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Item 7. Management’s Discussion and Analysis

2026-05-13 compared with 2025-05-14 · 122 added, 76 removed, 131 unchanged (60% of the section changed)

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This discussion should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.

We have omitted discussion of the earliest of the three years covered by our consolidated financial statements presented in this report because that disclosure was already included in our Annual Report on Form 10-K for fiscal 2024 , filed with the SEC on May 15, 2024.

You are encouraged to reference Part II, Item 7, within that report, for a discussion of our financial condition and results of operations for fiscal 2024 compared to fiscal 2023.

We derive substantially all of our revenues from the sale of specialty chemicals and ingredients that we formulate, manufacture, blend and distribute, for our Water Treatment, Industrial, and Health and Nutrition customers.

We derive substantially all of our revenues from the sale of water treatment, specialty ingredients, and chemistry products to our customers in a wide variety of industries.

We believe that we create value for our customers through superb service and support, quality products, personalized applications and trustworthy, creative employees

Financial Overview

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• Gross profit of $245.1 million, an increase of $19.5 million, or 9% from fiscal 2025;

• Diluted earnings per share (EPS) of $4.03, an increase of $0.44, or 12%, from fiscal 2024.

We focus on total profitability dollars when evaluating our financial results as opposed to profitability as a percentage of sales, as sales dollars tend to fluctuate as raw material prices rise and fall, particularly in our Water Treatment and Industrial segments.

• Operating cash flow of $144.3 million, an increase of $33.2 million, or 30% from fiscal 2025;

• Diluted earnings per share (EPS) of $3.91, a decrease of $0.12, or 3%, from fiscal 2025;

• Pro forma diluted EPS of $3.95, an increase of $0.32, or 9%, from fiscal 2025.

The costs for certain of our raw materials can rise or fall rapidly, causing fluctuations in gross profit as a percentage of sales.

We use the last in, first out (“LIFO”) method of valuing the majority of our inventory in our Water Treatment and Industrial segments, which causes the most recent product costs to be recognized in our income statement.

We use the last in, first out (“LIFO”) method of valuing the majority of our inventory, which causes the most recent product costs to be recognized in our consolidated statements of income.

The LIFO inventory valuation method and the resulting cost of sales are consistent with our business practices of pricing to current chemical raw material prices.

Inventories in our Health and Nutrition segment are valued using the first-in, first-out (“FIFO”) method.

We disclose the sales of our bulk commodity products as a percentage of total sales dollars for our Water Treatment and Industrial segments.

We disclose the sales of our bulk commodity products as a percentage of total sales dollars for our Water Treatment and Industrial Solutions segments.

Our definition of bulk commodity products includes products that we do not modify in any way, but receive, store, and ship from our facilities, or direct ship to our customers in large quantities.

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Business Acquisitions

On January 31, 2025, we acquired substantially all the assets of Amerochem Corporation ("Amerochem") under the terms of a purchase agreement with Amerochem and its shareholders.

Amerochem distributed water treatment chemicals and equipment to its customers primarily throughout North Carolina.

The results of operations since the acquisition date and the assets are included in our Water Treatment segment.

On October 30, 2024, we acquired substantially all the assets of Waterguard, Inc.

("Water Guard") under the terms of a purchase agreement with Water Guard and its shareholders.

Water Guard distributed water treatment chemicals and equipment to its customers primarily throughout North Carolina.

The results of operations since the

acquisition date and the assets are included in our Water Treatment segment.

On June 28, 2024, we acquired substantially all the assets of Wofford Water Service, Inc.

("Wofford") under the terms of a purchase agreement with Wofford and its shareholders.

Wofford distributed water treatment chemicals and equipment to customers mainly in Mississippi.

The results of operations since the acquisition date and the assets are included in our Water Treatment segment.

On June 3, 2024, we acquired substantially all the assets of Intercoastal Trading, Inc.

and certain related entities ("Intercoastal") under the terms of a purchase agreement with Intercoastal and its shareholders.

Intercoastal distributed water treatment chemicals and equipment to its customers in Maryland, Delaware and Virginia.

The results of operations since the acquisition date and the assets are included in our Water Treatment segment.

The aggregate annual revenue of these four businesses acquired in fiscal 2025 totaled approximately $67 million, as determined using the applicable twelve-month period preceding each respective acquisition date.

Recent Developments

After the end of the fiscal year, on April 25, 2025, we acquired substantially all of the assets of Surplus Management, Inc.

dba WaterSurplus ("WaterSurplus") for approximately $150 million, and may be obligated to pay up to an additional $53.7 million based on achieving certain earnings targets five years after the closing of the acquisition.

WaterSurplus delivers sustainable water treatment solutions throughout the United States focused on membrane separation systems, engineering and design services, media filtration systems, new equipment and rental unit manufacturing and sales, along with rapid-response PFAS removal solutions for “forever chemicals”.

WaterSurplus serves municipal water customers as well as customers in the food and beverage industry, offering patented products within its filtration business that reduce the frequency of membrane cleaning resulting in lower energy costs, downtime, and lower overall operational costs.

We completed the following acquisitions in fiscal 2026.

The results of operations since the date of each acquisition and the assets, including goodwill associated with these acquisitions, are included in our Water Treatment segment with the exception of the MakWood lactate business, which is included in our Food & Health Sciences segment.

Certain acquisitions discussed below are not included in Note 2 to our Consolidated Financial Statements as they were not deemed to be material enough to warrant disclosure.

• On December 3, 2025, we acquired substantially all the assets and assumed certain liabilities of Redbird Chemical, Inc.

(“Redbird”) for $4.6 million.

Redbird distributed chemicals to its customers in eastern Texas within both the water treatment and industrial markets.

• On August 29, 2025, we acquired substantially all the assets and assumed certain liabilities of StillWaters Technology, Inc.

("StillWaters") for $4.3 million.

StillWaters distributed water treatment chemicals and equipment for its customers in Alabama.

• On July 2, 2025, we acquired the lactate business of MakWood, Inc.

for $1.9 million.

We had previously been party to a Distribution Agreement with MakWood for certain lactate products under the Mak Lak trade name.

This acquisition agreement terminated the Distribution Agreement, and resulted in our acquisition of the lactate distribution business, including the customer list and associated brand name.

• On July 1, 2025, we acquired substantially all the assets and assumed certain liabilities of PhillTech, LLC ("PhillTech") for $5.0 million.

Located in Courtland, AL, PhillTech manufactured and distributed coagulants and corrosion control products for its water treatment customers.

• On June 13, 2025, we acquired substantially all the assets and assumed certain liabilities of Hendrickson Enterprises, LLC and Polymer Technologies, LLC (collectively, "Hendrickson") for approximately $1.5 million.

Hendrickson distributed water treatment chemicals and equipment to its customers via direct shipments from suppliers.

• On April 25, 2025, we acquired substantially all of the assets and assumed certain liabilities of WaterSurplus, Inc.

("WaterSurplus") and related entities for approximately $149.9 million paid at closing, with an additional amount payable as an earnout of up to $53.7 million based on cumulative gross profit for the first five years.

WaterSurplus is located in Rockford, IL and delivers sustainable water treatment solutions to customers throughout the United States.

The aggregate annual revenue of these six businesses acquired in fiscal 2026 totaled approximately $48 million, as determined using the applicable twelve-month period preceding each respective acquisition date.

Change in Reporting Segments

Effective beginning with the first quarter of fiscal 2026, we realigned our reporting segments to better reflect how we manage our operations and allocate resources.

We believe this realignment better reflects the value our company provides to our customers and our evolution from a bulk commodity distributor into a specialty ingredients company.

We now organize and manage our business by the following three segments, each of which meets the definition of reportable segments under ASC 280-10, Segment Reporting:

Water Treatment, Food and Health Sciences, and Industrial Solutions.

These segments are defined primarily by product and type of customer.

Information presented in this annual report has been recast to align with the new segments.

Additional information regarding these new segments is set forth in Note 15 to our Consolidated Financial Statements.

Results of Operations

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Sales were $1,083.7 million for fiscal 2026, an increase of $109.3 million, or 11%, from sales of $974.4 million for fiscal 2025.

The year-over-year increase was driven by sales growth in our Water Treatment segment, while sales in our Industrial and Health and Nutrition segments declined year over year.

The year-over-year increase was driven by sales growth in our Water Treatment and Industrial Solutions segments, which grew 22% and 7%, respectively , while sales in our Food and Health Sciences segment declined slightly.

Water Treatment Segment.

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Sales of bulk commodity products in the Water Treatment segment were approximately 9% of sales dollars in both fiscal 2026 and fiscal 2025.

Sales increased as a result of $72 million of added sales from acquired businesses as well as increased sales volumes of 5% in our legacy business.

Industrial Segment.

Industrial segment sales decreased $27.0 million, or 7%, to $382.5 million for fiscal 2025, as compared to $409.5 million for fiscal 2024.

Sales of bulk commodity products in the Industrial segment were approximately 15% of sales dollars in fiscal 2025 and 14% of sales dollars in fiscal 2024.

Although total sales volume was up slightly year over year, sales declined due to lower selling prices on certain products and product mix changes.

Health and Nutrition Segment.

Health and Nutrition segment sales decreased $0.9 million, or 1%, to $145.5 million for fiscal 2025, as compared to $146.4 million for fiscal 2024.

An increase in sales of our distributed products was largely offset by decreased sales of our manufactured products.

The overall decrease in sales of our manufactured products was driven by decreased sales of a lower-margin product.

Sales increased as a result of $83.3 million of added sales from acquired businesses as well as increased sales volumes and pricing on certain of our products in our legacy business.

Food and Health Sciences Segment.

Food and Health Sciences segment sales decreased $1.9 million, or 1%, to $320.7 million for fiscal 2026, as compared to $322.6 million for fiscal 2025.

Sales of our agricultural products increased $6.8 million, which was more than offset by declines in some of our other product lines resulting from lower selling prices, primarily driven by competitive pricing pressures.

Industrial Solutions Segment.

Industrial Solutions segment sales increased $14.3 million, or 7%, to $219.7 million for fiscal 2026, as compared to $205.4 million for fiscal 2025.

Sales of bulk commodity products in the Industrial Solutions segment were approximately 21% of sales dollars in fiscal 2026 and 23% of sales dollars in fiscal 2025.

Sales increased primarily as a result of increased sales volumes of certain of our manufactured, blended and repackaged products.

Gross profit increased $19.5 million, or 9%, to $245.1 million, or 23% of sales, for fiscal 2026, from $225.5 million, or 23% of sales, for fiscal 2025.

During fiscal 2026, the LIFO reserve increased, and gross profits decreased, by $1.5 million, primarily due to rising raw material costs.

In fiscal 2025, the LIFO reserve decreased, and gross profits increased, by $1.6 million, primarily due to lower prices year-over-year on certain products.

Gross profit increased due to increased sales volumes, partially offset by the unfavorable year-over-year impact of the increased LIFO reserve.

Water Treatment Segment.

Gross profit for the Water Treatment segment increased $23.1 million, or 19%, to $145.0 million, or 27% of sales, for fiscal 2026, from $121.8 million, or 27% of sales, for fiscal 2025.

Gross profit increased primarily as a result of the addition of sales from our acquired businesses.

Food and Health Sciences Segment.

Gross profit for our Food and Health Sciences segment decreased $4.6 million, or 6%, to $67.3 million, or 21% of sales, for fiscal 2026, from $71.9 million, or 22% of sales, for fiscal 2025.

Gross profit decreased as a result of lower selling prices, primarily as a result of competitive pricing pressures.

Industrial Solutions Segment.

Gross profit for the Industrial Solutions segment increased $1.0 million, or 3%, to $32.8 million, or 15% of sales, for fiscal 2026, from $31.8 million, or 15% of sales, for fiscal 2025.

Gross profit increased as a result of the increase in sales.

Selling, General and Administrative Expenses

SG&A expenses increased $17.4 million, or 16% to $123.8 million, or 11% of sales, for fiscal 2026, from $106.4 million, or 11% of sales, for fiscal 2025.

Expenses increased largely due to $19.3 million in added costs from the acquired business in our Water Treatment segment, including amortization of intangibles of $8.9 million, as well as increased variable costs.

This was partially offset by a reduction of $8.1 million to the Water Solutions earnout.

Operating Income

Operating income increased $2.1 million, or 2%, to $121.3 million, or 11% of sales, for fiscal 2026, as compared to $119.2 million, or 12% of sales, for fiscal 2025, due to the combined impact of the factors discussed above.

Interest Expense, Net

Interest expense was $13.5 million for fiscal 2026, an increase of $8.1 million from interest expense of $5.4 million for fiscal 2025.

Interest expense increased due to higher outstanding borrowings in the current year, primarily to fund current year acquisitions.

Income Tax Provision

Our effective tax rate was approximately 25% for fiscal 2026 and 26% for fiscal 2025.

The current year decrease in the effective tax rate was primarily driven by favorable tax provision adjustments recorded.

The effective tax rate is impacted by projected levels of annual taxable income, permanent items, and state taxes.

Fiscal 2025 Compared to Fiscal 2024

Sales were $974.4 million for fiscal 2025, an increase of $55.2 million, or 6%, from sales of $919.2 million for fiscal 2024.

The year-over-year increase was driven by sales growth in our Water Treatment segment, while sales in our Food and Health Sciences and Industrial Solutions segments declined year over year.

Water Treatment Segment.

Water Treatment segment sales increased $83.2 million, or 23%, to $446.5 million for fiscal 2025, as compared to $363.3 million for fiscal 2024.

Sales of bulk commodity products in the Water Treatment segment were approximately 9% of sales dollars in both fiscal 2025 and fiscal 2024.

Sales increased as a result of $72.1 million of added sales from acquired businesses as well as increased sales volumes in our legacy business.

Food and Health Sciences Segment.

Food and Health Sciences segment sales decreased $12.0 million, or 4%, to $322.6 million for fiscal 2025, as compared to $334.6 million for fiscal 2024.

Sales of our Food products decreased $11.1 million due to decreased selling prices driven by competitive pricing pressures.

Industrial Solutions Segment.

Industrial Solutions segment sales decreased $15.9 million, or 7%, to $205.4 million for fiscal 2025, as compared to $221.3 million for fiscal 2024.

Sales decreased primarily as a result of decreased selling prices.

Gross profit increased $31.9 million, or 16%, to $225.5 million, or 23% of sales, for fiscal 2025, from $193.6 million, or 21% of sales, for fiscal 2024.

During fiscal 2025, the LIFO reserve decreased, and gross profits increased, by $1.6 million, primarily due to lower prices year-over-year on certain products.

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Gross profit for the Water Treatment segment increased $22.8 million, or 23%, to $121.8 million, or 27% of sales, for fiscal 2025, from $99.1 million, or 27% of sales, for fiscal 2024.

During fiscal 2025, the LIFO reserve decreased, and gross profits increased, by $0.5 million.

During fiscal 2024, the LIFO reserve decreased, and gross profit increased, by $3.3 million.

Gross profit increased as a result of the increased sales.

Industrial Segment.

Gross profit for the Industrial segment increased $5.1 million, or 8%, to $72.6 million, or 19% of sales, for fiscal 2025, from $67.5 million, or 16% of sales, for fiscal 2024.

During fiscal 2025, the LIFO reserve decreased, and gross profits increased, by $1.1 million.

In fiscal 2024, the LIFO reserve decreased, and gross profits increased, by $12.1 million.

Included as a reduction to gross profit in the prior year was a $7.7 million charge to operating expense for an environmental liability related to PCBs discovered in the soil at our Rosemount, MN, facility.

Gross profit increased as a result of the environmental charge in the prior year not repeating in the current year, partially offset by the negative year-over-year impact of the change in the LIFO reserve, as well as improved margins on certain products.

Health and Nutrition Segment.

Gross profit for our Health and Nutrition segment increased $3.7 million, or 13%, to $31.3 million, or 22% of sales, for fiscal 2025, from $27.6 million, or 19% of sales, for fiscal 2024.

Gross profit increased as a result of a favorable product mix shift.

Gross profit increased as a result of increased sales.

Food and Health Sciences Segment.

Gross profit for our Food and Health Sciences segment increased $4.0 million, or 6%, to $71.9 million, or 22% of sales, for fiscal 2025, from $67.9 million, or 20% of sales, for fiscal 2024.

Gross profit increased as a result of the $3.3 million environmental liability recorded in fiscal 2024.

Industrial Solutions Segment.

Gross profit for the Industrial Solutions segment increased $5.1 million, or 19%, to $31.8 million, or 15% of sales, for fiscal 2025, from $26.7 million, or 12% of sales, for fiscal 2024.

Gross profit increased as a result of the $4.4 million environmental liability recorded in fiscal 2024.

Selling, General and Administrative Expenses

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Interest expense was $5.4 million for fiscal 2025, an increase of $1.2 million from interest expense of $4.3 million for fiscal 2024.

Interest expense increased due to higher outstanding borrowings in the current year, primarily to fund current year acquisitions.

Interest expense increased due to higher outstanding borrowings in fiscal 2025, primarily to fund acquisitions.

Income Tax Provision

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Cash provided by operating activities in fiscal 2026 was $144.3 million compared to $111.1 million in fiscal 2025.

The decrease in cash provided by operating activities in fiscal 2025 as compared to fiscal 2024 was primarily driven by increases in customer receivables as a result of higher sales, as well as higher inventory levels, partially offset by an increase in net income.

Due to the nature of our operations, which includes purchases of large quantities of bulk chemicals, the timing of purchases can result in significant changes in working capital and the resulting operating cash flow.

Historically, our cash requirements for working capital increase during the period from March through November as inventory levels increase as most of our barges are received during this period.

The increase in cash provided by operating activities in fiscal 2026 as compared to fiscal 2025 was primarily driven by favorable year-over-year changes in inventories and trade receivables compared to the same period a year ago.

Cash used in investing activities was $224.1 million in fiscal 2026 compared to $128.0 million in fiscal 2025.

Capital expenditures for property, plant and equipment were $58.2 million in fiscal 2026 and $41.1 million in fiscal 2025.

Cash used in investing activities included Water Treatment group acquisition spending of $87.4 million in fiscal 2025 compared to $83.5 million of acquisition spending in fiscal 2024.

Cash used in financing activities was $14.8 million in fiscal 2025 compared to $37.4 million in fiscal 2024.

Cash used in financing activities included net debt borrowings of $50.0 million in fiscal 2025 and net debt repayments of $13.0 million in fiscal 2024.

The increase in capital expenditures was primarily driven by real estate purchases and expansion of existing facilities.

In fiscal 2026, we incurred acquisition spending of $167.1 million, including the acquisition of WaterSurplus for $149.9 million paid at closing, compared to $87.4 million of acquisition spending in fiscal 2025.

Cash provided by financing activities was $78.6 million in fiscal 2026 compared to $14.8 million in fiscal 2025.

Cash provided by financing activities included net debt borrowings of $95.0 million in fiscal 2026 and net debt borrowings of $50.0 million in fiscal 2025.

We paid out cash dividends of $15.7 million in fiscal 2026 and $14.6 million in fiscal 2025.

In fiscal 2025, we used $20.7 million to repurchase shares under our board-authorized share repurchase program, and in fiscal 2024, we used $11.3 million to repurchase shares under the program.

In fiscal 2026, we did not repurchase shares under our board-authorized share repurchase program, and in fiscal 2025, we used $20.7 million to repurchase shares under the program.

Our cash balance was $3.9 million at March 29, 2026, a decrease of $1.2 million as compared with March 30, 2025.

Cash flows generated by operations during fiscal 2025 were offset by the cash expended for acquisitions, capital expenditures, repayments of debt, dividend payments and share repurchases in fiscal 2025.

We are party to the Credit Agreement with U.S.

Bank and the lenders which provides us with the Revolving Loan Facility totaling $400.0 million.

Cash flows generated by operations during fiscal 2026 were offset by the cash expended for acquisitions, capital expenditures, repayments of debt, and dividend payments in fiscal 2026.

We intentionally maintain a relatively low level of cash and use excess cash to reduce outstanding debt, which we believe represents a more efficient use of capital by lowering interest expense, improving cash flow, and strengthening our balance sheet, while continuing to maintain sufficient liquidity to meet our operational and contractual needs.

We are party to a second amended and restated credit agreement with U.S.

Bank National Association (“U.S.

Bank”) as administrative agent, sole lead arranger and sole book runner, and the other lenders from time to time party thereto (collectively, the “Lenders”), dated as of March 31, 2022 (as amended, restated or modified from time to time, the “Credit Agreement”).

A Joinder, Consent and Second Amendment, dated April 25, 2025 increased the revolving commitment under the Credit Agreement to provide us with senior secured revolving credit facilities (the “Revolving Loan Facility”) totaling $400.0 million.

A Third Amendment, dated October 15, 2025, modified terms to increase the permitted qualified receivables transactions to $10.0 million from $5.0 million, as defined in the Credit Agreement.

The Revolving Loan Facility includes a $10.0 million letter of credit subfacility and $25.0 million swingline subfacility.

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The Revolving Loan Facility is secured by substantially all of our personal property assets and those of our subsidiaries.

We may use the amount available under the Revolving Loan Facility for working capital, capital expenditures, share repurchases, restricted payments and acquisitions permitted under the Credit Agreement, and other general corporate purposes.

At March 29, 2026, we had $244 million outstanding under the Revolving Loan Facility.

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Debt issuance costs paid to the Lenders are being amortized as interest expense over the term of the Credit Agreement.

As of March 30, 2025, the unamortized balance of these costs was $0.2 million, and is reflected as a reduction of debt on our balance sheet.

The Credit Agreement requires us to maintain (a) a minimum fixed charge coverage ratio of 1.15 to 1.00 and (b) a maximum total cash flow leverage ratio of 3.5 to 1.0, subject to an election by us to increase the maximum total cash flow leverage ratio to 4.0 to 1.0 after certain Permitted Acquisitions subject to limitations set forth in the Credit Agreement.

As of March 29, 2026, the unamortized balance of these costs was $0.8 million, and is included within other assets on our consolidated balance sheet.

The Credit Agreement requires that we maintain (a) a minimum fixed charge coverage ratio of 1.15 to 1.00 and (b) a maximum total cash flow leverage ratio of 3.5 to 1.0, subject to an election by us to increase the maximum total cash flow leverage ratio to 4.0 to 1.0 after certain Permitted Acquisitions subject to limitations set forth in the Credit Agreement.

The Credit Agreement also contains other customary affirmative and negative covenants, including covenants that restrict our ability to incur additional indebtedness, dispose of significant assets, make certain investments, including any acquisitions other than permitted acquisitions, make certain payments, enter into sale and leaseback transactions, grant liens on our assets or enter into rate management transactions, subject to certain limitations.

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We were in compliance with all covenants of the Credit Agreement as of March 29, 2026 and expect to remain in compliance with all covenants for the next 12 months.

The Credit Agreement contains customary events of default, including failure to comply with covenants in the Credit Agreement and other loan documents, cross default to other material indebtedness, failure by us to pay or discharge material judgments, bankruptcy, and change of control.

The Credit Agreement contains customary events of default including failure to make payments under the Revolving Loan Facility, failure to comply with covenants in the Credit Agreement and other loan documents, cross default to other material indebtedness, our failure to pay or discharge material judgments, bankruptcy, and change of control of the Company.

The occurrence of an event of default would permit the lenders to terminate their commitments and accelerate loans under the Credit Facility.

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Earnout liability (5) $ 4,529 $ — $ — $ — $ 53,700 $ — $ 58,229

(1) Represents balance outstanding as of March 30, 2025, and assumes such amount remains outstanding until its maturity date, as periodic payments are not required under the terms of our Credit Agreement.

(1) Represents the balance outstanding as of March 29, 2026, and assumes such amount remains outstanding until its maturity date, as periodic payments are not required under the terms of our Credit Agreement.

However, it is our intention to pay down our debt with available excess cash flow.

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Payments on this obligation will continue through 2034.

(5) Represents the fair value of the earnout liability recorded in conjunction with the Water Solutions acquisition is based upon achieving certain targets payable 3 years after acquisition.

(5) Represents the fair value of the earnout liabilities recorded in conjunction with the Water Solutions and WaterSurplus acquisitions based upon achieving certain targets payable 3 years and 5 years after acquisition, respectively.

In addition to the above contractual obligations, in the ordinary course of business we have routine cash requirements related to capital expenditures for new trucks, facility improvements and expansions, safety equipment and other additions of property, plant and equipment.

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Acquisition accounting.

The fair value of the consideration we pay for each new acquisition is allocated to tangible assets and identifiable intangible assets and liabilities assumed.

The accounting for acquisitions involves a considerable amount of judgment and estimate, including the fair value of certain forms of consideration;

fair value of acquired intangible assets involving projections of future revenues and cash flows that are then either discounted at an estimated discount rate or measured at an estimated royalty rate;

fair value of other acquired assets and assumed liabilities, including potential contingencies;

and the useful lives of the acquired assets.

The assumptions used are determined at the time of the acquisition in accordance with accepted valuation models.

Projections are developed using internal forecasts, available industry and market data and estimates of long-term rates of growth for the business.

The impact of prior or future acquisitions on our financial position or results of operations may be materially impacted by the change in or initial selection of assumptions and estimates.

Our accounting for acquisitions requires significant judgment, and involves assumptions that are subject to a high degree of uncertainty and could materially affect our financial position and results of operations.

For each acquisition, we allocate the fair value of the consideration transferred to the tangible assets acquired, identifiable intangible assets, and liabilities assumed.

Determining these fair values requires management to make assumptions as of the acquisition date, including assumptions related to the future revenues and cash flows, discount rates, growth rates, and the estimated useful lives of acquired intangible assets.

These estimates are inherently subjective and are based on information available at the time of the acquisition, including internal forecasts, available industry and market data, and long-term growth assumptions.

The valuation of intangible assets is primarily based on discounted cash flow models.

Changes in key assumptions used in these models, particularly projected cash flows or discounted rates, could result in materially different fair value estimates and may affect recorded asset balances, future amortization expense or impairment charges.

Management establishes these assumptions at the time of acquisition and revises them if circumstances warrant.

While we believe our assumptions are reasonable, actual results may differ from estimates due to changes in operating performance or market conditions.

Any future acquisitions could involve assumptions that differ from those used in prior transactions.

See Note 2, Acquisitions included in Part II, Item 8 of this Form 10-K for further discussion of business combination accounting valuation methodology and assumptions.

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