Astronics Corporation
11/06/2025 | Press release | Distributed by Public on 11/06/2025 14:34
Quarterly Report for Quarter Ending September 27, 2025 (Form 10-Q)
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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(The following should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in the 2024 10-K.)
OVERVIEW
Astronics Corporation, through its subsidiaries, is a leading supplier of advanced technologies and products to the global aerospace and defense industries. Our products and services include advanced, high-performance electrical power generation and distribution systems, seat motion solutions, lighting and safety systems, avionics products, aircraft structures, systems certification, and automated test systems.
We have two reportable segments, Aerospace and Test Systems. Our Aerospace segment has principal operating facilities in the United States, Canada, 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.
Our Aerospace segment designs and manufactures products for the global aerospace industry. Product lines include lighting and safety systems, electrical power generation, distribution and seat motion systems, aircraft structures, avionics products, systems certification, and other products. Our primary Aerospace customers are the airframe manufacturers ("OEM") that build aircraft for the commercial transport, military and general aviation markets, suppliers to those OEMs, aircraft operators such as airlines, suppliers to the aircraft operators, and branches of the U.S. Department of Defense ("USDOD"). Our Test Systems segment designs, develops, manufactures and maintains automated test systems that support the aerospace and defense 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.
Our strategy is to increase our value by developing technologies and capabilities, either internally or through acquisition, and using those capabilities to provide innovative solutions to our targeted markets where our technology can be beneficial.
Important factors affecting our growth and profitability are the rate at which new aircraft are produced, government funding and timing of awards of military programs, our ability to have our products designed into new aircraft, the rates at which aircraft owners, including commercial airlines, refurbish or install upgrades to their aircraft and supply chain and labor market pressures. New aircraft build rates and aircraft owners' spending on upgrades and refurbishments is cyclical and dependent on the strength of the global economy. Once one of our products is designed into a new aircraft, the spare parts business associated thereto is also frequently retained by the Company. Future growth and profitability of the Test Systems business is dependent on developing and procuring new and follow-on business. The nature of our Test Systems business is such that it pursues large, often multi-year, projects. There can be significant periods of time between orders in this business, which may result in large fluctuations of sales and profit levels and backlog from period to period. Test Systems segment customers include the USDOD, prime contractors to the USDOD, mass transit operators and prime contractors to mass transit operators.
Each of the markets that we serve presents opportunities that we expect will provide growth for the Company over the long-term. We continue to look for opportunities in all of our markets to capitalize on our core competencies to expand our existing business and to grow through strategic acquisitions.
The main challenges that we continue to face include varying levels of supply chain pressures, material availability and cost increases (including costs associated with the recent imposition of tariffs by the United States and other countries discussed herein), labor availability and cost, and improving shareholder value through increasing profitability. Increasing profitability is dependent on many things, primarily sales growth, both acquired and organic, and the Company's ability to pass cost increases along to customers and control operating expenses, and to identify means of creating improved productivity. Sales are driven by increased build rates for existing aircraft, market acceptance and economic success of new aircraft and our products, continued government funding of defense programs, the Company's ability to obtain production contracts for parts we currently supply or have been selected to design and develop for new aircraft platforms and continually identifying and winning new business for our Test Systems segment.
Reduced aircraft build rates driven by regulatory actions impacting OEM production, a weak economy, aircraft groundings, tight credit markets, reduced air passenger travel, tariffs impacting OEM demand, and an increasing supply of used aircraft on the market would likely result in reduced demand for our products, which will result in lower profits. Reduction of defense spending may result in fewer opportunities for us to compete, which could result in lower profits in the future. Many of our newer development programs are based on new and unproven technology and at the same time we are challenged to develop the technology on a schedule that is consistent with specific programs. Delays in delivery schedules and incremental costs resulting from 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.
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 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. We are monitoring the production levels and anticipated ramp-up at The Boeing Company, and we continue to align with them on production expectations.
We are monitoring the ongoing conflict between Russia and Ukraine and the related export controls and financial and economic sanctions imposed on certain industry sectors, including the aviation sector, and parties in Russia by the U.S., the U.K., the European Union and others. Although the conflict has not resulted in a direct material adverse impact on our business to date, the implications of the Russia and Ukraine conflict in the short-term and long-term are difficult to predict at this time. 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 $18.0 million, net of cash acquired and the estimated closing adjustment.
Recent Developments
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was signed into law in the United States. The OBBBA permanently extends and modifies significant provisions enacted in 2017 as part of the Tax Cuts and Jobs Act ("TCJA") that were originally set to expire at the end of 2025. In addition, the OBBBA makes changes to certain U.S. corporate tax provisions, many of which are not in effect until 2026. Key provisions of the Tax Act relevant to the Company's operations include immediate expensing of certain domestic research and development expenses and domestic capital expenditures beginning in 2025 as well as changes to various U.S. international tax provisions going forward. These provisions of the Tax Act have favorably impacted the Company's effective tax rate and cash tax rate for the 2025 tax year and are expected to have favorable impacts in future years. Changes in tax laws may affect recorded deferred tax assets and deferred tax liabilities and our effective tax rate in the future and the Company is continuing to evaluate the impacts of the new legislation.
Appropriations for the U.S. Government's fiscal year 2026 funding bill were not enacted by September 30, 2025, and on October 1, 2025, the U.S. Government entered a shutdown, which is ongoing. If a prolonged government shutdown occurs, it could result in program disruptions, limit the U.S. Government's ability to progress programs and make timely payments and impact new program starts. A prolonged shutdown could have material consequences for our Company, our employees, our suppliers and our industry and could have a material adverse effect on our financial position, results of operations and/or cash flows.
CONSOLIDATED RESULTS OF OPERATIONS
| Nine Months Ended | Three Months Ended | ||||||||||||||||||||||
| ($ in thousands) | September 27, 2025 | September 28, 2024 | September 27, 2025 | September 28, 2024 | |||||||||||||||||||
| Sales | $ | 622,061 | $ | 586,886 | $ | 211,447 | $ | 203,698 | |||||||||||||||
| Gross Profit (sales less cost of products sold) | $ | 178,187 | $ | 158,306 | $ | 64,511 | $ | 55,224 | |||||||||||||||
| Gross Margin | 28.6 | % | 27.0 | % | 30.5 | % | 27.1 | % | |||||||||||||||
| Research and Development Expenses | $ | 32,849 | $ | 40,018 | $ | 10,210 | $ | 12,481 | |||||||||||||||
| Selling, General and Administrative Expenses ("SG&A") | $ | 104,388 | $ | 100,698 | $ | 31,246 | $ | 34,369 | |||||||||||||||
| 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 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 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 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 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. 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. For the trailing twelve months, bookings totaled $863.0 million and the book-to-bill ratio was 1.04:1. Backlog at the end of the quarter was $646.7 million.
CONSOLIDATED YEAR-TO-DATE RESULTS
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 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 year. The prior year was impacted by a $3.5 million atypical warranty reserve previously
mentioned. 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 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. This increase was partially offset by a $6.7 million decrease in litigation-related legal expenses. 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 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 $667.1 million in the nine months ended September 27, 2025 resulted in a book-to-bill ratio of 1.07:1.
SEGMENT RESULTS OF OPERATIONS
Operating profit, as presented below, is sales less cost of products sold and other operating expenses, excluding interest expense, other corporate expenses and other non-operating sales and expenses. Cost of products sold and other operating expenses are directly identifiable to the respective segment. Operating profit is reconciled to loss before income taxes in Note 14, Segment Information, to the Consolidated Condensed Financial Statements in Item 1, Financial Statement, of this report.
AEROSPACE SEGMENT
| Nine Months Ended | Three Months Ended | ||||||||||||||||||||||
| ($ 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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Less Inter-segment Sales
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(34) | (52) | - | (10) | |||||||||||||||||||
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Total Aerospace Sales
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$ | 577,726 | $ | 518,135 | $ | 192,725 | $ | 177,554 | |||||||||||||||
| Operating Profit | $ | 71,470 | $ | 45,628 | $ | 31,167 | $ | 14,251 | |||||||||||||||
| Operating Margin | 12.4 | % | 8.8 | % | 16.2 | % | 8.0 | % | |||||||||||||||
| Aerospace Sales by Market | |||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Commercial Transport | $ | 432,324 | $ | 383,679 | $ | 149,209 | $ | 133,850 | |||||||||||||||
| Military Aircraft | 88,250 | 63,545 | 27,554 | 21,685 | |||||||||||||||||||
| General Aviation | 47,532 | 56,643 | 13,919 | 18,077 | |||||||||||||||||||
| Other | 9,620 | 14,268 | 2,043 | 3,942 | |||||||||||||||||||
| $ | 577,726 | $ | 518,135 | $ | 192,725 | $ | 177,554 | ||||||||||||||||
| Aerospace Sales by Product Line | |||||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Electrical Power & Motion | $ | 296,541 | $ | 263,919 | $ | 101,295 | $ | 90,467 | |||||||||||||||
| Lighting & Safety | 154,324 | 135,162 | 51,654 | 46,921 | |||||||||||||||||||
| Avionics | 91,452 | 83,716 | 26,168 | 29,151 | |||||||||||||||||||
| Systems Certification | 15,842 | 12,272 | 7,938 | 4,460 | |||||||||||||||||||
| Structures | 9,947 | 8,798 | 3,627 | 2,613 | |||||||||||||||||||
| Other | 9,620 | 14,268 | 2,043 | 3,942 | |||||||||||||||||||
| $ | 577,726 | $ | 518,135 | $ | 192,725 | $ | 177,554 | ||||||||||||||||
| (In thousands) | September 27, 2025 | December 31, 2024 | |||||||||
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Total Assets
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$ | 544,463 | $ | 498,528 | |||||||
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Backlog
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$ | 572,459 | $ | 537,563 | |||||||
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, 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 $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 $572.5 million at quarter end.
AEROSPACE YEAR-TO-DATE RESULTS
Aerospace segment sales of $577.7 million increased $59.6 million, or 11.5%. Sales in the Commercial Transport market increased $48.6 million, or 12.7%. Growth was primarily related to increased demand by airlines for cabin power and IFEC products. 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.
Aerospace bookings were $610.2 million for a book-to-bill ratio of 1.06:1.
TEST SYSTEMS SEGMENT
| Nine Months Ended | Three Months Ended | ||||||||||||||||||||||
| ($ in thousands) | September 27, 2025 | September 28, 2024 | September 27, 2025 | September 28, 2024 | |||||||||||||||||||
| Sales | $ | 44,685 | $ | 68,790 | $ | 18,752 | $ | 26,183 | |||||||||||||||
| Less Inter-segment Sales | (350) | (39) | (30) | (39) | |||||||||||||||||||
| Total Test Systems Sales | $ | 44,335 | $ | 68,751 | $ | 18,722 | $ | 26,144 | |||||||||||||||
| Operating Loss | $ | (8,947) | $ | (8,428) | $ | (14) | $ | (13) | |||||||||||||||
| Operating Margin | (20.2) | % | (12.3) | % | (0.1) | % | - | % | |||||||||||||||
All Test Systems sales are to the Government and Defense Market.
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(In thousands)
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September 27, 2025 | December 31, 2024 | |||||||||
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Total Assets
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$ | 112,844 | $ | 128,828 | |||||||
| Backlog | $ | 74,264 | $ | 61,666 | |||||||
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.
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.
TEST SYSTEMS YEAR-TO-DATE RESULTS
Test Systems segment sales were $44.3 million, down $24.4 million from 2024. 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.
Test Systems segment operating loss was $8.9 million, compared with an operating loss of $8.4 million in the same prior-year period. The revisions to the estimated costs to complete had a $8.8 million detrimental impact to operating income and masked the savings realized from recent restructuring activities. Test Systems continues to be negatively affected by mix and under absorption of fixed costs at current volume levels.
Test Systems bookings were $56.9 million for a book-to-bill ratio of 1.28:1.
LIQUIDITY AND CAPITAL RESOURCES
Operating Activities:
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 $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 $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.
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 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.
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.
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 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.
BACKLOG
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.
MARKET RISK
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 nine months ended September 27, 2025 was not significant.
The future impacts of U.S. trade policies, treaties, and tariffs and their residual effects, including economic uncertainty, inflationary environment, and disruption within the global supply chain, and aerospace industry, on our business remain uncertain. 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 nine months ended September 27, 2025 was approximately $4 million and $7 million, respectively.
CRITICAL ACCOUNTING POLICIES
Refer to Note 2, Revenue, to the Consolidated Condensed Financial Statements in Item 1, Financial Statements, of this report for the Company's critical accounting policies with respect to revenue recognition. For a complete discussion of the Company's other critical accounting policies, refer to the 2024 10-K.
RECENT ACCOUNTING PRONOUNCEMENTS
Refer to Note 1, Basis of Presentation, to the Consolidated Condensed Financial Statements in Item 1, Financial Statements, of this report.
FORWARD-LOOKING STATEMENTS
Information included or incorporated by reference in this report that does not consist of historical facts, including statements accompanied by or containing words such as "may," "will," "should," "believes," "expects," "expected," "intends," "plans," "projects," "approximate," "estimates," "predicts," "potential," "outlook," "forecast," "anticipates," "presume," and "assume," and other words and terms of similar meaning, including their negative counterparts, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future performance and are subject to several factors, risks and uncertainties, the impact or occurrence of which could cause actual results to differ materially from the expected results described in the forward-looking statements. Certain of these factors, risks and uncertainties are discussed in the sections of this report entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." New factors, risks and uncertainties may emerge from time to time that may affect the forward-looking statements made herein. Given these factors, risks and uncertainties, investors should not place undue reliance on forward-looking statements as predictive of future results. Except as may be required by law, we disclaim any obligation to update the forward-looking statements made in this report to reflect any change in our expectations with regard thereto, or any changes in events, conditions or circumstances on which any such statement is based.
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