UFP Technologies Inc: Form 10-K for the period ended Dec 31, 2025

The Company is a contract development and manufacturing organization that specializes in single-use and single-patient medical devices. The Company is a vital link in the medical device supply chain and a valued outsourcing partner to many of the world's top medical device manufacturers. Our single-use and single-patient devices and components are used in a wide range of medical devices and packaging for minimally invasive surgery, infection prevention, wound care, wearables, orthopedic soft goods, and orthopedic implants.

The Company was incorporated in the State of Delaware in 1993.

The consolidated financial statements of the Company include the accounts and results of operations of UFP Technologies, Inc. and its wholly owned subsidiaries, as well as its share of minority-owned equity investments. All significant intercompany balances and transactions have been eliminated in consolidation.

Available Information

The Company’s Internet website address is http://www.ufpt.com. Through its website, the Company makes available, free of charge, its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, as soon as reasonably practicable after the Company electronically files such material with, or furnishes it to, the Securities and Exchange Commission (“SEC”). These SEC reports can be accessed through the investor relations section of the Company’s website. The information found on the Company’s website is not incorporated by reference in this or any other report filed with or furnished to the SEC. The SEC maintains an Internet website that contains reports, proxy and information statements, and other information regarding the Company and other issuers that file electronically with the SEC. The SEC’s Internet website address is http://www.sec.gov.

Market Overview

The applications for the Company’s products are numerous and diverse. The Company’s products are primarily sold to customers within the medical market. The global medical market is large and growing but the Company targets in specific segments where its development and manufacturing expertise and access to highly specialized materials helps customers differentiate products, improve patient outcomes, and increase their client’s speed to market. The product segments we target, and within which we operate, include minimally invasive surgery, infection control, orthopedics, interventional & surgical, surfaces & support, therapeutics, diagnostics, wound care, and biopharma.

Products

The Company’s products, which often are custom-made to its customers' specifications, are targeted at macro market trends and create specific opportunities in niche segments where the Company’s access to specialty materials, engineering know-how, and processing expertise can be leveraged to create value for its customers. Examples of its custom medical products include protective drapes for robotic surgery, patient handling and comfort, advanced wound care, infection prevention, disposables for surgical and endoscopic procedures, packaging for medical devices and orthopedic implants, components for cardiac implants, dispenser coils for catheters, and biopharma drug manufacturing. In general, the Company’s solutions are all aimed at improving treatment outcomes while reducing risk and cost.

Regulatory Climate and Environmental Considerations

The Company’s medical customers typically require Food and Drug Administration (“FDA”) approval for their products and therefore sometimes require their suppliers to manufacture in facilities that are FDA registered and comply with the International Organization for Standardization (“ISO”) 13485 quality standard for medical devices. The Company has nineteen manufacturing locations that are ISO 13485 certified and thirteen that are FDA registered. The Company designs products to provide optimum performance with minimum material. In addition, the Company bales and disposes certain of its urethane and cross-linked foam scrap for use in various recycled products. The Company’s Newburyport MA facility utilizes solar power to provide approximately 6% of its electricity, with plans to increase capacity in the future. The Company is aware of public support for environmentally responsible packaging and products. Future government action may impose restrictions affecting the industry in which the Company operates. There can be no assurance that any such action will not adversely impact the Company’s products and business.

Marketing and Net Sales

The Company markets to its target customers by promoting specific solutions, materials, and manufacturing capabilities and services. The Company markets through websites, trade shows and expositions, social media, online advertising, emails, and press releases. Its relationships with key material suppliers are also an important part of its marketing and sales efforts. The Company markets and sells its products principally through a direct sales force. The Company’s commercial leaders, in conjunction with Company engineers, collaborate with customers and in-house design and manufacturing experts to develop custom-engineered solutions on a cost-effective basis. For the year ended December 31, 2025, two customers’ net sales were approximately 24.3% and 21.5% of net sales, respectively. No other customer’s net sales exceeded 10% of net sales. For additional information, see “Risk Factors - We depend on a small number of customers for a large percentage of our net sales. The loss of any such customer, a reduction in net sales to any such customer, or the decline in the financial condition of any such customer could have a material adverse effect on our business, financial condition, and results of operations.”

Seasonality is not a major factor in the Company’s net sales. See the Company’s consolidated financial statements contained in Part IV, Item 15, of this Report for net sales by market.

Manufacturing

The Company’s manufacturing operations consist primarily of cutting, routing, compression and injection molding, vacuum-forming, micro-molding, thermoforming, laminating, radio frequency and impulse welding, and assembling. For medical custom-molded foam products and thermoplastic welded devices, the Company’s skilled engineering personnel analyze specific customer requirements to design and build prototype products to determine product functionality. Upon customer approval, prototypes are converted to final designs for commercial production runs. Molded cross-linked foam products are produced in a thermoforming process using heat, pressure, and precision metal tooling. Thin films and other materials are sealed using radio frequency and impulse welding and formed through a thermoforming process. Reticulated polyurethane foam is also used for many high-performance medical products requiring precision fluid or air management. These products are typically fabricated using high speed die-cutting or waterjet cutting. Laminated products for medical, military, and personal comfort and protection are produced through a process whereby the foam medium is heated to the melting point and then bonded to a non-foam material through the application of mechanical pressure.

The Company does not manufacture any of the raw materials used in its products. With the exception of certain grades of cross-linked foam, thermoplastic urethane (“TPU”) and technical polyurethane foams, these raw materials are available from multiple supply sources. Although the Company relies upon a limited number of suppliers for cross-linked and technical polyurethane foams, and TPU, the Company’s relationships with its suppliers are good, and the Company expects that these suppliers will be able to meet its requirements for these foams. Any delay or interruption in the supply of raw materials could have a material adverse effect on the Company’s business.

Research and Development

The Company’s engineering personnel continuously explore new design and manufacturing techniques, as well as new and innovative materials to meet the unique demands and specifications of its customers. Research and development is an integral part of the Company’s ongoing cost structure.

Competition

The medical design and contract manufacturing industry is highly competitive as is the foam and plastics converting industry as a whole. While there are several national companies that convert foam and plastics, the Company’s primary competition is from smaller independent regional manufacturing companies. These companies generally market their products in specific geographic areas from neighboring facilities. The Company’s custom engineered products face competition primarily from smaller companies that typically concentrate on the production of products for specific industries or regions. The Company expects to compete effectively in the engineered products market due to its ability to address its customers' primary vendor selection criteria, including inclusion on their preferred supplier lists, price, product performance, product reliability, manufacturing locations, and customer service, as well as its access to a wide variety of materials, its engineering expertise, its ability to combine foams with other materials such as plastics and laminates, and its ability to manufacture products in a clean room environment.

Patents and Other Proprietary Rights

The Company relies upon trade secrets, patents, and trademarks to protect its technology and proprietary rights. The Company believes the improvement of existing products, reliance upon trade secrets and unpatented proprietary know-how, and the development of new products are generally as important as patent protection in establishing and maintaining a competitive advantage. Nevertheless, the Company has obtained patents and may continue to make efforts to obtain patents, when available, although there can be no assurance that any patent obtained will provide substantial protection or be of commercial benefit to the Company, or that its validity will be upheld if challenged. The Company has a total of 21 active patents relating to technologies primarily in the medical device, foam, and packaging fields, including lubricious extruded medical tubing, systems and methods for securing medical devices, medical device designs, radio frequency and thermal welding processes. The Company also has patent applications in process. There can be no assurance that any patent or patent application will provide significant protection for the Company’s products and technology or will not be challenged or circumvented by others. The expiration dates for the Company’s patents range from 2026 through 2044. The Company’s U.S. registered trademarks are: UFP TECHNOLOGIES®, UFP MEDTECH®, SHAPING INNOVATION®, FLEXSHIELD®, FIRMALITE®, BIOSHELL®, T‑TUBES®, T‑TUBE®, TRI‑COVERS®, DESIGN NAIL®, PRO‑STICKS®, CRYOSHELL®, CASE FIT®, ALLOSHELL®, FLASH SHINER®, MAMBO®, WINEPACKS®, UNITED FOAM®, and the Company’s STACKED U LOGO. Each trademark, trade name, or service mark of any other company appearing in this Report belongs to its respective holder.

Human Capital Management

As of January 24, 2026, the Company had a total of 4,846 full-time employees (compared to 4,146 full-time employees as of January 25, 2025) and 503 temporary workers (compared to 189 temporary workers at January 25, 2025). The Company is not a party to any collective bargaining agreements. The Company considers its employee relations to be good.

The Company strives to promote a workplace that is professional, provides opportunities for career growth and treats all workers with dignity and respect. The Company does not tolerate unlawful discrimination and harassment in the workplace; it expressly prohibits any form of unlawful discrimination or harassment based on race, color, religion, sex, sexual orientation, gender identity or expression, national origin, ethnicity, age, physical or mental disability, genetic information, military or veteran status, pregnancy, childbirth or related medical conditions, or any other legally protected status under applicable federal, state, or local law.

The Company’s employees are tasked with upholding our Code of Ethics and Business Conduct, which we view as an important component of our operating strategy. This policy covers the conduct of the Company's employees in their work-related dealings with each other, as well as interactions with our customers, vendors, and other business partners. The Company’s compliance hotline is maintained for the confidential reporting of any suspected policy violations or unethical business conduct.

The Company’s commitment to its employees starts at the top with an executive-level officer – Senior Vice President of Human Resources (“SVP of HR”) – reporting to the CEO, attending all board meetings, and having significant involvement with the board’s compensation committee. This commitment is reflected in our efforts to attract, engage, and retain the best people possible.

Compensation and Benefits

The Company’s compensation and benefits offerings are supported by external data services. In addition to competitive compensation practices, the Company offers annual stock award bonus programs to reward and retain executives and key employees. Access to company subsidized health, life and disability insurance; a matching 401(k) plan; and paid time off for vacation, illness and personal reasons, are the highlights of the Company’s benefits available to all eligible full-time employees. For those employees struggling with life’s challenges, the Company offers employee assistance programs.

Growth and Development

The Company supports every employee’s opportunity for career growth. It offers tuition reimbursement for employees to further their industry-related formal education; access to virtual training and education platforms; reimbursement to attend work-related seminars; and on-the-job training and cross-training to improve job skills. Its talent management program provides feedback on performance, identifies employees with potential for advancement, and allows for personalized career development plans. Its summer internship program provides the opportunity for college and technical school students to demonstrate and develop the skills to become valuable members of our team.

The Company’s commitment to its employees has resulted in several national, regional, and local “Best in Class” awards.

Safety

As an essential manufacturing company, the Company takes its responsibility for our employees’ health and safety seriously. Its corporate safety officer reports directly to the Vice President, Operations, Medtech and works with dedicated safety officers at each of our plants to implement safety programs and training. Safety audits are conducted regularly to ensure compliance.

The risks factors described below could materially impact our business, including our results of operations and financial results. These are the risks and uncertainties we believe are most important for you to consider. Additional risks and uncertainties not presently known to us, which we currently deem immaterial, or which are similar to those faced by other companies in our industry or business in general, may also impair our business operations. If any of the following risks or uncertainties occur, our business, financial condition and operating results would likely suffer.

Risks Related to our Business

Our business, operating results, and cash flows have historically been affected and may continue to be adversely affected by inflation.

Inflation rates could rise in the future. Such inflationary pressures could affect our manufacturing costs, operating expenses (including wages) and other expenses. We may not be able to pass these cost increases on to our customers in a timely manner, which could have an impact on our gross margins and profitability. In addition, inflation could result in higher interest rates and could otherwise adversely impact the macroeconomic environment, which in turn could adversely impact our customers and their ability or willingness to purchase our products. Our inability to successfully manage the effects of inflation could have a material adverse effect on our business, results of operations and cash flows.

Our operating results depend in part on our ability to contain or reduce costs. There is substantial price competition in our industry and upward pressure on material and labor costs. Our success and profitability will depend on our ability to maintain a competitive cost and price structure.

Our efforts to maintain and improve profitability depend in part on our ability to maintain or reduce the costs of materials, components, supplies and labor. While the failure of any single cost containment effort by itself would most likely not significantly impact our results, we cannot give any assurance that we will be successful in controlling material and labor costs to maintain a competitive cost structure. There is substantial price competition in our industry, and our success and profitability will depend on our ability to maintain a competitive cost and price structure. We may have to reduce prices in the future to remain competitive. Also, our future profitability will depend in part upon our ability to continue to improve our manufacturing efficiencies and maintain a cost structure that will enable us to offer competitive prices in the face of upward pressure on material and labor costs. Our inability to maintain a competitive cost structure could have a material adverse effect on our business, financial condition and results of operations.

The ongoing conflict between Russia and Ukraine, other similar conflicts and civil unrest in Haiti, which is in proximity to our manufacturing facilities in the Dominican Republic could have a material adverse effect on our business and results of operations.

As a result of the ongoing military conflict between Russia and Ukraine, the United States and other countries have imposed significant sanctions on Russia and could impose even wider sanctions. The military conflict and related sanctions could damage or disrupt international commerce and the global economy. We cannot predict the broader or longer-term consequences of the conflict or of the sanctions imposed to date or in the future, which could include embargoes, regional instability, geopolitical shifts, exchange rate fluctuations, financial market disruptions and economic recession. Further, the conflict could exacerbate supply chain challenges, lead to an increase in cyberattacks from Russia, affect the global price and availability of key commodities, reduce our sales and earnings or otherwise have an adverse effect on our business and results of operations.

Our manufacturing facilities and warehouses in the Dominican Republic play a crucial role in the production of certain of our medical products. Our manufacturing facilities and warehouses may be damaged or our ability to use or access them may be disrupted as a result of civil unrest or other occurrences in Haiti. Such events may interfere with our manufacturing process, information systems, telecommunication services, and product delivery for sustained periods and may also make it difficult or impossible for employees to reach our business locations. Damage or destruction that interrupts our manufacturing facilities could adversely affect our reputation, our relationships with our largest customers, our leadership team’s ability to administer and supervise our business and cause us to incur substantial additional expenditures to repair or replace damaged equipment or facilities or commence alternate production locations.

In addition, the conflict between Russia and Ukraine, civil unrest in Haiti and similar conflicts or situations such as a break in the current ceasefire in the Israel-Hamas War may have the effect of heightening other risks disclosed in this Form 10-K, any of which could materially and adversely affect our business and results of operations. Such risks include but are not limited to interruptions in the transportation channels for the manufacture and global distribution of our products, heightened inflation, depressed levels of consumer and commercial spending, adverse changes in international trade policies and relations, and the inability to implement and execute our business strategy. We are currently unable to predict the extent, nature or duration of any of these occurrences.

We depend on a small number of customers for a large percentage of our net sales. The loss of any such customer, a reduction in net sales to any such customer, or the decline in the financial condition of any such customer could have a material adverse effect on our business, financial condition, and results of operations.

A limited number of customers typically represent a significant percentage of our net sales in any given year. Our top ten customers represented approximately 68.8%, 68.1%, and 59.3% of our total net sales in 2025, 2024, and 2023, respectively. Two customers (Intuitive Surgical SARL and Stryker) comprised approximately 24.3% and 21.5%, respectively, of our net sales for the year ended December 31, 2025; two customers (Intuitive Surgical SARL and Stryker) comprised approximately 29.2% and 15.4%, respectively, of our net sales for the year ended December 31, 2024; one customer comprised approximately 28.1% of our net sales for the year ended December 31, 2023. The loss of a significant portion of our expected future net sales to any of our large customers could have a material adverse effect on our business, financial condition, and results of operations. Likewise, a material adverse change in the financial condition of any of these customers could have a material adverse effect on our ability to collect accounts receivable from any such customer. One customer represented approximately 32.1% of gross accounts receivable for the year ended December 31, 2025, and one customer represented approximately 34.0% of gross accounts receivable for the year ended December 31, 2024.

Our business could be harmed if our products contain undetected errors or defects or do not meet applicable specifications.

Based on customer specifications, we are continuously developing new products and improving existing products. Our existing and newly introduced products can contain undetected errors or defects. In addition, these products may not meet their performance specifications under all conditions or for all applications. If, despite internal testing and testing by customers, any of our products contain errors or defects or fail to meet applicable specifications, then we may be required to enhance or improve those products or technologies. We may not be able to do so on a timely basis, if at all, and may only be able to do so at considerable expense. If a particular error or defect is repeated throughout our production process, the cost of repairing such defect may be highly disproportionate to the original cost of the product or component. In addition, any significant errors, defects, or other performance failures could render our existing and/or future products unreliable or ineffective and could lead to decreased confidence in our products, adverse customer reaction, negative publicity, mandatory or voluntary recalls, or legal claims, the occurrence of any of which could have a material adverse effect upon our business, financial condition, and results of operations.

Further, if our products are defectively designed, manufactured, or labeled, contain defective components or are misused, we may become subject to costly litigation by our customers or be expected to fund product recalls. Product liability claims could divert management's attention from our core business, be expensive to defend and result in sizable damage awards against us.

New technologies could result in the development of new products by our competitors and a decrease in demand for our products, which could materially adversely affect our business, financial condition and results of operations.

Our failure to develop new technologies, or anticipate or react to changes in existing technologies, could result in a decrease in our net sales and a loss of market share to our competitors. Our financial performance depends on our ability to design, develop, and manufacture new products and product enhancements on a timely and cost-effective basis. We may not be able to successfully identify new product opportunities or develop and bring new products to market in a timely and cost-effective manner.

Products or technologies developed by other companies may render our products or technologies obsolete or noncompetitive. Our failure to identify or capitalize on any fundamental shifts in technologies, relative to our competitors, could have a material adverse effect on our competitive position within our industry and harm our relationships with our customers.

If we fail to comply with specific provisions of our customer contracts or Food and Drug Administration (FDA) regulations, our business could be materially adversely affected.

Our customer contracts, particularly with respect to contracts for which the US government is a direct or indirect customer, may include unique and specialized requirements. This may also include contracts with customers that manufacture goods subject to FDA regulations. Failure to comply with the specific provisions in our customer contracts, or any violation of government or FDA contracting regulations, could result in termination of the contracts, increased costs to us, suspension of payments, imposition of fines, and suspension from future government contracting. Further, any negative publicity related to our failure to comply with the provisions in our customer contracts could have a material adverse effect on our business, financial condition, or results of operations.

Increased focus and evolving views of lawmakers on climate change and other ESG issues could have a long-term impact on our business and result of operations.

Increased public awareness and concern regarding global climate change and other ESG matters may result in more international, regional, and/or federal regulatory or other stakeholder requirements or expectations that could mandate more restrictive or expansive standards, such as more prescriptive reporting of ESG metrics, practices, and targets, or require such changes on a more accelerated time frame. There continues to be a lack of consistent climate and other ESG legislation, which creates economic and regulatory uncertainty; however, there has been an increasing amount of legislative and regulatory activity, particularly in the European Union, United Kingdom, and U.S. In addition, there is also an increasing number of state-level anti-ESG initiatives in the U.S. that may conflict with other regulatory requirements, resulting in regulatory uncertainty. New or revised legal and regulatory requirements could impose significant operational restrictions and compliance requirements upon the Company or its products, and could negatively impact the Company’s business, capital expenditures, results of operations, financial condition, and competitive position.

Global climate change and related regulations and changes in customer demand could negatively affect our operations and our business.

The effects of climate change could create financial risks to our business. For example, the effects of physical impacts of climate change could disrupt our operations by impacting the availability and cost of materials needed for manufacturing, exacerbate existing risks to our supply chain, disrupt our operations, and increase insurance and other operating costs. These factors may impact our decisions to construct new facilities or maintain existing facilities in areas more prone to physical climate risks. We could also face indirect financial risks passed through the supply chain and disruptions that could result in increased prices for our products and the resources needed to produce them.

The growing focus on addressing global climate change has resulted in more regulations designed to reduce greenhouse gas emissions and more customer demand for products and services that have a lower carbon footprint or that help businesses and consumers reduce carbon emissions throughout their value chains. We may be required to further increase research and development and other capital expenditures in order to develop offerings that meet these new regulations, standards, and customer demands. There can be no assurance that our new product development efforts will be successful, that our products will be accepted by the market, or that economic returns will reflect our investments in new product development.

We may pursue acquisitions or other strategic relationships that involve inherent risks, any of which may cause us to not realize anticipated benefits.

Our business strategy includes the acquisition of businesses and other business combinations that we expect will complement and expand our business. In addition, we may also pursue other strategic relationships or opportunities. We may not be able to successfully identify suitable acquisition or other strategic opportunities or complete any particular acquisition, combination, or other transaction on acceptable terms. Our identification of suitable acquisition candidates and strategic opportunities involves risks inherent in assessing the values, strengths, weaknesses, risks, and profitability of these opportunities including their effects on our business, diversion of our management’s attention and risks associated with unanticipated problems or unforeseen liabilities. Our failure to identify suitable acquisitions or other strategic opportunities may restrict our ability to grow. If we are successful in pursuing future acquisitions or strategic opportunities, we may be required to expend significant funds, incur additional debt, or issue additional securities, which may materially and adversely affect our results of operations and be dilutive to our stockholders. If we spend significant funds or incur additional debt, our ability to obtain financing for working capital or other purposes could decline and we may be more vulnerable to economic downturns and competitive pressures. In addition, we cannot guarantee that we will be able to finance additional acquisitions or that we will realize any anticipated benefits from acquisitions or other strategic opportunities that we complete. When and if we successfully acquire another business, the process of successfully integrating the acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of our existing business. Decreases in customer loyalty or product orders, failure to retain and develop the acquired workforce, failure to integrate financial reporting systems, failure to establish and maintain appropriate controls or unknown or contingent liabilities could adversely affect our ability to realize the anticipated benefits of an acquisition. The integration of an acquired business, whether or not successful, requires significant efforts which may result in additional expenses and divert the attention of our management and technical personnel from other projects. These transactions are inherently risky, and there can be no assurance that any past or future transaction will be successful.

Failure to retain key personnel could impair our ability to execute our business strategy.

The continuing service of our executive officers and essential sales, engineering, technical, back-office and management personnel, together with our ability to attract and retain such personnel, is a key factor in our continuing ability to execute our strategy. There is substantial competition to attract such employees, and the loss of any such key employees could have a material adverse effect on our business and operating results. The same could be true if we were to experience a high turnover rate among sales, engineering and technical personnel and we were unable to replace them.

We operate in highly competitive industries, and we may be unable to compete successfully, which could materially adversely affect our business, financial condition and results of operations.

We face intense competition in all markets and in each area of our business, in some cases from our own customers bringing programs in-house. Our current competitors may increase their participation in, or new competitors may enter into, the markets in which we compete. In addition, our suppliers may acquire or develop the capability and desire to compete with us. If our suppliers choose to expand their own operations, through acquisitions or otherwise, and begin manufacturing and selling products directly to our customers, it could reduce our pricing or sales volume and overall profitability. If we are unable to compete successfully with new or existing competitors, it could have a material adverse effect on our business, financial condition, and results of operations.

Further, technological innovation by any of our existing competitors, including our customers, or new competitors entering any of the markets in which we do business, could put us at a competitive disadvantage and could cause us to lose market share. Increased competition for the sales of our products could result in price reductions, reduced margins, and loss of market share, which could materially affect our prospects, business, financial condition and results of operations.

Actual or perceived failures to comply with applicable data protection, privacy and security laws, regulations, standards, and other requirements may adversely impact our business and financial results.

Laws and regulations in various countries around the world with regards to cybersecurity, privacy and data protection are rapidly expanding and creating a complex compliance environment. These laws include evolving legislation with respect to the collection, storage, handling, use, disclosure, transfer, and security of personal data and the notification requirements in the event of unauthorized access to or acquisition of certain types of personal information. Implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future, and we cannot yet determine the impact that future laws, regulations, standards, or perception of their requirements may have on our business. This evolution may create uncertainty in our business, affect our ability to operate in certain jurisdictions or to collect, store, transfer, use and share personal information, necessitate the acceptance of more onerous obligations in our contracts, result in liability or impose additional costs on us. Failure to comply with these laws may affect our reputation and operating results negatively, subject us to significant liabilities, costs or expenses, and may require significant management time and attention.

In some cases, these legal requirements may be either unclear in their interpretation and application or they may have inconsistent or conflicting requirements with each other. In addition, some of the privacy and data protection laws and regulations in the U.S., the EU, China and other countries place restrictions on our ability to process personal data across our business or across country borders, and could impact our business and operations. Compliance with these laws, many of which entail substantial penalties for non-compliance, or future regulations could impose even greater compliance burdens and risks on us.

Furthermore, the Federal Trade Commission (“FTC”) and many state Attorneys General continue to enforce federal and state consumer protection laws against companies for online collection, use, dissemination and security practices that appear to be unfair or deceptive. For example, according to the FTC, failing to take appropriate steps to keep consumers’ personal information secure can constitute violations under Section 5(a) of the Federal Trade Commission Act. The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities.

The EU’s General Data Protection Regulation (the “GDPR”), the CCPA, and the data protection and security laws of other states and countries impose additional requirements with respect to disclosure and deletion of personal information of their residents, imposing penalties for violations and, in some cases, private right of action for data breaches. These laws, and similar legislation that is developing or has been recently enacted, impose transparency and other obligations with respect to personal data of their respective residents and provide residents with similar rights for certain types of data breaches. We have invested, and continue to invest, human and technology resources in our data compliance efforts that may be time-intensive and costly. Despite our efforts, there is a risk that we may be subject to fines and penalties for non-compliance and experience litigation, reputational harm and business interruption if we fail to protect the privacy of third-party data or to comply with the GDPR, CCPA, and other applicable data privacy and protection regimes.

Security breaches, including cybersecurity incidents and other disruptions could compromise our information, expose us to liability and harm our reputation and business.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, personal information, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our customers and employees in our data centers and on our networks. The secure maintenance and transmission of this information is critical to our operations and business strategy. We rely on commercially available systems, software, tools and monitoring to provide security for processing, transmission, and storage of confidential information. Computer hackers may attempt to penetrate our computer systems and, if successful, misappropriate personal or confidential business information. In addition, an employee, contractor, or other third-party with whom we do business may attempt to circumvent our security measures in order to obtain such information and may purposefully or inadvertently cause a breach involving such information. Despite the security measures we have in place and any additional measures we may implement in the future to safeguard our systems and to mitigate potential security risks, our facilities and systems, and those of our third-party service providers, could be vulnerable to security breaches, including the Cyber Incident (as defined below) . If unauthorized parties gain access to our systems or databases, such as with the Cyber Incident, or those of third parties on which we rely, they could be able to steal, publish, delete, hold ransom or modify our private and sensitive information, including payment information, personal information, and confidential and other proprietary business information. The Company, its customers, suppliers and business partners, as well as the Company’s employees, could suffer harm if valuable business data, or employee, customer and other confidential and proprietary information were corrupted, lost, accessed or misappropriated by third parties due to a cyber-attack, a security systems failure, or due to one of our third-party service providers or our employees.

Any such compromise of our data security and access, public disclosure, or loss of personal or confidential business information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disruption of our operations, damage to our reputation, loss of our customers’ willingness to transact business with us, and subject us to additional costs and liabilities which could materially adversely affect our business. While we maintain insurance for cyber events, our insurance may not be sufficient to cover us against all losses that could potentially result from a breach of our systems or loss of sensitive data.

Even the most well protected IT networks, systems and facilities remain potentially vulnerable because the techniques used in attempted cybersecurity attacks are continually evolving, and may not be recognized until after the attack is launched against a target or, in some instances, are designed not to be detected and, in fact, may not be detected. Any such compromise of the Company’s or any of our partners’ IT systems could result in unauthorized access, public disclosure, or loss of personal, sensitive, or confidential business information, could result in legal claims and proceedings, liability under applicable laws and regulatory penalties, and could disrupt the Company’s operations, require significant management attention and resources to remedy any damages that result, and damage the Company’s reputation and customer willingness to transact business with it, any of which could adversely affect its business.

We experienced a material information technology (“IT”) systems incident in February 2026, which could result in a number of potentially unknown outcomes, including but not limited to, litigation, regulatory investigations or enforcement actions, or reputational harm, any of which could have a material impact on our business operations, financial condition, or results of operations.

On or about February 14, 2026, the Company detected suspicious activity involving its IT systems (the “Cyber Incident”). Upon detecting the issue, the Company began taking steps to assess, contain, and remediate the unauthorized activity, including isolating the affected systems and launching an investigation with the assistance of external cybersecurity advisors. The incident appears to have impacted many but not all of the Company’s IT systems and affected functions such as billing and label making for customer deliveries. Certain Company or Company-related data appear to have been stolen or destroyed. Although the Company has ascertained that certain files were exfiltrated, it is still investigating the extent of any sensitive information contained in the accessed systems, including whether any personal information was exfiltrated. It is evaluating what legal and regulatory notifications and filings may be required as a result of this incident and will make such filings as are required based on its findings.

As a result of the Cyber Incident, we may be subject to business disruptions or governmental investigations, private litigation or other claims, which could result in fines, other monetary relief, or injunctive relief that could materially increase our data security costs, adversely impact how we operate our systems and collect and use personal information. If, as a result of any such governmental investigation, other investigation or claim, we are found to be in violation of applicable laws and regulations including, without limitation, any applicable data privacy and information security laws or regulations, we could be subject to legal risk, including governmental enforcement action and civil litigation, which could adversely affect our business, reputation, financial condition or results of operations.

Defending any such litigation claim or enforcement action, regardless of merit, and whether successful or unsuccessful, and cooperating with regulatory investigations, could be expensive and time-consuming and adversely affect our business, reputation, results of operations or financial condition. In addition, we may be adversely impacted by reputational harm or a loss of confidence in the security and integrity of our IT systems among customers, employees and business partners. As of the date hereof, the Cyber Incident has not had a material impact on the Company’s financial systems, operations or financial condition due in part to the Company’s planned solutions for the issues posed by the incident. There is no assurance these planned solutions will work in the future for the Cyber Incident or any future incident. While the Company’s investigation and assessment of the Cyber Incident is ongoing, as of the date hereof, the Company does not believe the incident is reasonably likely to materially impact the Company’s financial condition or results of operations. There can be no assurance that the Cyber Incident or any future cybersecurity incidents will not have a material impact on the Company’s future operations, financial systems or financial condition.

Disruptions in the supply of components and raw materials we use in manufacturing our products could cause production delays or reductions in the number of products we manufacture, which could materially adversely affect our business, financial condition, and results of operations.

Our business is subject to the risk of periodic shortages of raw materials. We purchase raw materials pursuant to purchase orders placed from time to time in the ordinary course of business. Failure or delay by such suppliers in supplying us necessary raw materials could adversely affect our ability to manufacture and deliver products on a timely and competitive basis.

While we believe that we may, in certain circumstances, secure alternative sources of these materials, we may incur substantial delays and significant expense in doing so, the quality and reliability of alternative sources may not be the same and our operating results may be materially adversely affected. Alternative suppliers might charge significantly higher prices for materials than we currently pay. Under such circumstances, the disruption to our business could have a material adverse impact on our customer relationships, business, financial condition, and results of operations.

In addition, we are dependent on a relatively small number of suppliers for cross-linked foam, thermoformed plastic urethane and technical polyurethane foams. While we believe that we have developed strong relationships with these suppliers, any failure or delay by such suppliers in supplying us these necessary products could adversely affect our ability to manufacture and deliver products on a timely and competitive basis.

If we fail to accurately forecast component and raw material requirements for our products, we could incur additional costs and experience significant delays in shipments, which could have an adverse effect on the results of our business operations, and could damage our relationships with customers.

We use rolling forecasts based on anticipated product orders to determine our production requirements. It is important that we accurately predict both the demand for our products and the lead times required to obtain the necessary components and raw materials to manufacture our products. Lead times for our components and raw materials vary significantly and depend on multiple factors, including the specific supplier requirements, the size of the order, contract terms and current market demand. For substantial increases in our sales levels of certain products, some of our suppliers may need significant lead time. If we overestimate our component and raw material requirements, we may have excess inventory, which would increase our costs. If we underestimate our component and raw material requirements, we may encounter material shortages, which could interrupt production and delay delivery of our products to customers. Any of these occurrences could adversely affect our results of operations and damage our relationships with customers.

We may be unable to protect our proprietary technology from infringement.

We rely on a combination of patents, trademarks, and unpatented proprietary know-how and trade secrets to establish and protect our intellectual property rights. We enter into confidentiality agreements with suppliers, customers, employees, consultants, and potential acquisition candidates as necessary to protect our know-how, trade secrets and other proprietary information. However, these measures and our patents and trademarks may not afford complete protection of our intellectual property, and it is possible that third parties may copy or otherwise obtain and use our proprietary information and technology without authorization or otherwise infringe on our intellectual property rights. We cannot assure that our competitors will not independently develop equivalent or superior know-how, trade secrets or production methods. Significant impairment of our intellectual property rights could harm our business or our ability to compete. For example, if we are unable to maintain the proprietary nature of our technologies, our profit margins could be reduced as competitors could more easily imitate our products, possibly resulting in lower prices or lost sales for certain products. In such a case, our business, financial condition, and results of operations may be materially adversely affected.

Our products could infringe the intellectual property rights of others, which may lead to litigation that could itself be costly, result in the payment of substantial damages or royalties, and prevent us from using technology that is essential to our products.

We cannot guarantee that our products, manufacturing processes or other methods do not infringe the patents or other intellectual property rights of third parties. Infringement and other intellectual property claims and proceedings brought against us, whether successful or not, could result in substantial costs and harm our reputation. Such claims and proceedings can also distract and divert our management and key personnel from other tasks important to the success of our business. In addition, intellectual property litigation or claims could force us to do one or more of the following:

• Cease selling or using any of our products that incorporate the asserted intellectual property, which would adversely affect our net sales;
• Pay substantial damages for past use of the asserted intellectual property;
• Obtain a license from the holder of the asserted intellectual property, which license may not be available on reasonable terms, if at all; and/or
• Redesign or rename, in the case of trademark claims, our products to avoid infringing the intellectual property rights of third parties, which may be costly and time-consuming, even if possible.

In the event of an adverse determination in an intellectual property suit or proceeding, or our failure to license essential technology, our sales could be harmed, and our costs could increase, which could materially adversely affect our business, financial condition, and results of operations.

Reductions in the availability of energy supplies or an increase in energy costs may increase our operating costs.

We primarily use electricity and natural gas at our manufacturing facilities to operate our equipment. Over the past several years, prices for electricity and natural gas have fluctuated significantly. An outbreak or escalation of hostilities between the United States and any foreign power, or between foreign powers, or a natural disaster, could result in a real or perceived shortage of petroleum and/or natural gas, which could result in an increase in the cost of electricity or energy generally as well as an increase in the cost of our raw materials, of which many are petroleum-based. In addition, increased energy costs negatively impact our freight costs due to higher fuel prices. Future limitations on the availability or consumption of petroleum products and/or an increase in energy costs, particularly electricity for plant operations, could have a material adverse effect upon our business, financial condition, and results of operations.

Consolidation in the healthcare industry could result in greater competition and reduce our net sales and harm our business.

Many healthcare industry companies are consolidating to create new companies with greater market power. As the healthcare industry consolidates, competition to provide products and services to industry participants will become more intense. These industry participants may try to use their market power to negotiate price reductions for our products or may undertake additional vertical integration or supplier diversification initiatives. If we are forced to reduce our prices, our net sales would decrease and our operating results would suffer.

Our business is indirectly subject to healthcare industry cost containment and healthcare reform measures that could result in reduced sales of our products.

Several of our customers rely on third party payors, such as government programs and private health insurance plans, to reimburse some or all of the cost of the procedures in which our products are used. The continuing efforts of governments, insurance companies and other payors of healthcare costs to contain or reduce those costs could lead to patients being unable to obtain approval for payment from these third-party payors for procedures in which our products are used. If that occurs, sales of medical devices may decline significantly and our customers may reduce or eliminate purchases of our products, or demand further price reductions. The cost containment measures that healthcare payors are instituting both in the U.S. and internationally could reduce our revenues and harm our operating results.

In addition, in the U.S. and other jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes to reform healthcare systems. Various elements of healthcare reforms, such as comparative effectiveness research, an independent payment advisory board, payment system reforms, including shared savings pilots, and other provisions, could meaningfully change the way healthcare is developed and delivered and may have material adverse impact on numerous aspects of our business, results of operations and financial condition.

Expansion of our operations into markets outside of the U.S. subjects us to political, economic, legal, operational, and other risks that could have a material adverse effect on our business, results of operations, financial condition, cash flows and reputation.

We have recently added and expanded manufacturing facilities in Puerto Rico, the Dominican Republic, Ireland, Costa Rica, and Mexico. We may continue to expand our operations by offering our services and entering new lines of business in other markets outside of the U.S. This expansion increases our exposure to the inherent risks of doing business in international markets. Depending on the market, these risks include those relating to:

• Changes in the local economic environment including, among other things, labor cost increases and other general inflationary pressures;
• Political instability, armed conflicts, or terrorism;
• Public health crises, such as pandemics or epidemics;
• Social changes;
• Intellectual property legal protections and remedies;
• Trade regulations;
• Procedures and actions affecting approval, production, pricing, reimbursement and marketing of products and services;
• Foreign currency;
• Additional U.S. and foreign taxes;
• Export controls;
• Antitrust and competition laws and regulations;
• Lack of reliable legal systems which may affect our ability to enforce contractual rights;
• Changes in local laws or regulations, or interpretation or enforcement thereof;
• Potentially longer ramp-up times for starting up new operations, and for payment and collection cycles;
• Financial, operational and information technology systems integration;
• Failure to comply with U.S. laws, such as the foreign corrupt practices act, or local laws that prohibit us, our partners, or our partners’ or our agents or intermediaries from making improper payments to foreign officials or any third party for the purpose of obtaining or retaining business; and
• Data and privacy restrictions.
• Foreign currency fluctuations

Issues relating to the failure to comply with applicable non-U.S. laws, requirements or restrictions may also impact our domestic business and increase scrutiny of our domestic practices.

Additionally, some factors that will be critical to the success of our international business and operations will be different than those affecting our domestic business and operations. For example, conducting international operations requires us to devote significant management resources to implement our controls and systems in new markets, to comply with local laws and regulations, including fulfilling financial reporting and records retention requirements, and overcoming the numerous new challenges inherent in managing international operations, such as challenges based on differing languages and cultures, as well as differing regulatory and compliance environments, and challenges related to the timely hiring, integration and retention of a sufficient number of skilled personnel to carry out operations in an environment with which we are not familiar.

Any additional expansion of our international operations through acquisitions or through organic growth could increase these risks. Additionally, while we may invest material amounts of capital and incur significant costs in connection with the growth and development of our international operations, including the costs of starting up or acquiring new operations, we may not be able to operate them profitably on the anticipated timeline, or at all.

These risks could have a material adverse effect on our business, results of operations, financial condition, and cash flows, and could materially harm our reputation.

If significant tariffs or other restrictions are placed on imports or any related counter-measures are taken by foreign countries, our revenue and results of operations may be materially harmed. Potential changes in international trade relations between the United States and other countries could have a material adverse effect on our business.

There is currently significant uncertainty about the future relationship between the United States and various other countries, with respect to trade policies, treaties, government regulations and tariffs. The U.S. government has adopted a new approach to trade policy including in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements. The U.S. government has also imposed tariffs on certain foreign goods. These measures may materially increase costs for goods imported into the United States. This in turn could require us to materially increase prices to our customers which may reduce demand, or, if we are unable to increase prices to adequately address any tariffs, quotas or duties result in lowering our margin on products sold. Changes in U.S. trade policy have resulted in, and could result in more, U.S. trading partners adopting responsive trade policies, including imposition of increased tariffs, quotas or duties, making it more difficult or costly for us to export our products to those countries. The implementation of a border tax, tariff or higher customs duties on our products manufactured abroad or components that we import into the U.S., or any potential corresponding actions by other countries in which we do business, could negatively impact our financial performance.

We have incorporated and may further incorporate artificial intelligence (AI) into our internal operations to enhance employee productivity and improve cybersecurity. Implementation of artificial intelligence technologies may result in legal and regulatory risks, reputational harm, or other adverse consequences to our business.

We have a policy placing controls around the use of AI in the enterprise. Further, certain of our third-party vendors utilize AI and machine learning technologies in furnishing services to us. As with many technological innovations, AI presents risks and challenges that could affect its adoption, and therefore our business. By policy, we do not allow the upload of any personal or company confidential information to any AI tools except those from which we have obtained commercially reasonable assurances that such information will not be used other than to provide the services to the company (e.g., no training of models), nor will it be shared with any third party.

Though we have taken steps to be thoughtful in the allowed use of AI, it could pose certain risks to our customers, and it is not guaranteed that regulators will agree with our approach to limiting these risks or to our compliance more generally. Risks can include, but are not limited to, the potential for errors or inaccuracies in the algorithms or models used by AI, the potential for bias or inaccuracies in the data used to train the AI, the potential for improper processing of personal information, and the potential for cybersecurity breaches that could compromise internal operations. Such risks could negatively affect the performance of our business, as well as our reputation and the reputations of our customers, and we could incur liability through the violation of laws or contracts to which we are a party or civil claims.

Changes in foreign currency rates could have a material adverse effect on our financial position, results of operations, and cash flows.

A portion of our revenue is derived from our European operations and includes transactions in Euros, while our products are mainly manufactured in the U.S. and the Dominican Republic. In the event of a decline in the value of the Euro, we typically experience a decline in our revenues and profit margins. If we increase the selling prices on our products sold in Europe in order to maintain profit margins and recover costs, we may lose customer sales to lower cost competitors. Consequently, a strong U.S. dollar may adversely affect reported revenues and our profitability.

Additionally, balances maintained in foreign currencies create additional financial exposure to changing foreign currency rates. If foreign currency rates were to change significantly, we could incur material losses. While we use foreign currency contracts and other risk management techniques to hedge our foreign currency exposures, we cannot be certain that our efforts will be adequate to protect us against significant foreign currency rate fluctuations or that such efforts will not expose us to additional exchange rate risks.

Risks Related to our Share Ownership and our Capital Structure

Restrictions in our credit facilities may limit our business and financial activities, including our ability to obtain additional capital in the future.

In June 2024, we entered into a secured $275 million Third Amended and Restated Credit Agreement with Bank of America, N.A., which provided for a $150 million revolving credit facility and a $125 million term loan facility. This

Credit Agreement contains covenants imposing various restrictions on our business and financial activities. These restrictions may affect our ability to operate our business and undertake certain financial activities and may limit our ability to take advantage of potential business or financial opportunities as they arise. The restrictions these covenants place on us include limitations on our ability to incur liens, incur indebtedness, make investments, dissolve or merge or consolidate with or into another entity, dispose of certain property, and make restricted payments. The Credit Agreement also requires us to meet certain financial ratios, including a minimum fixed-charge coverage ratio and a maximum total funded debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”) ratio. The breach of any of these covenants or restrictions could result in a default under the Credit Agreement, which could have a material adverse impact to our business, financial condition, and results of operation.

We are also exposed to the risk of increasing interest rates as our revolving credit and term loan facilities are both at a variable interest rate. Any material changes in interest rates could result in higher interest expense and related payments for us.

Provisions of our corporate charter documents and Delaware law, may dissuade potential acquirers, prevent the replacement or removal of our current management, and may thereby affect the price of our common stock.

The board of directors has the authority to issue up to 1,000,000 shares of preferred stock and to determine the price, rights, preferences, privileges, and restrictions, including voting rights of those shares without any further vote or action by the stockholders. The rights of the holders of common stock will be subject to, and may be adversely affected by, the rights of the holders of any preferred stock that may be issued in the future. The issuance of preferred stock, while providing flexibility in connection with possible financings, acquisitions, and other corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock. We currently have no plans to issue shares of preferred stock.

Further, certain provisions of our certificate of incorporation, bylaws, and Delaware law could delay or make a merger, tender offer or proxy contest involving us or, for a third party to acquire a majority of our outstanding voting common stock more difficult. These include provisions that limit the ability of stockholders to take action by written consent, call special meetings, remove a director for cause, amend the bylaws, or approve a merger with another company. In addition, our bylaws set forth advance notice procedures for stockholders to nominate candidates for election as directors or to bring matters before an annual meeting of stockholders.

We are subject to the provisions of Section 203 of the Delaware General Corporation Law which prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which the person became an interested stock‐holder, unless the business combination is approved in a prescribed manner. For purposes of Section 203, a “business combination” includes a merger, asset sale or other transaction resulting in a financial benefit to the interested stockholder, and an “interested stockholder” is a person who, either alone or together with affiliates and associates, owns (or within the past three years did own) 15% or more of the corporation’s voting stock.

Financial Risks

Our operating results may fluctuate, which may make it difficult to forecast our future performance and may result in volatility in our stock price.

Our operating results could fluctuate from quarter to quarter, making forecasting future performance difficult and resulting in volatility in our stock price. These fluctuations are due to a variety of factors, including the following:

• timing of orders placed by our customers;
• our customers’ approach to inventory management;
• changes in the mix of our revenue represented by our various products and customers could result in reductions in our profits if the mix of our revenue represented by lower margin products increases;
• a portion of our costs are fixed in nature, which results in our operations being particularly sensitive to fluctuations in production volumes;
• increased costs and decreased availability of raw materials or supplies; and
• our ability to effectively execute on operational initiatives to drive manufacturing efficiencies.

Our international sales and operations are subject to a variety of market and financial risks and costs that could affect our profitability and operating results.

Our net sales to customers outside the U.S., which accounted for approximately 16.0%, of net sales for 2025, and our operations in Ireland, Mexico, Central America and the Caribbean are and could be subject to a number of risks and potential costs, including:

• changes in foreign economic conditions or regulatory requirements;
• changes in foreign currency exchange rates;
• local product preferences and product requirements;
• difficulties in enforcing agreements through foreign legal systems;
• less protection of intellectual property in some countries outside of the U.S.;
• trade protection measures and import and export licensing requirements;
• work force instability;
• political and economic instability;
• transportation delays or interruptions; and
• complex tax and cash management issues.

These risks are also present in connection with our entry into new geographic markets.

Also, due to our international operations, we are subject to exposure from currency exchange rate fluctuations. Historically, foreign currency exchange rate fluctuations have not had a material effect on our net financial results. However, fluctuations in foreign currency exchange rates could have a significant impact on our financial results in the future.

We have a complex tax profile due to the global nature of our operations and may experience increases and variability in our quarterly and annual effective tax rate due to several factors, including changes in the mix of pre-tax income and the jurisdictions to which it relates, business acquisitions, settlements with taxing authorities, and changes in tax rates.

Our global operations encompass multiple taxing jurisdictions. Variability in the mix and profitability of domestic and international activities, identification and resolution of various tax uncertainties, changes in tax laws and rates, and the extent to which we are able to realize deferred tax assets and avoid potential adverse outcomes included in deferred tax liabilities, among other matters, may significantly affect our effective income tax rate in the future.

Our effective income tax rate is the result of the income tax rates in the various countries in which we do business. Our mix of income and losses in these jurisdictions affects our effective tax rate. For example, relatively more income in higher tax rate jurisdictions would increase our effective tax rate and thus lower our net income. Similarly, if we generate losses in tax jurisdictions for which no benefits are available, our effective income tax rate will increase. Our effective income tax rate may also be impacted by the recognition of discrete income tax items, such as required adjustments to our liabilities for uncertain tax positions or our deferred tax asset valuation allowance.

We have recorded deferred tax assets based on our assessment that we will be able to realize their benefits. Realization of deferred tax assets involve significant judgments and estimates which are subject to change and ultimately depends on generating sufficient taxable income of the appropriate character during the appropriate periods. Changes in circumstances may affect the likelihood of such realization, which in turn may trigger a write-down of our deferred tax assets, the amount of which would depend on a number of factors. A write-down would reduce our reported net income, which may adversely impact our financial condition or results of operations or cash flows. In addition, we are potentially subject to ongoing and periodic tax examinations and audits in various jurisdictions. An adjustment from a taxing authority, could result in higher tax costs, penalties and interest, thereby adversely impacting our financial condition, results of operations or cash flows.

We may never realize the full value of our intangible assets, which represent a significant portion of our total assets.

At December 31, 2025, we had $338.3 million of goodwill and other intangible assets, representing approximately 51.6% of our total assets. These intangible assets consist primarily of goodwill, trade names, intellectual property, customer lists and non-compete agreements arising from our acquisitions. Goodwill and other intangible assets with indefinite lives are not amortized but are tested annually or upon the occurrence of certain events that indicate that the assets may be impaired. Definite lived intangible assets are amortized over their estimated useful lives and are tested for impairment upon the occurrence of certain events that indicate that the assets may not be recoverable. We may not receive the recorded value for our intangible assets if we sell or liquidate our business or assets. In addition, our significant amount of intangible assets increases the risk of a large charge to earnings in the event that the recoverability of these intangible assets is impaired. In the event of a significant charge to earnings, the market price of our common stock could be adversely affected. In addition, intangible assets with definite lives, which represent $140.8 million of our net intangible assets at December 31, 2025, will continue to be amortized. These expenses will continue to reduce our future earnings or increase our future losses. The accounting for intangible assets requires reliance on forward-looking estimates of sales and/or earnings. Estimating the future performance of our business is extremely challenging and the range of deviation from internal estimates could be more significant in this environment.

We have significant indebtedness that could adversely affect our operations, financial condition, and cash flows if we fail to meet certain financial covenants required by our debt agreements or if our access to capital markets is interrupted.

At December 31, 2025, the Company had approximately $135.5 million in outstanding borrowings under the Third Amended and Restated Credit Agreement and also had approximately $0.7 million in standby letters of credit outstanding, drawable as a financial guarantee on worker’s compensation insurance policies. The outstanding indebtedness and the terms and covenants of the agreements under which this debt was incurred, could, among other things:

• require us to dedicate a large portion of our cash flow from operations to the servicing and repayment of our outstanding indebtedness, thereby reducing funds available for working capital, capital expenditures, acquisitions, and other general corporate requirements;
• limit our ability to obtain additional financing to fund future working capital, capital expenditures, and other general corporate requirements in the future;
• delay or prevent an otherwise beneficial takeover or takeover attempt of us;
• limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
• restrict our ability to make strategic acquisitions or dispositions or to exploit business opportunities;
• place us at a competitive disadvantage compared to our competitors that have less outstanding indebtedness; and
• adversely affect the market price of our common stock.

General Risks

We are subject to a variety of federal, state and local laws and regulations, including health and safety laws and regulations, and the cost of complying, or our failure to comply, with such requirements could materially adversely affect our business, financial condition and results of operations.

We are subject to a variety of federal, state and local laws and regulations, including health and safety laws and regulations. The risks of substantial costs and liabilities related to compliance with these laws and regulations are an inherent part of our business. Despite our intention to comply with these laws and regulations, we cannot guarantee that we will at all times comply with all such requirements. Compliance with health and safety legislation and other regulatory requirements may prove to be more limiting and costly than we anticipate and may also increase substantially in future years. If we violate, or fail to comply with these requirements, we could be fined or otherwise sanctioned by regulators. In addition, these requirements are complex, change frequently and may become more stringent over time, which could materially adversely affect our business, financial condition and results of operations.

Our operations could be disrupted by natural or human causes beyond our control.

Our operations are subject to the risk of disruption by hurricanes, severe storms, floods and other forms of severe weather, earthquakes and other natural disasters, accidents, fire, power shortages, geopolitical unrest, war and other military action, terrorist attacks and other hostile acts, public health issues, epidemics or pandemics, and other events, such as raw material or supply scarcity, that are beyond our control and the control of the third parties on which we depend. Any of these catastrophic events, whether in the United States or abroad, may have a strong negative impact on the global economy, our employees, facilities, suppliers, or customers, and could decrease demand for our products or our customers’ products, create delays and inefficiencies in our supply chain and make it difficult or impossible for us to deliver products to our customers in a timely manner. If there is a natural disaster or other serious disruption at any of our facilities, we may experience plant shutdowns or periods of reduced production as a result of equipment failures, loss of power, delays in delivery of raw materials or supplies, personnel absences, or extensive damage to any of our facilities, any of which could materially adversely affect our business, financial condition, or results of operations. In addition, our insurance coverage may not adequately compensate us for losses incurred as a direct or indirect result of natural or other disasters.

Risk management and strategy

The Company employs a multi-faceted approach to assess, identify, and manage material risks from cybersecurity threats. Components of our approach include the following:

• The Company aligns its cybersecurity program with the Center for Internet Security (“CIS”) framework of Critical Security Controls
• System penetration testing is performed by rotating third-party service providers at least every 18 months.
• System vulnerability testing performed by our cybersecurity partner who is System of Organization Controls (“SOC”) 2 certified and also assists with mitigation.
• Network assessments are performed regularly by both an internal continuous process and by qualified 3rd party cybersecurity service providers at least bi-annually.
• Facilitated incident response tabletop exercises conducted at least bi-annually by qualified cybersecurity service providers.
• Monitoring of Federal government alerts (CISA, FBI) and industry threat information is performed to stay current on the newest cybersecurity threats bad actor tactics.
• Multifactor authentication is required for all authorized users to access network resources which adds a second layer of protection from unauthorized entry to our systems.
• Associates are required to complete mandatory cybersecurity awareness training annually.
• We have Certified Information System Security Professional (“CISSP”) and Information Systems Security Management Professional (“ISSMP”) certifications among our internal security personnel.
• Automated phishing testing is used to assess the effectiveness of our cybersecurity awareness training.

The cybersecurity risk assessment process is part of the Company’s overall risk management process. The Company's cybersecurity partner helps us prioritize actions to improve compliance with CIS Critical Security Controls and assists with those actions. The Company also utilizes other third-party consultants and services in our process of assessing and managing cybersecurity risk for a diverse perspective of our cybersecurity practices and posture. To mitigate the risk of cybersecurity threats related to the use of third-party service providers, the Company obtains and reviews SOC reports from third parties when available, to provide assurance that the third-party has appropriate controls in place and has not identified any significant cyber issues.

As discussed in Item 1A “Risk Factors” on or about February 14, 2026, the Company detected the Cyber Incident. Upon detecting the Cyber Incident, the Company began taking steps to assess, contain, and remediate the unauthorized activity, including isolating the affected systems and launching an investigation with the assistance of external cybersecurity advisors. Through the Company’s efforts, the Company believes that the third party responsible for the Cyber Incident has been removed from the Company’s IT systems, and the Company’s ability to access information impacted by the Cyber Incident has been restored in all material respects. The incident appears to have impacted many but not all of the Company’s IT systems and affected functions such as billing and label making for customer deliveries. Certain Company or Company-related data appear to have been stolen or destroyed. As a result of the Company’s contingency plans and data backup systems, the Company had implemented planned solutions for the issues posed by the incident. The Company’s operations have continued since the detection of the Cyber Incident in all material respects.

Although the Company has ascertained that certain files were exfiltrated, it is still investigating the extent of any sensitive information contained in the accessed systems, including whether any personal information was exfiltrated. It is evaluating what legal and regulatory notifications and filings may be required as a result of this incident and will make such filings as are required based on its findings. The Company continues to investigate the nature and scope of the unauthorized access.

The Company currently expects that a significant portion of its direct costs incurred relating to containing, investigating and remediating the cybersecurity incident will be reimbursed through insurance recoveries though there is no assurance these recoveries will be adequate.

As of the date hereof, the Cyber Incident has not had a material impact on the Company’s financial systems, operations or financial condition, and, while the Company’s investigation and assessment of this incident is ongoing, the Company does not believe the Cyber Incident is reasonably likely to materially impact the Company’s financial condition or results of operations.

The Company does not believe that any risks from cybersecurity threats such as the Cyber Incident have materially affected or are reasonably likely to affect our business strategy, results of operations, or financial condition. See Item 1A “Risk Factors” for a summary of certain cybersecurity risks, including the risks under the headings “Security breaches, including cybersecurity incidents and other disruptions could compromise our information, expose us to liability and harm our reputation and business” and “We experienced a material information technology (“IT”) systems incident in February 2026, which could result in a number of potentially unknown outcomes, including but not limited to, litigation, regulatory investigations or enforcement actions, or reputational harm, any of which could have a material impact on our business operations, financial condition, or results of operations.”

Governance

General risk assessment and management oversight resides with the Company’s Board of Directors. The Company’s Audit Committee has oversight of financial risks and is in charge of reviewing the Company’s information security disclosures and incident reporting related to cybersecurity. The Company’s Board of Directors reviews the Company’s information security procedures and evaluates management’s assessment of materiality for cyber incidents. The Board of Directors is formally updated on cybersecurity risks no less than annually. Management is responsible for assessing and managing material risks from cybersecurity threats. This responsibility primarily resides with the VP of Information Technology and his qualified team, including dedicated cybersecurity personnel. The qualifications of the Information Technology team include a combination of formal education (e.g. Master’s degrees in Cybersecurity and Information Assurance); CISSP and ISSMP certifications and, over 100 years of combined Information Technology experience. Management’s process for monitoring prevention, detection, mitigation, and remediation of cybersecurity incidents is summarized above in the Risk management and strategy section.]

The following table presents certain information relating to each of the Company’s design and manufacturing properties:

From time to time, the Company may be a party to various suits, claims and complaints arising in the ordinary course of business and is currently a party to a single employee claim. In the opinion of management of the Company, this active claim should not result in final judgments or settlements that, in the aggregate, would have a material adverse effect on the Company’s financial condition or results of operations.

Overview

UFP Technologies, Inc. is a contract development and manufacturing organization that specializes in single-use and single-patient medical devices. We are a vital link in the medical device supply chain and a valued outsourcing partner to many of the world's top medical device manufacturers. Our single-use and single-patient devices and components are used in a wide range of medical devices and packaging for minimally invasive surgery, infection prevention, wound care, wearables, orthopedic soft goods, and orthopedic implants.

Our current strategy includes further organic growth and growth through strategic acquisitions.

Net sales for the year ended December 31, 2025 increased 19.5% to $602.8 million from $504.4 million in the same period last year. The increase was primarily attributable to 23.2% growth in sales to customers in the medical market, which was largely due to sales from the companies we acquired in 2024 and 2025 (See Note 2 for further information regarding these acquisitions). These companies collectively contributed approximately $168.3 million in sales for the year ended December 31, 2025 compared to $73.1 million in the same period last year. Organic sales growth was 1.5% for the year ended December 31, 2025 as compared to the year ended December 31, 2024. Net sales from our largest two customers, Intuitive Surgical SARL and Stryker Corporation, were 24.3% and 21.5%, respectively, of our total net sales for the year ended December 31, 2025. Intuitive Surgical SARL and Stryker comprised approximately 29.2% and 15.4%, respectively, of our net sales for the year ended December 31, 2024.

In 2025, we executed a post-acquisition review of our AJR labor force’s United States employment eligibility through E-Verify protocols. This review has resulted in significant workforce turnover during the year (the "AJR Labor Issue"). Attention spent by experienced employees training new direct and indirect employees in our standards and policies has decreased productivity and therefore, has created inefficiencies in our AJR operations. To address the AJR Labor Issue, we recruited legally eligible replacement associates. We estimate that the AJR Labor Issue added over $6.3 million in incremental labor cost to our cost-of-sales for year ended December 31, 2025.

Impact of Tariffs

In 2025, the United States imposed increased tariffs on foreign imports into the United States, including all the countries in which we manufacture goods outside the United States and also the countries in which our customers operate. Although agreements have been made with various countries, the tariff policy environment remains dynamic, particularly in light of recent Supreme Court decisions, and we cannot predict what additional actions may ultimately be taken by the United States or other governments with respect to tariffs or trade relations, including retaliatory trade measures taken by other countries in response to existing or future United States tariffs or other measures. We estimate that tariffs not reimbursed by customers were immaterial to our 2025 results.

Cyber Incident

On or about February 14, 2026, the Company detected the Cyber Incident (as defined in Item 1C, Cybersecurity). As of the date hereof, the incident has not had a material impact on the Company’s financial systems, operations or financial condition. While the Company’s investigation and assessment of this incident is ongoing, as of the date of this filing, the Company believes its primary IT systems are operational in all material respects and the Company does not believe the incident is reasonably likely to materially impact the Company’s financial condition or results of operations. There can be no assurance that the Cyber Incident or any future cybersecurity incidents will not have a material impact on the Company’s future operations, financial systems or financial condition. See Item 1A “Risk Factors” under the headings “Security breaches, including cybersecurity incidents and other disruptions could compromise our information, expose us to liability and harm our reputation and business” and “We experienced a material information technology (“IT”) systems incident in February 2026, which could result in a number of potentially unknown outcomes, including but not limited to, litigation, regulatory investigations or enforcement actions, or reputational harm, any of which could have a material impact on our business operations, financial condition, or results of operations,” and the discussion in Item 1C, Cybersecurity.

Results of Operations

The following table sets forth, for the years indicated, the percentage of net sales represented by the items as shown in the Company’s Consolidated Statements of Income:

2025 Compared to 2024

Net Sales

Net sales increased 19.5% to $602.8 million for the year ended December 31, 2025, from net sales of $504.4 million for the same period in 2024. The increase in net sales is primarily due to increased sales to customers in the medical market of 23.2%. This increase includes sales from the companies we acquired in 2024 and 2025, which collectively contributed approximately $168.3 million in sales during the year ended December 31, 2025 compared to $73.1 million in the same period last year.

Gross profit as a percentage of net sales (“Gross Margin”) decreased to 28.3% for the year ended December 31, 2025, from 29.1% in 2024. As a percentage of net sales, material costs decreased 3.0% while overhead and labor costs collectively increased 3.8%. Absent the impact on Gross Margins from the AJR Labor Issue, gross margins for the year ended December 31, 2025 would have been 29.3%.

Selling, General and Administrative Expenses

Selling, General, and Administrative Expenses (“SG&A”) increased approximately 24.5% to $77.4 million for the year ended December 31, 2025, from $62.2 million in 2024. The increase is primarily attributable to increased headcount and other back-office resources for the year ended December 31, 2025 as compared to the year ended December 31, 2024. SG&A from our 2024 and 2025 acquisitions collectively contributed approximately $17.8 million in SG&A during the year ended December 31, 2025, as compared to $7.1 million during the year ended December 31, 2024. As a percentage of sales, SG&A increased to 12.8% for the year ended December 31, 2025, from 12.3% for the same period last year.

Acquisition Costs

We incurred approximately $0.3 million in costs associated with acquisition related activities which were charged to expense for the year ended December 31, 2025, as compared to $2.5 million for the year ended December 31, 2024. These costs were primarily for legal, due diligence and valuation services and are reflected on the face of the consolidated statements of comprehensive income.

Change in fair value of contingent consideration

In connection with the acquisitions of Welch and Marble in 2024, and DAS Medical in 2021, we are required to make contingent payments, subject to the entities achieving certain financial performance thresholds. The total potential contingent consideration payments for the Welch, Marble and DAS Medical acquisitions were $6.0 million, $0.5 million, and $20.0 million, respectively, as of each acquisition date. The fair value of the liability for the contingent consideration payments recognized upon the acquisition as part of the purchase accounting opening balance sheets totaled approximately $0.8 million, $0.4 million and $5.2 million for the Welch, Marble and the DAS Medical acquisitions, respectively, and was estimated by discounting to present value the probability-weighted contingent payments expected to be made. Assumptions used in the initial calculation were management’s financial forecasts, discount rate and various volatility factors. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. Contingent consideration is considered to be a Level 3 financial liability that is re-measured each reporting period. We paid approximately $5.3 million during the year ended December 31, 2025, related to contingent consideration. The fair value of the liability for the contingent consideration payments recognized at December 31, 2025 totaled approximately $5.3 million out of the remaining potential payments of $7.3 million. The change in fair value of contingent consideration for the Welch, Marble, and DAS Medical acquisitions resulted in an expense of approximately $0.3 million and $1.0 million, respectively, for the years ended December 31, 2025 and 2024. The change in fair value of contingent consideration for the acquisitions is included in change in fair value of contingent consideration in the condensed consolidated statements of comprehensive income.

Interest expense, net

Net interest expense was approximately $9.8 million and $8.1 million for the years ended December 31, 2025 and 2024, respectively. The increase in net interest expense for the year ended December 31, 2025 was primarily due to higher average debt in 2025 as compared to 2024. Interest income was immaterial.

Other Expense (Income)

Other expense was less than $0.1 million for the year ended December 31, 2025. Other income was $0.2 million for the year ended December 31, 2024. The changes in other expense (income) are primarily generated by equity method investment income in 2025 and foreign currency transaction gains/losses in both 2025 and 2024.

Income Taxes

We recorded income tax expense, as a percentage of income before income tax expense, of 17.2% for the year ended December 31, 2025 compared to 19.2% for the same period in 2024. The decrease in the effective tax rate for the current period as compared to the prior period is largely due to a shift in mix or pre-tax income to jurisdictions where we are taxed at a favorable rate as well as increased discrete tax benefits associated with vested equity and a state tax refund.

The effective tax rate for the year differs from the federal statutory rate of 21% due to favorable rates in foreign countries, federal deductions available for certain exported goods and federal credits, offset by state income taxes and disallowed compensation under section 162M of the Internal Revenue Code.

We note the potential for volatility in our effective tax rate, as any windfall or shortfall tax benefits related to our share-based compensation plans will be recorded directly into income tax expense.

For more information about the Company’s results of operations of 2024 compared to 2023, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — 2024 Compared to 2023” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024, filed with the SEC on March 3, 2025.

Liquidity and Capital Resources

We generally fund our operating expenses, capital requirements, and growth plan through internally generated cash and bank credit facilities.

Cash Flows

Net cash provided by operations for the year ended December 31, 2025 was approximately $91.9 million and was primarily a result of net income generated of approximately $68.3 million, depreciation and amortization of approximately $19.2 million, and share-based compensation of approximately $8.9 million for the year ended December 31, 2025.

Net cash used in investing activities for the year ended December 31, 2025 was approximately $27.6 million and was primarily the result of additions of manufacturing machinery and equipment and various building improvements, as well as the acquisitions of AJR Specialty, AJR Custom Foam, TPI, and UNIPEC.

Net cash used in financing activities was approximately $58.2 million for the year ended December 31, 2025 and was primarily the result of payments on the revolving line of credit of approximately $110.1 million and principal payments of long-term debt of approximately $12.5 million, partially offset by proceeds from advances on revolving line of credit of $68.7 million.

Outstanding and Available Debt

On June 27, 2024, we, as the borrower, entered into a secured $275 million Amended and Restated Credit Agreement (the “Third Amended and Restated Credit Agreement”) with certain of our subsidiaries (the “Subsidiary Guarantors”) and Bank of America, N.A., in its capacity as the initial lender, Administrative Agent, Swingline Lender and L/C Issuer, and certain other lenders from time-to-time party thereto.

The credit facilities under the Third Amended and Restated Credit Agreement consist of a secured term loan to us of $125 million and a secured revolving credit facility, under which we may borrow up to $150 million. The Third Amended and Restated Credit Facilities mature on June 27, 2029. This maturity date is subject to acceleration and we could be subject to additional fees and expenses in certain circumstances should one or more events of default described in the Third Amended and Restated Credit Agreement occur. The secured term loan requires quarterly principal payments of $3,125,000 that commence on December 31, 2024. The proceeds of the Third Amended and Restated Credit Agreement may be used for general corporate purposes, including funding certain acquisitions (see Note 2 for more information regarding this acquisition), as well as certain other permitted acquisitions. Our obligations under the Third Amended and Restated Credit Agreement are guaranteed by Subsidiary Guarantors and secured by substantially all of our assets.

The Third Amended and Restated Credit Facilities call for interest at Secured Overnight Financing Rate (“SOFR”) plus a margin that ranges from 1.25% to 2.25% or, at our discretion, the bank’s prime rate plus a margin that ranges from .25% to 1.25%. In both cases the applicable margin is dependent upon performance. Under the Third Amended and Restated Credit Agreement, we are subject to a minimum fixed-charge coverage financial covenant as well as a maximum total funded debt to EBITDA financial covenant. The Third Amended and Restated Credit Agreement contains other covenants customary for transactions of this type, including restrictions on certain payments, permitted indebtedness and permitted investments.

At December 31, 2025, we had approximately $135.5 million in outstanding borrowings under the Third Amended and Restated Credit Agreement, and also had approximately $0.7 million in standby letters of credit outstanding, drawable as a financial guarantee on worker’s compensation insurance policies. At December 31, 2025, the weighted average interest rate was approximately 5.1% and we were in compliance with all covenants under the Third Amended and Restated Credit Agreement.

Long-term debt consists of the following (in thousands):

26

Future maturities of long-term debt at December 31, 2025 are as follows (in thousands):

Future Liquidity

We require cash to pay for operating expenses, purchase capital equipment, and to service its contractual obligations. Our principal sources of funds are our operations and our Second Amended and Restated Credit Agreement. We generated cash of approximately $91.9 million from operations during the year ended December 31, 2025. We cannot guarantee that our operations will generate cash in future periods. Our longer-term liquidity is contingent upon future operating performance and the availability of draws on our revolving credit facility. Further, the economic uncertainty resulting from events including inflation, bank failures, and other factors beyond our control could affect our long-term ability to access the public markets and obtain necessary capital in order to properly capitalize and continue operations.

We plan to continue to add capacity to enhance operating efficiencies in our manufacturing plants and accommodate anticipated growth in demand. We may consider additional acquisitions of companies, technologies, or products that are complementary to our business. We believe that our existing resources, including our revolving credit facility, together with cash expected to be generated from operations, will be sufficient to fund our cash flow requirements, including capital asset acquisitions, through the next twelve months.

We may also require additional capital in the future to fund capital expenditures, acquisitions, or other investments. These capital requirements could be substantial. We anticipate that any future expansion of our business will be financed through existing resources, cash flow from operations, our revolving credit facility, or other new financing. We cannot guarantee that it will be able to meet existing financial covenants or obtain other new financing on favorable terms, if at all.

Enactment of the “One Big Beautiful Bill Act” (OBBBA)

On July 4, 2025, President Donald Trump signed the “One Big Beautiful Bill Act” (OBBBA) into law, which is considered the enactment date under U.S. GAAP. Key corporate tax provisions include the restoration of 100% bonus depreciation, immediate expensing for domestic research and experimental expenditures, changes to Section 163(j) interest limitations, updates to GILTI and FDII rules, amendments to energy credits, and expanded Section 162(m) aggregation requirements. In accordance with ASC 740, the effects of the new tax law have been recognized in the period of enactment. The impact of OBBBA to our income tax expense is immaterial.

Critical Accounting Estimates

The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales, and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates, including those listed below, on an ongoing basis. We base our estimates on historical experience and on various other assumptions believed to be reasonable under the circumstances, including current and anticipated worldwide economic conditions, both in general and specifically in relation to the packaging and component product industries, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are described in Note 1 to the consolidated financial statements included in Item 8 of this Report. We do not believe that any of the significant accounting policies required significant judgment and estimates in the preparation of our consolidated financial statements.

The following discussion of our market risk includes “forward-looking statements” that involve risk and uncertainties. Actual results could differ materially from those projected in the forward-looking statements.

Market risk represents the risk of changes in value of a financial instrument caused by fluctuations in interest rates, foreign exchange rates, and equity prices. At December 31, 2025, our cash and cash equivalents consisted primarily of bank accounts in U.S. dollars, and their valuation would not be affected by market risk. Interest under our credit facilities with Bank of America, N.A. call for interest at SOFR plus a margin that ranges from 1.25% to 2.25% or, at the discretion of the Company, the bank’s prime rate plus a margin that ranges from .25% to 1.25%. Therefore, future operations could be affected by interest rate changes. As of December 31, 2025, the applicable weighted average interest rate was approximately 5.1%.

Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Report (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We closed on the acquisitions of AJR Specialty and AJR Custom Foam in the second quarter of 2025 and TPI and UNIPEC in the third quarter of 2025. The 2025 acquisitions’ total assets and net sales constituted approximately 2.4% and 2.0%, respectively, of our consolidated total assets and net sales as shown on our consolidated financial statements as of and for the period ended December 31, 2025. As the acquisitions occurred in fiscal 2025, we excluded these businesses' internal control over financial reporting from the scope of the assessment of the effectiveness of our disclosure controls and procedures. This exclusion is in accordance with the general guidance issued by the Staff of the Securities and Exchange Commission that an assessment of a recently acquired business may be omitted from the scope within the first year of acquisition if specified conditions are satisfied.

We closed the acquisitions of Marble, AJR, Welch and AQF all in fiscal 2024. As of this annual report on Form 10-K, we have now included these businesses' internal control over financial reporting into the scope of the assessment of the effectiveness of our disclosure controls and procedures.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting, as defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Generally Accepted Accounting Principles (“GAAP”).

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance, as opposed to absolute assurance, of achieving their internal control objectives.

Management conducted an assessment of our internal control over financial reporting as of December 31, 2025, based on criteria established in the 2013 Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). Except as described above relating to the 2025 acquisitions, based on the assessment, management concluded that, as of December 31, 2025, our internal control over financial reporting is effective.

Except as described above, there was no change in our internal control over financial reporting that occurred during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

The effectiveness of our internal control over financial reporting as of December 31, 2025 has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in its report which is included under Part IV, Item 15, in this Report.