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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
ý☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended September 30, 2017April 1, 2023
or
¨☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from to
Commission File Number 0-7087
ASTRONICS CORPORATION
(Exact name of registrant as specified in its charter)

New York
(State or other jurisdiction of
incorporation or organization)
16-0959303
(IRS Employer
Identification Number)
130 Commerce Way, East Aurora, New York
(Address of principal executive offices)
14052
(Zip code)
(716) 805-1599
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $.01 par value per shareATRONASDAQ Stock Market
Securities registered pursuant to Section 12(g) of the Act: None
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(g) of the Act:
$.01 par value Common Stock, $.01 par value Class B Stock
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer”, an “accelerated filer”, a “non-accelerated filer” and, a “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer☐Accelerated filer☒Emerging growth company☐
Large accelerated filerýAccelerated filer¨Emerging growth company¨
Non-accelerated filer
¨
☐		Smaller Reporting Company¨☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a)
of the Exchange Act. ¨
 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨☐    No  ý
As of September 30, 2017, 28,002,226May 3, 2023, 32,459,574 shares of common stock were outstanding consisting of 21,075,59226,343,693 shares of common stock ($.01 par value) and 6,926,6346,115,881 shares of Class B common stock ($.01 par value).



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PART I
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PART II
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Part I – Financial Information
Item 1. Financial Statements
\ASTRONICS CORPORATION
Consolidated Condensed Balance Sheets
September 30, 2017April 1, 2023 with Comparative Figures for December 31, 20162022
(Unaudited)
(In thousands)
 September 30,
2017		 December 31,
2016
 (Unaudited)  
Current Assets:   
Cash and Cash Equivalents$15,377
 $17,901
Accounts Receivable, Net of Allowance for Doubtful Accounts114,985
 109,415
Inventories139,265
 116,597
Prepaid Expenses and Other Current Assets16,044
 11,160
Total Current Assets285,671
 255,073
Property, Plant and Equipment, Net of Accumulated Depreciation124,281
 122,812
Other Assets16,503
 13,149
Intangible Assets, Net of Accumulated Amortization95,055
 98,103
Goodwill119,118
 115,207
Total Assets$640,628
 $604,344
Current Liabilities:   
Current Maturities of Long-term Debt$2,695
 $2,636
Accounts Payable35,876
 25,070
Accrued Expenses and Other Current Liabilities32,533
 35,686
Customer Advance Payments and Deferred Revenue21,988
 23,168
Total Current Liabilities93,092
 86,560
Long-term Debt174,652
 145,484
Other Liabilities35,554
 34,851
Total Liabilities303,298
 266,895
Shareholders’ Equity:   
Common Stock297
 297
Accumulated Other Comprehensive Loss(11,115) (15,494)
Other Shareholders’ Equity348,148
 352,646
Total Shareholders’ Equity337,330
 337,449
Total Liabilities and Shareholders’ Equity$640,628
 $604,344
April 1, 2023December 31, 2022
Current Assets:
Cash and Cash Equivalents$4,220 $13,778 
Restricted Cash1,497 — 
Accounts Receivable, Net of Allowance for Estimated Credit Losses152,365 147,790 
Inventories199,944 187,983 
Prepaid Expenses and Other Current Assets16,150 15,743 
Total Current Assets374,176 365,294 
Property, Plant and Equipment, Net of Accumulated Depreciation88,623 90,658 
Operating Right-of-Use Assets12,179 13,028 
Other Assets7,564 8,605 
Intangible Assets, Net of Accumulated Amortization75,697 79,277 
Goodwill58,169 58,169 
Total Assets$616,408 $615,031 
Current Liabilities:
Current Maturities of Long-term Debt$6,750 $4,500 
Accounts Payable63,266 64,193 
Current Operating Lease Liabilities4,307 4,441 
Accrued Expenses and Other Current Liabilities45,066 45,911 
Customer Advance Payments and Deferred Revenue27,432 32,567 
Total Current Liabilities146,821 151,612 
Long-term Debt165,603 159,500 
Long-term Operating Lease Liabilities8,964 9,942 
Other Liabilities56,096 54,057 
Total Liabilities377,484 375,111 
Shareholders’ Equity:
Common Stock355 354 
Accumulated Other Comprehensive Loss(9,117)(9,526)
Other Shareholders’ Equity247,686 249,092 
Total Shareholders’ Equity238,924 239,920 
Total Liabilities and Shareholders’ Equity$616,408 $615,031 
See notes to consolidated condensed financial statements.

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ASTRONICS CORPORATION
Consolidated Condensed Statements of Operations
Three and Nine Months Ended September 30, 2017April 1, 2023 With Comparative Figures for 20162022
(Unaudited)
(In thousands, except per share data)
 Nine Months Ended Three Months Ended
 September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Sales$453,146
 $479,055
 $149,636
 $155,099
Cost of Products Sold348,186
 356,074
 117,143
 116,436
Gross Profit104,960
 122,981
 32,493
 38,663
Selling, General and Administrative Expenses66,504
 65,246
 22,410
 21,138
Income from Operations38,456
 57,735
 10,083
 17,525
Interest Expense, Net of Interest Income3,750
 3,246
 1,437
 1,103
Income Before Income Taxes34,706
 54,489
 8,646
 16,422
Provision for Income Taxes9,374
 15,950
 2,586
 4,348
Net Income$25,332
 $38,539
 $6,060
 $12,074
Earnings Per Share:       
Basic$0.88
 $1.32
 $0.21
 $0.42
Diluted$0.85
 $1.28
 $0.21
 $0.41
Three Months Ended
April 1, 2023April 2, 2022
Sales$156,538 $116,176 
Cost of Products Sold129,028 96,243 
Gross Profit27,510 19,933 
Selling, General and Administrative Expenses29,880 24,100 
Loss from Operations(2,370)(4,167)
Net Gain on Sale of Business(3,427)(11,284)
Other (Income), Net of Other Expense(1,288)462 
Interest Expense, Net of Interest Income5,470 1,631 
(Loss) Income Before Income Taxes(3,125)5,024 
Provision for Income Taxes1,290 8,125 
Net Loss$(4,415)$(3,101)
Loss Per Share:
Basic$(0.14)$(0.10)
Diluted$(0.14)$(0.10)
See notes to consolidated condensed financial statements.

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ASTRONICS CORPORATION
Consolidated Condensed Statements of Comprehensive IncomeLoss
Three and Nine Months Ended September 30, 2017April 1, 2023 With Comparative Figures for 20162022
(Unaudited)
(In thousands)
 Nine Months Ended Three Months Ended
 September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Net Income$25,332
 $38,539
 $6,060
 $12,074
Other Comprehensive Income:       
Foreign Currency Translation Adjustments3,987
 1,354
 1,496
 49
Retirement Liability Adjustment – Net of Tax392
 392
 130
 130
Other Comprehensive Income4,379
 1,746
 1,626
 179
Comprehensive Income$29,711
 $40,285
 $7,686
 $12,253
Three Months Ended
April 1, 2023April 2, 2022
Net Loss$(4,415)$(3,101)
Other Comprehensive Income:
Foreign Currency Translation Adjustments224 (181)
Retirement Liability Adjustment – Net of Tax185 351 
Total Other Comprehensive Income409 170 
Comprehensive Loss$(4,006)$(2,931)
See notes to consolidated condensed financial statements.

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ASTRONICS CORPORATION
Consolidated Condensed Statements of Cash Flows
NineThree Months Ended September 30, 2017
April 1, 2023 With Comparative Figures for 20162022

Three Months Ended
(Unaudited, In thousands)April 1, 2023April 2, 2022
Cash Flows from Operating Activities:
Net Loss$(4,415)$(3,101)
Adjustments to Reconcile Net Loss to Cash Flows from Operating Activities:
Depreciation and Amortization6,662 7,088 
Amortization of Deferred Financing Fees616 — 
Provisions for Non-Cash Losses on Inventory and Receivables627 175 
Equity-based Compensation Expense2,399 2,101 
Operating Lease Non-Cash Expense1,186 1,424 
Non-Cash Accrued 401K Contribution1,208 1,011 
Net Gain on Sale of Business, Before Taxes(3,427)(11,284)
Non-cash deferred liability recovery(5,824)— 
Other(525)513 
Changes in Operating Assets and Liabilities Providing (Using) Cash:
Accounts Receivable(4,170)(10,024)
Inventories(13,860)(9,015)
Accounts Payable(3,488)8,625 
Accrued Expenses2,909 (1,380)
Other Current Assets and Liabilities16 (363)
Customer Advance Payments and Deferred Revenue1,190 (113)
Income Taxes1,262 16,492 
Operating Lease Liabilities(1,447)(1,724)
Supplemental Retirement Plan and Other Liabilities(100)(109)
Cash Flows (Used) Provided by Operating Activities(19,181)316 
Cash Flows from Investing Activities:
Proceeds from Sale of Business3,437 21,961 
Capital Expenditures(1,573)(1,160)
Cash Flows Provided by Investing Activities1,864 20,801 
Cash Flows from Financing Activities:
Proceeds from Long-term Debt126,122 17,925 
Principal Payments on Long-term Debt(111,986)(43,925)
Stock Award Activity(602)108 
Finance Lease Principal Payments(11)(23)
Debt Acquisition Costs(4,347)(771)
Cash Flows Provided (Used) by Financing Activities9,176 (26,686)
Effect of Exchange Rates on Cash80 (173)
Decrease in Cash and Cash Equivalents and Restricted Cash(8,061)(5,742)
Cash and Cash Equivalents and Restricted Cash at Beginning of Period13,778 29,757 
Cash and Cash Equivalents and Restricted Cash at End of Period$5,717 $24,015 
See notes to consolidated condensed financial statements.
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ASTRONICS CORPORATION
Consolidated Condensed Statements of Shareholders’ Equity
Three Months Ended April 1, 2023 With Comparative Figures for 2022
(Unaudited)
(In thousands)
 Nine Months Ended
 September 30,
2017		 October 1,
2016
Cash Flows From Operating Activities:   
Net Income$25,332
 $38,539
Adjustments to Reconcile Net Income to Cash Provided By Operating Activities:   
Depreciation and Amortization19,269
 19,457
Provisions for Non-Cash Losses on Inventory and Receivables943
 1,554
Stock Compensation Expense2,203
 1,876
Deferred Tax Benefit(920) (3,527)
Other(657) 401
Cash Flows from Changes in Operating Assets and Liabilities:   
Accounts Receivable(1,515) (23,707)
Inventories(18,480) (5,113)
Accounts Payable8,267
 211
Accrued Expenses(5,483) (786)
Other Current Assets and Liabilities(4,556) (460)
Customer Advanced Payments and Deferred Revenue(2,336) (11,281)
Income Taxes(883) 6,860
Supplemental Retirement and Other Liabilities1,129
 1,126
Cash Provided By Operating Activities22,313
 25,150
Cash Flows From Investing Activities:   
Acquisition of Business, Net of Cash Acquired(10,199) —
Capital Expenditures(9,715) (9,869)
Other Investing Activities(2,070) (1,585)
Cash Used For Investing Activities(21,984) (11,454)
Cash Flows From Financing Activities:   
Proceeds from Long-term Debt42,000
 20,000
Payments for Long-term Debt(13,031) (25,909)
Purchase of Outstanding Shares for Treasury(32,382) (17,446)
Debt Acquisition Costs—
 (164)
Proceeds from Exercise of Stock Options349
 3,902
Income Tax Benefit from Exercise of Stock Options—
 529
Cash Used For Financing Activities(3,064) (19,088)
Effect of Exchange Rates on Cash211
 109
Decrease in Cash and Cash Equivalents(2,524) (5,283)
Cash and Cash Equivalents at Beginning of Period17,901
 18,561
Cash and Cash Equivalents at End of Period$15,377
 $13,278
Three Months Ended
April 1, 2023April 2, 2022
Common Stock
Beginning of Period$291 $289 
Net Issuance of Common Stock for Restricted Stock Units (“RSU’s”)1 1 
Class B Stock Converted to Common Stock1 — 
End of Period293 290 
Convertible Class B Stock
Beginning of Period63 64 
Class B Stock Converted to Common Stock(1)— 
End of Period62 64 
Additional Paid in Capital
Beginning of Period98,630 92,037 
Net Exercise of Stock Options and Equity-based Compensation Expense2,399 2,501 
Tax Withholding Related to Issuance of RSU’s(603)(293)
End of Period100,426 94,245 
Accumulated Comprehensive Loss
Beginning of Period(9,526)(14,495)
Foreign Currency Translation Adjustments224 (181)
Retirement Liability Adjustment – Net of Taxes185 351 
End of Period(9,117)(14,325)
Retained Earnings
Beginning of Period240,360 287,225 
Net Loss(4,415)(3,101)
Reissuance of Treasury Shares for 401K Contribution(1,482)(5,077)
End of Period234,463 279,047 
Treasury Stock
Beginning of Period(89,898)(108,516)
Shares Issued to Fund 401K Obligation2,695 9,277 
End of Period(87,203)(99,239)
Total Shareholders’ Equity$238,924 $260,082 
See notes to consolidated condensed financial statements.






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ASTRONICS CORPORATION
Consolidated Condensed Statements of Shareholders’ Equity, Continued
Three Months Ended April 1, 2023 With Comparative Figures for 2022
(Unaudited)
(In thousands)
Three Months Ended
(Shares)April 1, 2023April 2, 2022
Common Stock
Beginning of Period29,122 28,911 
Net Issuance from Exercise of Stock Options1 20 
Net Issuance of Common Stock for RSU’s83 42 
Class B Stock Converted to Common Stock67 36 
End of Period29,273 29,009 
Convertible Class B Stock
Beginning of Period6,314 6,375 
Net Issuance from Exercise of Stock Options— 24 
Class B Stock Converted to Common Stock(67)(36)
End of Period6,247 6,363 
Treasury Stock
Beginning of Period3,155 3,808 
Shares Issued to Fund 401K Obligation(95)(325)
End of Period3,060 3,483 
See notes to consolidated condensed financial statements.


