10q10k10q10k.net

What changed in DUCOMMUN INC /DE/'s 10-K — 2024 vs 2025

vs

Paragraph-level year-over-year comparison of DUCOMMUN INC /DE/'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+347 added−318 removedSource: 10-K (2026-02-26) vs 10-K (2025-02-27)

Top changes in DUCOMMUN INC /DE/'s 2025 10-K

347 paragraphs added · 318 removed · 252 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

58 edited+13 added−8 removed36 unchanged
Biggest changeWe believe that broadening the diversity of our pool of potential qualified applicants at the intern level will support our efforts at a diverse workforce reflective of the population and help us continue to develop a more diverse leadership team as our interns continue in their careers.
Biggest changeWe believe that broadening our pool of potential qualified applicants at the intern level will support our efforts in identifying and recruiting talented candidates that can grow into leadership positions as our interns continue in their careers. 10 Table of Contents Talent Acquisition, Retention, and Development We attract, develop, and retain employee talent by offering competitive compensation packages and fostering a culture of care about their well-being.
Our sales into the Industrial end-use markets are customer focused in various markets and driven primarily by their capital spending and manufacturing outsourcing demands. We continue to broaden and diversify our customer base in the end-use markets we serve by providing innovative product and service solutions by drawing on our core competencies, experience and technical expertise.
Our sales into the Industrial end-use markets are customer focused in various markets and are driven primarily by their capital spending and manufacturing outsourcing demands. We continue to broaden and diversify our customer base in the end-use markets we serve by providing innovative product and service solutions by drawing on our core competencies, experience and technical expertise.
For further information, see Note 16 in the accompanying notes to consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K. In addition, see Risk Factors contained within Part I, Item 1A of this Form 10-K for certain risks related to environmental matters. HUMAN CAPITAL Our employees are critical to our success.
For further information, see Note 15 in the accompanying notes to consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K. In addition, see Risk Factors contained within Part I, Item 1A of this Form 10-K for certain risks related to environmental matters. HUMAN CAPITAL Our employees are critical to our success.
These raw materials are generally available from a number of suppliers and are generally in adequate supply. However, from time to time, and due to the lingering supply chain issues, we have experienced increases in lead times and limited availability of various items including aluminum, titanium and certain other raw materials and/or components.
These raw materials are generally available from a number of suppliers and are generally in adequate supply. However, from time to time, and due to lingering supply chain issues, we have experienced increases in lead times and limited availability of various items including aluminum, titanium and certain other raw materials and/or components.
Structural Systems has been directed by California environmental agencies to investigate and take corrective action for groundwater contamination at its facilities located in Adelanto (a.k.a., El Mirage) and Monrovia, California. Based on currently available information, we have accrued $1.5 million at December 31, 2024 for our estimated liabilities related to these sites.
Structural Systems has been directed by California environmental agencies to investigate and take corrective action for groundwater contamination at its facilities located in Adelanto (a.k.a., El Mirage) and Monrovia, California. Based on currently available information, we have accrued $1.5 million at December 31, 2025 for our estimated liabilities related to these sites.
For additional information on revenues from major customers, see Note 17 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K. RESEARCH AND DEVELOPMENT We perform concurrent engineering with our customers and product development activities under our self-funded programs, as well as under contracts with others.
For additional information on revenues from major customers, see Note 16 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K. RESEARCH AND DEVELOPMENT We perform concurrent engineering with our customers and product development activities under our self-funded programs, as well as under contracts with others.
Backlog is affected by timing differences in the placement of customer orders, and tends to be concentrated in several programs to a greater extent, than our net revenues. As a result of these factors, trends in our overall level of backlog may not be indicative of trends in our future net revenues.
Backlog is affected by timing differences in the placement of customer orders and tends to be concentrated in certain programs to a greater extent than our net revenues. As a result of these factors, trends in our overall level of backlog may not be indicative of trends in our future net revenues.
Further, our revenues from commercial aircraft programs could be affected by changes in our customers’ inventory levels and changes in our customers’ aircraft production build rates as a result of changing demand by their end customer or in order to comply with regulatory requirements.
Further, our revenues from commercial aircraft programs could be affected by changes in our customers’ inventory levels and changes in our customers’ aircraft production build rates as a result of changing demand by their end customers or in order to comply with regulatory requirements.
While the ramp up in production and demand will be slower in the near and medium future, we will continue to identify opportunities to expand our presence and offerings with both major large aircraft manufacturers and their supply chain.
While the ramp up in production and demand will be slower in the near- and medium-term, we will continue to identify opportunities to expand our presence and offerings with both major large aircraft manufacturers and their supply chain.
We have supplemented our organic growth by identifying, acquiring and integrating acquisition opportunities that result in broader, more sophisticated product and service offerings while diversifying and expanding our customer base and markets. For example, in April 2023, we acquired 100% of the outstanding equity interests of BLR Aerospace L.L.C.
We have supplemented our organic growth by identifying, acquiring and integrating businesses that result in broader, more sophisticated product and service offerings while diversifying and expanding our customer base and markets. For example, in April 2023, we acquired 100% of the outstanding equity interests of BLR Aerospace L.L.C.
Concurrent engineering and product development activities are performed for commercial, military and space applications. 8 Table of Contents RAW MATERIALS AND COMPONENTS Raw materials and components used in the manufacturing of our products include aluminum, titanium, steel and carbon fibers, as well as a wide variety of electronic interconnect and circuit card assemblies and components.
Concurrent engineering and product development activities are performed for commercial, military and space applications. RAW MATERIALS AND COMPONENTS Raw materials and components used in the manufacturing of our products include aluminum, titanium, steel and carbon fibers, as well as a wide variety of electronic interconnect and circuit card assemblies and components.
The majority of the long-term agreements (“LTAs”) we enter into do not meet the definition of a contract under Accounting Standards Codification 606 (“ASC 606”) and thus, the backlog amount may or may not be greater than the remaining performance obligations amount as defined under ASC 606.
The majority of the long-term agreements (“LTAs”) we enter into do not meet the definition of a contract under Accounting Standards Codification 606 (“ASC 606”), and thus, the backlog amount may or may not be greater than the remaining 9 Table of Contents performance obligations amount as defined under ASC 606.
AEROSPACE AND DEFENSE END-USE MARKETS OVERVIEW Our largest end-use markets are the aerospace and defense markets and our revenues from these markets represented 96% of our total net revenues in 2024.
AEROSPACE AND DEFENSE END-USE MARKETS OVERVIEW Our largest end-use markets are the aerospace and defense markets, and our revenues from these markets represented 96% of our total net revenues in 2025.
We file electronically with the SEC required reports on Form 8-K, Form 10-Q, and Form 10-K; proxy materials; ownership reports for insiders as required by Section 16 of the Securities Exchange Act of 1934, as amended, registration statements on Forms S-3 and S-8, as necessary; and other forms or reports as required.
In addition, we file electronically with the SEC required reports on Form 8-K, Form 10-Q, and Form 10-K; proxy materials; ownership reports for insiders as required by Section 16 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), registration statements on Forms S-3 and S-8, as necessary; and other forms or reports as required.
DoD”) or other government agencies could result in payment delays, impair our ability to perform work on existing contracts or otherwise impact our operations, negatively impact future orders, and/or cause other disruptions or delays. The U.S. Government could experience a disruption to its operations and/or payments in 2025 as a result of the U.S.
DoW”) or other government agencies could result in payment delays, impair our ability to perform work on existing contracts or otherwise impact our operations, negatively impact future orders, and/or cause other disruptions or delays. The U.S. Government could experience a disruption to its operations and/or payments in 2026 as a result of the U.S.
We are the successor to a business that was founded in California in 1849 and reincorporated in Delaware in 1970. ACQUISITIONS Acquisitions have been an important element of our growth strategy.
We are the successor to a business that was founded in California in 1849 and reincorporated in Delaware in 1970. 4 Table of Contents ACQUISITIONS Acquisitions have been an important element of our growth strategy.
In 2020, we partnered with the Fund II Foundation to utilize its innovative internX platform to provide access to highly qualified and diverse science, technology, engineering and math (“STEM”) students.
Since 2020, we have partnered with the Fund II Foundation to utilize its innovative internX platform to provide access to highly qualified and diverse science, technology, engineering and math (“STEM”) students.
Military components manufactured by us are employed in many of the country’s front-line fighters, bombers, rotary-wing aircraft and support aircraft, as well as land and sea-based applications. Our defense business is diversified among a number of military manufacturers and programs. In the space sector, we are expanding our presence with unmanned aerial vehicles and continue to support various satellite programs.
Military components manufactured by us are employed in many of the country’s front-line fighters, bombers, rotary-wing aircraft and support aircraft, as well as land and sea-based applications. Our defense business is diversified among a number of military manufacturers and programs. In the space sector, we continue to support various satellite programs.
Net revenues related to military and space, commercial aerospace, and Industrial end-use markets in 2024 and 2023 were as follows: 7 Table of Contents Many of our contracts are firm fixed price contracts subject to termination at the convenience of the customer (as well as for default).
Net revenues related to military and space, commercial aerospace, and Industrial end-use markets in 2025 and 2024 were as follows: Many of our contracts are firm fixed price contracts subject to termination at the convenience of the customer (as well as for default).
For example, in 2023, California passed two wide-reaching bills that are likely to impose significant and mandatory climate-related reporting requirements for large public and private companies doing business in the state.
For example, in 2023, California passed two wide-reaching bills that were expected to impose significant and mandatory climate-related reporting requirements for large public and private companies doing business in the state.
Workforce Demographics As of December 31, 2024, we had a highly skilled workforce of 2,180 employees, of which 268 are subject to a collective bargaining agreement expiring in April 2025. Historically, we have been successful in negotiating renewals to expiring agreements without material disruption of operating activities, and believe our relations with our employees are good.
Workforce Demographics As of December 31, 2025, we had a highly skilled workforce of 2,130 employees, of which 282 are subject to a collective bargaining agreement expiring in April 2028. Historically, we have been successful in negotiating renewals to expiring agreements without material disruption of operating activities, and believe our relations with our employees are good.
We define backlog as potential revenue that is based on customer placed POs and LTAs with firm fixed price and expected delivery dates of 24 months or less. Backlog is subject to delivery delays or program cancellations, which are beyond our control.
We define backlog as customer placed POs and LTAs with firm fixed price and expected delivery dates of 24 months or less. Backlog is subject to delivery delays or program cancellations, which are beyond our control.
This notification was followed by the FAA announcing actions to increase its oversight of Boeing as well as not approving production rate increases or additional production lines for the 737 MAX until it is satisfied that Boeing is in full compliance with required quality control procedures.
This notification was followed by the FAA announcing actions to increase its oversight of Boeing as well as declining to approve production rate increases or additional production lines for the 737 MAX until it is satisfied that Boeing attained full compliance with required quality control procedures.
Factors expected to impact these markets include capital and industrial goods spending and general economic conditions. Our products are used in heavy industrial manufacturing systems and certain medical applications. Revenues from the Industrial end-use markets were 4% of our total net revenues during 2024.
Factors expected to impact these markets include capital and industrial goods spending and general economic conditions. Our products are used in heavy industrial manufacturing systems and certain medical applications. Revenues from the Industrial end-use markets were 4% of our total net revenues during 2025. Industrial end-use markets are not part of our core business.
ITEM 1. BUSINESS GENERAL Ducommun Incorporated (“Ducommun,” “the Company,” “we,” “us” or “our”) is a leading global provider of engineering and manufacturing services for high-performance products and high-cost-of failure applications used primarily in the aerospace and defense (“A&D”), industrial, medical and other industries (collectively, “Industrial”).
ITEM 1. BUSINESS GENERAL Ducommun Incorporated (“Ducommun,” “the Company,” “we,” “us” or “our”) is a leading designer and manufacturer of and provider of manufacturing solutions for high-performance products often used in high-cost-of failure applications primarily in the aerospace and defense (“A&D”), industrial, medical and other industries (collectively, “Industrial”).
The 10 Table of Contents SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including our company.
The SEC also maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including our company.
We anticipate that capital expenditures will continue to be required for the 9 Table of Contents foreseeable future to upgrade and maintain our environmental compliance efforts, however, we currently do not expect such expenditures to be material in 2025 and the near term.
We anticipate that capital expenditures will continue to be required for the foreseeable future to upgrade and maintain our environmental compliance efforts; however, we currently do not expect such expenditures to be material in 2026 and the near term.
Revenue based on remaining performance obligations is subject to delivery delays or program cancellations, which are beyond our control. Remaining performance obligations were $1,012.6 million at December 31, 2024. We anticipate recognizing an estimated 70% or $709.0 million of our remaining performance obligations during 2025.
Revenue based on remaining performance obligations is subject to delivery delays or program cancellations, which are beyond our control. Remaining performance obligations were $1,106.0 million at December 31, 2025. We anticipate recognizing an estimated 70% or $774.0 million of our remaining performance obligations during 2026.
Thus, the overall outlook continues to stabilize as we face uncertainties in the environment in the near-to medium-term as airlines are facing persistently high and volatile costs. The global economy is expecting a continued easing of inflation and interest rates, with regional economic and geopolitical difficulties adding uncertainty to the outlook and the financial viability of some airlines and regions.
We face uncertainties in the environment in the near-to medium-term as airlines are facing persistently high and volatile costs even as fuel prices have declined. The global economy is expecting a continued easing of inflation and interest rates, with regional economic and geopolitical difficulties adding uncertainty to the outlook and the financial viability of some airlines and regions.
Revenues from the commercial aerospace end-use market represented 42% of our total net revenues for 2024. The elevated inflation rate, high interest rates, supply chain issues, geopolitical developments, and other events have contributed and/or continues to contribute to a general slowdown in the global economy.
Revenues from the commercial aerospace end-use market represented 38% of our total net revenues for 2025. The elevated interest rates, inflation rate, supply chain issues, the imposition of tariffs and retaliatory measures, geopolitical developments, and other events have contributed and/or continues to contribute to a general slowdown in the global economy.
Due to the effects from the supply chain issues or regulatory compliance requirements, while both major large aircraft manufacturers, Boeing and Airbus SE (“Airbus”), expect improved build rates, it will take longer to reach pre-COVID-19 pandemic levels.
Due to the effects from supply chain issues or regulatory compliance requirements, while Boeing and Airbus expect improved build rates, it will take longer to reach pre-COVID-19 pandemic levels.
See Risk Factors contained within Part I, Item 1A of this Form 10-K for additional information regarding certain risks related to our employees. AVAILABLE INFORMATION General information about us can be obtained from our website address at www.ducommun.com .
See Risk Factors contained within Part I, Item 1A of this Form 10-K for additional information regarding certain risks related to our employees. AVAILABLE INFORMATION General information about us can be obtained from our website address at www.ducommun.com . We may use our website as a distribution channel of material company information.
To support these products, Structural Systems maintains advanced machine milling, stretch-forming, hot-forming, metal bonding, composite layup, and chemical milling capabilities and has an extensive engineering capability to support both design services and manufacturing.
To support these products, Structural Systems maintains extensive engineering capacity to support both design and manufacturing and also maintains advanced machine milling, stretch-forming, hot-forming, metal bonding, composite layup, and chemical milling capabilities.
As a result, we have significant revenues from certain customers. Boeing and RTX Corporation (f/k/a Raytheon Technologies Corporation) (“RTX”) were our largest customers, with Boeing generating 8.2% and RTX generating 18.5% of our 2024 net revenues. Revenues from our top 10 customers, including Boeing and RTX, were 60% of total net revenues during 2024.
As a result, we have significant revenues from certain customers. For 2025, Boeing and RTX Corporation (f/k/a Raytheon Technologies Corporation) (“RTX”) were our largest customers, with Boeing generating 13% and RTX generating 18% of our 2025 net revenues. Revenues from our top 10 customers, including Boeing and RTX, were 61% of total net revenues during 2025.
Boeing’s commercial market outlook forecast projects a three and two tenths percent growth rate in the global fleet over a 20 year period. Based on long-term global economic growth projections of two and six tenths percent average in annual gross domestic product (“GDP”) growth, Boeing projects demand for 43,975 new airplanes over the next 20 years.
Boeing’s commercial market outlook forecast projects a 3.1% growth rate in the global fleet over a 20 year period. Based on long-term global economic growth projections of 2.3% in average annual gross domestic product (“GDP”) growth, Boeing projects demand for 43,600 new airplanes over the next 20 years.
Government enacted a continuing resolution (“CR”) to keep the government funded through March 14, 2025 while the Congress works to enact full year fiscal year 2025 (“FY25”) appropriation bills or an additional CR to fund government departments and agencies after March 14, 2025.
Government enacted a continuing resolution (“CR”) to keep the government funded through January 30, 2026 while Congress works to enact full year fiscal year 2026 (“FY26”) remaining appropriation bills or an additional CR to fund government departments and agencies after January 30, 2026.
Revenues from the military and space end-use market in 2024 represented 54% of our total net revenues during 2024. On December 21, 2024, the U.S.
Revenues from the military and space end-use market in 2025 represented 58% of our total net revenues during 2025. On November 12, 2025, the U.S.
Electronic Systems’ product offerings primarily range from prototype development to complex assemblies as discussed in more detail below. Structural Systems designs, engineers and manufactures various sizes of complex contoured aerostructure components and assemblies and supplies composite and metal bonded structures and assemblies. Structural Systems’ products are primarily used on commercial aircraft, military fixed-wing aircraft and military and commercial rotary-wing aircraft.
Structural Systems designs, engineers and manufactures various sizes of complex contoured aerostructure components and assemblies and supplies composite and metal bonded structures and assemblies. Structural Systems’ products are primarily used on commercial aircraft, military fixed-wing aircraft and military and commercial rotary-wing aircraft.
Our business growth strategy is to differentiate ourselves from competitors by providing more complex assemblies to our customers as a higher value added supplier.
We currently compete with Tier One, Tier Two, and Tier Three suppliers. Our business growth strategy is to differentiate ourselves from competitors by providing more complex assemblies to our customers as a higher value added supplier.
We, and a number of our customers rely on the U.S. 6 Table of Contents Government in various aspects of our defense and commercial businesses. In the event of a shutdown, requirements to furlough employees in the U.S. Department of Defense (“U.S.
Government in various aspects of our defense and commercial businesses. In the event of a future shutdown, requirements to furlough employees in the U.S. Department of War (“U.S.
Backlog was $1,060.8 million at December 31, 2024, compared to $993.6 million at December 31, 2023. The increase in backlog was primarily in the military and space end-use markets, partially offset by a decrease in the commercial aerospace end-use markets and the industrial end-use markets.
Backlog was $1,202.9 million at December 31, 2025, compared to $1,060.8 million at December 31, 2024. The increase in backlog was primarily in the military and space and commercial aerospace end-use markets.
Electronic Systems also provides engineering expertise for aerospace system design, development, integration, and testing. We leverage the knowledge base, capabilities, talent, and technologies of this focused capability into direct support of our customers. Structural Systems Structural Systems has three major product offerings to support a global customer base: commercial aircraft, military fixed-wing aircraft, and military and commercial rotary-wing aircraft.
Electronic Systems also provides engineering expertise for aerospace system design, development, integration, and testing. We leverage the knowledge base, capabilities, talent, and technologies of this focused capability into direct support of our customers.
Talent Acquisition, Retention, and Development We attract, develop, and retain employee talent by offering competitive compensation packages and fostering a culture of care about their well-being. In addition, we endeavor to be a proactive corporate citizen by being responsive and supportive of the needs of our employees to attract qualified talent.
In addition, we endeavor to be a proactive corporate citizen by being responsive and supportive of the needs of our employees to attract qualified talent.
Treasury exhausting extraordinary measures after reaching its debt limit. In addition, U.S. Government discretionary spending in FY24 and FY25, including defense spending, was capped by the Fiscal Responsibility Act of 2023 (“FRA23”). If a CR for FY25 is in place on April 30, 2025, it would trigger a sequester under the FRA23.
Treasury exhausting extraordinary measures after reaching its debt limit. In addition, U.S. Government discretionary spending in fiscal years 2024 (“FY24”) and 2025 (“FY25”), including defense spending, was capped by the Fiscal Responsibility Act of 2023 (“FRA23”).
The long-term outlook for the industry remains positive due to the fundamental drivers of air travel demand: economic growth, increasing propensity to travel due to increased trade, globalization and improved airline services driven by liberalization of air traffic rights between countries.
The region is also expected to remain the world’s fastest growing air travel market, with passenger traffic expected to rise 4.4% annually, well above the global average of 3.6%. 6 Table of Contents We believe that the long-term outlook for the industry remains positive due to the fundamental drivers of air travel demand: economic growth, increasing propensity to travel, increased trade, globalization and improved airline services driven by liberalization of air traffic rights between countries.
Structural assembly products include winglets, engine components, and fuselage structural panels for aircraft. Metal and composite bonded structures and assemblies products include aircraft wing spoilers, large fuselage skins, rotor blades on rotary-wing aircraft and components, flight control surfaces, engine components, ammunition handling systems, magnetic seals, and aerodynamic systems.
Metal and composite bonded structures and assemblies products include aircraft wing spoilers, large fuselage skins, rotor blades on rotor wing aircraft, flight control surfaces and engine nacelle components. Ammunition handling systems include feed and eject chutes, storage magazines and custom gun mounts for fixed-wing and rotary-wing military aircraft and military ground vehicles.
According to the International Air Transport Association (“IATA”), it is estimating industry-wide profits of $31.5 billion for 2024, an increase from its forecast of $25.7 billion a year ago. For 2025, IATA is forecasting $36.6 billion in profits for the industry globally.
According to the International Air Transport Association (“IATA”), it is estimating industry-wide profits of $39.5 billion for 2025, an increase from $28.3 billion in 2024. For 2026, IATA is forecasting $41 billion in profits for the industry globally. Thus, the overall outlook continues to stabilize.
Tier Two suppliers provide more complex, value-added parts and may also assume more design risk, manufacturing risk, supply chain risk and project management risk than Tier Three suppliers. 5 Table of Contents Tier Three suppliers principally provide components or detailed parts. We currently compete with Tier One, Tier Two, and Tier Three suppliers.
A significant portion of our revenues is earned from subcontracts with the Primes. Tier One suppliers manufacture aircraft sections and purchase assemblies. Tier Two suppliers provide more complex, value-added parts and may also assume more design risk, manufacturing risk, supply chain risk and project management risk than Tier Three suppliers. Tier Three suppliers principally provide components or detailed parts.
The bills were subsequently amended in 2024 and will ultimately likely require annual disclosure of audited Scope 1 and 2 greenhouse gas (“GHG”) emissions and biennial disclosure related to certain climate risks, beginning in January 2026 and subject to final regulations expected to be promulgated by the California Air Resources Board around or near July 2025.
The bills were subsequently amended in 2024 and may ultimately require annual disclosure of audited Scope 1 and 2 greenhouse gas (“GHG”) emissions and biennial disclosure related to certain climate risks.
However, the industry remains vulnerable to various developments including fuel price spikes, credit market fluctuations, acts of terrorism, natural disasters, conflicts, epidemics, pandemics, and increased global environmental regulations.
Airbus’ demand projections are similar at 43,420 passenger plus freighter aircraft over the next 20 years. However, the industry remains vulnerable to various developments including fuel price spikes, potential new or increased tariffs, changing energy policies, credit market fluctuations, acts of terrorism, natural disasters, conflicts, epidemics, pandemics, and increased global environmental regulations.
Thus, revenues from commercial aircraft could be affected as a result of changes in new aircraft orders, or the cancellation or deferral by airlines of purchases of ordered aircraft.
Deliveries of new aircraft by airframe manufacturers are dependent on the demand and financial capacity of its customers, primarily airlines and leasing companies, to purchase the aircraft. Thus, revenues from commercial aircraft could be affected as a result of 7 Table of Contents changes in new aircraft orders, or the cancellation or deferral by airlines of purchases of ordered aircraft.
To this end, we continue to focus on protecting the health and safety of our employees and maintaining a safe work environment.
To this end, we continue to focus on protecting the health and safety of our employees and maintaining a safe work environment. In 2025, we utilized health and safety software tools implemented to track and engage our performance centers to continue to reduce our lost time and total recordable incident rates.
Our applications include structural components, structural assemblies, bonded (metal and composite) components, precision profile extrusions and extruded assemblies, ammunition handling systems, magnetic seals, and aerodynamic systems. In the structural components products, Structural Systems provides design services, engineers, and manufacturing of large complex contoured aluminum, titanium and Inconel aerostructure components for the aerospace industry.
In the structural components products, Structural Systems provides design services, engineers, and manufacturing of large complex contoured aluminum, titanium and Inconel aerostructure components for the aerospace industry. Structural assembly products include winglets, engine components, and fuselage structural panels for aircraft.
The acquisition of BLR added to our strategy to diversify and offer more customized, value-driven engineered products with aftermarket opportunities, and was included in our Structural Systems segment. 4 Table of Contents PRODUCTS AND SERVICES Business Segment Information We operate through two primary strategic businesses, Electronic Systems and Structural Systems, each of which is a reportable segment.
We utilized the 2022 Revolving Credit Facility (as defined below) to complete the acquisition. The acquisition of BLR added to our strategy to diversify and offer more customized, value-driven engineered products with aftermarket opportunities, and was included in our Structural Systems segment.
Net revenues by major customer for 2024 and 2023 were as follows: Net revenues from our customers, except the U.S. Government, are diversified over a number of different military and space, commercial aerospace, industrial, medical and other products.
(“TransDigm”) completed its acquisition of the Simmonds Precision Products, Inc. business of Goodrich Corporation from RTX, based on TransDigm’s announcement on October 6, 2025. Net revenues from our customers, except the U.S. Government, are diversified over a number of different military and space, commercial aerospace, industrial, medical and other products.
In July 2024, Boeing also pled guilty to conspiracy fraud charges, which may result in additional external oversight on its manufacturing and quality control process.
In July 2024, Boeing also pled guilty to conspiracy fraud charges, which resulted in additional external oversight on its manufacturing and quality control process. The combination of these factors has, in turn, created a significant challenge for some of our customers and the entire commercial aerospace manufacturing and services sector.
The results of operations among our operating segments vary due to differences in competitors, customers, extent of proprietary deliverables and performance. Electronic Systems designs, engineers and manufactures high-reliability electronic and electromechanical products used in worldwide technology-driven markets including A&D and Industrial end-use markets.
PRODUCTS AND SERVICES Business Segment Information We operate through two primary strategic businesses, Electronic Systems and Structural Systems, each of which is a reportable segment. The results of operations among our operating segments vary due to differences in competitors, customers, extent of proprietary deliverables and performance.
SALES AND MARKETING Our commercial revenues are substantially dependent on airframe manufacturers’ production rates of new aircraft. Deliveries of new aircraft by airframe manufacturers are dependent on the demand and financial capacity of its customers, primarily airlines and leasing companies, to purchase the aircraft.
We will continue to selectively prune this non-core business which should result in additional capacity for our core business. SALES AND MARKETING Our commercial revenues are substantially dependent on airframe manufacturers’ production rates of new aircraft.
Removed
We utilized the 2022 Revolving Credit Facility (as defined below) to complete the acquisition.
Added
Electronic Systems designs, engineers and manufactures high-reliability electronic and electromechanical products used in worldwide technology-driven markets including A&D and Industrial end-use markets. Electronic Systems’ product offerings primarily range from prototype development to complex assemblies as discussed in more detail below.
Removed
A significant portion of our revenues is earned from subcontracts with the Primes. Tier One suppliers manufacture aircraft sections and purchase assemblies.
Added
Structural Systems Structural Systems product offerings support a global customer base with end-use applications across commercial aircraft, military fixed-wing aircraft, military and commercial rotary-wing aircraft, and military ground vehicles. Products include structural components, structural assemblies, bonded (metal and composite) components, precision profile extrusions and extruded assemblies, ammunition handling systems, seals, and aerodynamic systems.
Removed
Further, in September 2024, the International Association of Machinists and Aerospace Workers District 751 voted to initiate a labor strike affecting more than 30,000 Boeing manufacturing employees primarily located in Washington state, and the manufacturing employees, after rejecting the contract offer in October, voted to approve the revised contract offer in November 2024.
Added
Seals include magnetic, mechanical and lip seals and O- 5 Table of Contents rings for various military and industrial applications. Aerodynamic systems include engineered structural components for rotorcraft and business jets.
Removed
The combination of these factors has, in turn, created a significant challenge for some of our customers and the entire commercial aerospace manufacturing and services sector. Airline financial performance, which also plays a role in the demand for new capacity, has been adversely impacted by the aforementioned issues.
Added
Recently, Boeing announced that the FAA cleared Boeing’s plan to raise 737 MAX production from 38 to 42 airplanes per month. Airline financial performance, which influences demand for new aircraft, is benefiting from the resilient demand for travel.
Removed
In The Boeing Company’s (“Boeing”) 2024 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”), they indicated that in 2024, global air traffic continued to expand beyond 2019 levels with domestic travel continuing to be the most robust and the single-aisle market following closely.
Added
In Boeing’s 2025 Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”), they indicated that in 2025, global air traffic expanded to near historical trend rates on an annual basis. The growth occurred despite a lower than usual contribution from the North America market, which had stagnant demand, particularly in the low-cost space.
Removed
International travel also surpassed pre-pandemic levels during 2024 and the wide-body market continues to improve with international travel recovery. The transition in the international commercial market from recovery to normal market conditions is continuing to progress as China international travel remains below 2019 levels. Overall, Boeing is experiencing strong demand from its airline customers globally.
Added
International demand outpaced domestic demand on an annual basis as international demand continued to build on the recovery momentum from 2024, including in China, thereby lifting demand for wide-body airplanes. Based on these trends, both single-aisle and wide-body demand remain above current industry supply levels. Overall, Boeing is experiencing strong demand from their airplane customers globally.
Removed
We believe our business in these markets in the long-term, is stable and we are well positioned in these markets even though the elevated inflation rate, high interest rates, and supply chain issues has had and will continue to have an impact on our business.
Added
Airbus SE (“Airbus”) is aligned with Boeing’s view on international demand as its Global Services Forecast for Asia-Pacific (including China and India) anticipates that total services demand in the region will grow at a 5.2% compound annual growth rate through 2044, reaching an estimated market value of $138.7 billion.
Removed
In 2024, we continued to invest in infrastructure to improve internal safety protocols related to key processes and refined our health and safety software tools to track and engage our performance centers to further reduce our lost time and total recordable incident rates.
Added
This sustained growth is expected to be underpinned by expanding air traffic and fleet growth.
Added
Subsequently, on February 3, 2026, President Trump signed into law a funding package to end the brief U.S. Government shutdown. The legislation will ensure full year funding for the federal government through the end of September 2026, with the lone exception of the Department of Homeland Security.
Added
Also, on January 7, 2026, President Trump called for increasing the FY27 U.S. military budget to $1.5 trillion, significantly higher than the $901 billion approved by Congress for FY26. However, such increase in the military budget would require congressional authorization. We, and a number of our customers, rely on the U.S.
Added
The discretionary spending caps that were put in place by FRA23 are no longer binding for FY26, though the legislation implies that Congress could continue to implement the caps by raising spending one percent above the FY25 level. Congress has not yet taken action to address this issue.
Added
Net revenues by major customer for 2025 and 2024 were as follows: 8 Table of Contents * Boeing completed its acquisition of all of Spirit Aerosystems Holdings, Inc.’s Boeing-related commercial operations, based on Boeing’s announcement on December 8, 2025. ** TransDigm Group Inc.
Added
On January 20, 2026, the California Air Resources Board issued an initial statement of reasons for a public hearing to be held on May 28, 2026 to consider the proposed amendments to the Regulation for the Mandatory Reporting of GHG.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

96 edited+33 added−28 removed67 unchanged
Biggest changeWe face potential liability for property damage, personal injury, or death as a result of the failure of products designed or manufactured by us. Although we currently maintain product liability insurance (including aircraft product liability insurance), any material product liability not covered by insurance could have a material adverse effect on our financial condition, results of operations and cash flows.
Biggest changeProduct liability claims in excess of insurance could adversely affect our financial results and financial condition. We face potential liability for property damage, personal injury, or death as a result of the failure of products designed or manufactured by us.
If the U.S. Government terminates a contract for convenience, the counterparty with whom we have contracted on a subcontract may terminate its contract with us. As a result of any such termination, whether on a direct government contract or subcontract, we may recover only our incurred or committed costs, settlement expenses and profit on work completed prior to the termination.
If the U.S. Government terminates a contract for convenience, the counterparty with whom we have contracted may terminate its subcontract with us. As a result of any such termination, whether on a direct government contract or subcontract, we may recover only our incurred or committed costs, settlement expenses and profit on work completed prior to the termination. If the U.S.
As a result, we are subject to the risks of conducting and operating our business internationally, including: • political instability that may result in price fluctuations of raw materials; • economic and geopolitical developments and conditions; • pandemics and disasters, natural or otherwise; • compliance with a variety of international laws, as well as U.S. laws affecting the activities of U.S. companies conducting business abroad, including, but not limited to, the Foreign Corrupt Practices Act; • imposition of taxes, export control approvals or licenses, tariffs, embargoes and other trade restrictions; • difficulties repatriating funds or restrictions on cash transfers; and • potential for new tariffs imposed on imports by the U.S. administration that may affect our ability to import raw materials into the U.S. and finished goods from our leased manufacturing facility in Mexico and increase the cost of such imports.
As a result, we are subject to the risks of conducting and operating our business internationally, including: • political instability that may result in price fluctuations of raw materials; • economic and geopolitical developments and conditions; • pandemics and disasters, natural or otherwise; • compliance with a variety of international laws, as well as U.S. laws affecting the activities of U.S. companies conducting business abroad, including, but not limited to, the Foreign Corrupt Practices Act; • imposition of taxes, export control approvals or licenses, tariffs, embargoes and other trade restrictions; • difficulties repatriating funds or restrictions on cash transfers; and • potential for new and/or increase in tariffs imposed on imports by the U.S. administration that may affect our ability to import raw materials into the U.S. and finished goods from our leased manufacturing facility in Mexico and increase the cost of such imports.
Many of our suppliers are small companies with limited financial resources and manufacturing capabilities. We do not currently have the ability to manufacture these components ourselves. These and other factors, including the impact from import tariffs, the loss of a critical supplier or raw materials and/or component shortages, could cause disruptions or cost inefficiencies in our operations.
Many of our suppliers are small companies with limited financial resources and manufacturing capabilities, and we do not currently have the ability to manufacture these components ourselves. These and other factors, including the impact from import tariffs, the loss of a critical supplier or raw materials and/or component shortages, could cause disruptions or cost inefficiencies in our operations.
In addition, 21 Table of Contents changes in intellectual property laws or their interpretation may impact our ability to protect and assert our intellectual property rights, increase costs and uncertainties in the prosecution of patent applications and enforcement or defense of issued patents, and diminish the value of our intellectual property.
In addition, changes in intellectual property laws or their interpretation may impact our ability to protect and assert our intellectual property rights, increase costs and uncertainties in the prosecution of patent applications and enforcement or defense of issued 21 Table of Contents patents, and diminish the value of our intellectual property.
We cannot be certain that the measures we have implemented will prevent our intellectual property from being improperly disclosed, challenged, invalidated, or circumvented, particularly in countries where intellectual property rights are not highly developed or protected. For example, competitors may avoid infringement liability by developing non-infringing competing technologies or by effectively concealing infringement.
We cannot be certain that the measures we have implemented will prevent our intellectual property from being misappropriated, improperly disclosed, challenged, invalidated, or circumvented, particularly in countries where intellectual property rights are not highly developed or protected. For example, competitors may avoid infringement liability by developing non-infringing competing technologies or by effectively concealing infringement.
If one or more of our customers’ government prime or subcontracts is terminated or canceled, our failure to replace sales generated from such contracts would result in lower sales and could have an adverse effect on our business, results of operations and financial condition. Further consolidation in the aerospace industry could adversely affect our business and financial results.
If one or more of our customers’ government prime or subcontracts is terminated or canceled, our failure to replace sales generated from such contracts would result in lower revenues and could have an adverse effect on our business, results of operations and financial condition. Further consolidation in the aerospace industry could adversely affect our business and financial results.
Even if such expenditures are made, there can be no assurance that we will be able to comply. We have been directed to investigate and take corrective action for groundwater contamination at certain sites and our ultimate liability for such matters will depend upon a number of factors.
Even if such expenditures are made, there can be no assurance that we will be able to comply. We have been directed to investigate and take corrective action for soil and groundwater contamination at certain sites and our ultimate liability for such matters will depend upon a number of factors.
If we do not protect and enforce our intellectual property rights successfully, or if they are circumvented, invalidated, or rendered obsolete by the rapid pace of technological change, it could have an adverse impact on our competitive position and our operating results.
If we do not protect and enforce our intellectual property rights successfully, or if they are misappropriated, circumvented, invalidated, or rendered obsolete by the rapid pace of technological change, it could have an adverse impact on our competitive position and our operating results.
If the U.S. Government terminates a direct contract with us for default, we may not even recover those amounts and instead may be liable for excess costs incurred by the U.S. Government in procuring undelivered items and services from another source. In addition, the U.S.
Government terminates a direct contract with us for default, we may not even recover those amounts and instead may be liable for excess costs incurred by the U.S. Government in procuring undelivered items and services from another source. In addition, the U.S.
Furthermore, continued economic conditions may continue to negatively impact and create greater pressure in the commercial real estate market, causing higher incidences of landlord default and/or lender foreclosure of properties, including properties occupied by us.
Furthermore, economic conditions may continue to negatively impact and create greater pressure in the commercial real estate market, causing higher incidences of landlord default and/or lender foreclosure of properties, including properties occupied by us.
Such claims may also require us to redesign affected products and services, enter into costly settlement or license agreements or pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or providing the affected products and services.
Such claims may also require us to redesign affected products and services, enter into costly settlement or license agreements or pay costly damage awards, or face a temporary or permanent injunction prohibiting us from marketing or providing or using the affected products and services.
However, we cannot ensure the outcome of any future audits and adjustments may be required to reduce net sales or profits upon completion and final negotiation of audits.
However, we cannot ensure the outcome of any future audits and adjustments may be required to reduce net sales or profits upon the completion and final negotiation of such audits.
If we are unable to successfully compete for new business, our net revenues growth and operating margins may decline. Some of our major customers have completed extensive cost containment efforts and we expect continued pricing pressures in 2025 and beyond. Competitive pricing pressures may have an adverse effect on our financial condition and operating results.
If we are unable to successfully compete for new business, our net revenues growth and operating margins may decline. Some of our major customers have completed extensive cost containment efforts and we expect continued pricing pressures in 2026 and beyond. Competitive pricing pressures may have an adverse effect on our financial condition and operating results.
The terms of the 2022 Term Loan require us to make installment payments of 0.625% of the initial outstanding principal balance on a quarterly basis during years one and two, 1.250% during years three and four, and 1.875% during year five, on the last business day of each calendar quarter.
The terms of the 2025 Term Loan require us to make installment payments of 0.625% of the initial outstanding principal balance on a quarterly basis during years one and two, 1.250% during years three and four, and 1.875% during year five, on the last business day of each calendar quarter.
The terms of the 2022 Term Loan require us to make installment payments of 0.625% of the initial outstanding principal balance on a quarterly basis during years one and two, 1.250% during years three and four, and 1.875% during year five, on the last business day of each calendar quarter.
The terms of the 2025 Term Loan require us to make installment payments of 0.625% of the initial outstanding principal balance on a quarterly basis during years one and two, 1.250% during years three and four, and 1.875% during year five, on the last business day of each calendar quarter.
Any system or service disruptions, including those caused by projects to improve our information technology systems, if not anticipated and appropriately mitigated, could disrupt our business and impair our ability to effectively provide products and related services to our customers and could have a material adverse effect on our business.
Any system or service disruptions, including those caused by projects to improve our information technology systems and manufacturing processes, if not anticipated and appropriately mitigated, could disrupt our business and impair our ability to effectively provide products and related services to our customers and could have a material adverse effect on our business.
Assertions by third parties that we violated their intellectual property rights could have a material adverse effect on our business, financial condition, and results of operations. Third parties may claim that we, our customers, licensees, or parties indemnified by us are infringing upon or otherwise violating their intellectual property rights.
Assertions by third parties that we violated their intellectual property rights could have a material adverse effect on our business, financial condition, and results of operations. Third parties may claim that we, our customers, licensees, vendors, licensors, or parties indemnified by us are infringing upon or otherwise violating their intellectual property rights.
The future success of our business depends in large part upon our and our customers’ ability to maintain and enhance technological capabilities, develop and market manufacturing services that meet changing customer needs and successfully anticipate or respond to technological advances in manufacturing processes such as the incorporation of artificial intelligence and other disruptive technologies on a cost-effective and timely basis, while meeting evolving industry and regulatory standards.
The future success of our business depends in large part upon our and our customers’ ability to maintain and enhance technological capabilities, develop and market manufacturing services that meet changing customer needs and successfully anticipate or respond to technological advances in manufacturing processes such as the incorporation of artificial intelligence and other disruptive technologies on a cost-effective and timely basis, while meeting evolving industry and regulatory 17 Table of Contents standards.
Our level of debt could: • limit our ability to obtain additional financing to fund capital expenditures, investments or acquisitions or other general corporate requirements; • require a portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, investments or acquisitions or other general corporate purposes; • increase our vulnerability to adverse changes in general economic, industry and competitive conditions; • place us at a disadvantage compared to other, less leveraged competitors; • expose us to the risk of increased borrowing costs and rising or high interest rates as a portion of our current borrowings under our 2022 Credit Facilities bear interest at variable rates (however, we have interest rate swaps that became effective on January 1, 2024, with an aggregate total notional amount of $150.0 million with a seven year tenor), which could further adversely impact our cash flows; • limit our flexibility to plan for and react to changes in our business and the industry in which we compete; • restrict us from making strategic acquisitions; • expose us to risk of unfavorable changes in the global credit markets; and 11 Table of Contents • make it more difficult for us to satisfy our obligations with respect to the 2022 Credit Facilities and our other debt.
Our level of debt could: • limit our ability to obtain additional financing to fund capital expenditures, investments or acquisitions or other general corporate requirements; • require a portion of our cash flows to be dedicated to debt service payments instead of other purposes, thereby reducing the amount of cash flows available for working capital, capital expenditures, investments or acquisitions or other general corporate purposes; • increase our vulnerability to adverse changes in general economic, industry and competitive conditions; • place us at a disadvantage compared to other, less leveraged competitors; • expose us to the risk of increased borrowing costs and rising or high interest rates as a portion of our current borrowings under our 2025 Credit Facilities bear interest at variable rates (however, we have interest rate swaps that were effective on January 1, 2024, with an aggregate total notional amount of $150.0 million with a seven year tenor), which could further adversely impact our cash flows; • limit our flexibility to plan for and react to changes in our business and the industry in which we compete; • restrict us from making strategic acquisitions; • expose us to risk of unfavorable changes in the global credit markets; and • make it more difficult for us to satisfy our obligations with respect to the 2025 Credit Facilities and our other debt.
Government agencies. Given our dependence on U.S. Government business, suspension or debarment could have a material adverse effect on our financial results. In addition, the U.S. Government may revise its procurement practices or adopt new contract rules and regulations at any time, including increased usage of fixed-price contracts, procurement reform, and compliance with cybersecurity requirements.
Government business, suspension or debarment could have a material adverse effect on our financial results. In addition, the U.S. Government may revise its procurement practices or adopt new contract rules and regulations at any time, including increased usage of fixed-price contracts, procurement reform, and compliance with cybersecurity requirements.
We derive a significant portion of our business from customers whose principal sales are to the U.S. Government. Accordingly, the success of our business depends upon government spending generally or for specific departments or agencies in particular.
We derive a significant portion of our business from customers whose principal sales are to the U.S. Government. Accordingly, the success of our business depends upon government spending generally or for specific departments or agencies.
Assuming incremental project design responsibilities would require us to assume additional risk in developing cost estimates and could expose us to increased risk of losses. There can be no assurance that we will be successful in obtaining the enhanced skills required to move up the value chain or that our customers will outsource such functions to us.
Assuming incremental project design responsibilities would require us to bear additional risk in developing cost estimates and could expose us to increased risk of losses. Moreover, there can be no assurance that we will be successful in obtaining the enhanced skills required to move up the value chain or that our customers will outsource such functions to us.
If any of these or other estimates and assumptions are not realized in the future, or if market multiples decline, we may be required to record an impairment charge for goodwill. We also test intangible assets with indefinite life periods for potential impairment annually and on an interim basis if there are indicators of potential impairment.
If any of these or other estimates and assumptions are not realized in the future, or if market multiples decline, we may be required to record an impairment charge for goodwill. 19 Table of Contents We also test intangible assets with indefinite life periods for potential impairment annually and on an interim basis if there are indicators of potential impairment.
If we do not continue to compete effectively and win contracts, our 16 Table of Contents future business, financial condition, results of operations and our ability to meet our financial obligations may be materially compromised. Our products and processes are subject to risk of obsolescence as a result of changes in technology and evolving industry and regulatory standards.
If we do not continue to compete effectively and win contracts, our future business, financial condition, results of operations and our ability to meet our financial obligations may be materially compromised. Our products and processes are subject to risk of obsolescence as a result of changes in technology and evolving industry and regulatory standards.
These estimates and assumptions include projected sales levels, including the addition of new customers, programs or platforms and increased content on existing programs or platforms, improvements in manufacturing efficiency, and reductions in operating costs.
These estimates and assumptions include projected revenue levels, including the addition of new customers, programs or platforms and increased content on existing programs or platforms, improvements in manufacturing efficiency, and reductions in operating costs.
We may be subject to litigation, other legal proceedings and indemnity claims, and, if any of these are resolved adversely against us in amounts that exceed the limits of our insurance coverage, it could have a material adverse effect on our business, financial condition, and results of operations.
LEGAL, REGULATORY, TAX, AND ACCOUNTING RISKS We may be subject to litigation, other legal proceedings and indemnity claims, and, if any of these are resolved adversely against us in amounts that exceed the limits of our insurance coverage, it could have a material adverse effect on our business, financial condition, and results of operations.
The 2022 Credit Facilities’ agreements contains a number of significant restrictions and covenants that limit our ability, among other things, to incur additional indebtedness, to create liens, to make certain payments, to make certain investments, to engage in transactions with affiliates, to sell certain assets or enter into mergers.
The 2025 Credit Facilities’ agreements contain a number of significant restrictions and covenants that limit our ability, among other things, to incur additional indebtedness, to create liens, to make certain payments, to make certain investments, to engage in transactions with affiliates, to sell certain assets or enter into mergers.
T he accuracy and appropriateness of certain costs and expenses used to substantiate our direct and indirect costs for the U.S. Government contracts are subject to extensive regulation and audit by the Defense Contract Audit Agency, an arm of the U.S. DoD. Such audits and reviews could result in adjustments to our contract costs and profitability.
The accuracy and appropriateness of certain costs and expenses used to substantiate our direct and indirect costs for the U.S. Government contracts are subject to extensive regulation and audit by the Defense Contract Audit Agency, an arm of the U.S. DoW. Such audits and reviews could result in adjustments to our contract costs and profitability.
See discussion of a fire in June 2020 which severely damaged our Guaymas, Mexico performance center in Note 16 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
See the “Guaymas Performance Center Fire” discussion of a fire in June 2020 which severely damaged our Guaymas, Mexico performance center in Note 15 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
As of December 31, 2024, we employed 2,180 people. One of our performance centers is party to a collective bargaining agreement, covering 268 full time hourly employees, which will expire in April 2025. Although we have not experienced any material labor-related work stoppage and consider our relations with our employees to be good, labor stoppages may occur in the future.
As of December 31, 2025, we employed 2,130 people. One of our performance centers is party to a collective bargaining agreement, covering 282 full time hourly employees, which will expire in April 2028. Although we have not experienced any material labor-related work stoppage and consider our relations with our employees to be good, labor stoppages may occur in the future.
We may not have the ability to renew facilities leases on terms favorable to us and relocation of operations presents risks due to business interruption. Certain of our manufacturing facilities and offices are leased and have lease terms that expire between 2025 and 2034.
We may not have the ability to renew facilities leases on terms favorable to us and relocation of operations presents risks due to business interruption. Certain of our manufacturing facilities and offices are leased and have lease terms that expire between 2026 and 2038.
Although we maintain standard property casualty insurance covering our properties and may be able to recover costs associated with certain natural disasters through insurance, we do not carry any earthquake insurance because of the cost of such insurance. Many of our properties are located in Southern California, an area subject to earthquake activity.
Although we maintain standard property casualty insurance covering our properties and may be able to recover costs associated with certain natural disasters through insurance, we do not carry any earthquake insurance due to its prohibitive cost and because many of our properties are located in Southern California, an area subject to earthquake activity.
We currently generate the majority of our revenues from customers in the aerospace and defense industry. Our business depends, in part, on the level of new military and commercial aircraft orders. As a result, we have significant sales to certain customers. Sales to The Boeing Company (“Boeing”), Spirit AeroSystems Holdings, Inc. (“Spirit”), and Viasat, Inc.
We currently generate the majority of our revenues from customers in the aerospace and defense industry. Our business depends, in part, on the level of new military and commercial aircraft orders. As a result, we have significant sales to certain customers. Sales to The Boeing Company (“Boeing”), which now includes Spirit AeroSystems Holdings, Inc.
Such changes could impair our ability to obtain new contracts or subcontracts or renew contracts or subcontracts under which we currently perform when those contracts are put up for competitive bidding. Any new contracting methods could be costly or administratively difficult for us to implement and could adversely affect our future net revenues.
Such changes could impair our ability to obtain new contracts or subcontracts or renew contracts or subcontracts under which we currently perform when those contracts expire and are subsequently opened for competitive bidding. Any new contracting methods could be costly or administratively difficult for us to implement and could adversely affect our future net revenues.
Further, such benefits may be realized later than expected, and the ongoing difficulties in implementing these measures may be greater than anticipated, which could cause us to incur additional costs or result in business disruptions.
Further, such benefits may be realized later than expected, and the ongoing difficulties in implementing these measures may be greater than anticipated, which 16 Table of Contents could cause us to incur additional costs or result in business disruptions.
We are subject to a number of procurement laws and regulations. Our business and our reputation could be adversely affected if we fail to comply with these laws. We must comply with and are affected by laws and regulations relating to the award, administration and performance of U.S. Government contracts.
Our business and our reputation could be adversely affected if we fail to comply with these laws. We must comply with and are affected by laws and regulations relating to the award, administration and performance of U.S. Government contracts.
Further, the levels of U.S. Department of Defense (“U.S. DoD”) spending in future periods are difficult to predict and are impacted by numerous factors such as the political environment, U.S. foreign policy, macroeconomic conditions and the ability of the U.S. Government to enact relevant legislation such as the authorization and appropriations bills.
Further, the levels of U.S. Department of War (“U.S. DoW”) spending in future periods are difficult to predict and are impacted by numerous factors such as the political environment, U.S. foreign policy, macroeconomic conditions and the ability of the U.S. Government to enact relevant legislation such as the authorization and appropriations bills. For instance, during the U.S.
We are required to comply with a leverage covenant as defined in the 2022 Credit Facilities. The leverage covenant is defined as Consolidated Funded Indebtedness less unrestricted cash and cash equivalents in excess of $5.0 million, divided by consolidated earnings before interest, taxes and depreciation and amortization (“EBITDA”) and other adjustments.
We are required to comply with a leverage covenant as defined in the 2025 Credit Facilities. The leverage covenant is defined as Consolidated Funded Indebtedness less unrestricted cash and cash equivalents, divided by consolidated earnings before interest, taxes and depreciation and amortization (“EBITDA”) and other adjustments.
Further, the failure or disruption of our communications or utilities could cause us to interrupt or suspend our operations or otherwise adversely affect our business.
Further, the failure or disruption of our communications or ability to procure power from utilities could cause us to interrupt or suspend our operations or otherwise adversely affect our business.
Failure by us or our sales representatives or consultants to comply with these laws and regulations could result in certain liabilities and could possibly result in suspension or debarment from government contracts or suspension of our export privileges, which could have a material adverse effect on our financial results. Environmental liabilities could adversely affect our financial results.
Failure by us or our sales representatives or consultants to comply with these laws and regulations could result in certain liabilities and could possibly result in suspension or debarment from government contracts or suspension of our export privileges, which could have a material adverse effect on our financial results. We are subject to a number of procurement laws and regulations.
DoD or other government agencies could result in payment delays, impair our ability to perform work on existing contracts or otherwise impact our operations, negatively impact future orders, and/or cause other disruptions or delays. The U.S. government could experience a disruption to its operations and/or payments in 2025 as a result of the U.S.
DoW or other government agencies could result in payment delays, the inability to obtain export licenses, impair our ability to perform work on existing contracts or otherwise impact our operations, negatively impact future orders, and/or cause other disruptions or delays. The U.S. Government could experience a disruption to its operations and/or payments in 2026 as a result of the U.S.
The majority of these leases provide renewal options at the fair market rental rate at the time of renewal, which, if renewed, could be significantly higher than our current rental rates. We may be unable to offset these cost increases by charging more for our products and services.
The majority of these leases include options to extend at the fair market rental rate upon expiration of their original terms, which, if renewed, could be significantly higher than our current rental rates. We may be unable to offset these cost increases by charging more for our products and services.
Our goodwill and other intangible assets as of December 31, 2024 were $394.2 million, or 35% of total assets. If our goodwill and/or other assets are impaired, it could have an adverse effect on our results of operations and financial condition.
Our goodwill and other intangible assets as of December 31, 2025 were $377.4 million, or 32% of total assets. If our goodwill and/or other assets are impaired, it could have an adverse effect on our results of operations and financial condition.
We, and a number of our customers rely on the U.S. government in various aspects of our defense and commercial businesses. In the event of a shutdown, requirements to furlough employees in the U.S.
Government in various aspects of our defense and commercial businesses. In the event of a future shutdown, requirements to furlough employees in the U.S.
Changes in regulations or political environments may affect our ability to conduct business in foreign markets including investment, procurement and repatriation of earnings.
Changes in regulations or political environments may affect our ability to obtain export licenses to deliver products to our international customers, and conduct business in foreign markets including investment, procurement and repatriation of earnings.
Significant judgment is required in determining our provision for income taxes. In the ordinary course of our business, there are transactions and calculations where the ultimate tax determination is uncertain.
Unanticipated changes in our tax provision or exposure to additional income tax liabilities could affect our profitability. Significant judgment is required in determining our provision for income taxes. In the ordinary course of our business, there are transactions and calculations where the ultimate tax determination is uncertain.
These restrictions also limit our ability to obtain future financings to withstand a future downturn in our business or the economy in general. 12 Table of Contents A breach of any covenant in the 2022 Credit Facilities could result in a default under the 2022 Credit Facilities.
These restrictions also limit our ability to obtain future financings to withstand a future downturn in our business or the economy in general. A breach of any covenant in the 2025 Credit Facilities could result in a default under the 2025 Credit Facilities. A default, if not waived, could result in acceleration of the debt outstanding under the agreement.
To address these risks, we invest in product design and development, and incur related capital expenditures. There can be no guarantee that our product design and development efforts will be successful, or that funds required to be invested in product design and development or incurred as capital expenditures will not increase materially in the future.
There can be no guarantee that our product design and development efforts will be successful, that funds required to be invested in product design and development or incurred as capital expenditures will not increase materially in the future, or that our products and processes will satisfy evolving regulatory standards.
Our California performance centers generated $184.0 million in net revenues during 2024. Even if covered by insurance, any significant damage or destruction of our facilities due to storms, earthquakes, fires or other natural disasters could result in our inability to meet customer delivery schedules and may result in the loss of customers and significant additional costs to us.
Even if covered by insurance, any significant damage or destruction of our facilities due to storms, earthquakes, fires or other natural disasters could result in our inability to meet customer delivery schedules and may result in the loss of customers, the termination of previously awarded contracts and impose significant additional costs on us.
Noncompliance could expose us to liability for penalties, including termination of our contracts and subcontracts, disqualification from bidding on future U.S. Government contracts and subcontracts, suspension or debarment from U.S. Government contracting and various other fines and penalties . Noncompliance found by any one agency could result in fines, penalties, debarment or suspension from receiving additional contracts with all U.S.
Government contracts and subcontracts, suspension or debarment from U.S. Government contracting and various other fines and penalties . Noncompliance found by any one agency could result in fines, penalties, debarment or suspension from receiving additional contracts with all U.S. Government agencies. Given our dependence on U.S.
Our ability to accurately report our financial results or prevent fraud may be adversely affected if our internal control over financial reporting is not effective. The accuracy of our financial reporting is dependent on the effectiveness of our internal controls.
Therefore, any changes in our underlying assumptions, circumstances or estimates could have a material adverse effect on our financial results. Our ability to accurately report our financial results or prevent fraud may be adversely affected if our internal control over financial reporting is not effective. The accuracy of our financial reporting is dependent on the effectiveness of our internal controls.
As a result, a stockholder who sells a significant amount of shares in a short period of time could negatively affect our share price. Our amount of debt may require us to raise additional capital to fund acquisitions.
The level of trading activity of our common stock may vary daily and typically represents only a small percentage of outstanding shares. As a result, a stockholder who sells a significant amount of shares in a short period of time could negatively affect our share price. Our amount of debt may require us to raise additional capital to fund acquisitions.
Changes in the economic environment and the financial condition of the industries we serve could result in customer cancellation of contractual orders or requests for rescheduling.
We generally make sales under purchase orders and contracts that are subject to cancellation, modification or rescheduling. Changes in the economic environment and the financial condition of the industries we serve could result in customer cancellation of contractual orders or requests for rescheduling.
This was followed by the FAA announcing actions to increase its oversight of Boeing as well as not approving production rate increases or additional production lines for the 737 MAX until it is satisfied that Boeing is in full compliance with required quality control procedures.
In early January 2024, the Federal Aviation Administration (“FAA”) initiated an investigation into Boeing’s quality control system, which was followed by the agency announcing actions to increase its oversight of Boeing as well as not approving production rate increases or additional production lines for the 737 MAX until it was satisfied that Boeing attained full compliance with required quality control procedures.
Acquisitions entail certain risks, including: • difficulty in integrating the operations and personnel of the acquired company within our existing operations or in maintaining uniform standards; • loss of key employees or customers of the acquired company; • the failure to achieve anticipated synergies; • unrecorded liabilities of acquired companies that we fail to discover during our due diligence investigations or that are not subject to indemnification or reimbursement by the seller; and • management and other personnel having their time and resources diverted to evaluate, negotiate and integrate acquisitions. 15 Table of Contents We may not be successful in achieving expected operating efficiencies and sustaining or improving operating expense reductions, and may experience business disruptions associated with restructuring, performance center consolidations, realignment, cost reduction, and other strategic initiatives.
Acquisitions entail certain risks, including: • difficulty in integrating the operations and personnel of the acquired company within our existing operations or in maintaining uniform standards; • loss of key employees or customers of the acquired company; • the failure to achieve anticipated synergies and/or future revenue growth; • unrecorded liabilities of acquired companies that we fail to discover during our due diligence investigations or that are not subject to indemnification or reimbursement by the seller; and • management and other personnel having their time and resources diverted to evaluate, negotiate and integrate acquisitions.
Revenue growth with our other commercial customers, 13 Table of Contents including Airbus SE (“Airbus”), and continued solid demand from defense OEMs (also known as prime contractors) have helped to mitigate a significant portion of this risk for the time being.
Revenue growth with our other commercial customers, including Airbus SE (“Airbus”), and continued solid demand from defense OEMs (also known as prime contractors) have helped to mitigate a significant portion of this risk for the time being. However, the industry remains vulnerable to various developments including fuel spikes, inflationary forces, supply chain issues, and elevated high interest rates.
Treasury exhausting extraordinary measures after reaching its debt limit. In addition, U.S. government discretionary spending in FY24 and FY25, including defense spending, was capped by the Fiscal Responsibility Act of 2023 (“FRA23”). If a CR for FY25 is in place on April 30, 2025, it would trigger a sequester under the FRA23.
Treasury exhausting extraordinary measures after reaching its debt limit. For instance, the U.S. Government discretionary spending in FY24 and FY25, including defense spending, was capped by the Fiscal Responsibility Act of 2023 (“FRA23”).
The final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals.
The final determination of tax audits and any related litigation could be materially different from our historical income tax provisions and accruals. Goodwill and/or other assets could be impaired in the future, which could result in substantial charges.
Any significant delay in, or impairment of, our ability to sell products outside of the United States could have a material adverse effect on our business, financial condition and results of operations. 14 Table of Contents Contracts with some of our customers, including Federal government contracts, contain provisions which give our customers a variety of rights that are unfavorable to us and the OEMs to whom we provide products and services, including the ability to terminate a contract at any time for convenience.
Further, if we are unable to pass along the increased costs to our customers, it could have a material impact on our financial position, results of operations and/or cash flows. 15 Table of Contents Contracts with some of our customers, including Federal government contracts, contain provisions which give our customers a variety of rights that are unfavorable to us and the OEMs to whom we provide products and services, including the ability to terminate a contract at any time for convenience.
In addition, if these measures are not successful or sustainable, we may have to undertake additional realignment and cost reduction efforts, which could result in significant additional charges. Moreover, if our restructuring and realignment efforts prove ineffective, our ability to achieve our other strategic and business plan goals may be adversely impacted.
In addition, if these measures are not successful or sustainable, we may have to undertake additional realignment and cost reduction efforts, which could result in significant additional charges.
The 2022 Revolving Credit Facility is a $200.0 million senior secured revolving credit facility that matures in July 2027. The 2022 Term Loan and 2022 Revolving Credit Facility, collectively are the new credit facilities (“2022 Credit Facilities”).
The 2025 Revolving Credit Facility replaced the 2022 Revolving Credit Facility (“2022 Revolving Credit Facility”) which was a $200.0 million senior secured revolving credit facility. The 2025 Term Loan and 2025 Revolving Credit Facility, collectively are the new credit facilities (“2025 Credit Facilities”).
In addition, the undrawn portion of the commitment of the 2022 Revolving Credit Facility is subject to a commitment fee ranging from 0.175% to 0.275%, based upon the consolidated total net adjusted leverage ratio.
The terms of the 2025 Revolving Credit Facility do not require us to make installment payments. However, the undrawn portion of the commitment of the 2025 Revolving Credit Facility is subject to a commitment fee ranging from 0.175% to 0.250%, based upon the consolidated total net adjusted leverage ratio.
The occurrence of any one of these events could have an adverse effect on our business, financial condition, results of operations and ability to satisfy our obligations in respect of our outstanding debt. We require a considerable amount of cash to run our business.
The occurrence of any one of these events could have an adverse effect on our business, financial condition, results of operations and ability to satisfy our obligations in respect of our outstanding debt. The covenants in our credit facilities impose restrictions that may limit our operating and financial flexibility.
We have historically achieved a portion of our growth through acquisitions and expect to evaluate selected future acquisitions as part of our strategy for growth. Any acquisition of another business entails risks and it is possible that we may not realize the expected benefits from an acquisition or that an acquisition could adversely affect our existing operations.
Any acquisition of another business entails risks and it is possible that we may not realize the expected benefits from an acquisition or that an acquisition could adversely affect our existing operations.
Additional risk factors not currently known to us or that we currently believe are immaterial may also impair our business, financial condition, results of operations and cash flows. Any of these risks, uncertainties and other factors could cause our future financial results to differ materially from recent financial results or from currently anticipated future financial results.
Additional risk factors not currently known to us or that we currently believe are immaterial may also impair our business, financial condition, results of operations and cash flows. These disclosures reflect our beliefs and opinions as to factors that could materially and adversely affect us and our securities in the future.
We must comply with numerous laws and regulations relating to the export of some of our products before we are permitted to sell or manufacture those products outside the United States. Compliance often entails the submission and timely receipt of the necessary export approvals, licenses, or authorizations from the U.S. Government.
Government approvals and related export licenses for proposed sales to certain foreign customers. We must comply with numerous laws and regulations relating to the export of some of our products before we are permitted to sell or manufacture those products outside the United States.
Additionally, if we choose to move any of our operations, those operations may be subject to additional relocation costs and associated risks of business interruption. LEGAL, REGULATORY, TAX, AND ACCOUNTING RISKS We are subject to extensive regulation and audit by the Defense Contract Audit Agency.
Additionally, if we choose to move any of our operations, those operations may be subject to additional relocation and recertification costs and associated risks of business interruption.
Even if new financing were available at that time, it may not be on terms or amounts that are acceptable to us or terms as favorable as our current agreements. If our debt is in default for any reason, our business, results of operations and financial condition could be materially and adversely affected.
A default could permit our lenders to foreclose on any of our assets securing such debt. Even if new financing were available at that time, it may not be on terms or amounts that are acceptable to us or terms as favorable as our current agreements.
In many cases, we make multi-year firm, fixed-price commitments to our customers, without assurance that our anticipated production costs will be achieved.
We enter into contracts providing for a firm, fixed-price for the sale of a majority of our products, regardless of the production costs incurred by us. In many cases, we make multi-year firm, fixed-price commitments to our customers, without assurance that our anticipated production costs will be achieved.
Government contracts, disclosure of cost and pricing data, civil penalties for violations of false claims to the U.S. Government for payment, defining reimbursable costs, establishing ethical standards for the procurement process, controlling the import and export of defense articles and services, and cybersecurity requirements, such as Cybersecurity Maturity Model Certification (“CMMC”).
Government for payment, defining reimbursable costs, establishing ethical standards for the procurement process, controlling the import and export of defense articles and services, and cybersecurity requirements, such as Cybersecurity Maturity Model Certification (“CMMC”). Noncompliance could expose us to liability for penalties, including termination of our contracts and subcontracts, disqualification from bidding on future U.S.
See Note 16 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.
See “Goodwill and Other Intangible Assets” in Note 7 of our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information. Environmental liabilities could adversely affect our financial results.
Boeing was one of our largest customers in 2024, and the 737 MAX was one of our highest commercial end use market revenue platforms. In early January 2024, the FAA initiated an investigation into Boeing’s quality control system.
Boeing was one of our largest customers in 2025, and the 737 MAX was one of our highest commercial end use market revenue platforms.
Upon termination for convenience of a fixed-price type contract, we normally are entitled to receive the purchase price for delivered items, reimbursement for allowable costs for work-in-process and an allowance for profit on the contract or adjustment for loss if completion of performance would have resulted in a loss. 17 Table of Contents Our operations are subject to numerous extensive, complex, costly and evolving laws, regulations and restrictions, including cybersecurity requirements, and failure to comply with these laws, regulations and restrictions could subject us to penalties and sanctions that could harm our business.
Upon termination for convenience of a fixed-price type contract, we normally are entitled to receive the purchase price for delivered items, reimbursement for allowable costs for work-in-process and an allowance for profit on the contract or adjustment for loss if completion of performance would have resulted in a loss.
Prime contracts with our major customers that have contracts with various agencies of the U.S. Government are subject to numerous laws, regulations and certifications, which affect how we do business with our customers and may impose added costs to our business.
Government are subject to numerous laws, regulations and certifications, which affect how we do business with our customers and may impose added costs to our operations. As a result, our business and contracts are subject to numerous extensive, complex, costly and evolving laws, regulations and restrictions, principally by the U.S. Government or its agencies.
We could also suffer an adverse impact on our reputation and a diversion of management’s attention and resources, which could have a material adverse effect on our business, financial condition, and results of operations.
We could also suffer an adverse impact on our reputation and a diversion of management’s attention and resources, which could have a material adverse effect on our business, financial condition, and results of operations. See Note 13 and Note 15 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.
At December 31, 2024, we were in compliance with the leverage covenant under the 2022 Credit Facilities. However, there is no assurance that we will continue to be in compliance with the leverage covenant in future periods.
However, there is no assurance that we will continue to be in compliance with all the covenants in future periods.
(“Viasat”) comprise a significant portion of our commercial aerospace end-use market in 2024. A significant portion of our net sales in our military and space end-use markets are made under subcontracts with original equipment manufacturers (“OEMs”), under their prime contracts with the U. S. Government.
A significant portion of our net sales in our military and space end-use markets are made under subcontracts with original equipment manufacturers (“OEMs”), pursuant to their prime contracts with the U. S. Government. We had significant sales in 2025 to Lockheed Martin Corporation (“Lockheed”), Northrop Grumman Corporation (“Northrop”), RTX Corporation (“RTX”), and TransDigm Group Inc.
Consolidation among our competitors may result in larger competitors with greater resources and market share, which could adversely affect our ability to compete successfully. Consolidation among our suppliers may result in fewer sources of supply and increased cost to us. Our growth strategy includes evaluating selected acquisitions, which entails certain risks to our business and financial performance.
Specifically, consolidation among our customers may result in delays in the awarding of new contracts and losses of existing business; consolidation among our competitors may result in larger competitors with greater resources and market share, which could adversely affect our ability to negotiate reasonable contractual terms and compete successfully; and consolidation among our suppliers may result in fewer sources of supply and increased cost to us.
We compete worldwide with a number of domestic and international companies that have substantially greater manufacturing, purchasing, marketing and financial resources than we do. Many of our customers have the in-house capability to fulfill their manufacturing requirements.
We compete worldwide with a number of domestic and international companies that have substantially greater manufacturing, purchasing, marketing and financial resources than we do, which could exert downward pressure on the prices we are able to charge for our products.

… 77 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

7 edited+0 added−0 removed8 unchanged
Biggest changeThe Department of Defense (“DoD”) will require defense contractors to comply with its CMMC program in the near future. We are incorporating the requirements of the CMMC program into our overall cybersecurity program and anticipate we will be in position to meet such requirements by the time it becomes fully rolled out in 2028.
Biggest changeThe Department of War (“DoW”) requires defense contractors to comply with its CMMC program for contracts that mandate the requirement. We are incorporating the requirements of the CMMC program into our overall cybersecurity program and anticipate we will be in position to meet such requirements by the time it becomes fully rolled out to all contracts in 2028.
As the threats and attacks are becoming more sophisticated, we will modify and enhance our cybersecurity program as needed. As a defense contractor, we must also comply with extensive regulations, including requirements imposed by the Defense Federal Acquisition Regulation Supplement (“DFARS”) related to adequately safeguarding controlled unclassified information (“CUI”).
As cybersecurity threats and attacks are becoming more sophisticated, we will modify and enhance our cybersecurity program as needed. As a defense contractor, we must also comply with extensive regulations, including requirements imposed by the Defense Federal Acquisition Regulation Supplement (“DFARS”) related to adequately safeguarding controlled unclassified information (“CUI”).
To date, we do not believe risks from cybersecurity threats, including as a result of any previous cybersecurity incidents have materially affected us or are reasonably likely to materiality affect us, including our business strategy, results of operations or financial condition.
To date, we do not believe risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, have materially affected us or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition.
CYBERSECURITY We have an enterprise-wide approach to addressing cybersecurity risk, including input and participation from management and support from our Information Technology (“IT”) Steering Committee that is comprised of our Senior Vice President Electronic and Structural Systems, Chief Financial Officer, General Counsel, Chief Human Resources Officer, Vice President Supply Chain Management, and Chief Information Security Officer (Head of IT and Cybersecurity or “CISO”).
CYBERSECURITY We have an enterprise-wide approach to addressing cybersecurity risk, including input and participation from management and support from our Information Technology (“IT”) Steering Committee that is comprised of our Senior Vice President Electronic and Structural Systems, Chief Financial Officer, General Counsel, Chief Human Resources Officer, Vice President Supply Chain Management, Vice President Engineered Products Group, and Chief Information Security Officer (Head of IT and Cybersecurity or “CISO”).
The Innovations Committee is a subset of the full Board of Directors which receive regular updates on our cybersecurity program. Our CISO has over 18 years of experience leading cybersecurity oversight for several companies and is updated on cyber events related to the monitoring, prevention, detection, mitigation, and remediation efforts from our IT security team.
The Innovation Committee is a subset of the full Board of Directors which receive regular updates on our cybersecurity program. Our CISO has over 19 years of experience leading cybersecurity oversight for several companies and is updated on cyber events related to the monitoring, prevention, detection, mitigation, and remediation efforts from our IT security team.
Further, we perform periodic simulations and tabletop exercises with the IT security team and will continue to expand its participants as appropriate. Our assessment of risks associated with the use of third party providers is on a limited basis and is part of our current overall cybersecurity risk management approach.
Further, we perform periodic simulations and tabletop exercises with the IT security team as well as with our executive team. Our assessment of risks associated with the use of third-party providers is on a limited basis and is part of our current overall cybersecurity risk management approach.
We also use an industry standard risk quantification model to identify, measure, and prioritize cybersecurity risks. This in turn, helps us develop and implement effective security controls and technology defenses. In addition, all employees are required to complete various cybersecurity awareness trainings on a regular basis.
We also use an industry standard risk quantification model to identify, measure, and prioritize cybersecurity risks. This, in turn, helps us develop and implement effective security controls and technology defenses. In addition, all members of management and employees with assigned e-mail boxes complete various cybersecurity awareness training on a regular basis.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged
Biggest changeITEM 2. PROPERTIES Our headquarters are located in Costa Mesa, California. As of December 31, 2024, we owned or leased facilities and land for corporate functions and manufacturing at locations throughout the United States and a manufacturing location outside the United States. We believe our existing facilities are suitable and adequate for our present purposes.
Biggest changeITEM 2. PROPERTIES Our headquarters are located in Costa Mesa, California. As of December 31, 2025, we owned or leased facilities and land for corporate functions and manufacturing at locations throughout the United States and a manufacturing location outside the United States. We believe our existing facilities are suitable and adequate for our present purposes.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed0 unchanged
Biggest changeITEM 3. LEGAL PROCEEDINGS See Note 16 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for a description of our legal proceedings, which description is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 23 Table of Contents PART II
Biggest changeITEM 3. LEGAL PROCEEDINGS See Note 15 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for a description of our legal proceedings, which description is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 23 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+1 added−0 removed1 unchanged
Biggest changeThe graph is not necessarily indicative of future price performance: (1) Includes AAR Corp, AeroVironment, Inc., Astronics Corporation, Barnes Group Inc., CIRCOR International, Inc., HEICO Corporation, Hexcel Corporation, Kaman Corporation, Kratos Defense & Security Solutions, Inc., Mercury Systems, Inc., RBC Bearings Incorporated, and Triumph Group, Inc. ITEM 6. [Reserved] 24 Table of Contents
Biggest changeThe graph is not necessarily indicative of future price performance: (1) Includes AAR Corp, AeroVironment, Inc., Albany International Corp., Astronics Corporation, Barnes Group Inc., Crane Company, ESCO Technologies Inc., Hexcel Corporation, Kratos Defense & Security Solutions, Inc., Mercury Systems, Inc., RBC Bearings Incorporated, Standex International Corporation, and Triumph Group, Inc. ITEM 6. [Reserved] 24 Table of Contents
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange under the symbol DCO. As of December 31, 2024, we had 127 holders of record of our common stock.
ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is listed on the New York Stock Exchange under the symbol DCO. As of December 31, 2025, we had 119 holders of record of our common stock.
Issuer Purchases of Equity Securities None. Performance Graph The following graph compares the yearly percentage change in our cumulative total shareholder return with the cumulative total return of the Russell 2000 Index and the median of our 2025 Proxy Statement peers (1) (“Median of Peers”) over a five-year period, assuming the reinvestment of any dividends.
The following graph compares the yearly percentage change in our cumulative total shareholder return with the cumulative total return of the Russell 2000 Index and the median of our 2026 Proxy Statement peers (1) (“Median of Peers”) over a five-year period, assuming the reinvestment of any dividends.
Added
Issuer Purchases of Equity Securities None. Performance Graph The following is not deemed “filed” for purposes of Section 18 of the Exchange Act or incorporated by reference into any of our other filings under the Exchange Act or the Securities Act of 1933, as amended, except to the extent specifically incorporated by reference into such filing.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

82 edited+48 added−30 removed47 unchanged
Biggest changeRecap for the year ended December 31, 2024: • Net revenues of $786.6 million • Net income of $31.5 million, or 4.0% of net revenues, or $2.10 per diluted share • Adjusted EBITDA of $116.6 million, or 14.8% of net revenues 25 Table of Contents RESULTS OF OPERATIONS 2024 Compared to 2023 The following table sets forth net revenues, selected financial data, the effective tax rate and diluted earnings per share: (Dollars in thousands, except per share data) Years Ended December 31, 2024 % of Net Revenues 2023 % of Net Revenues Net Revenues $ 786,551 100.0 % $ 756,992 100.0 % Cost of Sales 589,286 74.9 % 593,805 78.4 % Gross Profit 197,265 25.1 % 163,187 21.6 % Selling, General and Administrative Expenses 138,610 17.7 % 119,728 15.8 % Restructuring Charges 6,444 0.8 % 14,542 2.0 % Operating Income 52,211 6.6 % 28,917 3.8 % Interest Expense (15,304) (1.8) % (20,773) (2.7) % Other Income, Net — — % 8,235 1.1 % Income Before Taxes 36,907 4.8 % 16,379 2.2 % Income Tax Expense 5,412 nm 451 nm Net Income $ 31,495 4.0 % $ 15,928 2.1 % Effective Tax Rate 14.7 % nm 2.8 % nm Diluted Earnings Per Share $ 2.10 nm $ 1.14 nm nm = not meaningful Net Revenues by End-Use Market and Operating Segment Net revenues by end-use market and operating segment during 2024 and 2023, respectively, were as follows: (Dollars in thousands) Years Ended December 31, % of Net Revenues Change 2024 2023 2024 2023 Consolidated Ducommun Military and space $ 16,126 $ 419,945 $ 403,819 53.4 % 53.3 % Commercial aerospace 23,823 333,114 309,291 42.3 % 40.9 % Industrial (10,390) 33,492 43,882 4.3 % 5.8 % Total $ 29,559 $ 786,551 $ 756,992 100.0 % 100.0 % Electronic Systems Military and space $ 14,011 $ 307,496 $ 293,485 71.3 % 68.2 % Commercial aerospace (2,394) 90,375 92,769 20.9 % 21.6 % Industrial (10,390) 33,492 43,882 7.8 % 10.2 % Total $ 1,227 $ 431,363 $ 430,136 100.0 % 100.0 % Structural Systems Military and space $ 2,115 $ 112,449 $ 110,334 31.7 % 33.8 % Commercial aerospace 26,217 242,739 216,522 68.3 % 66.2 % Total $ 28,332 $ 355,188 $ 326,856 100.0 % 100.0 % Net revenues for 2024 were $786.6 million compared to $757.0 million for 2023.
Biggest changeRecap for the year ended December 31, 2025: • Net revenues of $824.7 million • Net loss of $33.9 million, or 4.1% of net revenues, or $2.27 per share • Adjusted EBITDA of $135.6 million, or 16.4% of net revenues 27 Table of Contents RESULTS OF OPERATIONS 2025 Compared to 2024 The following table sets forth net revenues, selected financial data, the effective tax (benefit) rate and diluted (loss) earnings per share: (Dollars in thousands, except per share data) Years Ended December 31, 2025 % of Net Revenues 2024 % of Net Revenues Net Revenues $ 824,730 100.0 % $ 786,551 100.0 % Cost of Sales 603,115 73.1 % 589,286 74.9 % Gross Profit 221,615 26.9 % 197,265 25.1 % Selling, General and Administrative Expenses 144,377 17.5 % 138,610 17.7 % Restructuring Charges 2,237 0.3 % 6,444 0.8 % Litigation Settlement and Related Costs, Net 107,305 13.0 % — — % Operating (Loss) Income (32,304) (3.9) % 52,211 6.6 % Interest Expense (12,676) (1.5) % (15,304) (1.8) % Loss on Extinguishment of Debt (581) (0.1) % — — % Other Income, Net 1,746 0.2 % — — % (Loss) Income Before Taxes (43,815) (5.3) % 36,907 4.8 % Income Tax (Benefit) Expense (9,877) nm 5,412 nm Net (Loss) Income $ (33,938) (4.1) % $ 31,495 4.0 % Effective Tax Rate 22.5 % nm 14.7 % nm Diluted (Loss) Earnings Per Share $ (2.27) nm $ 2.10 nm nm = not meaningful Net Revenues by End-Use Market and Operating Segment Net revenues by end-use market and operating segment during 2025 and 2024, respectively, were as follows: (Dollars in thousands) Years Ended December 31, % of Net Revenues Change 2025 2024 2025 2024 Consolidated Ducommun Military and space $ 59,957 $ 479,902 $ 419,945 58.2 % 53.4 % Commercial aerospace (24,796) 308,318 333,114 37.4 % 42.3 % Industrial 3,018 36,510 33,492 4.4 % 4.3 % Total $ 38,179 $ 824,730 $ 786,551 100.0 % 100.0 % Electronic Systems Military and space $ 43,650 $ 351,146 $ 307,496 75.9 % 71.3 % Commercial aerospace (15,349) 75,026 90,375 16.2 % 20.9 % Industrial 3,018 36,510 33,492 7.9 % 7.8 % Total $ 31,319 $ 462,682 $ 431,363 100.0 % 100.0 % Structural Systems Military and space $ 16,307 $ 128,756 $ 112,449 35.6 % 31.7 % Commercial aerospace (9,447) 233,292 242,739 64.4 % 68.3 % Total $ 6,860 $ 362,048 $ 355,188 100.0 % 100.0 % 28 Table of Contents Net revenues for 2025 were $824.7 million compared to $786.6 million for 2024.
The market approach also requires management judgment in selecting comparable companies, business acquisitions and the transaction values observed and its related control premiums. In the fourth quarter of 2024, the carrying amount of goodwill at the date of the most recent annual impairment evaluation for Electronic Systems and Structural Systems was $117.4 million and $127.2 million, respectively.
The market approach also requires management judgment in selecting comparable companies, business acquisitions and the transaction values observed and its related control premiums. In the fourth quarter of 2025, the carrying amount of goodwill at the date of the most recent annual impairment evaluation for Electronic Systems and Structural Systems was $117.4 million and $127.2 million, respectively.
See Note 16 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for additional information.
See Note 15 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for additional information.
See Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for the net impact of these adjustments to our consolidated financial statements for 2024 and 2023. Payments under long-term contracts may be received before or after revenue is recognized.
See Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for the net impact of these adjustments to our consolidated financial statements for 2025 and 2024. Payments under long-term contracts may be received before or after revenue is recognized.
If certain factors occur, including significant under performance of our business relative to expected operating results, significant adverse economic and industry trends, significant decline in our market capitalization for an extended period of time relative to net book value, a decision to divest individual businesses within a reporting unit, or a decision to group individual businesses differently, we may be required to perform an interim impairment test prior to the fourth quarter.
If certain factors occur, including significant under performance of our business relative to expected operating results, significant adverse economic and industry trends, significant decline in our market capitalization for an extended period of time relative to net book value, a 39 Table of Contents decision to divest individual businesses within a reporting unit, or a decision to group individual businesses differently, we may be required to perform an interim impairment test prior to the fourth quarter.
The Forward Interest Rate Swaps mature on a monthly basis, with fixed amount payer payment dates on the first day of each calendar month, commencing on February 1, 2024 through January 1, 2031. See Note 1, Note 4 , and Note 10 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.
The Forward Interest Rate Swaps mature on a monthly basis, with fixed amount payer payment dates on the first day of each calendar month, commencing on February 1, 2024 through January 1, 2031. See Note 1, Note 3, and Note 9 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.
The following financial items have been added back to or subtracted from our net income when calculating Adjusted EBITDA: • Interest expense may be useful to investors for determining current cash flow; 31 Table of Contents • Income tax expense may be useful to investors because it represents the taxes which may be payable for the period and the change in deferred taxes during the period, and may reduce cash flow available for use in our business; • Depreciation may be useful to investors because it generally represents the wear and tear on our property and equipment used in our operations; • Amortization expense may be useful to investors because it represents the estimated attrition of our acquired customer base and the diminishing value of product rights; • Stock-based compensation expense may be useful to our investors for determining current cash flow; • Restructuring charges may be useful to our investors in evaluating our core operating performance; • Professional fees related to unsolicited non-binding acquisition offer may be useful to our investors in evaluating our core operating performance; • Guaymas fire related expenses may be useful to our investors in evaluating our core operating performance; • Other fire related expenses may be useful to our investors in evaluating our core operating performance; • Insurance recoveries related to loss on operating assets (property and equipment, inventories, and other assets) may be useful to our investors in evaluating our core operating performance; • Insurance recoveries related to business interruption may be useful to our investors in evaluating our core operating performance; • Purchase accounting inventory step-ups may be useful to our investors as they do not necessarily reflect the current or on-going cash charges related to our core operating performance; • Loss on extinguishment of debt may be useful to our investors for determining current cash flow; and • Other debt refinancing costs may be useful to our investors in evaluating our core operating performance.
The following financial items have been added back to or subtracted from our net income when calculating Adjusted EBITDA: • Interest expense may be useful to investors for determining current cash flow; 33 Table of Contents • Income tax (benefit) expense may be useful to investors because it represents the taxes which may be payable for the period and the change in deferred taxes during the period, and may reduce cash flow available for use in our business; • Depreciation may be useful to investors because it generally represents the wear and tear on our property and equipment used in our operations; • Amortization expense may be useful to investors because it represents the estimated attrition of our acquired customer base and the diminishing value of product rights; • Stock-based compensation expense may be useful to our investors for determining current cash flow; • Restructuring charges may be useful to our investors in evaluating our core operating performance; • Litigation settlement and related costs, net, may be useful to our investors in evaluating our core operating performance; • Loss on extinguishment of debt may be useful to our investors for determining current cash flow; • Other debt refinancing costs may be useful to our investors in evaluating our core operating performance; • Gain on sale of property and other assets may be useful to our investors in evaluating our core operating performance; • Professional fees related to unsolicited non-binding acquisition offer may be useful to our investors in evaluating our core operating performance; • Guaymas fire related expenses may be useful to our investors in evaluating our core operating performance; • Other fire related expenses may be useful to our investors in evaluating our core operating performance; • Insurance recoveries related to loss on operating assets (property and equipment, inventories, and other assets) may be useful to our investors in evaluating our core operating performance; • Insurance recoveries related to business interruption may be useful to our investors in evaluating our core operating performance; and • Purchase accounting inventory step-ups may be useful to our investors as they do not necessarily reflect the current or on-going cash charges related to our core operating performance.
We evaluate other intangible assets for recoverability considering undiscounted cash flows when significant changes in conditions occur, and recognize impairment losses, if any, based upon the estimated fair value of the assets. 37 Table of Contents Accounting for Stock-Based Compensation We measure and recognize compensation expense for share-based payment transactions to our employees and non-employees at their estimated fair value.
We evaluate other intangible assets for recoverability considering undiscounted cash flows when significant changes in conditions occur, and recognize impairment losses, if any, based upon the estimated fair value of the assets. Accounting for Stock-Based Compensation We measure and recognize compensation expense for share-based payment transactions to our employees and non-employees at their estimated fair value.
See Note 2, Note 10, and Note 11 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.
See Note 2 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.
The Amended Forward Interest Rate Swaps weighted average fixed rate was 1.7% as a result of the difference between U.S. dollar-one month LIBOR and one month Term SOFR. See Note 1, Note 4, and Note 10 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.
The Amended Forward Interest Rate Swaps weighted average fixed rate is 1.7%, as a result of the difference between U.S. dollar-one month LIBOR and one month Term SOFR. See Note 1, Note 3, and Note 9 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.
Non-GAAP Financial Measures Adjusted earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, restructuring charges, professional fees related to unsolicited non-binding acquisition offer, Guaymas fire related expenses, other fire related 30 Table of Contents expenses, insurance recoveries related to loss on operating assets, insurance recoveries related to business interruption, inventory purchase accounting adjustments, loss on extinguishment of debt, and other debt refinancing costs (“Adjusted EBITDA”) was $116.6 million and $101.5 million for the years ended December 31, 2024 and December 31, 2023, respectively.
Non-GAAP Financial Measures Adjusted earnings before interest, taxes, depreciation, amortization, stock-based compensation expense, restructuring charges, professional fees related to unsolicited non-binding acquisition offer, Guaymas fire related expenses, other fire related expenses, insurance recoveries related to loss on operating assets, insurance recoveries related to business interruption, 32 Table of Contents inventory purchase accounting adjustments, loss on extinguishment of debt, and other debt refinancing costs (“Adjusted EBITDA”) was $135.6 million and $116.6 million for the years ended December 31, 2025 and December 31, 2024, respectively.
See Note 3 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.
See Note 1 and Note 15 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.
(“Spirit”), and Viasat, Inc. (“Viasat”). The revenues from Boeing, Lockheed, Northrop, RTX, Spirit, and Viasat are diversified over a number of commercial, military and space programs and some of which were generated by both operating segments. Gross Profit Gross profit consists of net revenues less cost of sales.
The revenues from Boeing, Lockheed, Northrop, and RTX are diversified over a number of commercial, military and space programs and some of which were generated by both operating segments. Gross Profit Gross profit consists of net revenues less cost of sales.
Inventories Inventories are stated at the lower of cost or net realizable value with cost being determined using a moving average cost basis for raw materials and actual cost for work-in-process and finished goods. The majority of our inventory is charged to cost of sales as raw materials are placed into production.
Inventories Inventories are stated at the lower of cost or net realizable value with cost being determined using a moving average cost basis for raw materials and actual cost for work-in-process and finished goods. The majority of our inventory is charged to cost of sales as raw materials are allocated to a customer order.
Since Boeing is one of our largest customers, if Boeing is unable to meet the full compliance of the FAA’s required quality control procedures, and/or recover from the impact of the labor strike in the near term, it could have a material adverse impact on our business, results of operations and financial condition.
Since Boeing is one of our largest customers, if Boeing is unable to meet the full compliance of the FAA’s required quality control procedures, and/or recover from the impact of a labor strike, which extended from early August 2025 to mid-November 2025, in the near term, it could have a material adverse impact on our business, results of operations and financial condition.
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Ducommun Incorporated (“Ducommun,” “the Company,” “we,” “us” or “our”) is a leading global provider of engineering and manufacturing services for high-performance products and high-cost-of failure applications used primarily in the aerospace and defense (“A&D”), industrial, medical, and other industries (“Industrial”).
Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Overview Ducommun Incorporated (“Ducommun,” “the Company,” “we,” “us” or “our”) is a leading designer and manufacturer of and provider of manufacturing solutions for high-performance products often used in high-cost-of failure applications primarily in the aerospace and defense (“A&D”), industrial, medical, and other industries (collectively, “Industrial”).
In November 2021, we entered into derivative contracts, U.S. dollar-one month LIBOR forward interest rate swaps designated as cash flow hedges, all with an effective date of January 1, 2024, for an aggregate total notional amount of $150.0 million, weighted average fixed rate of 1.8%, and all terminating on January 1, 2031 (“Forward Interest Rate Swaps”).
Derivatives In November 2021, we entered into U.S. dollar-one month London Interbank Offered Rate (“LIBOR”) forward interest rate swaps designated as cash flow hedges, all with an effective date of January 1, 2024, for an aggregate total notional amount of $150.0 million, weighted average fixed rate of 1.8%, and all terminating on January 1, 2031 (“Forward Interest Rate Swaps”).
In April 2022, management approved and commenced a restructuring plan that will position us for stronger performance. The restructuring plan mainly reduces headcount and consolidate facilities. As a result of this restructuring plan, we analyzed the need to write-down inventory and impair long-lived assets, including operating lease right-of-use assets.
Restructuring In April 2022, management approved and commenced a restructuring plan that was intended to position us for stronger performance. The restructuring plan mainly reduced headcount and consolidated facilities. As a result of this restructuring plan, we analyzed the need to write-down inventory and impair long-lived assets, including operating lease right-of-use assets.
As of December 31, 2024, we were in compliance with all covenants required under the 2022 Credit Facilities. See Note 10 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.
As of December 31, 2025, we were in compliance with 36 Table of Contents all covenants required under the 2025 Credit Facilities. See Note 9 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.
The majority of our revenues are recognized over time, however, for revenue contracts where revenue is recognized using the point in time method, inventory is not reduced until it is shipped or transfer of control to the customer has occurred. Our ending inventory consists of raw materials, work-in-process, and finished goods.
The majority of our revenues are recognized over time, however, for revenue contracts where revenue is recognized using the point in time method, inventory is not reduced until control of the goods transfers to our customer. Our ending inventory consists of raw materials, work-in-process, and finished goods.
The Forward Interest Rate Swaps were based on U.S. dollar-one month LIBOR and were amended to be based on one month Term SOFR as borrowings using LIBOR are no longer available under the 2022 Credit Facilities.
The Forward Interest Rate Swaps were based on U.S. dollar-one month LIBOR and were amended to be based on one month Term Secured Overnight Financing Rate (“SOFR”) as borrowings using LIBOR were no longer available under the 2022 Credit Facilities.
Cost of sales includes the cost of production of finished products and other expenses related to inventory management, manufacturing quality, and order fulfillment. Gross profit margin increased to 25.1% in 2024 compared to 21.6% in 2023.
Cost of sales includes the cost of production of finished products and other expenses related to inventory management, manufacturing quality, and order fulfillment. Gross profit margin increased to 26.9% in 2025 compared to 25.1% in 2024.
See Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for additional accounting policies. Revenue Recognition Our customers typically engage us to manufacture products based on designs and specifications provided by the end-use customer. This requires the building of tooling and manufacturing first article inspection products (prototypes) before volume manufacturing.
See Note 1 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for additional accounting policies. Revenue Recognition Our customers typically engage us to manufacture products based on designs and specifications provided by the end-use customer.
We made the mandatory quarterly amortization payments under our term loans of $7.8 million and $6.3 million during 2024 and 2023, respectively. As of December 31, 2024, we had $191.0 million of unused borrowing capacity under the 2022 Revolving Credit Facility, after deducting $0.2 million for standby letters of credit.
We made the mandatory quarterly amortization payments under our term loans of $9.4 million and $7.8 million during 2025 and 2024, respectively. As of December 31, 2025, we had $344.8 million of unused borrowing capacity under the 2025 Revolving Credit Facility, after deducting $0.2 million for standby letters of credit.
Cash generated from operations and bank borrowing capacity is expected to provide sufficient liquidity to meet our obligations during the next twelve months from the date of issuance of these financial statements. Cash Flow Summary 2024 Compared to 2023 Net cash provided by operating activities during 2024 was $34.2 million, compared to $31.1 million during 2023.
Cash generated from operations and bank borrowing capacity is expected to provide sufficient liquidity to meet our obligations during the next twelve months from the date of issuance of these financial statements. 37 Table of Contents Cash Flow Summary 2025 Compared to 2024 Net cash used in operating activities during 2025 was $33.4 million, compared to net cash provided by operating activities of $34.2 million during 2024.
When revenue is recognized before we bill our customer, a contract asset is created for the work performed but not yet billed. Similarly, when we receive payment before we ship our products to our customer and have met the shipping terms, a contract liability is created for the advance or progress payment.
When revenue is recognized before we bill our customer, a contract asset is created for the work performed but not yet billed. Similarly, when we receive payment before we recognized revenue, a contract liability is created for the advance or progress payment.
(2) 2024, 2023, and 2022 included $0.5 million, $0.5 million, and $0.2 million, respectively, of stock-based compensation expense recorded as cost of sales. 32 Table of Contents (3) 2024, 2023, and 2022 included $1.2 million, $0.3 million, and $0.5 million, respectively, of restructuring charges that were recorded as cost of sales.
(2) 2025, 2024, and 2023 each included $0.5 million of stock-based compensation expense recorded as cost of sales. (3) 2025, 2024, and 2023 included zero, $1.2 million, and $0.3 million, respectively, of restructuring charges that were recorded as cost of sales.
The increase in backlog was primarily in the military and space end-use markets; partially offset by a decrease in the commercial aerospace end-use markets and industrial end-use markets. $751.0 million of total backlog is expected to be delivered over the next 12 months.
The increase in backlog was primarily in the military and space and commercial aerospace end-use markets. $844.0 million of total backlog is expected to be delivered over the next 12 months.
Structural Systems Structural Systems’ net revenues in 2024 compared to 2023 increased $28.3 million primarily due to the following: • $26.2 million higher revenues in commercial aerospace end-use markets due to growth in Airbus, higher rates on rotary-wing aircraft, and business jet platforms; and • $2.1 million higher revenues in military and space end-use markets due to higher rates on selected rotary-wing aircraft and ground vehicles platforms, partially offset by lower rates on selected missile platforms.
Structural Systems Structural Systems’ net revenues in 2025 compared to 2024 increased $6.9 million, primarily due to the following: • $16.3 million higher revenues in military and space end-use markets due to higher rates on selected rotary-wing aircraft, missile, and ground vehicles platforms, partially offset by lower rates on selected fixed-wing aircraft platforms; partially offset by • $9.4 million lower revenues in commercial aerospace end-use markets due to lower revenues from Boeing and lower rates on rotary-wing aircraft platforms, partially offset by growth in Airbus.
We differentiate ourselves as a full-service solution-based provider, offering a wide range of value-added products and services in our primary businesses of electronics, structures and integrated solutions. We operate through two primary business segments: Electronic Systems and Structural Systems, each of which is a reportable segment.
Ducommun differentiates itself as a full-service solution-based provider, offering innovative, value-added proprietary products and manufacturing solutions to our customers in our primary businesses of electronics, structures and integrated solutions. We operate through two primary business segments: Electronic Systems and Structural Systems, each of which is a reportable segment.
The primary method used to estimate the standalone selling price is the expected cost plus a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service. We manufacture most products to customer specifications, and the product cannot be easily modified for another customer.
The primary 38 Table of Contents method used to estimate the standalone selling price is the expected cost plus a margin approach, under which we forecast our expected costs of satisfying a performance obligation and then add an appropriate margin for that distinct good or service.
The loss of production from the Guaymas performance center was absorbed by our other existing performance centers, however, we have reestablished and are in the process of ramping up our manufacturing capabilities in a different leased facility in Guaymas.
The loss of production from the Guaymas performance center was absorbed by our other existing performance centers, however, we have reestablished our operations and are in the process of certification with various customers and ramping up our manufacturing capabilities in a different leased facility in Guaymas. We have insurance coverage up to a capped amount, less our deductible.
Reconciliations of net income to Adjusted EBITDA and the presentation of Adjusted EBITDA as a percentage of net revenues were as follows: (Dollars in thousands) Years Ended December 31, 2024 2023 2022 Net income $ 31,495 $ 15,928 $ 28,789 Interest expense 15,304 20,773 11,571 Income tax expense 5,412 451 4,533 Depreciation 16,328 15,473 14,535 Amortization 17,110 17,098 16,886 Stock-based compensation expense (1)(2) 17,836 15,045 10,744 Restructuring charges (3) 7,656 14,855 6,686 Professional fees related to unsolicited non-binding acquisition offer 3,145 — — Guaymas fire related expenses — 3,896 4,466 Other fire related expenses — 477 — Insurance recoveries related to loss on operating assets — (5,724) — Insurance recoveries related to business interruption — (2,289) (5,400) Inventory purchase accounting adjustments (4)(5) 2,269 5,531 1,381 Loss on extinguishment of debt — — 295 Other debt refinancing costs — — 224 Adjusted EBITDA $ 116,555 $ 101,514 $ 94,710 Net income as a % of net revenues 4.0 % 2.1 % 4.0 % Adjusted EBITDA as a % of net revenues 14.8 % 13.4 % 13.3 % (1) 2024, 2023, and 2022 included $3.7 million, $2.7 million, and $1.2 million, respectively, of stock-based compensation expense for awards with both performance and market conditions that will be settled in cash.
Reconciliations of net income to Adjusted EBITDA and the presentation of Adjusted EBITDA as a percentage of net revenues were as follows: 34 Table of Contents (Dollars in thousands) Years Ended December 31, 2025 2024 2023 Net (loss) income $ (33,938) $ 31,495 $ 15,928 Interest expense 12,676 15,304 20,773 Income tax (benefit) expense (9,877) 5,412 451 Depreciation 16,358 16,328 15,473 Amortization 17,299 17,110 17,098 Stock-based compensation expense (1)(2) 24,520 17,836 15,045 Restructuring charges (3) 2,237 7,656 14,855 Litigation settlement and related costs, net 107,305 — — Loss on extinguishment of debt 581 — — Other debt refinancing costs 152 — — Gain on sale of property and other assets (1,746) — — Professional fees related to unsolicited non-binding acquisition offer — 3,145 — Guaymas fire related expenses — — 3,896 Other fire related expenses — — 477 Insurance recoveries related to loss on operating assets — — (5,724) Insurance recoveries related to business interruption — — (2,289) Inventory purchase accounting adjustments (4) — 2,269 5,531 Adjusted EBITDA $ 135,567 $ 116,555 $ 101,514 Net (loss) income as a % of net revenues (4.1) % 4.0 % 2.1 % Adjusted EBITDA as a % of net revenues 16.4 % 14.8 % 13.4 % (1) 2025, 2024, and 2023 included $3.0 million, $3.7 million, and $2.7 million, respectively, of stock-based compensation expense for awards with both performance and market conditions that will be settled in cash.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Form 10-K filed with the SEC on February 22, 2024.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Form 10-K filed with the SEC on February 27, 2025 for a comparison of our results of operations for the 2024 fiscal year to the 2023 fiscal year.
Electronic Systems Electronic Systems’ net revenues in 2024 compared to 2023 increased $1.2 million primarily due to the following: 29 Table of Contents • $14.0 million higher revenues in our military and space end-use markets due to higher rates on selected missile, electronic warfare, radar, and naval and submarine platforms, partially offset by lower rates on selected fixed-wing aircraft platforms; partially offset by • $2.4 million lower revenues in our commercial aerospace end-use markets due to lower revenues from in-flight entertainment, partially offset by higher rates on large aircraft and business jet platforms.
Electronic Systems Electronic Systems’ net revenues in 2025 compared to 2024 increased $31.3 million, primarily due to the following: • $43.7 million higher revenues in our military and space end-use markets due to higher rates on selected missile, classified program, fixed-wing aircraft, and radar platforms, partially offset by lower rates on selected electronic warfare platforms; partially offset by 31 Table of Contents • $15.3 million lower revenues in our commercial aerospace end-use markets due to lower rates on large aircraft platforms and lower revenues from in-flight entertainment.
We expect to spend a total of $23.0 million to $25.0 million for capital expenditures in 2025, financed by cash generated from operations, principally to support both growth in existing programs as well as new contract awards in Electronic Systems and Structural Systems.
Capital Expenditures We expect to spend a total of $20.0 million to $24.0 million for capital expenditures in 2026, financed by cash generated from operations, principally to support new contract awards in Electronic Systems and Structural Systems.
The increase in net income in 2024 compared to 2023 was primarily due to higher gross profit of $34.1 million, lower restructuring charges of $7.2 million (including the portion recorded in cost of sales which increased $0.9 million), and lower interest expense of $5.5 million, partially offset by higher SG&A expenses of $18.9 million, lower other income, net of $8.2 million, and higher income tax expense of $5.0 million. 28 Table of Contents Business Segment Performance We report our financial performance based upon the two reportable operating segments: Electronic Systems and Structural Systems.
The decrease in net income in 2025 compared to 2024 was primarily due to higher litigation settlement and related costs, net of $107.3 million and higher SG&A expenses of $5.8 million, partially offset by higher gross profit of $24.4 million, lower income tax expense of $15.3 million, and lower restructuring charges of $5.4 million (including the portion recorded in cost of sales, which decreased $1.2 million). 30 Table of Contents Business Segment Performance We report our financial performance based upon the two reportable operating segments: Electronic Systems and Structural Systems.
We record interest and penalty charges, if any, related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for interest and penalty charges as of December 31, 2024 and 2023 were not significant. If recognized, $2.5 million would affect the effective income tax rate.
Our unrecognized tax benefits were $5.0 million and $4.5 million in 2025 and 2024, respectively. We record interest and penalty charges, if any, related to uncertain tax positions as a component of tax expense and unrecognized tax benefits. The amounts accrued for interest and penalty charges as of December 31, 2025 and 2024 were not significant.
As part of our strategic plan to become a supplier of higher-level assemblies and win new contract awards, additional up-front investment in tooling will be required for newer programs which have higher engineering content and higher levels of complexity in assemblies. We believe the ongoing aerospace and defense subcontractor consolidation makes acquisitions an increasingly important component of our future growth.
As part of our strategic plan to become a supplier of higher-level assemblies and win new contract awards, additional up-front investment in tooling will be required for newer programs which have higher engineering content and higher levels of complexity in assemblies.
Net Income and Earnings per Diluted Share Net income and earnings per diluted share for 2024 were $31.5 million, or $2.10 per diluted share, compared to net income and earnings per diluted share for 2023 of $15.9 million, or $1.14 per diluted share.
Net (Loss) Income and (Loss) Earnings per Diluted Share Net loss and loss per share for 2025 were $33.9 million, or $2.27 per share, respectively, compared to net income and earnings per diluted share for 2024 of $31.5 million, or $2.10 per diluted share, respectively.
As such, these products are deemed to have no alternative use once the manufacturing process begins. In the event the customer invokes a termination for convenience clause, we would be entitled to costs incurred to date plus a reasonable profit. Contract costs typically include labor, materials, overhead, and when applicable, subcontractor costs.
In the event the customer invokes a termination for convenience clause, we would be entitled to costs incurred to date plus a reasonable profit. Contract costs typically include labor, materials, overhead, and when applicable, subcontractor costs.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2023 Form 10-K filed with the SEC on February 22, 2024.
Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2024 Form 10-K filed with the SEC on February 27, 2025 for our cash flow summary for the 2024 fiscal year to the 2023 fiscal year.
LIQUIDITY AND CAPITAL RESOURCES Available Liquidity Total debt, the weighted-average interest rate, cash and cash equivalents and available credit facilities were as follows: 33 Table of Contents (Dollars in millions) December 31, 2024 2023 Total debt, including short-term portion $ 243.2 $ 266.0 Weighted-average interest rate on debt 7.25 % 7.53 % Term Loans interest rate 7.02 % 6.93 % Cash and cash equivalents $ 37.1 $ 42.9 Unused Revolving Credit Facility $ 191.0 $ 176.0 In July 2022, we completed a refinancing of all our existing debt by entering into a new term loan (“2022 Term Loan”) and a new revolving credit facility (“2022 Revolving Credit Facility”).
LIQUIDITY AND CAPITAL RESOURCES Available Liquidity Total debt, the weighted-average interest rate, cash and cash equivalents and available credit facilities were as follows: (Dollars in millions) December 31, 2025 2024 Total debt, including short-term portion $ 305.0 $ 243.2 Weighted-average interest rate on debt 6.10 % 7.25 % Term Loans interest rate 5.81 % 7.02 % Cash and cash equivalents $ 45.3 $ 37.1 Unused Revolving Credit Facility $ 344.8 $ 191.0 Credit Facilities On November 24, 2025, we completed a refinancing of our existing debt by entering into a new senior secured term loan (“2025 Term Loan”) and a new revolving credit facility (“2025 Revolving Credit Facility”).
We believe we have adequately accrued for tax deficiencies or reductions in tax benefits, if any, that could result from the examination and all open audit years.
We believe we have adequately accrued for tax deficiencies or reductions in tax benefits, if any, that could result from the examination and all open audit years. On July 4, 2025, the U.S. enacted the One Big Beautiful Bill Act (“OBBBA”).
The year-over-year increase was primarily due to the following: • $23.8 million higher revenues in our commercial aerospace end-use markets due to growth in Airbus, higher rates on rotary-wing aircraft and growth in business jet platforms, partially offset by lower revenues from in-flight entertainment; and 26 Table of Contents • $16.1 million higher revenues in our military and space end-use markets due to higher rates on selected missile, electronic warfare, radar, and naval and submarine platforms, partially offset by lower rates on selected fixed-wing aircraft platforms.
The year-over-year increase was primarily due to the following: • $60.0 million higher revenues in our military and space end-use markets due to higher rates on selected missile, classified program, rotary-wing aircraft, fixed-wing aircraft, and radar platforms; partially offset by • $24.8 million lower revenues in our commercial aerospace end-use markets due to lower revenues from Boeing and in-flight entertainment, and lower rates on rotary-wing aircraft platforms.
This notification was followed by the FAA announcing actions to increase its oversight of Boeing as well as not approving production rate increases or additional production lines for the 737 MAX until it is satisfied that Boeing is in full compliance with required quality control procedures.
In early January 2024, the Federal Aviation Administration (“FAA”) initiated an investigation into Boeing’s quality control system, which was followed by the agency announcing actions to increase its oversight of Boeing as well as not approving production rate increases or additional production lines for the 737 MAX until it was satisfied that Boeing attained full compliance with required quality control procedures.
A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, control is transferred and the performance obligation is satisfied. The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services are highly interrelated or met the series guidance.
The majority of our contracts have a single performance obligation as the promise to transfer the individual goods or services are highly interrelated or met the series guidance.
We review the value of the production cost of contracts on a 36 Table of Contents quarterly basis to ensure when added to the estimated cost to complete, the value is not greater than the estimated realizable value of the related contracts.
We review the value of the production cost of contracts on a quarterly basis to ensure when added to the estimated cost to complete, the value is not greater than the estimated realizable value of the related contracts. Goodwill Goodwill is evaluated for impairment on an annual basis on the first day of the fourth fiscal quarter.
In conjunction with the closing of the 2022 Credit Facilities, we utilized the entire $250.0 million of proceeds from the 2022 Term Loan plus our existing cash on hand to pay off our entire debt balance outstanding of $254.2 million under our prior credit facilities.
In conjunction with the closing of the 2025 Credit Facilities, we utilized the entire $200.0 million of proceeds from the 2025 Term Loan combined with drawing down on the 2025 Revolving Credit Facility to pay off our entire debt balance outstanding of $320.0 million under the 2022 Credit Facilities.
The higher net cash provided by operating activities during 2024 was primarily due to higher net income, higher accounts payable mainly due to timing of payments, and lower inventories due to higher revenues, partially offset by higher contract assets due to higher revenues and lower contract liabilities due to lower net progress payments.
The lower net cash provided by operating activities during 2025 was primarily due to higher contract assets as a result of higher revenues, lower net income as a result of the litigation settlement and related costs, net, and higher accounts receivable, partially offset by higher contract liabilities and lower inventories.
The following table summarizes our business segment performance for 2024 and 2023: % (Dollars in thousands) Years Ended December 31, % of Net Revenues % of Net Revenues Change 2024 2023 2024 2023 Net Revenues Electronic Systems 0.3 % $ 431,363 $ 430,136 54.8 % 56.8 % Structural Systems 8.7 % 355,188 326,856 45.2 % 43.2 % Total Net Revenues 3.9 % $ 786,551 $ 756,992 100.0 % 100.0 % Segment Operating Income Electronic Systems $ 73,666 $ 42,086 17.1 % 9.8 % Structural Systems 24,964 23,460 7.0 % 7.2 % 98,630 65,546 Corporate General and Administrative Expenses (1) (46,419) (36,629) (5.9) % (4.8) % Total Operating Income $ 52,211 $ 28,917 6.6 % 3.8 % Adjusted EBITDA Electronic Systems Operating Income $ 73,666 $ 42,086 Other Income — 222 Depreciation and Amortization 14,455 14,276 Stock-Based Compensation Expense 351 462 Restructuring Charges 177 6,412 88,649 63,458 20.6 % 14.8 % Structural Systems Operating Income 24,964 23,460 Depreciation and Amortization 18,696 18,060 Stock-Based Compensation Expense 375 387 Restructuring Charges 7,479 8,334 Inventory Purchase Accounting Adjustments 2,269 5,531 Guaymas Fire Related Expenses — 3,896 Other Fire Related Expenses — 477 53,783 60,145 15.1 % 18.4 % Corporate General and Administrative Expenses (1) Operating Loss (46,419) (36,629) Depreciation and Amortization 287 235 Stock-Based Compensation Expense 17,110 14,196 Restructuring Charges — 109 Professional Fees Related to Unsolicited Non-Binding Acquisition Offer 3,145 — (25,877) (22,089) Adjusted EBITDA $ 116,555 $ 101,514 14.8 % 13.4 % Capital Expenditures Electronic Systems $ 4,908 $ 6,007 Structural Systems 6,281 13,127 Corporate Administration 3,220 — Total Capital Expenditures $ 14,409 $ 19,134 (1) Includes costs not allocated to either the Electronic Systems or Structural Systems operating segments.
The following table summarizes our business segment performance for 2025 and 2024: % (Dollars in thousands) Years Ended December 31, % of Net Revenues % of Net Revenues Change 2025 2024 2025 2024 Net Revenues Electronic Systems 7.3 % $ 462,682 $ 431,363 56.1 % 54.8 % Structural Systems 1.9 % 362,048 355,188 43.9 % 45.2 % Total Net Revenues 4.9 % $ 824,730 $ 786,551 100.0 % 100.0 % Segment Operating Income Electronic Systems $ 82,174 $ 73,666 17.8 % 17.1 % Structural Systems 46,417 24,964 12.8 % 7.0 % 128,591 98,630 Corporate General and Administrative Expenses (1) (160,895) (46,419) (19.5) % (5.9) % Total Operating (Loss) Income $ (32,304) $ 52,211 (3.9) % 6.6 % Adjusted EBITDA Electronic Systems Operating Income $ 82,174 $ 73,666 Depreciation and Amortization 14,302 14,455 Stock-Based Compensation Expense 405 351 Restructuring Charges 141 177 97,022 88,649 21.0 % 20.6 % Structural Systems Operating Income 46,417 24,964 Depreciation and Amortization 18,933 18,696 Stock-Based Compensation Expense 477 375 Restructuring Charges 2,096 7,479 Inventory Purchase Accounting Adjustments — 2,269 67,923 53,783 18.8 % 15.1 % Corporate General and Administrative Expenses (1) Operating Loss (160,895) (46,419) Depreciation and Amortization 422 287 Stock-Based Compensation Expense 23,638 17,110 Other Debt Refinancing Costs 152 — Professional Fees Related to Unsolicited Non-Binding Acquisition Offer — 3,145 Litigation Settlement and Related Costs, Net 107,305 — (29,378) (25,877) Adjusted EBITDA $ 135,567 $ 116,555 16.4 % 14.8 % Capital Expenditures Electronic Systems $ 5,976 $ 4,908 Structural Systems 8,515 6,281 Corporate Administration 166 3,220 Total Capital Expenditures $ 14,657 $ 14,409 (1) Includes costs not allocated to either the Electronic Systems or Structural Systems operating segments.
The deliverables within a customer purchase order are analyzed to determine the number of performance obligations. In addition, at times, in order to achieve economies of scale and based on our customer’s forecasted demand, we may build in advance of receiving a purchase order from our customer.
In addition, at times, in order to achieve economies of scale and based on our customer’s forecasted demand, we may build in advance of receiving a purchase order from our customer. When that occurs, we would not recognize revenue until we have received the customer purchase order.
Contract estimates, known as “estimates at completion,” are based on various assumptions to project the outcome of future events that can span multiple months or years.
A portion of the transaction price is not allocated to the shipping service; however, the cost of shipping and handling are accrued when the related revenue is recognized. Contract estimates, known as “estimates at completion,” are based on various assumptions to project the outcome of future events that can span multiple months or years.
In addition, the 2022 Term Loan requires quarterly amortization payments of 0.625% during year one and year two, 1.250% during year three and year four, and 1.875% during year five of the original outstanding principal balance of the 2022 Term Loan amount, on the last business day each quarter.
The terms of the 2025 Term Loan require us to make installment payments of 0.625% of the initial outstanding principal balance on a quarterly basis during years one and two, 1.250% during years three and four, and 1.875% during year five, on the last business day of each calendar quarter.
Deferred tax assets are evaluated quarterly and are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets are evaluated quarterly and are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax assets will not be realized. 40 Table of Contents Tax positions taken or expected to be taken in a tax return are recognized when it is more-likely-than-not, based on technical merits, to be sustained upon examination by taxing authorities.
The 2022 Term Loan is a $250.0 million senior secured loan that matures on July 14, 2027. The 2022 Revolving Credit Facility is a $200.0 million senior secured revolving credit facility that matures on July 14, 2027. The 2022 Term Loan and 2022 Revolving Credit Facility, collectively are the new credit facilities (“2022 Credit Facilities”).
The 2025 Revolving Credit Facility replaced the 2022 Revolving Credit Facility (“2022 Revolving Credit Facility”) which was a $200.0 million senior secured revolving credit facility. The 2025 Term Loan and 2025 Revolving Credit Facility, collectively are the new credit facilities (“2025 Credit Facilities”).
Net Revenues by Major Customers A significant portion of our net revenues are from our top ten customers as follows: Years Ended December 31, 2024 2023 Boeing Company 8.2 % 8.2 % Lockheed Martin Corporation 5.3 % 4.0 % Northrop Grumman Corporation 6.4 % 5.5 % RTX Corporation 18.5 % 16.8 % Spirit AeroSystems Holdings, Inc. 5.7 % 6.4 % Viasat, Inc. 3.0 % 5.5 % Top ten customers (1) 59.7 % 58.7 % (1) Includes The Boeing Company (“Boeing”), Lockheed Martin Corporation (“Lockheed”), Northrop Grumman Corporation (“Northrop”), RTX Corporation (f/k/a Raytheon Technologies Corporation) (“RTX”), Spirit AeroSystems Holdings, Inc.
Net Revenues by Major Customers A significant portion of our net revenues are from our top ten customers as follows: Years Ended December 31, 2025 2024 Boeing Company (1) 13.3 % 13.9 % Lockheed Martin Corporation 4.2 % 5.3 % Northrop Grumman Corporation 5.8 % 6.4 % RTX Corporation (2) 17.9 % 16.4 % Top ten customers (3) 60.7 % 60.1 % (1) The Boeing Company (“Boeing”) completed its acquisition of all of Spirit Aerosystems Holdings, Inc.’s Boeing-related commercial operations, based on Boeing’s announcement on December 8, 2025.
Further, the undrawn portion of the commitment of the 2022 Revolving Credit Facility is subject to a commitment fee ranging from 0.175% to 0.275%, based upon the consolidated total net adjusted leverage ratio, typically paid on a quarterly basis, on the last business day each quarter. However, the 2022 Revolving Credit Facility does not require any principal installment payments.
The terms of the 2025 Revolving Credit Facility do not require us to make installment payments. However, the undrawn portion of the commitment of the 2025 Revolving Credit Facility is subject to a commitment fee ranging from 0.175% to 0.250%, based upon the consolidated total net adjusted leverage ratio.
Restructuring Charges Restructuring charges decreased $7.2 million (including the portion recorded in cost of sales which increased $0.9 million) in 2024 compared to 2023 primarily due to the winding down of the restructuring plan that was approved and commenced in April 2022 that is expected to better position us for stronger performance.
Restructuring Charges Restructuring charges decreased $5.4 million (including the portion recorded in cost of sales, which decreased $1.2 million) in 2025 compared to 2024 primarily due to the completion of the restructuring plan that was approved and commenced in April 2022.
Contracts with our customers generally include a termination for convenience clause. We have a significant number of contracts that are started and completed within the same year, as well as contracts derived from long-term agreements and programs that can span several years.
We have a significant number of contracts that are started and completed within the same year, as well as contracts derived from long-term agreements and programs that can span several years. We recognize revenue under ASC 606, “Revenue from Contracts with Customers” (“ASC 606”), which utilizes a five-step model.
See Note 3 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information. Interest Expense Interest expense decreased in 2024 compared to 2023 primarily due to the interest rate swaps that became effective as of January 1, 2024, along with a lower debt balance.
See Note 1 and Note 15 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information. 29 Table of Contents Interest Expense Interest expense decreased in 2025 compared to 2024 primarily due to lower interest rates along with a lower outstanding debt balance during the year, prior to the payments related to the litigation settlements during the three months ended December 31, 2025.
We are subject to examination by the Internal Revenue Service (“IRS”) for tax years after 2020 and by state taxing authorities for tax years after 2019.
If recognized, $2.8 million would affect the effective income tax rate. We file U.S. Federal and state income tax returns. We are subject to examination by the Internal Revenue Service (“IRS”) for tax years after 2021 and by state taxing authorities for tax years after 2020.
We recognize revenue under ASC 606, “Revenue from 35 Table of Contents Contracts with Customers” (“ASC 606”), which utilizes a five-step model. The definition of a contract for us is typically defined as a customer purchase order as this is when we achieve an enforceable right to payment. The majority of our contracts are firm fixed-price contracts.
The definition of a contract for us is typically defined as a customer purchase order as this is when we achieve an enforceable right to payment. The majority of our contracts are firm fixed-price contracts. The deliverables within a customer purchase order are analyzed to determine the number of performance obligations.
When that occurs, we would not recognize revenue until we have received the customer purchase order. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under ASC 606.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under ASC 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, control is transferred and the performance obligation is satisfied.
In June 2020, a fire severely damaged our performance center in Guaymas, Mexico, which is part of our Structural Systems segment. We have insurance coverage and up to a capped amount, expect the damaged items will be covered, less our deductible.
In June 2020, a fire severely damaged our performance center in Guaymas, Mexico, which is part of our Structural Systems segment.
Corporate General and Administrative (“CG&A”) Expenses CG&A expenses in 2024 compared to 2023 increased $9.8 million primarily due to higher professional services fees of $4.6 million, of which $3.1 million was related to the unsolicited non-binding offer to acquire all the common stock outstanding of Ducommun Incorporated, higher stock-based compensation expense of $2.8 million, and higher compensation and benefits costs of $0.8 million.
Corporate General and Administrative (“CG&A”) Expenses CG&A expenses in 2025 compared to 2024 increased $114.5 million primarily due to higher litigation settlement and related costs, net of $107.3 million, higher stock-based compensation expense of $6.5 million, and higher other CG&A expenses of $2.1 million, partially offset by lower professional services fees of $2.9 million.
See Note 2 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information. In May 2023, we completed a public offering of our common stock resulting in net proceeds of $85.1 million.
See Note 15 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information on the litigation settlement and related costs, net. 2024 Compared to 2023 See Item 7.
We will continue to make prudent acquisitions and capital expenditures for manufacturing equipment and facilities to support long-term contracts for commercial and military aircraft and defense programs. We continue to depend on operating cash flow and the availability of our 2022 Credit Facilities to provide short-term liquidity.
Transaction Activity We believe the ongoing aerospace and defense subcontractor consolidation makes acquisitions an increasingly important component of our future growth. We will continue to make prudent acquisitions and capital expenditures for manufacturing equipment and facilities to support long-term contracts for commercial and military aircraft and defense programs.
The Structural Systems operating income in 2024 compared to 2023 increased $1.5 million primarily due to favorable manufacturing volume, lower Guaymas fire related expenses, lower inventory purchase accounting adjustments, partially offset by higher other manufacturing costs and unfavorable product mix.
Structural Systems segment operating income in 2025 compared to 2024 increased $21.5 million primarily due to lower other manufacturing costs and restructuring charges as a result of the completion of the wind down of our Monrovia performance center and higher manufacturing volume, partially offset by unfavorable product mix.
In July 2024, Boeing also pleaded guilty to conspiracy fraud charges, which may result in additional external oversight on its manufacturing and quality control process.
Subsequently, in July 2024, Boeing pleaded guilty to conspiracy fraud charges, which may result in additional external oversight on its manufacturing and quality control processes. More recently, Boeing announced that the FAA cleared Boeing’s plan to raise 737 MAX production from 38 airplanes to 42 airplanes per month.
Selling, General and Administrative (“SG&A”) Expenses SG&A expenses increased $18.9 million in 2024 compared to 2023 primarily due to BLR SG&A expenses of $4.7 million which did not exist for the full year in the prior year period, higher professional services fees of $6.3 million, of which $3.1 million was related to the unsolicited non-binding offer to acquire all the common stock outstanding of Ducommun Incorporated, higher compensation and benefits costs of $3.2 million, and higher stock-based compensation expense of $2.8 million.
Selling, General and Administrative (“SG&A”) Expenses SG&A expenses increased $5.8 million in 2025 compared to 2024 primarily due to higher stock-based compensation expense of $6.7 million and higher other SG&A expenses of $1.2 million, partially offset by lower professional services fees of $2.3 million.
In addition, revenues for our industrial end-use markets for 2024 decreased $10.4 million compared to 2023 mainly due to our selectively pruning non-core business.
In addition, revenues for our industrial end-use markets for 2025 increased $3.0 million compared to 2024 mainly due to restocking and last time buys.
The following table summarizes our backlog for 2024 and 2023: (Dollars in thousands) December 31, Change 2024 2023 Consolidated Ducommun Military and space $ 97,642 $ 624,785 $ 527,143 Commercial aerospace (13,589) 415,905 429,494 Industrial (16,802) 20,129 36,931 Total $ 67,251 $ 1,060,819 $ 993,568 Electronic Systems Military and space $ 61,865 $ 459,546 $ 397,681 Commercial aerospace (11,703) 76,291 87,994 Industrial (16,802) 20,129 36,931 Total $ 33,360 $ 555,966 $ 522,606 Structural Systems Military and space $ 35,777 $ 165,239 $ 129,462 Commercial aerospace (1,886) 339,614 341,500 Total $ 33,891 $ 504,853 $ 470,962 2023 Compared to 2022 See Item 7.
The following table summarizes our backlog for 2025 and 2024: 35 Table of Contents (Dollars in thousands) December 31, Change 2025 2024 Consolidated Ducommun Military and space $ 81,761 $ 706,546 $ 624,785 Commercial aerospace 61,736 477,641 415,905 Industrial (1,367) 18,762 20,129 Total $ 142,130 $ 1,202,949 $ 1,060,819 Electronic Systems Military and space $ 58,181 $ 517,727 $ 459,546 Commercial aerospace 13,740 90,031 76,291 Industrial (1,367) 18,762 20,129 Total $ 70,554 $ 626,520 $ 555,966 Structural Systems Military and space $ 23,580 $ 188,819 $ 165,239 Commercial aerospace 47,996 387,610 339,614 Total $ 71,576 $ 576,429 $ 504,853 2024 Compared to 2023 See Item 7.
Net cash used in financing activities during 2024 was $26.0 million compared to net cash provided by of $99.0 million during 2023.
Net cash provided by financing activities during 2025 was $54.7 million compared to net cash used in financing activities of $26.0 million during 2024. The lower net cash used in financing activities during 2025 was primarily due to higher net borrowings on our revolving credit facility to pay litigation settlement and related costs.
For both reporting units, we performed a quantitative (step one) goodwill impairment analysis. The fair value of our Electronic Systems and Structural Systems segments exceeded their respective carrying values and thus, were not deemed impaired.
This assessment indicated it was not more likely than not that the fair value of both Electronic Systems and Structural Systems exceeded their respective carrying values and thus, goodwill was not deemed to be impaired.
See Note 14 and Note 16 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for additional information. In April 2023, a fire damaged a relatively small portion of one of our performance centers in our Structural Systems reporting segment.
See Note 14 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information. The OBBBA also provides a supplementary $156 billion to the DoW for obligations through 2029.
The increase in gross margin percentage year-over-year was primarily due to a higher mix of engineered products, strategic value pricing actions and the benefits of the restructuring plan.
The increase in gross margin percentage year-over-year was primarily due to lower other manufacturing costs and restructuring charges as a result of the completion of the wind down of our Monrovia performance center, and higher manufacturing volume.
Acquisition related costs are not included as components of consideration transferred but instead, expensed as incurred and are included in selling, general and administrative expenses in our consolidated statements of income. See Note 2 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K.
While we have completed the restructuring plan and recorded all incurred expenses as of December 31, 2025, we will be making payments related to such plan during 2026. See Note 2 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information.
Income Tax Expense We recorded an income tax expense of $5.4 million (an effective tax rate of 14.7%) in 2024, compared to $0.5 million (an effective tax rate of 2.8%) in 2023.
See Note 15 to our consolidated financial statements included in Part IV, Item 15(a) of this Form 10-K for further information. Income Tax (Benefit) Expense We recorded an income tax benefit of $9.9 million (an effective tax rate of 22.5%) in 2025, compared to an income tax expense of $5.4 million (an effective tax rate of 14.7%) in 2024.
In addition, revenues for our industrial end-use markets for 2024 decreased $10.4 million compared to 2023 mainly due to our selectively pruning non-core business. Electronic Systems segment operating income in 2024 compared to 2023 increased $31.6 million primarily due to higher engineered products revenues, strategic value pricing actions and the benefits of the restructuring plan.
In addition, revenues for our industrial end-use markets for 2025 increased $3.0 million compared to 2024 mainly due to restocking and last time buys. Electronic Systems segment operating income in 2025 compared to 2024 increased $8.5 million primarily due to higher manufacturing volume and favorable product mix.

… 80 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

4 edited+0 added−0 removed0 unchanged
Biggest changeThe 2022 Term Loan bears interest, at our option, at a rate equal to either (i) Term Secured Overnight Financing Rate (“Term SOFR”) plus an applicable margin ranging from 1.375% to 2.375% per year or (ii) Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] Term SOFR plus 1.00%, and if the Base Rate is less than zero percent, it will be deemed zero percent) plus an applicable margin ranging from 0.375% to 1.375% per year, in each case based upon the consolidated total net adjusted leverage ratio.
Biggest changeThe 2025 Term Loan bears interest, at our option, at a rate equal to either (i) Term Secured Overnight Financing Rate (“Term SOFR”) plus an applicable margin ranging from 1.250% to 2.125% per year or (ii) Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] Term SOFR plus 1.00%, and if the Base Rate is less than zero percent, it will be deemed zero percent) plus an applicable margin ranging from 0.250% to 1.125% per year, in each case based upon the consolidated total net adjusted leverage ratio.
The 2022 Revolving Credit Facility bears interest, at our option, at a rate equal to either (i) Term SOFR plus an applicable margin ranging from 1.375% to 2.375% per year or (ii) Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] Term SOFR plus 1.00%, and if the Base Rate is less than zero percent, it will be deemed zero percent) plus an applicable margin ranging from 0.375% to 1.375% per year, in each case based upon the consolidated total net adjusted leverage ratio.
The 2025 Revolving Credit Facility bears interest, at our option, at a rate equal to either (i) Term SOFR plus an applicable margin ranging from 1.250% to 2.125% per year or (ii) Base Rate (defined as the highest of [a] Federal Funds Rate plus 0.50%, [b] Bank of America’s prime rate, and [c] Term SOFR plus 1.00%, and if the Base Rate is less than zero percent, it will be deemed zero percent) plus an applicable margin ranging from 0.250% to 1.125% per year, in each case based upon the consolidated total net adjusted leverage ratio.
A hypothetical 10% increase or decrease in the interest rate would have an immaterial impact on our financial condition and results of operations. 38 Table of Contents
A hypothetical 10% increase or decrease in the interest rate would have an immaterial impact on our financial condition and results of operations.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our main market risk exposure relates to changes in interest rates on our outstanding long-term debt. At December 31, 2024, we had borrowings of $243.2 million under our 2022 Credit Facilities.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our main market risk exposure relates to changes in U.S. interest rates on our outstanding long-term debt. At December 31, 2025, we had borrowings of $305.0 million under our 2025 Credit Facilities.

Other DCO 10-K year-over-year comparisons