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Item 7. Management’s Discussion and Analysis

2026-03-03 compared with 2025-03-11 · 79 added, 80 removed, 197 unchanged (45% of the section changed)

1 unchanged sentence

The Company’s fiscal year ends on the Saturday nearest to December 31.

Fiscal years 2024 and 2023 were each 52 weeks in length.

References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to results for “2024” or “fiscal year 2024” mean the fiscal year ended December 28, 2024, and references to results for “2023” or “fiscal year 2023” mean the fiscal year ended December 30, 2023.

References to the “fourth quarter of 2024” or the “fourth fiscal quarter of 2024” mean the thirteen-week period from September 29, 2024 to December 28, 2024, and references to the “fourth quarter of 2023” or the “fourth fiscal quarter of 2023” mean the thirteen-week period from October 1, 2023 to December 30, 2023.

Fiscal year 2025 was 53 weeks in length and fiscal year 2024 was 52 weeks in length.

References in this Management’s Discussion and Analysis of Financial Condition and Results of Operations to results for “2025” or “fiscal year 2025” mean the fiscal year ended January 3, 2026, and references to results for “2024” or “fiscal year 2024” mean the fiscal year ended December 28, 2024.

References to the “fourth quarter of 2025” or the “fourth fiscal quarter of 2025” mean the fourteen-week period from September 28, 2025 to January 3, 2026, and references to the “fourth quarter of 2024” or the “fourth fiscal quarter of 2024” mean the thirteen-week period from September 29, 2024 to December 28, 2024.

The following analysis excludes discontinued operations.

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Net income for the fourth quarter of 2025 was $1.2 million, or $0.19 per diluted share compared to $1.6 million, or $0.26 per diluted share, for the comparable 2024 period.

The Company’s backlog was $89.2 million on December 28, 2024, compared to $77.1 million on December 30, 2023, primarily due to an increase of $13.7 million in backlog at Velvac related to the launch of new mirror programs for Class 8 trucks, partially offset by a decrease of $1.7 million in backlog for returnable packaging products at Big 3 Products.

The Company’s backlog was $81.1 million on January 3, 2026, compared to $89.2 million on December 28, 2024, primarily due to decreased orders for returnable transport packaging products

Critical Accounting Estimates

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the testing of goodwill and other intangible assets for impairment;

and pensions and other postretirement benefits.

pensions and other postretirement benefits;

and gain or loss on held for sale.

Management uses historical experience and all available information to make its estimates and assumptions, but actual results will inevitably differ from the estimates and assumptions that are used to prepare the Company’s financial statements at any given time.

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If our estimates and assumptions as to collectability were materially incorrect, or if any of our significant customers were to develop unexpected and immediate financial problems that would prevent payment of amounts due to us, and our allowance for doubtful accounts were inadequate, this could result in an unexpected loss in profitability.

As of December 28, 2024 and December 30, 2023, the Company’s allowance for doubtful accounts total was $0.5 million and $0.5 million, respectively.

As of December 28, 2024, and December 30, 2023, the Company’s bad debt expense was $0.1 million and $0.1 million, respectively.

As of January 3, 2026 and December 28, 2024, the Company’s allowance for doubtful accounts total was $0.6 million and $0.5 million, respectively.

As of January 3, 2026, and December 28, 2024, the Company’s bad debt expense was $0.1 million and $0.1 million, respectively.

Inventories are valued at the lower of cost or net realizable value.

Cost is determined by the last-in, first-out (“LIFO”) method at Eberhard while Big 3 Precision and Velvac are valued using a first-in, first-out (“FIFO”) method.

Cost is determined by the last-in, first-out (“LIFO”) method at Eberhard while Big 3 Precision and Velvac and inventories outside the United States are valued using a first-in, first-out (“FIFO”) method.

Accordingly, a LIFO valuation reserve is calculated using the dollar value link chain method.

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The reserve fluctuates with market conditions, design cycles, and other economic factors and could vary significantly, whether favorably or unfavorably, from actual results due to, among other things, unanticipated changes in economic conditions, customer demand, or the competitive landscape.

The inventory reserve for excess or obsolete inventory reduced the Company’s inventory valuation by $1.9 million and $1.9 million as of December 28, 2024 and December 30, 2023, respectively.

The inventory reserve for excess or obsolete inventory reduced the Company’s inventory valuation by $1.8 million and $1.9 million as of January 3, 2026 and December 28, 2024, respectively.

Goodwill and Other Intangible Assets

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We consider the Company’s historical experience with pension fund asset performance, the current and expected allocation of our plan assets and expected long-term rates of return.

The long-term rate-of-return assumption used for determining net periodic pension expense was 7.5% for both 2024 and 2023.

The long-term rate-of-return assumption used for determining net periodic pension expense was 7.5% for both 2025 and 2024, respectively.

The Company reviews the long-term rate of return each year.

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Operating Profit

Net sales in the fourth quarter of 2024 increased 4.5% to $66.7 million from $63.8 million in the fourth quarter of 2023.

Sales increases were due to higher demand for returnable transport packaging products, partially offset by lower demand for truck accessories and truck mirror assemblies.

Net sales of existing products increased 2.8% while price increases and new products increased net sales by 1.7% in the fourth quarter of 2024 when compared to sales in the fourth quarter of 2023.

Net sales in the fourth quarter of 2025 decreased 13.7% to $57.5 million from $66.7 million in the fourth quarter of 2024.

Sales decreases were due to lower shipments of returnable transport packaging products and truck mirror assemblies.

Net sales of existing products decreased 19.9% while price increases and new products increased net sales by 6.2% in the fourth quarter of 2025 when compared to sales in the fourth quarter of 2024.

New products included various truck mirror assemblies, rotary latches, and handles.

Cost of products sold in the fourth quarter of 2024 increased $4.6 million or 10% from the corresponding period in 2023.

The increase in cost of products sold is primarily attributable to higher sales volume and a favorable adjustment to the LIFO reserve in the fourth quarter of 2023 that did not recur in the fourth quarter of 2024.

Cost of products sold in the fourth quarter of 2025 decreased $6.9 million or 13.5% from the corresponding period in 2024.

The decrease in cost of products sold is primarily attributable to the lower product shipments.

Gross margin as a percentage of net sales for the fourth quarter of 2025 was 22.8% compared to 23.0% in the prior year fourth quarter.

The decrease is primarily due to higher material costs in the fourth quarter of 2024 and a favorable adjustment to the LIFO reserve in the fourth quarter of 2023 that did not reoccur in the fourth quarter of 2024.

The decrease is primarily due to higher material costs in the fourth quarter of 2025.

Product development expenses decreased $0.2 million, or 19.3%, in the fourth quarter of 2025 compared to the corresponding period in 2024 as we continue to invest in new products at Eberhard, Velvac and Big 3 Products.

As a percentage of net sales, product development costs were 1.6% for the fourth quarter of 2025 compared to 1.7% for the corresponding period in 2024.

Selling and administrative expenses in the fourth quarter of 2024 increased 11.0% compared to the fourth quarter of 2023.

As a percentage of net sales, selling and administrative costs were 16.8% for the fourth quarter of 2024 compared to 15.8% for the corresponding period in 2023.

The increase was primarily the result of increased payroll-related expenses, legal and professional expenses, and selling costs.

Net income for the fourth quarter of 2024 was $1.6 million, or $0.26 per diluted share, from $3.9 million, or $0.63 per diluted share, in 2023.

Selling and administrative expenses in the fourth quarter of 2025 decreased 10.5% compared to the fourth quarter of 2024.

As a percentage of net sales, selling and administrative expenses were 17.4% for the fourth quarter of 2025 compared to 16.8% for the corresponding period in 2024.

The decrease was primarily the result of decreased commissions, legal fees and personnel-related costs.

Net income from continuing operations for the fourth quarter of 2025 was $1.2 million, or $0.19 per diluted share, from $1.6 million, or $0.26 per diluted share, for the same period in 2024.

Fiscal Year 2025 Compared to Fiscal Year 2024

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Selling and Administrative Expense

Restructuring Costs

Operating Profit

Net sales for 2024 increased 5% to $272.8 million from $258.9 million in 2023.

The sales increase was primarily due to higher demand for truck mirror assemblies and returnable transport packaging products.

Net sales of existing products were flat in 2024 compared to 2023 while price increases and new products increased net sales in 2024 by 5%.

Sales of new products contributed 4% to sales growth in 2024 and included various new truck mirror assemblies, rotary latches, D-rings, and mirror cams.

Cost of products sold increased $8.4 million or 4% to $205.5 million in 2024 from $197.1 million in 2023.

The increase in the cost of products sold is primarily attributable to higher sales volumes and a favorable adjustment to the LIFO reserve in the fourth quarter of 2023 that did not reoccur in the fourth quarter of 2024.

Net sales for 2025 decreased 8.7% to $249.0 million from $272.8 million in 2024.

The sales decrease was primarily due to lower shipments for truck mirror assemblies and returnable transport packaging products.

Net sales of existing products decreased 14.9% in 2025 compared to 2024 while price increases and new products increased net sales in 2025 by 6.2%.

Sales of new products increased 5.9% in 2025 and included various new truck mirror assemblies, rotary latches, D-rings, and mirror cams.

Cost of products sold decreased $13.5 million or 6.6% to $192.0 million in 2025 from $205.5 million in 2024.

The decrease in the cost of products sold is primarily attributable to lower sales volumes.

Tariffs incurred during 2025 were $10.2 million from China-sourced products as compared to $2.5 million in 2024.

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Gross margin as a percentage of sales was 22.9% in 2025 compared to 24.7% in 2024.

The increase primarily reflects the impact of improved pricing and various cost-savings initiatives.

Product development expenses as a percentage of sales was 1.8% and 2.2% in 2024 and 2023, respectively, as the Company continues to invest in new products at Eberhard, Velvac and Big 3 Products to better serve our customers.

Selling and administrative expenses increased $3.1 million or 7.9% to $42.2 million in 2024 from $39.1 million in 2023.

As a percentage of net sales, selling and administrative expenses were 15.5% for the fiscal year of 2024 compared to 15.1% for the corresponding period in 2023.

The increase was primarily the result of increased payroll-related expenses, legal and professional expenses, and travel related expenses.

Other income and expense decreased $1.2 million to $0.3 million of expense in 2024 from $0.9 million of income in 2023.

The decrease in other income and expense of $1.2 million was due to a $1.6 million favorable adjustment for the final settlement of our swap agreement with Santander in the second quarter of 2023 that did not recur in 2024, partially offset by an unfavorable working capital adjustment of $0.4 million in the third quarter of 2023 related to the sale of the Greenwald business.

Net income for 2024 increased 12% to $13.2 million, or $2.13 per diluted share, from $11.8 million, or $1.88 per diluted share, in 2023.

The following table shows the amount of change from the year ended December 30, 2023 to the year ended December 28, 2024 in other items (dollars in thousands):

The decrease primarily reflects the impact of higher material costs on lower sales volumes.

Product development expenses as a percentage of sales were 1.6% and 1.8% in 2025 and 2024, respectively, as the Company continues to invest in new products at Eberhard, Velvac and Big 3 Products to better serve our customers.

Selling and administrative expenses were $42.2 million in 2025 compared to $42.2 million in 2024.

As a percentage of net sales, selling and administrative expenses were 17.0% for the fiscal year of 2025 compared to 15.5% for the fiscal year 2024.

During 2025, Selling and administrative expenses include a $2.5 million of restructuring charges composed of personnel and facilities related cost.

The charges relate to actions completed within the fiscal year 2025.

Other expense increased $0.1 million to $0.5 million of expense in 2025 from $0.3 million of expense in 2024.

The increase in other expense is due to costs associated with credit agreement refinancing partially offset by recovery of employment tax credits.

Net income from continuing operations for 2025 decreased 57% to $6.0 million, or $0.98 per diluted share, from $13.2 million, or $2.13 per diluted share, in 2024.

The following table shows the amount of change from the year ended December 28, 2024 to the year ended January 3, 2026 in other items (dollars in thousands):

Interest Expense

Interest expense decreased in 2024 from 2023 is primarily due to paydown of principal.

Other (Income) Expense

Income Tax Expense

Intere st expense decreased in 2025 from 2024 is primarily due to paydown of principal.

The effective tax rate for 2025 was 20.6% compared to the 2024 effective tax rate of 22.6%.

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in demand or payment from a particular industry or customer should not have a material impact on the Company’s sales and collection of receivables.

Management expects that the Company’s foreseeable cash needs for operations, capital expenditures, debt service and dividend payments will continue to be met in the next 12 months from December 28, 2024 and beyond by the Company’s operating cash flows and available credit facility.

Management expects that the Company’s foreseeable cash needs for operations, capital expenditures, debt service and dividend payments will continue to be met in the next 12 months from January 3, 2026 and beyond by the Company’s operating cash flows and available credit facility.

The following table shows key financial ratios at the end of each fiscal year:

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Net cash used in investing activities

Net cash used in by financing activities

Net cash used in financing activities

All cash held by foreign subsidiaries is readily convertible into other currencies, including the U.S.

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In 2025, the Company contributed $3.1 million to its defined benefit retirement plan.

In 2024, reductions in working capital requirements provided $4.9 million, driven primarily by reductions in inventory and prepaid expenses.

In 2023, reductions in working capital requirements provided $7.8 million, primarily driven by reductions in accounts receivable and inventory, partially offset by decreases in accounts payable and other accrued liabilities.

In 2024, cash used to support increases in working capital requirements was $5.4 million, driven primarily by payments of accounts payable.

In 2024, reductions in working capital requirements provided $4.9 million, primarily driven by reductions in inventory and prepaid expenses.

The Company used $0.5 million and $7.9 million for investing activities in 2025 and 2024, respectively.

In 2025, the Company invested $4.0 million in capital expenditures, sold $2.2 million in marketable securities, and received $1.5 million from the sale of business assets.

In 2024, the Company invested $9.7 million in capital expenditures, invested $1.0 million in marketable securities, received $2.3 million on the sale of one of its buildings, and received payments on notes receivable of $0.5 million.

In 2023, the Company invested $5.5 million in capital expenditures, invested $1.0 million in marketable securities, and received payments on notes receivable of $2.3 million.

Capital expenditures in fiscal year 2026 are expected to be approximately $7.3 million.

In 2024, the Company made total debt payments of $4.8 million, of which $1.8 million were principal payments on the revolving commitment portion of the credit facility and used $2.7 million for payment of dividends.

In 2025, the Company made total debt payments of $44.8 million, of which $36.0 million were principal payments on the former credit facility and $2.7 million were for payment of dividends.

The Company anticipates dividend payments in fiscal 2026 to be approximately $2.8 million.

The Company has $66 million available on its revolving line of credit.

See Note 6 - Debt in Item 8, Financial Statements and Supplementary Data for further discussion on the Company’s debt facilities.

In 2023, the Company made total debt payments of $79.7 million, of which $59.3 million was an accelerated principal payment and used $2.8 million for payment of dividends.

The Company leases certain equipment and buildings under cancelable and non-cancelable operating leases that expire at various dates for up to ten years.

See Note 6 - Debt in Item 8, Financial Statements and Supplementary Data , of this Form 10-K for further discussion on the Company’s debt facilities.

In 2024, the Company made total debt payments of $4.8 million, of which $1.8 million were principal payments on the revolving commitment portion of the credit facility and $2.7 million were for payment of dividends.

The Company leases certain equipment and buildings under cancelable and non-cancelable operating leases that expire at various dates for up to 8 years.

Rent expenses amounted to approximately $4.5 million in 2025 and $4.9 million in 2024.

On June 16, 2023, the Company entered into a credit agreement with TD Bank, N.A., Wells Fargo Bank, Bank of America, and M&T Bank as lenders (the “Credit Agreement”), that included a $60 million term portion and a $30 million revolving commitment portion.

The proceeds of the term loan were used to repay the Company’s remaining outstanding term loan and to terminate its existing credit facility with Santander Bank, N.A.

(approximately $59 million).

The term loan portion of the credit facility requires quarterly principal payments of (i) $750,000 beginning on September 30, 2023 through June 30, 2025, (ii) $1,125,000 beginning on September 30, 2025 through June 30, 2027, and (iii) $1,500,000 beginning on September 30, 2027 through March 31, 2028, with the balance of the term loan payable on the maturity date of June 16, 2028.

Amounts outstanding under the revolving portion of the credit facility are generally due and payable on June 16, 2028, the expiration date of the Credit Agreement.

The Company can elect to prepay some or all the outstanding balance from time to time without penalty.

A commitment fee is payable on the unused portion of the revolving credit facility based on the Company’s consolidated ratio of net debt to adjusted EBITDA from time to time.

Currently, the commitment fee is 0.30%.

The term loan bears interest at a variable rate based on the term secured overnight financing rate (“SOFR”), plus an adjustment of ten basis points, plus an applicable margin of 1.875% to 2.625%, depending on the Company’s senior net leverage ratio.

Borrowings under the revolving portion bear interest at a variable rate based on, at the Company’s election, a base rate plus an applicable margin of 0.875% to 1.625% or term SOFR, plus an adjustment of ten basis points, plus an applicable margin of 1.875% to 2.625%, with such margins determined based on the Company’s senior net leverage ratio.

The Company’s obligations under the Credit Agreement are secured by a lien on certain of the Company’s and its subsidiaries’ assets pursuant to a Pledge and Security Agreement, dated as of June 16, 2023, with TD Bank, N.A., as administrative agent.

The Company’s loan covenants under the Credit Agreement require the Company to maintain a senior net leverage ratio not to exceed 3.5 to 1.

In addition, the Company is required to maintain a fixed charge coverage ratio to be not less than 1.25 to 1.

The Company was in compliance with all covenants as of December 28, 2024 and December 30, 2023.

A decrease in earnings due to the impact of current economic conditions and inflationary pressures or the resulting harm to the financial condition of our customers, or an increase in indebtedness incurred to offset such a decrease in earnings, would have a negative impact on our senior net leverage ratio and our fixed charge coverage ratio, which in turn would increase the cost of borrowing under the Credit Agreement and could cause us to fail to comply with the covenants under our Covenant Agreement.

In addition to funding capital requirements, we may use available cash to pay down our indebtedness, to make investments, which may include investments in publicly traded securities, or to make acquisitions that we believe will complement or expand our existing businesses.

On October 28, 2025, the Company entered into a credit agreement with the lenders from time to time party thereto, Citizens Bank, N.A., as the administrative agent, as an LC issuer, and as the swing line lender (the “Citizens Credit Agreement”).

The Citizens Credit Agreement replaces the Company’s prior credit facility with TD Bank, N.A.

(“TD Bank”), which was repaid using borrowings under the Citizens Credit Agreement and terminated on October 28, 2025.

See Note 6 - Debt for additional information regarding the terms of the prior credit facility with TD Bank.

The Citizens Credit Agreement established a new $100 million five-year unsecured revolving credit facility and provides for the extension of credit to the Company in the form of revolving loans, swing line loans and letters of credit, at any time and from time to time during the term of the Citizens Credit Agreement.

See Note 6, Debt, for additional information regarding the terms of the Citizens Credit Agreement, including repayment terms, interest rates, and applicable loan covenants.

Under the terms of the Citizens Credit Agreement, the Company is subject to restrictive covenants that limit our ability to, among other things, incur additional indebtedness, pay dividends, or make other distributions, and consolidate, merge, sell or otherwise dispose of assets, as well as financial covenants that require us to maintain a maximum senior net leverage ratio and a minimum interest coverage ratio.

These covenants may limit how we conduct our business, and in the event of certain defaults, our repayment obligations may be accelerated.

The Company was in compliance with all its covenants under the Citizens Credit Agreement as of January 3, 2026 and through the date of filing this Form 10-K.

The Company has $66 million available on its line of credit under the Citizens Credit Agreement as of the date of filing this Form 10-K.

As of the end of the fourth quarter of 2025, the Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a material current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Non-GAAP Financial Measures

The non-GAAP financial measures we provide in this report should be viewed in addition to, and not as an alternative for, results prepared in accordance with U.S.

The non-GAAP financial measures we provide in this Form 10-K should be viewed in addition to, and not as an alternative for, results prepared in accordance with U.S.

To supplement the consolidated financial statements prepared in accordance with U.S.

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Reconciliation of Non-GAAP Measures

Adjusted Net Income and Adjusted Earnings per Share from Continuing Operations Calculation

For the Three and Twelve Months ended December 28, 2024 and December 30, 2023

Adjusted Net Income from Continuing Operations and Adjusted Earnings per Share from Continuing Operations Calculation

For the Three and Twelve Months ended January 3, 2026 and December 28, 2024

Three Months Ended

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Severance and accrued compensation

Greenwald final sale adjustment

Personnel and facilities restructuring

Credit Agreement refinancing

Non-GAAP tax impact of adjustments (1)

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Estimate of the tax effect of the items identified to determine a non-GAAP annual effective tax rate applied to the pretax amount in order to calculate the non-GAAP provision for income taxes

Expenses associated with accrued compensation and severance related to the elimination of the Chief Operating Officer position and the departure of two former Chief Executive Officers

Final settlement of working capital adjustment associated with Greenwald sale

Expenses associated with accrued compensation and severance related to the elimination of the former Chief Operating Officer position and the departure of two former Chief Executive Officers

Expenses associated with severance and facilities related costs.

Writeoff of fees associated with former credit agreement.

Reconciliation of Non-GAAP Measures

Adjusted EBITDA from Operations Calculation

For the Three and Twelve Months ended December 28, 2024 and December 30, 2023

Adjusted EBITDA and Adjusted EBITDA from Operations Calculation

For the Three and Twelve Months ended January 3, 2026 and December 28, 2024

Three Months Ended

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Severance and accrued compensation

Greenwald final sale adjustment

Personnel and facilities restructuring

Credit Agreement refinancing

Adjusted EBITDA from continuing operations

Net loss from discontinued operations as reported per generally accepted accounting principles (GAAP)

Net income (loss) from discontinued operations as reported per generally accepted accounting principles (GAAP)

Interest expense

Provision for income taxes

Provision (benefit) for income taxes

Depreciation and amortization

Business closure costs

Loss on classification as held for sale

(Gain) Loss on classification as held for sale

Adjusted EBITDA from discontinued operations

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Severance and accrued compensation

Greenwald final sale adjustment

Business closure costs

Loss on classification as held for sale

Personnel and facilities restructuring

Credit Agreement refinancing

(Gain) Loss on classification as held for sale

Total adjusted EBITDA

Expenses associated with accrued compensation and severance related to the elimination of the former Chief Operating Officer position and the departure of two former Chief Executive Officers

Final settlement of working capital adjustment associated with Greenwald sale

Associated Toolmakers closure costs

Impact of classifying Big 3 Mold business as held for sale

Expenses associated with severance and facilities related costs

Writeoff of fees associated with former credit agreement.

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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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