Company Quick10K Filing
Astronics
Price28.90 EPS5
Shares33 P/E6
MCap954 P/FCF32
Net Debt157 EBIT190
TEV1,111 TEV/EBIT6
TTM 2019-09-28, in MM, except price, ratios
10-Q 2020-03-28 Filed 2020-05-07
10-K 2019-12-31 Filed 2020-03-02
10-Q 2019-09-28 Filed 2019-11-07
10-Q 2019-06-29 Filed 2019-08-08
10-Q 2019-03-30 Filed 2019-05-09
10-K 2018-12-31 Filed 2019-03-01
10-Q 2018-09-29 Filed 2018-11-07
10-Q 2018-06-30 Filed 2018-08-08
10-Q 2018-03-31 Filed 2018-05-10
10-K 2017-12-31 Filed 2018-03-01
10-Q 2017-09-30 Filed 2017-11-09
10-Q 2017-07-01 Filed 2017-08-16
10-Q 2017-04-01 Filed 2017-05-05
10-K 2016-12-31 Filed 2017-02-24
10-Q 2016-10-01 Filed 2016-11-08
10-Q 2016-07-02 Filed 2016-08-04
10-Q 2016-04-02 Filed 2016-05-05
10-K 2015-12-31 Filed 2016-02-24
10-Q 2015-10-03 Filed 2015-11-10
10-Q 2015-07-04 Filed 2015-08-11
10-Q 2015-04-04 Filed 2015-05-13
10-K 2014-12-31 Filed 2015-02-27
10-Q 2014-09-27 Filed 2014-11-04
10-Q 2014-06-28 Filed 2014-08-05
10-Q 2014-03-29 Filed 2014-05-08
10-K 2013-12-31 Filed 2014-03-07
10-Q 2013-09-28 Filed 2013-11-05
10-Q 2013-06-29 Filed 2013-08-06
10-Q 2013-03-30 Filed 2013-05-06
10-K 2012-12-31 Filed 2013-02-22
10-Q 2012-09-29 Filed 2012-11-07
10-Q 2012-06-30 Filed 2012-08-08
10-Q 2012-03-31 Filed 2012-05-04
10-K 2011-12-31 Filed 2012-03-07
10-Q 2011-10-01 Filed 2011-11-08
10-Q 2011-07-02 Filed 2011-08-09
10-Q 2011-04-02 Filed 2011-05-06
10-K 2010-12-31 Filed 2011-03-03
10-Q 2010-10-02 Filed 2010-11-08
10-Q 2010-07-03 Filed 2010-08-05
10-Q 2010-04-03 Filed 2010-05-07
10-K 2009-12-31 Filed 2010-03-01
8-K 2020-05-21
8-K 2020-05-06
8-K 2020-05-04
8-K 2020-03-30
8-K 2020-02-26
8-K 2020-02-03
8-K 2019-12-09
8-K 2019-11-05
8-K 2019-10-04
8-K 2019-09-19
8-K 2019-08-05
8-K 2019-07-01
8-K 2019-06-10
8-K 2019-05-30
8-K 2019-05-08
8-K 2019-02-21
8-K 2019-02-13
8-K 2018-12-14
8-K 2018-11-13
8-K 2018-11-05
8-K 2018-09-21
8-K 2018-08-03
8-K 2018-06-13
8-K 2018-05-31
8-K 2018-05-09
8-K 2018-02-26
8-K 2018-02-16

ATRO 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 atro20200328-10qxexh311.htm
EX-31.2 atro20200328-10qxexh312.htm
EX-32 atro20200328-10qxexh32.htm

Astronics Earnings 2020-03-28

Balance SheetIncome StatementCash Flow
0.80.60.50.30.20.02012201420172020
Assets, Equity
0.30.20.10.1-0.0-0.12012201420172020
Rev, G Profit, Net Income
0.20.10.0-0.0-0.1-0.22012201420172020
Ops, Inv, Fin

atro-20200328
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Table of Contents

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
Form 10-Q
 
Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 28, 2020
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: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each classTrading SymbolName of each exchange on which registered
Common Stock, $.01 par value per shareATRONASDAQ Stock Market
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last report)



Table of Contents
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  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “large accelerated filer”, an “accelerated filer”, a “non-accelerated filer” and a “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
Accelerated 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 May 1, 2020, 30,755,863 shares of common stock were outstanding consisting of 23,258,552 shares of common stock ($.01 par value) and 7,497,311 shares of Class B common stock ($.01 par value).



