Company Information Filing Information Global Industrial Company submitted its Form 10-Q for Q2 2025, registered in Delaware, with GIC stock listed on NYSE, and 38,374,314 shares outstanding as of July 25, 2025 - Global Industrial Company submitted its Form 10-Q quarterly report for the period ended June 30, 20252 - The company's stock ticker GIC is listed on the New York Stock Exchange3 - The company is identified as an accelerated filer4 Shares Outstanding | Metric | Quantity (shares) | | :--- | :--- | | Shares outstanding as of July 25, 2025 | 38,374,314 | Table of Contents The report's table of contents outlines financial information (Part I) and other information (Part II), including financial statements, MD&A, market risk, internal controls, legal proceedings, risk factors, and exhibits - The report is divided into two main parts: Part I for financial information and Part II for other information5 - The financial information section includes financial statements, management's discussion and analysis, quantitative and qualitative disclosures about market risk, and controls and procedures5 - The other information section includes legal proceedings, risk factors, other information, and exhibits5 Available Information & Corporate Governance The company provides SEC reports on its investor website and has adopted various corporate governance documents to ensure transparency and compliance - The company provides annual reports (Form 10-K), quarterly reports (Form 10-Q), and current reports (Form 8-K) and all amendments free of charge through its investor website (https://investors.globalindustrial.com)[6](index=6&type=chunk) - The company's Board of Directors has adopted and made publicly available several corporate governance documents, including a Code of Business Conduct and Ethics, Audit Committee Charter, Compensation Committee Charter, Nominating/Corporate Governance Committee Charter, Corporate Governance Guidelines and Principles, and Conflict Minerals Disclosure78 Part I Financial Information Item 1. Financial Statements This section presents Global Industrial Company's unaudited condensed consolidated financial statements, including balance sheets, income statements, comprehensive income, cash flows, and shareholders' equity, along with related notes Condensed Consolidated Balance Sheets Provides a snapshot of the company's financial position at specific dates, detailing assets, liabilities, and equity Balance Sheet Key Data (as of June 30, 2025 vs December 31, 2024) | Metric (million USD) | June 30, 2025 | December 31, 2024 | Change (million USD) | Change Rate | | :--- | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | 55.1 | 44.6 | 10.5 | 23.54% | | Accounts Receivable, Net | 156.8 | 126.5 | 30.3 | 23.95% | | Inventory | 171.2 | 167.1 | 4.1 | 2.45% | | Total Current Assets | 394.0 | 352.6 | 41.4 | 11.74% | | Total Assets | 586.5 | 520.7 | 65.8 | 12.64% | | Accounts Payable | 115.0 | 106.5 | 8.5 | 7.98% | | Accrued Expenses and Other Current Liabilities | 57.4 | 47.8 | 9.6 | 20.08% | | Total Current Liabilities | 187.3 | 168.4 | 18.9 | 11.22% | | Total Liabilities | 281.3 | 239.6 | 41.7 | 17.40% | | Total Shareholders' Equity | 305.2 | 281.1 | 24.1 | 8.57% | - As of June 30, 2025, the company's total assets were $586.5 million, a 12.64% increase from December 31, 20249 - Cash and cash equivalents increased by $10.5 million to $55.1 million, and net accounts receivable increased by $30.3 million to $156.8 million9 Condensed Consolidated Statements of Operations Details the company's revenues, costs, and net income for the reported periods, reflecting operational performance Income Statement Key Data (as of June 30, 2025) | Metric (million USD) | 2025 Q2 | 2024 Q2 | Y-o-Y Change Rate | 2025 H1 | 2024 H1 | Y-o-Y Change Rate | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Net Sales | 358.9 | 347.8 | 3.2% | 679.9 | 671.2 | 1.3% | | Cost of Sales | 225.9 | 225.3 | 0.3% | 434.8 | 437.8 | -0.7% | | Gross Profit | 133.0 | 122.5 | 8.6% | 245.1 | 233.4 | 5.0% | | Selling, Distribution and Administrative Expenses | 99.5 | 96.1 | 3.5% | 193.4 | 189.6 | 2.0% | | Operating Income from Continuing Operations | 33.5 | 26.4 | 26.9% | 51.7 | 43.8 | 18.0% | | Net Income from Continuing Operations | 25.1 | 20.2 | 24.3% | 38.6 | 33.3 | 15.9% | | Net Income | 25.1 | 20.3 | 23.6% | 38.7 | 33.5 | 15.5% | | Diluted Net Income per Share from Continuing Operations | 0.65 | 0.52 | 25.0% | 0.99 | 0.86 | 15.1% | | Diluted Net Income per Share | 0.65 | 0.52 | 25.0% | 0.99 | 0.87 | 13.8% | | Dividends (USD per share) | 0.26 | 0.25 | 4.0% | 0.52 | 0.50 | 4.0% | - Q2 2025 net sales increased 3.2% year-over-year to $358.9 million, and year-to-date sales increased 1.3% to $679.9 million10 - Operating income from continuing operations grew 26.9% to $33.5 million in Q2 2025, and 18.0% to $51.7 million year-to-date10 - Diluted net income per share increased 25.0% from $0.52 to $0.65 in Q2 202510 Condensed Consolidated Statements of Comprehensive Income Presents net income and other comprehensive income items, showing the total change in equity from non-owner sources Comprehensive Income Statement Key Data (as of June 30, 2025) | Metric (million USD) | 2025 Q2 | 2024 Q2 | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | :--- | :--- | | Net Income | 25.1 | 20.3 | 38.7 | 33.5 | | Foreign Currency Translation Adjustment | 0.5 | (0.2) | 0.7 | (0.4) | | Total Comprehensive Income | 25.6 | 20.1 | 39.4 | 33.1 | - Total comprehensive income for Q2 2025 was $25.6 million, an increase from $20.1 million in the prior year quarter12 - The foreign currency translation adjustment was a positive $0.5 million in Q2 2025, compared to a negative $0.2 million in the prior year quarter, indicating a positive impact from exchange rate movements on comprehensive income12 Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities for the reported periods Cash Flow Statement Key Data (as of June 30, 2025) | Metric (million USD) | 2025 H1 | 2024 H1 | | :--- | :--- | | Net Cash from Operating Activities for Continuing Operations | 35.1 | 25.0 | | Net Cash from Investing Activities | (5.6) | (2.2) | | Net Cash from Financing Activities | (18.9) | (18.5) | | Net Increase in Cash | 10.5 | 4.4 | | Cash and Cash Equivalents at End of Period | 55.1 | 38.8 | - Net cash from operating activities for continuing operations in H1 2025 was $35.1 million, a significant increase from $25.0 million in H1 2024, primarily due to increased net income and adjustments for non-cash items14 - Net cash used in investing activities was $5.6 million, primarily due to $4.0 million for an acquisition14 - Net cash used in financing activities was $18.9 million, primarily for $20.1 million in dividend payments14 Condensed Consolidated Statement of Shareholders' Equity Outlines changes in the company's equity accounts, including common stock, retained earnings, and accumulated other comprehensive income Changes in Shareholders' Equity (as of June 30, 2025) | Metric (million USD) | January 1, 2025 | March 31, 2025 | June 30, 2025 | | :--- | :--- | :--- | :--- | | Common Stock | 0.4 | 0.4 | 0.4 | | Additional Paid-in Capital | 207.5 | 209.0 | 210.6 | | Treasury Stock | (16.8) | (15.2) | (15.0) | | Retained Earnings | 88.6 | 92.1 | 107.1 | | Accumulated Other Comprehensive Income | 1.4 | 1.6 | 2.1 | | Total Shareholders' Equity | 281.1 | 287.9 | 305.2 | - Total shareholders' equity increased to $305.2 million as of June 30, 2025, up from $281.1 million at the beginning of the year15 - Retained earnings increased from $88.6 million at the beginning of the year to $107.1 million, primarily driven by net income contributions15 - The treasury stock balance decreased from ($16.8 million) at the beginning of the year to ($15.0 million), reflecting stock transaction activities15 Notes to Condensed Consolidated Financial Statements Provides detailed explanations and additional information supporting the condensed consolidated financial statements 1. Basis of Presentation Describes the company's business, operating segments, recent acquisition, and fiscal year structure - The company is a value-added distributor of industrial equipment and supplies in North America, marketing through branded e-commerce websites and relationship marketers19 - The company operates and is managed internally as a single reportable business segment19 - In April 2025, the company acquired an equipment service provider for approximately $4.3 million in cash, aiming to broaden its value-added services in certain key equipment categories20 - The company operates on a 52-53 week fiscal year, typically ending on the Saturday closest to December 31; both Q2 2025 and 2024 were 13 weeks, and the first six months were 26 weeks23 2. Acquisition Details the April 2025 acquisition of an equipment service provider, including its purpose and initial purchase price allocation - In April 2025, the company acquired an equipment service provider for approximately $4.3 million in cash, with $0.3 million held in escrow for potential obligations28 - This acquisition aims to broaden the company's value-added services in certain key equipment categories28 - The preliminary purchase price allocation showed total net identifiable assets acquired of $3.3 million, including $0.7 million in customer lists and $1.0 million in goodwill29 - The acquisition's revenue and net income contributions were not material for the three and six months ended June 30, 202530 3. Goodwill and Intangibles Presents the company's goodwill and intangible assets, including their carrying values and amortization Goodwill and Intangible Assets (million USD) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Goodwill | 40.6 | 39.6 | | Finite-Lived Intangible Assets | 24.6 | 25.4 | | Indefinite-Lived Intangible Assets | 0.7 | 0.7 | | Total | 65.9 | 65.7 | Net Carrying Value of Finite-Lived Intangible Assets (as of June 30, 2025) | Asset Class | Amortization Period (years) | Gross Carrying Amount (million USD) | Accumulated Amortization (million USD) | Net Carrying Value (million USD) | Weighted-Average Useful Life (years) | | :--- | :--- | :--- | :--- | :--- | :--- | | Customer Lists | 10 | 26.8 | 7.1 | 19.7 | 7.9 | | Trademarks | 10 | 6.2 | 1.3 | 4.9 | 7.9 | | Total | | 33.0 | 8.4 | 24.6 | 7.9 | - Goodwill was $40.6 million as of June 30, 2025, an increase from $39.6 million as of December 31, 202432 - In H1 2025, the company recorded $1.5 million in intangible asset amortization expense, primarily related to the May 2023 acquisition of Indoff32 4. Revenue Discloses revenue by geographic region and provides information on contract liabilities Revenue from Continuing Operations by Geographic Region (million USD) | Region | 2025 Q2 | 2024 Q2 | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | :--- | :--- | | United States | 340.7 | 330.7 | 646.2 | 637.1 | | Canada | 18.2 | 17.1 | 33.7 | 34.1 | | Consolidated Total | 358.9 | 347.8 | 679.9 | 671.2 | - The company discloses revenue by geographic region (United States and Canada), believing this best reflects the impact of economic and industry factors on revenue and cash flows33 - Contract liabilities were approximately $3.3 million as of June 30, 2025, a decrease from $4.1 million as of December 31, 202433 5. Credit Losses Explains the company's methodology for estimating credit losses on trade receivables and presents changes in the allowance for credit losses - The company maintains an allowance for credit losses on its portfolio of trade accounts receivable from commercial customers and public sector organizations, estimated based on customer financial condition, historical loss experience, current market economic conditions, and future economic forecasts34 Changes in Allowance for Trade Accounts Receivable Credit Losses (million USD) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Beginning Balance | 2.8 | 2.9 | | Current Period Provision | 0.6 | 2.1 | | Write-offs - Trade Accounts Receivable | (0.7) | (2.2) | | Ending Balance | 2.7 | 2.8 | - In H1 2025, the allowance for credit losses had an ending balance of $2.7 million, with $0.6 million in current period provisions and $0.7 million in write-offs36 6. Leases Details the company's operating and finance leases, including lease costs, sublease income, and future lease liability maturities - The company has operating and finance leases for office and warehouse facilities, headquarters, call centers, machinery, and certain computer and communication equipment, with lease terms extending through 203437 - In Q2 2025, the company recorded $28.2 million in operating right-of-use assets and related lease liabilities, primarily associated with the renewal of an existing warehouse location37 Lease Costs and Sublease Income (million USD) | Metric | 2025 Q2 | 2024 Q2 | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | :--- | :--- | | Operating Lease Cost from Continuing Operations | 5.0 | 4.4 | 9.3 | 8.7 | | Sublease Income from Continuing Operations | 0.4 | 0.6 | 0.9 | 1.2 | Lease Liability Maturities (million USD) | Year Ending December 31 | Operating Leases | | :--- | :--- | | 2025 (Adjusted) | 9.1 | | 2026 | 21.6 | | 2027 | 17.7 | | 2028 | 17.5 | | 2029 | 17.8 | | 2030 | 15.8 | | Thereafter | 30.1 | | Total Lease Payments | 129.6 | | Less: Interest | (22.6) | | Total Present Value of Lease Liabilities | 107.0 | 7. Net Income (Loss) per Common Share Explains the calculation of basic and diluted net income per common share, considering potential dilutive securities - Basic and diluted net income per common share are calculated using the two-class method based on the weighted-average number of common shares outstanding, as the company has unvested restricted stock that participates in dividends40 Net Income per Common Share Calculation (million USD, except per share amounts) | Metric | 2025 Q2 | 2024 Q2 | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | :--- | :--- | | Net Income from Continuing Operations | 25.1 | 20.2 | 38.6 | 33.3 | | Basic Net Income per Share (Continuing Operations) (USD) | 0.65 | 0.52 | 1.00 | 0.87 | | Diluted Net Income per Share (Continuing Operations) (USD) | 0.65 | 0.52 | 0.99 | 0.86 | | Basic Net Income per Share (USD) | 0.65 | 0.52 | 1.00 | 0.88 | | Diluted Net Income per Share (USD) | 0.65 | 0.52 | 0.99 | 0.87 | | Basic Weighted-Average Common Shares and Common Share Equivalents (millions) | 38.4 | 38.2 | 38.4 | 38.2 | | Diluted Weighted-Average Common Shares and Common Share Equivalents (millions) | 38.4 | 38.4 | 38.4 | 38.4 | - Potentially dilutive securities, such as stock options, restricted stock units, and performance stock units, are dilutive only when the average market price exceeds the exercise price, otherwise they are excluded41 8. Credit Facilities Describes the company's secured revolving credit facility, its covenants, and available capacity - The company has a $125 million secured revolving credit facility with a five-year term, maturing on October 19, 2026, for borrowing in the United States42 - The credit agreement contains operating, financial, and other covenants, including levels of capital expenditures, availability tests for dividend payments and stock repurchases, and a fixed charge coverage test for acquisitions42 - As of June 30, 2025, qualified collateral under the credit agreement was $125 million, with total availability of approximately $122.1 million, outstanding letters of credit totaling $1.7 million, and excess availability of $120.4 million42 - The company was in compliance with all covenants under the credit agreement as of June 30, 202542 9. Fair Value Measurements Defines fair value, outlines the fair value hierarchy, and discusses the valuation of financial and non-financial assets - Fair value accounting defines fair value as the price received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date43 - The fair value hierarchy categorizes inputs into three levels: Level 1 for unadjusted quoted prices in active markets for identical assets or liabilities, Level 2 for observable inputs other than Level 1 quoted prices, and Level 3 for unobservable inputs4344 - The carrying values of cash, accounts receivable, and accounts payable are considered representative of their fair values due to their short-term nature, with cash classified as Level 1 in the fair value hierarchy45 - Goodwill and indefinite-lived intangible assets are measured for fair value in the company's annual impairment tests, while long-lived assets are assessed for impairment by evaluating estimated undiscounted cash flows4647 10. Segment Reporting Reports the company's performance as a single operating segment and provides a reconciliation of operating income to net income - The company reports the results of its continuing operations as a single reportable segment, with the Chief Operating Decision Maker (CEO) assessing segment performance based on operating income48 Segment Operating Income and Net Income Reconciliation (million USD) | Metric | 2025 Q2 | 2024 Q2 | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | 358.9 | 347.8 | 679.9 | 671.2 | | Cost of Sales | 225.9 | 225.3 | 434.8 | 437.8 | | Net Advertising Expense | 24.2 | 25.8 | 44.0 | 47.7 | | Depreciation and Amortization | 1.9 | 1.9 | 3.8 | 3.8 | | Other Costs | 73.4 | 68.4 | 145.6 | 138.1 | | Operating Income | 33.5 | 26.4 | 51.7 | 43.8 | | Net Income | 25.1 | 20.2 | 38.6 | 33.3 | - Long-lived assets outside the U.S. were $3.2 million as of June 30, 2025, compared to $3.1 million as of December 31, 202448 11. Legal Proceedings Describes the various legal actions the company is involved in and its approach to assessing and accruing for potential liabilities - The company and its subsidiaries are involved in various lawsuits, claims, investigations, and proceedings from time to time, including commercial, employment, tax, customs and trade, customer, vendor, personal injury, creditor rights, and health and safety law matters50 - The company regularly evaluates all litigation and potential litigation to determine the likelihood of an unfavorable outcome and records its best estimate of a loss when the likelihood is high and can be reasonably estimated51 - As of June 30, 2025, the company has accrued for certain litigation, claims, investigations, and proceedings and believes any reasonably possible losses beyond the amounts accrued are not material to the financial statements51 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and operating performance, covering forward-looking statements, business overview, operating conditions, outlook, key accounting policies, and financial results Forward-Looking Statements and Risk Factors Discusses the nature of forward-looking statements in the report and outlines various risks and uncertainties that could impact the company's performance - This report contains forward-looking statements based on management's estimates, assumptions, and projections, which are not guarantees of future performance53 - Forward-looking statements are subject to risks and uncertainties that could materially affect the company's business, operating results, or financial condition54 - Risk factors include macroeconomic conditions, global political and economic market conditions, supply chain disruptions, increased tariffs and freight costs, extreme weather, labor market competition, acquisition integration risks, industry consolidation, e-commerce risks, information system security, internal control deficiencies, and legal proceedings5558 Overview Provides a high-level description of Global Industrial Company as a value-added distributor of industrial equipment and supplies in North America - Global Industrial Company, through its subsidiaries, is a value-added distributor of industrial equipment and supplies in North America, accessing the market through branded e-commerce websites and relationship marketers57 Continuing Operations Focuses on the company's MRO solutions for diverse customers and its product offerings, including recent acquisition to expand services - The company focuses on providing maintenance, repair, and operations (MRO) solutions to a diverse customer base, from small businesses to large enterprises and the public sector59 - The company offers a broad range of products through its private brands (e.g., Global Industrial Exclusive Brands, Nexel, Paramount, Interion, Absocold) and well-known brands59 - In April 2025, the company acquired an equipment service provider to expand its value-added services in certain key equipment categories59 Operating Conditions Describes the highly fragmented and capital-intensive nature of the North American industrial products market and key components of operating expenses - The North American industrial products market is highly fragmented, with diverse distribution channels, and is capital-intensive, requiring significant warehousing costs61 - The company supplements its product offerings through a combination of inventory and direct shipments61 - Major components of the company's operating expenses include employee-related costs (salaries, commissions, bonuses, benefits, equity compensation) and marketing expenses62 Business Outlook Presents the company's expectations for future performance, including revenue growth, gross margin fluctuations, and SD&A expenses - The company's Q2 revenue was $358.9 million, up 3.2% year-over-year, primarily driven by strong sales to its largest strategic customers64 - Gross margin reached a quarterly high of 37.1%, benefiting from positive price management, overall freight cost management, and the timing of cost flow-through for products purchased before new tariffs were implemented64 - The company anticipates potential gross margin volatility as pre-tariff inventory depletes, possibly requiring further price increases to offset additional tariff costs64 - Selling, distribution, and administrative expenses (SD&A) are expected to be impacted by Indoff business integration costs and IT control remediation, but the company will maintain strict cost controls64 Critical Accounting Policies and Estimates Identifies key accounting policies requiring significant management judgment, such as revenue recognition, inventory valuation, and intangible asset valuation - Critical accounting policies include revenue recognition, inventory valuation, and the valuation of intangible assets acquired through business combinations, all requiring significant management judgment65 - These judgments are based on historical experience, industry trends, customer information, future economic forecasts, and external information65 - There were no significant changes to the company's critical accounting policies during the second quarter ended June 30, 202566 Highlights from Q2 2025 and Year to Date Q2 2025 Summarizes key financial achievements and performance metrics for the second quarter and first half of 2025 Q2 2025 Financial Highlights | Metric | 2025 Q2 | 2024 Q2 | Change Rate | | :--- | :--- | :--- | :--- | | Consolidated Sales | $358.9 million | $347.8 million | +3.2% | | Consolidated Gross Margin | 37.1% | 35.2% | +1.9% | | Operating Income from Continuing Operations | $33.5 million | $26.4 million | +26.9% | | Diluted Net Income per Share from Continuing Operations | $0.65 | $0.52 | +25.0% | H1 2025 Financial Highlights | Metric | 2025 H1 | 2024 H1 | Change Rate | | :--- | :--- | :--- | :--- | | Consolidated Sales | $679.9 million | $671.2 million | +1.3% | | Consolidated Gross Margin | 36.0% | 34.8% | +1.2% | | Operating Income from Continuing Operations | $51.7 million | $43.8 million | +18.0% | | Diluted Net Income per Share from Continuing Operations | $0.99 | $0.86 | +15.1% | - Consolidated gross margin reached a quarterly high of 37.1% in Q2 202572 Results of Operations Provides a detailed analysis of the company's financial performance across various income statement line items NET SALES Analyzes the drivers of net sales growth, including contributions from strategic customers and geographic performance Net Sales (million USD) | Period | 2025 | 2024 | Change Rate | | :--- | :--- | :--- | :--- | | 2025 Q2 | 358.9 | 347.8 | 3.2% | | 2025 H1 | 679.9 | 671.2 | 1.3% | - Net sales growth was primarily driven by strong sales to the largest strategic customers, partially offset by reduced sales to smaller and transactional customers77 - U.S. sales increased by 3.0% in Q2, while Canadian sales grew by 6.4% (or 7.4% in local currency)77 GROSS MARGIN Explains the factors contributing to changes in gross margin, such as pricing, inventory valuation, and freight management Gross Margin | Period | 2025 | 2024 | Change (basis points) | | :--- | :--- | :--- | :--- | | 2025 Q2 | 37.1% | 35.2% | +190 | | 2025 H1 | 36.0% | 34.8% | +120 | - The increase in gross margin was attributed to price capture, a temporary favorable impact from inventory valuation flowing through cost of sales, and overall freight management (including outbound and inbound logistics) and quality improvements reducing freight claims and customer returns80 - The company anticipates future gross margin volatility due to inventory timing, inflationary pressures from increased tariff-related costs, and supply chain diversification efforts81 SELLING, DISTRIBUTION AND ADMINISTRATIVE EXPENSES ("SD&A") Discusses the trends and components of SD&A expenses, including personnel costs and advertising SD&A as a Percentage of Net Sales | Period | 2025 | 2024 | Change (percentage points) | | :--- | :--- | :--- | :--- | | 2025 Q2 | 27.7% | 27.6% | +0.1 | | 2025 H1 | 28.4% | 28.2% | +0.2 | - SD&A expenses as a percentage of net sales were largely flat year-over-year in Q2 2025, primarily due to strong general and discretionary cost controls and planned modest net advertising spending82 - Cost increases included approximately $4.4 million in total payroll and related costs (with $2.1 million in variable compensation) and approximately $2.4 million in equity compensation expense82 - In H1 2025, SD&A expenses increased primarily due to approximately $7.0 million in payroll and related costs (with $3.0 million in variable compensation) and approximately $3.3 million in equity compensation expense, partially offset by approximately $1.8 million in net advertising savings83 OPERATING MARGIN Examines the changes in operating margin, attributing them to improvements in gross margin and cost controls Operating Margin from Continuing Operations | Period | 2025 | 2024 | Change (percentage points) | | :--- | :--- | :--- | :--- | | 2025 Q2 | 9.3% | 7.6% | +1.7 | | 2025 H1 | 7.6% | 6.5% | +1.1 | - Operating margin increased by 170 basis points in Q2 2025 and 110 basis points in H1 2025, primarily due to improved gross margin, continued strong general and discretionary cost controls, and lower marketing and selling expenses84 INTEREST AND OTHER (INCOME) EXPENSE, NET Explains the fluctuations in net interest and other income/expense, primarily due to foreign currency exchange rates Interest and Other (Income) Expense, Net (million USD) | Period | 2025 | 2024 | | :--- | :--- | :--- | | 2025 Q2 | (0.3) (Income) | 0.1 (Expense) | | 2025 H1 | (0.2) (Income) | 0.3 (Expense) | - Fluctuations in net interest and other (income) expense are primarily influenced by foreign currency exchange rate movements85 INCOME TAXES Details the income tax expense and effective tax rates, noting their relation to operations in various jurisdictions Income Tax Expense (million USD) | Period | 2025 | 2024 | | :--- | :--- | :--- | | 2025 Q2 | 8.7 | 6.1 | | 2025 H1 | 13.3 | 10.2 | Effective Income Tax Rate | Period | 2025 | 2024 | Change (percentage points) | | :--- | :--- | :--- | :--- | | 2025 Q2 | 25.7% | 23.2% | +2.5 | | 2025 H1 | 25.6% | 23.4% | +2.2 | - Income tax expense is primarily related to operations in the U.S., Canada, and India, and certain U.S. state taxes86 Financial Condition, Liquidity and Capital Resources Assesses the company's financial health, cash flows, and ability to meet its short-term and long-term obligations Selected Liquidity Data (million USD) | Metric | June 30, 2025 | December 31, 2024 | Change (million USD) | | :--- | :--- | :--- | :--- | | Cash and Cash Equivalents | 55.1 | 44.6 | 10.5 | | Accounts Receivable, Net | 156.8 | 126.5 | 30.3 | | Inventory | 171.2 | 167.1 | 4.1 | | Accounts Payable | 115.0 | 106.5 | 8.5 | | Working Capital | 206.7 | 184.2 | 22.5 | - The company's primary liquidity needs include supporting working capital, dividend payments, capital expenditures, inventory purchases, technology upgrades, sales and marketing investments, and acquisitions88 - The company expects its existing cash, cash flows from operations, and credit facility to be sufficient to meet its working capital and other cash needs for at least the next twelve months88 - Working capital increased by $22.5 million, primarily due to higher accounts receivable balances from increased sales, increased cash balances, and increased inventory balances, partially offset by increased accounts payable and accrued expenses89 Operating Activities Analyzes cash flows generated from the company's primary business operations, including changes in working capital Cash Flow from Operating Activities (million USD) | Period | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | | Net Cash from Operating Activities for Continuing Operations | 35.1 | 25.0 | | Net Cash from Operating Activities for Discontinued Operations | 0.0 | 0.2 | - In H1 2025, net cash from operating activities for continuing operations was $35.1 million, an increase from $25.0 million in H1 2024, primarily due to increased net income and adjustments for non-cash items90 - Changes in working capital accounts used $11.3 million in cash in 2025, primarily impacted by changes in accounts receivable, inventory, accounts payable, and prepaid expenses balances90 Investing Activities Details cash flows related to the acquisition and disposal of long-term assets, including business acquisitions Cash Flow from Investing Activities (million USD) | Period | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | | Net Cash from Investing Activities | (5.6) | (2.2) | - Net cash used in investing activities in 2025 was $5.6 million, including $4.0 million for the acquisition of an equipment service provider and $1.6 million for warehouse machinery and equipment, computer equipment upgrades, and mold purchases91 - Net cash used in investing activities in 2024 was $2.2 million, primarily for warehouse machinery and equipment, leasehold improvements, and computer equipment upgrades91 Financing Activities Explains cash flows from debt, equity, and dividend payments, reflecting how the company funds its operations Cash Flow from Financing Activities (million USD) | Period | 2025 H1 | 2024 H1 | | :--- | :--- | :--- | | Net Cash from Financing Activities | (18.9) | (18.5) | | Dividends Paid | (20.1) | (19.2) | | Proceeds from Issuance of Common Stock | 1.2 | 1.4 | | Proceeds from Issuance of Common Stock under Employee Stock Purchase Plan | 0.8 | 0.8 | - Net cash used in financing activities in 2025 was $18.9 million, primarily for quarterly dividend payments of $0.26 per share, totaling approximately $20.1 million92 - The company maintains a $125 million secured revolving credit facility, with approximately $122.1 million available as of June 30, 2025, and is in compliance with all credit agreement covenants93 Material Cash Requirements Outlines the company's significant future cash obligations, such as lease payments and other contractual commitments - As of June 30, 2025, the company has approximately $129.6 million in obligations under non-cancelable operating and finance leases, with terms extending through 203499 - For the remainder of 2025, the company expects cash expenditures for operating leases to be approximately $9.1 million99 - The company also has purchase and other obligations, primarily consisting of commitments under certain employment, consulting, and service agreements, and $1.7 million in outstanding letters of credit100 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risks primarily involve changes in interest rates and foreign currency exchange rates, with limited use of derivative financial instruments and no significant exposure to interest rate risk due to the absence of outstanding floating-rate debt - The company's market risks include changes in U.S. and international interest rates and currency exchange rates (primarily Canadian dollar to U.S. dollar)101 - The company has limited involvement with derivative financial instruments, not for trading purposes, and had no outstanding options or forward foreign exchange contracts as of June 30, 2025102 - The company's exposure to interest rate risk is primarily related to its floating-rate debt, but as of June 30, 2025, the company had no outstanding floating-rate credit facility debt, so changes in interest rates are not expected to materially affect its financial condition, results of operations, or cash flows103 Item 4. Controls and Procedures Management assessed disclosure controls and internal controls as ineffective due to material weaknesses in IT general controls, though financial statements are fairly presented, and remediation efforts are ongoing Evaluation of Disclosure Controls and Procedures Management concluded that disclosure controls and procedures were ineffective due to material weaknesses in IT general controls, despite fair presentation of financial statements - As of June 30, 2025, the company's management, including the CEO and CFO, concluded that its disclosure controls and procedures were ineffective104 - This conclusion is due to material weaknesses in the design and operating effectiveness of information technology general controls (ITGCs), first identified on December 31, 2023, and extended to the control environment assessment of Indoff LLC104 - Despite the material weaknesses, management believes the consolidated financial statements in this quarterly report and the 2024 annual report are fairly presented in all material respects regarding the company's financial position, results of operations, and cash flows105 Inherent Limitations of Internal Controls over Financial Reporting Acknowledges that internal controls provide reasonable, not absolute, assurance against misstatements or fraud due to inherent limitations - The company's internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles106 - Management does not expect internal controls to prevent or detect all errors and fraud, as control systems have inherent limitations and can only provide reasonable, not absolute, assurance107 Management's Report on Internal Control Over Financial Reporting Management reported ineffective internal controls over financial reporting due to material weaknesses in IT general controls for both Global Industrial and Indoff businesses - Management, including the CEO and CFO, concluded that the company's internal controls over financial reporting were ineffective as of June 30, 2025, due to material weaknesses in the design and operating effectiveness of information technology general controls (ITGCs) for both Global Industrial and Indoff businesses108 - Consequently, automated and IT-dependent manual business process controls relying on IT systems were also deemed ineffective108 - Despite these material weaknesses, management still believes the consolidated financial statements are fairly presented in all material respects regarding the company's financial position, results of operations, and cash flows109 Inadequate Information Technology General Controls and Business Process Controls Highlights previously disclosed material weaknesses in IT general controls affecting automated and IT-dependent manual business process controls - The company previously disclosed in its 2024 and 2023 annual reports material weaknesses in ITGCs in the design and operation of key accounting, reporting, and proprietary information technology systems, including those supporting the company's financial reporting processes110 - These deficiencies rendered automated and IT-dependent manual business process controls relying on these systems ineffective110 Remediation of the Material Weaknesses in Internal Control Over Financial Reporting Details the company's ongoing remediation efforts to strengthen IT general controls and the overall internal control environment - The company made substantial progress in remediating the design and operating effectiveness of its control environment in 2024, continuing into 2025111 - The remediation plan includes engaging expert accounting consulting firms to assess control design, assist with ITGC documentation, remediation, and testing, training relevant personnel, implementing technical solutions to streamline control framework management and enhance user access controls, and adopting principles of limited access and segregation of duties112116 - The company will continue to monitor the design and effectiveness of these processes, procedures, and controls and make further changes as needed, but a conclusion of full remediation can only be reached after relevant controls are fully implemented and operating effectively for a sufficient period114 Changes in Internal Control Over Financial Reporting States that no significant changes in internal control over financial reporting occurred during the quarter, apart from ongoing remediation - Aside from the ongoing remediation plan mentioned above, there were no changes in the company's internal control over financial reporting that materially affected or are reasonably likely to materially affect its internal control during the quarter ended June 30, 2025115 Part II Other Information Item 1. Legal Proceedings This section refers to Note 11 of the condensed consolidated financial statements for a detailed description of the company's legal proceedings, assessments, and handling of various claims - For information regarding the company's legal proceedings, please refer to Note 11 of the condensed consolidated financial statements117 Item 1A. Risk Factors This section references the company's 2024 Form 10-K for economic, industry, company, and business-related risk factors, noting no material changes in Q2 2025 - For information regarding economic, industry, company, and business-related risk factors, please refer to Item 1A, "Risk Factors," in the company's 2024 Annual Report on Form 10-K118 - There were no material changes to the company's risk factors during the second quarter ended June 30, 2025119 Item 5. Other Information This section states that no directors or officers adopted or terminated Rule 10b5-1(c) plans or engaged in "non-Rule 10b5-1 trading arrangements" during the quarter ended June 30, 2025 - During the three months ended June 30, 2025, no directors or executive officers of the company adopted or terminated any contract, instruction, or written plan for the purchase or sale of Global Industrial securities intended to satisfy the affirmative defense conditions of Rule 10b5-1(c)120 - No "non-Rule 10b5-1 trading arrangements" were entered into during this period120 Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications under Sarbanes-Oxley and XBRL-related interactive data files - Exhibits include CEO and CFO certifications filed under Sections 302 and 906 of the Sarbanes-Oxley Act121 - Also included are the XBRL instance document, taxonomy extension schema document, calculation linkbase document, definition linkbase document, label linkbase document, and presentation linkbase document121 - The Cover Page Interactive Data File (Inline XBRL format) is included as Exhibit 101121 Signatures This report was signed by authorized representatives, including the President and CEO and Senior Vice President and CFO, on July 29, 2025, as required by the Securities Exchange Act of 1934 - This report has been signed as required by the Securities Exchange Act of 1934122 - Signatories include Anesa Chaibi, President and Chief Executive Officer, and Thomas Clark, Senior Vice President and Chief Financial Officer124127 - The signing date is July 29, 2025124127
Systemax(GIC) - 2025 Q2 - Quarterly Report