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Item 2. Management’s Discussion and Analysis

2025-05-08 compared with 2024-11-07 · 109 added, 173 removed, 86 unchanged (77% of the section changed)

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OVERVIEW OF MARKETS AND RELATED INDUSTRY PERFORMANCE

Third Quarter and Nine Months Ended 2024 Financial Overview

First Quarter 2025 Financial Overview

Recreational Vehicle ("RV") Industry

The RV industry is our primary market and comprised 43% and 44% of the Company's net sales in the third quarter and nine months ended September 29, 2024, respectively, and 46% and 43% in the third quarter and nine months ended October 1, 2023, respectively.

Net sales to the RV industry in the third quarter and nine months ended September 29, 2024 decreased 1% and increased 10%, respectively, compared to the prior year periods.

According to the RV Industry Association ("RVIA"), RV wholesale unit shipments in the third quarter of 2024 totaled approximately 77,800 units, an increase of 6% from approximately 73,300 units in the third quarter of 2023.

While we estimate RV industry retail unit sales in the third quarter of 2024 decreased by approximately 8% compared to the third quarter of 2023, we estimate that industry retail unit sales exceeded wholesale unit shipments in the third quarter of 2024 as RV OEMs maintained lower production volumes.

RV wholesale unit shipments for the first nine months of 2024 totaled approximately 256,400 units, an increase of 8% from approximately 238,100 units, compared to the first nine months of 2023.

While we estimate RV industry retail unit sales in the first nine months of 2024 decreased by approximately 10% compared to the first nine months of 2023, we estimate that industry retail unit sales exceeded wholesale unit shipments which resulted in improved alignment of dealer inventory levels with current retail demand.

The Company’s RV products are sold primarily to major manufacturers of RVs, smaller original equipment manufacturers ("OEMs"), and to a lesser extent, manufacturers in adjacent industries.

The principal types of recreational vehicles include (1) towables:

conventional travel trailers, fifth wheels, folding camping trailers, and truck campers;

and (2) motorized:

class A (large motor homes), class B (van campers), and class C (small-to-mid size motor homes).

The RV industry is our primary market and comprised 48% and 45% of the Company's net sales in the first quarter ended March 30, 2025 and March 31, 2024, respectively.

Net sales to the RV industry in the first quarter of 2025 increased 14% compared to the prior year period.

According to the RV Industry Association ("RVIA"), RV wholesale unit shipments in the first quarter of 2025 totaled approximately 97,800 units, an increase of 14% from approximately 85,900 units in the first quarter of 2024.

While we estimate RV industry retail unit sales in the first quarter of 2025 decreased by approximately 7% compared to the first quarter of 2024, we estimate that wholesale unit shipments exceeded industry retail unit sales in the first quarter of 2025 as RV OEMs increased production volumes in anticipation of higher retail demand later in the year.

Marine Industry

Net sales to the marine industry comprised 15% and 16% of the Company's net sales in the third quarter and nine months ended September 29, 2024, respectively, and 20% and 24% in the third quarter and nine months ended October 1, 2023, respectively.

Net sales to the marine industry in the third quarter and nine months ended September 29, 2024 decreased 21% and 29%, respectively, compared to the prior year periods.

The decrease in net sales to the marine industry was in line with the decrease in wholesale powerboats volumes.

The Company’s sales to the marine industry are primarily focused on the powerboat sector of the market which is comprised of four main categories:

fiberglass, aluminum fishing, pontoon and ski & wake.

Net sales to the marine industry comprised approximately 15% and 17% of the Company's net sales in the first quarter ended March 30, 2025 and March 31, 2024, respectively.

Net sales to the marine industry decreased 4% compared to the prior year period.

Our marine revenue is generally correlated to marine industry wholesale powerboat unit shipments.

According to Company estimates based on data published by the National Marine Manufacturers Association ("NMMA"), wholesale powerboat unit shipments decreased 23% and 27% in the third quarter and first nine months of 2024, respectively, compared to the prior year periods.

We estimate that marine industry retail powerboat unit sales decreased 8% in both the third quarter and first nine months of 2024, respectively, compared to the prior year periods, primarily due to the current macroeconomic environment faced by the end consumer, such as economic uncertainty and higher interest rates.

According to Company estimates based on data published by the National Marine Manufacturers Association ("NMMA"), wholesale powerboat unit shipments decreased 10% in the first quarter of 2025, compared to the prior year period.

We estimate that marine industry retail powerboat unit sales decreased 5% in the first quarter of 2025 compared to the prior year period, primarily due to the current macroeconomic environment faced by the end consumer, such as economic uncertainty and elevated interest rates.

Powersports Industry

Through acquisitions completed in recent years, the Company entered the powersports end market.

Powersports is a category of motorsports which includes vehicles such as motorcycles, all-terrain vehicles (ATV's), utility vehicles (UTV's), snowmobiles, scooters, golf carts and other personal transportation vehicles, and other related categories.

Previously, our sales to the powersports end market were included in the Company’s marine end market sales.

Effective with the first quarter of 2024, powersports net sales are being reported separately after the January 2024 acquisition of Sportech, LLC (“Sportech”), as discussed in Note 5 "Acquisitions" of the Notes to Condensed Consolidated Financial Statements.

Net sales to the powersports industry increased 204% in the third quarter ended September 29, 2024 compared to the prior year quarter, representing 10% and 3% of the Company's consolidated net sales in the respective periods.

Net sales to the powersports industry increased 179% in the first nine months of 2024 compared to the prior year period, representing 9% and 3% of the Company's consolidated net sales in the respective periods.

The increases in net sales for these periods are primarily attributable to the Company's acquisition of Sportech in January 2024.

Powersports is a category of motorsports which includes vehicles such as motorcycles, all-terrain vehicles ("ATVs"), side-by-sides, snowmobiles, scooters, golf carts and other personal transportation vehicles, and other related categories.

Our powersports business is primarily focused on the utility and premium segments of the side-by-side market, which have been outperforming the more discretionary recreational segment.

We also participate in the motorcycle and golf cart segments of the market.

OEMs and dealers are actively managing field inventory levels to align with retail demand and in an effort to update units held in dealer inventories.

Net sales to the powersports industry comprised 8% and 9% of the Company's net sales in the first quarter ended March 30, 2025 and March 31, 2024, respectively.

Net sales to the powersports industry in the first quarter of 2025 decreased 2% compared to the prior year period.

Manufactured Housing ("MH") Industry

Net sales to the MH industry comprised 19% and 18% of the Company's net sales in the third quarter and nine months ended September 29, 2024, respectively, and 17% and 16% in the third quarter and nine months ended October 1, 2023, respectively.

Net sales to the MH industry in the third quarter and the first nine months of September 29, 2024 increased 22% and 20%, respectively, compared to the prior year periods.

According to Company estimates based on industry data from the Manufactured Housing Institute, MH industry wholesale unit shipments increased 17% in both the third quarter and first nine months of 2024 compared to the prior year periods, primarily driven by OEMs increasing production from significantly reduced levels in 2023 in anticipation of a recovery in demand.

The Company’s products for this market are sold primarily to major manufacturers of manufactured homes, other OEMs, and to a lesser extent, manufacturers in adjacent industries.

Factors that may favorably impact demand in this industry include jobs growth, consumer confidence, favorable changes in financing regulations, a narrowing in the difference between interest rates on MH loans and mortgages on traditional residential "stick-built" housing, and any improvement in conditions in the asset-backed securities markets for manufactured housing loans.

Net sales to the MH industry comprised 17% and 16% of the Company's net sales in the first quarter ended March 30, 2025 and March 31, 2024, respectively.

Net sales to the MH industry in the first quarter ended March 30, 2025 increased 11% compared to the prior year period.

According to Company estimates based on industry data from the Manufactured Housing Institute, MH industry wholesale unit shipments increased 6% in the first quarter of 2025 compared to the prior year period, primarily driven by OEMs increasing production in first quarter of 2025 in anticipation of an increase in demand.

Industrial Market

The industrial market is comprised primarily of kitchen cabinet, countertop, hospitality, retail and commercial fixtures, and office and household furniture markets and regional distributors.

Net sales to the industrial market comprised 13% of the Company's net sales in both the third quarter and nine months ended September 29, 2024, and 14% in both the third quarter and nine months ended October 1, 2023.

Net sales to the industrial market in the third quarter and the first nine months of September 29, 2024 increased 2% and decreased 2%, respectively, compared to the prior year periods.

Net sales to the industrial market comprised 12% and 13% of the Company's net sales in the first quarter ended March 30, 2025 and March 31, 2024, respectively.

Net sales to the industrial market in the first quarter ended March 30, 2025 increased 2% compared to the prior year period.

Overall, our revenues in these markets are focused on residential and multifamily housing, hospitality, high-rise housing and office, commercial construction and institutional furniture markets.

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According to the U.S.

Census Bureau, combined new housing starts decreased 3% in the third quarter of 2024 compared to the prior year quarter, reflecting decreases in multifamily housing starts and single-family housing starts of 11% and 1%, respectively.

For the first nine months of 2024, combined new housing starts decreased 3% compared to the prior year period, reflecting a decrease in multifamily housing starts of 29%, partially offset by an increase in single-family housing starts of 10%.

Census Bureau, combined new housing starts decreased 2% in the first quarter of 2025 compared to the prior year quarter, reflecting a decrease in single-family housing starts of 6%, partially offset by an increase in multifamily housing starts of 11%.

Our industrial products are generally among the last components installed in new unit construction and as such our related sales typically trail new housing starts by four to six months.

RESULTS OF OPERATIONS

Third Quarter and Nine Months Ended September 29, 2024 Compared to Third Quarter and Nine Months Ended October 1, 2023

First Quarter Ended March 30, 2025 Compared to First Quarter Ended March 31, 2024

The following table sets forth the percentage relationship to net sales of certain items on the Company’s Condensed Consolidated Statements of Income.

Third Quarter Ended Amount Change % Change

($ in thousands) September 29, 2024 October 1, 2023

Net sales $ 919,444 100.0 % $ 866,073 100.0 % $ 53,371 6 %

Cost of goods sold 706,930 76.9 % 666,954 77.0 % 39,976 6 %

Gross profit 212,514 23.1 % 199,119 23.0 % 13,395 7 %

Warehouse and delivery expenses 37,865 4.1 % 37,664 4.3 % 201 1 %

Selling, general and administrative expenses 75,783 8.2 % 70,873 8.2 % 4,910 7 %

Amortization of intangible assets 24,449 2.7 % 19,507 2.3 % 4,942 25 %

Operating income 74,417 8.1 % 71,075 8.2 % 3,342 5 %

Interest expense, net 20,050 2.2 % 16,879 1.9 % 3,171 19 %

Income taxes 13,501 1.5 % 14,646 1.7 % (1,145) (8) %

Net income $ 40,866 4.4 % $ 39,550 4.6 % $ 1,316 3 %

Nine Months Ended Amount Change % Change

($ in thousands) September 29, 2024 October 1, 2023

First Quarter Ended

Amount Change % Change

($ in thousands) March 30, 2025 March 31, 2024

Net sales $ 1,003,420 100.0 % $ 933,492 100.0 % $ 69,928 7 %

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Net income $ 38,238 3.8 % $ 35,093 3.8 % $ 3,145 9 %

Net sales in the third quarter of 2024 increased $53.3 million, or 6%, to $919.4 million compared to $866.1 million in the third quarter of 2023.

Net sales in the third quarter of 2024 increased due to increased sales to the powersports, MH and industrial markets, partially offset by decreased sales to the marine and RV markets.

Sales to the powersports market increased $58.6 million, or 204%, compared to the prior year quarter, primarily attributable to the Company’s acquisition of Sportech in the first quarter of 2024.

Net sales in the first quarter of 2025 increased $69.9 million, or 7%, to $1.00 billion compared to $933.5 million in the first quarter of 2024.

Net sales in the first quarter of 2025 increased due to increased sales to the RV, MH and industrial markets, partially offset by decreased sales to the marine and powersports markets.

Sales to the RV market increased $57.9 million, or 14%, compared to the prior year quarter, primarily due to an increase in estimated wholesale shipments of approximately 14%.

Sales to the MH market increased $17.1 million, or 11%, compared to the prior year quarter, primarily due to an increase in estimated wholesale MH industry unit shipments of approximately 6%.

Sales to the industrial market increased $2.3 million, or 2%, when compared to the prior year quarter, which is in line with housing start trends in the prior two quarters given the timing at which our products are installed in relation to housing starts.

Sales to the marine market decreased $35.7 million, or 21%, primarily attributable to a decrease in estimated wholesale units of 23% compared to the prior year quarter.

The Company's sales to the RV market decreased $3.6 million, or 1%, to $396.5 million in the third quarter of 2024 from $400.1 million in the third quarter of 2023, resulting from decreased production by our RV OEM customers.

Net sales in the first nine months of 2024 increased $182.7 million, or 7%, to $2.87 billion from $2.69 billion in the first nine months of 2023.

Net sales in the first nine months of 2024 increased due to increased sales to the powersports, RV and MH markets, partially offset by decreased sales to the marine and industrial markets.

Sales to the powersports

market increased $175.8 million, or 179%, in the first nine months of 2024 compared to the first nine months of 2023, primarily attributable to the Company’s acquisition of Sportech in the first quarter of 2024.

Sales to the RV market increased $116.6 million, or 10%, compared to the first nine months of 2023, due to industry volume growth.

Sales to the MH market increased $85.1 million, or 20%, compared to the first nine months of 2023, primarily due to an increase in estimated wholesale MH industry unit shipments of approximately 17%.

Sales to the marine market decreased $187.0 million, or 29%, compared to the first nine months of 2023, primarily attributable to a decrease in estimated wholesale units of 27% compared to the first nine months of 2023.

Sales to the industrial market decreased $7.8 million, or 2%, compared to the first nine months of 2023.

Revenue attributable to acquisitions completed in the first nine months of 2024 was $78.6 million and $216.4 million in the third quarter and the first nine months of 2024, respectively.

Revenue attributable to acquisitions completed in the first nine months of 2023 was $7.3 million and $9.8 million in the third quarter and the first nine months of 2023, respectively.

Cost of Goods Sold.

Cost of goods sold increased $39.9 million, or 6%, to $706.9 million in the third quarter of 2024 compared to $667.0 million in the third quarter of 2023.

As a percentage of net sales, cost of goods sold decreased 10 basis points in the third quarter of 2024 to 76.9% compared to 77.0% in the third quarter of 2023.

Cost of goods sold as a percentage of net sales decreased in the third quarter of 2024 primarily as a result of acquisitions completed in 2023 and 2024 which had a positive impact on material costs, partially offset by increased manufacturing overhead and labor costs, resulting from different cost profiles of acquired businesses.

The decrease in cost of goods sold as a percentage of net sales in the third quarter of 2024 primarily reflected a 100 basis point decrease in materials as a percentage of net sales, partially offset by increases of 70 and 20 basis points in overhead and labor, respectively.

Cost of goods sold increased $137.4 million, or 7%, to $2.22 billion in the first nine months of 2024 from $2.08 billion in the first nine months of 2023.

As a percentage of net sales, cost of goods sold decreased 10 basis points in the first nine months of 2024 to 77.4% compared to 77.5% in the first nine months of 2023.

Cost of goods sold as a percentage of net sales decreased in the first nine months of 2024 primarily as a result of continued cost reduction and automation initiatives we deployed throughout 2023 and into 2024 that had a positive impact on material and labor costs, partially offset by increased manufacturing overhead costs, resulting from different cost profiles of acquired businesses.

The decrease in cost of goods sold as a percentage of net sales in the first nine months of 2024 primarily reflected decreases in materials and labor costs of 40 and 20 basis points, respectively, partially offset by increased overhead cost of 50 basis points.

In general, the Company's cost of goods sold percentage can be impacted from quarter-to-quarter by demand changes in certain market sectors that can result in fluctuating costs of certain raw materials and commodity-based components that are utilized in production.

Sales to the industrial market increased $2.9 million, or 2%, compared to the prior year quarter, which is attributable to product mix shifts by certain customers.

Sales to the marine market decreased $6.3 million, or 4%, primarily attributable to a decrease in estimated powerboat wholesale units of 10% compared to the prior year quarter.

Sales to the powersports market decreased $1.7 million, or 2%, compared to the prior year quarter.

Revenue in the first quarter of 2025 attributable to acquisitions completed in the first quarter of 2025 was $4.3 million.

Revenue in the first quarter of 2024 attributable to acquisitions completed in the first three months of 2024 was $58.1 million.

Cost of goods sold increased $46.2 million, or 6%, to $774.8 million in the first quarter of 2025 compared to $728.6 million in the first quarter of 2024.

As a percentage of net sales, cost of goods sold decreased 90 basis points in the first quarter of 2025 to 77.2% compared to 78.1% in the first quarter of 2024.

The decrease in cost of goods sold as a percentage of net sales in the first quarter of 2025 primarily reflected a 60 basis point decrease in labor as a percentage of net sales, 20 basis point decrease in material as a percentage of net sales and 10 basis point decrease in overhead as a percentage of net sales.

Gross Profit.

Gross profit increased $13.4 million, or 7%, to $212.5 million in the third quarter of 2024 compared to $199.1 million in the prior year period.

As a percentage of net sales, gross profit increased 10 basis points to 23.1% in the first nine months of 2024 compared to 23.0% in the prior year period.

Gross profit increased $45.4 million, or 8%, to $648.7 million in the first nine months of 2024 compared to $603.3 million in the prior year period.

As a percentage of net sales, gross profit increased 10 basis points to 22.6% in the first nine months of 2024 compared to 22.5% in the prior year period.

The increase in gross profit as a percentage of net sales in the third quarter and first nine months of 2024 compared to the same periods in 2023 reflects the impact of the factors discussed above under "Cost of Goods Sold".

Gross profit increased $23.7 million, or 12%, to $228.6 million in the first quarter of 2025 compared to $204.9 million in the prior year period.

As a percentage of net sales, gross profit increased 90 basis points to 22.8% in the first quarter of 2025 compared to 21.9% in the prior year period.

The increase in gross profit as a percentage of net sales in the first quarter of 2025 compared to the same period in 2024 reflects the impact of the factors discussed above under "Cost of Goods Sold".

Warehouse and Delivery Expenses .

Warehouse and delivery expenses increased $0.2 million, or 1%, to $37.9 million in the third quarter of 2024 compared to $37.7 million in the third quarter of 2023.

As a percentage of net sales, warehouse and delivery expenses decreased 20 basis points to 4.1% in third quarter of 2024 compared to 4.3% the third quarter of 2023.

Warehouse and delivery expenses increased $4.6 million, or 4%, to $114.1 million in the first nine months of 2024 compared to $109.5 million in the first nine months of 2023.

As a percentage of net sales, warehouse and delivery expenses decreased 10 basis points to 4.0% in the first nine months of 2024 compared to 4.1% in the first nine months of 2023.

The increase in warehouse and delivery expenses in the third quarter and first nine months of 2024 compared to the same periods in 2023 is primarily attributable to the increase in sales, and the decrease as a percentage of net sales is primarily attributable to the fixed nature of certain expenses.

Warehouse and delivery expenses increased $7.1 million, or 19%, to $44.6 million in the first quarter of 2025 compared to $37.4 million in the first quarter of 2024.

As a percentage of net sales, warehouse and delivery expenses increased 40 basis points to 4.4% in first quarter of 2025 compared to 4.0% the first quarter of 2024.

The increase in warehouse and delivery expenses in the first quarter of 2025 compared to the same period in 2024 is primarily attributable to the increase in sales.

The increase in warehouse and delivery expenses as a percentage of net sales in the first quarter of 2025 compared to the same period in 2024 is primarily related to higher freight costs.

Selling, General and Administrative ("SG&A") Expenses .

SG&A expenses increased $4.9 million, or 7%, to $75.8 million in the third quarter of 2024 compared to $70.9 million in the prior year quarter.

The increase in SG&A expenses in the third quarter of 2024 compared to the prior year quarter is primarily related to increased professional fees and insurance expenses, partially offset by decreased wages and incentive compensation.

In the third quarter of 2024, SG&A expenses as a percentage of net sales of 8.2%, remained flat compared to the third quarter of 2023.

SG&A expenses increased $12.8 million, or 6%, to $244.6 million in the first nine months of 2024 compared to $231.8 million in the prior year period.

The increase in SG&A expenses in the first nine months of 2024 compared to 2023 is primarily attributable to $5.0 million of transaction costs associated with the acquisition of Sportech, increased technology expenses, wages and incentive compensation, partially offset by decreased insurance expenses.

As a percentage of net sales, SG&A expenses decreased 10 basis points to 8.5% in the first nine months of 2024 compared to 8.6% in the first nine months of 2023.

The decrease in SG&A expenses as a percentage of net sales in the first nine months of 2024 compared to the prior year period is primarily attributable to increased net sales and the fixed-cost nature of certain SG&A expenses.

SG&A expenses increased $8.7 million, or 10%, to $93.9 million in the first quarter of 2025 compared to $85.2 million in the prior year quarter.

The increase in SG&A expenses in the first quarter of 2025 compared to the prior year quarter is primarily related to increased wages, technology expenses, loss on sale of fixed assets, and insurance expenses, partially offset by decreased professional fees.

In the first quarter of 2025, SG&A expenses as a percentage of net sales increased 30 basis points to 9.4% compared to 9.1% in the first quarter of 2024.

Amortization of Intangible Assets.

Amortization of intangible assets increased $4.9 million, or 25%, to $24.4 million in the third quarter of 2024 compared to $19.5 million in the prior year quarter.

Amortization of intangible assets increased $12.4 million, or 21%, to $71.5 million in the first nine months of 2024 compared to $59.1 million in the prior year period.

The increases in the third quarter and first nine months of 2024 compared to the comparable prior year periods primarily reflect the impact of the Sportech acquisition as well as other acquisitions completed in 2024 and 2023.

Amortization of intangible assets increased $1.7 million, or 7%, to $24.5 million in the first quarter of 2025 compared to $22.8 million in the prior year quarter, primarily reflecting the impact of the acquisitions completed in 2024.

Operating Income.

Operating income increased $3.3 million, or 5%, to $74.4 million in the third quarter of 2024 compared to $71.1 million in the third quarter of 2023.

As a percentage of net sales, operating income decreased 10 basis points to 8.1% in the third quarter of 2024 compared to 8.2% in the same period in 2023.

The increase in operating income is primarily attributable to increased net sales and the items discussed above.

The decrease to operating income as a percentage of net sales is primarily attributable to the items discussed above.

For the first nine months of 2024, operating income increased $15.5 million, or 8%, to $218.4 million from $202.9 million in the first nine months of 2023.

Operating income as a percentage of net sales was 7.6% in both the first nine months of 2024 and the first nine months of 2023.

Operating income increased $6.3 million, or 10%, to $65.6 million in the first quarter of 2025 compared to $59.3 million in the first quarter of 2024.

As a percentage of net sales, operating income increased 10 basis points to 6.5% in the first quarter of 2025 compared to 6.4% in the same period in 2024.

The increase in operating income is primarily attributable to increased net sales and the items discussed above.

The increase to operating income as a percentage of net sales is primarily attributable to the items discussed above.

Interest Expense, Net.

Interest expense increased $3.2 million, or 19%, to $20.1 million in the third quarter of 2024 compared to $16.9 million in the prior year quarter.

Interest expense increased $6.9 million, or 13%, to $60.5 million in the first nine months of 2024 from $53.6 million in the prior year period.

These increases primarily reflect higher debt levels and higher interest rates on our term loan and revolver balances.

Interest expense decreased $1.0 million, or 5%, to $19.1 million in the first quarter of 2025 compared to $20.1 million in the prior year quarter.

The decrease primarily reflects a lower average interest rate on our outstanding debt compared to the prior year quarter.

Income Taxes.

Income tax expense decreased $1.1 million in the third quarter of 2024 to $13.5 million compared to $14.6 million in the prior year quarter.

Income tax expense decreased $3.1 million in the first nine months of 2024 to $34.1 million compared to $37.2 million in the prior year period.

The effective tax rates were 24.8% and 21.6% in the third quarter and first nine months of 2024, respectively, and 27.0% and 24.9% in the third quarter and first nine months of 2023, respectively.

The decrease in income tax expense in the third quarter and first nine months of 2024 compared to the same periods in 2023 is primarily related to increased excess tax benefits on share-based compensation.

Income tax expense increased $4.0 million in the first quarter of 2025 to $8.2 million compared to $4.2 million in the prior year quarter.

The effective tax rate was 17.7% in the first quarter of 2025 and 10.6% in the first quarter of 2024.

The increase in income tax expense in the first quarter of 2025 compared to the same period in 2024 is primarily related to decreased excess tax benefits on share-based compensation and an increase in income before taxes.

SEGMENT REPORTING

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The Company does not measure profitability at the customer end market (RV, marine, powersports, MH and industrial) level.

Third Quarter and Nine Months Ended September 29, 2024 Compared to 2023

In the discussion that follows, sales attributable to the Company’s reportable segments include intersegment sales and gross profit includes the impact of intersegment operating activity.

First Quarter Ended March 30, 2025 Compared to 2024

In the discussion that follows, sales attributable to the Company’s reportable segments include inter-segment sales and gross profit includes the impact of inter-segment operating activity.

The table below presents information about the sales, gross profit and operating income of the Company’s reportable segments.

A reconciliation of consolidated net sales and operating income is presented in Note 11 "Segment Information" of the Notes to Condensed Consolidated Financial Statements.

Third Quarter Ended Amount Change % Change

($ in thousands) September 29, 2024 October 1, 2023

Manufacturing $ 685,296 $ 659,493 $ 25,803 4%

Distribution $ 239,135 $ 226,859 $ 12,276 5%

Manufacturing $ 153,793 $ 144,194 $ 9,599 7%

Distribution $ 53,230 $ 50,187 $ 3,043 6%

Operating Income

Manufacturing $ 86,429 $ 80,777 $ 5,652 7%

Distribution $ 23,400 $ 24,026 $ (626) (3)%

Nine Months Ended Amount Change % Change

($ in thousands) September 29, 2024 October 1, 2023

First Quarter Ended Amount Change % Change

($ in thousands) March 30, 2025 March 31, 2024

Manufacturing $ 754,487 $ 714,510 $ 39,977 6%

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Manufacturing

Manufacturing segment sales increased $25.8 million, or 4%, to $685.3 million in the third quarter of 2024 compared to $659.5 million in the prior year quarter.

For the first nine months of 2024, sales increased $67.0 million, or 3%, to $2.14 billion compared to $2.07 billion in the prior year period.

The manufacturing segment accounted for approximately 74% of the Company’s sales for both the third quarter of 2024 and 2023, and 74% of the Company's sales for both the first nine months of 2024 and 2023.

Manufacturing segment sales in the third quarter of 2024 compared to the prior year quarter increased due to increased sales to the powersports, MH and industrial markets, partially offset by decreased sales to the marine market.

Sales to the powersports market increased 225% compared to the prior year quarter, primarily attributable to the Company’s acquisition of Sportech in the first quarter of 2024.

Manufacturing segment sales increased $40.0 million, or 6%, to $754.5 million in the first quarter of 2025 compared to $714.5 million in the prior year quarter.

The manufacturing segment accounted for approximately 75% of the Company’s sales for both the first quarter of 2025 and 2024.

Manufacturing segment sales in the first quarter of 2025 compared to the prior year quarter increased due to increased sales to the RV, MH, and industrial markets, partially offset by decreased sales to the marine and powersports markets.

Sales to the RV market increased 19%, primarily attributable to an increase in estimated wholesale units of 14% compared to the prior year quarter.

Sales to the MH market increased 10% compared to the prior year quarter, primarily due to an increase in estimated wholesale MH industry unit shipments of approximately 6%.

Sales to the industrial market increased 1% when compared to the prior year quarter, which is in line with housing start trends in the prior two quarters given the timing at which our products are installed in relation to housing starts.

Sales to the marine market decreased 23%, primarily attributable to a decrease in estimated wholesale units of 23% compared to the prior year quarter.

Manufacturing segment sales in the first nine months of 2024 compared to the same prior year period increased due to increased sales to the powersports, RV and MH markets, partially offset by decreased sales to the marine and industrial markets.

Sales to the powersports market increased 200% in the first nine months of 2024, compared to the first nine months of 2023, primarily attributable to the Company’s acquisition of Sportech in the first quarter of 2024.

Sales to the RV market increased 12% compared to the first nine months of 2023, due to industry volume growth.

Sales to the MH market increased 14% compared to the first nine months of 2023, primarily due to an increase in estimated wholesale MH industry unit shipments of approximately 17%.

Sales to the marine market decreased 31% compared to the first nine months of 2023, primarily attributable to a decrease in estimated wholesale unit shipments of 27% compared to the first nine months of 2023.

Sales to the industrial market decreased 2% compared to the first nine months of 2023.

Manufacturing segment sales attributable to acquisitions completed in the first nine months of 2024 were $73.9 million and $211.7 million in the third quarter and the first nine months of 2024, respectively.

Sales to the industrial market increased 1% compared to the prior year quarter.

Sales to the marine market decreased 5%, primarily attributable to a decrease in estimated powerboat wholesale unit shipments of 10% compared to the prior year quarter.

Sales to the powersports market decreased 3% compared to the prior year quarter.

Manufacturing segment sales in the first quarter of 2025 attributable to acquisitions completed in the first quarter of 2025 were $4.3 million.

Manufacturing segment sales in the first quarter of 2024 attributable to acquisitions completed in the first quarter of 2024 were $ 58.1 million.

Gross Profit .

Manufacturing segment gross profit increased $9.6 million, or 7%, to $153.8 million in the third quarter of 2024 compared to $144.2 million in the third quarter of 2023.

As a percentage of sales, gross profit increased 50 basis points to 22.4% in the third quarter of 2024 compared to 21.9% in the prior year quarter.

The increase in gross profit as a percentage of sales in the third quarter of 2024 compared to the same quarter in 2023 is attributable to decreased manufacturing overhead costs, partially offset by increased material and labor costs.

Manufacturing segment gross profit increased $27.9 million, or 6%, to $488.7 million in the first nine months of 2024 compared to $460.8 million in the first nine months of 2023.

As a percentage of sales, gross profit increased 60 basis points to 22.8% in the first nine months of 2024 compared to 22.2% in the prior year period.

The increase in gross profit as a percentage of sales in the first nine months of 2024 compared to the same period in 2023 is attributable to decreased material and labor costs as a percentage of sales, partially offset by increased manufacturing overhead costs as a percentage of sales.

Manufacturing segment gross profit increased $12.7 million, or 8%, to $169.4 million in the first quarter of 2025 compared to $156.7 million in the first quarter of 2024.

As a percentage of sales, gross profit increased 60 basis points to 22.5% in the first quarter of 2025 compared to 21.9% in the prior year quarter.

The increase in gross profit as a percentage of sales in the first quarter of 2025 compared to the same quarter in 2024 is attributable to decreased labor and manufacturing costs as a percentage of sales, partially offset by increased material costs as a percentage of sales.

Operating Income.

Operating income increased $5.6 million to $86.4 million in the third quarter of 2024 compared to $80.8 million in the prior year quarter.

For the first nine months of 2024, operating income increased $19.5 million, or 7%, to $282.6 million compared to $263.1 million in the first nine months of 2023.

The overall increase in operating income in the third quarter and first nine months of 2024 primarily reflects the items discussed above.

Sales increased $12.2 million, or 5%, to $239.1 million in the third quarter of 2024 compared to $226.9 million in the prior year quarter.

For the first nine months of 2024, sales increased $75.5 million, or 11%, to $747.3 million compared to $671.8 million in the prior year period.

This segment accounted for approximately 26% of the Company’s

sales for the third quarter of 2024 and 2023, and 26% and 24% of the Company's sales for the first nine months of 2024 and 2023, respectively.

Distribution segment sales in the third quarter of 2024 compared to the third quarter of 2023 increased due to increased sales to the MH, marine, industrial and powersports markets, partially offset by decreased sales to the RV market.

Operating income increased $10.7 million, or 12%, to $98.1 million in the first quarter of 2025 compared to $87.5 million in the prior year quarter.

The overall increase in operating income in the first quarter of 2025 primarily reflects the items discussed above.

Distribution segment sales increased $15.6 million, or 7%, to $254.1 million in the first quarter of 2025 compared to $238.5 million in the prior year quarter.

This segment accounted for approximately 25% of the Company’s sales for both the first quarter of 2025 and 2024.

Distribution segment sales in the first quarter of 2025 compared to the first quarter of 2024 increased due to increased sales to each of our markets.

Sales to the MH market increased 12% compared to the prior year quarter, primarily due to an increase in estimated wholesale MH industry unit shipments of approximately 6%.

Sales to the RV market increased 3% compared to the prior year quarter.

Sales to the industrial market increased 17% compared to the prior year quarter.

Sales to the marine market increased 4% compared to the prior year quarter, primarily attributable to product mix shifts by certain customers.

Sales to the industrial market increased 9% when compared to the prior year quarter, primarily reflecting market share gains and an increase in housing starts in the prior two quarters given the timing at which our products are installed in relation to housing starts.

Sales to the powersports market increased 5%, compared to the prior year quarter, primarily attributable to the Company’s acquisition of Sportech in the first quarter of 2024.

Sales to the RV market decreased 4% when compared to the prior year quarter primarily due to decreased production by our RV OEM customers.

Distribution segment sales in the first nine months of 2024 compared to the first nine months of 2023 increased due to increased sales to the MH and RV markets, partially offset by decreased sales to the industrial and powersports markets.

Sales to the MH market increased 25% compared to the first nine months of 2023, primarily due to an increase in estimated wholesale MH industry unit shipments of approximately 17%.

Sales to the RV market increased 6% compared to the first nine months of 2023, due to industry wholesale volume growth.

Sales to the industrial market decreased 3% compared to the first nine months of 2023, primarily reflect product mix shifts by certain customers.

Sales to the powersports market decreased 7% in the first nine months of 2024 compared to the first nine months of 2023, primarily attributable to product mix shifts by certain customers.

Distribution segment sales attributable to acquisitions completed in the first nine months of 2024 were approximately $4.7 million in both the third quarter and first nine months of 2024.

Sales to the powersports market increased 37% compared to the prior year quarter, primarily attributable to product mix shifts by certain customers.

Gross Profit.

Distribution segment gross profit increased $3.0 million, or 6%, to $53.2 million in the third quarter of 2024 compared to $50.2 million in the third quarter of 2023.

As a percentage of sales, gross profit increased 20 basis points to 22.3% in the third quarter of 2024 compared to 22.1% in the prior year quarter.

The increase in gross profit as a percentage of sales in the third quarter of 2024 compared to the same quarter in 2023 is attributable to decreased material costs as a percentage of sales, partially offset by increased labor costs as a percentage of sales.

Distribution segment gross profit increased $14.6 million, or 10%, to $161.4 million in the first nine months of 2024 compared to $146.8 million in the first nine months of 2023.

As a percentage of sales, gross profit decreased 30 basis points to 21.6% in the first nine months of 2024 compared to 21.9% in the prior year period primarily due to different cost profiles of acquired businesses.

Distribution segment gross profit increased $11.6 million, or 23%, to $61.7 million in the first quarter of 2025 compared to $50.1 million in the first quarter of 2024.

As a percentage of sales, gross profit increased 330 basis points to 24.3% in the first quarter of 2025 compared to 21.0% in the prior year quarter.

The increase in gross profit as a percentage of sales in the first quarter of 2025 compared to the same quarter in 2024 is attributable to decreased labor and material costs as a percentage of sales.

Operating Income.

Operating income decreased $0.6 million, or 3%, to $23.4 million in the third quarter of 2024 compared to $24.0 million in the prior year quarter.

For the first nine months of 2024, operating income increased $9.1 million, or 13%, to $77.3 million compared to $68.2 million in the first nine months of 2023.

The changes in operating income in the third quarter and first nine months of 2024 reflect the impact of the items discussed above.

Operating income increased $1.3 million, or 5%, to $25.0 million in the first quarter of 2025 compared to $23.7 million in the prior year quarter.

The increase in operating income in the first quarter of 2025 primary reflects the impact of the items discussed above.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of liquidity are cash flows from operation, available cash reserves and borrowing capacity available under the revolving credit and term loan facility (the “2024 Credit Facility”), as discussed in Note 8 "Debt" of the Notes to Condensed Consolidated Financial Statements.

Our liquidity as of September 29, 2024 consisted of cash and cash equivalents of $52.6 million and $405.0 million of availability under the 2021 Credit Facility, net of $5 million of outstanding letters of credit.

Subsequent to the end of the third quarter of 2024, we expanded our access to capital and reduced our cost of debt by issuing $500.0 million in aggregate principal amount of 6.375% senior notes due 2032 (the “6.375% Senior Notes”).

The proceeds from the issuance were utilized to redeem all $300.0 million aggregate principal amount of the Company’s 7.50% Senior Notes due 2027 (the “7.50% Senior Notes”), to repay a portion of the Company’s borrowings under its existing senior secured credit facility and pay related fees and expenses, as discussed in Note 14 "Subsequent Events" to our Condensed Consolidated Financial Statements.

As of September 29, 2024, the Company's existing cash and cash equivalents, cash generated from operations, and available borrowings under the 2021 Credit Facility are expected to be sufficient to meet anticipated cash needs for working capital and capital expenditures for at least the next 12 months, exclusive of any acquisitions, based on the Company's current cash flow budgets and forecast of short-term and long-term liquidity needs.

Our liquidity as of March 30, 2025 consisted of cash and cash equivalents of $86.6 million and $658.0 million of availability under the 2024 Credit Facility, net of $7.0 million of outstanding letters of credit.

As of March 30, 2025, the Company's existing cash and cash equivalents, cash generated from operations, and available borrowings under the 2024 Credit Facility are expected to be sufficient to meet anticipated cash needs for working capital and capital expenditures for at least the next 12 months, exclusive of any acquisitions, based on the Company's current cash flow budgets and forecast of short-term and long-term liquidity needs.

Principal uses of cash are to support working capital demands, meet debt service requirements and support the Company's capital allocation strategy, which includes acquisitions, capital expenditures, dividends and repurchases of the Company’s common stock, among others.

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The Company will continue to assess its liquidity position and potential sources of supplemental liquidity in view of operating performance, current economic and capital market conditions, and other relevant circumstances.

In the first nine months of 2024, the Company utilized available borrowing capacity under the Revolver due 2027 and cash on hand to fund the acquisitions of Sportech and ICON Direct LLC ("RecPro"), as discussed in Note 5 "Acquisitions" of the Notes to Condensed Consolidated Financial Statements.

As of and for the reporting period ended September 29, 2024, the Company was in compliance with its financial covenants as required under the terms of the credit agreement that established the 2021 Credit Facility (the “2021 Credit Agreement”).

The required maximum consolidated secured net leverage ratio and the required minimum consolidated fixed charge coverage ratio, as such ratios are defined in the 2021 Credit Agreement, compared to the actual amounts as of September 29, 2024 and for the fiscal period then ended are as follows:

In the first three months of 2025, the Company utilized available borrowing capacity under the Revolver due 2029 and cash on hand to fund two acquisitions, as discussed in Note 5 "Acquisitions" of the Notes to Condensed Consolidated Financial Statements.

As of and for the reporting period ended March 30, 2025, the Company was in compliance with its financial covenants as required under the terms of the credit agreement that established the 2024 Credit Facility (the “2024 Credit Agreement”).

The required maximum consolidated secured net leverage ratio and the required minimum consolidated interest coverage ratio, as such ratios are defined in the 2024 Credit Agreement, compared to the actual amounts as of March 30, 2025 and for the fiscal period then ended are as follows:

Required Actual

Consolidated secured net leverage ratio (12-month period) 2.75 0.43

Consolidated fixed charge coverage ratio (12-month period) 1.50 3.55

In addition, as of September 29, 2024, the Company's consolidated total net leverage ratio (12-month period) was 2.65, which is used to determine the applicable borrowing margin under the 2021 Credit Agreement.

Consolidated interest coverage ratio (12-month period) 3.00 6.70

In addition, as of March 30, 2025, the Company's consolidated total net leverage ratio (12-month period) was 2.74.

While this ratio is not a covenant under the 2024 Credit Agreement, it is used in determining the applicable borrowing margin under the 2024 Credit Agreement.

Operating Activities:

Cash flows from operating activities are one of the Company's primary sources of liquidity, representing the net income the Company earned in the reported periods, adjusted for certain non-cash items and changes in operating assets and liabilities.

Net cash provided by operating activities was $224.2 million in the first nine months of 2024 compared to $293.8 million in the first nine months of 2023.

The decrease in operating cash flows is primarily attributable to a $40.4 million use of cash for working capital, net of business acquisitions, compared to a $56.1 million source of cash in the prior year period, partially offset by a $11.7 million increase in net income and a $16.0 million increase in depreciation and amortization compared to the first nine months of 2023.

Net cash provided by operating activities increased $4.9 million, or 14%, to $40.1 million in the first three months of 2025 compared to $35.2 million in the first three months of 2024.

The increase in operating cash flows is primarily attributable to a $5.0 million decrease in operating assets and liabilities, net of business acquisitions, as a use of cash, increased net income, depreciation and amortization, and losses on sale of property plant and equipment of $3.1 million, $2.3 million and $2.0 million, respectively, partially offset by decreased deferred income taxes of $5.7 million compared to the first three months of 2024.

Investing Activities:

Net cash used in investing activities increased $409.9 million to $485.4 million in the first nine months of 2024 compared to $75.5 million in the first nine months of 2023 due to an increase in cash used in business acquisitions, which were $411.6 million in the nine months of 2024, primarily due to the acquisitions of Sportech and RecPro, compared to $26.0 million in the first nine months of 2023.

Net cash used in investing activities decreased $304.6 million to $66.1 million in the first three months of 2025 compared to $370.7 million in the first three months of 2024 due to a decrease in cash used in business acquisitions, which were $47.6 million in the three months of 2025 compared to $329.6 million in the first three months of 2024, primarily due to the acquisition of Sportech in January 2024.

Financing Activities:

Net cash provided by financing activities was $302.4 million in the first nine months of 2024 compared to $224.8 million use of cash in the first nine months of 2023 primarily due to an increase in cash provided from net borrowings of $365.0 million under the Revolver due 2027 to fund the acquisitions of Sportech and RecPro.

Net cash provided by financing activities was $79.0 million in the first three months of 2025 compared to $341.7 million in the first three months of 2024, primarily due to a decrease in net borrowings under our revolving credit facility of $265 million, to $110.0 million in the first three months of 2025 from $375.0 million in the first three months of 2024.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

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There have been no material changes to our critical accounting policies which are summarized in the MD&A in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 20, 2025.

Manufacturing operations in the RV, marine and MH industries historically have been seasonal and at their highest levels when the weather is moderate.

Manufacturing operations in the RV, marine, powersports and MH industries historically have been seasonal and at their highest levels when the weather is moderate.

Accordingly, the Company’s sales and profits had generally been the highest in the second quarter and lowest in the fourth quarter.

Seasonal industry trends in the past several years have included the impact related to the addition of major RV manufacturer open houses for dealers in the August-September timeframe and marine open houses in the December to February timeframe, resulting in dealers delaying certain restocking purchases until new product lines are introduced at these shows.

In addition, recent seasonal industry trends have been, and future trends may be, different than in prior years due to volatile economic conditions, interest rates, access to financing, cost of fuel, national and regional economic conditions and consumer confidence on retail sales of RVs and marine units and other products for which the Company sells its components, as well as fluctuations in RV and marine dealer inventories, increased volatility in demand from RV and marine dealers, the timing of dealer orders, and from time to time, the impact of severe weather conditions on the timing of industry-wide wholesale shipments.

Seasonal industry trends in the past several years have included the impact related to the addition of major RV manufacturer open houses for dealers in the August-September

timeframe and marine open houses in the December-February timeframe, resulting in dealers delaying certain restocking purchases until new product lines are introduced at these shows.

In addition, recent seasonal industry trends have been, and future trends may be, different than in prior years due to volatile economic conditions, interest rates, access to financing, cost of fuel, national and regional economic conditions and consumer confidence on retail sales of RVs, powersports and marine units and other products for which the Company sells its components, as well as fluctuations in RV, powersports and marine dealer inventories, increased volatility in demand from RV, powersports and marine dealers, the timing of dealer orders, and from time to time, the impact of severe weather conditions on the timing of industry-wide wholesale shipments.

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

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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-Q

Item 2. Management’s Discussion and Analysis