Applied Aerospace & Defense, Inc. — financial distress indicators
Financial-health summary
Applied Aerospace & Defense, Inc.'s reported numbers place it in the 'Weak' financial-health band (distress score 66/100). The main indicators are operating profit does not cover interest, cash runway under 12 months and very high leverage. Independently, the Ohlson accounting model puts its 1-year failure probability at 87% and the market-implied (Merton) default probability is 12.5%. In its favour: strong current ratio (2.09).
Stress by dimension
Share price — last 12 months
Indicators behind the score
Each red flag shows the evidence from the company’s own filings and the financial or legal principle behind it. Points add to the 0–100 score.
Interest coverage (EBIT / interest) is 0.55×.
When EBIT < interest, debt service is funded from cash reserves or new borrowing — the classic precursor to payment default and covenant breach.
At the current free-cash-flow burn, cash covers ~5 months.
Going-concern standard: management must assess ability to continue for 12 months (ASC 205-40). Runway below that horizon forces dilution, asset sales or default.
Total debt is 10.5× EBITDA.
Debt above ~6× EBITDA is deep sub-investment-grade territory; refinancing becomes difficult when rates or earnings move against the company.
O-score 1.88 → model probability 87%.
Ohlson (1980) logit model of 1-year corporate failure; O > 0 (p > 50%) is the original failure cut-off.
Recurring net losses.
Repeated losses are a core input in both Ohlson and Altman failure models.
Merton distance-to-default 1.15 σ → PD 12.5%.
Investment-grade issuers typically have 1-year PD well below 1%.
Revenue vs net income
Cash generation
Debt vs cash vs equity
✅ Mitigating factors
- Strong current ratio (2.09).
- Revenue still growing (+51% YoY).
📰 Recent news scan
- Can Applied Aerospace (AADX) Turn Record Backlog Into Real Profit?Yahoo Finance · 2026-09-23
- Merchant Supplier, Massive Upside: Guggenheim Picks Applied Aerospace & Defense (AADX) as its Top Defense BetYahoo Finance · 2026-09-18
- This Stock Can Rise 150%, Plus 12 More Aerospace BuysYahoo Finance · 2026-09-15
- Applied Aerospace & Defense (AADX) is Positioned for Accelerated GrowthYahoo Finance · 2026-09-10
- Applied Aerospace & Defense Appoints Elizabeth Robertson as Executive Vice President of Business DevelopmentYahoo Finance · 2026-09-01
- Can Applied Aerospace & Defense (AADX) Convert Its Backlog Into Durable Earnings Growth?Yahoo Finance · 2026-08-19
⚖️ U.S. legal pathway — Title 11, U.S. Code
Which chapter would apply?
- Chapter 11 — reorganisation. Management usually stays in control as debtor-in-possession; the automatic stay (§362) halts collection; a plan must meet the best-interests test (§1129(a)(7)) and the absolute priority rule (§1129(b)) — creditors are paid before shareholders, who are frequently wiped out.
- Chapter 7 — liquidation. A trustee sells assets and distributes proceeds by statutory priority (§§507, 726).
- Subchapter V (“Chapter 5”) is a fast track for small-business debtors under a statutory debt cap, but SEC-reporting companies are excluded (§101(51D)) — so it rarely applies to listed companies.
What typically triggers a filing
- Payment default or covenant breach lenders will not waive; a debt maturity that cannot be refinanced.
- Auditor going-concern doubt (ASC 205-40 / PCAOB AS 2415) — often itself a default trigger in loan agreements.
- Creditors can force a case with an involuntary petition (§303) if debts are not paid as they come due.
- Delisting after sustained sub-$1 prices or equity deficits cuts off equity funding.
Transactions shortly before filing can be clawed back (preferences — 90 days, §547; fraudulent transfers — 2 years, §548).
Frequently asked questions
What do Applied Aerospace & Defense, Inc.'s financial-health indicators show?
As of 2026-10-08, Applied Aerospace & Defense, Inc.'s public financial data places it in the 'Weak' band with a distress score of 66/100, driven by operating profit does not cover interest, cash runway under 12 months and very high leverage. This is a statistical screen of reported numbers — it does not mean the company is insolvent, has defaulted or will enter insolvency proceedings.
What is Applied Aerospace & Defense, Inc.'s financial distress score?
66/100 ('Weak'). Ohlson O-score 1.88 (model 1-year failure probability 87%). Merton distance-to-default 1.15 σ (model default probability 12.5%).
What works in Applied Aerospace & Defense, Inc.'s favour?
Strong current ratio (2.09). Revenue still growing (+51% YoY).
How are shareholders treated if a company enters insolvency?
In a Chapter 11 reorganisation the absolute priority rule pays secured lenders, then unsecured creditors, before shareholders — so existing shares are usually cancelled or heavily diluted. In Chapter 7 the company is liquidated and shareholders rarely recover anything.
Other Industrials & Capital Goods companies with distress indicators
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- Nexus Advanced Technologies Inc. (NXAT)Very weak 100/100
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Methodology
Score = capped sum of rule-based red flags across seven dimensions (liquidity, solvency, profitability, cash flow, sales trend, market signal, news). Ohlson O-score (1980) gives an accounting-based 1-year failure probability; Merton distance-to-default (Bharath & Shumway 2008) gives a market-implied probability. Financial institutions use a capital-based rule set. Recalculated every trading day from the latest filings, prices and news.