On October 3, 2025, Ducommun Incorporated (the "Company") and certain of its wholly-owned subsidiaries entered into a binding settlement term sheet (the "Term Sheet") to resolve the previously disclosed action captioned Williams International Co., LLC v. Ducommun Incorporated, et al. (No. 2:23-CV-9403-MEMF-AJR) filed in the U.S. District Court for the Central District of California (the "Litigation") following a mediation held on that date. For additional information about the Litigation, see "Guaymas Performance Center Fire" in Note 10, Commitments and Contingencies, to the unaudited Condensed Consolidated Financial Statements included in the Company's Quarterly Report on Form 10-Q for the quarterly period ended June 28, 2025, filed with the Securities and Exchange Commission ("SEC") on August 7, 2025 (the "Q2 2025 Form 10-Q").

The Term Sheet provides for, among other things, the final dismissal of the Litigation with prejudice and a release of claims against the Company in exchange for the Company issuing a payment of $150 million, $56 million of which is expected to be funded by the Company's insurance carriers. The Term Sheet also includes a mutual release of all of the plaintiff's past, present and future claims arising from the June 2020 fire (the "Fire") at the Company's Guaymas, Mexico performance center and an indemnification in favor of the Company from any future subrogation claims that may be brought by the plaintiff's insurers. The incident, claim and payment are all one-time events.

Excluded from the scope of the Term Sheet are (1) releases from certain of the plaintiff's insurers for amounts previously paid to the plaintiff for damages incurred from the Fire, in relation to which we believe claims against the Company are likely time barred, and another insurer who intervened in the Litigation asserting a subrogation claim which we expect to settle in the amount of $1.35 million, and (2) a subrogation claim asserted by the insurer of the entity that provides the labor and facilities for our Guaymas performance center through an arbitration proceeding currently pending in Arizona for amounts it had previously paid to the plaintiff for damages from the Fire and for which we believe to have favorable arguments to successfully defend against the claim. The foregoing claims were previously disclosed in the Q2 2025 Form 10-Q.

Final dismissal of the Litigation is subject to the finalization of a definitive settlement agreement not inconsistent with the Term Sheet and the plaintiff dismissing all claims alleged in the Litigation with prejudice, with each of the parties bearing their own fees and expenses. In settling the case, the Company is not admitting any liability, and entry into the Term Sheet does not constitute an admission of liability or fault or an admission regarding the accuracy of any allegation made by the plaintiffs or plaintiffs' counsel.

The Company expects to record the one-time net settlement amount of $94 million (net of insurance recovery) as an expense for the quarter ending September 27, 2025 and to pay such settlement from its existing revolving credit facility within forty-five (45) days of the finalization of the definitive settlement agreement. In addition, the Company expects to record legal expenses of approximately $4 million and $3 million related to this matter in Q3 2025 and Q4 2025, respectively. Separately, the Company expects to incur additional expenses of approximately $3 million in future periods related to the subrogation claim asserted by the insurer of the entity that provides labor and facilities for our Guaymas performance center.