What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-06 compared with 2025-08-07 · 104 added, 111 removed, 155 unchanged (58% of the section changed)

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We have two reportable segments, Aerospace and Test Systems.

Our Aerospace segment has principal operating facilities in the United States, Canada and France and an engineering office in Ukraine.

Our Aerospace segment has principal operating facilities in the United States, Canada, France and Germany (arising from our October 2025 acquisition) and an engineering office in Ukraine.

Our Test Systems segment has principal operating facilities in the United States and an engineering office in India.

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Department of Defense (“USDOD”).

Our Test Systems segment designs, develops, manufactures and maintains automated test systems that support the aerospace and defense and mass transit industries as well as training and simulation devices for both commercial and military applications.

Our Test Systems segment designs, develops, manufactures and maintains automated test systems that support the aerospace and defense and mass transit industries.

In the Test Systems segment, Astronics’ products are sold to a global customer base including OEMs and prime government contractors for both electronics and military products.

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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

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from tariffs and other trade policy matters, supply chain pressures, and labor market pressures have in the past resulted in, and could in the future also result in, lower profits.

Delays in delivery schedules and incremental costs resulting from tariffs and other trade policy matters, supply chain pressures, and labor market pressures have in the past resulted in, and

could in the future also result in, lower profits.

We will continue to address these challenges by working to improve operating efficiencies and focusing on executing on the growth opportunities currently in front of us.

Our ABL Revolving Credit Facility subjects us to various financial and other affirmative and negative covenants with which we must comply on an ongoing or periodic basis.

These include financial covenants pertaining to minimum excess availability requirements and minimum fixed charge coverage ratio requirements.

On October 22, 2025, the Company entered into a $300 million senior secured, cash flow-based revolving credit facility (the “New Revolver”).

The New Revolver replaces the Company’s ABL Revolving Credit Facility, which was terminated on October 22, 2025.

The New Revolver subjects us to various financial and other affirmative and negative covenants with which we must comply on an ongoing or periodic basis.

These include financial covenants pertaining to a total leverage ratio, a consolidated interest coverage ratio, and a secured net debt leverage ratio requirement.

An unexpected decline in our revenues or operating income, including occurring as a result of events beyond our control, could cause us to violate our financial covenants.

While the Company expects to remain in compliance with the required financial covenants for the duration of the agreements, any unexpected negative impacts to our business, including as a result of declines in aircraft production rates from expectations or production delays resulting from regulatory actions or labor strikes affecting OEMs, additional supply chain pressures, tariffs and our ability to mitigate tariff effects, the timing of customer orders, our ability to meet customer delivery schedules, or labor availability and cost pressures, could result in lower revenues and reduced financial profits, and, as a result thereof, our inability to satisfy the financial covenants in our ABL Revolving Credit Facility.

While the Company expects to remain in compliance with the required financial covenants for the duration of the agreement, any unexpected negative impacts to our business, including as a result of declines in aircraft production rates from expectations or production delays resulting from regulatory actions or labor strikes affecting OEMs, additional supply chain pressures, tariffs and our ability to mitigate tariff effects, the timing of customer orders, our ability to meet customer delivery schedules, or labor availability and cost pressures, could result in lower revenues and reduced financial profits, and, as a result thereof, our inability to satisfy the financial covenants in our New Revolver.

Challenges affecting the commercial aviation industry or key participants can adversely impact the demand for our products and services, the timing of orders, deliveries and related payments and other factors.

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Factors such as increased energy costs, the availability of certain raw materials for aircraft manufacturers, embargoes on flights from Russian airlines, sanctions on Russian companies, and the stability of Ukrainian customers could impact the global economy and aviation sector.

Recent Acquisitions

On June 30, 2025, the Company purchased the membership interests of Envoy Aerospace, LLC, located in Aurora, Illinois.

Envoy Aerospace is an FAA Organization Designation Authorization (“ODA”) services provider.

Envoy Aerospace is included in our Aerospace segment.

The total purchase price was approximately $8.3 million, net of cash acquired and the estimated closing adjustment.

On October 13, 2025, the Company acquired all of the issued and outstanding capital stock of Bühler Motor Aviation (“BMA”), located in Uhldingen-Mühlhofen, Germany.

BMA is an established manufacturer of aircraft seat actuation systems with a broad product portfolio that includes actuators, electronics, control panels, pneumatic systems, and lighting.

BMA will be included in our Aerospace segment.

The total purchase price was approximately $18.0 million, net of cash acquired and the estimated closing adjustment.

Recent Developments

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was signed into law in the United States.

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corporate tax provisions, many of which are not in effect until 2026.

Changes in tax laws may affect recorded deferred tax assets and deferred tax liabilities and our effective tax rate in the future and the Company is currently evaluating the impacts of the new legislation.

Key provisions of the Tax Act relevant to the Company’s operations include immediate expensing of certain domestic research and development expenses and domestic capital expenditures beginning in 2025 as well as changes to various U.S.

international tax provisions going forward.

These provisions of the Tax Act have favorably impacted the Company’s effective tax rate and cash tax rate for the 2025 tax year and are expected to have favorable impacts in future years.

Changes in tax laws may affect recorded deferred tax assets and deferred tax liabilities and our effective tax rate in the future and the Company is continuing to evaluate the impacts of the new legislation.

Appropriations for the U.S.

Government’s fiscal year 2026 funding bill were not enacted by September 30, 2025, and on October 1, 2025, the U.S.

Government entered a shutdown, which is ongoing.

If a prolonged government shutdown occurs, it could result in program disruptions, limit the U.S.

Government’s ability to progress programs and make timely payments and impact new program starts.

A prolonged shutdown could have material consequences for our Company, our employees, our suppliers and our industry and could have a material adverse effect on our financial position, results of operations and/or cash flows.

CONSOLIDATED RESULTS OF OPERATIONS

Six Months Ended Three Months Ended

($ in thousands) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024

Nine Months Ended Three Months Ended

($ in thousands) September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024

Sales $ 622,061 $ 586,886 $ 211,447 $ 203,698

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SG&A Expenses as a Percentage of Sales 16.8 % 17.2 % 14.8 % 16.9 %

Loss on Settlement of Debt $ 32,644 $ 6,987 $ 32,644 $ 6,987

Interest Expense, Net $ 9,167 $ 17,832 $ 2,920 $ 6,217

Effective Tax Rate 14.4 % (58.5) % 9.9 % (126.9) %

Net Income (Loss) $ 10,842 $ (1,645) $ 1,314 $ 1,533

Net Loss $ (256) $ (13,383) $ (11,098) $ (11,738)

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

CONSOLIDATED SECOND QUARTER RESULTS

Growth in sales were driven by the Aerospace segment’s continued strength in demand primarily from the Commercial Transport market.

CONSOLIDATED THIRD QUARTER RESULTS

Growth in sales was driven by the Aerospace segment’s continued strength in demand primarily from the Commercial Transport market.

Aerospace sales increased $15.2 million, or 8.5%, which more than offset a $7.4 million decline in Test Systems sales.

Consolidated sales were negatively impacted by $6.4 million due to revisions of estimated costs to complete certain long-term mass transit contracts in the Test Systems segment.

Consolidated cost of products sold in the second quarter of 2025 was $151.9 million, compared with $142.5 million in the same prior-year period.

The increase was primarily due to higher sales volume.

Additionally, simplification initiatives in the

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Aerospace segment, including costs related to footprint rationalization and product portfolio shaping activities, resulted in $5.8 million in charges within cost of products sold during the quarter.

Consolidated cost of products sold in the third quarter of 2025 was $146.9 million, compared with $148.5 million in the same prior-year period.

Tariff expense in the current quarter was approximately $4 million.

The prior year was negatively impacted by a $3.5 million atypical warranty reserve.

Both periods reflect the change in presentation for research & development expenses (“R&D”), which is now identified as an expense item on the income statement below gross profit.

In the second quarter of 2025, the $2.7 million increase in selling, general and administrative expenses (“SG&A”) is primarily attributable to a $3.5 million legal fee reimbursement charge relating to the patent infringement dispute in the UK, partially offset by a $1.7 million decrease in litigation-related legal expenses.

In the third quarter of 2025, SG&A decreased $3.1 million.

Litigation-related expenses were down $4.3 million, somewhat offset by $1.2 million in higher legal and accounting expenses related to acquisitions.

R&D was down $2.3 million reflecting the timing of projects.

As a result of the refinancing in December 2024 which resulted in a lower average interest rate, interest expense was down $2.8 million.

Tax expense in the quarter was $0.5 million compared with a tax benefit of $0.3 million in the prior-year period.

Consolidated net income of $1.3 million, or $0.04 per diluted share, compares with net income of $1.5 million, or $0.04 per diluted share, in the prior-year period.

The prior-year period was negatively impacted by $1.3 million in reserves related to the bankruptcy filing of an Aerospace customer.

A $32.6 million Loss on Settlement of Debt was the result of certain costs incurred related to the partial repurchase of convertible notes due 2030 discussed in the Liquidity and Capital Resources section below, compared to a Loss on Settlement of Debt of $7.0 million in the prior year.

Interest expense was down $3.3 million, or 53.0%, on lower rates following the 2024 refinancing activities.

Tax benefit in the quarter was $1.2 million compared with a tax expense of $6.6 million in the prior-year period, mostly as a result of a valuation allowance reversal associated with research and development costs that are expected to be expensed for tax purposes in the current year under the One Big Beautiful Bill Act.

Consolidated net loss of $0.31 per diluted share improved from $0.34 per diluted share in the prior-year period from the strength in sales and profitability that more than offset the incremental loss on settlement of debt.

Bookings of $210.4 million in the quarter resulted in a book-to-bill ratio of 1.00:1.

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CONSOLIDATED YEAR-TO-DATE RESULTS

Growth in sales were driven by the Aerospace segment due to continued strength in demand primarily from the Commercial Transport and Military Aircraft markets.

Growth in sales was driven by the Aerospace segment due to continued strength in demand primarily from the Commercial Transport and Military Aircraft markets.

Aerospace sales increased $59.6 million, or 11.5%, which more than offset the $24.4 million decline in Test Systems sales.

Consolidated sales were negatively impacted by $8.3 million, resulting from revisions of estimated costs to complete certain long-term mass transit contracts in the Test Systems segment.

Consolidated cost of products sold in the first half of 2025 was $296.9 million, compared with $280.1 million in the same prior-year period.

Consolidated cost of products sold in 2025 was $443.9 million, compared with $428.6 million in the same prior-year period.

The increase was primarily due to higher sales volume.

Additionally, simplification initiatives in the Aerospace segment, including costs related to footprint rationalization and product portfolio shaping activities, resulted in $5.8 million in charges within cost of products sold during the quarter.

The prior year was impacted by a $3.5 million atypical warranty reserve previously

Both periods reflect the change in presentation for R&D, which is now identified as an expense item on the income statement below gross profit.

In the first half of 2025, the $6.8 million increase in SG&A included a $9.7 million reserve adjustment relating to a patent infringement dispute in the UK.

In 2025, the $3.7 million increase in SG&A included a $9.7 million reserve adjustment relating to a patent infringement dispute in the UK.

This included a $0.5 million increase to the original damages award reserve of $11.9 million, $5.7 million in interest expense related to the damages award, and a $3.5 million legal fee reimbursement charge.

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R&D was down $7.2 million reflecting the timing of projects.

The expenses in the current year include a $32.6 million loss on settlement of debt as a result of a partial repurchase of convertible notes due 2030, compared to a loss on settlement of debt of $7.0 million in the prior year.

As a result of the lower outstanding borrowings and the reduced cost of debt resulting from the refinancing in December 2024, interest expense was down $8.7 million, or 48.6%.

Tax expense in the first half of 2025 was $1.2 million compared with a tax benefit of $1.6 million in the prior-year period.

Tax expense in the first half of 2025 was partially offset by a $1.1 million discrete adjustment to reverse certain federal and state deferred tax liabilities.

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

Bookings of $456.8 million in the first half of 2025 resulted in a book-to-bill ratio of 1.11:1.

Tax benefit in the nine months ended September 27, 2025 was less than $0.1 million compared with a tax expense of $4.9 million in the prior-year period, primarily due to a valuation allowance reversal associated with research and development costs that are expected to be expensed for tax purposes in the current year under the OBBBA, along with a $1.1 million discrete adjustment to reverse certain federal and state deferred tax liabilities.

Stronger profitability and lower interest expense resulted in consolidated net loss of $0.3 million, or $0.01 per diluted share, up from the net loss of $13.4 million, or $0.38 per diluted share, in the same prior-year period.

Bookings of $667.1 million in the nine months ended September 27, 2025 resulted in a book-to-bill ratio of 1.07:1.

SEGMENT RESULTS OF OPERATIONS

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Cost of products sold and other operating expenses are directly identifiable to the respective segment.

Operating profit is reconciled to income (loss) before income taxes in Note 14, Segment Information, to the Consolidated Condensed Financial Statements in Item 1, Financial Statement, of this report.

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Operating profit is reconciled to loss before income taxes in Note 14, Segment Information, to the Consolidated Condensed Financial Statements in Item 1, Financial Statement, of this report.

AEROSPACE SEGMENT

Six Months Ended Three Months Ended

($ in thousands) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024

Nine Months Ended Three Months Ended

($ in thousands) September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024

Sales $ 577,760 $ 518,187 $ 192,725 $ 177,564

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$ 577,726 $ 518,135 $ 192,725 $ 177,554

(In thousands) June 28, 2025 December 31, 2024

(In thousands) September 27, 2025 December 31, 2024

$ 544,463 $ 498,528

$ 572,459 $ 537,563

AEROSPACE SECOND QUARTER RESULTS

AEROSPACE THIRD QUARTER RESULTS

Aerospace segment sales of $192.7 million increased $15.2 million, or 8.5%.

Sales in the Commercial Transport market increased $15.4 million, or 11.5%.

Growth was primarily related to increased demand by airlines for cabin power and inflight entertainment & connectivity (“IFEC”) products.

Growth was primarily related to increased demand by airlines for cabin power, seat motion and system certification products and services.

Military Aircraft sales increased $5.9 million, or 27.1%, to $27.6 million, driven by increased demand for lighting and safety products.

General Aviation sales decreased $0.6 million, or 3.4%, to $18.4 million due to lower airframe power sales.

Other sales decreased $2.5 million as the Company is winding down its non-core contract manufacturing arrangements.

Aerospace segment operating profit of $18.0 million, or 9.3% of sales, decreased over the prior-year period as a result of the previously discussed $6.2 million charge related to simplification initiatives, a $3.5 million legal fee reimbursement charge related to the UK patent dispute, and a $1.0 million warranty expense true-up related to a new product launch that requires a field modification.

These were partially offset by a $1.5 million decrease in litigation-related expenses.

General Aviation sales decreased $4.2 million, or 23.0%, to $13.9 million due to lower airframe power and inflight entertainment & connectivity (“IFEC”) product sales to the VVIP market due to the timing of programs.

Other sales decreased $1.9 million as the Company has wound down its non-core contract manufacturing arrangements.

Aerospace segment operating profit of $31.2 million, or 16.2% of sales, improved over the prior-year period reflecting the leverage gained on higher volume, pricing initiatives, and improving production efficiencies, combined with a $4.4 million decrease in litigation-related expenses.

The prior year was impacted by a $3.5 million atypical warranty reserve and a non-cash reserve associated with a customer bankruptcy of $2.2 million.

Aerospace bookings were $191.9 million for a book-to-bill ratio of 1.00:1.

Backlog for the Aerospace segment was a $570.9 million at quarter end.

Backlog for the Aerospace segment was $572.5 million at quarter end.

AEROSPACE YEAR-TO-DATE RESULTS

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Growth was primarily related to increased demand by airlines for cabin power and IFEC products.

Military Aircraft sales increased $18.8 million, or 45.0%, to $60.7 million, driven by progress on the FLRAA

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program and increased demand for lighting and safety products.

General Aviation sales decreased $5.0 million, or 12.8%, to $33.6 million due to lower VVIP and airframe power sales.

Military Aircraft sales increased $24.7 million, or 38.9%, to $88.3 million, driven by progress on the FLRAA program and increased demand for lighting and safety products.

General Aviation sales decreased $9.1 million, or 16.1%, to $47.5 million due to lower VVIP and airframe power sales due to timing of programs.

Aerospace segment operating profit of $71.5 million, or 12.4% of sales, improved over the prior-year period resulting from leverage gained on higher volume and improving production efficiencies and a $7.3 million decrease in litigation-related expenses, partially offset by the previously discussed $9.7 million true-up in legal reserves related to the UK patent dispute and $6.5 million in simplification initiatives.

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TEST SYSTEMS SEGMENT

Six Months Ended Three Months Ended

($ in thousands) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024

Nine Months Ended Three Months Ended

($ in thousands) September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024

Sales $ 44,685 $ 68,790 $ 18,752 $ 26,183

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(In thousands)

June 28, 2025 December 31, 2024

September 27, 2025 December 31, 2024

$ 112,844 $ 128,828

Backlog $ 74,264 $ 61,666

TEST SYSTEMS SECOND QUARTER RESULTS

Test Systems segment sales were $11.1 million, down $10.1 million from the comparator quarter in 2024.

Segment sales were negatively impacted by $6.4 million due to revisions of estimated costs to complete certain long-term mass transit Test contracts.

The revisions resulted in reduced revenue recognized in the period due to lower estimates of the percentage of work completed on the programs.

Test Systems segment operating loss was $6.7 million, compared with an operating loss of $5.3 million in the second quarter of 2024.

The revisions to the estimated costs to complete had a $6.9 million detrimental impact to operating income and masked the savings realized from recent restructuring activities.

TEST SYSTEMS THIRD QUARTER RESULTS

Test Systems segment sales of $18.7 million were down $7.4 million from the comparator quarter in 2024.

The decrease was driven by lower sales of radio test sets in general as full rate production for the U.S.

Army program has not yet begun.

Test Systems segment operating profit was near break-even in both periods.

Test Systems continues to be negatively affected by mix and under absorption of fixed costs at current volume levels.

Test Systems bookings were $26.4 million for a book-to-bill ratio of 2.39:1.

Bookings for the Test Systems segment in the quarter were $18.5 million.

The book-to-bill ratio was 0.99:1 for the quarter.

Backlog for the Test Systems segment was $74.3 million at quarter end.

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Test Systems segment sales were $44.3 million, down $24.4 million from 2024.

Segment sales were negatively impacted by $8.3 million due to revisions of estimated costs to complete certain long-term mass transit Test contracts.

The decrease was driven by lower sales on our U.S.

Army and U.S.

Marine Corps’ radio Test programs.

Additionally, segment sales were negatively impacted by $8.3 million due to revisions of estimated costs to complete certain long-term mass transit Test contracts.

The revisions resulted in reduced revenue recognized in the period due to lower estimates of the percentage of work completed on the programs.

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Operating Activities:

Cash provided by operating activities totaled $13.0 million for the first six months of 2025, as compared with $4.2 million cash used for operating activities during the same period in 2024.

Cash flow from operating activities increased compared with the

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same period of 2024 primarily the result of higher cash earnings resulting from higher net income and improved working capital management.

Cash provided by operating activities in the first six months of 2025 included $21.6 million in payments related to the UK patent dispute and $12.8 million in net income tax payments.

Cash provided by operating activities totaled $47.2 million for the first nine months of 2025, as compared with $4.1 million cash provided by operating activities during the same period in 2024.

Cash flow from operating activities increased compared with the same period of 2024 reflecting higher cash earnings and lower working capital requirements.

Cash provided by operating activities in the first nine months of 2025 included $21.6 million in payments related to the UK patent dispute and $12.6 million in net income tax payments in Washington.

Investing Activities:

Cash used for investing activities was $6.7 million for the first six months of 2025 compared with $3.4 million in cash used for investing activities in the same period of 2024 representing capital expenditures for each period.

Cash used for investing activities was $24.5 million for the first nine months of 2025 compared with $5.2 million in cash used for investing activities in the same period of 2024 representing acquisition activity in the current year and capital expenditures for each period.

The higher level of capital expenditures relates to the ongoing facility expansion activities.

Financing Activities:

Cash used for financing activities totaled $12.5 million for the first six months of 2025, as compared with cash provided by financing activities of $0.8 million during the same prior-year period.

The Company made net payments under its credit facilities of $10.0 million in the first six months of 2025 compared with net borrowings of $5.9 million in the same prior-year period.

The Company amended its asset-based revolving credit facility (the “ABL Revolving Credit Facility”) on July 11, 2024, by entering into the Seventh Amended and Restated Credit Agreement, which set the maximum aggregate amount that the Company can borrow pursuant to the revolving credit line at $200.0 million, with borrowings subject to a borrowing base determined primarily by inventory, accounts receivable, machinery and equipment and real estate.

On November 25, 2024, the Company entered into a second amendment to the ABL Revolving Credit Facility which increased the maximum aggregate amount that the Company can borrow pursuant to the ABL Revolving Credit Facility to $220.0 million from $200.0 million.

The maturity date of borrowings under the ABL Revolving Credit Facility is July 11, 2027.

The Company and the applicable lenders also agreed in a separate first amendment to increase the amount of unsecured indebtedness the Company is permitted to incur under the ABL Revolving Credit Facility, subject to completion of the Convertible Notes offering (discussed below).

Under the terms of the ABL Revolving Credit Facility, the Company pays interest on the unpaid principal amount of the ABL Revolving Credit Facility at a rate equal to SOFR plus a term SOFR adjustment in the amount of 0.10% per annum (which collectively shall be at least 1.00%) plus an applicable margin ranging from 2.75% to 3.25% determined based upon the Company’s Excess Availability (as defined in the ABL Revolving Credit Facility).

The Company is required to pay a quarterly commitment fee under the ABL Revolving Credit Facility on undrawn revolving credit commitments in an amount equal to 0.25% or 0.375% based on the Company’s average excess availability under the ABL Revolving Credit Facility.

On June 28, 2025, there was no balance outstanding on the ABL Revolving Credit Facility and there remained $197.8 million available for future borrowings, before our minimum excess availability requirement discussed below.

The amount available for future borrowings as of June 28, 2025, is net of $2.3 million in outstanding letters of credit.

Pursuant to the ABL Revolving Credit Facility, the Company is subject to a minimum fixed charge coverage ratio of 1.10 to 1.00.

The Company is also required to maintain a minimum excess availability of the greater of 10% of the borrowing base under the ABL Revolving Credit Facility, or $15.0 million.

As of June 28, 2025, the Company was in compliance with these covenants.

On December 3, 2024, the Company issued $165.0 million aggregate principal amount of 5.500% Convertible Senior Notes due 2030 (the “Convertible Notes”), which amount includes the additional Convertible Notes issued pursuant to the initial purchasers’ full exercise of their option to purchase additional Convertible Notes.

The Convertible Notes bear interest at a rate of 5.500% per annum, payable semi-annually in arrears on March 15 and September 15 of each year, beginning on March 15, 2025.

The Convertible Notes will mature on March 15, 2030, unless earlier converted, redeemed or repurchased.

The initial conversion rate is 43.6814 shares of common stock per $1,000 principal amount of Convertible Notes, which represent the initial conversion price of $22.89 per share.

The Convertible Notes are convertible at the option of the holders at any time on or after December 15, 2029, until the close of business on the second scheduled trading day immediately preceding the maturity date.

Upon conversion, the Company will satisfy its conversion obligations by paying and/or delivering, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election.

Beginning March 20, 2028, if the Company’s stock price has been at least 130% of the conversion price for a specified period of time, the Convertible Notes may be called at the option of the issuer.

After the first quarter of 2025, if the Company’s stock price has been at least 130% of the conversion price for 20 of 30 trading days ending on and including the last trading day of the immediately preceding quarter, the Convertible Notes may be redeemed at the option of the holder.

During the fiscal quarter ended June 28, 2025, our stock price met the price trigger defined above, and therefore, holders of our Convertible Notes may convert their notes at their option at any time during our third fiscal quarter ended September 27, 2025.

The fair value of the

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Convertible Notes was approximately $284.0 million and $176.9 million as of June 28, 2025 and December 31, 2024, respectively, based on quoted prices for these instruments in active markets, and is classified as a Level 1 measurement within the fair value hierarchy.

Interest expense was $3.1 million and $5.9 million for the three months ended and $6.2 million and $11.6 million for the six months ended June 28, 2025 and June 29, 2024, respectively.

The Company entered into a $90.0 million Term Loan Facility on January 19, 2023, and paid interest at a rate equal to SOFR (which was required to be at least 2.50%) plus 8.75%.

The Company refinanced its credit facilities on July 11, 2024, and repaid in full all outstanding indebtedness under the previous term loan dated January 19, 2023.

Debt issuance cost amortization expense was $0.6 million and $0.9 million for the three months ended and $1.2 million and $1.7 million for the six months ended June 28, 2025 and June 29, 2024, respectively.

All costs are amortized to interest expense over the term of the respective agreement.

Unamortized deferred debt issuance costs associated with the ABL Revolving Credit Facility ($2.4 million and $3.0 million as of June 28, 2025 and December 31, 2024, respectively) are recorded within Other Assets and those associated with the Convertible Notes ($5.7 million and $6.3 million as of June 28, 2025 and December 31, 2024, respectively) are recorded as a reduction of the carrying value of the debt on the Consolidated Condensed Balance Sheets.

Certain of the Company’s subsidiaries are borrowers under the ABL Revolving Credit Facility and the assets of such subsidiaries also secure the obligations under the ABL Revolving Credit Facility.

In the event of voluntary or involuntary bankruptcy of the Company or any subsidiary, all unpaid principal and other amounts owing under the credit facilities automatically become due and payable.

Other events of default, such as failure to make payments as they become due and breach of financial and other covenants, change of control, cross default under other material debt agreements, and a going concern qualification for any reason other than loan maturity date give the agent the option to declare all such amounts immediately due and payable.

On August 8, 2023, the Company initiated an at-the-market equity offering program (the “ATM Program”) for the sale from time to time of shares of the Company’s common stock, par value $0.01 per share, having an aggregate offering price of up to $30.0 million.

During the three and six months ended June 28, 2025, and June 29, 2024, the Company did not sell any shares of its common stock under the ATM Program.

As of June 28, 2025, the Company had remaining capacity under the ATM Program to sell shares of common stock having an aggregate offering price up to approximately $8.2 million.

Cash used for financing activities totaled $22.6 million for the first nine months of 2025, as compared with cash used for financing activities of $3.9 million during the same prior-year period.

The Company received net proceeds under its convertible notes and ABL revolving credit facilities of $14.2 million, offset by $26.9 million in payments for capped call transactions, in the first nine months of 2025 compared with net borrowings of $8.5 million in the same prior-year period.

Cash on hand at the end of the quarter was $19.6 million.

Net debt was $323.4 million, compared with $156.6 million at the end of 2024.

Lufthansa Technik AG (“Lufthansa”) filed actions in Germany, the United Kingdom (“UK”) and France.

These matters are more fully discussed in Note 13, Legal Proceedings, to the Consolidated Condensed Financial Statements in Item 1, Financial Statements, of this report.

The Company expects its cash flow from operations will provide sufficient cash flows to fund operations, including payment of any further amounts related to the Lufthansa matters.

The Company paid $21.6 million ordered liabilities for damages, interest and legal fee reimbursement related to the UK matter in the second quarter of 2025.

The Company paid $21.6 million for ordered liabilities for damages, interest and legal fee reimbursement related to the UK matter in the second quarter of 2025.

The Company may also evaluate various actions and alternatives to enhance its profitability and cash generation from operating activities, which could include manufacturing efficiency initiatives, cost-reduction measures, working with vendors and suppliers to reduce lead times and expedite shipment of critical components, and working with customers to expedite receivable collections.

The Company may also utilize available capacity under the ABL Revolving Credit Facility.

Our ability to maintain sufficient liquidity and comply with financial debt covenants is highly dependent upon achieving expected operating results.

Failure to achieve expected operating results could have a material adverse effect on our liquidity, our ability to obtain financing or access our existing financing, and our operations in the future and could allow our debt holders to demand payment of all outstanding amounts.

We are in compliance with all covenants under each of our financing arrangements.

See Note 7, Long-term Debt and Notes Payable, to the Consolidated Condensed Financial Statements in Item 1, Financial Statements, of this report for additional details.

During the three and nine months ended September 27, 2025, and September 28, 2024, the Company did not sell any shares of its common stock under the ATM Program.

As of September 27, 2025, the Company had remaining capacity under the ATM Program to sell shares of common stock having an aggregate offering price up to approximately $8.2 million.

On October 22, 2025, the Company entered into a cash flow-based revolving credit facility and terminated the ABL Revolving Credit Facility.

See further discussion in Note 16, Subsequent Events, to the Consolidated Condensed Financial Statements in Item 1, Financial Statements, of this report.

OFF BALANCE SHEET ARRANGEMENTS

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

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

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The Company’s backlog on September 27, 2025 was $646.7 million compared with $599.2 million on December 31, 2024 and $611.9 million on September 28, 2024.

CONTRACTUAL OBLIGATIONS AND COMMITMENTS

Our contractual obligations and commitments have not changed materially from the disclosures in our 2024 10-K, except as set forth below.

On September 15, 2025, the Company issued $225.0 million aggregate principal amount of 0.000% Convertible Senior Notes due 2031 (the “2031 Notes”).

The Company used part of the net proceeds to repurchase a portion of the 2030 Notes and the remainder to enter into the capped call transactions.

On October 22, 2025, the Company entered into a $300 million senior secured, cash flow-based revolving credit facility (the “New Revolver”).

The New Revolver replaces the Company’s ABL Revolving Credit Facility, which was terminated on October 22, 2025.

The scheduled maturity date for the New Revolver is October 16, 2030.

Refer to Note 7, Long-term Debt and Notes Payable, and Note 16, Subsequent Events, to the Consolidated Condensed Financial Statements in Item 1, Financial Statements, of this report, for additional information.

Although the majority of our sales, expenses, and cash flows are transacted in U.S.

dollars, we have exposure to changes in foreign currency exchange rates related primarily to the Euro and the Canadian dollar.

The Company believes that the impact of changes in foreign currency exchange rates on its business and financial results for the three and six months ended June 28, 2025 was not significant.

The Company believes that the impact of changes in foreign currency exchange rates on its business and financial results for the three and nine months ended September 27, 2025 was not significant.

The future impacts of U.S.

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As we cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and China, Malaysia or other countries, what products may be subject to such actions, what actions may be taken by the other countries in retaliation, and what actions we may be able to take to address and mitigate such tariffs, the ultimate financial impact on our results cannot be reasonably estimated but could be material.

The impact of tariffs on its business and financial results for the three and six months ended June 28, 2025 was not significant.

The impact of tariffs on its business and financial results for the three and nine months ended September 27, 2025 was approximately $4 million and $7 million, respectively.

CRITICAL ACCOUNTING POLICIES

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The disclosure above under the heading “Market Risk” in Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” of this report is incorporated by reference into this Item 3.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis