Helios Technologies, Inc.: Form 10-Q for the period ended Jun 28, 2025

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, 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.

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 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 and assembling cartridge valve technology and quick release couplings. We also continue to add capabilities and activities to our recently expanded Tijuana, Mexico facility to support our Electronics segment. Initial efforts have focused on circuit board assembly and wire harness production. We paused activities as a result of the changing tariff landscape but continue to evaluate plans to move additional production activities to Tijuana in the second half of 2025.

The initial phase of the restructuring activities to better optimize our European regional operations are complete. This included transitioning some manufacturing of manifolds and integrated package assembly to our Roncolo, Italy location. To create capacity in Roncolo, we moved some turning and lathing operations from Roncolo to our Rivolta, Italy location. These activities included transferring equipment and operations between facilities. Additional phases of this project are currently paused, we continue to evaluate plans for restructuring activities to optimizing operations in the European Region.

In January 2025, the Company began the early phases of restructuring the Helios Center of Engineering Excellence (“HCEE”). Consistent with the Company's previously announced restructuring plan, during the end of the second quarter 2025, management ceased operations at the San Antonio office and reassigned resources to the operations at our other major facilities across the business, and eliminated certain positions. As a result of this planned change in the HCEE business operations, the workforce intangible asset associated with the HCEE acquisition was reviewed by management and it was determined that the remaining net book value of the asset should be accelerated and amortized over a useful life ending June 2025. This resulted in an increase $0.3 and $0.8 of amortization expense in the three and six months ending June 28, 2025, respectively.

Restructuring costs totaled $1.2 and $3.2, for the three months ended June 28, 2025 and June 29, 2024.

Global Economic and Geopolitical Conditions

We expect the challenging macroeconomic conditions to continue, characterized by economic uncertainty and market disruption driven inflationary pressures, political uncertainty, potential changes to current global trade policies and modifications of existing trade agreements, the potential negotiation of new trade agreements and imposition of new (and retaliatory) tariffs, and the ongoing geopolitical conflicts in Ukraine and the Middle East. We are continuously monitoring these economic and geopolitical conditions and remain focused on liquidity management, 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.

Tariffs

During the first half of 2025, additional tariffs were imposed on goods imported into the U.S. from China, Mexico and Canada, tariffs on steel and aluminum were increased and various reciprocal tariffs were also imposed. These costs are reflected in the cost of sales on our Consolidated Statement of Operations.

We import goods into the U.S. primarily from Mexico, Italy and China. Based on the tariffs in effect as of the date of this Form 10-Q, many of these goods are exempt from the recent tariffs imposed. Due to the dynamic tariff environment, it is not possible to predict if these exemptions will remain in place, or if tariff rates imposed will change. Tariffs on product we import from China represent the greatest exposure, as some of those products imported are subject to tariffs of up to 55% under the current structure.

We export products from our U.S. locations to more than 40 countries. Our total U.S. exports were approximately $29.5 or 13.9% of total sales in the three months ended June 28, 2025, of which exports to China were $3.4 or 1.6% of total sales in the period. For the six months ended June 28, 2025, our total U.S. exports were approximately $57.8 or 14.2% of total sales, of which exports to China were $10.3 or 2.5% of total sales. Based on the tariffs in effect as of the date of this Form 10-Q, products we export to China from the U.S. are subject to tariffs up to 10%. Trade relations between the U.S. and other countries are fluid and we are unable to predict if tariffs (including retaliatory tariffs) imposed by other countries on our U.S. exports will change in the future.

Due to the fluidity of the tariff environment and potential subsequent changes to effective dates, amounts of announced tariffs, and various exemptions for imports into the U.S., we are unable to fully quantify the impact the tariffs will have on our results of operations when and if enacted. Our current expectation, however, is to leverage our regional production capabilities, source components from local suppliers, and raise our prices, which we believe may mitigate the impact of higher tariff costs, though we are not able to provide assurances that we will be able to offset any or all tariff-related costs. Additionally, increased prices could impact demand for our products, including our ability to attract new customers or cause increases in existing customer attrition. If our attempts to mitigate tariff-related costs are not sufficient to offset our increased tariff-related costs adequately or in a timely manner, our business, results of operations, and our financial and/or operating costs may be adversely affected.

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 9% during the first six months of 2025 compared to the first six months of the prior year while the U.S. index of orders of hydraulic products declined 3% during the same period. In Europe, the CEMA (European Agricultural Machinery Association) Business Barometer reported in June 2025 that the general business climate index for the European agricultural machinery industry has dropped slightly after continuous rises over the last months. Both the current business sentiment and expectations for turnover in the next six months, however, trended upward in the second quarter. The report also indicated that the confidence index remains low for France and Germany, especially when broken into the larger segments of tractors, arable and harvesting equipment, while improvement was reflected for other important markets with Poland, Spain and UK leading the European market ranking. The CECE (Committee for European Construction Equipment) June report noted that the business climate went down for the month as future expectations suffered a setback but remain positive on average across European markets for the next six months. Expectations for India and China went down while North America was a bit more optimistic. The report also indicated European sales grew in June over the prior year period, the first month of growth in the past twenty-three months. The order intake continued to trend upward in European markets but international markets seem to be losing momentum despite just having entered into growth territory.

Electronics

The Federal Reserve’s Industrial Production Index, which measures the real output of all relevant establishments located in the U.S., reports second quarter 2025 output of semiconductors and other electronics components increased from the fourth quarter 2024, the fifth sequential quarterly increase. The Institute of Printed Circuits Association (“IPC”) reported that total North American printed circuit board (“PCB”) shipments were down 8.6% in June after being up 21.4% in May and down 6.8% in April compared with the same months last year. PCB bookings in 2025 were up 4.9% in June compared to the prior year, with bookings for the first six months of the year higher by 16.2%. The book to bill ratio, calculated as the value of orders booked over the past three months divided by the value of sales in the same period, was above 1.1 for each month, indicating the stronger demand environment that started the year continues. The IPC also reported that North American electronics manufacturing services (“EMS”) shipments were up 3.0% in June compared to the prior year. EMS bookings decreased 8.9% in June year over year after being up 5.0% in May and down 10.0% in April, highlighting the sector's choppiness in the quarter.

Executive Officer and Board Transitions

On January 6, 2025, the Company announced that the Board of Directors ("Board") promoted Sean Bagan to President and Chief Executive Officer of the Company, effective January 6, 2025. The Board subsequently nominated Mr. Bagan for election to the Board at the 2025 Annual Meeting of Shareholders. Mr. Bagan also continues to serve as Chief Financial Officer while the Company conducts a search process, which will include internal and external candidates, to identify a permanent Chief Financial Officer to backfill his previous role. In connection with Mr. Bagan’s appointment, Chairman Philippe Lemaitre, serving as Executive Chairman, resumed his role as Non-Executive Chairman.

On March 13, 2025, Mr. Lemaitre notified the Company of his decision to retire and not seek re-nomination at the 2025 Annual Meeting of Shareholders. He had served on Helios’ Board since 2007 and as Chair since 2013. On March 13, 2025, the Board of the Company elected Laura Dempsey Brown to serve as the new Non-Executive Chair of the Company, effective March 13, 2025.

On June 5, 2025, the Board appointed Ian Walsh to serve as a member of the Board effective June 5, 2025. Mr. Walsh was also appointed to serve on the Board's Audit Committee and Governance Committee. He serves as a member of the class of directors whose term will expire at the 2026 Annual Meeting of Shareholders.

2025 Second Quarter Results and Comparison of the Three Months Ended June 28, 2025, and June 29, 2024

(In millions, except per share data)

The following is a discussion of our second quarter of 2025 results of operations and liquidity and capital resources. Comparisons are with the corresponding reporting period of 2024, unless otherwise noted.

The following table presents our consolidated results of operations:

Second quarter consolidated net sales declined $7.4, 3.4%, below the prior-year second quarter. Changes in foreign currency exchange rates had a favorable impact to our second quarter sales of $1.6, 0.8%.

Consolidated net sales for the year-to-date period were lower by $23.9, 5.5%. Changes in foreign currency exchange rates had an unfavorable impact to our year-to-date quarter sales of $0.7, 0.2%.

Second quarter sales were negatively impacted by reduced demand in our recreational, industrial and mobile end markets. Sales in the agriculture end market were flat compared to the prior year period, an improvement from year over year declines in the prior five quarters. Sales for the year-to-date period were negatively impacted by reduced demand for products in our mobile, industrial, agriculture and recreational end markets, offset partially by an increase in the health and wellness end market. Sales were up in the EMEA region driven by stronger demand for our QRC products, while sales were down in the Americas and APAC regions during the second quarter compared to the prior year period. Sales in all regions were down in the year-to-date period compared to the prior year.

Second quarter gross profit decreased $3.1, 4.4%, below the prior year second quarter primarily from the impact of lower volume, higher material costs as a percentage of sales, and net tariff impacts partially offset by lower labor and overhead costs. Gross margin decreased by 30 basis points as the impact of lower fixed costs leverage on lower volume and higher material costs more than offset reductions in labor and overhead.

Year-to-date gross profit decreased $10.4, 7.5%, primarily from the impact of lower volume and higher material costs as a percentage of sales, partially offset by lower labor and overhead costs. Gross margin decreased by 70 basis points as the impact of lower fixed costs leverage on lower volume and higher material costs more than offset reductions in labor and overhead.

Second quarter operating income as a percentage of sales decreased 150 basis points to 10.3%. The decrease is due to the gross margin level changes and higher operating expenses as a percentage of revenue, primarily from higher SEA expense and higher amortization related to the HCEE accelerated intangible amortization as a result of restructuring activities, compared with the prior year period. SEA expenses were $0.6 higher than the year ago period, mainly due to higher wages and benefit costs associated with the leadership change within the Electronics segment.

Year-to-date operating income as a percentage of sales decreased 110 basis points to 9.6%. The decrease is due to the gross margin level changes and higher operating expenses as a percentage of revenue, primarily from higher amortization related to the HCEE accelerated intangible amortization as a result of restructuring activities, compared with the prior year period.

Net interest expense decreased by $1.5 to $7.0 in the second quarter of 2025 primarily due to lower debt outstanding compared to the prior year period. Average net debt decreased to $391.4 during the second quarter of 2025 compared with $470.9 during the second quarter of 2024. The reduction in average net debt is due to the paying down of debt incurred from prior year acquisitions. Year to date interest expense totaled $14.4, a decrease of $2.3. The prior year period interest expense benefited $1.8 from a recognized gain on an interest rate swap agreement. Excluding the impact of the interest rate swap agreement, interest expense was lower by $4.1 due to carrying a lower debt balance throughout the period and lower average interest rates. Average net debt for the year-to-date period decreased to $394.3 compared with $484.6 during the prior-year period.

The provision for income taxes for the second quarter of 2025 was 23.8% of pretax income compared to 23.0% for the prior-year second quarter. The year-to-date provision was 23.7% and 23.1% of pretax income for 2025 and 2024, respectively. 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 Organisation for Economic Co-operation and Development (“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 multinational enterprise’s (“MNE’s”) top-up tax for a jurisdiction to be zero and would allow the MNE to avoid undertaking detailed Global Anti-Base Erosion (“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 legislation and application of safe harbors. Based on its current assessment, the Company does not expect the implementation of Pillar Two to have a material impact on its consolidated effective tax rate for 2025.

As of June 28, 2025, the Company classified certain assets and liabilities of Guwing and CFP as held for sale in accordance with ASC 360. The related assets and liabilities are presented separately on the consolidated balance sheet as "Assets Held for Sale" and "Liabilities Held for Sale," respectively. The component remains reported in continuing operations as the planned sale does not represent a strategic shift under ASC 205-20. The Company evaluated the temporary differences between the book and tax basis of the disposal group and determined that the bases were substantially equal at the time of classification. Accordingly, no deferred tax asset or liability was recorded in connection with the held-for-sale classification.

SEGMENT RESULTS

Hydraulics

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

Second quarter net sales for the Hydraulics segment decreased by $4.8, 3.3%, compared with the prior year second quarter. The decline in sales in the second quarter was driven by softness across all end markets, most predominantly in the industrial and mobile end markets. Sales to the agriculture market was relatively flat with the prior year period. Changes in foreign currency exchange rates had a favorable impact of $1.5, 1.0%.

Year-to-date net sales for the Hydraulics segment decreased by $20.8, 7.2%, compared with the prior year period. The decline in sales was driven by softness across all end markets, most predominantly in the agriculture, mobile and industrial end markets. Changes in foreign currency exchange rates had an unfavorable impact of $0.6, 0.2%.

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

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

Americas - sales declined $5.3, 8.9%, primarily from generally softer demand in the region.

EMEA - excluding favorable changes in foreign currency rates of $2.0, sales increase $1.3, 3.0%, driven by stronger demand for our QRC products.

APAC - excluding unfavorable changes in foreign currency rates of $0.5, sales decreased $2.3, 5.4%, with decreased demand in China, Australia, India and Korea.

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

Americas - sales declined $11.2, 9.7%, primarily from generally softer demand in the region.

EMEA - excluding favorable changes in foreign currency rates of $1.0, sales decreased $5.3, 6.0%, primarily driven by softness in the agriculture end market.

APAC - excluding unfavorable changes in foreign currency rates of $1.4, sales decreased $3.9, 4.6%, with decreased demand in China, Korea and India.

Second quarter gross profit increased $1.6, 3.6%, or 220 basis points, primarily due to lower material and direct labor costs partially offset by lost leverage on lower volume and net tariff impacts.

Year-to-date gross profit decreased $5.6, 6.3%, primarily due to lower volume. Gross margin increased 30 basis points as lower material and direct labor costs as a percentage of sales more than offset the impact of lower fixed costs leverage on lower volume and net tariff impacts.

Operating income as a percentage of sales increased 130 basis points to 17.7% in the second quarter of 2025 due to the gross margin increase partially offset by higher operating expenses. SEA expenses went up by $0.5, mainly due to higher labor and benefit costs. R&D expenses went up by $0.1.

Operating income as a percentage of sales was 15.9% in the year-to-date period, flat compared to the prior year as the gross margin increase was offset by higher operating expenses as a percentage of sales. SEA expenses went down by $2.4, mainly due to lower labor and benefit costs, but increased 30 basis points as a percentage of sales.

Electronics

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

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Second quarter net sales for the Electronics segment decreased $2.6, 3.5%, compared with the prior year second quarter. Compared to the prior year period, second quarter sales in the industrial end market increased slightly, while sales to the recreational and agriculture end markets decreased. Sales to the mobile end market were relatively flat. Changes in foreign currency exchange rates had minimal impact.

Year-to-date net sales for the Electronics segment decreased $3.1, 2.2%, compared with the prior year period. Strength in the health and wellness end market was offset by declines in the recreational, industrial and mobile end markets.

Changes in foreign currency exchange rates had minimal impact.

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

Sales decreased across most end markets in the Americas region, while higher sales in health and wellness were offset by year over year declines in other end markets in the EMEA region in the second quarter and year-to-date period. APAC sales increased over the comparable second quarter and year-to-date period in APAC driven by the health and wellness end market.

Second quarter gross profit decreased $4.7, 18.3% compared to the prior year second quarter, primarily due to lower volume, higher material costs, and higher freight and duties. Freight and duties included a $2.4 expense related to a product import classification change. Gross margin declined 530 basis points, 195 basis points excluding the freight and duties expense related to the product import classification change, primarily due to the impact of lower fixed costs leverage on lower volume, higher material costs and an unfavorable product mix.

Year-to-date gross profit decreased $4.8, 9.9%, primarily due to lower volume, higher material costs and higher freight and duties. Freight and duties included a $2.4 expense related to a product import classification change. Gross margin declined 270 basis points over the same period to 30.9%. Excluding the freight and duties expense related to the product import classification change, gross margin was 32.6%, a decline of 100 basis points of the prior year.

Operating income as a percentage of sales decreased 570 basis points to 8.2% in the second quarter of 2025 compared to the prior year period due to the lower gross margin and higher amortization expense related to the HCEE accelerated intangible amortization as a result of restructuring activities. SEA expenses were flat and R&D expenses decreased $0.4 year over year.

Year-to-date operating income as a percentage of sales decreased 220 basis points to 9.9% compared to the prior year period. This is primarily due to lower SEA and R&D expenses as a percentage of sales partially offsetting the gross margin decline. SEA expenses increased by $0.4 while R&D expenses decreased by $0.7 year over year.

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 second quarter of 2025, these costs totaled $9.0 for amortization of acquisition-related intangible assets of $8.3, $0.4 for officer transition costs and $0.3 for activities related to the plan to sell CFP. Compared to the first quarter of 2024, these costs increased by $0.8, primary due to higher amortization related to the HCEE accelerated intangible amortization as a result of restructuring activities and officer transition costs. Year-to-date, corporate and other costs totaled $17.4 for amortization of acquisition related intangible assets of $16.5, $0.5 related to officer transition costs and $0.4 for activities related to the sale of CFP. This compared to $16.7 in the 2024 year-to-date period that included amortization of acquisition related intangible assets of $15.7, $0.5 related to our acquisition and integration activities and $0.5 for 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 six months of 2025, cash provided by operating activities totaled $56.0. At the end of the second quarter, we had $53.0 of available cash and cash equivalents on hand and $358.6 of available credit on our revolving credit facilities. We also have a $400.0 accordion feature available under our Third Amended and Restated Credit Agreement, 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, dividends to shareholders, and share repurchases.

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 as well as share repurchases could be reduced or suspended.

Cash Flows

The following table summarizes our cash flows for the periods:

Cash on hand increased $8.9 in the first two quarters of 2025 to $53.0 as of June 28, 2025. Changes in exchange rates during the six months ended June 28, 2025, positively impacted cash and cash equivalents $4.6. 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 $4.4 to $56.0. 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 $8.3 in the first two quarters of 2025 compared to the same period in 2024. Changes in net operating assets and liabilities improved cash flow by $12.7 in the second quarter, compared to the prior year period, primarily from days payable outstanding optimization, partially and offset by an increase in accounts receivable and inventory. Changes in inventory decreased cash by $1.7 in comparison to an increase of cash by $6.3 in the first two quarters of 2025 and 2024, respectively. Days of inventory on hand decreased to 122 days as of June 28, 2025, compared with 128 days as of June 29, 2024. Changes in accounts receivable reduced cash by $23.4 and $19.5 in the first two quarters of 2025 and 2024, respectively. Days sales outstanding increased slightly to 57 days as of June 28, 2025, compared with 55 days as of June 29, 2024. Changes in accounts payable increased cash by $21.4 in comparison to a reduction of cash of $1.9 in 2025 and 2024, respectively. Days payables outstanding for the 2025 year increased to 50 days from 41 days during 2024.

Investing activities

Cash used in investing activities totaled $13.2 in the first two quarters of 2025, compared to $15.4 in the first two quarters of the prior year. The year-over-year decline reflects our disciplined approach to capital allocation and continued focus on strategic investment priorities.

Capital expenditures totaled $11.5, 2.8%, of sales for the first two quarters of 2025, a decrease of $2.1 over the prior year comparable period. Capital expenditures for 2025 are forecasted to be approximately 3.25% to 3.50% of sales, for investments in machinery and equipment, improvements to manufacturing technology and maintaining or replacing existing machine capabilities.

Financing activities

Net cash used in financing activities totaled $38.5 during the first two quarters of 2025, compared to $22.6 in the same period of the prior year. In the first two quarters of 2025, repayments, net of borrowings, totaled $25.6 compared to $18.2 in the first two quarters of 2024.

Borrowings on our term loans and revolving credit facilities as of June 28, 2025, totaled $291.9 and $144.3, respectively. See Note 9 of the Notes to the Consolidated Financial Statements included in this Quarterly Report for additional information regarding our credit facilities.

On June 25, 2024, the Company amended and restated its credit agreement (the “Third Amended and Restated Credit Agreement”) with PNC Bank, National Association, as administrative agent, and the lenders party thereto. The amendment extended the debt maturity for five years and increased the Company’s revolving credit facility (the “Revolving Credit Facility) to $500.0, with the aggregate principal amount of the term loan credit facility (the “Term Loan Facility”) remaining at $300.0. The amendment also revised the accordion feature to permit an increase of up to an additional $400.0. Borrowings under the line of credit bear interest at defined rates plus an applicable margin based on the Company’s leverage ratio. Scheduled principal payments under the Term Loan Facility are payable in quarterly installments beginning on September 28, 2024 and continuing on the last day of each following fiscal quarter, beginning at $3.75 before increasing to $5.6 in June 2026 and $7.5 in June 2028. All remaining principal and unpaid accrued interest are due on the Term Loan Facility maturity date, which is June 25, 2029.

During the second quarter of 2025, we declared a quarterly cash dividend of $0.09 per share payable on July 21, 2025, to shareholders of record as of July 7, 2025. The declaration and payment of future dividends is subject to the sole discretion of the Board, 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.

Share Repurchase Program

On February 20, 2025, the Board approved a multi-year share repurchase program (the "Share Repurchase Program"), authorizing the Company to repurchase up to $100.0 of our outstanding common stock. The Company may purchase shares at management’s discretion from time to time in the open market, through privately negotiated transactions, through investment banking institutions or through other means in accordance with applicable federal securities laws, including Rule 10b5-1 trading plans. To the extent that the Company repurchases its shares, the amount and timing of any repurchases are subject to a variety of factors including, but not limited to, general business and market conditions, share price, regulatory and legal requirements and capital availability. The program does not obligate the Company to acquire a minimum number of shares. The share repurchase program will be funded with cash on hand and cash generated from operations. During the six months ended June 28, 2025, the Company repurchased 200,000 shares of its common stock for $6.5. As of June 28, 2025, the Company has $93.5 million of remaining availability to repurchase outstanding common stock under its Share Repurchase Program.

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 material changes made during the first six months of 2025, are disclosed in Note 2 of the Notes to the Consolidated Unaudited Financial Statements included in this Quarterly Report on Form 10-Q.

Interest Rate Risk

Our exposure to interest rate risk results from variable rate debt outstanding under our term loans and revolving credit facility. We pay interest on outstanding borrowings at interest rates that fluctuate based upon changes in various base rates. As of June 28, 2025, we had $144.3 in borrowings outstanding under the revolving credit facilities and $291.9 in borrowings outstanding under the term loans. Based on our level of variable rate debt outstanding during the quarter ended June 28, 2025, a one percentage point increase or decrease in the average interest rate would have an impact on our annual financing costs over the next twelve months of approximately $4.5. This analysis excludes any effects from interest rate swap contracts as the Company does not have any active interest rate swap contracts.

See “Item 7A – Quantitative and Qualitative Disclosures about Market Risk” in our Form 10-K. Except as described above, there were no material changes during the six months ended June 28, 2025.

The Company’s management, with the participation of the President, 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 President, 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.

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.