10-Q: Quarterly report pursuant to Section 13 or 15(d)
Published on August 13, 2024
ROC
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _______________, ____ to _______________, ____
Commission File Number:
(Exact name of registrant as specified in its charter)
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 12, 2024, the registrant had
Table of Contents
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PART I. |
3 |
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Item 1. |
3 |
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Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 |
3 |
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4 |
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Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2024 and 2023 |
5 |
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Condensed Consolidated Statements of Equity for the three and six months ended June 30, 2024 |
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7 |
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Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
9 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
16 |
Item 3. |
25 |
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Item 4. |
25 |
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PART II. |
27 |
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Item 1. |
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Item 1A. |
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Item 2. |
45 |
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Item 3. |
45 |
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Item 4. |
45 |
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Item 5. |
45 |
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Item 6. |
46 |
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47 |
2
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
Loar Holdings Inc.
Condensed Consolidated Balance Sheets
(Unaudited, in thousands except share amounts)
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June 30, 2024 |
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December 31, 2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net |
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Inventories |
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Other current assets |
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Income taxes receivable |
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Total current assets |
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Property, plant and equipment |
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Finance lease assets |
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Operating lease assets |
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Other long-term assets |
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Intangible assets, net |
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Goodwill |
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Total assets |
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$ |
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$ |
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Liabilities and equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Current portion of long-term debt |
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Current portion of finance lease liabilities |
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Current portion of operating lease liabilities |
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Income taxes payable |
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Accrued expenses and other current liabilities |
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Total current liabilities |
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Deferred income taxes |
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Long-term debt, net |
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Finance lease liabilities |
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Operating lease liabilities |
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Environmental liabilities |
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Other long-term liabilities |
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Equity: |
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Preferred stock, $ |
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Common stock, $ |
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— |
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Additional paid-in capital |
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— |
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Accumulated deficit |
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( |
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— |
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Accumulated other comprehensive income |
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— |
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Member's equity |
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— |
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Total equity |
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Total liabilities and equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Loar Holdings Inc.
Condensed Consolidated Statements of Operations
(Unaudited, in thousands except per common share and per common unit amounts)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net sales |
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$ |
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$ |
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$ |
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$ |
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Cost of sales |
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Gross profit |
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Selling, general and administrative expenses |
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Transaction expenses |
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Other income |
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Operating income |
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Interest expense, net |
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Refinancing costs |
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— |
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— |
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Income before income taxes |
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Income tax provision |
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( |
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( |
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( |
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( |
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Net income (loss) |
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$ |
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$ |
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$ |
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$ |
( |
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Net income per common share: |
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Basic |
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$ |
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n/a |
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$ |
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n/a |
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Diluted |
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$ |
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n/a |
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$ |
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n/a |
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Weighted average common shares outstanding: |
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Basic |
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n/a |
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n/a |
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Diluted |
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n/a |
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n/a |
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Net income (loss) per common unit |
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n/a |
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$ |
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n/a |
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$ |
( |
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Weighted average common units outstanding - basic and diluted |
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n/a |
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n/a |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Loar Holdings Inc.
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited, in thousands)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net income (loss) |
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$ |
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$ |
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$ |
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$ |
( |
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Cumulative translation adjustments, net of tax |
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( |
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Comprehensive income (loss) |
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$ |
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$ |
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$ |
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$ |
( |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Loar Holdings Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited, in thousands)
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Loar Holdings, LLC and Subsidiaries (Prior to Corporate Conversion) |
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Loar Holdings Inc. Stockholders' Equity |
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Common Stock |
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Member's Equity |
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Shares |
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Amount |
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Additional Paid-in Capital |
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Accumulated Deficit |
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Accumulated Other Comprehensive Income |
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Total Equity |
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Balance, January 1, 2024 |
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$ |
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— |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Cumulative translation |
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— |
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— |
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— |
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— |
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— |
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Balance, March 31, 2024 |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation prior |
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— |
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— |
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— |
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— |
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— |
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Reclassification of members |
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— |
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— |
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— |
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( |
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— |
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Effect of the Corporate |
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— |
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— |
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— |
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Issuance of common stock sold in |
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— |
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— |
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— |
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Issuance of common stock to |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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— |
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Cumulative translation |
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— |
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— |
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— |
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— |
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— |
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Balance, June 30, 2024 |
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$ |
— |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
6
Loar Holdings Inc.
Condensed Consolidated Statements of Member's Equity
(Unaudited, in thousands)
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Member's Equity |
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Balance, January 1, 2023 |
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$ |
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Net loss |
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( |
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Stock-based compensation |
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Cumulative translation adjustments, net of tax |
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Balance, March 31, 2023 |
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Net income |
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Stock-based compensation |
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Cumulative translation adjustments, net of tax |
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( |
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Balance, June 30, 2023 |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
7
Loar Holdings Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited, in thousands)
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Six Months Ended June 30, |
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2024 |
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2023 |
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Operating Activities |
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Net income (loss) |
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$ |
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$ |
( |
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Adjustments to reconcile net income (loss) to net cash provided by (used in) operating |
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Depreciation |
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Amortization of intangibles and other long-term assets |
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Amortization of debt issuance costs |
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Stock-based compensation |
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Deferred income taxes |
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( |
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Non-cash lease expense |
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Refinancing costs |
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— |
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Other income |
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( |
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— |
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Changes in assets and liabilities: |
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Accounts receivable |
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( |
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( |
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Inventories |
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( |
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( |
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Other assets |
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( |
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( |
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Accounts payable |
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Other liabilities |
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( |
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( |
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Environmental liabilities |
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( |
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( |
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Operating lease liabilities |
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( |
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( |
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Net cash provided by (used in) operating activities |
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( |
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Investing Activities |
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Capital expenditures |
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( |
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( |
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Proceeds from sale of fixed assets |
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— |
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Proceeds from acquisition purchase price adjustment |
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— |
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Net cash used in investing activities |
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( |
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( |
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Financing Activities |
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Net proceeds from issuance of common stock |
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— |
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Payments of long-term debt |
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( |
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( |
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Proceeds from issuance of long-term debt |
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— |
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Financing costs and other, net |
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( |
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( |
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Payments of finance lease liabilities |
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( |
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( |
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Net cash provided by financing activities |
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Effect of translation adjustments on cash and cash equivalents |
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( |
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Net increase in cash and cash equivalents |
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Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period |
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$ |
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$ |
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Supplemental information |
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Interest paid during the period, net of capitalized amounts |
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$ |
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$ |
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Income taxes paid during the period, net |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
8
Loar Holdings Inc.
Notes to Condensed Consolidated Financial Statements
1. Organization
Prior to April 16, 2024, Loar Holdings Inc. (the Company) operated as a Delaware limited liability company under the name Loar Holdings, LLC. On April 16, 2024, the Company converted to a Delaware corporation and changed its name to Loar Holdings Inc. (the Corporate Conversion). In the Corporate Conversion, all of the equity interests of the Company outstanding as of the date thereof were converted into shares of common stock. Specifically, holders of Loar Holdings, LLC units received
The registration statement related to the Company’s initial public offering (IPO) was declared effective on April 24, 2024, and the
Company’s common stock began trading on the New York Stock Exchange on April 25, 2024. On April 29, 2024, the Company
completed its IPO for the sale of
per share. The Company received net proceeds from the IPO of approximately $
2. Basis of Presentation
As used in this Quarterly Report on Form 10-Q, unless expressly stated otherwise or the context otherwise requires, the terms “Loar,” the “Company,” “we,” “us” and “our” refer to Loar Holdings Inc. and its subsidiaries, collectively.
Principles of Consolidation
The financial information included herein is unaudited; however, the information reflects all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for a fair presentation of the Company’s condensed consolidated financial statements for the interim periods presented. These financial statements and notes should be read in conjunction with the financial statements and related notes for the year ended December 31, 2023 included in Loar Holdings Inc. Amendment No. 2 to Form S-1 filed on April 23, 2024. As disclosed therein, the Company’s annual consolidated financial statements were prepared in conformity with generally accepted accounting principles in the United States (GAAP). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been omitted pursuant to the rules and regulations of the United States Securities and Exchange Commission (SEC). The December 31, 2023 condensed consolidated balance sheet was derived from Loar Holdings, LLC’s audited financial statements for the year then-ended. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full year.
Recent Accounting Pronouncements
In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which expands disclosures about reportable segments, and provides requirements for more detailed reporting of a segment’s expenses that are regularly provided to the Chief Operating Decision Maker (CODM) and included within each reported measure of a segment’s profit or loss. Additionally, ASU 2023-07 requires all segment profit or loss and assets disclosures to be provided on an annual and interim basis. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning one year later. Early adoption is permitted, and the amendments must be applied retrospectively to all prior periods presented. The adoption of this guidance will not affect the Company’s consolidated results of operations, financial position or cash flows, and the Company is currently evaluating the standard to determine its impact on the Company’s disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires a public business entity to disclose specific categories in its annual effective tax rate reconciliation and provide disaggregated information about significant reconciling items by jurisdiction and by nature. The ASU also requires entities to disclose their income tax payments (net of refunds) to international, federal, and state and local jurisdictions. The standard makes several other changes to income tax disclosure requirements. This standard is effective for annual periods beginning after December 15, 2024, and requires prospective application with the option to apply it retrospectively. The adoption of this guidance will not affect the Company’s consolidated results of operations, financial position or cash flows, and the Company is currently evaluating the standard to determine its impact on the Company’s disclosures.
9
3. Acquisitions
DAC Engineered Products, LLC
On
The total purchase price was allocated to the underlying assets acquired and liabilities assumed based upon the estimated fair values at the date of acquisition in accordance with Accounting Standards Codification (ASC) 805, Business Combinations.
Assets acquired: |
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Current assets |
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$ |
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Property, plant and equipment |
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Intangible assets |
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Goodwill |
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Deferred taxes |
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Total assets acquired |
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Liabilities assumed: |
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Current liabilities |
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Long-term liabilities |
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Total liabilities assumed |
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Net assets acquired |
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$ |
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The results of operations of DAC are included in the Company’s condensed consolidated financial statements for the period subsequent to the completion of the acquisition.
Had the acquisition of DAC occurred as of January 1, 2023, net sales and income before income taxes on a pro forma basis for the three and six months ended June 30, 2023 would not have been materially different than the reported amounts.
CAV Systems Group Limited
On
10
The total purchase price was allocated to the underlying assets acquired and liabilities assumed based upon the estimated fair values at the date of acquisition in accordance with ASC 805, Business Combinations.
Assets acquired: |
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Current assets |
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$ |
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Property, plant and equipment |
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Intangible assets |
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Goodwill |
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Deferred taxes |
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Total assets acquired |
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Liabilities assumed: |
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Current liabilities |
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Long-term liabilities |
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Total liabilities assumed |
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Net assets acquired |
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$ |
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The results of operations of CAV are included in the Company’s condensed consolidated financial statements for the period subsequent to the completion of the acquisition.
Had the acquisition of CAV occurred as of January 1, 2023, net sales and income before income taxes on a pro forma basis for the three and six months ended June 30, 2023 would not have been materially different than the reported amounts.
4. Revenue Recognition
All revenue recognized in the condensed consolidated statements of operations is considered to be revenue from contracts with customers.
Revenue is recognized in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services when control of the promised good or service is transferred to the customer. Substantially all of the Company’s revenue from contracts with customers is recognized at a point in time, which is generally upon shipment of goods to the customer.
The Company sells specialty aerospace components based on a customer purchase order, which generally includes a fixed price per unit. The Company satisfies the single performance obligation generally upon shipment of the goods, as this is when contractual control transfers to the customer and recognizes revenue at that point in time. Total revenues do not include taxes, such as sales tax or value-added tax, which are assessed by governmental authorities and collected by the Company.
Products are covered by a standard assurance warranty, generally extended for a period of 25 days to two years depending on the customer, which promises that delivered products conform to contract specifications. The Company does not offer refunds or accept returns, unless related to a defect or warranty related matter. The Company does not sell extended warranties and does not provide warranties outside of fixing defects that existed at the time of sale. As such, warranties are accounted for under ASC 460, Guarantees and not as a separate performance obligation.
Customers generally have payment terms between 30 and 90 days from the satisfaction of the performance obligations. As a practical expedient, the Company does not adjust the amount of consideration for a financing component, as the period between the transfer of goods or services and the customer’s payment is, at contract inception, expected to be one year or less.
11
Net sales by end market were as follows (in thousands):
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Three Months Ended June 30, |
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2024 |
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2023 |
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OEM |
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Aftermarket |
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Total |
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OEM |
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Aftermarket |
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Total |
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Commercial Aerospace |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Business Jet and General Aviation |
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Total Commercial |
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Defense |
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Other |
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Total |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Six Months Ended June 30, |
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2024 |
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2023 |
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OEM |
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Aftermarket |
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Total |
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OEM |
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Aftermarket |
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Total |
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Commercial Aerospace |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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Business Jet and General Aviation |
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Total Commercial |
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Defense |
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Other |
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Total |
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$ |
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$ |
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$ |
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$ |
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$ |
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$ |
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5. Inventories
Inventories consisted of the following (in thousands):
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June 30, 2024 |
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December 31, 2023 |
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Raw materials |
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$ |
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$ |
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Work-in-process |
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Finished goods |
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Total |
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$ |
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$ |
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6. Property, Plant and Equipment
Property, plant and equipment consisted of the following (in thousands):
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June 30, 2024 |
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December 31, 2023 |
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Land |
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$ |
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$ |
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Buildings and improvements |
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Machinery, equipment, furniture and fixtures |
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Total |
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Less: accumulated depreciation and amortization |
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( |
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( |
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Total |
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$ |
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$ |
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For the three and six months ended June 30, 2024 there were sales of property, plant and equipment of $
12
7. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consisted of the following (in thousands):
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June 30, 2024 |
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December 31, 2023 |
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Compensation and related benefits |
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$ |
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$ |
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Other |
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Total accrued expenses and other current liabilities |
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$ |
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$ |
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8. Long-Term Debt
The Company’s debt consisted of the following (in thousands):
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June 30, 2024 |
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December 31, 2023 |
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Term loans |
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$ |
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Less: unamortized debt issuance costs |
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( |
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( |
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Total net debt |
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Less: current portion |
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( |
) |
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( |
) |
Long-term debt |
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$ |
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$ |
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The Company’s long-term debt at June 30, 2024 consisted of borrowings under its Credit Agreement, dated as of October 2, 2017, as amended from time to time (the Credit Agreement). On March 26, 2024, the Credit Agreement was amended to extend the termination date of the Delayed Draw Term Loan Commitment by approximately nine months, extending it from April 1, 2024 to December 31, 2024.
On May 3, 2024, the Company used a portion of the net proceeds from its IPO to voluntarily repay $
On May 10, 2024, the Credit Agreement was amended to extend the maturity date to
At June 30, 2024, there was $
The Credit Agreement requires the maintenance of a quarterly leverage ratio. There are also certain non-financial covenants in place limiting us from, among other things, incurring other indebtedness, creating any liens on our properties, entering into merger or consolidation transactions, disposing of all or substantially all of our assets and payment of certain dividends and distributions. The Company was in compliance with all financial and non-financial covenants of the Credit Agreement as of June 30, 2024.
The Credit Agreement requires mandatory prepayments of the principal amount if there is excess cash flow, as defined, during a calendar year. The Credit Agreement permits voluntary principal prepayments, in whole or in part, at
9. Stock Compensation
Restricted Equity Unit Awards
Under the terms of the Loar Acquisition 13, LLC Amended and Restated Limited Liability Agreement, the Company was permitted to and did grant restricted equity units to eligible management of Loar Group. The consummation of the IPO was an event that triggered the vesting of any outstanding unvested equity units. At April 16, 2024, there were
13
2024 Equity Incentive Plan
On April 16, 2024, in connection with the IPO, the Board of Directors adopted, and the Company shareholders approved the 2024 Equity Incentive Plan (2024 Plan), pursuant to which employees, consultants and directors of the Company and employees, consultants and directors of affiliates performing services for the Company, including the executive officers, will be eligible to receive awards.
On April 24, 2024, the Company granted
On April 24, 2024, the Company granted
Risk-free interest rate |
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Expected dividend yield of stock |
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Expected volatility of stock |
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The risk-free interest rate was based upon the U.S. Treasury bond rates with a term similar to the maturity date of the award. The Company will account for forfeitures as they occur and forfeiture estimates were not included in the valuation. The Company does not anticipate declaring and paying regular cash dividends in future periods; thus, no dividend yield assumption was used. As there was no trading history as of the grant date, the Company estimated the volatility of its stock based on selected guideline companies over a ten-year lookback period. The Company recognized $
10. Fair Value of Financial Instruments
The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, finance leases and debt. The carrying amounts of all financial instruments reported on the condensed consolidated balance sheets at June 30, 2024 and December 31, 2023 are considered to approximate fair value either due to the relatively short period of time between the origination of these financial instruments and their expected realization, or the interest rates associated with the debt obligations approximate current market rates.
11. Commitments and Contingencies
There are various lawsuits and claims pending against the Company incidental to its business. Although the final results in such suits and proceedings cannot be predicted with certainty, in the opinion of management, the ultimate liability, if any, will not have a material impact on the condensed consolidated financial statements.
14
12. Net Income (Loss) per Common Share and Common Unit
Net income (loss) per common share and common unit was computed as follows (in thousands, except net income per common share and net income (loss) per common unit amounts):
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net income (loss) |
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$ |
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$ |
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$ |
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$ |
( |
) |
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Denominator for basic and diluted earnings per common share: |
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Weighted-average common shares outstanding - basic |
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n/a |
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n/a |
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Effect of dilutive common shares |
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n/a |
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n/a |
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Weighted average common shares outstanding—diluted |
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n/a |
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n/a |
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Net income per common shares—basic |
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$ |
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n/a |
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$ |
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n/a |
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Net income per common shares—diluted |
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$ |
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n/a |
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$ |
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n/a |
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Denominator for basic and diluted earnings per common unit: |
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Weighted average common units outstanding—basic |
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n/a |
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n/a |
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Effect of dilutive common units |
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n/a |
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— |
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n/a |
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— |
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Weighted average common units outstanding—diluted |
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n/a |
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n/a |
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||||
Net income (loss) per common unit—basic and diluted |
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n/a |
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$ |
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n/a |
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$ |
( |
) |
13. Income Taxes
At the end of each quarter, the Company makes an estimate of its annual effective income tax rate. The estimate used in the year-to-date period may change in subsequent periods.
The effective income tax rate for the three months ended June 30, 2024 was
The effective income tax rate for the six months ended June 30, 2024 was
The Company's effective income tax rate for the six months ended June 30, 2024 differs from the U.S. federal statutory tax rate of
14. Subsequent Events
Entry into a Material Definitive Agreement
On
The transaction is expected to close shortly after receiving requisite regulatory approvals and is subject to customary closing conditions. The acquisition will be financed through additional borrowings under the Company's existing credit agreement and cash on hand.
15
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion in conjunction with our condensed consolidated financial statements including the related notes thereto, included elsewhere in this Quarterly Report on Form 10-Q.
This Quarterly Report on Form 10-Q contains both historical information and, “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act), and 27A of the Securities Act of 1933, as amended. All statements other than statements of historical fact included that address activities, events or developments that we expect, believe or anticipate will or may occur in the future are forward-looking statements, including, in particular, the statements about our plans, objectives, strategies and prospects regarding, among other things, our financial condition, results of operations and business. We have identified some of these forward-looking statements with words like “believe,” “may,” “will,” “should,” “expect,” “intend,” “plan,” “predict,” “anticipate,” “estimate” or “continue” and other words and terms of similar meaning. These forward-looking statements may be contained throughout this Quarterly Report on Form 10-Q. These forward-looking statements are based on current expectations about future events affecting us and are subject to uncertainties and factors relating to, among other things, our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Many factors mentioned in our discussion in this Quarterly Report on Form 10-Q, including the risks outlined under “Risk Factors,” will be important in determining future results. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we do not know whether our expectations will prove correct. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties, including those described under “Risk Factors” in the Quarterly Report on Form 10-Q. Since our actual results, performance or achievements could differ materially from those expressed in, or implied by, these forward-looking statements, we cannot give any assurance that any of the events anticipated by these forward-looking statements will occur or, if any of them does occur, what impact they will have on our business, results of operations and financial condition. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date they are made. We do not undertake any obligation to update these forward-looking statements, or the risk factors contained in this Quarterly Report on Form 10-Q, to reflect new information, future events or otherwise, except as may be required under federal securities laws.
Important factors that could cause actual results to differ materially from the forward-looking statements made in this Quarterly Report on Form 10-Q include but are not limited to: the sensitivity of our business to the number of flight hours that our customers’ planes spend aloft and our customers’ profitability, both of which are affected by general economic conditions; future geopolitical or other worldwide events; cyber-security threats and natural disasters; our reliance on certain customers; the U.S. defense budget and risks associated with being a government supplier including government audits and investigations; failure to maintain government or industry approvals; failure to complete or successfully integrate acquisitions; our indebtedness; potential environmental liabilities; liabilities arising in connection with litigation; increases in raw material costs, taxes and labor costs that cannot be recovered in product pricing; risks and costs associated with our international sales and operations; and other factors. Refer to Part II, Item 1A included in this Quarterly Report on Form 10-Q and to the sections of our Form S-1 titled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for additional information regarding the foregoing factors that may affect our business.
Overview
We specialize in the design, manufacture, and sale of niche aerospace and defense components that are essential for today’s aircraft and aerospace and defense systems. We focus on mission-critical, highly engineered solutions with high intellectual property content. Furthermore, our products have significant aftermarket exposure, which has historically generated predictable and recurring revenue.
The products we manufacture cover a diverse range of applications supporting nearly every major aircraft platform in use today and include auto throttles, lap-belt airbags, two- and three-point seat belts, water purification systems, fire barriers, polyimide washers and bushings, latches, hold-open and tie rods, temperature and fluid sensors and switches, carbon and metallic brake discs, fluid and pneumatic-based ice protection, RAM air components, sealing solutions and motion and actuation devices, among others.
We primarily serve three core end markets: commercial, business jet and general aviation, and defense, which have long historical track records of consistent growth. We also serve a diversified customer base within these end markets where we maintain long-standing customer relationships. We believe that the demanding, extensive and costly qualification process for new entrants, coupled
16
with our history of consistently delivering exceptional solutions for our customers, has provided us with leading market positions and created significant barriers to entry for potential competitors. By utilizing differentiated design, engineering, and manufacturing capabilities, along with a highly targeted acquisition strategy, we have sought to create long-term, sustainable value with a consistent, global business model.
As a specialized supplier in the aerospace and defense component industry, we believe we are well positioned to deliver innovative, mission-critical solutions to a wide array of aerospace and defense customers. Our key competitive strengths support our ability to offer differentiated solutions to our customers. We have a portfolio of mission-critical, niche aerospace and defense components that we believe hold leading market positions. We have intellectual property-driven proprietary products and expertise in an industry with high barriers to entry. We are strategically focused on higher-margin aftermarket content. We have highly diversified revenue streams, and our diversification stretches across end-markets, customers, platforms, and product category or application. We have an established business model with a lean, entrepreneurial structure. We have a disciplined and strategic approach to acquisitions with a history of successful integration. We have a track record of strong growth, margins and cash flow generation.
Corporate Conversion
Prior to April 16, 2024, we operated as a Delaware limited liability company under the name Loar Holdings, LLC. On April 16, 2024, we converted to a Delaware corporation and changed our name to Loar Holdings Inc. In the conversion, holders of Loar Holdings, LLC units received 377,450.980392157 shares of common stock of Loar Holdings Inc. for each unit of Loar Holdings, LLC. The purpose of the corporate conversion was to reorganize our structure so that the entity that offered our common stock to the public in our initial public offering (IPO) was a corporation rather than a limited liability company, so that existing investors and new investors in the offering would own our common stock rather than equity interests in a limited liability company.
Initial Public Offering
On April 29, 2024, we completed our IPO in which we issued and sold 12.6 million shares of our common stock at an IPO price of $28.00 per share. The Company received net proceeds from the IPO of approximately $325.7 million after deducting underwriting discounts, commissions and other offering costs of $28.5 million.