Avanos Medical(AVNS) - 2025 Q2 - Quarterly Report

PART I – FINANCIAL INFORMATION Item 1. Financial Statements The company presents its unaudited condensed consolidated financial statements and related notes for the periods presented Unaudited Condensed Consolidated Income Statements Condensed Consolidated Income Statement Highlights (in millions, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $175.0 | $171.7 | $342.5 | $337.8 | | Gross Profit | $92.1 | $95.6 | $181.9 | $190.4 | | Goodwill impairment | $77.0 | — | $77.0 | — | | Operating (Loss) Income | $(74.5) | $6.3 | $(64.2) | $10.3 | | Net (Loss) Income | $(76.8) | $1.8 | $(70.2) | $0.9 | | Basic (Loss) Earnings Per Share | $(1.66) | $0.04 | $(1.52) | $0.02 | | Diluted (Loss) Earnings Per Share | $(1.66) | $0.04 | $(1.52) | $0.02 | Unaudited Condensed Consolidated Statements of Comprehensive Income Condensed Consolidated Statements of Comprehensive Income (Loss) Highlights (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net (Loss) Income | $(76.8) | $1.8 | $(70.2) | $0.9 | | Total Other Comprehensive Income (Loss) | $10.3 | $(8.0) | $12.6 | $(10.5) | | Comprehensive (Loss) Income | $(66.5) | $(6.2) | $(57.6) | $(9.6) | Unaudited Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $90.3 | $107.7 | | Total Current Assets | $356.0 | $393.4 | | Goodwill | $381.2 | $455.6 | | TOTAL ASSETS | $1,039.0 | $1,154.2 | | Total Current Liabilities | $134.6 | $165.9 | | Long-Term Debt | $95.7 | $125.3 | | Total Liabilities | $262.7 | $325.7 | | Total Stockholders' Equity | $776.3 | $828.5 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $1,039.0 | $1,154.2 | Unaudited Condensed Consolidated Statements of Stockholders' Equity Condensed Consolidated Statement of Stockholders' Equity Highlights (in millions) | Metric | June 30, 2025 (YTD) | June 30, 2024 (YTD) | | :--- | :--- | :--- | | Additional Paid-in Capital, end of period | $1,686.9 | $1,671.5 | | Accumulated Deficit, end of period | $(777.2) | $(314.0) | | Treasury Stock, end of period | $(101.9) | $(98.5) | | Accumulated Other Comprehensive Loss, end of period | $(32.0) | $(37.5) | | Total Stockholders' Equity, end of period | $776.3 | $1,222.0 | Unaudited Condensed Consolidated Cash Flow Statements Condensed Consolidated Cash Flow Statement Highlights (in millions) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Cash Provided by Operating Activities | $32.5 | $19.8 | | Cash Used in Investing Activities | $(22.3) | $(7.9) | | Cash Used in Financing Activities | $(32.3) | $(5.7) | | Effect of Exchange Rate Changes on Cash | $4.7 | $(1.7) | | (Decrease) Increase in Cash and Cash Equivalents | $(17.4) | $4.5 | | Cash and Cash Equivalents - End of Period | $90.3 | $92.2 | Notes to the Unaudited Condensed Consolidated Financial Statements Note 1. Accounting Policies - Avanos Medical, Inc is a medical technology company focused on clinically superior medical device solutions, addressing nutrition and pain management needs globally[20] - The interim financial statements are prepared in accordance with GAAP for interim information and Rule 10-01 of Regulation S-X, and should be read with the Annual Report on Form 10-K for the year ended December 31, 2024[21] - The company adopted ASU No 2023-05 (Joint Venture Formations) and ASU No 2023-07 (Segment Reporting) in 2025 and Q4 2024, respectively, with no material effect on financial position, results, or cash flows[28][29] - FASB issued ASU No 2024-03 (Disaggregation of Income Statement Expenses) in November 2024, effective for annual periods after December 15, 2026, which is not expected to materially affect financial statements[30] Note 2. Goodwill Impairment - In the second quarter of 2025, Avanos recorded a $77.0 million goodwill impairment related to its Pain Management and Recovery (PM&R) reporting unit due to a decrease in market capitalization[32] Changes in Goodwill Carrying Amount (in millions) | Segment | Balance, December 31, 2024 | Goodwill Impairment | Currency Translation Adjustment | Balance, June 30, 2025 | | :--- | :--- | :--- | :--- | :--- | | SNS | $327.6 | — | — | $327.6 | | PM&R | $128.0 | $(77.0) | $2.6 | $53.6 | | Total | $455.6 | $(77.0) | $2.6 | $381.2 | Note 3. Segment Information - Effective Q1 2025, the company manages its business in two operating and reportable segments: Specialty Nutrition Systems (SNS) and Pain Management and Recovery (PM&R)[34][35] - Corporate and other expenses for the six months ended June 30, 2025, include a $77.0 million goodwill impairment associated with the PM&R reporting unit[38] Segment Net Sales and Operating Income (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net Sales: | | | | | | SNS | $102.7 | $97.7 | $203.8 | $192.3 | | PM&R | $61.0 | $59.3 | $117.2 | $115.6 | | Total Segment Net Sales | $163.7 | $157.0 | $321.0 | $307.9 | | Reportable Segment Operating Income (Loss): | | | | | | SNS | $18.0 | $21.8 | $39.1 | $37.2 | | PM&R | $1.8 | $0.1 | $2.0 | $(2.0) | | Total Segment Operating Income (Loss) | $19.8 | $21.9 | $41.1 | $35.2 | Note 4. Restructuring Activities - The company initiated a three-year Transformation Process in January 2023, substantially complete by end of 2024, incurring $27.4 million in net expenses since inception[39][40] - A Post-RH Divestiture Plan, initiated in 2024 and expanded in H1 2025, is expected to be substantially complete by end of 2025, with $7.6 million in costs incurred in H1 2025[41] - The restructuring liability as of June 30, 2025, was $1.7 million, down from $3.8 million at December 31, 2024[44] Note 5. Supplemental Balance Sheet Information Accounts Receivable (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accounts receivable, net of allowances | $110.2 | $132.8 | Inventories (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Inventories | $142.7 | $138.8 | Property, Plant and Equipment, net (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Property, Plant and Equipment, net | $114.3 | $110.7 | Intangible Assets, net (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Net Carrying Amount | $105.4 | $112.3 | Accrued Expenses (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Accrued Expenses | $66.0 | $91.3 | Note 6. Discontinued Operations - The sale of the Respiratory Health (RH) business closed on October 2, 2023, for $110 million cash, with the final transfer of manufacturing assets completed on October 1, 2024[52][53][95] - No activity from discontinued operations was reported for the three and six months ended June 30, 2025[55][102] Financial Results of Discontinued Operations (in millions) for 2024 | Metric | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net Sales | $13.6 | $30.5 | | Net Loss from discontinued operations, net of tax | $(2.5) | $(3.9) | Note 7. Fair Value Information - The company uses a three-level fair value hierarchy for financial instruments, with Level 1 for quoted prices in active markets, Level 2 for similar assets/liabilities or observable inputs, and Level 3 for unobservable inputs[58][59] Fair Value of Financial Instruments (in millions) | Instrument | Fair Value Hierarchy Level | June 30, 2025 Carrying Amount | June 30, 2025 Estimated Fair Value | December 31, 2024 Carrying Amount | December 31, 2024 Estimated Fair Value | | :--- | :--- | :--- | :--- | :--- | :--- | | Cash and cash equivalents | 1 | $90.3 | $90.3 | $107.7 | $107.7 | | Revolving Credit Facility | 2 | — | — | $25.0 | $25.0 | | Term Loan Facility | 2 | $105.1 | $105.1 | $109.7 | $109.7 | Note 8. Debt - The company entered into a $500.0 million credit agreement on June 24, 2022, consisting of a $125.0 million Term Loan Facility and a $375.0 million Revolving Credit Facility, maturing on June 24, 2027[62] - During the six months ended June 30, 2025, the company repaid $4.7 million of the Term Loan Facility and $25.0 million of the Revolving Credit Facility[66] Debt Balances (in millions) | Debt Type | Weighted-Average Interest Rate | Maturity | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | :--- | :--- | | Revolving Credit Facility | 5.94% | 2027 | $— | $25.0 | | Term Loan Facility | 5.82% | 2027 | $105.5 | $110.2 | | Total Long-Term Debt, net | | | $95.7 | $125.3 | Note 9. Accumulated Other Comprehensive Loss Changes in Accumulated Other Comprehensive Loss (AOCL) (in millions) | Component | Balance, December 31, 2024 | Other Comprehensive Income (Loss) | Balance, June 30, 2025 | | :--- | :--- | :--- | :--- | | Unrealized Currency Translation | $(44.9) | $11.4 | $(33.5) | | Cash Flow Hedges | — | $1.1 | $1.1 | | Defined Benefit Plans | $0.3 | $0.1 | $0.4 | | Total Accumulated Other Comprehensive Loss | $(44.6) | $12.6 | $(32.0) | Note 10. Stock-Based Compensation Stock-Based Compensation Expense (in millions) | Type of Award | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Stock options | $0.2 | — | $0.2 | — | | Time-based restricted share units | $3.5 | $2.4 | $6.6 | $4.9 | | Performance-based restricted share units | $0.3 | $1.4 | $1.0 | $2.4 | | Employee stock purchase plan | $0.1 | — | $0.1 | $0.1 | | Total stock-based compensation | $4.1 | $3.8 | $7.9 | $7.4 | Note 11. Commitments and Contingencies - The company is subject to various legal proceedings, claims, and governmental investigations, but believes the ultimate resolution will not materially adversely affect its business or financial condition[70][75] - The DOJ's criminal investigation related to MicroCool surgical gowns was dismissed in January 2025, following the DPA term expiration in July 2024[71] - The company operates in an industry with extensive patent litigation, which can be costly and result in significant damage awards or injunctions[72] Note 12. Derivative Financial Instruments - The company uses derivative instruments, specifically foreign currency swap contracts, to hedge forecasted cash flows denominated in Mexican pesos, designated as cash flow hedges[77] - As of June 30, 2025, the derivative asset for foreign exchange contracts was $1.4 million, and the aggregate notional value of outstanding foreign currency swap contracts was $21.6 million[77][78] Note 13. Earnings Per Share ("EPS") - For the three and six months ended June 30, 2025, 2.5 million and 1.8 million potentially dilutive stock options and RSU awards, respectively, were excluded from EPS computation as they were anti-dilutive[81] Basic and Diluted EPS (in millions, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net (Loss) Income | $(76.8) | $1.8 | $(70.2) | $0.9 | | Basic (Loss) Earnings Per Share | $(1.66) | $0.04 | $(1.52) | $0.02 | | Diluted (Loss) Earnings Per Share | $(1.66) | $0.04 | $(1.52) | $0.02 | | Basic weighted average shares outstanding | 46.3 | 45.9 | 46.2 | 46.1 | | Diluted weighted average shares outstanding | 46.3 | 46.3 | 46.2 | 46.6 | Note 14. Revenue Net Sales by Product Category (in millions) | Product Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Specialty Nutrition Systems: | | | | | | Enteral feeding | $74.5 | $72.7 | $149.0 | $142.7 | | Neonate solutions | $28.2 | $25.0 | $54.8 | $49.6 | | Total SNS | $102.7 | $97.7 | $203.8 | $192.3 | | Pain Management and Recovery: | | | | | | Surgical pain and recovery | $25.2 | $27.8 | $49.7 | $54.8 | | Radiofrequency ablation | $35.8 | $31.5 | $67.5 | $60.8 | | Total PM&R | $61.0 | $59.3 | $117.2 | $115.6 | | Corporate and Other | $11.3 | $14.7 | $21.5 | $29.9 | | Total Net Sales | $175.0 | $171.7 | $342.5 | $337.8 | Liabilities for Estimated Returns, Rebates and Incentives (in millions) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accrued rebates and customer incentives | $23.1 | $24.2 | | Accrued sales returns | $0.1 | $0.1 | | Total estimated liabilities | $23.2 | $24.3 | Note 15. Share Repurchase Programs - The Board approved a new one-year program on November 1, 2024, to repurchase up to $25.0 million of common stock[86] - No common stock repurchases occurred in the six months ended June 30, 2025[87] Common Stock Repurchases (Six Months Ended June 30, 2024) | Period | Shares Repurchased | Aggregate Purchase Price (in millions) | Average Price per Share | | :--- | :--- | :--- | :--- | | First quarter of 2024 | 342,680 | $6.7 | $19.45 | | Second quarter of 2024 | 169,571 | $3.3 | $19.67 | Note 16. Subsequent Events - The One Big Beautiful Bill Act (OBBBA) was enacted on July 4, 2025, extending or making permanent certain tax provisions, with the company currently assessing its impact[89] - On July 31, 2025, the company sold substantially all assets of its Hyaluronic Acid (HA) product line to Channel-Markers Medical, LLC, aligning with its strategic focus on PM&R and SNS segments[90] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition, operational results, and key business factors for the periods presented Introduction - Avanos is a medical technology company focused on delivering clinically superior medical device solutions for patient nutrition and pain management, holding leading market positions globally[91] Goodwill Impairment - A $77.0 million goodwill impairment was recorded in Q2 2025 for the Pain Management and Recovery reporting unit due to a decrease in market capitalization[93] Divestiture of the Respiratory Health Business - The sale of the Respiratory Health (RH) business to SunMed Group Holdings, LLC, for $110 million cash, was finalized on October 1, 2024, with remaining transition services to terminate within three years[94][95][96] Restructuring Activities - The three-year Transformation Process, initiated in January 2023, was largely complete by the end of 2024, focusing on commercial organization, portfolio rationalization, and cost management[98][99] - The Post-RH Divestiture Plan, aimed at aligning organizational structure and operational footprint, incurred $7.6 million in costs in H1 2025 and may expand through 2026 under the new CEO[100][101] Discontinued Operations - No net sales from discontinued operations were reported for the three and six months ended June 30, 2025, following the RH Divestiture[102] Risks Related to Tariffs - New and increased U.S tariffs and retaliatory measures pose significant risks to global operations, particularly due to manufacturing in Mexico and Canada, and sourcing from foreign suppliers[103] - The company has implemented mitigation strategies including cost containment, pricing actions, and supply chain adjustments, but inability to offset costs or reduced demand could negatively impact financial performance[103] Results of Operations and Related Information Use of Non-GAAP Measures - The company uses 'Adjusted operating income' as a non-GAAP measure to assess operational performance and provide insight into ongoing business operations[104] Net Sales Net Sales by Segment (in millions) | Segment | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (QoQ) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Specialty Nutrition Systems | $102.7 | $97.7 | 5.1% | $203.8 | $192.3 | 6.0% | | Pain Management and Recovery | $61.0 | $59.3 | 2.9% | $117.2 | $115.6 | 1.4% | | Corporate and Other | $11.3 | $14.7 | (23.1)% | $21.5 | $29.9 | (28.1)% | | Total Net Sales | $175.0 | $171.7 | 1.9% | $342.5 | $337.8 | 1.4% | Net Sales - Percentage Change Breakdown (QTD) | Segment | Total | Volume | Pricing/Mix | Currency | (a) Other | | :--- | :--- | :--- | :--- | :--- | :--- | | Specialty Nutrition Systems | 5.1% | 4.4% | 0.5% | 0.7% | (0.5)% | | Pain Management and Recovery | 2.9% | 3.1% | 0.3% | 0.4% | (0.9)% | | Corporate and Other | (23.1)% | (26.4)% | (2.0)% | —% | 5.3% | Net Sales by Segment - Second Quarter of 2025 Compared to the Second Quarter of 2024 - Specialty Nutrition Systems net sales increased 5.1% to $102.7 million, driven by 4.4% volume growth from strong demand in enteral feeding and neonate solutions[106] - Pain Management and Recovery net sales increased 2.9% to $61.0 million, with RFA solutions growing 13.7% due to generator sales, while surgical pain and recovery decreased 9.4% due to lower volume[108] Net Sales by Segment - First Six Months of 2025 Compared to the First Six Months of 2024 - Specialty Nutrition Systems net sales increased 6.0% to $203.8 million, with 6.5% volume growth from continued strong demand[109] - Pain Management and Recovery net sales increased 1.4% to $117.2 million, with RFA solutions growing 11.0% from generator sales, offset by a 9.3% decrease in surgical pain and recovery due to lower volume[110] Net Sales by Geographic Region Net Sales by Geographic Region (in millions) | Region | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (QoQ) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | North America | $138.5 | $136.6 | 1.4% | $269.3 | $268.7 | 0.2% | | Europe, Middle East and Africa | $22.8 | $23.5 | (3.0)% | $46.5 | $46.5 | —% | | Asia Pacific and Latin America | $13.7 | $11.6 | 18.1% | $26.7 | $22.6 | 18.1% | | Total net sales | $175.0 | $171.7 | 1.9% | $342.5 | $337.8 | 1.4% | Cost of Products Sold - Cost of products sold increased in both the three and six months ended June 30, 2025, primarily due to increased tariffs and higher net sales across both reportable segments[113] Cost of Products Sold (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Specialty Nutrition Systems | $46.9 | $39.8 | $90.3 | $80.0 | | Pain Management and Recovery | $26.9 | $24.9 | $51.8 | $48.9 | | Total Cost of Products Sold | $82.9 | $76.1 | $160.6 | $147.4 | Research and Development Research and Development Expenses (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Specialty Nutrition Systems | $4.5 | $4.1 | $8.7 | $8.3 | | Pain Management and Recovery | $1.2 | $2.0 | $2.4 | $4.0 | | Total Research and Development | $5.8 | $6.3 | $11.2 | $13.3 | Selling and General Expenses - Selling and general expenses increased in Q2 2025 due to post-divestiture restructuring costs, but decreased in H1 2025 due to savings from the Transformation Process and increased spending discipline[117] Selling and General Expenses (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Specialty Nutrition Systems | $33.5 | $32.2 | $65.8 | $67.0 | | Pain Management and Recovery | $31.2 | $32.0 | $61.1 | $64.4 | | Total Selling and General Expenses | $83.5 | $80.9 | $159.2 | $164.5 | Other (Income) Expense, net - Other income in H1 2025 primarily relates to a $1.4 million recovery from a customer claim in 2023[118] Other (Income) Expense, net (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Other (Income) Expense, net | $0.3 | $2.1 | $(1.3) | $2.3 | Operating Income (Loss) - Consolidated operating loss for Q2 and H1 2025 was primarily driven by the $77.0 million goodwill impairment[120] Operating Income (Loss) (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Specialty Nutrition Systems | $18.0 | $21.8 | $39.1 | $37.2 | | Pain Management and Recovery | $1.8 | $0.1 | $2.0 | $(2.0) | | Total Operating Income (Loss) | $(74.5) | $6.3 | $(64.2) | $10.3 | Adjusted Operating Income - Adjustments include post-RH Divestiture restructuring charges of $4.5 million (Q2 2025) and $7.6 million (H1 2025), and a $1.4 million recovery for litigation and legal in H1 2025[123][126] Adjusted Operating Income (Loss) (non-GAAP, in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Operating income (Loss), as reported (GAAP) | $(74.5) | $6.3 | $(64.2) | $10.3 | | Goodwill impairment | $77.0 | — | $77.0 | — | | Intangibles amortization | $5.2 | $6.3 | $10.3 | $12.4 | | Adjusted operating income (Loss) (non-GAAP) | $12.2 | $21.8 | $29.3 | $38.1 | Interest Expense - Interest expense decreased due to lower outstanding debt balances, which were $105.1 million as of June 30, 2025, compared to $134.7 million as of December 31, 2024[128] Interest Expense (in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Interest expense | $2.0 | $3.1 | $4.1 | $6.2 | Income Taxes Income Tax Provision and Effective Tax Rate | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Income tax provision | $0.9 | $1.9 | $4.0 | $2.9 | | Effective tax rate | 1.2% | 30.6% | 6.0% | 37.7% | Liquidity and Capital Resources - Primary liquidity sources are cash on hand from operating activities and the Revolving Credit Facility, expected to be sufficient for working capital and capital expenditures for the next twelve months[130] - Cash and cash equivalents decreased by $17.4 million to $90.3 million as of June 30, 2025, primarily due to debt repayments and capital expenditures, partially offset by operating cash flow[132] - As of June 30, 2025, $51.7 million of the $90.3 million cash and cash equivalents was held by foreign subsidiaries, considered indefinitely reinvested[131] - The company was in compliance with all customary operational and financial covenants under its Credit Agreement as of June 30, 2025[137] Critical Accounting Policies and Use of Estimates - No significant changes to critical accounting estimates were reported in the three and six months ended June 30, 2025, from those disclosed in the Form 10-K[139] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company reports no material changes to its market risk position from the prior annual report - No material changes regarding the company's market risk position from the information provided in Item 7A of the Form 10-K[140] Item 4. Controls and Procedures Management confirms the effectiveness of disclosure controls and reports no material changes in internal controls - The CEO and CFO concluded that disclosure controls and procedures were operating effectively as of June 30, 2025[141] - No changes in internal control over financial reporting occurred during the three months ended June 30, 2025, that materially affected or are reasonably likely to materially affect internal control over financial reporting[142] PART II – OTHER INFORMATION Item 1. Legal Proceedings The company discloses various legal proceedings that are not expected to have a material adverse effect - The company is subject to various legal proceedings, claims, and governmental investigations, but believes their ultimate resolution will not materially adversely affect its business, financial condition, results of operations, or liquidity[143] Item 1A. Risk Factors The company updates its risk factors, highlighting risks from new tariffs and international trade measures - The imposition of new and increased U.S tariffs and retaliatory trade measures by other countries poses significant risks to the company's global operations, particularly given its manufacturing in Mexico and Canada and sourcing from foreign suppliers[144][145] - Inability to successfully pass through additional tariff costs, reduced demand due to higher prices, or failure to mitigate tariff impacts through supply chain adjustments could materially negatively affect financial performance[145] - Changes to international trade agreements like USMCA or WTO could result in additional tariffs or trade restrictions, further impacting the company's business[146] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section indicates no applicable information regarding unregistered sales of equity securities for the period - Not applicable[150] Item 3. Defaults Upon Senior Securities This section indicates no defaults upon senior securities to report for the period - Not applicable[150] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the company - Not applicable[151] Item 5. Other Information This section indicates no other information to report for the period - None[151] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including corporate documents and certifications - The report includes various exhibits such as the Second Amended and Restated Certificate of Incorporation, Sixth Amended and Restated Bylaws, Section 302 CEO and CFO Certifications, Section 906 CEO and CFO Certifications, and XBRL Instance Document and Taxonomy Extension Documents[152] Signatures This section contains the certifying signatures of the company's senior financial officers - The report is signed by Scott M Galovan, Senior Vice President, Chief Financial Officer, and John J Hurley, Controller, on August 5, 2025[155]