Park Ohio Holdings Corp: Form 10-Q for the period ended Jun 30, 2025

Our condensed consolidated financial statements include the accounts of Park-Ohio Holdings Corp. and its subsidiaries (collectively, “we,” “our,” or the “Company”). All significant intercompany transactions have been eliminated in consolidation.

EXECUTIVE OVERVIEW

We are a diversified international company providing world-class customers with a supply chain management outsourcing service, capital equipment used on their production lines, and manufactured components used to assemble their products. We operate through three reportable segments: Supply Technologies, Assembly Components and Engineered Products.

Supply Technologies provides our customers with Total Supply Management™, a proactive solutions approach that manages the efficiencies of every aspect of supplying production parts and materials to our customers’ manufacturing floor, from strategic planning to program implementation. Total Supply Management™ includes such services as engineering and design support, part usage and cost analysis, supplier selection, quality assurance, bar coding, product packaging and tracking, just-in-time and point-of-use delivery, electronic billing services and ongoing technical support. Our Supply Technologies business services customers in the following principal industries: heavy-duty truck; power sports and recreational equipment; aerospace and defense; semiconductor equipment; electrical distribution and controls; consumer electronics; bus and coaches; automotive; agricultural and industrial equipment; HVAC; lawn and garden; plumbing; and medical devices.

Assembly Components manufactures products oriented towards fuel efficiency and reduced emission standards. Assembly Components designs, develops and manufactures aluminum products and highly efficient, high pressure direct fuel injection fuel rails and pipes; fuel filler pipes that route fuel from the gas cap to the gas tank; flexible multi-layer plastic and rubber assemblies used to transport fuel from the vehicle's gas tank and then, at extreme high pressure, to the engine's fuel injector nozzles. Our product offerings include gasoline direct injection systems and fuel filler assemblies, and industrial hose and injected molded rubber and plastic components. Our products are primarily used in the following industries: including automotive and light-vehicle; agricultural equipment; construction equipment; heavy-duty truck; and bus.

Engineered Products operates a diverse group of niche manufacturing businesses that design and manufacture a broad range of highly-engineered products, including induction heating and melting systems, pipe threading systems and forged and machined products. Engineered Products also produces and provides services and spare parts for the equipment it manufactures. The principal customers of Engineered Products are OEMs, sub-assemblers and end users in the following industries: ferrous and non-ferrous metals; coatings; forging; foundry; heavy-duty truck; construction equipment; automotive; oil and gas; rail; aerospace and defense; and power generation.

Our business is global in scope, and government trade actions may materially and adversely impact our business, financial condition and results of operations. The U.S. government has recently taken, and may continue to take, trade actions that impact or could impact our operations, including, but not limited to, imposing tariffs on certain goods and raw materials imported into the United States. For example, during April 2025, the U.S. government announced baseline tariffs on products from all countries and additional individualized reciprocal tariffs on the countries with which the United States has the largest trade deficits, including China. In addition, several governments, including the European Union, China and India, have imposed tariffs, including reciprocal tariffs, on certain goods imported from the United States. Given the current macroeconomic environment and uncertainty around tariffs, we continue to assess the impact of added costs for certain imported raw materials and other components and demand softness in certain of our key end markets. We are working with our customers and suppliers and expect to mitigate the impact of added costs caused by tariffs. Conversely, we believe many of our businesses are well positioned to benefit in the long term from the current environment due to higher production activity and localized sourcing back into the United States.

Sales and operating income for these three segments are provided in Note 4 to the condensed consolidated financial statements, included elsewhere herein.

Subsequent Events

On July 31, 2025, Park-Ohio Industries, Inc. (“Park-Ohio”), a subsidiary of Park-Ohio Holdings Corp., completed its offering of $350.0 million aggregate principal amount of senior secured notes due 2030 (the "New Notes") in a private offering. The New Notes were priced at 99.50% of par and bear an interest rate of 8.50% per annum. The New Notes are senior secured obligations of Park-Ohio and are guaranteed (with certain exceptions) by Park-Ohio's domestic subsidiaries that guarantee the debt under Park-Ohio's Seventh Amended and Restated Credit Agreement (the "Credit Agreement") on a senior secured basis. Park-Ohio intends to use the net proceeds from the offering of the New Notes, along with cash on hand, to redeem all $350.0 million aggregate principal amount of its outstanding 6.625% Senior Notes due 2027 (the “Notes”) and pay related fees and expenses.

In July 2025, Park-Ohio entered into an amendment to the Credit Agreement in order to, among other things, extend the maturity date to the fifth anniversary from the closing of the amendment.

RESULTS OF CONTINUING OPERATIONS

Three Months Ended June 30, 2025 Compared with Three Months Ended June 30, 2024

(Dollars in millions, except per share data)

*Calculation not meaningful

Net Sales

Net sales decreased 7.5% to $400.1 million in the second quarter of 2025 compared to $432.6 million in the same period in 2024. This decrease was primarily due to lower demand in all three of our business segments.

The factors explaining the changes in segment net sales for the three months ended June 30, 2025 compared to the corresponding 2024 period are contained within the “Segment Results” section below.

Cost of Sales and Gross Margin

Cost of sales decreased to $331.9 million in the second quarter of 2025 compared to $359.4 million in the same period in 2024. The decrease in cost of sales was primarily due to the decrease in net sales for the 2025 period compared to the corresponding period in 2024, plus the impact of ongoing profit improvement initiatives. Gross margin improved to 17.0% in the 2025 period compared to 16.9% in the corresponding 2024 period, as cost-containment measures helped offset the lower sales levels.

SG&A Expenses

SG&A expenses were $46.8 million in the second quarter of 2025 compared to $47.4 million in the comparable period in 2024, a decrease of 1.3%. As a percentage of net sales, SG&A expenses were 11.7% in the second quarter of 2025 compared to 11.0% in corresponding 2024 period. These increases were driven by ongoing inflation, higher employee costs and fixed SG&A costs over lower sales levels.

Restructuring and Other Special Charges

During the second quarter of 2024, the Company recorded charges of $1.3 million in connection with restructuring and other special charges, spread across our business segments, which included $0.4 million in our Supply Technologies segment, $0.5 million in our Assembly Components segment and $0.4 million in our Engineered Products segment.

During the second quarter of 2024, the Company recorded charges of $1.2 million in connection with restructuring and other special charges, primarily in our Engineered Products segment.

Other Components of Pension and Other Postretirement Benefits (“OPEB”) Income, Net

Other components of pension and OPEB income, net was $1.8 million in the quarter ended June 30, 2025 compared to $1.4 million in the corresponding quarter in 2024. This increase was due to lower net actuarial losses impacting 2025 compared to 2024.

Interest Expense, Net

Interest expense, net was $11.2 million in the second quarter of 2025 compared to $12.0 million in the 2024 second quarter. The decrease was due primarily to lower interest rates and lower average outstanding debt balances in the 2025 second quarter compared to the same quarter a year ago.

Income Tax Expense

The effective income tax rates of 17% and 19% for the three months ended June 30, 2025 and 2024, respectively, differed from the U.S. federal statutory rate of 21% (the “U.S. statutory rate”) due primarily to federal research and development tax credit benefit (“R&D benefit”), partially offset by income earned at certain of our foreign entities that are taxed at higher rates than the U.S. statutory rate.

RESULTS OF CONTINUING OPERATIONS

Six Months Ended June 30, 2025 Compared with Six Months Ended June 30, 2024

(Dollars in millions, except per share data)

*Calculation not meaningful

Net Sales

Net sales decreased 5.3% to $805.5 million in the first six months of 2025 compared to $850.2 million in the same period in 2024. This decrease was primarily due to lower demand in our Supply Technologies and Assembly Components segments.

The factors explaining the changes in segment net sales for the six months ended June 30, 2025 compared to the corresponding 2024 period are contained in the “Segment Results” section below.

Cost of Sales and Gross Margin

Cost of sales decreased to $669.2 million in the first six months of 2025 compared to $705.6 million in the same period in 2024, driven by the decrease in net sales described above. Gross margin was 16.9% in the 2025 period compared to 17.0% in the corresponding 2024 period. The year-over-year gross margin decrease was driven by the decrease in net sales described above, partially offset by cost-containment measures due to lower sales levels.

SG&A Expenses

SG&A expenses were $95.0 million in the first six months of 2025, compared to $94.5 million in the same period in 2024, an increase of 0.5%. As a percentage of net sales, SG&A expenses were 11.8% in the first six months of 2025 compared to 11.1% in the comparable period in 2024. These increases were driven by ongoing inflation, higher employee costs and fixed SG&A costs over lower sales levels.

Restructuring and Other Special Charges

During the first six months of 2025, the Company recorded $2.3 million in connection restructuring and other special charges which included $0.4 million in our Supply Technologies segment, $0.7 million in our Assembly Components segment and $1.2 million in our Engineered Products segment.

During 2024, the Company recorded $1.2 million in connection restructuring and other special charges, primarily in our Engineered Products segment, as well as acquisition-related charges of $0.3 million in connection with the acquisition of EMA Indutec GmbH (“EMA”)

Other Components of Pension and OPEB Income, Net

Other components of pension and OPEB income, net was $3.6 million in the first six months of 2025 compared to $2.7 million in the corresponding period in 2024. This increase was due to lower net actuarial losses impacting 2025 compared to 2024.

Interest Expense, Net

Interest expense, net was $22.2 million in the first six months of 2025 compared to $23.9 million in the 2024 period. The decrease was due primarily to lower interest rates and lower average outstanding debt balances in the 2025 period compared to the same period a year ago.

Income Tax Expense

The effective income tax rates of 18% and 22% for the six months ended June 30, 2025 and 2024, respectively, differed from the U.S. statutory rate of due primarily to the R&D benefit and income earned at certain of our foreign entities that are taxed at higher rates than the U.S. statutory rate.

SEGMENT RESULTS

For purposes of measuring business segment performance, the chief operating decision maker utilizes segment operating income, which is defined as revenues less expenses identifiable to the product lines within each segment. The Company does not allocate items that are non-operating; unusual in nature; or corporate costs, which include but are not limited to executive compensation and corporate office costs. Segment operating income reconciles to consolidated income before income taxes by adjusting for corporate costs; other components of pension and other postretirement benefits income, net; and interest expense, net.

Supply Technologies Segment

(Dollars in millions)

Three months ended June 30:

Net sales decreased 7.7% in the three months ended June 30, 2025 compared to the 2024 period due primarily to lower customer demand in certain end markets in our supply chain business, including power sports, heavy duty truck and bus, industrial equipment and aerospace and defense, partially offset by increases in the electrical and semiconductor end markets. Sales in our fastener manufacturing business were down 10% year-over-year, driven by overall market softness.

Segment operating income was $16.3 million in the 2025 period compared to $19.0 million in the 2024 period. Operating income margin was 8.7% in the 2025 quarter compared to 9.4% in the 2024 period. In the 2025 period, profit-enhancement actions, including alignment of variable costs to lower demand levels, partially offset the impact of lower sales levels on profitability. In the 2025 and 2024 periods, charges related to restructuring and other special charges were $0.4 million and $0.2 million, respectively.

Six months ended June 30:

Net sales decreased 6.2% in the six months ended June 30, 2025 compared to the 2024 period due primarily to lower customer demand in certain end markets in our supply chain business, including power sports, heavy duty truck and bus, industrial and agricultural equipment and aerospace and defense, partially offset by increases in the electrical and semiconductor end markets. Sales in our fastener manufacturing business were down 10% year-over-year, driven by overall market softness.

Segment operating income was $34.1 million in the 2025 period compared to $38.5 million in the 2024 period. Operating income margin was 9.1% in the six month ended June 30, 2025 compared to 9.6% in the 2024 period. In the 2025 period, profit-enhancement actions, including alignment of variable costs to lower demand levels, partially offset the impact of lower sales levels on profitability. In the 2025 and 2024 periods, charges related to restructuring and other special charges were $0.4 million and $0.2 million, respectively.

Assembly Components Segment

(Dollars in millions)

Three months ended June 30:

Net sales decreased 7.8% in the three months ended June 30, 2025 compared to the 2024 period. Sales were lower quarter-over-quarter due primarily to lower unit volumes in our fuel rail and extruded rubber products, customer delays on new business launches, and favorable pricing that ended in 2024 on certain legacy programs

Segment operating income in the 2025 period decreased by $1.3 million, and segment operating income margin decreased by 80 basis points compared to the corresponding period of 2024. The decreases in operating income and margin in the second quarter of 2025 compared to the 2024 period were due to the lower unit volumes. The 2025 period also included $0.5 million of charges related to restructuring and other special charges.

Six months ended June 30:

Net sales were $192.0 million, or 8.7%, lower in the six months ended June 30, 2025 compared to the 2024 period. The decrease was due primarily to lower unit volumes in our fuel rail and extruded rubber products, customer delays on new business launches, and favorable pricing that ended in 2024 on certain legacy programs

Segment operating income decreased to $10.9 million in the six months ended June 30, 2025 compared to $15.5 million in the 2024 period. The decrease was due to the lower unit volumes. The 2025 period also included $0.7 million of charges related to restructuring and other special charges.

Engineered Products Segment

(Dollars in millions)

Three months ended June 30:

Net sales were $117.9 million in the 2025 second quarter, a decrease of 7.1%, compared to $126.9 million in last year's second quarter. The year-over-year decrease was driven by lower sales in our capital equipment business in North America, partially offset by sales growth in Europe and Asia. In our forged and machined products business, second quarter 2025 sales were down 22% compared to the same quarter a year ago, driven by order delays and closure of a small manufacturing operation in 2024.

Segment operating income in the 2025 period decreased by $0.3 million compared to the corresponding 2024 period. The decrease in the 2025 period was driven by the lower sales, partially offset by operational efficiencies, alignment of variable costs to lower demand levels and other profit-enhancement initiatives. The 2025 and 2024 periods also included $0.4 million and $1.0 million, respectively, of charges related to restructuring and other special charges.

Six months ended June 30:

Net sales were $238.6 million in the six months ended June 30, 2025 compared to $240.4 million in comparable 2024 period. The year-over-year decrease was driven by lower sales in our forged and machined products business, driven by order delays and closure of a small manufacturing operation in 2024, offset by a 5% increase in sales at our industrial equipment business.

Segment operating income in the 2025 and 2024 periods was $9.8 million. The 2025 and 2024 periods also included $1.2 million and $1.3 million, respectively, of charges related to restructuring and other special charges.

Liquidity and Capital Resources

The following table summarizes the major components of cash flow:

(In millions)

Operating Activities

In the six months ended June 30, 2025, we utilized cash of $23.7 million compared to $0.4 million in the same period of 2024. Cash flow from operating activities was lower in 2025 due to higher working capital needs, primarily higher accounts receivable and lower accrued expenses.

Investing Activities

Capital expenditures were $16.9 million in the six months ended June 30, 2025 and were primarily to provide increased capacity for future growth in our Engineered Products and Assembly Components segments, to maintain existing operations and for information system implementations.

Capital expenditures were $13.2 million in the six months ended June 30, 2024 and were primarily to provide increased capacity for future growth in our Engineered Products and Assembly Components segments, to maintain existing operations and for information system implementations. Additionally, during the six months ended June 30, 2024, the Company paid $11.0 million, net of cash acquired for the EMA acquisition.

Financing Activities

During the six months ended June 30, 2025, we had net debt borrowings of $36.7 million to fund capital expenditures and working capital needs. In addition, the Company made cash dividend payments to shareholders totaling $3.6 million.

During the six months ended June 30, 2024, we had net debt borrowings of $41.7 million to fund capital expenditures and the EMA acquisition. In addition, in the six months ended June 30, 2024, the Company made scheduled payments related to prior acquisitions totaling $0.7 million and made cash dividend payments to shareholders totaling $3.3 million.

We do not have off-balance sheet arrangements, financing or other relationships with unconsolidated entities or other persons, other than the letters of credits disclosed in Note 8 to the condensed consolidated financial statements, included elsewhere herein.

Liquidity

Our liquidity needs are primarily for working capital, capital expenditures, dividends and acquisitions. Our primary sources of liquidity have been funds provided by operations, funds available from existing bank credit arrangements and the sale of our debt securities. Our existing financial resources (working capital, available bank borrowing arrangements and our at-the-market program) and anticipated cash flow from operations are expected to be adequate to meet anticipated cash requirements for at least the next twelve months and the foreseeable future thereafter, including but not limited to our ability to maintain current operations and fund capital expenditure requirements, service our debt, pursue acquisitions, pay dividends and repurchase common shares. For more information about our at the market program and other sales of common stock, see Note

13, “Weighted-Average Number of Shares Used in Computing Earnings Per Share,” to the condensed consolidated financial statements, included elsewhere herein.

As of June 30, 2025, we had total liquidity of $189.4 million, which included $45.6 million of cash and cash equivalents and $143.8 million of unused borrowing availability under our credit agreements, which includes $8.5 million of suppressed availability.

The Company had cash and cash equivalents held by foreign subsidiaries of $34.8 million at June 30, 2025 and $43.4 million at December 31, 2024. We do not expect restrictions on repatriation of cash held outside the U.S. to have a material effect on our overall liquidity, financial condition or results of operations for the foreseeable future.

The Company has two components to its assertion regarding reinvestment of foreign earnings outside of the United States. First, for all foreign subsidiaries except RB&W Corporation of Canada (“RB&W”), all earnings are permanently reinvested outside of the United States. Second, for RB&W, dividend distributions may be made, but only to the extent of current earnings in excess of cash required to fund its business operations; all accumulated earnings are permanently reinvested.

Senior Notes

In April 2017, Park-Ohio completed the sale, in a private placement, of $350.0 million aggregate principal amount of the Notes. The net proceeds from the issuance of the Notes were used to repay in full our previously outstanding 8.125% Senior Notes due 2021 and our outstanding term loan, and to repay a portion of the borrowings then outstanding under our revolving credit facility. On July 31, 2025, Park-Ohio completed its offering of $350.0 million aggregate principal amount of the New Notes in a private offering. Park-Ohio intends to use the net proceeds from the offering of the New Notes, along with cash on hand, to redeem all of the outstanding Notes. See the Condensed Consolidation Financial Statements Note 14 for further discussion.

Credit Agreement

In September 2023, Park-Ohio amended its Credit Agreement. The Credit Agreement provides for a revolving credit facility in the amount of $405.0 million, including a $40.0 million Canadian revolving subcommitment and a European revolving subcommitment in the amount of $30.0 million. Pursuant to the Credit Agreement, Park-Ohio has the option to increase the availability under the revolving credit facility by an aggregate incremental amount up to $70.0 million. The Credit Agreement was scheduled to mature on January 14, 2027. In July 2025, Park-Ohio entered into an amendment to the Credit Agreement in order to, among other things, extend the maturity date to the fifth anniversary from the closing of the amendment.

Finance Leases

As of June 30, 2025, the Company had finance leases totaling $15.1 million.

Covenants

The future availability of bank borrowings under the revolving credit facility provided by the Credit Agreement is based on (1) our calculated availability under the Credit Agreement and (2) if such calculated availability decreases below $50.625 million, our ability to meet a debt service ratio covenant. If our calculated availability is less than $50.625 million, our debt service coverage ratio must be greater than 1.0. At June 30, 2025, our calculated availability under the Credit Agreement was $102.7 million; therefore, the debt service ratio covenant did not apply.

Failure to maintain calculated availability of at least $50.625 million and meet the debt service ratio covenant could materially impact the availability and interest rate of future borrowings. Our debt service coverage ratio could be materially impacted by negative economic trends. To make certain permitted payments as defined under the Credit Agreement, including but not limited to acquisitions and dividends, we must meet defined availability thresholds ranging from $37.5 million to $50.625 million, and a defined debt service coverage ratio of 1.15.

As our calculated availability under the Credit Agreement was above $50.625 million, we were also in compliance with the other covenants contained in the revolving credit facility as of June 30, 2025. While we expect to remain in compliance throughout 2025, declines in sales volumes in the future, including due to the current macroeconomic conditions, could adversely impact our ability to remain in compliance with certain of these financial covenants. Additionally, to the extent our customers are adversely affected by declines in the economy in general, they may be unable to pay their accounts payable to us on a timely basis or at all, which could make our accounts receivable ineligible for purposes of the revolving credit facility and could reduce our borrowing base and our ability to borrow under such facility.

Dividends

The Company declared and paid dividends to shareholders of $3.6 million during the six months ended June 30, 2025. On July 18, 2025, the Company's Board of Directors declared a quarterly dividend of $0.125 per common share. The dividend will be paid on August 15, 2025 to shareholders of record as of the close of business on August 1, 2025 and will result in a cash outlay of approximately $1.8 million. Although we currently intend to pay a quarterly dividend on an ongoing basis, all future dividend declarations will be at the discretion of our Board of Directors and dependent upon then-existing conditions, including our operating results and financial condition, capital requirements, contractual restrictions, business prospects and other factors that our Board of Directors may deem relevant.

Seasonality; Variability of Operating Results

The timing of orders placed by our customers has varied with, among other factors, orders for customers’ finished goods, customer production schedules, competitive conditions and general economic conditions. The variability of the level and timing of orders has, from time to time, resulted in significant periodic and quarterly fluctuations in the operations of our businesses. Such variability is particularly evident in our capital equipment business, included in the Engineered Products segment, which typically ships large systems at a relatively lower pace than our other businesses.

Critical Accounting Policies

Our critical accounting policies are described in "Item. 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations," and in the notes to our consolidated financial statements for the year ended December 31, 2024, both contained in our Annual Report on Form 10-K for the year ended December 31, 2024. There were no new critical accounting policies or updates to existing critical accounting policies as a result of new accounting pronouncements in this Quarterly Report on Form 10-Q.

The application of our critical accounting policies may require management to make judgments and estimates about the amounts reflected in the condensed consolidated financial statements. Management uses historical experience and all available information to make these estimates and judgments, and different amounts could be reported using different assumptions and estimates.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. The words “believes”, “anticipates”, “plans”, “expects”, “intends”, “estimates” and similar expressions are intended to identify forward-looking statements.

These forward-looking statements, including statements regarding future performance of the Company, that are subject to known and unknown risks, uncertainties and other factors that may cause our actual results, performance and achievements, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These factors that could cause actual results to differ materially from expectations include, but are not limited to, the following: the impact supply chain and logistic issues have on our business, results of operations, financial position and liquidity; our substantial indebtedness; the uncertainty of the global economic environment; general business conditions and competitive factors, including pricing pressures and product innovation; demand for our products and services; the impact of labor disturbances affecting our customers; raw material availability and pricing; fluctuations in energy costs;

component part availability and pricing; changes in our relationships with customers and suppliers; the financial condition of our customers, including the impact of any bankruptcies; our ability to successfully integrate recent and future acquisitions into existing operations; the amounts and timing, if any, of purchases of our common stock; changes in general economic conditions such as inflation rates, interest rates, tax rates, unemployment rates, higher labor and healthcare costs, recessions and changing government policies, laws and regulations, including those related to the current global uncertainties and crises, such as tariffs and surcharges; adverse impacts to us, our suppliers and customers from acts of terrorism or hostilities, including the conflicts between Russia and Ukraine and in the Middle East, or political unrest, including the rising tension between China and the United States; public health issues, including the outbreak of infectious diseases and any impact on our facilities and operations and our customers and suppliers; our ability to meet various covenants, including financial covenants, contained in the agreements governing our indebtedness; disruptions, uncertainties or volatility in the credit markets that may limit our access to capital; potential disruption due to a partial or complete reconfiguration of the European Union; increasingly stringent domestic and foreign governmental regulations, including those affecting the environment or import and export controls and other trade barriers; inherent uncertainties involved in assessing our potential liability for environmental remediation-related activities; the outcome of pending and future litigation and other claims and disputes with customers; our dependence on the automotive and heavy-duty truck industries, which are highly cyclical; the dependence of the automotive industry on consumer spending; our ability to negotiate contracts with labor unions; our dependence on key management; our dependence on information systems; our ability to continue to pay cash dividends, and the timing and amount of any such dividends; and the other factors we describe under “Item 1A. Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Any forward-looking statement speaks only as of the date on which such statement is made, and we undertake no obligation to update any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. In light of these and other uncertainties, the inclusion of a forward-looking statement herein should not be regarded as a representation by us that our plans and objectives will be achieved.

We are exposed to market risk, including changes in interest rates. As of June 30, 2025, we are subject to interest rate risk on borrowings under the floating rate revolving credit facility provided by our Credit Agreement. A 100-basis-point increase in the interest rate would have resulted in an increase in interest expense on these borrowings of approximately $1.4 million during the six-month period ended June 30, 2025.

Our foreign subsidiaries generally conduct business in local currencies. We face translation risks related to the changes in foreign currency exchange rates. Amounts invested in our foreign operations are translated in U.S. dollars at the exchange rates in effect at the balance sheet date. The resulting translation adjustments are recorded as a component of Accumulated other comprehensive loss in the Shareholders' Equity section of the accompanying Condensed Consolidated Balance Sheets. Sales and expenses at our foreign operations are translated into U.S. dollars at the applicable monthly average exchange rates. Therefore, changes in exchange rates may either positively or negatively affect our net sales and expenses from foreign operations as expressed in U.S. dollars.

Our largest exposures to commodity prices relate to metal and rubber compounds, which have fluctuated widely in recent years. In 2025 and 2024, we entered into agreements to hedge foreign currency. These agreements did not have a material impact on the results of the Company. We have no other commodity swap agreements or forward purchase contracts.

Evaluation of disclosure controls and procedures.

Under the supervision of and with the participation of our management, including our chief executive officer and chief financial officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15(d)-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report. Based on that evaluation, our chief executive officer and chief financial officer have concluded that, as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were effective.

Changes in internal control over financial reporting.

During the quarter ended June 30, 2025, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There have been no material changes in the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2024. Investors should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.