Table of Contents
TABLE OF CONTENTS
PAGE
PART I
Item 1
Item 2
Item 3
Item 4
PART II
Item 1
Item 1a
Item 2
Item 3
Item 4
Item 5
Item 6

2

Table of Contents
Part I – Financial Information
Item 1. Financial Statements
ASTRONICS CORPORATION
Consolidated Condensed Balance Sheets
March 28, 2020 with Comparative Figures for December 31, 2019
(Unaudited)
(In thousands)
 
March 28, 2020December 31, 2019
Current Assets:
Cash and Cash Equivalents
$188,364  $31,906  
Accounts Receivable, Net of Allowance for Doubtful Accounts
133,729  147,998  
Inventories
151,798  145,787  
Prepaid Expenses and Other Current Assets
20,658  15,853  
Assets Held for Sale  1,537  
Total Current Assets
494,549  343,081  
Property, Plant and Equipment, Net of Accumulated Depreciation111,522  112,499  
Operating Right-of-Use Assets22,018  23,602  
Other Assets27,932  31,271  
Intangible Assets, Net of Accumulated Amortization123,008  127,293  
Goodwill70,997  144,970  
Total Assets
$850,026  $782,716  
Current Liabilities:
Current Maturities of Long-term Debt
$223  $224  
Accounts Payable
42,080  35,842  
Current Operating Lease Liabilities4,687  4,517  
Accrued Expenses and Other Current Liabilities
42,380  48,697  
Customer Advance Payments and Deferred Revenue
30,832  31,360  
Total Current Liabilities
120,202  120,640  
Long-term Debt333,000  188,000  
Long-term Operating Lease Liabilities19,992  21,039  
Other Liabilities63,023  64,180  
Total Liabilities536,217  393,859  
Shareholders’ Equity:
Common Stock
346  345  
Accumulated Other Comprehensive Loss
(17,717) (15,628) 
Other Shareholders’ Equity
331,180  404,140  
Total Shareholders’ Equity
313,809  388,857  
Total Liabilities and Shareholders’ Equity$850,026  $782,716  
See notes to consolidated condensed financial statements.
3

Table of Contents
ASTRONICS CORPORATION
Consolidated Condensed Statements of Operations
Three Months Ended March 28, 2020 With Comparative Figures for 2019
(Unaudited)
(In thousands, except per share data)
 
Three Months Ended
March 28, 2020March 30, 2019
Sales$157,584  $208,174  
Cost of Products Sold121,865  156,097  
Gross Profit35,719  52,077  
Selling, General and Administrative Expenses28,867  29,196  
Impairment Loss74,408    
(Loss) Income from Operations(67,556) 22,881  
Gain on Sale of Business  80,133  
Other Expense, Net of Other Income388  215  
Interest Expense, Net of Interest Income1,333  1,804  
(Loss) Income Before Income Taxes(69,277) 100,995  
(Benefit from) Provision for Income Taxes(2,314) 22,849  
Net (Loss) Income$(66,963) $78,146  
(Loss) Earnings Per Share:
Basic
$(2.17) $2.40  
Diluted
$(2.17) $2.35  
See notes to consolidated condensed financial statements.
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ASTRONICS CORPORATION
Consolidated Condensed Statements of Comprehensive (Loss) Income
Three Months Ended March 28, 2020 With Comparative Figures for 2019
(Unaudited)
(In thousands)
 
Three Months Ended
March 28, 2020March 30, 2019
Net (Loss) Income$(66,963) $78,146  
Other Comprehensive (Loss) Income:
Foreign Currency Translation Adjustments
(2,304) (270) 
Retirement Liability Adjustment – Net of Tax
215  150  
Total Other Comprehensive Loss(2,089) (120) 
Comprehensive (Loss) Income$(69,052) $78,026  
See notes to consolidated condensed financial statements.
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ASTRONICS CORPORATION
Consolidated Condensed Statements of Cash Flows
Three Months Ended March 28, 2020 With Comparative Figures for 2019
(Unaudited)
(In thousands)
Three Months Ended
March 28, 2020March 30, 2019
Cash Flows from Operating Activities:
Net (Loss) Income$(66,963) $78,146  
Adjustments to Reconcile Net (Loss) Income to Cash Flows from Operating Activities, Excluding the Effects of Divestitures:
Depreciation and Amortization7,971  8,076  
Provisions for Non-Cash Losses on Inventory and Receivables872  2,498  
Equity-based Compensation Expense1,703  1,193  
Deferred Tax Expense (Benefit)2,050  (3,398) 
Operating Lease Amortization Expense1,210  988  
Gain on Sale of Business, Before Taxes  (80,133) 
Impairment Loss74,408    
Other968  (736) 
Cash Flows from Changes in Operating Assets and Liabilities, Excluding the Effects of Divestitures:
Accounts Receivable13,644  (6,414) 
Inventories(7,224) (5,943) 
Accounts Payable6,295  (2,032) 
Accrued Expenses(5,730) (9,283) 
Other Current Assets and Liabilities(557) (2,860) 
Customer Advanced Payments and Deferred Revenue(490) 4,055  
Income Taxes(3,591) 26,824  
Operating Lease Liabilities(1,217) (1,005) 
Supplemental Retirement and Other Liabilities(99) 1,378  
Cash Flows from Operating Activities23,250  11,354  
Cash Flows from Investing Activities:
Proceeds on Sale of Business  103,793  
Capital Expenditures(2,793) (3,474) 
Cash Flows from Investing Activities(2,793) 100,319  
Cash Flows from Financing Activities:
Proceeds from Long-term Debt150,000  10,000  
Payments for Long-term Debt(5,000) (122,026) 
Purchase of Outstanding Shares for Treasury(7,732)   
Stock Options Activity33  159  
Finance Lease Principal Payments(461) (395) 
Cash Flows from Financing Activities136,840  (112,262) 
Effect of Exchange Rates on Cash(839) (67) 
Increase (Decrease) in Cash and Cash Equivalents156,458  (656) 
Cash and Cash Equivalents at Beginning of Period31,906  16,622  
Cash and Cash Equivalents at End of Period$188,364  $15,966  
See notes to consolidated condensed financial statements.
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ASTRONICS CORPORATION
Consolidated Condensed Statements of Shareholders' Equity
Three Months Ended March 28, 2020 With Comparative Figures for 2019
(Unaudited)
(In thousands)

Three Months Ended
March 28, 2020March 30, 2019
Common Stock
Beginning of Period$269  $260  
Class B Stock Converted to Common Stock2  2  
End of Period$271  $262  
Convertible Class B Stock
Beginning of Period$76  $83  
Net Exercise of Stock Options1  —  
Class B Stock Converted to Common Stock(2) (2) 
End of Period$75  $81  
Additional Paid in Capital
Beginning of Period$76,340  $73,044  
Net Exercise of Stock Options and Equity-based Compensation Expense1,735  1,352  
End of Period$78,075  $74,396  
Accumulated Comprehensive Loss
Beginning of Period$(15,628) $(13,329) 
Foreign Currency Translation Adjustments(2,304) (270) 
Retirement Liability Adjustment – Net of Taxes215  150  
End of Period$(17,717) $(13,449) 
Retained Earnings
Beginning of Period$428,584  $376,567  
Net (Loss) Income(66,963) 78,146  
End of Period$361,621  $454,713  
Treasury Stock
Beginning of Period$(100,784) $(50,000) 
Purchase of Shares(7,732) —  
End of Period$(108,516) $(50,000) 
Total Shareholders’ Equity$313,809  $466,003  
See notes to consolidated condensed financial statements.





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ASTRONICS CORPORATION
Consolidated Condensed Statements of Shareholders' Equity, Continued
Three Months Ended March 28, 2020 With Comparative Figures for 2019
(Unaudited)
(In thousands)

Three Months Ended
March 28, 2020March 30, 2019
Common Stock
Beginning of Period26,874  25,978  
Net Issuance from Exercise of Stock Options25  21  
Class B Stock Converted to Common Stock189  179  
End of Period27,088  26,178  
Convertible Class B Stock
Beginning of Period7,650  8,290  
Net Issuance from Exercise of Stock Options15  35  
Class B Stock Converted to Common Stock(189) (179) 
End of Period7,476  8,146  
Treasury Stock
Beginning of Period3,526  1,675  
Purchase of Shares282  —  
End of Period3,808  1,675  
See notes to consolidated condensed financial statements.

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ASTRONICS CORPORATION
Notes to Consolidated Condensed Financial Statements
March 28, 2020
(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.
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 could increase the volatility we experience in our financial results in future interim and annual periods. Operating results for the three months ended March 28, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020.
The balance sheet at December 31, 2019 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 2019 annual report on Form 10-K.
Description of the Business
Astronics Corporation (“Astronics” or the “Company”) is a leading provider of advanced technologies to the global aerospace, defense and electronics 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 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.
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 plus certain contingent purchase consideration (“earn-out”) as described in Note 18. 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 July 1, 2019, the Company acquired all of the issued and outstanding capital stock of Freedom Communication Technologies, Inc. (“Freedom”). Freedom, located in Kilgore, Texas, is a leader in wireless communication testing, primarily for the civil land mobile radio market. Freedom is included in our Test Systems segment. The total consideration for the transaction was $21.8 million, net of $0.6 million in cash acquired.
On July 12, 2019, the Company sold intellectual property and certain assets associated with its Airfield Lighting product line for $1.0 million in cash. The Airfield Lighting product line, part of the Aerospace segment, was not core to the business and represented less than 1% of revenue. The Company recorded a pre-tax loss on the sale of approximately $1.3 million.
On October 4, 2019, the Company acquired the stock of the primary operating subsidiaries as well as certain other assets from mass transit and defense market test solution provider, Diagnosys Test Systems Limited, for $7.0 million in cash, plus earn-outs estimated at a fair value of $2.5 million. Diagnosys Inc. and its affiliates (“Diagnosys”) is included in our Test Systems segment. Diagnosys is a developer and manufacturer of comprehensive automated test equipment providing test, support, and repair of high value electronics, electro-mechanical, pneumatic and printed circuit boards focused on the global mass transit and defense markets. The terms of the acquisition allow for a potential earn-out of up to an additional $13.0 million over the three years post-acquisition based on achievement of new order levels of over $72.0 million during that period. The acquired business has operations in Westford, Massachusetts as well as Ferndown, England, and an engineering center of excellence in Bangalore, India.
For additional information regarding these acquisitions and divestitures see Note 18.
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Impact of the COVID-19 Pandemic
On March 11, 2020, the World Health Organization classified the COVID-19 outbreak as a pandemic. The COVID-19 pandemic has had a sudden and significant impact on the global economy, and particularly in the aerospace industry, resulting in the grounding of the majority of the global commercial transportation fleet and significant cost cutting and cash preservation actions by the global airlines. This in turn has resulted in a significant reduction in airlines spending for both new aircraft and on upgrading their existing fleet with the Company’s products. We expect this low level of investment by the airlines will continue at least through 2020, however, 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 and the related length of its impact on the global economy and the aerospace industry, which are uncertain and cannot be predicted at this time.
Trade Accounts Receivable and Contract Assets
The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts. The Company regularly reviews the allowance by considering factors such as the age 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 doubtful accounts balance was $3.7 million and $3.6 million at March 28, 2020 and December 31, 2019, respectively. The Company‘s year-to-date bad debt expense was insignificant in the three months ended March 28, 2020 and March 30, 2019.
The Company's exposure to credit losses may increase if its customers are adversely affected by global economic recessions, disruption associated with the current COVID-19 pandemic, 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 company’s cash flows are impacted by the COVID-19 pandemic.
Cost of Products Sold, Engineering and Development, Interest, and Selling, General and Administrative Expenses
Cost of products sold includes the costs to manufacture products 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 application of the Company’s existing technologies. These costs are expensed when incurred and included in cost of products sold. Research and development, design and related engineering amounted to $26.2 million and $26.7 million for the three months ended March 28, 2020 and March 30, 2019, 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 months ended March 28, 2020 and March 30, 2019.
Goodwill Impairment
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.
As a result of the qualitative factors related to the COVID-19 pandemic, as discussed above, we performed interim quantitative assessments for the reporting units which had goodwill as of March 28, 2020. Based on our quantitative assessment, the Company recorded goodwill impairment charges associated with four Aerospace reporting units, totaling approximately $73.7 million within the Impairment Loss line in the Consolidated Condensed Statement of Operations in the three months ended March 28, 2020.
For additional information regarding the quantitative test and the related goodwill impairment see Note 6.
Valuation of Long-Lived Assets
Long-lived assets 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. In conjunction with the deteriorating economic conditions associated with the COVID-19 pandemic, we recorded an impairment charge to right-of-use (“ROU”) assets of approximately $0.7 million incurred in one reporting unit in the Aerospace segment within the Impairment Loss line in the Consolidated Condensed Statement of Operations in the three months ended March 28, 2020. No other long-lived asset impairments were warranted based on the quantitative analysis performed.
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Foreign Currency Translation
The aggregate transaction gain or loss included in operations was insignificant for the three months ended March 28, 2020 and March 30, 2019.
Newly Adopted and Recent Accounting Pronouncements
Recent Accounting Pronouncements Adopted
StandardDescriptionFinancial Statement Effect or Other Significant Matters
ASU No. 2016-13
Financial Instruments - Credit Losses (Topic 326)
The standard replaces the incurred loss model with the current expected credit loss (CECL) model to estimate credit losses for financial assets measured at amortized cost and certain off-balance sheet credit exposures. The CECL model requires a Company to estimate credit losses expected over the life of the financial assets based on historical experience, current conditions and reasonable and supportable forecasts. The provisions of the standard are effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. The amendment requires a modified retrospective approach by recording a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.
The Company adopted this guidance as of January 1, 2020. The standard changed the way entities recognize impairment of most financial assets. Short-term and long-term financial assets, as defined by the standard, are impacted by immediate recognition of estimated credit losses in the financial statements, reflecting the net amount expected to be collected. The adoption of this standard had an immaterial impact on our condensed consolidated financial statements.

Date of adoption: Q1 2020
ASU No. 2018-13
Fair Value Measurement (Topic 820)
The standard removes the disclosure requirements for the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy. The provisions of this ASU are effective for years beginning after December 15, 2019, with early adoption permitted.
This ASU did not have a significant impact on our consolidated financial statements, as it only includes changes to disclosure requirements.
Date of adoption: Q1 2020
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Recent Accounting Pronouncements Not Yet Adopted
StandardDescriptionFinancial Statement Effect or Other Significant Matters
ASU No. 2018-14
Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20)
The standard includes updates to the disclosure requirements for defined benefit plans including several additions, deletions and modifications to the disclosure requirements. The provisions of this ASU are effective for years beginning after December 15, 2020, with early adoption permitted.
This ASU does not have a significant impact on our consolidated financial statements, as it only includes changes to disclosure requirements.
Planned date of adoption: Q1 2021
ASU No. 2019-12
Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes
The amendments in this update simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and improve consistent application by clarifying and amending existing guidance. The amendments of this standard are effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued, with the amendments to be applied on a respective, modified retrospective or prospective basis, depending on the specific amendment.
The Company is currently evaluating the requirements of this standard. The standard is not expected to have a material impact on the Company's financial statements.

Planned date of adoption: Q1 2021
ASU No. 2020-04
Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting
The amendments in Update 2020-04 are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued due to reference rate reform. The new guidance provides the following optional expedients: simplify accounting analyses under current U.S. GAAP for contract modifications, simplify the assessment of hedge effectiveness, allow hedging relationships affected by reference rate reform to continue and allow a one-time election to sell or transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform.The amendments are effective for all entities from the beginning of an interim period that includes the issuance date of the ASU. An entity may elect to apply the amendments prospectively through December 31, 2022. After 2021, it is unclear whether banks will continue to provide LIBOR submissions to the administrator of LIBOR, and no consensus currently exists as to what benchmark rate or rates may become accepted alternatives to LIBOR. The Company is currently evaluating the impact of adopting this guidance.
We consider the applicability and impact of all ASUs. ASUs not listed above 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.
2) Revenue
Revenue is recognized when, or as, the Company transfers control of promised products or services to a customer in an amount that reflects the consideration the Company expects to be entitled in exchange for transferring those products or services. Sales shown on the Company's Consolidated Statements of Operations are from contracts with customers.
Payment terms and conditions vary by contract, although terms generally include a requirement of payment within a range from 30 to 90 days after the performance obligation has been satisfied; or in certain cases, up-front deposits. In circumstances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that the Company's contracts generally do not include a significant financing component. Taxes collected from customers, which are subsequently remitted to governmental authorities, are excluded from sales.
The Company recognizes an asset for the incremental, material costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year and the costs are expected to be recovered. These incremental costs include, but are not limited to, sales commissions incurred to obtain a contract with a customer. As of March 28, 2020, the Company does not have material incremental costs on any open contracts with an original expected duration of greater than one year.
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The Company recognizes an asset for certain, material costs to fulfill a contract if it is determined that the costs 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 the goods 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 March 28, 2020, the Company does not have material capitalized fulfillment costs.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts which are, therefore, not distinct. Thus, the contract's transaction price is the revenue recognized when or as that performance obligation is satisfied. Promised goods or services that are immaterial in the context of the contract are not separately assessed as performance obligations.
Some of our contracts have multiple performance obligations, most commonly due to the contract covering multiple phases of the product lifecycle (development, production, maintenance and support). For contracts with multiple performance obligations, the contract’s transaction price is allocated to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. The primary method used to estimate standalone selling price is the expected cost plus margin approach, under which expected costs are forecast to satisfy a performance obligation and then an appropriate margin is added for that distinct good or service. Shipping and handling activities that occur after the customer has obtained control of the good are considered fulfillment activities, not performance obligations.
Some of our contracts offer price discounts or free units after a specified volume has been purchased. The Company evaluates these options to determine whether they provide a material right to the customer, representing a separate performance obligation. If the option provides a material right to the customer, revenue is allocated to these rights and recognized when those future goods or services are transferred, or when the option expires.
Contract modifications are routine in the performance of our contracts. Contracts are often modified to account for changes in contract specifications or requirements. In most instances, contract modifications are for goods or services that are distinct, and, therefore, are accounted for as new contracts. The effect of modifications has been reflected when identifying the satisfied and unsatisfied performance obligations, determining the transaction price and allocating the transaction price.
The majority of the Company’s revenue from contracts with customers is recognized at a point in time, when the customer obtains control of the promised product, which is generally upon delivery and acceptance by the customer. These contracts may provide credits or incentives, which may be accounted for as variable consideration. Variable consideration is estimated at the most likely amount to predict the consideration to which the Company will be entitled, and only to the extent it is probable that a subsequent change in estimate will not result in a significant revenue reversal when estimating the amount of revenue to recognize. Variable consideration is treated as a change to the sales transaction price and based on an assessment of all information (i.e., historical, current and forecasted) that is reasonably available to the Company, and estimated at contract inception and updated at the end of each reporting period as additional information becomes available. Most of our contracts do not contain rights to return product; where this right does exist, it is evaluated as possible variable consideration.
For contracts that are subject to the requirement to accrue anticipated losses, the company recognizes the entire anticipated loss in the period that the loss becomes probable.
For contracts with customers in which the Company promises to provide a product to the customer that has no alternative use to the Company and the Company has enforceable rights to payment for progress completed to date inclusive of profit, the Company satisfies the performance obligation and recognizes revenue over time, using costs incurred to date relative to total estimated costs at completion to measure progress toward satisfying our performance obligations. Incurred cost represents work performed, which corresponds with, and thereby best depicts, the transfer of control to the customer. Contract costs include labor, material and overhead.
The Company also recognizes revenue from service contracts (including service-type warranties) over time. The Company recognizes revenue over time during the term of the agreement as the customer is simultaneously receiving and consuming the benefits provided throughout the Company’s performance. The Company typically recognizes revenue on a straight-line basis throughout the contract period.
On March 28, 2020, we had $369.4 million of remaining performance obligations, which we refer to as total backlog. We expect to recognize approximately $268.1 million of our remaining performance obligations as revenue in 2020. As a result of the COVID-19 pandemic, the Company received order cancellations from customers subsequent to the period ending March 28,
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2020. Of the Company’s backlog at March 28, 2020 of $369.4 million, $3.0 million is no longer expected to be recognized as revenue as a result of order cancellations received subsequent to quarter end in the Aerospace segment.
Costs in excess of billings includes unbilled amounts resulting from revenues under contracts with customers that are satisfied over time and when the cost-to-cost measurement method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer, and right to payment is not just subject to the passage of time. Amounts may not exceed their net realizable value. Costs in excess of billings are classified as current assets, within Accounts Receivable, Net of Allowance for Doubtful Accounts on our Consolidated Condensed Balance Sheet.
Billings in excess of cost includes billings in excess of revenue recognized as well as other elements of deferred revenue, which includes advanced payments, up-front payments, and progress billing payments. Billings in excess of cost are reported in our Consolidated Condensed Balance Sheet classified as current liabilities, within Customer Advance Payments and Deferred Revenue, and non-current liabilities, within Other Liabilities. To determine the revenue recognized in the period from the beginning balance of billings in excess of cost, the contract liability as of the beginning of the period is recognized as revenue on a contract-by-contract basis when the Company satisfies the performance obligation related to the individual contract. Once the beginning contract liability balance for an individual contract has been fully recognized as revenue, any additional payments received in the period are recognized as revenue once the related costs have been incurred.
We recognized $8.7 million and $8.2 million during the three months ended March 28, 2020 and March 30, 2019, 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 March 28, 2020:
(In thousands)Contract AssetsContract Liabilities
Beginning Balance, January 1, 2020$19,567  $38,758  
Ending Balance, March 28, 2020
$17,127  $37,750  
The following table presents our revenue disaggregated by Market Segments as follows:
Three Months Ended
(In thousands)March 28, 2020March 30, 2019
Aerospace Segment
Commercial Transport
$102,775  $141,778  
Military
18,11320,953
Business Jet
15,00619,837
Other
5,1765,933
Aerospace Total141,070188,501
Test Systems Segment
Semiconductor
1,6343,354
Aerospace & Defense
14,88016,319
Test Systems Total16,51419,673
Total$157,584  $208,174  
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The following table presents our revenue disaggregated by Product Lines as follows:
Three Months Ended
(In thousands)March 28, 2020March 30, 2019
Aerospace Segment
Electrical Power & Motion
$69,456  $92,537  
Lighting & Safety
37,92248,605
Avionics
22,14333,861
Systems Certification
3,3311,618
Structures
3,0425,947
Other
5,1765,933
Aerospace Total141,070188,501
Test Systems16,51419,673
Total$157,584  $208,174  

3) Inventories
Inventories consisted of the following:
(In thousands)
March 28, 2020December 31, 2019
Finished Goods
$33,452  $33,434  
Work in Progress
29,742  25,594  
Raw Material
88,604  86,759  
$151,798  $145,787  
The Company has evaluated the carrying value of 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 following:
(In thousands)
March 28, 2020December 31, 2019
Land
$9,795  $9,802  
Buildings and Improvements
74,817  74,723  
Machinery and Equipment
116,906  115,202  
Construction in Progress
5,752  5,453  
207,270  205,180  
Less Accumulated Depreciation
95,748  92,681  
$111,522  $112,499  
Additionally, net Property, Plant and Equipment of $1.5 million are classified in Assets Held for Sale at December 31, 2019. Refer to Note 18.
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5) Intangible Assets
The following table summarizes acquired intangible assets as follows: 
March 28, 2020December 31, 2019
(In thousands)
Weighted
Average Life
Gross Carrying
Amount
Accumulated
Amortization
Gross Carrying
Amount
Accumulated
Amortization
Patents11 years$2,146  $1,826  $2,146  $1,804  
Non-compete Agreement4 years11,318  8,363  11,318  7,696  
Trade Names10 years11,433  6,797  11,438  6,550  
Completed and Unpatented Technology9 years48,192  22,268  48,201  21,196  
Customer Relationships15 years142,194  53,021  142,212  50,776  
Total Intangible Assets12 years$215,283  $92,275  $215,315  $88,022  
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)
March 28, 2020March 30, 2019
Amortization Expense
$4,265  $4,224  
Amortization expense for acquired intangible assets expected for 2020 and for each of the next five years is summarized as follows:
(In thousands)
2020$17,198  
2021$15,404  
2022$14,973  
2023$13,938  
2024$12,917  
2025$10,994  

6) Goodwill
The following table summarizes the changes in the carrying amount of goodwill for the three months ended March 28, 2020:
(In thousands)December 31, 2019Impairment Charges
Foreign
Currency
Translation
March 28, 2020
Aerospace$123,038  $(73,704) $(269) $49,065  
Test Systems21,932      21,932  
$144,970  $(73,704) $(269) $70,997  
Goodwill Impairment Testing