Advanced Drainage Systems, Inc.: Form 10-Q for the period ended Dec 31, 2025

Unless the context otherwise indicates or requires, as used in this Quarterly Report on Form 10-Q (“Form 10-Q”), the terms “we,” “our,” “us,” “ADS” and the “Company” refer to Advanced Drainage Systems, Inc. and its directly- and indirectly-owned subsidiaries as a combined entity, except where it is clear that the terms mean only Advanced Drainage Systems, Inc. exclusive of its subsidiaries. We consolidate our joint ventures for purposes of GAAP, except for our South American Joint Venture.

Our fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, references to “year” pertain to our fiscal year. For example, 2026 refers to fiscal 2026, which is the period from April 1, 2025 to March 31, 2026.

The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with our Condensed Consolidated Financial Statements and related footnotes included elsewhere in this Form 10-Q and with the audited Consolidated Financial Statements included in our Fiscal 2025 Form 10-K, as filed with the Securities and Exchange Commission (the “SEC”) on May 15, 2025. In addition to historical condensed consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. This discussion contains forward-looking statements that are based on the beliefs of our management, as well as assumptions made by, and information currently available to, our management. Our actual results could differ materially from those discussed in the forward-looking statements. For more information, see the section entitled “Forward-Looking Statements.”

Overview

ADS is the leading manufacturer of innovative water management solutions in the stormwater and onsite septic wastewater industries, providing superior drainage solutions for use in the construction and agriculture marketplaces. Our innovative products, for which we hold many patents, are used across a broad range of end markets and applications, including non-residential, residential, infrastructure and agriculture applications. We have established a leading position in many of these end markets by leveraging our national sales and distribution platform, industry-acclaimed engineering support, overall product breadth and scale plus manufacturing excellence.

Executive Summary

Third Quarter Fiscal 2026 Results

• Net sales increased 0.4% to $693.4 million
• Net income increased 14.3% to $94.0 million
• Net income per diluted share increased 14.4% to $1.19
• Adjusted EBITDA, a non-GAAP measure, increased 9.3% to $209.2 million

Net sales increased $2.8 million, or 0.4%, to $693.4 million, as compared to $690.5 million in the prior year quarter. Domestic Pipe sales decreased $12.9 million, or 3.8%, to $326.7 million. Domestic Allied Products & Other sales increased $14.1 million, or 9.4%, to $164.7 million. Infiltrator sales increased $2.9 million, or 1.9%, to $152.9 million, primarily due to growth in tanks and advanced treatment products. The overall increase in domestic net sales was primarily driven by growth in the Company's core non-residential construction end market. International sales decreased $1.3 million, or 2.5%, to $49.1 million.

Gross profit increased $17.6 million, or 7.3%, to $259.2 million as compared to $241.6 million in the prior year. The increase in gross profit is primarily driven by volume growth, favorable price/cost, and favorable mix of Allied Products & Other and Infiltrator.

Selling, general and administrative expenses increased $8.0 million, or 7.9% to $108.7 million, as compared to $100.8 million in the prior year. As a percentage of Net sales, Selling, general and administrative expenses increased to 15.7% as compared to 14.6% in the prior year, primarily driven by transaction costs associated with the acquisition of NDS.

Adjusted EBITDA, a non-GAAP measure, increased $17.7 million, or 9.3%, to $209.2 million, as compared to $191.5 million in the prior year. As a percentage of Net sales, Adjusted EBITDA was 30.2% as compared to 27.7% in the prior year.

Year-to-date Fiscal 2026 Results

• Net sales increased 3.7% to $2,373.6 million
• Net income increased 5.0% to $394.6 million
• Net income per diluted share increased 5.2% to $5.02
• Adjusted EBITDA, a non-GAAP measure, increased 8.8% to $774.9 million

Net sales increased $85.1 million, or 3.7%, to $2,373.6 million, as compared to $2,288.5 million in the prior year. Domestic Pipe sales decreased $17.1 million to $1,155.3 million. Domestic Allied Products & Other sales increased $40.6 million, or 7.9%, to $551.1 million. Infiltrator sales increased $70.0 million, or 15.9%, to $511.0 million. The overall increase in domestic net sales was primarily driven by growth in the core non-residential and residential construction end markets. International sales decreased $8.4 million, or 5.1%, to $156.2 million.

Gross profit increased $61.7 million, or 7.1%, to $929.7 million as compared to $868.0 million in the prior year. The increase in gross profit is primarily driven by favorable volume and mix of construction market and Infiltrator sales, partially offset by unfavorable fixed cost absorption as well as the mix impact from the inclusion of Orenco.

Selling, general and administrative expenses increased $43.0 million, or 14.9% to $331.9 million, as compared to $289.0 million. As a percentage of Net sales, Selling, general and administrative expense increased to 14.0% as compared to 12.6% in the prior year. The increase was primarily driven by the acquisition of Orenco, as well as realignment expenses and transaction costs associated with the acquisition of NDS.

Adjusted EBITDA, a non-GAAP measure, increased $62.4 million, or 8.8%, to $774.9 million, as compared to $712.5 million in the prior year. As a percentage of Net sales, Adjusted EBITDA was 32.6% as compared to 31.1% in the prior year.

Results of Operations

Comparison of the Three Months Ended December 31, 2025 to the Three Months Ended December 31, 2024

The following table summarizes our operating results as a percentage of Net sales that have been derived from our Condensed Consolidated Financial Statements for the periods presented. We believe this presentation is useful to investors in comparing historical results.

(In thousands)

Net sales - The following table presents Net sales to external customers by reportable segment for the three months ended December 31, 2025 and 2024.

(Amounts in thousands)

- 22 -

Our consolidated Net sales for the three months ended December 31, 2025 increased by $2.8 million, or 0.4%, compared to the same period in fiscal 2025. The overall decrease in Domestic Pipe Net sales was primarily driven by lower volume of sales in the residential and infrastructure end markets. Net sales of Infiltrator increased due to increased demand in the residential markets, primarily from growth in tanks and advanced treatment products. Allied Products & Other increased due to growth in the residential, non-residential and infrastructure end markets.

Cost of goods sold and Gross profit - The following table presents gross profit by reportable segment for the three months ended December 31, 2025 and 2024.

(Amounts in thousands)

Our consolidated Cost of goods sold for the three months ended December 31, 2025 decreased by $14.7 million, or 3.3%, and our consolidated Gross profit increased by $17.6 million, or 7.3%, compared to the same period in fiscal 2025. The increase in gross profit for Domestic Pipe is primarily driven by favorable material costs partially offset by transportation costs. The increase in gross profit for both Infiltrator and Allied Products & Other was primarily driven by volume.

Selling, general and administrative expenses

(Amounts in thousands)

Selling, general and administrative expenses for the three months ended December 31, 2025 increased $8.0 million from the same period in fiscal 2025 and as a percentage of Net sales, increased by 1.1%. The increase in Selling, general and administrative expenses was primarily due to transaction costs of $7.2 million related to the acquisition of NDS.

Loss (gain) on disposal of assets and costs from exit and disposal activities - The loss on disposal in fiscal 2026 was due to exit and disposal activities. See “Note 2. Restructuring and Loss (Gain) on Disposal of Assets and Costs from Exit and Disposal Activities” for additional information.

Income tax expense - The following table presents the effective tax rates for the periods presented:

See “Note 11. Income Taxes” for additional information.

Comparison of the Nine Months Ended December 31, 2025 to the Nine Months Ended December 31, 2024

The following table summarizes our operating results as a percentage of Net sales that have been derived from our Condensed Consolidated Financial Statements for the periods presented. We believe this presentation is useful to investors in comparing historical results.

(In thousands)

Net sales - The following table presents Net sales to external customers by reportable segment for the nine months ended December 31, 2025 and 2024.

(Amounts in thousands)

Our consolidated Net sales for the nine months ended December 31, 2025 increased by $85.1 million, or 3.7%, compared to the same period in fiscal 2025. The overall decrease in Domestic Pipe Net sales was primarily driven by lower demand in the residential and infrastructure end markets partially offset by improved demand in the non-residential construction market. Net sales for Infiltrator were driven by volume in the residential markets and the acquisition of Orenco. For the international segment, the decrease was driven by decreased volume. Allied Products & Other increased due to demand in the residential and non-residential construction markets.

Cost of goods sold and Gross profit - The following table presents gross profit by reportable segment for the nine months ended December 31, 2025 and 2024.

(Amounts in thousands)

- 24 -

Our consolidated Cost of goods sold for the nine months ended December 31, 2025 increased by $23.4 million, or 1.6%, and our consolidated Gross profit increased by $61.7 million, or 7.1%, compared to the same period in fiscal 2025. The increase in gross profit for Domestic Pipe is primarily driven by favorable material cost partially offset by unfavorable fixed cost absorption. The increase in gross profit for Infiltrator was driven by volume and the acquisition of Orenco. For the International segment, the decrease was driven by decreased volume. The increase in gross profit for Allied Products & Other was driven by volume.

Selling, general and administrative expenses

(Amounts in thousands)

Selling, general and administrative expenses for nine months ended December 31, 2025 increased $43.0 million from the same period in fiscal 2025 and as a percentage of Net sales, increased by 1.4%. The increase in Selling, general and administrative expenses was due to realignment expenses of $10.0 million, transaction costs of $17.3 million and operating expenses for Orenco.

Loss (gain) on disposal of assets and costs from exit and disposal activities - The gain on disposal in fiscal 2026 was due to the sale of properties held-for-sale partially offset by exit and disposal activities. See “Note 2. Restructuring and (Loss) Gain on Disposal of Assets and Costs from Exit and Disposal Activities” for additional information.

Income tax expense - The following table presents the effective tax rates for the nine months ended December 31, 2025 and 2024.

The change in the effective tax rate for the nine months ended December 31, 2025 was primarily driven by the decrease of the discrete income tax benefit related to the stock-based compensation windfall. See “Note 11. Income Taxes” for additional information.

Adjusted EBITDA and Adjusted EBITDA Margin - Adjusted EBITDA and Adjusted EBITDA Margin, which are non-GAAP financial measures, have been presented in this Form 10-Q as supplemental measures of financial performance that are not required by, or presented in accordance with GAAP and should not be considered as alternatives to net income as measures of financial performance or cash flows from operations or any other performance measure derived in accordance with GAAP. We calculate Adjusted EBITDA as net income before interest, income taxes, depreciation and amortization, stock-based compensation expense, non-cash charges and certain other expenses. We calculate Adjusted EBITDA Margin as Adjusted EBITDA divided by Net sales.

Adjusted EBITDA and Adjusted EBITDA Margin are included in this Form 10-Q because they are key metrics used by management and our board of directors to assess our consolidated financial performance. These non-GAAP financial measures are frequently used by analysts, investors and other interested parties to evaluate companies in our industry. In addition to covenant compliance and executive performance evaluations, we use these non-GAAP financial measures to supplement GAAP measures of performance to evaluate the effectiveness of our consolidated business strategies, to make budgeting decisions and to compare our performance against that of other peer companies using similar measures. We use Adjusted EBITDA Margin to evaluate our ability to generate profitable sales.

Adjusted EBITDA and Adjusted EBITDA Margin contain certain other limitations, including the failure to reflect our cash expenditures, cash requirements for working capital needs, cash expenditures to replace assets being depreciated and amortized and interest expense, or the cash requirements necessary to service interest on principal payments on our indebtedness. In evaluating Adjusted EBITDA and Adjusted EBITDA Margin, you should be aware that in the future we will incur expenses that are the same as or similar to some of the adjustments in this presentation, such as stock-based compensation expense, derivative fair value adjustments, and foreign currency transaction losses. Management compensates for these limitations by relying on our GAAP results and using non-GAAP measures on a supplemental basis.

The following table presents a reconciliation of Adjusted EBITDA to Net income, the most comparable GAAP measure, for each of the periods presented.

(In thousands)

(a) Includes costs associated with closure of one recycling facility, one offsite storage location and one distribution yard, as well as professional fees incurred in connection with supporting enterprise-wide restructuring and realignment initiatives. Excludes gain on sale of properties previously held-for-sale and equipment. See “Note 2. Restructuring and (Loss) Gain on Disposal of Assets and Costs from Exit and Disposal Activities” for additional information.

(b) Represents expenses recorded related to legal, accounting and other professional fees incurred in connection with business or asset acquisitions and dispositions.

(c) Includes derivative fair value adjustments, foreign currency transaction (gains) losses, legal settlements, inventory step-up costs, and the proportionate share of interest, income taxes, depreciation and amortization related to the South American Joint Venture, which is accounted for under the equity method of accounting and executive retirement expense.

Liquidity and Capital Resources

Historically, we have funded our operations through internally generated cash flow supplemented by debt financings, equity issuance and finance and operating leases. These sources have been sufficient historically to fund our primary liquidity requirements, including working capital, capital expenditures, debt service and dividend payments for our common stock. From time to time, we may explore additional financing methods and other means to raise capital. There can be no assurance that any additional financing will be available to us on acceptable terms or at all.

Free Cash Flow - Free cash flow is a non-GAAP financial measure that comprises cash flow from operations less capital expenditures and is used by management and our Board of Directors to assess our ability to generate cash. Accordingly, free cash flow has been presented as a supplemental measure of liquidity that is not required by, or presented in accordance with GAAP, because management believes that free cash flow provides useful information to investors and others in understanding and evaluating our ability to generate cash flow from operations after capital expenditures. Free cash flow is not a GAAP measure of our liquidity and should not be considered as an alternative to cash flow from operating activities as a measure of liquidity or any other liquidity measure derived in accordance with GAAP. Our measure of free cash flow is not necessarily comparable to other similarly titled captions of other companies due to different methods of calculation.

The following table presents a reconciliation of free cash flow to cash provided by operating activities, the most comparable GAAP measure, for each of the periods presented:

(Amounts in thousands)

The following table presents key liquidity metrics utilized by management including the leverage ratio which is calculated as net debt divided by the trailing twelve months Adjusted EBITDA:

(Amounts in thousands)

The following table summarizes our available liquidity for the period presented:

(Amounts in thousands)

In addition to the available liquidity above, we have the ability to borrow up to $1.3 billion under our Senior Secured Credit Facility, subject to leverage ratio restrictions.

As of December 31, 2025, we had $41.1 million in cash that was held by our foreign subsidiaries, including $26.1 million held by our Canadian subsidiaries. We continue to evaluate our strategy regarding foreign cash, but our earnings in foreign subsidiaries still remain indefinitely reinvested, except for Canada. We plan to repatriate earnings from Canada and believe that there will be no additional tax costs associated with the repatriation of such earnings other than any potential non-U.S. withholding taxes.

Working Capital and Cash Flows

As of December 31, 2025, we had $1,598.1 million in liquidity, including $1,008.2 million of cash and $589.9 million in borrowings available under our Revolving Credit Agreement, net of outstanding letters of credit. We believe that our cash on hand, together with the availability of borrowings under our Credit Agreement and other financing arrangements and cash generated from operations, will be sufficient to meet our working capital requirements, anticipated capital expenditures, and scheduled principal and interest payments on our indebtedness for at least the next twelve months.

As disclosed in “Note 15. Subsequent Events”, we primarily funded our acquisition of NDS in the fourth fiscal quarter of 2026 with cash on hand and the remainder with availability under our Revolving Credit Facility.

Working Capital - Working capital increased to $1,291.7 million as of December 31, 2025, from $926.4 million as of March 31, 2025. The increase in working capital is primarily due to increased cash on hand offset by changes in inventory and accounts receivable due to seasonality.

(Amounts in thousands)

Operating Cash Flows - Cash flows from operating activities increased $238.9 million during the nine months ended December 31, 2025 primarily driven by changes in working capital.

Investing Cash Flows - Cash flows used in investing activities during the nine months ended December 31, 2025 decreased by $216.3 million compared to the same period in fiscal 2025. The decrease in cash used in investing activities was due to the proceeds from the sale of properties held-for-sale and the acquisition of Orenco in the prior year offset by the acquisition of River Valley Pipe.

Capital expenditures totaled $196.7 million and $166.4 million for the nine months ended December 31, 2025 and 2024, respectively. Our capital expenditures for the nine months ended December 31, 2025 were used primarily to support facility expansions, equipment replacements and technology improvement initiatives. We also acquired $36.6 million of property, plant and equipment under finance leases, which includes material handling transportation equipment to update our fleet of forklifts, trucks and trailers.

We currently anticipate that we will make capital expenditures of approximately $250 million in fiscal year 2026, including approximately $95 million of open orders as of December 31, 2025. Such capital expenditures are expected to be financed using funds generated by operations.

Financing Cash Flows - During the nine months ended December 31, 2025, cash used in financing activities included $42.1 million of dividend payments, $31.2 million of payments of finance lease obligations and $7.0 million for shares withheld for tax purposes. Cash provided by financing activities includes proceeds from the commercial loan agreement of $27.2 million.

During the nine months ended December 31, 2024, cash used in financing activities included the repurchase of common stock of $69.9 million, $37.3 million of dividend payments, $17.8 million of payments of finance lease obligations and $10.6 million for shares withheld for tax purposes.

Financing Transactions - There have been no changes in our debt disclosures from those disclosed in “Liquidity and Capital Resources” in our Fiscal 2025 Form 10-K. We are in compliance with our debt covenants as of December 31, 2025.

As of December 31, 2025, we have $408.0 million of debt under our Term Loan facility maturing within twelve months on its scheduled maturity. We have classified this debt as long-term debt as we have the intent and the ability to refinance these borrowings on a long-term basis as supported by the available capacity under the Revolving Credit Facility.

Off-Balance Sheet Arrangements

Excluding the guarantees of 50% of certain debt of our unconsolidated South American Joint Venture as further discussed in “Note 8. Related Party Transactions” to the Condensed Consolidated Financial Statements, we do not have any other off-balance sheet arrangements. As of December 31, 2025, our South American Joint Venture had no outstanding debt subject to our guarantees. We do not believe that this guarantee will have a current or future effect on our financial condition, results of operations, liquidity or capital resources.

Critical Accounting Policies and Estimates

There have been no changes in critical accounting policies from those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Fiscal 2025 Form 10-K, except as disclosed in “Note 1. Background and Summary of Significant Accounting Policies.”

We are subject to various market risks, primarily related to changes in interest rates, credit, raw material supply prices and, to a lesser extent, foreign currency exchange rates. Our financial position, results of operations or cash flows may be negatively impacted in the event of adverse movements in the respective market rates or prices in each of these risk categories. Our exposure in each category is limited to those risks that arise in the normal course of business, as we do not engage in speculative, non-operating transactions. Our exposure to market risk has not materially changed from what we previously disclosed in Part II. Item 7A. “Quantitative and Qualitative Disclosures about Market Risk” of our Fiscal 2025 Form 10-K except as disclosed below.

Interest Rate Risk - We are subject to interest rate risk associated with our bank debt. A 1.0% increase in interest rates on our variable-rate debt would increase our annual forecasted interest expense by approximately $4.0 million based on our borrowings as of December 31, 2025. Assuming the Revolving Credit Facility is fully drawn, each 1.0% increase or decrease in the applicable interest rate would change our interest expense by approximately $10.0 million, for the twelve months ended December 31, 2025.

Evaluation of Disclosure Controls and Procedures - The Company’s CEO and Chief Financial Officer (“CFO”) are responsible for evaluating the effectiveness of our disclosure controls and procedures as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”), rules 13a-15(e) and 15d-15(e). The Company’s disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in the Company’s reports under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including the Company’s CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Based on the evaluation of our disclosure controls and procedures, our CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this report.

Changes in Internal Control over Financial Reporting - There were no changes in the Company’s internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act that occurred during the three months ended December 31, 2025 that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

The following risk factors are related to the acquisition of NDS. Additional important risk factors that could affect our operations and financial performance, or that could cause results or events to differ from current expectations, are described in “Part I, Item 1A — Risk Factors” of our Fiscal 2025 Form 10-K. These factors are further supplemented by those discussed in “Part II, Item 7A — Quantitative and Qualitative Disclosures about Market Risk” of our Fiscal 2025 Form 10-K and in “Part I, Item 3 — Quantitative and Qualitative Disclosures about Market Risk” and “Part II, Item 1 — Legal Proceedings” of this Quarterly Report on Form 10-Q.

Risks Relating to Our Acquisition of NDS

We may be unable to successfully integrate our and NDS’ businesses in order to realize the anticipated benefits of the acquisition or do so within the intended timeframe.

We will be required to devote significant management attention and resources to integrating the business practices and operations of NDS with our business. We may be unable to realize the planned synergies from the acquisition or other benefits in the timeframe that we expect or at all. We continue to assess synergies that we may realize as a combined company, the realization of which will depend on a number of factors.

The success of the acquisition, including anticipated synergies, benefits and cost savings, will depend, in part, on our ability to successfully combine and integrate our current operations with NDS’ business. If we experience difficulties with the integration process or other unforeseen costs, the anticipated benefits and cost savings of the acquisition may not be realized fully or at all, or may take longer to realize than expected. The integration planning and implementation process will result in significant costs and divert management attention and resources. These integration matters could have an adverse effect on our combined company for an undetermined period after completion of the acquisition. In addition, the actual cost savings of the acquisition could be less than anticipated, or otherwise offset by other factors.

Additional difficulties we may encounter as part of the integration process include the following:

• the costs of integration and compliance and the possibility that the full benefits anticipated to result from our acquisition of NDS will not be realized;
• any delay in the integration of management teams, strategies, operations, products and services;
• diversion of the attention of each company’s management as a result of our acquisition of NDS;
• differences in business backgrounds, corporate cultures and management philosophies that may delay successful integration;
• operating in foreign jurisdictions where we have no prior operating experience, including compliance, workforce and operational challenges;
• the ability to retain key employees;
• the ability to create and enforce uniform standards, controls, procedures, policies and information systems;
• the challenge of integrating complex systems, technology, networks and other assets of NDS into those of ours in a seamless manner that minimizes any adverse impact on customers, suppliers, employees and other constituencies;
• potential unknown liabilities and unforeseen increased expenses or delays associated with the acquisition, including costs to integrate NDS beyond current estimates and operating in; or
• the disruption of, or the loss of momentum in, each company’s ongoing businesses or inconsistencies in standards, controls, procedures and policies.

Any of these factors could adversely affect each company’s ability to maintain relationships with customers, suppliers, employees and other constituencies or our ability to achieve the anticipated benefits of the acquisition or could reduce each company’s earnings or otherwise adversely affect our business and financial results after the acquisition. These risks are not limited to our acquisition of NDS and could also apply to our future acquisitions.

Uncertainties associated with our acquisition of NDS may cause a loss of management personnel and other key employees, which could adversely affect our future business, operations and financial results.

The acquisition of NDS could disrupt our and NDS’ businesses. We are dependent on the experience and industry knowledge of senior management and other key employees to execute our business plans, which could be disrupted by the unanticipated departure of any key member of our management team or employee base, as well as management or key employees of NDS. Our and NDS’ current and prospective employees may experience uncertainty about their roles within our company, which may have an adverse effect on the ability of each of us to attract or retain key management and other key personnel.

Accordingly, no assurance can be given that we will be able to attract or retain our and NDS’ key management personnel and other key employees to the same extent that our companies have previously been able to attract or retain such employees. In addition, because of the specialized and technical nature of our business, our future performance is dependent on the continued service of, and on our ability to attract and retain, qualified management, engineering, technical, marketing and support personnel. Competition for such personnel is intense, and we may be unable to continue to attract or retain such personnel.

Our results after our acquisition of NDS may suffer if we do not effectively manage our expanded operations following the acquisition or the business of NDS may underperform relative to our expectations.

Following our acquisition of NDS, the size and complexity of our business will increase significantly beyond the current size of either our or NDS’ existing business. Our future success depends, in part, upon our ability to manage this expanded business, which will pose substantial challenges for management, including challenges related to the management and monitoring of new operations and new types of manufacturing processes and products and associated increased costs and complexity. There can be no assurances that we will be successful after completion of the acquisition or that we will realize the expected benefits currently anticipated from our acquisition of NDS.

Additionally, we may not be able to maintain the levels of revenue, earnings or operating efficiency that we and NDS have achieved or might achieve separately. The business and financial performance of NDS is subject to certain risks and uncertainties, including the risk of the loss of, or changes to, its relationships with its customers. We may be unable to achieve the same growth, revenues and profitability that NDS has achieved in the past.