# Helios Technologies, Inc.: Form 10-Q for the period ended Mar 30, 2024

- Company: [Helios Technologies, Inc.](/companies/hlio.md) (CIK 1024795)
- Form: 10-Q
- Filed: 2024-05-09
- Accepted by EDGAR: May 9, 2024, 18:28 ET
- Period: 2024-03-30
- Accession: 0000950170-24-056684
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1024795/000095017024056684/hlio-20240330.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1024795/000095017024056684/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-03-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-12-31 to 2024-03-30 | $212.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-12-31 to 2024-03-30 | $144.8m | us-gaap:CostOfGoodsAndServicesSold |
| Gross profit | 3 months, 2023-12-31 to 2024-03-30 | $67.2m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2023-12-31 to 2024-03-30 | $39.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-12-31 to 2024-03-30 | $20.3m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-12-31 to 2024-03-30 | $2.8m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-12-31 to 2024-03-30 | $9.2m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-12-31 to 2024-03-30 | $0.28 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-12-31 to 2024-03-30 | $0.28 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-12-31 to 2024-03-30 | 33,300,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-12-31 to 2024-03-30 | $17.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-12-31 to 2024-03-30 | $5.5m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-12-31 to 2024-03-30 | $3.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-03-30 | $37.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-03-30 | $409.3m | us-gaap:AssetsCurrent |
| Total assets | at 2024-03-30 | $1.58bn | us-gaap:Assets |
| Current liabilities | at 2024-03-30 | $144.8m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-03-30 | $727.0m | us-gaap:Liabilities |
| Long-term debt | at 2024-03-30 | $292.7m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-03-30 | $23.2m | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-03-30 | $856.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 26,563 characters.

This report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The words "expects," "anticipates," "believes," "intends," "plans," "will" and similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this Form 10-Q with the Securities and Exchange Commission. These forward-looking statements are subject to risks and uncertainties, including, without limitation, those discussed in this report and those identified in Part I, Item 1A, "Risk Factors" included in our Form 10-K. In addition, new risks emerge from time to time, and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. Accordingly, our future results may differ materially from historical results or from those discussed or implied by these forward-looking statements. Given these risks and uncertainties, the reader should not place undue reliance on these forward-looking statements.

### OVERVIEW

We are a global leader in highly engineered motion control and electronic controls technology for diverse end markets, including construction, material handling, agriculture, industrial, mobile, energy, recreational vehicles, marine and health and wellness.

We operate under two business segments: Hydraulics and Electronics. The Hydraulics segment designs and manufactures hydraulic motion control and fluid conveyance technology products, including cartridge valves, manifolds, quick release couplings as well as engineers hydraulic solutions and in some cases complete systems. Our Hydraulics segment includes products sold under the Sun Hydraulics, Faster, Custom Fluidpower, Seungwon, NEM, Taimi, Daman and Schultes brands. The Electronics segment designs and manufactures customized electronic controls systems, displays, wire harnesses and software solutions for a variety of end markets including industrial and mobile, recreational and health and wellness. The Electronics segment includes products sold under the Enovation Controls, Murphy, Zero Off, HCT, Balboa Water Group and Joyonway brands.

### Recent Acquisitions

In January 2023, we completed the acquisition of Schultes Precision Manufacturing, Inc. Schultes is a highly trusted specialist in manufacturing precision machined components and assemblies for customers requiring very tight tolerances, superior quality and exceptional value-added manufacturing processes. Currently serving the hydraulic, aerospace, communication, food services, medical device and dental industries, Schultes brings the manufacturing quality, reliability and responsiveness critical to its customers’ success. Schultes provides additional manufacturing know-how and expands our business into new end markets with attractive secular tailwinds.

In May 2023, we acquired i3 Product Development, a custom design and engineering services firm, with over 55 engineers with expertise in electronics, mechanical, industrial, embedded and software engineering. We anticipate that i3 will equip Helios with significant value-added professional services capabilities to provide customization to Helios platforms and to develop greenfield solutions. i3 specializes in working to transform customers' ideas into industrial design solutions through rapid prototyping and creating 3D models in house. They have also built and patented a remote support platform that provides customers in the field support for their internet of things devices. Their solutions are used across many sectors, including medical, off-highway, recreational and commercial marine, power sports, health and wellness, agriculture, consumer goods, industrial, sports and fitness.

### Restructuring Activities

Our previously announced restructuring activities within our Hydraulics segment related to the creation of our two new Regional Operational Centers of Excellence ("CoE") are substantially complete. The Hydraulic Manifold Solutions CoE, located in Mishawaka, Indiana, is now doing the manifold machining and integrated package assembly for Sun Hydraulics, Faster Inc., and Daman. The Hydraulic Valve and Coupling Solutions CoE, located in Sarasota, Florida, is manufacturing cartridge valve technology (CVT) and quick release couplings (QRC). There still remain some integration and optimization activities we expect to be completed in 2024.

We have also initiated some restructuring activities to better optimize our European regional operations. We are transitioning some manufacturing of manifolds and integrated package assembly to our Roncolo, Italy location. To create capacity in Roncolo, we are moving some turning and lathing operations from Roncolo to our Rivolta, Italy location. These activities include transferring equipment and operations between facilities. We expect the transition to largely take place throughout 2024.

### Manufacturing and Operating Strategy Activities

During 2021, we augmented our strategy to transform our business from a holding company to a global integrated operating company. This strategy leverages the breadth of our global footprint and depth of our manufacturing capabilities. We created manufacturing roadmaps with several programs to continuously improve processes that will drive efficiency and improvements across the business. In support of our mission to “Think and Act Globally”, we are driving “in the region, for the region” manufacturing to better align supply chain and manufacturing value streams with customers geographically to shorten lead times, reduce inventory, optimize costs, and mitigate global supply risks. We have made significant progress against our strategy as disclosed in 2023 related to the creation of our new Centers of Excellence, transferring some of the board assembly and wire harness production from our Tulsa location to our facility in Tijuana, adding capacity at our plants in Italy, India, Tijuana and Indiana, and constructing an automated warehouse at our Faster Italy location. We notably began a project to optimize our European operations and we expect the new project to take place throughout this fiscal year.

### Global Economic and Geopolitical Conditions

We expect to see challenging macroeconomic conditions to continue, characterized by economic uncertainty and market disruption driven by inflationary pressures, political uncertainty, the ongoing Russia-Ukraine war and the Israeli-Hamas war. We do not have operations in these regions at this time and those conflicts have not and are not expected to have a material impact on our financial condition or results. In addition, we are continuously monitoring these economic and geopolitical conditions and remain focused on pricing discipline, cost savings initiatives and production efficiency as ways to mitigate the risks associated with the uncertainty.

Refer to Item 1A "Risk Factors" of our Form 10-K for additional discussion of risks related to global economic conditions.

### Industry Conditions

The capital goods industries in general, and the Hydraulics and Electronics segments specifically, are subject to economic cycles. We utilize industry trend reports from various sources, as well as feedback from customers and distributors, to evaluate economic trends. We also rely on global government statistics such as Gross Domestic Product and Purchasing Managers Index to understand macroeconomic conditions.

#### Hydraulics

According to the National Fluid Power Association (the fluid power industry’s trade association in the U.S.), the U.S. index of shipments of hydraulic products decreased 8% during the first three months of 2024 compared to the first three months of the prior year while the U.S. index of orders of hydraulic products declined 9% during the same period. Monthly shipments have been down year over year each month back to September 2023, with March declining 16%. Looking at the first three months of 2024 compared to the prior three months, shipments and orders are up 2% and 1% respectively. The three month average order volume has trended up through the first three months of 2024 compared to the second half of 2023. In Europe, the CEMA Business Barometer reported in March 2024 that the general business climate index for the European agricultural machinery industry continued to deteriorate. The CEMA Barometer report also indicated an expectation for turnover to decline over the next six months with the full year 2024 to be down in the single-digit range. The CECE (Committee for European Construction Equipment) recently reported that the business climate index related to Europe took a step back in March with the view of current business environment and future expectations being negative on average. The CECE reported that the rate of decline of incoming orders in Europe is getting smaller but that declines are expected to continue through 2024.

#### Electronics

The Federal Reserve’s Industrial Production Index, which measures the real output of all relevant establishments located in the U.S., reports first quarter 2024 sales of semiconductors and other electronics components declined slightly from Q4 2023 but remain higher than sales levels seen in recent years in comparable periods. The Institute of Printed Circuits Association (“IPC”) reported that total North American printed circuit board (“PCB”) shipments were down 24% in March, 12% in February and 4% in January compared with the same months last year. PCB bookings in the first 3 months of 2024 were up compared to the prior year, with March being down only 2% while February was up 26%. The quarterly increase in order bookings was seen as a reversal of a downward trend and a positive sign for demand. The IPC also reported that North American electronics manufacturing services (“EMS”) shipments were down 4% in March, but up 26% in February and 3% in January compared to the prior year. EMS bookings trended up in the quarter as well with February and March up 5% and 26%, respectively while January was down 12% year over year.

### 2024 First Quarter Results and Comparison of the Three Months Ended March 30, 2024, and April 1, 2023

(In millions, except per share data)

The following is a discussion of our first quarter of 2024 results of operations and liquidity and capital resources; comparisons are with the corresponding reporting period of 2023, unless otherwise noted.

The following table presents our consolidated results of operations:

|  | Three Months Ended March 30, 2024 | April 1, 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $212.0 | $213.2 | $(1.2) | (0.6)% |
| Gross profit | $67.2 | $71.0 | $(3.8) | (5.4)% |
| Gross profit % | 31.7% | 33.3% |  |  |
| Operating income | $20.3 | $24.8 | $(4.5) | (18.1)% |
| Operating income % | 9.6% | 11.6% |  |  |
| Net income | $9.2 | $13.9 | $(4.7) | (33.8)% |
| Diluted net income per share | $0.28 | $0.42 | $(0.1) | (33.3)% |

24

First quarter consolidated net sales declined $1.2, 0.6% over the prior-year first quarter. We experienced organic net sales decline of $5.1, 2.4%, which was offset partially by sales from acquisitions totaling $3.9. Sales were impacted by reduced demand for products in our mobile, industrial and agricultural end markets, offset partially by an increase to the health and wellness and off-road vehicle end markets. Consolidated net sales were slightly up in the Americas and APAC regions and down in the EMEA region during the first quarter. Changes in foreign currency exchange rates had an unfavorable impact to our first quarter organic sales of $0.3, 0.1%.

Supply chain and pricing did not have a material impact on our sales in the first quarter compared to the prior year period. Although inflation persists, we did see a more stable pricing environment this quarter compared to the prior year period.

First quarter gross profit decreased $3.8, 5.4%, over the prior year first quarter driven by lower volume, higher material and labor costs and unfavorable foreign currency impacts of $0.3. Gross margin declined by 160 basis points, impacted by lower fixed costs leverage on lower volume, a higher mix of revenue in lower margin products, and other cost impacts noted above.

First quarter operating income as a percentage of sales declined 200 basis points to 9.6%. In addition to the gross margin level changes, SEA expenses increased by $0.9 mainly due to higher wages and the 2023 acquisitions.

Net interest expense increased by $2.0 to $8.2 in the first quarter of 2024. Average net debt increased to $488.2 during the first quarter of 2024 compared with $446.0 during the first quarter of 2023, due to higher interest rates in the current period and higher debt from borrowings to fund acquisitions.

The provision for income taxes for the first quarter of 2024 was 23.2% of pretax income compared to 22.8% for the prior-year first quarter. These effective rates fluctuate relative to the levels of income and different tax rates in effect among the countries in which we sell our products.

On December 20, 2022, the OECD published Pillar Two guidance on safe harbors and penalty relief (the “Safe Harbor Guidance”). The Safe Harbor Guidance includes a Transitional Country-by-Country Report (“CbCR”) Safe Harbor, which would deem a MNE’s top-up tax for a jurisdiction to be zero and would allow the MNE to avoid undertaking detailed GloBE calculations in respect of that jurisdiction during the Transition Period if it can demonstrate one of the three transitional tests.

The company continues to evaluate the impact of Pillar Two and application of safe harbors. The company does not expect it to have a material impact in 2024 to their effective tax rate.

### SEGMENT RESULTS

### Hydraulics

The following table presents the results of operations for the Hydraulics segment:

|  | Three Months Ended March 30, 2024 | April 1, 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $142.4 | $147.7 | $(5.3) | (3.6)% |
| Gross profit | $44.5 | $50.0 | $(5.5) | (11.0)% |
| Gross profit % | 31.3% | 33.9% |  |  |
| Operating income | $21.8 | $28.0 | $(6.2) | (22.1)% |
| Operating income % | 15.3% | 19.0% |  |  |

First quarter net sales for the Hydraulics segment decreased by $5.3, 3.6%, compared with the prior year first quarter. We experienced organic net sales decline of $7.2, 4.9%, from the prior year, which was partially offset by acquisition sales totaling $1.9. Sales in the first quarter to the mobile, industrial and agriculture end markets were down compared to the prior year-period. These declines were partially offset by higher sales from the smaller niche markets. Changes in foreign currency exchange rates had an unfavorable impact of $0.2, 0.1%.

The following table presents net sales based on the geographic region of the sale for the Hydraulics segment:

|  | Three Months Ended March 30, 2024 | April 1, 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Americas | $55.8 | $57.9 | $(2.1) | (3.6)% |
| EMEA | 45.5 | 49.4 | (3.9) | (7.9)% |
| APAC | 41.1 | 40.4 | 0.7 | 1.7% |
| **Total** | $142.4 | $147.7 |  |  |

Regional sales performance in the first quarter compared to the prior year quarter was driven by:

Americas - excluding the impact of acquisitions, sales declined $4.0, 6.9%, primarily from softer demand in the region

EMEA - excluding favorable changes in foreign currency rates of $0.5, sales declined $4.4, 8.9%, primarily from softer demand within the agriculture market

APAC - excluding unfavorable changes in foreign currency rates of $0.7, sales increased $1.4, 3.5%, primarily from increased demand in China

First quarter gross profit declined $5.5, 11.0%, from lower volume while gross margin declined by 260 basis points, primarily from fixed cost absorption on lower volume and higher labor costs. Changes in foreign currency exchange rates had an unfavorable impact of $0.1.

Operating income as a percentage of sales declined 370 basis points to 15.3% in the first quarter of 2024. SEA expenses went up by $0.7, mainly due to higher wages and the 2023 acquisitions.

As previously noted in the third quarter of 2023, the Company experienced aggregate losses related to a fire and a weather-related incident at one of its manufacturing locations in Italy, which resulted in the shut-down of operations for a period of time and disruption in production as recovery efforts ensued. There are insurance claims open related to these incidents and the Company is working closely with the insurance carrier to assess the claims and evaluate potential recoveries. Losses from damage to the building, equipment and supplies are expected to be fully offset by probable insurance recoveries, which represents anticipated insurance proceeds not in excess of the associated losses, for which receipt has been deemed probable. Any recoveries in excess of losses incurred will be recognized when all contingencies related to the claim have been resolved. Management is hopeful these claims will be resolved in 2024.

### Electronics

The following table presents the results of operations for the Electronics segment:

|  | Three Months Ended March 30, 2024 | April 1, 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Net sales | $69.6 | $65.5 | $4.1 | 6.3% |
| Gross profit | $22.7 | $21.0 | $1.7 | 8.1% |
| Gross profit % | 32.6% | 32.1% |  |  |
| Operating income | $7.1 | $7.5 | $(0.4) | (5.3)% |
| Operating income % | 10.2% | 11.5% |  |  |

26

First quarter net sales for the Electronics segment increased $4.1, 6.3%, compared with the prior year first quarter. We experienced organic net sales growth of $2.1, 3.2%, with incremental acquisition sales of $2.0. Compared to the prior year period, first quarter sales in the health and wellness and off-road vehicle markets increased, while sales to the industrial and marine end markets decreased. Changes in foreign currency exchange rates had an unfavorable impact of $0.1, 0.2%.

