ASTRONICS CORP 10-Q

Item 1. Financial Statements ASTRONICS CORPORATION Consolidated Condensed Balance Sheets March 29, 2025 with Comparative Figures for December 31, 2024 (Unaudited) (In thousands) March 29, 2025 December 31, 2024 Current Assets: Cash and Cash Equivalents $ 24,805 $ 9,285 Restricted Cash 1,143 9,143 Accounts Receivable, Net of Allowance for Estimated Credit Losses 194,040 191,446 Inventories 197,936 199,741 Prepaid Expenses and Other Current Assets 14,538 16,557 Total Current Assets 432,462 426,172 Property, Plant and Equipment, Net of Accumulated Depreciation 80,446 80,687 Operating Right-of-Use Assets 33,873 23,609 Other Assets 7,847 7,763 Intangible Assets, Net of Accumulated Amortization 49,546 52,477 Goodwill 58,068 58,056 Total Assets $ 662,242 $ 648,764 Current Liabilities: Accounts Payable $ 45,283 $ 42,960 Current Operating Lease Liabilities 5,104 4,697 Accrued Expenses and Other Current Liabilities 76,997 81,004 Customer Advance Payments and Deferred Revenue 30,429 27,491 Total Current Liabilities 157,813 156,152 Long-term Debt 160,115 168,669 Long-term Operating Lease Liabilities 30,837 20,508 Other Liabilities 46,720 47,338 Total Liabilities 395,485 392,667 Shareholders’ Equity: Common Stock 381 380 Accumulated Other Comprehensive Loss ( 3,347 ) ( 3,863 ) Other Shareholders’ Equity 269,723 259,580 Total Shareholders’ Equity 266,757 256,097 Total Liabilities and Shareholders’ Equity $ 662,242 $ 648,764 See notes to Consolidated Condensed Financial Statements. 3 Table of Content ASTRONICS CORPORATION Consolidated Condensed Statements of Operations Three Months Ended March 29, 2025 with Comparative Figures for 2024 (Unaudited) (In thousands, except per share data) Three Months Ended March 29, 2025 March 30, 2024 Sales $ 205,936 $ 185,074 Cost of Products Sold 145,087 137,560 Gross Profit 60,849 47,514 Research and Development Expenses 11,067 13,323 Selling, General and Administrative Expenses 36,645 32,525 Income from Operations 13,137 1,666 Other (Income) Expense, Net ( 187 ) 436 Interest Expense, Net of Interest Income 3,150 5,759 Income (Loss) Before Income Taxes 10,174 ( 4,529 ) Provision for (Benefit from) Income Taxes 646 ( 1,351 ) Net Income (Loss) $ 9,528 $ ( 3,178 ) Earnings (Loss) Per Share: Basic $ 0.27 $ ( 0.09 ) Diluted $ 0.26 $ ( 0.09 ) See notes to Consolidated Condensed Financial Statements. 4 Table of Content ASTRONICS CORPORATION Consolidated Condensed Statements of Comprehensive Income (Loss) Three Months Ended March 29, 2025 with Comparative Figures for 2024 (Unaudited) (In thousands) Three Months Ended March 29, 2025 March 30, 2024 Net Income (Loss) $ 9,528 $ ( 3,178 ) Other Comprehensive Income (Loss): Foreign Currency Translation Adjustments 752 ( 756 ) Retirement Liability Adjustment – Net of Tax ( 236 ) 281 Total Other Comprehensive Income (Loss) 516 ( 475 ) Comprehensive Income (Loss) $ 10,044 $ ( 3,653 ) See notes to Consolidated Condensed Financial Statements. 5 Table of Content ASTRONICS CORPORATION Consolidated Condensed Statements of Cash Flows Three Months Ended March 29, 2025 with Comparative Figures for 2024 (Unaudited) (In thousands) Three Months Ended March 29, 2025 March 30, 2024 Cash Flows from Operating Activities: Net Income (Loss) $ 9,528 $ ( 3,178 ) Adjustments to Reconcile Net Income (Loss) to Cash Flows from Operating Activities: Non-cash items: Depreciation and Amortization 5,588 6,328 Amortization of Deferred Financing Fees 602 832 Provisions for Non-Cash Losses on Inventory and Receivables 1,728 767 Equity-based Compensation Expense 2,345 2,802 Deferred Tax Benefit ( 1,125 ) — Operating Lease Non-Cash Expense 1,550 1,280 Non-Cash 401K Contribution and Quarterly Bonus Accrual — 3,454 Non-Cash Annual Stock Bonus Accrual — 1,448 Non-Cash Litigation Provision Adjustment 6,228 — Other ( 214 ) 968 Changes in Operating Assets and Liabilities Providing (Using) Cash: Accounts Receivable ( 2,037 ) 1,427 Inventories 515 ( 8,826 ) Accounts Payable 2,867 224 Accrued Expenses ( 11,514 ) ( 1,717 ) Customer Advance Payments and Deferred Revenue 2,776 ( 1,685 ) Income Taxes 959 ( 1,722 ) Operating Lease Liabilities ( 1,071 ) ( 1,196 ) Supplemental Retirement Plan Liabilities ( 101 ) ( 101 ) Other Assets and Liabilities 2,018 932 Net Cash from Operating Activities 20,642 2,037 Cash Flows from Investing Activities: Capital Expenditures ( 2,105 ) ( 1,598 ) Net Cash from Investing Activities ( 2,105 ) ( 1,598 ) Cash Flows from Financing Activities: Proceeds from Long-term Debt 1,143 1,356 Principal Payments on Long-term Debt ( 10,000 ) ( 7,249 ) Stock Award Activity ( 1,730 ) 1,713 Financing-related Costs ( 740 ) ( 809 ) Other ( 44 ) ( 53 ) Net Cash from Financing Activities ( 11,371 ) ( 5,042 ) Effect of Exchange Rates on Cash 354 ( 100 ) Increase (Decrease) in Cash and Cash Equivalents and Restricted Cash 7,520 ( 4,703 ) Cash and Cash Equivalents and Restricted Cash at Beginning of Period 18,428 11,313 Cash and Cash Equivalents and Restricted Cash at End of Period $ 25,948 $ 6,610 Supplemental Disclosure of Cash Flow Information Interest Paid $ 2,724 $ 5,001 Income Taxes Paid, Net of Refunds $ 827 $ 32 See notes to Consolidated Condensed Financial Statements. 