Information included or incorporated by reference 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”“presume,” “assume” and “assume,”other words and terms of similar meaning, including their negative counterparts, are forward-looking statements.statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. TheseForward-looking statements are subject to several factors, risks and uncertainties that may cause actual results to differ materially from those that we expected, including but not limited to:

While we believe that the forward-looking statements in this report are reasonable, 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 entitledin Item 1A, “Risk Factors”Factors,” and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” NewAll written and oral forward-looking statements attributable to us, or persons acting on our behalf, are expressly qualified in their entirety by the cautionary statements as well as other cautionary statements that are made from time to time in our other filings with the U.S. Securities and Exchange Commission and public communications. You should evaluate all forward-looking statements made in this report in the context of these risks and uncertainties.

The important factors discussed above may not contain all of the factors that are important to you. In addition, 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. WeThe forward-looking statements included in this report are made only as of the date hereof and are based on our current expectations. Except as required by applicable law, we disclaim any obligation to update or revise the forward-looking statements made in this report.report as a result of new information, future events or otherwise.

Astronics Corporation (“Astronics” or the “Company”) is a leading provider of advanced technologies to the global aerospace, defense and other mission-criticalelectronics industries. Our products and services include advanced, high-performance electrical power generation, distribution and seat motion systems, lighting and safety systems, avionics products, systems and certification, aircraft structures and automated test systems.

We have principal operations in the United States (“U.S.”), Canada, France and England, as well as engineering offices in the Ukraine and India. Our operation in Ukraine is a small engineering office and we have not experienced any significant disruption in staffing or services as a result of the Ukrainian and Russian conflict.

The spreadOur business continues to face varying levels of supply chain pressures from the residual impacts of the COVID-19 outbreakpandemic. Domestic air travel has disrupted businesses on a global scale. On March 11, 2020,recovered from the World Health Organization classified the outbreak as a pandemic. COVID-19 has caused disruption and volatility in the global capital markets, and has authored an economic slowdown in the Aerospace industry in particular. As we entered this crisis, the Company established two clear priorities: first and foremost the health and safety of our employees and their families, and second, continuing to meet the needs of our customers and secure the financial well-beingimpact of the Company. Substantially all of our operationsCOVID-19 pandemic, and production activities have, to-date, remained operational. In responseinternational travel utilizing primarily widebody aircraft is close to the COVID-19 crisis, we implemented changes in our work practices to maintain a safe working environment for production employees at our facilities, while enabling other employees to productively work from home. As we bring employees back to the workplace and return to in-person meetings with customers and suppliers, we have adopted a flexible work approach. This allows for a smooth transition from COVID-19 conditions to a future that better meets the needs of the business and the interests of our employees. In terms of maintaining our financial health and liquidity, in early 2020, we implemented workforce reduction activities to align capacity with expected demand. We also implemented significant cost conservation measures, and we continue to closely monitor spending priorities.pre-pandemic levels. As economic activity recovers,continues to recover, we will continue to monitor the situation, to assessassessing further possible implications on our operations, supply chain, liquidity, cash flow and customer orders, and to take actions in an effort to mitigate adverse consequences. While the industry is seeing some improvement on rising vaccination rates and easing travel restrictions, the ultimate impact of COVID-19 on our business, results of operations, financial condition and cash flows is dependent on future developments, including the duration of the pandemic, vaccination rates and efficacy and the related length of impact on the global economy, supply chain and the aerospace industry, which are uncertain and cannot be predicted at this time. We believe that our existing financial arrangements are sufficient to meet our operating needs.orders.

See Part I, Item 1A, Risk Factors, for an additional discussion of risk related to supply chain disruptions and the recent government vaccine mandates.

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 $7.3 million and $7.4 million under the grant in 2022 and 2021, and expects to receive the remainder in 2022. The receipt of the full award is primarily conditioned upon the Company committing to not furlough, lay off or reduce the compensation levels of a defined group of employees during the six-month period of performance between September 2021 and March 2022.respectively. The grant benefit is beingwas recognized ratably over the six-month performance period as a reduction to costCost of products soldProducts Sold in proportion to the compensation expense that the award iswas intended to defray. During the yearyears ended December 31, 2022 and 2021, the Company recognized $6.0 million and $8.7 million of the award.award, respectively.

For additional details regarding thegovernment subsidies and grants, and their impact on consolidated results of operations and financial position, see Note 1 to the consolidated financial statementsConsolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report.

On February 13, 2019, the Company completed a divestiture of its semiconductor test business within the Test Systems segment. The business was not core to the future of the Test Systems segment. The total proceeds of the divestiture amounted to $103.8 million. The Company recorded a pre-tax gain on the sale of $80.1 million in the first quarter of 2019. The Company recorded income tax expense relating to the gain of $19.7 million.

On October 6, 2021, the Company sold one of its Aerospace facilitiesbuildings for $9.2 million. Net cash proceeds were approximately $8.8 million and a gain on sale of approximately $5.0 million was recorded. The operation has been integrated into another facility.

Our Aerospace segment designs and manufactures products for the global aerospace industry. Product lines include lighting and safety systems, electrical power generation, distribution and motionsseat motion systems, aircraft structures, avionics products, systems certification, and other products. Our Aerospace customers are the airframe manufacturers (“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. During 2021,2023, this segment’s sales were divided 55%72% to the commercial transport market, 19%10% to the military aircraft market, 16%13% to the business jetgeneral aviation market and 10%5% to other markets. As a result of the COVID-19 pandemic and its adverse impact on air travel worldwide, the commercial aerospace industry has been significantly disrupted. Most of this segment’s sales are a result of contracts or purchase orders received from customers, placed on a day-to-day basis or for single year procurements rather than long-term multi-year contract commitments. On occasion, the Company does receive contractual commitments or blanket purchase orders from our customers covering multiple-year deliveries of hardware to our customers.

Our Test Systems segment designs, develops, manufactures and maintains automated test systems that support the aerospace and defense, communications and mass transit industries as well as training and simulation devices for both commercial and military applications. 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. The nature of our Test Systems business is such that it pursues large, often multi-year, projects.

Sales by segment, geographic region, major customer and foreign operations are provided in Note 20 ofin Item 8, Financial Statements and Supplementary Data, inof this report.

We have historically had a significant concentration of business with twoone major customers; Panasonic Avionics Corporation (“Panasonic”) andcustomer, The Boeing Company (“Boeing”). While sales to Panasonic accounted for less than 10% of sales in 2021, they accounted for 11.1% of sales in 2020, and 13.0% of sales in 2019. Sales to Boeing accounted for 11.0% of sales in 2023, 11.0% of sales in 2022, and 10.0% of sales in 2021, 9.5% of sales in 2020, and 13.6% of sales in 2019.2021. Sales to Panasonic and Boeing are primarily in the Aerospace segment.

Our strategy is to increase our value by developing technologies and capabilities either internally or through acquisition, and use those capabilities to provide innovative solutions to the aerospace and defense and otherour targeted markets where our technology can be beneficial.

Liquidity is discussed in Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in the Liquidity and Capital Resources section of this report.

We experience considerable competition in the market sectors we serve, principally with respect to product performance and price, from various competitors, many of which are substantially larger and have greater resources.resources than we do. Success in the markets we serve depends upon product innovation, customer support, responsiveness and cost management. We continue to invest in developing the technologies and engineering support critical to competing in our markets.

All U.S. government contracts, including subcontracts where the U.S. government is the ultimate customer, may be subject to termination at the election of the government. Our revenue stream relies on military spending. Approximately 18%12% of our 20212023 consolidated sales were made to U.S. government-related markets.

Materials, supplies and components are purchased from numerous sources. We believe that the loss of any one source, although potentially disruptive in the short-term, would not materially affect our operations in the long-term. The COVID-19 pandemic has significantly disrupted the global supply chain for certain components. See further discussion within the Risk Factor discussion in Item 1A.

Our business is typically not seasonal.

At December 31, 2021,2023, our consolidated backlog was $415.7$592.3 million. At December 31, 2020,2022, our backlog was $283.4$571.4 million. The increase in backlog is driven primarily by recovering demand from our commercial aerospacetransport and business jetgeneral aviation customers, with increased OEM build rates and increased spending by commercial airlines on fleet improvements.

Backlog in the Aerospace segment was $334.7$517.2 million at December 31, 2021,2023, of which $299.4$474.5 million is expected to be recognized as revenue in 2022.2024. Backlog in the Test Systems segment was $81.0$75.0 million at December 31, 2021.2023. The Test Systems segment expects to recognize $40.5$52.1 million of this backlog as revenue in 2022.2024.

We have a number of patents. While the aggregate protection of these patents is of value, our only material business that is dependent upon the protection afforded by these patents is our cabin power distribution products. Our patents and patent applications relate to electroluminescence, instrument panels, cord reels and handsets, and a broad patent covering the cabin power distribution technology. We regard our expertise and techniques as proprietary and rely upon trade secret laws and contractual arrangements to protect our rights. We have trademark protection in our major markets.

We are engaged in a variety of engineering and design activities as well as basic researchResearch and development activities directedcosts are expensed as incurred and include salaries, benefits, consulting, material costs and depreciation. Research and development expenses amounted to the substantial improvement or new application of our existing technologies.$53.5 million in 2023, $48.3 million in 2022 and $43.3 million in 2021. These costs are expensed when incurred and included in costCost of products sold. Research, development and engineering costs amounted to approximately $85.3 million in 2021, $86.8 million in 2020 and $108.9 million in 2019.

As of December 31, 2021,2023, we employed approximately 2,1002,500 employees, of whom approximately 1,7002,000 were employed in the United States and approximately 400500 were employed outside of the United States. We have approximately 70 hourly140 non-exempt production employees at PECO who are subject to collective bargaining agreements. We also leverage temporary workers to provide flexibility for our business and manufacturing needs.

We greatly value our employees and recognize that, without them, the Company would not have achieved the success it has accomplished since inception. We strive to provide a positive, supportive work culture with a clear global vision and a collaborative work style. We strongly believe that a focus on learning and supporting career development can lead to success. Astronics Corporation regularly earns “best employer” awards.

As it relates to customers, investors, suppliers and partners, our Company is dedicated to conducting business with integrity and responsibility for the greater good. We promote honest and ethical conduct, compliance with applicable government regulations and accountability by all of its directors, officers and employees.

When considering an acquisition or partnership, we embed questions specific to human capital management within our due diligence approach. These questions are in the areas of culture, equal employment opportunity, compliance with governing bodies, ethics, as well as employee benefits. We ask these in an effort to ensure that the acquisition candidate is a positive cultural fit and to minimize any risk when assessing the acquisition candidate.

In addition, our Corporate Governance Guidelines outline expectations that the Board establish and promote policies that encourage a positive, supportive work culture. The Board recognizes that culture is critical to the long-term success of Astronics and our strategy.

We believe that future success largely depends upon our continued ability to attract and retain highly skilled employees. We provide employees with competitive salaries and bonuses, opportunities for equity ownership, development programs that enable continued learning and growth and a robust employment package that promotes well-being across all aspects of their lives, including;

The lifeblood of any organization is its employee base. We rely on our individual subsidiaries to regularly gather employee feedback, using the method each subsidiary believes is most appropriate. In some instances that feedback is obtained through “Town Hall” formats; in other instances, it is obtained through surveys. We also expect our managers to solicit and, where applicable, use employee feedback to improve its business practices and working environment. We are proud to have received numerous awards, recognizing both product quality as well as the ability to provide an excellent work environment.

The Company believes that diversity and inclusion is critical for the attraction and retention of top talent, and employs policies and procedures to recruit women and minority talent as well as policies to ensure pay equality. Astronics has an Equal Employment Opportunity Policy whereby the Company commits to providing equal employment opportunity and affirmative action plans for all qualified employees and applicants without regard to race, color, sex, sexual orientation, gender identity, religion, national origin, disability, veteran status, age, marital status, pregnancy, genetic information or other legally protected status.

Astronics is committed to the safety of our customers and our employees. Each Astronics operation maintains environmental, health and safety policies and practices that seek to promote the operation of its businesses in a manner that is protective of the health and safety of the public and its employees, particularly in the response to the global COVID-19 pandemic. We have implemented actions to maintain the health of our employees including social distancing measures, the use of masks, restricting visitors and unnecessary travel, and working from home whenever possible.employees.

Our operations offer several health and welfare programs to employees to promote fitness and wellness and to encourage preventative healthcare. In addition, our employees are offered a confidential employee assistance program that provides professional counseling to employees and their family members. Also, many of our operations offer green space for employees to use during their breaks.

We file our financial information and other materials as electronically required with the U.S. Securities and Exchange Commission (“SEC”). These materials can be accessed electronically via the Internet at www.sec.gov. Such materials and other information about the Company areWe also make available free of charge through our website at www.astronics.com.www.astronics.com our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file those reports with, or furnish them to, the SEC. The information contained on our website is not incorporated by reference in this annual report on Form 10-K and should not be considered a part of this report.

In our Aerospace segment, demand by the business jetgeneral aviation markets for our products is dependent upon several factors, including capital investment, product innovations, economic growth and wealth creation and technology upgrades. In addition, the commercial airline industry is highly cyclical with significant downturns in the past and sensitive to such things as fuel price increases, labor disputes, global economic conditions, availability of capital to fund new aircraft purchasespurchase and upgrades of existing aircraft and passenger demand, all of which have been significantly impacted by the ongoing COVID-19 pandemic.demand. A change in any of these factors could result in a further reduction in the amount of air travel and the ability of airlines to invest in new aircraft or to upgrade existing aircraft. Therefore, our business is directly affected by economic factors and other trends that affect our customers in the commercial aerospace industry. These factors would reduce orders for new aircraft and would likely reduce airlines’ spending for cabin upgrades for which we supply

products, thus reducing our sales and profits. A reduction in air travel may also result in our commercial airline customers being unable to pay our invoices on a timely basis or not at all.

We are a supplier on various new aircraft programs just entering or expected to begin production in the future. As with any new program, there is risk as to whether the aircraft or program will be successful and accepted by the market. As is customary for our business, we purchase inventory and invest in specific capital equipment to support our production requirements generally based on delivery schedules provided by our customer. If a program or aircraft is not successful, we may have to write-off all or

In our Test Systems segment, the market for our products is concentrated with a limited number of significant customers accounting for a substantial portion of the purchases of test equipment. In any one reporting period, a single customer or several customers may contribute an even larger percentage of our consolidated sales. In addition, our ability to increase sales will depend, in part, on our ability to obtain orders from current or new significant customers. The opportunities to obtain orders from these customers may be limited, which may impair our ability to grow sales. We expect that sales of our Test Systems products will continue to be concentrated with a limited number of significant customers for the foreseeable future. Additionally, demand for some of our test products is dependent upon government funding levels for our products, our ability to compete successfully for those contracts and our ability to develop products to satisfy the demands of our customers.

We believe that the principal points of competition in our markets are product quality, price, design and engineering capabilities, product development, conformity to customer specifications, quality of support after the sale, timeliness of delivery and effectiveness of the distribution organization. Maintaining and improving our competitive position will require continued investment in manufacturing, engineering, quality standards, marketing, customer service and support and our distribution networks. If we do not maintain, or are otherwise unable to maintain, sufficient resources to make these investments, or are not successful in maintaining our competitive position, our business operations and financial performance will suffer.

potential for substantial civil and criminal fines and penalties. These fines and penalties could be imposed for failing to follow procurement integrity and bidding rules, employing improper billing practices or otherwise failing to follow cost accounting standards, receiving or paying kickbacks or filing false claims. We have been, and expect to continue to be, subjected to audits and investigations by government agencies. The failure to comply with the terms of our government contracts could harm our business reputation.reputation, which could significantly reduce our sales and earnings. It could also result in our suspension or debarment from future government contracts.contracts, which would adversely affect our business, financial condition, results of operations, and cash flows.

In addition, any acquisition, once successfully integrated, could negatively impact our financial performance if it does not perform as planned, does not increase earnings, or does not prove otherwise to be beneficial to us.

The threats we face vary from attacks common to most industries, such as ransomware attacks to disable critical infrastructure and extort companies for ransom payments, to more advanced and persistent, highly organized adversaries, including nation states, which target us and other defense contractors because we protect sensitive information. If we are unable to protect sensitive information, our customers or governmental authorities could question the adequacy of our threat mitigation and detection processes and procedures, and depending on the severity of the incident, our customers’ data, our employees’ data, our intellectual property, and other third-party data (such as subcontractors, suppliers and vendors) could be compromised. As a consequence of their persistence, sophistication and volume, we may not be successful in defending against all such attacks. Due to the evolving nature of these security threats, the impact of any future incident cannot be predicted.

Although we work cooperatively with our customers, suppliers, and subcontractors to seek to minimize the impact of cyber threats, other security threats or business disruptions, we must rely on the safeguards put in place by these entities, which may affect the security of our information. These entities have varying levels of cybersecurity expertise and safeguards and their relationships with U.S. government contractors, such as Astronics, may increase the likelihood that they are targeted by the same cyber threats we face.

In an effort to mitigate these risks, in some cases, we have incurred higher costs to secure available inventory, or have extended or placed non-cancellable purchase commitments with suppliers, which introduces inventory risk if our forecasts and assumptions prove inaccurate. While we may attempt to recover the increased costs through price increases to our customers, we may be unable to mitigate the effect on our results of operations. We have also multi-sourced and pre-ordered components and raw materials inventory in some cases in an effort to reduce the impact of the adverse supply chain conditions we have experienced. Despite our attempts to mitigate the impact on our business, these constrained supply conditions are expected to adversely impact our costs of goods sold, including our ability to continue to reduce the cost to produce our products in a manner consistent with prior periods. In addition, some suppliers have indicated that, as a result of current shortages, they intend to cease manufacture of certain components used in our products. Limits on manufacturing availability or capacity or delays in production or delivery of components or raw materials due to COVID-related restrictions could further delay or inhibit our ability to obtain supply of components and produce finished goods. There can be no assurance that the impacts of the pandemic on the supply chain will not continue, or worsen, in the future. These supply chain constraints and their related challenges could result in shortages, increased material costs or use of cash, engineering design changes, and delays in new product introductions, each of which could adversely impact our growth, gross margin and financial results. These types of negative financial impacts on our business may become more acute asif supply chain pressures increase.

years and are expected to continue to rise. If this trend continues, the cost of labor and to provide healthcare and other benefits to our employees could continue to increase, adversely impacting our future profitability. As the labor market recovers from the effects of the COVID-19 pandemic, competitionCompetition for employees has escalated in the labor market which has increased costs associated with attracting and retaining employees. We cannot be certain that we will be able to maintain an adequately skilled labor force necessary to operate efficiently or that our labor costs will not increase as a result of a shortage in the availability of skilled employees. Changes to healthcare regulations involving the Patient Protection and Affordable Care Act may also increase the cost of providing such benefits to our employees. We cannot predict the ultimate content, timing, or effect of any healthcare reform legislation or the impact of potential legislation or related proposals and policies on our results. Any significant increases in the costs attributable to our self-insured health and workers’ compensation plans could adversely impact our business, results of operations, financial condition and cash flows.

Additionally, our credit facilityABL Revolving Credit Facility and Term Loan Facility also containscontain a number of restrictive covenants that impose significant operating and financial restrictions on the Company and our subsidiaries and may limit our ability to engage in acts that maywe believe to be in our long-term best interests. The credit facility includesABL Revolving Credit Facility and Term Loan Facility include covenants restricting, among other things, the ability of the Company and our subsidiaries to:

growth rates and terminal values. Certain of these assumptions, particularly the discount rate, are based on market conditions and are outside of our control. Changes in these assumptions could affect our future earnings and equity.

Additionally, pension obligations and the related costs are determined using actual results and actuarial valuations that involve several assumptions. The most critical assumption is the discount rate. Other assumptions include mortality, salary and bonus levels and retirement age. The discount rate assumptions are based on current market conditions and are outside of our control. Changes in these assumptions could affect our future earnings and equity.

Refer to Note 19 of our consolidated financial statementsConsolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report for discussion on this and other legal proceedings. 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 results of operations or financial condition.

In addition, the stock market in general, and the market prices for companies in the aerospace and defense industry in particular, have experienced significant price and volume fluctuations that often have been unrelated to the operating performance of the companies affected by these fluctuations. These broad market fluctuations may adversely affect the market price of our common stock, regardless of our operating performance. Global health crises, such assimilar to the current COVID-19 pandemic, with the breadth of its impact worldwide, and particularly on the aerospace industry, could also cause significant volatility in the market price.

On December 31, 2021,2023, we own or lease 1.31.1 million square feet of space, distributed by segment as follows:

We have principal operations in the U.S., Canada, France and the UK, as well as engineering offices in the Ukraine and India.

Upon the expiration of our current leases, we believe that we will be able to either secure renewal terms or enter into leases for or purchases of alternative locations at market terms. We believe that our properties have been adequately maintained and are generally in good condition.

Currently, we are involved in legal proceedings relating to allegations of patent infringement and, based on rulings to date, we have concluded that losses related to certain of these proceedings are probable. For a discussion of contingencies related to legal proceedings, see Note 19 to our consolidated financial statementsConsolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report.

The table below sets forth the range of prices for the Company’s Common Stock is traded on the NASDAQ NationalNasdaq Global Select Market System, for each quarterly period duringunder the last two years.symbol “ATRO”. The approximate number of shareholders of record as of March 2, 2022,February 26, 2024, was 705717 for Common Stock and 1,9461,878 for Class B Stock.

The Company has not paid any cash dividends in the three-year period ended December 31, 2021.2023. The Company has no plans to pay cash dividends in the future as it plans to retain all cash from operations as a source of capital to service debt and finance working capital and growth in the business.

The following table summarizes our purchases of our common stock for the quarterthree months ended December 31, 2021:2023:

(1) On October 4, 2021, we accepted delivery of 729 shares at $14.38 in connection with the issuance of restricted stock units.

The following graph compares the Company’s annual percentage change in cumulative total return on common shares over the past five years with the cumulative total return of companies comprising the S&P 500 Index and the NASDAQ Composite Index. This presentation assumes that $100 was invested in shares of the relevant issuers on December 31, 2016,2018, and that dividends received were immediately invested in additional shares. The graph plots the value of the initial $100 investment at one-year intervals for the fiscal years shown. The NASDAQ Composite Index replaces the CRSP NASDAQ Stock Market (US and Foreign Companies) Index in this analysis and going forward, as the CRSP Index data is no longer accessible. The CRSP index has been included with data through 2020.

Astronics Corporation, through its subsidiaries, is a leading supplier of advanced technologies and products to the global aerospace and defense industries. Our products and services include advanced, high-performance electrical power generation and distribution systems, seat motion solutions, lighting and safety systems, avionics products, aircraft structures, systems certification, and automated test systems.

We have two reportable segments, Aerospace and Test Systems. Our Aerospace segment has principal operating facilities in the United States, Canada and France. Our Test Systems segment has principal operating facilities in the United States and the United Kingdom. We have engineering offices in the Ukraine and India.

Our Aerospace segment designs and manufactures products for the global aerospace industry. Product lines include lighting and safety systems, electrical power generation, distribution and seat motionsmotion systems, aircraft structures, avionics products, systems certification, and other products. Our primary Aerospace customers are the airframe manufacturers (“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 (“USDOD”). Our Test Systems segment designs, develops, manufactures and maintains automated test systems that support the aerospace and defense communications and mass transit industries as well as training and simulation devices for both commercial and military applications. 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 our 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 pressures, the rate at which new aircraft are produced, government funding and timing of awards 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.aircraft and supply chain and labor market pressures. 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 associated thereto 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. 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.

Challenges whichThe main challenges that we continue to face us include varying levels of supply chain pressures from the ongoingresidual impacts of the COVID-19 pandemic, material availability and its continued impact on the aerospace industrycost increases, labor availability and cost, and improving shareholder value through increasing profitability. Increasing profitability is dependent on many things, primarily sales growth, both acquired and organic, and the Company’s ability to pass cost increases along to customers and control operating expenses, and to identify means of creating improved productivity. Sales are driven by increased build rates for existing aircraft, market acceptance and economic success of new aircraft and our products, continued government funding of defense programs, the Company’s ability to obtain production contracts for parts we currently supply or have been selected to design and develop for new aircraft platforms and continually identifying and winning new business for our Test Systems segment.

Reduced aircraft build rates driven by a weak economy, aircraft groundings, tight credit markets, reduced air passenger travel, and an increasing supply of used aircraft on the market would likely result in reduced demand for our products, which will result in lower profits. 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 and labor rate pressures canhave in the past resulted, and could in the future also result in, lower profits. We will

In September 2021, the Company entered into an agreement withwas 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”) for a grant of up to $14.7 million.. The Company received $7.3 million and $7.4 million under the grant in 2021. The Company expects to receive a second installment of approximately $5.2 million in the first quarter of 2022 and a final installment in the second or third quarter of 2022 upon final confirmation from the USDOT of the Company meeting its grant commitments. The receipt of the full award is primarily conditioned upon the Company committing to not furlough, lay off or reduce the compensation levels of a defined group of employees during the six-month period of performance between September 2021, and March 2022.respectively. The grant benefit will bewas recognized ratably over the six-month performance period as a reduction to costCost of products soldProducts Sold in proportion to the compensation expense that the award is intended to defray. During the yearyears ended December 31, 2022 and 2021, the Company recognized $6.0 million and $8.7 million of the award, respectively.

