Loar Holdings Inc
For the period ended Sep 30, 2024. Filed Nov 13, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 13, 2024
LOAR$75.30+3.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-13.
0000950170-24-096339
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-13.
0000950170-24-126401
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 116 previous paragraphs and 117 current paragraphs.
68 unchanged; 34 reworded; 15 added; 14 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 7 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (15)
Current report
AAI Acquisition
Current report
On August 26, 2024, the Company acquired 100% of the membership interests of Applied Avionics, LLC, a Delaware LLC (AAI), which was formerly known as Applied Avionics, Inc. from AAI Holdings, Inc., a Delaware corporation (AAI Parent) for $383.5 million in cash. AAI Parent is owned by certain individual shareholders thereof, including certain members of AAI’s management team. Incorporated in 1968, AAI designs, develops and manufactures highly engineered avionics interface solutions. See Note 3, Acquisitions, of the Notes to Condensed Consolidated Financial Statements for further information.
Current report
Net sales for the three months ended September 30, 2024 increased $20.7 million, or 25.0%, to $103.5 million as compared to $82.8 million for the three months ended September 30, 2023.
Current report
Cost of sales for the three months ended September 30, 2024 decreased 2.0% as a percentage of net sales to 48.9% from 50.9% in the comparable period last year. This decrease in cost of sales is primarily attributable to our operating leverage and execution of strategic value drivers, partially offset by higher acquisition and facility integration costs.
Current report
Other Income, net
Current report
Other income for the three months ended September 30, 2024 was $1.6 million and relates principally to$1.7 million of proceeds received from the settlement of buyer-side representations and warranties insurance covering the acquisition of DAC.
Current report
The income tax expense for the three months ended September 30, 2024 was $4.2 million compared to an income tax benefit of $2.9 million for the three months ended September 30, 2023. The increase inincome tax expense was primarily driven by an increase in the Company's earnings in 2024 compared to 2023.
Current report
Nine months ended September 30, 2024 compared with nine months ended September 30, 2023
Current report
Net sales for the nine months ended September 30, 2024 increased $61.3 million, or 26.5%, to $292.4 million as compared to $231.0 million for the nine months ended September 30, 2023.
Current report
Cost of sales for the nine months ended September 30, 2024 decreased 0.2% as a percentage of net sales to 50.4% compared to 50.6% in the comparable period last year. This is primarily attributable to our operating leverage and execution of strategic value drivers, partially offset by higher acquisition and facility integration costs.
Current report
Other Income, net
Current report
Other income for the nine months ended September 30, 2024 was $4.4 million, and relates to a $2.9 million reduction in the estimated contingent purchase price for the CAV acquisition and$1.7 million of proceeds received from the settlement of buyer-side representations and warranties insurance covering the acquisition of DAC.
Current report
Theincome tax expense for thenine months ended September 30, 2024 was $7.9 million compared to $6.7 million for thenine months ended September 30, 2023. The increase inincome tax expense was primarily due to an increase in earnings in 2024 which was partially offset by an increase in favorable discrete items.
Current report
On August 26, 2024, the Credit Agreement was amended to make available to the Company an incremental term loan in an aggregate principal amount equal to $360 million for purposes of (i) paying a portion of the consideration payable by it pursuant to the terms of that certain purchase agreement (the "Purchase Agreement") pursuant to which the Company agreed to purchase from AAI Parent all the issued and outstanding equity interests of AAI, (ii) paying fees and expenses incurred in connection with the foregoing, and (iii) otherwise to fund working capital and general corporate purposes.
Current report
Represents accounting adjustments to inventory associated with acquisitions of businesses that were charged to cost of sales when inventory was sold.
Removed paragraphs (14)
Previous report
Recent Developments
Previous report
On July 18, 2024, Loar Group entered into the Purchase Agreement with AAI, AAI Parent, and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the representative of AAI Parent, pursuant to which, Loar Group agreed to purchase from AAI Parent all the issued and outstanding equity interests of AAI in exchange for aggregate cash consideration of approximately $385 million, subject to certain adjustments as set forth in the Purchase Agreement. See Note 14, Subsequent Events, of the Notes to Condensed Consolidated Financial Statements for further information.
Previous report
Net sales for the three months ended June 30, 2024 increased $23.0 million, or 31.1%, to $97.0 million as compared to $74.0 million for the three months ended June 30, 2023.
Previous report
Cost of sales for the three months ended June 30, 2024 increased 1.6% as a percentage of net sales to 51.0% from 49.4% in the comparable period last year. This increase in cost of sales is primarily attributable to the impact of increased defense sales which typically have higher costs as a percentage of sales and the dilutive effects of an acquisition which was not included in the results for the three months ended June 30, 2023. These increases were partially offset by the leveraging of our fixed overhead costs supporting higher production and sales levels.
Previous report
Other Income
Previous report
Other income for the three months ended June 30, 2024, of $2.9 million relates to the reduction in the estimated contingent purchase price for the CAV acquisition.
Previous report
The effective income tax rate for the three months ended June 30, 2024 was 22.9% compared to 41.2% for the three months ended June 30, 2023. The decrease in the effective tax rate was driven by a decrease in the Company's valuation allowance against its deferred tax asset for disallowed interest carryforward due to the repayment and refinancing of the Company's debt during the second quarter of 2024.
Previous report
Six months ended June 30, 2024 compared with six months ended June 30, 2023
Previous report
Net sales for the six months ended June 30, 2024 increased $40.6 million, or 27.4%, to $188.9 million as compared to $148.2 million for the six months ended June 30, 2023.
Previous report
Cost of sales for the six months ended June 30, 2024 increased 0.9% as a percentage of net sales to 51.3% from 50.4% in the comparable period last year. This increase in cost of sales is primarily attributable to the impact of increased defense sales, which typically have higher costs as a percentage of sales and the dilutive effects of an acquisition which was not included in the results for the six months ended June 30, 2023. These increases were partially offset by the leveraging of our fixed overhead costs supporting higher production and sales levels.
Previous report
Other Income
Previous report
Other income for the six months ended June 30, 2024, of $2.9 million relates to the reduction in the estimated contingent purchase price for the CAV acquisition.
Previous report
The effective income tax rate for the six months ended June 30, 2024 was 26.9% compared to 354.2% for the six months ended June 30, 2023. The decrease in the effective tax rate was primarily due to the establishment of a valuation allowance against the Company's deferred tax asset for its disallowed interest carryforward during the first quarter of 2023.
Previous report
On March 26, 2024, the Credit Agreement was amended to extend the termination date of the Delayed Draw Term Loan Commitment by approximately nine months, extending it from April 1, 2024 to December 31, 2024.
Reworded paragraphs (34)
Previous wording
Important factors that could cause actual results to differ materially from the forward-looking statements made in this Quarterly Report on Form 10-Q include but are not limited to: the sensitivity of our business to the number of flight hours that our customers’ planes spend aloft and our customers’ profitability, both of which are affected by general economic conditions; future geopolitical or other worldwide events; cyber-security threats and natural disasters; our reliance on certain customers; the U.S. defense budget and risks associated with being a government supplier including government audits and investigations; failure to maintain government or industry approvals; failure to complete or successfully integrate acquisitions; our indebtedness; potential environmental liabilities; liabilities arising in connection with litigation; increases in raw material costs, taxes and labor costs that cannot be recovered in product pricing; risks and costs associated with our international sales and operations; and other factors. Refer to Part II, Item 1A included in this Quarterly Report on Form 10-Q and to the sections of our Form S-1 titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for additional information regarding the foregoing factors that may affect our business.
Current wording
Important factors that could cause actual results to differ materially from the forward-looking statements made in this Quarterly Report on Form 10-Q include but are not limited to: the sensitivity of our business to the number of flight hours that our customers’ planes spend aloft and our customers’ profitability, both of which are affected by general economic conditions; future geopolitical or other worldwide events; cyber-security threats and natural disasters; our reliance on certain customers; the U.S. defense budget and risks associated with being a government supplier including government audits and investigations; failure to maintain government or industry approvals; failure to complete or successfully integrate acquisitions; our indebtedness; potential environmental liabilities; liabilities arising in connection with litigation; increases in raw material costs, taxes and labor costs that cannot be recovered in product pricing; risks and costs associated with our international sales and operations; and other factors. Refer to Part II, Item 1A included in this Quarterly Report on Form 10-Q and to the sections of our Amendment No. 2 for Form S-1 filed April 23, 2024 titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for additional information regarding the foregoing factors that may affect our business.
Previous wording
The products we manufacture cover a diverse range of applications supporting nearly every major aircraft platform in use today and include auto throttles, lap-belt airbags, two- and three-point seat belts, water purification systems, fire barriers, polyimide washers and bushings, latches, hold-open and tie rods, temperature and fluid sensors and switches, carbon and metallic brake discs, fluid and pneumatic-based ice protection, RAM air components, sealing solutions and motion and actuation devices, among others.
Current wording
The products we manufacture cover a diverse range of applications supporting nearly every major aircraft platform in use today and include auto throttles, lap-belt airbags, two- and three-point seat belts, water purification systems, fire barriers, polyimide washers and bushings, latches, hold-open and tie rods, temperature and fluid sensors and switches, carbon and metallic brake discs, fluid and pneumatic-based ice protection, RAM air components, sealing solutions and motion and actuation devices, customized edge-lighted panels, knobs and annunciators for incandescent and LED illuminated pushbutton switches, among others.
Previous wording
On April 29, 2024, we completed our IPO in which we issued and sold 12.6 million shares of our common stock at an IPO price of $28.00 per share. The Company received net proceeds from the IPO of approximately $325.7 million after deducting underwriting discounts, commissions and other offering costs of $28.5 million.
Current wording
On April 29, 2024, we completed our IPO in which we issued and sold 12.6 million shares of our common stock at an IPO price of $28.00 per share. The Company received net proceeds from the IPO of approximately $325.4 million after deducting underwriting discounts, commissions and other offering costs of $28.8 million.
Previous wording
As we look to the remainder of 2024, we anticipate net sales growth to be driven by organic growth, in particular the conversion of high levels of backlog of our existing products, and the impact from strategic acquisitions. Backlog primarily consists of firm orders for products that have not yet shipped. Continued inflationary pressures and supply chain disruptions may lead to higher material and labor costs although these pressures and disruptions have not had a material effect on our year-to-date results of operations or capital resources, and we do not expect them to materially affect our outlook or business goals. During 2024, we have continued and plan to continue our commitment to develop new products and services, further market penetration, and pursue an aggressive acquisition strategy while seeking to maintain our financial strength and flexibility.
Current wording
As we look to 2025, we anticipate net sales growth to be driven by organic growth, in particular the conversion of high levels of backlog of our existing products, and the impact from strategic acquisitions. Backlog primarily consists of firm orders for products that have not yet shipped. Continued inflationary pressures and supply chain disruptions may lead to higher material and labor costs although these pressures and disruptions have not had a material effect on our year-to-date results of operations or capital resources, and we do not expect them to materially affect our outlook or business goals. During 2024, we have continued and plan to continue our commitment to develop new products and services, further market penetration, and pursue an aggressive acquisition strategy while seeking to maintain our financial strength and flexibility.
Previous wording
The following table sets forth, for the three months and six months ended June 30, 2024 and 2023, certain operating data of the Company, including presentation of the amounts as a percentage of net sales (in thousands unless otherwise indicated):
Current wording
The following table sets forth, for the three and nine months ended September 30, 2024 and 2023, certain operating data of the Company, including presentation of the amounts as a percentage of net sales (in thousands unless otherwise indicated):
Previous wording
Net organic sales represent net sales from our existing businesses for comparable periods and exclude net sales from acquisitions. We include net sales from new acquisitions in net organic sales from the 13th-month after the acquisition on a comparative basis with the prior period. Net acquisition sales for the three months and six months ended June 30, 2024 represent net sales from acquisitions that were completed in 2023 for which there are no comparable net sales during the prior year. We believe this measure provides an understanding of underlying sales trends as it provides net sales comparisons on a consistent basis. We do not believe our net sales are subject to significant seasonal variations. See Note 3, Acquisitions, of the Notes to Condensed Consolidated Financial Statements for further information on the Company’s acquisition activities.
Current wording
Net organic sales represent net sales from our existing businesses for comparable periods and exclude net sales from acquisitions. We include net sales from new acquisitions in net organic sales from the 13th-month after the acquisition on a comparative basis with the prior period. Net acquisition sales for the three months ended September 30, 2024 represent net sales from acquisitions that were completed in 2023 and 2024 for which there are no comparable net sales during the prior year. We believe this measure provides an understanding of underlying sales trends as it provides net sales comparisons on a consistent basis. We do not believe our net sales are subject to significant seasonal variations. See Note 3, Acquisitions, of the Notes to Condensed Consolidated Financial Statements for further information on the Company’s acquisition activities.
Previous wording
Net organic sales for the three months ended June 30, 2024 increased $12.6 million, or 17.0%, to $86.6 million as compared to $74.0 million for the three months ended June 30, 2023. The increase in net organic sales was primarily related to increases in defense sales ($7.4 million, an increase of 56.1%), aftermarket total commercial sales ($5.4 million, an increase of 20.4%) and OEM total commercial sales ($2.2 million, an increase of 9.0%). The increase in defense sales was primarily driven by increased market share due to new product launches. The increase in aftermarket total commercial sales was primarily due to the continuing recovery in commercial air travel demand. The increase in OEM total commercial sales was driven by increases in aircraft production for general aviation, wide-body and narrow-body aircraft, as an improving supply chain has allowed us to deliver parts that were previously held because our customers were experiencing bottlenecks in other areas of their supply chains.
Current wording
Net organic sales for the three months ended September 30, 2024 increased $13.7 million, or 16.5%, to $96.5 million as compared to $82.8 million for the three months ended September 30, 2023. The increase in net organic sales was primarily related to increases in OEM total commercial sales ($6.5 million, an increase of 24.6%), aftermarket total commercial sales ($5.6 million, an increase of 17.7%), defense sales ($4.7 million, an increase of 30.8%), partially offset by a decline in sales of non-aerospace products ($3.0 million, a decrease of 31.3%). The increase in OEM total commercial sales was driven by increases in demand to support aircraft production for general aviation, wide-body and narrow-body aircraft, as an improving supply chain has allowed us to deliver parts that were previously held because our customers were experiencing bottlenecks in other areas of their supply chains. The increase in aftermarket total commercial sales was primarily due to the continuing recovery in commercial air travel demand. The increase in defense sales was primarily driven by increased market share due to new product launches.
Previous wording
Net acquisition sales of $10.5 million for the three months ended June 30, 2024 is made up of DAC and CAV which were acquired on July 3, 2023 and September 1, 2023, respectively. This represents 14.1% of the increase in total net sales for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.
Current wording
Net acquisition sales of $7.0 million for the three months ended September 30, 2024 is made up of CAV and AAI which were acquired on September 1, 2023 and August 26, 2024, respectively. This represents 8.5% of the increase in total net sales for the three months ended September 30, 2024 compared to the three months ended September 30, 2023.
Previous wording
Cost of sales for the three months ended June 30, 2024 increased $13.0 million, or 35.5%, to $49.5 million compared to $36.5 million for the three months ended June 30, 2023. Cost of sales and the related percentage of net sales for the three months ended June 30, 2024 and 2023 were as follows (in thousands except for percentages):
Current wording
Cost of sales for the three months ended September 30, 2024 increased $8.4 million, or 20.0%, to $50.6 million compared to $42.2 million for the three months ended September 30, 2023. Cost of sales and the related percentage of net sales for the three months ended September 30, 2024 and 2023 were as follows (in thousands except for percentages):
Previous wording
Selling, general and administrative expenses increased by $7.8 million to $27.3 million, or 28.1% as a percentage of net sales, for the three months ended June 30, 2024 from $19.5 million, or 26.3% as a percentage of net sales, for the three months ended June 30, 2023. Selling, general and administrative expenses and the related percentage of net sales for the three months ended June 30, 2024 and 2023 were as follows (amounts in thousands except for percentages):
Current wording
Selling, general and administrative expenses increased by $8.3 million to $30.2 million, or 29.2% as a percentage of net sales, for the three months ended September 30, 2024 from $21.9 million, or 26.4% as a percentage of net sales, for the three months ended September 30, 2023 Selling, general and administrative expenses and the related percentage of net sales for the three months ended September 30, 2024 and 2023 were as follows (amounts in thousands except for percentages):
Previous wording
Selling, general and administrative expenses increased by 0.7% as a percentage of net sales for the six months ended June 30, 2024 when compared to the same period in 2023. This was primarily driven by stock-based compensation expense, research and development costs, acquisition and facility integration costs, and infrastructure costs related to being a public company, partially offset by the leveraging of fixed costs.
Current wording
Selling, general and administrative expenses increased by 2.8% as a percentage of net sales for the three months ended September 30, 2024 when compared to the same period in 2023. This was primarily driven by stock-based compensation expense, the impact of the AAI acquisition during the quarter, and infrastructure costs related to being a public company, partially offset by the leveraging of fixed costs.
Previous wording
Transaction expenses for the three months ended June 30, 2024 and 2023 were $0.9 million and $0.4 million, respectively. Transaction costs can fluctuate depending on the size and number of acquisitions in each year.
Current wording
Transaction expenses for the three months ended September 30, 2024 and 2023 were $1.4 million and $2.0 million, respectively. Transaction costs can fluctuate depending on the size and number of acquisitions in each year.
Previous wording
Operating income for the three months ended June 30, 2024, was $22.2 million, or 22.9% as a percentage of net sales, compared to $17.6 million, or 23.8% as a percentage of net sales for the three months ended June 30, 2023. The increase in operating income is due to the factors discussed above.
Current wording
Operating income for the three months ended September 30, 2024, was $22.8 million, or 22.0% as a percentage of net sales, compared to $17.1 million, or 20.6% as a percentage of net sales for the three months ended September 30, 2023. The increase in operating income is due to the factors discussed above.
Previous wording
Interest expense for the three months ended June 30, 2024 decreased $6.0 million, or 35.8%, to $10.6 million compared to $16.6 million for the three months ended June 30, 2023. This decrease was attributable to the repayment of $284.6 million aggregate principal amount of the Company's debt on May 3, 2024 with a portion of the proceeds from our IPO.
Current wording
Interest expense for the three months ended September 30, 2024 decreased $7.2 million, or 41.9%, to $10.0 million compared to $17.2 million for the three months ended September 30, 2023. This decrease was attributable to the repayment of $284.6 million aggregate principal amount of the Company's debt in May 2024 with a portion of the proceeds from our IPO and lower interest rates, partially offset by interest on the August 26, 2024 borrowing of the $360.0 million incremental term loan for the acquisition of AAI.
Previous wording
Net income for the three months ended June 30, 2024 was $7.6 million, or 7.9% as a percentage of net sales, compared to net income for the three months ended June 30, 2023 of $0.6 million, or 0.8% as a percentage of net sales. The improvement in results is primarily due to the factors discussed above.
Current wording
Net income for the three months ended September 30, 2024 was $8.7 million, or 8.4% as a percentage of net sales, compared to net income for the three months ended September 30, 2023 of $2.9 million, or 3.4% as a percentage of net sales. The improvement in results is primarily due to the factors discussed above.
Previous wording
Net organic sales represent net sales from our existing businesses for comparable periods and exclude net sales from acquisitions. We include net sales from new acquisitions in net organic sales from the 13th-month after the acquisition on a comparative basis with the prior period. Net acquisition sales for the six months ended June 30, 2024 represent net sales from acquisitions that were completed in 2023 for which there are no comparable net sales during the prior year. We believe this measure provides an understanding of underlying sales trends as it provides net sales comparisons on a consistent basis. We do not believe our net sales are subject to significant seasonal variations. See Note 3, Acquisitions, of the Notes to Condensed Consolidated Financial Statements for further information on the Company’s acquisition activities.
Current wording
Net organic sales represent net sales from our existing businesses for comparable periods and exclude net sales from acquisitions. We include net sales from new acquisitions in net organic sales from the 13th-month after the acquisition on a comparative basis with the prior period. Net acquisition sales for the nine months ended September 30, 2024 represent net sales from acquisitions that were completed in 2023 and 2024 for which there are no comparable net sales during the prior year. We believe this measure provides an understanding of underlying sales trends as it provides net sales comparisons on a consistent basis. We do not believe our net sales are subject to significant seasonal variations. See Note 3, Acquisitions, of the Notes to Condensed Consolidated Financial Statements for further information on the Company’s acquisition activities.
Previous wording
Net organic sales for the six months ended June 30, 2024 increased $20.8 million, or 14.1%, to $169.0 million compared to $148.2 million for the six months ended June 30, 2023. The increase in net organic sales was primarily related to increases in defense sales ($8.6 million, an increase of 30.2%), OEM total commercial sales ($8.2 million, an increase of 17.9%) and aftermarket total commercial sales ($6.4 million, an increase of 11.4%). The increase in defense sales was primarily driven by increased market share due to new product launches. The increase in OEM total commercial sales was driven by increases in aircraft production for general aviation, wide-body and narrow-body aircraft, as an improving supply chain has allowed us to deliver parts that were previously held because our customers were experiencing bottlenecks in other areas of their supply chains. The increase in aftermarket total commercial sales was primarily due to the continuing recovery in commercial air travel demand, partially offset by destocking at a handful of our distributors and end customers.
Current wording
Net organic sales for the nine months ended September 30, 2024 increased $34.5 million, or 14.9%, to $265.6 million compared to $231.0 million for the nine months ended September 30, 2023. The increase in net organic sales was primarily related to increases in OEM total commercial sales ($14.6 million, an increase of 20.3%), defense sales ($13.3 million, an increase of 30.4%), and aftermarket total commercial sales ($12.0 million, an increase of 13.7%), partially offset by a decline in sales of non-aerospace products ($5.3 million, a decrease of 19.0%). The increase in OEM total commercial sales was driven by increases in demand to support aircraft production for general aviation, wide-body and narrow-body aircraft, as an improving supply chain has allowed us to deliver parts that were previously held because our customers were experiencing bottlenecks in other areas of their supply chains. The increase in defense sales was primarily driven by increased market share due to new product launches. The increase in aftermarket total commercial sales was primarily due to the continuing recovery in commercial air travel demand, partially offset by destocking at a handful of our distributors and end customers.
Previous wording
Net acquisition sales of $19.8 million for the six months ended June 30, 2024, is made up of DAC and CAV which were acquired on July 30, 2023 and September 1, 2023, respectively. This represents 13.4% of the increase in total net sales for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.
Current wording
Net acquisition sales of $26.8 million for the nine months ended September 30, 2024, is made up of DAC, CAV, and AAI which were acquired on July 30, 2023, September 1, 2023, and August 26, 2024, respectively. This represents 11.6% of the increase in total net sales for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023.
Previous wording
Cost of sales for the six months ended June 30, 2024 increased $22.2 million or 29.7% to $96.9 million compared to $74.7 million for the six months ended June 30, 2023. Cost of sales and the related percentage of net sales for the six months ended June 30, 2024 and 2023 were as follows (in thousands except for percentages):
Current wording
Cost of sales for the nine months ended September 30, 2024 increased $30.6 million or 26.2% to $147.5 million compared to $116.9 million for the nine months ended September 30, 2023. Cost of sales and the related percentage of net sales for the nine months ended September 30, 2024 and 2023 were as follows (in thousands except for percentages):
Previous wording
Selling, general and administrative expenses increased by $11.8 million to $50.2 million, or 26.6% as a percentage of net sales, for the six months ended June 30, 2024 from $38.3 million, or 25.9 % as a percentage of net sales, for the six months ended June 30, 2023. Selling, general and administrative expenses and the related percentage of net sales for the six months ended June 30, 2024 and 2023 were as follows (amounts in thousands except for percentages):
Current wording
Selling, general and administrative expenses increased by $20.2 million to $80.4 million, or 27.5% as a percentage of net sales, for the nine months ended September 30, 2024 from $60.2 million, or 26.1 % as a percentage of net sales, for the nine months ended September 30, 2023. Selling, general and administrative expenses and the related percentage of net sales for the nine months ended September 30, 2024 and 2023 were as follows (amounts in thousands except for percentages):
Previous wording
Selling, general and administrative expenses increased by 1.8% as a percentage of net sales for the three months ended June 30, 2024 when compared to the same period in 2023. This was primarily driven by stock-based compensation expense, research and development costs, and infrastructure costs related to being a public company, partially offset by the leveraging of fixed costs.
Current wording
Selling, general and administrative expenses increased by 1.4% as a percentage of net sales for the nine months ended September 30, 2024 when compared to the same period in 2023. This was primarily driven by stock-based compensation expense, the impact of the AAI acquisition during the period, research and development costs, and infrastructure costs related to being a public company, partially offset by the leveraging of fixed costs.
Previous wording
Transaction expenses for the six months ended June 30, 2024 and 2023 were $1.1 million and $0.6 million, respectively. Transaction costs can fluctuate depending on the size and number of acquisitions in each year.
Current wording
Transaction expenses for the nine months ended September 30, 2024 and 2023 were $2.5 million and $2.6 million, respectively. Transaction costs can fluctuate depending on the size and number of acquisitions in each year.
Previous wording
Operating income for the six months ended June 30, 2024, was $43.5 million, or 23.0% as a percentage of net sales, compared to $34.7 million, or 23.4% as a percentage of net sales for the six months ended June 30, 2023. The increase in operating income is due to the factors discussed above.
Current wording
Operating income for the nine months ended September 30, 2024, was $66.4 million, or 22.7% as a percentage of net sales, compared to $51.8 million, or 22.4% as a percentage of net sales for the nine months ended September 30, 2023. The increase in operating income is due to the factors discussed above.
Previous wording
Interest expense for the six months ended June 30, 2024 decreased $3.6 million, or 11.3%, to $28.4 million compared to $32.0 million for the six months ended June 30, 2023. This decrease was attributable to the repayment of $284.6 million aggregate principal amount of the Company's debt in May 2024 with a portion of the proceeds from our IPO.
Current wording
Interest expense for the nine months ended September 30, 2024 decreased $10.8 million, or 22.0%, to $38.3 million compared to $49.1 million for the nine months ended September 30, 2023. This decrease was attributable to the repayment of $284.6 million aggregate principal amount of the Company's debt in May 2024 with a portion of the proceeds from our IPO and lower interest rates, partially offset by interest on the August 26, 2024 borrowing of the $360.0 million incremental term loan for the acquisition of AAI.
Previous wording
Net income for the six months ended June 30, 2024 was $9.9 million, or 5.2% as a percentage of net sales, compared to a net loss for the six months ended June 30, 2023 of $6.9 million, or 4.7% as a percentage of net sales. The improvement in results is due to the factors discussed above.
Current wording
Net income for the nine months ended September 30, 2024 was $18.5 million, or 6.3% as a percentage of net sales, compared to a net loss for the nine months ended September 30, 2023 of $4.0 million, or 1.8% as a percentage of net sales. The improvement in results is due to the factors discussed above.
Previous wording
Our principal historical liquidity requirements have been for acquisitions, capital expenditures, servicing indebtedness and working capital needs. We fund our investing activities primarily from cash provided by our operating and financing activities. As of June 30, 2024, we had availability of $100 million of a Delayed Draw Term Loans Commitment (as defined below) and a $50 million revolving line of credit. Based on our current outlook, we believe that net cash provided by operating activities and available borrowings under our Credit Agreement will be sufficient to fund our cash requirements for at least the next twelve months. As we continue to expand our business, including by any acquisitions we may make, we may in the future require additional working capital for increased costs. See “Credit Agreement” (below) for additional detail regarding our financing activities.
Current wording
Our principal historical liquidity requirements have been for acquisitions, capital expenditures, servicing indebtedness and working capital needs. We fund our investing activities primarily from cash provided by our operating and financing activities. As of September 30, 2024, we had availability of $100 million of a delayed draw term loans commitment and a $50 million revolving line of credit. Based on our current outlook, we believe that net cash provided by operating activities and available borrowings under our Credit Agreement will be sufficient to fund our cash requirements for at least the next twelve months. As we continue to expand our business, including by any acquisitions we may make, we may in the future require additional working capital for increased costs. See “Credit Agreement” (below) for additional detail regarding our financing activities.
Previous wording
Net cash provided by operating activities was $17.9 million in the six months ended June 30, 2024 compared to net cash used in operating activities of $0.6 million in the six months ended June 30, 2023. The $18.5 million increase in cash provided by operating activities was primarily driven by an increase in net income of $16.8 million. Changes in certain other working capital accounts drove the remainder of the increase for the six months ended June 30, 2024.
Current wording
Net cash provided by operating activities in the nine months ended September 30, 2024 and 2023 was $34.2 million and $0.8 million, respectively. The $33.4 million increase was primarily driven by an increase in net income of $22.6 million. Changes in certain other working capital accounts drove the remainder of the increase for the nine months ended September 30, 2024.
Previous wording
Net cash used in investing activities in the six months ended June 30, 2024 and 2023 of $3.8 million and $4.7 million, respectively, was primarily due to capital expenditures of $4.5 million and $4.7 million, respectively.
Current wording
Net cash used in investing activities in the nine months ended September 30, 2024 and 2023 of $389.3 million and $68.1 million, respectively, was primarily due to the $383.5 million acquisition of AAI in August 2024 and the acquisitions of DAC and CAV during July 2023 and September 2023, respectively, which totaled $60.3 million.
Previous wording
Net cash provided by financing activities in the six months ended June 30, 2024 of $37.6 million was principally related to proceeds from the Company's IPO of $325.7 million, partially offset by payments on our Credit Agreement of $286.3 million. Net cash provided by financing activities in the six months ended June 30, 2023 of $16.9 million was primarily due to borrowings under the credit Agreement to finance the acquisition of DAC.
Current wording
Net cash provided by financing activities in the nine months ended September 30, 2024 of $388.5 million was principally related to proceeds from the August 26, 2024 borrowing of the $360.0 million incremental term loan for the acquisition of AAI and the Company's IPO of $325.4 million, partially offset by payments on our Credit Agreement of $287.9 million. Net cash provided by financing activities in the nine months ended September 30, 2023 of $47.5 million was primarily due to borrowings under the Credit Agreement to finance the acquisition of DAC and CAV.
Previous wording
On May 10, 2024, the Credit Agreement was amended to extend the maturity date to May 10, 2030 from April 2, 2026 and reduce the applicable margin by between 2.0 and 2.5 percentage points based on the Company’s leverage ratio. At the Company’s election, interest on loans will accrue at the SOFR rate plus the applicable margin of 4.75% or at the base rate plus the applicable margin of 3.75% as long as the Company maintains a leverage ratio of less than 5.5 to 1. The Company also increased the existing availability under its Delayed Draw Term Commitment to $100 million, which terminates if not drawn upon by May 10, 2026. In addition, the existing revolving line of credit under the Credit Agreement was replaced with a new revolving credit commitment of $50 million. The unused portion of the revolving line of credit carries a commitment fee of 0.375%. Loans outstanding under the revolving line of credit, if any, mature on May 10, 2029. The Company capitalized approximately $0.9 million in debt issuance costs associated with the amendment during the three and six months ended June 30, 2024.
Current wording
On May 10, 2024, the Credit Agreement was amended to extend the maturity date to May 10, 2030 from April 2, 2026 and reduce the applicable margin by between 2.0 and 2.5 percentage points based on the Company’s leverage ratio. At the Company’s election, interest on loans will accrue at the SOFR rate plus the applicable margin of 4.75% or at the base rate plus the applicable margin of 3.75% as long as the Company maintains a leverage ratio of less than 5.5 to 1. The Company also increased the existing availability under its delayed draw term loan commitment to $100 million, which terminates if not drawn upon by May 10, 2026. In addition, the existing revolving line of credit under the Credit Agreement was replaced with a new revolving credit commitment of $50 million. The unused portion of the revolving line of credit carries a commitment fee of 0.375%. Loans outstanding under the revolving line of credit, if any, mature on May 10, 2029. The Company capitalized approximately $0.9 million in debt issuance costs associated with the amendment during the three and six months ended June 30, 2024.
Previous wording
At June 30, 2024, there was $252.9 million outstanding under the Credit Agreement, and there remained availability of $100.0 million in Delayed Draw Term Loan Commitments and $50.0 million in Revolving Loans.
Current wording
At September 30, 2024, there was $611.4 million outstanding under the Credit Agreement, and there remained availability of $100.0 million in delayed draw term loan commitments and $50.0 million in revolving line of credit.
Previous wording
We have future obligations under various contracts relating to debt and interest payments, finance and operating leases and our post-retirement benefit plan. During the six months ended June 30, 2024, there were no material changes to these obligations as described in our December 31, 2023 annual financial statements reported in the Company’s Form S-1 filed with the Securities and Exchange Commission.
Current wording
We have future obligations under various contracts relating to debt and interest payments, finance and operating leases and our post-retirement benefit plan. During the nine months ended September 30, 2024, there were no material changes to these obligations as described in our December 31, 2023 annual consolidated financial statements reported in the Company’s Form S-1 filed with the Securities and Exchange Commission on April 23, 2024.
Previous wording
The following table sets forth a reconciliation of net income (loss) to EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin for the three and six months ended June 30, 2024 and 2023 (in thousands unless otherwise indicated):
Current wording
The following table sets forth a reconciliation of net income (loss) to EBITDA, Adjusted EBITDA, and Adjusted EBITDA Margin for the three and nine months ended September 30, 2024 and 2023 (in thousands unless otherwise indicated):
Previous wording
Represents the reduction in the estimated contingent purchase price for the CAV acquisition in 2024 and a grant from the U.S. Department of Transportation under the Aviation Manufacturing Jobs Protection Program in 2023..
Current wording
Represents a $2.9 million reduction in the estimated contingent purchase price for the CAV acquisition and $1.7 million of proceeds from the settlement of buyer-side representations and warranties insurance covering the acquisition of DAC during the nine months ended September 30, 2024 and $1.7 million of proceeds from the settlement of buyer-side representations and warranties insurance covering the acquisition of DAC and $1.7 million of proceeds from the settlement of buyer-side representations and warranties insurance covering the acquisition of DAC received during the three months ended September 30, 2024, and in 2023 represents a grant from the U.S. Department of Transportation under the Aviation Manufacturing Jobs Protection Program.