What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-03-07 compared with 2024-03-11 · 136 added, 164 removed, 193 unchanged (61% of the section changed)

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and accessories.

The Company’s products are concentrated in residential and commercial construction, and general industrial markets,

with a comprehensive portfolio of intellectual property and patents issued in various countries around the world.

The Company’s

primary product, flexible gas piping, is used for gas piping within residential and commercial buildings.

Through its flexibility and

ease of use, the Company’s TracPipe ® and TracPipe ® CounterStrike ® flexible gas piping,

along with its fittings distributed under the trademark AutoFlare ® , allows users to substantially cut the time required

to install gas piping, as compared to traditional methods.

The Company’s newest product line MediTrac ® corrugated

medical tubing (“CMT”) is used for piping medical gases (oxygen, nitrogen, nitrous oxide, carbon dioxide, and medical vacuum)

in health care facilities.

Building on the recognized strengths and strategies employed in the flexible gas piping market, MediTrac ®

CMT can be used in place of rigid copper pipe, and due to its long continuous lengths and flexibility, it can be installed approximately

five times faster than rigid copper pipe, saving on installation labor and construction schedules.

The Company’s products are manufactured

at its Exton, Pennsylvania and Houston, Texas facilities in the U.S., and in Banbury, Oxfordshire in the U.K.

A majority of the Company’s

sales across all industries are generated through independent outside sales organizations such as sales representatives, wholesalers

and distributors, or a combination of both.

The Company has a broad distribution network in North America and to a lesser extent in other

global markets.

The Company’s products are concentrated in residential and commercial construction within buildings, and general

industrial markets, with a comprehensive portfolio of intellectual property and patents issued in various countries around the world.

The residential and commercial construction market also utilizes corrugated stainless steel tubing (“CSST”) primarily for

flexible gas piping.

Through its flexibility and ease of use, the Company’s TracPipe ® CSST and TracPipe ®

CounterStrike ® CSST, along with its fittings distributed under the trademark AutoFlare ® , allows users

to substantially cut the time required to install gas piping, as compared to traditional methods.

The Company’s newest product

line MediTrac ® corrugated medical tubing (“CMT”) is used for piping medical gases (oxygen, nitrogen, nitrous

oxide, carbon dioxide, and medical vacuum) in health care facilities.

Building on the recognized strengths and strategies employed in

the flexible gas piping market, MediTrac ® CMT can be used in place of rigid copper pipe, and due to its long continuous

lengths and flexibility, it can be installed approximately five times faster than rigid copper pipe, saving on installation labor and

construction schedules.

The Company’s products are manufactured at its Exton, Pennsylvania and Houston, Texas facilities in the

U.S., and in Banbury, Oxfordshire in the U.K.

A majority of the Company’s sales across all industries are generated through independent

outside sales organizations such as sales representatives, wholesalers and distributors, or a combination of both.

The Company has a

broad distribution network in North America and to a lesser extent in other global markets.

in Financial Condition

Company’s cash balance of $46,356,000 as of December 31, 2023 increased $8,653,000 (23.0%) from a $37,703,000 balance at December

The primary reason for the increase in cash is due to income generated from operations during 2023.

This was partially offset

by dividend payments during 2023 totaling $13,124,000, as detailed in Note 12, Shareholders’ Equity, to the Consolidated Financial

Statements included in this report.

See the Company’s Consolidated Statements of Cash Flows for further details regarding the change

Receivable were $15,361,000 and $17,503,000 as of December 31, 2023 and December 31, 2022, respectively, decreasing $2,142,000 or 12.2%.

This is mostly timing related, associated with greater cash collections resulting from higher sales during the fourth quarter of the

previous year versus the current quarter.

was $15,597,000 and $17,764,000 as of December 31, 2023 and December 31, 2022, respectively, decreasing $2,167,000 or 12.2%.

is mainly the result of lower inventory required to be on hand as the supply chain environment has recently stabilized and due to lower

raw material costs.

Liabilities were $4,390,000 and $7,530,000 as of December 31, 2023 and December 31, 2022, respectively.

The decrease of $3,140,000 or

41.7% mainly relates to the payment of an accrual for legal and product liability matters associated with two cases provided for in the

previous year, which were resolved through settlement.

Company’s cash and cash equivalents balance of $51,699,000 as of December 31, 2024 increased $5,343,000 or 11.5% from a $46,356,000

balance at December 31, 2023.

The primary reason for the increase is due to income generated from operations during 2024.

This was partially

offset by dividend payments during 2024 totaling $13,527,000, as detailed in Note 12, Shareholders’ Equity, to the Consolidated

Financial Statements included in this report.

See the Company’s Consolidated Statements of Cash Flows for further details regarding

the change in cash and cash equivalents.

earnings were $72,880,000 and $68,493,000 as of December 31, 2024 and December 31, 2023, respectively, increasing $4,387,000 or 6.4%.

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Company reported comparative results from operations for the twelve month periods ended December 31, 2024 and 2023 as follows:

Twelve-months ended December 31,

(dollars in thousands)

Twelve-months

ended December 31,

in thousands)

Operating Profit

The Company’s sales for the full year of 2023 were $111,465,000, reflecting a decrease of $14,022,000, or 11.2%, compared

to $125,487,000 in 2022.

The Company’s sales for the year were $101,681,000, reflecting a decrease of $9,784,000, or 8.8%, compared to $111,465,000

in the previous year.

The decrease in sales is mainly due to lower sales unit volumes as a result of the overall market being suppressed

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The Company’s gross profit margins were 61.2% and 61.3% for the years ended December 31, 2024, and 2023, respectively.

The decline in gross profit margin is mainly due to an increase in the provision for excess inventories for MediTrac ® CMT

Higher amounts of materials for MediTrac ® CMT products were initially purchased for cost considerations and

because of longer required lead times.

Also, lower production, which caused lower absorption of factory labor and overhead costs, contributed

to the lower gross profit margin.

Lower raw material costs, mainly for strip, partly offset the above referenced reasons for the decline

in gross profit margin.

Selling expenses consist primarily of employee salaries and associated overhead costs, commissions, and the cost of marketing

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for 2024 and 2023, respectively, representing a decrease of $454,000, or 2.2%.

The decreases are mostly related to commissions and freight.

In the previous year, commissions increased partly because of a shift of more shipments from third party warehouses, whose shipments

are subject to commission, compared to those directly from the manufacturing facilities, whose shipments are not subject to commission.

Freight costs decreased because of lower sales volumes and lower carrier rates.

These decreases were partially offset by higher staffing

related costs and travel.

As a percentage of net sales, selling expenses were 18.8% and 17.5% for the twelve months ended December 31,

2023 and 2022, respectively.

The decrease is mostly related to commissions due to the

lower net sales, which were partially offset by higher travel.

As a percentage of net sales, selling expenses were 20.2% and 18.8% for

the twelve months ended December 31, 2024 and 2023, respectively.

and Administrative Expenses .

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between periods.

Product liability reserves and expenses were lower by $3,010,000, associated primarily with two cases, which were provided

for in the previous year and subsequently resolved through settlement.

There also was a decrease in the incentive compensation component

which is aligned with profitability.

These were partly offset by increases in staffing related costs, umbrella insurance premiums, and

The incentive compensation component which is aligned with profitability decreased due to lower operating profit and

due to changes in the executive management team at the beginning of the year.

In addition, product liability reserves and expenses and

stock based compensation, which moves in relation to the Company’s stock price, as detailed in Note 8, Stock Based Compensation

As a percentage of net sales, general and administrative expenses were 15.9% and 16.4% for the twelve months ended December 31,

2023 and 2022, respectively.

Plans, were lower.

These were partly offset by increases in staffing related costs, computer and information technology related expenses,

and umbrella insurance premiums.

As a percentage of net sales, general and administrative expenses were 15.8% and 15.9% for the twelve

months ended December 31, 2024 and 2023, respectively.

Engineering expenses consist of development expenses associated with the development of new products, and costs related

to enhancements of existing products and manufacturing processes.

Engineering expenses decreased $865,000 or 18.3% between periods, being

$3,868,000 and $4,733,000 for the years ended December 31, 2023 and 2022, respectively, mainly associated with decreases in staffing

related costs.

Engineering expenses increased $200,000 or 5.2% between periods, being

$4,068,000 and $3,868,000 for the years ended December 31, 2024 and 2023, respectively, mainly associated with increases in consulting

and staffing related costs.

As a percentage of net sales for the year, engineering expenses were 4.0% in 2024 and 3.5% in 2023.

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a profit of $21,571,000 in 2024, as compared to $25,799,000 in 2023.

Interest income is recorded on cash investments, and interest expense is recorded at times when the Company has debt amounts

outstanding on its line of credit.

The Company recorded interest income of $1,700,000 for 2023, compared to $174,000 for 2022.

in interest income was mainly due to the increase in interest rates during 2023.

There were no borrowings on its line of credit during

2023 or 2022.

Interest income is recorded on investments in cash equivalents, and interest expense is recorded at times when the Company

has debt amounts outstanding on its line of credit.

The Company recorded interest income of $2,278,000 for 2024, compared to $1,700,000

The increase in interest income was mainly due to higher invested cash equivalent balances during 2024.

There were no borrowings

on its line of credit during 2024 or 2023.

Income (Expense) .

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and France subsidiaries

The Company recognized other income of $46,000 during 2023 and other expense of $211,000 during 2022.

The Company recognized other expense of $227,000 during 2024 and other income of $46,000 during 2023.

Tax Expense .

Income tax expense was $5,707,000 for 2024, compared to $6,825,000 for 2023.

The $502,000 or 6.9% decrease in tax expense

was largely the result of the decrease in income before taxes.

The effective tax rate for 2023 and 2022 was at approximately 25% and

24% of income before taxes, respectively.

months ended December 31, 2022 vs.

twelve months ended December 31, 2021

a comparison of our results of operations for the twelve months ended December 31, 2022 vs.

twelve months ended December 31, 2021, see

“Part II, Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual

Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on March 10, 2023.

The $1,118,000 or 16.4% decrease in tax

expense was largely the result of the decrease in income before taxes.

The effective tax rate for 2024 and 2023 was approximately 24%

and 25% of income before taxes respectively.

and Contingencies

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generated from operations.

of December 31, 2023, the Company had a cash balance of $46,356,000.

Additionally, the Company has a $15,000,000 line of credit available,

as discussed in detail in Note 6, Line of Credit and Other Borrowings, which had no borrowings outstanding against it as of December

As of December 31, 2022 and December 31, 2021, the Company had cash balances of $37,703,000 and $32,913,000, respectively,

with no borrowings against the line of credit.

of December 31, 2024, the Company had a cash and cash equivalents balance of $51,699,000.

Additionally, the Company has a $15,000,000

line of credit available, as discussed in detail in Note 6, Line of Credit and Other Borrowings, which had no borrowings outstanding

against it as of December 31, 2024.

As of December 31, 2023, the Company had a cash and cash equivalents balance of $46,356,000, with

no borrowings against the line of credit.

provided by operating activities is net income adjusted for certain non-cash items and changes in certain assets and liabilities, such

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2024, the Company’s cash provided from operating activities was $20,857,000, compared to $23,422,000 of cash provided during 2023.

and $25,149,000 of cash provided during 2021.

This illustrates an increase of $8,176,000 during 2023, versus a decrease during 2022 of

For details of the operating cash flows refer to the Consolidated Statements of Cash Flows in the Company’s Consolidated

Financial Statements.

This illustrates a decrease of $2,565,000 during 2024.

For details of the operating cash flows refer to the Consolidated Statements of

Cash Flows in the Company’s Consolidated Financial Statements.

a general trend, the Company tends to deplete or generate lower amounts of cash early in the year, as significant payments are typically

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and accumulated during the latter portion of the year.

used in investing activities during 2023, 2022, and 2021 was $1,642,000, $942,000, and $971,000 respectively, all related to various

capital expenditure projects.

used in investing activities during 2024 and 2023 was $2,006,000 and $1,642,000, respectively, all related to various capital expenditure

financing activities relate to dividend payments, which are detailed in Note 12, Shareholders’ Equity, in the Consolidated Financial

Statements included in this report.

Dividend payments for 2023, 2022, and 2021 amounted to $13,124,000, $9,489,000, and $14,867,000,

respectively.

The Company had no borrowings or payments on its line of credit during 2023, 2022, or 2021 as described in Note 6, Line

of Credit and Other Borrowings.

Dividend payments for 2024 and 2023 amounted to $13,527,000 and $13,124,000, respectively.

had no borrowings or payments on its line of credit during 2024 or 2023 as described in Note 6, Line of Credit and Other Borrowings.

believe our existing cash and cash equivalents, along with our borrowing capacity, will be sufficient to meet our anticipated cash needs

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or supplementary facilities for additional capacity.

Company’s primary contractual obligations as of December 31, 2023, which are due over the next twelve months, are summarized in

the following table and are more fully explained in Notes to the Consolidated Financial Statements.

Contractual Obligations

(in thousands)

Operating Lease Obligations*

Purchase Obligations

Other Liabilities

Total Contractual Obligations

*Includes the estimated current portion of the West Chester, Pennsylvania lease, with a lease commencement date of January 1, 2024.

Note 14, Subsequent Events, in the Consolidated Financial Statements for additional details.

explained in Note 8, Stock Based Compensation Plans, to the Consolidated Financial Statements included in this report, the Company is

obligated to make payments to plan participants.

Due to the uncertain nature of the payments, due to numerous variables, including the

potential change in stock price, and employment status of participants and any applicable forfeitures, the amounts are not disclosed

in the above table.

The liability associated with this plan as of December 31, 2023, which is anticipated to be paid within the next

year, is $206,000.

Impact of Known Trends or Uncertainties

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Actual results may differ from these estimates under different assumptions or conditions.

Company’s accounting policy relating to revenue recognition reflects the impact of the adoption of Accounting Standards Codification

(“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”), which is discussed further in the Notes

to the Consolidated Financial Statements.

As a result of the adoption of ASC 606, the Company records revenue based upon a five-step

The Company sells goods on typical, unmodified free on board (FOB) shipping point terms.

As the seller, it can be determined

that the shipped goods meet the agreed-upon specifications in the contract or customer purchase order (e.g., items, quantities, and prices)

with the buyer, so customer acceptance would be deemed a formality, as noted in ASC 606-10-55-86.

As a result, the Company has a legal

right to payment upon shipment of the goods.

Based upon the above, the Company has concluded that transfer of control substantively transfers

to the customer upon shipment.

Other than standard product warranty provisions, the sales arrangements provide for no other post-shipment

The Company offers rebates and other sales incentives, promotional allowances, or discounts to certain customers, typically

related to purchase volume, and are classified as a reduction of revenue and recorded at the time of sale.

The Company periodically evaluates

whether an allowance for sales returns is necessary.

Historically, the Company has experienced minimal sales returns.

If it is believed

there are to be material potential sales returns, the Company will provide the necessary provision against sales.

Company applies the requirements of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)

Topic 606, Revenue from Contracts with Customers (“Topic 606”).

The standard requires revenue to be recognized in

a manner to depict the transfer of goods or services to a customer at an amount that reflects the consideration expected to be received

in exchange for those goods or services.

The principle of Topic 606 is achieved through applying a five-step approach, which is discussed

further in the Notes to the Consolidated Financial Statements.

The Company sells goods on typical, unmodified free on board (FOB) shipping

As the seller, it can be determined that the shipped goods meet the agreed-upon specifications in the contract or customer

purchase order (e.g., items, quantities, and prices) with the buyer, so customer acceptance would be deemed a formality, as noted in

ASC 606-10-55-86.

As a result, the Company has a legal right to payment upon shipment of the goods.

Based upon the above, the Company

has concluded that transfer of control substantively transfers to the customer upon shipment.

Other than standard product warranty provisions,

the sales arrangements provide for no other post-shipment obligations.

The Company offers rebates and other sales incentives, promotional

allowances, or discounts to certain customers, typically related to purchase volume, and are classified as a reduction of revenue and

recorded at the time of sale.

The Company periodically evaluates whether an allowance for sales returns is necessary.

Historically, the

Company has experienced minimal sales returns.

If it is believed there are to be material potential sales returns, the Company will provide

the necessary provision against sales.

for Credit Losses

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conditions change.

accordance with Financial Accounting Standards Board (“FASB”) ASC Topic 350, Intangibles – Goodwill and Other (ASU

2017-04) , using the simplified method as adopted, the Company performed an annual impairment test as of December 31, 2023.

did not indicate any impairment of goodwill as the Company’s estimated fair value of the reporting unit exceeded carrying value.

The test may be performed more frequently if we believe indicators of impairment might exist.

These indicators may include changes in

macroeconomic and industry conditions, overall financial performance, and other relevant entity-specific events.

accordance with FASB ASC Topic 350, Intangibles – Goodwill and Other (ASU 2017-04) , using the simplified method as adopted,

the Company performed an annual impairment test as of December 31, 2024.

This test did not indicate any impairment of goodwill as the

Company’s estimated fair value of the reporting unit exceeded carrying value.

The test may be performed more frequently if we believe

indicators of impairment might exist.

These indicators may include changes in macroeconomic and industry conditions, overall financial

performance, and other relevant entity-specific events.

Liability Reserves

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It is possible that the Company may incur

increased litigation costs in the future due to a variety of factors, including a higher number of claims, higher legal costs, and higher

insurance deductibles or retentions.

Litigation is subject to many uncertainties and management is unable to predict the outcome of the

pending suits and claims.

From time to time, depending upon the nature of a particular case, the Company may decide to spend more than

a deductible or retention to enable more discretion regarding the defense, although this is not common.

It is possible that the results

of operations or liquidity of the Company, as well as the Company’s ability to procure reasonably priced insurance, could be adversely

affected by the pending litigation, potentially materially.

The Company is currently unable to estimate the ultimate liability, if any,

that may result from the pending litigation, or potential litigation from future claims or claims that have not yet come to our attention,

and accordingly, the liability in the Consolidated Financial Statements primarily represents an accrual for legal costs for services

previously rendered, settlements for Claims not yet paid, and anticipated settlements for claims within the Company’s remaining

retention under its insurance policies.

increased litigation costs in the future due to a variety of factors, including a higher number of claims, higher financial magnitude

of claims, higher legal costs, and higher insurance deductibles or retentions.

Litigation is subject to many uncertainties and management

is unable to predict the outcome of the pending suits and claims.

From time to time, depending upon the nature of a particular case,

the Company may decide to spend more than a deductible or retention to enable more discretion regarding the defense, although this is

It is possible that the results of operations or liquidity of the Company, as well as the Company’s ability to procure

reasonably priced insurance, could be adversely affected by the pending litigation, potentially materially.

The Company is currently

unable to estimate the ultimate liability, if any, that may result from the pending litigation, or potential litigation from future claims

or claims that have not yet come to our attention, and accordingly, the liability in the Consolidated Financial Statements primarily

represents an accrual for legal costs for services previously rendered, settlements for Claims not yet paid, and anticipated settlements

for claims within the Company’s remaining retention under its insurance policies.

Based Compensation Plans

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a pro-rata basis, 1/3 per year from the grant date.

The Company does not believe the amended and restated plan will have a material impact

upon compensation expense.

The amended and restated plan did not have a material impact upon compensation expense.

details of the Plan are provided in Note 8, Stock Based Compensation Plans, to the Consolidated Financial Statements included in this

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a material impact on the Company’s Consolidated Financial Statements.

November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures .

The ASU expands public entities’ segment disclosures by requiring disclosure of significant segment expenses that are regularly

provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description

of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets.

of the guidance is to enable investors to better understand an entity’s overall performance and assess potential future cash flows.

The amendment is effective for fiscal years beginning after December 15, 2023 and interim periods in fiscal years beginning after December

The impact of the adoption did not have a material impact on the Company’s Consolidated Financial Statements.

December 2023, the FASB issued ASU No.

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2023-09 on its Consolidated Financial Statements.

7A - QUANTITATATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Company does not engage in the purchase or trading of market risk sensitive instruments.

The Company does not presently have any positions

with respect to hedge transactions such as forward contracts relating to currency fluctuations.

No market risk sensitive instruments

are held for speculative or trading purposes.

November 2024, the FASB issued ASU No.

2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures

(Subtopic 220-40):

Disaggregation of Income Statement Expenses .

The ASU requires new tabular disclosures disaggregating prescribed

expense categories within relevant income statement captions.

The amendment is effective for annual periods beginning after December

15, 2026 and interim periods in fiscal years beginning after December 15, 2027.

The Company is in the process of evaluating the impact

2024-03 on its Consolidated Financial Statements.

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