The following table presents net sales based on the geographic region of the sale for the Electronics segment:

|  | Three Months Ended March 30, 2024 | April 1, 2023 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Americas | $58.1 | $55.1 | $3.0 | 5.4% |
| EMEA | 6.5 | 6.7 | (0.2) | (3.0)% |
| APAC | 5.0 | 3.7 | 1.3 | 35.1% |
| **Total** | $69.6 | $65.5 |  |  |

First quarter gross profit increased $1.7, 8.1% compared to the prior year first quarter, primarily due to the higher sales volume. Gross margin increased by 50 basis points to 32.6% as the increased leverage of our fixed cost base on the higher sales and lower freight costs more than offset the impact of a higher mix of revenue in products with a lower margin profile.

SEA expenses increased by $2.1, 15.6%, in the first quarter of 2024 compared to the prior year first quarter, primarily from increased wages and the 2023 acquisitions.

### Corporate and Other

Certain costs are excluded from business segment results as they are not used in evaluating the results of, or in allocating resources to, our operating segments. For the first quarter of 2024, these costs totaled $8.6 for: amortization of acquisition-related intangible assets of $7.9, $0.4 related to our acquisition and integration activities and $0.3 for officer transition costs. Compared to the first quarter of 2023, these costs decreased by $2.1, primarily from the net impact of other acquisition and integration activities and the roll off of certain officer transition costs.

### LIQUIDITY AND CAPITAL RESOURCES

Historically, our primary source of capital has been cash generated from operations. We also use borrowings on our credit facilities to fund acquisitions. During the first three months of 2024, cash provided by operating activities totaled $17.8. At the end of the first quarter, we had $37.3 of available cash and cash equivalents on hand and $196.9 of available credit on our revolving credit facilities. We also have a $300.0 accordion feature available on our credit facility, subject to certain pro forma compliance requirements, intended to support potential future acquisitions.

Our principal uses of cash are operating expenses, capital expenditures, servicing debt, acquisition-related payments and dividends to shareholders.

We believe that cash generated from operations and our borrowing availability under our credit facilities will be sufficient to satisfy our operating expenses for the foreseeable future. In the event that economic conditions were to severely worsen for a protracted period of time, we would have several options available to ensure liquidity in addition to increased borrowings. Capital expenditures could be postponed since they primarily pertain to long-term improvements in operations, operating expense reductions could be made, acquisition activity could be delayed and finally, the dividend to shareholders could be reduced or suspended.

#### Cash Flows

The following table summarizes our cash flows for the periods:

|  | Three Months Ended March 30, 2024 | April 1, 2023 | $ Change |
| --- | ---: | ---: | ---: |
| Net cash provided by operating activities | $17.8 | $12.3 | $5.5 |
| Net cash used in investing activities | (6.3) | (94.6) | 88.3 |
| Net cash (used in) provided by financing activities | (5.4) | 73.8 | (79.2) |
| Effect of exchange rate changes on cash and cash equivalents | (1.2) | 1.1 | (2.3) |
| Net increase (decrease) in cash and cash equivalents | $4.9 | $(7.4) | $12.3 |

Cash on hand increased $4.9 in the first quarter of 2024 to $37.3 as of March 30, 2024. Changes in exchange rates during the three months ended March 30, 2024, negatively impacted cash and cash equivalents $1.2. Cash balances on hand are a result of our cash management strategy, which focuses on maintaining sufficient cash to fund operations while reinvesting cash in the Company and paying down borrowings on our credit facilities.

#### Operating activities

Year-to-date cash from operations increased by $5.5 to $17.8. Cash earnings (calculated as net income plus adjustments to reconcile net income to net cash provided by operating activities, excluding changes in net operating assets and liabilities) decreased by $3.3 in the first three quarters of 2024 compared to the same period in 2023. Changes in net operating assets and liabilities improved cash flow by $8.8, compared to the prior year period, primarily from favorable differences from the prior year in cash flows from inventories and other current assets, offset by an increase in accounts receivable and accrued expenses and other liabilities. Investments in inventory reduced cash by $0.7 and $6.5 in the first quarter of 2024 and 2023, respectively. Days of inventory on hand increased to 135 days as of March 30, 2024, compared with 126 days as of April 1, 2023. Changes in accounts receivable reduced cash by $13.1 and $9.5 in the first quarter of 2024 and 2023, respectively. Days sales outstanding decreased slightly to 54 days as of March 30, 2024, compared with 60 days as of April 1, 2023, as a result of initiatives to improve our collection patterns.

#### Investing activities

Cash used in investing activities totaled $6.3 in the first quarter of 2024, compared to $94.6 in the first quarter of the prior year. The large difference is a result of $84.7 cash paid, net of cash acquired, for acquisitions in the first quarter of 2023.

Capital expenditures totaled $5.5, 2.6%, of sales for the first quarter of 2024, a decrease of $3.6 over the prior year comparable period. Capital expenditures for 2024 are forecasted to be approximately 3%-4% of sales, for investments in machinery and equipment for capacity expansion projects, improvements to manufacturing technology and maintaining or replacing existing machine capabilities.

#### Financing activities

Net cash used in financing activities totaled $5.4 during the first quarter of 2024, compared with cash provided of $73.8 in the prior year period. In the first quarter of 2024, repayments, net of borrowings, totaled $0.7. Cash paid for acquisitions in first quarter of 2023 was primarily financed with borrowings on our credit facility; borrowings, net of repayments, totaled $78.4.

In May 2023, we entered into an incremental facility amendment to our credit agreement with PNC Bank, National Association, as administrative agent, and various lenders party thereto. With the amendment we incurred a new term loan with an aggregate principal amount of $150.0 for which the proceeds were used to repay outstanding balances on our revolving credit facility. The new term loan is payable in full in October 2025 and is not subject to any required repayments prior to that date. As part of the Incremental Facility Amendment, we continue to have the ability to increase our revolving credit facility or incur a new term loan up to an additional borrowing limit of $300.0.

During the first quarter of 2024, we declared a quarterly cash dividend of $0.09 per share payable on April 19, 2024, to shareholders of record as of April 4, 2024. The declaration and payment of future dividends is subject to the sole discretion of the board of directors, and any determination as to the payment of future dividends will depend upon our profitability, financial condition, capital needs, future prospects and other factors deemed pertinent by the board of directors.

### Off Balance Sheet Arrangements

We do not engage in any off-balance sheet financing arrangements. In particular, we do not have any material interest in variable interest entities, which include special purpose entities and structured finance entities.

### Critical Accounting Policies and Estimates

We currently apply judgment and estimates that may have a material effect on the eventual outcome of assets, liabilities, revenues and expenses for impairment of long-lived assets, inventory, goodwill, accruals, income taxes and fair value measurements. Our critical accounting policies and estimates are included in our Form 10-K, and any changes made during the first three months of 2024, are disclosed in Note 2 to the Consolidated, Unaudited Financial Statements.

## Market risk

As filed, 169 characters.

See “Item 7A – Quantitative and Qualitative Disclosures about Market Risk” in our Form 10-K. There were no material changes during the three months ended March 30, 2024.

## Controls and procedures

As filed, 1,389 characters.

The Company’s management, with the participation of the Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this report, have concluded that our disclosure controls and procedures are effective and are designed to ensure that the information we are required to disclose is recorded, processed, summarized and reported within the necessary time periods. Our disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports that we file or submit pursuant to the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting identified in management's evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Securities Exchange Act of 1934, as amended, during the period covered by this report that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 619 characters.

In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors that affect our business and financial results that are discussed in Part I, Item 1A, “Risk Factors” of our Form 10-K. These factors could materially adversely affect our business, financial condition, liquidity, results of operations and capital position, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this report. There have been no material changes to such risk factors.

Filed May 9, 2024.
Source: SEC EDGAR, the filing index for accession 0000950170-24-056684. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.