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Item 2. Management’s Discussion and Analysis

2025-07-29 compared with 2025-04-22 · 86 added, 52 removed, 128 unchanged (52% of the section changed)

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The following information should be read in conjunction with the audited consolidated financial statements and notes thereto, along with Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), in our Annual Report on Form 10-K for the year ended December 31, 2024.

Recent Developments

As disclosed in Part I, Item 1A, "Risk Factors", of our Annual Report on Form 10-K for the year ended December 31, 2024, the Company’s business is subject to risks related to, among other factors, tariffs and other trade protection measures put in place by the United States or other countries.

Starting in the first quarter of 2025, the United States government announced additional tariffs on goods imported into the U.S.

from numerous countries and multiple nations countered with reciprocal tariffs and other actions in response.

government continues to negotiate with other countries regarding the tariffs.

While the Company is well positioned to respond to the tariff environment, costs are impacted by trade policies.

Critical Accounting Estimates

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Refer to Item 7, MD&A, of our Annual Report on Form 10-K for the year ended December 31, 2024 for information with respect to our critical accounting estimates which we believe could have the most significant effect on our reported results and require subjective or complex judgments by management.

Except for the items reported below, management believes that as of March 31, 2025, and during the period from January 1, 2025 through March 31, 2025, there has been no material change to this information.

Except for the items reported below, management believes that as of June 30, 2025, and during the period from January 1, 2025 through June 30, 2025, there has been no material change to this information.

Recent Accounting Pronouncements

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The operating results of PMC are reported as discontinued operations in our condensed consolidated statements of operations for all periods presented.

The condensed consolidated statements of cash flows for the three months ended March 31, 2025 and March 31, 2024 have not been adjusted to separately disclose cash flows related to the discontinued operations.

The major components of the Income from discontinued operations, net of tax presented in the condensed consolidated statements of operations for the three months ended March 31, 2025 and March 31, 2024, are as follows (in millions):

Three Months Ended

March 31, 2025 March 31, 2024

Selling, general and administrative income (1) $ (2.6) $ —

The condensed consolidated statements of cash flows for the six months ended June 30, 2025 and June 30, 2024 have not been adjusted to separately disclose cash flows related to the discontinued operations.

The major components of the Income from discontinued operations, net of tax presented in the condensed consolidated statements of operations for the three and six months ended June 30, 2025 and June 30, 2024, are as follows (in millions):

Three Months Ended Six Months Ended

June 30, 2025 June 30, 2024 June 30, 2025 June 30, 2024

Selling, general and administrative expense (1) $ — $ (0.7) $ (2.6) $ (0.7)

Income from discontinued operations before income tax — 0.7 2.6 0.7

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Income from discontinued operations, net of tax $ 0.4 $ 0.7 $ 3.0 $ 1.0

(1) Selling, general and administrative income includes the release of certain accruals as a result of costs the Company will no longer incur related to the Spin-Off Transaction.

(1) Selling, general and administrative expense includes the release of certain accruals as a result of costs the Company will no longer incur related to the Spin-Off Transaction.

See Item 1, Note 3, Discontinued Operations for additional information.

Restructuring and Other Similar Charges

During the three months ended March 31, 2025, the Company continued to execute various restructuring actions.

During the three and six months ended June 30, 2025, the Company continued to execute various restructuring actions.

These initiatives were implemented to drive efficiencies and reduce operating costs while also modifying the Company's footprint to reflect changes in the markets it serves, the impact of mergers and acquisitions on the Company's overall manufacturing capacity and the refinement of its overall product portfolio.

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As such, the Company expects further expenses related to workforce reductions, potential impairment or accelerated depreciation of assets, lease termination costs and other facility rationalization costs.

For the three months ended March 31, 2025, restructuring charges totaled $1.7 million.

For the three months ended March 31, 2024, restructuring charges totaled $6.3 million.

For the three and six months ended June 30, 2025, restructuring charges totaled $1.9 million and $3.6 million, respectively.

For the three and six months ended June 30, 2024, restructuring charges totaled $0.7 million and $7.0 million, respectively.

Refer to Item 1, Note 2, Restructuring and Other Similar Charges for further information.

Results of Operations

Three Months Ended March 31, 2025 compared with the Three Months Ended March 31, 2024:

Three Months Ended June 30, 2025 compared with the Three Months Ended June 30, 2024:

(Dollars in Millions)

Three Months Ended

March 31, 2025 March 31, 2024 Change % Change

June 30, 2025 June 30, 2024 Change % Change

Net sales $ 444.5 $ 412.0 $ 32.5 7.9 %

Net sales were $388.8 million and $373.8 million during the three months ended March 31, 2025 and March 31, 2024, respectively, an increase of 4% year over year.

Net sales were $444.5 million and $412.0 million during the three months ended June 30, 2025 and June 30, 2024, respectively, an increase of 8% year over year.

Core sales improved 8% year over year, including growth in all product categories.

Year-over-year growth was volume driven as the first quarter has no impact from tariff related price increases.

The impact from foreign currency exchange rates reduced net sales by 1% in the quarter compared to the prior year quarter.

Income from operations

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Three Months Ended

March 31, 2025 March 31, 2024 Change % Change

June 30, 2025 June 30, 2024 Change % Change

Income from operations $ 77.6 $ 71.9 $ 5.7 7.9 %

% of net sales 17.5 % 17.5 % — %

During the three months ended March 31, 2025, income from operations was $63.4 million compared to $53.2 million during the three months ended March 31, 2024.

Income from operations as a percentage of net sales increased by 210 basis points year over year due to the benefits from our productivity initiatives and continuous improvement activities across the organization, as well as lower restructuring charges and carryover benefits of synergy actions taken in the prior year.

During the three months ended June 30, 2025, income from operations was $77.6 million compared to $71.9 million during the three months ended June 30, 2024.

Income from operations as a percentage of net sales stayed consistent year over year as a result of the favorable impact of year-over-year sales growth (inclusive of price realization) and productivity savings being offset primarily by the year-over-year change in the adjustment to state inventories at last-in, first-out cost and incremental restructuring expense.

Interest expense, net

Interest expense, net was $7.3 million for the three months ended March 31, 2025, compared to $8.8 million for the three months ended March 31, 2024.

The decrease in interest expense, net as compared to the prior year period is primarily due to reduced interest expense in the current year as a result of lower interest rates.

Interest expense, net was $7.7 million for the three months ended June 30, 2025, compared to $8.5 million for the three months ended June 30, 2024.

The decrease in interest expense, net as compared to the prior year period is primarily due to lower interest rates.

Other expense, net

Other expense, net for the three months ended March 31, 2025 and 2024, was $0.0 million and $1.4 million, respectively.

Other expense, net for the three months ended June 30, 2025 and 2024, was $2.0 million and $1.6 million, respectively.

Other expense, net consists primarily of foreign currency transaction gains and losses, the non-service cost components associated with our defined benefit and postretirement plans and other non-operational gains and losses.

The year-over-year change is primarily driven by lower defined benefit plan costs in the current year as a result of the curtailment gain of $0.7 million recognized in connection with the U.S.

pension plan freeze as well as a higher expected return on plan assets.

The year-over-year change is primarily driven by increased other non-operational and foreign currency transaction losses, offset by lower defined benefit plan costs in the current year.

Provision for income taxes

The income tax provision was $15.1 million for the three months ended March 31, 2025, compared to $9.0 million for the three months ended March 31, 2024.

The effective income tax rate for the three months ended March 31, 2025 was 26.9% versus 20.9% for the three months ended March 31, 2024.

The effective income tax rate for the three months ended March 31, 2025 was above the U.S.

The income tax provision was $17.8 million for the three months ended June 30, 2025, compared to $16.5 million for the three months ended June 30, 2024.

The effective income tax rate for the three months ended June 30, 2025 was 26.2% versus 26.7% for the three months ended June 30, 2024.

The effective income tax rate for the three months ended June 30, 2025 and the three months ended June 30, 2024 was above the U.S.

federal statutory rate of 21% primarily due to the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes and the accrual of foreign income taxes, which are generally above the U.S.

federal statutory rate, partially offset by the recognition of income tax benefits associated with share-based payments.

The effective income tax rate for the three months ended March 31, 2024 was slightly below the U.S.

federal statutory rate of 21% as the accrual of additional income taxes associated with compensation deduction limitations under Section 162(m) of the Internal Revenue Code, the accrual of various state income taxes and the accrual of foreign income taxes, which are generally above the U.S.

federal statutory rate, was effectively offset by the recognition of certain previously unrecognized tax benefits due to the lapse of the applicable statutes of limitations and income tax benefits associated with share-based payments.

On a quarterly basis, we review and analyze our valuation allowances associated with deferred tax assets relating to certain foreign and state net operating loss carryforwards as well as U.S.

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Future changes to the balances of these valuation allowances, as a result of our continued review and analysis, could impact the financial statements for such period of change.

Net income for the three months ended March 31, 2025, was $43.6 million compared to net income of $34.3 million for the three months ended March 31, 2024.

Diluted net income per share for the three months ended March 31, 2025 and March 31, 2024, was $0.26 and $0.19, respectively.

Net income for the three months ended June 30, 2025, was $50.5 million compared to net income of $46.0 million for the three months ended June 30, 2024.

Diluted net income per share for the three months ended June 30, 2025 and June 30, 2024, was $0.29 and $0.27, respectively.

The year-over-year change is the result of the factors described above.

Net income from discontinued operations, net of tax, was $2.6 million for the three months ended March 31, 2025 compared to net income from discontinued operations, net of tax, of $0.3 million for the three months ended March 31, 2024.

Diluted net income per share from discontinued operations for the three months ended March 31, 2025 and March 31, 2024, was $0.02 and $0.00, respectively.

Net income from discontinued operations, net of tax, was $0.4 million for the three months ended June 30, 2025 compared to net income from discontinued operations, net of tax, of $0.7 million for the three months ended June 30, 2024.

Diluted net income per share from discontinued operations for the three months ended June 30, 2025 and June 30, 2024, was $0.00 and $0.01, respectively.

Six Months Ended June 30, 2025 compared with the Six Months Ended June 30, 2024:

(Dollars in Millions)

Six Months Ended

June 30, 2025 June 30, 2024 Change % Change

Net sales $ 833.3 $ 785.8 $ 47.5 6.0 %

Net sales were $833.3 million during the six months ended June 30, 2025, an increase of 6% year over year.

Core sales improved 7% year over year, including growth in all product categories.

The impact from foreign currency exchange rates reduced net sales by 1% in the year.

Income from operations

(Dollars in Millions)

Six Months Ended

June 30, 2025 June 30, 2024 Change % Change

Income from operations 141.0 125.1 15.9 12.7 %

% of net sales 16.9 % 15.9 % 1.0 %

Income from operations during the six months ended June 30, 2025 was $141.0 million compared to $125.1 million during the six months ended June 30, 2024.

Income from operations as a percentage of net sales increased by 100 basis points year over year as a result of the favorable impact of year-over-year sales growth (inclusive of price realization) and productivity savings being slightly offset primarily by the year-over-year change in the adjustment to state inventories at last-in, first-out cost.

Interest expense, net

Interest expense, net was $15.0 million during the six months ended June 30, 2025, compared to $17.3 million during the six months ended June 30, 2024.

The decrease in interest expense, net as compared to the prior year period is primarily due to reduced interest expense in the current year as a result of lower interest rates.

Other expense, net

Other expense, net during the six months ended June 30, 2025 was $2.0 million compared to $3.0 million during the six months ended June 30, 2024.

Other expense, net consists primarily of foreign currency transaction gains and losses, the non-service cost components associated with our defined benefit plans and other non-operational gains and losses.

The year-over-year change is primarily driven by lower defined benefit plan costs in the current year, partly offset by foreign currency transaction losses.

Provision for income taxes

The income tax provision was $32.9 million for the six months ended June 30, 2025, compared to $25.5 million for the six months ended June 30, 2024.

The effective income tax rate for the six months ended June 30, 2025 was 26.5% versus 24.3% for the six months ended June 30, 2024.

