31, 2023.

The interest rate on current maturities of long-term debt was 14.20 % at December 31, 2023.

The Company incurred $ 12.2 million in incremental debt issuance costs during 2024.

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

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

Debt issuance cost amortization expense was approximately $ 2.6 million, $ 3.0 million and $ 0.8 million in 2024, 2023 and 2022, respectively.

Unamortized deferred debt issuance costs associated with the ABL Revolving Credit Facility ($ 3.0 million as of December 31, 2024) are recorded within Other Assets and those associated with the Convertible Notes ($ 6.3 million as of December 31, 2024) are recorded as a reduction of the carrying value of the debt on the Consolidated Balance Sheets.

The unamortized balance of deferred debt issuance costs on our previous credit facilities of $ 2.0 million was recorded within Other Assets and $ 4.3 million was recorded as a reduction of the carrying value of the debt on the Consolidated Balance Sheets at December 31, 2023.

In 2024, the Company recorded a loss on extinguishment of the debt of approximately $ 10.1 million below Income from Operations, which was comprised of $ 4.5 million of prepayment fees on the previous term loans and a write-off of $ 5.6 million of unamortized deferred financing costs.

The Company also had a write-off of deferred financing costs of approximately $ 0.5 million related to the exiting ABL lender in Interest Expense within the Consolidated Statements of Operations.

Certain of the Company’s subsidiaries are borrowers under the ABL Revolving Credit Facility and the assets of such subsidiaries also secure the obligations under the ABL Revolving Credit Facility.

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

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

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

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

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

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

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

NOTE 9 — WARRANTY

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Balance at End of the Year $ 18,081 $ 9,751 $ 8,009

Warranties issued in 2024 includes an atypical warranty reserve of $ 5.2 million related to a new product launch that requires field modification.

NOTE 10 — LEASES

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

We lease certain

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

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

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

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

The weighted-average remaining term for the Company’s operating and financing leases are approximately 8 years and 2 years, respectively.

The weighted-average remaining term for the Company’s operating and financing leases are approximately 7 years and 1 year, respectively.

The weighted-average discount rates for the Company’s operating and financing leases are approximately 5.8 % and 6.3 %, respectively.

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Total Lease Liability $ 25,205 $ 127

These amounts exclude annual operating lease payments of $ 3.3 million per year through 2033, which represents legal binding lease payments for leases signed, but not yet commenced.

NOTE 11 — INCOME TAXES

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Stock Compensation Expense ( 2.0 ) % ( 1.4 ) % ( 2.2 ) %

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

Meals and Entertainment ( 1.7 ) % — % — %

Parking Expenses ( 1.4 ) % — % — %

Other ( 7.4 ) % ( 1.4 ) % ( 0.3 ) %

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Change in Valuation Allowance ( 172.7 ) % ( 26.1 ) % ( 44.6 ) %

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

Net GILTI and FDII Tax Expense (Benefit) 16.4 % ( 1.0 ) % 1.8 %

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

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

Penalties ( 3.1 ) % — % — %

Other ( 0.8 ) % ( 0.6 ) % ( 0.1 ) %

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

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

As a result, the Company has valuation allowances against its deferred tax assets of approximately $ 78.7 million, $ 65.6 million, and $ 57.4 million during the years ended December 31, 2024, 2023 and 2022, respectively, for the portion of deferred tax assets not realizable by the Company’s existing deferred tax liabilities.

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

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At December 31, 2024, gross state net operating loss carryforwards amounted to approximately $ 132.6 million.

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

Of these state net operating loss carryforwards, $ 118.9 million begin to expire at various dates from 2024 through 2044 and the remaining $ 13.7 million will carryforward indefinitely.

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

At December 31, 2024, state income tax credit carryforwards amounted to approximately $ 1.1 million and begin to expire at various dates from 2024 to 2040.

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

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

The Company maintains a full valuation allowance against these credits.

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The years under which we conducted our evaluation coincided with the tax years currently still subject to examination by major federal and state tax jurisdictions, those being 2019 through 2024 for federal purposes and 2017 through 2024 for state purposes.

Pretax income (loss) from the Company’s foreign subsidiaries amounted to approximately $ 6.5 million, $ 0.1 million and $( 3.3 ) million for 2023, 2022 and 2021, respectively.

Pretax income from the Company’s foreign subsidiaries amounted to approximately $ 9.6 million, $ 6.5 million and $ 0.1 million for 2024, 2023 and 2022, respectively.

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

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

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

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

However, for the years ended December 31, 2024 and 2023, we determined that we could no longer assert indefinite reinvestment on approximately $ 3.0 million and $ 1.9 million of the unremitted earnings of Luminescent Systems Canada Inc., respectively.

As a result, we have recorded a deferred tax liability of approximately $ 0.2 million and $ 0.1 million at December 31, 2024 and 2023 respectively, related to local country withholding taxes that are expected to be incurred upon ultimate repatriation of such earnings.

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

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) was enacted in response to the economic uncertainty resulting from the COVID-19 pandemic.

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

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

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

No tax benefit was recorded for the years ending December 31, 2023 and 2022.

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

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

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

Rules under Pillar Two generally became effective beginning January 1, 2024 in most jurisdictions that have issued legislation.

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

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

however, Pillar Two is currently not applicable as the Company does not meet the threshold of having consolidated revenue over €750 million in two out of the four preceding years.

NOTE 12 — PROFIT SHARING/401K PLAN

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

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

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

The plan may be amended or terminated at any time.

Total charges to income before income taxes for this plan was approximately $ 8.9 million, $ 5.3 million and $ 4.7 million in 2024, 2023 and 2022, respectively.

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

The Company had funded the contributions in 2022, 2023 and the first quarter of 2024 with treasury stock in lieu of cash and funded the remainder of the 2024 contributions with cash.

NOTE 13 — RETIREMENT PLANS AND RELATED POST RETIREMENT BENEFITS

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

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

same periods will be recognized as a component of AOCI.

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

Unrecognized prior service costs of $ 0.6 million ($ 1.2 million net of $ 0.6 million in taxes) and unrecognized actuarial losses of $ 2.0 million ($ 3.6 million net of $ 1.6 million in taxes) are included in AOCI at December 31, 2023 and have not yet been recognized in net periodic pension cost.

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

If actuarial gains and losses exceed ten percent of the projected benefit obligation, we amortize them over the average expected future lifetime of participants.

Unrecognized prior service costs of $ 0.3 million and unrecognized actuarial gains of $ 4.9 million are included in AOCI at December 31, 2024 and have not yet been recognized in net periodic pension cost.

The reconciliation of the beginning and ending balances of the projected benefit obligation of the plans for the years ended December 31 is as follows:

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Interest Cost 1,371 1,302

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

Actuarial (Gain) Loss ( 6,134 ) 1,529

Special Termination Benefits 624 —

Benefits Paid ( 348 ) ( 348 )

End of the Year — December 31 $ 24,311 $ 28,798

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

In 2024, the net actuarial gain of $ 6.1 million is due to the increase of 69 basis points in the discount rate and change in the bonus scale used to measure the benefit obligation as of December 31, 2024 compared to the prior year.

The Company incurred charges of $ 0.6 million in 2024 associated with a waiver of an early retirement penalty provided by the plan related to a retiring participant.

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

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The accumulated postretirement benefit obligation is $ 0.8 million at December 31, 2024 and 2023.

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

The plan is recognized in the accompanying Consolidated Balance Sheets as a current accrued pension liability of $ 0.1 million and a long-term accrued pension liability of $ 0.7 million.

The net periodic cost for the years ended December 31, 2024, 2023 and 2022 was not material.

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

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

At-the-Market Equity Offering

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

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

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 having an aggregate offering price of up to $ 30.0 million.

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

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

No shares were sold under the ATM Program in 2024.

As of December 31, 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.