6 Table of Content ASTRONICS CORPORATION Consolidated Condensed Statements of Shareholders’ Equity Three Months Ended March 29, 2025 with Comparative Figures for 2024 (Unaudited) (In thousands) Three Months Ended March 29, 2025 March 30, 2024 Common Stock Beginning of Period $ 329 $ 314 Net Shares Issued to Fund Bonus Obligations — 2 Net Issuance of Common Stock for Restricted Stock Units (“RSUs”) 1 1 Class B Stock Converted to Common Stock 3 1 End of Period 333 318 Convertible Class B Stock Beginning of Period 51 59 Class B Stock Converted to Common Stock ( 3 ) ( 1 ) End of Period 48 58 Additional Paid in Capital Beginning of Period 144,149 129,544 Equity-based Compensation Expense and Net Exercise of Stock Options, including ESPP 2,345 2,802 Gross Shares Issued to Fund Bonus Obligations — 2,747 Tax Withholding Related to Issuance of RSUs and Shares for Bonus Obligations ( 1,730 ) ( 1,027 ) End of Period 144,764 134,066 Accumulated Comprehensive Loss Beginning of Period ( 3,863 ) ( 9,426 ) Foreign Currency Translation Adjustments 752 ( 756 ) Retirement Liability Adjustment – Net of Taxes ( 236 ) 281 End of Period ( 3,347 ) ( 9,901 ) Retained Earnings Beginning of Period 192,208 209,753 Net Income (Loss) 9,528 ( 3,178 ) Reissuance of Treasury Shares for 401K Contribution — ( 676 ) End of Period 201,736 205,899 Treasury Stock Beginning of Period ( 76,777 ) ( 80,726 ) Net Issuance to Fund 401K Obligation — 2,009 End of Period ( 76,777 ) ( 78,717 ) Total Shareholders’ Equity $ 266,757 $ 251,723 See notes to Consolidated Condensed Financial Statements. 7 Table of Content ASTRONICS CORPORATION Consolidated Condensed Statements of Shareholders’ Equity, Continued Three Months Ended March 29, 2025 with Comparative Figures for 2024 (Unaudited) (In thousands) Three Months Ended (Shares) March 29, 2025 March 30, 2024 Common Stock Beginning of Period 32,871 31,402 Net Shares Issued to Fund Bonus Obligations — 144 Net Issuance of Common Stock for RSUs 143 107 Class B Stock Converted to Common Stock 287 179 End of Period 33,301 31,832 Convertible Class B Stock Beginning of Period 5,086 5,952 Class B Stock Converted to Common Stock ( 287 ) ( 179 ) End of Period 4,799 5,773 Treasury Stock Beginning of Period 2,694 2,833 Net Shares Issued to Fund 401K Obligation — ( 71 ) End of Period 2,694 2,762 See notes to Consolidated Condensed Financial Statements. 8 Table of Content ASTRONICS CORPORATION Notes to Consolidated Condensed Financial Statements March 29, 2025 (Unaudited) 1) Basis of Presentation The accompanying unaudited statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included. Operating Results The results of operations for any interim period are not necessarily indicative of results for the full year. Operating results for the three months ended March 29, 2025, are not necessarily indicative of the results that may be expected for the year ending December 31, 2025. The balance sheet on December 31, 2024, has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by U.S. GAAP for complete financial statements. For further information, refer to the Consolidated Financial Statements and the notes thereto included in Astronics Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the Securities and Exchange Commission (“SEC”) on March 5, 2025 (the “2024 10-K”). Description of the Business Astronics Corporation (“Astronics” or the “Company”) is a leading provider of advanced technologies to the global aerospace, defense, and electronics industries. Our products and services include advanced, high-performance electrical power generation, distribution and seat motion systems, lighting and safety systems, avionics products, systems and certification, aircraft structures and automated test systems. 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. The Aerospace segment designs and manufactures products for the global aerospace and defense industry. 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. Restricted Cash Under the provisions of the ABL Revolving Credit Facility (as defined and discussed below in Note 7, Long-term Debt and Notes Payable), the Company has a cash dominion arrangement with the banking institution for its accounts within the United States whereby daily cash receipts are contractually utilized to pay down outstanding balances on the ABL Revolving Credit Facility. Account balances that have not yet been applied to the ABL Revolving Credit Facility are classified as restricted cash in the accompanying Consolidated Condensed Balance Sheets. The following table provides a reconciliation of cash and restricted cash included in Consolidated Condensed Balance Sheets to the amounts included in the Consolidated Condensed Statements of Cash Flows. (In thousands) March 29, 2025 March 30, 2024 Cash and Cash Equivalents $ 24,805 $ 5,308 Restricted Cash 1,143 1,302 Total Cash and Restricted Cash Shown in Statements of Cash Flows $ 25,948 $ 6,610 Trade Accounts Receivable and Contract Assets The allowance for estimated credit losses is based on the Company’s assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering factors such as the age of the receivable balances, historical experience, credit quality, current economic conditions, and reasonable and supportable forecasts of future economic conditions that may affect a customer’s ability to pay. 9 Table of Content The changes in allowances for estimated credit losses for the three months ended March 29, 2025 and March 30, 2024 consisted of the following: Three Months Ended (In thousands) March 29, 2025 March 30, 2024 Balance at Beginning of the Period $ 2,377 $ 9,193 Bad Debt Expense, Net of Recoveries ( 128 ) 86 Write-off Charges Against the Allowance and Other Adjustments 42 ( 683 ) Balance at End of the Period $ 2,291 $ 8,596 On February 4, 2025, the Company entered into a factoring agreement with Citibank, N.A. under which we can sell certain receivables resulting from sales to a certain customer. The arrangement is designed to provide the Company with an immediate cash advance on eligible receivables, up to a limit of $ 45.0 million per year, as restricted by the terms of our ABL Revolving Credit Facility. The Company did not utilize the factoring agreement during the three months ended March 29, 2025. Research and Development Expenses Research and development costs are expensed as incurred and include salaries, benefits, consulting, material costs, and depreciation. During the first quarter of 2025, the Company changed its financial statement presentation of research and development costs. These costs were previously included within Cost of Products Sold and were a factor in arriving at Gross Profit. Research and development expenses, which amounted to $ 11.1 million and $ 13.3 million for the three months ended March 29, 2025 and March 30, 2024, respectively, have been reclassified from Cost of Products Sold to a separate line item below Gross Profit in the accompanying Consolidated Condensed Statements of Operations. All periods presented have been revised to reflect this presentation. Valuation of Goodwill and Long-Lived Assets 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. Long-lived assets are evaluated for recoverability whenever adverse effects or changes in circumstances indicate that the carrying value may not be recoverable. The recoverability test consists of comparing the undiscounted projected cash flows with the carrying amount. Should the carrying amount exceed undiscounted projected cash flows, an impairment loss would be recognized to the extent the carrying amount exceeds fair value. As of March 29, 2025 and March 30, 2024, the Company concluded that no indicators of impairment relating to intangible assets or goodwill existed and an interim test was not performed in the three-month periods then ended. Foreign Currency Translation The aggregate foreign currency transaction gain or loss included in operations was immaterial for the three months ended March 29, 2025 and March 30, 2024. New or Recent Accounting Pronouncements We consider the applicability and impact of all ASUs. There have been no new applicable accounting pronouncements or changes in accounting pronouncements during the three months ended March 29, 2025 as compared with the recent accounting pronouncements described in the 2024 10-K. ASUs not disclosed were assessed and determined to be either not applicable or had or are expected to have minimal impact on our financial statements and related disclosures. 2) Revenue On March 29, 2025, we had $ 673.0 million of remaining performance obligations, which we refer to as total backlog. We expect to recognize approximately $ 508.3 million of our outstanding performance obligations as revenue over the next twelve months and the balance thereafter. 10 Table of Content 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: (In thousands) Contract Assets Contract Liabilities Beginning Balance, January 1, 2025 $ 54,171 $ 28,171 Ending Balance, March 29, 2025 $ 56,040 $ 31,099 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 $ 1.9 million revision of estimated costs to complete a certain long-term mass transit Test contract, which was recorded in the first quarter of 2025. The revision resulted in reduced revenue recognized during the three months ended March 29, 2025 due to lower estimates of the percentage of work completed on the program. The increase in contract liabilities reflects the net impact of new customer advances or deferred revenues recorded in excess of revenue recognized. We recognized $ 11.6 million and $ 9.2 million during the three months ended March 29, 2025 and March 30, 2024, respectively, in revenues that were included in the contract liability balance at the beginning of the period. The Company recognizes an asset for certain, material costs to fulfill a contract if it is determined that the costs relate directly to a contract or an anticipated contract that can be specifically identified, generate or enhance resources that will be used in satisfying performance obligations in the future, and are expected to be recovered. Such costs are amortized on a systematic basis that is consistent with the transfer to the customer of the goods to which the asset relates. Start-up costs are expensed as incurred. Capitalized fulfillment costs are included in Inventories in the accompanying Consolidated Condensed Balance Sheets. Should future orders not materialize or it is determined the costs are no longer probable of recovery, the capitalized costs are written off. The Company capitalized fulfillment costs of $ 5.3 million and $ 8.3 million on March 29, 2025 and December 31, 2024, respectively. Amortization of fulfillment costs recognized within Cost of Products Sold was $ 3.3 million and $ 0.3 million for the three months ended March 29, 2025 and March 30, 2024, respectively. The following table presents our revenue disaggregated by Market Segments as follows: Three Months Ended (In thousands) March 29, 2025 March 30, 2024 Aerospace Segment Commercial Transport $ 137,542 $ 121,430 Military Aircraft 33,263 17,079 General Aviation 15,243 19,551 Other 5,327 5,578 Aerospace Total 191,375 163,638 Test Systems Segment Government & Defense 14,561 21,436 Test Systems Total 14,561 21,436 Total $ 205,936 $ 185,074 11 Table of Content The following table presents our revenue disaggregated by Product Lines as follows: Three Months Ended (In thousands) March 29, 2025 March 30, 2024 Aerospace Segment Electrical Power & Motion $ 100,080 $ 83,124 Lighting & Safety 49,671 41,787 Avionics 28,234 25,594 Systems Certification 5,068 4,448 Structures 2,995 3,107 Other 5,327 5,578 Aerospace Total 191,375 163,638 Test Systems 14,561 21,436 Total $ 205,936 $ 185,074 3) Inventories Inventories consisted of the following: ( In thousands ) March 29, 2025 December 31, 2024 Finished Goods $ 29,101 $ 27,941 Work in Progress 31,925 31,927 Raw Material 136,910 139,873 $ 197,936 $ 199,741 4) Property, Plant and Equipment Property, Plant and Equipment consisted of the following: (In thousands) March 29, 2025 December 31, 2024 Land $ 8,589 $ 8,551 Buildings and Improvements 72,396 72,150 Machinery and Equipment 128,015 125,874 Construction in Progress 4,183 3,997 Total Property, Plant and Equipment, Gross 213,183 210,572 Less Accumulated Depreciation 132,737 129,885 Total Property, Plant and Equipment, Net $ 80,446 $ 80,687 12 Table of Content 5) Intangible Assets The following table summarizes acquired intangible assets as follows: March 29, 2025 December 31, 2024 (In thousands) Weighted Average Life Gross Carrying Amount Accumulated Amortization Gross Carrying Amount Accumulated Amortization Patents 11 years $ 2,146 $ 2,146 $ 2,146 $ 2,146 Non-compete Agreement 4 years 11,082 11,082 11,082 11,082 Trade Names 10 years 11,411 10,404 11,380 10,351 Completed and Unpatented Technology 9 years 47,871 43,398 47,818 42,617 Customer Relationships 15 years 142,162 98,096 142,065 95,818 Total Intangible Assets 13 years $ 214,672 $ 165,126 $ 214,491 $ 162,014 All acquired intangible assets other than goodwill and one trade name are being amortized. Amortization expense for acquired intangibles is summarized as follows: Three Months Ended (In thousands) March 29, 2025 March 30, 2024 Amortization Expense $ 2,975 $ 3,270 Amortization expense for acquired intangible assets expected for 2025 and for each of the next five years is summarized as follows: (In thousands) 2025 $ 10,938 2026 $ 9,533 2027 $ 7,825 2028 $ 7,037 2029 $ 5,664 2030 $ 3,583 6) Goodwill The following table summarizes the changes in the carrying amount of goodwill for the three months ended March 29, 2025: (In thousands) December 31, 2024 Foreign Currency Translation March 29, 2025 Aerospace $ 36,421 $ 12 $ 36,433 Test Systems 21,635 — 21,635 $ 58,056 $ 12 $ 58,068 7) Long-term Debt and Notes Payable 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. 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 is 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 13 Table of Content 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 March 29, 2025, there was $ 1.1 million outstanding on the ABL Revolving Credit Facility and there remained $ 187.1 million available for future borrowings, before our minimum excess availability requirement discussed below. The amount available for future borrowings as of March 29, 2025, is net of a $ 18.1 million reserve for the damage award relating to the patent infringement dispute in the United Kingdom discussed in Note 13, Legal Proceedings, and $ 2.3 million in outstanding letters of credit. 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 a minimum excess availability of the greater of 10 % of the borrowing base under the ABL Revolving Credit Facility, or $ 15.0 million. As of March 29, 2025, the Company was in compliance with these covenants. On December 3, 2024, the Company issued $ 165.0 million aggregate principal amount of 5.500 % Convertible Senior Notes due 2030 (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 $ 228.4 million and $ 176.9 million as of March 29, 2025 and December 31, 2024, respectively, based on quoted prices for these instruments in active markets, and is classified as a Level 1 measurement within the fair value hierarchy. Interest expense was approximately $ 3.2 million and $ 5.8 million during the three months ended March 29, 2025 and March 30, 2024, respectively. The Company entered into a $ 90.0 million Term Loan Facility on January 19, 2023, and paid interest at a rate equal to SOFR (which was required to be at least 2.50 %) plus 8.75 %. The Company refinanced its credit facilities on July 11, 2024, and repaid in full all outstanding indebtedness under the previous term loan dated January 19, 2023. Debt issuance cost amortization expense was approximately $ 0.6 million and $ 0.8 million during the three months ended March 29, 2025 and March 30, 2024, respectively. Unamortized deferred debt issuance costs associated with the ABL Revolving Credit Facility ($ 2.7 million and $ 3.0 million as of March 29, 2025 and December 31, 2024, respectively) are recorded within Other Assets and those associated with the Convertible Notes ($ 6.0 million and $ 6.3 million as of March 29, 2025 and December 31, 2024, respectively) are recorded as a reduction of the carrying value of the debt on the Consolidated Condensed Balance Sheets. 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. 8) Product Warranties In the ordinary course of business, the Company warrants its products against defects in design, materials, and workmanship typically over periods ranging from twelve to sixty months . The Company determines warranty reserves needed by product line based on experience and current facts and circumstances. 14 Table of Content Activity in the warranty accrual, which is included in Accrued Expenses and Other Current Liabilities on the Consolidated Condensed Balance Sheets, is summarized as follows: Three Months Ended (In thousands) March 29, 2025 March 30, 2024 Balance at Beginning of Period $ 18,081 $ 9,751 Warranties Issued 907 1,489 Warranties Settled ( 1,320 ) ( 746 ) Reassessed Warranty Exposure ( 57 ) 28 Balance at End of Period $ 17,611 $ 10,522 9) Income Taxes The effective tax rates were approximately 6.3 % and 29.8 % for the three months ended March 29, 2025 and March 30, 2024, respectively. Beginning with the 2022 tax year, certain research and development costs are required to be capitalized and amortized over sixty months for income tax purposes. The tax rate in the 2025 period was impacted by a valuation allowance applied against the deferred tax asset associated with the research and development costs that are expected to be capitalized and was partially offset by the removal of valuation allowances related to net operating losses and certain timing differences that are expected to reverse during 2025. In addition, the tax rate in the 2025 period was also impacted by state income taxes and the federal research and development credit expected for 2025 and a discrete adjustment to reverse certain federal and state deferred tax liabilities. The Company records a valuation allowance against the deferred tax assets if and to the extent it is more likely than not that the Company will not recover the deferred tax assets. In evaluating the need for a valuation allowance, the Company weighs all relevant positive and negative evidence, and considers among other factors, historical financial performance, projected future taxable income, scheduled reversals of deferred tax liabilities, the overall business environment, and tax planning strategies. After considering the losses in recent periods and cumulative pre-tax losses in the three-year period ending with the current year, the Company determined that projections of future taxable income could not be relied upon as a source of income to realize its deferred tax assets. However, the Company is relying on a significant portion of its existing deferred tax liabilities for the realizability of deferred tax assets. Accordingly, during the years ended December 31, 2024 and 2023, the Company determined that a portion of its deferred tax assets were not expected to be realizable in the future and the Company continues to maintain the valuation allowance against its deferred tax assets as of March 29, 2025. 10) Earnings Per Share The following table sets forth the computation of basic earnings per share: Three months ended (In thousands, except per share amounts) March 29, 2025 March 30, 2024 Basic Earnings per Common Share: Net Income (Loss) - Basic $ 9,528 $ ( 3,178 ) Weighted Average Shares - Basic 35,285 34,863 Basic Earnings per Common Share $ 0.27 $ ( 0.09 ) 15 Table of Content The following table sets forth the computation of diluted net income (loss) per share: Three months ended (In thousands, except per share amounts) March 29, 2025 March 30, 2024 Diluted earnings per common share: Net Income (Loss) - Basic $ 9,528 $ ( 3,178 ) Convertible Notes Interest Expense, Net of Tax 1,792 — Net Income (Loss) - Diluted $ 11,320 $ ( 3,178 ) Weighted Average Shares - Basic 35,285 34,863 Net Effect of Dilutive Stock Awards 464 — Net Effect of Dilutive Convertible Notes 7,208 — Weighted Average Shares - Diluted 42,957 34,863 Diluted Net Income (Loss) Per Share $ 0.26 $ ( 0.09 ) 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 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 three months ended March 30, 2024, therefore all outstanding stock options and unvested restricted stock units were excluded from the computation of diluted loss per share because the effect of their inclusion would be anti-dilutive. The number of common shares excluded from the computation was approximately 471,000 shares as of March 29, 2025 and 1,043,000 shares as of March 30, 2024. 11) Shareholders’ Equity Share Buyback Program The Company’s Board of Directors from time to time authorizes the repurchase of common stock, which allows the Company to purchase shares of its common stock in accordance with applicable securities laws on the open market or through privately negotiated transactions. 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. 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, having an aggregate offering price of up to $ 30.0 million. During the three months ended March 29, 2025 and March 30, 2024, the Company did not sell any shares of our common stock under the ATM Program. As of March 29, 2025, the Company had remaining capacity under the ATM Program to sell shares of common stock having an aggregate offering price up to approximately $ 8.2 million. Comprehensive Income (Loss) and Accumulated Other Comprehensive Loss The components of accumulated other comprehensive loss are as follows: (In thousands) March 29, 2025 December 31, 2024 Foreign Currency Translation Adjustments $ ( 7,470 ) $ ( 8,222 ) Retirement Liability Adjustment – Before Tax 1,841 2,077 Tax Benefit of Retirement Liability Adjustment 2,282 2,282 Retirement Liability Adjustment – After Tax 4,123 4,359 Accumulated Other Comprehensive Loss $ ( 3,347 ) $ ( 3,863 ) 16 Table of Content The components of other comprehensive income (loss) are as follows: Three Months Ended (In thousands) March 29, 2025 March 30, 2024 Foreign Currency Translation Adjustments $ 752 $ ( 756 ) Retirement Liability Adjustments: Reclassifications to Selling, General and Administrative Expenses: Amortization of Prior Service Cost 96 97 Amortization of Net Actuarial (Gains) Losses ( 332 ) 184 Retirement Liability Adjustment ( 236 ) 281 Other Comprehensive Income (Loss) $ 516 $ ( 475 ) 12) Sales to Major Customers The loss of major customers or a significant reduction in business with a major customer would significantly, and negatively impact our sales and earnings. In the three months ended March 29, 2025, the Company had one major customer over 10% of consolidated sales within the Aerospace segment. Sales to the Safran Group (“Safran”) accounted for 10.3 % of consolidated sales during the three months ended March 29, 2025. Accounts receivable from Safran on March 29, 2025 were approximately $ 8.1 million. In the three months ended March 30, 2024, the Company had one major customer over 10% of consolidated sales primarily in the Aerospace segment. Sales to the Boeing Company (“Boeing”) accounted for 10.7 % of consolidated sales in the three months ended March 30, 2024. 13) Legal Proceedings Lufthansa One of the Company’s subsidiaries is involved in numerous patent infringement actions brought by Lufthansa Technik AG (“Lufthansa”) in Germany, the United Kingdom (“UK”) and France. The Company is vigorously defending all such litigation and proceedings. Additional information about these legal proceedings can be found in Note 19, Legal Proceedings, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, in the 2024 10-K. The reserve for the German indirect claim and interest was approximately $ 17.2 million at March 29, 2025 and $ 17.1 million on December 31, 2024. The Company currently believes it is unlikely that the damages in the German indirect proceedings and related interest will be paid within the next twelve months. Therefore, the liability related to this matter is classified within Other Liabilities (non-current) in the Consolidated Condensed Balance Sheets at March 29, 2025 and December 31, 2024. In the matter before the UK High Court of Justice, Lufthansa had pleaded its case for monetary compensation at a separate trial which was conducted 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 by the court in the amount of $ 11.9 million. Such amount was recorded as a liability in the Company’s Consolidated Financial Statements as of December 31, 2024. Following a consequential hearing on March 20, 2025, the amount was adjusted upwards by $ 0.5 million related to the resolution of a provisional item. Additionally, on April 30, 2025, the UK High Court of Justice issued a draft order related to interest associated with damages, which obligated the Company to accrue a reserve estimate of $ 5.7 million relating to such interest associated with the damages. Both of these amounts were recorded in the three months ended March 29, 2025 within Selling, General and Administrative Expenses in the Company’s Consolidated Condensed Statement of Operations. Accordingly, as of March 29, 2025, we have recognized a liability within Accrued Expenses and Other Current Liabilities in the accompanying Consolidated Condensed Balance Sheet of $ 18.1 million associated with this claim, inclusive of interest. The Company paid $ 12.4 million of this liability for damages in the second quarter of 2025, and expects to pay an additional $ 5.7 million in interest liability related thereto in the second quarter of 2025. There is a further consequential hearing on May 16, 2025 which will address applications for permission to appeal the court’s findings in these matters, as well as the issue of reimbursement of legal fees in the damages phase of the litigation. 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. On May 1, 2025, Lufthansa estimated their legal fees at approximately $ 7.2 million. The Company believes they have valid defenses against this claim and as such, no amounts have been reserved for legal fee reimbursement as of March 29, 2025. The Company expects any appeal will likely be heard in the first half of 2026. 17 Table of Content A liability for reimbursement of Lufthansa’s legal expenses associated with the UK matter, exclusive of the damages phase, was approximately $ 1.0 million at March 29, 2025 and December 31, 2024, 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 Sheets as of March 29, 2025 and December 31, 2024. With respect to the proceeding in France, as previously disclosed, on December 4, 2020, the Court held the French patent invalid for all asserted claims. Lufthansa appealed this judgment. The appeal hearing took place on December 8, 2022, and on February 24, 2023, the Court upheld the first instance judgment in favor of AES. Lufthansa lodged an appeal before the French Supreme Court. A decision from this Court was rendered on March 19, 2025, remanding the case to the Court of Appeal of Paris for reconsideration of the invalidity of Lufthansa’s French patent. It is now upon Lufthansa to initiate the remanded proceedings before the court of appeal by filing a specific declaration. A second ruling by the Court of Appeal of Paris is not expected before at least 2026. As loss exposure is not probable and estimable at this time, the Company has not recorded any liability with respect to the French matter as of March 29, 2025 or December 31, 2024. There were no other significant developments in any of these matters during the three months ended March 29, 2025. Other On March 23, 2020, Teradyne, Inc. filed a complaint against the Company and its subsidiary, Astronics Test Systems (“ATS”) (together, “the Defendants”) in the United States District Court for the Central District of California alleging patent and copyright infringement, and certain other related claims. The Defendants moved to dismiss certain claims from the case. On November 6, 2020, the Court dismissed the Company from the case, and also dismissed a number of claims, though the patent and copyright infringement claims remained. In addition, on December 21, 2020, ATS filed a petition for inter partes review (“IPR”) with the US Patent Trial and Appeal Board (“PTAB”), seeking to invalidate the subject patent, and on July 21, 2021, the PTAB instituted IPR. The PTAB issued its decision on July 20, 2022, in which it invalidated all of Teradyne’s patent claims. Teradyne did not appeal the decision. On December 7, 2023, the District Court granted ATS’s motion for summary judgment on its affirmative defense of fair use. The Court subsequently entered final judgment in favor of ATS on December 14, 2023. Teradyne 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 has elected not to pursue an appeal. As such, the summary judgment ruling stands and final judgment in favor of ATS has been entered. No amounts have been accrued for this matter in the Consolidated Condensed Financial Statements as of March 29, 2025, or the Consolidated Financial Statements as of December 31, 2024, 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. 14) Segment Information 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. 18 Table of Content Segment information and reconciliations to consolidated amounts are as follows: Three Months Ended (In thousands) March 29, 2025 March 30, 2024 Sales: Aerospace $ 191,388 $ 163,675 Less Inter-segment Sales ( 13 ) ( 37 ) Total Aerospace Sales 191,375 163,638 Test Systems 14,592 21,436 Less Inter-segment Sales ( 31 ) — Total Test Systems Sales 14,561 21,436 Total Consolidated Sales 205,936 185,074 Less 1 Cost of Products Sold: Aerospace 132,892 119,257 69.4 % 72.9 % Test Systems 12,195 18,303 83.8 % 85.4 % Other Segment Items 2 Aerospace 36,219 32,284 Test Systems 4,589 6,212 Operating Income (Loss) and Margins: Aerospace 22,264 12,097 11.6 % 7.4 % Test Systems ( 2,223 ) ( 3,079 ) ( 15.3 ) % ( 14.4 ) % Total Operating Income 20,041 9,018 9.7 % 4.9 % Deductions from Segment Measure of Operating Profit: Interest Expense, Net of Interest Income 3,150 5,759 Corporate Expenses and Other 6,717 7,788 Income (Loss) Before Income Taxes $ 10,174 $ ( 4,529 ) 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, Research and Development Expenses, and sublease and rental income. (In thousands) March 29, 2025 December 31, 2024 Total Assets: Aerospace $ 512,912 $ 498,528 Test Systems 121,465 128,828 Corporate 27,865 21,408 Total Assets $ 662,242 $ 648,764 19 Table of Content Three Months Ended (In thousands) March 29, 2025 March 30, 2024 Depreciation and Amortization: Aerospace $ 4,498 $ 5,021 Test Systems 1,078 1,251 Corporate 12 56 Total Depreciation and Amortization $ 5,588 $ 6,328 Capital Expenditures: Aerospace $ 2,082 $ 1,470 Test Systems 23 118 Corporate — 10 Total Capital Expenditures $ 2,105 $ 1,598 15) Fair Value There were no financial assets or liabilities carried at fair value measured on a recurring basis on March 29, 2025 or December 31, 2024. There were no non-recurring fair value measurements performed in the three months ended March 29, 2025 and March 30, 2024. Due to their short-term nature, the carrying value of cash and equivalents, accounts receivable, and accounts payable approximate fair value. The carrying value of the Company’s variable rate long-term debt instruments also approximates fair value due to the variable rate feature of these instruments. Refer to Note 7, Long-term Debt and Notes Payable, for additional information relating to the fair value of the Company’s outstanding fixed-rate Convertible Notes. 20 Table of Content