What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-01 · 92 added, 62 removed, 116 unchanged (57% of the section changed)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) provides a comparison of the Company's results of operations, as well as liquidity and capital resources for the quarters ended March 31, 2025 and 2024.

The MD&A should be read in conjunction with the Company's consolidated financial statements and notes included in Item 1 of this Quarterly Report.

8 unchanged sentences

Macroeconomic Events

Ongoing geopolitical tensions, including conflicts in the Middle East and Eastern Europe, along with evolving global trade dynamics, continue to contribute to economic uncertainty and market volatility.

In March 2025, the U.S.

imposed additional tariffs on a wide range of imports, with the potential for further tariff actions.

These trade measures, along with updates to export controls and sanctions regimes, pose ongoing risks to global supply chains, potentially increasing the cost of goods, straining procurement cycles, and impacting customer demand.

We are closely monitoring the evolving trade landscape, and our analysis of the potential impact of tariffs on our operations is actively underway.

Future trade policy shifts or retaliatory measures could raise manufacturing costs, affect product pricing, or contribute to inflationary pressures on our customers, which may in turn reduce demand for our products.

Our business remains sensitive to global demand trends.

In China, market saturation has contributed to declining sales of mid-tier products and intensified pricing competition.

In certain other markets, including Australia and Mexico, shifting customer behavior has led to deferred purchases or a greater reliance on rental solutions.

In response, we continue to pursue operational efficiencies, refine cost management strategies, and monitor global developments closely to mitigate potential risks.

As a company with a global presence, we are subject to risks and uncertainties caused by significant events with macroeconomic impacts, including, but not limited to, geopolitical tensions, elevated interest rates, monetary policy changes, and foreign currency fluctuations.

The global business landscape continues to be shaped by volatility, including heightened uncertainty in trade policy.

Previously implemented U.S.

tariffs and the potential for future actions could increase input costs, disrupt supply chains, and impact customer demand as end users absorb cost increases.

These trade dynamics may also create competitive shifts within the market.

Future policy changes or retaliatory measures could increase manufacturing costs and pressure pricing, potentially reducing product demand.

We are carefully monitoring these developments to assess potential impacts and will continue to adapt as the situation evolves.

Demand trends across our key markets remain mixed.

In China, recovery is slow due to market saturation impacting product sales and driving pricing competition.

In other regions like Mexico, uncertainty and rising interest rates are leading to delayed spending decisions and increased rental solutions.

In Europe, heightened competitive pressures have tempered demand for our products.

To manage these challenges, we are focused on cost control, operational improvements, and diversifying sourcing.

We are taking proactive pricing actions alongside supply-chain initiatives to mitigate the impact of tariffs, although some margin pressure may persist as the full benefits of our cost-out and pricing initiatives are phased in, leading to a gradual improvement in margin rates.

At the same time, we are adapting our product and service offerings to meet evolving customer needs and continuing to invest in innovation to support long-term demand, while maintaining disciplined spending across the organization.

As described in Part I, Item 1A - Risk Factors in the annual report on Form 10-K for the fiscal year ended December 31, 2024, we may encounter financial difficulties if the United States or other global economies experience an additional or continued long-term economic downturn as our product sales are sensitive to declines in capital spending by our customers.

1 unchanged sentence

Changes in foreign currency may also adversely impact our new sales, earnings, and financial condition.

We are actively monitoring the global macroeconomic environment, including geopolitical conflict, the potential impact of global supply chain constraints on material inflation, and change in demand for our products.

Amid the uncertainties of a slowing global economy, rising inflation, and ongoing geopolitical challenges, our focus remains on building long-term resilience.

With our global footprint, supply chain, and customer base, we

are working to navigate the effects of shifting trade policies, such as tariffs, alongside broader geopolitical and macroeconomic uncertainties.

While the full impact of these factors is uncertain and difficult to predict, we are committed to supporting our customers, ensuring operational stability, and navigating these volatile conditions with a focus on long-term growth.

The following table compares the results of operations for the three months ended March 31, 2025 and 2024, respectively (in millions, except per share data and percentages):

We are actively monitoring the global macroeconomic

environment, including geopolitical conflict, the potential impact of global supply chain constraints on material inflation, and change in demand for our products.

Amid ongoing economic uncertainty, we are actively managing margins through market-based pricing actions and targeted supply-chain strategies, including supplier negotiations, dual sourcing, and logistics shifts to mitigate tariff-related cost inflation.

While timing mismatches between cost increases and realization of both price increases and cost-out initiatives may pressure margins in the near term, diligent management of both levers is crucial for sustained profitability.

We continuously strive to optimize our financial performance to achieve sustainable profitability and expand our margins.

The following table compares the results of operations for the three and six months ended June 30, 2025 and 2024, respectively (in millions, except per share data and percentages):

Three Months Ended

June 30, Six Months Ended

2025 % 2024 % 2025 % 2024 %

6 unchanged sentences

Interest expense, net (2.2) (0.7) (2.5) (0.8) (4.5) (0.7) (4.8) (0.7)

Net foreign currency transaction loss (0.2) (0.1) (0.2) (0.1)

Other income, net 0.1 — 0.1 —

Net foreign currency transaction (loss) gain (0.8) (0.3) 0.7 0.2 (1.0) (0.2) 0.5 0.1

Other (expense) income, net (0.3) (0.1) 0.1 — (0.2) — 0.2 —

Income before income taxes 27.3 8.6 36.9 11.1 44.5 7.3 72.0 11.2

2 unchanged sentences

Net income per share - diluted $ 1.08 $ 1.45 $ 1.77 $ 2.94

Consolidated net sales for the first quarter of 2025 totaled $290.0 million, a 6.8% decrease as compared to consolidated net sales of $311.0 million in the first quarter of 2024.

Consolidated net sales for the second quarter of 2025 totaled $318.6 million, a 3.7% decrease as compared to consolidated net sales of $331.0 million in the second quarter of 2024.

The components of the consolidated net sales change were as follows:

Three Months Ended March 31

Three Months Ended June 30, Six Months Ended June 30,

Price 1.8% 0.9%

Volume (6.3)% (5.6)%

2 unchanged sentences

Foreign currency 0.8% (0.7)%

Total decline (6.8)%

The 6.8% decrease in consolidated net sales in the first quarter of 2025 as compared to the same period in 2024 was driven by:

• Organic sales decline of 5.0% was primarily due to broad volume declines across all geographies, particularly in North America, which was lapping a significant backlog reduction benefit in the prior year period;

• A net unfavorable impact from foreign currency exchange of approximately 2.1% due primarily to the strengthening of the Brazilian Real and Euro relative to the U.S.

Total (3.7)% (5.2)%

The 3.7% decrease in consolidated net sales in the second quarter of 2025 as compared to the same period in 2024 was driven by:

• Organic sales decline of 4.5% was primarily due to volume declines across all geographies, particularly in North America, which was lapping a significant backlog-reduction benefit in the prior-year period, partly offset by price realization;

• A net favorable impact from foreign currency exchange of approximately 0.8% primarily due to the strengthening of the Euro relative to the U.S.

The 5.2% decrease in consolidated net sales in the first six months of 2025 as compared to the same period in 2024 was driven by:

• Organic sales decline of 4.7% was primarily due to volume declines across all geographies, particularly in North America, which was lapping a significant backlog-reduction benefit in the prior-year period, partly offset by price realization;

• A net unfavorable impact from foreign currency exchange of approximately 0.7%;

partly offset by

• Acquisition-related growth of 0.2% driven by TCS.

The following table sets forth the net sales by geographic area for the three months ended March 31, 2025 and 2024 (in millions, except percentages):

The following table sets forth the net sales by geographic area for the three and six months ended June 30, 2025 and 2024 (in millions, except percentages):

Three Months Ended

2025 2024 % Change

June 30, Six Months Ended

2025 2024 % Change 2025 2024 % Change

Americas $ 213.5 $ 227.8 (6.3) % $ 410.8 $ 443.4 (7.4) %

2 unchanged sentences

Total $ 318.6 $ 331.0 (3.7) % $ 608.6 $ 642.0 (5.2) %

Americas net sales were $197.3 million for the first quarter of 2025, a decrease of 8.5% from the first quarter of 2024 driven by:

• Organic sales decline of 6.9% was driven by volume declines, particularly in North America, which was lapping a significant backlog reduction benefit in the prior year period, partly offset by price realization in Latin America;

Americas net sales were $213.5 million for the second quarter of 2025, a decrease of 6.3% from the second quarter of 2024 driven by:

• Organic sales decline of 5.5% was driven by volume declines, particularly in North America industrial equipment, which was lapping a significant backlog reduction benefit in the prior year period, partly offset by price realization and volume increases in commercial equipment;

• A net unfavorable impact from foreign currency exchange of approximately 0.8%.

Europe, Middle East and Africa ("EMEA")

EMEA net sales were $76.0 million for the first quarter of 2025, a decrease of 1.0% from the first quarter of 2024 driven by:

Americas net sales were $410.8 million for the first six months of 2025, a decrease of 7.4% from the first six months of 2024 driven by:

• Organic sales decline of 6.2% was driven by volume declines, particularly in North America industrial equipment, which was lapping a significant backlog reduction benefit in the prior year period, partly offset by volume increases in commercial equipment and price realization;

• A net unfavorable impact from foreign currency exchange of approximately 1.2%.

Europe, Middle East and Africa ("EMEA")

EMEA net sales were $84.7 million for the second quarter of 2025, an increase of 3.9% from the second quarter of 2024 driven by:

• A net favorable impact from foreign currency exchange of approximately 5.3%;

partly offset by

• Organic sales decline of 1.4% was primarily due to volume declines in Germany and the Middle East region, partly offset by volume increases in the UK and Iberia, and price realization.

EMEA net sales were $160.7 million for the first six months of 2025, an increase of 1.5% from the first six months of 2024 driven by:

• A net favorable impact from foreign currency exchange of approximately 1.2%;

• Acquisition-related growth of 0.7% due to TCS;

• Organic sales growth of 0.6% was primarily due to price realization in parts and consumables and service, partly offset by volume declines in equipment.

partly offset by

• Organic sales decline of 0.4% was primarily due to volume declines in Germany and the Middle East region, partly offset by volume increases in the UK and Iberia, and price realization.

Asia Pacific ("APAC")

APAC net sales were $16.7 million for the first quarter of 2025, a decrease of 10.2% from the first quarter of 2024 driven by:

• Organic sales decline of 7.5% driven primarily by net volume declines in parts and consumables and the impact of negative product mix;

APAC net sales were $20.4 million for the second quarter of 2025, a decrease of 6.0% from the second quarter of 2024 driven by:

• Organic sales decline of 5.0% driven primarily by decreased volumes in China, partly offset by increased equipment volume in Australia;

• A net unfavorable impact from foreign currency exchange of approximately 1.0%.

Gross profit margin of 41.4% was 280 basis points lower in the first quarter of 2025 compared to the first quarter of 2024.

The margin rate decrease was primarily attributed to a shift in product and channel mix as well as ongoing inflation.

The prior-year quarter includes benefits from a significant reduction in the backlog, largely consisting of higher-margin industrial products sold to direct customers.

APAC net sales were $37.1 million for the first six months of 2025, a decrease of 7.9% from the first six months of 2024 driven by:

• Organic sales decline of 6.2% driven primarily by decreased volumes in China, partly offset by increased equipment volume in Australia;

• A net unfavorable impact from foreign currency exchange of approximately 1.7%.

Gross profit margin of 42.1% was 100 basis points lower in the second quarter of 2025 compared to the second quarter of 2024.

Gross profit margin of 41.8% was 180 basis points lower in the first six months of 2025 compared to first six months of 2024.

The margin rate decrease in both periods was primarily attributed to a shift in product and customer mix as well as ongoing inflation and lower productivity.

This was partly offset by price realization.

The prior-year periods include benefits from a significant reduction in the backlog, largely consisting of higher-margin industrial products sold through direct channels.

Operating Expense

Selling and Administrative Expense

Selling and administrative expense ("S&A expense") was $90.7 million for the first quarter of 2025, an increase of $0.8 million compared to the first quarter of 2024.

As a percentage of net sales, S&A expense for the first quarter of 2025 increased 240 basis points to 31.3% from 28.9% in the first quarter of 2024.

The S&A expense increase was driven by higher costs linked to our strategic investments, including Enterprise Resource Planning ("ERP") modernization costs and restructuring-related charges, partly offset by lower compensation and benefit expense and discretionary spending.

Selling and administrative expense ("S&A expense") was $93.7 million for the second quarter of 2025, an increase of $0.8 million compared to the second quarter of 2024.

As a percentage of net sales, S&A expense for the second quarter of 2025 increased 130 basis points to 29.4% from 28.1% in the second quarter of 2024.

The S&A expense increase was driven by higher costs linked to our strategic investments, including Enterprise Resource Planning ("ERP") costs, and a bad debt charge.

This increase was partly offset by lower variable compensation expense and discretionary spending.

S&A expense was $184.4 million for the first six months of 2025, an increase of $1.6 million compared to the first six months of 2024.

As a percentage of net sales, S&A expense for the first six months of 2025 increased 180 basis points to 30.3% from 28.5% in the first six months of 2024.

The S&A expense increase was driven by higher costs linked to our strategic investments, including ERP costs and restructuring-related charges, and a bad debt charge, partly offset by lower variable compensation expense and discretionary spending.

Research and Development Expense

Research and development expense ("R&D expense") was $9.7 million, or 3.3% of net sales, for the first quarter of 2025, with R&D expense as a percentage of net sales increasing 10 basis points compared to the first quarter of 2024.

Research and development expense ("R&D expense") was $9.8 million, or 3.1% of net sales, for the second quarter of 2025, with R&D expense as a percentage of net sales decreasing 30 basis points compared to the second quarter of 2024.

R&D expense was $19.5 million, or 3.2% of net sales, for the first six months of 2025, with R&D expense as a percentage of net sales decreasing 10 basis points compared to the first six months of 2024.

We continue to invest in developing innovative products and technologies at levels necessary to propel our technology and innovative leadership position and drive growth.

1 unchanged sentence

Interest Expense, Net

Interest expense, net was $2.3 million in the first quarter of 2025 and 2024.

The following table compares the debt levels, average interest rate, interest income and interest expense for the three months ended March 31, 2025 and 2024, respectively (in millions, except percentages):

Three Months Ended March 31,

Interest expense, net was $2.2 million in the second quarter of 2025 compared to $2.5 million in the second quarter of 2024.

The following table compares the debt levels, average interest rate, interest income and interest expense for the three and six months ended June 30, 2025 and 2024, respectively (in millions, except percentages):

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Weighted Average Outstanding Borrowings $ 213.8 $ 214.6 $ 209.3 $ 214.1

3 unchanged sentences

Interest expense, net $ 2.2 $ 2.5 $ 4.5 $ 4.9

Our debt portfolio as of March 31, 2025 was comprised of debt predominately in U.S.

Our debt portfolio as of June 30, 2025 was comprised of debt predominately in U.S.

The Company manages its floating rate debt exposure using fixed rate interest rate swaps to reduce the Company's risk of the possibility of increased interest costs.

1 unchanged sentence

Net Foreign Currency Transaction Loss

Net foreign currency transaction loss was $0.2 million in the first quarters of 2025 and 2024.

The unfavorable impact was primarily due to the strengthening of the Euro relative to the U.S.

The effective tax rate for the first quarter of 2025 was 23.8% compared to 19.1% for the first quarter of 2024.

The increase was primarily due to a decrease in discrete tax benefits associated with share-based compensation recognized in the first quarter of 2024.

Net foreign currency transaction loss was $0.8 million in the second quarter of 2025 compared to a gain of $0.7 million in the second quarter of 2024.

Net foreign currency translation loss was $1.0 million in the first six months of 2025 compared to a gain of $0.5 million in the first six months of 2024.

The unfavorable impact in both periods was primarily due to the strengthening of the Euro relative to the U.S.

The effective tax rate for the second quarter of 2025 was 26.0% compared to 24.4% for the second quarter of 2024.

The increase was primarily due to a decrease in discrete tax benefits associated with share-based compensation recognized in the second quarter of 2024.

The effective tax rate for the first six months of 2025 was 25.2% compared to 21.8% for the first six months of 2024.

The increase was primarily due to a decrease in discrete tax benefits associated with share-based compensation recognized in the first six months of 2024.

In general, it is our practice and intention to permanently reinvest the earnings of our foreign subsidiaries and repatriate earnings only when the tax impact is zero or immaterial.

1 unchanged sentence

Liquidity and Capital Resources

Cash and cash equivalents totaled $79.5 million at March 31, 2025 compared to $99.8 million as of December 31, 2024.

Cash and cash equivalents totaled $80.1 million at June 30, 2025 compared to $99.8 million as of December 31, 2024.

Wherever possible, cash management is centralized and intercompany financing is used to provide working capital to subsidiaries as needed.

Our current ratio was 2.1 as of March 31, 2025 and 2.0 as of December 31, 2024.

Our primary working capital, which is comprised of accounts receivable, inventories and accounts payables, was $327.2 million as of March 31, 2025 and $316.0 million as of December 31, 2024.

Our debt-to-capital ratio was 25.5% as of March 31, 2025 compared to 24.3% as of December 31, 2024.

As of March 31, 2025, we had letters of credit and bank guarantees outstanding in the amount of $3.2 million, leaving approximately $434.3 million of unused borrowing capacity on our revolving facility.

Our current ratio was 2.1 as of June 30, 2025 and 2.0 as of December 31, 2024.

Our primary working capital, which is comprised of accounts receivable, inventories and accounts payables, was $338.4 million as of June 30, 2025 and $316.0 million as of December 31, 2024.

Our debt-to-capital ratio was 24.6% as of June 30, 2025 compared to 24.3% as of December 31, 2024.

As of June 30, 2025, we had letters of credit and bank guarantees outstanding in the amount of $3.2 million, leaving approximately $434.3 million of unused borrowing capacity on our revolving facility.

Cash Flow from Operating Activities

Net cash used in operating activities during the three months ended March 31, 2025 was $0.4 million compared to net cash provided by operating activities of $2.9 million during the three months ended March 31, 2024.

The cash used was driven by spend of our ERP modernization project of $12.4 million as well as consumption of working capital and lower operating performance.

Net cash provided by operating activities during the six months ended June 30, 2025 was $22.1 million compared to net cash provided by operating activities of $21.5 million during the six months ended June 30, 2024.

The increase was the result of decreased consumption of working capital, partly offset by spend on our ERP project of $28.4 million and lower operating performance.

Cash Flow from Investing Activities

Net cash used in investing activities during the three months ended March 31, 2025 was $6.9 million compared to net cash used in investing activities of $60.6 million during the three months ended March 31, 2024.

The cash used was driven by capital expenditures.

Net cash used in investing activities during the six months ended June 30, 2025 was $10.6 million compared to net cash used in investing activities of $64.9 million during the six months ended June 30, 2024.

The decrease was primarily due to one-time cash outflows in the prior year related to a $32.1 million investment in Brain, Corp and a $25.7 million net cash outlay for the acquisition of TCS.

Cash Flow from Financing Activities

Net cash used in financing activities during the three months ended March 31, 2025 was $13.7 million compared to net cash provided by financing activities of $26.9 million during the three months ended March 31, 2024.

The cash used was driven by share repurchases and dividends, partly offset by net proceeds from borrowings.

Net cash used in financing activities during the six months ended June 30, 2025 was $32.8 million compared to net cash provided by financing activities of $12.4 million during the six months ended June 30, 2024.

The decrease was driven by increased repurchases of common stock and lower proceeds from the exercise of stock options.

Newly Issued Accounting Guidance

17 unchanged sentences

Cautionary Statement Relevant to Forward-Looking Information

This Quarterly Report, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2, contains forward-looking statements within the meaning of the Private Securities

Litigation Reform Act of 1995.

Forward-looking statements generally can be identified by the use of forward-looking terminology such as “may,” “will,” “expect,” “intend,” “estimate,” “anticipate,” “believe,” “project,” or “continue” or similar words or the negative thereof.

30 unchanged sentences

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