The effective income tax rate for the six months ended June 30, 2025 and the six months ended June 30, 2024 was above the U.S.

federal statutory rate, partially offset by the recognition of income tax benefits associated with share-based payments.

Net income for the six months ended June 30, 2025, was $94.1 million compared to $80.3 million for the six months ended June 30, 2024.

Diluted net income per share for the six months ended June 30, 2025 and June 30, 2024, was $0.55 and $0.46, respectively.

The year-over-year change is the result of the factors described above.

Net income from discontinued operations, net of tax, was $3.0 million for the six months ended June 30, 2025 compared to $1.0 million for the six months ended June 30, 2024.

Diluted net income per share from discontinued operations for the six months ended June 30, 2025 and June 30, 2024, was $0.02 and $0.01, respectively.

Non-GAAP Financial Measures

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synergies related to operational changes ranging from mergers, acquisitions or dispositions to restructuring, and/or exclude one-time transition expenditures that we anticipate incurring to realize cost savings before such savings have occurred.

The calculation of Adjusted EBITDA under our credit agreement as of March 31, 2025, is presented in the table in the "Covenant Compliance" section below.

The calculation of Adjusted EBITDA under our credit agreement as of June 30, 2025, is presented in the table in the "Covenant Compliance" section below.

However, the results of such calculation could differ in the future based on the different types of adjustments that may be included in such respective calculations at the time.

For the three months ended March 31, 2025, we reported net income of $43.6 million and Adjusted EBITDA for the same period of $98.0 million.

For the six months ended June 30, 2025, we reported net income of $94.1 million and Adjusted EBITDA for the same period of $215.9 million.

See "Covenant Compliance" for a reconciliation of Adjusted EBITDA to GAAP net income.

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Certain covenants contained in the credit agreement restrict our ability to take certain actions, such as incurring additional debt or making acquisitions, if we are unable to meet a maximum total Net First Lien Leverage Ratio (consolidated indebtedness to Adjusted EBITDA) of 5.00 to 1.00 as of the end of each fiscal quarter.

As of March 31, 2025, our Net First Lien Leverage Ratio was 0.98 to 1.00.

As of June 30, 2025, our Net First Lien Leverage Ratio was 0.79 to 1.00.

Failure to comply with these covenants could limit our long-term growth prospects by hindering our ability to borrow under the revolver, to obtain future debt and/or to make acquisitions.

Set forth below is a reconciliation of net income to Adjusted EBITDA for the periods indicated below.

(in millions) Three months ended March 31, 2024 Twelve months ended December 31, 2024 Three months ended March 31, 2025 Twelve months ended March 31, 2025

(in millions) Six months ended June 30, 2024 Twelve months ended December 31, 2024 Six months ended June 30, 2025 Twelve months ended June 30, 2025

Net income $ 80.3 $ 160.2 $ 94.1 $ 174.0

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See Item 1, Note 2, Restructuring and Other Similar Charges for more information.

(4) Last-in first-out (LIFO) inventory adjustments are excluded in calculating Adjusted EBITDA as defined in our credit agreement.

(4) Last-In, First-Out ("LIFO") adjustments are excluded in calculating Adjusted EBITDA as defined in our credit agreement.

(5) Other, net consists of gains and losses on the disposition of long-lived assets per the credit agreement.

(6) Our credit agreement defines our consolidated indebtedness as the sum of all indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of indebtedness for borrowed money and capitalized lease obligations, less unrestricted cash, which was $107.3 million (as defined by the credit agreement) at March 31, 2025.

(6) Our credit agreement defines our consolidated indebtedness as the sum of all indebtedness (other than letters of credit or bank guarantees, to the extent undrawn) consisting of indebtedness for borrowed money and capitalized lease obligations, less unrestricted cash, which was $169.3 million (as defined by the credit agreement) at June 30, 2025.

(7) Our credit agreement defines the Net First Lien Leverage Ratio as the ratio of consolidated indebtedness (as described above) to Adjusted EBITDA for the trailing four fiscal quarters.

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Our primary sources of liquidity are available cash and cash equivalents, cash flow from operations, and borrowing availability of up to $200.0 million under our revolving credit facility.

As of March 31, 2025, we had $144.7 million of cash and cash equivalents and $188.9 million of additional borrowing capacity under our revolving credit facility.

As of March 31, 2025, the available borrowings under our credit facility were reduced by $11.1 million due to outstanding letters of credit.

As of June 30, 2025, we had $201.9 million of cash and cash equivalents and $189.9 million of additional borrowing capacity under our revolving credit facility.

As of June 30, 2025, the available borrowings under our credit facility were reduced by $10.1 million due to outstanding letters of credit.

As of December 31, 2024, we had $198.0 million of cash and cash equivalents and $188.7 million of additional borrowing capacity under our revolving credit facility.

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We believe this resource is adequate for our expected short-term and long-term needs.

Net cash provided by operating activities was $42.9 million and $53.9 million during the three months ended March 31, 2025 and 2024, respectively.

The change in year-over-year operating cash flows was primarily the result of higher use of cash for trade working capital partially offset by an increase in net income during the three months ended March 31, 2025.

Cash used for investing activities was $4.3 million during the three months ended March 31, 2025 and $2.1 million during the three months ended March 31, 2024.

Investing activities during the three months ended March 31, 2025, consisted of $4.3 million of capital expenditures.

Investing activities during the three months ended March 31, 2024, consisted of $3.7 million of capital expenditures, which were partially offset by $1.6 million from the sale of certain long-lived assets.

Cash used for financing activities was $92.1 million during the three months ended March 31, 2025, compared to $30.9 million during the three months ended March 31, 2024.

During the three months ended March 31, 2025, we utilized $0.2 million of cash for payments on finance leases, $77.4 million to repurchase outstanding shares of our common stock, and $15.2 million for the payment of common stock dividends, which was partially offset by $0.7 million of proceeds from the exercise of stock options and ESPP contributions, net of taxes withheld and paid on employees' share-based awards.

During the three months ended March 31, 2024, we utilized $0.2 million of cash for payments on finance leases, $18.9 million to repurchase outstanding shares of our common stock, and $13.9 million for the payment of common stock dividends, which was partially offset by $2.1 million of proceeds from the exercise of stock options.

As of March 31, 2025, we had $495.8 million of total indebtedness outstanding as follows (in millions):

Net cash provided by operating activities was $153.5 million and $139.0 million during the six months ended June 30, 2025 and 2024, respectively.

The change in year-over-year operating cash flows was primarily the result of an increase in net income during the six months ended June 30, 2025.

Cash used for investing activities was $13.3 million during the six months ended June 30, 2025 and $7.0 million during the six months ended June 30, 2024.

Investing activities during the six months ended June 30, 2025, consisted of $13.3 million of capital expenditures.

Investing activities during the six months ended June 30, 2024, consisted of $8.6 million of capital expenditures, which were partially offset by $1.6 million from the sale of certain long-lived assets.

Cash used for financing activities was $138.7 million during the six months ended June 30, 2025, compared to $104.2 million during the six months ended June 30, 2024.

During the six months ended June 30, 2025, we utilized $0.4 million of cash for payments on finance leases, $109.9 million to repurchase outstanding shares of our common stock, and $30.3 million for the payment of common stock dividends, which was partially offset by $1.9 million of proceeds from the exercise of stock options and ESPP contributions, net of taxes withheld and paid on employees' share-based awards.

During the six months ended June 30, 2024, we utilized $0.4 million of cash for payments on finance leases, $79.9 million to repurchase outstanding shares of our common stock, and $27.7 million for the payment of common stock dividends, which was partially offset by $3.8 million of proceeds from the exercise of stock options.

As of June 30, 2025, we had $495.9 million of total indebtedness outstanding as follows (in millions):

Total Debt at

March 31, 2025

June 30, 2025

Current Maturities of Debt Long-term

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Total $ 495.9 $ 0.8 $ 495.1

(1) Includes unamortized original issue discount and debt issuance costs of $5.0 million at March 31, 2025.

(1) Includes unamortized original issue discount and debt issuance costs of $4.7 million at June 30, 2025.

See Item 1, Note 12, Long-Term Debt for a description of our outstanding indebtedness.

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