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ASTRONICS CORPORATION
Notes to Consolidated Condensed Financial Statements
September 30, 2017April 1, 2023
(Unaudited)
1) Basis of Presentation
The accompanying unaudited statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation have been included.
All 2016 share quantities and per share data reported have been restated to reflect the impact of the three-for-twenty Class B stock distribution to shareholders of record on October 11, 2016.
Operating Results
The results of operations for any interim period are not necessarily indicative of results for the full year. In addition, the COVID-19 pandemic and supply chain disruptions have increased the volatility we experience in our financial results in recent periods and this could continue in future interim and annual periods. Operating results for the ninethree months ended September 30, 2017April 1, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.2023.
The balance sheet at December 31, 20162022 has been derived from the audited financial statements at that date, but does not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements.
For further information, refer to the financial statements and footnotes thereto included in Astronics Corporation’s 20162022 annual report on Form 10-K.
Description of the Business
Astronics Corporation (“Astronics” or the “Company”) is a leading supplierprovider of productsadvanced technologies to the global aerospace, defense electronics and semiconductorelectronics industries. Our products and services include advanced, high-performance electrical power generation, distribution and motion systems, lighting &and safety systems, avionics products, systems and certification, aircraft structures systems certification,and automated test systems and other products.systems.
We have principal operations in the United States (“U.S.”), Canada, France and France. We designEngland, as well as engineering offices in the Ukraine and build our products through our wholly owned subsidiaries Armstrong Aerospace, Inc. (“Armstrong”); Astronics Advanced Electronic Systems Corp. (“AES”); Astronics AeroSat Corporation (“AeroSat”); Ballard Technology, Inc. (“Ballard”); Astronics DME LLC (“DME”); Luminescent Systems, Inc. (“LSI”); Luminescent Systems Canada, Inc. (“LSI Canada”); Max-Viz, Inc. (“Max-Viz”); Peco, Inc. (“Peco”); PGA Electronic s.a. (“PGA”) and AstronicsIndia.
On February 13, 2019, the Company completed a divestiture of its semiconductor test business within the Test Systems Inc. (“ATS”). On April 3, 2017, Astronics Custom Control Concepts Inc. ("CCC") acquired allsegment. The transaction included two elements of contingent earnouts. 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 2023.
Impact of the assetsCOVID-19 Pandemic
On March 11, 2020, the World Health Organization classified the COVID-19 outbreak as a pandemic. The spread of the COVID-19 pandemic disrupted businesses on a global scale, led to significant volatility in financial markets and certain liabilitiesaffected the aviation and industrial industries. The impacts of Custom Control Concepts LLC.the pandemic have placed labor and supply chain pressures on our business and we have been impacted by customer demand variability. Although we saw stable and growing backlog during 2022 and into 2023 in our aerospace business, COVID-19 related disruptions are ongoing and continue to adversely challenge our markets. While we remain bullish about the aerospace business, we believe the recovery to pre-pandemic activity, particularly in the widebody market, will take longer than originally anticipated at the outset of the pandemic. 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.
CostIn September 2021 the Company was awarded a grant of Products Sold, Engineering and Development and Selling, General and Administrative Expenses
Costup to $14.7 million from the U.S. Department of Transportation (“USDOT”) under the Aviation Manufacturing Jobs Protection Program (“AMJP”). The Company received $5.2 million in the first quarter of 2022. The grant benefit was recognized ratably over the performance period as a reduction to cost of products sold includesin proportion to the costscompensation expense that the award is intended to manufacture productsdefray. During the three months ended April 2, 2022, the Company recognized $6.0 million of the award.
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Restricted Cash
Under the provisions of the ABL Revolving Credit Facility (see Note 7), the Company has a lockbox arrangement with the banking institution for its accounts within the United States whereby daily lockbox receipts are contractually utilized to pay down outstanding balances on the Revolving Credit Facility debt. Lockbox balances that have not yet been applied to the Revolving Credit Facility are classified as restricted cash in the accompanying Consolidated Condensed Balance Sheets. The following table provides a reconciliation of cash and restricted cash included in Consolidated Condensed Balance Sheets to the amounts included in the Consolidated Condensed Statements of Cash Flows.
(In thousands)April 1, 2023April 2, 2022
Cash and Cash Equivalents$4,220 $24,015 
Restricted cash1,497 — 
Total Cash and Restricted Cash Shown in Statements of Cash Flows$5,717 $24,015 
Trade Accounts Receivable and Contract Assets
The allowance for estimated credit losses is based on the Company’s assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering factors such as direct materials and labor and manufacturing overhead as well as all engineering and development costs. The Company is engaged in a variety of engineering and design activities as well as basic research and development activities directed to the substantial improvement or new applicationage of the receivable balances, historical experience, credit quality, current economic conditions, and reasonable and supportable forecasts of future economic conditions that may affect a customer’s ability to pay. The allowance for estimated credit losses balance was $2.3 million and $2.6 million at April 1, 2023 and December 31, 2022, respectively. The Company’s existing technologies. Thesebad debt expense was insignificant during the three months ended April 1, 2023 and April 2, 2022. Total write-offs charged against the allowance were insignificant the three months ended April 1, 2023 and April 2, 2022. Total recoveries were $0.3 million in the three months ended April 1, 2023 and $0.2 million in the three months ended April 2, 2022.
The Company's exposure to credit losses may increase if its customers are adversely affected by global economic recessions, disruption associated with the COVID-19 pandemic or the Russian/Ukrainian conflict, industry conditions, or other customer-specific factors. Although the Company has historically not experienced significant credit losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade receivables and contract assets as airlines and other aerospace companies’ cash flows are impacted by the COVID-19 pandemic and associated supply chain disruptions.
Research and Development Expenses
Research and development costs are expensed whenas incurred and include salaries, benefits, consulting, material costs and depreciation. Research and development expenses amounted to $12.7 million and $12.2 million for the three months ended April 1, 2023 and April 2, 2022, respectively. These costs are included in cost of products sold. Research
Valuation of Goodwill and development, design and related engineering amounted to $23.7 million and $21.6 million for the three months ended and $69.5 million and $66.2 million for the nine months ended September 30, 2017 and October 1, 2016, respectively. Selling, general and administrative expenses include costs primarily related to our sales and marketing departments and administrative departments. Interest expense is shown net of interest income. Interest income was insignificant for the three and nine months ended September 30, 2017 and October 1, 2016.
Foreign Currency Translation

Long-Lived Assets
The aggregate transaction gain or loss included in operations was insignificant for the three and nine months ended September 30, 2017 and October 1, 2016.

Accounting Pronouncements Adopted in 2017

On January 1, 2017, the Company adopted Accounting Standards Update (“ASU”) No. 2016-09, Improvements to Employee Share-Based Payment Accounting. Prospectively, beginning January 1, 2017, excess tax benefits/deficiencies are reflected as income tax benefit/expense in the statement of income, resulting in a $0.3 million tax benefit for the nine months ended September 30, 2017. The extent of excess tax benefits/deficiencies is subject to variation in the Company’s stock price and timing/extent of employee stock option exercises. Under previous accounting guidance, when a share-based payment award such as a stock option was granted to an employee, the fair value of the award was generally recognized over the vesting period. However, the related deduction from taxes payable was based on the award’s intrinsic valuetests goodwill at the time of exercise, which could be either greater (creatingreporting unit level on an excess tax benefit)annual basis or less (creating a tax deficiency)more frequently if an event occurs or circumstances change that would more likely than the compensation cost recognized in the financial statements. Excess tax benefits were recognized in additional paid-in capital (“APIC”) within equity, while deficiencies were first recorded to APIC to the extent previously recognized excess tax benefits existed, after which time deficiencies were recorded to income tax expense. The Company’s adoption of this ASU also resulted in associated excess tax benefits being classified as an operating activity in the same manner as other cash flows related to income taxes in the statement of cash flows prospectively beginning January 1, 2017. Based on the adoption methodology applied, the statement of cash flows classification of prior periods has not changed.  As permitted by the ASU, the Company has elected to account for forfeitures as they occur.  None of the other provisions in this amended guidance had a significant impact on the Company’s consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Simplifying the Test for Goodwill Impairment. Under the new standard, goodwill impairment would be measured as the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying value of goodwill. This ASU eliminates existing guidance that requires an entity to determine goodwill impairment by calculating the implied fair value of goodwill by hypothetically assigningreduce the fair value of a reporting unit to all ofbelow its assets and liabilities as if that reporting unit had been acquired in a business combination. This ASU is effective prospectively to annual and interim impairment tests beginning after December 15, 2019, with early adoption permitted. The adoption of ASU 2017-04 on January 1, 2017 had no impact on the financial statements as of or for the three or nine months ended September 30, 2017, as there was no impairment analysis performed during the period.carrying amount.

2) Inventories
Inventories are as follows:
(In thousands)September 30,
2017		 December 31,
2016
Finished Goods$36,850
 $28,792
Work in Progress32,997
 20,790
Raw Material69,418
 67,015
 $139,265
 $116,597
3) Property, Plant and Equipment
The following table summarizes Property, Plant and Equipment as follows:
(In thousands)September 30,
2017		 December 31,
2016
Land$11,223
 $11,112
Buildings and Improvements81,361
 79,191
Machinery and Equipment102,386
 93,683
Construction in Progress9,334
 8,182
 204,304
 192,168
Less Accumulated Depreciation80,023
 69,356
 $124,281
 $122,812

4) Intangible Assets
The following table summarizes acquired intangibleLong-lived assets as follows:
  September 30, 2017 December 31, 2016
(In thousands)
Weighted
Average Life
 
Gross Carrying
Amount
 
Accumulated
Amortization
 
Gross Carrying
Amount
 
Accumulated
Amortization
Patents4 Years $2,146
 $1,590
 $2,146
 $1,450
Non-compete Agreement3 Years 2,500
 1,354
 2,500
 979
Trade Names7 Years 10,480
 3,866
 10,189
 3,153
Completed and Unpatented Technology5 Years 26,094
 11,147
 24,118
 9,221
BacklogLess than 1 Year 11,524
 11,424
 11,224
 11,224
Customer Relationships11 Years 99,831
 28,139
 97,046
 23,093
Total Intangible Assets5 Years $152,575
 $57,520
 $147,223
 $49,120
All acquired intangible assets other than goodwill and one trade name are being amortized. Amortization expense for acquired intangibles is summarized as follows:
 Nine Months Ended Three Months Ended
(In thousands)September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Amortization Expense$8,269
 $8,202
 $2,929
 $2,595
Amortization expense for acquired intangible assets expected for 2017 and for each of the next five years is summarized as follows:
(In thousands) 
2017$11,089
201810,593
201910,214
20209,658
20219,612
20229,216
5) Goodwill
The following table summarizes the changes in the carrying amount of goodwill for the nine months ended September 30, 2017:
(In thousands)December 31,
2016		 Acquisition 
Foreign
Currency
Translation
 September 30,
2017
Aerospace$115,207
 $3,067
 $844
 $119,118
Test Systems—
 —
 —
 —
 $115,207
 $3,067
 $844
 $119,118
6) Long-term Debt and Notes Payable
The Company’s obligations under the Credit Agreement as amended are jointly and severally guaranteed by each domestic subsidiary of the Company other than a non-material subsidiary. The obligations are secured by a first priority lien on substantially all of the Company’s and the guarantors’ assets.
The Company's Credit Agreement consists of a $350 million revolving credit line with the option to increase the line by up to $150 million. he Credit Agreement expires on January 13, 2021. At September 30, 2017, there was $167.0 million outstanding

on the revolving credit facility and there remains $181.9 million available, net of outstanding letters of credit. The credit facility allocates up to $20 million of the $350 million revolving credit line for the issuance of letters of credit, including certain existing letters of credit. At September 30, 2017, outstanding letters of credit totaled $1.1 million.
The maximum permitted leverage ratio of funded debt to Adjusted EBITDA (as defined in the Agreement) is 3.5 to 1, increasing to 4.0 to 1 for up to two fiscal quarters following the closing of an acquisition permitted under the Agreement. The Company’s leverage ratio was 2.12 to 1 at September 30, 2017. The Company will pay interest on the unpaid principal amount of the facility at a rate equal to one-, three- or six-month LIBOR plus between 137.5 basis points and 225 basis points based upon the Company’s leverage ratio. The Company will also pay a commitment fee to the lenders in an amount equal to between 17.5 basis points and 35 basis points on the undrawn portion of the credit facility, based upon the Company’s leverage ratio. The Company must also maintain a minimum interest coverage ratio (Adjusted EBITDA to interest expense) of 3.0 to 1 for the term of the Agreement. The Company’s interest coverage ratio was 20.2 to 1 at September 30, 2017.
In the event of voluntary or involuntary bankruptcy of the Company or any subsidiary, all unpaid principal and other amounts owing under the Agreement automatically become due and payable. Other events of default, such as failure to make payments as they become due and breach of financial and other covenants, change of control, judgments over a certain amount, and cross default under other agreements give the Agent the option to declare all such amounts immediately due and payable.
7) Product Warranties
In the ordinary course of business, the Company warrants its products against defects in design, materials and workmanship typically over periods ranging from 12 to 60 months. The Company determines warranty reserves needed by product line based on experience and current facts and circumstances. Activity in the warranty accrual is summarized as follows:
 Nine Months Ended Three Months Ended
(In thousands)September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Balance at Beginning of Period$4,675
 $5,741
 $4,637
 $5,361
Acquisitions359
 —
 —
 —
Warranties Issued1,315
 1,806
 483
 600
Warranties Settled(1,832) (1,906) (608) (616)
Reassessed Warranty Exposure101
 (313) 106
 (17)
Balance at End of Period$4,618
 $5,328
 $4,618
 $5,328
8) Income Taxes
The effective tax rates were approximately 27.0% and 29.3% for the nine months ended and 29.9% and 26.5% for the three months ended September 30, 2017 and October 1, 2016, respectively. The 2017 tax rates were favorably impacted relative to the statutory rate by excess tax benefits associated with the exercise of stock options, decreases in foreign tax rates, and from the federal research and development tax credit.

9) Shareholders’ Equity
The changes in shareholders’ equity for the nine months ended September 30, 2017 are summarized as follows:
   Number of Shares
(Dollars and Shares in thousands)Amount 
Common
Stock
 
Convertible
Class B Stock
Shares Authorized  40,000
 15,000
Share Par Value  $0.01
 $0.01
COMMON STOCK     
Beginning of Period$297
 21,955
 7,665
Conversion of Class B Shares to Common Shares—
 777
 (777)
Exercise of Stock Options—
 18
 39
End of Period$297
 22,750
 6,927
ADDITIONAL PAID IN CAPITAL     
Beginning of Period$64,752
    
Stock Compensation Expense2,203
    
Exercise of Stock Options349
    
End of Period$67,304
    
ACCUMULATED OTHER COMPREHENSIVE LOSS     
Beginning of Period$(15,494)    
Foreign Currency Translation Adjustment3,987
    
Retirement Liability Adjustment – Net of Tax392
    
End of Period$(11,115)    
RETAINED EARNINGS     
Beginning of Period$305,512
    
Net Income25,332
    
End of Period$330,844
    
TREASURY STOCK     
Beginning of Period$(17,618) (523)  
Purchase(32,382) (1,152)  
End of Period$(50,000) (1,675)  
TOTAL SHAREHOLDERS’ EQUITY     
Beginning of Period$337,449
    
      
End of Period$337,330
 21,075
 6,927

On February 24, 2016, the Company’s Board of Directors authorized the repurchase of up to $50 million of common stock (the “Buyback Program”). The Buyback Program allowed the Company to purchase shares of its common stock in accordance with applicable securities laws on the open market or through privately negotiated transactions. The Company has repurchased approximately 1,675,000 shares and has completed the program, which authorized repurchases up to $50.0 million.


10) Earnings Per Share
Basic and diluted weighted-average shares outstanding are as follows:
 Nine Months Ended Three Months Ended
(In thousands)September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Weighted Average Shares - Basic28,779
 29,199
 28,322
 28,925
Net Effect of Dilutive Stock Options978
 937
 678
 883
Weighted Average Shares - Diluted29,757
 30,136
 29,000
 29,808
The 2016 information above has been adjusted to reflect the impact of the three-for-twenty Class B stock distribution to shareholders of record on October 11, 2016.
Stock options with exercise prices greater than the average market price of the underlying common shares are excluded from the computation of diluted earnings per share because they are out-of-the-money and the effect of their inclusion would be anti-dilutive. The number of common shares covered by out-of-the-money stock options at September 30, 2017 was approximately 356,000 shares.
11) Accumulated Other Comprehensive Loss and Other Comprehensive Income
The components of accumulated other comprehensive loss are as follows:
(In thousands)September 30,
2017		 December 31,
2016
Foreign Currency Translation Adjustments$(4,610) $(8,597)
Retirement Liability Adjustment – Before Tax(10,008) (10,611)
Tax Benefit3,503
 3,714
Retirement Liability Adjustment – After Tax(6,505) (6,897)
Accumulated Other Comprehensive Loss$(11,115) $(15,494)
The components of other comprehensive income are as follows:
 Nine Months Ended Three Months Ended
(In thousands)September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Foreign Currency Translation Adjustments$3,987
 $1,354
 $1,496
 $49
Retirement Liability Adjustments:       
Reclassifications to General and Administrative Expense:       
Amortization of Prior Service Cost303
 329
 101
 110
Amortization of Net Actuarial Losses300
 273
 100
 90
Tax Benefit(211) (210) (71) (70)
Retirement Liability Adjustment392
 392
 130
 130
Other Comprehensive Income$4,379
 $1,746
 $1,626
 $179

12) Supplemental Retirement Plan and Related Post Retirement Benefits
The Company has two non-qualified supplemental retirement defined benefit plans (“SERP” and “SERP II”) for certain executive officers. The following table sets forth information regarding the net periodic pension cost for the plans.
 Nine Months Ended Three Months Ended
(In thousands)September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Service Cost$138
 $130
 $46
 $43
Interest Cost672
 675
 224
 225
Amortization of Prior Service Cost291
 310
 97
 103
Amortization of Net Actuarial Losses279
 257
 93
 86
Net Periodic Cost$1,380
 $1,372
 $460
 $457
Participants in the SERP are entitled to paid medical, dental and long-term care insurance benefits upon retirement under the plan. The following table sets forth information regarding the net periodic cost recognized for those benefits:
 Nine Months Ended Three Months Ended
(In thousands)September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Service Cost$6
 $4
 $2
 $1
Interest Cost30
 30
 10
 10
Amortization of Prior Service Cost12
 19
 4
 7
Amortization of Net Actuarial Losses21
 16
 7
 4
Net Periodic Cost$69
 $69
 $23
 $22
13) Sales to Major Customers
The Company has a significant concentration of business with two major customers, each in excess of 10% of consolidated sales. The loss of either of these customers would significantly, negatively impact our sales and earnings.
Sales to these two customers represented 20% and 17% of consolidated sales for the nine months ended and 20% and 17% for the three months ended September 30, 2017. Sales to these customers were in the Aerospace segment. Accounts receivable from these customers at September 30, 2017 was approximately $29.9 million. Sales to these two customers represented 21% and 15% of consolidated sales for the nine months ended and 21% and 15% for the three months ended October 1, 2016.
14) Legal Proceedings

The Company is subject to various legal proceedings, claims, and litigation arising in the ordinary course of business. While the outcome of these matters is currently not determinable, we do not expect these matters will have a material adverse effect on our business, financial position, results of operations, or cash flows. However, the results of these matters cannot be predicted with certainty. Should the Company fail to prevail in any legal matter or should several legal matters be resolved against the Company in the same reporting period, then the financial results of that particular reporting period could be materially adversely affected.

On December 29, 2010, Lufthansa Technik AG (“Lufthansa”) filed a Statement of Claim in the Regional State Court of Mannheim, Germany. Lufthansa’s claim asserts that our subsidiary, AES sold, marketed and brought into use in Germany a power supply system that infringes upon a German patent held by Lufthansa. The relief sought by Lufthansa includes requiring AES to stop selling and marketing the allegedly infringing power supply system, a recall of allegedly infringing products sold to commercial customers since November 26, 2003 and compensation for damages. The claim does not specify an estimate of damages and a damages claim would be pursued by Lufthansa in separate court proceedings.

On February 6, 2015, the Regional State Court of Mannheim, Germany rendered its decision that the patent was infringed. The judgment does not require AES to recall products that are already installed in aircraft or have been sold to other end users.  On July 15, 2015, Lufthansa advised AES of their intention to enforce the accounting provisions of the decision, which required AES to provide certain financial information regarding sales of the infringing product to enable Lufthansa to make an estimate

of requested damages. Additionally, if Lufthansa provides the required bank guarantee specified in the decision, the Company may be required to offer a recall of products that are in the distribution channels in Germany. No such bank guarantee has been issued to date. As of September 30, 2017, there are no products in the distribution channels in Germany.

The Company appealed to the Higher Regional Court of Karlsruhe.  On November 15, 2016, the Court issued its ruling and upheld the lower court’s decision.  The Company has submitted a petition to grant AES leave for appeal to the Federal Supreme Court. The Company believes it has valid defenses to refute the decision.  Should the Federal Supreme Court decide to hear the case, the appeal process is estimated to extend up to two years. We estimate AES’s potential exposure related to this matter to be approximately $1 million to $3 million. As loss exposure is not probable at this time, the Company has not recorded any liability with respect to this litigation as of September 30, 2017.

On November 26, 2014, Lufthansa filed a complaint in the United States District for the Western District of Washington. Lufthansa’s complaint in this action alleges that AES manufactures, uses, sells and offers for sale a power supply system that infringes upon a U.S. patent held by Lufthansa. The patent at issue in the U.S. action is based on technology similar to that involved in the German action. On April 25, 2016, the Court issued its ruling on claim construction, holding that the sole independent claim in the patent is indefinite, rendering all claims in the patent indefinite. Based on this ruling, AES filed a motion for summary judgment on the grounds that the Court’s ruling that the patent is indefinite renders the patent invalid and unenforceable. On July 20, 2016, the U.S. District Court granted the motion for summary judgment and issued an order dismissing all claims against AES with prejudice.

Lufthansa appealed the District Court's decision to the United States Court of Appeals for the Federal Circuit. On October 19, 2017, the Federal Circuit affirmed the district court’s decision, holding that the sole independent claim of the patent is indefinite, rending all claims on the patent indefinite. Lufthansa has until November 20, 2017, to ask for rehearing or rehearing en banc. If it does not file such a petition, it has until January 18, 2018, to file a petition for writ of certiorari with the U.S. Supreme Court. As loss exposure is neither probable nor estimable at this time, the Companyhas not recorded any liability with respect to this litigation as of September 30, 2017.
15) Segment Information
Below are the sales and operating profit by segment for the nine months ended September 30, 2017 and October 1, 2016 and a reconciliation of segment operating profit to income before income taxes. Operating profit is net sales less cost of products sold and other operating expenses excluding interest and corporate expenses. Cost of products sold and other operating expenses are directly identifiable to the respective segment.
 Nine Months Ended Three Months Ended
(Dollars in thousands)September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Sales       
Aerospace$395,037
 $406,356
 $128,663
 $125,179
Less Intersegment Sales—
 (367) —
 —
Total Aerospace Sales395,037
 405,989
 128,663
 125,179
Total Test Systems Sales58,109
 73,066
 20,973
 29,920
Total Consolidated Sales$453,146
 $479,055
 $149,636
 $155,099
Operating Profit and Margins       
Aerospace$46,753
 $61,099
 $13,015
 $17,557
 11.8% 15.0% 10.1% 14.0%
Test Systems2,843
 6,524
 1,093
 3,240
 4.9% 8.9% 5.2% 10.8%
Total Operating Profit49,596
 67,623
 14,108
 20,797
 10.9% 14.1% 9.4% 13.4%
Deductions from Operating Profit       
Interest Expense, Net of Interest Income3,750
 3,246
 1,437
 1,103
Corporate Expenses and Other11,140
 9,888
 4,025
 3,272
Income Before Income Taxes$34,706
 $54,489
 $8,646
 $16,422

Total Assets:
(In thousands)September 30,
2017		 December 31,
2016
Aerospace$523,563
 $500,892
Test Systems85,848
 76,575
Corporate31,217
 26,877
Total Assets$640,628
 $604,344
16) Fair Value
A fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. Fair value is based upon an exit price model. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and involves consideration of factors specific to the asset or liability.
The Company follows a valuation hierarchy for disclosure of the inputs to valuation used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3 inputs are unobservable inputs based on our own assumptions used to measure assets and liabilities at fair value.

On a Recurring Basis:
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The financial liabilities carried at fair value measured on a recurring basis consisted of contingent consideration related to a prior acquisition, valued at zero at December 31, 2016, determined using Level 3 inputs. This arrangement has expired and as of September 30, 2017 there are no financial liabilities carried at fair value measured on a recurring basis. There were no financial assets carried at fair value measured on a recurring basis at December 31, 2016 or September 30, 2017.

On a Non-recurring Basis:
The Company estimates the fair value of reporting units, utilizing unobservable Level 3 inputs. Level 3 inputs require significant management judgment due to the absence of quoted market prices or observable inputs for assets of a similar nature. The Company utilizes a discounted cash flow analysis to estimate the fair value of reporting units utilizing unobservable inputs. The fair value measurement of the reporting unit under the step-one and step-two analysis of the quantitative goodwill impairment test are classified as Level 3 inputs.

Intangible assets that are amortized are evaluated for recoverability whenever adverse effects or changes in circumstances indicate that the carrying value may not be recoverable. The recoverability test consists of comparing the undiscounted projected cash flows with the carrying amount. Should the carrying amount exceed undiscounted projected cash flows, an impairment loss would be recognized to the extent the carrying amount exceeds fair value. For
As of April 1, 2023 and April 2, 2022, the Company’s indefinite-livedCompany concluded that no indicators of impairment relating to intangible assets or goodwill existed and an interim test was not performed in the three month periods then ended.
Foreign Currency Translation
The aggregate foreign currency transaction gain or loss included in operations was insignificant for the three months ended April 1, 2023 and April 2, 2022.
Newly Adopted Accounting Pronouncement
We consider the applicability and impact of all ASUs. Recent ASUs were assessed and determined to be either not applicable, or had or are expected to have minimal impact on our financial statements and related disclosures.
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2) Revenue
On April 1, 2023, we had $578.5 million of remaining performance obligations, which we refer to as total backlog. We expect to recognize approximately $498.7 million of our remaining performance obligations as revenue over the next twelve months and the balance thereafter.
We recognized $14.1 million and $6.0 million during the three months ended April 1, 2023 and April 2, 2022, respectively, in revenues that were included in the contract liability balance at the beginning of the period.
The Company's contract assets and contract liabilities consist primarily of costs and profits in excess of billings and billings in excess of cost and profits, respectively. The following table presents the beginning and ending balances of contract assets and contract liabilities during the three months ended April 1, 2023:
(In thousands)Contract AssetsContract Liabilities
Beginning Balance, January 1, 2023$27,349 $33,209 
Ending Balance, April 1, 2023$30,299 $28,570 
The Company recognizes an asset for certain, material costs to fulfill a contract if it is determined that the impairment test consistscosts relate directly to a contract or an anticipated contract that can be specifically identified, generate or enhance resources that will be used in satisfying performance obligations in the future, and are expected to be recovered. Such costs are amortized on a systematic basis that is consistent with the transfer to the customer of comparing the fairgoods to which the asset relates. Start-up costs are expensed as incurred. Capitalized fulfillment costs are included in Inventories in the accompanying Consolidated Condensed Balance Sheets. Should future orders not materialize or it is determined the costs are no longer probable of recovery, the capitalized costs are written off. As of April 1, 2023 and December 31, 2022, the Company capitalized $3.0 million and $2.5 million of costs, respectively.
The following table presents our revenue disaggregated by Market Segments as follows:
Three Months Ended
(In thousands)April 1, 2023April 2, 2022
Aerospace Segment
Commercial Transport$94,213 $64,089 
Military Aircraft14,064 14,976 
General Aviation19,448 15,867 
Other7,872 6,462 
Aerospace Total135,597 101,394 
Test Systems Segment
Government & Defense20,941 14,782 
Test Systems Total20,941 14,782 
Total$156,538 $116,176 
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The following table presents our revenue disaggregated by Product Lines as follows:
Three Months Ended
(In thousands)April 1, 2023April 2, 2022
Aerospace Segment
Electrical Power & Motion$53,454 $44,467 
Lighting & Safety36,553 29,211 
Avionics29,741 18,875 
Systems Certification5,677 1,002 
Structures2,300 1,377 
Other7,872 6,462 
Aerospace Total135,597 101,394 
Test Systems20,941 14,782 
Total$156,538 $116,176 
3) Inventories
Inventories consisted of the following:
(In thousands)
April 1, 2023December 31, 2022
Finished Goods$32,527 $30,703 
Work in Progress30,298 29,895 
Raw Material137,119 127,385 
$199,944 $187,983 
The Company has evaluated the carrying value determined usingof existing inventories and believe they are properly reflected at their lower of carrying value or net realizable value. Future changes in demand or other market developments could result in future inventory charges. The Company is actively managing inventories and aligning them to meet known current and future demand.
4) Property, Plant and Equipment
Property, Plant and Equipment consisted of the relief from royalty method, with its carrying amount. An impairment loss would be recognizedfollowing:
(In thousands)April 1, 2023December 31, 2022
Land$8,590 $8,578 
Buildings and Improvements71,188 73,744 
Machinery and Equipment123,976 123,071 
Construction in Progress6,295 6,415 
210,049 211,808 
Less Accumulated Depreciation121,426 121,150 
$88,623 $90,658 
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5) Intangible Assets
The following table summarizes acquired intangible assets as follows:
April 1, 2023December 31, 2022
(In thousands)
Weighted
Average Life
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
Patents11 years$2,146 $2,088 $2,146 $2,066 
Non-compete Agreement4 years11,082 11,057 11,082 11,052 
Trade Names10 years11,412 9,550 11,402 9,350 
Completed and Unpatented Technology9 years47,872 35,970 47,855 34,877 
Customer Relationships15 years142,166 80,316 142,133 77,996 
Total Intangible Assets12 years$214,678 $138,981 $214,618 $135,341 
All acquired intangible assets other than goodwill and one trade name are being amortized. Amortization expense for acquired intangibles is summarized as follows:
Three Months Ended
(In thousands)April 1, 2023April 2, 2022
Amortization Expense$3,597 $3,765 
Amortization expense for acquired intangible assets expected for 2023 and for each of the next five years is summarized as follows:
(In thousands)
2023$13,882 
2024$12,856 
2025$10,935 
2026$9,533 
2027$7,825 
2028$7,037 
6) Goodwill
The following table summarizes the changes in the carrying amount of goodwill for the three months ended April 1, 2023:
(In thousands)December 31, 2022
Foreign
Currency
Translation
April 1, 2023
Aerospace$36,534 $— $36,534 
Test Systems21,635 — 21,635 
$58,169 $— $58,169 
7) Long-term Debt and Notes Payable
The Company's long-term debt at December 31, 2022 consisted of borrowings under its Fifth Amended and Restated Credit Agreement (the “Agreement”). The maturity date of the loans under the Agreement was November 30, 2023. At December 31, 2022, there was $164.0 million outstanding on the Agreement and there remained $6.0 million available.
The Company amended the Agreement on January 19, 2023 by entering into the Sixth Amended and Restated Credit Agreement (the “ABL Revolving Credit Facility”). The ABL Revolving Credit Facility set the maximum aggregate amount that the Company can borrow under the revolving credit line at $115 million, with borrowings subject to a borrowing base determined primarily by certain domestic inventory and accounts receivable. The maturity date of borrowings under the ABL Revolving Credit Facility is January 19, 2026. Under the terms of the ABL Revolving Credit Facility, the Company will now pay interest on the unpaid principal amount of the facility at a rate equal to SOFR (which is required to be at least 1.00%) plus 2.25% to 2.75%. The Company will 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. Under the provisions of the ABL Revolving Credit Facility, the Company has a cash dominion arrangement with the lead banking institution whereby eligible daily cash
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receipts are contractually utilized to pay down outstanding borrowings. Eligible cash receipts that have not yet been applied to outstanding debt balance are classified as restricted cash in the accompanying consolidated balance sheets. At April 1, 2023, there was $88.1 million outstanding on the ABL Revolving Credit Facility and there remained $26.9 million available. The Company is also required to maintain minimum liquidity of $20 million through the date of delivery of the compliance certificate for the quarter ended March 31, 2024, and $10 million thereafter.
The Company also entered into a $90 million asset-based Term Loan Facility on January 19, 2023. The Term Loan Facility is secured primarily by fixed assets, real estate and intellectual property. The maturity date of the Term Loan Facility is the earlier of the stated maturity date of the ABL Revolving Credit Facility or January 19, 2027, provided the ABL Revolving Credit Facility is extended beyond that date. The Company pays interest under the Term Loan Facility at a rate equal to SOFR (which is required to be at least 2.50%) plus 8.75%. The Company will pay a commitment fee under the Term Loan Facility of 5% of the total aggregate commitment, or $4.5 million, $1.8 million which was paid on the closing date, $1.8 million of which will be paid on June 19, 2023 and $0.9 million of which will be paid on the date that the financial statements and compliance certificate for the fiscal quarter of the Company ending on or about March 31, 2024 are required to be delivered under the Term Loan Facility.
Amortization of the principal under the Term Loan Facility will begin in April with a monthly amortization rate of 0.292% of the outstanding term loan principal balance for the period April 1, 2023 through June 1, 2023, increasing to 0.542% per month for the period July 1, 2023 through September 1, 2023 then increasing to 0.833% thereafter. Total scheduled principal payments of $6.8 million are payable over the next twelve months and as such, have been classified as current in the accompanying consolidated condensed balance sheet as of April 1, 2023. The weighted-average interest rate on current maturities of long-debt is 13.60%. The remaining balance $83.2 million is recorded as long-term in the accompanying consolidated condensed balance sheet.
Pursuant to the ABL Revolving Credit Facility and the Term Loan Facility, the Company is required to comply with a minimum trailing four quarter EBITDA of $14.7 million for the Company’s first quarter of 2023, $23.3 million in the second quarter, $39.2 million in the third quarter, $51.7 million in the fourth quarter, $57.6 million in the first quarter of 2024, $65.2 million in the second quarter of 2024 and $70 million thereafter. In addition, mandatory prepayment of a portion of excess cash flow, as defined by the Term Loan Facility, is payable towards the principal amount outstanding on an annual basis. Any voluntary prepayments made are subject to a prepayment fee, as defined by the Term Loan Facility. Beginning with the first quarter of 2024, the Company is subject to a minimum fixed charge coverage ratio of 1.10 to 1.00. Further, the Company is subject to restrictions on additional indebtedness, share repurchases and dividend payments, and a limitation on capital expenditures. The Company is in compliance with all covenant requirements as of April 1, 2023.
The Company incurred $8.5 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. Deferred debt issuance costs associated with the ABL Revolving Credit Facility ($2.6 million as of April 1, 2023) are recorded within other assets and those associated with the Term Loan Facility ($5.8 million as of April 1, 2023) are recorded as a reduction of the carrying value of the debt on the Consolidated Condensed Balance Sheet.
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. Other events of default, such as failure to make payments as they become due and breach of financial and other covenants, change of control, cross default under other material debt agreements, and a going concern qualification for any reason other than loan maturity date give the agent the option to declare all such amounts immediately due and payable.
The Company expects its sales growth and reductions in working capital will provide sufficient cash flows to fund operations. However, the Company may also evaluate various actions and alternatives to enhance its profitability and cash generation from operating activities, which could include manufacturing efficiency initiatives, cost-reduction measures, working with vendors and suppliers to reduce lead times and expedite shipment of critical components, and working with customers to expedite receivable collections.
Our ability to maintain sufficient liquidity and comply with financial debt covenants is highly dependent upon achieving expected operating results. Failure to achieve expected operating results could have a material adverse effect on our liquidity, our ability to obtain financing or access our existing financing, and our operations in the future and could allow our debt holders to demand payment of all outstanding amounts.
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8) Product Warranties
In the ordinary course of business, the Company warrants its products against defects in design, materials and workmanship typically over periods ranging from twelve to sixty months. The Company determines warranty reserves needed by product line based on experience and current facts and circumstances.
Activity in the warranty accrual is summarized as follows:
Three Months Ended
(In thousands)April 1, 2023April 2, 2022
Balance at Beginning of Period$8,009 $8,183 
Warranties Issued780 785 
Warranties Settled(1,337)(163)
Reassessed Warranty Exposure(51)(756)
Balance at End of Period$7,401 $8,049 
9) Income Taxes
The effective tax rates were approximately (41.3)% and 161.7% for the three months ended April 1, 2023 and April 2, 2022, respectively. Beginning with the 2022 tax year, certain research and development costs are required to be capitalized and amortized over sixty months for income tax purposes. The tax rate in the 2023 period was impacted by a valuation allowance applied against the deferred tax asset associated with the research and development costs that are expected to be capitalized and was partially offset by the removal of valuation allowances related to net operating losses and certain timing differences that are expected to reverse during 2023. In addition, the tax rate in the 2023 period was also impacted by state income taxes and the federal research and development credit expected for 2023.
The Company records a valuation allowance against the deferred tax assets if and to the extent it is more likely than not that the Company will not recover the deferred tax assets. In evaluating the need for a valuation allowance, the Company weighs all relevant positive and negative evidence, and considers among other factors, historical financial performance, projected future taxable income, scheduled reversals of deferred tax liabilities, the overall business environment, and tax planning strategies. Losses in recent periods and cumulative pre-tax losses in the three year period ending with the current year, combined with the significant uncertainty brought about by the COVID-19 pandemic, is collectively considered significant negative evidence under ASC 740 when assessing whether an entity can use projected income as a basis for concluding that deferred tax assets are realizable on a more-likely than not basis. For purposes of assessing the recoverability of deferred tax assets, the Company determined that it could not include future projected earnings in the analysis due to recent history of losses and therefore had insufficient objective positive evidence that the Company will generate sufficient future taxable income to overcome the negative evidence of cumulative losses. Accordingly, during the years ended December 31, 2022 and 2021, the Company determined that a portion of its deferred tax assets were not expected to be realizable in the future and the Company continues to maintain the valuation allowance against its deferred tax assets as of April 1, 2023.
10) Earnings Per Share
Basic and diluted weighted-average shares outstanding are as follows:
Three Months Ended
(In thousands)April 1, 2023April 2, 2022
Weighted Average Shares - Basic32,505 31,933 
Net Effect of Dilutive Stock Options— — 
Weighted Average Shares - Diluted32,505 31,933 
Stock options with exercise prices greater than the average market price of the underlying common shares are excluded from the computation of diluted earnings per share because they are out-of-the-money and the effect of their inclusion would be anti-dilutive. The number of common shares covered by out-of-the-money stock options was approximately 826,000 shares as of April 1, 2023 and 848,000 shares as of April 2, 2022. Further, due to our net loss in the three month periods ended April 1, 2023 and April 2, 2022, the assumed exercise of stock compensation had an antidilutive effect and therefore was excluded from the computation of diluted loss per share.
Currently, the Company expects to fund the 401K contribution for the quarter ended April 1, 2023 with treasury stock in lieu of cash. The earnings per share calculation for the quarter ended April 1, 2023 is inclusive of the approximately 0.1 million in
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shares outstanding for the equivalent shares needed to fulfill the obligation using the closing share price as of April 1, 2023. Actual shares issued may differ based on the sale price on the settlement date.
11) Shareholders' Equity
Share Buyback and Reissuance
The Company’s Board of Directors from time to time authorizes the repurchase of common stock, which allows the Company to purchase shares of its common stock in accordance with applicable securities laws on the open market or through privately negotiated transactions. Common shares repurchased by the Company are recorded at cost as treasury shares and result in a reduction of equity. Under its current credit agreements, and as described further in Note 7, the Company is currently restricted from further stock repurchases.
When treasury shares are reissued, the Company determines the cost using an average cost method. The difference between the average cost of the treasury shares and reissuance price is included in Additional paid-in capital or Retained earnings. During the three month periods ended April 1, 2023 and April 2, 2022, the Company reissued 95,000 and 325,000 treasury shares, respectively, associated with the funding of employer 401K contributions and recorded the difference between the average cost and the reissuance price, $1.5 million and $5.1 million, respectively, as a reduction to Retained earnings.
Comprehensive Income and Accumulated Other Comprehensive Loss
The components of accumulated other comprehensive loss are as follows:
(In thousands)April 1, 2023December 31, 2022
Foreign Currency Translation Adjustments$(7,111)$(7,335)
Retirement Liability Adjustment – Before Tax(4,288)(4,473)
Tax Benefit of Retirement Liability Adjustment2,282 2,282 
Retirement Liability Adjustment – After Tax(2,006)(2,191)
Accumulated Other Comprehensive Loss$(9,117)$(9,526)
The components of other comprehensive income are as follows:
Three Months Ended
(In thousands)April 1, 2023April 2, 2022
Foreign Currency Translation Adjustments$224 $(181)
Retirement Liability Adjustments:
Reclassifications to Selling, General and Administrative Expense:
Amortization of Prior Service Cost95 101 
Amortization of Net Actuarial Losses90 250 
Retirement Liability Adjustment185 351 
Other Comprehensive Income$409 $170 
12) Supplemental Retirement Plan and Related Post Retirement Benefits
The Company has two non-qualified supplemental retirement defined benefit plans (“SERP” and “SERP II”) for certain current and retired executive officers. The following table sets forth information regarding the net periodic pension cost for the plans.
Three Months Ended
(In thousands)April 1, 2023April 2, 2022
Service Cost$26 $34 
Interest Cost325 209 
Amortization of Prior Service Cost95 97 
Amortization of Net Actuarial Losses90 239 
Net Periodic Cost$536 $579 
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Participants in the SERP are entitled to paid medical, dental and long-term care insurance benefits upon retirement under the plan. The Company also has a defined benefit plan related to its subsidiary in France. The net periodic cost for both plans for the three months ended April 1, 2023 and April 2, 2022 is immaterial.
The service cost component of net periodic benefit costs above is recorded in Selling, General and Administrative Expenses within the Consolidated Condensed Statements of Operations, while the remaining components are recorded in Other Income, Net of Other Expense.
13) Sales to Major Customers
The loss of major customers or a significant reduction in business with a major customer would significantly, negatively impact our sales and earnings. In the three months ended April 1, 2023 and April 2, 2022, the Company had one customer in excess of 10% of consolidated sales. Sales to The Boeing Company (“Boeing”) accounted for 10.2% and 13.4% of sales in the three months ended April 1, 2023 and April 2, 2022, respectively. Accounts receivable from Boeing at April 1, 2023 were approximately $18.3 million.
14) Legal Proceedings
Lufthansa
One of the Company’s subsidiaries is involved in numerous patent infringement actions brought by Lufthansa Technik AG (“Lufthansa”) in Germany, UK and France. The Company is vigorously defending all such litigation and proceedings. Additional information about these legal proceedings can be found in Note 19 “Legal Proceedings” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. The reserve for the German indirect claim and interest was approximately $18.0 million at April 1, 2023, which included an additional $0.2 million in interest accrued during the three months ended April 1, 2023, and $17.8 million at December 31, 2022. The Company currently believes it is unlikely that the appeals process will be completed or the damages and related interest will be paid within the next twelve months. Therefore, the liability related to these matters is classified within Other Liabilities (non-current) in the Consolidated Condensed Balance Sheets at April 1, 2023 and December 31, 2022. There were no significant developments in the German indirect claim during the quarter ended April 1, 2023.
In the UK matter, as previously disclosed, Lufthansa has pleaded its fair value.case for monetary compensation, which will be determined at a separate trial, which is now set to take place in October 2024. Under English Law, Lufthansa had the option of pursuing a claim in relation to the defendants’ profits from their infringing activities or pursuing a claim in relation to Lufthansa's own lost profits. Lufthansa has now elected for the infringers’ profits as the measure of compensation. We have estimated damages and accrued interest for AES and its indemnified customers of approximately $7.2 million and $7.0 million at April 1, 2023 and December 31, 2022, respectively. This variance is due to currency fluctuation. Interest will accrue until final payment to Lufthansa. This amount is subject to change as additional data is received and evaluated, and as additional information regarding the nature of its claim is put forward by Lufthansa in advance of the damages trial. The damages trial is scheduled to be heard starting in October 2024, with payment likely due in late 2024 or early 2025. Therefore, the liability related to these matters is classified within Other Liabilities (non-current) in the Consolidated Condensed Balance Sheets at April 1, 2023 and December 31, 2022.

As previously disclosed, in 2020, the Court held the French patent invalid for all asserted claims. There can consequently be no finding of infringement on first instance. Lufthansa has appealed this judgment. The appeal hearing took place on December 8, 2022, and on February 24, 2023, the court upheld the first instance judgment in favor of AES. On March 20, 2023, Lufthansa lodged an appeal before the French Supreme Court. The merits of this Supreme Court challenge remain to be filed and assessed. As loss exposure is not probable and estimable at this time, the Company has not recorded any liability with respect to the French matter as of April 2, 2023 or December 31, 2022.
At September 30, 2017,There were no other significant developments in any of these matters during the three months ended April 1, 2023.
A liability for reimbursement of Lufthansa’s legal expenses associated with the UK matter was approximately $0.7 million at December 31, 2022 and $0.8 million at April 1, 2023 which is expected to be paid within the next twelve months and, as such, is classified in Accrued Expenses and Other Current Liabilities in the accompanying Consolidated Condensed Balance Sheet as of April 1, 2023 and December 31, 2022.
Other
On March 23, 2020, Teradyne, Inc. filed a complaint against the Company and its subsidiary, Astronics Test Systems (“ATS”) (together, “the Defendants”) in the United States District Court for the Central District of California alleging patent and
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copyright infringement, and certain other related claims. The Defendants moved to dismiss certain claims from the case. On November 6, 2020, the Court dismissed the Company from the case, and also dismissed a number of claims, though the patent and copyright infringement claims remained. The case proceeded to discovery. In addition, on December 21, 2020, ATS filed a petition for inter partes review (“IPR”) with the US Patent Trial and Appeal Board (“PTAB”), seeking to invalidate the subject patent, and on July 21, 2021, the PTAB instituted IPR. ATS requested and, on August 26, 2021, the District Court granted, a stay of litigation during the IPR proceeding. Oral arguments on the IPR were held on April 21, 2022. The PTAB issued its decision on July 20, 2022, in which it invalidated all of Teradyne’s patent claims. Teradyne will not appeal the decision. The stay of litigation was lifted with respect to the remaining claims in August 2022 and discovery has resumed. Trial is scheduled for December 5, 2023. No amounts have been accrued for this matter in the April 1, 2023 or December 31, 2022 financial statements, as loss exposure was neither probable nor estimable at such times.
Other than these proceedings, we are not party to any significant pending legal proceedings that management believes will result in a material adverse effect on our financial condition or results of operations.
15) Segment Information
Below are the sales and operating profit by segment for the three months ended April 1, 2023 and April 2, 2022 and a reconciliation of segment operating profit to (loss) income before income taxes. Operating profit is net sales less cost of products sold and other operating expenses excluding interest and corporate expenses. Cost of products sold and other operating expenses are directly identifiable to the respective segment.
Three Months Ended
(In thousands)April 1, 2023April 2, 2022
Sales:
Aerospace$135,715 $101,394 
Less Inter-segment Sales(118)— 
Total Aerospace Sales135,597 101,394 
Test Systems20,941 14,798 
Less Inter-segment Sales— (16)
Total Test Systems Sales20,941 14,782 
Total Consolidated Sales$156,538 $116,176 
Segment Measure of Operating Profit and Margins
Aerospace$4,087 $3,050 
3.0 %3.0 %
Test Systems(597)(1,787)
(2.9)%(12.1)%
Total Segment Measure of Operating Profit3,490 1,263 
2.2 %1.1 %
Deductions from Segment Measure of Operating Profit:
Net Gain on Sale of Business(3,427)(11,284)
Interest Expense, Net of Interest Income5,470 1,631 
Corporate Expenses and Other4,572 5,892 
(Loss) Income Before Income Taxes$(3,125)$5,024 
During the three months ended April 1, 2023, $5.8 million was recognized in sales related to the reversal of a deferred revenue liability assumed with an acquisition and associated with a customer program within our Test Systems Segment which is no longer expected to occur, which also benefits operating loss for the period. Absent that benefit, Test Systems’ operating loss was $6.4 million. In the quarter ended April 2, 2022, $6.0 million of the AMJP grant was recognized as an offset to the cost of products sold in the Aerospace segment. Corporate expenses and other for the quarter ended April 1, 2023 includes income of $1.8 million associated with the reversal of a liability related to an equity investment, as we will no longer be required to make
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the associated payment. This amount is included in Other Income, Net of Other Expense in the Consolidated Condensed Statement of Operations.
Total Assets:
(In thousands)April 1, 2023December 31, 2022
Aerospace$498,348 $481,416 
Test Systems103,778 111,513 
Corporate14,282 22,102 
Total Assets$616,408 $615,031 
16) Fair Value
There were no financial assets or liabilities carried at fair value of goodwillmeasured on a recurring basis at April 1, 2023 or December 31, 2022.
There were no non-recurring fair value measurements performed in the three months ended April 1, 2023 and intangible assets classified using Level 3 inputs are comprised of the CCC goodwill and intangible assets acquired on April 3, 2017, which are currently valued based on management’s best estimates. When the accounting for the acquisition is finalized, these intangible assets will be valued using discounted cash flow methodology.

2, 2022.
Due to their short-term nature, the carrying value of cash and equivalents, accounts receivable accounts payable, and notesaccounts payable approximate fair value. The carrying value of the Company’s variable rate long-term debt instruments also approximates fair value due to the variable rate feature of these instruments. As of September 30, 2017, the Company concluded that no indicators of impairment relating to intangible assets or goodwill existed and an interim test was not performed.

17) Recent Accounting PronouncementsSubsequent Events

In May 2014,Shortly after the Financial Accounting Standards Board (“FASB”) issued ASU No. 2014-9, Revenue from Contractsquarter ended the Test Systems segment implemented restructuring initiatives to align the workforce and management structure with Customers. This new standard is effective for reporting periodsnear-term revenue expectations and operational needs. These initiatives are expected to provide savings of approximately $4 million to $5 million annually, beginning after December 15, 2017, pursuant towith the issuance of ASU 2015-14, Revenue from Contracts with Customers: Deferral of Effective Date issued in August 2015. The comprehensive new standard will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. Adoption of the new rules could affect the timing of revenue recognition for certain transactions. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards.third quarter. The Company will adopt the new standard on January 1, 2018, using the modified retrospective transition method.

The adoption of this amendment may require us to accelerate the recognition of revenue as compared to current standards, for certain customers, in cases where we produce products unique to those customers; and for which we would have an enforceable right of payment for production completed to date. The Company has identified its revenue streams, reviewed the initial impacts of adopting the new standard on those revenue streams, and appointed a project management leader. The Company continues to evaluate the quantitative and qualitative impacts of the standard.

In February 2016, the FASB issued ASU No. 2016 - 02, Leases. The new standard is effective for reporting periods beginning after December 15, 2018. Early adoption is permitted. The standard will require lessees to report most leases as assets and liabilities on the balance sheet, while lessor accounting will remain substantially unchanged. The standard requires a modified retrospective transition approach for existing leases, whereby the new rules will be applied to the earliest year presented.  The adoption of the standard is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity in practice in how certain cash receipts and payments are presented and classified in the statement of cash flows. The standard provides guidance in a number of situations including, among others, settlement of zero-coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The ASU also provides guidance for classifying cash receipts and payments that have aspects of more than one class of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The standard requires application using a retrospective transition method. This ASU is not expected to have a material impact on the Company’s consolidated results of operations and financial condition.

In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, which narrows the existing definition of a business and provides a framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business. The ASU requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities (collectively, the set) is not a business. To be considered a business, the set would need to include an input and a substantive process that together significantly contribute to the ability to create outputs. The standard also narrows the definition of outputs. The definition of a business affects areas of accounting such as acquisitions, disposals and goodwill. Under the new guidance, fewer acquired sets are expected to be considered businesses. This ASU is effective for fiscal years beginning after December 15, 2017 on a prospective basis with early adoption permitted. The Company would apply this guidance to applicable transactions after the adoption date.

In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits(Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires employers to include only the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses. The other components of net benefit cost, including amortization of prior service cost/credit and net actuarial gains/losses, and settlement and curtailment effects, are to be included in non-operating expenses. The ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. The effective date for adoption of this guidance begins on January 1, 2018, with early adoption permitted. The Company is currently evaluating the effect that this standard will have on the consolidated financial statements.

18) Acquisitions
Custom Control Concepts LLC
On April 3, 2017, Astronics Custom Control Concepts Inc., a wholly owned subsidiary of the Company acquired substantially all the assets and certain liabilities of Custom Control Concepts LLC (“CCC”), located in Kent, Washington. CCC is a provider of cabin management and in-flight entertainment systems for a range of aircraft. The total consideration for the transaction was approximately $10.2 million, net of $0.5incur $0.6 million in cash acquired. Allseverance charges during the second quarter of the goodwill and purchased intangible assets are expected to be deductible for tax purposes over 15 years. The purchase price allocation for this acquisition has not been finalized. CCC is included in our Aerospace segment.

Telefonix, Incorporated
Subsequent to the end of the third quarter, on October 26, 2017, the Company, through a wholly owned acquisition subsidiary, entered into an agreement to purchase substantially all of the assets of Telefonix, Incorporated and a related company, Product Development Technologies, LLC. Under the terms of the Agreement, the total consideration for the transaction will be approximately $104.0 million in cash.



2023.
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Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(The following should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in the Company’s Form 10-K for the year ended December 31, 2016.2022.)
OVERVIEW
Astronics Corporation, (“Astronics” or the “Company”)through its subsidiaries, is a leading supplier of advanced technologies and products to the global aerospace defense, electronics and semiconductordefense industries. Our products and services include advanced, high-performance electrical power generation and distribution andsystems, seat motion systems,solutions, lighting &and safety systems, avionics products, aircraft structures, systems certification, and automated test systems.
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 primary Aerospace customers are the airframe manufacturers ("OEM"(“OEM”) that build aircraft for the commercial transport, military and general aviation markets, suppliers to those OEM’s,OEMs, aircraft operators such as airlines, suppliers to the aircraft operators, and branches of the U.S. Department of Defense as well as the Federal Aviation Administration and airport operators.(“USDOD”). Our Test Systems segment designs, develops, manufactures and maintains automated test systems that support the semiconductor, aerospace communications and weapons test systemsdefense and mass transit industries as well as training and simulation devices for both commercial and military applications. In the Test Systems segment, Astronics’ products are sold to a global customer base including OEM'sOEMs and prime government contractors for both electronics and military products.
Our strategy is to increase our value by developing technologies and capabilities, either internally or through acquisition, and using those capabilities to provide innovative solutions to the aerospace and defense, semiconductor and otherour targeted markets where our technology can be beneficial.
Important factors affecting our growth and profitability are the ongoing impacts of the COVID-19 pandemic and the timing and extent of recovery (as discussed more fully below), supply chain and labor market pressures, the rate at which new aircraft are produced, government funding of military programs, our ability to have our products designed into new aircraft and the rates at which aircraft owners, including commercial airlines, refurbish or install upgrades to their aircraft. New aircraft build rates and aircraft owners spending on upgrades and refurbishments is cyclical and dependent on the strength of the global economy. Once one of our products is designed into a new aircraft, the spare parts business is also frequently retained by the Company. Future growth and profitability of the Test Systems business is dependent on developing and procuring new and follow-on business in commercial electronics and semiconductor markets as well as with the military.business. The nature of our Test Systems business is such that it pursues large, often multi-year, projects. There can be significant periods of time between orders in this business which may result in large fluctuations of sales and profit levels and backlog from period to period. Test Systems segment customers include the USDOD, prime contractors to the USDOD, mass transit operators and prime contractors to mass transit operators.
Each of the markets that we serve presents opportunities that we expect will provide growth for the Company over the long-term. We continue to look for opportunities in all of our markets to capitalize on our core competencies to expand our existing business and to grow through strategic acquisitions.
ACQUISITIONSChallenges which continue to face us include the ongoing COVID-19 pandemic and its continued impact on the aerospace industry, supply chain pressures including material availability and cost increases, labor availability and cost, inflationary pressures, 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.
Custom Control Concepts LLCReduced 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. Reduction of defense spending may result in fewer opportunities for us to compete, which could result in lower profits in the future. Many of our newer development programs are based on new and unproven technology and at the same time we are challenged to develop the technology on a schedule that is consistent with specific programs. Delays in delivery schedules and incremental costs resulting from supply chain pressures can 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.
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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. These include financial covenants pertaining to minimum trailing four quarter EBITDA requirements, minimum liquidity requirements and 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. During 2023, given the ongoing challenges faced in our business as described herein, including as a result of the COVID-19 pandemic and its continued impact on the aerospace industry, and based upon our 2023 Outlook as described herein, our ability to satisfy the already tight financial covenants in our ABL Revolving Credit Facility and Term Loan Facility is expected to be challenging and is an item that our management team will be closely monitoring throughout the year. 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 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 during 2023.
In September 2021 the Company was awarded a grant of up to $14.7 million from the U.S. Department of Transportation (“USDOT”) under the Aviation Manufacturing Jobs Protection Program (“AMJP”). The Company received $5.2 million in the first quarter of 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 is intended to defray. During the three months ended April 2, 2022, the Company recognized $6.0 million of the award.
We are also 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. Although the conflict has not resulted in a direct material adverse impact on our business to date, the implications of the Russia and Ukraine conflict in the short-term and long-term are difficult to predict at this time. 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.
On April 3, 2017, Astronics Custom Control Concepts Inc., a wholly owned subsidiary ofFebruary 13, 2019, the Company acquired substantially allcompleted a divestiture of its semiconductor test business within the assets and certain liabilitiesTest Systems segment. The transaction included two elements of Custom Control Concepts LLC (“CCC”), located in Kent, Washington. CCC is a provider of cabin management and in-flight entertainment (IFE) systems for a range of aircraft. The total considerationcontingent earnouts. In March 2022, the Company agreed with the earnout calculation for the transaction was approximately $10.2 million, netcalendar 2021 earnout in the amount of $0.5 million$11.3 million. The Company recorded the gain and received the payment in cash acquired. CCC is included in our Aerospace segment.

Telefonix, Incorporated
Subsequent to the endfirst quarter of the third quarter, on October 26, 2017,2022. In March 2023, the Company through a wholly owned acquisition subsidiary, entered into an agreement to purchase substantially all ofagreed with the assets of Telefonix, Incorporated and a related company, Product Development Technologies, LLC. Under the terms of the Agreement, the total considerationfinal earnout calculation for the transaction will be approximately $104.0 millioncalendar 2022 earnout in cash.the amount of $3.4 million. The Company recorded the gain and received the payment in the first quarter of 2023.

CONSOLIDATED RESULTS OF OPERATIONS AND OUTLOOK
 Nine Months Ended Three Months Ended
(Dollars in thousands)September 30,
2017		 October 1,
2016		 September 30,
2017		 October 1,
2016
Sales$453,146
 $479,055
 $149,636
 $155,099
Gross Profit (sales less cost of products sold)$104,960
 $122,981
 $32,493
 $38,663
Gross Margin23.2% 25.7% 21.7% 24.9%
Selling, General and Administrative Expenses$66,504
 $65,246
 $22,410
 $21,138
SG&A Expenses as a Percentage of Sales14.7% 13.6% 15.0% 13.6%
Interest Expense, Net of Interest Income$3,750
 $3,246
 $1,437
 $1,103
Effective Tax Rate27.0% 29.3% 29.9% 26.5%
Net Income$25,332
 $38,539
 $6,060
 $12,074
Three Months Ended
($ in thousands)April 1, 2023April 2, 2022
Sales$156,538 $116,176 
Gross Profit (sales less cost of products sold)$27,510 $19,933 
Gross Margin17.6 %17.2 %
Selling, General and Administrative Expenses$29,880 $24,100 
SG&A Expenses as a Percentage of Sales19.1 %20.7 %
Net Gain on Sale of Business$(3,427)$(11,284)
Interest Expense, Net$5,470 $1,631 
Effective Tax Rate(41.3)%161.7 %
Net Loss$(4,415)$(3,101)
A discussion by segment can be found at “Segment Results of Operations and Outlook” in this MD&A.
CONSOLIDATED THIRDFIRST QUARTER RESULTS
Consolidated sales were down $5.5up $40.4 million, or 34.7%, from the same period last year.first quarter of 2022. Aerospace segment sales of $128.7increased $34.2 million, were up $3.5 million andor 33.7%, driven by higher sales to the commercial transport market. Test Systems segment sales increased $6.2 million, due primarily to the reversal of $21.0a $5.8 million were down $9.0 million.deferred revenue liability assumed with an acquisition and associated with a customer program which is no longer expected to occur.
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Consolidated cost of products sold in the thirdfirst quarter of 2017 increased $0.7 million to $117.12023 was $129.0 million, compared with $116.4$96.2 million in the third quarter of 2016.prior-year period. The increase was primarily due to higher volume and higher material and labor costs. The prior-year period benefited the result of the additionalAMJP Program grant which provided a $6.0 million offset to cost of products sold by Custom Control Concepts ("CCC") offset by lower organic sales volumes. Organic Engineering and Development ("E&D") costs were $22.2 million in the quarter, compared with $21.6 million in last year’s third quarter. As a percent of sales, organic E&D costs were 14.8% and 13.9% in the third quarters of 2017 and 2016, respectively. CCC incurred E&D costs of $1.5 million in the third quarter.sold.
Selling, general and administrative (“SG&A”) expenses were $22.4$29.9 million in the first quarter of 2023 compared with $24.1 million in the prior-year period primarily due to increased wages and benefits and an increase of $3.2 million in litigation-related legal expenses.
The Company recognized in the quarter 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 period. Other income in the 2023 first quarter included $1.8 million associated with the reversal of a liability related to an equity investment.
Interest expense was $5.5 million in the current period, compared with $1.6 million in the prior-year period, primarily driven by higher interest rates on the Company’s new credit facilities. Interest expense includes approximately $0.6 million of non-cash amortization of capitalized financing-related fees.
Income tax expense was $1.3 million in the current period, primarily due to a valuation allowance applied against the deferred tax asset associated with research and development costs that are required to be capitalized for tax purposes.
Consolidated net loss was $4.4 million, or 15.0% of sales, in the third quarter of 2017 compared with $21.1 million, or 13.6% of sales, in the same period last year.
The effective tax rate for the quarter was 29.9%, compared with 26.5% in the third quarter of 2016. The 2017 third quarter tax rate was unfavorably impacted by additional state income tax expense when compared with the third quarter of 2016.
Net income was $6.1 million, or $0.21$0.14 per diluted share, compared with $12.1net loss of $3.1 million, or $0.41$0.10 per diluted share, in the prior year.
CONSOLIDATED YEAR-TO-DATE RESULTS
Consolidated sales for the first nine months of 2017 decreased by $25.9 million, or 5.4%, to $453.1 million. Aerospace segment salesBookings were down $11.0 million, or 2.7%, year-over-year to $395.0 million, while Test Systems segment sales were down $15.0 million, or 20.5%, to $58.1 million.
Consolidated cost of products sold in nine months ended 2017 decreased $7.9 million to $348.2 million compared with $356.1$157.8 million in the same periodquarter resulting in a book-to-bill ratio of 2016. The decrease1.05:1, excluding the impact of the $5.8 million adjustment to sales referred to previously. Backlog at quarter end was a result of lower organic sales volumes offset by CCC's additional costs of products sold. Organic E&D costs were 14.7% of sales, or $66.8 million, compared with $66.2 million, or 13.8% of sales, in the prior year’s first nine months. SG&A expenses were $66.5 million, or 14.7% of sales, in the first nine months of 2017 compared with $65.2 million, or 13.6% of sales, in the same period last year.
The effective tax rate for the first nine months of 2017 was 27.0%, compared with 29.3% in the first nine months of 2016. The tax rate in the first nine months of 2017 was favorably impacted by excess tax benefits as a result of a new U.S. GAAP accounting standard impacting the tax accounting treatment of employee share-based compensation, decreases in foreign tax rates, and the federal research and development tax credit.
Net income for the first half of 2017 totaled $25.3 million, or $0.85 per diluted share.

During the third quarter, the Company repurchased approximately 702,000 shares at an aggregate cost of $18.9 million under its share repurchase program. Since the inception of the program in February 2016, the Company has repurchased approximately 1,675,000 shares and has completed the program, which authorized repurchases up to $50.0 million.
CONSOLIDATED OUTLOOK
Fourth quarter sales are forecasted to be in the range of $169 million to $183 million, with $139 million to $150 million expected from the Aerospace segment and $30 million to $33 million from the Test segment.
Consolidated annual sales in 2017 are forecasted to be in the range of $622 million to $636record $578.5 million. Approximately $534 million to $545$498.7 million of revenue is expected from the Aerospace segment and $88 million to $91 million from the Test Systems segment. The Company issued its initial revenue outlook for 2018 of $675 million to $750 million. The Aerospace segmentbacklog is expected to ship over the next twelve months.
COVID-19 Impacts on Our Business
On March 11, 2020, the World Health Organization classified the COVID-19 outbreak as a pandemic. The spread of the COVID-19 pandemic disrupted businesses on a global scale, led to significant volatility in financial markets and affected the aviation and industrial industries. The impacts of the pandemic have 2018placed labor and supply chain pressures on our business and we have been impacted by customer demand variability. Although we saw stable and growing backlog throughout 2022 and into 2023 in our aerospace business, disruptions are ongoing and continue to adversely challenge our commercial transport market. While we remain bullish about the aerospace business, we believe the recovery to pre-pandemic activity, particularly in the widebody market, will take longer than originally anticipated at the outset of the pandemic. 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.
Outlook
We had a solid start to the year as continued strong customer demand and an improving supply chain helped us exceed the upper end of our revenue expectations for the quarter. Our leading position in passenger power and inflight connectivity for commercial aerospace combined with the robust recovery in that market has driven demand for our products. The trends give us confidence in the revenue ramp we are planning for the rest of $5702023.
We expect revenue to increase significantly in the second quarter to $165 million to $630$175 million and are maintaining full year guidance of $640 million to $680 million. TheWe have also restructured our Test segment is expected to generate $105take out approximately $4 million to $120$5 million in revenue in 2018. These estimates are without effectcosts and improve operating results. We expect this effort, together with the cooperation of our supply chain and strong customer demand, will improve financial results as we advance through the new revenue recognition rules that will be effective January 1, 2018.year.
Consolidated backlog at September 30, 2017April 1, 2023 was $302.3 million,$578.5 million. Approximately 86% of which approximately $148.5 million is expected to ship in 2017.
The effective tax rate for 2017the backlog is expected to be recognized as revenue in over the range of 28% to 30%.next twelve months and the balance thereafter.
Capital equipment spending in 2017 is expected to be in the range of $17 million to $19 million.
E&D costsPlanned capital expenditures for 2023 are expected to be in the range of $96approximately $14 million to $97 million including the engineering costs from CCC.$17 million.
SEGMENT RESULTS OF OPERATIONS AND OUTLOOK
Operating profit, as presented below, is sales less cost of products sold and other operating expenses, excluding interest expense, other corporate expenses and other corporatenon-operating sales and expenses. Cost of products sold and other operating expenses are directly identifiable to the respective segment. Operating profit is reconciled to earnings(loss) income before income taxes in Note 15 of the Notes to Consolidated Condensed Financial Statements included in this report.

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AEROSPACE SEGMENT
Three Months Ended
($ in thousands)April 1, 2023April 2, 2022
Sales$135,715 $101,394 
Less Inter-segment Sales(118)— 
Total Aerospace Sales$135,597 $101,394 
Operating Profit$4,087 $3,050 
Operating Margin3.0 %3.0 %
Aerospace Sales by Market
(In thousands)
Commercial Transport$94,213 $64,089 
Military Aircraft14,064 14,976 
General Aviation19,448 15,867 
Other7,872 6,462 
$135,597 $101,394 
Aerospace Sales by Product Line
(In thousands)
Electrical Power & Motion$53,454 $44,467 
Lighting & Safety36,553 29,211 
Avionics29,741 18,875 
Systems Certification5,677 1,002 
Structures2,300 1,377 
Other7,872 6,462 
$135,597 $101,394 
(In thousands)April 1, 2023December 31, 2022
Total Assets$498,348 $481,416 
Backlog$492,159 $477,660 
AEROSPACE SEGMENT
 Nine Months Ended Three Months Ended
(In thousands)September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Sales       
Aerospace$395,037
 $406,356
 $128,663
 $125,179
Less Intersegment Sales—
 (367) —
 —
Total Aerospace Sales$395,037
 $405,989
 $128,663
 $125,179
Operating Profit$46,753
 $61,099
 $13,015
 $17,557
Operating Margin11.8% 15.0% 10.1% 14.0%
        
Aerospace Sales by Market       
(In thousands)       
Commercial Transport$306,898
 $331,174
 $98,821
 $101,355
Military46,297
 39,932
 15,365
 13,679
Business Jet28,844
 20,365
 10,592
 6,133
Other12,998
 14,518
 3,885
 4,012
 $395,037
 $405,989
 $128,663
 $125,179
Aerospace Sales by Product Line       
(In thousands)       
Electrical Power & Motion$199,014
 $219,215
 $63,972
 $68,259
Lighting & Safety122,317
 121,520
 37,001
 38,975
Avionics31,424
 22,684
 11,348
 5,866
Systems Certification9,405
 12,577
 4,454
 2,580
Structures19,879
 15,475
 8,003
 5,487
Other12,998
 14,518
 3,885
 4,012
 $395,037
 $405,989
 $128,663
 $125,179
(In thousands)September 30, 2017 December 31, 2016
Total Assets$523,563
 $500,892
Backlog$233,162
 $219,146
AEROSPACE THIRDFIRST QUARTER RESULTS
Aerospace segment sales increased by $3.5$34.2 million, or 2.8%33.7%, when compared with the prior year’s third quarter to $128.7 million. CCC contributed $3.5$135.6 million driven by a 47.0%, or $30.1 million increase in commercial transport sales. Sales to this market were $94.2 million, or 60.2% of consolidated sales in the 2017 third quarter.
Electrical Power & Motion sales decreased $4.3quarter, compared with $64.1 million, or 6.3%, due to lower sales55.1% of in-seat and cabin power products due to a combination of lower volume and pricing. Lighting & Safety sales decreased by $2.0 million primarily due to lower passenger service unit sales. Avionics sales were up $5.5 million as a result of $2.0 million increase in antennae and other avionics sales combined with the CCC acquisition. Structures sales increased by $2.5 million and Systems Certification sales increased by $1.9 million on higher project activity.
Aerospace operating profit for the third quarter of 2017 was $13.0 million, or 10.1% of sales, compared with $17.6 million, or 14.0% ofconsolidated sales in the same period last year. first quarter of 2022. Improving global airline travel driving higher fleet utilization and increased production rates resulted in increased demand.
General Aviation sales increased $3.6 million, or 22.6%, to $19.4 million.
Aerospace segment operating profit was negatively impacted by market pricing pressures primarily relatingimproved to cabin power products, a $1.8 million operating loss from the CCC acquisition and slightly higher E&D costs. Organic Aerospace E&D costs were $19.6$4.1 million compared with $18.9operating profit of $3.1 million in the same period last year. CCC incurred E&D costsyear, which included an AMJP grant offset to cost of $1.5sales of $6.0 million. Absent the impact of the AMJP grant on last year’s first quarter, aerospace operating profit improved $7.0 million duringon a sales increase of $34.2 million. The improvement in operating profit was driven by higher volume primarily in the quarter.commercial transport market, partially offset by the effects of material and labor inflation.
AEROSPACE OUTLOOK
Aerospace orders in the third quarter of 2017bookings were $146.2$150.1 million, for a book-to-bill ratio of 1.14:11.11:1. Backlog for the quarter. BacklogAerospace segment was $233.2a record $492.2 million at quarter end with approximately $441.7 million expected to be recognized as revenue over the endnext twelve months.
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Our Aerospace business continues to accelerate, in step with the third quarterair travel recovery that is underway worldwide. Our business is trending back to pre-pandemic levels and will benefit further from a number of 2017.high-profile programs that we have won during the downturn, including our involvement on the U.S. Army’s Future Long-Range Assault Aircraft (“FLRAA”) program which we expect to begin in the next several weeks. Margin performance will continue to improve as supply chain spot buys decline and volume increases.


TEST SYSTEMS SEGMENT
Three Months Ended
($ in thousands)April 1, 2023April 2, 2022
Sales$20,941 $14,798 
Less Inter-segment Sales— (16)
Total Test Systems Sales$20,941 $14,782 
Operating Loss$(597)$(1,787)
Operating Margin(2.9)%(12.1)%
AEROSPACE YEAR-TO-DATEAll Test Systems sales are to the Government and Defense Market.
(In thousands)April 1, 2023December 31, 2022
Total Assets$103,778 $111,513 
Backlog$86,319 $93,696 
TEST SYSTEMS FIRST QUARTER RESULTS
AerospaceTest Systems segment sales decreased by $11.0were $20.9 million, or 2.7%, to $395.0up $6.2 million when compared with the prior year’s first nine months.
Electrical Power & Motion sales decreased $20.2prior-year period primarily as a result of a reversal of $5.8 million or 9.2%, for similar reasons as discussed in the quarter anddeferred revenue liability recorded with a previous acquisition. Absent that item, Test Systems Certifications sales decreased $3.2 million from lower project activity earlier in the year. These declines were partially offset by increased Avionics sales, up $8.7 million of which $7.0 million was from the CCC acquisition and $1.7 million from other avionics products. Structures sales increased by $4.4$0.4 million.
AerospaceTest Systems segment operating profit for the first nine months of 2017loss was $46.8$0.6 million or 11.8% of sales, compared with $61.1 million, or 15.0% of sales, in the same period last year. Aerospace operating profit was negatively impacted by lower sales volumes and market pricing pressures, coupled with the operating loss from the acquired CCC business. E&D costs for Aerospace were $62.5 million (inclusive of $2.7 million related to the acquired CCC business) and $58.3$1.8 million in the first nine monthsquarter of 20172022. Absent the non-operating sales adjustment resulting from the reversal of the deferred revenue liability, Test Systems operating loss for the current period was $6.4 million and 2016, respectively. Aerospace SG&A expense was $46.9negatively affected by mix, under absorption of fixed costs due to volume and $2.6 million in increased litigation-related legal expenses.
Shortly after the first nine monthsquarter ended the Test Systems segment implemented restructuring initiatives to align the workforce and management structure with near-term revenue expectations and operational needs. These initiatives are expected to provide savings of 2017 as compared with $45.5 million in the same period in 2016.
AEROSPACE OUTLOOK
We expect 2017 sales for our Aerospace segment to be in the range of $534$4 million to $545 million. The Aerospace segment’s backlog at the end of$5 million annually, beginning with the third quarter of 2017 was $233.2 million with approximately $124.8 million expected to be shipped over the remaining part of 2017 and $212.1 million is expected to ship over the next 12 months.
TEST SYSTEMS SEGMENT
 Nine Months Ended Three Months Ended
(In thousands)September 30, 2017 October 1, 2016 September 30, 2017 October 1, 2016
Sales$58,109
 $73,066
 $20,973
 $29,920
Operating profit (loss)$2,843
 $6,524
 $1,093
 $3,240
Operating Margin4.9% 8.9% 5.2% 10.8%
        
Test Systems Sales by Market       
(In thousands)       
Semiconductor$18,343
 $33,863
 $6,632
 $16,878
Aerospace & Defense39,766
 39,203
 14,341
 13,042
 $58,109
 $73,066
 $20,973
 $29,920
(In thousands)September 30, 2017 December 31, 2016
Total Assets$85,848
 $76,575
Backlog$69,119
 $38,887

quarter.
TEST SYSTEMS THIRD QUARTER RESULTSOUTLOOK
Sales in the third quarter of 2017 decreased approximately $9.0 million to $21.0 million compared with the same period in 2016, a decrease of 29.9%. The $10.2 million decline in sales to the Semiconductor market were somewhat offset by a $1.3 million increase in sales to the Aerospace & Defense market when compared with the prior-year period.
Operating profit was $1.1 million, or 5.2% of sales, compared with $3.2 million, or 10.8% of sales, in last year’s third quarter. E&D costs were $2.6 million, down slightly from $2.7 million in the third quarter of 2016. Test Systems SG&A expense decreased to $2.6 million in the third quarter of 2017 compared with $3.4 million in the same period last year.
OrdersBookings for the Test Systems segment in the quarter were $40.2$7.7 million, for a book-to-bill ratio of 1.91:0.51:1 for the quarter. Backlog was $69.1 million atquarter, excluding the endimpact of the third quarter of 2017.

TEST SYSTEMS YEAR-TO-DATE RESULTS
Sales in the first nine months of 2017 decreased 20.5%$5.8 million adjustment to $58.1 million compared with sales of $73.1 million for the same period in 2016, duereferred to lower sales to the Semiconductor market. Sales to the Semiconductor market decreased $15.5 million compared with the same period in 2016.
Operating profit was $2.8 million, or 4.9% of sales, compared with $6.5 million, or 8.9% of sales, in the first nine months of 2016. E&D costs were $7.0 million in the first nine months of 2017 compared with $7.9 million in the same period in the prior year. SG&A costs declined to $8.4 million in the first nine months of 2017 compared with $9.8 million in the same period in 2016.
TEST SYSTEMS OUTLOOK
We expect sales for the Test Systems segment for 2017 to be in the range of $88 million to $91 million.previously. The Test Systems segment’s backlog at the end of the thirdfirst quarter of 20172023 was $69.1$86.3 million, with approximately $23.7$57.1 million expected to be shipped over the remaining part of 2017 and approximately $58.1 million scheduled to shiprecognized as revenue over the next 12twelve months.
In April 2023, Astronics announced that the Test business had been awarded a contract award to produce portable radio test equipment for the U.S. Marine Corps’ Handheld Radio Test Sets program (“HHRTS”). This program is expected to generate revenue of approximately $40 million over a five-year period. An initial task order for approximately $10 million is expected in the coming weeks.
Our Test business is going through a transition period. We have been quite successful winning new business, including radio test programs for both the U.S. Army and U.S. Marine Corps, which promise to be major contributors to our results in the near future. However, these programs have developed more slowly than expected, so we found it necessary to restructure and right size the business for the interim period. We expect the restructuring to improve profitability for the segment at current run rates until the new programs gain traction.
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LIQUIDITY AND CAPITAL RESOURCES
Operating Activities:
Cash provided byused for operating activities totaled $22.3$19.2 million for the first ninethree months of 2017,2023, as compared with $25.2$0.3 million cash provided by operating activities during the same period in 2016.2022. Cash flow from operating activities decreased compared with the same period of 20162022 primarily duerelated to the impact of lower net income and lower increases in netinventory to fulfill customer demand in upcoming quarters coupled with increased lead times on certain key components required inventory to be purchased further in advance. In contrast, operating assetscash flows in the first quarter of 2022 benefited from the receipt of income tax refunds and AMJP grant proceeds. We expect to generate positive cash flow for the first nine monthsremainder of 2017 when compared with the first nine months of 2016.2023.
Investing Activities:
Cash used forprovided by investing activities included $10.2 million for the acquisition of CCC, as well as capital expenditures, which were $9.7was $1.9 million for the first ninethree months of 20172023 compared with $9.9$20.8 million usedin cash provided by investing activities in the same period of 2016.2022. Investing cash flows in 2022 were positively impacted by the receipt of $10.7 million and $11.3 million related to the calendar 2020 and 2021 earnouts, respectively, from the sale of the semiconductor business compared to $3.4 million received in the current year related to the calendar 2022 earnout. The Company expects capital spending in 20172023 to be in the range of $17$14 million to $19and $17 million.
Financing Activities:
The primaryCash provided by financing activities totaled $9.2 million for the first three months of 2023, as compared with cash used for financing activities of $26.7 million during the same period in 2017 relate to2022. The Company had net borrowingsproceeds on our senior credit facility to fundfacilities of $14.1 million in the acquisitionfirst three months of CCC and purchases2023 compared with net repayments of treasury stock as part$26.0 million in the same period in 2022. During the current year period, the Company also paid $4.3 million in debt issuance costs associated with the January 2023 refinancing. Additional debt issuance costs of $3.0 million will be paid in the future, largely comprised of the buyback program.
The Company’s obligations under the Credit Agreement as amended are jointly and severally guaranteed by each domestic subsidiary of the Company other than a non-material subsidiary. The obligations are secured by a first priority lien on substantially all of the Company’s and the guarantors’ assets.remaining Term Loan commitment fee, which is discussed further below.
The Company's long-term debt at December 31, 2022 consisted of borrowings under its Fifth Amended and Restated Credit Agreement consists(the “Agreement”). The maturity date of a $350 million revolving credit line with the option to increaseloans under the line by up to $150 million. The Credit Agreement expires January 13, 2021. On January 13, 2016,was November 30, 2023. At September 30, 2017December 31, 2022, there was $167.0$164.0 million outstanding on the revolving credit facilityAgreement and there remains $181.9remained $6.0 million available, net of outstanding letters of credit. available.
The credit facility allocates up to $20 million ofCompany amended the $350 millionAgreement on January 19, 2023 by entering into the Sixth Amended and Restated Credit Agreement (the “ABL Revolving Credit Facility”). The ABL Revolving Credit Facility set the maximum aggregate amount that the Company can borrow under the revolving credit line for the issuanceat $115 million, with borrowings subject to a borrowing base determined primarily by certain domestic inventory and accounts receivable. The maturity date of letters of credit, including certain existing letters of credit. At September 30, 2017, outstanding letters of credit totaled $1.1 million.
The maximum permitted leverage ratio of funded debt to Adjusted EBITDA (as defined in the Agreement) is 3.5 to 1, increasing to 4.0 to 1 for up to two fiscal quarters following the closing of an acquisition permittedborrowings under the Agreement. The Company’s leverage ratio was 2.12 to 1 at September 30, 2017. TheABL Revolving Credit Facility is January 19, 2026. Under the terms of the ABL Revolving Credit Facility, the Company will now pay interest on the unpaid principal amount of the facility at a rate equal to one-, three- or six-month LIBORSOFR (which is required to be at least 1.00%) plus between 137.5 basis points and 225 basis points based upon the Company’s leverage ratio.2.25% to 2.75%. The Company will also pay a quarterly commitment fee tounder the lendersABL Revolving Credit Facility in an amount equal to between 17.5 basis points and 35 basis points0.25% or 0.375% based on the undrawnCompany’s average excess availability. Under the provisions of the ABL Revolving Credit Facility, the Company has a cash dominion arrangement with the lead banking institution whereby eligible daily cash receipts are contractually utilized to pay down outstanding borrowings. Eligible cash receipts that have not yet been applied to outstanding debt balance are classified as restricted cash in the accompanying consolidated balance sheets. At April 1, 2023, there was $88.1 million outstanding on the ABL Revolving Credit Facility and there remained $26.9 million available. The Company is also required to maintain minimum liquidity of $20 million through the date of delivery of the compliance certificate for the quarter ended March 31, 2024, and $10 million thereafter.
The Company also entered into a $90 million asset-based Term Loan Facility on January 19, 2023. The Term Loan Facility is secured primarily by fixed assets, real estate and intellectual property. The maturity date of the Term Loan Facility is the earlier of the stated maturity date of the ABL Revolving Credit Facility or January 19, 2027, provided the ABL Revolving Credit Facility is extended beyond that date. The Company pays interest under the Term Loan Facility at a rate equal to SOFR (which is required to be at least 2.50%) plus 8.75%. The Company will pay a commitment fee under the Term Loan Facility of 5% of the total aggregate commitment, or $4.5 million, $1.8 million which was paid on the closing date, $1.8 million of which will be paid on June 19, 2023 and $0.9 million of which will be paid on the date that the financial statements and compliance certificate for the fiscal quarter of the Company ending on or about March 31, 2024 are required to be delivered under the Term Loan Facility.
Amortization of the principal under the Term Loan Facility will begin in April with a monthly amortization rate of 0.292% of the outstanding term loan principal balance for the period April 1, 2023 through June 1, 2023, increasing to 0.542% per month for the period July 1, 2023 through September 1, 2023 then increasing to 0.833% thereafter. Total scheduled principal payments of $6.8 million are payable over the next twelve months and as such, have been classified as current in the accompanying
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consolidated condensed balance sheet as of April 1, 2023. The weighted-average interest rate on current maturities of long-debt is 13.60%. The remaining balance $83.2 million is recorded as long-term in the accompanying consolidated condensed balance sheet.
Pursuant to the ABL Revolving Credit Facility and the Term Loan Facility, the Company is required to comply with a minimum trailing four quarter EBITDA of $14.7 million for the Company’s first quarter of 2023, $23.3 million in the second quarter, $39.2 million in the third quarter, $51.7 million in the fourth quarter, $57.6 million in the first quarter of 2024, $65.2 million in the second quarter of 2024 and $70 million thereafter. In addition, mandatory prepayment of a portion of excess cash flow, as defined by the credit facility, based uponTerm Loan Facility, is payable towards the Company’s leverage ratio.principal amount outstanding on an annual basis. Any voluntary prepayments made are subject to a prepayment fee, as defined by the Term Loan Facility. Beginning with the first quarter of 2024, the Company is subject to a minimum fixed charge coverage ratio of 1.10 to 1.00. Further, the Company is subject to restrictions on additional indebtedness, share repurchases and dividend payments, and a limitation on capital expenditures. The Company must also maintain a minimum interest coverage ratio (Adjusted EBITDAis in compliance with all covenant requirements as of April 1, 2023.
The Company incurred $8.5 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) of 3.0 to 1 forexpense over the term of the Agreement. Therespective agreement. Deferred debt issuance costs associated with the ABL Revolving Credit Facility ($2.6 million as of April 1, 2023) are recorded within other assets and those associated with the Term Loan Facility ($5.8 million as of April 1, 2023) are recorded as a reduction of the carrying value of the debt on the Consolidated Condensed Balance Sheet.
Certain of the Company’s interest coverage ratio was 20.2 to 1 at September 30, 2017.

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 Agreementcredit facilities automatically become due and payable. Other events of default, such as failure to make payments as they become due and breach of financial and other covenants, change of control, judgments over a certain amount, and cross default under other material debt agreements, and a going concern qualification for any reason other than loan maturity date give the Agentagent the option to declare all such amounts immediately due and payable.
Cash on hand at the end of the quarter was $5.7 million. Net debt was $172.4 million, compared with $150.2 million at the end of 2022.
The Company expects its sales growth and reductions in working capital will provide sufficient cash flows to fund operations. However, the Company may also evaluate various actions and alternatives to enhance its profitability and cash generation from operating activities, which could include manufacturing efficiency initiatives, cost-reduction measures, working with vendors and suppliers to reduce lead times and expedite shipment of critical components, and working with customers to expedite receivable collections.
Our ability to maintain sufficient liquidity and comply with financial debt covenants is highly dependent upon achieving expected operating results. Failure to achieve expected operating results could have a material adverse effect on our liquidity, our ability to obtain financing or access our existing financing, and our operations in the future and could allow our debt holders to demand payment of all outstanding amounts.
OFF BALANCE SHEET ARRANGEMENTS
We do not have any material off balance sheet arrangements that have or are reasonably likely to have a material future effect on our results of operations or financial condition.
BACKLOG
The Company’s backlog at September 30, 2017April 1, 2023 was $302.3$578.5 million compared with $258.0$571.4 million at December 31, 20162022 and $275.2$475.1 million at October 1, 2016.April 2, 2022.
CONTRACTUAL OBLIGATIONS AND COMMITMENTS
The following table representsExcept as noted below, our contractual obligations asand commitments have not changed materially from the disclosures in our 2022 Annual Report on Form 10-K.
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Table of September 30, 2017:
Contents
 Payments Due by Period
(In thousands)Total 2017 2018-2019 2019-2020 After 2020
Long-term Debt$177,345
 $682
 $4,595
 $171,172
 $896
Purchase Obligations118,478
 67,634
 50,427
 417
 —
Interest on Long-term Debt16,212
 1,267
 9,868
 5,065
 12
Supplemental Retirement Plan and Post Retirement Obligations22,243
 104
 826
 811
 20,502
Operating Leases6,083
 864
 4,829
 371
—
19
Other Long-term Liabilities203
 17
 95
 29
 62
Total Contractual Obligations$340,564
 $70,568
 $70,640
 $177,865
 $21,491
MARKET RISK
NotesRisk due to Contractual Obligations Table
Purchase Obligations — Purchase obligations are comprisedfluctuation in interest rates is a function of the Company’s commitments for goods and servicesfloating rate debt obligations, which total approximately $178.1 million at April 1, 2023. A change of 1% in the normal courseinterest rates of business.all variable rate debt would impact annual net loss by approximately $1.8 million, before income taxes.
Long-Term Debt — See Part 1 Financial Information, Item 1 Financial Statements, Note 6, Long-Term Debt and Notes Payable included in this report.
Operating Leases — Operating lease obligations are primarily related to the Company's facility leases.
On October 26, 2017, we entered into an agreement to purchase substantially all of the assets of Telefonix, Incorporated and a related company, Product Development Technologies, LLC, for approximately $104 million in cash. The table above excludes any obligations or commitments related to this pending acquisition.
MARKET RISK
The Company believes that there have been no material changes in the current year regarding the market risk information for its exposure to interest rate fluctuations. 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 in 20172023 have not been significant.
The future impacts of the Russia and Ukraine conflict and the COVID-19 pandemic and their residual effects, including economic uncertainty, inflationary environment and disruption within the global supply chain, labor markets and aerospace industry, on our business remain uncertain. As we cannot anticipate the ultimate duration or scope of the Russia-Ukraine war and the COVID-19 pandemic, the ultimate financial impact to our results cannot be reasonably estimated, but could be material.
CRITICAL ACCOUNTING POLICIES
Refer to Note 2 of the Notes to Consolidated Condensed Financial Statements included in this report for the Company’s critical accounting policies with respect to revenue recognition. For a complete discussion of the Company’s other critical accounting policies, refer to the Company’s annual report on Form 10-K for the year ended December 31, 2016 for a complete discussion of the Company’s critical accounting policies.2022.

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-9, Revenue from Contracts with Customers. This new standard is effective for reporting periods beginning after December 15, 2017, pursuantRefer to the issuance of ASU 2015-14, Revenue from Contracts with Customers: Deferral of Effective Date issued in August 2015. The comprehensive new standard will supersede existing revenue recognition guidance and require revenue to be recognized when promised goods or services are transferred to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. AdoptionNote 1 of the new rules could affect the timing of revenue recognition for certain transactions. The guidance permits two implementation approaches, one requiring retrospective application of the new standard with restatement of prior years and one requiring prospective application of the new standard with disclosure of results under old standards. The Company will adopt the new standard on January 1, 2018, using the modified retrospective transition method.

The adoption of this amendment may require usNotes to accelerate the recognition of revenue as compared to current standards, for certain customers, in cases where we produce products unique to those customers; and for which we would have an enforceable right of payment for production completed to date. The Company has identified its revenue streams, reviewed the initial impacts of adopting the new standard on those revenue streams, and appointed a project management leader. The Company continues to evaluate the quantitative and qualitative impacts of the standard.

In February 2016, the FASB issued ASU No. 2016 - 02, Leases. The new standard is effective for reporting periods beginning after December 15, 2018. Early adoption is permitted. The standard will require lessees to report most leases as assets and liabilities on the balance sheet, while lessor accounting will remain substantially unchanged. The standard requires a modified retrospective transition approach for existing leases, whereby the new rules will be applied to the earliest year presented.  The adoption of the standard is not expected to have a material effect on the Company’s financial position, results of operations or cash flows.

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which is intended to reduce diversity in practice in how certain cash receipts and payments are presented and classified in the statement of cash flows. The standard provides guidance in a number of situations including, among others, settlement of zero-coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. The ASU also provides guidance for classifying cash receipts and payments that have aspects of more than one class of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, with early adoption permitted. The standard requires application using a retrospective transition method. This ASU is not expected to have a material impact on the Company’s consolidated results of operations and financial condition.

In January 2017, the FASB issued ASU No. 2017-01, Clarifying the Definition of a Business, which narrows the existing definition of a business and provides a framework for evaluating whether a transaction should be accounted for as an acquisition (or disposal) of assets or a business. The ASU requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities (collectively, the set) is not a business. To be considered a business, the set would need to include an input and a substantive process that together significantly contribute to the ability to create outputs. The standard also narrows the definition of outputs. The definition of a business affects areas of accounting such as acquisitions, disposals and goodwill. Under the new guidance, fewer acquired sets are expected to be considered businesses. This ASU is effective for


fiscal years beginning after December 15, 2017 on a prospective basis with early adoption permitted. The Company would apply this guidance to applicable transactions after the adoption date.

In March 2017, the FASB issued ASU 2017-07, Compensation-Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires employers to include only the service cost component of net periodic pension cost and net periodic postretirement benefit cost in operating expenses. The other components of net benefit cost, including amortization of prior service cost/credit and net actuarial gains/losses, and settlement and curtailment effects, are to beConsolidated Condensed Financial Statements included in non-operating expenses. The ASU also stipulates that only the service cost component of net benefit cost is eligible for capitalization. The effective date for adoption of this guidance begins on January 1, 2018, with early adoption permitted. The Company is currently evaluating the effect that this standard will have on the consolidated financial statements.report.


FORWARD-LOOKING STATEMENTS
Information included in this report that does not consist of historical facts, including statements accompanied by or containing words such as “may,” “will,” “should,” “believes,” “expects,” “expected,” “intends,” “plans,” “projects,” “approximate,” “estimates,” “predicts,” “potential,” “outlook,” “forecast,” “anticipates,” “presume” and “assume,” are forward-looking statements. Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and are subject to several factors, risks and uncertainties, the impact or occurrence of which could cause actual results to differ materially from the expected results described in the forward-looking statements. Certain of these factors, risks and uncertainties are discussed in the sections of this report entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” New factors, risks and uncertainties may emerge from time to time that may affect the forward-looking statements made herein. Given these factors, risks and uncertainties, investors should not place undue reliance on forward-looking statements as predictive of future results. We disclaim any obligation to update the forward-looking statements made in this report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
See Market Risk in Item 2, above.

Item 4. Controls and Procedures
a)Evaluation of Disclosure Controls and Procedures

a.Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures that are designed to ensure that material information relating to us, including our consolidated subsidiaries, is made known to our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) by others within our organization to allow timely decisions regarding required disclosure. Under the supervision andThe Company’s management, with the participation of our management, including ourthe Company’s Chief Executive Officer and Chief Financial Officer, we conducted an evaluation ofhas evaluated the effectiveness of ourthe Company’s disclosure controls and procedures as of September 30, 2017.April 1, 2023. Based on thisthat evaluation, as a result of the material weakness in our internal control over financial reporting described below, ourCompany’s Chief Executive Officer and Chief Financial Officer concluded that ourthe Company’s disclosure controls and procedures were not effective as of September 30, 2017.April 1, 2023.

Notwithstanding the material weakness discussed below, our management, including our Chief Executive Officer and Chiefb.Changes in Internal Control over Financial Officer, has concluded that the consolidated financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented in conformity with accounting principles generally accepted in the United States.

During the quarter ended July 1, 2017, management discovered a material weakness in the design of information technology change controls over a report writing application. Additionally, management identified deficiencies in certain review controls over the financial statement consolidation process, which when aggregated along with the information technology change controls matter described above, aggregated to a material weakness over the financial statement close process as of December 31, 2016. Management does not expect adjustments to any previously issued financial statements as a result of these deficiencies.

The Company is implementing changes to the design and application of new controls and is making significant changes to the design of existing controls over information technology as well as controls related to the financial statement consolidation process. The Company has made progress towards remediation of the material weakness as of the date of this filing and expects to complete remediation by December 31, 2017. We will continue the process of enhancing our controls as well as continue to test their effectiveness over the remainder of 2017.

b)Changes in Internal Control over Financial Reporting

Reporting
There werehave been no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter ended September 30, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings

The Company is subject to variousCurrently, we are involved in legal proceedings claims,relating to an allegation of patent infringement and, litigation arising in the ordinary coursebased on rulings to date we have concluded that losses related to these proceedings are probable. For a discussion of business. While the outcome of these matters is currently not determinable, we do not expect these matters will have a material adverse effect on our business, financial position, results of operations, or cash flows. However, the results of these matters cannot be predicted with certainty. Should the Company failcontingencies related to prevail in any legal matter or should several legal matters be resolved against the Company in the same reporting period, then the financial results of that particular reporting period could be materially adversely affected.

On December 29, 2010, Lufthansa Technik AG (“Lufthansa”) filed a Statement of Claim in the Regional State Court of Mannheim, Germany. Lufthansa’s claim asserts that our subsidiary, AES sold, marketed and brought into use in Germany a power supply system that infringes upon a German patent held by Lufthansa. The relief sought by Lufthansa includes requiring AES to stop selling and marketing the allegedly infringing power supply system, a recall of allegedly infringing products sold to commercial customers since November 26, 2003 and compensation for damages. The claim does not specify an estimate of damages and a damages claim would be pursued by Lufthansa in separate court proceedings.

On February 6, 2015, the Regional State Court of Mannheim, Germany rendered its decision that the patent was infringed. The judgment does not require AES to recall products that are already installed in aircraft or have been sold to other end users.  On July 15, 2015, Lufthansa advised AES of their intention to enforce the accounting provisionsproceedings, see Note 14 of the decision, which required AESNotes to provide certain financial information regarding sales of the infringing product to enable Lufthansa to make an estimate of requested damages. Additionally, if Lufthansa provides the required bank guarantee specified in the decision, the Company may be required to offer a recall of products that are in the distribution channels in Germany. No such bank guarantee has been issued to date. As of September 30, 2017, there are no products in the distribution channels in Germany.Consolidated Condensed Financial Statements.

The Company appealed to the Higher Regional Court of Karlsruhe.  On November 15, 2016, the Court issued its ruling and upheld the lower court’s decision.  The Company has submitted a petition to grant AES leave for appeal to the Federal Supreme Court. The Company believes it has valid defenses to refute the decision.  Should the Federal Supreme Court decide to hear the case, the appeal process is estimated to extend up to two years. We estimate AES’s potential exposure related to this matter to be approximately $1 million to $3 million. As loss exposure is not probable at this time, the Company has not recorded any liability with respect to this litigation as of September 30, 2017.

On November 26, 2014, Lufthansa filed a complaint in the United States District for the Western District of Washington. Lufthansa’s complaint in this action alleges that AES manufactures, uses, sells and offers for sale a power supply system that infringes upon a U.S. patent held by Lufthansa. The patent at issue in the U.S. action is based on technology similar to that involved in the German action. On April 25, 2016, the Court issued its ruling on claim construction, holding that the sole independent claim in the patent is indefinite, rendering all claims in the patent indefinite. Based on this ruling, AES filed a motion for summary judgment on the grounds that the Court’s ruling that the patent is indefinite renders the patent invalid and unenforceable. On July 20, 2016, the U.S. District Court granted the motion for summary judgment and issued an order dismissing all claims against AES with prejudice.

Lufthansa appealed the District Court's decision to the United States Court of Appeals for the Federal Circuit. On October 19, 2017, the Federal Circuit affirmed the district court’s decision, holding that the sole independent claim of the patent is indefinite, rending all claims on the patent indefinite. Lufthansa has until November 20, 2017, to ask for rehearing or rehearing en banc. If it does not file such a petition, it has until January 18, 2018, to file a petition for writ of certiorari with the U.S. Supreme Court. As loss exposure is neither probable nor estimable at this time, the Companyhas not recorded any liability with respect to this litigation as of September 30, 2017.
Other than this proceeding, we are not party to any significant pending legal proceedings that management believes will result in material adverse effect on our financial condition or results of operations.
Item 1a. Risk Factors
In addition to other information set forth in this report, you should carefully consider the factors discussed in Part 1, Item 1A. “Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2016,2022, which could materially affect our business, financial condition or results of operations. The risks described in our Annual Report on Form 10-K are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or results of operations.

Item 2. Unregistered sales of equity securities and use of proceeds
(c) The following table summarizes our purchases of our common stock for the quarterthree months ended September 30, 2017.April 1, 2023.

PeriodTotal Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Dollar Value of Shares that may yet be Purchased Under the Program (1)
January 1, 2023 - January 28, 2023— $— — $41,483,815 
January 29, 2023 - February 25, 2023*5,552 $15.22 — $41,483,815 
February 26, 2023 - April 1, 2023**41,715 $13.50 — $41,483,815 
*Represents shares withheld for taxes on the net settlement of stock option exercises
**Represents shares withheld for taxes on the net settlement of RSU issuances
Period(a) Total Number of Shares Purchased(b) Average Price Paid Per Share(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(d) Maximum Dollar Value of Shares that may yet be Purchased Under the Program (1)
July 2, 2017 -
July 29, 2017
90,135$30.2990,135$16,128,000
July 30, 2017 -
August 26, 2017
588,402$26.38588,402$606,000
August 27, 2017 -
September 30, 2017 (2)
23,229$26.0923,229$—

(1) On February 24, 2016, the Company’s Board of Directors authorized the repurchase of up to $50 million of common stock.

(2) The Company has repurchased approximately 1,675,000 shares and has completed the program.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
None.
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Item 6. Exhibits
Section 302 Certification - Chief Executive Officer
Section 302 Certification - Chief Financial Officer
Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Exhibit 101.1*Instance Document
Exhibit 101.2*Schema Document
Exhibit 101.3*Calculation Linkbase Document
Exhibit 101.4*Labels Linkbase Document
Exhibit 101.5*Presentation Linkbase Document
Exhibit 101.6*Definition Linkbase Document
*Submitted electronically herewith.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ASTRONICS CORPORATION
(Registrant)
Date:November 9, 2017May 10, 2023By:/s/ David C. Burney
David C. Burney
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)


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