KRATOS DEFENSE SECURITY SOLUTIONS INC

Previous wording

The potential challenges presented by the recent elections, Presidential and congressional changes and the related transitions, the CRA, the current budgetary and deficit funding environment, Israel, Ukraine and Taiwan funding support, continuing heightened levels of inflation, ongoing supply chain disruption, and the challenging appropriations process, among other items, all continue to create significant short and long-term risks to the industry and the Company.

Current wording

The potential challenges presented by the recent elections, Presidential and Congressional changes, the CRA, proposed new tariffs, the current budgetary and deficit funding environment, the Trump Administration’s stated fiscal policies, including the extension and potential expansion of reduced federal tax rates, Israel, Ukraine and Taiwan funding support, continuing heightened levels of inflation, ongoing supply chain disruption, and the challenging appropriations process, among other items, all continue to create significant short and long-term risks to the industry and the Company. Additionally, the Trump Administration has recently executed certain executive orders directly related to significantly changing the current DoD procurement policies and procedures, and the Federal Acquisition Regulations, the potential impact of which such changes, if effected either by executive orders or changes to the relevant law, to the industry, and to Kratos, is unknown at this time.

Previous wording

Also, an industry wide shortage of qualified labor, and the cost of that labor for the Company and its labor base is a significant operational challenge. The cost of labor has increased significantly and current challenges in hiring, obtaining and retaining employees, including those employees requiring National Security clearances, is adversely impacting Kratos’ ability to execute its business. There is also a significant industry wide labor shortage, including in the Science, Technology, Engineering, and Math (STEM) discipline areas, and also including employees willing and/or able to obtain National Security clearances, and for high level manufacturing and production disciplines.

Current wording

Also, an industry wide shortage of qualified labor, and the cost of that labor for the Company and its labor base is a significant operational challenge. The cost of labor has increased significantly and current challenges in hiring, obtaining and retaining employees, including those employees requiring National Security clearances, is adversely impacting Kratos’ ability to execute its business. The challenge of retaining skilled experienced production personnel has continued to negatively impact our operating margins, especially on our longer-term firm fixed-priced production contracts. There is also a significant industry wide labor shortage, including in the Science, Technology, Engineering, and Math (STEM) discipline areas, and also including employees willing and/or able to obtain National Security clearances, and for high level manufacturing and production disciplines.

Previous wording

We do believe that our business is well-positioned in areas that the DoD and other customers currently indicate are priorities for future defense spending, including as identified in the 2024 defense budget and related Future Years Defense Program (FYDP), the President’s 2025 National Security and Defense Budget Request and the 2022 National Security Strategy document. As noted above, we believe that there is a generational recapitalization of weapon systems occurring with the U.S. and its allies to address peer and near peer threats, including Russia, China, North Korea and Iran, and the Company’s positioning as a proven provider of hardware, systems and software to address these threats for and with our customers and partners is recognized in the industry. We believe that the Company’s hardware, software and solution offerings, including jet unmanned aerial drones, rocket and hypersonic systems, C5ISR and air defense systems, jet engine and propulsion systems for missiles, drones, hypersonic and supersonic vehicles, microwave electronics for missile, radar and air defense systems and training systems, address mission critical priority areas of the DoD.

Current wording

We do believe that our business is well-positioned, including in areas that the Trump Administration, the DoD, national security related and other customers currently indicate are priorities for future defense spending. As noted above, we believe that there is a generational recapitalization of weapon systems occurring with the U.S. and its allies to address peer and near peer threats, including Russia, China, North Korea and Iran, and the Company’s positioning as a proven provider of military grade hardware, systems and software to address these threats for and with our customers and partners is recognized in the industry. We believe that the Company’s military grade hardware, software and solution offerings, including jet unmanned aerial drones, rocket and hypersonic systems, C5ISR and air defense systems, jet engine and propulsion systems for missiles, drones, hypersonic and supersonic vehicles, microwave electronics for missile, radar and air defense systems and training systems, address mission critical priority areas of the DoD.

Previous wording

Product sales increased $3.9 million to $172.0 million for the three months ended September 29, 2024 from $168.1 million for the three months ended October 1, 2023, primarily as a result of increased production in our US segment. As a percentage of total consolidated revenues, product sales were 62.3% for the three months ended September 29, 2024 as compared to 61.2% for the three months ended October 1, 2023. Service revenues decreased by $2.6 million to $103.9 million for the three months ended September 29, 2024 from $106.5 million for the three months ended October 1, 2023, primarily related to decreased activity in our space and satellite business in our KGS segment.

Current wording

Product sales increased $29.5 million to $200.2 million for the three months ended March 30, 2025 from $170.7 million for the three months ended March 31, 2024, primarily as a result of increased production in our US segment. As a percentage of total consolidated revenues, product sales were 66.2% for the three months ended March 30, 2025 as compared to 61.6% for the three months ended March 31, 2024. Service revenues decreased by $4.1 million to $102.4 million for the three months ended March 30, 2025 from $106.5 million for the three months ended March 31, 2024, primarily related to decreased activity in our space, training and cyber business in our KGS segment.

Previous wording

Cost of Revenues. Cost of revenues increased $5.5 million to $206.7 million for the three months ended September 29, 2024 from $201.2 million for the three months ended October 1, 2023. The increase in cost of revenues was primarily related to the increased revenues as well the impact of increased labor and material costs, with the most notable increased activity in our Unmanned Systems segment.

Current wording

Cost of Revenues. Cost of revenues increased $22.8 million to $229.0 million for the three months ended March 30, 2025 from $206.2 million for the three months ended March 31, 2024. The increase in cost of revenues was primarily related to the increased revenues as well the impact of increased labor and material costs, with the most notable increased activity in our Unmanned Systems segment.

Previous wording

Gross Margin. Gross margin decreased to 25.1% for the three months ended September 29, 2024 from 26.7% for the three months ended October 1, 2023. Margins on services increased to 26.2% for the three months ended September 29, 2024 from 25.8% for the three months ended October 1, 2023. Margins on products decreased to 24.4% for the three months ended September 29, 2024 from 27.3% for the three months end October 1, 2023. Margins in the KGS segment decreased to 27.4% for the three months ended September 29, 2024 from 27.9% for the three months ended October 1, 2023. Margins in the US segment decreased to 17.6% for the three months ended September 29, 2024 from 22.0% for the three months ended October 1, 2023, primarily due to a less favorable mix of products produced and shipped, and from the impact of increased labor and material costs in the three months ended September 29, 2024.

Current wording

Gross Margin. Gross margin decreased to 24.3% for the three months ended March 30, 2025 from 25.6% for the three months ended March 31, 2024. Margins on services increased to 26.1% for the three months ended March 30, 2025 from 25.6% for the three months ended March 31, 2024. Margins on products decreased to 23.4% for the three months ended March 30, 2025 from 25.6% for the three months end March 31, 2024. Margins in the KGS segment decreased to 26.6% for the three months ended March 30, 2025 from 27.3% for the three months ended March 31, 2024. Margins in the US segment decreased to 15.8% for the three months ended March 30, 2025 from 19.5% for the three months ended March 31, 2024, primarily due to a less favorable mix of products produced and shipped, and from the impact of increased labor and material costs in the three months ended March 30, 2025, which are not recoverable under multi-year fixed priced contracts.

Previous wording

Selling, General and Administrative (“SG&A”) Expenses. SG&A expenses increased $1.7 million to $52.6 million for the three months ended September 29, 2024 from $50.9 million for the three months ended October 1, 2023 due primarily to the increased revenue volume and headcount. As a percentage of revenues, SG&A increased to 19.1% at September 29, 2024 from 18.5% at October 1, 2023.

Current wording

Selling, General and Administrative (“SG&A”) Expenses. SG&A expenses increased $2.6 million to $57.0 million for the three months ended March 30, 2025 from $54.4 million for the three months ended March 31, 2024 due primarily to the increased revenue volume and headcount. As a percentage of revenues, SG&A decreased to 18.8% at March 30, 2025 from 19.6% at March 31, 2024.

Previous wording

Research and Development (“R&D”) Expenses. R&D expenses decreased $0.4 million to $9.9 million for the three months ended September 29, 2024 from $10.3 million for the three months ended October 1, 2023, primarily due to decreased development efforts in our space and satellite communications business partially offset with increases in our unmanned systems and microwave products businesses. As a percentage of revenues, R&D decreased to 3.6% for the three months ended September 29, 2024 from 3.8% for the three months ended October 1, 2023. R&D expenses are made by the Company, typically in conjunction with our customers, for the Company to achieve a “first to market” position with our products or technology. We also invest in R&D expenses to achieve market leading “designed in” positions on major programs, platforms or systems.

Current wording

Research and Development (“R&D”) Expenses. R&D expenses increased $0.4 million to $10.0 million for the three months ended March 30, 2025 from $9.6 million for the three months ended March 31, 2024, primarily due to increased development efforts in our space and satellite communications business and our microwave products businesses partially offset with decreases in our unmanned systems. As a percentage of revenues, R&D decreased to 3.3% for the three months ended

Previous wording

Research and Development (“R&D”) Expenses. R&D expenses were $29.7 million for the nine months ended September 29, 2024 and $30.4 million for the nine months ended October 1, 2023, primarily due to decreased development efforts in our space and satellite communications business partially offset with increases in our unmanned systems and microwave products businesses. As a percentage of revenues, R&D expenses decreased to 3.5% for the nine months ended September 29, 2024 from 4.0% for the nine months ended October 1, 2023. R&D expenses are made by the Company, typically in conjunction with our customers, for the Company to achieve a “first to market” position with our products or technology. We also invest in R&D expenses to achieve market leading “designed in” positions on major programs, platforms or systems.

Current wording

March 30, 2025 from 3.5% for the three months ended March 31, 2024. R&D expenses are made by the Company, typically in conjunction with our customers, for the Company to achieve a “first to market” position with our products or technology. We also invest in R&D expenses to achieve market leading “designed in” positions on major programs, platforms or systems.

Previous wording

Total Other Expense, Net. The total other expense, net was $0.7 million for the three months ended September 29, 2024 and $5.4 million for the three months ended October 1, 2023. This decrease in total other expense, net of $4.7 million was primarily related to a decrease in interest expense of $1.9 million as a result of the reduction of debt and the interest rate hedge entered into during the third quarter of 2023 on the Company’s Term Loan A, and an increase in interest income of $3.2 million in the three months ended September 29, 2024, resulting from the increased cash balances following the February 27, 2024 stock offering which raised approximately $331.2 million in net proceeds.

Current wording

Total Other Expense, Net. The total other expense, net was $1.2 million for the three months ended March 30, 2025 and $3.0 million for the three months ended March 31, 2024. This decrease in total other expense, net of $1.8 million was primarily related to a decrease in interest expense of $1.0 million as a result of the reduction of debt and the interest rate hedge entered into during the third quarter of 2023 on the Company’s Term Loan A, and an increase in interest income of $0.9 million in the three months ended March 30, 2025, resulting from the increased cash balances following the February 27, 2024 stock offering which raised approximately $331.2 million in net proceeds.

Previous wording

Provision for Income Taxes. The income tax expense for the three months ended September 29, 2024 was $2.6 million and the income tax expense for the three months ended October 1, 2023 was $3.8 million. For the three months ended September 29, 2024 and October 1, 2023, the Company utilized the discrete effective tax rate method. The discrete method is applied when it is not possible to reliably estimate our full year effective tax rate due to significant permanent differences in relation to pre-tax book income, resulting in significant variability to our effective tax rate.

Current wording

Provision for Income Taxes. Income tax expense decreased $1.8 million to $0.9 million for the three months ended March 30, 2025 from $2.7 million for the three months ended March 31, 2024, primarily as a result of increased tax benefits related to stock based compensation, as well as a change in the tax rate method used to estimate our interim tax provision. For the three months ended March 30, 2025, the Company utilized the annual effective tax rate method based on the forecasted information provided. For the three months ended March 31, 2024, the Company utilized the discrete effective tax rate method. The discrete method is applied when it is not possible to reliably estimate our full year effective tax rate due to significant permanent differences in relation to pre-tax book income, resulting in significant variability to our effective tax rate.

Previous wording

On September 29, 2024, we had approximately $1,294.0 million of total backlog, of which $1,098.6 million was funded. We expect to recognize approximately 19% of the remaining total backlog as revenue in fiscal year 2024, an additional 50% in fiscal year 2025 and the balance thereafter. Our comparable total backlog balance as of October 1, 2023, was approximately $1,165.0 million, of which $850.9 million was funded. Backlog as of September 29, 2024 as compared to October 1, 2023 has increased primarily as a result of contract awards in our Microwave Products, C5ISR, Defense and Rocket Support and Unmanned Systems businesses.

Current wording

On March 30, 2025, we had approximately $1,508.1 million of total backlog, of which $1,173.6 million was funded. We expect to recognize approximately 48% of the remaining total backlog as revenue in fiscal year 2025, an additional 25% in fiscal year 2026 and the balance thereafter. Our comparable total backlog balance as of March 31, 2024, was approximately $1,272.8 million, of which $1,043.9 million was funded. Backlog as of March 30, 2025 as compared to March 31, 2024 has increased primarily as a result of contract awards in our Microwave Products, C5ISR, Defense and Rocket Support and Unmanned Systems businesses.

Previous wording

As of September 29, 2024, we had cash and cash equivalents of $301.5 million compared with cash and cash equivalents of $72.8 million as of December 31, 2023, which includes $39.3 million and $44.1 million, respectively, of cash and cash equivalents held by our foreign subsidiaries. We are not presently aware of any restrictions on the repatriation of these funds, however, earnings of these foreign subsidiaries are essentially considered permanently invested in these foreign subsidiaries. If these funds were needed to fund our operations or satisfy obligations in the United States they could be repatriated, and their repatriation into the United States may cause us to incur additional foreign withholding taxes. We do not currently intend to repatriate these earnings.

Current wording

As of March 30, 2025, we had cash and cash equivalents of $263.7 million compared with cash and cash equivalents of $329.3 million as of December 29, 2024, which includes $27.9 million and $40.2 million, respectively, of cash and cash equivalents held by our foreign subsidiaries. We are not presently aware of any restrictions on the repatriation of these funds, however, earnings of these foreign subsidiaries are essentially considered permanently invested in these foreign subsidiaries. If these funds were needed to fund our operations or satisfy obligations in the United States they could be repatriated, and their repatriation into the United States may cause us to incur additional foreign withholding taxes. We do not currently intend to repatriate these earnings.

Previous wording

Our total long-term debt decreased from $227.5 million at December 31, 2023 to $187.5 million at September 29, 2024, reflecting the $5.0 million in aggregate principal payments we have made on the Term Loan A and a net $35.0 million repayment made during the nine months ended September 29, 2024 on our Revolving Credit Facility. On February 18, 2022, we completed the refinancing of our outstanding $90 million revolving credit facility and $300 million of Senior Secured Notes, with a new 5-year $200 million Revolving Credit Facility and 5-year $200 million Term Loan A. As of September 29, 2024, the Company has made an aggregate of $12.5 million of principal payments on Term Loan A, and has no amounts outstanding under the new Revolving Credit Facility, with $200.0 million remaining in borrowing capacity, less approximately $8.0 million for outstanding letters of credit (as more fully described in Note 9 of the accompanying unaudited condensed consolidated financial statements).

Current wording

March 30, 2025. On February 18, 2022, we completed the refinancing of our outstanding $90 million revolving credit facility and $300 million of Senior Secured Notes, with a new 5-year $200 million Revolving Credit Facility and 5-year $200 million Term Loan A. As of March 30, 2025, the Company has made an aggregate of $17.5 million of principal payments on Term Loan A, and has no amounts outstanding under the new Revolving Credit Facility, with $200.0 million remaining in borrowing capacity, less approximately $8.9 million for outstanding letters of credit (as more fully described in Note 9 of the accompanying unaudited condensed consolidated financial statements).

Previous wording

We use our operating cash flow to finance trade accounts receivable, fund necessary increases in inventory including increasing inventory stock levels and advance buys in larger lot sizes to gain pricing benefits where possible, in order to mitigate the impact of supply chain disruptions and price increases, utilize working capital to fund revenue growth, fund prepayments required for long lead items necessary for production, fund internal investments of engineering and software development costs, fund capital expenditures, our internal research and development investments and our ongoing operations, service our debt, enhance our security infrastructure, including cyber security infrastructure, and make strategic acquisitions. Financing trade accounts receivable is necessary because, on average, our customers do not pay us as quickly as we pay our vendors and employees for their goods and services because a number of our receivables are contractually billable and due to us only when certain contractual milestones are achieved. Financing increases in inventory balances are necessary to fulfill shipment requirements to meet delivery schedules of our customers, to fund advanced inventory purchases to mitigate supply chain disruptions, and to fund production for work in progress and increased inventory levels and prepayments for long-lead materials related to production and revenue growth. These financing requirements have increased and have recently negatively impacted our operating cash flows due to actions we have taken to advance inventory purchases in an attempt to mitigate supply chain disruptions and to bolster our inventory levels. For the nine months ended September 29, 2024, approximately $35.5 million of operating cash flow use was related to increases in prepaid expenses and other assets which also include certain vendor prepayments and deposits related to the procurement of long-lead materials and inventory. Cash from continuing operations is primarily derived from our customer contracts in progress and associated changes in working capital components. Our days sales outstanding (“DSO”) have decreased from 116 days as of December 31, 2023 to 105 days at September 29, 2024, primarily reflecting the timing of outstanding contractual billing milestones. Our DSOs are impacted by the achievement of contractual billing milestones such as equipment shipments and deliveries on certain products, and for certain flight requirements that must be fulfilled on certain aerial target programs, or final milestone billings which are not due until completion on certain projects, and therefore we are unable to contractually bill for amounts outstanding related to those milestones at this time.

Current wording

We use our operating cash flow to finance trade accounts receivable, fund necessary increases in inventory including increasing inventory stock levels and advance buys in larger lot sizes to gain pricing benefits where possible, in order to mitigate the impact of supply chain disruptions and price increases, utilize working capital to fund revenue growth, fund prepayments required for long lead items necessary for production, fund internal investments of engineering and software development costs, fund capital expenditures, our internal research and development investments and our ongoing operations, service our debt, enhance our security infrastructure, including cyber security infrastructure, and make strategic acquisitions. Financing trade accounts receivable is necessary because, on average, our customers do not pay us as quickly as we pay our vendors and employees for their goods and services because a number of our receivables are contractually billable and due to us only when certain contractual milestones are achieved. Financing increases in inventory balances are necessary to fulfill shipment requirements to meet delivery schedules of our customers, to fund advanced inventory purchases to mitigate supply chain disruptions, and to fund production for work in progress and increased inventory levels and prepayments for long-lead materials related to production and revenue growth. These financing requirements have increased and have recently negatively impacted our operating cash flows due to actions we have taken to advance inventory purchases in an attempt to mitigate supply chain disruptions and to bolster our inventory levels. For the three months ended March 30, 2025, approximately $12.8 million of operating cash flow use was related to increases in prepaid expenses and other assets which also include certain vendor prepayments and deposits related to the procurement of long-lead materials and inventory. Cash from continuing operations is primarily derived from our customer contracts in progress and associated changes in working capital components. Our days sales outstanding (“DSO”) have increased from 104 days as of December 29, 2024 to 109 days at March 30, 2025, primarily reflecting the timing of outstanding contractual billing milestones. Our DSO's are impacted by the achievement of contractual billing milestones such as equipment shipments and deliveries on certain products, and for certain flight requirements that must be fulfilled on certain aerial target programs, or final milestone billings which are not due until completion on certain projects, and therefore we are unable to contractually bill for amounts outstanding related to those milestones at this time.

Previous wording

Net cash provided by operating activities was $4.1 million for the nine months ended September 29, 2024. Net cash provided by operating activities for the nine months ended September 29, 2024 was primarily a result of net income of $12.4 million and changes in net working capital accounts of $70.7 million partially offset by noncash charges of $62.4 million which includes stock compensation, depreciation and amortization. Net cash used in operating activities was $2.2 million for the nine months ended October 1, 2023. Net cash used in operating activities from continuing operations for the nine months ended October 1, 2023 was primarily a result of the net loss of $3.2 million and changes in net working capital accounts of $51.9 million offset by noncash charges $53.1 million which includes stock compensation, depreciation and amortization.

Current wording

Net cash used in operating activities was $29.2 million for the three months ended March 30, 2025. Net cash used in operating activities for the three months ended March 30, 2025 was primarily a result of net income of $4.5 million and changes in net working capital accounts of $56.0 million partially offset by noncash charges of $22.3 million which includes stock compensation, depreciation and amortization. Net cash provided by operating activities was $0.7 million for the three months ended March 31, 2024. Net cash provided by operating activities from continuing operations for the three months ended March 31, 2024 was primarily a result of the net gain of $1.3 million and changes in net working capital accounts of $22.3 million partially offset by noncash charges of $21.7 million which includes stock compensation, depreciation and amortization.

Previous wording

Net cash used in investing activities was $56.1 million for the nine months ended September 29, 2024 and is primarily comprised of $44.6 million in capital expenditures and $11.3 million in cash paid for the remaining minority interests in KTT Core (along with a corresponding issuance of 583,700 shares of Kratos common stock valued at $11.3 million). During the nine months ended September 29, 2024, capital expenditures of approximately $20.5 million were incurred in our US business, primarily related to our unmanned tactical initiative. We expect our capital expenditures for fiscal year 2024 to continue to be significant for investments we are making, specifically in our US business totaling approximately $30 to $34 million, including approximately $18 to $22 million for capital aerial targets and related support equipment. The Company is currently producing or anticipates producing several versions of the Valkyrie within the 24 unit production, based on routine communications with the customers, which mix and ultimate duration of the 24 Lot Build may change as a result. Net cash used in investing activities for the nine months ended October 1, 2023 is comprised of $33.1 million in capital expenditures partially offset by receipt of $8.3 million of proceeds from the sale of Valkyries which had been previously built as capital assets as they were produced ahead of government contract award. During the nine months ended October 1, 2023, capital expenditures of approximately $16.5 million were incurred in our US business, primarily related to our unmanned tactical initiative. The Company made the decision in the first quarter of 2023 to move forward with its second serial production run of 12 next generation Valkyries. The total estimated amount related to production of Valkyries and related equipment, ahead of government contract award, including the first and second production run, is $18 to $22 million of the estimated 2024 capital expenditures for the US business.

Current wording

Net cash used in investing activities was $22.6 million for the three months ended March 30, 2025 and is comprised of $22.6 million in capital expenditures. During the three months ended March 30, 2025, capital expenditures of approximately $8.3 million were incurred in our US business, primarily related to our unmanned tactical initiative. We expect our capital expenditures for fiscal year 2025 to continue to be significant for investments we are making, specifically in our US business totaling approximately $35 to $40 million, including approximately $18 to $22 million for capital aerial targets and related support equipment. The Company is currently producing or anticipates producing several versions of the Valkyrie within the 24 unit production, based on routine communications with the customers, which mix and ultimate duration of the 24 Lot Build may change as a result. Net cash used in investing activities for the three months ended March 31, 2024 is comprised of $16.6 million in capital expenditures. During the three months ended March 31, 2024, capital expenditures of approximately $6.8 million were incurred in our US business, primarily related to our unmanned tactical initiative.

Previous wording

Net cash provided by financing activities was $280.6 million for the nine months ended September 29, 2024, which included employee stock purchase plan receipts of $8.2 million and net proceeds from the issuance of common stock of approximately $330.7 million. These proceeds were partially offset by $5.0 million of principal payments on our Term Loan A and a $45.0 million payment (partially offset by a $10.0 million draw) on our Revolving Credit Facility, payroll withholding taxes paid from vested restricted stock traded for taxes of $17.3 million and payments made on financing lease obligations of $1.0 million. Net cash used in financing activities was $12.1 million for the nine months ended October 1, 2023, which included $3.8 million of principal payments on our $200 million Term Loan A and a $64.0 million payment (partially offset by a $54.0 million draw) on the new Revolving Credit Facility, payroll withholding taxes paid from vested restricted stock of $3.6 million and payments made on financing lease obligations of $1.2 million. These uses were partially offset by employee stock purchase plan receipts of $6.5 million.

Current wording

Net cash used in financing activities was $14.5 million for the three months ended March 30, 2025, which included $2.5 million of principal payments on our Term Loan A, payroll withholding taxes paid from vested restricted stock traded for taxes of $16.2 million and payments made on financing lease obligations of $0.4 million. These uses were partially offset by employee stock purchase plan receipts of $4.6 million, Net cash provided by financing activities was $282.6 million for the three months ended March 31, 2024, which included employee stock purchase plan receipts of $3.6 million and net proceeds from the issuance of common stock of approximately $330.7 million. These proceeds were partially offset by $1.3 million of principal payments on our Term Loan A and a $45.0 million payment (partially offset by a $10.0 million draw) on our Revolving Credit Facility, payroll withholding taxes paid from vested restricted stock traded for taxes of $15.1 million and payments made on financing lease obligations of $0.3 million.

Previous wording

On February 18, 2022, the Company completed the refinancing of its then-outstanding $90 million revolving credit facility and $300 million Senior Secured Notes, with a new 5-year $200 million Revolving Credit Facility and 5-year $200 million Term Loan A. The Company incurred debt issuance costs of $3.3 million associated with the 2022 Credit Facility. As of September 29, 2024, the Company has made an aggregate of $12.5 million of principal payments on Term Loan A. As of September 29, 2024, the Company has no amounts outstanding under the Revolving Credit Facility, with $200.0 million remaining in borrowing capacity, less approximately $8.0 million for outstanding letters of credit.

Current wording

On February 18, 2022, the Company completed the refinancing of its then-outstanding $90 million revolving credit facility and $300 million Senior Secured Notes, with a new 5-year $200 million Revolving Credit Facility and 5-year $200 million Term Loan A. The Company incurred debt issuance costs of $3.3 million associated with the 2022 Credit Facility. As of March 30, 2025, the Company has made an aggregate of $17.5 million of principal payments on Term Loan A. As of March 30, 2025, the Company has no amounts outstanding under the Revolving Credit Facility, with $200.0 million remaining in borrowing capacity, less approximately $8.9 million for outstanding letters of credit.

Previous wording

Borrowings under the Revolving Credit Facility and the Term Loan A may take the form of base rate loans or SOFR loans. Base rate loans under the Credit Agreement will bear interest at a rate per annum equal to the sum of the Applicable Margin (as defined in the Credit Agreement) from time to time in effect plus the highest of (i) the Agent’s (as defined in the Credit Agreement) prime lending rate, as in effect at such time, (ii) the Federal Funds Rate (as defined in the Credit Agreement), as in effect at such time, plus 0.50%, (iii) the Adjusted Term SOFR (as defined in the Credit Agreement) for a one-month tenor in effect on such day, plus 1.00% and (iv) 1.00%. SOFR loans will bear interest a rate per annum equal to the sum of the Applicable Margin from time to time in effect plus the Adjusted Term SOFR for an Interest Period (as defined in the Credit Agreement) selected by the Company of one, three or six months. The Applicable Margin varies between 1.25% and 2.25% per annum for SOFR loans and between 0.25% and 1.25% per annum for base rate loans, and is based on the Company’s total net leverage ratio from time to time.

Current wording

Margin (as defined in the Credit Agreement) from time to time in effect plus the highest of (i) the Agent’s (as defined in the Credit Agreement) prime lending rate, as in effect at such time, (ii) the Federal Funds Rate (as defined in the Credit Agreement), as in effect at such time, plus 0.50%, (iii) the Adjusted Term SOFR (as defined in the Credit Agreement) for a one-month tenor in effect on such day, plus 1.00% and (iv) 1.00%. SOFR loans will bear interest a rate per annum equal to the sum of the Applicable Margin from time to time in effect plus the Adjusted Term SOFR for an Interest Period (as defined in the Credit Agreement) selected by the Company of one, three or six months. The Applicable Margin varies between 1.25% and 2.25% per annum for SOFR loans and between 0.25% and 1.25% per annum for base rate loans, and is based on the Company’s total net leverage ratio from time to time.