NOTE D — INVENTORY

Following are the major classes of inventory as of the below dates (in thousands):

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The Company recorded inventory scrap loss reserves of $0.8 million and $1.6 million for the three and six months ended June 30, 2025, respectively. The Company recorded inventory scrap loss reserves of $0.4 million and $0.9 million for the three and six months ended June 30, 2024, respectively. Additions to inventory reserves are included in cost of products in the accompanying condensed consolidated statements of operations.

Our allocation of inventory between short term and long term reflects the inventory’s operating cycle, which is longer than one year due to teardown and repair lead times. Inventory expected to be monetized within 18 months, along with work-in-process and inventory used in MRO activities, is reported under current assets.

In April 2024, one of the Company’s leased secondary parts warehouses in Roswell, New Mexico, was destroyed by a fire. Inside the warehouse were various aircraft parts typically sold by the Company as USM. The Company carries

insurance covering these parts, with a limit of $100 million and $10,000 deductible. The Company filed a claim for the replacement value of the inventory that was destroyed or rendered not sellable by the fire in the amount of $67.6 million. The cost basis of the destroyed inventory was $6.0 million. As of June 30, 2025, the Company has collected approximately $34.6 million from insurance companies in connection with this claim, of which $3.7 million was collected during the six months ended June 30, 2025. The recognition of any gain on insurance proceeds exceeding the related loss has been deferred until the claim is fully settled with the insurers. The deferred gain in the amount of $28.6 million as of June 30, 2025 is presented under deferred insurance proceeds in the accompanying condensed consolidated balance sheets.