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Item 7. Management’s Discussion and Analysis

2026-02-27 compared with 2025-02-27 · 113 added, 93 removed, 197 unchanged (51% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations.

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” should be read in conjunction with the Consolidated Financial Statements and related notes thereto included in PART II, ITEM 8 of this Annual Report on Form 10-K.

The matters discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contain certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve significant risks and uncertainties.

See the “Statement Regarding Forward-Looking Statements” above and PART I, ITEM 1A, “Risk Factors” in this Annual Report on Form 10-K for additional information regarding forward-looking statements and the factors that could cause actual results to differ materially from those anticipated in the forward-looking statements.

See the “Cautionary Statement on Forward-Looking Information” above and PART I, ITEM 1A, “Risk Factors” in this Annual Report on Form 10-K for additional information regarding forward-looking statements and the factors that could cause actual results to differ materially from those anticipated in the forward-looking statements.

In ITEM 7, we discuss 2025 and 2024 results and comparisons of 2025 results to 2024 results.

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Our products are sold under our various brand names, under our customers’ private-label brands, or in bulk.

We are one of the leading aftermarket suppliers of parts that were traditionally available to consumers only from OE manufacturers or salvage yards.

These parts include, among other parts, leaf springs, intake manifolds, exhaust manifolds, oil filters and coolers, window regulators, radiator fan assemblies, tire pressure monitor sensors, exhaust gas recirculation (EGR) coolers, driveshafts, UTV windshields, and complex electronics modules.

We are one of the leading aftermarket suppliers of parts that were traditionally available to consumers only from OEMs or salvage yards.

These parts include, among others, leaf springs, intake manifolds, exhaust manifolds, oil filters and coolers, window regulators, radiator fan assemblies, tire pressure monitor sensors, exhaust gas recirculation ("EGR") coolers, driveshafts, UTV windshields, and complex electronics modules.

We generate most of our net sales from customers in North America, primarily in the United States.

Our products are sold primarily through aftermarket retailers, including through their online platforms;

national, regional, and local warehouse distributors and specialty markets;

and salvage yards.

Our products are sold primarily through aftermarket retailers, including their online platforms;

and national, regional, and local warehouse distributors and specialty markets.

We also distribute aftermarket parts outside the United States, with sales primarily into Canada and Mexico, and to a lesser extent, Europe, the Middle East, and Australia.

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The introduction of new products and product lines to customers, as well as business acquisitions, may also cause significant fluctuations from quarter to quarter.

Our 2024 fiscal year was a 52-week period that ended on December 31, 2024, our 2023 fiscal year was a 52-week period that ended on December 31, 2023 and our fiscal 2022 was a 53-week period that ended on December 31, 2022.

Business Performance Summary

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Net income increased 7% to $204.2 million in 2025 from $190.0 million in 2024.

Additionally, in 2024 we generated $231.0 million of cash flows from operations, repaid a total of $94.4 million of outstanding debt obligations, and repurchased 865,283 common shares under a share repurchase program for $78.9 million.

Additionally, in 2025, we generated $113.6 million of cash flows from operations, repaid a total of $42.1 million of outstanding debt obligations, and repurchased 313,334 shares of common stock under our share repurchase program for $39.8 million.

New Product Development

New product development is an important success factor for us and has been a source of growth for us.

New product development is a key success factor for us and has been a significant contributor to our growth.

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, increased customer and end-user awareness programs, and customer service improvements.

These investments historically have enabled us to provide an expanding array of new product offerings and grow revenues at levels that generally have exceeded market growth rates.

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 2025, we introduced 5,560 new distinct parts to our customers and end-users, including 1,608 “New-to-the-Aftermarket” parts.

Please see ITEM 1, “Business – Product Development” for a year-over-year comparison of new product introductions.

One area of focus for the light-duty sector has been our complex electronics program, which capitalizes on the growing number of electronic components being utilized on today’s OE platforms.

One area of focus for the light-duty sector has been our complex electronics program, which capitalizes on the growing number of electronic components being utilized on today’s original equipment platforms.

New vehicles contain an average of approximately 100 electronic modules, with some high-end luxury vehicles exceeding that.

Our complex electronics products are designed and developed in-house and tested to help ensure consistent performance, and our product portfolio is focused on further developing our leadership position in this category.

Our complex electronics products are designed and developed in-house and tested to help ensure consistent performance.

Our product portfolio is focused on further developing our leadership position in this category.

Another area of focus has been on products we market for the heavy-duty sector.

We believe that this sector provides many of the same growth opportunities that the light-duty sector has provided us.

We specialize in offering parts to this sector that were traditionally only available from OE manufacturers or salvage yards, similar to how we approach the light-duty sector.

We specialize in offering parts to this sector that were traditionally only available from OEMs or salvage yards, similar to how we approach the light-duty sector.

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.

On October 4, 2022, we acquired Super ATV, a leading independent supplier to the powersports aftermarket with a family of highly respected brands spanning functional accessories and upgrades, as well as replacement parts for specialty vehicles.

See Note 2, "Business Acquisitions and Investments", to the Consolidated Financial Statements, included under ITEM 8 for additional information.

We may acquire businesses in the future to supplement our financial growth, increase our customer base, add to our distribution capabilities, or enhance our product development resources, among other reasons.

We may acquire businesses in the future to supplement our financial growth, expand our customer base, add to our distribution capabilities, or enhance our product development resources, among other reasons.

Industry Factors

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According to data from the Auto Care Association (“Auto Care”), the US SAAR experienced a decline from 2008 to 2011 as consumers purchased fewer new vehicles as a result of the Great Recession of 2008.

We believe that the declining US SAAR during that period resulted in a follow-on decline in our primary VIO subsegment (7-to-14-year-old vehicles) commencing in 2016.

We believe that the declining US SAAR during that period led to a follow-on decline in our primary VIO subsegment (7-to-14-year-old vehicles) commencing in 2016.

However, following 2011 and the impact of the Great Recession of 2008, U.S.

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Department of Transportation, the number of miles driven through October 2025 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 2025 and, if high prices persist, they may negatively impact miles driven as consumers reduce travel or seek alternative methods of transportation.

Brand Protection

We operate in a highly competitive market.

As a result, we are continuously evaluating our approach to brand, pricing, and terms to our different customers and channels.

As a result, we are continuously evaluating our approach to branding, pricing, and terms for our customers and channels.

For example, we maintain brand protection policies, which are designed to ensure that certain of our branded products are not advertised below certain approved pricing levels.

In addition, we may pursue legal remedies when we see third parties violating our intellectual property rights, including those that violate our patents, wrongfully represent our products as their own, or use our product images for their own marketing efforts.

In addition, we may pursue legal remedies when we observe third parties violating our intellectual property rights, including those that infringe on our patents, misrepresent our products as their own, or use our product images for their own marketing efforts.

Discounts, Allowances, and Incentives

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These incentives can be in the form of “off-invoice” discounts that are immediately deducted from sales at the time of sale.

For those customers that choose to receive their incentives on a quarterly or annual basis instead of “off-invoice,” we provide rebates and accrue for such incentives as the related sales are made and reduce sales accordingly.

For those customers who choose to receive their incentives on a quarterly or annual basis instead of “off-invoice,” we provide rebates and accrue for such incentives as the related sales are made, and reduce sales accordingly.

Additionally, rebates and discounts are provided to customers to support promotional activities such as advertising and sales force allowances.

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We attempt to avoid or minimize these concessions as much as possible, but we have granted pricing concessions, indemnification rights, and extended customer payment terms, and allowed a higher level of product returns in certain cases.

These concessions impact net sales as well as our profit levels and may require additional capital to finance the business.

These concessions affect both our net sales and profit levels, and may require additional capital to support the business.

We expect our customers to continue to exert pressure on our margins.

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We may incur customer acquisition costs where we incur change-over costs to induce a customer to switch from a competitor’s brand, including expanding new product lines into our existing customers.

Change-over costs include the costs related to removing the customer’s inventory of competitor products and replacing it with our products, which is commonly referred to as a stock lift.

Change-over costs include the costs associated with removing the customer’s inventory of competitor products and replacing it with our products, which is commonly referred to as a stock lift.

Customer acquisition costs are recorded as a reduction to revenue when incurred.

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In addition to warranty returns, we may permit our customers to return new, undamaged products to us within customer-specific limits if they have overstocked their inventories.

At the time products are sold, we accrue a liability for product warranties and overstock returns as a percentage of sales based upon estimates established

using historical information on the nature, frequency, and average cost of the claim and the probability of the customer return.

At the time products are sold, we accrue a liability for product warranties and overstock returns as a percentage of sales based upon estimates established using historical information on the nature, frequency, and average cost of claims and the probability of customer returns.

Significant judgments and estimates must be made and used in connection with establishing the sales returns and other allowances in any accounting period.

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Foreign Currency

Many of our products and related raw materials and components are purchased from suppliers in a variety of non-U.S.

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

Many of our products and related raw materials and components are purchased from suppliers in non-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.

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As a result, fluctuations in foreign currency exchange rates may impact our financial results.

Impact of Labor Market and Inflationary Costs

material costs;

and wage inflation from an increasingly competitive labor market.

Impact of 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 and material costs, and wage inflation from an increasingly competitive labor market.

Higher labor costs and material inflation resulting from geopolitical events, rising interest rates, disruptions to supply chain and logistics networks, and the trade policies of the U.S.

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We attempt to offset inflationary pressures with cost-saving initiatives, price increases to customers, and the use of alternative suppliers.

There can be no assurance that we will be successful in implementing such cost-saving initiatives, pricing increases, or supplier diversification in the future to offset increased inflationary costs.

There can be no assurance that we will be successful in implementing such cost-saving initiatives, pricing increases, or supplier diversification in the future to offset increased inflationary costs, or that the price increases we implement will not make our products uncompetitive or negatively impact customer demand.

Impact of Interest Rates

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Additionally, our outstanding borrowings under our credit facility bear interest at variable rates tied to Term SOFR or the applicable base rate.

Under the terms of the credit facility, a change in interest rates affects the rate at which we can borrow funds thereunder and also impacts the interest cost on existing borrowings.

Interest rates may hold steady at their current rates for prolonged periods or may increase in the future, resulting in increased costs associated with our accounts receivable sales programs and outstanding borrowings.

During the year ended December 31, 2023, we saw significant increases in Term SOFR and other reference rates.

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

Under the terms of the credit facility, a change in interest rates affects the rate at which we can borrow funds thereunder and impacts the interest cost on existing borrowings.

Interest rates may remain steady at their current levels for prolonged periods or may increase in the future, resulting in increased costs associated with our accounts receivable sales programs and outstanding borrowings.

Interest rates remained elevated throughout much of 2024, but began to decline starting in the second half of that year and generally declined throughout 2025.

Impact of Tariffs

We source the majority of our raw materials and parts from suppliers in a variety of non-U.S.

Prior to 2025, the U.S.

government imposed tariffs on certain foreign goods, including steel and aluminum and certain vehicle parts, which resulted in increased costs for importing those goods into the United States.

Those tariffs primarily impacted raw materials and parts that we source from China.

We have taken several actions to

mitigate the impact of those tariffs, including, but not limited to, passing along price increases to our customers and negotiating cost concessions from our suppliers.

We are actively monitoring recent trade policy and tariff announcements, including the executive orders issued by the President of the United States in February 2025.

Among other things, those executive orders directed the United States to impose new tariffs on imports from Canada, Mexico, and China, subsequently paused the imposition of tariffs on Canada and Mexico for a month, announced tariffs on steel and aluminum imported into the United States, and directed federal agencies to investigate how to adjust U.S.

tariffs to match those of other countries.

We are currently evaluating the potential impact of the announced tariffs on our business and financial condition and actions we may take to mitigate the impact.

In addition, we are currently monitoring the potential impact, if any, of actions taken by these countries in response to the announced tariffs.

There can be no assurance that the recently announced tariffs or future imposition of any tariffs, changes thereto, or potential actions taken by countries in response to the tariffs will not have a material adverse effect on our business, results of operations, financial condition, or liquidity in any period or that any actions we take to mitigate the impact of the tariffs will be effective.

We source the majority of our raw materials and parts from suppliers in various non-U.S.

In 2025, approximately 77% of our total volume of purchases of products was sourced from suppliers in various non-U.S.

countries, with approximately 38% sourced from third-party suppliers in China.

At the beginning of 2025, the U.S.

Administration implemented new tariffs that took effect throughout the year, and it continues to engage in trade negotiations with other countries regarding the implementation of additional tariffs.

These actions, as well as reactionary tariff adjustments made by other countries, have impacted our business and contributed to inflationary cost increases, and we expect these impacts to continue.

We have taken actions designed to mitigate the impacts of 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 experienced a temporary increase in gross margin in 2025 due to the price increases taking effect before the increased cost of inventory, reflecting higher tariffs, was recognized as an expense in our statement of operations.

We expect gross margin to decrease as we start to recognize these higher tariff costs in our Statement of Operations and Comprehensive Income in 2026.

On February 20, 2026, the U.S.

Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA").

The ultimate availability, timing, and amount of any potential refunds of such tariffs remain highly uncertain and are subject to further legal, regulatory, and administrative developments.

Following the Supreme Court’s decision, the U.S.

Administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs.

There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs may be imposed, modified, or suspended, and the impacts of such actions on our business.

There also remains substantial uncertainty regarding how countries with which the U.S.

has negotiated or is in the process of negotiating tariff trade deals will respond to any further tariff actions by the U.S.

Administration.

We continue to monitor and evaluate these developments and assess their potential impact on our business, financial condition, and results of operations.

Results of Operations

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Selling, general, and administrative expenses 541,484 25.4 % 513,450 25.6 %

Goodwill impairment charge 56,706 2.7 % — — %

Income from operations 299,547 14.1 % 292,909 14.6 %

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Year Ended December 31, 2025, Compared to Year Ended December 31, 2024

Net sales increased $79.4 million, or 4.1%, for the year ended December 31, 2024 compared to the prior year, driven primarily by volume, including from new product introductions.

Gross profit as a percentage of net sales increased 460 basis points compared to the prior year primarily due to sales of lower-cost inventory and cost savings initiatives.

Selling, general and administrative expenses (“SG&A”) increased $42.8 million, or 120 basis points as a percentage of net sales for the year ended December 31, 2024, compared to the prior year, primarily due to $20.5 million of favorable fair value adjustments in the prior year period to the estimated contingent consideration obligation for an acquisition and higher compensation and benefits costs in the current year period.

Our effective tax rate increased to 25.9% in the year ended December 31, 2024 from 23.3% in the year ended December 31, 2023, primarily due to recording a reserve in 2024 in connection with a state tax dispute.

Net sales increased $121.1 million, or 6.0%, for the year ended December 31, 2025, compared to the prior year, driven by tariff-related pricing actions in our Light Duty and Heavy Duty segments, increased customer demand in the first half of the year, and sales of new products, 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 200 basis points compared to the prior year, primarily due to a timing benefit of tariff-related price increases taking effect before the increased cost of inventory, reflecting higher tariffs, was recognized as an expense in our statement of operations.

Additionally, favorable mix from higher sales of new products, as well as supplier diversification, productivity, and automation initiatives, benefited the gross profit percentage during the year.

Selling, general, and administrative expenses (“SG&A”) increased $28.0 million, but decreased 20 basis points as a percentage of net sales for the year ended December 31, 2025, compared to the prior year, due to favorable leverage on higher net sales that more than offset additional investments made in the current year.

Goodwill impairment charge represents a non-cash charge recorded in the year ended December 31, 2025, for the Heavy Duty reporting unit.

As part of our annual goodwill impairment evaluation during the fourth quarter, management concluded that the carrying value of the Heavy Duty reporting unit exceeded its fair value and therefore recorded an impairment charge of $56.7 million, representing the goodwill balance in the Heavy Duty reporting unit as of the measurement date.

The Heavy Duty reporting unit has been negatively impacted by continued macroeconomic challenges impacting the heavy-duty aftermarket industry, resulting in reduced projections of cash flows.

Our effective tax rate remained flat at 25.9% in the years ended December 31, 2025, and December 31, 2024.

The effective tax rate for the year ended December 31, 2025, reflected the impact of a goodwill impairment charge that increased the rate by 2.1%.

The effective tax rate in the prior year included a reserve in connection with a state tax dispute, which increased the rate by approximately 2.5%.

Segment Operating Results

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Total $ 379,279 $ 322,979

Light Duty net sales increased $103.1 million, or 7.1%, for the year ended December 31, 2024 compared to the prior year, primarily due to volume increases, including sales of new products launched.

Light Duty net sales increased $126.5 million, or 8.1%, for the year ended December 31, 2025, compared to the prior year, primarily due to tariff-related pricing actions, increased customer demand in the first half of the year, and strong demand for new products.

Light Duty segment income from operations as a percentage of net sales increased to 20.5% for the year ended December 31, 2025, from 18.2% for the year ended December 31, 2024.

This increase was primarily driven by the sell-through of lower-cost inventory and operational excellence initiatives delivering cost-savings, partially offset by higher compensation and benefits costs.

Heavy Duty net sales decreased $25.4 million, or 9.9%, for the year ended December 31, 2024 compared to the prior year.

The decrease in net sales primarily reflects reduced customer demand from lower freight industry shipping volumes in the year ended December 31, 2024, as well as sales performance in the year ended December 31, 2023 driven by customers’ inventory restocking at the end of the global pandemic.

This increase was primarily driven by a timing benefit of tariff-related price increases taking effect before the increased cost of inventory, reflecting higher tariffs, was recognized as an expense in segment income, favorable mix from higher new product sales, operational excellence initiatives delivering cost savings, and favorable leverage on higher net sales.

Heavy Duty net sales increased $1.1 million, or 0.5%, for the year ended December 31, 2025, compared to the prior year.

The increase in net sales primarily reflects tariff-related pricing actions offset by reduced customer demand from continued market pressures in freight transportation and the trucking aftermarket.

Heavy Duty segment income from operations as a percentage of net sales decreased by 60 basis points for the year ended December 31, 2025, compared to the prior year.

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

This decrease was primarily driven by lower

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 increased $1.7 million, or 0.8%, for the year ended December 31, 2024 compared to the prior year, primarily due to volume increases, including sales of new products launched.

Specialty Vehicle segment income from operations as a percentage of net sales increased to 15.2% for the year ended December 31, 2024, from 15.0% for the year ended December 31, 2023.

This increase was primarily driven by the sell-through of lower-cost inventory and cost savings initiatives compared to the year ended December 31, 2023.

Specialty Vehicle net sales decreased $6.4 million, or 3.0%, for the year ended December 31, 2025, compared to the prior year, primarily due to reduced customer demand across our sales channels, partially offset by pricing actions.

Specialty Vehicle segment income from operations as a percentage of net sales decreased to 13.1% for the year ended December 31, 2025, from 15.2% for the year ended December 31, 2024.

This decrease was primarily driven by the deleverage of fixed costs on lower net sales volumes and higher tariff costs incurred on products sold starting in the fourth quarter of 2025.

Liquidity and Capital Resources

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Refer to Note 6, “Long-Term Debt”, to the Consolidated Financial Statements, included under ITEM 8, for additional information regarding our credit agreement.

Tariffs increase our use of cash since we pay for the tariffs upon the arrival of our goods in the United States but collect the cash on any passthrough price increases from our customers on a delayed basis according to the 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 from any pass-through price increases to our customers on a delayed basis, taking into account our inventory turns and payment terms negotiated with those 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 as a result of customer requests and market demands.

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

Where available and when we deem appropriate, we participate in accounts receivable sales programs with several customers that allow us to sell our accounts receivable to financial institutions to offset the negative cash flow impact of these payment term extensions.

We have and may continue to extend payment terms to certain customers in response to customer requests and market demands.

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

Where available and when we deem appropriate, we participate in accounts receivable sales programs with several customers.

The programs generally enable us to sell our accounts receivable to financial institutions at discounted rates without recourse to offset the negative cash flow impact of these

payment term extensions.

However, any sales of accounts receivable through these programs ultimately result in us receiving a lesser amount of cash upfront than if we collected those accounts receivable ourselves in due course, resulting in accounts receivable factoring costs.

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See ITEM 7A, “Quantitative and Qualitative Disclosures about Market Risk” for more information.

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

During the years ended December 31, 2024 and 2023, we sold approximately $1,106.4 million and $949.5 million, respectively, under these programs.

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

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

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

Sales of accounts receivable $ 1,387,816 $ 1,106,400

Factoring costs $ 58,309 $ 51,252

If receivables had not been sold, $1,093.1 million and $853.6 million of additional receivables would have been outstanding at December 31, 2025 and 2024, respectively, based on standard payment terms.

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

During the years ended December 31, 2024 and 2023, factoring costs associated with these accounts receivable sales programs were $51.3 million and $50.2 million, respectively.

The increase in factoring costs year over year was primarily driven by higher accounts receivable sold under these programs.

The increase in factoring costs year over year was primarily driven by higher accounts receivable sold under these programs, partially offset by lower Term SOFR rates in 2025.

Credit Agreement

We have a credit agreement which consists of a $600.0 million revolving credit facility and a $500.0 million term loan.

We have a credit agreement that consists of a $600.0 million revolving credit facility and a $500.0 million term loan.

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 December 31, 2024, we were not in default with respect to the credit agreement.

As of December 31, 2024, there was $14.0 million in outstanding borrowings under the revolving credit facility, and $468.8 million in outstanding borrowings under the term loan portion of the credit agreement, and as of such date we had outstanding letters of credit for $1.2 million in the aggregate.

As of December 31, 2025, there were $440.6 million in outstanding borrowings under the term loan.

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

Net of outstanding borrowings and letters of credit, we had $598.9 million available under the credit agreement as of December 31, 2025.

Our credit agreement contains affirmative and negative covenants.

As of December 31, 2025, we were not in default with respect to our credit agreement.

Refer to Note 6, "Long-Term Debt", to the Consolidated Financial Statements, included under ITEM 8, for additional information regarding the credit agreement.

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Effect of foreign exchange on cash and cash equivalents 323 (424)

Net increase (decrease) in cash and cash equivalents $ 20,323 $ (9,220)

During the year ended December 31, 2024, cash provided by operating activities was $231.0 million compared to $208.8 million during the year ended December 31, 2023.

The $22.3 million increase was primarily driven by higher net income, partially offset by working capital changes, primarily higher inventory balances.

Net (decrease) increase in cash and cash equivalents $ (7,701) $ 20,323

During the year ended December 31, 2025, cash provided by operating activities decreased $117.4 million from the prior year primarily 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 selling accounts receivable under our customer-sponsored accounts receivable sales programs.

Investing activities used $38.0 million and $39.3 million of cash in the years ended December 31, 2025, and 2024, respectively.

The decrease in cash used in investing activities during the year ended December 31, 2024 compared to the prior year was primarily due to higher additions for property, plant and equipment in the prior year.

Financing activities in the year ended December 31, 2024 included $78.9 million paid to repurchase 865,283 shares of common stock under our share repurchase plan, and the repayments of $78.8 million of outstanding borrowings under our revolving credit facility and $15.6 of our term loan balance under our credit agreement.

During the year ended December 31, 2023, we repaid $146.6 million of outstanding borrowings under our revolving credit facility and $12.5 million of our term loan balance under our credit agreement.

The remaining uses of cash from financing activities in each period resulted primarily from the repurchase of our common stock from our 401(k) Plan and income tax withholding in connection with the vesting of restricted stock awards (“RSAs”) and restricted stock units (“RSUs”), and proceeds from the exercise of stock options.

Cash used in financing activities during the year ended December 31, 2025, decreased $87.3 million from the prior year, due to lower levels of debt repayments and share repurchases in the current year, and included $39.8 million paid to repurchase 313,334 shares of common stock under our share repurchase plan, and the repayment of $14.0 million of outstanding borrowings under our revolving credit facility and $28.1 million of our term loan balance under our credit agreement.

During the year ended December 31, 2024, $78.9 million was paid to repurchase 865,283 shares of common stock under our share repurchase plan, and we repaid $78.8 million of outstanding borrowings under our revolving credit facility and $15.6 million of our term loan balance under our credit agreement.

Off-Balance Sheet Arrangements

Off-balance sheet arrangements are transactions, agreements, or other contractual arrangements with an unconsolidated entity for which we have an obligation to the entity that is not recorded in our consolidated financial statements.

We historically have not utilized off-balance sheet financial instruments, and currently do not plan to utilize off-balance sheet arrangements in the future to fund our working capital requirements, operations, or growth plans.

We have not utilized off-balance sheet financial instruments, and currently do not plan to utilize off-balance sheet arrangements in the future to fund our working capital requirements, operations, or growth plans.

We may issue standby letters of credit under our credit agreement.

Letters of credit totaling $1.1 million and $1.2 million were outstanding at December 31, 2025, and 2024, respectively.

Those letters of credit are

issued primarily to satisfy the requirements of workers' compensation, general liability, and other insurance policies.

Those letters of credit are issued primarily to satisfy the requirements of workers' compensation, general liability, and other insurance policies.

Each of the outstanding letters of credit has a one-year term from the date of issuance.

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The Lewisberry lease expires December 31, 2027.

We also lease our facilities in Madison, IN, and Shreveport, LA, from entities in which Lindsay Hunt, our President, Specialty Vehicle, and certain of her family members are owners.

We also lease our facilities in Madison, IN, and Shreveport, LA, from entities in which Lindsay Hunt, our former President, Specialty Vehicle, and certain of her family members are owners.

Each lease is a non-cancelable operating lease, was renewed in October 2022 in connection with the acquisition of Super ATV, LLC, a leading supplier to the powersports aftermarket ("SuperATV"), and will expire on October 31, 2027.

8 unchanged sentences

We are a partner in a joint venture with one of our suppliers and own minority interest investments in two other suppliers.

Aggregate purchases from both of these companies were $18.4 million, $22.7 million, and $24.9 million in the years ended December 31, 2024, 2023, and 2022, respectively.

Aggregate purchases from these companies were $24.8 million, $18.4 million, and $22.7 million in the years ended December 31, 2025, 2024, and 2023, respectively.

Critical Accounting Policies and Estimates

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We provide reserves for discontinued and excess inventory based upon historical demand, forecasted usage, estimated customer requirements, and product line updates.

We maintain contact

with our customer base to understand buying patterns, customer preferences, and the life cycle of our products.

We maintain contact with our customer base to understand buying patterns, customer preferences, and the life cycle of our products.

Changes in customer requirements are factored into the reserves, as needed.

Purchase Accounting .

The purchase price of an acquired business is allocated to the underlying tangible and intangible assets acquired and liabilities assumed based upon their respective fair market values, with any excess recorded as goodwill.

Such fair market value assessments require judgments and estimates which may change over time and may cause the final amounts to differ materially from original estimates.

Any adjustments to fair value assessments are recorded to goodwill over the purchase price allocation period which cannot exceed twelve months from the date of acquisition.

Refer to Note 2, "Business Acquisitions and Investments”, in the accompanying consolidated financial statements for additional information.

Goodwill and Other Acquired Intangible Assets

Goodwill is reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate the carrying value of the goodwill may be impaired.

For the annual test, we have the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount (“Step 0”).

If through the Step 0 test we determine it is more likely than not that the fair value of a reporting unit is less than its carrying amount (or if the Company elects to not perform Step 0), then we would perform a quantitative test (“Step 1”) to determine whether an impairment charge was necessary.

During 2025 and 2024, we elected to perform a Step 1 test of our goodwill for the purpose of assessing goodwill for impairment.

We estimate the fair value of our reporting units based primarily upon discounted cash flow projections for their underlying operations, which requires us to make significant assumptions regarding estimated cash flows, including long-term revenue and expense forecasts, profit margins, discount rates, and terminal growth rates.

We develop these assumptions based on the market risks unique to each reporting unit.

In addition to the use of discounted cash flow projections, when appropriate, our estimates of the fair values of our reporting units include the results of applying the guideline company valuation method, which is a market approach.

The application of the guideline company valuation method requires us to make judgments regarding (1) the appropriate set of comparable publicly traded guideline peer companies for which observable market multiples should be considered and (2) the appropriate multiple(s) to select from the range of multiples that may be observed for those guideline companies.

For the year ended December 31, 2025, we determined that the carrying value of our Heavy Duty reporting unit exceeded its fair value, and therefore recorded an impairment charge of $56.7 million, representing the balance of goodwill in that reporting unit.

For the year ended December 31, 2024, we determined that goodwill was not impaired at that time as part of our annual goodwill impairment review.

Refer to Note 5, "Goodwill and Intangible Assets," in the accompanying consolidated financial statements for additional information on the goodwill impairment charge recorded in 2025.

Recently Issued Accounting Pronouncements

1 unchanged sentence

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