What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-05 compared with 2024-03-05 · 104 added, 86 removed, 216 unchanged (47% of the section changed)

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● Revenue was $529,968 for 2024 compared with $578,634 in 2023.

The increase in revenues reflects the economic growth and increases in demand from many of our served markets.

Certain markets, primarily Industrial, experienced supply-chain constraints in the prior year period impacting customer order patterns and lead times, which began to normalize in 2023.

Certain markets, primarily Industrial and Vehicle, experienced decreases in revenue and our Industrial market was impacted by elevated shipments in 2023 as supply chains normalized, combined with slowing demand at certain customers beginning in the second quarter of 2024.

The acquisitions completed in 2023 and 2024 contributed an incremental $40,856 of revenues in 2024.

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customers were 55% of total sales for 2024 and 59% for 2023, with the balance of sales to customers primarily in Europe, Canada and Asia-Pacific.

● Gross profit was $183,683 for 2023, a 17% increase from $157,259 in 2022.

As a percentage of revenue, gross margin increased 40 basis points to 31.7% in 2023 from 31.3% in 2022.

The gross margin increase was largely driven by volume increases of higher margin products primarily in our Industrial and A&D markets compared to lower volumes of pandemic related Medical market products with lower margins, combined with pricing and margin accretive acquisitions.

The margin expansion continues to be muted, to some extent, by higher material and labor costs as well as costs associated with addressing the challenging global supply chain environment to meet the needs of our customers.

● Gross profit was $165,691 for 2024, a 10% decrease from $183,683 in 2023.

As a percentage of revenue, gross margin decreased 40 basis points to 31.3% in 2024 from 31.7% in 2023.

The gross margin decrease was largely driven by lower fixed cost absorption on lower sales volumes, as well as the gross margin impact of our most recent acquisition.

● Operating income was $30,038 for 2024 compared with $42,314 for 2023, or 5.7% and 7.3% of revenue in 2024 and 2023, respectively.

● Net income was $13,166 for 2024, or $0.79 per diluted share, compared with $24,097, or $1.48 per diluted share, for 2023.

Net income was 39% higher in 2023 compared to 2022, and earnings per diluted share increased by 36% as compared to 2022.

Net income was 45% lower in 2024 compared to 2023, and earnings per diluted share decreased by 46% as compared to 2023.

● Bookings were $480,031 for 2024 compared with $520,275 for 2023, a decrease of 8%.

Decreases in bookings are primarily due to a normalization of customer order patterns as lead times are reducing due to improvement in the global supply chain environment, and, to a lesser extent, economic softening in some European markets.

Decreases in bookings are primarily due to a slowing demand at certain customers beginning in the second quarter of 2024.

Backlog as of December 31, 2024 was $230,788, a decrease of 17% from $276,093 at year end 2023.

Included in backlog as of December 31, 2024 is $7,353 contributed by the 2024 business acquisition.

● Debt of $218,402, net of cash of $31,901, decreased by $18,339 to $186,501 at December 31, 2023 from debt of $235,454, net of cash of $30,614 of $204,840 at December 31, 2022, primarily as a result of payments made on debt from cash flows generated by operations, offset in part by borrowings to fund acquisition activities and capital expenditures.

● We declared and paid a dividend of $0.025 in the first quarter of 2023 and $0.03 in each of the second, third, and fourth quarters of 2023 and declared and paid a dividend of $0.025 in each quarter of 2022 pursuant to our quarterly dividend program.

● Debt of $224,177, net of cash of $36,102, increased by $1,574 to $188,075 at December 31, 2024 from debt of $218,402, net of cash of $31,901 of $186,501 at December 31, 2023, primarily as a result of borrowings to fund acquisition activities and capital expenditures, offset in part by payments made on debt from cash flows generated by operations.

● We declared and paid a dividend of $0.03 in each quarter of 2024, as well as declaring and paying $0.025 in the first quarter of 2023 and $0.03 in each of the second, third, and fourth quarters of 2023 pursuant to

our quarterly dividend program.

Dividends to shareholders for 2024 and 2023 were $0.12 and $0.115 per share, respectively.

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Outlook for 2025

In recent years, we navigated a difficult environment related to the COVID-19 pandemic, while advancing our strategic priorities and delivering solid results.

We experienced record orders in 2023, reflecting increases in our Industrial and Vehicle markets.

This demand, combined with supply chain constraints, resulted in some inefficiencies and additional costs as our teams worked hard to support and meet customer demand and schedules.

While the economic outlook for 2023 remains uncertain and we expect continued upward pressure on material and labor costs, we believe we are in a strong operational, financial and reputational position.

Our record level of backlog, diversified end market penetration and demonstrated agility position us well to perform across varied market trends and

give us confidence that we can drive further efficiency, profitable growth and increased free cash flow while delivering long-term value for our shareholders.

In 2024, we will focus on leveraging our resources to expand our business in our selected target markets.

In addition, we will continue to execute the ongoing critical issues as defined by our Board approved strategy.

The critical issues from that strategy include:

1) Further develop our structure to Win within our selected target markets and customers

2) Improve speed of play in all areas of our business through process improvement

3) Strengthen our balance sheet by improving working capital turns and driving margin improvement.

We experienced a significant demand shift starting in the late second quarter of 2024, with notable declines in our Industrial Automation sector prompted by extended capital expenditure cycles, delayed factory expansions and budget constraints on automation upgrades as well as market softness in the recreational vehicle marketplace driven by increased financing costs and tightening of household budgets.

These factors combined with intermittent uneven order flow in other served markets, spurred a slowdown in demand.

The declines were in large part due to significant inventory rebalancing at some of our larger customers surfacing as the supply chain returned to more normal conditions and macroeconomic pressures shifting customer priorities.

These market conditions substantially persisted through the second half of 2024.

Our Simplify to Accelerate NOW program continues to generate tangible results while enhancing our agility and competitiveness.

● Annualized Savings:

To date, Allient has implemented $10 million in total annualized cost savings.

● Operational Efficiencies:

The program’s focus on refining the organizational structure, eliminating redundancies, and optimizing production processes has led to initial margin improvements, bolstering overall profitability.

● Enhanced Agility:

By simplifying its operations, Allient aims to improve its speed to market, enhance customer service, and strengthen its competitive positioning across targeted industries.

● Future Cost Rationalization:

Beyond the current $10 million in savings, Allient is actively identifying further opportunities to rationalize its cost structure in 2025, ensuring continued alignment with evolving market conditions and customer demands.

Our goal is to drive $6 million to $7 million in annual savings.

In early February 2025, we announced plans to expand machining capabilities at our Dothan, Alabama facility, an initiative expected to help support our goal.

While this transition presents complexities and requires focused execution, we are confident in the long-term efficiencies it will create.

One-time implementation costs are expected to be equivalent to the annualized savings, resulting in a one-year pay back on the investment.

We anticipate realizing the initial benefits of this initiative toward the end of 2025.

Allient is an applied technology/know-how motion company, and to grow, we will continue to invest in the technical resources to ensure we can move forward with our mantra to “ create controlled motion solutions that change the game ” and to meet the emerging needs of our customers in our served market segments.

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Our global production footprint provides us with the opportunity to be a value added supplier for global companies who require support around the world.

We will continue to evaluate and find areas to leverage our current manufacturing and sales footprint to drive sales and improve efficiencies.

In addition to our strategy described above, time and resources have been spent during 2023 to further understand the ESG ecosystem and developments impacting stakeholder expectations and assess our performance.

The Company has a number of initiatives focused on individual components of ESG, and, under the oversight of the Board of Directors, is continuing to integrate ESG with our broader strategy and Enterprise Risk Management (ERM).

The strategy will include looking to further enhance the Company’s ability to meet ongoing and emerging challenges, including the impacts of the COVID-19 pandemic.

We will continue to evaluate and find areas to leverage our current manufacturing and sales capabilities to drive sales and improve efficiencies.

While near-term order patterns remain fluid, the fundamental drivers of our business remain strong.

Overall, our strategic initiatives position Allient for stronger financial performance, greater operational flexibility, and enhanced earnings power in the years ahead.

Critical Accounting Policies and Estimates

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The Company satisfies its performance obligations under a contract with a customer by transferring goods and services generally in exchange for monetary consideration from the customer.

The Company considers the customer’s purchase

order, and the Company’s corresponding sales order acknowledgment as the contract with the customer.

The Company considers the customer’s purchase order, and the Company’s corresponding sales order acknowledgment as the contract with the customer.

In the normal course of business, the Company does not accept product returns unless the item is defective as manufactured.

The Company establishes provisions for estimated returns and warranties.

Company establishes provisions for estimated returns and warranties.

All contracts include a standard warranty clause to guarantee that the product complies with agreed specifications.

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If the carrying amount of the reporting unit exceeds its fair value, an impairment loss is recognized equal to the excess, limited to the amount of goodwill allocated to that reporting unit.

We performed a qualitative assessment of our single reporting unit as of October 31, 2023.

As part of this analysis, we evaluated factors including, but not limited to, our market capitalization and stock price performance, macro-economic conditions, market and industry conditions, cost factors, the competitive environment, and the operational stability and overall financial performance of our reporting unit.

The assessment indicated that it was more-likely-than-not that the fair value of our reporting unit exceeded its carrying amount, and as such, a quantitative assessment was not performed.

We do not believe that our reporting unit is at risk for impairment.

However, changes to the factors considered above could affect the estimated fair value of our reporting unit and could result in a goodwill impairment charge in a future period.

We elected to bypass the qualitative assessment and performed a quantitative assessment of our single reporting unit as of October 31, 2024.

Fair value of the reporting unit is estimating using a weighted methodology that utilizes the income and market approaches.

The income approach incorporates significant assumptions and estimates, including discounted cash flow modeling to forecast cash flows, revenue growth, operating income margin, and discount rate.

As the fair value of our reporting unit exceeds its carrying value, Allient does not believe that our reporting unit is at risk for impairment.

Fair value is calculated based on estimated discounted future cash flows and comparable publicly traded companies.

Changes to the factors considered above could affect the estimated fair value of our reporting unit and could result in a goodwill impairment charge in a future period.

As of December 31, 2024, we have $131,789 of goodwill recorded on our consolidated balance sheet, representing approximately 23% of total assets.

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Interest expense

Other expense, net

Other (income) expense, net

Total other expense, net

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Diluted earnings per share

The increase in revenues in 2023 reflects improved sales in certain markets we serve, specifically Industrial and A&D.

The increase reflects the economic recovery and the increases in demand from many of our served markets, as certain markets continued to experience supply chain constraints in the prior year period impacting customer order patterns and lead times .

The decrease in revenues for 2024 reflects decreases within each of the target markets, most significantly in Vehicle.

Decreases in revenues compared to the prior year period are largely impacted by elevated shipments during the prior year period as supply chains normalized, combined with elevated inventory levels and slowing demand at our customers in the current period, partially offset by revenue contributed from the 2023 and 2024 acquisitions .

Our sales for 2024 were comprised of 55% to U.S.

customers and 45% to customers primarily in Europe, Canada and Asia-Pacific.

The overall increase in revenue was due to a 15% volume increase and a minimal foreign currency impact.

The overall decrease in revenue was primarily due to an 8% volume decrease and a minimal foreign currency impact.

The acquisitions completed in 2023 and 2024 contributed an incremental $40,856 of revenues in 2024.

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The 8% decrease in orders in 2024 compared to 2023 is due to an 8% decrease in volume with minimal foreign currency impact.

Decreases in bookings are primarily due to a normalization of customer order patterns as lead times are reducing due to improvement in the global supply chain environment and, to a lesser extent, economic softening in some European markets.

Decreases in bookings are primarily due to a slowing demand at certain customers beginning in the second quarter of 2024.

The acquisitions completed in 2023 and 2024 contributed an incremental $39,993 of orders in 2024.

The decrease in backlog as of December 31, 2023, compared to December 31, 2022 includes incremental backlog of $2,344 from the acquisition that was completed during 2023.

The decrease in backlog as of December 31, 2024, compared to December 31, 2023 includes an incremental backlog of $7,353 from the acquisition that was completed during 2024.

GROSS PROFIT AND GROSS MARGIN:

Gross margins improved to 31.7% for 2023, compared to 31.3% for 2022.

The increase in gross margin percentage was largely driven by volume increases of higher margin products primarily in our Industrial and A&D markets combined with pricing and margin accretive acquisitions.

The margin expansion continues to be muted, to some extent, by the continued increases in material and labor costs..

Gross margins decreased to 31.3% for 2024, compared to 31.7% for 2023.

The gross margin decrease was largely driven by lower fixed cost absorption on lower sales volumes, as well as the gross margin impact of our most recent acquisition.

SELLING EXPENSES:

Selling expenses increased 13% during 2023 compared to 2022 primarily due to sales commissions related to the revenue growth as well as increased costs in connection with our acquisitions.

Selling expenses as a percentage of revenues were comparable at 4% during 2023 and 2022.

Selling expenses increased 2% during 2024 compared to 2023 primarily due to increased costs in connection with our acquisitions and the mix of sales with commissions.

Selling expenses as a percentage of revenues were 5% and 4% during 2024 and 2023, respectively.

GENERAL AND ADMINISTRATIVE EXPENSES:

General and administrative expenses increased by 15% during 2023 compared to 2022 due primarily to incentive compensation-related expenses due to current year Company performance and increased costs in connection with our acquisitions.

As a percentage of revenues, general and administrative expenses were comparable at 10% in both 2023 and 2022.

General and administrative expenses decreased by 5% during 2024 compared to 2023 due to l ower incentive compensation as well as cost reduction actions taken reflecting our Simplify to Accelerate NOW strategy .

As a percentage of revenues, general and administrative expenses were 11% and 10% in 2024 and 2023, respectively.

ENGINEERING AND DEVELOPMENT EXPENSES:

Engineering and development expenses increased by 8% in 2023 compared to 2022.

The increase is primarily due to the continued ramp up of development projects to meet the future needs of target markets and supporting growing customer application development needs, as well as increased costs in connection with our acquisitions.

As a percentage of revenues, engineering and development expenses were 7% and 8% for the years ended December 31, 2023 and 2022, respectively.

Engineering and development expenses decreased by 5% in 2024 compared to 2023.

The decrease reflects the cost reduction actions taken as part of our Simplify to Accelerate NOW strategy .

As a percentage of revenues, engineering and development expenses were 7% for each of the years ended December 31, 2024 and 2023.

BUSINESS DEVELOPMENT COSTS:

The increase in business development costs in 2023 compared to 2022 is largely due to fair value changes of contingent consideration of $1.9 million related to acquisitions, manufacturing footprint rationalization, and costs incurred due to current period acquisition activities, offset by lower acquisition-related costs in 2023.

The decrease in business development costs in 2024 compared to 2023 is largely due to the fair value changes of contingent consideration of $1.9 million related to acquisitions incurred in 2023, compared to the $300 contra expense recognized in 2024, offset in part by restructuring expenses recognized in 2024.

AMORTIZATION OF INTANGIBLE ASSETS:

Amortization of intangible assets increased 10% in 2023 compared to 2022, due to the inclusion of the full year of intangible asset amortization of the 2022 acquisitions and, to a lesser extent, the incremental intangible asset amortization from the 2023 acquisition.

Amortization of intangible assets increased 1% in 2024 compared to 2023, due to the inclusion of the full year of intangible asset amortization of the 2023 acquisition and the intangible asset amortization from the 2024 acquisition.

INTEREST EXPENSE:

Interest expense increased by 61% in 2023 compared to 2022 primarily due to higher interest rates, offset in part by the impact of interest rate swaps.

Interest expense increased by 7% in 2024 compared to 2023 primarily due to higher average debt balances and higher interest rates, offset in part by the impact of interest rate swaps.

INCOME TAXES:

For 2024 and 2023, the effective income tax rate was 21.9% and 18.9%, respectively.

The effective rate differs from the statutory rate primarily due to state income taxes, the impact of foreign tax provisions in the U.S., foreign tax rate differences, Section 162(m) compensation limits, and the benefit of Research and Development tax credits and incentives.

The effective tax rate for 2023 was lower than the effective tax rate for 2022 primarily due to increases in certain credits and incentives, the realization of certain deferred income tax assets that had been reserved in prior years, as well as the impact of the mix of foreign and domestic income.

The effective rate differs from the statutory rate primarily due to state income taxes, the impact of foreign tax provisions in the U.S., foreign tax rate differences, Section 162(m) compensation limits, the benefit of Research and Development tax credits and incentives and withholding taxes on foreign distributions.

The effective tax rate for 2024 was higher than the effective tax rate for 2023 primarily due to increases due to impacts of section 162(m) compensation and withholding taxes on foreign distributions, partially offset by increases in certain credits and incentives, the realization of certain deferred income tax assets that had been reserved in prior years, as well as the impact of the mix of foreign and domestic income.

NET INCOME AND ADJUSTED NET INCOME:

Net income increased during 2023 compared to 2022, primarily due to operating income increases, reflecting increased revenues and higher gross margin, partially offset by an increase in operating expenses and interest expense.

Net income decreased during 2024 compared to 2023, primarily due to operating income decreases, reflecting decreased revenues and lower gross margin, partially offset by a decrease in operating expenses.

Adjusted net income for the years ended December 31, 2024 and 2023 was $24,679 and $37,458, respectively.

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Non-GAAP Measures

Organic growth, EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted diluted earnings per share are provided for information purposes only and are not measures of financial performance under GAAP.

Revenue excluding foreign currency exchange, Organic growth, EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted diluted earnings per share are provided for information purposes only and are not measures of financial performance under GAAP.

Management believes the presentation of these financial measures reflecting non-GAAP adjustments provides important supplemental information to investors and other users of our financial statements in evaluating the operating results of the Company as distinct from results that include items that are not indicative of ongoing operating results.

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Organic growth is reported revenues adjusted for the impact of foreign currency and the revenue contribution from acquisitions.

The Company’s calculation of Revenue excluding foreign currency exchange impacts for the years ending December 31, 2024 and 2023 is as follows:

For the year ended December 31,

Revenue as reported

Currency impact unfavorable

Revenue excluding foreign currency exchange impacts

The Company’s calculation of organic growth for 2024 is as follows:

December 31, 2024

Revenue increase over prior year

Revenue change over prior year

Impact of acquisitions and foreign currency

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Stock-based compensation expense

Business development costs

Foreign currency loss

Acquisition and integration-related costs

Restructuring and business realignment costs

Foreign currency (gain)/loss

Adjusted EBITDA

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Amortization of intangible assets – net

Foreign currency loss – net

Business development costs – net

Foreign currency (gain) / loss – net

Acquisition and integration-related costs – net

Restructuring and business realignment costs – net

Non-GAAP adjusted net income and adjusted diluted earnings per share

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The Company’s liquidity position as measured by cash and cash equivalents increased by $4,201 to a balance of $36,102 at December 31, 2024 from 2023.

Year Ended December 31,

(in thousands):

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Net cash used in investing activities

Net cash (used in) provided by financing activities

Net cash used in financing activities

Effect of foreign exchange rates on cash

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Of the $36,102 cash and cash equivalents on hand at December 31, 2024, $30,020 was located at our foreign subsidiaries and may be subject to withholding tax if repatriated to the U.S.

During 2023, the cash provided by operating activities increased from 2022 primarily due to increases in net income, adjusted for non-cash items, as well as improvements in working capital, most notably receivables and inventories, due to improvement in 2023 of supply chains as inventories had been significantly impacted by supply chain disruptions during 2022.

The cash used in investing activities in 2023 decreased as compared with 2022, due to less acquisition activity and, to a lesser extent, timing of capital expenditures.

During 2024, the cash provided by operating activities decreased from 2023 primarily due to decreases in cash due to changes in accounts payable and accrued liabilities, as well as a decrease in net income, offset partially by increases in cash due to changes in accounts receivable and inventory.

The cash used in investing activities in 2024 increased as compared with 2023 due to $20,000 in cash paid for the acquisition of SNC, offset by $5,129 of cash paid in 2023 for the acquisition of Sierramotion, as well as by a decrease in capital expenditures of $1,920.

The Company expects 2025 capital expenditures to be approximately $10,000 to $12,000.

Cash used in financing activities in 2023 as compared to cash provided from financing activities in 2022 reflects the increase in debt payments made during 2023 due to cash generated from operations, as well as lower debt borrowings due to less acquisition activity as compared to 2022.

The 2023 activity includes Amended Revolving Facility borrowings of $7,000 to fund business acquisition activity in the third quarter of 2023, as compared to the $71,000 to fund the three acquisitions in the second quarter of 2022 and, to a lesser extent, inventory requirements during uncertain supply chain environments in 2022.

Debt payments of $28,395 and $7,585 were made during 2023 and 2022, respectively.

At December 31, 2023, the Company had $210,120 of obligations under the Amended Revolving Facility, excluding deferred financing costs.

Cash used in financing activities in 2024 as compared to cash used in financing activities in 2023 reflects the borrowings of $20,000 from the Amended Revolving Facility to fund the SNC acquisition and the $50,000 of fixed-rate Notes issued in March 2024 that were used to pay down the Revolving Facility, as compared to the $11,000 borrowed in 2023, primarily to fund the business acquisition activity in the third quarter of 2023 and, to a lesser extent, inventory requirements during uncertain supply chain environments in 2023.

Debt repayments, excluding the pay down on the Revolving Facility of $50,000 from the Notes issuance, of $18,433 and $28,395 were made during 2024 and 2023, respectively.

At December 31, 2024, the Company had $168,962 of obligations under the Amended Revolving Facility, excluding deferred financing costs and $50,000 for the Notes issued in March 2024 .

The Amended Credit Agreement includes covenants and restrictions that limit the Company’s ability to incur additional indebtedness, make certain investments, create, incur or assume certain liens, merge, consolidate or sell all or substantially all of its assets and enter into transactions with an affiliate of the Company on other than an arms’ length transaction.

These covenants, which are described more fully in the Amended Credit Agreement, to which reference is made for a complete statement of the covenants, are subject to certain exceptions.

The Amended Credit Agreement contains financial covenants that require that the Company maintain a minimum interest coverage ratio of at least 3.0 to 1.0 at the end of each fiscal quarter.

In addition, the Company’s Leverage Ratio at the end of any fiscal quarter shall not be greater than 3.5 to 1.0 ratio;

provided that the Company may elect to temporarily increase the Leverage Ratio by 0.5x during the twelve-month period following a material acquisition under the Amended Credit Agreement (“acquisition leverage increase”), subject to certain exceptions.

Financial covenants under the 2024 Credit and Note Payable Agreements require the Company to maintain a minimum interest coverage ratio of at least 3.0:1.0 at the end of each fiscal quarter.

In addition, the Company’s Leverage Ratio at the end of any fiscal quarter shall not be greater than 4.25:1.0 through December 31, 2024 or greater than 3.75 to 1.0 as of the end of any fiscal quarter thereafter;

provided that the Company may elect to temporarily increase the Leverage Ratio by 0.5:1.0 following a material acquisition under the 2024 Credit and Note Payable Agreements.

The 2024 Credit and Note Payable Agreements also include covenants and restrictions that limit the Company’s ability to incur additional indebtedness, merge, consolidate or sell all or substantially all of its assets and enter into transactions with an affiliate of the Company on other than an arms’ length transaction.

These covenants, which are described more fully in the 2024 Credit and Note Payable Agreements, to which reference is made for a complete statement of the covenants, are subject to certain exceptions.

The Company was in compliance with all covenants at December 31, 2024 as well as at each quarter end during 2024.

As of December 31, 2024, the unused Amended Revolving Facility was $111,038.

The amount available to borrow may be lower and may vary from period to period based upon our debt and EBITDA levels, which impacts our covenant calculations.

The Amended Credit Agreement matures in February 2025.

There were no borrowings under the China Facility during 2023 or 2022.

The Company closed the China Facility during 2023.

The amount available to borrow may be lower and may vary from period to period based upon our debt and EBITDA levels, which impacts our covenant

calculations.

The Amended Credit Agreement matures in March 2029.

On October 22, 2024, the Company entered into a Second Amendment to the Third Amended and Restated Credit Agreement and a Second Amendment to the Note Purchase and Private Shelf Agreement (collectively, the “October 2024 Credit and Note Payable Amendments”).

These amendments include provisions to increase the maximum Leverage Ratio to 4.5:1.0 for the quarters ending March 31, 2025 and June 30, 2025, 4.0:1.0 for the quarter ending September 30, 2025, and returning to 3.75:1.0 for the quarter ending December 31, 2025 and thereafter.

From January 1, 2025 through September 30, 2025, borrowings under the Revolving Facility will bear interest at Term SOFR plus a margin of 2.50% and a commitment fee of 0.325% on the unused portion of the Revolving Facility.

Also, from October 1, 2024 through September 30, 2025, the Series A Notes will bear interest at 6.46%.

The Company declared dividends, in total, of $0.12 and $0.115 per share during 2024 and 2023, respectively.

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Foreign Currency

transactions denominated in Euros, Swedish Krona, Chinese Renminbi, Canadian dollar, Czech Krona, Mexican pesos, British Pound Sterling, and New Zealand dollar, respectively.

We have international operations in The Netherlands, Sweden, Germany, China, Portugal, Canada, Czech Republic, Mexico, the United Kingdom and New Zealand which expose us to foreign currency exchange rate fluctuations due to transactions denominated in Euros, Swedish Krona, Chinese Renminbi, Canadian dollar, Czech Krona, Mexican pesos, British Pound Sterling, and New Zealand dollar, respectively.

We continuously evaluate our foreign currency risk and we take action from time to time in order to best mitigate these risks.

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The net effect of these translation adjustments is recorded in the consolidated financial statements as comprehensive (loss) income.

The translation adjustment was a gain of $3,669 and a loss of $9,516 for the years ended December 31, 2023 and 2022, respectively.

The translation adjustment was a loss of $12,033 and a gain of $3,669 for the years ended December 31, 2024 and 2023, respectively.

Translation adjustments are not adjusted for income taxes as they relate to permanent investments in our foreign subsidiaries.

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We have contracts to hedge our short-term balance sheet exposure, primarily intercompany, that are denominated in currencies (Euro, Mexican Peso, Canadian Dollar, New Zealand Dollar, Chinese Renminbi, Swedish Krona) other than the subsidiary’s functional currency and are adjusted to current values using period-end exchange rates.

The resulting gains or losses are recorded in other expense (income), net in the consolidated statements of income and comprehensive income.

The resulting gains or losses are recorded in other (income) expense, net in the consolidated statements of income and comprehensive income.

To minimize foreign currency exposure, the Company had foreign currency contracts with notional amounts of $30,945 and $22,193 at December 31, 2024 and 2023, respectively.

The foreign currency contracts are recorded in the consolidated balance sheets at fair value and resulting gains or losses are recorded in other expense (income), net in the consolidated statements of income and comprehensive income.

During the years ended December 31, 2023 and 2022, we recorded losses of $115 and $1,109, respectively, which is included in other expense (income), net and generally offset the gains or losses from the foreign currency adjustments on the intercompany balances that are also included in other expense (income), net.

Net foreign currency transaction gains and losses included in total other expense (income), net amounted to a loss of $281 and a gain of $298 in 2023 and 2022, respectively.

During the years ended December 31, 2024 and 2023, we recorded losses of $1,749 and $115, respectively, which is included in other (income) expense, net and generally offset

the gains or losses from the foreign currency adjustments on the intercompany balances that are also included in other (income) expense, net.

Net foreign currency transaction gains and losses included in total other (income) expense, net amounted to a gain of $85 and a loss of $281 in 2024 and 2023, respectively.

Interest Rates

Interest rates on our Amended Credit Agreement are based on Term SOFR plus a margin of 1.00% to 2.25% (1.625% at December 31, 2023), depending on the Company’s ratio of total funded indebtedness to consolidated EBITDA.

The Series A Notes under our 2024 Note Payable Agreement will bear interest at a fixed rate 5.96% and will mature on March 21, 2031.

Interest on the Notes will be payable quarterly on the 21st day of March, June, September and December in each year, commencing on June 21, 2024.

As amended on October 22, 2024, the Series A Notes will bear interest at 6.46% from October 1, 2024 through September 30, 2025.

Interest will be computed on the basis of a 360-day year composed of twelve 30-day months.

Interest rates on our Credit Facility are based on Term SOFR plus a margin of 1.25% to 2.50% (2.125% at December 31, 2024), depending on the Company’s ratio of total funded indebtedness to consolidated EBITDA.

As amended on October 22, 2024, borrowings under the Credit Facility will bear interest at Term SOFR plus a margin of 2.50% from January 1, 2025 through September 30, 2025.

We use interest rate derivatives to add stability to interest expense and to manage our exposure to interest rate movements.

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Interest rate swaps designated as cash flow hedges involve the receipt of variable amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

In February 2017, the Company entered into three interest rate swaps with a combined notional amount of $40,000 that matured in February 2022.

In March 2020, the Company entered into two additional interest rate swaps with a combined notional amount of $20,000 that increased to $60,000 in March 2022 and matures in December 2024.

In March 2020, the Company entered into two interest rate swaps with a combined notional amount of $20,000 that increased to $60,000 in March 2022 and matured in December 2024.

In March 2022 the Company entered into an additional interest rate swap with a notional amount of $40,000 that matures in December 2026.

In September 2024, the Company entered into an additional interest rate swap with a notional amount of $50,000 that matures in September 2027.

As of December 31, 2024, we had $168,962 outstanding under the Amended Revolving Facility (excluding deferred financing fees), of which $90,000 is currently being hedged.

2 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis