What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-25 compared with 2024-02-29 · 80 added, 105 removed, 419 unchanged (31% of the section changed)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

VPG is a global, diversified company focused on precision measurement and sensing technologies that help power the future by bridging the physical world with the digital one.

VPG is a global leader in precision measurement and sensing technologies that help power the future by bridging the physical world with the digital one.

Many of our specialized sensors, weighing solutions, and measurement systems are “designed-in” by our customers, and address growing applications across a diverse array of industries and markets.

Our products are marketed under brand names that we believe are characterized as having a very high level of precision and quality, and we employ an operationally diversified structure to manage our businesses.

Driven by the continued proliferation of data generated by the expanding use of sensors across a widening array of industrial and non-industrial applications, precision measurement and sensing technologies help ensure and deliver required levels of quality of mission-critical or high-value data.

Driven by the continued proliferation of data generated by the expanding use of sensors across a widening array of industrial and technology-driven applications, precision measurement and sensing technologies help ensure and deliver required levels of quality of mission-critical or high-value data.

VPG’s products are often at the first stage of a data value chain (i.e., the process of converting the physical world into a digital format that can be used for a specific purpose) and as such impact the effectiveness of vast number of critical, high-value downstream processes.

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In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets.

Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel.

These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers.

Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks.

As of February 29, 2024 (the date of this filing), our operations in Israel have operated at near normal levels.

resulting in extensive casualties and military engagement.

In addition, Hezbollah, another terrorist organization based in Lebanon began attacking Israel.

While Israel has entered into ceasefire agreements with Hamas and Hezbollah, the threat of new attacks remains, including from additional extremist groups.

As of February 25, 2025 (the date of this filing), our operations in Israel have operated at normal levels.

The extent and duration of the current war, as well as the possibility of further spread of the conflict to other countries in the region as well as involving other political and military entities in the Middle East, poses risks to our operations and may lead to disruptions which could adversely affect our business, prospects, financial condition and results of operations.

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The results of operations for the years ended December 31, 2024 and 2023 include items affecting comparability as listed in the reconciliations below.

The reconciliations below include certain financial measures which are not recognized in accordance with U.S.

The reconciliations below include certain financial measures which are not recognized in accordance

generally accepted accounting principles ("GAAP"), including adjusted gross profits, adjusted gross profit margin, adjusted operating income, adjusted operating margin, adjusted net earnings, adjusted net earnings per diluted share, EBITDA, and adjusted EBITDA.

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79 335 79 335 79 335 0.01 0.02

COVID-19 impact (c)

— 138 — 138 — 138 — 0.01

Start-up costs (d)

Acquisition costs (b)

— — 101 — 101 — 0.01 —

Restructuring costs — — 1,062 1,560 1,062 1,560 0.08 0.11

Foreign exchange (gain)/loss (e)

— — — — 822 (3,579) 0.06 (0.26)

Tax effect of reconciling items and discrete tax items (f)

Foreign exchange (gain)/loss (c )

— — — — (1,879) 822 (0.14) 0.06

Tax effect of reconciling items and discrete tax items — — — — (3,079) (1,245) (0.24) (0.10)

As Adjusted - Non GAAP $ 125,611 $ 150,677 $ 18,453 $ 43,849 $ 12,700 $ 29,669 $ 0.95 $ 2.17

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Acquisition purchase accounting adjustments (a) 79 335

Acquisition costs (b) 101 —

Restructuring costs 1,062 1,560

COVID-19 impact (b) — 138

Start-up costs (c) — 150

Foreign exchange (gain) loss (d) 822 (3,579)

Severance cost 347 —

Foreign exchange (gain) loss (c) (1,879) 822

ADJUSTED EBITDA 35,668 60,374

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(a) Acquisition purchase accounting adjustments include fair market value adjustments associated with inventory recorded as a component of costs of products sold.

(b) COVID-19 impact is the net impact to the Company of costs incurred as a result of the COVID-19 pandemic, net of government subsidies received.

(d) Impact of foreign currency exchange rates on assets and liabilities.

(b) Acquisition costs associated with the acquisition of Nokra in September 2024

Financial Metrics

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Inventory turnover 1.87 1.62 1.65 1.55 1.62

Net revenues for the fourth quarter of 2023 increased 4.3% from the net revenues of $85.9 million reported in the third quarter of 2023, and decreased 7.0% from $96.2 million for the comparable prior year period.

Net revenues in the Sensors segment of $34.3 million in the fourth quarter of 2023 increased 5.3% from $32.5 million in the third quarter of 2023, and decreased 5.7% from $36.3 million in the fourth quarter of 2022.

Sequentially, the increase in revenues primarily reflected higher precision resistor sales in the Test and Measurement market.

The year-over-year decrease in revenues was primarily attributable to lower sales of advanced sensors in our Other markets for consumer applications, and in our Avionics, Military and Space ("AMS") market, and in our General Industrial market, which offset higher sales of precision resistors in the Test and Measurement market.

Net revenues of $72.7 million for the fourth quarter of 2024 decreased 4.1% from the net revenues of $75.7 million reported in the third quarter of 2024, and decreased 18.8% from $89.5 million for the comparable prior year period.

Net revenues in the Sensors segment of $25.8 million in the fourth quarter of 2024 decreased 8.7% from $28.2 million in the third quarter of 2024, and decreased 24.8% from $34.3 million in the fourth quarter of 2023.

Sequentially, the decline in revenues primarily reflected lower sales of advanced sensors in our Other markets for consumer applications and lower precision resistor sales in the Test and Measurement market.

The year-over-year decrease in revenues was primarily attributable to lower sales of precision resistors in the Test & Measurement market and lower sales of advanced sensors in our Other markets for consumer applications.

Net revenues in the Weighing Solutions segment of $25.7 million in the fourth quarter of 2024 increased 2.2% compared to revenues of $25.2 million in the third quarter of 2024.

The sequential increase in revenues was primarily attributable to increased revenues from OEM customers for precision agriculture and construction applications in our Other market segment and higher revenue in our General Industrial market, partially offset by lower sales in the Transportation market.

Net revenues in the fourth quarter of 2023 decreased 8.0% compared to $33.1 million in the fourth quarter of 2022 mainly due to lower revenues in our Industrial Weighing market and lower revenues from OEM customers for precision agriculture applications in our Other market segment.

Net revenues in the Measurement Systems segment of $24.8 million in the fourth quarter of 2023 increased 2.0% from $24.4 million in the third quarter of 2023 and decreased 7.5% from $26.8 million in the fourth quarter of 2022.

The sequential increase in revenue was primarily attributable to higher sales of Diversified Technical Systems, Inc.

("DTS") products to the AMS market, which was partially offset by lower sales of Dynamic Systems Inc.

("DSI") and KELK products to the Steel market.

The year-over-year decline in revenues was primarily attributable to lower sales of DSI and KELK products to the steel market and lower sales of DTS products to the Transportation market, which was partially offset by higher sales of DTS products to the AMS market.

The gross profit margin for the fourth quarter of 2023 increased 1.1% compared to the third quarter of 2023, and increased 1.8% from the fourth quarter of 2022.

Sequentially, gross profit margins improved in the Sensors segment, decreased in the Weighing Solutions segment, and improved in the Measurement Systems segments.

The increase in the Sensors segment gross profit margin was primarily due to higher volume and improved manufacturing efficiencies.

In the Weighing Solutions segment, gross profit margin decreased due to a reduction in inventory and unfavorable product mix, partially offset by higher volume.

In the Measurement Systems segment, gross profit margin increased reflecting higher volume and favorable product mix.

Compared to the fourth quarter of 2022, gross profit margins increased in all of the reporting segments.

In the Sensors segment, the increase in gross profit margin was primarily due to favorable foreign exchange rates and improved manufacturing efficiencies, which offset the impact of lower volume.

In the Weighing Solutions segment, the increase in g ross profit margin was primarily due to increased selling prices, favorable foreign currency exchange rates, and manufacturing efficiencies, partially offset by lower volume.

In the Measurement Systems segment, gross profit margin increased reflecting higher volume and favorable product mix.

The sequential increase in revenues reflected higher revenue in our Industrial Weighing market and in our Other markets, which offset lower revenue in the Transportation market.

Net revenues in the fourth quarter of 2024 decreased 15.4% compared to $30.4 million in the fourth quarter of 2023 mainly due to lower revenues in our Other markets from OEM customers for precision agriculture and construction applications and lower revenues in the Transportation and General Industrial markets.

Net revenues in the Measurement Systems segment of $21.2 million in the fourth quarter of 2024 decreased 5.3% from $22.4 million in the third quarter of 2024 and decreased 14.8% from $24.8 million in the fourth quarter of 2023.

The sequential decline in revenue was primarily attributable to lower sales of DSI products, which was partially offset by the added revenues related to the acquisition of Nokra on September 30, 2024.

The year-over-year decline in revenues was primarily attributable to lower sales of DTS products, which offset the added revenue related to the acquisition of Nokra on September 30, 2024.

The gross profit margin for the fourth quarter of 2024 decreased 1.8% compared to the third quarter of 2024, and decreased 4.8% from the fourth quarter of 2023.

Sequentially, gross profit margins improved in the Sensors segment, decreased in the Weighing Solutions segment, and decreased in the Measurement Systems segments.

Sequentially, the increase in gross profit margin in the Sensors segment was primarily due to improved manufacturing efficiencies, which offset the impact of lower volume.

The decrease in gross margin for the Weighing Solutions segment was primarily due to higher material costs and the reduction in inventory which offset higher volume.

In the Measurement Systems segment, the lower adjusted gross profit margin in the fourth quarter of 2024 reflected lower volume and unfavorable product mix.

Compared to the fourth quarter of 2023, gross profit margins decreased in all of the reporting segments.

In the Sensors segment, the decreased in gross profit margin was primarily due to lower volume and unfavorable product mix, which was partially offset by improved manufacturing efficiencies.

In the Weighing Solutions segment, the decreased in g ross profit margin was primarily due to lower volume.

In the Measurement Systems segment, gross profit margin decreased reflecting lower volume and unfavorable product mix.

Operationally Diversified

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Our advanced sensors manufacturing technology also offers us the capability to produce high-quality foil strain gages in a highly automated environment, which we believe results in reduced manufacturing and lead times, improved quality and increased margins.

As a sign of our commitment to these businesses, we signed a long-term lease for a state-of-the-art facility that has been constructed in Israel.

We fully transitioned to this facility in the third quarter of fiscal 2021.

As a sign of our commitment to these businesses, we signed a long-term lease for a state-of-the-art facility that has been constructed in Israel and fully transitioned to this facility in the third quarter of fiscal 2021.

Our design, research, and product development teams, in partnership with our marketing teams, drive our efforts to bring innovations to market.

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Our acquisition strategy is focused on identifying and acquiring high-value, growing technology-driven businesses that augment, expand and/or leverage our current offering in precision measurement and sensor markets.

We expect to expand our expertise and our acquisition focus to other precision measurement solutions, including in the fields of measurement of force, weight, pressure, torque, tilt, motion, and acceleration.

We expect to expand our expertise and acquisition focus to other precision measurement solutions, including in the fields of measurement of force, weight, pressure, torque, tilt, motion, and acceleration.

We believe acquired businesses will benefit from improvements we implement to reduce redundant functions and from our current global manufacturing and distribution footprint.

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We believe our R&D efforts should provide us with a variety of opportunities to leverage technology, products, and our manufacturing base in order to ultimately improve our financial performance.

The amount charged to expense for research and development aggregated $20.4 million, $19.8 million, and $17.2 million for the years ended December 31, 2023, 2022, and 2021, respectively.

The amount charged to expense for research and development was $20.0 million, $20.4 million, and $19.8 million for the years ended December 31, 2024, 2023, and 2022, respectively.

Cost Management

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Effects of Foreign Exchange Rate on Operations

For the year ended December 31, 2023, exchange rate impacts decreased net revenues by $2.2 million and decrease costs of products sold and selling, general, and administrative expenses by $9.1 million.

For the year ended December 31, 2022, exchange rate impacts decreased net revenues by $16.1 million and decreased costs of products sold and selling, general, and administrative expenses by $13.3 million.

For the year ended December 31, 2024, foreign exchange rate impacts decreased net revenues by $0.9 million and decrease costs of products sold and selling, general, and administrative expenses by $1.1 million.

For the year ended December 31, 2023, foreign exchange rate impacts decreased net revenues by $2.2 million and decreased costs of products sold and selling, general, and administrative expenses by $9.1 million.

Critical Accounting Policies and Estimates

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However, if we conclude otherwise, then we are required to perform the quantitative impairment test by calculating the fair value of the reporting unit and comparing it against its carrying value.

We have four reporting units to which goodwill was allocated:

The Company has four reporting units to which goodwill was allocated:

steel, on-board weighing, DSI, and DTS.

For the steel and on-board weighing goodwill reporting units, we performed the qualitative assessment, which included assessment of macroeconomic conditions, industry and market considerations, cost factors, overall financial performance, and other entity specific events which could impact the reporting unit.

Based on this review, it was determined that the fair value of each of those reporting units was in excess of its carrying value and therefore no quantitative impairment test was required.

For the DSI and DTS goodwill reporting units, the Company performed the quantitative impairment test.

In estimating the fair value of our DSI and DTS reporting units the Company used the income approach.

In 2024 the Company performed a quantitative impairment test for all its reporting units.

In estimating the fair value of our reporting units the Company used the income approach.

The income approach to valuation requires management to make significant estimates and assumptions related to future revenues, profitability, working capital requirements and selection of discount rate and long term growth rate.

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The discount rate at which obligations could effectively be settled and the expected long-term rate of return on plan assets are two critical assumptions in measuring the cost and benefit obligations of our pension and other postretirement benefit plans.

Other important assumptions include the anticipated rate of future increases in compensation levels, estimated mortality, and for

postretirement medical plans, increases or trends in health care costs.

Other important assumptions include the anticipated rate of future increases in compensation levels, estimated mortality, and for postretirement medical plans, increases or trends in health care costs.

Management reviews these assumptions at least annually.

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We utilize published long-term high-quality bond indices to determine the discount rate at the measurement date.

We utilize bond yields at various maturity dates to reflect the timing of expected future benefit payments.

We utilize bond yields at various maturity dates to reflect

the timing of expected future benefit payments.

We believe the discount rates selected are the rates at which these obligations could effectively be settled.

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subsidiaries to be indefinitely invested outside the United States based on our estimates that future domestic cash generation will be sufficient to meet future domestic cash needs and our plans for reinvestment of foreign subsidiary earnings.

As of December 31, 2023, the Company had provided for a deferred tax liability of $2.1 million of withholding tax associated with unremitted, non-permanently reinvested earnings, including planned cash distributions of $16.6 million.

As of December 31, 2024, the Company had provided for a deferred tax liability of $2.3 million of withholding tax associated with $25.3 million of unremitted, non-permanently reinvested earnings.

Additional withholding taxes of approximately $32.0 million are estimated to be payable upon the distribution of the remaining unremitted earnings at December 31, 2024.

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Net change (13.7) %

During the year ended December 31, 2023, net revenues decreased 2.1% over the prior year.

Decreased volume in the Sensors and Weighing Solutions reporting segments was partially offset by volume increase in the Measurement System reporting segment.

Volume increases in our steel and AMS end markets, were offset by lower volume across all of our other market sectors.

The overall volume decreases were partially offset by increased selling prices across all of our reporting segments.

During the year ended December 31, 2024, net revenues decreased 13.7% over the prior year in all three reporting segments.

Gross Profit Margin

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Gross profit margin 41.0 % 42.3 %

The gross profit margin for the year ended December 31, 2023 increased 1.0% over the prior year.

The increase in gross profit margin was primarily due to improved gross profit margins in the Weighing Solutions and Measurement Systems reporting segments partially offset by decreased gross profit margin in the Sensors reporting segment.

The gross profit margin for the year ended December 31, 2024 decreased 1.3% over the prior year.

The decrease in gross profit margin was primarily due to decreased gross profit margins in the Weighing Solutions and Sensors reporting segments partially offset by increased gross profit margin in the Measurement Systems reporting segment.

Analysis of revenues and gross profit margins for our reportable segments is provided below.

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Net change (19.7) %

For the year ended December 31, 2023, net revenues decreased 8.2% as compared to the prior year, due to lower sales of precision resistors in the Test and Measurement market, and lower sales of advanced sensors products primarily in our Other markets (mainly for consumer applications), partially offset by increases in precision resistor sales in the AMS market.

For the year ended December 31, 2024, net revenues decreased 19.7% as compared to the prior year, due to lower sales of precision resistors in the Test and Measurement and the AMS markets, and lower sales of advanced sensors products primarily in the AMS market.

Gross profit as a percentage of net revenues for the Sensors segment was as follows:

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Gross profit margin 34.5 % 39.4 %

For the year ended December 31, 2023, the gross profit margin decreased 0.7% as compared to the prior year primarily due to volume decreases and manufacturing inefficiencies, which were partially offset by favorable foreign currency exchange rates.

For the year ended December 31, 2024, the gross profit margin decreased 4.9% as compared to the prior year primarily due to lower volume.

Weighing Solutions

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For the year ended December 31, 2024, net revenues decreased 12.5% from the prior year.

Increased sales of load cells in our Other markets for precision agriculture and construction applications and transducer systems in our Industrial Weighing market,

were offset by lower sales of our load cell products in our Industrial weighing market.

The overall volume decline was only partially offset by higher average selling prices.

Gross profit as a percentage of net revenues for the Weighing Solutions segment was as follows:

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Gross profit margin 36.6 % 37.0 %

For the year ended December 31, 2023, the gross profit margin increased 2.7% as compared to the prior year.

The increase in gross profit margin was primarily due to cost reductions, manufacturing efficiencies, favorable foreign currency exchange rates, and higher selling prices, which offset the impact of lower volume.

For the year ended December 31, 2024, the gross profit margin decreased 0.4% as compared to the prior year, due to lower volume.

Measurement Systems

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Net change (6.1) %

For the year ended December 31, 2023, net revenues increased 9.6% as compared to the prior year, primarily due to increased revenue in the Steel market and higher sales of DTS products in the AMS market.

For the year ended December 31, 2024, net revenues decreased 6.1% as compared to the prior year, primarily attributable to lower sales of DSI and DTS products partially offset by the added revenue related to the acquisition of Nokra on September 30, 2024.

Gross profit as a percentage of net revenues for the Measurement Systems segment was as follows:

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Gross profit margin 54.6 % 53.8 %

For the year ended December 31, 2023, the gross profit margin increased 0.2% from the prior year.

Higher revenues coupled with lower purchase accounting adjustments related to the DTS acquisition were partially offset by higher material costs and higher manufacturing costs.

For the year ended December 31, 2024, the gross profit margin increased 0.8% from the prior year mostly due to favorable product mix partially offset by lower volume.

Selling, General, and Administrative Expenses

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as a percentage of net revenues 35.1 % 30.1 %

SG&A expenses for the year ended December 31, 2023 increased $2.5 million as compared to the prior year due to higher personnel costs, including increases in headcount, wages and travel costs, higher IT costs and higher commissions.

SG&A expenses for the year ended December 31, 2024 increased $0.7 million as compared to the prior year mostly due to added personnel costs related to the acquisition of Nokra on September 30, 2024.

Impairment of Goodwill and Indefinite-lived Intangible Assets

For the years ended December 31, 2023 and December 31, 2022, as a result of our annual impairment tests performed on goodwill and indefinite-lived intangible assets there was no impairment on goodwill and indefinite-lived intangible assets.

For the years ended December 31, 2024 and December 31, 2023, no impairment of goodwill and indefinite-lived intangible assets was recorded.

Restructuring Costs

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Acquisition Costs

There were no acquisition costs recorded in our consolidated statements of operations for the year ended December 31, 2023 or December 31, 2022.

For the year ended December 31, 2024, we recorded acquisition costs in our consolidated statements of operations of $0.1 million in connection with the acquisition of Nokra.

There were no acquisition costs recorded in our consolidated statements of operations for the year ended December 31, 2023.

Other Income (Expense)

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The Company recorded interest expense of $2.5 million, and $4.0 million for the years ended December 31, 2024 and 2023, respectively.

Interest expense was higher in 2023 compared to 2022 mainly due to higher borrowing rates during 2023.

Interest expense was lower in 2024 compared to 2023 mainly due to partial repayment of loans that occurred in the second half of 2023 and lower borrowing rates during 2024.

The following table analyzes the components of the line “Other” on the consolidated statements of operations (in thousands) :

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2024 2023 Change

Foreign exchange gain/(loss) $ (822) $ 3,579 $ (4,401)

Foreign currency exchange gain/(loss) $ 1,878 $ (822) $ 2,700

Interest income 1,673 1,651 22

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Foreign currency exchange gains and losses represent the impact of changes in foreign currency exchange rates.

The change in foreign exchange gains / (losses) for the year ended December 31, 2023, as compared to the prior year period, is primarily due to fluctuations in the Israeli shekel, the Canadian dollar and the British pound.

The change in the dollar-shekel exchange rate resulted in a unfavorable currency exchange impact primarily related to the shekel-denominated lease liability for the Sensors facility in Israel.

The change in foreign currency exchange gains / (losses) for the year ended December 31, 2024, as compared to the prior year period, is primarily due to fluctuations in the Japanese Yen, Israeli shekel and the Canadian dollar.

Our effective tax rate for the year ended December 31, 2024 was 44.0%, as compared to 32.3% for the year ended December 31, 2023.

Our effective tax rate was higher in 2023 compared to 2022 primarily due to increases in valuation allowances, increases in reserves for uncertain tax positions and changes in our geographical mix of income.

Our effective tax rate was higher in 2024 compared to 2023 primarily due to increases in valuation allowances and changes in our geographical mix of income.

We reassessed our ability to realize our U.S.

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• 7.6% increase related to changes in valuation allowances

• 2.3% increase related to residual U.S.

tax on foreign earnings

• 1.2% increase related to changes in reserves for uncertain tax positions

• 1.0% increase related to statutory tax rate changes

• 2.9% decrease related to specialty tax credits, such as research credits

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statutory rate and foreign tax rates

• 1.5% increase related to foreign currency primarily attributable to our operations in India, Israel and Taiwan

• 3.3% increase related to changes in valuation allowances

• 2.3% increase related to residual U.S.

tax on foreign earnings

• 1.2% increase related to changes in reserves for uncertain tax positions

• 1.4% decrease related to specialty tax credits, such as research credits

• 2.2% decrease related to changes in reserves for uncertain tax positions

• 3.6% decrease related to changes in valuation allowances

Additional information about income taxes is included in Note 7 to our consolidated financial statements.

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We believe that our current cash and cash equivalents, credit facilities, and projected cash from operations will be sufficient to meet our liquidity needs for at least the next 12 months.

On March 20, 2020, the Company entered into a Third Amended and Restated Credit Agreement (the “2020 Credit Agreement”) among the Company, the lenders named therein, Citizens Bank, National Association and Wells Fargo Bank, National Association as joint lead arrangers and JPMorgan Chase Bank, National Association as agent for such lenders (the “Agent”), pursuant to which the terms of the Company’s multi-currency, secured credit facility were revised to provide a secured revolving facility (the “2020 Revolving Facility”) in an aggregate principal amount of $75.0 million, with a sublimit of $10.0 million which can be used for letters of credit for the account of the Company or its subsidiaries that are parties to the Credit Agreement.

The proceeds of the 2020 Revolving Facility may be used on an ongoing basis for working capital and general corporate purposes.

On August 15, 2024, the Company entered into a Fourth Amended and Restated Credit Agreement (the “2024 Credit Agreement”) among the Company, the lenders party thereto, JPMorgan Chase Bank, N.A., Wells Fargo Bank, N.A.

and HSBC as joint lead arrangers and joint bookrunner, and JPMorgan Chase Bank, N.A, as agent for such lenders (the “Agent”), pursuant to which the Company’s existing credit facility was amended and restated to, among other things, extend the maturity date from March 20, 2025 to August 15, 2029 and adjust the interest rate and commitment fee.

The 2024 Credit Agreement provides for a multi-currency, secured credit facility (the “2024 Revolving Facility”) in an aggregate principal amount of $75.0 million, with a sublimit of $10.0 million which can be used for letters of credit for the account of the Company or its subsidiaries that are parties to the 2024 Credit Agreement, the proceeds of which may be used for working capital and general corporate purposes, and a portion of which were used to refinance the Company’s existing revolving credit facility.

The aggregate principal amount of the 2024 Revolving Facility may be increased by a maximum of $25.0 million upon the request of the Company, subject to the terms of the 2024 Credit Agreement.

The 2020 Credit Agreement terminates on March 20, 2025.

On May 5, 2023, the Company entered into Amendment No.

1 to Third Amended and Restated Credit Agreement (the “Credit Agreement Amendment”) amending the Third Amended and Restated Credit Agreement, dated March 20, 2020.

The primary purpose of the changes made in the Credit Agreement Amendment were to update the interest rate provisions to replace LIBOR with SOFR for U.S.

dollar denominated loans as well as update the other applicable reference borrowing rates for foreign currency loans which took effect on June 15, 2023.

Interest payable on amounts borrowed under the 2020 Revolving Facility, taking into account the effect of the Credit Agreement Amendment, is based upon the following:

(a) for revolving credit loans denominated in US Dollars, the SOFR rate plus applicable credit spread;

and (b) for revolving credit loans denominated in foreign currencies, at other applicable local reference rates plus an interest margin.

Depending upon the Company’s leverage ratio, an interest rate margin ranging from 1.50% to 2.75% per annum is added to the applicable SOFR rate to determine the interest payable on the SOFR loans.

The Company is required to pay a quarterly fee of 0.25% per annum to 0.40% per annum on the unused portion of the 2020 Revolving Facility, which is determined based on the Company’s leverage ratio each quarter.

The Company may elect to make loans under the 2024 Revolving Facility in US Dollars, Euros, Canadian Dollars, Sterling, Japanese Yen or such other freely convertible foreign currency.

Amounts borrowed under the 2024 Revolving Facility accrue interest in an amount equal to a floating rate plus a specified margin.

Such floating rates are (i) for loans denominated in US Dollars, at the Company’s option, either (a) the greatest of:

the Agent’s prime rate, the Federal Funds rate, or a 1.00% floor (the “US Base Rate”), or (b) the Secured Overnight Financing Rate (“SOFR”), (ii) for loans denominated in Canadian Dollars, at the Company’s option, either (x) the greatest of:

the PRIMCAN Index rate, the average 30 day rate for loans accruing interest based on the Canadian Overnight Repo Rate Average (“CORRA”) (the “Canadian Base Rate”), or (y) CORRA, (iii) for loans denominated in Pounds Sterling, the Sterling Overnight Index Average (“SONIA”), (iv) for loans denominated in Euros, the Euro Interbank Offered Rate (“EURIBOR"), and (v) for loans denominated in Japanese Yen, the Tokyo Interbank Offered Rate (“TIBOR”).

The specified interest margin for US Base Rate Loans and Canadian Base Rate Loans is 0.25%.

Depending upon the Company’s leverage ratio, the interest rate margin for loans based on SOFR, CORRA, SONIA, EURIBOR and TIBOR ranges from 1.75% to 3.00% per annum.

The Company is required to pay a quarterly fee of 0.20% per annum to 0.40% per annum on the unused portion of the 2024 Revolving Facility, which is also determined based on the Company’s leverage ratio.

Additional customary fees apply with respect to letters of credit.

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The obligations of the Company and the guarantors under the 2024 Credit Agreement are secured by substantially all the assets (excluding real estate) of the Company and such guarantors.

The 2020 Credit Agreement restricts the Company from paying cash dividends and requires the Company to comply with other customary covenants, representations, and warranties, including the maintenance of specific financial ratios.

The financial maintenance covenants include an interest coverage ratio and a leverage ratio.

The Company was in compliance with its financial maintenance covenants at December 31, 2023.

If the Company is not in compliance with any of these covenant restrictions, the credit facility could be terminated by the lenders, and all amounts outstanding pursuant to the credit facility could become immediately payable.

The 2024 Credit Agreement restricts the Company from paying cash dividends and requires the Company to comply with other customary covenants, representations, and warranties, including the maintenance of a specified interest coverage ratio and a leverage ratio, each tested as of the last day of each fiscal quarter.

If the Company is not in compliance with any of these covenant restrictions, the 2024 Revolving Facility could be terminated by the lenders, and all amounts outstanding pursuant to the 2024 Credit Agreement could become immediately payable.

Our business has historically generated significant cash flow.

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subsidiaries.

See the following table for the percentage of cash and cash equivalents, by region, at December 31, 2023 and December 31, 2022:

See the following table for the percentage of cash and cash equivalents, by region of subsidiary, at December 31, 2024 and December 31, 2023:

Asia 21 % 22 %

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Europe 14 % 23 %

United Kingdom 5 % 10 %

Canada 3 % 11 %

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significant developments from the recent and potential changes in tariffs and trade regulation;

our efforts and efforts by governmental authorities to mitigate the COVID-19 pandemic, such as travel bans, shelter-in-place orders and business closures and the related impact on resource

allocations, manufacturing and supply chains;

our status as a “critical”, “essential” or “life-sustaining” business in light of COVID-19 business closure laws, orders and guidance being challenged by a governmental body or other applicable authority;

our ability to execute our new corporate strategy and business continuity, operational and budget plans;

3 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-K

Item 7. Management’s Discussion and Analysis