Loar Holdings Inc.

1. Organization

Prior to April 16, 2024, Loar Holdings Inc. (the Company) operated as a Delaware limited liability company under the name Loar Holdings, LLC. On April 16, 2024, the Company converted to a Delaware corporation and changed its name to Loar Holdings Inc. (the Corporate Conversion). In the Corporate Conversion, all of the equity interests of the Company outstanding as of the date thereof were converted into shares of common stock. Specifically, holders of Loar Holdings, LLC units received 377,450.980392157 shares of common stock of Loar Holdings Inc. for each unit of Loar Holdings, LLC. The purpose of the Corporate Conversion was to reorganize the Company’s structure in advance of the public offering of common stock so that the entity offering the common stock to the public in the offering was a corporation rather than a limited liability company, so that the existing investors and new investors in the offering would own the Company’s common stock rather than equity interests in a limited liability company.

The registration statement related to the Company’s initial public offering (IPO) was declared effective on April 24, 2024, and the Company’s common stock began trading on the New York Stock Exchange on April 25, 2024. On April 29, 2024, the Company completed its IPO for the sale of 12.6 million shares of common stock, $0.01 par value per share, at a public offering 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.

On December 12, 2024, the Company completed a follow-on offering in which it issued 3,852,500 shares of common stock at a price of $85.00 per share (Follow-on Offering). The Company received net proceeds from the offering of approximately $311.6 million after deducting underwriting discounts, commissions and other offering costs of $16.0 million.

Description of Business

Loar specializes in the design, manufacture, and sale of niche aerospace and defense components that are essential for today’s aircraft and aerospace and defense systems. The Company focuses on mission-critical highly engineered solutions with high intellectual property content. Manufactured products include 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 and knobs and annunciators for incandescent and LED illuminated pushbutton switches, among others. The Company’s activities are conducted through its wholly owned subsidiaries, which operate across eleven manufacturing facilities located in the United States, one manufacturing facility in Germany and one manufacturing facility in the United Kingdom (UK).

Loar’s operations are organized and managed asone segment designed to offer its customers aerospace related parts and supplies. A chief operating decision maker assesses performance and allocates resources based upon an evaluation of consolidated data that includes the results of the Company’s overall operations that have similar economic characteristics. As such, the single operating segment reflects how the Company’s operations are managed, how resources are allocated, and how operating performance is evaluated by senior management.

The Company’s customers are concentrated in the aerospace industry. The Company’stwo largest customers accounted for approximately 21% and 24% of sales during the years ended December 31, 2024 and 2023, respectively, and approximately 28% and 36% of accounts receivable at December 31, 2024 and 2023, respectively.

As of December 31, 2024, the Company had approximately 1,500 full-time, part-time and temporary employees. Approximately 135 of the full-time and part-time employees are represented by labor unions. One collective bargaining agreement between the Company and a labor union expires on October 31, 2025 and one agreement, covering approximately 55 employees, does not have an expiration.

Geographic Area Information

Net sales are measured based on the geographic destination of sales. Long-lived tangible assets consist of property, plant and equipment, net and finance and operating lease assets. Net sales and tangible long-lived assets of individual countries outside of the United States are not material.

Net sales by geographic area were as follows (in thousands):

Long-lived tangible assets were as follows (in thousands):

2. Acquisitions

Applied Avionics, Inc.

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.

The total purchase price was allocated to the underlying assets acquired and liabilities assumed based upon the estimated fair values at the date of acquisition in accordance with Accounting Standards Codification (ASC) 805, Business Combinations. The following table summarizes the preliminary purchase price allocation of the estimated fair values of the assets acquired and the liabilities assumed at the transaction date (in thousands):

Inventory was recorded at its estimated fair value, which represented an amount equivalent to estimated selling price less fulfillment costs and a normative selling profit. The increase in fair value of inventory from the acquisition was approximately $1.1 million, which was recognized in cost of goods sold for the year ended December 31, 2024.

Goodwill is primarily attributable to the assembled workforce and expected synergies with other acquired companies, combined with the industry operating expertise of management. These are among the factors that contributed to a purchase price that resulted in the recognition of goodwill. Goodwill is deductible for tax purposes.

The results of operations of AAI are included in the Company’s consolidated financial statements for the period subsequent to the

completion of the acquisition. AAI contributed $14.9 million of net sales and $3.4 million of operating income for the year ended December 31, 2024.

Thepro forma information below gives effect to the AAI acquisition as if it had been completed on January 1, 2023. The table below presents unaudited pro forma consolidated income statement information as if the AAI acquisition had been included in the Company’s consolidated results for the entire period reflected. The pro forma results are not necessarily indicative of the operating results that would have occurred had the acquisition been effective January 1, 2023, nor are they intended to be indicative of results that may occur in the future. The underlying pro forma information includes the historical financial results of the Company and the acquired business adjusted for certain items. In the pro forma information presented, each of the years ended December 31, 2024 and 2023 includes $9.7 million of amortization of acquired intangible assets resulting from the preliminary purchase price allocation. The $1.1 million of inventory step-up resulting from the preliminary purchase price allocation has been included in the pro forma results for the year ended December 31, 2023 to reflect the pro forma transaction date of January 1, 2023, and the inventory step-up expense of $1.1 million recorded for the year ended December 31, 2024 has been excluded. Interest expense has been adjusted as though the debt incurred to finance the AAI acquisition had been outstanding at January 1, 2023. The pro forma interest expense adjustments for the years ended December 31, 2024 and 2023 are $24.6 million, and $36.9 million, respectively. The pro forma information does not include the effects of any synergies, cost reduction initiatives or anticipated integration costs related to the acquisitions.

DAC Engineered Products, LLC

On July 3, 2023, the Company acquired Desser Aerospace’s Proprietary Solutions businesses from VSE Corporation (NASDAQ:VSEC; VSE) for $31.1 million in cash. The Company received $0.3 million during the year ended December 31, 2024 related to an adjustment to the working capital calculation used to arrive at the final purchase price.

The acquired entities operate as DAC Engineered Products, LLC (DAC). Under the purchase agreement, there is a potential future payout of up to $7.0 million to the seller related to achieving certain financial targets for 2024 and 2025. The fair value of the liability in connection with this contingent payout is de minimis. DAC’s products include, but are not limited to: carbon brake discs, steel brake discs, starter generators and vacuum generators, primarily for general aviation and regional jets.

The total purchase price was allocated to the underlying assets acquired and liabilities assumed based upon the fair values at the date of acquisition in accordance with Accounting Standards Codification (ASC) 805, Business Combinations. The following table summarizes the purchase price allocation of the fair values of the assets acquired and the liabilities assumed at the transaction date (in thousands):

Inventory was recorded at its estimated fair value, which represented an amount equivalent to estimated selling price less fulfillment costs and a normative selling profit. The increase in fair value of inventory from the acquisition was approximately $0.2 million, which was recognized in cost of goods sold for the year ended December 31, 2023.

Goodwill is primarily attributable to the assembled workforce and expected synergies with other acquired companies, combined with the industry operating expertise of management. These are among the factors that contributed to a purchase price that resulted in the recognition of goodwill. Goodwill is deductible for tax purposes.

The results of operations of DAC are included in the Company’s consolidated financial statements for the period subsequent to the completion of the acquisition. DAC contributed $7.9 million of net sales and $2.0 million of operating income for the year ended December 31, 2023.

During the year ended December 31, 2024, the Company received proceeds of approximately $1.7 million from the settlement of buyer-side representations and warranties insurance covering the acquisition of DAC. The insurance policy covered the Company for certain balance sheet items that were not correctly reflected in accordance with GAAP. This amount was recorded as other income on the consolidated statements of operations during the year ended December 31, 2024.

Had the acquisition of DAC occurred as of January 1, 2022, net sales on a pro forma basis for the year ended December 31, 2023 would not have been materially different than the reported amounts. Additionally, income before income taxes on a pro forma basis for the year ended December 31, 2023 would have been $2.1 million. The pro forma results are not necessarily indicative of the operating results that would have occurred had the acquisition been effective January 1, 2022, nor are they intended to be indicative of results that may occur in the future. The underlying pro forma information includes the historical financial results of the Company and the acquired business adjusted for certain items such as amortization of acquired intangible assets of $0.4 million and interest expense of $1.3 million, for the year ended December 31, 2023. The pro forma information does not include the effects of any synergies, cost reduction initiatives or anticipated integration costs related to the acquisitions.

CAV Systems Group Limited

On September 1, 2023, the Company, through its newly formed UK subsidiary, Change Acquisition Limited, acquired 100% of the stock of CAV Systems Group Limited (CAV), a leading provider of highly engineered ice protection and drag reduction systems for $29.0 million in cash. The Company recorded an additional $3.1 million in purchase consideration that may be paid to the seller if CAV achieves certain financial targets for the years 2023 through 2026. The maximum payout to the seller related to achieving these financial targets is $18.4 million. During the year ended December 31, 2024, management revaluated the estimated contingent consideration liability and recorded a reduction in contingent consideration totaling $2.9 million. This amount was recorded as other income on the consolidated statements of operations. The remaining contingent consideration totaling $0.2 million at December 31, 2024 is recorded in accrued expenses and other current liabilities in the accompanying consolidated balance sheets.

The total purchase price was allocated to the underlying assets acquired and liabilities assumed based upon the fair values at the date of acquisition in accordance with ASC 805, Business Combinations. The following table summarizes the purchase price allocation of the fair values of the assets acquired and the liabilities assumed at the transaction date (in thousands):

Inventory was recorded at its estimated fair value, which represented an amount equivalent to estimated selling price less fulfillment costs and a normative selling profit. The increase in fair value of inventory from the acquisition was approximately $0.4 million, which was recognized in cost of goods sold for the year ended December 31, 2023.

Goodwill is primarily attributable to the assembled workforce and expected synergies with other acquired companies, combined with the industry operating expertise of management. These are among the factors that contributed to a purchase price that resulted in the recognition of goodwill. Goodwill is not deductible for tax purposes.

The results of operations of CAV are included in the Company’s consolidated financial statements for the period subsequent to the completion of the acquisition. CAV contributed $6.5 million of net sales and had a $0.2 million operating loss for the year ended December 31, 2023.

Had the acquisition of CAV occurred as of January 1, 2022, net sales on a pro forma basis for the year ended December 31, 2023 would not have been materially different than the reported amount. Additionally, income before income taxes on a pro forma basis for the year ended December 31, 2023 would have been $0.4 million. The pro forma results are not necessarily indicative of the operating results that would have occurred had the acquisition been effective January 1, 2022, nor are they intended to be indicative of results that may occur in the future. The underlying pro forma information includes the historical financial results of the Company and the acquired business adjusted for certain items such as amortization of acquired intangible assets of $0.4 million and interest expense of $2.4 million for the year ended December 31, 2023. The pro forma information does not include the effects of any synergies, cost reduction initiatives or anticipated integration costs related to the acquisitions.

3. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The accompanying consolidated financial statements were prepared in conformity with U.S. Generally Accepted Accounting Principles (GAAP) and include the accounts of the Company and its subsidiaries. Intercompany accounts and transactions between consolidated entities have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Examples include estimates related to the allowance for current expected credit loss, inventory obsolescence, purchase price allocation for intangible assets and goodwill arising from business combinations, useful lives of definite-lived assets, income taxes, stock-based compensation, environmental reserves and litigation.

Cash and Cash Equivalents and Restricted Cash

Cash and cash equivalents consist only of cash and investments with original maturities of three months or less. As of December 31, 2024 and 2023 there wereno cash equivalents or restricted cash.

Accounts Receivable

The Company does not require collateral for its trade accounts receivable. Accounts receivable have been reduced by an allowance based on specific account evaluations, historical write-offs and economic conditions. When a receivable balance is known to be uncollectible, it is written off against the allowance for current expected credit loss. All provisions for allowances for credit losses are included in selling, general and administrative expenses in the consolidated statements of operations.

Inventories

Inventories are stated at the lower of cost or net realizable value. Cost is determined primarily using the weighted-average cost method of inventory accounting. Write-downs for slow-moving and obsolete inventories are provided based on current assessments about future product demand, production requirements for the next 12 months and usage for the last 12 months.

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Maintenance and repairs are expensed when incurred; renewals and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the accounts, and any gain or loss is included in the results of operations. Depreciation is calculated on the straight-line method over the estimated useful lives of the related assets as follows: buildings from 25 to 40 years, leasehold improvements fromone to 20 years, machinery and equipment fromtwo to 12 years and furniture and fixtures from fiveto 10 years.

Finite-Lived Intangible Assets

Intangible assets consist of customer relationships, tradenames, technology, favorable leases and contract backlog, which are stated at cost and are being amortized on a straight-line method over periods ofone to 20 years. The estimated useful lives are evaluated annually.

Evaluation of Long-Lived Assets

Long-lived assets, including finite-lived intangible assets and property, plant and equipment, are assessed for recoverability if any event occurs or circumstances change that indicates possible impairment. In evaluating the value and future economic benefits of long-lived assets, the carrying value of the asset or group of assets is compared to management’s estimate of the anticipated undiscounted future net cash flows of the related long-lived asset.

There wereno impairment charges related to property, plant and equipment and finite-lived intangible assets for the years ended December 31, 2024 and 2023.

Goodwill and Other Indefinite-Lived Intangible Assets

The Company does not amortize goodwill and other intangible assets that are deemed to have indefinite lives. The Company reviews these assets for impairment at least annually, on the first day of the fourth quarter, using either a qualitative or quantitative analysis. Additionally, goodwill is evaluated for impairment whenever an event occurs or circumstances change which would indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. An impairment loss, if indicated, is recognized in the amount by which the carrying value of a reporting unit, including goodwill exceeds the reporting unit’s fair value.

When evaluating whether goodwill is impaired, the Company performs a qualitative assessment to determine if it is more likely than not that its fair value is less than its carrying amount. If the qualitative assessment determines that it is more likely than not that its fair value is less than its carrying amount, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the Company must measure the impairment loss. The impairment loss, if any, is recognized in the amount by which the carrying value of the reporting unit, including goodwill exceeds the reporting unit’s fair value. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, no further impairment analysis is needed.

For purposes of testing goodwill for impairment, the Company operates as asingle reporting unit. No goodwill impairment charge was recorded for the years ended December 31, 2024 and 2023.

Debt Issuance Costs

Debt issuance costs represent legal and other direct costs related to the Company’s long-term debt. These costs are recorded as a reduction to the carrying value of the loans payable on the consolidated balance sheets. Debt issuance costs are amortized to interest expense using the effective interest method through the final principal maturity date.

Leases

For any new or modified lease, the Company, at the inception of the contract, determines whether a contract is or contains a lease. The Company records right-of-use (ROU) assets and lease liabilities for its finance and operating leases, which are initially recognized based on the discounted future lease payments over the term of the lease. As the rate implicit in the Company’s leases is not easily determinable, the Company’s applicable incremental borrowing rate is used in calculating the present value of the sum of the lease payments. Lease term is defined as the noncancelable period of the lease plus any options to extend or terminate the lease when it is reasonably certain that the Company will exercise the option.

Across all classes of assets, the Company has elected not to recognize ROU asset and lease liabilities for its short-term leases, which are defined as leases with an initial term of 12 months or less. Lease and non-lease components are combined.

Income Taxes

Income taxes are accounted for under the asset and liability method. Deferred income tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred income tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply in the year in which those temporary differences are expected to be recovered or settled. Deferred income tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred income tax assets will not be realized.

The Company accounts for uncertainties in income taxes under the provisions of ASC 740, Income Taxes, which defines the thresholds for recognizing the benefits of tax return positions in the financial statements as “more likely than not” to be sustained by the taxing authorities.

Stock-Based Compensation

The Company accounts for stock-based compensation under the fair value recognition provisions of ASC 718, Compensation – Stock Compensation. Under the fair value provisions, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is the vesting period.

Shipping and Handling Costs

Costs associated with inventory storage and handling costs at the Company’s facilities are recorded in cost of sales in the accompanying statements of operations.

Research and Development Costs

Research and development costs are expensed as incurred and are recorded in selling, general and administrative expenses in the accompanying statements of operations.

The expense recognized for research and development costs for the years ended December 31, 2024 and 2023 was $8.8 million and $6.3 million, respectively.

Environmental Costs

Loar accrues for losses associated with environmental remediation obligations when such losses are probable and reasonably estimable. Accruals for estimated losses from environmental remediation obligations are recognized no later than the completion of the remedial feasibility study. Such accruals are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their present value.

Foreign Currency

Assets and liabilities from a foreign operation are translated from local currency to U.S. dollars at the exchange rate in effect at the balance sheet date. Gains and losses from the translation of a foreign operation are included in equity on the Company’s consolidated balance sheets. Sales and expenses are translated at the average monthly exchange rates prevailing during the period.

Foreign currency transaction gains and losses arising from currency exchange rate fluctuations on transactions denominated in a currency other than the local currency are included in the Company’s consolidated statements of operations.

Government Assistance

The Company was awarded a grant from the U.S. Department of Transportation under the Aviation Manufacturing Jobs Protection Program and received approximately $0.5 million during the year ended December 31, 2023. This grant was recorded in other income on the consolidated statements of operations.

During 2023, the Company received approximately $0.2 million, of refundable employee retention tax credits which were available under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), enacted on March 27, 2020. These benefits were recorded primarily in cost of sales on the consolidated statements of operations.

The Company didnot receive government assistance during the year ended December 31, 2024

Net Income (Loss) per Common Share or Common Unit

Basic net income (loss) per common share or common unit is calculated by dividing net income (loss) by the weighted average common shares or common units outstanding for the period. Diluted net income (loss) per common share or common unit is calculated by dividing net income (loss) by the weighted average common shares or common units outstanding for the period plus the effect of any potential common shares or common units that have been issued if these additional units are dilutive.

Recent Accounting Pronouncements

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands disclosures about reportable segments, and provides requirements for more detailed reporting of a segment’s expenses that are regularly provided to the Chief Operating Decision Maker (CODM) and included within each reported measure of a segment’s profit or loss. Additionally, ASU 2023-07 requires all segment profit or loss and assets disclosures to be provided on an annual and interim basis. ASU 2023-07 is effective for fiscal years beginning after December 15,

2023 and interim periods within fiscal years beginning one year later. Early adoption is permitted, and the amendments must be applied retrospectively to all prior periods presented. The Company adopted this standard during the year ended December 31, 2024 and it did not have an effect on the Company’s consolidated results of operations, financial position or cash flows.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires a public business entity to disclose specific categories in its annual effective tax rate reconciliation and provide disaggregated information about significant reconciling items by jurisdiction and by nature. The ASU also requires entities to disclose their income tax payments (net of refunds) to international, federal, and state and local jurisdictions. The standard makes several other changes to income tax disclosure requirements. This standard is effective for annual periods beginning after December 15, 2024, and requires prospective application with the option to apply it retrospectively. The adoption of this guidance will not affect the Company’s consolidated results of operations, financial position or cash flows, and the Company is currently evaluating the standard to determine its impact on the Company’s disclosures.

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Sub Topic 220-40): Disaggregation of Income Statement Expenses . The guidance requires disaggregated information about certain income statement costs and expenses for public entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories within the notes to the financial statements. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.

Reclassifications

Certain reclassifications have been made to the prior year's consolidated financial statements to conform with the current year's presentation in the consolidated statements of cash flows and select notes to the consolidated financial statements . These reclassifications have resulted in no changes to the Company's consolidated results of operations, financial position or cash flows.

4. Revenue Recognition

All revenue recognized in the consolidated statements of operations is considered to be revenue from contracts with customers.

Revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services when control of the promised good or service is transferred to the customer. Substantially all of the Company’s revenue from contracts with customers is recognized at a point in time, which is generally upon shipment of goods to the customer.

The Company sells specialty aerospace components based on a customer purchase order, which generally includes a fixed price per unit. The Company satisfies the single performance obligation generally upon shipment of the goods, as this is when contractual control transfers to the customer and recognizes revenue at that point in time. Total revenues do not include taxes, such as sales tax or value-added tax, which are assessed by governmental authorities and collected by the Company.

Products are covered by a standard assurance warranty, generally extended for a period of 25 days to two years depending on the customer, which promises that delivered products conform to contract specifications. The Company does not offer refunds or accept returns, unless related to a defect or warranty related matter. The Company does not sell extended warranties and does not provide warranties outside of fixing defects that existed at the time of sale. As such, warranties are accounted for under ASC 460, Guarantees and not as a separate performance obligation.

Customers generally have payment terms between 30 and 90 days from the satisfaction of the performance obligations. As a practical expedient, the Company does not adjust the amount of consideration for a financing component, as the period between the transfer of goods or services and the customer’s payment is, at contract inception, expected to be one year or less.

Net sales to foreign customers, primarily in Western Europe, Canada and Asia, were $125.4 million and $103.8 million for the years ended December 31, 2024 and 2023, respectively.

Net sales by end market were as follows (in thousands):

Contract Liabilities

Contract liabilities, or deferred revenue, represents payments received in advance of the satisfaction of performance under the contract. The Company receives payments from customers based on established terms. The Company's contract liabilities consisted of the following (in thousands):

(1)

Included in accrued expenses and other current liabilities on the consolidated balance sheets.

The increase in current contract liabilities at December 31, 2024 compared to December 31, 2023 is principally due to the acquisition of AAI. During the year ended December 31, 2024, the revenue recognized that was included in the contract liability balance at December 31, 2023 was approximately $1.3 million. The Company had no material contract assets at December 31, 2024 and 2023.

5. Inventories

Inventories consisted of the following (in thousands):

6. Property, Plant and Equipment

Property, plant and equipment consisted of the following (in thousands):

For the year ended December 31, 2024, there were sales of property, plant and equipment totaling $0.3 million which is included in capital expenditures in the consolidated statements of cash flows. There wereno sales of property, plant and equipment for the year ended December 31, 2023 .

7. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following (in thousands):

A reclassification has been made in the prior year's presentation to conform with the current year. This reclassification resulted in no changes to the Company's financial condition.

8. Long-Term Debt

The Company’s debt consisted of the following (in thousands):

The Company’s long-term debt at December 31, 2024 consisted of borrowings under its credit agreement, dated as of October 2, 2017, as amended from time to time (Credit Agreement). The Credit Agreement is secured by substantially all of the assets of the Company.

On April 28, 2023, the Company borrowed $20.0 million of available delayed draw term loans under the Credit Agreement (Delayed Draw Term Loans) to finance the acquisition of DAC.

On June 30, 2023, the Company amended the Credit Agreement to extend the maturity date byeighteen months, extending it from October 2, 2024 to April 2, 2026. In addition, the London Interbank Offered Rate (LIBOR) Rate was replaced with Adjusted Term Secured Overnight Financing Rate (SOFR) as an election in which borrowings under the Credit Agreement accrue interest at the SOFR rate plus a margin of 7.25%.

On August 30, 2023, the Company borrowed $33.0 million of available Delayed Draw Term Loans to finance the acquisition of CAV.

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.

On April 10, 2024, the Company amended the Credit Agreement to permit certain non-pro rata open market purchases of term loans pursuant to open market purchases. In addition, the Company also entered into that certain Master Open Market Purchase Agreement, by and between affiliates of lender and the Company (the “Master Open Market Purchase Agreement”) to repurchase term loans on a non-pro rata basis subject to certain conditions as set forth therein.

On May 3, 2024, the Company used a portion of the net proceeds from its IPO to voluntarily repay $284.6 million aggregate principal amount of term loans under the Credit Agreement plus accrued interest of $0.3 million. The Company wrote off $0.8 million in unamortized debt issuance costs and expensed $0.8 million in refinancing costs associated with the amendment of the Credit Agreement. These charges are included in refinancing costs in the consolidated statements of operations during the year ended December 31, 2024.

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 thebase 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 Loans 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.

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 (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.

On December 17, 2024, the Company used the net proceeds from its Follow-on Offering and cash from operations to repay $330.0 million aggregate principal amount of term loans under its Credit Agreement plus accrued interest of $1.5 million. The Company wrote-off $4.8 million in unamortized debt issuance costs which isincluded in refinancing costs in the consolidated statements of operations during the year ended December 31, 2024.

The Credit Agreement requires the maintenance of a quarterly leverage ratio. There are also certain non-financial covenants in place limiting the Company, from among other things, incurring other indebtedness, creating any liens on its properties, entering into merger or consolidation transactions, disposing of all or substantially all of its assets and payment of certain dividends and distributions. The Company was in compliance with all financial and nonfinancial covenants of the Credit Agreement as of December 31, 2024.

The Credit Agreement requires mandatory prepayments of the principal amount if there is excess cash flow, as defined, during a calendar year.

The Credit Agreement permits voluntary principal prepayments, in whole or in part, with no premium for any prepayments made. Any voluntary loan prepayments are applied to reduce future scheduled installments of principal in the order specified by the Company, or if the Company does not specify, the prepayment is applied to reduce the scheduled installments of principal in direct order of maturity. During the year ended December 31, 2024, the Company made voluntary prepayments of $614.6 million. The prepayments exceeded the quarterly mandatory principal payments for the remainder of the Term Loan. Accordingly, the next term loan principal payment is due on May 10, 2030. There were no voluntary prepayments made under the Credit Agreement during the year ended December 31, 2023.

The Company paid approximately $8.1 million of debt issuance costs for the year ended December 31, 2024. The unamortized balance of deferred debt issuance costs was approximately $4.8 million as of December 31, 2024, and of which approximately $4.1 has been recorded as a reduction to the outstanding long-term debt and approximately $0.7 million, which is related to the revolving credit facility, has been recorded in other current assets on the Company’s consolidated balance sheet.

At December 31, 2024, there was $281.4 million outstanding under the Credit Agreement, and there remained available $100.0 million in Delayed Draw Term Loans Commitment and a $50.0 million revolving line of credit. The weighted average interest rate for all outstanding loans under the Credit Agreement was 9.1% at December 31, 2024. The annual effective interest rate under the Credit Facility was 11.1% at December 31, 2024.

9. Environmental Costs

In connection with Loar Group’s acquisition of AGC Acquisition LLC in 2013, the Company acquired the property and building associated with manufacturing operations. The acquired facilities entered into the state of Connecticut’s voluntary remediation program in 2009 for environmental remediation of certain known contaminants. The Company had an independent third-party evaluation of the facilities to determine the potential range of costs for remediation of the site. Accordingly, the Company recorded an environmental liability at the acquisition date totaling approximately $2.5 million. The Company is not entitled to any third-party recoveries related to this environmental liability. The balance at December 31, 2024 was approximately $0.1 million and is included in accrued expenses and other current liabilities in the Consolidated Balance Sheets. The likelihood an additional material related loss may be incurred is remote.

10. Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, finance leases and debt. The carrying amounts of all financial instruments reported on the consolidated balance sheets at December 31, 2024 and 2023 are considered to approximate fair value either due to the relatively short period of time between theorigination of these financial instruments and their expected realization, or because the interest rates associated with the debt obligations approximate current market rates.

11. Equity

Membership Units

Prior to April 16, 2024, the Company operated as a Delaware limited liability company under the name Loar Holdings, LLC. The total number of common units of Loar Holdings, LLC issued and outstanding was 204 units.

On April 16, 2024, the Company converted to a Delaware corporation and changed its name to Loar Holdings Inc. In the conversion, holders of Loar Holdings, LLC common units received 377,450.980392157 shares of common stock of Loar Holdings Inc. for each unit of Loar Holdings, LLC. The purpose of the corporate conversion was to reorganize the structure so that the entity that offered its common stock to the public in an initial public offering (IPO) was a corporation rather than a limited liability company, so that existing investors and new investors in the offering would own the Company's common stock rather than equity interests in a limited liability company.

Restricted Equity Unit Awards

Under the Loar Acquisition 13, LLC Amended and Restated Limited Liability Agreement, the Company may grant restricted equity units to eligible management of Loar Group. The restricted units authorized for issuance are comprised of 11,000 Incentive Units,5,000 Promote Units and 1,000 Special Promote Units.

During the years ended December 31, 2024 and 2023, there wereno restricted equity units issued.

At April 16, 2024 there were 10,500 Incentive Units,5,000 Promote Units and 1,000 Special Promote Units outstanding, of which 552.5 Incentive Units were not yet vested. The consummation of the IPO was an event that triggered the vesting of any outstanding nonvested equity units. Upon consummation of the IPO, the unrecognized compensation expense of $1.1 million related to these Incentive Units was recorded and all outstanding restricted equity unit awards were converted into shares of common stock.

Compensation expense is recognized on the estimated fair value of restricted units over the vesting period. Compensation expense incurred in connection with all awards was approximately $1.2 million and $0.4 million for the years ended December 31, 2024 and 2023, respectively.

Restricted equity unit award activity was as follows:

2024 Equity Incentive Plan

On April 16, 2024, in conn ection with the IPO, the Board of Directors adopted, and the Company shareholders approved the 2024 Equity Incentive Plan (2024 Plan), pursuant to which employees, consultants and directors of the Company and employees, consultants and directors of affiliates performing services for the Company, including the executive officers, will be eligible to receive awards. Nine million shares of the Company's authorized shares of common stock have been reserved for future issuance under the 2024 Plan.

On April 24, 2024, the Company granted 53,571 fully vested shares to non-employee directors of the Company who purchased shares of common stock under the directed share program of the IPO. The shares granted represented a matching grant equal to 25% of the aggregate fair value of the purchased shares, up to a maximum aggregate matching grant equal to $500,000 perdirector (Matching Grant Shares). The Matching Grant Shares are restricted from sale prior to the third anniversary of the non-employee director’s stock purchase date. The stock awards were fully vested on their grant date and all compensation expense wasrecognized on the grant date. Since there are post-vesting restrictions, a Finnerty model was utilized to calculate a valuation discount from the market value of common shares reflecting the restriction embedded in the shares preventing the sale of the underlying shares for athree-year period of time. The calculation under the Finnerty model yielded a valuation discount of 10%. The Company recognized $1.4 million of stock compensation expense related to the Matching Grant Shares during the year ended December 31, 2024.

In connection with the IPO, on April 24, 2024, the Company granted 4.6 million options to purchase shares of common stock to certain employees. During the remainder of the year ended December 31, 2024, there were additional grants of 0.6 million options to purchase common stock to certain employees. The weighted-average grant date fair value of options granted during the year ended December 31, 2024 was $13.10.

Each grant of options to purchase common stock was granted infive separate, equal size tranches: Tranche A, Tranche B, Tranche C, Tranche D and Tranche E. Tranche A vests on the first anniversary of the date of grant with an exercise price equal to the closing price of our common stock on the trading day immediately preceding the date of grant (the "Grant Price"). Tranche B vests on the second anniversary of the date of grant with an exercise price set at the product of 1.10 and the Grant Price. Tranche C vests on the third anniversary of the date of grant with an exercise price set at the product of 1.21 and the Grant Price. Tranche D vests on the fourth anniversary of the date of grant with an exercise price set at the product of 1.33 and the Grant Price. Tranche E vests on the fifth anniversary of the date of grant with an exercise price set at the product of 1.46 and the Grant Price. The options expire on the earlier of (i)ten years from the grant date or (ii)90 days after termination of employment other than upon death, disability or cause.

The fair value of the stock options was estimated at the dates of grant using a binomial lattice option-pricing model with the following weighted average assumptions:

The risk-free interest rate was based upon the U.S. Treasury bond rates with a term similar to the maturity date of the award. The Company will account for forfeitures as they occur, and forfeiture estimates were not included in the valuation. The Company does not anticipate declaring and paying regular cash dividends in future periods; thus, no dividend yield assumption was used. As there was no or insufficient trading history as of the grant dates, the Company estimated the volatility of its stock based on selected guideline companies over a ten-year lookback period.

The Company recognized stock compensation expense of $8.5 million related to stock options during the year ended December 31, 2024. As of December 31, 2024, there was approximately $59.5 million of total unrecognized compensation expense related to non-vested awards expected to vest, which is expected to be recognized over a weighted-average period of 4.4 years.

The following table summarizes the activity, pricing and other information for the Company’s stock option activity during the year ended December 31, 2024:

There were 3,753,429 remaining shares available for awards under the 2024 Plan.

Inducement Awards

On December 15, 2024, the Company granted options to purchase an aggregate of 68,000 sharesof common stock to three new employees (Inducement Awards). These options to purchase common stock were granted without stockholder approval as material inducements to the employees entering into employment with Loar pursuant to NYSE Listed Company Manual Section

303A.08 and were approved by the Compensation Committee of the Board of Directors of the Company. The weighted-average grant date fair value of the Inducement Award options granted was $31.25.

Each grant of options to purchase common stock was granted infive separate, equal size tranches: Tranche A, Tranche B, Tranche C, Tranche D and Tranche E. Tranche A vests on the first anniversary of the date of grant with an exercise price equal to the closing price of our common stock on the trading day immediately preceding the date of grant (the "Grant Price"). Tranche B vests on the second anniversary of the date of grant with an exercise price set at the product of 1.10 and the Grant Price. Tranche C vests on the third anniversary of the date of grant with an exercise price set at the product of 1.21 and the Grant Price. Tranche D vests on the fourth anniversary of the date of grant with an exercise price set at the product of 1.33 and the Grant Price. Tranche E vests on the fifth anniversary of the date of grant with an exercise price set at the product of 1.46 and the Grant Price. The options expire on the earlier of (i)ten years from the grant date or (ii)90 days after termination of employment other than upon death, disability or cause.

The fair value of the stock options was estimated at the dates of grant using a binomial lattice option-pricing model with the following weighted average assumptions:

The risk-free interest rate was based upon the U.S. Treasury bond rates with a term similar to the maturity date of the award. The Company will account for forfeitures as they occur, and forfeiture estimates were not included in the valuation. The Company does not anticipate declaring and paying regular cash dividends in future periods; thus, no dividend yield assumption was used. As there was no or insufficient trading history as of the grant dates, the Company estimated the volatility of its stock based on selected guideline companies over a ten-year lookback period.

The Company recognized stock compensation expense of $0.02 million related to inducement options during the year ended December 31, 2024. As of December 31, 2024, there was approximately $2.1 million of total unrecognized compensation expense related to non-vested awards expected to vest, which is expected to be recognized over a period of 5.0 years.

The inducement options have a weighted average exercise price per option of $96.85, a weighted remaining contractual term of 10.0 years, andno intrinsic value as of December 31, 2024.

12. Net Income (Loss) per Common Share and Common Unit

Net income (loss) per common share and common unit was computed as follows (in thousands, except per common share and per common unit amounts):

For the year ended December 31, 2024,652,000 potentially dilutive outstanding stock options were excluded from the calculation of diluted income per common share because the exercise prices are greater than the average share price the Company's common stock, and their inclusion would be anti-dilutive. In each of the year ended December 31, 2023, there wereno potentially dilutive units so that basic and diluted net loss per common unit are the same.

13. Employee Savings Plan

The Company has a 401(k) defined contribution plan covering substantially all employees. The Company has a discretionary policy of matching employee contributions. Company contributions were approximately $1.7 million in each of the years ended December 31, 2024 and 2023.

14. Leases

The Company’s leases consist of certain manufacturing facilities, offices and equipment. Such leases, some of which are noncancellable and, in many cases, include renewals, expire at various dates. Such options to renew are included in the lease term when it is reasonably certain that the option will be exercised. The Company’s lease agreements typically do not contain any significant residual value guaranties or restrictive covenants.

For any new or modified lease, the Company, at the inception of the contract, determines whether a contract is or contains a lease. The Company records right-of-use (ROU) assets and lease liabilities for its finance and operating leases, which are initially recognized based on the discounted future lease payments over the term of the lease. Lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. The discount rate implicit within the lease is generally not determinable and therefore the Company determines the discount rate based on the incremental borrowing rate. The incremental borrowing rate for the Company’s leases is determined based on the rate of interest that the Company would pay to borrow on a collateralized basis, over a similar term, an amount equal to the lease payments.

Right-of-use assets and lease liabilities are included within the Consolidated Balance Sheets.

The future minimum lease payments under finance and operating leases as of December 31, 2024 are as follows (in thousands):

The following table includes supplemental information related to leases:

The components of lease expense were as follows (in thousands):

Supplemental cash flow information related to leases is as follows (in thousands):

15. Commitments and Contingencies

There are various lawsuits and claims pending against the Company incidental to its business. Although the final results in such suits and proceedings cannot be predicted with certainty, in the opinion of management, the ultimate liability, if any, will not have a material impact on the consolidated financial statements.

16. Goodwill and Intangible Assets

The change in goodwill was as follows (in thousands):

The Company performs an annual impairment test of goodwill on the first day of the fourth quarter of each year. Based on the results of its impairment test, Loar determined thatno impairment of goodwill existed at December 31, 2024 and 2023.

Intangible assets subject to amortization consisted of the following (dollars in thousands):

A reclassification has been made in the prior year's presentation to conform with the current year. This reclassification resulted in no changes to the Company's financial condition.

The aggregate amortization expense was $31.5 million for the year ended December 31, 2024, of which$3.2 million was charged to cost of sales and $28.3 million was charged to selling, general and administrative expenses. The aggregate amortization expense was $28.1 million for the year ended December 31, 2023, of which $3.2 million was charged to cost of sales and $24.9 million was charged to selling, general and administrative expenses.

The estimated amortization expense of intangible assets, assuming no increase or decrease in the gross carrying amounts, in each of the five succeeding years is as follows (in thousands):

17. Income Taxes

The components of income before income taxes are as follows (in thousands):

The income tax provision consisted of (in thousands):

Thedifferences between the income tax provision on income before income taxes at the federal statutory income tax rate and the income tax provision shown in the accompanying consolidated statements of operations are presented in the table below (in thousands). A reclassification has been made in the prior year's presentation to conform with the current year. This reclassification resulted in no changes to the Company's results of operations.

The components of the net deferred income tax liability were as follows (in thousands):

The Company had state net operating loss carryforwards of approximately $7.4 million as of December 31, 2024, which begin to expire in 2040. As of December 31, 2024, the Company had state research and development credits of approximately $0.4 million, which carryforward indefinitely. As of December 31, 2024, the Company had foreign net operating loss carryforwards of $9.7 million and foreign research and development credits of $0.2 million, which carryforward indefinitely.

The realization of deferred income tax assets may be dependent on the Company’s ability to generate sufficient income in future years in the associated jurisdiction to which the deferred income tax assets relate. As of December 31, 2024, the Company determined that it was not more likely than not to realize some of its deferred tax assets related to its disallowed interest carryforward and foreign research and development credits, and therefore has established valuation allowances of $11.1 million, $0.3 million and $0.1 million against its federal, state, and foreign deferred tax assets, respectively.

The Company files income tax returns in the United States, various state jurisdictions, Germany, and the UK, with varying statutes of limitations. The Company is subject to income tax examination by Federal, state, Germany, and UK tax authorities for years generally beginning in 2020.

The Company recognizes the benefits of tax return positions if it is determined that the positions are “more-likely-than-not” to be sustained by the taxing authority. Interest and penalties accrued on unrecognized tax benefits will be recorded as tax expense in the period incurred.

The change in unrecognized tax benefits were as follows (in thousands):

The Company’s policy is to record tax-related interest and penalties within the tax provision. On December 31, 2024 interest or penalties related to uncertain tax positions were not material. The Company doesnot expect any significant increases or decreases to its unrecognized tax benefits within the next twelve months.

The Company has not recognized a deferred tax liability for the undistributed earnings of the Company’s foreign operations as the Company considers these earnings to be permanently reinvested. For the years ended December 31, 2024 and 2023, the undistributed earnings of the Company’s foreign subsidiaries were not material.

18. Related-Party Transactions

Blackstone Alternative Credit Advisors LP and affiliates (Blackstone Credit), a lender under the Credit Agreement, owns approximately 13% of Loar Holdings Inc. At December 31, 2024, the outstanding debt balance due to this lender was approximately $281.4 million, of whichno amount is due within the next twelve months. During the years ended December 31, 2024 and 2023, this lender provided additional term loans totaling $360.0 million and $53.0 million, respectively, and the Company, through the Credit Agreement administrative agent, paid interest and principal payments totaling approximately $669.7 million and $68.8 million, respectively, to this lender.

Until January 2024, certain members of management were lenders under the Credit Agreement. During January 2024, the Credit Agreement indebtedness held by the management lenders was purchased by Blackstone Credit. As a result of this transaction, Blackstone Credit became the sole lender under the Credit Agreement.

There wasno outstanding debt balance due to these lenders at December 31, 2024. During the year ended December 31, 2023, the Company, through the Credit Agreement administrative agent, paid to these lenders interest and principal payments totaling approximately $1.6 million. There wereno payments to these lenders during the year ended December 31, 2024.

19. Segment Reporting

The Company reports the results of its continuing operations inone reportable segment. The Company’s Chief Operating Decision Maker (CODM) is the Company’s Chief Executive Officer (CEO). The CEO, in the role as CODM, evaluates segment performance based on sales and Adjusted EBITDA. EBITDA means earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA means EBITDA, adjusted for other items within a relevant period which are not reflective of the segment's operating performance in the period. Adjusted EBITDA is not a measurement of financial performance under U.S. GAAP, but it is the measure the Company uses to evaluate operating performance, review and assess the performance of the management team in connection with employee incentive programs, and to prepare its annual budget and financial projections. In addition, the Company uses Adjusted EBITDA of target companies to evaluate acquisitions.

The CODM assesses performance and reviews assets and makes significant capital expenditure decisions for the Company on a segment level basis and decides how to allocate resources based on Adjusted EBITDA. The CODM uses Adjusted EBITDA when determining whether to reinvest profits into the segment or to use them for acquisitions or other transactions. The measure of segment assets is reported on the balance sheet as total assets.

The following table provides a reconciliation of the Company's segment Adjusted EBITDA to net income (loss) for the years ended December 31, 2024 and 2023 (unaudited, in thousands):

(1)

Represents cost of sales adjusted to exclude the recognition of inventory step-up of $1.1 million and $0.6 million during the years ended December 31, 2024 and 2023, the amortization of intangible and other long-lived assets of $3.5 million and $3.2 million during the years ended December 31, 2024 and 2023, depreciation of $10.2 million and $8.7 million during the years ended December 31, 2024 and 2023, and acquisition and facility integration costs of $2.9 million during the year ended December 31, 2024.

(2)

Represents selling, general and administrative expenses adjusted to exclude the amortization of intangible and other long-lived assets of $28.3 million and $24.9 million during the years ended December 31, 2024 and 2023, depreciation of $1.0 million and $1.3 million during the years ended December 31, 2024 and 2023, stock based compensation of $11.1 million and $0.4 million during the years ended December 31, 2024 and 2023, acquisition and facility integration costs of $1.6 million during each of the years ended December 31, 2024 and 2023, and research and development costs of $8.8 million and $6.3 million during the years ended December 31, 2024 and 2023.

(3)

Represents costs incurred to investigate, examine, design and test new or significantly enhance existing products, services or processes.

(4)

Represents accounting adjustments to inventory associated with acquisitions of businesses that were charged to cost of sales when inventory was sold.

(5)

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 year ended December 31, 2024 and in 2023 represents a grant from the U.S. Department of Transportation under the Aviation Manufacturing Jobs Protection Program.

(6)

Represents third party transaction-related costs for acquisitions comprising deal fees, legal, financial and tax due diligence expenses, and valuation costs that are required to be expensed as incurred.

(7)

Represents the non-cash compensation expense recognized by the Company for equity awards.

(8)

Represents costs incurred to integrate acquired businesses and product lines into our operations, facility relocation costs and other acquisition-related costs.

20. Subsequent Event

On March 7, 2025, following completion of the works council consultation process required under French Law, the Company entered into a purchase agreement to acquire 100% of the shares of LMB Fans & Motors ("LMB") for €365 million plus the assumption of net debt, payable in cash at closing (estimated to be €44.3 million). LMB is a global specialty player in the design and production of customized high-performance fans and motors. The transaction is expected to close in the third quarter of 2025 shortly after receiving requisite regulatory approvals and is subject to customary closing conditions.

The acquisition will be financed through additional borrowings under the Company's existing Credit Agreement and cash on hand. In connection with the acquisition, we entered into an incremental term facility commitment letter with Blackstone Credit (the “Commitment Letter”), pursuant to which Blackstone Credit has committed, subject to the satisfaction of customary conditions, to provide us with an incremental term loan facility in an amount equal to the U.S. dollar equivalent of €400.0 million (the “Incremental Loan Facility”). The loans under the Incremental Loan Facility will mature on the same date, will amortize, and will bear the same interest rate as the existing term loans outstanding under the Credit Agreement.