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Item 7. Management’s Discussion and Analysis

2026-02-19 compared with 2025-02-20 · 97 added, 84 removed, 144 unchanged (56% of the section changed)

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Recreational Vehicle ("RV") Industry

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 45% and 44% of the Company’s consolidated net sales for the years ended December 31, 2025 and 2024, respectively.

Net sales to the RV industry increased 9% for the year ended December 31, 2025 compared to 2024.

Following a dealer inventory restocking in the first half of 2024, OEMs reduced production slightly in the second half of 2024 as retail demand decreased, with dealers managing inventory levels and the OEMs demonstrating operating discipline to maintain a balanced inventory channel for the long-term health and stability of the industry.

According to the RV Industry Association (“RVIA”), RV industry wholesale unit shipments totaled approximately 333,700 units in 2024, an increase of 7% from approximately 313,200 units in 2023.

According to Statistical Surveys, Inc.

("SSI"), RV industry retail unit sales totaled approximately 352,700 units in 2024, a decrease of 7% from approximately 380,700 units in 2023.

Following a dealer inventory restocking in the first half of 2024, OEMs reduced production levels slightly in the second half of the year as dealers actively managed inventory levels as retail demand softened.

In 2025, dealer inventory dynamics continued to normalize, with inventory reductions moderating as dealer inventory levels moved closer to targeted levels.

According to the RV Industry Association (“RVIA”), RV industry wholesale unit shipments totaled approximately 342,200 units in 2025, an increase of 3% compared to approximately 333,700 units in 2024.

According to Company estimates based on data from Statistical Surveys, Inc.

("SSI"), RV industry retail unit sales totaled approximately 348,700 units in 2025, a decrease of 2% compared to approximately 354,400 units in 2024.

Marine Industry

Net sales to the marine industry comprised approximately 15% and 23% of the Company's consolidated net sales for the years ended December 31, 2024 and 2023, respectively.

Net sales to the marine industry in the year ended December 31, 2024 decreased 27% compared to 2023.

The decrease in net sales to the marine industry was in line with the decrease in wholesale powerboat unit shipments.

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% of the Company's consolidated net sales for each of the years ended December 31, 2025 and 2024.

Net sales to the marine industry in the year ended December 31, 2025 increased 6% compared to 2024.

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

According to Company estimates based on data published by the National Marine Manufacturers Association ("NMMA"), wholesale powerboat unit shipments totaled approximately 140,100 units in 2025, a decrease of 4% compared to 146,000 units in 2024.

According to SSI, we estimate marine retail powerboat shipments totaled approximately 165,000 units in 2024, a decrease of 8% from approximately 179,500 units in 2023.

According to SSI, we estimate marine retail powerboat shipments totaled approximately 152,300 units in 2025, a decrease of 8% compared to approximately 165,200 units in 2024.

Powersports Industry

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

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 disclosed in Note 2 "Revenue Recognition" of the Notes to Consolidated Financial Statements included herein.

Net sales to the powersports industry comprised approximately 10% and 4% of the Company's consolidated net sales for the years ended December 31, 2024 and 2023, respectively.

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 dealer inventories with retail demand.

Net sales to the powersports industry comprised approximately 10% of the Company's consolidated net sales for each of the years ended December 31, 2025 and 2024.

Net sales to the powersports industry increased 9% during the year ended December 31, 2025 compared to 2024.

The increase in net sales for this period is primarily attributable to the Company's acquisition of Sportech in January 2024.

Manufactured Housing ("MH") Industry

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 "site-built" housing, and any improvement in conditions in the asset-backed securities markets for manufactured housing loans.

Net sales to the MH industry comprised approximately 17% and 18% of the Company's consolidated net sales for the years ended December 31, 2025 and 2024, respectively.

Net sales to the MH industry increased 20% during the year ended December 31, 2024 compared to 2023.

Net sales to the MH industry decreased less than 1% during the year ended December 31, 2025 compared to 2024.

MH sales are generally correlated to MH industry wholesale unit shipments.

According to Company estimates based on industry data from the Manufactured Housing Institute, MH industry wholesale unit shipments totaled approximately 103,300 units in 2024, an increase of 16% compared to 89,200 units in 2023, primarily driven by OEMs increasing production from significantly reduced levels in 2023 in anticipation of a recovery in demand.

Based on industry data from the Manufactured Housing Institute, MH industry wholesale unit shipments totaled 102,700 units in 2025, a decrease of 1% compared to approximately 103,300 units in 2024.

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 approximately 13% and 14% of the Company's consolidated net sales for the years ended December 31, 2024 and 2023, respectively.

Net sales to the industrial market decreased 1% during the year ended December 31, 2024 compared to 2023.

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.

We estimate that approximately 75% to 85% of our industrial business is directly tied to the residential housing market, with the remaining industrial sales tied to the non-residential and commercial markets.

During the year ended December 31, 2024, combined new housing starts decreased 4% compared to 2023, reflecting a decrease in multifamily housing starts of 25%, partially offset by an increase in single-family housing starts of 6%.

The industrial market is comprised primarily of U.S.

residential housing market and non-housing market categories and includes kitchen cabinet, countertop, hospitality, retail and commercial fixtures, and office and household furniture markets and regional distributors.

Net sales to the industrial market comprised approximately 13% of the Company's consolidated net sales in both years ended December 31, 2025 and 2024.

Net sales to the industrial market increased 4% during the year ended December 31, 2025 compared to 2024.

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

During the year ended December 31, 2025, combined new housing starts decreased 2% compared to 2024, reflecting a decrease in single-family housing starts of 7%, partially offset by an increase in multifamily housing starts of 12%.

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.

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Interest expense, net 74,507 1.9 % 79,470 2.1 % (4,963) (6) %

Other expenses 24,420 0.6 % — — % 24,420 N/A

Income taxes 42,006 1.1 % 40,169 1.1 % 1,837 5 %

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Net sales in 2025 increased approximately $235.1 million, or 6%, to $3.95 billion compared to $3.72 billion in 2024.

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

The Company's sales to the powersports market increased $230.3 million, or 189%, in 2024 compared to 2023, primarily attributable to the Company’s acquisition of Sportech in the first quarter of 2024.

Sales to the RV market increased $121.9 million, or 8%, to $1.63 billion in 2024 compared to $1.50 billion in 2023, due to industry volume growth and the Company’s acquisition of ICON Direct LLC which does business as RecPro (“RecPro”) in the third quarter of 2024.

Sales to the MH market increased $113.9 million, or 20%, to $682.1 million in 2024 compared to $568.2 million in 2023, primarily due to an increase in estimated MH industry wholesale unit shipments of approximately 16%.

Sales to the marine market decreased $211.9 million, or 27%, to $570.7 million in 2024 compared to $782.6 million in 2023 primarily attributable to a decrease in estimated powerboat wholesale unit shipments of 25% compared to 2023.

Sales to the industrial market decreased $6.5 million, or 1%, compared to 2023.

In 2024 and 2023 , net sales attributable to acquisitions completed in each of those years was $295.7 million and $17.7 million , respectively.

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

Sales to the RV market increased $150.9 million, or 9%, to $1.78 billion in 2025

compared to $1.63 billion in 2024, primarily due to industry volume growth and the Company’s acquisition of ICON Direct LLC, doing business as RecPro (“RecPro”) in the third quarter of 2024.

Sales to the marine market increased $35.7 million, or 6%, to $606.4 million in 2025 compared to $570.7 million in 2024, primarily attributable to acquisitions completed in 2025, partially offset by a decrease in estimated powerboat wholesale unit shipments of 4% compared to 2024.

The Company's sales to the powersports market increased $31.9 million, or 9%, in 2025 compared to 2024, primarily attributable to the continued growth of Patrick's attachment rates on premium utility vehicles and a recovery in utility vehicle wholesale unit shipments.

Sales to the industrial market increased $17.2 million, or 4%, in 2025 compared to 2024, primarily attributable to market share gains and product mix shifts by certain customers.

Sales to the MH market decreased $0.6 million, or less than 1%, to $681.5 million in 2025 compared to $682.1 million in 2024, due to a decrease in MH industry wholesale unit shipments of 1% compared to 2024.

In 2025 and 2024, net sales attributable to acquisitions completed in each of t hose years was $44.0 million and $295.7 million , respectively.

Cost of Goods Sold.

Cost of goods sold increased $158.1 million, or 5%, to $3.04 billion in 2025 compared to $2.88 billion in 2024.

As a percentage of net sales, cost of goods sold increased 10-basis points during 2024 to 77.5% compared to 77.4% in 2023.

Cost of goods sold as a percentage of net sales increased in 2024 compared to 2023 primarily as a result of a 50-basis point increase in overhead as a percentage of net sales due to higher research and development costs, partially offset by a 40-basis point decrease in labor as a percentage of net sales.

As a percentage of net sales, cost of goods sold decreased 60 basis points during 2025 to 76.9% compared to 77.5% in 2024.

Cost of goods sold as a percentage of net sales decreased in 2025 compared to 2024 primarily as a result of continued cost reduction and automation initiatives we deployed throughout 2024 and into 2025 that had a positive impact on labor and overhead costs.

The decrease in cost of goods sold as a percentage of net sales in 2025 reflects a 50 basis point decrease in labor and 20 basis point decrease in overhead as a percentage of net sales, partially offset by a 10 basis point increase in material as a percentage of net sales.

In general, the Company's cost of goods sold percentage can be impacted from period-to-period 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.

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Gross profit increased $77.0 million or 9%, to $912.9 million in 2025 compared to $835.9 million in 2024.

As a percentage of net sales, gross profit decreased to 22.5% in 2024 compared to 22.6% in 2023.

The decrease in gross profit as a percentage of net sales in 2024 compared to 2023 reflects the impact of the factors discussed above under “Cost of Goods Sold”.

As a percentage of net sales, gross profit increased 60 basis points to 23.1% in 2025 compared to 22.5% in 2024.

The increase in gross profit as a percentage of net sales in 2025 compared to 2024 reflects the impact of the factors discussed above under “Cost of Goods Sold”.

Economic or industry-wide factors affecting the profitability of our sales to the RV, marine, powersports, MH and industrial markets include the costs of commodities and supply chain constraints and the labor used to manufacture our products, the competitive environment and the impact of different gross margin profiles of acquired companies, all of which can cause gross margins to fluctuate from quarter-to-quarter and year-to-year.

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As a percentage of net sales, warehouse and delivery expenses increased 30 basis points to 4.5% in 2025 compared to 4.2% in 2024.

The increase in warehouse and delivery expenses in 2024 compared to 2023 is primarily attributable to the increase in sales, and the increase as a percentage of net sales is primarily related to an increase in certain expenses that are fixed in nature, including fleet and insurance expenses.

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

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

SG&A expenses increased $35.8 million, or 11%, to $361.6 million in 2025 compared to $325.8 million in 2024.

As a percentage of net sales, SG&A expenses were 8.8% in 2024 and 8.6% in 2023.

The increase in SG&A expenses in 2024 compared to 2023 is primarily due to increased wages, $5.0 million of transaction costs associated with the acquisition of Sportech, increased technology expenses and the $2.5 million write-off of deferred financing costs due to early payment debt, partially offset by decreased incentive compensation and insurance expenses.

The increase in SG&A expenses as a percentage of net sales in 2024 compared to 2023 is primarily attributable to the Sportech acquisition-related costs, increased technology expenses and deferred financing costs write-off mentioned above, partially offset by decreased incentive compensation, wages and insurance expenses.

Additionally, certain 2023 and 2024 acquisitions operate with comparatively higher SG&A as a percentage of sales when compared to the consolidated percentage.

As a percentage of net sales, SG&A expenses increased 40 basis points to 9.2% in 2025 compared to 8.8% in 2024.

The increase in SG&A expenses in 2025 compared to 2024 is primarily due to the cost profile of certain 2024 acquisitions, increased wages, incentive compensation, selling expenses, technology expenses, and loss on sales of assets, partially offset by decreased professional fees.

The increase in SG&A expenses as a percentage of net sales in 2025 compared to 2024 is primarily due to increased incentive compensation, selling expenses, technology expenses, and loss on sales of assets, partially offset by decreased professional fees.

Amortization of Intangible Assets.

Amortization of intangible assets increased $1.0 million, or 1%, in 2025 compared to 2024.

The increase in 2024 compared to 2023 primarily reflect the impact of the Sportech acquisition as well as other acquisitions completed in 2024 and 2023.

The increase in 2025 compared to 2024 primarily reflects the impact of the RecPro acquisition as well as other acquisitions completed in 2025 and 2024.

Operating Income.

Operating income decreased $2.2 million, or 1%, to $258.0 million in 2024 compared to $260.2 million in 2023.

Operating income increased $17.9 million, or 7%, to $276.0 million in 2025 compared to $258.0 million in 2024.

Operating income as a percentage of net sales increased 10 basis points to 7.0% in 2025 compared to 6.9% in 2024.

Operating income in 2025 and 2024 included $1.3 million and $47.2 million, respectively, from the businesses acquired in each respective year.

Operating income as a percentage of net sales decreased 60 basis points to 6.9% in 2024 compared to 7.5% in 2023.

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

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

Interest Expense, Net.

Interest expense, net, increased $10.5 million, or 15%, to $79.5 million in 2024 compared to $68.9 million in 2023.

The increase primarily reflects interest associated with the issuance of our 6.375% Senior Notes due 2032 (the “6.375% Senior Notes”) in October 2024, higher debt levels and higher interest rates on our term loan and revolver balances.

Interest expense, net, decreased $5.0 million, or 6%, to $74.5 million in 2025 compared to $79.5 million in 2024.

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

Other Expenses.

Other expenses were $24.4 million in 2025 compared to zero in the prior year period, reflecting expenses related to a legal settlement.

Income Taxes.

Income tax expense decreased $8.2 million, or 17%, to $40.2 million in 2024 compared to $48.4 million in 2023 as a result of the decrease in pre-tax income and a decrease in the effective tax rate.

For 2024, the effective tax rate was 22.5% compared to 25.3% in 2023.

The decrease in the effective tax rate in 2024 is primarily related to increased excess tax benefits on share-based compensation.

Income tax expense increased $1.8 million, or 5%, to $42.0 million in 2025 compared to $40.2 million in 2024.

This increase primarily reflects an increase in the effective tax rate to 23.7% in 2025 compared to 22.5% in 2024, partially offset by a decrease in income before taxes of $1.5 million.

The increase in the effective tax rate in 2025 compared to 2024 is primarily related to decreased excess tax benefits on share-based compensation.

BUSINESS SEGMENTS

The Company's reportable segments, manufacturing and distribution, are based on its method of internal reporting.

The Company regularly evaluates the performance of the manufacturing and distribution segments and allocates resources to them based on a variety of indicators including net sales and operating income.

The Company does not measure profitability at the

end market (RV, marine, powersports, MH and industrial) level.

See Notes 17 "Segment Information" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for additional details.

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

See Note 17 "Segment Information" of the Notes to Consolidated Financial Statements included elsewhere in this Form 10-K for additional details.

Net sales pertaining to the manufacturing and distribution segments as stated in the table below and in the following discussions include intersegment sales.

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Manufacturing

Manufacturing sales increased $103.2 million, or 4%, to $2.76 billion in 2024 compared to $2.65 billion in 2023.

The manufacturing segment accounted for approximately 74% of the Company’s consolidated net sales in 2024 compared to approximately 75% of the Company's consolidated net sales in 2023.

Manufacturing segment sales in 2024 compared to 2023 increased due to increased sales to the powersports, MH and RV markets, partially offset by decreased sales to the marine and industrial markets.

Sales to the powersports market increased 210% in 2024 compared to 2023, primarily attributable to the Company’s acquisition of Sportech in the first quarter of 2024.

Sales to the MH market increased 16% compared to 2023, primarily due to an increase in estimated MH industry wholesale unit shipments of approximately 16%.

Sales to the RV market increased 10% compared to 2023, due to industry volume growth.

Sales to the marine market decreased 29% compared to 2023, primarily attributable to a decrease in estimated powerboat wholesale unit shipments of 25%.

Sales to the industrial market decreased 2% compared to 2023.

Manufacturing segment sales increased $202.4 million, or 7%, to $2.96 billion in 2025 compared to $2.76 billion in 2024.

The manufacturing segment accounted for approximately 74% of the Company’s consolidated sales for each of the years ended December 31, 2025 and 2024.

Manufacturing segment sales in 2025 compared to 2024 increased due to increased sales to the RV, marine, powersports and industrial markets, partially offset by decreased sales to the MH market.

Sales to the RV market increased $125.0 million, or 11%, compared to 2024, due to an increase in estimated wholesale units of 3% compared to 2024.

Sales to the marine market increased $36.0 million, or 7%, compared to 2024, primarily attributable to acquisitions completed in 2025.

Sales to the powersports market increased $28.8 million, or 9%, in 2025 compared to 2024, primarily attributable to the continued growth of Patrick's attachment rates on premium utility vehicles and a recovery in utility vehicle wholesale unit shipments.

Sales to the industrial market increased $13.5 million, or 3%, compared to 2024, primarily due to market share gains and product mix shifts of certain customers.

Sales to the MH market decreased $1.8 million, or 1%, compared to 2024.

For 2025 and 2024, manufacturing segment sales attributable to acquisitions completed in each of those years were $44.0 million and $275.4 million, respectively.

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Manufacturing segment gross profit increased $43.6 million, or 7%, to $656.2 million in 2025 compared to $612.6 million in 2024.

As a percentage of sales, gross profit increased 40 basis points to 22.2% in 2024 compared to 21.8% in 2023.

The increase in gross profit as a percentage of sales in 2024 compared to 2023 is attributable to decreases in material and labor costs as a percentage of sales, partially offset by increased overhead costs as a percentage of sales.

As a percentage of sales, gross profit was 22.2% in both 2025 and 2024.

The increase in manufacturing gross profit is attributable to increased sales.

Operating Income.

Manufacturing segment operating income increased $17.1 million, or 5%, to $358.0 million in 2025 compared to $341.0 million in 2024.

Manufacturing segment operating income in 2024 attributable to acquisitions completed in such year was approximately $46.5 million and manufacturing segment operating loss in 2023 attributable to acquisitions completed in such year was $(0.6) million.

The increase in operating income in 2024 primarily reflects the items discussed above.

Distribution sales increased $90.7 million, or 10%, to $980.1 million in 2024 compared to $889.4 million in 2023.

The distribution segment accounted for approximately 26% of the Company’s consolidated net sales for 2024 compared to 25% of the Company's consolidated net sales in 2023.

Distribution segment sales in 2024 compared to 2023 increased due to increased sales to all five of our end markets.

Sales to the MH market increased 23% compared to 2023, primarily due to an increase in estimated MH industry wholesale unit shipments of approximately 16%.

Sales to the powersports market increased 6% compared to 2023, primarily attributable to product mix shifts by certain customers.

Sales to the RV market increased 4% compared to 2023, primarily attributable to the Company’s acquisition of RecPro in the third quarter of 2024.

Sales to the marine market increased 3% compared to 2023.

Sales to the industrial market increased 2% compared to 2023, primarily reflecting product mix shifts by certain customers.

For 2024 and 2023, distribution segment sales attributable to acquisitions completed in each of those years were $20.3 million and $14.1 million, respectively.

As a percentage of sales, operating income decreased 30 basis points to 12.1% in 2025 compared to 12.4% in 2024.

The increase in operating income is attributable to increased sales.

The decrease to operating income as a percentage of sales is primarily related to an increase in selling, general and administrative expenses as a percentage of sales.

Manufacturing segment operating income in 2025 attributable to acquisitions completed during the year was approximately $1.3 million compared to manufacturing segment operating income of $46.5 million in 2024 attributable to acquisitions completed during that year.

Distribution segment sales increased $34.2 million, or 3%, to $1.01 billion in 2025 compared to $980.1 million in 2024.

The distribution segment accounted for approximately 26% of the Company’s consolidated net sales for each of the years ended December 31, 2025 and 2024.

Distribution segment sales in 2025 compared to 2024 increased due to increased sales to the RV, industrial, powersports and MH markets, partially offset by decreased sales to the marine market.

Sales to the RV market increased $25.9 million, or 5%, compared to 2024, primarily attributable to the Company’s acquisition of RecPro in the third quarter of 2024.

Sales to the industrial market increased $3.7 million, or 10%, compared to 2024, primarily due to market share gains and product mix shifts by certain customers.

Sales to the powersports market increased $3.1 million, or 23%, compared to 2024, primarily attributable to the continued growth of Patrick's attachment rates on premium utility vehicles and a recovery in utility vehicle wholesale unit shipments.

Sales to the MH market increased $1.2 million, or less than 1%, compared to 2024.

Sales to the marine market decreased $0.3 million, or 1%, compared to 2024.

For 2024, distribution segment sales attributable to acquisitions completed in 2024 were $20.3 million.

Gross Profit.

Distribution segment gross profit increased $26.6 million, or 12%, to $251.4 million in 2025 compared to $224.9 million in 2024.

As a percentage of sales, gross profit increased 90 basis points 22.9% in 2024 compared to 22.0% in 2023.

The increase in gross profit as a percentage of net sales for 2024 is primarily attributed to decreases in material and labor costs as a percentage of net sales.

As a percentage of sales, gross profit increased 190 basis points to 24.8% in 2025 compared to 22.9% in 2024.

The increase in manufacturing gross profit is attributable to increased sales.

The increase to gross profit as a percentage of sales is attributable to decreased labor and material costs as a percentage of sales.

Operating Income.

Distribution segment operating income increased $14.6 million, or 16%, to $104.7 million in 2024 compared to $90.1 million in 2023.

For 2024 and 2023 distribution segment operating income attributable to acquisitions completed in each of those years was immaterial.

The increase in operating income in 2024 primarily reflects the items discussed above.

Distribution segment operating income decreased $1.7 million, or 2%, to $103.0 million in 2025 compared to $104.7 million in 2024.

As a percentage of sales, operating income decreased 50 basis points to 10.2% in 2025 compared to 10.7% in 2024.

The decrease in operating income and operating income as a percentage of sales is attributable to the items discussed above, as well as an increase in operating expenses and operating expenses as a percentage of sales.

Distribution segment operating income in 2024 attributable to acquisitions completed during the year was immaterial.

LIQUIDITY AND CAPITAL RESOURCES

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The Company's primary sources of liquidity are cash flows from operations, which includes selling its products and collecting receivables, available cash reserves and borrowing capacity available under the revolving credit and term loan facility (the “2024 Credit Facility”) as discussed in Note 7 "Debt" of the Notes to Consolidated Financial Statements.

During 2024, we expanded our access to capital and reduced our cost of debt by issuing $500 million in aggregate principal amount of 6.375% Senior Notes.

The proceeds from the issuance, together with borrowings under the 2024 Credit Facility, were utilized to redeem all $300 million aggregate principal amount of the Company’s 7.50% Senior Notes due 2027 (the “7.50% Senior Notes”), to repay all borrowings under its existing senior secured credit facility and to pay related fees and expenses, as discussed in Note 7 "Debt" of the Notes to Consolidated Financial Statements .

As of December 31, 2025, our liquidity consisted of cash and cash equivalents of $26.4 million and $791.5 million of availability under our 2024 Credit Facility.

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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.

Year Ended December 31, 2024 Compared to 2023

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 decreased $81.9 million, or 20%, to $326.8 million in 2024 compared to $408.7 million in 2023.

The decrease in operating cash flows is primarily attributable to a decrease in operating assets and liabilities, net of business acquisitions, as a source of cash of $93.3 million, from $98.9 million in 2023 compared to $5.6 million in 2024, a decrease in net income of $4.5 million and an increase in deferred income taxes of $5.9 million, partially offset by increased depreciation and amortization expense of $22.0 million and loss on extinguishment of debt of $2.5 million.

Net cash provided by operating activities increased $2.6 million, or 1%, to $329.4 million in 2025 compared to $326.8 million in 2024.

The increase in operating cash flows is primarily attributable to a $42.0 million increase in deferred income taxes, a $3.7 million increase in depreciation and amortization, a $2.4 million increase in loss on sale of assets, and a $2.3 million increase related to stock based compensation, partially offset by changes in operating assets and liabilities, net of business acquisitions, which represented a source of cash of $5.6 million in 2024 compared to a use of cash of $32.9 million in 2025 as well as a $3.3 million decrease in net income compared to 2024.

Investing Activities:

Net cash used in investing activities increased $426.3 million, to $512.8 million in 2024 compared to $86.5 million in 2023 primarily due to an increase in cash used in business acquisitions, which were $411.7 million in 2024, primarily due to the acquisitions of Sportech and RecPro, compared to $25.9 million in 2023, an increase in cash used for capital expenditures of $16.7 million and an increase in other investing activities of $24.7 million.

Net cash used in investing activities decreased $306.4 million, to $206.5 million in 2025 compared to $512.8 million in 2024 primarily due to a decrease in cash used in business acquisitions, which were $121.7 million in 2025, compared to $411.7 million in 2024, and a $23.3 million decrease in other investing activities, partially offset by a $7.2 million increase in cash used for capital expenditures.

Financing Activities:

Net cash flows provided by financing activities was $208.2 million in 2024 compared to net cash flows used in financing activities of $333.6 million in 2023.

The change in cash flow from financing activities was primarily due to net borrowings of $100 million under the Revolver due 2029 and proceeds from the issuance of $500 million aggregate principal amount of 6.375% Senior Notes in 2024 and compared to cash used in 2023 to redeem the $172.5 million 1.00% Convertible Senior Notes due 2023, partially offset by the redemption of the $300 million 7.50% Senior Notes in 2024.

Net cash flows used in financing activities was $130.1 million in 2025 compared to net cash flows provided by financing activities of $208.2 million in 2024.

The change in financing cash flows primarily reflects proceeds from the issuance of $500 million of 6.375% Senior Notes in 2024, partially offset by the redemption of $300 million of 7.50% Senior Notes in 2024 and a $125.0 million decrease in financing cash flows related to the Revolver due 2029 compared to 2024.

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis