UFP Technologies(UFPT) - 2025 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Presents the company's unaudited condensed consolidated financial statements and management's analysis Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items Condensed Consolidated Balance Sheets Presents the company's financial position, including assets, liabilities, and equity, at specific dates Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $14,892 | $13,450 | | Total current assets | $191,390 | $194,945 | | Total assets | $634,659 | $628,995 | | Total current liabilities | $69,195 | $76,295 | | Long-term debt, excl. current | $151,125 | $176,875 | | Total liabilities | $249,168 | $286,235 | | Total stockholders' equity | $385,491 | $342,760 | Condensed Consolidated Statements of Comprehensive Income Details the company's revenues, expenses, and net income over specific reporting periods Comprehensive Income Highlights (in thousands, except per share data) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $151,176 | $110,177 | $299,324 | $215,186 | | Gross profit | $43,543 | $33,031 | $85,695 | $63,114 | | Operating income | $24,329 | $17,951 | $47,455 | $33,876 | | Net income | $17,180 | $13,552 | $34,364 | $26,245 | | Basic EPS | $2.23 | $1.77 | $4.46 | $3.43 | | Diluted EPS | $2.21 | $1.75 | $4.42 | $3.38 | | Comprehensive income | $22,474 | $13,371 | $41,983 | $25,481 | Condensed Consolidated Statements of Stockholders' Equity Outlines changes in equity components, including net income, share-based compensation, and other comprehensive income Stockholders' Equity Changes (in thousands) for Six Months Ended June 30, 2025 | Item | Amount | | :--- | :--- | | Balance at December 31, 2024 | $342,760 | | Share-based compensation | $4,497 | | Exercise of stock options net of shares presented for exercise | $165 | | Net share settlement of RSU's | $(3,914) | | Other comprehensive income | $7,619 | | Net income | $34,364 | | Balance at June 30, 2025 | $385,491 | Condensed Consolidated Statements of Cash Flows Summarizes cash inflows and outflows from operating, investing, and financing activities over specific periods Cash Flow Highlights (in thousands) for Six Months Ended June 30 | Activity | 2025 | 2024 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $39,141 | $22,368 | +$16,773 | | Net cash used in investing activities | $(8,467) | $(9,113) | +$646 | | Net cash used in financing activities | $(29,781) | $(1,673) | -$28,108 | | Net increase in cash and cash equivalents | $1,442 | $11,465 | -$10,023 | | Cash and cash equivalents at end of period | $14,892 | $16,728 | -$1,836 | Notes to Interim Condensed Consolidated Financial Statements Provides detailed explanations and disclosures supporting the interim condensed consolidated financial statements (1) Basis of Presentation This note explains that the interim financial statements are prepared in accordance with SEC rules for Form 10-Q, are unaudited, and include all necessary adjustments for fair presentation. It also mentions the evaluation of a new accounting pronouncement (ASU 2023-09) related to income tax disclosures - Statements are unaudited but include all normal, recurring adjustments necessary for a fair presentation of results for these interim periods[23] - The Company is currently evaluating the impact of ASU 2023-09, which requires additional quantitative and qualitative income tax disclosures, effective for annual periods beginning after December 15, 2024[26] (2) Acquisitions This note details several acquisitions made by the Company, including AJR Specialty Products, AJR Custom Foam Products, Marble Medical, AJR Enterprises, Welch Fluorocarbon, and AQF Medical, highlighting their strategic importance and financial impact - On April 25, 2025, the Company acquired AJR Specialty Products, LLC and AJR Custom Foam Products, LLC for $2.8 million in cash, enhancing capacity in single-use safe patient handling and expertise in specialty fabrics and foam fabrication[27][28] - In 2024, the Company completed four acquisitions: Marble Medical ($4.5 million cash + $0.5 million contingent), AJR Enterprises ($110 million cash), Welch Fluorocarbon ($34.6 million cash + $6.0 million contingent), and AQF Medical (€43 million cash, approximately $48.0 million). These acquisitions collectively contributed approximately $76.3 million in sales during the first half of 2025[31][35][40][45][114] Unaudited Pro Forma Consolidated Statement of Comprehensive Income (in thousands) for Six Months Ended June 30, 2024 (as if 2024 acquisitions occurred at beginning of period) | Metric | Amount | | :--- | :--- | | Sales | $279,349 | | Operating Income | $43,016 | | Net Income | $29,515 | | Basic EPS | $3.85 | | Diluted EPS | $3.81 | (3) Equity Method Investment This note describes the Company's 50% equity interest in AQF Asia PTE Ltd., accounted for using the equity method due to significant influence but lack of control - The Company holds a 50% equity interest in AQF Asia PTE Ltd., accounted for using the equity method due to significant influence but not control[51] Equity Method Investment Roll-Forward (in thousands) for Six Months Ended June 30, 2025 | Item | Amount | | :--- | :--- | | Equity Method Investment - December 31, 2024 | $6,808 | | 50% share of AQF Asia net income | $157 | | Amortization of basis differences | $(59) | | Equity Method Investment - June 30, 2025 | $6,906 | (4) Revenue Recognition This note explains the Company's revenue recognition policies, primarily recognizing product sales upon shipment and tooling/machinery sales upon customer acceptance. It also disaggregates revenue by product type and details contract balances Net Sales by Type (in thousands) | Type | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Products | $149,332 | $105,248 | $294,432 | $208,517 | | Tooling and Machinery | $302 | $3,292 | $1,800 | $4,557 | | Engineering services | $1,542 | $1,637 | $3,092 | $2,112 | | Total net sales | $151,176 | $110,177 | $299,324 | $215,186 | Contract Liabilities (Deferred Revenue) (in thousands) | Period | Beginning Balance | End Balance | | :--- | :--- | :--- | | Six Months Ended June 30, 2025 | $4,667 | $4,609 | | Six Months Ended June 30, 2024 | $6,616 | $4,552 | (5) Supplemental Cash Flow Information This note provides additional details on cash paid for interest and income taxes, and non-cash investing and financing activities Cash Paid (in thousands) for Six Months Ended June 30 | Item | 2025 | 2024 | | :--- | :--- | :--- | | Interest | $5,528 | $1,228 | | Income taxes, net of refunds | $881 | $5,735 | (6) Receivables and Allowance for Credit Losses This note details the composition of receivables and the methodology for the allowance for credit losses, including a roll-forward of the allowance Receivables, Net (in thousands) | Date | Accounts receivable–trade | Less allowance for credit losses | Receivables, net | | :--- | :--- | :--- | :--- | | June 30, 2025 | $85,693 | $(762) | $84,931 | | December 31, 2024 | $85,562 | $(885) | $84,677 | Allowance for Credit Losses Roll-Forward (in thousands) for Six Months Ended June 30 | Item | 2025 | 2024 | | :--- | :--- | :--- | | Allowance - beginning of period | $885 | $727 | | Provision (adjustment) for expected credit losses | $(121) | $107 | | Amounts written off against the allowance, net of recoveries | $(2) | $(17) | | Allowance - end of period | $762 | $817 | (7) Fair Value of Financial Instruments This note categorizes financial instruments measured at fair value into Level 1, 2, or 3 based on input observability, focusing on contingent consideration and non-competition payments Level 3 Financial Liabilities (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Accrued contingent consideration (earn-out) | $5,515 | $10,239 | | Present value of non-competition payments | $5,076 | $6,871 | - The Company paid approximately $5.3 million related to contingent consideration and $1.8 million related to non-competition agreements for the six months ended June 30, 2025[67][68] (8) Share-Based Compensation This note explains the accounting for share-based compensation, including common stock grants, stock option grants, and restricted stock unit (RSU) awards, and their impact on expenses Share-Based Compensation Expense (in thousands) | Type | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Common stock grants | $100 | $100 | $200 | $200 | | Stock option grants | $65 | $118 | $173 | $230 | | Restricted Stock Unit Awards ("RSUs") | $2,120 | $1,518 | $4,124 | $2,819 | | Total share-based compensation | $2,285 | $1,736 | $4,497 | $3,249 | - As of June 30, 2025, the Company had approximately $13.2 million of unrecognized compensation expense, expected to be recognized over a period of 2.8 years[77] (9) Inventories This note provides a breakdown of inventory components (raw materials, work in process, finished goods) and their valuation method Inventories (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Raw materials | $62,789 | $65,747 | | Work in process | $6,565 | $5,730 | | Finished goods | $15,846 | $16,059 | | Total inventory | $85,200 | $87,536 | (10) Property, Plant and Equipment This note lists the categories of property, plant, and equipment, along with their gross amounts, accumulated depreciation, and net book value Property, Plant and Equipment, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Property, plant and equipment (gross) | $142,948 | $134,934 | | Accumulated depreciation and amortization | $(69,031) | $(64,370) | | Net property, plant and equipment | $73,917 | $70,564 | (11) Leases This note details the Company's operating and finance leases, including Right of Use (ROU) assets, lease liabilities, and lease costs, along with weighted-average remaining lease terms and discount rates ROU Assets and Lease Liabilities (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total ROU assets | $17,011 | $16,148 | | Total lease liabilities - current | $4,715 | $4,226 | | Total lease liabilities - long-term | $12,749 | $12,432 | Total Lease Cost (in thousands) for Six Months Ended June 30 | Item | 2025 | 2024 | | :--- | :--- | :--- | | Total lease cost | $2,791 | $2,011 | | Operating cash flows from operating leases | $2,244 | $1,682 | | Financing cash flows from finance leases | $32 | $41 | | ROU assets obtained in exchange for lease liabilities | $2,711 | $- | (12) Income Per Share This note explains the calculation of basic and diluted income per share, including the weighted average common shares outstanding and dilutive common stock equivalents Weighted Average Common Shares Outstanding (in thousands) | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :--- | :--- | :--- | :--- | :--- | | Basic weighted average common shares outstanding | 7,709 | 7,672 | 7,698 | 7,662 | | Diluted weighted average common shares outstanding | 7,773 | 7,753 | 7,783 | 7,756 | - For the three and six months ended June 30, 2025, 2,958 stock awards were excluded from the computation of diluted earnings per share because their effect would be antidilutive[84] (13) Segment Data This note states that the Company operates as a single operating and reportable segment, with the CEO reviewing consolidated results. It disaggregates net sales by market (Medical and Non-medical) and geographic area, and identifies major customers Net Sales by Market (in thousands) | Market | 3 Months Ended June 30, 2025 | % | 3 Months Ended June 30, 2024 | % | 6 Months Ended June 30, 2025 | % | 6 Months Ended June 30, 2024 | % | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Medical | $139,335 | 92.2% | $95,419 | 86.6% | $274,749 | 91.8% | $185,456 | 86.2% | | Non-medical | $11,841 | 7.8% | $14,758 | 13.4% | $24,575 | 8.2% | $29,730 | 13.8% | | Net Sales | $151,176 | 100.0% | $110,177 | 100.0% | $299,324 | 100.0% | $215,186 | 100.0% | - Net sales shipped to customers outside of the United States comprised approximately 17.1% of consolidated net sales for the six months ended June 30, 2025, down from 18.6% in the prior year period[86] - Two customers comprised approximately 24.4% and 22.1% of consolidated net sales for the six months ended June 30, 2025[87] (14) Goodwill and Other Intangible Assets This note provides a roll-forward of goodwill and details the carrying values and amortization schedule for definite-lived intangible assets Goodwill Carrying Amount (in thousands) | Date | Amount | | :--- | :--- | | December 31, 2024 | $189,657 | | Foreign currency translation | $3,294 | | June 30, 2025 | $192,968 | Definite-Lived Intangible Assets, Net (in thousands) as of June 30, 2025 | Type | Net Balance | | :--- | :--- | | Customer List | $112,515 | | Intellectual Property | $24,446 | | Tradename & Brand | $780 | | Non Compete | $4,233 | | Total | $141,974 | - Amortization expense related to intangible assets was approximately $4.8 million for the six months ended June 30, 2025, compared to $2.0 million for the same period in 2024[90] (15) Other Long-Term Liabilities This note lists the components of other long-term liabilities, including non-competition payments and accrued contingent consideration Other Long-Term Liabilities (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Present value of non-competition payments | $3,127 | $4,989 | | Accrued contingent consideration | $791 | $4,938 | | Other | $250 | $1,217 | | Total | $4,168 | $11,144 | (16) Income Taxes This note discusses the Company's income tax expense and effective tax rates for the reporting periods, noting factors influencing the rate changes Income Tax Expense and Effective Rate | Period | Income Before Tax Expense (in thousands) | Income Tax Expense (in thousands) | Effective Tax Rate | | :--- | :--- | :--- | :--- | | 3 Months Ended June 30, 2025 | $21,626 | $4,446 | 20.6% | | 3 Months Ended June 30, 2024 | $17,372 | $3,820 | 22.0% | | 6 Months Ended June 30, 2025 | $41,907 | $7,543 | 18.0% | | 6 Months Ended June 30, 2024 | $32,707 | $6,462 | 19.8% | - The decrease in the effective tax rate for Q2 2025 is largely due to higher anticipated income from operations in the Dominican Republic where the Company pays lower taxes[128] - The decrease in the effective tax rate for H1 2025 is largely due to increased discrete tax benefits associated with vested equity and a state tax refund[129] (17) Debt This note details the Company's $275 million Third Amended and Restated Credit Agreement, including a secured term loan and revolving credit facility, interest rates, covenants, and maturity - The Company has a $275 million Third Amended and Restated Credit Agreement, consisting of a $125 million secured term loan and a $150 million secured revolving credit facility, maturing on June 27, 2029[93][94] - At June 30, 2025, outstanding borrowings were approximately $163.6 million, with a weighted average interest rate of approximately 5.7%. The Company was in compliance with all covenants[96] Future Maturities of Long-Term Debt (in thousands) at June 30, 2025 | Year | Term Loan | Revolving credit facility | Total | | :--- | :--- | :--- | :--- | | Remainder of 2025 | $6,250 | $- | $6,250 | | 2026 | $12,500 | $- | $12,500 | | 2027 | $12,500 | $- | $12,500 | | 2028 | $12,500 | $- | $12,500 | | 2029 | $71,875 | $48,000 | $119,875 | | Total | $115,625 | $48,000 | $163,625 | (18) Subsequent Events This note reports on two acquisitions completed shortly after the reporting period: Universal Plastics & Engineering Company, Inc. (UNIPEC) and Techno Plastics Industries, Inc. (TPI), and the enactment of the "One Big Beautiful Bill Act" (OBBBA) - On July 2, 2025, the Company acquired Universal Plastics & Engineering Company, Inc. (UNIPEC) for $7.5 million in cash, specializing in precision thermoformed and heat-sealed polymer components for implantable medical devices[99][100] - On July 7, 2025, the Company acquired Techno Plastics Industries, Inc. (TPI) for $4.5 million in cash, a specialty manufacturer of precision thermoplastic injection-molded components[103][104] - On July 4, 2025, the "One Big Beautiful Bill Act" (OBBBA) was signed into law, including corporate tax provisions like 100% bonus depreciation. The Company is evaluating its impact but does not expect a material effect on income tax expense[106] 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 results of operations, including an overview of the business, analysis of sales, profitability, expenses, liquidity, and capital resources, as well as forward-looking statements and the impact of recent legislative changes Forward-looking Statements This section provides a cautionary note regarding forward-looking statements, highlighting inherent risks and uncertainties that could cause actual results to differ materially from projections - Forward-looking statements are subject to known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from any future results expressed or implied[107] - Investors are cautioned not to place undue reliance on these statements due to the inherent uncertainty of estimates, forecasts, and projections[110] Overview This section describes UFP Technologies as a contract development and manufacturing organization specializing in single-use and single-patient medical devices, emphasizing its role in the medical device supply chain and its strategy for organic and acquisition-based growth - UFP Technologies is a contract development and manufacturing organization (CDMO) specializing in single-use and single-patient medical devices, serving as an outsourcing partner to medical device manufacturers[112] - The Company's strategy includes further organic growth and growth through strategic acquisitions[113] - Net sales for the six months ended June 30, 2025, increased 39.1% to $299.3 million, primarily due to 48.2% growth in the medical market, largely driven by 2024 acquisitions[114] Impact of Tariffs This section discusses the potential impact of increased U.S. tariffs on foreign imports, noting that while direct impact has not been material, raw material price increases are anticipated to be passed on to customers - Increased U.S. tariffs have not had a material direct impact on the Company's business, financial condition, or results of operations to date[116] - The Company estimates an increase of approximately $9 million in annual price increases due to tariffs being passed through by raw material suppliers, which it intends to pass on to customers[116] Results of Operations This section provides a detailed analysis of the Company's financial performance for the three and six months ended June 30, 2025, compared to 2024, covering net sales, gross profit, SG&A, contingent consideration, interest expense, other expense/income, and income taxes Net Sales Net sales saw significant growth for both the three and six months ended June 30, 2025, primarily driven by acquisitions and strong organic growth in the medical market - Net sales for the three months ended June 30, 2025, increased 37.2% to $151.2 million, with medical market sales growing 46.0% primarily due to 2024 and 2025 acquisitions ($35.7 million contribution)[117] - Organic sales growth for the second quarter was 4.9%, with organic growth in the medical market at approximately 10%[117] - Net sales for the six months ended June 30, 2025, increased 39.1% to $299.3 million, with medical market sales growing 48.2% primarily due to 2024 and 2025 acquisitions ($76.3 million contribution)[118] Gross Profit Gross margin slightly decreased for both the three and six months ended June 30, 2025, primarily due to increased material and labor costs and inefficiencies from newly acquired AJR operations - Gross margin decreased to 28.8% for the three months ended June 30, 2025, from 30.0% for the same period in 2024[119] - Gross margin decreased slightly to 28.6% for the six months ended June 30, 2025, from 29.3% for the same period in 2024[120] - Inefficiencies in newly acquired AJR operations added an estimated $1.2 million to cost-of-sales in the second quarter, with anticipated gradual improvement for the balance of the year[119] Selling, General and Administrative Expenses SG&A expenses increased in absolute terms for both periods due to 2024 acquisitions, but decreased as a percentage of sales, indicating improved operational leverage - SG&A increased 34.4% to $18.7 million for the three months ended June 30, 2025, from $13.9 million in 2024, primarily due to 2024 acquisitions[121] - As a percentage of sales, SG&A decreased to 12.4% for the three months ended June 30, 2025, from 12.6% in 2024[121] - SG&A increased 34.5% to $37.4 million for the six months ended June 30, 2025, from $27.8 million in 2024, decreasing as a percentage of sales to 12.5% from 12.9%[122] Change in fair value of contingent consideration The Company recognized an expense related to the change in fair value of contingent consideration for past acquisitions (Welch, Marble, DAS Medical), reflecting re-measurements based on performance thresholds - The change in fair value of contingent consideration resulted in an expense of approximately $0.3 million for the three months ended June 30, 2025, and $0.5 million for the six months ended June 30, 2025[123] - The fair value of the liability for contingent consideration payments recognized at June 30, 2025, totaled approximately $5.5 million out of remaining potential payments of $9.3 million[123] Interest expense, net Net interest expense significantly increased for both periods, primarily due to higher debt levels incurred for the 2024 acquisitions - Net interest expense was approximately $2.7 million for the three months ended June 30, 2025, up from $0.6 million in 2024[124] - Net interest expense was approximately $5.5 million for the six months ended June 30, 2025, up from $1.2 million in 2024, primarily due to higher debt related to borrowings for 2024 acquisitions[125] Other expense (income) Other expense increased for both periods, driven by foreign currency transaction losses in 2025, partially offset by equity method investment income - Other expenses were approximately $32 thousand for the three months ended June 30, 2025, compared to $2 thousand in 2024[126] - Other expense was approximately $68 thousand for the six months ended June 30, 2025, compared to other income of $39 thousand in 2024, primarily due to foreign currency transaction losses in 2025 and equity method investment income[127] Income Taxes The effective tax rate decreased for both the three and six months ended June 30, 2025, influenced by higher income from lower-tax jurisdictions and discrete tax benefits - The effective tax rate for the three months ended June 30, 2025, was 20.6%, down from 22.0% in 2024, largely due to higher anticipated income from operations in the Dominican Republic[128] - The effective tax rate for the six months ended June 30, 2025, was 18.0%, down from 19.8% in 2024, due to increased discrete tax benefits associated with vested equity and a state tax refund[129] Liquidity and Capital Resources This section discusses how the Company funds its operations and growth, including cash flows from operating activities, debt facilities, and future liquidity plans Cash Flows Net cash provided by operating activities significantly increased, while net cash used in financing activities also rose substantially, primarily due to debt repayments - Net cash provided by operating activities for the six months ended June 30, 2025, was approximately $39.1 million, primarily from net income, depreciation, and share-based compensation[131] - Net cash used in investing activities was approximately $8.5 million, mainly for capital additions and acquisitions[133] - Net cash used for financing activities was approximately $29.8 million, primarily due to $36.0 million in revolving line of credit payments and $6.3 million in long-term debt principal payments[134] Outstanding and Available Debt This section details the Company's $275 million credit agreement, including outstanding borrowings, interest rates, and compliance with covenants - The Company has a $275 million Third Amended and Restated Credit Agreement, comprising a $125 million secured term loan and a $150 million secured revolving credit facility, maturing on June 27, 2029[135][136] - At June 30, 2025, outstanding borrowings were approximately $163.6 million, with a weighted average interest rate of approximately 5.7%. The Company was in compliance with all covenants[138] Future Maturities of Long-Term Debt (in thousands) at June 30, 2025 | Year | Term Loan | Revolving credit facility | Total | | :--- | :--- | :--- | :--- | | Remainder of 2025 | $6,250 | $- | $6,250 | | 2026 | $12,500 | $- | $12,500 | | 2027 | $12,500 | $- | $12,500 | | 2028 | $12,500 | $- | $12,500 | | 2029 | $71,875 | $48,000 | $119,875 | | Total | $115,625 | $48,000 | $163,625 | Future Liquidity The Company expects existing resources, including its revolving credit facility and cash from operations, to be sufficient for the next twelve months, with plans for continued capacity expansion and potential future acquisitions - The Company believes its existing resources, including its revolving credit facility and cash expected from operations, will be sufficient to fund cash flow requirements through the next twelve months[141] - The Company plans to continue adding capacity, enhancing operating efficiencies, and considering additional acquisitions complementary to its business[141] Enactment of the "One Big Beautiful Bill Act" (OBBBA) The "One Big Beautiful Bill Act" (OBBBA) was signed into law on July 4, 2025, introducing corporate tax provisions such as 100% bonus depreciation and immediate expensing for R&D. The Company is evaluating its impact but does not expect a material effect on income tax expense - The "One Big Beautiful Bill Act" (OBBBA) was signed into law on July 4, 2025, restoring 100% bonus depreciation and allowing immediate expensing for domestic research and experimental expenditures[143] - The Company is currently evaluating the impact of OBBBA on its financial statements but does not expect it to have a material impact on income tax expense[143] Critical Accounting Estimates This section states that there have been no material changes to the Company's critical accounting estimates since the last annual report - There have been no material changes to the Company's Critical Accounting Estimates as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024[144] Commitments and Contractual Obligations This section states that there have been no material changes to the Company's contractual obligations and commitments outside the ordinary course of business since the last annual report - There have been no material changes outside the ordinary course of business to the Company's contractual obligations and commitments as disclosed in its Annual Report on Form 10-K for the year ended December 31, 2024[145] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section states that there have been no material changes in the Company's market risks as previously disclosed in its Annual Report on Form 10-K - There have been no material changes in the Company's market risks as previously disclosed in Item 7A of its Annual Report on Form 10-K for the year ended December 31, 2024[146] Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025. However, recently acquired businesses (2024 and 2025 acquisitions) were excluded from the scope of this assessment - The Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[147] - Acquisitions from 2024 and 2025, representing approximately 33.3% of consolidated total assets and 24.3% of net sales, were excluded from the assessment of the effectiveness of disclosure controls and procedures due to timing[148] PART II - OTHER INFORMATION Covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits Item 1. Legal Proceedings The Company is not a party to any material litigation or other material legal proceedings, and management believes any ordinary course claims will not have a material adverse effect - The Company is not a party to any material litigation or other material legal proceedings[149] - Management believes that any suits, claims, and complaints arising in the ordinary course of business should not result in final judgments or settlements that would have a material adverse effect on the Company's financial condition or results of operations[149] Item 1A. Risk Factors This section refers readers to the detailed discussion of risks and uncertainties in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, and other public filings - For a detailed discussion of the risks that affect the business, readers should refer to Part I, Item 1A, "Risk Factors" in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024, as well as other public filings with the SEC[150] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section states that there were no unregistered sales of equity securities or use of proceeds during the reporting period - None[151] Item 3. Defaults upon Senior Securities This section states that there were no defaults upon senior securities during the reporting period - None[152] Item 4. Mine Safety Disclosures This section states that the disclosure requirements for mine safety are not applicable to the Company - Not Applicable[153] Item 5. Other Information This section reports that no directors or executive officers adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the second quarter of fiscal 2025 - During the second quarter of fiscal 2025, none of the Company's directors or executive officers adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements[154] Item 6. Exhibits This section provides a list of exhibits filed with the Form 10-Q, including certifications and XBRL documents - Exhibits include Rule 13a-14(a)/15d-14(a) Certifications of the Chief Executive Officer and Chief Financial Officer, and Certifications pursuant to 18 U.S.C., Section 1350[155] - Inline XBRL Instance Document and related taxonomy extension documents are also filed[155] Signatures Details the authorized signatories for the financial report, confirming its official submission - The report was signed on August 11, 2025, by R. Jeffrey Bailly, Chairman, Chief Executive Officer, and Director, and Ronald J. Lataille, Chief Financial Officer[161]