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

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

The Company has funded substantially all of its 2022 and 2023 401K contributions, and will fund the remaining 2023 401K contributions outstanding with treasury stock in lieu of cash.

The earnings per share computations for the years ended December 31, 2023 and 2022 are each inclusive of approximately 0.1 million in shares outstanding for the equivalent shares needed to fulfill the respective period’s 401K obligation using the closing share price as of December 31, 2023 and 2022.

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

The Company includes the dilutive effect of shares issuable upon conversion of its Convertible Notes in the calculation of diluted income per share using the if-converted method.

The Company has the option for the Convertible Notes to settle the conversion value in any combination of cash or shares, and as such, the maximum number of shares issuable are included in the dilutive share count if the effect would be dilutive.

The Company incurred a net loss for the years ended December 31, 2024, 2023, and 2022, therefore all outstanding stock options, unvested restricted stock units and the effect of the Convertible Notes are excluded from the computation of diluted loss per share because the effect of their inclusion would be antidilutive.

Antidilutive shares excluded from diluted loss per share computations were as follows:

(In thousands) 2024 2023 2022

Stock Options and Unvested RSUs 1,040 767 1,380

Convertible Notes 553 — —

Total Antidilutive Securities 1,593 767 1,380

The Company funded substantially all of its 2023 and a portion of its 2024 401K contributions outstanding with treasury stock in lieu of cash, and returned to cash contributions in the second quarter of 2024.

The earnings per share computations for the year ended December 31, 2023 are inclusive of approximately 0.1 million in shares outstanding for the equivalent shares needed to fulfill the period’s 401K obligation using the closing share price as of December 31, 2023.

NOTE 16 — EQUITY COMPENSATION

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

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

The Company established its 2011 Incentive Stock Option Plan for the purpose of attracting and retaining executive officers and key employees, and to align management’s interest with those of the shareholders.

At December 31, 2024, the Company had options outstanding for 124,143 shares under the plans.

The Company established the Directors Stock Option Plans for the purpose of attracting and retaining the services of experienced and knowledgeable outside directors, and to align their interest with those of the shareholders.

The Company established the 2005 Directors Stock Option Plan for the purpose of attracting and retaining the services of experienced and knowledgeable outside directors, and to align their interest with those of the shareholders.

At December 31, 2024, the Company had options outstanding for 28,254 shares under the plans.

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

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

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

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

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

made out of those plans.

Upon inception, the remaining options available for future grant under the 2011 Incentive Stock Option Plan and the 2005 Directors Stock Option Plan were rolled in the Long Term Incentive Plan, and no further grants may be made out of those plans.

The Long Term Incentive Plan was amended and restated in May 2021.

At December 31, 2024, the Company had stock options and RSUs outstanding that covered 1,963,720 shares under the Long Term Incentive Plan, and there were 278,560 shares available for future grant under this plan.

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Tax benefit excludes the impact of valuation allowances recorded against deferred tax assets.

In the fourth quarter of 2024, the Company entered into a Transition and Retirement Agreement with its former CFO, which granted certain benefits related to the retirement.

Equity-based Compensation Expense includes $ 0.6 million related with accelerated RSU vesting pursuant to that Agreement.

Stock Options

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The total fair value of options that vested during the year amounted to $ 2.1 million, $ 3.0 million and $ 2.4 million for the years ended December 31, 2024, 2023 and 2022, respectively.

At December 31, 2023, total compensation costs related to non-vested option awards not yet recognized amounts to $ 3.6 million and will be recognized over a weighted average period of approximately 2 years.

At December 31, 2024, total compensation costs related to non-vested option awards not yet recognized amounts to $ 3.0 million and will be recognized over a weighted average period of approximately one year .

The following is a summary of weighted average exercise prices and contractual lives for outstanding and exercisable stock options as of December 31, 2024:

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

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

RSU Shares Weighted

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Included in total equity-based compensation expense for the year ended December 31, 2024 was $ 5.3 million related to RSUs.

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

At December 31, 2024, total compensation costs related to non-vested awards not yet recognized amounts to $ 3.7 million and will be recognized over a weighted average period of approximately two years .

Employee Stock Purchase Plan

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Employees are allowed to enroll annually.

Employees indicate the number of shares they wish to obtain through the program and their intention to pay for the shares through payroll deductions over the annual cycle of October 1 through September 30.

Employees indicate the aggregate value of shares they wish to obtain through the program and their intention to pay for the shares through payroll deductions over the annual cycle of October 1 through September 30.

Employees can withdraw anytime during the annual cycle, and all money withheld from the employees’ pay is returned.

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NOTE 17 — FAIR VALUE

ASC Topic 820, Fair Value Measurements and Disclosures , (“ASC Topic 820”) defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements.

This statement applies under other accounting pronouncements that require or permit fair value measurements.

The statement indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.

ASC Topic 820 defines fair value based upon an exit price model.

The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and involves consideration of factors specific to the asset or liability.

ASC Topic 820 establishes a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value.

This hierarchy prioritizes the inputs into three broad levels as follows:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value.

On a Recurring Basis:

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

On October 4, 2019, the Company acquired the stock of the primary operating subsidiaries as well as certain other assets from mass transit and defense market test solution provider, Diagnosys Test Systems Limited.

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

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

The fair value assigned to the earnout was determined using the real options method, which requires Level 3 inputs such as new order forecasts, discount rate, volatility factors, and other market variables to assess the probability of Diagnosys achieving certain order levels over the period.

Based on actual and forecasted new orders, the fair value was zero as of December 31, 2021, with the contingent consideration liability fair value adjustment of $ 2.2 million recorded within SG&A expenses in the Consolidated Statements of Operations in the year ended December 31, 2021.

The earnout period has expired and no amounts were paid or are payable related to this earnout.

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

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

On a Non-recurring Basis:

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

Refer to Note 8, Long-Term Debt, for additional information relating to the fair value of the Company's outstanding fixed-rate Convertible Notes.

NOTE 18 — SELECTED QUARTERLY FINANCIAL INFORMATION

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Gross Profit (Sales Less Cost of Products Sold) $ 50,054 $ 39,973

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

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

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

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

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

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

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

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

Income Before Income Taxes $ 576 $ 1,534

Net (Loss) Income $ ( 2,832 ) $ 6,976

Basic (Loss) Earnings Per Share $ ( 0.08 ) $ 0.20

Diluted (Loss) Earnings Per Share $ ( 0.08 ) $ 0.20

Income before taxes in 2024 includes an increase in litigation-related legal expenses and legal reserve adjustments of $ 7.0 million compared to the prior-year period, and a loss on extinguishment of the debt of $ 3.2 million.

NOTE 19 — LEGAL PROCEEDINGS

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

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

Approximately $ 0.7 million, $ 0.7 million, and $ 0.6 million was recorded within Selling, General and Administrative Expenses in the Company’s Consolidated Statements of Operations for each of 2024, 2023 and 2022, respectively, for additional interest accrued during such periods.

In connection with the indirect sales claims, we currently believe it is unlikely that the appeals process will be completed and any damages and related interest will be paid before December 31, 2025.

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

Therefore, the liability related to this matter (inclusive of accrued interest), totaling $ 17.1 million, is classified within other liabilities (non-current) in the Consolidated Balance Sheets at December 31, 2024 and 2023.

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

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

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

As loss exposure is not probable and estimable at this time, the Company has not recorded any liability with respect to the French matter as of December 31, 2023 or 2022.

AES filed briefs with the French Supreme Court on January 22, 2024 and on September 11, 2024 in response to Lufthansa’s appeal.

The written phase of the procedure was closed in January 2025 and a decision from this Court is currently expected in March 2025.

As loss exposure is not probable and estimable at this time, the Company has not recorded any liability with respect to the French matter as of December 31, 2024 or December 31, 2023.

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

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

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

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

The damages trial is scheduled for October 2024.

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

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

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

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

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

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

Interest will accrue until final payment to Lufthansa.

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

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

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

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

The variance is due to currency fluctuation.

Separate from any such damages Lufthansa may seek in connection with the UK infringement decision discussed above, as a result of the first instance judgement in their favor, Lufthansa was entitled to reimbursement from AES of a proportion of its legal expenditures in the UK case.

Lufthansa sought an account of the profits that AES and certain of its customers had made from UK sales.

The trial of that issue took place in October 2024.

Both the Company and Lufthansa submitted to the UK High Court of Justice calculations of the estimated profits derived from the reports of the parties’ respective financial experts.

The account of profits trial judgment was published on February 21, 2025.

The February 2025 judgment quantified the amount payable in aggregate in respect of the profits derived from infringing Lufthansa’s UK patent by the defendants as $ 11.9 million.

Any additional amounts required to be paid by the Company related to certain other factors peripheral to the damages award, including potential reimbursement of legal fees related to the damages proceedings, will be determined at follow-up hearings

expected to occur in the first half of 2025.

The Company is unable to estimate a range of exposure, if any, related to such peripheral issues, and as such, has not recorded any additional liabilities at this time

It is expected that one or more of the parties may seek permission to appeal the February 21, 2025 judgment;

permission to appeal is not assured under English law.

The Company expects that payment of the ordered liability will be required in the second quarter of 2025, and that an appeal, if any, would likely be heard in early 2026.

Accordingly, the Company recorded additional expense of $ 4.8 million in the quarter ended December 31, 2024, within Selling, General and Administrative Expenses in the Company’s Consolidated Statements of Operations.

The $ 11.9 million liability related to this matter is classified within Accrued Expenses and Other Current Liabilities in the accompanying Consolidated Balance Sheets as of December 31, 2024.

The liability related to this matter was $ 7.4 million as of December 31, 2023, classified within Other Liabilities (non-current) in the Company’s Consolidated Balance Sheet at such date.

Separate from payment of profits from the February 2025 judgment discussed above, as a result of the first instance judgement in their favor, Lufthansa was entitled to reimbursement from AES of a proportion of its legal expenditures in the UK case.

An interim reimbursement was paid to Lufthansa in August 2020.

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

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

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

A payment of $ 0.3 million was made in 2022.

It is likely the remaining amount will be payable within the next twelve months, and as such, the liability of $ 0.7 million has been classified as a current liability in the accompanying Consolidated Balance Sheets within other accrued expenses at December 31, 2023.

A liability for reimbursement of Lufthansa’s legal expenses associated with the UK matter for the June 2022 trial and the appeal of that decision was approximately $ 1.0 million and $ 0.7 million on December 31, 2024 and December 31, 2023, respectively, 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 December 31, 2024 and December 31, 2023.

In the normal course, a defendant in the Company’s position would be ordered to make a partial reimbursement of Lufthansa’s legal costs.

Whether that is the case and the amount depends on a number of variables including the size of the order for payment of profits.

Additional amounts may be payable by the Company associated with Lufthansa’s legal fees incurred related to the account of profits proceedings, but the Company is unable to estimate a range of exposure and as such has not recorded any additional liabilities at this time.

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

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However, it is reasonably possible that additional damages and interest could be incurred if the appellate court in France was to rule in favor of Lufthansa, or if damages in the UK matter are calculated on a different basis than our estimate or using information not currently available.

There were no other significant developments in any of these matters during the year ended December 31, 2024.

On March 23, 2020, Teradyne, Inc.

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

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

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

Teradyne appealed to the United States Court of Appeals for the Ninth Circuit.

On January 30, 2025, the Ninth Circuit affirmed the District Court’s grant of summary judgment.

Teradyne may pursue an appeal by petitioning the United States Supreme Court for a writ of certiorari.

It is unknown at this time whether Teradyne will pursue either option, or, if it does, whether the United States Supreme Court will grant a writ of certiorari.

No amounts have been accrued for this matter in the December 31, 2024 or 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.

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

Accrued legal fees were $ 6.5 million and $ 7.9 million as of December 31, 2024 and 2023, respectively.

NOTE 20 — SEGMENTS

The Company reports segment information based on the management approach, which designates the internal reporting used by the Chief Operating Decision Maker (“CODM”) for making decisions and assessing performance as the source of the Company’s reportable segments.

The CODM, which is the Company’s Chief Executive Officer, allocates resources and assesses the performance of each operating segment based on historical and potential future product sales, gross margin associated with those sales, and operating income (loss) before interest, taxes, and corporate expenses.

The Company has determined its reportable segments to be Aerospace and Test Systems based on the information used by the CODM.

Segment information and reconciliations to consolidated amounts for the years ended December 31 are as follows:

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Total Consolidated Sales $ 795,426 $ 689,206 $ 534,894

Cost of Products Sold:

Aerospace $ 549,017 $ 499,948 $ 399,834

77.7 % 82.7 % 86.7 %

Test Systems $ 78,067 $ 68,462 $ 63,520

88.0 % 81.1 % 86.2 %

Other Segment Items 2

Aerospace $ 95,261 $ 80,253 $ 63,245

Test Systems $ 19,152 $ 24,659 $ 18,296

Operating Income (Loss) and Margins:

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Net Gain on Sale of Businesses $ — $ 3,427 $ 11,284

Loss on Extinguishment of Debt ( 10,148 ) — —

Interest Expense, Net of Interest Income ( 21,998 ) ( 23,328 ) ( 9,422 )

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Loss before Income Taxes $ ( 7,867 ) $ ( 26,311 ) $ ( 29,793 )

1 The significant expenses and amounts presented align with the segment-level information that is regularly provided to the CODM.

Inter-segment expenses are included within the amounts shown.

2 Other segment items include Selling, General and Administrative Expenses and sublease and rental income.

(In thousands) 2024 2023 2022

Depreciation and Amortization:

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Total Capital Expenditures $ 8,428 $ 7,643 $ 7,675

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

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

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

During the year ended December 31, 2024 and 2023, reserves associated with customer bankruptcies of $ 3.2 million and $ 11.1 million, respectively, negatively impacted Aerospace Operating Income.

Aerospace Operating Income in the years ended December 31, 2024 and 2023 include compensation expense related to resumed incentive programs including bonuses, 401K and profit sharing contributions of $ 19.9 million and $ 6.7 million, respectively.

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

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

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

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

Corporate expenses and other for the year ended December 31, 2023, includes income of $ 1.8 million associated with the reversal of a liability related to an equity investment, as we are no longer required to make the associated payment.

This amount is included in Other Income, Net.

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

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

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Sales recorded by the Company’s foreign operations were $ 82.1 million, $ 69.3 million and $ 50.0 million in 2024, 2023 and 2022, respectively.

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

Net income (loss) from foreign operations was $ 7.6 million, $ 5.3 million and $( 0.2 ) million in 2024, 2023

and 2022, respectively.

Net assets held outside of the U.S.

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

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

The First Earnout may not exceed $ 35.0 million in total.

The “Second Earnout” is calculated based on a multiple of future sales related to an existing product and program with an existing customer exceeding an annual threshold for each annual period from 2019 through 2022.

The Second Earnout is not capped.

For the Second Earnout, if the applicable sales in an annual period do not exceed the annual threshold, no amounts will be paid relative to such annual period;

the sales in such annual period do not carry over to the next annual period.

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

We consider the proceeds realizable when we have received

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

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

The First Earnout was capped at $ 35.0 million in total.

The “Second Earnout” was calculated based on a multiple of future sales related to an existing product and program with an existing customer exceeding an annual threshold for each annual period from 2019 through 2022.

The Second Earnout was not capped.

For the Second Earnout, if the applicable sales in an annual period did not exceed the annual threshold, no amounts would be paid relative to such annual period;

the sales in such annual period did not carry over to the next annual period.

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

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

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

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

Other Disposal Activity

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

Net cash proceeds were approximately $ 8.8 million.

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

The operation has been integrated into another facility.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Not applicable.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data