ASTRONICS CORP

Previous wording

The main challenges that we continue to face include varying levels of supply chain pressures, material availability and cost increases (including costs associated with the recent imposition or proposed imposition of tariffs by the United States and other countries discussed herein), labor availability and cost, and improving shareholder value through increasing profitability. 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. Sales are driven by increased build rates for existing aircraft, market acceptance and economic success of new aircraft and our products, continued government funding of defense programs, the Company’s ability to obtain production contracts for parts we currently supply or have been selected to design and develop for new aircraft platforms and continually identifying and winning new business for our Test Systems segment.

Current wording

The main challenges that we continue to face include varying levels of supply chain pressures, material availability and cost increases (including costs associated with the recent imposition of tariffs by the United States and other countries discussed herein), labor availability and cost, and improving shareholder value through increasing profitability. 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. Sales are driven by increased build rates for existing aircraft, market acceptance and economic success of new aircraft and our products, continued government funding of defense programs, the Company’s ability to obtain production contracts for parts we currently supply or have been selected to design and develop for new aircraft platforms and continually identifying and winning new business for our Test Systems segment.

Previous wording

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. 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. 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, tariffs, 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.

Current wording

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. 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. 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, tariffs and our ability to mitigate tariff effects, the timing of customer orders, 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.

Previous wording

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.

Current wording

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 levels and anticipated ramp-up at The Boeing Company, and we continue to align with them on production expectations.

Previous wording

Bookings of $279.7 million in the quarter resulted in a book-to-bill ratio of 1.36:1. For the trailing twelve months, bookings totaled $883.7 million and the book-to-bill ratio was 1.08:1. Backlog at the end of the quarter was $673.0 million.

Current wording

Bookings of $177.0 million in the quarter resulted in a book-to-bill ratio of 0.86:1. For the trailing twelve months, bookings totaled $841.8 million and the book-to-bill ratio was 1.02:1. Backlog at the end of the quarter was $645.4 million.

Previous wording

Growth in sales were driven by the Aerospace segment due to continued strength in demand primarily from the Commercial Transport and Military Aircraft markets. Aerospace sales increased $27.7 million, or 17.0%, which more than offset the $6.9 million decline in Test Systems sales. Consolidated sales and gross profit were negatively impacted by a $1.9 million revision of estimated costs to complete a long-term mass transit contract in the Test Systems segment.

Current wording

Growth in sales were driven by the Aerospace segment due to continued strength in demand primarily from the Commercial Transport and Military Aircraft markets. Aerospace sales increased $44.4 million, or 13.0%, which more than offset the $17.0 million decline in Test Systems sales. Consolidated sales were negatively impacted by $8.3 million, resulting from revisions of estimated costs to complete certain long-term mass transit contracts in the Test Systems segment.

Previous wording

Consolidated cost of products sold in the first quarter of 2025 was $145.1 million, compared with $137.6 million in the same prior-year period. The increase was primarily due to higher sales volume. Both periods reflect the change in presentation for research & development expenses (“R&D”), which is now identified as an expense item on the income statement below gross profit.

Current wording

Consolidated cost of products sold in the first half of 2025 was $296.9 million, compared with $280.1 million in the same prior-year period. The increase was primarily due to higher sales volume. Additionally, simplification initiatives in the Aerospace segment, including costs related to footprint rationalization and product portfolio shaping activities, resulted in $5.8 million in charges within cost of products sold during the quarter. Both periods reflect the change in presentation for R&D, which is now identified as an expense item on the income statement below gross profit.

Previous wording

In the first quarter of 2025, the $4.1 million increase in selling, general and administrative expenses (“SG&A”) included a $6.2 million reserve adjustment to the damage award relating to a patent infringement dispute in the UK. This included a

Current wording

In the first half of 2025, the $6.8 million increase in SG&A included a $9.7 million reserve adjustment relating to a patent infringement dispute in the UK. This included a $0.5 million increase to the original damages award reserve of $11.9 million, $5.7 million in interest expense related to the damages award, and a $3.5 million legal fee reimbursement charge. This increase was partially offset by a $2.4 million decrease in litigation-related legal expenses. R&D was down $4.9 million reflecting the timing of projects.

Previous wording

As a result of the refinancing in December 2024, interest expense was down $2.6 million, or 45%. Tax expense in the quarter was $0.6 million compared with a tax benefit of $1.4 million in the prior-year period. Tax expense in the quarter was partially offset by a $1.1 million discrete adjustment to reverse certain federal and state deferred tax liabilities.

Current wording

As a result of the lower outstanding borrowings and the reduced cost of debt resulting from the refinancing in December 2024, interest expense was down $5.4 million, or 46.2%. Tax expense in the first half of 2025 was $1.2 million compared with a tax benefit of $1.6 million in the prior-year period. Tax expense in the first half of 2025 was partially offset by a $1.1 million discrete adjustment to reverse certain federal and state deferred tax liabilities.

Previous wording

Stronger profitability and lower interest expense resulted in consolidated net income of $9.5 million, or $0.26 per diluted share, up from the net loss of $3.2 million, or $(0.09) per diluted share, in the same prior-year period.

Current wording

Stronger profitability and lower interest expense resulted in consolidated net income of $10.8 million, or $0.30 per diluted share, up from the net loss of $1.6 million, or $0.05 per diluted share, in the same prior-year period.

Previous wording

Aerospace bookings were $267.7 million for a book-to-bill ratio of 1.40:1. Backlog for the Aerospace segment was a $613.9 million at quarter end.

Current wording

Aerospace bookings were $150.6 million for a book-to-bill ratio of 0.78:1. Backlog for the Aerospace segment was a $570.9 million at quarter end.

Previous wording

Aerospace segment sales of $191.4 million increased $27.7 million, or 17.0%. Sales in the Commercial Transport market increased $16.1 million, or 13.3%. Growth was primarily related to increased demand by airlines for cabin power and inflight entertainment & connectivity (“IFEC”) products, which are in the Electrical Power & Motion and Avionics product groups. Military Aircraft sales increased $16.2 million, or 94.8%, to $33.3 million, driven by progress on the FLRAA program and increased demand for lighting and safety products.

Current wording

Aerospace segment sales of $385.0 million increased $44.4 million, or 13.0%. Sales in the Commercial Transport market increased $33.3 million, or 13.3%. Growth was primarily related to increased demand by airlines for cabin power and IFEC products. Military Aircraft sales increased $18.8 million, or 45.0%, to $60.7 million, driven by progress on the FLRAA program and increased demand for lighting and safety products. General Aviation sales decreased $5.0 million, or 12.8%, to $33.6 million due to lower VVIP and airframe power sales.

Previous wording

Aerospace segment operating profit of $22.3 million, or 11.6% of sales, improved over the prior-year period despite the previously discussed $6.2 million true-up in legal reserves related to the UK patent dispute, which was partially offset by a $1.3 million decrease in litigation-related expenses.

Current wording

Aerospace segment operating profit of $40.3 million, or 10.5% of sales, improved over the prior-year period resulting from leverage gained on higher volume and improving production efficiencies and a $2.8 million decrease in litigation-related expenses, partially offset by the previously discussed $9.7 million true-up in legal reserves related to the UK patent dispute and $6.5 million in simplification initiatives.

Previous wording

Test Systems segment sales were $14.6 million, down $6.9 million from the comparator quarter in 2024. Segment sales were negatively impacted by $1.9 million due to a revision of estimated costs to complete a certain long-term mass transit Test contract. The revision resulted in reduced revenue recognized in the period due to lower estimates of the percentage of work completed on the program. The project is now anticipated to be completed later in 2026.

Current wording

Test Systems segment sales were $11.1 million, down $10.1 million from the comparator quarter in 2024. Segment sales were negatively impacted by $6.4 million due to revisions of estimated costs to complete certain long-term mass transit Test contracts. The revisions resulted in reduced revenue recognized in the period due to lower estimates of the percentage of work completed on the programs.

Previous wording

Bookings for the Test Systems segment in the quarter were $12.0 million. The book-to-bill ratio was 0.82:1 for the quarter. Backlog for the Test Systems segment was $59.1 million at quarter end.

Current wording

Test Systems bookings were $26.4 million for a book-to-bill ratio of 2.39:1. Backlog for the Test Systems segment was $74.5 million at quarter end.

Previous wording

Test Systems segment operating loss was $2.2 million, compared with an operating loss of $3.1 million in the same prior-year period. The improvement was the result of savings realized from restructuring initiatives implemented in the prior year, despite lower volume, the previously mentioned long-term contract estimated cost revision and an increase in litigation-related legal expenses of $0.6 million. Test Systems continues to be negatively affected by mix and under absorption of fixed costs at current volume levels.

Current wording

Test Systems segment operating loss was $8.9 million, compared with an operating loss of $8.4 million in the same prior-year period. The revisions to the estimated costs to complete had a $8.8 million detrimental impact to operating income and masked the savings realized from recent restructuring activities. Test Systems continues to be negatively affected by mix and under absorption of fixed costs at current volume levels.

Previous wording

Cash provided by operating activities totaled $20.6 million for the first three months of 2025, as compared with $2.0 million cash provided by operating activities during the same period in 2024. Cash flow from operating activities increased compared with the same period of 2024 primarily the result of higher cash earnings resulting from higher net income and improved working capital management.

Current wording

Cash provided by operating activities totaled $13.0 million for the first six months of 2025, as compared with $4.2 million cash used for operating activities during the same period in 2024. Cash flow from operating activities increased compared with the same period of 2024 primarily the result of higher cash earnings resulting from higher net income and improved working capital management. Cash provided by operating activities in the first six months of 2025 included $21.6 million in payments related to the UK patent dispute and $12.8 million in net income tax payments.

Previous wording

Cash used for investing activities was $2.1 million for the first three months of 2025 compared with $1.6 million in cash used for investing activities in the same period of 2024 representing capital expenditures for each period.

Current wording

Cash used for investing activities was $6.7 million for the first six months of 2025 compared with $3.4 million in cash used for investing activities in the same period of 2024 representing capital expenditures for each period. The higher level of capital expenditures relates to the ongoing facility expansion activities.

Previous wording

Cash used for financing activities totaled $11.4 million for the first three months of 2025, as compared with cash used for financing activities of $5.0 million during the same prior-year period. The Company made net payments under our credit facilities of $8.9 million in the first three months of 2025 compared with net payments of $5.9 million in the same prior-year period.

Current wording

Cash used for financing activities totaled $12.5 million for the first six months of 2025, as compared with cash provided by financing activities of $0.8 million during the same prior-year period. The Company made net payments under its credit facilities of $10.0 million in the first six months of 2025 compared with net borrowings of $5.9 million in the same prior-year period.

Previous wording

Under the terms of the ABL Revolving Credit Facility, the Company pays interest on the unpaid principal amount of the ABL Revolving Credit Facility at a rate equal to SOFR plus a term SOFR adjustment in the amount of 0.10% per annum (which collectively shall be at least 1.00%) plus an applicable margin ranging from 2.75% to 3.25% determined based upon the Company’s Excess Availability (as defined in the ABL Revolving Credit Facility). The Company is required to pay a quarterly commitment fee under the ABL Revolving Credit Facility on undrawn revolving credit commitments in an amount equal to 0.25% or 0.375% based on the Company’s average excess availability under the ABL Revolving Credit Facility. On March 29, 2025, there was $1.1 million outstanding on the ABL Revolving Credit Facility and there remained $187.1 million available for future borrowings, before our minimum excess availability requirement discussed below. The amount available for future borrowings as of March 29, 2025, is net of a $18.1 million reserve for the damage award relating to the patent infringement dispute in the United Kingdom discussed in Note 13, Legal Proceedings, to the Consolidated Condensed Financial Statements in Item 1, Financial Statement, of this report, and $2.3 million in outstanding letters of credit..

Current wording

Under the terms of the ABL Revolving Credit Facility, the Company pays interest on the unpaid principal amount of the ABL Revolving Credit Facility at a rate equal to SOFR plus a term SOFR adjustment in the amount of 0.10% per annum (which collectively shall be at least 1.00%) plus an applicable margin ranging from 2.75% to 3.25% determined based upon the Company’s Excess Availability (as defined in the ABL Revolving Credit Facility). The Company is required to pay a quarterly commitment fee under the ABL Revolving Credit Facility on undrawn revolving credit commitments in an amount equal to 0.25% or 0.375% based on the Company’s average excess availability under the ABL Revolving Credit Facility. On June 28, 2025, there was no balance outstanding on the ABL Revolving Credit Facility and there remained $197.8 million available for future borrowings, before our minimum excess availability requirement discussed below. The amount available for future borrowings as of June 28, 2025, is net of $2.3 million in outstanding letters of credit.

Previous wording

On December 3, 2024, the Company issued $165.0 million aggregate principal amount of 5.500% Convertible Senior Notes due 2030 (the “Convertible Notes”), which amount includes the additional Convertible Notes issued pursuant to the initial purchasers’ full exercise of their option to purchase additional Convertible Notes. The Convertible Notes bear interest at a rate of 5.500% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2025. The Convertible Notes will mature on March 15, 2030, unless earlier converted, redeemed or repurchased. The initial conversion rate is 43.6814 shares of common stock per $1,000 principal amount of Convertible Notes, which represent the initial conversion price of $22.89 per share. The Convertible Notes are convertible at the option of the holders at any time on or after December 15, 2029, until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, the Company will satisfy its conversion obligations by paying and/or delivering, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election. Beginning March 20, 2028, if the Company’s stock price has been at least 130% of the conversion price for a specified period of time, the Convertible Notes may be called at the option of the issuer. Under the same conditions, the Company can elect to redeem the Convertible Notes for cash. After the first quarter of 2025, if the Company’s stock price has been at least 130% of the conversion price for 20 of 30 trading days ending on and including the last trading day of the immediately preceding quarter, the Convertible Notes may be called at the option of the holder. The fair value of the Convertible Notes was approximately $228.4 million and $176.9 million as of March 29, 2025 and December 31, 2024, respectively, based on quoted prices for these instruments in active markets, and is classified as a Level 1 measurement within the fair value hierarchy.

Current wording

On December 3, 2024, the Company issued $165.0 million aggregate principal amount of 5.500% Convertible Senior Notes due 2030 (the “Convertible Notes”), which amount includes the additional Convertible Notes issued pursuant to the initial purchasers’ full exercise of their option to purchase additional Convertible Notes. The Convertible Notes bear interest at a rate of 5.500% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2025. The Convertible Notes will mature on March 15, 2030, unless earlier converted, redeemed or repurchased. The initial conversion rate is 43.6814 shares of common stock per $1,000 principal amount of Convertible Notes, which represent the initial conversion price of $22.89 per share. The Convertible Notes are convertible at the option of the holders at any time on or after December 15, 2029, until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon conversion, the Company will satisfy its conversion obligations by paying and/or delivering, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election. Beginning March 20, 2028, if the Company’s stock price has been at least 130% of the conversion price for a specified period of time, the Convertible Notes may be called at the option of the issuer. After the first quarter of 2025, if the Company’s stock price has been at least 130% of the conversion price for 20 of 30 trading days ending on and including the last trading day of the immediately preceding quarter, the Convertible Notes may be redeemed at the option of the holder. During the fiscal quarter ended June 28, 2025, our stock price met the price trigger defined above, and therefore, holders of our Convertible Notes may convert their notes at their option at any time during our third fiscal quarter ended September 27, 2025. The fair value of the

Previous wording

Interest expense was approximately $3.2 million and $5.8 million during the three months ended March 29, 2025 and March 30, 2024, respectively. The Company entered into a $90.0 million Term Loan Facility on January 19, 2023, and paid interest at a rate equal to SOFR (which was required to be at least 2.50%) plus 8.75%. The Company refinanced its credit facilities on July 11, 2024, and repaid in full all outstanding indebtedness under the previous term loan dated January 19, 2023.

Current wording

Interest expense was $3.1 million and $5.9 million for the three months ended and $6.2 million and $11.6 million for the six months ended June 28, 2025 and June 29, 2024, respectively. The Company entered into a $90.0 million Term Loan Facility on January 19, 2023, and paid interest at a rate equal to SOFR (which was required to be at least 2.50%) plus 8.75%. The Company refinanced its credit facilities on July 11, 2024, and repaid in full all outstanding indebtedness under the previous term loan dated January 19, 2023.

Previous wording

Debt issuance cost amortization expense was approximately $0.6 million and $0.8 million during the three months ended March 29, 2025 and March 30, 2024, respectively. Unamortized deferred debt issuance costs associated with the ABL Revolving Credit Facility ($2.7 million and $3.0 million as of March 29, 2025 and December 31, 2024, respectively) are recorded within Other Assets and those associated with the Convertible Notes ($6.0 million and $6.3 million as of March 29, 2025 and December 31, 2024, respectively) are recorded as a reduction of the carrying value of the debt on the Consolidated Condensed Balance Sheets.

Current wording

Debt issuance cost amortization expense was $0.6 million and $0.9 million for the three months ended and $1.2 million and $1.7 million for the six months ended June 28, 2025 and June 29, 2024, respectively. All costs are amortized to interest expense over the term of the respective agreement. Unamortized deferred debt issuance costs associated with the ABL Revolving Credit Facility ($2.4 million and $3.0 million as of June 28, 2025 and December 31, 2024, respectively) are recorded within Other Assets and those associated with the Convertible Notes ($5.7 million and $6.3 million as of June 28, 2025 and December 31, 2024, respectively) are recorded as a reduction of the carrying value of the debt on the Consolidated Condensed Balance Sheets.

Previous wording

During the three months ended March 29, 2025, and March 30, 2024, the Company did not sell any shares of its common stock under the ATM Program. As of March 29, 2025, the Company had remaining capacity under the ATM Program to sell shares of common stock having an aggregate offering price up to approximately $8.2 million.

Current wording

On August 8, 2023, the Company initiated an at-the-market equity offering program (the “ATM Program”) for the sale from time to time of shares of the Company’s common stock, par value $0.01 per share, having an aggregate offering price of up to $30.0 million. During the three and six months ended June 28, 2025, and June 29, 2024, the Company did not sell any shares of its common stock under the ATM Program. As of June 28, 2025, the Company had remaining capacity under the ATM Program to sell shares of common stock having an aggregate offering price up to approximately $8.2 million.

Previous wording

Cash on hand at the end of the quarter was $25.9 million. Net debt was $140.2 million, compared with $156.6 million at the end of 2024.

Current wording

Cash on hand at the end of the quarter was $13.5 million. Net debt was $151.5 million, compared with $156.6 million at the end of 2024.

Previous wording

The Company expects its cash flow from operations will provide sufficient cash flows to fund operations, including payment of the damage award and the associated interest, and any legal fee reimbursement in the Lufthansa UK matter. The Company paid the $12.4 million ordered liability for damages in the second quarter of 2025, and expects to pay the $5.7 million in interest in the second quarter of 2025. The Company may also evaluate various actions and alternatives to enhance its profitability and cash generation from operating activities, which could include manufacturing efficiency initiatives, cost-reduction measures, working with vendors and suppliers to reduce lead times and expedite shipment of critical components, and working with customers to expedite receivable collections. The Company may also utilize available capacity under the ABL Revolving Credit Facility.

Current wording

The Company expects its cash flow from operations will provide sufficient cash flows to fund operations, including payment of any further amounts related to the Lufthansa matters. The Company paid $21.6 million ordered liabilities for damages, interest and legal fee reimbursement related to the UK matter in the second quarter of 2025. The Company may also evaluate various actions and alternatives to enhance its profitability and cash generation from operating activities, which could include manufacturing efficiency initiatives, cost-reduction measures, working with vendors and suppliers to reduce lead times and expedite shipment of critical components, and working with customers to expedite receivable collections. The Company may also utilize available capacity under the ABL Revolving Credit Facility.

Previous wording

The Company’s backlog on March 29, 2025 was $673.0 million compared with $599.2 million on December 31, 2024 and $605.6 million on March 30, 2024.

Current wording

The Company’s backlog on June 28, 2025 was $645.4 million compared with $599.2 million on December 31, 2024 and $626.4 million on June 29, 2024.

Previous wording

Although the majority of our sales, expenses, and cash flows are transacted in U.S. dollars, we have exposure to changes in foreign currency exchange rates related primarily to the Euro and the Canadian dollar. The Company believes that the impact of changes in foreign currency exchange rates on its business and financial results for the first quarter of 2025 was not significant.

Current wording

Although the majority of our sales, expenses, and cash flows are transacted in U.S. dollars, we have exposure to changes in foreign currency exchange rates related primarily to the Euro and the Canadian dollar. The Company believes that the impact of changes in foreign currency exchange rates on its business and financial results for the three and six months ended June 28, 2025 was not significant.

Previous wording

The future impacts of U.S. trade policies, treaties, and tariffs and their residual effects, including economic uncertainty, inflationary environment, and disruption within the global supply chain, and aerospace industry, on our business remain uncertain. As we cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and China or other countries, what products may be subject to such actions, or what actions may be taken by the other countries in retaliation, the ultimate financial impact on our results cannot be reasonably estimated but could be material. The impact of tariffs on its business and financial results for the first quarter of 2025 was not significant.

Current wording

The future impacts of U.S. trade policies, treaties, and tariffs and their residual effects, including economic uncertainty, inflationary environment, and disruption within the global supply chain, and aerospace industry, on our business remain uncertain. As we cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and China, Malaysia or other countries, what products may be subject to such actions, what actions may be taken by the other countries in retaliation, and what actions we may be able to take to address and mitigate such tariffs, the ultimate financial impact on our results cannot be reasonably estimated but could be material. The impact of tariffs on its business and financial results for the three and six months ended June 28, 2025 was not significant.