What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-12 compared with 2026-05-13 · 90 added, 50 removed, 156 unchanged (47% of the section changed)

6 unchanged sentences

Our Test Systems segment has principal operating facilities in the United States and an engineering office in India.

Our Aerospace segment designs and manufactures products for the global aerospace industry.

Our Aerospace segment designs and manufactures products for the global aerospace and defense industry.

Product lines include lighting and safety systems, electrical power generation, distribution and seat motion systems, inflight entertainment and connectivity products, and other products.

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Department of Defense (“USDOD”).

Our Test Systems segment designs, develops, manufactures and maintains automated test systems that support the aerospace and defense and mass transit industries.

Our Test Systems segment designs, develops, manufactures and maintains automated test systems that support the aerospace and defense, communications and mass transit industries.

In the Test Systems segment, Astronics’ products are sold to a global customer base including OEMs and prime government contractors for both electronics and military products.

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On October 22, 2025, the Company entered into the $300.0 million senior secured Revolving Credit Facility.

The Revolving Credit Facility replaced the Company’s ABL Revolving Credit Facility which was terminated on October 22, 2025.

The Revolving Credit Facility replaced the Company’s ABL Revolving Credit Facility which was terminated.

The Revolving Credit Facility subjects us to various financial and other affirmative and negative covenants with which we must comply on an ongoing or periodic basis.

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Court of International Trade.

As of the filing date, it remains uncertain what impact these decisions will have on our future financial results, including the process and availability of obtaining refunds of amounts previously paid for the IEEPA tariffs or any fluctuations of the level of replacement tariffs imposed or the addition of any new tariffs through other means.

Refunds of previously paid tariffs represent gain contingencies under ASC 450-30.

Consistent with this guidance, the Company recognizes such refunds as a reduction of Cost of Products Sold in the period in which the gain is realized or realizable, generally when cash is received.

Refunds that have been approved but not yet received, or that remain subject to appeal, further agency action, or other contingencies, are not recognized until realization criteria are met.

As a result, during the three and six months ended July 4, 2026, the Company received $2.0 million in IEEPA tariff refunds in the Consolidated Condensed Statement of Operations.

The ultimate impact of these developments on our future financial results remains uncertain, including the timing and extent of any future refunds of tariffs previously paid under IEEPA and the nature, scope, and rate of any replacement tariffs or other trade measures that may be implemented.

CONSOLIDATED RESULTS OF OPERATIONS

Three Months Ended

($ in thousands) April 4, 2026 March 29, 2025

Six Months Ended Three Months Ended

($ in thousands) July 4, 2026 June 28, 2025 July 4, 2026 June 28, 2025

Sales $ 490,576 $ 410,614 $ 259,957 $ 204,678

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A discussion by segment can be found in “Segment Results of Operations” in this MD&A.

CONSOLIDATED FIRST QUARTER RESULTS

Growth in sales was driven by the Aerospace segment’s continued strength in demand primarily from the Commercial Transport market.

CONSOLIDATED SECOND QUARTER RESULTS

Growth in sales was driven by the Aerospace segment’s continued strength in demand primarily from the Commercial Transport market, including $5.9 million from the acquisition of BMA.

Aerospace sales increased $43.7 million, or 22.6%, while Test Systems sales grew $11.6 million, or 105.1%.

In the prior year, first quarter consolidated sales and gross profit was negatively impacted by a $1.9 million revision of estimated costs to complete a long-term mass transit contract in the Test Systems segment.

Consolidated cost of products sold in the first quarter of 2026 was $155.5 million, compared with $145.1 million in the same prior-year period primarily attributable to higher volume and a $1.7 million increase in tariff expenses.

Test Systems sales in the prior year were negatively impacted by $6.4 million due to revisions of estimated costs to complete certain long-term mass transit contracts.

Consolidated cost of products sold in the second quarter of 2026 was $173.1 million, compared with $151.9 million in the second quarter of 2025, primarily due to higher volume.

This increase was partially offset by a $2.0 million IEEPA tariff refund.

