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What changed in ASTRONICS CORP's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of ASTRONICS CORP's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+342 added−308 removedSource: 10-K (2025-03-05) vs 10-K (2024-03-05)

Top changes in ASTRONICS CORP's 2024 10-K

342 paragraphs added · 308 removed · 237 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

28 edited+8 added−9 removed20 unchanged
Biggest changeFor additional information, see discussion in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 8, Long-Term Debt, of Item 8, Financial Statements and Supplementary Data, of this report. Impact of the COVID-19 Pandemic Our business continues to face varying levels of supply chain pressures from the residual impacts of the COVID-19 pandemic.
Biggest changeOn December 3, 2024, the Company repaid in full all outstanding indebtedness on the Term Loan Facility. For additional information, see discussion in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, and Note 8, Long-Term Debt, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report.
Certification and conformance is required 5 prior to installation of a part on an aircraft. Our operations may in the future be subject to new and more stringent regulatory requirements. In that regard, we closely monitor the FAA and industry trade groups in an attempt to understand how possible future regulations might impact us.
Certification and conformance is required prior to installation of a part on an aircraft. Our operations may in the future be subject to new and more stringent regulatory requirements. In that regard, we closely monitor the FAA and industry trade groups in an attempt to understand how possible future regulations might impact us.
We have principal operations in the United States (“U.S.”), Canada, France and England, as well as engineering offices in Ukraine and India. Our operation in Ukraine is a small engineering office and we have not experienced any significant disruption in staffing or services as a result of the Ukrainian and Russian conflict.
We have principal operations in the United States (“U.S.”), Canada and France, as well as engineering offices in Ukraine and India. Our operation in Ukraine is a small engineering office and we have not experienced any significant disruption in staffing or services as a result of the Ukrainian and Russian conflict.
The Board recognizes that culture is critical to the long-term success of Astronics and our strategy. Compensation Programs and Employee Benefits We believe that future success largely depends upon our continued ability to attract and retain highly skilled employees.
The Board recognizes that culture is critical to the long-term success of Astronics and our strategy. 7 Compensation Programs and Employee Benefits We believe that future success largely depends upon our continued ability to attract and retain highly skilled employees.
Most of this segment’s sales are a result of contracts or purchase orders received from customers, placed on a day-to-day basis or for single year procurements rather than long-term multi-year contract commitments. On occasion, the Company does receive contractual commitments or blanket purchase orders from our customers covering multiple-year deliveries of hardware to our customers.
Most of this segment’s sales are a result of contracts or purchase orders received from customers, placed 5 on a day-to-day basis or for a single year procurement rather than long-term multi-year contract commitments. On occasion, the Company does receive contractual commitments or blanket purchase orders from our customers covering multiple-year deliveries of hardware to our customers.
The information contained on our website is not incorporated by reference in this annual report on Form 10-K and should not be considered a part of this report. 7 Information About Our Executive Officers The executive officers of the Company, their ages, their positions and offices with the Company as of December 31, 2023, and the date each assumed their office with the Company, are as follows: Name and Age of Executive Officer Positions and Offices with Astronics Year First Elected Officer Peter J.
The information contained on our website is not incorporated by reference in this annual report on Form 10-K and should not be considered a part of this report. 8 Information About Our Executive Officers The executive officers of the Company, their ages, their positions and offices with the Company as of December 31, 2024, and the date each assumed their office with the Company, are as follows: Name and Age of Executive Officer Positions and Offices with Astronics Year First Elected Officer Peter J.
In March 2022, the Company agreed with the earnout calculation for the calendar 2021 earnout in the amount of $11.3 million. The Company recorded the gain and received the payment in the first quarter of 2022. In March 2023, the Company agreed with the final earnout calculation for the calendar 2022 earnout in the amount of $3.4 million.
The Company recorded the gain and received the payment in the first quarter of 2022. In March 2023, the Company agreed with the final earnout calculation for the calendar 2022 earnout in the amount of $3.4 million. The Company recorded the gain and received the payment in the first quarter of 2023.
Sales by segment, geographic region, major customer and foreign operations are provided in Note 20 in Item 8, Financial Statements and Supplementary Data, of this report. We have a significant concentration of business with one major customer, The Boeing Company (“Boeing”).
Sales by segment, geographic region, major customer and foreign operations are provided in Note 20, Segments, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report. We have a significant concentration of business with one major customer, The Boeing Company (“Boeing”).
Approximately 12% of our 2023 consolidated sales were made to U.S. government-related markets. Government Regulation The FAA regulates the manufacture, repair and operation of all aircraft and aircraft parts operated in the United States. Its regulations are designed to ensure that all aircraft and aviation equipment are continuously maintained in proper condition to ensure safe operation of the aircraft.
Approximately 15% of our 2024 consolidated sales were made to U.S. government-related markets. Government Regulation The FAA regulates the manufacture, repair and operation of all aircraft and aircraft parts operated in the United States. Its regulations are designed to ensure that all aircraft and aviation equipment are continuously maintained in proper condition to ensure safe operation of the aircraft.
Human Capital Resources Human Capital Management and Corporate Culture As of December 31, 2023, we employed approximately 2,500 employees, of whom approximately 2,000 were employed in the United States and approximately 500 were employed outside of the United States. We have approximately 140 non-exempt production employees at PECO who are subject to collective bargaining agreements.
Human Capital Resources Human Capital Management and Corporate Culture As of December 31, 2024, we employed approximately 2,500 full-time employees, of whom approximately 2,000 were employed in the United States and approximately 500 were employed outside of the United States. We have approximately 120 non-exempt production employees at PECO who are subject to collective bargaining agreements.
Raw Materials Materials, supplies and components are purchased from numerous sources. We believe that the loss of any one source, although potentially disruptive in the short-term, would not materially affect our operations in the long-term. Seasonality Our business is typically not seasonal. Backlog At December 31, 2023, our consolidated backlog was $592.3 million.
Raw Materials Materials, supplies and components are purchased from numerous sources. We believe that the loss of any one source, although potentially disruptive in the short-term, would not materially affect our operations in the long-term. 6 Seasonality Our business is typically not seasonal. Backlog At December 31, 2024, our consolidated backlog was $599.2 million.
Sales to Boeing accounted for 11.0% of sales in 2023, 11.0% of sales in 2022, and 10.0% of sales in 2021. Sales to Boeing are primarily in the Aerospace segment.
Sales to Boeing accounted for 10.2% of sales in 2024, 11.0% of sales in 2023, and 11.0% of sales in 2022. Sales to Boeing are primarily in the Aerospace segment.
Practices as to Maintaining Working Capital Liquidity is discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the Liquidity and Capital Resources section of this report.
Practices as to Maintaining Working Capital Liquidity is discussed under the heading “ Liquidity and Capital Resources ”, in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this report.
As a result, the Company recorded a full reserve of $7.5 million for outstanding accounts receivable and $3.6 million for dedicated inventory. The associated assets existed prior to 2023. Products and Customers Our Aerospace segment designs and manufactures products for the global aerospace industry.
As a result, the Company recorded a full reserve of $7.5 million for outstanding accounts receivable and a reserve of $3.6 million for inventory. Products and Customers Our Aerospace segment designs and manufactures products for the global aerospace industry.
The Company received $7.3 million and $7.4 million under the grant in 2022 and 2021, respectively. The grant benefit was recognized ratably over the six-month performance period as a reduction to Cost of Products Sold in proportion to the compensation expense that the award was intended to defray.
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.
At December 31, 2022, our backlog was $571.4 million. The increase in backlog is driven primarily by recovering demand from our commercial transport and general aviation customers, with increased OEM build rates and increased spending by commercial airlines on fleet improvements.
At December 31, 2023, our backlog was $586.6 million. The increase in backlog is driven primarily by recovering demand from our commercial transport and general aviation customers, with increased OEM build rates and increased spending by commercial airlines on fleet improvements. The backlog in each of the periods presented excludes backlog associated with the customer bankruptcies referred to previously.
Divestitures On February 13, 2019, the Company completed a divestiture of its semiconductor test business within the Test Systems segment. The total proceeds of the divestiture included two elements of contingent purchase consideration (“earnout”).
Divestitures On February 13, 2019, the Company completed a divestiture of its semiconductor test business within the Test Systems segment. The total proceeds of the divestiture included two elements of contingent purchase consideration (“earnout”). In March 2022, the Company agreed with the earnout calculation for the calendar 2021 earnout in the amount of $11.3 million.
We are proud to have received numerous awards, recognizing both product quality as well as the ability to provide an excellent work environment.
We are proud to have received numerous awards, recognizing both product quality as well as the ability to provide an excellent work environment. Inclusion The Company believes that inclusion is important to attract and retain top talent.
During 2023, this segment’s sales were divided 72% to the commercial transport market, 10% to the military aircraft market, 13% to the general aviation market and 5% to other markets.
During 2024, this segment’s sales were divided 74% to the commercial transport market, 12% to the military aircraft market, 11% to the general aviation market and 3% to other markets.
Patents We have a number of patents. While the aggregate protection of these patents is of value, our only material business that is dependent upon the protection afforded by these patents is our cabin power distribution products.
While the aggregate protection of these patents is of value, our only material business that is dependent upon the protection afforded by these patents is our cabin power distribution products. Our patents and patent applications relate to electroluminescence, instrument panels, cord reels and handsets, and a broad patent covering the cabin power distribution technology.
We ask these in an effort to ensure that the acquisition candidate is a positive cultural fit and to minimize any risk when assessing the acquisition candidate. 6 In addition, our Corporate Governance Guidelines outline expectations that the Board establish and promote policies that encourage a positive, supportive work culture.
In addition, our Corporate Governance Guidelines outline expectations that the Board establish and promote policies that encourage a positive, supportive work culture.
The Company recorded the gain and received the payment in the first quarter of 2023. We are not eligible for any further earnout payments related to this divestiture. For further information, see Note 21 in Item 8, Financial Statements and Supplementary Data, of this report. On October 6, 2021, the Company sold one of its Aerospace buildings for $9.2 million.
We are not eligible for any further earnout payments related to this divestiture. For further information, see Note 21, Divestiture Activities, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report. Customer Bankruptcies In October 2024, a customer reported within the Aerospace segment declared bankruptcy.
These questions are in the areas of culture, equal employment opportunity, compliance with governing bodies, ethics, as well as employee benefits.
These questions are in the areas of culture, equal employment opportunity, compliance with governing bodies, ethics, as well as employee benefits. We ask these in an effort to ensure that the acquisition candidate is a positive cultural fit and to minimize any risk when assessing the acquisition candidate.
Gundermann Age 61 President, Chief Executive Officer and Director of the Company 2001 David C. Burney Age 61 Executive Vice President, Treasurer and Chief Financial Officer of the Company 2003 Mark A. Peabody Age 64 President, Aerospace Segment and Executive Vice President of Astronics Corporation 2010 James S. Kramer Age 60 Luminescent Systems Inc.
Gundermann Age 62 President, Chief Executive Officer and Director of Astronics Corporation 2001 David C. Burney Age 62 Former Executive Vice President, Treasurer and Chief Financial Officer of Astronics Corporation 2003 Nancy L. Hedges Age 51 Vice President, Treasurer and Chief Financial Officer of Astronics Corporation 2014 Mark A.
President and Executive Vice President of Astronics Corporation 2010 James F. Mulato Age 63 President of Astronics Test Systems, Inc. and Executive Vice President of Astronics Corporation 2019 Michael C. Kuehn Age 63 Astronics Connectivity Systems & Certification Corp. President and Executive Vice President of Astronics Corporation 2019 The principal occupation and employment for Messrs.
Peabody Age 65 President, Aerospace Segment and Executive Vice President of Astronics Corporation 2010 James F. Mulato Age 64 President of Astronics Test Systems, Inc. and Executive Vice President of Astronics Corporation 2019 The principal occupation and employment for Messrs. Gundermann, Burney, Peabody and Mulato for over five years have been with the Company in their respective current roles. Mr.
Our patents and patent applications relate to electroluminescence, instrument panels, cord reels and handsets, and a broad patent covering the cabin power distribution technology. We regard our expertise and techniques as proprietary and rely upon trade secret laws and contractual arrangements to protect our rights. We have trademark protection in our major markets.
We regard our expertise and techniques as proprietary and rely upon trade secret laws and contractual arrangements to protect our rights. We have trademark protection in our major markets. Research and Development Expenses Research and development costs are expensed as incurred and include salaries, benefits, consulting, material costs and depreciation.
Net cash proceeds were approximately $8.8 million and a gain on sale of approximately $5.0 million was recorded. The operation has been integrated into another facility. 4 Customer Bankruptcy 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 $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.
See Part I, Item 1A, Risk Factors, for an additional discussion of risk related to supply chain disruptions. In September 2021, the Company was awarded a grant of up to $14.7 million from the U.S. Department of Transportation (“USDOT”) under the Aviation Manufacturing Jobs Protection Program (“AMJP”).
Research and development expenses amounted to $52.1 million in 2024, $53.5 million in 2023 and $48.3 million in 2022. These costs are included in Cost of Products Sold. Government Subsidies In September 2021, the Company was awarded a grant of up to $14.7 million from the U.S. Department of Transportation (“USDOT”) under the Aviation Manufacturing Jobs Protection Program (“AMJP”).
Removed
Refinancing On January 19, 2023, the Company completed a financing transaction totaling $205 million, which refinanced its previous revolving credit facility which was scheduled to mature in November 2023. The new financing consists of a $90 million asset-based term loan (the “Term Loan Facility”) and a $115 million asset-based revolving credit facility (the “ABL Revolving Credit Facility”).
Added
Refinancing On July 11, 2024, the Company completed a financing transaction that refinanced its previous credit facilities.
Removed
The Term Loan Facility requires monthly amortization that began in April 2023 and bears interest at the Secured Overnight Financing Rate (“SOFR”) plus 8.75%. The ABL Revolving Credit Facility bears interest at SOFR plus between 2.25% and 2.75%.
Added
The refinancing consisted of an amendment and restatement of the Company’s asset-based revolving credit facility with a principal amount available to be borrowed thereunder of $200.0 million (the “ABL Revolving Credit Facility”), with amounts borrowed thereunder carrying an interest rate of SOFR plus between 2.50% to 3.00%.
Removed
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.
Added
The Company also entered into a $55.0 million term loan facility (the “Term Loan Facility”) at an interest rate of SOFR plus a term SOFR plus between 5.50% to 6.75%.
Removed
During the years ended December 31, 2022 and 2021, the Company recognized $6.0 million and $8.7 million of the award, respectively. For additional details regarding government subsidies and grants, and their impact on consolidated results of operations and financial position, see Note 1 to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report.
Added
On November 25, 2024, the Company amended the ABL Revolving Credit Facility increasing the revolving credit line to $220.0 million with an interest rate of SOFR plus 2.75% to 3.25% (an increase of 0.25% to each such applicable margin).
Removed
In the fourth quarter of 2021, the Company agreed to an earnout payment of $10.7 million for the calendar 2020 earnout, which was recorded in 2021 as a separate line item below operating loss and was received by the Company in early January 2022.
Added
On December 3, 2024, the Company issued $165.0 million aggregate principal amount of 5.500% Convertible Senior Notes (the “Convertible Notes”), which amount includes the additional notes issued pursuant to the initial purchasers’ full exercise of their option to purchase additional Convertible Notes. The Convertible Notes will mature on March 15, 2030, unless earlier converted, redeemed or repurchased.
Removed
Backlog in the Aerospace segment was $517.2 million at December 31, 2023, of which $474.5 million is expected to be recognized as revenue in 2024. Backlog in the Test Systems segment was $75.0 million at December 31, 2023. The Test Systems segment expects to recognize $52.1 million of this backlog as revenue in 2024.
Added
Backlog in the Aerospace segment was $537.6 million at December 31, 2024. Backlog in the Test Systems segment was $61.7 million at December 31, 2024. Patents We have a number of patents.
Removed
Research and Development Expenses Research and development costs are expensed as incurred and include salaries, benefits, consulting, material costs and depreciation. Research and development expenses amounted to $53.5 million in 2023, $48.3 million in 2022 and $43.3 million in 2021. These costs are included in Cost of Products Sold.
Added
Burney retired from his position as Executive Vice President, Treasurer and Chief Financial Officer of the Company on January 3, 2025. Effective January 4, 2025 and as previously disclosed by the Company, Nancy L. Hedges, previously the Company’s Controller, became the Company’s Vice President, Treasurer and Chief Financial Officer. Ms.
Removed
Diversity and Inclusion The Company believes that diversity and inclusion is critical for the attraction and retention of top talent, and employs policies and procedures to recruit women and minority talent as well as policies to ensure pay equality.
Added
Hedges now serves as the Company’s principal financial officer and continues in her role as the Company’s principal accounting officer.
Removed
Gundermann, Burney, Kramer, Kuehn, Mulato and Peabody for over five years have been with the Company in their respective current roles.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

106 edited+43 added−11 removed60 unchanged
Biggest changeIf critical components or raw materials used to manufacture our products or used in our development programs become scarce or unavailable, then we may incur delays in manufacturing and delivery of our products and in completing our development programs, which has damaged, and could continue to damage, our business, results of operations and financial condition.
Biggest changeRefer to the risk factor below under the heading “ Currently, our subsidiary, Astronics Advanced Electronic Systems Corp., is a defendant in actions filed in various jurisdictions by Lufthansa Technik AG relating to an allegation of patent infringement and based on rulings to date, we have concluded that losses related to these proceedings are probable ” and Note 19, Legal Proceedings, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report for further discussion. 12 If critical components or raw materials used to manufacture our products or used in our development programs become scarce or unavailable, then we may incur delays in manufacturing and delivery of our products and in completing our development programs, which has damaged, and could continue to damage, our business, results of operations and financial condition.
Furthermore, on contracts for which we are a subcontractor and not the prime contractor, the U.S. government could terminate the prime contract for convenience or otherwise, irrespective of our performance as a subcontractor.
Furthermore, on government contracts for which we are a subcontractor and not the prime contractor, the U.S. government could terminate the prime contract for convenience or otherwise, irrespective of our performance as a subcontractor.
We cannot assure you that our means of protecting our proprietary rights in the United States or abroad will be adequate, or that others will not develop technologies similar or superior to our technology or design around our proprietary rights. Litigation may be necessary to protect our intellectual property rights or defend against claims of infringement.
We cannot assure you that our means of protecting our intellectual property rights in the United States or abroad will be adequate, or that others will not develop technologies similar or superior to our technology or design around our proprietary rights. Litigation may be necessary to protect our intellectual property rights or defend against claims of infringement.
Growth by acquisition involves risks that could adversely affect our financial condition and operating results, including: • the potential exposure to unanticipated liabilities; • the potential that expected benefits or synergies are not realized and that operating costs increase; • the risks associated with incurring additional acquisition indebtedness, including that additional indebtedness could limit our cash flow availability for operations and our flexibility; • difficulties in integrating the operations and personnel of acquired companies; • the potential loss of key employees, suppliers or customers of acquired businesses; and • diversion of management time and attention from our core business.
Growth by acquisition involves risks that could materially adversely affect our business, financial condition and results of operations, including: • the potential exposure to unanticipated liabilities; • the potential that expected benefits or synergies are not realized and that operating costs increase; • the risks associated with incurring additional acquisition indebtedness, including that additional indebtedness could limit our cash flow availability for operations and our flexibility; • difficulties in integrating the operations and personnel of acquired companies; • the potential loss of key employees, suppliers or customers of acquired businesses; and • diversion of management time and attention from our core business.
Our goodwill asset impairment evaluations are determined using valuations that involve several assumptions, including discount rates, cash flow estimates, 14 growth rates and terminal values. Certain of these assumptions, particularly the discount rate, are based on market conditions and are outside of our control. Changes in these assumptions could affect our future earnings and equity.
Our goodwill asset impairment evaluations are determined using valuations that involve several assumptions, including discount rates, cash flow estimates, growth rates and terminal values. Certain of these assumptions, particularly the discount rate, are based on market conditions and are outside of our control. Changes in these assumptions could affect our future earnings and equity.
In our Test Systems segment, the market for our products is concentrated with a limited number of significant customers accounting for a substantial portion of the purchases of test equipment. In any one reporting period, a single customer or several customers may contribute an even larger percentage of our consolidated sales.
In our Test Systems segment, the market for our products is concentrated with a limited number of significant customers accounting for a substantial portion of the purchases of test equipment. In any one reporting period, a single customer or several customers may contribute to an even larger percentage of our consolidated sales.
The most significant impact of this provision is to the cash tax liability for 2023 (as the liability for 2022 is partially offset by certain tax credits and loss carryforwards); the impact will decline annually thereafter over the five-year amortization period to an immaterial amount in year six.
The most significant impact of this provision is to the cash tax liability for 2024 and 2023 (as the liability for 2022 is partially offset by certain tax credits and loss carryforwards); the impact will decline annually thereafter over the five-year amortization period to an immaterial amount in year six.
Also, sales to the U.S. government and its contractors as well as foreign military and government customers, either directly or as a subcontractor to other contractors, often use a competitive bidding process and have unique purchasing and delivery requirements, which often makes the timing of sales to these customers unpredictable.
Also, sales to the U.S. government and its contractors, as well as foreign military and government customers, either directly or as a subcontractor to other contractors, often use a competitive bidding process and 10 have unique purchasing and delivery requirements, which often makes the timing of sales to these customers unpredictable.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make significant and subjective estimates and assumptions that may affect the reported amounts of tangible and intangible long-lived assets, including goodwill, in the financial statements.
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make significant and subjective estimates and assumptions that may affect the reported amounts of tangible and intangible long-lived assets, including goodwill, in the Consolidated Financial Statements.
Our financial results could continue to be adversely impacted by the escalation of labor and benefit costs. Consistent with the experience of other employers, our labor, medical and workers’ compensation costs have increased substantially in recent 11 years and are expected to continue to rise.
Our financial results could continue to be adversely impacted by the escalation of labor and benefit costs. Consistent with the experience of other employers, our labor, medical and workers’ compensation costs have increased substantially in recent years and are expected to continue to rise.
These entities have varying levels of cybersecurity expertise and safeguards and their relationships with U.S. government contractors, such as Astronics, may increase the likelihood that they are targeted by the same cyber threats we face.
These entities have varying levels of cybersecurity expertise and safeguards and their relationships with U.S. government contractors, such as Astronics, may increase the likelihood that they are targeted by the same cybersecurity threats we face.
Our operations depend on our manufacturing facilities, which are subject to physical and other risks that could disrupt production. Our manufacturing facilities or our customers' facilities could be damaged or disrupted by a natural disaster, war, 12 or terrorist activity.
Our operations depend on our manufacturing facilities, which are subject to physical and other risks that could disrupt production. Our manufacturing facilities or our customers’ facilities could be damaged or disrupted by a natural disaster, war, or terrorist activity.
If we are not able to increase revenue or reduce our costs, we may not be able to achieve profitability in future periods and our business, financial condition, results of operations and cash flows may be adversely affected.
If we are not able to increase revenue or reduce our costs, we may not be able to achieve profitability in future periods and our business, financial condition, results of operations and cash flows may be materially adversely affected.
Changes to our level of debt subsequent to December 31, 2023 could have significant consequences to our business, including the following: • Depending on interest rates and debt maturities, a substantial portion of our cash flow from operations could be dedicated to paying principal and interest on our debt, thereby reducing funds available for our acquisition strategy, capital expenditures or other purposes; • A significant amount of additional debt could make us more vulnerable to changes in economic conditions or increases in prevailing interest rates; • Our ability to obtain additional financing for acquisitions, capital expenditures or for other purposes could be impaired; • The increase in the amount of debt we have outstanding and the associated interest expense increases the risk of non-compliance with some of the covenants in our debt agreements which require us to maintain specified financial ratios; and • We may be more leveraged than some of our competitors, which may result in a competitive disadvantage.
Changes to our level of debt subsequent to December 31, 2024, could have significant consequences to our business, including the following: • Depending on interest rates and debt maturities, a substantial portion of our cash flow from operations could be dedicated to paying principal and interest on our debt, thereby reducing funds available for our acquisition strategy, capital expenditures or other purposes; • A significant amount of additional debt could make us more vulnerable to changes in economic conditions or increases in prevailing interest rates; 16 • Our ability to obtain additional financing for acquisitions, capital expenditures or for other purposes could be impaired; • The increase in the amount of debt we have outstanding and the associated interest expense increases the risk of non-compliance with some of the covenants in our debt agreements which require us to maintain specified financial ratios; and • We may be more leveraged than some of our competitors, which may result in a competitive disadvantage.
If any of these events were to occur, we may not be able to pay our debts and other monetary obligations as they come due, and our ability to continue to 13 operate as a going concern could be impaired, which could in turn cause a significant decline in our stock price and could result in a significant loss of value for our shareholders.
If any of these events were to occur, we may not be able to pay our debts and other monetary obligations as they come due, and our ability to continue to operate as a going concern could be impaired, which could in turn cause a significant decline in our common stock price and could result in a significant loss of value for our shareholders.
As is customary for our business, we purchase inventory and invest in specific capital equipment to support our production requirements generally based on delivery schedules provided by our customer. If a program or aircraft is not successful, we may have to write-off all or a part of the inventory, accounts receivable and capital equipment related to the program.
As is customary for our industry, we purchase inventory and invest in specific capital equipment to support our production requirements generally based on delivery schedules provided by our customer. If a program or aircraft is not successful, we may have to write-off all or a part of the inventory, accounts receivable and capital equipment related to the program.
Air travelers may also respond negatively to the 737 MAX aircraft due to perceived safety concerns, which would negatively impact Boeing. Boeing is a major customer of ours and any financial or customer losses it suffers may result in a negative impact on our business, financial condition and results of operations.
Air travelers may also respond negatively to the 737 MAX aircraft due to perceived safety concerns, which could negatively impact Boeing. Boeing is a major customer of ours and any financial or customer losses it suffers may result in a negative impact on our business, financial condition and results of operations.
If for some reason our security clearance is invalidated or terminated, we may not be able to continue to perform our present classified contracts or be able to enter into new classified contracts, which could affect our ability to compete for and capture new business. 16 Our business is subject to regulation in the United States and internationally.
If for some reason our security clearance is invalidated or terminated, we may not be able to continue to perform our present classified contracts or be able to enter into new classified contracts, which could affect our ability to compete for and capture new business. 19 Our business is subject to regulation in the United States and internationally.
We have experienced considerable price inflation in our costs for labor and materials in recent years, which has adversely affected our business, results of operations and financial condition. We may not be able to pass through inflationary cost increases under our existing fixed-price contracts.
We have experienced considerable price inflation in our costs for labor and materials in recent years, which has materially adversely affected our business, results of operations and financial condition. We may not be able to pass through to our customers inflationary cost increases under our existing fixed-price contracts.
In addition, following an event of default, the lenders under the ABL Revolving Credit Facility and Term Loan Facility will have the right to proceed against the collateral granted to them to secure the debt, which includes our available accounts receivable, inventory, machinery and equipment, real estate and intellectual property.
In addition, following an event of default, the lenders under the ABL Revolving Credit Facility will have the right to proceed against the collateral granted to them to secure the debt, which includes our available accounts receivable, inventory, machinery and equipment, real estate and intellectual property.
The ABL Revolving Credit Facility and Term Loan Facility include covenants restricting, among other things, the ability of the Company and our subsidiaries to: • incur additional indebtedness; • pay dividends on or repurchase our capital stock; • make certain acquisitions or investments; • sell assets; and • engage in certain business activities.
The ABL Revolving Credit Facility include covenants restricting, among other things, the ability of the Company and our subsidiaries to: • incur additional indebtedness; • pay dividends on or repurchase our capital stock; • make certain acquisitions or investments; • sell assets; and • engage in certain business activities.
In addition, the commercial airline industry is highly cyclical with significant downturns in the past and sensitive to such things as fuel price increases, labor disputes, global economic conditions, availability of capital to fund new aircraft purchase and upgrades of existing aircraft and passenger demand.
In addition, the commercial airline industry is highly cyclical, with significant downturns in the past and sensitivity to such things as fuel price increases, labor disputes, global economic conditions, availability of capital to fund new aircraft purchase and upgrades of existing aircraft and passenger demand.
These supply chain constraints and their related challenges could result in shortages, increased material costs or use of cash, engineering design changes, and delays in new product introductions, each of which could adversely impact our growth, gross margin and financial results. These types of negative financial impacts on our business may become more acute if supply chain pressures increase.
Supply chain constraints and their related challenges could result in shortages, increased material costs or use of cash, engineering design changes, and delays in new product introductions, each of which could materially adversely affect our growth, gross margin and financial results. These types of negative financial impacts on our business may become more acute if supply chain pressures increase.
We may have to modify our products significantly in the future to remain competitive, and new products we introduce may not be accepted by our customers. Our new product development efforts may not be successful, which would result in a reduction in our sales and earnings.
We may have to modify our products significantly in the future to remain competitive, and new products we introduce may not be accepted by our customers. Our new product development efforts may not be successful, which could result in a reduction in our sales and earnings.
Such an event could result in significant expenses, disrupt sales and affect our reputation and that of our products. We are also exposed to product liability claims. We carry aircraft and non-aircraft product liability insurance consistent with industry norms. However, this insurance coverage may not be sufficient to fully cover the payment of any potential claim.
Such an event could result in significant expenses, disrupt sales and affect our reputation and that of our products. We are also exposed to product liability claims. We carry aircraft and non-aircraft product liability insurance consistent with the commercial standards in our industry. However, this insurance coverage may not be sufficient to fully cover the payment of any potential claim.
Sales to the U.S. government and its prime contractors and subcontractors represent a significant portion of our business. The funding of these programs is generally subject to annual congressional appropriations, and congressional priorities are subject to change.
Sales to the U.S. government and its prime contractors and subcontractors represent a significant portion of our business. The funding of these programs is generally subject to annual congressional appropriations, and presidential and congressional priorities are unpredictable and subject to change.
These estimates are integral in the determination of whether a potential non-cash impairment loss exists as well as the calculation of that loss. Actual future results could differ from those estimates. We had no such asset impairment charges in 2023, 2022 or 2021. Changes in discount rates and other estimates could affect our future earnings and equity.
These estimates are integral in the determination of whether a potential non-cash impairment loss exists as well as the calculation of that loss. Actual future results could differ materially from those estimates. We had no such asset impairment charges in 2024, 2023 or 2022. Changes in discount rates and other estimates could affect our future earnings and equity.
Because it is generally not possible to predict the amount of time required and the costs involved in achieving certain research, development, and engineering objectives, the development expenses we incur may exceed our cost estimates and estimated product development schedules may be extended. Furthermore, any new products we develop may not generate sales sufficient to offset our costs.
Because it is difficult to predict the amount of time required and the costs involved in achieving certain research, development, and engineering objectives, the development expenses we incur may exceed our cost estimates and estimated product development schedules may be extended. Furthermore, any new products we develop may not generate sales sufficient to offset our costs.
Subject to the limits contained in our ABL Revolving Credit Facility and Term Loan Facility, we may incur additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks described above related to our debt could intensify.
Subject to the limits contained in our ABL Revolving Credit Facility, we may incur additional debt from time to time to finance working capital, capital expenditures, investments or acquisitions, or for other purposes. If we do so, the risks described above related to our debt could intensify.
Due to increased demand across a range of industries, the global supply chain for certain critical components or raw materials used in the manufacture of our products and used in our development programs has experienced, and may in future periods experience, significant strain in recent periods.
Due to increased demand across a range of industries, the global supply chain for certain critical components and raw materials used in the manufacture of our products and used in our development programs has in the past experienced, and may in future periods experience, significant strain.
Changes in U.S. administrative policy could lead to changes in existing trade agreements, greater restrictions on free trade generally, and significant increases in tariffs on goods imported into the United States, particularly tariffs on products manufactures in China and Mexico, among other possible changes.
Changes in U.S. administrative policy could lead to changes in existing trade agreements, greater restrictions on free trade generally, and significant increases in tariffs on goods imported into the United States, particularly tariffs on products manufactured in Canada, China and Mexico, among other possible changes.
A change in any of these factors could result in a further reduction in the amount of air travel and the ability of airlines to invest in new aircraft or to upgrade existing aircraft. Therefore, our business is directly affected by economic factors and other trends that affect our customers in the commercial aerospace industry.
Any change in these factors could result in a further reduction in the amount of 9 discretionary air travel and the ability of airlines to invest in new aircraft or to upgrade existing aircraft. Therefore, our business is directly affected by economic factors outside of our control and other trends that affect our customers in the commercial aerospace industry.
If our subcontractors fail to perform their contractual obligations, our prime contract performance and our ability to obtain future business could be materially and adversely impacted. Many of our contracts involve subcontracts with other companies upon which we rely to perform a portion of the services we must provide to our customers.
If our subcontractors fail to perform their contractual obligations, our prime contract performance and our ability to obtain future business could be materially adversely affected. Many of our contracts involve subcontracts with other companies upon whom we rely to perform a portion of the services we must provide to our customers.
This constrained supply environment has adversely affected, and could further affect, availability, lead times and the cost of components, and could impact our ability to timely complete development programs, respond to accelerated or quick-turn delivery requests from customers, or meet customer demand and product delivery dates for our end customers in situations where we cannot timely secure adequate supply of these components.
A constrained supply environment has in the past adversely affected, and could in the future adversely affect, availability, lead times and the cost of components, and could impact our ability to timely complete development programs, respond to accelerated or quick-turn delivery requests from customers, or meet customer demand and product delivery dates for our end customers in situations where we cannot timely secure adequate supply of these components.
This uncertainty includes: (i) the possibility of altering the existing tariffs or penalties on products manufactured outside the United States, including the U.S. government’s 25% tariff on a range of products from China; (ii) the effects stemming from the removal of such previously imposed tariffs; (iii) subsequent tariffs imposed by the United States on any other U.S. trading partners such as Russia; and (iv) potential tariffs imposed by trading partners on U.S. goods.
This uncertainty includes: (i) the possibility of altering the existing tariffs or penalties on products manufactured outside the United States, including the U.S. government’s 25% tariff on a range of products from China; (ii) the effects stemming from the removal of such previously imposed tariffs; (iii) subsequent tariffs imposed by the United States on any other countries; and (iv) potential tariffs imposed by trading partners on U.S. exports.
If this trend continues, the cost of labor and to provide healthcare and other benefits to our employees could continue to increase, adversely impacting our future profitability. Competition for employees has escalated in the labor market which has increased costs associated with attracting and retaining employees.
If this trend continues, the cost of labor and to provide healthcare and other benefits to our employees could continue to increase, which could materially adversely affect our future profitability. Competition for employees has escalated in the labor market which has increased costs associated with attracting and retaining skilled employees.
Our ABL Revolving Credit Facility and Term Loan Facility contain financial and restrictive covenants that we may be unable to satisfy, and that, if not satisfied, could result in the acceleration of any outstanding indebtedness thereunder and limit our ability to borrow additional funds.
Our ABL Revolving Credit Facility contains financial and restrictive covenants that we may be unable to satisfy, and that, if not satisfied, could result in the acceleration of any outstanding indebtedness thereunder and limit our ability to borrow additional funds.
Although this write-off would not result in an outlay of cash and is not included in the financial covenant calculation, it could reduce our earnings and net worth significantly. Our future operating results could be impacted by estimates used to calculate impairment losses on goodwill and long-lived assets.
Although such a write-off may not result in an outlay of cash and is not included in the financial covenant calculation, it could reduce our earnings and net worth significantly. Our future operating results could be impacted by estimates used to calculate impairment losses on goodwill and long-lived assets.
If the debt under the ABL Revolving Credit Facility and Term Loan Facility were to be accelerated, we cannot assure you that our assets would be sufficient to repay in full our debt.
If the debt under the ABL Revolving Credit Facility were to be accelerated, we cannot assure you that our assets would be sufficient to repay in full our debt.
These broad market fluctuations may adversely affect the market price of our common stock, regardless of our operating performance. Global health crises, similar to the COVID-19 pandemic, with the breadth of its impact worldwide, and particularly on the aerospace industry, could also cause significant volatility in the market price. ITEM 1B. UNRESOLVED STAFF COMMENTS None. 17
These broad market fluctuations may adversely affect the market price of our common stock, regardless of our operating performance. Global health crises, such as the recent COVID-19 pandemic, with the breadth of its impact worldwide, and particularly on the aerospace industry, could also cause significant volatility in the market price. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Additionally, our ABL Revolving Credit Facility and Term Loan Facility also contain a number of restrictive covenants that impose significant operating and financial restrictions on the Company and our subsidiaries and may limit our ability to engage in acts that we believe to be in our long-term best interests.
Additionally, our ABL Revolving Credit Facility contains a number of restrictive covenants that impose significant operating and financial restrictions on the Company and our subsidiaries and may limit our ability to engage in acts that we believe to be 15 in our long-term best interests.
In general, litigation claims can be expensive and time consuming to bring or defend against and could result in settlements or damages that could significantly and adversely impact our results of operations and financial condition.
In general, litigation claims can be expensive and time consuming to bring or defend against and could result in settlements or damages that could materially adversely affect our results of operations and financial condition.
Further, as the amount available to us under our credit facilities is subject to borrowing base calculations determined by the value of accounts receivable and inventory (under our ABL Revolving Credit Facility) and real estate and fixed assets (under our Term Loan Facility), an unexpected decline in the value of these assets would require a mandatory prepayment.
Further, as the amount available to us under our ABL Revolving Credit Facility is subject to borrowing base calculations determined by the value of accounts receivable, inventory, real estate and machinery and equipment, an unexpected decline in the value of these assets would require a mandatory prepayment.
Our operations and financial performance will be negatively impacted if our competitors: • develop products that are superior to our products; • develop products that are more competitively priced than our products; • develop methods of more efficiently and effectively providing products and services; or • adapt more quickly than we do to new technologies or evolving customer requirements.
Our operations and financial performance will be negatively impacted if our competitors: • develop products that are superior to our products; • develop products that are more competitively priced than our products; • develop methods of more efficiently and effectively providing products and services; or • adapt more quickly than we do to new technologies, such as generative artificial intelligence (“AI”), or evolving customer requirements.
These factors would reduce orders for new aircraft and would likely reduce airlines’ spending for cabin upgrades for which we supply 8 products, thus reducing our sales and profits. A reduction in air travel may also result in our commercial airline customers being unable to pay our invoices on a timely basis or at all.
These factors could reduce orders for new aircraft and could reduce airline investment in cabin upgrades for which we supply products, thus reducing our sales and profits. A reduction in air travel may also result in our commercial airline customers being unable to pay our invoices on a timely basis or at all.
Although we currently maintain alternative sources for raw materials, i f we are unable to source our products from the countries where we wish to purchase them, either because of the occurrence or threat of wars or other conflicts, regulatory changes or for any other reason, or if the cost of doing so increases, it could have a material adverse effect on our business, financial condition and results of operations.
Although we currently maintain alternative sources for raw materials, i f we are unable to source our products from the countries where we wish to purchase them, either because of the occurrence or threat of wars or other conflicts, regulatory changes or for any other reason, or if the cost of doing so increases, it could materially adversely affect our business, financial condition and results of operations.
Any new pandemic or other future public health crisis, or a resurgence of COVID-19 or variants could materially impact our financial condition or results of operations. In our Aerospace segment, demand by the general aviation markets for our products is dependent upon several factors, including capital investment, product innovations, economic growth and wealth creation and technology upgrades.
Any new pandemic or other future public health crisis could materially adversely affect our business, financial condition and results of operations. In our Aerospace segment, demand by the general aviation markets for our products is dependent upon several factors, including capital investment, product innovations, economic growth and wealth creation and technology upgrades.
ITEM 1A. RISK FACTORS Our business faces many risks, and you should carefully consider the following risk factors, together with all of the other information included in this report, including the financial statements and related notes contained in Item 8, Financial Statements and Supplementary Data, of this report, when deciding to invest in us.
RISK FACTORS Our business faces many risks, and you should carefully consider the following risk factors, together with all of the other information included in this report, including the financial statements and related notes contained in Item 8 , Financial Statements and Supplementary Data , and discussion in Item 7 , Management’s Discussion and Analysis of Financial Condition and Results of Operations , when deciding to invest in us.
The amount of debt we have outstanding, as well as any debt we may incur in the future, could have an adverse effect on our operational and financial flexibility. As of December 31, 2023, we had approximately $172.5 million of debt outstanding.
The amount of debt we have outstanding, as well as any debt we may incur in the future, could have an adverse effect on our operational and financial flexibility. As of December 31, 2024, we had approximately $175.0 million of debt outstanding.
If any audit or review were to uncover inaccurate costs or improper activities, we could be subject to penalties and sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from conducting future business with the U.S. Government. Any such outcome could have a material adverse effect on our financial results.
If any audit or review were to uncover inaccurate costs or improper activities, we could be subject to penalties and sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from conducting future business with the U.S. Government. Any such outcome could materially adversely affect our financial results.
A write-off of these assets could result in a significant reduction of earnings and cause covenant violations relating to our debt agreements. This could result in our being unable to borrow additional funds under our bank credit facility or being obliged to refinance or renegotiate the terms of our indebtedness.
A write-off of these assets could result in a significant reduction of earnings and cause covenant violations relating to our debt agreements. This could result in our being unable to borrow additional funds under the ABL Revolving Credit Facility or being obliged to refinance or renegotiate our indebtedness on potentially unfavorable terms for us.
Additionally, should insurance market conditions change, aircraft and non-aircraft product liability insurance coverage may not be available in the future at a cost acceptable to us. A product recall or a product liability claim not covered by insurance could have a material adverse effect on our business, financial condition and results of operations.
Additionally, should insurance market conditions change, aircraft and non-aircraft product liability insurance coverage may not be available in the future at a cost acceptable to us. A product recall or a product liability claim not covered by insurance could materially adversely affect our business, liquidity, financial condition and results of operations.
We had no goodwill impairment charges during 2023, 2022 or 2021. Our goodwill and other intangible assets may increase in the future since our strategy includes growing through acquisitions. We may have to write-off all or part of our goodwill or purchased intangible assets if their value becomes impaired.
Our goodwill and other intangible assets may increase in the future since our strategy includes growing through acquisitions. We may have to write-off all or part of our goodwill or purchased intangible assets if their value becomes impaired.
In 2023, approximately 10% of our sales were made by our subsidiaries in foreign countries, predominately in our subsidiaries in France and Canada. Net assets held by our foreign subsidiaries total $39.1 million at December 31, 2023. Approximately 25% of our consolidated sales in 2023 were made to customers outside of the United States.
In 2024, approximately 10% of our sales were made by our subsidiaries in foreign countries, predominately in our subsidiaries in France and Canada. Net assets held by our foreign subsidiaries total $41.3 million as of December 31, 2024. Approximately 25% of our consolidated sales in 2024 were made to customers outside of the United States.
Disruptions in the supply of raw materials and components could temporarily impair our ability to manufacture our products for our customers or require us to pay higher prices to obtain these raw materials or components from other sources, which could have a material adverse effect on our business and our results of operations.
Disruptions in the supply of raw materials and components could temporarily impair our ability to manufacture our products for our customers or require us to pay higher prices to obtain these raw materials or components from other sources, which could materially adversely affect our business and our results of operations.
These developments, or the perception that any of them could occur, could have a material effect on global economic conditions and the stability of global financial markets, and could significantly reduce global trade and, in particular, trade between the impacted nations and the United States.
These developments, or the perception that any of them could occur, could materially adversely affect global economic conditions and the stability of global financial markets, and could significantly reduce global trade and, in particular, trade between the impacted nations and the United States.
Failure by our subcontractors to satisfactorily provide, on a timely basis, the agreed-upon supplies or perform the agreed-upon services may materially and adversely impact our ability to perform our obligations with our customer and could result in the assessment of late delivery penalties. Subcontractor performance deficiencies could result in a customer terminating our contract for default.
Failure by our subcontractors to satisfactorily provide, on a timely basis, the agreed-upon supplies or perform the agreed-upon services may materially adversely affect our ability to perform our obligations to our customer and could result in the assessment of late delivery penalties.
Currently, our AES subsidiary is a defendant in actions filed in various jurisdictions by Lufthansa Technik AG relating to an allegation of patent infringement and based on rulings to date we have concluded that losses related to these proceedings are probable.
Currently, our subsidiary, Astronics Advanced Electronic Systems Corp., is a defendant in actions filed in various jurisdictions by Lufthansa Technik AG relating to an allegation of patent infringement and based on rulings to date, we have concluded that losses related to these proceedings are probable and the amounts of such losses could be substantial.
Due to the evolving nature of these security threats, the impact of any future incident cannot be predicted. 10 Although we work cooperatively with our customers, suppliers, and subcontractors to seek to minimize the impact of cyber threats, other security threats or business disruptions, we must rely on the safeguards put in place by these entities, which may affect the security of our information.
Although we work cooperatively with our customers, suppliers, and subcontractors to seek to minimize the impact of cybersecurity threats, other security threats or business disruptions, we must rely on the safeguards put in place by these entities, which may affect the security of our information.
Additionally, demand for some of our test products is dependent upon government funding levels for our products, our ability to compete successfully for those contracts and our ability to develop products to satisfy the demands of our customers. Our products are sold in highly competitive markets.
Additionally, demand for some of our test products is dependent upon certain factors, including government funding levels for our products, our ability to compete successfully for those contracts and our ability to develop products to satisfy the demands of our customers.
We maintain property damage and business interruption insurance at the levels typical in our industry or for our customers and suppliers, however, a pandemic or other major catastrophe, such as an earthquake, hurricane, fire, flood, tornado or other natural disaster at any of our sites, or war or terrorist activities in any of the areas where we conduct operations could result in a prolonged interruption of our business.
We maintain property damage and business interruption insurance consistent with the commercial standards in our industry or for our customers and suppliers, however, a pandemic or other major catastrophe, such as an earthquake, hurricane, fire, flood, tornado or other natural disaster at any of our sites, or political instability resulting from war, insurrections, terrorist activities, foreign civil unrest or other unforeseen circumstances in any of the areas where we conduct operations could result in a prolonged interruption of our business.
If any of these events occur, our sales and profits could be adversely affected. We may incur losses and liabilities as a result of our acquisition strategy.
If any of these events occur, our sales and profits could be materially adversely affected. We may incur losses and liabilities as a result of our acquisition strategy. Part of our business strategy involves developing technologies and capabilities through acquisitions.
The price of our common stock has been and likely will continue to be subject to wide fluctuations in response to a number of events and factors, such as: • our ability to comply with the financial and other affirmative and negative covenants included in our ABL Revolving Credit Facility and Term Loan Facility; • quarterly variations in operating results; • variances of our quarterly results of operations from securities analyst estimates; • changes in financial estimates; • announcements of technological innovations and new products; • news reports relating to trends in our markets or adverse happenings at our customers; • the cancellation of major contracts or programs with our customers; and • residual impacts of the COVID-19 pandemic on the aerospace industry and our Company.
The price of our common stock has been and likely will continue to be subject to wide fluctuations in response to a number of events and factors, such as: • our ability to comply with the financial and other affirmative and negative covenants included in our ABL Revolving Credit Facility; • quarterly variations in operating results; • variances of our quarterly results of operations from securities analyst estimates; • changes in financial estimates; • announcements of technological innovations and new products; • news reports relating to trends in our markets or adverse happenings at our customers; and • the cancellation of major contracts or programs with our customers; In addition, the stock market in general, and the market prices for companies in the aerospace and defense industry in particular, have experienced significant price and volume fluctuations that often have been unrelated to the operating performance of the companies affected by these fluctuations.
In addition, competition for qualified technical personnel in our industry is intense, and we believe that our future growth and success will depend on our ability to attract, train and retain such personnel. Future terror attacks, war, or other civil disturbances could negatively impact our business.
In addition, competition for qualified technical personnel in our industry is intense, and we believe that our future growth and success will depend on our ability to attract, train and retain such qualified personnel.
In addition, government expenditures for defense programs may decline or these defense programs may be terminated. A decline in governmental expenditures, a change in spending priorities (e.g., shifting funds to assist Ukraine in the Russia and Ukraine conflict), or the termination of existing contracts may result in a reduction in the volume of contracts awarded to us.
In addition, government expenditures for defense programs may decline or these defense programs may be terminated. A decline in governmental expenditures, a change in spending priorities, or the U.S. government’s termination of existing contracts may result in a reduction in the volume of government contracts awarded to us.
Our failure, or failure by an authorized agent or representative that is attributable to us, to comply with these laws and regulations could result in administrative, civil or criminal liabilities and could, in the extreme case, result in monetary penalties, suspension or debarment from government contracts or suspension of our export privileges, which would have a material adverse effect on us. 15 Trade policies, treaties, and tariffs could have a material adverse effect on our business.
Our failure, or failure by an authorized agent or representative that is attributable to us, to comply with these laws and regulations could result in administrative, civil or criminal liabilities and could, in the extreme case, result in monetary penalties, suspension or debarment from government contracts or suspension of our export privileges, which could materially adversely affect our business, financial condition and results of operations.
If a global health crisis, similar to the COVID-19 pandemic, we to occur in the future, we may find it difficult to access our existing financing or obtain additional financing and/or fund our operations and meet our debt service obligations.
While both domestic air travel and international air travel utilizing primarily widebody aircraft have recovered from the impact of the COVID-19 pandemic, if a global health crisis similar to the COVID-19 pandemic were to occur in the future, we may find it difficult to access our existing financing or obtain additional financing and/or fund our operations and meet our debt service obligations.
A covenant violation could result in a default under the ABL Revolving Credit Facility and Term Loan Facility. If any such default occurs, the lenders may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and payable.
If any such default occurs, the lenders may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and payable.
The construction of aircraft is heavily regulated, and failure to comply with applicable laws could reduce our sales or require us to incur additional costs to achieve compliance, and we may incur significant expenses to comply with new or more stringent governmental regulation.
In addition, our non-unionized labor force may become subject to labor union organizing efforts, which could cause us to incur additional labor costs and increase the related risks that we now face. 14 The construction of aircraft is heavily regulated, and failure to comply with applicable laws could reduce our sales or require us to incur additional costs to achieve compliance, and we may incur significant expenses to comply with new or more stringent governmental regulation.
These fines and penalties could be imposed for failing to follow procurement integrity and bidding rules, employing improper billing practices or otherwise failing to follow cost accounting standards, receiving or paying kickbacks or filing false claims. We have been, and expect to continue to be, subjected to audits and investigations by government agencies.
These risks include the potential for substantial civil and criminal fines and penalties. These fines and penalties could be imposed for failing to follow procurement integrity and bidding rules, employing improper billing practices or otherwise failing to follow cost accounting standards, receiving or paying kickbacks or filing false claims.
These include financial covenants pertaining to minimum trailing four quarter EBITDA requirements, minimum liquidity requirements, minimum fixed charge coverage ratio requirements, maximum capital expenditure requirements, and excess cash flow repayment provisions. An unexpected decline in our revenues or operating income, including occurring as a result of events beyond our control, could cause us to violate our financial covenants.
These include financial covenants pertaining to minimum excess availability and minimum fixed charge coverage ratio requirements. An unexpected decline in our revenues or operating income, including occurring as a result of events beyond our control, could cause us to violate our financial covenants. A covenant violation could result in a default under the ABL Revolving Credit Facility.
If we fail to meet expectations of securities analysts or investors due to fluctuations in our sales or operating results, our stock price could decline significantly. Our sales and earnings may fluctuate from quarter to quarter due to a number of factors, including delays or cancellations of programs and supply chain challenges on revenues and costs.
Our sales and earnings may fluctuate from quarter to quarter due to a number of factors, including delays or cancellations of programs and supply chain challenges on revenues and costs. It is likely that in some future quarters our operating results may fall below the expectations of securities analysts or investors.
Our results of operations are affected by our fixed-price contracts, which could subject us to losses in the event that we have cost overruns. For the year ended December 31, 2023, fixed-price contracts represented almost all of the Company’s sales. On fixed-price contracts, we agree to perform the scope of work specified in the contract for a predetermined price.
For the year ended December 31, 2024, fixed-price contracts represented almost all of the Company’s sales. On fixed-price contracts, we agree to perform the scope of work specified in the contract for a predetermined price.
Our business is dependent on the availability of raw materials and components for our products, particularly electrical components common in the semiconductor industry. There is continued uncertainty about the future relationship between the United States and various other countries, most significantly China, with respect to trade policies, treaties, tariffs, and taxes.
There is continued uncertainty about the future relationship between the United States and various other countries, 18 most significantly China, with respect to trade policies, treaties, tariffs, and taxes.
Our operating results for future periods are subject to numerous uncertainties and we cannot be certain that we will be profitable or that we will not experience substantial net losses in the future.
For the years ended December 31, 2024, 2023 and 2022, we incurred a net loss of $16.2 million, $26.4 million and $35.7 million, respectively. Our operating results for future periods are subject to numerous uncertainties and we cannot be certain that we will be profitable or that we will not experience substantial net losses in the future.
While we may attempt to recover the increased costs through price increases to our customers, we may be unable to mitigate the effect on our results of operations. We have also multi-sourced and pre-ordered components and raw materials inventory in some cases in an effort to reduce the impact of the adverse supply chain conditions we have experienced.
We have also multi-sourced and pre-ordered components and raw materials inventory in some cases in an effort to reduce the impact of the adverse supply chain conditions we have experienced or may experience in the future.
We have resources applied to specific government contracts and if any of those contracts were terminated, we may incur substantial costs redeploying those resources. Contracting in the defense industry is subject to significant regulation, including rules related to bidding, billing and accounting kickbacks and false claims, and any non-compliance could subject us to fines and penalties or possible debarment.
Contracting in the defense industry is subject to significant regulation, including rules related to bidding, billing and accounting kickbacks and false claims, and any non-compliance could subject us to fines and penalties or possible debarment. Like all government contractors, we are subject to risks associated with this contracting.
In addition, some suppliers have indicated that, as a result of current shortages, they intend to cease manufacture of certain components used in our products. Limits on manufacturing availability or capacity or delays in production or delivery of components or raw materials could further delay or inhibit our ability to obtain supply of components and produce finished goods.
Limits on manufacturing availability or capacity or delays in production or delivery of components or raw materials could delay or inhibit our ability to obtain supply of components and produce finished goods.
The markets we serve are sensitive to fluctuations in general business cycles, global pandemics, domestic and foreign governmental tariffs, trade and monetary policies, national and international conflicts, and economic conditions and events, and are facing varying levels of supply chain pressures from the residual impacts of the COVID-19 pandemic.
The markets we serve are cyclical and sensitive to domestic and foreign economic conditions, conflicts and events, which may cause our operating results to fluctuate. The markets we serve are sensitive to fluctuations in general business cycles, global pandemics, domestic and foreign governmental tariffs, trade and monetary policies, national and international conflicts, and economic conditions and events.
A default termination could expose us to liability and substantially impair our ability to compete for future contracts and orders. Some of our contracts contain late delivery penalties .
Subcontractor performance deficiencies could result in a customer terminating our contract for cause or could otherwise result in our default under the applicable 13 contract. A termination for cause or other default could expose us to liability, damage our reputation and substantially impair our ability to compete for future contracts and orders. Some of our contracts contain late delivery penalties.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeFurthermore, as we implement solutions, we engage with industry-leading partners to receive guidance on best practices for solution use and overall security. This collaboration ensures that our cybersecurity strategies align with the latest industry standards and best practices. We also maintain regular communication with external partners to stay abreast of current cybersecurity trends and emerging threats.
Biggest changeThis collaboration seeks to align our cybersecurity strategies with the latest industry standards and best practices. We also maintain regular communication with external partners to stay abreast of current cybersecurity trends and emerging threats. This proactive approach enables us to seek to enhance our security posture and adapt our defenses to evolving cyber risks.
For more information regarding the risks we face from cybersecurity threats, please see Item 1A, Risk Factors, under the heading “ Our business and operations could be adversely impacted in the event of a failure of our information technology infrastructure or adversely impacted by a successful cyber-attack .” ITEM 2 .
For more information regarding the risks we face from cybersecurity threats, please see Item 1A, Risk Factors, under the heading “ Our business and operations could be adversely impacted in the event of a failure of our information technology infrastructure or adversely impacted by a successful cyber-attack. ” 21 ITEM 2 .
The Company also conducts regular periodic training of its employees as to the protection of sensitive information which includes security awareness training intended to prevent the success of “phishing” attacks. 18 • Third-party risks – We also consider and evaluate cybersecurity risks associated with use of third-party service providers.
The Company also conducts regular periodic training of its employees as to the protection of sensitive information which includes security awareness training intended to prevent the success of “phishing” attacks. • Third-party risks – We also consider and evaluate cybersecurity risks associated with use of third-party service providers.
User access to third-party systems is reviewed annually, and we obtain and review a System and Organization Controls (SOC) 1 or SOC 2 report from key third-party service providers. Key cybersecurity risks and mitigating responses are addressed within our Company-wide policies.
User access to third-party systems is reviewed annually, and we obtain and review a System and Organization Controls (“SOC”) 1 or SOC 2 report from key third-party service providers. Key cybersecurity risks and mitigating responses are addressed within our Company-wide policies.
We continuously strive to surpass industry best practices by implementing robust risk-based controls aimed at safeguarding both our partners’ and the Company’s information systems.
We continuously strive to surpass industry best practices by implementing risk-based controls aimed at safeguarding both our partners’ and the Company’s information systems.
In order to protect both commercial and defense-related businesses and support our production operations, the Company has adopted security principles in accordance with the National Institute of Standards and Technology Cybersecurity Framework, contractual requirements and other global standards. We conduct comprehensive annual security assessments, including external and internal penetration tests, social engineering attacks, and vulnerability assessments.
In order to protect both commercial and defense-related businesses and support our production operations, the Company has adopted security principles in accordance with the National Institute of 20 Standards and Technology Cybersecurity Framework, contractual requirements and other global standards. We conduct annual security assessments, including external and internal penetration tests, social engineering attacks, and vulnerability assessments.
We employ multi-layered defense and continuous monitoring to seek to mitigate the risk associated with these threats.
We employ multi-layered defense and monitoring to seek to mitigate the risk associated with these threats.
We have processes in place to seek to mitigate these threats, including but not limited to controls over access to our systems and access to network resources. • External threats – We recognize the risk that hackers, vandals, and saboteurs may seek to gain access to information contained in our systems.
We have processes in place to seek to mitigate these threats, including through controls over access to our systems and access to network resources. • External threats – We recognize the risk that hackers, vandals, and saboteurs may seek to gain access to information contained in our systems.
PROPERTIES On December 31, 2023, we own or lease 1.1 million square feet of space, distributed by segment as follows: Owned Leased Total Aerospace 625,000 367,000 992,000 Test Systems — 138,000 138,000 Total Square Feet 625,000 505,000 1,130,000 We have principal operations in the U.S., Canada, France and the UK, as well as engineering offices in Ukraine and India.
PROPERTIES On December 31, 2024, we own or lease 1,079,000 square feet of space, distributed by segment as follows: Owned Leased Total Aerospace 625,000 326,000 951,000 Test Systems — 128,000 128,000 Total Square Feet 625,000 454,000 1,079,000 We have principal operations in the U.S., Canada and France, as well as engineering offices in Ukraine and India.
This proactive approach enables us to continuously enhance our security posture and adapt our defenses to evolving cyber risks. The Company’s Director of Information Technology (“IT”), who reports to our CFO, has over 20 years of experience leading cyber security oversight and is responsible for management of cybersecurity risk and the protection and defense of our networks and systems.
The Company’s Director of Information Technology (“IT”), who reports to our CFO, has over 20 years of experience leading cyber security oversight and is responsible for management of cybersecurity risk and the protection and defense of our networks and systems.
The B oard of Directors oversees an enterprise-wide approach to risk management, designed to support the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance and enhance shareholder value.
Cybersecurity remains a top priority across the organization, with resources allocated in an efficient manner to seek to mitigate risks and enhance our overall security posture. The B oard of Directors oversees an enterprise-wide approach to risk management, designed to support the achievement of organizational objectives, including strategic objectives, to improve long-term organizational performance and enhance shareholder value.
These assessments provide critical insights into our security posture and help us identify and address potential weaknesses proactively. Leveraging the expertise of multiple vendors, we ensure a thorough evaluation from diverse perspectives, enhancing the effectiveness of our security measures.
These assessments provide critical insights into our security posture and help us identify and seek to address potential weaknesses proactively. We leverage multiple vendors and their diverse perspectives as means to enhance the effectiveness of our security measures. Furthermore, as we implement solutions, we engage with industry-leading partners to receive guidance on best practices for solution use and overall security.
Our IT security team, lead by the Director of IT, consists of professionals with broad cybersecurity experiences, including a number of cybersecurity certifications and degrees. Our cybersecurity initiatives benefit from a wealth of practical knowledge and strategic insight.
Our IT security team, led by the Director of IT, consists of professionals with broad cybersecurity experiences, including a number of cybersecurity certifications and degrees. As a result, our IT security teams utilize their understanding of industry best practices and hands-on experience to seek to implement effective cybersecurity solutions.
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The IT security teams’ comprehensive understanding of industry best practices, combined with hands-on experience in implementing cybersecurity solutions, ensures that our networks and systems are effectively protected against emerging threats. As a result, cybersecurity remains a top priority across the organization, with resources allocated efficiently to mitigate risks and enhance our overall security posture.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFor a discussion of contingencies related to legal proceedings, see Note 19 to our Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 19 PART II
Biggest changeFor a discussion of contingencies related to legal proceedings, see Note 19, Legal Proceedings, to our Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report. ITEM 4. MINE SAFETY DISCLOSURES Not Applicable. 22 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeReturn % — (8.21) (52.67) (9.30) (14.18) 69.10 Cum $ 100.00 91.79 43.45 39.41 33.82 57.19 S&P 500 Index - Total Returns Return % — 31.49 18.40 28.71 (18.11) 26.29 Cum $ 100.00 131.49 155.68 200.37 164.08 207.21 NASDAQ Composite-Total Return Return % — 36.69 44.92 22.18 (32.54) 44.64 Cum $ 100.00 136.69 198.10 242.03 163.28 236.17 21 ITEM 6. [Reserved]
Biggest changeReturn % — (52.67) (9.30) (14.18) 69.10 (8.39) Cumulative $ 100.00 47.33 42.93 36.85 62.31 57.08 S&P 500 Index - Total Return Return % — 18.40 28.71 (18.11) 26.29 25.02 Cumulative $ 100.00 118.40 152.39 124.79 157.59 197.02 NASDAQ Composite - Total Return Return % — 44.92 22.18 (32.54) 44.64 29.57 Cumulative $ 100.00 144.92 177.06 119.45 172.77 223.87 NASDAQ US Small Cap Aerospace and Defense TR Index - Total Return Return % — 7.76 (7.24) (7.27) 32.41 47.69 Cumulative $ 100.00 107.76 99.95 92.68 122.72 181.25 ITEM 6. [Reserved]
The Company has not paid any cash dividends in the three-year period ended December 31, 2023. The Company has no plans to pay cash dividends in the future as it plans to retain all cash from operations as a source of capital to service debt and finance working capital and growth in the business.
The Company has not paid any cash dividends in the three-year period ended December 31, 2024. The Company has no plans to pay cash dividends in the future as it plans to retain all cash from operations as a source of capital to service debt and finance working capital and growth in the business.
This presentation assumes that $100 was invested in shares of the relevant issuers on December 31, 2018, and that dividends received were immediately invested in additional shares. The graph plots the value of the initial $100 investment at one-year intervals for the fiscal years shown. 2018 2019 2020 2021 2022 2023 Astronics Corp.
This presentation assumes that $100 was invested in shares of the relevant issuers on December 31, 2019, and that dividends received were immediately invested in additional shares. The graph plots the value of the initial $100 investment at one-year intervals for the fiscal years shown. 23 2019 2020 2021 2022 2023 2024 Astronics Corp.
The following table summarizes our purchases of our common stock for the three months ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Numbers (or approximate Dollar Value) of Shares that may yet be Purchased Under the Program (1) October 1 - October 28 — $ — — $ 41,483,815 October 29 - November 25 — $ — — $ 41,483,815 November 26 - December 31 — $ — — $ 41,483,815 (1) On September 17, 2019, the Board of Directors authorized an additional share repurchase program.
The following table summarizes our purchases of our common stock for the three months ended December 31, 2024: Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs Maximum Numbers (or approximate Dollar Value) of Shares that may yet be Purchased Under the Program (1) October 1 - October 26 — $ — — $ 41,483,815 October 27 - November 23 — $ — — $ 41,483,815 November 24 - December 31 — $ — — $ 41,483,815 (1) On September 17, 2019, the Board of Directors authorized an additional share repurchase program.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s Common Stock is traded on the Nasdaq Global Select Market under the symbol “ATRO”. The approximate number of shareholders of record as of February 26, 2024, was 717 for Common Stock and 1,878 for Class B Stock.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s Common Stock is traded on the Nasdaq Global Select Market under the symbol “ATRO”. The approximate number of shareholders of record as of February 26, 2025, was 1,901 for Common Stock and 1,810 for Class B Stock.
Cumulative repurchases under this plan were approximately 310,000 shares at a cost of $8.5 million before the 10b5-1 plan associated with the share repurchase program was terminated on February 3, 2020. 20 The following graph compares the Company’s annual percentage change in cumulative total return on common shares over the past five years with the cumulative total return of companies comprising the S&P 500 Index and the NASDAQ Composite Index.
This program authorizes repurchases of up to $50 million of common stock. Cumulative repurchases under this plan were approximately 310,000 shares at a cost of $8.5 million before the 10b5-1 plan associated with the share repurchase program was terminated on February 3, 2020.
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This program authorizes repurchases of up to $50 million of common stock.
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The following graph compares the Company’s annual percentage change in cumulative total return on common shares over the past five years with the cumulative total return of companies comprising the S&P 500 Index, the NASDAQ US Small Cap Aerospace and Defense TR Index and the NASDAQ Composite Index.
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We have elected to remove the NASDAQ Composite Index, beginning with our next Annual Report on Form 10-K, and replace the NASDAQ Composite Index with the NASDAQ US Small Cap Aerospace and Defense TR Index as we believe it is more representative of companies with market capitalization comparable to Astronics. All four indices are presented for this year of transition.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeApproximately $474.5 million of the December 31, 2023 backlog is expected to be recognized as revenue over the next twelve months. 2022 Compared With 2021 For a comparison of Aerospace segment results for the years ended December 31, 2022 and 2021, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 10, 2023. 28 TEST SYSTEMS SEGMENT (In thousands, except percentages) 2023 2022 Sales $ 84,376 $ 73,698 Operating Loss $ (8,745) $ (8,118) Operating Margin (10.4) % (11.0) % 2023 2022 Total Assets $ 122,681 $ 111,513 Backlog $ 75,036 $ 93,696 2023 Compared With 2022 Test Systems segment sales were $84.4 million, up $10.7 million compared with the prior year as a result of the reversal of a $5.8 million deferred revenue liability recorded with a previous acquisition and higher radio test revenue.
Biggest changeThe Aerospace segment’s backlog at December 31, 2024 was $537.6 million, compared to $511.5 million at December 31, 2023. 30 2023 Compared With 2022 For a comparison of Aerospace segment results for the years ended December 31, 2023 and 2022, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 5, 2024.
See Note 2 to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report for a further description of revenue recognition under ASC 606. Reviews for Impairment of Goodwill Our goodwill is the result of the excess of purchase price over net assets acquired from acquisitions.
See Note 2, Revenue, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report for a further description of revenue recognition under ASC 606. Reviews for Impairment of Goodwill Our goodwill is the result of the excess of purchase price over net assets acquired from acquisitions.
Increasing profitability is dependent on many things, primarily sales growth, both acquired and organic, and the Company’s ability to pass cost increases along to customers and control operating expenses, and to identify means of creating improved productivity.
Increasing profitability is dependent on many things, primarily sales growth, both acquired and organic, and the Company’s ability to pass cost increases along to customers and control operating expenses, and to identify means of creating improved 24 productivity.
SEGMENT RESULTS OF OPERATIONS Operating profit (loss), as presented below, is sales less cost of products sold and other operating expenses, excluding interest expense, other corporate expenses and other non-operating sales and expenses. Cost of products sold and other operating expenses are directly identifiable to the respective segment.
SEGMENT RESULTS OF OPERATIONS Operating profit, as presented below, is sales less cost of products sold and other operating expenses, excluding interest expense, other corporate expenses and other non-operating sales and expenses. Cost of products sold and other operating expenses are directly identifiable to the respective segment.
If the carrying value of the reporting unit exceeds its fair value, goodwill is considered impaired and the impairment loss is recorded for the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying value of goodwill.
If the carrying value of 27 the reporting unit exceeds its fair value, goodwill is considered impaired and the impairment loss is recorded for the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying value of goodwill.
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 million.
On August 8, 2023, the Company initiated an at-the-market equity offering 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 million.
Legal Reserves — Refer to Note 19, Legal Proceeding in Item 8, Financial Statements and Supplementary Data, of this report for management’s estimate of damages to be paid related to our ongoing litigation with Lufthansa Technik and timing thereof.
Legal Reserves — Refer to Note 19, Legal Proceedings, in Item 8, Financial Statements and Supplementary Data, of this report for management’s estimate of damages to be paid related to our ongoing litigation with Lufthansa Technik and timing thereof.
Our products and services include advanced, high-performance electrical power generation and distribution systems, seat motion solutions, lighting and safety systems, avionics products, aircraft structures, systems certification, and automated test systems. We have two reportable segments, Aerospace and Test Systems. Our Aerospace segment has principal operating facilities in the United States, Canada and France.
Our products and services include advanced, high-performance electrical power generation and distribution systems, seat motion solutions, lighting and safety systems, avionics products, aircraft structures, systems certification, and automated test systems. We have two reportable segments, Aerospace and Test Systems. Our Aerospace segment has principal operating facilities in the United States, Canada and France and an engineering office in Ukraine.
We had approximately $58.2 million of goodwill as of December 31, 2023 and 2022. We identify our reporting units by assessing whether the components of our operating segments constitute businesses for which discrete financial information is available and segment management regularly reviews the operating results of those components.
We had approximately $58.1 million and $58.2 million of goodwill as of December 31, 2024 and 2023, respectively. We identify our reporting units by assessing whether the components of our operating segments constitute businesses for which discrete financial information is available and segment management regularly reviews the operating results of those components.
In addition to state income taxes, the following items had the most significant impact on the difference between our statutory U.S. federal income tax rate (21% in 2023 and 2022) and our effective tax rate: 2023: • Recognition of approximately $6.8 million of valuation allowance against federal deferred tax assets.
In addition to state income taxes, the following items had the most significant impact on the difference between our statutory U.S. federal income tax rate (21% in 2024 and 2023) and our effective tax rate: 2024: • Recognition of approximately $13.6 million of valuation allowance against federal deferred tax assets.
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.
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.
Aircraft build rates are expected to continue to improve during 2024 and 2025 from current levels as production of the 737 MAX and A-320 is expected to increase, and the aftermarket is expected to strengthen over the course of 23 the year as aircraft utilization and load factors increase.
Aircraft build rates are expected to continue to improve during 2025 and 2026 from current levels as production of both the 737 MAX and A-320 are expected to increase, and the aftermarket is expected to strengthen over the course of the year as aircraft utilization and load factors increase.
Reduced aircraft build rates driven by a weak economy, aircraft groundings, tight credit markets, reduced air passenger travel, and an increasing supply of used aircraft on the market would likely result in reduced demand for our products, which will result in lower profits.
Reduced aircraft build rates driven by regulatory actions impacting OEM production, a weak economy, aircraft groundings, tight credit markets, reduced air passenger travel, and an increasing supply of used aircraft on the market would likely result in reduced demand for our products, which will result in lower profits.
See Part I, Item 1A, Risk Factors, for an additional discussion of risks associated with our potential inability to satisfy the financial and restrictive covenants set forth in the ABL Revolving Credit Facility and Term Loan Facility. In September 2021, the Company was awarded a grant of up to $14.7 million from the U.S.
See Item 1A, Risk Factors, of this report for an additional discussion of risks associated with our potential inability to satisfy the financial and restrictive covenants set forth in the ABL Revolving Credit Facility. In September 2021, the Company was awarded a grant of up to $14.7 million from the U.S.
The Company may also utilize available capacity under the ABL Revolving Credit Facility and sales proceeds from the ATM Program. Our ability to maintain sufficient liquidity and comply with financial debt covenants is highly dependent upon achieving expected operating results.
The Company may also utilize available capacity under the ABL Revolving Credit Facility. Our ability to maintain sufficient liquidity and comply with financial debt covenants is highly dependent upon achieving expected operating results.
Our Test Systems segment has principal operating facilities in the United States and the United Kingdom. We have engineering offices in Ukraine and India. Our Aerospace segment designs and manufactures products for the global aerospace industry. Product lines include lighting and safety systems, electrical power generation, distribution and seat motion systems, aircraft structures, avionics products, systems certification, and other products.
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. Product lines include lighting and safety systems, electrical power generation, distribution and seat motion systems, aircraft structures, avionics products, systems certification, and other products.
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.
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.
As a result, the Company recorded a full reserve of $7.5 million for outstanding accounts receivable and a $3.6 million reserve against dedicated inventory. The associated assets existed prior to 2023. DIVESTITURES On February 13, 2019, the Company completed a divestiture of its semiconductor test business within the Test Systems segment. The transaction included two elements of contingent earnouts.
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. DIVESTITURES On February 13, 2019, the Company completed a divestiture of its semiconductor test business within the Test Systems segment.
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. Operating Activities Cash used for operating activities totaled $24.0 million in 2023, as compared with $28.3 million cash used for operating activities in 2022.
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. Operating Activities Cash provided by operating activities totaled $30.6 million in 2024, as compared with $24.0 million cash used for operating activities in 2023.
RECENT ACCOUNTING PRONOUNCEMENTS See Note 1 of the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report.
RECENT ACCOUNTING PRONOUNCEMENTS See Note 1, Summary of Significant Accounting Principles and Practices, of the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report.
Test Systems Products Sales by our Test Systems segment accounted for approximately 12.2% of our consolidated sales in 2023 and amounted to $84.4 million. This 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.
Test Systems Products Sales by our Test Systems segment accounted for approximately 11.2% of our consolidated sales in 2024 and amounted to $88.7 million. This 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 26 military applications.
See Note 11 of the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report for additional information. • Recognition of approximately $3.4 million of 2023 U.S. R&D tax credits. 2022: • Recognition of approximately $13.2 million of valuation allowance against federal deferred tax assets.
See Note 11, Income Taxes, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report for additional information. • Recognition of approximately $3.4 million of 2024 U.S. R&D tax credits. 2023: • Recognition of approximately $6.8 million of valuation allowance against federal deferred tax assets.
Sales to this market totaled approximately $432.2 million or 62.8% of our consolidated sales in 2023. Maintaining and growing sales to the commercial transport market will depend not only on continued market recovery post-pandemic, but also on airlines’ capital spending budgets for cabin upgrades as well as the purchase of new aircraft by global airlines.
Sales to this market totaled approximately $524.6 million or 65.9% of our consolidated sales in 2024. Maintaining and growing sales to the commercial transport market will depend not only on continued market recovery post-pandemic, but also on airlines’ capital spending budgets for cabin upgrades as well as the purchase of new aircraft by global airlines.
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.
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.
Our cash flow from operations, available borrowing capacity, and proceeds under our ATM Program (as defined below) are expected to provide us with the financial resources needed to run our operations and reinvest in our business for at least the next 12 months. Our ability to maintain sufficient liquidity is highly dependent upon achieving expected operating results.
Our cash flow from operations and available borrowing capacity under our ABL Revolving Credit Facilities are expected to provide us with the financial resources needed to run our operations and reinvest in our business for at least the next 12 months. Our ability to maintain sufficient liquidity is highly dependent upon achieving expected operating results.
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.
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.
While the Company expects to remain in compliance with the required financial covenants for the duration of the agreements, any unexpected negative impacts to our business, including as a result of additional supply chain pressures, the timing of customer orders, and our ability to meet customer delivery schedules, or labor availability and cost pressures, could result in lower revenues and reduced financial profits, and, as a result thereof, our inability to satisfy the financial covenants in our ABL Revolving Credit Facility and Term Loan Facility.
While the Company expects to remain in compliance with the required financial covenants for the duration of the agreements, any unexpected negative impacts to our business, including as a result of declines in aircraft production rates from expectations or production delays resulting from regulatory actions or labor strikes affecting OEMs, additional supply chain pressures, the timing of customer orders, and our ability to meet customer delivery schedules, or labor availability and cost pressures, could result in lower revenues and reduced financial profits, and, as a result thereof, our inability to satisfy the financial covenants in our ABL Revolving Credit Facility.
The main challenges that we continue to face include varying levels of supply chain pressures from the residual impacts of the COVID-19 pandemic, material availability and cost increases, labor availability and cost, and improving shareholder value through increasing profitability.
The main challenges that we continue to face include varying levels of supply chain pressures, material availability and cost increases (including tariffs), labor availability and cost, and improving shareholder value through increasing profitability.
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS For further information on our contractual obligations and other commitments as of December 31, 2023 and estimated timing thereof, see the notes referenced below, in Item 8, Financial Statements and Supplementary Data, of this report. Long-term Debt and Interest Payments — Refer to Note 8, Long-Term Debt, in this report.
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS For further information on our contractual obligations and other commitments as of December 31, 2024 and estimated timing thereof, see the notes to the Consolidated Financial Statements referenced below, in Item 8, Financial Statements and Supplementary Data, of this report.
Factors such as increased energy costs, the availability of certain raw materials for aircraft manufacturers, embargoes on flights from Russian airlines, sanctions on Russian companies, and the stability of Ukrainian customers could impact the global economy and aviation sector. In November 2023, a non-core contract manufacturing customer reported within the Aerospace segment filed for bankruptcy under Chapter 11.
Factors such as increased energy costs, the availability of certain raw materials for aircraft manufacturers, embargoes on flights from Russian airlines, sanctions on Russian companies, and the stability of Ukrainian customers could impact the global economy and aviation sector. In October 2024, a customer reported within the Aerospace segment declared bankruptcy.
We are monitoring the ongoing conflict between Russia and Ukraine and the related export controls and financial and economic sanctions imposed on certain industry sectors, including the aviation sector, and parties in Russia by the U.S., the U.K., the European Union and others.
During the year ended December 31, 2022, the Company recognized $6.0 million of the award. We are monitoring the ongoing conflict between Russia and Ukraine and the related export controls and financial and economic sanctions imposed on certain industry sectors, including the aviation sector, and parties in Russia by the U.S., the U.K., the European Union and others.
The Test Systems segment expects to recognize $52.1 million of backlog as revenue in 2024. 2022 Compared With 2021 For a comparison of Test Systems segment results for the years ended December 31, 2022 and 2021, see Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 10, 2023.
Backlog in the Test Systems segment was $61.7 million at December 31, 2024, compared to $75.0 million at December 31, 2023. 2023 Compared With 2022 For a comparison of Test Systems segment results for the years ended December 31, 2023 and 2022, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 5, 2024.
LIQUIDITY AND CAPITAL RESOURCES (In thousands) 2023 2022 Cash Flow Data Net Cash Flows from: Operating Activities $ (23,950) $ (28,312) Investing Activities $ (4,106) $ 14,386 Financing Activities $ 25,435 $ (1,412) Year-end Financial Position Working Capital (1) $ 246,448 $ 213,682 Indebtedness $ 172,499 $ 164,000 Other Year-end Data Capital Expenditures $ 7,643 $ 7,675 (1) Working capital is calculated as the difference between Current Assets and Current Liabilities.
LIQUIDITY AND CAPITAL RESOURCES (In thousands) 2024 2023 Cash Flow Data Net Cash Flows from: Operating Activities $ 30,566 $ (23,950) Investing Activities $ (8,428) $ (4,106) Financing Activities $ (14,530) $ 25,435 Year-end Financial Position Working Capital 1 $ 270,020 $ 246,448 Indebtedness $ 175,000 $ 172,499 Other Data for the Annual Period Capital Expenditures $ 8,428 $ 7,643 1 Working capital is calculated as the difference between Current Assets and Current Liabilities.
Consistent with the Aerospace segment, the Test Systems segment does not significantly rely on any one program such that cancellation of a particular program will cause material financial loss, and we believe that we will continue to have opportunities similar to past years regarding this market. 24 CRITICAL ACCOUNTING ESTIMATES Our financial statements and accompanying notes are prepared in accordance with U.S. generally accepted accounting principles.
Consistent with the Aerospace segment, the Test Systems segment does not significantly rely on any one program such that cancellation of a particular program will cause material financial loss, and we believe that we will continue to have opportunities similar to past years regarding this market.
Certain of the Company’s subsidiaries are borrowers or guarantors under the ABL Revolving Credit Facility and the Term Loan 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.
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.
Sales to this market totaled approximately 11.7% of our consolidated sales in 2023 and amounted to $80.8 million. Sales to the general aviation market are driven by our ship set content on new aircraft and build rates of new aircraft. General aviation OEM build rates are impacted by global wealth creation and corporate profitability.
Sales to the general aviation market are driven by our ship set content on new aircraft and build rates of new aircraft. General aviation OEM build rates are impacted by global wealth creation and corporate profitability.
Our ability to maintain and grow sales to this market depends on our ability to maintain our technological advantages over our competitors and maintain our relationships with major in-flight entertainment suppliers and global airlines.
Our ability to maintain and grow sales to this market depends on our ability to maintain our technological advantages over our competitors and maintain our relationships with major in-flight entertainment suppliers and global airlines. Military Aerospace Market Sales to the military aerospace market include sales of lighting and safety products, avionics products, electrical power products and structures products.
Future interest payments under the two credit facilities of approximately $35.5 million have been estimated using the applicable interest rate of each debt facility based on expected future borrowings and scheduled term loan repayments. Actual future ABL borrowings and rates may differ from those used to estimate the amounts discussed above.
Future interest payments under the ABL Revolving Credit Facilities and the Convertible Notes of approximately $49.9 million have been estimated using the applicable interest rate of each debt instrument based on expected future borrowings or outstanding amount of Convertible Notes, as applicable. Actual future ABL borrowings and rates may differ from those used to estimate the amounts discussed above.
See Part I, Item 1A, Risk Factors, for an additional discussion of risk related to supply chain disruptions. 2022 Compared With 2021 For a comparison of our results of operations for the years ended December 31, 2022 and 2021, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 10, 2023.
R&D tax credits. 2023 Compared With 2022 For a comparison of our results of operations for the years ended December 31, 2023 and 2022, see Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 5, 2024.
Selling, General and Administrative (“SG&A”) expenses were $127.5 million in 2023 compared with $101.6 million in the prior-year period primarily due to increased wages and benefits, an accounts receivable reserve charge of $7.5 million associated with the bankruptcy of a customer, a net increase of $7.9 million in litigation-related legal expenses and reserve adjustments, and a $2.8 million increase of incentive compensation expenses recorded in SG&A.
Selling, General and Administrative (“SG&A”) expenses were $141.9 million in 2024 compared with $127.5 million in the prior-year period primarily due to increased wages and benefits, including a $6.0 million increase for resumed incentive programs, and an increase of $8.9 million in litigation-related legal expenses and reserve adjustments in 2024.
However, beginning with the 2022 tax year, these costs are required to be capitalized for tax purposes and amortized over 5 years. While this would typically result in the creation of an associated deferred tax asset, due to our cumulative three-year pre-tax loss, a valuation allowance was applied against the deferred tax asset.
While this would typically result in the creation of an associated deferred tax asset, due to our cumulative three-year pre-tax loss, a valuation allowance was applied against the deferred tax asset.
In March 2022, the Company agreed with the earnout calculation for the calendar 2021 earnout for $11.3 million. The Company recorded the gain and received the payment in the first quarter of 2022. In March 2023, the Company agreed with the final earnout calculation for the calendar 2022 earnout for $3.4 million.
The total proceeds of the divestiture included two elements of contingent purchase consideration (“earnout”). In March 2022, the Company agreed with the earnout calculation for the calendar 2021 earnout in the amount of $11.3 million. The Company recorded the gain and received the payment in the first quarter of 2022.
In the commercial transport market, while many of our key long-term fundamentals remain intact, we continue to see residual, though improving, near-term market pressure due to effects of certain supply chain challenges. We have experienced improvement throughout 2023 driven by the increased production rate of the 737 MAX and improved activity with our airline customers.
MARKETS Commercial Transport Market The commercial transport market is our largest end market with sales driven by new aircraft production and aftermarket airline retrofit programs. In the commercial transport market, while many of our key long-term fundamentals remain intact, we continue to see residual, though improving, near-term market pressure due to effects of certain supply chain challenges.
Purchase Obligations — Purchase obligations are comprised of the Company’s commitments for goods and services in the normal course of business and amount to approximately $191.1 million payable over the next twelve months. 29 Supplemental Retirement Plan and Post Retirement Obligations — Anticipated payments related with the Company’s defined benefit plans are detailed in Note 13, Retirement Plans and Related Post Retirement Benefits in Item 8, Financial Statements and Supplementary Data, of this report.
Supplemental Retirement Plan and Post Retirement Obligations — Anticipated payments related with the Company’s defined benefit plans are detailed in Note 13, Retirement Plans and Related Post Retirement Benefits, in Item 8, Financial Statements and Supplementary Data, of this report.
The Company’s four reporting units remaining with goodwill as of the first day of our fourth quarter were subject to the annual goodwill impairment test.
The Company’s four reporting units remaining with goodwill as of the first day of our fourth quarter were subject to the annual goodwill impairment test. Based on our quantitative assessments of our reporting units, we concluded that goodwill was not impaired in 2024, 2023 or 2022.
Based on our quantitative assessments of our reporting units, we concluded that goodwill was not impaired in 2023, 2022 or 2021. 25 CONSOLIDATED RESULTS OF OPERATIONS AND PERFORMANCE (In thousands, except percentages, employees and per share data) 2023 2022 RESULTS OF OPERATIONS: Sales $ 689,206 $ 534,894 Gross Margin 17.5 % 13.4 % SG&A Expenses as a Percentage of Sales 18.5 % 19.0 % Loss from Operations $ (6,671) $ (30,044) Operating Margin (1.0) % (5.6) % Net Gain on Sale of Businesses $ 3,427 $ 11,284 Other (Income) Expense, Net $ (261) $ 1,611 Interest Expense, Net $ 23,328 $ 9,422 Effective Tax Rate (0.4) % (20.0) % Net Loss $ (26,421) $ (35,747) Net Loss Margin (3.8) % (6.7) % Diluted Loss Per Share $ (0.80) $ (1.11) Weighted Average Shares Outstanding – Diluted 33,104 32,164 OTHER YEAR-END DATA: Number of Employees 2,500 2,400 A discussion by segment can be found at “Segment Results of Operations” in this MD&A.
CONSOLIDATED RESULTS OF OPERATIONS AND PERFORMANCE (In thousands, except percentages and per share data) 2024 2023 RESULTS OF OPERATIONS: Sales $ 795,426 $ 689,206 Gross Margin 21.2 % 17.5 % SG&A Expenses as a Percentage of Sales 17.8 % 18.5 % Income (Loss) from Operations $ 26,466 $ (6,671) Operating Margin 3.3 % (1.0) % Net Gain on Sale of Businesses $ — $ 3,427 Loss on Extinguishment of Debt $ 10,148 $ — Other Expense (Income), Net $ 2,187 $ (261) Interest Expense, Net $ 21,998 $ 23,328 Effective Tax Rate (106.1) % (0.4) % Net Loss $ (16,215) $ (26,421) Net Loss Margin (2.0) % (3.8) % Diluted Loss Per Share $ (0.46) $ (0.80) Weighted Average Shares Outstanding – Diluted 35,037 33,104 A discussion by segment can be found at “Segment Results of Operations” in this MD&A.
Our cash flows from operations are primarily dependent on our net loss adjusted for non-cash expenses and income and the timing of collections of receivables, inventory levels and payments to suppliers and employees.
The $3.4 million earnout in 2023 from the sale of the semiconductor business is treated as investing activities and thus is shown as a non-cash gain removed from the calculation of cash flow from operations. 32 Our cash flows from operations are primarily dependent on our net loss adjusted for non-cash expenses and income and the timing of collections of receivables, inventory levels and payments to suppliers and employees.
These include financial covenants pertaining to minimum trailing four-quarter EBITDA requirements, minimum liquidity requirements, minimum fixed charge coverage ratio requirements, and excess cash flow repayment provisions. An unexpected decline in our revenues or operating income, including occurring as a result of events beyond our control, could cause us to violate our financial covenants.
An unexpected decline in our revenues or operating income, including occurring as a result of events beyond our control, could cause us to violate our financial covenants.
During the year ended December 31, 2023, the Company sold 1,334,228 shares of our common stock under the ATM Program, generating aggregate net proceeds of $21.3 million after deducting related expenses.
During the year ended December 31, 2024, the Company did not sell any shares of our common stock under the ATM Program. During the year ended December 31, 2023, the Company sold 1,334,228 shares of our common stock under the ATM Program.
The critical accounting policies have been reviewed with the Audit Committee of our Board of Directors. Revenue Recognition Astronics recognizes revenue when it transfers control of a promised good or service to a customer in an amount that reflects the consideration it expects to receive in exchange for the good or service.
Revenue Recognition Astronics recognizes revenue when it transfers control of a promised good or service to a customer in an amount that reflects the consideration it expects to receive in exchange for the good or service. Our performance obligations are satisfied and control is transferred either at a point-in-time or over-time.
The preparation of the Company’s financial statements requires management to make estimates, assumptions and judgments that affect the amounts reported. These estimates, assumptions and judgments are affected by management’s application of accounting policies, which are discussed in the Notes to Consolidated Financial Statements, Note 1 in Item 8, Financial Statements and Supplementary Data, of this report.
These estimates, assumptions and judgments are affected by management’s application of accounting policies, which are discussed in Note 1, Summary of Significant Accounting Principles and Practices, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report. The critical accounting policies have been reviewed with the Audit Committee of our Board of Directors.
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%.
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).
Military Aerospace Market Sales to the military aerospace market include sales of lighting and safety products, avionics products, electrical power and seat motion products and structures products. Sales to this market totaled approximately 8.9% of our consolidated sales and amounted to $61.6 million in 2023. The military market is dependent on governmental funding which can change from year to year.
Sales to this market totaled approximately 11.1% of our consolidated sales and amounted to $88.0 million in 2024. The military market is dependent on governmental funding which can change from year to year.
Delays in delivery schedules and incremental costs resulting from supply chain and labor rate pressures have in the past resulted, and could in the future also result in, lower profits.
Delays in delivery schedules and incremental costs resulting from supply chain, tariff and labor rate pressures have in the past resulted, and could in the future also result in, lower profits. We will continue to address these challenges by working to improve operating efficiencies and focusing on executing on the growth opportunities currently in front of us.
The ABL Revolving Credit Facility has a scheduled maturity of January 19, 2026, an interest rate of SOFR plus 2.25% to 2.75% and is collateralized primarily by inventory and accounts receivable. The ABL Revolving Credit Facility requires payment of a quarterly commitment fee of 0.25% or 0.375% based on the Company’s average excess availability.
The ABL Revolving Credit Facility has a scheduled maturity of July 11, 2027, an interest rate of SOFR plus 2.75% to 3.25% and is collateralized primarily by inventory, accounts receivable, machinery and equipment and real estate.
Cash flow from operating activities improved compared with 2022 primarily related to improvement in our financial results, coupled with accounts receivable and inventory using less cash as supply chain challenges have improved, partially offset by increased outflows related to accounts payable.
Cash flow from operating activities improved compared with 2023 primarily related to improvement in our financial results, coupled with accounts receivable using less cash, partially offset by increased outflows related to inventory and accounts payable. Non-cash items include $10.1 million for the loss on extinguishment of debt in 2024 and a $5.8 million deferred liability recovery in 2023.
The ABL Revolving Credit Facility set the maximum aggregate amount that the Company can borrow under the revolving credit line at $115 million, with borrowings subject to a borrowing base determined primarily by certain domestic inventory and accounts receivable. The maturity date of borrowings under the ABL Revolving Credit Facility is January 19, 2026.
The Company amended its 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 received proceeds from our at-the-market equity offering program (the “ATM Program”) of $21.3 million in 2023. Additionally, the Company made net borrowings under our credit facilities of $8.5 million in 2023 compared with net repayments of $1.0 million in 2022, partially offset by an increase in costs associated with amending and refinancing our credit facilities.
Additionally, the Company made net borrowings under our credit facilities of $2.5 million in 2024 compared with net borrowings of $8.5 million in 2023, coupled with a $9.9 million increase in costs associated with amending and refinancing our credit facilities in 2024.
See Note 11 of the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report for additional information. • Recognition of approximately $2.6 million of 2022 U.S. R&D tax credits. 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.
See Note 11, Income Taxes, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report for additional information. • Recognition of approximately $3.4 million of 2023 U.S.
Operating profit (loss) is reconciled to loss before income taxes in Note 20 of Item 8, Financial Statements and Supplementary Data, of this report. We do not have 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.
Operating profit is reconciled to loss before income taxes in Note 20, Segments, to the Consolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report.
Investing cash flows in 2023 were positively impacted by the receipt of $3.4 million related to the calendar 2022 earnout from the sales of the semiconductor business compared to the receipt of $10.7 million and $11.3 million related to the calendar 2020 and 2021 earnouts, respectively, in 2022. 30 Future requirements for PP&E depend on numerous factors, including expansion of existing product lines and introduction of new products.
Investing Activities Cash used for investing activities in 2024 was $8.4 million compared to $4.1 million cash used for investing activities in 2023. Investing cash flows in 2023 were positively impacted by the receipt of $3.4 million related to the calendar 2022 earnout from the sales of the semiconductor business.
As of December 31, 2023, 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. Cash on hand at the end of the year was $11.3 million. Net debt was $161.2 million, compared with $150.2 million at the end of 2022.
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. 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 prior-year period reflects $2.6 million in expense related to a customer accommodation dispute and a lease termination settlement. In 2023, the Company recognized a final earnout of $3.4 million for the 2019 sale of its semiconductor test business, compared with $11.3 million recognized in the prior year.
In 2023, the Company recognized a final earnout of $3.4 million for the 2019 sale of its semiconductor test business. Other Income in 2023 included $1.8 million associated with the reversal of a liability related to an equity investment.
Sales to the aerospace and defense market were $48.2 million in 2023. Sales to the mass transit market were $18.9 million and sales to other markets were $17.3 million in 2023.
Sales to the aerospace and defense market were $45.4 million in 2024. Sales to the mass transit market were $10.9 million and sales to the radio test market were $32.5 million in 2024.
Backlog in the Test Systems segment was $75.0 million at December 31, 2023. Income Taxes Our effective tax rates for 2023 and 2022 were (0.4)% and (20.0)%, respectively. In the past, research and development costs were deducted as incurred.
Backlog at the end of the year was $599.2 million Income Taxes Our effective tax rates for 2024 and 2023 were (106.1)% and (0.4)%, respectively. Prior to 2022, research and development costs were deducted as incurred. However, beginning with the 2022 tax year, these costs are required to be capitalized for tax purposes and amortized over five years.
Refer to Note 8 of our Consolidated Financial Statements in Item 8, Financial Statement and Supplementary Data, of this report for additional information regarding our credit facility. 32 DIVIDENDS Management believes that it should retain the capital generated from operating activities for investment in advancing technologies, acquisitions and debt retirement.
DIVIDENDS Management believes that it should retain the capital generated from operating activities for investment in advancing technologies, acquisitions and debt retirement. Accordingly, there are no plans to institute a cash dividend program.
We will continue to address these challenges by working to improve operating efficiencies and focusing on executing on the growth opportunities currently in front of us. 22 Our ABL Revolving Credit Facility and Term Loan Facility each subject us to various financial and other affirmative and negative covenants with which we must comply on an ongoing or periodic basis.
Our ABL 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. These include financial covenants pertaining to minimum excess availability requirements and minimum fixed charge coverage ratio requirements.
Consolidated net loss was $26.4 million, or $0.80 per diluted share, compared with net loss of $35.7 million, or $1.11 per diluted share, in the prior year. 26 At December 31, 2023, our consolidated backlog was $592.3 million. At December 31, 2022, our backlog was $571.4 million. Backlog in the Aerospace segment was $517.2 million at December 31, 2023.
Consolidated net loss was $16.2 million, or $0.46 per diluted share, compared with net loss of $26.4 million, or $0.80 per diluted share, in the prior year. For the year, bookings totaled $808.1 million, resulting in a book-to-bill ratio of 1.02:1.
Test System sales increased $10.7 million, due primarily to the reversal of a $5.8 million deferred revenue liability assumed with an acquisition and associated with a customer program which is no longer expected to occur, and higher radio test product revenue. Consolidated Cost of Products Sold in 2023 was $568.4 million, compared with $463.4 million in the prior year.
The prior-year period Test Systems sales benefited from the reversal of a $5.8 million deferred revenue liability recorded with a previous acquisition. Consolidated cost of products sold in 2024 was $627.1 million, compared with $568.4 million in the prior year.
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.
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.
AEROSPACE SEGMENT (In thousands, except percentages) 2023 2022 Sales $ 604,830 $ 461,196 Operating Profit (Loss) $ 24,629 $ (1,883) Operating Margin 4.1 % (0.4) % 2023 2022 Total Assets $ 493,660 $ 481,416 Backlog $ 517,240 $ 477,660 27 Sales by Market 2023 2022 Commercial Transport $ 432,199 $ 314,564 Military 61,617 54,534 General Aviation 80,842 63,395 Other 30,172 28,703 Total $ 604,830 $ 461,196 Sales by Product Line 2023 2022 Electrical Power & Motion $ 268,049 $ 187,446 Lighting & Safety 157,434 124,347 Avionics 113,117 97,234 Systems Certification 26,255 17,222 Structures 9,803 6,244 Other 30,172 28,703 Total $ 604,830 $ 461,196 2023 Compared With 2022 Aerospace segment sales increased $143.6 million, or 31.1%, to $604.8 million.
We do not have 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. 29 AEROSPACE SEGMENT (In thousands, except percentages) 2024 2023 Sales $ 706,684 $ 604,830 Operating Profit $ 62,406 $ 24,629 Operating Margin 8.8 % 4.1 % 2024 2023 Total Assets $ 498,528 $ 493,660 Backlog $ 537,563 $ 511,540 Sales by Market 2024 2023 Commercial Transport $ 524,572 $ 432,199 Military 88,019 61,617 General Aviation 74,344 80,842 Other 19,749 30,172 Total $ 706,684 $ 604,830 Sales by Product Line 2024 2023 Electrical Power & Motion $ 359,043 $ 268,049 Lighting & Safety 179,403 157,434 Avionics 120,183 113,117 Systems Certification 17,003 26,255 Structures 11,303 9,803 Other 19,749 30,172 Total $ 706,684 $ 604,830 2024 Compared With 2023 Aerospace segment sales of $706.7 million were up $101.9 million, or 16.8%.
The Company expects its cash flow from operations will provide sufficient cash flows to fund operations.
The Company expects its cash flow from operations will provide sufficient cash flows to fund operations, including payment of the $11.9 million damage award related to the February 21, 2025 ruling issued in relation to the Lufthansa UK matter.
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. All costs are amortized to interest expense over the term of the respective agreement.
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.
We have seen notable improvement in the current year and expect that to continue into 2024 as build rates are expected to increase post-pandemic. Sales to the general aviation market include sales of lighting and safety products, avionics products, and electrical power and seat motion products.
Sales to the general aviation market include sales of lighting and safety products, avionics products, and electrical power and seat motion products. Sales to this market totaled approximately 9.3% of our consolidated sales in 2024 and amounted to $74.3 million.
Management believes that our cash flow from operations and current borrowing arrangements will provide for these capital expenditures. We expect to continue to evaluate acquisition opportunities in the future. Financing Activities Cash provided by financing activities totaled $25.4 million for 2023, as compared with cash used for financing activities of $1.4 million for 2022.
Future requirements for PP&E depend on numerous factors, including expansion of existing product lines and introduction of new products. Management believes that our cash flow from operations and available capacity under our ABL Revolving Credit Facility will provide for these capital expenditures. We expect to continue to evaluate acquisition opportunities in the future.
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 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 funded the repayment of its obligations under the previous agreement with borrowings under the ABL Revolving Credit Facility and the Term Loan Facility.
Absent the non-operating sales adjustment resulting from the reversal of the deferred revenue liability, Test Systems operating loss for the current period was $14.5 million and continued to be negatively affected by mix and under absorption of fixed costs due to volume, a $5.0 million increase in litigation-related legal expenses, and $0.7 million of non-cash bonuses.
The prior-year period sales benefited from the reversal of a $5.8 million deferred revenue liability recorded with a previous acquisition. Test Systems operating loss was $8.5 million compared with operating loss of $8.7 million in 2023. Test Systems operating loss for the prior-year period benefited from the $5.8 million sales adjustment resulting from the reversal of the deferred revenue liability.
The book-to-bill ratio is calculated as total orders received during the period compared with total revenue recognized during the period. The Aerospace segment’s backlog at December 31, 2023 was $517.2 million, compared to $477.7 million at December 31, 2022.
The improvement in segment operating profit reflects leverage gained on higher volume and improving production efficiencies. Aerospace bookings in 2024 were $732.7 million, for a book-to-bill ratio of 1.04:1. The book-to-bill ratio is calculated as total orders received during the period compared with total revenue recognized during the period.
Removed
Our ability to satisfy the tight financial covenants in our ABL Revolving Credit Facility and Term Loan Facility is expected to be challenging in 2024 and is an item that our management team continues to closely monitor.
Added
Challenges affecting the commercial aviation industry or key participants can adversely impact the demand for our products and services, the timing of orders, deliveries and related payments and other factors. We are monitoring the production and other challenges at The Boeing Company, including the recently resolved strike, and we continue to align with them on production expectations.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA 10% change in the value of the U.S. dollar versus the Euros would have had an immaterial impact to 2023 net loss. Risk due to fluctuation in interest rates is a function of the Company’s floating rate debt obligations, which total approximately $172.5 million as of December 31, 2023.
Biggest changeA 10% change in the value of the U.S. dollar versus the Euros would have had an immaterial impact to 2024 net loss. Risk due to fluctuation in interest rates is a function of the Company’s floating rate debt obligations, which total approximately $10.0 million as of December 31, 2024.
As we cannot anticipate the ultimate duration or scope of the Russia-Ukraine war and the residual effects of the COVID-19 pandemic, the ultimate financial impact to our results cannot be reasonably estimated, but could be material. 33
As we cannot anticipate the ultimate duration or scope of the Russia-Ukraine war and the residual effects of the COVID-19 pandemic, the ultimate financial impact to our results cannot be reasonably estimated, but could be material. 35
A change of 1% in interest rates of all variable rate debt would impact annual net loss by approximately $1.7 million, before income taxes.
A change of 1% in interest rates of all variable rate debt would impact annual net loss by approximately $0.1 million, before income taxes.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has limited exposure to fluctuation in foreign currency exchange rates to U.S. dollar, primarily in Canadian dollars and Euros currency. Approximately 90% of the Company’s consolidated sales are transacted in U.S. dollars. Net assets held in or measured in Canadian dollars amounted to $11.1 million at December 31, 2023.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company has limited exposure to fluctuation in foreign currency exchange rates to U.S. dollar, primarily in Canadian dollars and Euros currency. Approximately 90% of the Company’s consolidated sales are transacted in U.S. dollars. Net assets held in or measured in Canadian dollars amounted to $14.0 million at December 31, 2024.
A 10% change in the value of the U.S. dollar versus the Canadian dollar would have had an immaterial impact to 2023 net loss. Net assets held in or measured in Euros amounted to $24.8 million at December 31, 2023.
A 10% change in the value of the U.S. dollar versus the Canadian dollar would have had an immaterial impact to 2024 net loss. Net assets held in or measured in Euros amounted to $26.1 million at December 31, 2024.

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