# VSE Corp: Form 10-Q for the period ended Jun 30, 2024

- Company: [VSE Corp](/companies/vsec.md) (CIK 102752)
- Form: 10-Q
- Filed: 2024-08-01
- Accepted by EDGAR: Aug 1, 2024, 17:13 ET
- Period: 2024-06-30
- Accession: 0000102752-24-000072
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/102752/000010275224000072/vsec-20240630.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/102752/000010275224000072/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-04-01 to 2024-06-30 | $266.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2024-01-01 to 2024-06-30 | $507.5m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Selling, general and administrative | 3 months, 2024-04-01 to 2024-06-30 | $4.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 6 months, 2024-01-01 to 2024-06-30 | $7.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-04-01 to 2024-06-30 | $6.1m | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2024-01-01 to 2024-06-30 | $30.3m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2024-04-01 to 2024-06-30 | −$917.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2024-01-01 to 2024-06-30 | $2.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-04-01 to 2024-06-30 | −$2.8m | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2024-01-01 to 2024-06-30 | −$9.4m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.16 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.57 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-04-01 to 2024-06-30 | −$0.16 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2024-01-01 to 2024-06-30 | −$0.57 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-04-01 to 2024-06-30 | 17,202,115 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2024-01-01 to 2024-06-30 | 16,571,033 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 6 months, 2024-01-01 to 2024-06-30 | −$96.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 6 months, 2024-01-01 to 2024-06-30 | $11.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 6 months, 2024-01-01 to 2024-06-30 | $3.2m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-06-30 | $19.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-06-30 | $796.4m | us-gaap:AssetsCurrent |
| Total assets | at 2024-06-30 | $1.49bn | us-gaap:Assets |
| Current liabilities | at 2024-06-30 | $225.6m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-06-30 | $713.0m | us-gaap:Liabilities |
| Long-term debt | at 2024-06-30 | $433.5m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-06-30 | $30.0m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-06-30 | $781.3m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 25,459 characters.

### Business Overview

We are a diversified aftermarket products and services company providing maintenance, repair and overhaul ("MRO") services, parts distribution, logistics, supply chain management and consulting services for transportation assets to commercial and government markets.

### Recent Developments

#### Sale of Federal and Defense Segment

In February 2024, we entered into two separate agreements to sell substantially all of the Federal and Defense segment assets ("FDS Sale"). See Note (3) "Discontinued Operations" to the consolidated financial statements for further information.

#### Strategic Review

On February 29, 2024, we announced a process to explore and evaluate strategic alternatives involving our Fleet segment with a view to enhance shareholder value (the “Strategic Process”). The Strategic Process could include, among other alternatives, a possible sale of the Fleet segment. Any potential strategic alternative will be evaluated by our Board of Directors.

#### Acquisition of Turbine Controls, LLC

On April 24, 2024, we completed the acquisition of our previously announced definitive agreement to acquire Turbine Controls, LLC ("TCI"), a leading provider of aftermarket MRO support services for complex engine components, as well as engine and airframe accessories, across commercial and military applications. See Note (2) "Acquisitions" for further information.

#### Underwritten Public Offering

In May 2024, we entered into an underwriting agreement with certain underwriters, relating to the issuance and sale of up to 2,429,577 shares of the Company's common stock at a public offering price of $71.00 per share. On May 17, 2024, the Company issued 2,429,577 shares, which included the exercise by the underwriters of their option to purchase additional shares, pursuant to the underwriting agreement. Net proceeds of $162.0 million was received by the Company, which were used to repay outstanding borrowings under our revolving credit facility, including amounts borrowed to pay the purchase price of the acquisition of TCI and for general corporate purposes. See Note (1) "Nature of Operations and Basis of Presentation" to the consolidated financial statements for further information.

#### Lease Abandonment

As a result of the Federal and Defense business segment divestiture and evaluation of our facilities, in June 2024, we vacated our corporate and Federal and Defense headquarters office space in Alexandria, Virginia, and relocated the remaining Virginia-based corporate staff to a smaller office space in Vienna, VA. The relocation resulted in non-recurring lease abandonment costs, which included the non-cash write-off of the operating lease right-of-use assets and associated property and equipment. See Note (13) "Lease Abandonment and Other Restructuring Costs" to the consolidated financial statements for further information.

### Business Trends

The following discussion provides a brief description of some of the key business factors impacting our results of operations detailed by segment.

### Aviation Segment

During the second quarter of 2024, our strong program execution of new and existing distribution awards, our expanded portfolio of MRO capabilities, and contributions from recent acquisitions produced strong results, with quarterly revenue reaching $192.8 million for the three months ended June 30, 2024, representing a 55% increase year-over-year. Market growth and share gains have resulted in increased repair and distribution revenue of 112% and 32%, respectively, during the three months ended June 30, 2024, compared to the same period for the prior year. Our growth has been driven by several strategic initiatives, including executing on newly awarded distribution agreements, most notably the Pratt Whitney Canada EMEA program, the introduction of new products and service capabilities to our portfolio, including our new Original Equipment Manufacturers ("OEM") licensed manufacturing program, and contributions from recent acquisitions. Additionally, expanding our partnerships with OEMs has provided us new opportunities, including access to new markets with an established customer base.

We believe the July 2023 acquisition of Desser Aerospace and the recently completed acquisition of TCI in April 2024 will increase our exposure to the high-growth, higher-margin aviation distribution and MRO markets. Furthermore, we believe that the Honeywell FCS acquisition in September 2023 to exclusively manufacture, sell, market, distribute, and repair certain fuel control systems, expands our existing capabilities and provides access to new customers and end markets while strengthening our partnership with Honeywell.

### Fleet Segment

During the second quarter of 2024, our Fleet segment's growth was negatively impacted by a decline in activity within the United States Postal Service ("USPS"), partially offset by growth in e-commerce fulfillment and commercial fleet sales. The decline in USPS revenue is the result of USPS' transition to a new Fleet Management Information System, which has led to a temporary reduction in maintenance-related activity and parts usage. We continue to make progress in executing our revenue diversification strategy through the scaling of our new e-commerce fulfillment and distribution center ("Olive Branch facility"). The expansion of the Olive Branch facility has been instrumental in our ability to capture new customers and drive revenue growth within e-commerce fulfillment. Our commercial revenues were 64% of total Fleet segment revenue for the three months ended June 30, 2024, compared to 47% for the same period in the prior year.

### Results of Operations

### Consolidated Results of Operations

The following table summarizes our consolidated results of operations (in thousands):

|  | Three months ended June 30, 2024 | 2023 | Change ($) | Change (%) | Six months ended June 30, 2024 | 2023 | Change ($) | Change (%) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenues | $265,959 | $205,223 | $60,736 | 30% | $507,498 | $393,810 | $113,688 | 29% |
| Costs and operating expenses | 259,827 | 184,586 | 75,241 | 41% | 477,192 | 356,395 | 120,797 | 34% |
| Operating income | 6,132 | 20,637 | (14,505) | (70)% | 30,306 | 37,415 | (7,109) | (19)% |
| Interest expense, net | 9,826 | 7,366 | 2,460 | 33% | 19,013 | 13,346 | 5,667 | 42% |
| (Loss) income from continuing operations before income taxes | (3,694) | 13,271 | (16,965) | (128)% | 11,293 | 24,069 | (12,776) | (53)% |
| Provision for income taxes | (917) | 3,182 | (4,099) | (129)% | 1,970 | 5,860 | (3,890) | (66)% |
| Net (loss) income from continuing operations | $(2,777) | $10,089 | $(12,866) | (128)% | $9,323 | $18,209 | $(8,886) | (49)% |

*Revenues.* Revenues increased for the three months ended June 30, 2024, compared to the same period in the prior year due to growth in our Aviation segment of $68.1 million, partially offset by declines in our Fleet segment of $7.4 million. See "Segment Operating Results" section below for further discussion of revenues by segment.

Revenues increased for the six months ended June 30, 2024, compared to the same period in the prior year due to growth in our Aviation segment of $117.2 million, partially offset by declines in our Fleet segment of $3.6 million. See "Segment Operating Results" section below for further discussion of revenues by segment.

*Costs and Operating Expenses.* Costs and operating expenses increased for the three and six months ended June 30, 2024, compared to the same periods in the prior year primarily due to increases in revenue. Costs and operating expenses for our operating segments increase and decrease in conjunction with the level of business activity and revenues generated by each segment. See "Segment Operating Results" for discussion of cost and operating expenses by segment.

*Operating Income.* Operating income decreased for the three months ended June 30, 2024, compared to the same period of the prior year primarily due to an increase in corporate costs, including a lease abandonment charge of $12.9 million, corporate restructuring charges of $3.8 million, and a decrease in operating income of $5.6 million for our Fleet segment. These operating income decreases were partially offset by an increase of $8.7 million for our Aviation segment. See "Segment Operating Results" for a discussion of operating income by segment.

Operating income decreased for the six months ended June 30, 2024, compared to the same period of the prior year primarily due to an increase in corporate costs, including a lease abandonment charge of $12.9 million, corporate restructuring charges of $3.8 million, and a decrease in operating income of $4.9 million for our Fleet segment. These operating income decreases were partially offset by an increase of $15.3 million for our Aviation segment. See "Segment Operating Results" for a discussion of operating income by segment.

*Interest Expense.* Interest expense increased for the three and six months ended June 30, 2024, as compared to the same periods in the prior year primarily due to an increase in our debt facility borrowings and a higher average interest rate on borrowings outstanding.

*Provision for Income Taxes.* Our effective tax rate for continued operations was 24.8% and 17.4% for the three and six months ended June 30, 2024 respectively, and 24.0% and 24.3% for the three and six months ended June 30, 2023 respectively. Our tax rate is affected by discrete items that may occur in any given year but may not be consistent from year to year. Permanent differences such as foreign derived intangible income deduction, Section 162(m) limitation, capital gains tax treatment, state income taxes, certain federal and state tax credits and other items caused differences between our statutory U.S. federal income tax rate and our effective tax rate. The higher effective tax rate for the three months ended June 30, 2024 primarily resulted from lower book income and higher disallowed compensation pursuant to Section 162(m) in 2024. The lower effective tax rate for the six months ended June 30, 2024 primarily resulted from lower book income in 2024 and higher excess stock compensation deduction for tax purposes in connection with current year stock vesting.

### Segment Operating Results

#### Aviation Segment Results

The results of operations for our Aviation segment were as follows (in thousands):

|  | Three months ended June 30, 2024 | 2023 | Change ($) | Change (%) | Six months ended June 30, 2024 | 2023 | Change ($) | Change (%) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenues | $192,828 | $124,729 | $68,099 | 55% | $355,211 | $237,964 | $117,247 | 49% |
| Costs and operating expenses | 168,360 | 108,946 | 59,414 | 55% | 308,433 | 206,517 | 101,916 | 49% |
| Operating income | $24,468 | $15,783 | $8,685 | 55% | $46,778 | $31,447 | $15,331 | 49% |
| Profit percentage | 12.7% | 12.7% |  |  | 13.2% | 13.2% |  |  |

*Revenues.* Revenues for our Aviation segment increased for the three months ended June 30, 2024, compared to the same period of the prior year primarily driven by contributions from our acquisitions of Desser and TCI, the launch and expansion of recently awarded distribution agreements, and improved demand for our products and services resulting from strong end market activity in global air travel. Aviation distribution revenue increased $28.3 million, or 32%, and repair revenue increased $39.8 million, or 112%, for the three months ended June 30, 2024, compared to the same period in the prior year.

Revenues for our Aviation segment increased for the six months ended June 30, 2024, compared to the same period of the prior year primarily driven by the contributions from our acquisitions of Desser and TCI, the launch and expansion of recently awarded distribution agreements, improved demand for our products and services resulting from strong end market activity. Aviation distribution revenue increased $58.8 million, or 35%, and repair revenue increased $58.4 million, or 86%, for the six months ended June 30, 2024, compared to the same period in the prior year.

*Costs and operating expenses.* Costs and operating expenses increased for the three months ended June 30, 2024, compared to the same period of the prior year primarily due to increased revenues. Costs and operating expenses for this segment included expenses for amortization of intangible assets associated with acquisitions and allocated corporate costs. Expense for amortization of intangible assets was $4.3 million for the three months ended June 30, 2024, compared to $2.5 million for the same period in the prior year. Allocated corporate costs were $4.6 million for the three months ended June 30, 2024, compared to $3.0 million for the same period in the prior year.

Costs and operating expenses increased for the six months ended June 30, 2024, compared to the same period of the prior year primarily due to increased revenues. Costs and operating expenses for this segment included expenses for amortization of intangible assets associated with acquisitions and allocated corporate costs. Expense for amortization of intangible assets was $7.7 million for the six months ended June 30, 2024, compared to $5.0 million for the same period in the prior year. Allocated corporate costs were $8.9 million for the six months ended June 30, 2024, compared to $6.2 million for the same period in the prior year.

*Operating income.* Operating income increased for the three and six months ended June 30, 2024, compared to the same period of the prior year primarily due to revenue growth and a favorable shift in sales mix and pricing, and contributions from our newly launched OEM licensed manufacturing program, offset by increased amortization of intangible assets and allocated corporate costs.

#### Fleet Segment Results

The results of operations for our Fleet segment were as follows (in thousands):

|  | Three months ended June 30, 2024 | 2023 | Change ($) | Change (%) | Six months ended June 30, 2024 | 2023 | Change ($) | Change (%) |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Revenues | $73,131 | $80,494 | $(7,363) | (9)% | $152,287 | $155,846 | $(3,559) | (2)% |
| Costs and operating expenses | 70,920 | 72,640 | (1,720) | (2)% | 143,459 | 142,093 | 1,366 | 1% |
| Operating income | $2,211 | $7,854 | $(5,643) | (72)% | $8,828 | $13,753 | $(4,925) | (36)% |
| Profit percentage | 3.0% | 9.8% |  |  | 5.8% | 8.8% |  |  |

*Revenues.* Revenues for our Fleet segment decreased for the three months ended June 30, 2024, compared to the same period of the prior year primarily due to a decline in activity by other government customers of $15.8 million, or 37%, partially offset by increases from commercial customers of $8.4 million, or 22%. Revenues from other government customers decreased primarily due to lower maintenance activity within the USPS vehicle fleet program driven by USPS' transition to a new Fleet Management Information System. Commercial customer revenue growth was driven by our e-commerce fulfillment and commercial fleet businesses.

Revenues for our Fleet segment decreased for the six months ended June 30, 2024, compared to the same period of the prior year primarily due to a decline in activity by other government customers of $24.1 million, or 28%, partially offset by increases from commercial customers of $20.5 million or 29%. Revenues from other government customers decreased primarily due to lower maintenance activity within the USPS vehicle fleet program driven by USPS' transition to a new Fleet Management Information System. Commercial customer revenue growth was driven by our e-commerce fulfillment and commercial fleet businesses.

*Costs and operating expense.* Costs and operating expenses decreased for the three months ended June 30, 2024, compared to the same period of the prior year primarily due to decreased revenues. In addition, costs and operating expenses for this segment included expenses for amortization of intangible assets associated with acquisitions and allocated corporate costs. Expense for amortization of intangible assets was immaterial for the three months ended June 30, 2024, compared to $1.1 million for the same period in the prior year. Allocated corporate costs were $1.8 million for the three months ended June 30, 2024, compared to $2.0 million for the same period in the prior year.

Costs and operating expenses increased for the six months ended June 30, 2024, compared to the same period of the prior year primarily due to shift in sales mix. In addition, costs and operating expenses for this segment included expenses for amortization of intangible assets associated with acquisitions and allocated corporate costs. Expense for amortization of intangible assets was immaterial for the six months ended June 30, 2024, compared to $2.6 million for the same period in the prior year. Allocated corporate costs were $4.0 million for the six months ended June 30, 2024, compared to $4.0 million for the same period in the prior year.

*Operating income.* Operating income decreased for the three and six months ended June 30, 2024, compared to the same period of the prior year primarily driven by a sales mix shift due to a decrease in revenues from our USPS vehicle fleet program, partially offset by a reduction in the amortization of intangible assets.

### Liquidity and Capital Resources

### Liquidity

Our internal sources of liquidity are primarily from operating activities, specifically from changes in our level of revenues and associated inventory, accounts receivable and accounts payable, and from profitability. Significant increases or decreases in revenues and inventory, accounts receivable and accounts payable can affect our liquidity. Our inventory and accounts payable levels can be affected by the timing of large opportunistic inventory purchases and by distributor agreement requirements. Our accounts receivable and accounts payable levels can be affected by changes in the level of work we perform and by the timing of large purchases. In addition to operating cash flows, other significant factors that affect our overall management of liquidity include capital expenditures, and investments in the acquisition of businesses.

Our primary sources of external financing are the capital markets and our credit agreement. Our credit agreement is with a bank group and includes a term loan and a revolving facility, with an aggregate maximum borrowing capacity of our revolving facility of $350.0 million. Under the credit agreement we may elect to increase the maximum availability of the term loan, the revolving facility, or a combination of both, subject to customary lender commitment approvals. The aggregate limit of increases is $25.0 million. Our outstanding borrowings under the credit agreement increased approximately $33.5 million for the six months ended June 30, 2024. As of June 30, 2024, we had borrowings outstanding under our term loan of $292.5 million, borrowings outstanding under our revolving facility of $174.0 million, outstanding letters of credit of $0.8 million, and $175.2 million of unused commitments under the credit agreement.

In May 2024, we completed an underwritten public offering of 2,429,577 shares of the Company's common stock, generating proceeds of $162.0 million in connection with the offering, net of issuance costs. We used substantially all of the proceeds of the public offering to repay outstanding borrowings under our revolving credit facility, including amounts borrowed to pay the purchase price of the acquisition of TCI and for general corporate purposes.

We believe our existing balances of cash and cash equivalents, along with our cash flows from operations and debt instruments under our credit agreement mentioned above, will provide sufficient liquidity for our business operations as well as capital expenditures, dividends, and other capital requirements associated with our business operations over the next twelve months and thereafter for the foreseeable future.

### Cash Flows

The following table summarizes our cash flows (in thousands):

|  | Six months ended June 30, 2024 | 2023 |
| --- | ---: | ---: |
| Net cash used in operating activities | $(96,588) | $(65,091) |
| Net cash used in investing activities | (81,820) | (16,291) |
| Net cash provided by financing activities | 189,471 | 85,244 |
| Net increase in cash and cash equivalents | $11,063 | $3,862 |

Cash used in operating activities increased $31.5 million for the six months ended June 30, 2024, as compared to the same period of the prior year. The increase was primarily due to greater use of cash for inventory purchases.

Cash used in investing activities increased $65.5 million for the six months ended June 30, 2024, as compared to the same period of the prior year. The increase was primarily due to cash paid for the TCI acquisition, net of cash acquired, of $112.3 million, offset by cash provided of $42.1 million related to the FDS sale. See Note (2) "Acquisitions" and Note (3) "Discontinued Operations" to the consolidated financial statements for further information.

Cash provided by financing activities increased $104.2 million for the six months ended June 30, 2024, as compared to the same period of the prior year. The increase was primarily due to the receipt of $162.0 million in proceeds related to our public underwritten offering of our common stock in May 2024, offset by lower proceeds from net borrowings of our debt during the current period due to the decrease in our term loan facility.

We paid cash dividends totaling $3.2 million or $0.20 per share during the six months ending June 30, 2024. Pursuant to our credit agreement, our payment of cash dividends is subject to annual restrictions. We have paid cash dividends each year since 1973.

### Other Obligations and Commitments

There have not been any material changes to our other obligations and commitments that were included in our Annual Report on Form 10-K for the year ended December 31, 2023.

### Inflation and Pricing

There have not been any material changes to this disclosure from those discussed in our most recently filed Annual Report on Form 10-K.

### Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

### Disclosures About Market Risk

### Interest Rate Risk

Our credit agreement provides available borrowing to us at variable interest rates. Our interest expense is impacted by the overall global economic and interest rate environment. The inflationary environment has also resulted in central banks raising short-term interest rates. Accordingly, future interest rate changes could potentially put us at risk for a material adverse impact on future earnings and cash flows. To mitigate the risks associated with future interest rate movements we have employed interest rate hedges to fix the rate on a portion of our outstanding borrowings for various periods.

For additional information related to our debt and interest rate swap agreements, see Note (5) and Note (6), respectively, to our Consolidated Financial Statements contained in this report.

Other than as discussed above, there have been no material changes to our market risks from those discussed in our most recently filed Annual Report on Form 10-K.

### Critical Accounting Policies, Estimates and Judgments

Our consolidated financial statements are prepared in accordance with United States Generally Accepted Accounting Principles ("U.S. GAAP"), which require us to make estimates and assumptions. Certain critical accounting policies affect the more significant accounts, particularly those that involve judgments, estimates and assumptions used in the preparation of our consolidated financial statements, including revenue recognition, inventory valuation, business combinations, goodwill and intangible assets, and income taxes. If any of these estimates, assumptions or judgments prove to be incorrect, our reported results could be materially affected. Actual results may differ significantly from our estimates under different assumptions or conditions. See "Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations" and Note (1) "Nature of Business and Summary of Significant Accounting Policies" in our 2023 Annual Report on Form 10-K for further discussions of our significant accounting policies and estimates. There have been no significant changes in our critical accounting estimates during the six months ended June 30, 2024, from those disclosed in our most recently filed Annual Report on Form 10-K.

### Recently Issued Accounting Pronouncements

For a description of recently announced accounting standards, including the expected dates of adoption and estimated effects, if any, on our consolidated financial statements, see Note (1) "Nature of Business and Summary of Significant Accounting Policies — Recent Adopted Accounting Pronouncements” to our Consolidated Financial Statements included in our Annual Report on Form 10-K for the year ended December 31, 2023.

## Market risk

As filed, 133 characters.

See "Disclosures About Market Risk" in Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

## Controls and procedures

As filed, 1,981 characters.

### Evaluation of Disclosure Controls and Procedures

Our management has evaluated, with the participation of our Chief Executive Officer and Chief Financial Officer, the effectiveness of the disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")). Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2024, our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

### Changes in Internal Control Over Financial Reporting

In connection with our acquisition of TCI, certain areas of internal control over financial reporting changed. These areas are primarily related to integrating our corporate functions such as entity level controls and certain financial reporting controls. Certain control structure items remain in operation at TCI, primarily related to information technology, inventory management, human resources, processing and billing of revenues, and collection of those revenues. The control structure at TCI has been modified to appropriately oversee and incorporate these activities into the overall control structure. We will continue to evaluate the need for additional internal controls over financial reporting.

There have been no additional changes in our internal control over financial reporting during the quarterly period covered by this report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 486 characters.

There have been no material changes to the previously disclosed risk factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 ("2023 Form 10-K”). The risk factors disclosed in our 2023 Form 10-K should be considered together with information included in this Quarterly Report on Form 10-Q for the quarter ended June 30, 2024, and under "Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Filed Aug 1, 2024.
Source: SEC EDGAR, the filing index for accession 0000102752-24-000072. Last ingested by Listed: Nov 5, 2026, 19:54 ET. No prices; not investment advice.