The prior year included a $5.8 million charge related to Aerospace simplification initiatives.

SG&A decreased $0.9 million.

Litigation-related expenses were down $1.2 million and the prior-year period included a $6.2 million reserve adjustment to the damage award relating to the patent infringement dispute in the UK.

Appeals to the UK damage award are scheduled to be heard in July 2026.

Litigation-related expenses were down $0.9 million, and the prior-year period included a $3.5 million legal fee reimbursement charge relating to the patent infringement dispute in the UK.

These decreases were mostly offset by higher wages and benefits, higher incentive-based compensation expenses driven by increased profitability, and incremental expenses related to the acquired BMA business.

R&D was down $0.7 million reflecting the timing of projects.

Interest expense was down $0.8 million, or 24.7%, on lower rates following the September 2025 refinancing activities.

Tax expense in the quarter of $2.8 million reflects the benefits of a partial valuation allowance reversal and research and development costs expected to be expensed.

Consolidated net income of $0.75 per diluted share improved from $0.03 per diluted share in the prior-year period from stronger operating profit.

Bookings of $306.2 million in the quarter resulted in a book-to-bill ratio of 1.18:1.

For the trailing twelve months, bookings totaled $1.06 billion and the book-to-bill ratio was 1.13:1.

Backlog at the end of the quarter was $780.6 million.

CONSOLIDATED YEAR-TO-DATE RESULTS

Growth in sales was driven by the Aerospace segment’s continued strength in demand primarily from the Commercial Transport market, including $10.5 million from the acquisition of BMA.

Aerospace sales increased $66.1 million, or 17.2%, while Test Systems sales grew $13.9 million, or 54.1%.

In the prior year, year-to-date consolidated sales were negatively impacted by $8.3 million, resulting from revisions of estimated costs to complete certain long-term mass transit contracts in the Test Systems segment.

Consolidated cost of products sold in the first half of 2026 was $328.5 million, compared with $296.9 million in the same prior-year period primarily attributable to higher volume.

The prior year included a $5.8 million charge related to Aerospace simplification initiatives.

SG&A decreased $1.8 million.

Litigation-related expenses were down $2.1 million and the prior-year period included $9.7 million reserve adjustment relating to the patent infringement dispute in the UK.

These decreases were mostly offset by higher wages and benefits, higher incentive-based compensation expenses driven by increased profitability, and the incremental expenses related with the acquired BMA business.

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Interest expense was down $1.6 million, or 25.3%, on lower rates following the September 2025 refinancing activities.

Tax benefit in the quarter was $0.8 million compared with a tax expense of $0.6 million in the prior-year period, mostly as a result of a $2.7 million discrete adjustment for the expected benefit of a stock-based compensation deduction along with a valuation allowance reversal associated with an expected net operating loss deduction and with research and development costs that are expected to be expensed for tax purposes in the current year under the One Big Beautiful Bill Act.

Tax expense in the first half of 2026 was $2.0 million compared with tax expense of $1.2 million in the prior-year period, mostly as a result of a $2.7 million discrete adjustment for the expected benefit of a stock-based compensation deduction along with a partial valuation allowance reversal associated with an expected net operating loss deduction and with research and development costs that are expected to be expensed for tax purposes in the current year under the One Big Beautiful Bill Act.

Tax expense in the prior year was partially offset by a $1.1 million discrete adjustment to reverse certain federal and state deferred tax liabilities.

Consolidated net income of $0.67 per diluted share improved from $0.26 per diluted share in the prior-year period from stronger operating profit, lower interest expense and lower tax.

Bookings of $290.4 million in the quarter resulted in a book-to-bill ratio of 1.26:1.

For the trailing twelve months, bookings totaled $935.1 million and the book-to-bill ratio was 1.05:1.

Backlog at the end of the quarter was $734.3 million.

Consolidated net income of $1.31 per diluted share improved from $0.25 per diluted share in the prior-year period from stronger operating profit.

Bookings of $596.6 million in the first half of 2026 resulted in a book-to-bill ratio of 1.22:1.

SEGMENT RESULTS OF OPERATIONS

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AEROSPACE SEGMENT

Three Months Ended

($ in thousands) April 4, 2026 March 29, 2025

Six Months Ended Three Months Ended

($ in thousands) July 4, 2026 June 28, 2025 July 4, 2026 June 28, 2025

Sales $ 451,135 $ 385,035 $ 237,292 $ 193,647

Less Inter-segment Sales

(23) (34) — (21)

Total Aerospace Sales

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Operating Margin 18.5 % 10.5 % 20.3 % 9.3 %

Aerospace Sales by Market Three Months Ended

(In thousands) April 4, 2026 March 29, 2025

Aerospace Sales by Market Six Months Ended Three Months Ended

(In thousands) July 4, 2026 June 28, 2025 July 4, 2026 June 28, 2025

Commercial Transport $ 333,425 $ 283,115 $ 177,006 $ 145,573

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$ 451,112 $ 385,001 $ 237,292 $ 193,626

Aerospace Sales by Product Line Three Months Ended

(In thousands) April 4, 2026 March 29, 2025

Aerospace Sales by Product Line Six Months Ended Three Months Ended

Recast Recast

(In thousands) July 4, 2026 June 28, 2025 July 4, 2026 June 28, 2025

Inflight Entertainment & Connectivity $ 236,756 $ 209,012 $ 126,008 $ 105,902

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Prior‑period disaggregated revenue information has been recast to conform to the current‑period presentation.

(In thousands) April 4, 2026 December 31, 2025

(In thousands) July 4, 2026 December 31, 2025

$ 614,128 $ 570,294

$ 657,212 $ 600,803

AEROSPACE FIRST QUARTER RESULTS

AEROSPACE SECOND QUARTER RESULTS

Aerospace segment sales of $237.3 million increased $43.7 million, or 22.6%.

Sales in the Commercial Transport market increased $31.4 million, or 21.6%.

Growth was primarily related to increased demand for seat motion and lighting and safety products.

General Aviation sales increased $6.2 million, or 40.7%, to $21.4 million due to higher inflight entertainment & connectivity (“IFEC”) product sales to the VVIP market.

Military Aircraft sales remained consistent with the prior-year period.

Other sales decreased $2.9 million as the Company has wound down its non-core contract manufacturing arrangements.

Aerospace segment operating profit of $35.3 million, or 16.5% of sales, improved over the prior-year period reflecting the leverage gained on higher volume, improving production efficiencies, a $2.8 million catch-up of profit on the MV-75 program based on revised program estimates, and a $7.0 million decrease in litigation-related expenses and legal reserve adjustments related to the UK patent dispute previously discussed.

Growth was primarily related to increased demand for seat motion and inflight entertainment & connectivity (“IFEC”) products.

General Aviation sales increased $9.2 million, or 50.3%, to $27.6 million due to higher IFEC sales of VVIP products.

Military Aircraft sales increased $3.2 million, or 11.7%, to $30.6 million due to increased sales of flight critical airframe power products.

Aerospace segment operating profit of $48.3 million, or 20.3% of sales, improved over the prior-year period reflecting the leverage gained on higher volume, improving production efficiencies, a $2.0 million IEEPA tariff refund, a $4.6 million decrease in litigation-related expenses and legal reserve adjustments related to the UK patent dispute previously discussed, and the absence of a $6.2 million charge for simplification initiatives in the prior-year period.

Aerospace bookings were $243.1 million for a book-to-bill ratio of 1.02:1.

Backlog for the Aerospace segment was $657.2 million at quarter end.

AEROSPACE YEAR-TO-DATE RESULTS

Aerospace segment sales of $451.1 million increased $66.1 million, or 17.2%.

Sales in the Commercial Transport market increased $50.3 million, or 17.8%.

Growth was primarily related to increased demand for seat motion and IFEC products.

General Aviation sales increased $15.4 million, or 45.9%, to $49.1 million due to higher IFEC product sales to the VVIP market.

Military Aircraft sales increased $3.4 million with the prior-year period.

Other sales decreased $3.1 million as the Company has wound down its non-core contract manufacturing arrangements.

Aerospace segment operating profit of $83.6 million, or 18.5% of sales, improved over the prior-year period reflecting the leverage gained on higher volume, improving production efficiencies, a $2.8 million catch-up of profit on the MV-75 FLRAA program based on revised program estimates, a $11.6 million decrease in litigation-related expenses and legal reserve adjustments related to the UK patent dispute previously discussed, and the absence of a $6.5 million charge for simplification initiatives in the prior-year period.

Aerospace bookings of $507.5 million in the first half of 2026 resulted in a book-to-bill ratio of 1.13:1.

TEST SYSTEMS SEGMENT

Three Months Ended

($ in thousands) April 4, 2026 March 29, 2025

Six Months Ended Three Months Ended

($ in thousands) July 4, 2026 June 28, 2025 July 4, 2026 June 28, 2025

Sales $ 39,498 $ 25,933 $ 22,674 $ 11,341

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(In thousands)

April 4, 2026 December 31, 2025

July 4, 2026 December 31, 2025

$ 126,664 $ 119,603

Backlog $ 123,346 $ 73,692

TEST SYSTEMS FIRST QUARTER RESULTS

TEST SYSTEMS SECOND QUARTER RESULTS

Test Systems segment sales of $22.7 million were up $11.6 million from the comparator quarter in 2025.

Segment sales in the prior-year period were negatively impacted by $1.9 million revision of estimated costs to complete a certain long-term mass transit Test contract reducing revenue recognized in the period.

Test Systems segment operating profit was $0.4 million, compared with an operating loss of $2.2 million in the first quarter of 2025.

Test Systems profitability, while improving, continues to be negatively affected by mix and under absorption of fixed costs at current volume levels.

Segment sales in the prior-year period were negatively impacted by a $6.4 million revision of estimated costs to complete certain long-term mass transit contracts reducing revenue recognized in the period.

Test Systems segment operating profit was $0.6 million, compared with an operating loss of $6.7 million in the second quarter of 2025.

The revisions to the estimated costs to complete had a $6.9 million detrimental impact to operating income in the prior year.

Test Systems profitability continues to be negatively affected by mix and under absorption of fixed costs at current volume levels, as well as approximately $4.1 million of revenue in the current quarter at no margin related to dedicated raw materials for the U.S.

Army and U.S.

Marine Corps Radio Test programs.

Margin on that revenue will be recognized through 2026 as production on those programs progress further.

Bookings for the Test Systems segment in the quarter were $63.1 million.

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Backlog for the Test Systems segment was $123.3 million at quarter end.

TEST SYSTEMS YEAR-TO-DATE RESULTS

Test Systems segment sales of $39.5 million were up $13.9 million from the comparator quarter in 2025.

Segment sales in the prior-year period were negatively impacted by $8.3 million revision of estimated costs to complete certain long-term mass transit Test contracts reducing revenue recognized in the period.

Test Systems segment operating profit was $1.0 million, compared with an operating loss of $8.9 million in the first half of 2025.

Test Systems profitability, while improving, continues to be negatively affected by mix and under absorption of fixed costs at current volume levels.

In the prior-year period, the revisions to the estimated costs to complete had a $8.8 million detrimental impact to operating income.

Test Systems bookings of $89.1 million in the first half of 2026 resulted in a book-to-bill ratio of 2.26:1.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities:

Cash provided by operating activities totaled $10.6 million for the first three months of 2026, as compared with $20.6 million cash provided by operating activities during the same period in 2025.

Cash flow from operating activities decreased compared with the same period of 2025 reflecting higher cash earnings offset by higher working capital requirements, including higher inventory levels to support anticipated revenue growth in the coming quarters.

Cash provided by operating activities totaled $40.7 million for the first six months of 2026, as compared with $13.0 million cash provided by operating activities during the same period in 2025.

Cash flow from operating activities increased compared with the same period of 2025 reflecting higher cash earnings offset by higher working capital requirements, including higher inventory levels to support anticipated revenue growth in the coming quarters.

Cash provided by operating activities in the prior-year period included $21.6 million in payments related to the UK patent dispute and $12.8 million in net income tax payments.

Investing Activities:

Cash used for investing activities was $11.2 million for the first three months of 2026 compared with $2.1 million in cash used for investing activities in the same period of 2025 reflecting elevated capital expenditures for necessary catch-up investments on previously deferred spending as well as the consolidation of operations and capacity improvement in a new Seattle facility.

Cash used for investing activities was $16.9 million for the first six months of 2026 compared with $6.7 million in cash used for investing activities in the same period of 2025 reflecting elevated capital expenditures for necessary catch-up investments on previously deferred spending as well as the consolidation of operations and capacity improvement in a new Seattle facility.

Financing Activities:

Cash used for financing activities totaled $5.5 million for the first three months of 2026, as compared with cash used for financing activities of $11.4 million during the same prior-year period.

The Company made net payments of $8.9 million on its ABL facility in the prior-year period.

Cash used for financing activities totaled $32.7 million for the first six months of 2026, as compared with cash used for financing activities of $12.5 million during the same prior-year period.

The Company made net payments on long-term debt of $25.0 million compared to $10.0 million in the prior-year period.

Cash on hand at the end of the quarter was $9.0 million.

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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.

As of April 4, 2026, we are in compliance with all covenants under each of our financing arrangements.

As of July 4, 2026, we are in compliance with all covenants under each of our financing arrangements.

Our financing arrangements are more fully discussed in Note 7, Long-term Debt and Notes Payable, to the Consolidated Condensed Financial Statements in Item 1, Financial Statements, of this report for additional details.

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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 April 4, 2026, and March 29, 2025, the Company did not sell any shares of its common stock under the ATM Program.

As of April 4, 2026, the Company had remaining capacity under the ATM Program to sell shares of common stock having an aggregate offering price up to approximately $8.2 million.

During the three and six months ended July 4, 2026, and June 28, 2025, the Company did not sell any shares of its common stock under the ATM Program.

As of July 4, 2026, 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.

OFF BALANCE SHEET ARRANGEMENTS

We do not have any material off balance sheet arrangements that have or are reasonably likely to have a material future effect on our results of operations or financial condition.

The Company’s backlog on April 4, 2026 was $734.3 million compared with $674.5 million on December 31, 2025 and $673.0 million on March 29, 2025.

The Company’s backlog on July 4, 2026 was $780.6 million compared with $674.5 million on December 31, 2025 and $645.4 million on June 28, 2025.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

2 unchanged sentences

dollars, we have exposure to changes in foreign currency exchange rates related primarily to the Euro and the Canadian dollar.

The Company believes that the impact of changes in foreign currency exchange rates on its business and financial results for the three months ended April 4, 2026 was not significant.

The Company believes that the impact of changes in foreign currency exchange rates on its business and financial results for the three and six months ended July 4, 2026 was not significant.

The future impacts of U.S.

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As we cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and various other countries, what products may be subject to such actions, what actions may be taken by the other countries in retaliation, and what actions we may be able to take to address and mitigate such tariffs, the ultimate financial impact on our results cannot be reasonably estimated but could be material.

The impact of tariffs on its business and financial results for the three months ended April 4, 2026 was approximately $2.5 million.

The impact of tariffs on its business and financial results for the three and six months ended July 4, 2026 was approximately $0.7 million and $3.2 million, respectively, net of $2.0 million of IEEPA tariff refunds.

CRITICAL ACCOUNTING POLICIES

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Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These statements are not guarantees of future performance and are subject to several factors, risks and uncertainties, the impact or occurrence of which could cause actual

results to differ materially from the expected results described in the forward-looking statements.

These statements are not guarantees of future performance and are subject to several factors, risks and uncertainties, the impact or occurrence of which could cause actual results to differ materially from the expected results described in the forward-looking statements.

Certain of these factors, risks and uncertainties are discussed in the sections of this report entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” New factors, risks and uncertainties may emerge from time to time that may affect the forward-looking statements made herein.

4 unchanged sentences

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis