What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2024-08-06 compared with 2024-05-07 · 146 added, 104 removed, 411 unchanged (38% of the section changed)

FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)

Three Months Ended

March 29, March 31,

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME (UNAUDITED)

Three Months Ended Six Months Ended

June 28, June 30, June 28, June 30,

(In thousands, except per share data) 2024 2023 2024 2023

6 unchanged sentences

Other expense, net ( 4,735 ) ( 311 ) ( 6,368 ) ( 311 )

Income (loss) from operations before income taxes 1,124 ( 23,217 )

Income tax benefit ( 20 ) ( 5,737 )

Net income (loss) $ 1,144 $ ( 17,480 )

Earnings (loss) per share

(Loss) income from operations before income taxes ( 8,114 ) 2,009 ( 6,990 ) ( 21,208 )

Income tax (benefit) expense ( 1,570 ) 210 ( 1,590 ) ( 5,527 )

Net (loss) income $ ( 6,544 ) $ 1,799 $ ( 5,400 ) $ ( 15,681 )

(Loss) earnings per share

Basic $ ( 0.21 ) $ 0.06 $ ( 0.17 ) $ ( 0.51 )

3 unchanged sentences

The accompanying notes are an integral part of these financial statements.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

Three Months Ended

March 29, March 31,

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (UNAUDITED)

Three Months Ended Six Months Ended

June 28, June 30, June 28, June 30,

(In thousands) 2024 2023 2024 2023

Net income (loss) $ 1,144 $ ( 17,480 )

Other comprehensive income (loss), net of tax

Net (loss) income $ ( 6,544 ) $ 1,799 $ ( 5,400 ) $ ( 15,681 )

Other comprehensive (loss) income, net of tax

Changes in derivative instruments:

Net change in fair value of interest rate swaps 541 7,658 5,462 5,311

Tax benefit 430 148

Tax expense ( 708 ) ( 1,444 ) ( 278 ) ( 1,296 )

Net change in derivative instruments ( 167 ) 6,214 5,184 4,015

Foreign currency translation adjustments, net of tax ( 1,451 ) 274 ( 4,294 ) 2,080

Other comprehensive income (loss), net of tax 2,508 ( 393 )

Total comprehensive income (loss) $ 3,652 $ ( 17,873 )

Other comprehensive (loss) income, net of tax ( 1,618 ) 6,488 890 6,095

Total comprehensive (loss) income $ ( 8,162 ) $ 8,287 $ ( 4,510 ) $ ( 9,586 )

The accompanying notes are an integral part of these financial statements.

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

March 29, December 31,

June 28, December 31,

(In thousands, except per share data) 2024 2023

33 unchanged sentences

100,000,000 shares authorized;

31,452,806 and 31,191,628 shares issued and outstanding as of March 29, 2024 and December 31, 2023, respectively

31,480,227 and 31,191,628 shares issued and outstanding as of June 28, 2024 and December 31, 2023, respectively

Additional paid in capital 767,982 762,324

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Three Months Ended

March 29, March 31,

Six Months Ended

June 28, June 30,

(In thousands) 2024 2023

Operating activities

Net income (loss) $ 1,144 $ ( 17,480 )

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Net loss $ ( 5,400 ) $ ( 15,681 )

Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation expense 11,870 11,326

Amortization of intangible assets 45,525 45,211

Amortization of cloud computing arrangements 886 142

Impairment of non-operating long-lived asset 2,192 —

Loss on disposal of property, plant, and equipment 269 522

9 unchanged sentences

Other liabilities 5,811 31,831

Net cash used in operating activities ( 57,226 ) ( 38,492 )

Net cash (used in) provided by operating activities ( 31,551 ) 78,140

Investing activities

33 unchanged sentences

Balance at March 31, 2023 31,005 $ 310 $ 748,137 $ 235,944 $ ( 5,920 ) $ 978,471

Net income — — — 1,799 — 1,799

Foreign currency translation adjustments — — — — 274 274

Unrealized gain on cash flow hedge — — — — 6,214 6,214

Employee stock awards and stock options 76 1 — — — 1

Taxes withheld on restricted stock unit compensation awards — — ( 1,812 ) — — ( 1,812 )

Stock-based compensation — — 7,771 — — 7,771

Balance at June 30, 2023 31,081 $ 311 $ 754,096 $ 237,743 $ 568 $ 992,718

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES TO SHAREHOLDERS' EQUITY (UNAUDITED)

Common Stock Issued Additional Paid-in Capital Accumulated Other Comprehensive (Loss) Income Total Shareholders' Equity

8 unchanged sentences

Balance at March 29, 2024 31,453 $ 315 $ 761,605 $ 231,995 $ ( 179 ) $ 993,736

Net loss — — — ( 6,544 ) — ( 6,544 )

Foreign currency translation adjustments — — — — ( 1,451 ) ( 1,451 )

Unrealized gain on cash flow hedge — — — — ( 167 ) ( 167 )

Employee stock awards and stock options 27 — 146 — — 146

Taxes withheld on restricted stock unit compensation awards — — ( 65 ) — — ( 65 )

Stock-based compensation — — 6,296 — — 6,296

Balance at June 28, 2024 31,480 $ 315 $ 767,982 $ 225,451 $ ( 1,797 ) $ 991,951

The accompanying notes are an integral part of these financial statements.

16 unchanged sentences

The Company accounts for its investments in HDSS, J&J, and ServCore under the equity method and has the ability to exercise significant influence but does not hold a controlling interest.

The Company's proportionate 25 %, 50 %, and 40 % shares, respectively, of income or losses from HDSS, J&J, and ServCore are recorded in selling, general and administrative expenses in the Condensed Consolidated Statements of Income (Loss).

The Company's investment in these joint ventures is recorded in other non-current assets in the Condensed Consolidated Balance Sheets.

2 unchanged sentences

Any cash distributions in excess of cumulative earnings are recorded as a return of investment in investing cash flows within the Condensed Consolidated Statements of Cash Flows.

As of March 29, 2024 and December 31, 2023, the Company's combined investment balance was $ 4.8 million and $ 5.4 million, respectively.

The Company's proportionate share of income from equity method investments was $ 2.6 million and $ 1.8 million for the three months ended March 29, 2024 and March 31, 2023 , respectively.

As of June 28, 2024 and December 31, 2023, the Company's combined investment balance was $ 6.7 million and $ 5.4 million, respectively.

The Company's proportionate share of income from equity method investments was $ 4.4 million and $ 7.0 million for the three and six months ended June 28, 2024, respectively, and $ 2.0 million and $ 3.8 million for the three and six months ended June 30, 2023 , respectively.

Basis of Presentation

The Company's quarterly financial periods end on the Friday closest to the last day of the calendar quarter (March 29, 2024 for the first quarter of 2024 and March 31, 2023 for the first quarter of 2023), except for the last quarter of the fiscal year, which ends on December 31.

The Company's quarterly financial periods end on the Friday closest to the last day of the calendar quarter (June 28, 2024 for the second quarter of 2024 and June 30, 2023 for the second quarter of 2023), except for the last quarter of the fiscal year, which ends on December 31.

For ease of presentation, the quarterly financial statements included herein are described as three months ended.

9 unchanged sentences

Restricted Cash

As of March 29, 2024, the Company had total cash, cash equivalents, and restricted cash of $ 35.7 million which included $ 2.1 million of restricted cash.

As of June 28, 2024, the Company had total cash, cash equivalents, and restricted cash of $ 44.8 million which included $ 2.1 million of restricted cash.

The Company's restricted cash was $ 2.0 million as of December 31, 2023.

Cloud Computing Arrangements (CCA)

The Company capitalizes implementation costs associated with its CCA consistent with costs capitalized for internal-use software.

Capitalized CCA implementation costs are included in prepaid expenses and other current assets and other non-current assets on the Company's Condensed Consolidated Balance Sheets.

The CCA implementation costs are amortized over the term of the related hosting agreement, including renewal periods that are reasonably certain to be exercised.

Amortization expense of CCA implementation costs is included in cost of revenue on the Company's Condensed Consolidated Statements of (Loss) Income.

The CCA implementation costs are included within operating activities on the Company's Condensed Consolidated Statements of Cash Flows.

As of June 28, 2024, the Company had total capitalized CCA implementation costs, net of accumulated amortization, of $ 31.2 million included in prepaid expenses and other current assets and other non-current assets.

Prepaid Expenses and Other Current Assets

The components of prepaid expenses and other current assets are as follows:

June 28, December 31,

(In thousands) 2024 2023

Inventory, net $ 46,580 $ 46,981

Prepaid expenses 58,851 30,664

Prepaid taxes 11,565 10,715

Other 32,929 7,863

Total $ 149,925 $ 96,223

Related Party Transactions

During the three months ended March 29, 2024 and March 31, 2023, the Company recorded income of $ 0.5 million and $ 0.7 million, respectively, related to a Transition Services Agreement with Crestview Aerospace LLC (Crestview).

The income was recorded as a reduction in cost of sales.

During the three and six months ended June 28, 2024, the Company recorded income of $ 0.2 million and $ 0.7 million, respectively, and $ 0.7 million and $ 1.4 million of income for the three and six months ended June 30, 2023, respectively, related to a Transition Services Agreement with Crestview Aerospace LLC (Crestview).

The income was recorded as a reduction in cost of revenue.

Crestview is a subsidiary of American Industrial Partners Capital Fund VI, L.P.

14 unchanged sentences

Remaining Performance Obligations

Remaining performance obligations represent firm orders by the customer and excludes potential orders under indefinite delivery and indefinite quantity (IDIQ) contracts, unexercised contract options and contracts awarded to us that are being protested by competitors with the U.S.

Remaining performance obligations represent firm orders by the customer and exclude potential orders under indefinite delivery and indefinite quantity (IDIQ) contracts, unexercised contract options and contracts awarded to us that are being protested by competitors with the U.S.

Government Accountability Office (GAO) or in the U.S.

11 unchanged sentences

Remaining performance obligations are presented in the following table:

March 29, December 31,

June 28, December 31,

(In millions) 2024 2023

Performance Obligations $ 3,838 $ 3,629

As of March 29, 2024, the Company expects to recognize approximately 63 % and 37 % of these remaining performance obligations as revenue in 2024 and 2025, respectively.

As of June 28, 2024, the Company expects to recognize approximately 47 % and 53 % of these remaining performance obligations as revenue in 2024 and 2025, respectively.

Contract Estimates

The impact of adjustments in contract estimates on the Company's operating income can be reflected in either revenue or cost of revenue.

Cumulative adjustments for the three months ended March 29, 2024 and March 31, 2023 were favorable by $ 0.5 million and $ 13.1 million, respectively.

For the three months ended March 29, 2024 and March 31, 2023, the net adjustments to operating income increased revenue by $ 3.4 million and $ 13.9 million, respectively.

Cumulative adjustments for the three months ended June 28, 2024 and June 30, 2023 were favorable by $ 0.7 million and $ 9.1 million, respectively.

Cumulative adjustments for the six months ended June 28, 2024 and June 30, 2023 were favorable by $ 1.2 million and $ 22.2 million, respectively.

For the three and six months ended June 28, 2024, the net adjustments to operating income increased revenue by $ 6.0 million and $ 9.4 million, respectively.

For the three and six months ended June 30, 2023, the net adjustments to operating income increased revenue by $ 9.6 million and $ 23.5 million, respectively.

Revenue by Category

1 unchanged sentence

On a cost-plus contract, the Company is paid allowable incurred costs plus a profit, which can be fixed or variable depending on the contract’s fee arrangement, up to funding levels predetermined by the Company's customers.

On cost-plus contracts, the Company does not bear the risks of unexpected cost overruns, provided that incurred costs do not exceed the predetermined funded amounts.

The Company does not bear the risks of unexpected cost overruns, provided that incurred costs do not exceed the predetermined funded amounts.

Most of the Company's cost-plus contracts also contain a firm-fixed-price element.

12 unchanged sentences

Revenue by contract type is as follows:

Three Months Ended

March 29, March 31, %

(In thousands) 2024 2023 Change

Three Months Ended Six Months Ended

June 28, June 30, % June 28, June 30, %

(In thousands) 2024 2023 Change 2024 2023 Change

Cost-plus and cost-reimbursable $ 615,837 $ 507,282 21.4 % $ 1,200,659 $ 1,019,217 17.8 %

3 unchanged sentences

Revenue by geographic region in which the contract is performed is as follows:

Three Months Ended

March 29, March 31, %

(In thousands) 2024 2023 Change

Three Months Ended Six Months Ended

June 28, June 30, % June 28, June 30, %

(In thousands) 2024 2023 Change 2024 2023 Change

United States $ 578,881 $ 578,514 0.1 % $ 1,123,608 $ 1,127,284 ( 0.3 ) %

4 unchanged sentences

Revenue by contract relationship is as follows:

Three Months Ended

March 29, March 31, %

(In thousands) 2024 2023 Change

Three Months Ended Six Months Ended

June 28, June 30, % June 28, June 30, %

(In thousands) 2024 2023 Change 2024 2023 Change

Prime contractor $ 1,006,121 $ 916,060 9.8 % $ 1,951,276 $ 1,795,239 8.7 %

2 unchanged sentences

Revenue by customer is as follows:

Three Months Ended

March 29, March 31, %

(In thousands) 2024 2023 Change

Three Months Ended Six Months Ended

June 28, June 30, % June 28, June 30, %

(In thousands) 2024 2023 Change 2024 2023 Change

Army $ 456,690 $ 393,499 16.1 % $ 890,120 $ 784,002 13.5 %

11 unchanged sentences

As of January 1, 2023, the Company had contract assets of $ 487.8 million.

As of March 29, 2024 and December 31, 2023, the Company had contract assets of $ 658.9 million and $ 561.9 million, respectively.

As of June 28, 2024 and December 31, 2023, the Company had contract assets of $ 662.7 million and $ 561.9 million, respectively.

Contract assets primarily consist of unbilled receivables which represent rights to consideration for work completed but not billed as of the reporting date.

5 unchanged sentences

As of January 1, 2023, the Company had contract liabilities of $ 76.4 million.

As of March 29, 2024 and December 31, 2023, contract liabilities, included in other accrued liabilities in the Condensed Consolidated Balance Sheets, were $ 142.0 million and $ 109.6 million, respectively.

As of June 28, 2024 and December 31, 2023, contract liabilities, included in other accrued liabilities in the Condensed Consolidated Balance Sheets, were $ 101.0 million and $ 109.6 million, respectively.

Receivables were comprised of the following:

March 29, December 31,

June 28, December 31,

(In thousands) 2024 2023

3 unchanged sentences

Total receivables $ 781,898 $ 705,995

As of March 29, 2024 and December 31, 2023, substantially all billed receivables are due from the U.S.

As of June 28, 2024 and December 31, 2023, substantially all billed receivables were due from the U.S.

government, either directly as prime contractor to the U.S.

3 unchanged sentences

Unbilled receivables are contract assets that represent revenue recognized on long-term contracts in excess of amounts billed as of the balance sheet date.

The Company expects to bill customers for most of the March 29, 2024 contract assets during 2024.

The Company expects to bill customers for most of the June 28, 2024 contract assets during 2024.

Changes in the balance of receivables are primarily due to the timing differences between performance and customers' payments.

1 unchanged sentence

First Lien Credit Agreement

The First Lien Credit Agreement provides for a tranche of term loans in an aggregate original principal amount of $ 911.1 million.

The loans under the First Lien Credit Agreement amortize in an amount equal to approximately $ 2.3 million per quarter through September 30, 2028, with the balance of $ 865.6 million due on December 6, 2028.

On May 30, 2024, the First Lien Credit Agreement was amended to provide, among other things, a new tranche of term loans in an aggregate original principal amount of $ 906.6 million (the New Term Loans), in which the New Term Loans replace or refinance in full all the existing term loans outstanding under the First Lien Term Tranche as in effect immediately prior to the amendment (the Existing Term Loans).

The loans under the First Lien Credit Agreement, as amended (the First Lien Credit Agreement), amortize in an amount equal to approximately $ 2.3 million per quarter through September 30, 2030, with the balance of $ 847.6 million due on December 6, 2030.

The replacement of the Existing Term Loans with the New Term Loans resulted in a loss on extinguishment of debt of $ 2.0 million in the Condensed Consolidated Statement of (Loss) Income for the three and six months ended June 28, 2024.

Vertex Aerospace Services LLC (Vertex Borrower) obligations under the First Lien Credit Agreement are guaranteed by Vertex Intermediate LLC and Vertex Borrower’s wholly-owned domestic subsidiaries (collectively, the Guarantors), subject to customary exceptions and limitations.

1 unchanged sentence

The borrowings under the First Lien Credit Agreement bear interest at rates that, at the Vertex Borrower’s option, can be either a base rate, determined by reference to the greater of (a) the federal funds rate plus 0.50 %, (b) the prime lending rate, or (c) an adjusted Secured Overnight Financing Rate (SOFR) rate plus 1.00 %, plus a margin of 1.75 % per annum, or SOFR, plus a margin of 2.75 % per annum.

As of March 29, 2024, the effective interest rate for the First Lien Credit Agreement was 9.48 %.

As of June 28, 2024, the effective interest rate for the First Lien Credit Agreement was 8.64 %.

The First Lien Credit Agreement contains customary representations and warranties and affirmative covenants.

2 unchanged sentences

If an event of default occurs and is continuing, the Vertex Borrower may be required immediately to repay all amounts outstanding under the First Lien Credit Agreement.

As of March 29, 2024, the carrying value of the First Lien Credit Agreement was $ 906.6 million, excluding deferred discount and unamortized deferred financing costs of $ 34.7 million.

The estimated fair value of the First Lien Credit Agreement as of March 29, 2024 was $ 908.8 million.

As of June 28, 2024, the carrying value of the First Lien Credit Agreement was $ 904.3 million, excluding deferred discount and unamortized deferred financing costs of $ 32.2 million.

The estimated fair value of the First Lien Credit Agreement as of June 28, 2024 was $ 905.4 million.

The fair value is based on observable inputs of interest rates that are currently available to us for debt with similar terms and maturities for non-public debt (Level 2).

5 unchanged sentences

The borrowings under the 2023 Credit Agreement bear interest at rates that, at the Vertex Borrower’s option, can be either a base rate, determined by reference to the greater of (a) the federal funds rate plus 0.50 %, (b) the prime lending rate, or (c) an adjusted SOFR rate plus 1.00 %, plus a margin of 1.00 % to 2.25 % per annum, or SOFR, plus a margin of 2.00 % to 3.25 % per annum, in each case, depending on the consolidated total net leverage ratio of the Vertex Borrower and its subsidiaries.

As of March 29, 2024, the effective interest rates for the 2023 Revolver and Term Loan were 9.14 % and 8.38 %, respectively.

As of June 28, 2024, the effective interest rates for the 2023 Revolver and Term Loan were 9.60 % and 8.65 %, respectively.

Unutilized commitments under the 2023 Revolver are subject to a per annum fee ranging from 0.25 % to 0.50 % depending on the consolidated total net leverage ratio of the Vertex Borrower and its subsidiaries.

4 unchanged sentences

The 2023 Credit Agreement contains customary events of default, including, but not limited to, payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, failure of any guaranty or security document supporting the 2023 Credit Agreement to be in full force and effect, and a change of control.

If an event of default occurs and is continuing, the Borrowers may be required immediately to repay all amounts outstanding under the 2023 Credit Agreement.

As of March 29, 2024, there were $ 56.0 million of outstanding borrowings and $ 17.2 million of outstanding letters of credit under the 2023 Revolver.

Availability under the 2023 Revolver was $ 426.8 million as of March 29, 2024.

If an event of default occurs and is continuing, the Vertex Borrowers may be required immediately to repay all amounts outstanding under the 2023 Credit Agreement.

As of June 28, 2024, there were $ 46.0 million of outstanding borrowings and $ 17.8 million of outstanding letters of credit under the 2023 Revolver.

Availability under the 2023 Revolver was $ 436.2 million as of June 28, 2024.

Unamortized deferred financing costs related to the 2023 Revolver of $ 3.7 million are included in other non-current assets in the Condensed Consolidated Balance Sheets.

As of March 29, 2024, the fair value of the 2023 Revolver approximated the carrying value because the debt bears a floating interest rate.

As of March 29, 2024, the carrying value of the 2023 Term Loan was $ 243.8 million, excluding unamortized deferred financing costs of $ 2.0 million.

The estimated fair value of the 2023 Term Loan as of March 29, 2024 was $ 244.1 million.

As of June 28, 2024, the fair value of the 2023 Revolver approximated the carrying value because the debt bears a floating interest rate.

As of June 28, 2024, the carrying value of the 2023 Term Loan was $ 242.2 million, excluding unamortized deferred financing costs of $ 1.8 million.

The estimated fair value of the 2023 Term Loan as of June 28, 2024 was $ 242.5 million.

The fair value is based on observable inputs of interest rates that are currently available to us for debt with similar terms and maturities for non-public debt (Level 2).

The aggregate scheduled maturities of the First Lien Credit Agreement and 2023 Credit Agreement as of March 29, 2024 are as follows:

The aggregate scheduled maturities of the First Lien Credit Agreement and 2023 Credit Agreement as of June 28, 2024 are as follows:

(In thousands) Payments due

2024 (remainder of the year) $ 7,658

2028 1,131,527

After 2028 863,506

Total $ 1,192,490

As of March 29, 2024, the Company was in compliance with all covenants related to the First Lien Credit Agreement and the 2023 Credit Agreement .

As of June 28, 2024, the Company was in compliance with all covenants related to the First Lien Credit Agreement and the 2023 Credit Agreement .

DERIVATIVE INSTRUMENTS

During the periods covered by this report, the Company has made no changes to its policies or strategies for the use of derivative instruments and there has been no change in related accounting methods.

For the Company's derivative instruments, which are designated as cash flow hedges, gains and losses are initially reported as a component of accumulated other comprehensive income (loss) and subsequently recognized in earnings with the corresponding hedged item.

For the Company's derivative instruments, which are designated as cash flow hedges, gains and losses are initially reported as a component of accumulated other comprehensive loss and subsequently recognized in earnings with the corresponding hedged item.

Interest Rate Derivative Instruments

1 unchanged sentence

To mitigate this risk, the Company entered into $ 350.0 million of interest rate swap contracts during the first six months of 2023.

As of March 29, 2024 and December 31, 2023, these contracts had notional values of $ 343.8 million and $ 345.3 million, respectively.

As of June 28, 2024 and December 31, 2023, these contracts had notional values of $ 342.2 million and $ 345.3 million, respectively.

These contracts are designated and qualify as effective cash flow hedges.

The following table summarizes the amount at fair value and location of the derivative instruments for interest rate hedges in the Condensed Consolidated Balance Sheets as of March 29, 2024:

(In thousands) Fair Value (level 2)

Balance sheet caption Amount

The following table summarizes the amount at fair value and location of the derivative instruments for interest rate hedges in the Condensed Consolidated Balance Sheets:

Fair Value (level 2)

June 28, December 31,

(In thousands) Balance sheet caption 2024 2023

Interest rate swap designated as cash flow hedge Prepaid expenses and other current assets $ 4,067 $ 3,381

Interest rate swap designated as cash flow hedge Other non-current assets $ 1,770 $ —

Interest rate swap designated as cash flow hedge Other non-current liabilities $ — $ 3,006

Interest rate swap designated as cash flow hedge Accumulated other comprehensive income $ 5,837 $ 375

The Company regularly assesses the creditworthiness of the counterparty.

As of March 29, 2024, the counterparty to the interest rate swaps had performed in accordance with its contractual obligations.

As of June 28, 2024, the counterparty to the interest rate swaps had performed in accordance with its contractual obligations.

Both the counterparty credit risk and the Company's credit risk were considered in the fair value determination.

Net interest rate derivative gains of $ 1.5 million and a nominal amount were recognized in interest expense, net, in the Condensed Consolidated Statements of Income (Loss) during the three months ended March 29, 2024 and March 31, 2023, respectively.

The Company expects $ 4.3 million of existing interest rate swap gains reported in accumulated other comprehensive income as of March 29, 2024 to be recognized in earnings within the next 12 months.

Net interest rate derivative gains of $ 1.4 million and $ 2.9 million were recognized in interest expense, net, in the Condensed Consolidated Statements of (Loss) Income during the three and six months ended June 28, 2024, respectively.

Net interest rate derivative gains of $ 1.2 million were recognized in interest expense, net, in the Condensed Consolidated Statements of (Loss) Income during both the three and six months ended June 30, 2023 .

The Company expects $ 4.3 million of existing interest rate swap gains reported in accumulated other comprehensive income as of June 28, 2024 to be recognized in earnings within the next 12 months.

COMMITMENTS AND CONTINGENCIES

8 unchanged sentences

Such assessments, along with any assessments regarding provisions for other legal proceedings, are reviewed on a quarterly basis for sufficiency based on the latest information available to us.

The Company estimated and accrued $ 12.4 million and $ 12.1 million as of March 29, 2024 and December 31, 2023, respectively, in other accrued liabilities in the Condensed Consolidated Balance Sheets for legal proceedings and for claims with respect to its U.S.

The Company estimated and accrued $ 13.3 million and $ 12.1 million as of June 28, 2024 and December 31, 2023, respectively, in other accrued liabilities in the Condensed Consolidated Balance Sheets for legal proceedings and for claims with respect to its U.S.

government contracts as discussed below, including years where the U.S.

36 unchanged sentences

Liability-based awards are revalued at the end of each reporting period to reflect changes in fair value.

Stock-based compensation expense and the associated tax benefits impacting the Company's Condensed Consolidated Statements of Income (Loss) were as follows:

Three Months Ended

March 29, March 31,

Stock-based compensation expense and the associated tax benefits impacting the Company's Condensed Consolidated Statements of (Loss) Income were as follows:

Three Months Ended Six Months Ended

June 28, June 30, June 28, June 30,

(In thousands) 2024 2023 2024 2023

3 unchanged sentences

Future tax benefit $ 1,585 $ 1,756 $ 2,813 $ 4,445

As of March 29, 2024, total unrecognized compensation costs related to equity-based awards and liability-based awards were $ 26.6 million and $ 0.5 million, respectively, which are expected to be recognized ratably over a weighted average period of 1.85 years and 0.76 years, respectively.

The following table provides a summary of the activities for NQOs, RSUs and PSUs for the three months ended March 29, 2024:

As of June 28, 2024, total unrecognized compensation costs related to equity-based awards and liability-based awards were $ 22.6 million and $ 0.1 million, respectively, which are expected to be recognized ratably over a weighted average period of 1.41 years and 0.51 years, respectively.

The following table provides a summary of the activities for NQOs, RSUs and PSUs for the six months ended June 28, 2024:

NQOs RSUs PSUs

5 unchanged sentences

Forfeited or expired — $ — ( 75 ) $ 42.50 ( 86 ) $ 31.22

Outstanding at March 29, 2024 40 $ 22.93 625 $ 40.86 329 $ 41.88

Outstanding at June 28, 2024 34 $ 22.43 621 $ 41.49 342 $ 43.36

Restricted Stock Units

3 unchanged sentences

Stock compensation expense will be recognized ratably over the requisite service period of the RSU awards.

As of March 29, 2024, there was $ 18.5 million of unrecognized RSU related compensation expense.

As of June 28, 2024, there was $ 15.4 million of unrecognized RSU related compensation expense.

Total Shareholder Return Awards

1 unchanged sentence

Any payments earned are made in cash following completion of the performance period according to the achievement of specified performance goals.

There were no cash-based TSR awards granted in the first quarter of 2024.

As of March 29, 2024, there was $ 0.5 million of unrecognized TSR related compensation expense.

There were no cash-based TSR awards granted in the first half of 2024.

As of June 28, 2024, there was $ 0.1 million of unrecognized TSR related compensation expense.

Performance Share Units

During the first quarter of 2024, the Company granted performance-based awards with market conditions.

During the first half of 2024, the Company granted performance-based awards with market conditions.

The awards will vest and the stock will be issued at the end of a three-year period based on the attainment of certain total shareholder return performance measures as compared to peer group companies, and the employee's continued service through the vesting date.

1 unchanged sentence

If performance is below the threshold level of performance, no shares will be issued.

As of March 29, 2024, there was $ 8.1 million of unrecognized PSU related compensation expense.

As of June 28, 2024, there was $ 7.2 million of unrecognized PSU related compensation expense.

Effective Tax Rate

1 unchanged sentence

The computation of the estimated effective income tax rate at each interim period requires certain estimates and judgment including, but not limited to, forecasted operating income for the year, projections of the income earned and taxed in various jurisdictions, newly enacted tax rate and legislative changes, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year.

For the three months ended March 29, 2024 and March 31, 2023, the Company recorded income tax benefits which were not material and $ 5.7 million, respectively.

The Company's effective income tax rates for the three months ended March 29, 2024 and March 31, 2023 were ( 1.8 )% and 24.7 %, respectively.

For the three months ended June 28, 2024 and June 30, 2023, the Company recorded income tax benefits of $ 1.6 million and an income tax provision of $ 0.2 million, respectively, representing effective income tax rates of 19.3 % and 10.5 %, respectively.

For the six months ended June 28, 2024 and June 30, 2023, the Company recorded income tax benefits of $ 1.6 million and $ 5.5 million, respectively, representing effective income tax rates of 22.7 % and 26.1 %, respectively.

The effective income tax rates vary from the federal statutory rate of 21.0% mainly due to state and foreign taxes, disallowed compensation deduction under Internal Revenue Code Section 162(m), offset by available deductions not reflected in book income and income tax credits.

Uncertain Tax Positions

As of March 29, 2024 and December 31, 2023, unrecognized tax benefits from uncertain tax positions were $ 6.6 million and $ 6.6 million, respectively.

As of both June 28, 2024 and December 31, 2023, unrecognized tax benefits from uncertain tax positions were $ 6.6 million.

EARNINGS PER SHARE

2 unchanged sentences

Diluted EPS includes the dilutive effect of stock-based compensation outstanding after application of the treasury stock method.

Three Months Ended

March 29, March 31,

Three Months Ended Six Months Ended

June 28, June 30, June 28, June 30,

(In thousands, except per share data) 2024 2023 2024 2023

Net income (loss) $ 1,144 $ ( 17,480 )

Net (loss) income $ ( 6,544 ) $ 1,799 $ ( 5,400 ) $ ( 15,681 )

Weighted average common shares outstanding 31,470 31,033 31,411 30,981

2 unchanged sentences

Diluted weighted average common shares outstanding 31,470 31,605 31,411 30,981

Earnings (loss) per share

(Loss) earnings per share

Basic $ ( 0.21 ) $ 0.06 $ ( 0.17 ) $ ( 0.51 )

1 unchanged sentence

The following table summarizes the weighted average of anti-dilutive securities excluded from the diluted EPS calculation.

Three Months Ended

March 29, March 31,

Three Months Ended Six Months Ended

June 28, June 30, June 28, June 30,

(In thousands) 2024 2023 2024 2023

Anti-dilutive stock options — —

Anti-dilutive restricted stock units 11 2 58 2

Total 11 2 58 2

POST-EMPLOYMENT BENEFIT PLANS

4 unchanged sentences

Adjustments to the fair value of the plan investments and obligations are recorded in selling, general, and administrative expenses.

The plans assets and liabilities were $ 4.2 million and $ 3.2 million as of March 29, 2024 and December 31, 2023, respectively.

The plans assets and liabilities were $ 4.8 million and $ 3.2 million as of June 28, 2024 and December 31, 2023, respectively.

Multi-Employer Pension Plans

C ertain Company employees who perform work on contracts within the continental United States participate in multi-employer pension plans of which the Company is not the sponsor.

Company expenses related to these plans were $ 5.0 million and $ 3.3 million for the three months ended March 29, 2024 and March 31, 2023, respectively.

Company expenses related to these plans were $ 4.4 million and $ 9.4 million for the three and six months ended June 28, 2024, respectively, and $ 4.9 million and $ 8.2 million for the three and six months ended June 30, 2023, respectively.

SALE OF RECEIVABLES

6 unchanged sentences

As of and for the

Three Months Ended

Six Months Ended

June 28, June 30,

(In thousands) 2024 2023

3 unchanged sentences

Outstanding balance sold to MUFG 1

194,595 112,996

Cash collected, not remitted to MUFG 2

( 46,854 ) ( 69,706 )

Remaining sold receivables $ 147,741 $ 43,290

1 For the three months ended March 29, 2024, the Company recorded a net cash inflow from sale of receivables of $ 33.7 million from operating activities.

2 Includes the cash collected on behalf of, but not yet remitted to, MUFG as of March 29, 2024.

1 For the six months ended June 28, 2024, the Company recorded a net cash inflow from sale of receivables of $ 121.9 million from operating activities.

2 Includes the cash collected on behalf of, but not yet remitted to, MUFG as of June 28, 2024.

This balance is included in other accrued liabilities as of the balance sheet date.

During the three months ended March 29, 2024, the Company incurred purchase discount fees, net of servicing fees, of $ 1.6 million, which are presented in other expense, net on the Condensed Consolidated Statements of Income (Loss) and are reflected as cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows.

During the six months ended June 28, 2024 and June 30, 2023, the Company incurred purchase discount fees, net of servicing fees, of $ 4.2 million and $ 0.2 million, respectively, which are presented in other expense, net on the Condensed Consolidated Statements of (Loss) Income and are reflected as cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows.

The Company does not retain an ongoing financial interest in the transferred receivables other than cash collection and administrative services.

The Company estimated that its servicing fee was at fair value and therefore has not recognized a servicing asset or liability as of March 29, 2024.

The Company estimated that its servicing fee was at fair value and therefore has not recognized a servicing asset or liability as of June 28, 2024.

Proceeds from the sale of receivables are reflected as cash flows from operating activities on the Condensed Consolidated Statements of Cash Flows.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements