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Item 1. Financial Statements

2024-11-04 compared with 2024-08-06 · 124 added, 108 removed, 449 unchanged (34% of the section changed)

FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF (LOSS) INCOME (UNAUDITED)

Three Months Ended Six Months Ended

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

CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS) (UNAUDITED)

Three Months Ended Nine Months Ended

September 27, September 29, September 27, September 29,

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

6 unchanged sentences

Other expense, net ( 3,198 ) ( 2,024 ) ( 9,566 ) ( 2,335 )

(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

Income (loss) from operations before income taxes 19,537 ( 11,237 ) 12,547 ( 32,445 )

Income tax expense (benefit) 4,486 ( 4,837 ) 2,896 ( 10,364 )

Net income (loss) $ 15,051 $ ( 6,400 ) $ 9,651 $ ( 22,081 )

Earnings (loss) per share

Basic $ 0.48 $ ( 0.21 ) $ 0.31 $ ( 0.71 )

3 unchanged sentences

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

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

Three Months Ended Six Months Ended

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

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

Three Months Ended Nine Months Ended

September 27, September 29, September 27, September 29,

(In thousands) 2024 2023 2024 2023

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

Net income (loss) $ 15,051 $ ( 6,400 ) $ 9,651 $ ( 22,081 )

Other comprehensive (loss) income, net of tax

1 unchanged sentence

Net change in fair value of interest rate swaps ( 10,247 ) 4,170 ( 4,785 ) 9,481

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

Tax benefit (expense) 2,523 ( 1,759 ) 1,220 ( 3,203 )

Net change in derivative instruments ( 7,724 ) 2,411 ( 3,565 ) 6,278

1 unchanged sentence

Other comprehensive (loss) income, net of tax ( 3,150 ) 87 ( 2,260 ) 6,182

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

Total comprehensive income (loss) $ 11,901 $ ( 6,313 ) $ 7,391 $ ( 15,899 )

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

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

June 28, December 31,

September 27, December 31,

(In thousands, except per share data) 2024 2023

33 unchanged sentences

100,000,000 shares authorized;

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

31,556,556 and 31,191,628 shares issued and outstanding as of September 27, 2024 and December 31, 2023, respectively

Additional paid in capital 766,690 762,324

5 unchanged sentences

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

Six Months Ended

June 28, June 30,

Nine Months Ended

September 27, September 29,

(In thousands) 2024 2023

Operating activities

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

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

Net income (loss) $ 9,651 $ ( 22,081 )

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

Depreciation expense 16,442 16,532

13 unchanged sentences

Other liabilities ( 16,581 ) 9,182

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

Net cash provided by operating activities 31,103 135,175

Investing activities

2 unchanged sentences

Acquisitions of businesses ( 16,939 ) —

Distribution from joint venture — 834

Net cash used in investing activities ( 27,625 ) ( 15,709 )

7 unchanged sentences

Prepayment premium on early redemption of debt — ( 1,600 )

Payments of employee withholding taxes on share-based compensation ( 5,767 ) ( 14,618 )

Net cash provided by (used in) financing activities 31,525 ( 113,607 )

Payments of employee withholding taxes on stock-based compensation ( 8,036 ) ( 17,871 )

Net cash used in financing activities ( 16,739 ) ( 155,734 )

Exchange rate effect on cash 467 ( 1,540 )

22 unchanged sentences

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

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

Taxes withheld on stock 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

Net income — — — ( 6,400 ) — ( 6,400 )

Foreign currency translation adjustments — — — — ( 2,324 ) ( 2,324 )

Unrealized gain on cash flow hedge — — — — 2,411 2,411

Employee stock awards and stock options 106 1 — — — 1

Taxes withheld on stock compensation awards — — ( 3,254 ) — — ( 3,254 )

Stock-based compensation — — 5,939 — — 5,939

Balance at September 29, 2023 31,187 $ 312 $ 756,781 $ 231,343 $ 655 $ 989,091

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

11 unchanged sentences

Foreign currency translation adjustments — — — — 162 162

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

Unrealized loss on cash flow hedge — — — — ( 1,780 ) ( 1,780 )

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

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

Taxes withheld on stock 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

Net income — — — 15,051 — 15,051

Foreign currency translation adjustments — — — — 4,574 4,574

Unrealized loss on cash flow hedge — — — — ( 7,724 ) ( 7,724 )

Employee stock awards and stock options 77 1 4 — — 5

Taxes withheld on stock compensation awards — — ( 2,269 ) — — ( 2,269 )

Stock-based compensation — — 973 — — 973

Balance at September 27, 2024 31,557 $ 316 $ 766,690 $ 240,502 $ ( 4,947 ) $ 1,002,561

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

15 unchanged sentences

Pursuant to the joint venture agreement, ServCore Resources and Services Solutions, LLC (ServCore) was established to operate and manage labor and life support services outside of the continental United States at designated locations serviced by V2X and others around the world.

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 (Loss) Income.

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

In February 2022, the Company and Permagreen Grønland formed Inuksuk A/S (Inuksuk), a corporation in Greenland to bid for certain contracts in Greenland.

The Company accounts for its investments in HDSS, J&J, ServCore, and Inuksuk 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 %, 40 %, and 49 % shares, respectively, of income or losses from HDSS, J&J, ServCore, and Inuksuk are recorded in selling, general and administrative expenses in the Condensed Consolidated Statements of Income (Loss).

These investments are recorded in other non-current assets in the Condensed Consolidated Balance Sheets.

When cash distributions are received by the Company from its equity method investments, the cash distribution is compared to cumulative earnings and cumulative cash distributions.

1 unchanged sentence

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 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.

As of September 27, 2024 and December 31, 2023, the Company's combined investment balance was $ 8.7 million and $ 5.4 million, respectively.

The Company's proportionate share of income from equity method investments was $ 2.0 million and $ 9.0 million for the three and nine months ended September 27, 2024, respectively, and a loss of $ 1.5 million and income of $ 2.3 million for the three and nine months ended September 29, 2023 , respectively.

Basis of Presentation

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.

The Company's quarterly financial periods end on the Friday closest to the last day of the calendar quarter (September 27, 2024 for the third quarter of 2024 and September 29, 2023 for the third 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 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.

As of September 27, 2024, the Company had total cash, cash equivalents, and restricted cash of $ 59.9 million which included $ 2.1 million of restricted cash.

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

3 unchanged sentences

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.

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

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.

As of September 27, 2024, the Company had total capitalized CCA implementation costs, net of accumulated amortization, of $ 30 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,

September 27, December 31,

(In thousands) 2024 2023

5 unchanged sentences

Related Party Transactions

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).

During the three and nine months ended September 27, 2024, the Company recorded no income and income of $ 0.7 million, respectively, and $ 0.7 million and $ 2.1 million of income for the three and nine months ended September 29, 2023, respectively, related to a Transition Services Agreement with Crestview Aerospace LLC (Crestview).

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

29 unchanged sentences

Remaining performance obligations are presented in the following table:

June 28, December 31,

September 27, December 31,

(In millions) 2024 2023

Performance Obligations $ 4,033 $ 3,629

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.

As of September 27, 2024, the Company expects to recognize approximately 23 % and 77 % 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 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.

Cumulative adjustments for the three and nine months ended September 27, 2024 were favorable by $ 17.3 million and $ 18.5 million, respectively.

Cumulative adjustments for the three and nine months ended September 29, 2023 were favorable by $ 5.0 million and $ 27.2 million, respectively.

For the three and nine months ended September 27, 2024, the net adjustments to operating income increased revenue by $ 12.8 million and $ 22.2 million, respectively.

For the three and nine months ended September 29, 2023, the net adjustments to operating income increased revenue by $ 10.3 million and $ 33.8 million, respectively.

Revenue by Category

16 unchanged sentences

Revenue by contract type is as follows:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 27, September 29, % September 27, September 29, %

(In thousands) 2024 2023 Change 2024 2023 Change

4 unchanged sentences

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 27, September 29, % September 27, September 29, %

(In thousands) 2024 2023 Change 2024 2023 Change

5 unchanged sentences

Revenue by contract relationship is as follows:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 27, September 29, % September 27, September 29, %

(In thousands) 2024 2023 Change 2024 2023 Change

3 unchanged sentences

Revenue by customer is as follows:

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 27, September 29, % September 27, September 29, %

(In thousands) 2024 2023 Change 2024 2023 Change

12 unchanged sentences

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

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

As of September 27, 2024 and December 31, 2023, the Company had contract assets of $ 644.7 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 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.

As of September 27, 2024 and December 31, 2023, contract liabilities, included in other accrued liabilities in the Condensed Consolidated Balance Sheets, were $ 96.2 million and $ 109.6 million, respectively.

Receivables were comprised of the following:

June 28, December 31,

September 27, December 31,

(In thousands) 2024 2023

3 unchanged sentences

Total receivables $ 766,399 $ 705,995

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

As of September 27, 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 June 28, 2024 contract assets during 2024.

The Company expects to bill customers for most of the September 27, 2024 contract assets during 2024.

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

3 unchanged sentences

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.

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 Income (Loss) for the nine months ended September 27, 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 June 28, 2024, the effective interest rate for the First Lien Credit Agreement was 8.64 %.

As of September 27, 2024, the effective interest rate for the First Lien Credit Agreement was 8.52 %.

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 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.

As of September 27, 2024, the carrying value of the First Lien Credit Agreement was $ 904.3 million, excluding deferred discount and unamortized deferred financing costs of $ 31.0 million.

The estimated fair value of the First Lien Credit Agreement as of September 27, 2024 was $ 903.2 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).

4 unchanged sentences

The Vertex Borrower’s obligations under the 2023 Credit Agreement and the Guarantors’ obligations under the related guarantees are secured by a first priority-lien on substantially all of the Vertex Borrower’s and the Guarantors’ assets (subject to customary exceptions and limitations) which exists on a pari passu basis with the lien held by the First Lien Credit Agreement lenders.

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

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 adjusted 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 September 27, 2024, the effective interest rate for the 2023 Term Loan was 8.55 %.

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.

2 unchanged sentences

The 2023 Credit Agreement also includes negative covenants that limit, among other things, additional indebtedness, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions.

The 2023 Credit Agreement contains financial covenants requiring (a) the consolidated total net leverage ratio not to exceed 5.00 to 1.00 for the reporting periods ending on or after June 30, 2023, and on or prior to June 30, 2024, with further step downs thereafter, and (b) the consolidated interest coverage ratio be at least 2.00 to 1.00 commencing with the reporting period ending on June 30, 2023.

The 2023 Credit Agreement contains financial covenants requiring (a) the consolidated total net leverage ratio not to exceed 5.00 to 1.00 for the reporting periods ending on or after June 30, 2023, and on or prior to June 30, 2024, with a step down to 4.75 to 1.00 for periods ending on or after July 1, 2024, and on or prior to December 31, 2025, with further step downs thereafter, and (b) the consolidated interest coverage ratio be at least 2.00 to 1.00 commencing with the reporting period ending on June 30, 2023.

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 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 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.

As of September 27, 2024, there were $ 15.9 million of outstanding letters of credit under the 2023 Revolver.

Availability under the 2023 Revolver was $ 484.1 million as of September 27, 2024.

Unamortized deferred financing costs related to the 2023 Revolver of $ 3.4 million are included in other non-current assets in the Condensed Consolidated Balance Sheets as of September 27, 2024.

As of September 27, 2024, the fair value of the 2023 Revolver approximated the carrying value because the debt bears a floating interest rate.

As of September 27, 2024, the carrying value of the 2023 Term Loan was $ 242.2 million, excluding unamortized deferred financing costs of $ 1.7 million.

The estimated fair value of the 2023 Term Loan as of September 27, 2024 was $ 242.3 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 June 28, 2024 are as follows:

The aggregate scheduled maturities of the First Lien Credit Agreement and 2023 Credit Agreement as of September 27, 2024 are as follows:

(In thousands) Payments due

2 unchanged sentences

Total $ 1,146,491

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 .

As of September 27, 2024, the Company was in compliance with all covenants related to the First Lien Credit Agreement and the 2023 Credit Agreement.

DERIVATIVE INSTRUMENTS

3 unchanged sentences

The Company is exposed to the risk that the earnings and cash flows could be adversely impacted due to fluctuations in interest rates.

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

To mitigate this risk, the Company entered into $ 100.0 million and $ 350.0 million of interest rate swap contracts during the three months ended September 27, 2024 and the first six months of 2023, respectively.

As of September 27, 2024 and December 31, 2023, these contracts had notional values of $ 442.2 million and $ 345.3 million, respectively.

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

1 unchanged sentence

Fair Value (level 2)

June 28, December 31,

September 27, December 31,

(In thousands) Balance sheet caption 2024 2023

Interest rate swap designated as cash flow hedge Prepaid expenses and other current assets $ 519 $ 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 accrued liabilities $ 53 $ —

Interest rate swap designated as cash flow hedge Other non-current liabilities $ 4,876 $ 3,006

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

Interest rate swap designated as cash flow hedge Accumulated other comprehensive loss $ ( 4,411 ) $ 375

The Company regularly assesses the creditworthiness of the counterparty.

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

As of September 27, 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 $ 1.4 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.

Net interest rate derivative gains of $ 1.6 million and $ 4.5 million were recognized in interest expense, net, in the Condensed Consolidated Statements of Income (Loss) during the three and nine months ended September 27, 2024, respectively.

Net interest rate derivative gains of $ 1.4 million and $ 2.6 million were recognized in interest expense, net, in the Condensed Consolidated Statements of Income (Loss) during the three and nine months ended September 29, 2023, respectively .

The Company expects $ 0.2 million of existing interest rate swap gains reported in accumulated other comprehensive loss as of September 27, 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 $ 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.

The Company estimated and accrued $ 14.0 million and $ 12.1 million as of September 27, 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 (Loss) Income were as follows:

Three Months Ended Six Months Ended

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

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 Nine Months Ended

September 27, September 29, September 27, September 29,

(In thousands) 2024 2023 2024 2023

3 unchanged sentences

Future tax benefit $ 275 $ 1,688 $ 3,283 $ 7,112

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:

As of September 27, 2024, total unrecognized compensation costs related to equity-based awards and liability-based awards were $ 17.2 million and $ 0.04 million, respectively, which are expected to be recognized ratably over a weighted average period of 1.33 years and 0.26 years, respectively.

The following table provides a summary of the activities for NQOs, RSUs and PSUs for the nine months ended September 27, 2024:

NQOs RSUs PSUs

5 unchanged sentences

Forfeited or expired — $ — ( 109 ) $ 42.42 ( 157 ) $ 36.26

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

Outstanding at September 27, 2024 34 $ 22.43 458 $ 41.35 262 $ 43.55

Restricted Stock Units

3 unchanged sentences

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

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

As of September 27, 2024, there was $ 12.1 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 half of 2024.

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

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

As of September 27, 2024, there was $ 0.04 million of unrecognized TSR related compensation expense.

Performance Share Units

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

During the first nine months 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 June 28, 2024, there was $ 7.2 million of unrecognized PSU related compensation expense.

As of September 27, 2024, there was $ 5.1 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 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.

For the three months ended September 27, 2024 and September 29, 2023, the Company recorded an income tax provision of $ 4.5 million and income tax benefits of $ 4.8 million, respectively, representing effective income tax rates of 23.0 % and 43.0 %, respectively.

For the nine months ended September 27, 2024 and September 29, 2023, the Company recorded an income tax provision of $ 2.9 million and income tax benefits of $ 10.4 million, respectively, representing effective income tax rates of 23.1 % and 31.9 %, 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 both June 28, 2024 and December 31, 2023, unrecognized tax benefits from uncertain tax positions were $ 6.6 million.

As of both September 27, 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 Six Months Ended

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

Three Months Ended Nine Months Ended

September 27, September 29, September 27, September 29,

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

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

Net income (loss) $ 15,051 $ ( 6,400 ) $ 9,651 $ ( 22,081 )

Weighted average common shares outstanding 31,550 31,179 31,458 31,048

2 unchanged sentences

Diluted weighted average common shares outstanding 31,973 31,179 31,921 31,048

(Loss) earnings per share

Earnings (loss) per share

Basic $ 0.48 $ ( 0.21 ) $ 0.31 $ ( 0.71 )

1 unchanged sentence

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

Three Months Ended Six Months Ended

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

Three Months Ended Nine Months Ended

September 27, September 29, September 27, September 29,

(In thousands) 2024 2023 2024 2023

7 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 $ 4.8 million and $ 3.2 million as of June 28, 2024 and December 31, 2023, respectively.

The plans assets and liabilities were $ 5.0 million and $ 3.2 million as of September 27, 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 $ 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.

Company expenses related to these plans were $ 3.6 million and $ 13.0 million for the three and nine months ended September 27, 2024, respectively, and $ 2.9 million and $ 11.1 million for the three and nine months ended September 29, 2023, respectively.

SALE OF RECEIVABLES

6 unchanged sentences

As of and for the

Six Months Ended

June 28, June 30,

Nine Months Ended

September 27, September 29,

(In thousands) 2024 2023

7 unchanged sentences

Remaining sold receivables $ 105,152 $ 20,866

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.

1 For the nine months ended September 27, 2024, the Company recorded a net cash inflow from sale of receivables of $ 70.7 million from operating activities.

2 Includes the cash collected on behalf of, but not yet remitted to, MUFG as of September 27, 2024.

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

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.

During the nine months ended September 27, 2024 and September 29, 2023, the Company incurred purchase discount fees, net of servicing fees, of $ 7.4 million and $ 2.1 million, respectively, 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.

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 June 28, 2024.

The servicing fee approximates fair value and, therefore, the Company has not recognized a servicing asset or liability as of September 27, 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