Ampco Pittsburgh Corp: Form 10-Q for the period ended Jun 30, 2025

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(in thousands, except per share amounts)

Forward-Looking Statements

The Private Securities Litigation Reform Act of 1995 (the “Act”) provides a safe harbor for forward-looking statements made by us or on behalf of Ampco-Pittsburgh Corporation and its subsidiaries (collectively, “we,” “us,” “our,” or the “Corporation”). Management’s Discussion and Analysis of Financial Condition and Results of Operations and other sections of this Quarterly Report on Form 10-Q, as well as the condensed consolidated financial statements and notes hereto, may include, but are not limited to, statements about operating performance, trends and events we expect or anticipate will occur in the future, statements about sales and production levels, timing of orders for our products, restructurings, the impact from pandemics and geopolitical conflicts, profitability and anticipated expenses, inflation, the global supply chain, the continued impact of tariffs, global trade conditions, and cash outflows. All statements in this document other than statements of historical fact are statements that are, or could be, deemed “forward-looking statements” within the meaning of the Act and words such as “may,” “will,” “intend,” “believe,” “expect,” “anticipate,” “estimate,” “project,” “target,” “goal,” “forecast,” and other terms of similar meaning that indicate future events and trends are also generally intended to identify forward-looking statements. Forward-looking statements speak only as of the date on which such statements are made, are not guarantees of future performance or expectations, and involve risks and uncertainties. For us, these risks and uncertainties include, but are not limited to:

• inability to maintain adequate liquidity to meet our operating cash flow requirements, repay maturing debt and meet other financial obligations including severance costs associated with our anticipated exit from our operations in the U.K.;
• economic downturns, cyclical demand for our products and insufficient demand for our products;
• excess global capacity in the steel industry;
• inability to successfully restructure our operations, exit our U.K. operations, and/or invest in operations that will yield the best long-term value to our shareholders;
• changes in the global economic environment, inflation, the ongoing impact of tariffs, elevated interest rates, recessions or prolonged periods of slow economic growth, and global instability and actual and threatened geopolitical conflict;
• liability of our subsidiaries for claims alleging personal injury from exposure to asbestos-containing components historically used in certain products of our subsidiaries;
• inability to obtain necessary capital or financing on satisfactory terms to acquire capital expenditures that may be necessary to support our growth strategy;
• inoperability of certain equipment on which we rely;
• increases in commodity prices or insufficient hedging against increases in commodity prices, reductions in electricity and natural gas supply or shortages of key production materials for us or our customers;
• inability to satisfy the continued listing requirements of the New York Stock Exchange;
• potential attacks on information technology infrastructure and other cyber-based business disruptions;
• fluctuations in the value of the U.S. dollar relative to other currencies;
• changes in the existing regulatory environment;
• consequences of pandemics and geopolitical conflicts;
• work stoppage or another industrial action on the part of any of our unions;
• failure to maintain an effective system of internal control; and
• those discussed more fully elsewhere in this report and in documents filed with the Securities and Exchange Commission by us, particularly in Item 1A, Risk Factors, in Part I of our Annual Report on Form 10-K for the year ended December 31, 2024.

We cannot guarantee any future results, levels of activity, performance or achievements. In addition, there may be events in the future that we are not able to predict accurately or control which may cause actual results to differ materially from expectations expressed or implied by forward-looking statements. Except as required by applicable law, we assume no obligation, and disclaim any obligation, to update forward-looking statements whether as a result of new information, events or otherwise.

The Business

The Corporation manufactures and sells highly engineered, high-performance specialty metal products and customized equipment utilized by industry throughout the world. It operates in two business segments – the *Forged and Cast Engineered Products (“*FCEP”) segment and the *Air and Liquid Processing (“*ALP”) segment. This segment presentation is consistent with how the Corporation’s chief operating decision-maker evaluates financial performance and makes resource allocation and strategic decisions about the business.

The FCEP segment produces forged hardened steel rolls, cast rolls and forged engineered products (“FEP”). Forged hardened steel rolls are used primarily in hot and cold rolling mills by producers of steel, aluminum and other metals. Cast rolls, which are produced in a variety of iron and steel qualities, are used mainly in hot strip mills, medium/heavy section mills, roughing mills, and plate mills. FEP principally are sold to customers in the steel distribution market, oil and gas industry and the aluminum and plastic extrusion industries. The segment has operations in the United States, England, Sweden, and Slovenia, and an equity interest in three joint venture companies in China. Collectively, the segment primarily competes with European, Asian and North and South American companies in both domestic and foreign markets and distributes a significant portion of its products through sales offices located throughout the world.

The ALP segment includes Aerofin, Buffalo Air Handling and Buffalo Pumps, all divisions of Air & Liquid Systems Corporation (“Air & Liquid”), a wholly owned subsidiary of the Corporation. Aerofin produces custom-engineered finned tube heat exchange coils and related heat transfer products for a variety of industries including original equipment manufacturers and commercial, nuclear power generation and industrial manufacturing. Buffalo Air Handling produces large custom-designed air handling systems for institutional (e.g., hospital, university), pharmaceutical and general industrial building markets. Buffalo Pumps manufactures centrifugal pumps for the fossil-fueled power generation, marine defense and industrial refrigeration industries. The segment has operations in Virginia and New York with headquarters in Carnegie, Pennsylvania. The segment utilizes an independent group of sales offices located throughout the United States and Canada.

Executive Overview

For the FCEP segment, global steel manufacturing capacity continues to exceed global consumption of steel products. Demand for steel is soft but stable. Increased entry of low-priced products from other countries has negatively impacted local demand in the U.S. and Europe, with several of the segment’s largest customers engaging in trade cases to reduce the number of imports into the U.S. The U.S. government previously announced new tariffs on steel and aluminum imports to the U.S. and has, for now, removed the exceptions allowing certain countries to send un-tariffed products to the U.S. As a result, tariffs are now incurred on forged and cast rolls shipped from the segment's European facilities into the U.S. and on U.S. forged and cast rolls shipped into China. Since the cast roll market is currently underserved in the U.S., the Corporation believes the segment's European operations are on equal footing with its competition with respect to tariffs. Subject to negotiations with customers, it is expected that the costs associated with tariffs will be passed on to customers. With the recently announced trade deals, tariff rates with many of the segment's largest trading partners have begun to be finalized, however, outcomes are fluid and subject to change. Accordingly, it is difficult to predict how tariffs will affect the ordering patterns of the segment's customers. Customer deferral of orders has occurred and may continue to occur. The primary focus for the FCEP segment is to improve its profitability by maintaining a strong position in the roll market and continuing to improve operational efficiency and equipment reliability following the completion of a significant capital equipment program.

In February 2025, Union Electric Steel UK Limited (“UES-UK”), an indirect subsidiary of the Corporation, entered into a formal consultation process with its unions and staff to evaluate various options to improve its profitability, which it completed during the second quarter of 2025. The U.K. operations have been impacted by unpredictable and high energy costs compared to its foreign competitors, lower demand for its products manufactured in the U.K., and increased imports of rolls and flat rolled steel into Europe from low-cost countries. In light of UES-UK's historical performance and management's outlook for the remainder of 2025 and subsequent years, UES-UK has decided to exit its operations. While UES-UK continues to review its restructuring alternatives, it is currently expected it will complete its orders in backlog and will cease foundry operations at the end of 2025 and finishing operations in the spring of 2026. As of the date of this filing, no decision has been made by the Board of Directors of UES-UK as to the method to liquidate and dissolve its operations.

For the three and six months ended June 30, 2025, the Corporation recognized charges approximating $6,750 primarily for employee-related costs payable to the 168 employees of UES-UK under existing benefit plans and accelerated depreciation from reducing the estimated remaining useful lives and revising the estimated salvage value of the property, plant and equipment of UES-UK (the “U.K. Exit Charge”). Additional benefits may be earned by the employees as additional services are rendered which will be accrued as earned and could range between $500 - $600.

For the ALP segment, businesses are benefiting from steady demand and increased market share but continue to face increasing production costs due to inflation. The segment has been implementing price increases for certain of its products to help mitigate these inflationary effects. The focus for this segment is to grow revenues, strengthen engineering and manufacturing capabilities to keep pace with growth opportunities, and continue to improve its sales distribution network. Following previous U.S. government actions, tariffs are now incurred on certain of the segment's raw materials. It is expected that the costs associated with these tariffs will be passed on to customers. Tariff outcomes are fluid and subject to change; however, the U.S.'s onshoring of additional manufacturing capabilities would potentially increase demand for the segment's products.

The Corporation is actively monitoring, and will continue to actively monitor, changes prompted by the U.S. government, repercussions from the Middle East conflicts and similar geopolitical matters, economic conditions, and other developments relevant to its business including the potential impact on its operations, financial condition, liquidity, suppliers, industry, and workforce.

Selected Financial Information

Net sales approximated $113,104 and $110,988 for the three months ended June 30, 2025 and 2024, respectively, an improvement of $2,116, and $217,369 and $221,203 for the six months ended June 30, 2025 and 2024, respectively, a decrease of $3,834. A discussion of net sales for the Corporation’s two segments is included below.

(Loss) income from operations approximated $(3,078) and $5,043 for the three months ended June 30, 2025 and 2024, respectively, a decrease of $8,121, and $772 and $5,125 for the six months ended June 30, 2025 and 2024, respectively, a decrease of $4,353. Loss from operations for the three and six months ended June 30, 2025 includes:

• The U.K. Exit Charge for severance and related costs associated with exiting the Corporation's U.K. operations of approximately $6,750 and
• Employee-retention credits, which were refundable employer payroll taxes for certain eligible businesses affected by the COVID-19 pandemic, of $735 received from the Internal Revenue Service during the second quarter of 2025 (the “Employee-Retention Credits”) for the FCEP ($456) and ALP ($279) segments.

A discussion of (loss) income from operations for the Corporation’s two segments along with the U.K. Exit Charge is included below.

Backlog equaled $351,266 as of June 30, 2025 versus $378,884 as of December 31, 2024. Backlog represents the accumulation of firm orders on hand which: (i) are supported by evidence of a contractual arrangement, (ii) include a fixed and determinable sales price, (iii) have reasonably assured collectability, and (iv) generally are expected to ship within two years from the backlog reporting date. Backlog at a certain date may not be a direct measure of future revenue for a particular order because price increases, negotiated subsequently to the original order, are not included in backlog until the updated contract is received from the customer and certain surcharges are not determinable until the order is complete and ready for shipment to the customer. Approximately 37% of the backlog is expected to be released after 2025. A discussion of backlog by segment is included below.

Costs of products sold, excluding depreciation and amortization, as a percentage of net sales, for the three months ended June 30, 2025 and 2024 approximated 81.3% and 79.0%, respectively, with the increase primarily being driven by the FCEP segment. Costs of products sold, excluding depreciation and amortization, as a percentage of net sales, for the six months ended June 30, 2025 and 2024 approximated 80.1% and 81.5%, respectively, with both segments contributing to the decrease. Included in costs of products sold, excluding depreciation and amortization, for the three and six months ended June 30, 2025 is the benefit from the Employee-Retention Credits. See further discussion in the below commentary for the Corporation’s two segments.

Selling and administrative expenses approximated $12,968 and $13,550 for the three months ended June 30, 2025 and 2024, respectively, with the decrease primarily due to lower employee-related costs and lower commission costs for the ALP segment offset by professional fees associated with efforts to exit the U.K. operations. Selling and administrative expenses were comparable for the six months ended June 30, 2025 and 2024, and approximated $26,627 and $26,523, respectively. While the Corporation is experiencing inflationary increases and incurred professional fees associated with the efforts to exit the U.K. operations, commission costs for the ALP segment were lower for the six months ended June 30, 2025 when compared to the same period of the prior year by approximately $500 due to changes in product mix.

Depreciation and amortization includes approximately $654 of accelerated depreciation for the U.K. operations for each of the three and six months ended June 30, 2025 as a result of the expected exiting of the U.K. operations and depreciating the net book value of the assets over their shorter lives to their estimated salvage values.

Severance charge represents primarily statutory severance and other benefits payable to the 168 employees of UES-UK under existing benefit plans. Additional benefits may be earned by the employees as additional services are rendered which will be accrued as earned and could range between $500 - $600.

Interest expense decreased approximately $192 and $223 for the three and six month periods ended June 30, 2025, respectively, when compared to the same periods of the prior year, primarily due to:

Other (expense) income – net is comprised of the following:

Other (expense) income – net fluctuated primarily due to:

• Changes in foreign exchange gains and losses;
• Lower net pension and other postretirement income primarily due to a lower expected long-term rate of return on the assets of U.S. defined benefit pension plan in 2025 versus 2024; and
• Changes in unrealized losses and gains in the market value of the Rabbi trust investments corresponding to the volatility in the financial markets; offset by
• Higher investment income which includes approximately $102 of interest received during the second quarter of 2025 associated with the Employee-Retention Credits and a $96 dividend from one of the Corporation's Chinese joint ventures received during the second quarter of 2025 versus third quarter of 2024.

Income tax provision for each of the periods includes income taxes associated with the Corporation’s profitable operations. An income tax benefit is not able to be recognized on losses of certain of the Corporation’s entities since it is “more likely than not” the asset will not be realized. Accordingly, changes in the income tax provision for each of the periods include the effects of changes in the pre-tax income of the Corporation’s profitable operations in each jurisdiction and changes in expectations as to whether an income tax benefit will be able to be realized for the deferred income tax assets recognized.

The income tax provisions for 2025 benefited from a lower statutory income tax rate on the earnings of the Corporation's majority-owned Chinese joint venture as a result of the joint venture qualifying as a high-tech enterprise (“HTE”). As a HTE, the earnings of the Chinese joint venture through 2026 will be taxed at a rate of 15% (versus 25%). The effect on the income tax provisions was a benefit of $300 and $800 for the three and six months ended June 30, 2025, respectively, when compared to the income tax provisions for the three and six months ended June 30, 2024.

Valuation allowances are recorded against the majority of the Corporation’s deferred income tax assets. The Corporation will maintain the valuation allowances until there is sufficient evidence to support the reversal of all or some portion of the allowances. Given the Corporation’s current earnings and anticipated future earnings in Sweden, the Corporation believes there is a reasonable possibility within the next 12 months, sufficient positive evidence may become available to allow the Corporation to conclude some portion of the valuation allowance will no longer be needed. Release of any portion of the valuation allowance would result in the recognition of deferred income tax assets on the Corporation’s condensed consolidated balance sheet and a decrease to the Corporation’s income tax expense in the period the release is recorded. The exact timing and the amount of the valuation allowance released are subject to, among many items, the level of profitability achieved. Once the valuation allowance is completely reversed, a tax provision would be recognized on future earnings.

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted in the U.S. OBBBA includes a number of tax provisions and multiple effective dates, with certain provisions effective in 2025 and others through 2027. The Corporation is currently evaluating the impact of OBBBA on its condensed consolidated financial statements.

Net (loss) attributable to Ampco-Pittsburgh and net (loss) per common share attributable to Ampco-Pittsburgh equaled $(7,335), or $(0.36) per common share, and $(6,193), or $(0.31) per common share, for the three and six months ended June 30, 2025, respectively, including the U.K. Exit Charge and Employee-Retention Credits. No income tax benefit was able to be recognized for the U.K. Exit Charge since the U.K. operations remained in a three-year cumulative loss position as of June 30, 2025. The U.K. Exit Charge and Employee-Retention Credits impacted net loss attributable to Ampco-Pittsburgh and net loss per common share attributable to Ampco-Pittsburgh by $6,006, or $0.30 per common share, for each of the three and six months ended June 30, 2025. The income tax benefit resulting from the Corporation's majority-owned Chinese joint venture qualifying as an HTE of approximately $500 reduced the net loss attributable to Ampco-Pittsburgh and net loss per common share attributable to Ampco-Pittsburgh by approximately $299, or $0.01 per common share, for the six months ended June 30, 2025.

Net income attributable to Ampco-Pittsburgh and net income per common share attributable to Ampco-Pittsburgh equaled $2,012, or $0.10 per common share, and $(705), or $(0.04) per common share, for the three and six months ended June 30, 2024, respectively.

Net Sales and Operating Results by Segment

Forged and Cast Engineered Products

The change in net sales for the three and six months ended June 30, 2025, when compared to the same periods of the prior year, is primarily due to the following:

• Changes in volume and product mix, which improved net sales by approximately $1,100 for the three months ended June 30, 2025, when compared to the three months ended June 30, 2024, but adversely affected net sales by approximately $5,200 for the six months ended June 30, 2025, when compared to the six months ended June 30, 2024;
• Changes in pricing and lower variable-index surcharges passed through to customers as a result of fluctuations in the price of raw materials, energy and transportation costs, which reduced net sales by approximately $1,100 for the three months

ended June 30, 2025, when compared to the three months ended June 30, 2024, but increased net sales by approximately $1,300 for the six months ended June 30, 2025, when compared to the six months ended June 30, 2024; and

• Changes in exchange rates used to translate net sales of the segment’s foreign subsidiaries into the U.S. dollar, which increased net sales for the three and six months ended June 30, 2025, when compared to the same periods of 2024, by approximately $2,200 and $1,200, respectively.

The change in (loss) income from operations for the three and six months ended June 30, 2025, when compared to the three and six months ended June 30, 2024, is primarily due to:

• Recognition of the U.K. Exit Charge in the second quarter of 2025, which reduced operating results by approximately $6,750 for the three and six months ended June 30, 2025, when compared to the three and six months ended June 30, 2024;
• Unfavorable manufacturing absorption as a result of temporary plant shutdowns to align production with customer needs, which adversely impacted operating results by approximately $1,400 and $900 for the three and six months ended June 30, 2025, respectively, when compared to the same periods of the prior year;
• Changes in pricing and lower variable-index surcharges net of changes in manufacturing costs, which reduced operating results by approximately $1,400 for the three months ended June 30, 3025, versus the three months ended June 30, 2024, but improved operating results by approximately $3,800 for the six months ended June 30, 2025, when compared to the six months ended June 30, 2024;
• Lower volume of roll shipments, offset by a higher volume of FEP shipments, which decreased operating results by $300 and $2,900 for the three and six months ended June 30, 2025, respectively, when compared to the three and six months ended June 30, 2024; and
• Higher selling and administrative expenses, principally due to inflationary increases and higher professional fees offset by lower employee-related costs, which decreased operating results by approximately $100 and $800 for the three and six months ended June 30, 2025, respectively, when compared to the same periods of the prior year; offset by
• Employee-Retention Credits received in the second quarter of 2025 of approximately $456, which improved operating results by the same amount for the three and six months ended June 30, 2025, when compared to the same periods of 2024; and
• Changes in exchange rates used to translate the operating results of the segment’s foreign subsidiaries into the U.S. dollar, which improved operating results by approximately $200 and $100 for the three and six months ended June 30, 2025, respectively, when compared to the same periods of 2024.

Backlog decreased at June 30, 2025 from December 31, 2024 by $38,101 primarily due to:

• Lower backlog for mill rolls of approximately $54,300 due to (i) lower demand in Europe as a result of mills operating at a reduced rate, (ii) U.S. customers deferring orders due, in part, to the current geopolitical events with tariffs resulting in uncertainty as to the total cost of a roll, (iii) timing of orders for the following year, and (iv) lower orders for UES-UK resulting from the anticipated exit of UES-UK; offset by
• Higher exchange rates used to translate the backlog of the Corporation’s foreign subsidiaries into the U.S. dollar, which increased backlog at June 30, 2025 when compared to backlog at December 31, 2024, by approximately $14,300; and
• Improved demand for FEP, which increased backlog at June 30, 2025 when compared to backlog at December 31, 2024 by approximately $1,900.

At June 30, 2025, approximately 32% of backlog is expected to ship after 2025.

At June 30, 2025, UES-UK backlog approximated $14,700 which is expected to be completed and shipped over approximately the next 12 months.

Air and Liquid Processing

The decrease in net sales for the three and six months ended June 30, 2025, when compared to the same periods of the prior year, is primarily due to:

• Lower net sales of air handling units principally due to the timing of shipments and associated revenue recognition.
• Lower net sales of heat exchange coils principally due to:
• A lower volume of shipments to original equipment manufacturers and fossil-utility customers of approximately $1,900 and $2,400 for the three and six months ended June 30, 2025, respectively, when compared to the three and six months ended June 30, 2024;
• Changes in the volume of sales to customers in the commercial industry, primarily due to timing of when orders are needed by the customer, which increased net sales by approximately $400 for the three months ended June 30, 2025, when compared to the same period of the prior year, but reduced net sales by approximately $600 for the six months ended June 30, 2025, when compared to the same period of the prior year; and
• A higher volume of shipments to customers in the nuclear industry of approximately $800 and $3,000 for the three and six months ended June 30, 2025, respectively, when compared to the three and six months ended June 30, 2024.
• Higher net sales of centrifugal pumps principally due to:
• A higher volume of shipments of replacement pumps and parts of approximately $4,600 and $9,400 for the three and six months ended June 30, 2025, respectively, when compared to the three and six months ended June 30, 2024; offset by
• A lower volume of shipments of new pump sets of approximately $3,800 and $8,600 for the three and six months ended June 30, 2025, respectively, when compared to the three and six months ended June 30, 2024.

The improvement in operating income for the three and six months ended June 30, 2025, when compared to the same periods of the prior year, is principally due to:

• Changes in product mix, offset in part by the net lower volume of shipments and higher manufacturing costs, which had a net benefit to operating income of approximately $300 and $1,800 for the three and six months ended June 30, 2025, respectively, when compared to the three and six months ended June 30, 2024;
• Lower commission costs of approximately $140 and $500 for the three and six months ended June 30, 2025, respectively, when compared to the three and six months ended June 30, 2024; and
• Employee-Retention Credits of $279 for the three and six months ended June 30, 2025.

Backlog at June 30, 2025 improved when compared to backlog December 31, 2024 by approximately $10,483 with each of the product lines improving. In particular, backlog for:

• Centrifugal pumps increased approximately $5,172 primarily due to strong order activity in the U.S. Navy market;
• Air handling units increased approximately $4,044 primarily due to strong order activity in the pharmaceutical market; and
• Heat exchange coils increased approximately $1,267 primarily due to record order intake in the nuclear market.

At June 30, 2025, approximately 45% of backlog is expected to ship after 2025.

Non-GAAP Financial Measures

The Corporation presents non-GAAP adjusted EBITDA and non-GAAP adjusted income (loss) from operations. Non-GAAP adjusted EBITDA is calculated as net (loss) income excluding interest expense, other (expense) income - net, income tax provision, depreciation and amortization, and stock-based compensation along with significant charges or credits that are one-time charges or credits, unrelated to the Corporation’s ongoing results of operations, or beyond its control. Non-GAAP adjusted income (loss) from operations is calculated as (loss) income from operations excluding depreciation and amortization and stock-based compensation along with significant charges or credits that are one-time charges or credits, unrelated to the segment’s ongoing results of operations, or beyond its control. During the three and six months ended June 30, 2025, the non-GAAP financial measures were adjusted to exclude the severance and other exit costs component of U.K. Exit Charge (the accelerated depreciation component of the U.K. Exit Charge is included in depreciation and amortization) and the Employee-Retention Credits. These non-GAAP financial measures are not based on any standardized methodology prescribed by accounting principles generally accepted in the United States of America (“GAAP”).

Beginning in 2025, the Corporation began presenting non-GAAP adjusted EBITDA along with non-GAAP adjusted income (loss) from operations. These measures are key measures used by the Corporation's management and Board of Directors to understand and evaluate the operating performance of the Corporation and its segments. While these non-GAAP measures may not be directly comparable to similarly titled measures presented by other companies, the Corporation's management and Board of Directors believe these non-GAAP measures enhance comparability to companies in its stated industry peer group.

The Corporation believes these non-GAAP financial measures help identify underlying trends in its business that otherwise could be masked by the effect of the items it excludes from adjusted EBITDA and adjusted income (loss) from operations. The Corporation also believes these non-GAAP financial measures provide useful information to management, shareholders and investors, and others in understanding and evaluating its operating results, enhancing the overall understanding of its past performance and future prospects and allowing for greater transparency with respect to key financial metrics used by the Corporation’s management in its financial and operational decision-making. In particular, the Corporation believes the exclusion of the severance and other exit costs component of the U.K. Exit Charge and the Employee-Retention Credits can provide a useful measure for period-to-period comparisons of the Corporation’s core business performance.

Non-GAAP adjusted EBITDA and non-GAAP adjusted income (loss) from operations are not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are limitations related to the use of non-GAAP adjusted EBITDA, rather than net (loss) income, or non-GAAP adjusted income (loss) from operations, rather than (loss) income from operations, which are the nearest GAAP equivalents. Among other things, there can be no assurance that additional expenses similar to the severance and other exit costs component of the U.K. Exit Charge or additional benefits similar to the Employee-Retention Credits will not occur in future periods.

No income tax benefit was able to be recognized for the U.K. Exit Charge since the U.K. operations remained in a three-year cumulative loss position as of June 30, 2025. The tax expense associated with the Employee-Retention Credits was not significant.

The following is a reconciliation of net (loss) income to non-GAAP adjusted EBITDA for the three and six months ended June 30, 2025 and 2024, respectively:

(1) Depreciation and amortization for the three and six months ended June 30, 2025 includes accelerated depreciation of $654.

The following is a reconciliation of (loss) income from operations to non-GAAP adjusted income (loss) from operations for the three and six months ended June 30, 2025 and 2024, respectively:

(1) Corporate represents the operating expenses of the corporate office and other costs not allocated to the segments.

(2) Depreciation and amortization expense for the FCEP segment for the three and six months ended June 30, 2025 includes accelerated depreciation of $654.

Liquidity and Capital Resources

Net cash flows used in operating activities equaled $(7,614) and $(780) for the six months ended June 30, 2025 and 2024, respectively, a change of $(6,834) primarily due to:

• Higher investment in trade working capital of approximately $5,100;
• Higher net asbestos-related payments of $1,326 for the six months ended June 30, 2025 versus the six months ended June 30, 2024, primarily due to the prior year including reimbursement from an asbestos-related insurance carrier of pre-2024 costs of approximately $1,756, which reduced net asbestos-related payment for the six months ended June 30, 2024 by the same amount; and
• Higher investment in contract assets, net of changes in customer-related liabilities, of approximately $2,500 for the six months ended June 30, 2025 versus the six months ended June 30, 2024; offset by
• Lower contributions to the U.S. defined benefit pension plan of approximately $1,490 for the six months ended June 30, 2025 versus the six months ended June 30, 2024.

Trade receivables at June 30, 2025 increased by approximately $13,700 when compared to trade receivables at December 31, 2024 primarily due to:

• Higher sales in May and June of 2025 versus November and December of 2024, which increased trade receivables at June 30, 2025 when compared to December 31, 2024 by approximately $11,500 and
• Higher exchange rates used to translate the trade receivables of the Corporation’s foreign subsidiaries into the U.S. dollar, which increased trade receivables at June 30, 2025 when compared to December 31, 2024 by approximately $2,300.

Inventories at June 30, 2025 increased by approximately $6,900 when compared to inventories at December 31, 2024 primarily due to:

• Higher in-process and finished goods inventories at June 30, 2025 versus December 31, 2024 of approximately $3,500 resulting from higher production in anticipation of planned summer shutdowns;
• Higher exchange rates used to translate the inventories of the Corporation’s foreign subsidiaries into the U.S. dollar, which increased inventories at June 30, 2025 when compared to December 31, 2024 by approximately $3,000; and
• Timing of shipments and associated revenue recognition, particularly for air handling units which increased inventories at June 30, 2025 when compared to December 31, 2024 by approximately $1,600; offset by
• Lower raw material inventories at June 30, 2025 when compared to December 31, 2024 of approximately $1,000 principally due to the timing of production.

Accounts payable at June 30, 2025 increased by approximately $9,000 when compared to accounts payable at December 31, 2024 primarily due to timing of payments and higher exchange rates used to translate the accounts payable of the Corporation’s foreign subsidiaries into the U.S. dollar which increased accounts payables at June 30, 2025 when compared to December 31, 2024 by approximately $2,000.

Accrued severance costs of $5,922 associated with the U.K. Exit Charge are expected to be paid within the next 12-18 months.

Asbestos-related payments are expected to continue in the foreseeable future. The amount of asbestos-related payments and corresponding insurance recoveries are difficult to predict and can vary based on a number of factors, including changes in assumptions, as outlined in Note 16 to the condensed consolidated financial statements.

Net cash flows used in investing activities equaled $(3,014) and $(4,370) for the six months ended June 30, 2025 and 2024, respectively, a change of $1,356 which is primarily due to:

• Lower capital spend of $1,488 by the FCEP segment primarily due to the completion of a significant capital equipment program during the second quarter of 2024; and
• Lower capital spend of approximately $361 by the ALP segment. Certain of this capital spend may be able to be subsidized by various government incentives such as grants. For the six months ended June 30, 2025 and 2024, the Corporation received approximately $323 and $808 in government incentives. To date, no repayment obligations exist for any government incentive received.

At June 30, 2025, commitments for future capital expenditures approximated $8,400 which are expected to be spent over the next 12-18 months.

Net cash flows provided by financing activities equaled $4,374 and $5,922 for the six months ended June 30, 2025 and 2024, respectively, a change of $(1,548) which is primarily due to:

• Proceeds of $13,500 from the new Equipment Term Notes resulting from amending the Corporation's revolving credit facility in June 2025; offset by
• Higher net repayments on the Corporation’s revolving credit facility of $12,708 enabled primarily by the proceeds from the new Equipment Term Notes;
• Higher repayment of debt principal of $473 in the current year, primarily on the equipment financing facility;
• No proceeds from the equipment financing facility in the current year, due to the completion of a significant capital equipment program during the second quarter of 2024, whereas the prior year included proceeds from the equipment financing facility of $1,692; and
• Payment of deferred financing fees of $840 in connection with amending the Corporation's revolving credit facility.

In addition, Åkers TISCO Roll Co., Ltd. (“ATR”), a 59.88% indirectly owned joint venture of Union Electric Steel Corporation, repaid $664 due to its minority shareholder during the six months ended June 30, 2024.

The current portion of debt increased approximately $6,531 as of June 30, 2025 from December 31, 2024 due to:

• Outstanding swing loans as of June 30, 2025 of $4,687 whereas no swing loans were outstanding as of December 31, 2024. Swing loans are temporary advances under the revolving credit facility and short-term in nature. Accordingly,

swing loans are classified as a current liability until the amount is either repaid, as customers remit payments, or, if elected by the Corporation, refinanced as a longer-term loan under the revolving credit facility.

• Principal payments due for the next 12 months related to the new Equipment Term Notes.

The effect of exchange rate changes on cash and cash equivalents is primarily attributable to the fluctuation of the British pound and Swedish krona against the U.S. dollar.

As a result of the above, cash and cash equivalents decreased by $5,482 during 2025 and ended the period at $9,945 in comparison to $15,427 at December 31, 2024. The majority of the Corporation’s cash and cash equivalents is held by its foreign operations. Domestic customer remittances are used to repay borrowings under the Corporation’s revolving credit facility daily, resulting in minimal cash maintained by the Corporation’s domestic operations. Cash held by the Corporation’s foreign operations is considered to be permanently re-invested; accordingly, a provision for estimated local and withholding tax has not been made. If the Corporation were to remit any foreign earnings to it or any of its U.S. entities, the estimated tax impact would be insignificant.

Funds on hand, funds generated from future operations and availability under the Corporation’s revolving credit facility are expected to be sufficient to finance the Corporation’s operational requirements, including severance and other costs associated with the anticipated termination of operations at UES-UK, debt service costs and capital expenditures. As of June 30, 2025, remaining availability under the revolving credit facility approximated $34,190, net of standard availability reserves. Since a significant portion of the Corporation’s debt includes variable rate interest, increases in the underlying benchmark rates will increase the Corporation’s debt service costs. Similarly, decreases in the underlying benchmark rates will decrease the Corporation’s debt service costs.

The maturity date for the revolving credit facility is June 25, 2030 and, subject to the other terms and conditions of the revolving credit agreement, will become due on that date. Additionally, while the Corporation anticipates it has sufficient liquidity to finance the Corporation’s operational requirements, debt service costs and capital expenditures, it may from time to time consider alternatives, potential transactions and other strategies in an attempt to enhance its liquidity, including assessing restructuring alternatives for UES-UK. Given such measures are forward-looking, the Corporation cannot ensure it will be successful in achieving such enhancements to improve its liquidity.

Litigation and Environmental Matters

See Note 16 and Note 17 to the condensed consolidated financial statements.

Critical Accounting Policies

The Corporation’s critical accounting policies, as summarized in its Annual Report on Form 10-K for the year ended December 31, 2024, remain unchanged.

Recently Issued Accounting Pronouncements

See Note 1 to the condensed consolidated financial statements.

Disclosure controls and procedures. An evaluation of the effectiveness of the Corporation’s disclosure controls and procedures as of the end of the period covered by this report was carried out under the supervision, and with the participation, of management, including the principal executive officer and principal financial officer. Disclosure controls and procedures are defined under Securities and Exchange Commission (“SEC”) rules as controls and other procedures designed to ensure information required to be disclosed by a company in the reports it files under the Securities Exchange Act of 1934 (as amended, the “Exchange Act”) is recorded, processed, summarized and reported within the required time periods. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure information required to be disclosed by an issuer in the reports it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, the Corporation’s management, including the principal executive officer and principal financial officer, has concluded the Corporation’s disclosure controls and procedures were effective as of June 30, 2025.

Changes in internal control. There has been no change in the Corporation’s internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rules 13a-15 or 15d-15 under the Exchange Act that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

There have been no material changes in our risk factors from those disclosed in Part I, Item 1A to our Annual Report on Form 10-K for the year ended December 31, 2024, except for the updated risk factors provided below. The risk factors disclosed in Part I, Item 1A to our Annual Report on Form 10-K for the year ended December 31, 2024, in addition to the other information set forth in this report, including the updated risk factors below, could adversely affect the Corporation’s operating performance and financial condition. Additional risks not currently known or deemed immaterial may also result in adverse effects on the Corporation.

The imposition of tariffs by the United States has negatively affected, and could continue to negatively affect, our operations, financial performance and liquidity.

The United States currently imposes tariffs on primary steel imports and aluminum imports into the United States and has expanded tariffs to other imported products. Our geographic production footprint and our cost base is exposed to these tariffs and could be exposed to additional tariffs, higher tariffs or similar actions in the future, which exposes us to deferral of customer orders and pass-through risk to our customers. The tariffs have and could continue to depress overall market conditions as end-market demand in the United States may falter. Volatility in tariff actions has caused deferred demand as markets await more certainty in trade policy. This volatility has and may continue to negatively impact our order backlog. Depending on market demand and capacity utilization of competitors, our products could become less cost competitive over time, exposing us to potential loss of market share. Our financial condition, results of operations and liquidity may be affected by these tariffs, or similar actions. Moreover, these tariffs, or other changes in U.S. trade policy, have resulted in, and may continue to trigger, retaliatory actions by affected countries which could adversely impact demand for our products, as well as impact our costs, customers, suppliers, and/or the U.S. economy or certain sectors thereof and, thus, may adversely impact our business, operations and financial performance.

We may from time to time undertake internal corporate reorganizations that may adversely impact our business and results of operations.

From time to time, we have undertaken, and may undertake again, internal corporate reorganizations in an effort to simplify our organizational structure, streamline our operations or to address other operational factors. Such internal reorganization involves and may involve, among other things, the combination or dissolution of certain of our existing subsidiaries, including legal insolvency proceedings, and the creation of new subsidiaries. These transactions could be disruptive to our business, result in significant expense, require regulatory approvals, and fail to result in the intended or expected benefits, any of which could adversely impact our business and results of operations.

Items 2-4 None.