mec(MEC) - 2025 Q2 - Quarterly Report

Cautionary Statement Regarding Forward-Looking Statements Important Factors Affecting Results Outlines significant factors that could cause actual results to differ from forward-looking statements - Macroeconomic conditions (inflation, interest rates, labor availability, material cost pressures, inconsistent customer demand) have negatively impacted and may continue to impact the Company's business, financial condition, cash flows, and results of operations[9] - Key risks include developments in customer industries, production scheduling, competition, maintaining expertise, loss of large customers, volatility in raw material prices, geopolitical developments, and the ability to recruit and retain personnel[9] - Additional risks involve manufacturing issues, successful acquisition integration, developing new processes, information technology systems, legal disputes, capital-intensive industry, and the ability to remediate material weakness in internal control over financial reporting[9][11] PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Presents unaudited condensed consolidated financial statements, including balance sheets, income, cash flows, equity, and notes Condensed Consolidated Balance Sheets Summarizes the company's financial position, detailing assets, liabilities, and shareholders' equity at specific dates Condensed Consolidated Balance Sheet Summary (in thousands) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total current assets | $113,728 | $112,944 | $784 | 0.7% | | Total assets | $433,745 | $445,570 | $(11,825) | -2.7% | | Total current liabilities | $69,596 | $64,592 | $5,004 | 7.7% | | Bank revolving credit notes | $69,280 | $79,725 | $(10,445) | -13.1% | | Total liabilities | $186,902 | $193,817 | $(6,915) | -3.6% | | Total shareholders' equity | $246,843 | $251,753 | $(4,910) | -2.0% | Condensed Consolidated Statements of Comprehensive Income (Loss) Presents the company's net sales, income from operations, and net income (loss) over specific periods Three Months Ended June 30, 2025 and 2024 (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (in thousands) | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :-------------------- | :------- | | Net sales | $132,328 | $163,636 | $(31,308) | -19.1% | | Income from operations| $76 | $8,150 | $(8,074) | -99.1% | | Net income (loss) | $(1,097) | $3,782 | $(4,879) | -129.0% | | Basic EPS | $(0.05) | $0.18 | $(0.23) | -127.8% | | Diluted EPS | $(0.05) | $0.18 | $(0.23) | -127.8% | Six Months Ended June 30, 2025 and 2024 (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (in thousands) | % Change | | :-------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Net sales | $267,907 | $324,905 | $(56,998) | -17.5% | | Income from operations| $1,654 | $15,780 | $(14,126) | -89.5% | | Net income (loss) | $(1,077) | $7,023 | $(8,100) | -115.3% | | Basic EPS | $(0.05) | $0.34 | $(0.39) | -114.7% | | Diluted EPS | $(0.05) | $0.34 | $(0.39) | -114.7% | Condensed Consolidated Statements of Cash Flows Details cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Cash Flow Summary (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Net cash provided by operating activities | $23,307 | $33,900 | $(10,593) | -31.2% | | Net cash used in investing activities | $(5,402) | $(6,767) | $1,365 | 20.2% | | Net cash used in financing activities | $(17,905) | $(27,491) | $9,586 | 34.9% | | Net increase (decrease) in cash and cash equivalents | $0 | $(358) | $358 | -100.0% | Condensed Consolidated Statements of Shareholders' Equity Outlines changes in shareholders' equity, including paid-in capital, treasury shares, and retained earnings Condensed Consolidated Shareholders' Equity Summary (in thousands) | Equity Component (in thousands) | Balance as of Dec 31, 2024 | Balance as of Jun 30, 2025 | Change (in thousands) | % Change | | :------------------------------ | :------------------------- | :------------------------- | :-------------------- | :------- | | Additional Paid-in-Capital | $207,076 | $207,850 | $774 | 0.4% | | Treasury Shares | $(15,409) | $(20,016) | $(4,607) | 29.9% | | Retained Earnings | $60,086 | $59,009 | $(1,077) | -1.8% | | Total Shareholders' Equity | $251,753 | $246,843 | $(4,910) | -2.0% | - Net loss of $1,097 thousand for the three months ended June 30, 2025, contributed to the decrease in retained earnings[21] - Treasury stock purchases amounted to $2,860 thousand for the three months ended June 30, 2025, increasing the negative balance[21] Notes to Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the condensed consolidated financial statements Note 1. Basis of presentation Describes the company's business, operations, accounting policies, and recent accounting pronouncements - MEC is a leading U.S.-based, vertically-integrated, value-added manufacturing partner providing solutions from concept to production, serving diverse end markets including commercial vehicles, construction, powersports, agriculture, and military[25] - The Company operates 27 facilities, with 26 in operation, across multiple states, and recently added four facilities in Illinois and North Carolina through the Accu-Fab acquisition[25] - ASU 2024-03 (Expense Disaggregation Disclosures) is effective for fiscal years beginning after December 15, 2026, requiring disaggregation of certain expenses and disclosure of total selling expenses[27] - ASU 2023-09 (Improvements to Income Tax Disclosures) is effective for fiscal years beginning after December 15, 2024, aiming to enhance transparency in income tax information, which the Company believes will expand disclosures but not materially impact financial statements[28][29] Note 2. Select balance sheet data Provides detailed breakdowns of inventory, property, plant and equipment, goodwill, and intangible assets Inventory Components (in thousands) | Inventory Component (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Finished goods and purchased parts | $24,526 | $25,952 | | Raw materials | $19,595 | $19,386 | | Work-in-process | $9,826 | $9,418 | | Total Inventories, net | $53,947 | $54,756 | Property, Plant and Equipment, Net (in thousands) | Property, Plant and Equipment (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------- | :------------ | :---------------- | | Total property, plant and equipment, gross | $432,720 | $427,352 | | Less accumulated depreciation | $285,407 | $270,824 | | Total property, plant and equipment, net | $147,313 | $156,528 | - Depreciation expense for the six months ended June 30, 2025, was $15,619 thousand, up from $15,179 thousand in the prior year[32] - Goodwill balance remained unchanged at $92,650 thousand from December 31, 2024, to June 30, 2025[34] Intangible Assets, Net (in thousands) | Intangible Assets (in thousands) | June 30, 2025 Net | December 31, 2024 Net | | :------------------------------- | :---------------- | :-------------------- | | Customer relationships and contracts | $35,832 | $38,208 | | Trade name | $5,117 | $5,856 | | Developed technology | $3,500 | $3,850 | | Patents | $8 | $9 | | Total amortizable intangible assets, net | $44,457 | $47,923 | | Indefinite lived brand name asset | $3,811 | $3,811 | | Total intangible assets, net | $48,268 | $51,734 | - Amortization expense for intangible assets was $3,466 thousand for both the three and six months ended June 30, 2025 and 2024[36] Note 3. Debt Details the company's credit agreement, revolving credit facility, financial covenants, and interest rates - The Company amended its credit agreement on June 26, 2025, increasing the revolving credit facility to $350,000 thousand from $250,000 thousand by exercising a $100,000 thousand accordion feature[38][41] - As of June 30, 2025, the consolidated total leverage ratio was 1.36 to 1.00 (covenant maximum 3.50 to 1.00) and the consolidated interest coverage ratio was 5.59 to 1.00 (covenant minimum 3.00 to 1.00), indicating compliance with financial covenants[43][45] - The interest rate on bank revolving credit notes decreased to 5.66% at June 30, 2025, from 6.55% at December 31, 2024[44] - Outstanding bank revolving credit notes decreased to $69,280 thousand at June 30, 2025, from $79,725 thousand at December 31, 2024[45] Note 4. Leases Presents information on finance, operating, short-term, and variable lease expenses and related cash flows Lease Expense Details (in thousands) | Lease Expense (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total finance lease expense | $199 | $131 | $341 | $243 | | Operating lease expense | $1,321 | $1,353 | $2,647 | $2,693 | | Short-term lease expense | $326 | $159 | $477 | $311 | | Variable lease expense | $49 | $60 | $164 | $112 | | Lease income | $(547) | $(537) | $(1,094) | $(1,069) | | Total lease expense | $1,348 | $1,166 | $2,535 | $2,290 | - Cash paid for operating lease liabilities for the six months ended June 30, 2025, was $3,074 thousand, up from $2,980 thousand in the prior year[52] - Right-of-use assets obtained for operating leases significantly increased to $2,798 thousand for the six months ended June 30, 2025, from $337 thousand in the prior year[52] Note 5. Employee stock ownership plan Details the ESOP plan, including expense recognition, plan amendments, and allocated shares - The Company recorded no ESOP expense for the three and six months ended June 30, 2025 and 2024[53] - As of January 1, 2025, the ESOP plan was amended to reduce the distribution period to full distribution on the annual distribution date of the year following separation[54] - Allocated ESOP shares decreased to 1,904,459 at June 30, 2025, from 3,474,467 at December 31, 2024[55] Note 6. Retirement plans Describes the company's 401(k) plan, including employer matching contributions and associated expenses - The Company provides a 50% match for employee 401(k) contributions, up to 6%[57] Employer 401(k) Match Expense (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Employer match expense| $801 | $922 | $1,747 | $1,976 | Note 7. Income taxes Provides details on income tax expense/benefit, effective tax rates, and impacts of recent tax legislation Income Tax Expense and Effective Tax Rate | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax (benefit) expense | $(225) | $1,399 | $(234) | $2,433 | | Effective tax rate (ETR) | 17.02% | 27.00% | 17.85% | 25.73% | - The decrease in income tax expense/benefit is primarily due to a pre-tax loss in the current year period compared to pre-tax income in the prior year[125][134] - The U.S. enacted H.R. 1 (One Big Beautiful Bill Act) on July 4, 2025, which is expected to impact deferred tax liability and income tax payable due to provisions for 100% bonus depreciation and full expensing of R&D expenditures[61] - As of June 30, 2025, there is one unrecognized tax benefit requiring recognition, which would affect the Company's effective tax rate if recognized[62] Note 8. Commitments and contingencies Addresses management's assessment of potential losses from litigation and claims - Management believes that the likelihood of loss from current litigation and claims is remote, or any reasonably possible loss is not expected to have a material adverse impact on the condensed consolidated financial statements[64] Note 9. Deferred compensation Outlines the deferred compensation plan for eligible employees and related expenses and liabilities - Eligible employees can defer a portion of their compensation (up to 50% of base salary, up to 100% of annual short-term cash incentive) into a non-funded deferred compensation plan[65][68] Deferred Compensation Expense (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Deferred compensation elected | $75 | $83 | $675 | $447 | | Total expense | $383 | $53 | $310 | $285 | - The short-term portion of accrued deferred compensation increased to $1,382 thousand at June 30, 2025, from $251 thousand at December 31, 2024[68] Note 10. Self-Funded insurance Describes the company's self-funded employee medical benefits and associated expenses and liabilities - The Company is self-funded for employee medical benefits and has an aggregate stop loss limit to mitigate risk[69] Self-Funded Insurance Expenses (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Expenses related to contract | $3,642 | $6,382 | $7,772 | $12,551 | - Estimated accrued liability for unpaid claims decreased to $805 thousand at June 30, 2025, from $1,184 thousand at December 31, 2024[69] Note 11. Segments Confirms the company operates as a single reporting unit and segment within the United States - The Company operates as a single reporting unit and segment, managed on a consolidated basis, providing value-added manufacturing solutions[70] - All sales are generated and assets are located within the United States[71] Note 12. Fair value of financial instruments Discusses fair value measurements for financial instruments and impairment assessments for non-financial assets Fair Value Measurements of Financial Instruments (in thousands) | Financial Instrument | Balance at June 30, 2025 (in thousands) | Fair Value Measurements (Level 1) | | :------------------- | :-------------------------------------- | :-------------------------------- | | Deferred compensation liability | $5,701 | $5,701 | - Deferred compensation liabilities are recorded at amounts due to participants and are classified as Level 1 or Level 2 in the fair value hierarchy, with the current balance entirely Level 1[77] - No impairment was recognized for non-financial assets (goodwill, intangible assets, PP&E) as of June 30, 2025[78] Note 13. Earnings Per Share Presents basic and diluted earnings per share calculations and weighted average shares outstanding Earnings Per Share (EPS) | EPS Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic EPS | $(0.05) | $0.18 | $(0.05) | $0.34 | | Diluted EPS| $(0.05) | $0.18 | $(0.05) | $0.34 | Weighted Average Shares Outstanding | Shares Outstanding | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Basic weighted average shares | 20,514,496 | 20,602,650 | 20,517,579 | 20,544,292 | | Diluted weighted average shares | 20,699,151 | 21,034,780 | 20,718,822 | 20,914,499 | Note 14. Revenue Recognition Details contract balances, revenue recognition, and net sales by product category and end market Contract Balances (in thousands) | Contract Balances (in thousands) | As of December 31, 2024 | As of June 30, 2025 | | :------------------------------- | :---------------------- | :------------------ | | Contract Assets | $4,761 | $3,778 | | Contract Liabilities | $3,462 | $2,536 | - Revenue recognized from deferred revenue (contract liability) was $2,514 thousand for the six months ended June 30, 2025, compared to $2,344 thousand in the prior year[83] Net Sales by Product Category (in thousands) | Product Category (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Outdoor sports | $2,107 | $2,205 | $3,892 | $4,364 | | Fabrication | $63,956 | $87,201 | $131,814 | $178,115 | | Performance structures | $39,860 | $47,795 | $83,194 | $93,564 | | Tube | $20,560 | $19,846 | $37,070 | $38,921 | | Tank | $9,296 | $12,625 | $19,185 | $23,701 | | Total, net sales | $132,328 | $163,636 | $267,907 | $324,905 | Net Sales by End Market (in thousands) | End Market (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Commercial vehicle | $49,134 | $62,130 | $100,010 | $121,084 | | Construction & access | $20,173 | $27,230 | $39,698 | $55,676 | | Powersports | $19,625 | $30,306 | $41,875 | $60,597 | | Agriculture | $9,233 | $14,639 | $20,168 | $29,597 | | Military | $8,342 | $6,579 | $16,829 | $14,530 | | Other | $25,821 | $22,752 | $49,327 | $43,421 | | Total, net sales | $132,328 | $163,636 | $267,907 | $324,905 | Note 15. Concentration of major customers Identifies major customers and their percentage contribution to net sales and accounts receivable Major Customer Concentration | Customer | Net Sales (3 Months Ended June 30, 2025) | Net Sales (3 Months Ended June 30, 2024) | Net Sales (6 Months Ended June 30, 2025) | Net Sales (6 Months Ended June 30, 2024) | Accounts Receivable (June 30, 2025) | Accounts Receivable (Dec 31, 2024) | | :------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :---------------------------------- | :--------------------------------- | | A | 15.5% | 16.2 % | 16.1 % | 16.4 % | 10.7% | 11.1 % | | B | 11.3 % | 13.0 % | 11.0 % | 13.5 % | 12.1 % | <10 % | | C | <10 % | 11.0 % | <10 % | 10.4 % | <10 % | <10 % | | D | <10 % | <10 % | <10 % | <10 % | 11.0 % | 15.2 % | Note 16. Stock-based compensation Provides information on the incentive plan, stock-based compensation expense, and equity awards - The Company has 1,589,590 shares available for issuance under the 2019 Omnibus Incentive Plan as of June 30, 2025[87] Stock-Based Compensation Expense (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Stock-based compensation expense | $1,007 | $1,338 | $2,108 | $2,495 | - No stock options were granted in the three or six months ended June 30, 2025 or 2024. 125,363 options were exercised in the six months ended June 30, 2025, with a weighted average strike price of $11.69[90] - The Company granted 323,137 RSUs (inclusive of director awards) and 169,062 PSUs during the six months ended June 30, 2025[91][92] - PSUs are earned based on a 3-year average Return on Invested Capital (ROIC) and a 2027 adjusted EBITDA target (for 2025 grants)[92] Note 17. Common Equity Details changes in common shares outstanding due to treasury stock purchases and stock-based compensation Common Shares Outstanding | Shares Outstanding | As of December 31, 2024 | As of June 30, 2025 | | :----------------- | :---------------------- | :------------------ | | Shares Outstanding | 20,416,908 | 20,299,977 | - Treasury stock purchases reduced outstanding shares by 304,136 during the six months ended June 30, 2025[94] - Common stock issued (including stock-based compensation impact) increased outstanding shares by 187,205 during the six months ended June 30, 2025[94] Note 18. Subsequent Events Discloses significant events occurring after the reporting period, including acquisitions and restructuring plans - On July 1, 2025, the Company acquired Accu-Fab for $140,500 thousand, subject to customary adjustments, financed by borrowing under its Credit Agreement[96] - Accu-Fab is a vertically integrated manufacturing partner serving critical power infrastructure, data center, and renewable energy end-markets[96] - The Company incurred $2,378 thousand in non-recurring transaction costs related to the Accu-Fab acquisition as of June 30, 2025[96] - On August 5, 2025, the Company initiated a restructuring plan to consolidate three warehouses and one manufacturing facility, expecting $5,000-$7,000 thousand in total restructuring costs[97] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management's perspective on financial condition, operating results, liquidity, and macroeconomic impacts Overview of Business and Macroeconomic Conditions Provides an overview of the company's business and the impact of current macroeconomic conditions - MEC is a leading U.S.-based, vertically-integrated manufacturing partner providing solutions from design to production for diverse end markets[100] - Macroeconomic conditions, including elevated interest rates, inconsistent customer demand, material cost inflation, and labor availability, have negatively impacted the Company and are expected to continue through 2025[102] Assessment of Performance Evaluates key performance indicators, including non-GAAP measures like EBITDA and free cash flow - Net sales are affected by macroeconomic conditions, weather, acquisitions, and customer production schedules, recognized at shipment or delivery[103] - Manufacturing margins are net sales less cost of sales, with commodity price fluctuations largely mitigated by contractual pass-through agreements with customers[104] - Key non-GAAP performance indicators include EBITDA, EBITDA Margin, Adjusted EBITDA, Adjusted EBITDA Margin, and Free Cash Flow, used by management and investors to evaluate operating performance[107][108][109] EBITDA and Adjusted EBITDA Performance (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | EBITDA | $9,679 | $17,541 | $20,740 | $34,425 | | Adjusted EBITDA | $13,675 | $19,639 | $26,667 | $38,159 | | EBITDA Margin | 7.3% | 10.7% | 7.7% | 10.6% | | Adjusted EBITDA Margin| 10.3% | 12.0% | 10.0% | 11.7% | Free Cash Flow Analysis (in thousands) | Cash Flow Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $23,307 | $33,900 | | Capital expenditures | $5,408 | $6,874 | | Free cash flow | $17,899 | $27,026 | - Free cash flow decreased by $9,127 thousand (33.8%) for the six months ended June 30, 2025, due to lower cash from operating activities, partially offset by reduced capital expenditures[117] Consolidated Results of Operations Analyzes the company's net sales, manufacturing margins, income from operations, and net income (loss) Three Months Consolidated Results (in thousands) | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (in thousands) | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :-------------------- | :------- | | Net sales | $132,328 | $163,636 | $(31,308) | -19.1% | | Manufacturing margins | $13,624 | $22,277 | $(8,653) | -38.8% | | Income from operations| $76 | $8,150 | $(8,074) | -99.1% | | Net income (loss) | $(1,097) | $3,782 | $(4,879) | -129.0% | - Net sales decreased by 19.1% due to lower customer demand across most key end markets and customer de-stocking, partially offset by new projects in the 'Other' end market and increased military aftermarket demand[119] - Manufacturing margin percentage decreased by 330 basis points to 10.3% due to reduced absorption of fixed costs from lower sales[121] Six Months Consolidated Results (in thousands) | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (in thousands) | % Change | | :-------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Net sales | $267,907 | $324,905 | $(56,998) | -17.5% | | Manufacturing margins | $29,152 | $43,209 | $(14,057) | -32.5% | | Income from operations| $1,654 | $15,780 | $(14,126) | -89.5% | | Net income (loss) | $(1,077) | $7,023 | $(8,100) | -115.3% | | Basic EPS | $(0.05) | $0.34 | $(0.39) | -114.7% | | Diluted EPS | $(0.05) | $0.34 | $(0.39) | -114.7% | - Six-month net sales decreased by 17.5% due to reduced customer demand and de-stocking, partially offset by new initiatives in 'Other' and increased military aftermarket demand[128] - Six-month manufacturing margin percentage decreased by 240 basis points to 10.9% due to reduced absorption of fixed costs from lower sales[130] Liquidity and Capital Resources Discusses cash flows from operating, investing, and financing activities, debt, and contractual obligations Cash Flow Activities (in thousands) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :----------------------------- | :-------------------- | :------- | | Net cash provided by operating activities | $23,307 | $33,900 | $(10,593) | -31.2% | | Net cash used in investing activities | $(5,402) | $(6,767) | $1,365 | 20.2% | | Net cash used in financing activities | $(17,905) | $(27,491) | $9,586 | 34.9% | - Operating cash flow decreased due to lower net income and higher cash use from decreased accrued liabilities and less inventory decline, partially offset by reduced cash used for accounts receivable[136] - Investing cash flow decreased due to lower capital expenditures, reflecting a focus on leveraging recent investments and controlling spend[137] - Financing cash flow decreased due to lower debt repayments relative to borrowings and financing costs for the Credit Agreement amendment, partially offset by increased treasury stock purchases ($4,607 thousand vs. $998 thousand)[138] - The revolving credit facility was increased to $350,000 thousand, with $115,923 thousand available as of June 30, 2025 (prior to Accu-Fab acquisition), and the Company remains compliant with debt covenants[139][141][143] Contractual Obligations (in thousands) | Contractual Obligation (in thousands) | Total | 2025 (Remainder) | 2026 – 2027 | 2028 – 2029 | Thereafter | | :------------------------------------ | :------- | :--------------- | :---------- | :---------- | :--------- | | Long-term debt principal payment obligations | $71,155 | $500 | $1,000 | $69,655 | $0 | | Forecasted interest on debt payment obligations | $23,916 | $5,543 | $14,744 | $3,629 | $0 | | Finance lease obligations | $942 | $149 | $793 | $0 | $0 | | Operating lease obligations | $33,652 | $3,108 | $12,295 | $10,150 | $8,099 | | Total | $129,665 | $9,300 | $28,832 | $83,434 | $8,099 | Item 3. Quantitative and Qualitative Disclosures About Market Risk Discusses market risks from customer forecasts, interest rates, and commodity prices, and mitigation - Customer order forecasts can fluctuate dramatically, impacting the use and consumption of the Company's products[152] - The Company is exposed to interest rate risk on SOFR-based floating rate borrowings; a hypothetical 100-basis-point increase would result in an additional $0.4 million in interest expense[153][155] - Commodity raw material prices (steel, aluminum, copper, paint) are subject to fluctuations, but the Company mitigates this risk through contractual pass-through agreements with customers[156] Item 4. Controls and Procedures Evaluates disclosure controls, identifies a material weakness in internal control, and outlines remediation - Disclosure controls and procedures were deemed not effective as of June 30, 2025, due to a material weakness in internal control over financial reporting[158] - The material weakness relates to deficiencies in the design and operating effectiveness of internal control over financial reporting concerning the review and approval of journal entries[160] - Remediation efforts include enhancing controls over journal entry review/approval and providing additional training to personnel[161][162] - Despite the material weakness, management believes the condensed consolidated financial statements fairly present the financial position, results of operations, and cash flows[158] PART II. OTHER INFORMATION Item 1. Legal Proceedings Confirms the company is not currently involved in any material litigation proceedings - The Company is not currently a party to any material litigation proceedings[166] Item 1A. Risk Factors States no material changes to risk factors previously disclosed in the Annual Report on Form 10-K - No material changes to the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[167] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Details the company's share repurchase activities under its approved program during the quarter Share Repurchase Activity | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :--------- | :------------------------------- | :--------------------------- | | April 2025 | — | $— | | May 2025 | 58,473 | $16.00 | | June 2025 | 124,864 | $15.41 | | Total | 183,337 | | - The Board of Directors approved a new share repurchase program of up to $25 million through 2026 on October 26, 2023[168] - As of June 2025, $14,497,519 remained available for repurchase under the program[168] Item 5. Other Information Confirms no director or Section 16 officer adopted or terminated trading arrangements during the quarter - No director or Section 16 officer adopted or terminated a 'Rule 10b5-1 trading arrangement' or 'non-Rule 10b5-1 trading arrangement' during the three months ended June 30, 2025[169] Item 6. Exhibits Lists exhibits filed as part of this Quarterly Report, including acquisition agreements and certifications - Key exhibits include the Purchase Agreement for Accu-Fab (Exhibit 2) and the First Amendment to the Amended and Restated Credit Agreement (Exhibit 10)[171] - Certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32) are also filed[171] Signatures Contains official signatures of the company's President & CEO and CFO, certifying the report filing - The report is signed by Jagadeesh A. Reddy, President & Chief Executive Officer, and Rachele M. Lehr, Chief Financial Officer, on August 6, 2025[176]