We are monitoring the ongoing conflict between Russia and expects to recognizeUkraine and the remaining $6.0 millionrelated export controls and financial and economic sanctions imposed on certain industry sectors, including the aviation sector, and parties in Russia by the first quarter of 2022.

In November 2023, a non-core contract manufacturing customer demandreported within the Aerospace segment filed for all market channels, with commercial transport (both OEM and aftermarket channels) being the most adversely impacted due to the pandemic's impact on air travel worldwide.bankruptcy under Chapter 11. As a result, the Company executed restructuring activities in the formrecorded a full reserve of workforce reduction$7.5 million for outstanding accounts receivable and a $3.6 million reserve against dedicated inventory. The associated assets existed prior to better align capacity with expected demand. Restructuring charges in severance expense totaling $0.6 million, associated primarily with the Aerospace segment, were recorded in the year ended December 31, 2021, compared with $4.9 million recorded in the year ended December 31, 2020.

On February 13, 2019, the Company completed a divestiture of its semiconductor test business within the Test Systems segment. The total proceeds of the divestiture amounted to $103.8 million plus certain contingent purchase consideration (“earnout”).

On October 6, 2021, as part of a planned consolidation effort, the Company sold one of its Aerospace facilitiesbuildings for $9.2 million. Net cash proceeds were approximately $8.8 million. Amillion and a gain on sale of approximately $5.0 million was recorded in 2021.recorded. The business of that facility will be relocated to one of the Company’s other operations.operation has been integrated into another facility.

The commercial transport market is our largest end market with sales driven by new aircraft production and aftermarket airline retrofit programs. In the commercial transport market, while many of our key long-term fundamentals remain intact, we continue to see residual, though improving, near-term market pressure due to COVID-19. Despite solid progress on the vaccine front, 2022 will remain very challenging for our commercial transport products witheffects of certain supply chain challenges. We have experienced improvement expected throughout 20222023 driven by the planned increased production rate of the 737 MAX and an expectation of improved activity with our airline customers. Aircraft build rates are expected to continue to improve modestly during 20222024 and 2025 from current levels as production of the 737 MAX and A-320 picks up,is expected to increase, and the aftermarket is expected to strengthen over the course of

the year as aircraft utilization and load factors increase. On the other hand, wide-bodyInternational travel utilizing primarily widebody aircraft is close to pre-pandemic levels and we believe widebody aircraft production rates and usage are expectedwill continue to remain depressed throughout 2022 and possibly for several years due to low international travel demand caused by the pandemic.directionally match air traffic volumes.

Sales to the commercial transport market include sales of lighting and safety systems, electrical power generation, distribution and motionsseat motion systems, aircraft structures, avionics products and systems certification. Sales to this market totaled approximately $202.0$432.2 million or 45.4%62.8% of our consolidated sales in 2021. As a result of the COVID-19 pandemic and its adverse impact on air travel worldwide, the commercial aerospace industry has been significantly disrupted.2023.

Maintaining and growing sales to the commercial transport market will depend not only on continued market recovery from the impacts of the COVID-19 pandemic,post-pandemic, but also on airlines’ capital spending budgets for cabin upgrades as well as the purchase of new aircraft by global airlines. This spending by the airlines is impacted by their profits, cash flow and available financing as well as competitive pressures between the airlines to improve the travel experience for their passengers. We expect that new aircraft will be equipped with more passenger and aircraft connectivity and in-seat power than previous generation aircraft which drives demand for our avionics and power products. This market has historically experienced strong growth from airlines installing in-seat passenger power systems on their existing and newly delivered aircraft. Our ability to maintain and grow sales to this market depends on our ability to maintain our technological advantages over our competitors and maintain our relationships with major in-flight entertainment suppliers and global airlines.

Sales to the military aerospace market include sales of lighting &and safety products, avionics products, electrical power &and seat motion products and structures products. Sales to this market totaled approximately 15.8%8.9% of our consolidated sales and amounted to $70.3$61.6 million in 2021.2023.

The military market is dependent on governmental funding which can change from year to year. Risks are that overall spending may be reduced in the future, specific programs may be eliminated or that we fail to win new business through the competitive bid process. Astronics does not have significant reliance on any one program such that cancellation of a particular program will cause material financial loss. We believe that we will continue to have opportunities similar to past years regardingwith respect to this market.

The business jetSales to the general aviation market has also been impacted by the pandemic with new aircraft build rates significantly lower than pre-pandemic levels. Mostconsist mostly of our sales in this market are line-fit products driven by aircraft build rates although there are some aftermarket sales as well. We expecthave seen notable improvement in 2022the current year and expect that to continue into 2024 as build rates are expected to increase.increase post-pandemic.

Sales to the business jetgeneral aviation market include sales of lighting &and safety products, avionics products, and electrical power &and seat motion products. Sales to this market totaled approximately 12.7%11.7% of our consolidated sales in 20212023 and amounted to $56.7$80.8 million.

Sales to the business jetgeneral aviation market are driven by our ship set content on new aircraft and build rates of new aircraft. Business jetGeneral aviation OEM build rates are impacted by global wealth creation and corporate profitability. We continue to see opportunities on new aircraft currently in the design phase to employ our lighting &and safety, electrical power and avionics technologies in this market. There is risk involved in the development of products for any new aircraft including the risk that the aircraft will not ultimately be produced

Sales by our Test Systems segment accounted for approximately 17.9%12.2% of our consolidated sales in 20212023 and amounted to $79.7$84.4 million. This segment designs, develops, manufactures and maintains automated test systems that support the aerospace and defense, communications and mass transit industries as well as training and simulation devices for both commercial and military applications. Sales to the aerospace &and defense market were approximately $62.9$48.2 million in 2021.2023. Sales to the mass transit market were approximately $16.8 million.$18.9 million and sales to other markets were $17.3 million in 2023.

Sales to the military marketand mass transit markets are subject to fluctuations resulting from changes in governmental spending, elimination of certain programs, or failure to win new business through the competitive bid process. Consistent with the Aerospace segment, the Test Systems segment does not significantly rely on any one program such that cancellation of a particular program will cause material financial loss, and we believe that we will continue to have opportunities similar to past years regarding this market.

Our financial statements and accompanying notes are prepared in accordance with U.S. generally accepted accounting principles. The preparation of the Company’s financial statements requires management to make estimates, assumptions and judgments that affect the amounts reported. These estimates, assumptions and judgments are affected by management’s application of accounting policies, which are discussed in the Notes to Consolidated Financial Statements, Note 1 ofin Item 8, Financial Statements and Supplementary Data, of this report. The critical accounting policies have been reviewed with the Audit Committee of our Board of Directors.

Astronics recognizes revenue when it transfers control of a promised good or service to a customer in an amount that reflects the consideration it expects to receive in exchange for the good or service. Our performance obligations are satisfied and control is transferred either at a point-in-time or over-time. The majority of our revenue is recognized at a point-in-time when control is transferred, which is generally evidenced by the shipment or delivery of the product to the customer, a transfer of title, a transfer of the significant risks and rewards of ownership, and customer acceptance. For certain contracts under which we produce products with no alternative use and for which we have an enforceable right to recover costs incurred plus a reasonable profit margin for work completed to date and for certain other contracts under which we create or enhance a customer-owned asset while performing repair and overhaul services, control is transferred to the customer over-time.over time. The Company recognizes revenue using an over-timeover time recognition model for these types of contracts.

We utilize the cost-to-cost method as a measure of progress for performance obligations that are satisfied over-timeover time as we believe this input method best represents the transfer of control to the customer. Under the cost-to-cost method, the extent of progress toward completion is measured based on the proportion of costs incurred to date to the total estimated costs at completion of the performance obligation. These projections require management to make numerous assumptions and estimates relating to items such as the complexity of design and related development costs, performance of subcontractors, availability and cost of materials, labor productivity and cost, overhead, capital costs, and manufacturing efficiency. We review our cost estimates on a periodic basis, or when circumstances change and warrant a modification to a previous estimate. Cost estimates are largely based on negotiated or estimated purchase contract terms, historical performance trends and other economic projections.

See Note 2 to the consolidated financial statementsConsolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report for a further description of revenue recognition under ASC 606.

Our goodwill is the result of the excess of purchase price over net assets acquired from acquisitions. AsWe had approximately $58.2 million of goodwill as of December 31, 20212023 and December 31, 2020, we had approximately $58.3 million of goodwill.2022.

We identify our reporting units by assessing whether the components of our operating segments constitute businesses for which discrete financial information is available and segment management regularly reviews the operating results of those components. The Test Systems operating segment is its own reporting unit while the other reporting units are one level below our Aerospace operating segment.

The Company tests goodwill at the reporting unit level on an annual basis or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

The Company’s four reporting units remaining with goodwill as of the first day of our fourth quarter were subject to the annual goodwill impairment test. Based on our quantitative assessments of our reporting units, we concluded that goodwill was not impaired in 2023, 2022 or 2021.

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

Consolidated sales were down $57.7up $154.3 million, or 28.8%, to $444.9$689.2 million compared to the prior year. Aerospace sales were down $52.8increased $143.6 million, and continue to be negatively affectedor 31.1%, driven by the continued impactsincreased demand across our range of the COVID-19 pandemic, while the prior-year period was inclusive of the pre-pandemic levels during the first quarter.aerospace product lines. Test System sales decreased $4.9 million.increased $10.7 million, due primarily to the reversal of a $5.8 million deferred revenue liability assumed with an acquisition and associated with a customer program which is no longer expected to occur, and higher radio test product revenue.

Consolidated costCost of products sold were down $26.2Products Sold in 2023 was $568.4 million, to $379.5 million in 2021 from $405.7compared with $463.4 million in the prior year. The decreaseincrease was primarily due to lowerhigher volume related toas well a $3.6 million inventory reserve charge associated with the continued impactsbankruptcy of a customer and $1.4 million in non-cash stock bonuses reinstated in the COVID-19 pandemic on the global aerospace industry.current year. The current yearprior-year period benefited from $8.7the AMJP Program grant which provided a $6.0 million recognized as an offset to costCost of products sold relatedProducts Sold. Research and development expenses increased $5.2 million due to higher innovation spend. Margins remained under pressure in the AMJP award, but was negatively impacted by higher warranty expensesyear because of $3.9 million.

Selling, generalGeneral and administrativeAdministrative (“SG&A”) expenses were $99.1$127.5 million in 2023 compared with $110.5$101.6 million in the prior-year period primarily due to increased wages and benefits, an accounts receivable reserve charge of $7.5 million associated with the bankruptcy of a customer, a net increase of $7.9 million in litigation-related legal expenses and reserve adjustments, and a $2.8 million increase of incentive compensation expenses recorded in SG&A. The prior-year period reflects $2.6 million in expense related to a customer accommodation dispute and a lease termination settlement.

In 2023, the Company recognized a final earnout of $3.4 million for the prior year period. The decrease in 2021 was due to the cost control measures implemented at the onset2019 sale of the pandemic lateits semiconductor test business, compared with $11.3 million recognized in the first quarterprior year. Other Income in 2023 included $1.8 million associated with the reversal of 2020 which resulted in lower labor costs and discretionary spending. The Company incurred $0.6a liability related to an equity investment.

Interest expense was $23.3 million in restructuring-related severance charges in the current year, and $5.3compared with $9.4 million in the prior year, primarily in the Aerospace segment. SG&A in the current year also benefited from a $2.2 million non-cash reduction of the fair value of a contingent consideration liability. However,driven by higher interest rates on credit facilities entered into in January 2022, the Company was notified of an adverse ruling in its long-running intellectual property dispute with Lufthansa Technik, which has been in litigation since 2010 in the U.S., France, Germany and the United Kingdom. Most recently, the U.K. Court has ruled that the subject patent is valid and that the Company has been infringing the expired patent. Based on the information currently available, the Company accrued $8.4 million relative to the U.K. matter in 2021, although the actual amount of damages will not be known until the damages trial is completed, which is expected to occur sometime in 2023. This amount was recorded within SG&A in the fourth quarter of 2021.

Consolidated net loss was $(25.6)$26.4 million, or $(0.82)$0.80 per diluted share, compared with net loss of $(115.8)$35.7 million, or $(3.76)$1.11 per diluted share, in the prior year. The after-tax impact of the impairment loss in 2020 was $(2.64) per diluted share.

Our effective tax rates for 20212023 and 20202022 were 5.1%(0.4)% and (3.0)(20.0)%, respectively. In the past, research and development costs were deducted as incurred. However, beginning with the 2022 tax year, these costs are required to be capitalized for tax purposes and amortized over 5 years. While this would typically result in the creation of an associated deferred tax asset, due to our cumulative three-year pre-tax loss, a valuation allowance was applied against the deferred tax asset. In addition to state income taxes, the following items had the most significant impact on the difference between our statutory U.S. federal income tax rate (21% in 20212023 and 2020)2022) and our effective tax rate:

Our Business

See Part I, Item 1A, Risk Factors, for an additional discussion of risk related to supply chain disruptions and the recent government vaccine mandates.disruptions.

InFor a comparison of our results of operations for the years ended December 31, 2022 and 2021, we experienced an increase in bookings, however we have also been impacted by supply chain pressures that we expect will continue to impact delivery schedulessee Item 7, Management’s Discussion and costs, limiting the Company’s ability to respond to accelerated or quick-turn delivery requests from customersAnalysis of Financial Condition and delaying shipments that otherwise would have been made in 2021. We estimate that we had backlog at the endResults of the yearOperations, of $15 million to $17 million that would have shipped if our supply chain had been functioning normally. Our initial expectation is that 2022 revenue will be in the range of $550 million to $600 millionAnnual Report on Form 10-K for the year which includes what we consider reasonable allowances for continued supply chain and labor disruptions. We expect the first quarter to show a modest volume increase over the fourth quarter, with a stronger ramp in the latter half of the year, though supply chain and the tight labor market are risk items.

Operating profit (loss), as presented below, is sales less cost of products sold and other operating expenses, excluding interest expense, other corporate expenses and other non-operating sales and expenses. Cost of products sold and other operating expenses are directly identifiable to the respective segment. Operating lossprofit (loss) is reconciled to loss before income taxes in Note 20 of Item 8, Financial Statements and Supplementary Data, of this report.

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

For further information on our contractual obligations and other commitments as of December 31, 20212023 and estimated timing thereof, see the notes referenced below, ofin Item 8, Financial Statements and Supplementary Data, of this report.

Our cash flow from operations, and available borrowing capacity, and proceeds under our ATM Program (as defined below) are expected to provide us with the financial resources needed to run our operations and reinvest in our business.business for at least the next 12 months.

Our ability to maintain sufficient liquidity 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.

Cash used for operating activities totaled $5.5$24.0 million in 2021,2023, as compared with $37.3$28.3 million cash provided byused for operating activities in 2020.2022. Cash flow from operating activities decreasedimproved compared with the 2020 due2022 primarily related to lower net income adjusted for non-cash or non-operating expense or income items,improvement in our financial results, coupled with changes in net operating assets, primarily increases in accounts receivable and inventories. Non-cash itemsinventory using less cash as supply chain challenges have improved, partially offset by increased outflows related to accounts payable. The $3.4 million and $11.3 million earnouts in 2021 include the $10.7 million earnout2023 and 2022, respectively, from the sale of the semiconductor business are treated as investing activities and thus are shown as non-cash gains removed from the $5.0 million net gain on the salecalculation of facilities within the Aerospace segment, as well as the $8.4cash flow from operations. Additional non-cash items in 2023 include $12.6 million incremental reserveprovisions for estimated impactsinventory and receivables, primarily the result of the intellectual property dispute with Lufthansa Technik.customer bankruptcy previously discussed, and a $5.8 million deferred liability recovery. Operating cash flows in 2022 benefited from the receipt of income tax refunds and AMJP grant proceeds.

Our cash flows from operations are primarily dependent on our net incomeloss adjusted for non-cash expenses and income and the timing of collections of receivables, level of inventory levels and payments to suppliers and employees. Sales and operating results of our Aerospace segment are influenced by the impact in 2021 and 2020 of the COVID-19 pandemic on the aerospace industry, in particular, build rates of new aircraft, which are subject to general economic conditions, airline passenger travel and spending

Cash used for investing activities in 20202023 was $5.8$4.1 million primarilycompared to $14.4 million cash provided by investing activities in 2022. Investing cash flows in 2023 were positively impacted by the resultreceipt of PP&E of $7.5$3.4 million partially offset by proceedsrelated to the calendar 2022 earnout from the sales of PP&E.

Future requirements for PP&E depend on numerous factors, including expansion of existing product lines and introduction of new products. Management believes that our cash flow from operations and current borrowing arrangements will provide for these capital expenditures. We expect to continue to evaluate acquisition opportunities in the future. Investing cash flows in 2022 will be positively impacted by the receipt of $10.7 million related with the calendar 2020 earnout from the sale of the semiconductor business and approximately $11.2 million related with the calendar 2021 earnout, which is expected to be received in the first quarter of 2022.

Cash provided by financing activities totaled $25.4 million for 2023, as compared with cash used for financing activities totaled $7.5of $1.4 million for 2021, as compared with $24.62022. The Company received proceeds from our at-the-market equity offering program (the “ATM Program”) of $21.3 million for 2020. Thein 2023. Additionally, the Company made net repayments towardsborrowings under our senior credit facilityfacilities of $10.0$8.5 million in 20212023 compared with net repayments of $15.0$1.0 million in 2020. Cash used2022, partially offset by an increase in 2020 also included $7.7 million of share repurchases before the 10b-5 plancosts associated with the share repurchase program was terminated.amending and refinancing our credit facilities.

The Company's FifthCompany amended the existing revolving credit facility on January 19, 2023 by entering into the Sixth Amended and Restated Credit Agreement (the “Agreement”) was amended in May 2020 (the “Amended“ABL Revolving Credit Facility”) and reduced. The ABL Revolving Credit Facility set the maximum aggregate amount that the Company can borrow under the revolving credit line from $500at $115 million, with borrowings subject to $375 million.a borrowing base determined primarily by certain domestic inventory and accounts receivable. The Amendedmaturity date of borrowings under the ABL Revolving Credit Facility suspendedis January 19, 2026. Under the applicationterms of the leverage ratio up through and including the second quarter of 2021 (the “suspension period”). The maximum net leverage ratio, which represents the ratio of funded debt, net of cash to adjusted EBITDA (as defined in the Agreement) was set at 6.00 to 1 for the third quarter of 2021, 5.50 to 1 for the fourth quarter of 2021, 4.50 to 1 for the first quarter of 2022, and returns to 3.75 to 1 for each quarter thereafter. Through the second quarter of 2021, the Company was also required to maintain a minimum interest coverage ratio. As noted above, the maximum net leverage ratio was set at 5.50 to 1 for the quarter ended December 31, 2021. During the suspension period, the Company paid interest on the unpaid principal amount of the AmendedABL Revolving Credit Facility, at a rate of 3.25% and a commitment fee of 0.35% on the undrawn portion of the Amended Facility. After the suspension period, the Company pays interest on the unpaid principal amount of the Amended Facility at LIBOR (of at least 1.00%) plus between 1.00% to 2.25% and a commitment fee of 0.10% to 0.35% on the undrawn portion of the Amended Facility, both based upon the Company’s leverage ratio. The Amended Facility provided for the payment of a consent fee of 15 basis points of the commitment for each consenting lender.

Pursuant to the ABL Revolving Credit Facility and the Term Loan Facility, the Company was required to comply with a minimum trailing four quarter Adjusted EBITDA, as defined in the ABL Revolving Credit Facility and Term Loan Facility Agreements, of $51.7 million in the Company’s fourth quarter of 2023, increasing to $57.6 million in the first quarter of 2024, $65.2 million in the second quarter of 2024 and $70 million thereafter. The non-cash accounts receivable reserve associated with the customer bankruptcy recorded in 2023 was not required to be included in the calculation of EBITDA pursuant to our ABL Revolving Credit Facility and the Term Loan Facility. Mandatory prepayment of a portion of excess cash flow, as defined by the AmendedTerm Loan Facility, based uponis payable towards the Company’s leverage ratio. The amendment providedprincipal amount outstanding on an annual basis. No such amounts are payable for the paymentyear ended December 31, 2023. 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 consent feeminimum fixed charge coverage ratio of 10 basis points of1.10 to 1.00. Further, the commitment for each consenting lender.Company is subject to excess cash flow repayment provisions, restrictions on

The amendment will require the Company to maintain minimum liquidity, defined as unrestricted cash plus the unused revolving credit commitments, of $35 million. The maximum net leverage ratio is set at 4.75 to 1 for the firstadditional indebtedness, share repurchases and second quarters of 2022 and 3.75 to 1 thereafter, and the definition of Adjusted EBITDA has been modified to exclude income from earnoutdividend payments, and asset sales.a limitation on capital expenditures. The Company was in compliance with its financialdebt covenants atunder the ABL Revolving Credit Facility and Term Loan Facility as of and for the year ended December 31, 2021.2023. The Company was in compliance with debt covenants under the ABL Revolving Credit Facility and Term Loan Facility as of and for the year ended December 31, 2023.

The AmendedCompany incurred $8.8 million in incremental debt issuance costs related to the new facilities, allocated between the ABL Revolving Credit Facility continuesand the temporary restrictions on certain activities, including dividend payments, acquisitions and share repurchases, throughTerm Loan Facility. All costs are amortized to interest expense over the third quarter of 2022. The Company’s obligations under the Amended Facility are jointly and severally guaranteed by each domestic subsidiaryterm of the Company other than non-material subsidiaries. The obligationsrespective agreement. Unamortized deferred debt issuance costs associated with the ABL Revolving Credit Facility ($2.0 million as of December 31, 2023) are secured byrecorded within Other Assets and those associated with the Term Loan Facility ($4.3 million as of December 31, 2023) are recorded as a first priority lienreduction of the carrying value of the debt on substantially allthe Consolidated Balance Sheets.

Certain of the Company’s subsidiaries are borrowers or guarantors under the ABL Revolving Credit Facility and the guarantors’ assets.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 Amended Facilitycredit 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 agent the option to declare all such amounts immediately due and payable.

Refer to Note 8 of our consolidated financial statementsConsolidated Financial Statements in Item 8, Financial Statement and Supplementary Data, of this report for additional information regarding our credit facility.

Management believes that it should retain the capital generated from operating activities for investment in advancing technologies, acquisitions and debt retirement. Accordingly, there are no plans to institute a cash dividend program.

Information regarding certain relationships and related transactions is incorporated herein by reference to the information included in the Company’s 20222024 Proxy Statement which will be filed with the CommissionSEC within 120 days after the end of the Company’s 20212023 fiscal year.

See Note 1 of the consolidated financial statements atConsolidated Financial Statements in Item 8, Financial Statements and Supplementary Data, of this report.

The Company has limited exposure to fluctuation in foreign currency exchange rates to U.S. dollar, primarily in Canadian dollars and Euros currency. Approximately 92%90% of the Company’s consolidated sales are transacted in U.S. dollars. Net assets held in or measured in Canadian dollars amounted to $11.6$11.1 million at December 31, 2021.2023. A 10% change in the value of the U.S. dollar versus the Canadian dollar would have had a $0.8 millionan immaterial impact to 20212023 net income.loss. Net assets held in or measured in Euros amounted to $26.5$24.8 million at December 31, 2021.2023. A 10% change in the value of the U.S. dollar versus the Euros would have had a $0.1 millionan immaterial impact to 20212023 net income.loss.

Risk due to fluctuation in interest rates is a function of the Company’s floating rate debt obligations, which total approximately $163.0$172.5 million atas of December 31, 2021.2023. A change of 1% in interest rates of all variable rate debt would impact annual net incomeloss by approximately $1.6$1.7 million, before income taxes.

To the Shareholders and the Board of Directors of Astronics Corporation

We have audited the accompanying consolidated balance sheets of Astronics Corporation (the Company) as of December 31, 20212023 and 2020,2022, the related consolidated statements of operations, comprehensive (loss) income, shareholders'loss, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2021,2023, and the related notes and financial statement schedule listed in the Index at Item 15(a)(2)(collectively (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 20212023 and 2020,2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021,2023, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company'sCompany’s internal control over financial reporting as of December 31, 2021,2023, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated March 4, 20222024 expressed an unqualified opinion thereon.

These financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 20212023 based upon the framework in Internal Control – Integrated Framework originally issued in 2013 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management concluded that our internal control over financial reporting is effective as of December 31, 2021.2023.

Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated financial statementsConsolidated Financial Statements included in this Annual Report on Form 10-K and, as part of their audit, has issued their report, included herein, on the effectiveness of our internal control over financial reporting.

To the Shareholders and the Board of Directors of Astronics Corporation

We have audited Astronics Corporation’s internal control over financial reporting as of December 31, 2021,2023, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Astronics Corporation (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021,2023, based on the COSO criteria.

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.