What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-10-28 compared with 2025-08-05 · 65 added, 65 removed, 202 unchanged (39% of the section changed)

42 unchanged sentences

We have made incremental investments to increase our new product development efforts to grow our business and strengthen our relationships with our customers.

The investments primarily have been in the form of increased product development resources, additional customer and end-user awareness programs, and customer service improvements.

The investments have primarily been in the form of increased product development resources, additional customer and end-user awareness programs, and customer service improvements.

These investments have enabled us to

provide an expanding array of new product offerings and grow revenues at levels that generally have exceeded market growth rates.

In the six months ended June 28, 2025, we introduced 2,588 new distinct parts to our customers and end-users, including 914 “New-to-the-Aftermarket” parts.

In the nine months ended September 27, 2025, we introduced 4,357 new distinct parts to our customers and end-users, including 1,199 “New-to-the-Aftermarket” parts.

We introduced 5,335 new distinct parts to our customers and end-users in the fiscal year ended December 31, 2024, including 1,659 “New-to-the-Aftermarket” parts.

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Within the specialty vehicle sector, we focus on providing performance parts and accessories and nondiscretionary repair parts for UTVs and ATVs.

We are dedicated to developing better and more innovative materials that will be compatible across a wide variety of makes and models to enhance both the performance and appearance of customers’ vehicles.

We are dedicated to developing better and more innovative materials that will be compatible across a wide variety of makes and models to maintain as well as to enhance both the performance and appearance of customers’ vehicles.

A key component of our strategy is growth through acquisitions.

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Department of Transportation, the number of miles driven through October 2024 increased 1.0% year over year in the light-duty sector.

However, global gasoline prices remained high during 2024 and, if they continue, they may negatively impact miles driven as consumers reduce travel or seek alternative methods of transportation.

However, global gasoline prices remained high during 2024 and, if high prices persist, they may negatively impact miles driven as consumers reduce travel or seek alternative methods of transportation.

Brand Protection

28 unchanged sentences

Many of our products and related raw materials and components are sourced from suppliers in various non-U.S.

The products generally are sourced through purchase orders with the purchase price specified in U.S.

The products are generally sourced through purchase orders with the purchase price specified in U.S.

Accordingly, we generally do not have exposure to fluctuations in the relationship between the U.S.

15 unchanged sentences

Impact of Labor Market and Inflationary Costs

We experienced broad-based inflationary impacts during the year ended December 31, 2023, due primarily to global transportation and logistics constraints, which resulted in significantly higher transportation costs, tariffs, material costs, and wage inflation from an increasingly competitive labor market.

We experienced broad-based inflationary impacts during the year ended December 31, 2023, due primarily to global transportation and logistics constraints, which resulted in significantly higher transportation costs, tariffs and material costs, and wage inflation from an increasingly competitive labor market.

Certain of these increased costs in the second half of 2023 impacted our results of operations in the first half of 2024.

10 unchanged sentences

Interest rates remained elevated throughout much of 2024, but began to decline starting in the second half of that year.

Interest rates remained relatively stable throughout the first quarter of 2025, but declined in the second quarter of 2025.

Interest rates remained relatively stable throughout the first quarter of 2025, but declined subsequently.

Impact of Tariffs

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We expect these actions and any reactionary tariff adjustments made by other countries will impact our business and contribute to inflationary cost increases.

As a result, we are taking actions designed to mitigate the potential impacts of these tariffs, including, but not limited to, diversifying our supply chain, passing along price increases to our customers, and negotiating cost concessions from our suppliers where possible.

We have taken actions designed to mitigate the potential impacts of these tariffs, including, but not limited to, diversifying our supply chain and negotiating cost concessions from our suppliers where possible.

In addition, starting in the third quarter of 2025, we implemented pass-through price increases to offset the dollar impact of certain new tariff costs.

We have started to experience a temporary increase in gross and operating margin percentages in 2025 due to the price increases taking effect before the increased cost of inventory, reflecting higher tariffs, is recognized as an expense in our statement of operations.

We expect margins to decrease as we start to recognize these higher tariff costs in our Statement of Operations and Comprehensive Income in the fourth quarter of 2025.

Absent any changes in trade regulations, we anticipate inflationary cost increases due to these tariffs, as well as any resulting impact on macroeconomic conditions and our business, to continue throughout the remainder of 2025.

Starting in the third quarter of 2025, we implemented pass-through price increases to offset the dollar impact of the new tariff costs.

We expect to see a temporary increase in gross and operating margin percentages in 2025 due to the price increases taking effect before the increased cost of inventory reflecting higher tariffs is recognized as an expense in our statement of operations.

Results of Operations

The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in our Condensed Consolidated Statements of Operations:

Three Months Ended* Six Months Ended*

(in thousands, except percentage data) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024

The following table sets forth, for the periods indicated, the percentage of net sales represented by certain items in our Condensed Consolidated Statements of Operations and Comprehensive Income:

Three Months Ended* Nine Months Ended*

(in thousands, except percentage data) September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024

Net sales $ 543,736 100.0 % $ 503,773 100.0 % $ 1,592,387 100.0 % $ 1,475,425 100.0 %

9 unchanged sentences

* Percentage of sales information may not add due to rounding

Three Months Ended June 28, 2025, Compared to Three Months Ended June 29, 2024

Net sales increased $38.0 million, or 7.6%, for the three months ended June 28, 2025, compared to the prior year period, driven by volume growth from increased customer demand and sales of new products in our Light Duty segment, and new business wins in our Heavy Duty segment, partially offset by reduced demand in our Specialty Vehicle segment impacted by soft market conditions in the specialty vehicle sector.

Gross profit as a percentage of net sales increased 100 basis points compared to the prior year period, primarily due to the sales growth noted above and favorable mix from higher sales of new products, as well as supplier diversification, productivity, and automation initiatives, that delivered cost savings.

Selling, general, and administrative expenses (“SG&A”) increased $10.1 million, or 10 basis points as a percentage of net sales, for the three months ended June 28, 2025, compared to the prior year period, as favorable leverage from higher sales was more than offset by additional investments made in the current year period.

Interest expense, net, decreased $3.0 million for the three months ended June 28, 2025, compared to the prior year period.

Three Months Ended September 27, 2025, Compared to Three Months Ended September 28, 2024

Net sales increased $40.0 million, or 7.9%, for the three months ended September 27, 2025, compared to the prior year period, primarily driven by tariff-related pricing actions in our Light Duty and Heavy Duty segments, and new business wins in our Heavy Duty segment.

Gross profit as a percentage of net sales increased 390 basis points compared to the prior year period, primarily due to the sales growth noted above resulting from pricing actions enacted on inventory purchased before higher tariffs took effect earlier this year.

Gross margin also benefited from a favorable mix from higher sales of new products and supplier diversification.

Selling, general, and administrative expenses (“SG&A”) increased 30 basis points as a percentage of net sales, for the three months ended September 27, 2025, compared to the prior year period, due to higher factoring costs and additional investments made, partially offset by favorable leverage from higher sales.

Interest expense, net, decreased $2.6 million for the three months ended September 27, 2025, compared to the prior year period.

The decrease was driven by lower outstanding principal on our revolving credit facility and term loan, resulting from repayments over the last several quarters, as well as lower average Term SOFR rates during the current year period.

Our effective tax rate decreased to 23.6% for the three months ended June 28, 2025, from 24.0% for the three months ended June 29, 2024.

Six Months Ended June 28, 2025, Compared to Six Months Ended June 29, 2024

Net sales increased $77.0 million, or 7.9%, for the six months ended June 28, 2025, compared to the prior year period, driven by increased customer demand and sales of new products in our Light Duty segment, partially offset by reduced demand impacted by soft market conditions in the heavy duty and specialty vehicle sectors.

Gross profit as a percentage of net sales increased 150 basis points compared to the prior year period, primarily due to the sales growth noted above and favorable mix from higher sales of new products, as well as supplier diversification, productivity, and automation initiatives, that delivered cost savings.

Selling, general, and administrative expenses (“SG&A”) increased $10.7 million, but decreased 90 basis points as a percentage of net sales, for the six months ended June 28, 2025, compared to the prior year period, due to favorable leverage on higher net sales that more than offset additional investments made in the current year period.

Interest expense, net, decreased $6.3 million for the six months ended June 28, 2025, compared to the prior year period.

Our effective tax rate of 23.5% for the three months ended September 27, 2025 was higher than our effective tax rate of 22.3% for the three months ended September 28, 2024 because the three months ended September 28, 2024 benefited from favorable discrete items.

Nine Months Ended September 27, 2025, Compared to Nine Months Ended September 28, 2024

Net sales increased $117.0 million, or 7.9%, for the nine months ended September 27, 2025, compared to the prior year period, driven by increased customer demand and sales of new products and tariff-related pricing actions in our Light Duty and Heavy Duty segments, partially offset by reduced demand impacted by soft market conditions in the heavy duty and specialty vehicle sectors.

Gross profit as a percentage of net sales increased 240 basis points for the nine months ended September 27, 2025, compared to the prior year period, primarily due to the sales growth noted above and favorable mix from higher sales of new products, as well as supplier diversification, productivity, and automation initiatives, that delivered cost savings.

Selling, general, and administrative expenses (“SG&A”) decreased 60 basis points as a percentage of net sales, for the nine months ended September 27, 2025, compared to the prior year period, due to favorable leverage on higher net sales that more than offset additional investments made in the current year period.

Interest expense, net, decreased $8.8 million for the nine months ended September 27, 2025, compared to the prior year period.

The decrease was driven by lower outstanding principal on our revolving credit facility and term loan resulting from repayments over the last several quarters, as well as lower average Term SOFR rates during the current year period.

Our effective tax rate decreased to 23.0% for the six months ended June 28, 2025, from 24.4% for the three months ended June 29, 2024, due to tax deductions related to the vesting of restricted stock units in the current year period.

Our effective tax rate of 23.2% for the nine months ended September 27, 2025 was lower than our effective tax rate of 23.6% for the nine months ended September 28, 2024 due to tax deductions related to the vesting of restricted stock units in the current year period.

Segment Operating Results

Segment operating results were as follows:

For the Three Months Ended For the Six Months Ended

(in thousands) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024

For the Three Months Ended For the Nine Months Ended

(in thousands) September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024

Light Duty $ 430,316 $ 393,577 $ 1,263,500 $ 1,138,228

7 unchanged sentences

Total $ 111,478 $ 85,916 $ 285,890 $ 229,552

Three Months Ended June 28, 2025, Compared to Three Months Ended June 29, 2024

Light Duty net sales increased $39.0 million, or 10.1%, for the three months ended June 28, 2025, compared to the prior year period, primarily due to volume growth from increased customer demand and sales of new products.

Light Duty segment income from operations as a percentage of net sales increased to 18.5% for the three months ended June 28, 2025, from 17.1% for the three months ended June 29, 2024.

This increase was primarily driven by supplier diversification initiatives, favorable mix driven by higher new product sales, operational excellence initiatives delivering cost savings, and favorable leverage on higher net sales.

Heavy Duty net sales increased $0.9 million, or 1.4%, for the three months ended June 28, 2025, compared to the prior year period.

The increase in net sales primarily reflects new business wins.

Heavy Duty segment income as a percentage of net sales decreased to 0.8% for the three months ended June 28, 2025, from 4.4% for the three months ended June 29, 2024.

This decrease was primarily driven by the impact of investments we made as part of initiatives to grow sales and improve margins on a long-term basis.

Three Months Ended September 27, 2025, Compared to Three Months Ended September 28, 2024

Light Duty net sales increased $36.7 million, or 9.3%, for the three months ended September 27, 2025, compared to the prior year period, primarily due to tariff-related pricing actions.

Light Duty segment income from operations as a percentage of net sales increased to 23.7% for the three months ended September 27, 2025, from 19.0% for the three months ended September 28, 2024.

This increase was primarily driven by the sales growth noted above from pricing actions enacted on inventory purchased before higher tariffs went into effect earlier this year and supplier diversification initiatives.

Heavy Duty net sales increased $3.4 million, or 5.7%, for the three months ended September 27, 2025, compared to the prior year period.

The increase in net sales primarily reflects tariff-related pricing actions and new business wins.

Heavy Duty segment income as a percentage of net sales remained stable at 4.5% for the three months ended September 27, 2025, and September 28, 2024, as the benefit of higher net sales was offset by lower manufacturing productivity.

Specialty Vehicle

Specialty Vehicle net sales decreased $1.8 million, or 3.2%, for the three months ended June 28, 2025, compared to the prior year period, primarily due to reduced customer demand, partially offset by price increases.

Specialty Vehicle segment income as a percentage of net sales decreased to 17.3% from 17.8% for the three months ended June 28, 2025, and June 29, 2024, respectively.

This decrease was primarily driven by the deleverage of fixed costs on lower net sales volumes.

Six Months Ended June 28, 2025, Compared to Six Months Ended June 29, 2024

Light Duty net sales increased $88.5 million, or 11.9%, for the six months ended June 28, 2025, compared to the prior year period, primarily due to increased customer demand and sales of new products.

Light Duty segment income from operations as a percentage of net sales increased to 19.2% for the six months ended June 28, 2025, from 16.6% for the six months ended June 29, 2024.

This increase was primarily driven by favorable mix from higher new product sales, operational excellence initiatives delivering cost savings, and favorable leverage on higher net sales.

Heavy Duty net sales decreased $5.3 million, or 4.4%, for the six months ended June 28, 2025, compared to the prior year period.

The decrease in net sales primarily reflects reduced customer demand from continued market pressures in freight transportation and the trucking aftermarket, partially offset by price increases.

Heavy Duty segment income as a percentage of net sales decreased to 0.3% for the six months ended June 28, 2025, from 2.3% for the six months ended June 29, 2024.

This decrease was primarily driven by the deleverage of fixed costs on lower net sales volumes and the impact of investments we made as part of initiatives to grow sales and improve margins on a long-term basis.

Specialty Vehicle net sales decreased slightly, for the three months ended September 27, 2025, compared to the prior year period, primarily due to reduced customer demand.

Specialty Vehicle segment income as a percentage of net sales decreased to 12.8% for the three months ended September 27, 2025, from 17.0% for the three months ended September 28, 2024.

This decrease was primarily driven by lower manufacturing productivity in the first quarter of 2025, as we proactively reduced production in our Chinese manufacturing facility following our ramp up of production in the fourth quarter of 2024 in advance of tariff increases.

Nine Months Ended September 27, 2025, Compared to Nine Months Ended September 28, 2024

Light Duty net sales increased $125.3 million, or 11.0%, for the nine months ended September 27, 2025, compared to the prior year period, primarily due to increased customer demand and sales of new products, as well as tariff-related pricing actions.

Light Duty segment income from operations as a percentage of net sales increased to 20.7% for the nine months ended September 27, 2025, from 17.4% for the nine months ended September 28, 2024.

This increase was primarily driven by the sales growth noted above from pricing actions enacted on inventory purchased before higher tariffs went into effect earlier this year, favorable mix from higher new product sales, operational excellence initiatives delivering cost savings, and favorable leverage on higher net sales.

Heavy Duty net sales decreased $1.8 million, or 1.0%, for the nine months ended September 27, 2025, compared to the prior year period.

The decrease in net sales primarily reflects reduced customer demand from continued market pressures in freight transportation and the trucking aftermarket, partially offset by tariff-related pricing actions and new business wins.

Heavy Duty segment income as a percentage of net sales decreased to 1.8% for the nine months ended September 27, 2025, from 3.0% for the nine months ended September 28, 2024.

This decrease was primarily driven by the deleverage of fixed costs on lower net sales volumes, lower manufacturing productivity, and the impact of investments we made as part of initiatives to grow sales and improve margins on a long-term basis.

Specialty Vehicle

Specialty Vehicle net sales decreased $6.3 million, or 5.8%, for the six months ended June 28, 2025, compared to the prior year period, primarily due to reduced customer demand.

Specialty Vehicle segment income as a percentage of net sales decreased to 14.0% from 15.9% for the six months ended June 28, 2025, and June 29, 2024, respectively.

This decrease was primarily driven by the deleverage of fixed costs on lower net sales volumes.

Specialty Vehicle net sales decreased $6.5 million, or 4.1%, for the nine months ended September 27, 2025, compared to the prior year period, primarily due to reduced customer demand.

Specialty Vehicle segment income as a percentage of net sales decreased to 13.6% for the nine months ended September 27, 2025, from 16.3% for the nine months ended September 28, 2024.

decrease was primarily driven by the deleverage of fixed costs on lower net sales volumes and lower manufacturing productivity.

Liquidity and Capital Resources

1 unchanged sentence

Key components of our liquidity and capital resources were as follows:

(in thousands) June 28, 2025 December 31, 2024

(in thousands) September 27, 2025 December 31, 2024

Cash and cash equivalents $ 55,505 $ 57,137

4 unchanged sentences

See Note 7, “Commitments and Contingencies”, in the accompanying condensed consolidated financial statements for additional information regarding commitments and contingencies that may affect our liquidity.

Increases in tariffs accelerate our use of cash, as we pay for the higher costs upon arrival of our goods in the United States, but we collect the cash on any pass-through price increases from our

customers on a delayed basis, taking into account our inventory turns and payment terms negotiated with our customers.

Increases in tariffs accelerate our use of cash, as we pay for the higher costs upon arrival of our goods in the United States, but we collect the cash on any pass-through price increases from our customers on a delayed basis, taking into account our inventory turns and payment terms negotiated with our customers.

We currently anticipate that additional liquidity needs to cover increased tariffs on imported products can be managed through additional factoring under our accounts receivable sales programs with certain customers, as well as borrowings under our existing revolving credit facility.

Payment Terms and Accounts Receivable Sales Programs

Over the past several years, we have continued to extend payment terms to certain customers in response to customer requests and market demands.

We have extended payment terms in place with certain of our customers.

These extended terms have resulted in increased accounts receivable levels and significant cash usage.

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Sales of accounts receivable under these programs, and related factoring costs, were as follows:

Three Months Ended Six Months Ended

(in thousands) June 28, 2025 June 29, 2024 June 28, 2025 June 29, 2024

Three Months Ended Nine Months Ended

(in thousands) September 27, 2025 September 28, 2024 September 27, 2025 September 28, 2024

Sales of accounts receivable $ 341,011 $ 254,657 $ 1,030,085 $ 791,413

Factoring costs 14,590 11,939 43,744 38,171

If receivables had not been sold, $989.1 million and $853.6 million of additional receivables would have been outstanding at June 28, 2025, and December 31, 2024, respectively, based on standard payment terms.

If receivables had not been sold, $1,028.5 million and $853.6 million of additional receivables would have been outstanding at September 27, 2025, and December 31, 2024, respectively, based on standard payment terms.

Further extensions of customer payment terms would result in additional cash usage or increased costs associated with the sales of accounts receivable.

2 unchanged sentences

The credit agreement matures on October 4, 2027, is guaranteed by the Company’s material domestic subsidiaries, and is supported by a security interest in substantially all of the Company’s material domestic subsidiaries’ personal property and assets, subject to certain exceptions.

As of June 28, 2025, there was $462.5 million in outstanding borrowings under the term loan.

As of September 27, 2025, there was $456.3 million in outstanding borrowings under the term loan.

Also on that date, we had outstanding letters of credit for $1.1 million in aggregate.

Net of outstanding borrowings and letters of credit, we had $598.9 million available under the credit facility at June 28, 2025.

Net of outstanding borrowings and letters of credit, we had $598.9 million available under the credit facility at September 27, 2025.

Our credit agreement contains affirmative and negative covenants.

As of June 28, 2025, we were not in default with respect to our credit agreement.

As of September 27, 2025, we were not in default with respect to our credit agreement.

Refer to Note 7, “Long-Term Debt” to the Notes to Consolidated Financial Statements contained in PART II, ITEM 8 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2024, for additional information.

The following summarizes the activities included in the Condensed Consolidated Statements of Cash Flows:

Six Months Ended

(in thousands) June 28, 2025 June 29, 2024

Nine Months Ended

(in thousands) September 27, 2025 September 28, 2024

Cash provided by operating activities $ 71,990 $ 159,622

3 unchanged sentences

Net (decrease) increase in cash and cash equivalents $ (1,632) $ 8,313

For the six months ended June 28, 2025, cash provided by operating activities decreased $55.5 million from the prior year period as a result of cash used to fund investments in inventory to meet customer demand and to pay for increased tariffs on imports, partially offset by higher proceeds from accounts receivable.

Investing activities used cash of $19.4 million and $22.7 million during the six months ended June 28, 2025, and June 29, 2024, respectively.

Financing activities during the six months ended June 28, 2025, included $15.3 million paid to repurchase 122,923 shares of common stock and $20.2 million to repay outstanding borrowings under our credit agreement.

During the six months ended June 29, 2024, we paid $51.2 million to repurchase 581,880 shares of common stock and $29.6 million to repay outstanding borrowings under our credit agreement.

For the nine months ended September 27, 2025, cash provided by operating activities decreased $87.6 million from the prior year period as a result of cash used to fund investments in inventory to meet customer demand and increased tariffs on imports, partially offset by higher proceeds from accounts receivable.

Investing activities used cash of $29.8 million and $31.2 million during the nine months ended September 27, 2025, and September 28, 2024, respectively, reflecting timing of spending on capital investments.

Financing activities during the nine months ended September 27, 2025, included $15.3 million paid to repurchase 122,923 shares of common stock and $26.5 million to repay outstanding borrowings under our credit agreement.

During the nine months ended September 28, 2024, we paid $78.1 million to repurchase 855,971 shares of common stock, and repaid $40.4 million of outstanding borrowings under our credit agreement.

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-Q

Item 2. Management’s Discussion and Analysis