UFP Technologies UFPT Form 10-Q filing Q2 FY2025

ITEM 1: FINANCIAL STATEMENTS Item 1. Financial Statements

UFP Technologies, Inc.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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The accompanying notes are an integral part of these condensed consolidated financial statements.

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UFP TECHNOLOGIES, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(In thousands)

(Unaudited)

The accompanying notes are an integral part of these consolidated financial statements.

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The accompanying notes are an integral part of these condensed consolidated financial statements.

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Notes to Interim Condensed Consolidated Financial Statements

(1) Basis of Presentation

The interim condensed consolidated financial statements of UFP Technologies, Inc. (the “Company”) presented herein, have been prepared pursuant to the rules of the Securities and Exchange Commission for quarterly reports on Form 10-Q and do not include all the information and note disclosures required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the consolidated financial statements and notes thereto for the year ended December 31, 2024, included in the Company's 2024 Annual Report on Form 10-K, as filed with the Securities and Exchange Commission.

The condensed consolidated balance sheets as of June 30, 2025 and December 31, 2024, the condensed consolidated statements of comprehensive income for the three and six months ended June 30, 2025 and 2024, the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2025 and 2024, and the condensed consolidated statements of cash flows for the six months ended June 30, 2025 and 2024 are unaudited but, in the opinion of management, include all adjustments (consisting of normal, recurring adjustments) necessary for a fair presentation of results for these interim periods. The condensed consolidated balance sheet as of December 31, 2024 has been derived from the Company’s annual financial statements that were audited by an independent registered public accounting firm but does not include all of the information and footnotes required for complete annual financial statements.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

The results of operations for the three and six months ended June 30, 2025 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 2025.

Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740)-Improvements to Income Tax Disclosures. The ASU requires additional quantitative and qualitative income tax disclosures to allow readers of the consolidated financial statements to assess how the Company’s operations, related tax risks and tax planning affect its tax rate and prospects for future cash flows. For public business entities, the ASU is effective for annual periods beginning after December 15, 2024. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements.

(2) Acquisitions

AJR Specialty Products and AJR Custom Foam Products

On April 25, 2025, the Company purchased 100% of the outstanding membership interests of AJR Specialty Products, LLC, (“AJR Specialty”) and AJR Custom Foam Products, LLC, (“AJR Custom Foam”) pursuant to a Securities Purchase Agreement, for an aggregate purchase price of $2.8 million in cash. The purchase price was subject to adjustment based upon AJR’s estimated working capital at closing. A portion of the purchase price is being held in escrow to indemnify the Company against certain claims, losses, and liabilities. The Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type. As part of the Securities Purchase Agreement, the Sellers as well as certain restricted parties have agreed not to compete with the Company for a period of seven years.

AJR Specialty and AJR Custom Foam, are both headquartered in St. Charles, IL. AJR Specialty and AJR Custom Foam provide additional capacity in the growing single-use safe patient handling space, as well as additional expertise in specialty fabrics and foam fabrication.

Acquisition costs associated with the transaction charged to expense during the three and six months ended June 30, 2025 were approximately $31 thousand and $59 thousand, respectively. These costs were primarily for legal services, which are included within “Acquisition costs” on the face of the Condensed Consolidated Statements of Comprehensive Income.

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As the revenues, earnings, balance sheet, and pro forma effects of the AJR Specialty and AJR Custom Foam acquisitions are not, and would not have been, material to the results of operations or financial position of the Company, the Company has elected to not disclose substantially all required disclosures of Accounting Standards Codification 805, Business Combinations, for this acquisition.

Marble Medical

On June 24, 2024, the Company purchased 100% of the outstanding shares of common stock of Marble Medical, Inc., (“Marble”) pursuant to a Stock Purchase Agreement and related agreements, for an aggregate purchase price of $4.5 million in cash, plus up to an additional $0.5 million based upon the achievement of sales targets of Marble for each of the 12-month periods ended December 31, 2024, and 2025. As of the opening balance sheet the contingent consideration had a fair value of approximately $400 thousand. The purchase price was subject to an adjustment based upon Marble’s estimated working capital at closing, which resulted in an increase of approximately $100 thousand. A portion of the purchase price is being held by the Company to indemnify the Company against certain claims, losses, and liabilities. The Stock Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type.

Founded in 1988 and headquartered in Tallahassee, FL, Marble develops and manufactures adhesive based medical components and single-use devices. The purchase price includes certain real estate, which encompasses Marble’s manufacturing, warehouse and office facilities. Marble enhances the Company’s adhesives expertise as well as precision die cutting capabilities.

The following table summarizes the allocation of the total purchase price of approximately $5.0 million, net of cash acquired, to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s estimates of fair value (in thousands):

Acquisition costs associated with the transaction of approximately $146 thousand were charged to expense during the six months ended June 30, 2024. These costs were primarily for legal services, which are included within “Acquisition costs” on the face of the Condensed Consolidated Statements of Comprehensive Income.

100% of the goodwill related to the Marble acquisition is expected to be deductible for tax purposes. The goodwill is attributable to the workforce of Marble and the synergies that have been and are expected to further be realized post-acquisition.

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AJR Enterprises

On July 1, 2024, the Company purchased 100% of the issued and outstanding membership interests of AJR Enterprises, LLC, (“AJR”) pursuant to a Securities Purchase Agreement and related agreements, for an aggregate purchase price of $110 million in cash. The purchase price was subject to an adjustment based upon AJR’s estimated working capital at closing, a final working capital adjustment, and a reduction for certain AJR liabilities funded by the sellers, which together resulted in an increase to the purchase price of approximately $700 thousand. A portion of the purchase price is being held by the Company to indemnify the Company against certain claims, losses, and liabilities. The Securities Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type.

Founded in 1997 and headquartered in St. Charles, IL, with an additional manufacturing plant in Santiago, Dominican Republic, AJR develops and manufactures single-use patient handling systems. Patient surfaces and transfer devices are a growing market due in part to government guidelines and legislation around safe patient handling. AJR’s ‘cut and sew’ manufacturing capabilities and specialty fabrics expertise supplement the Company’s thermoplastic joining expertise, allowing the Company to offer a comprehensive suite of development, commercialization, and manufacturing services for this market.

The following table summarizes the allocation of the total purchase price of approximately $110.7 million, net of cash acquired, to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s preliminary estimates of fair value (in thousands):

Acquisition costs associated with the transaction were approximately $600 thousand of which $422 thousand were charged to expense during the six months ended June 30, 2024, with the balance being charged to expense during the third quarter of 2024. These costs were primarily for legal, due diligence, and valuation services, which are included within “Acquisition costs” on the face of the Condensed Consolidated Statements of Comprehensive Income.

100% of the goodwill related to the AJR acquisition is expected to be deductible for tax purposes. The goodwill is attributable to the workforce of AJR and the significant synergies that have been and are expected to further be realized post-acquisition.

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Welch Fluorocarbon

On July 15, 2024, the Company purchased 100% of the outstanding shares of common stock of Welch Fluorocarbon, Inc., (“Welch”) pursuant to a Stock Purchase Agreement and related agreements, for an aggregate purchase price of $34.6 million in cash, plus up to an additional $6.0 million based upon the achievement of certain EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) targets of Welch for each of the 12-month periods ended December 31, 2024, 2025, and 2026. The contingent consideration has a fair value of approximately $800 thousand as of the opening balance sheet. The purchase price was subject to an adjustment based upon Welch’s working capital at closing, the assumption by the sellers of certain liabilities and a final working capital adjustment which together resulted in a decrease in the purchase price of approximately $200 thousand. A portion of the purchase price is being held by the Company to indemnify the Company against certain claims, losses, and liabilities. The Stock Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type.

Founded in 1985 and headquartered in Dover, NH, Welch develops and manufactures thermoformed, and heat sealed implantable medical device components utilizing thin, high-performance films. Welch provides thin film thermoforming capabilities and expertise in developing and manufacturing components for implantable medical devices.

Also on July 15, 2024, pursuant to separate purchase and sale agreements (with separate legal parties), the Company purchased certain real estate in Dover, NH, which encompasses a majority of Welch’s manufacturing, warehousing and office facilities for an aggregate purchase of approximately $3.2 million.

The following table summarizes the allocation of the total purchase price of approximately $35.2 million, net of cash acquired, to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s preliminary estimates of fair value (in thousands):

Acquisition costs associated with the transaction were approximately $281 thousand, of which $229 thousand was charged to expense during the six months ended June 30, 2024, with the balance being charged to expense during the third quarter of 2024. These costs were primarily for legal and valuation services, which are included within “Acquisition costs” on the face of the Condensed Consolidated Statements of Comprehensive Income.

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100% of the goodwill related to the Welch acquisition is expected to be deductible for tax purposes. The goodwill is attributable to the workforce of Welch and the synergies that have been and are expected to further be realized post-acquisition.

AQF

On August 23, 2024, the Company purchased 100% of the issued and outstanding membership interests of the parent holding companies of AQF Limited, operating as AQF Medical, (“AQF”) pursuant to a Share Purchase Agreement and related agreements, for an aggregate purchase price of €43 million in cash (total purchase price in U.S. Dollars amounted to approximately $48.0 million). The purchase price was subject to an adjustment based upon AQF’s working capital at closing, the assumption by the sellers of certain liabilities and a final working capital adjustment, which resulted in a net decrease of approximately $300 thousand. A portion of the purchase price is being held by the Company to indemnify the Company against certain claims, losses, and liabilities. The Share Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type.

Founded in 2005 and headquartered in Navan, Ireland with additional joint venture operations in Singapore, AQF develops and manufactures custom-engineered foam and thermoplastic components used in a wide range of medical devices and packaging. AQF enhances the Company’s expertise in converting specialty foams and films, and provides an expanded European manufacturing presence, and an Asian market presence in Singapore.

The following table summarizes the allocation of the total purchase price of approximately $47.7 million, net of cash acquired, to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s preliminary estimates of fair value (in thousands):

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Acquisition costs associated with the transaction were approximately $1.5 million, of which $116 thousand was charged to expense during the six months ended June 30, 2024, with the balance being charged to expense during the second half of 2024. These costs were primarily for legal, due diligence, and valuation services, which are included within “Acquisition costs” on the face of the Condensed Consolidated Statements of Comprehensive Income.

None of the goodwill related to the AQF acquisition is expected to be deductible for tax purposes. Goodwill is attributable to the workforce of AQF and the synergies that have been and are expected to further be realized post-acquisition.

Pro-forma Statements

The following table contains an unaudited pro forma consolidated statement of comprehensive income for the three and six months ended June 30, 2024, as if the collective acquisitions of Marble Medical, AJR Enterprises, Welch Fluorocarbon and AQF had occurred at the beginning of the respective periods (in thousands):

The above unaudited pro forma information is presented for illustrative purposes only and may not be indicative of the results of operations that would have occurred had all 2024 acquisitions occurred as presented. In addition, future results may vary significantly from the results reflected in such pro forma information. Pro-forma adjustments include depreciation adjustments on fixed asset step up/down; inventory step-up; amortization of intangibles; and estimated interest expense.

(3) Equity Method Investment

In conjunction with the acquisition of AQF, the Company became 50% owners of the equity interest in AQF Asia PTE Ltd., located in Singapore (“AQF Asia”). While the Company owns 50% of the equity interest of AQF Asia and does have significant influence over the entity, the Company has concluded that it does not have control of AQF Asia due to certain veto rights held by the other joint venture partner with regards to management decision making.

As a result, the Company accounts for its ownership interest in AQF Asia following the equity method of accounting, in accordance with ASC 323, Investments —Equity Method and Joint Ventures. Under this method, the carrying cost is initially recorded at fair value and then increased or decreased by recording its percentage of profit or loss in the consolidated statement of comprehensive income and a corresponding change to the carrying value of the asset. The initial fair value of this equity method investment was approximately $7.0 million. The following table provides a roll-forward of the equity method investment for the six months ended June 30, 2025:

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(4) Revenue Recognition

The Company recognizes revenue when a customer obtains control of a promised good or service. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to in exchange for promised goods or services. The Company recognizes revenue in accordance with the core principles of ASC 606 which include (1) identifying the contract with a customer, (2) identifying separate performance obligations within the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations, and (5) recognizing revenue. The Company recognizes all but an immaterial portion of its product sales upon shipment. The Company recognizes revenue from the sale of tooling and machinery primarily upon customer acceptance. The Company recognizes revenue from engineering services, which are primarily product development services, as the services are performed or as otherwise determined based on the substance of the agreement. The Company recognizes revenue from bill-and-hold transactions at the time the specified goods are complete and available to the customer.

Standard payment terms are net 30 days unless contract terms state otherwise. When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or significantly after performance, resulting in a significant financing component. We do not assess whether a significant financing component exists if the period between when we perform our obligations under the contract and when the customer pays is one year or less. In the ordinary course of business, the Company accepts sales returns from customers for defective goods, such amounts being immaterial. Although only applicable to an insignificant number of transactions, the Company has elected to exclude sales taxes from the transaction price. The Company has elected to account for shipping and handling activities for which the Company is responsible under the terms and conditions of the sale not as performance obligations but rather as fulfillment costs. These activities are required to fulfill the Company’s promise to transfer the goods and are expensed when revenue is recognized. Variable consideration to be included in the transaction price is estimated using either the expected value method or the most likely method based on facts and circumstances. Variable consideration is included in the transaction price if it is probable that a significant future reversal of cumulative revenue under the contract will not occur. The Company has elected to not disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations, as the Company’s contracts have an original expected duration of one year or less, or revenue has been recognized at the amount for which the Company has the right to invoice for engineering services performed.

Disaggregated Revenue

The following table presents the Company’s revenue disaggregated by the major types of goods and services sold to the Company’s customers (in thousands) (See Note 13 for further information regarding net sales by market):

Contract Balances

The timing of revenue recognition may differ from the time of invoicing to customers. When invoicing occurs prior to revenue recognition, the Company has contract liabilities included within “deferred revenue” on the condensed consolidated balance sheet.

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The following table presents opening and closing balances of contract liabilities for the six months ended June 30, 2025 and 2024 (in thousands):

Revenue recognized during the six months ended June 30, 2025 and 2024 from amounts included in deferred revenue at the beginning of the period were approximately $2.0 million and $3.0 million, respectively.

When invoicing occurs after revenue recognition, the Company has contract assets, which are included within “receivables, net” on the condensed consolidated balance sheets.

The following table presents opening and closing balances of contract assets for the six months ended June 30, 2025 and 2024 (in thousands):

(5) Supplemental Cash Flow Information

Supplemental cash flow information consists of the following (in thousands):

(6) Receivables and Allowance for Credit Losses

Receivables consist of the following (in thousands):

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The Company is exposed to credit losses primarily through sales of products and services. The Company’s expected loss allowance methodology is developed using historical collection experience, current and future economic and market conditions, and a review of the current status of customers' trade accounts receivables. The estimate of the amount of accounts receivable that may not be collected is based on the aging of the accounts receivable balances as well as the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible.

The following table provides a roll-forward of the allowance for credit losses that is deducted from accounts receivable to present the net amount expected to be collected for the six months ended June 30, 2025 and 2024 (in thousands):

(7) Fair Value of Financial Instruments

Financial instruments recorded at fair value in the consolidated balance sheets, or disclosed at fair value in the footnotes, are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels defined by ASC 820, Fair Value Measurements and Disclosures, and directly related to the amount of subjectivity associated with inputs to fair valuation of these assets and liabilities, are as follows:

Level 1

Valued based on unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.

Level 2

Valued based on either directly or indirectly observable prices for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3

Valued based on management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

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The following table presents the fair value and hierarchical levels, for financial assets that are measured at fair value on a recurring basis (in thousands):

In connection with the acquisitions of Welch and Marble in 2024, and DAS Medical in 2021, the Company is required to make contingent payments, subject to the entities achieving certain financial performance thresholds. The contingent consideration payments for the Welch, Marble and DAS Medical acquisitions are up to $6 million, $500 thousand and $20 million, respectively. The fair value of the liability for the contingent consideration payments recognized upon the acquisition as part of the purchase accounting opening balance sheets totaled approximately $800 thousand, $400 thousand and $5.2 million for the Welch, Marble and DAS Medical acquisitions, respectively, and was estimated by discounting to present value the probability-weighted contingent payments expected to be made. Assumptions used in the initial calculation were management’s financial forecasts, a discount rate and various volatility factors. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. Contingent consideration is considered to be a Level 3 financial liability that is re-measured each reporting period. The Company paid approximately $5.0 million and $5.3 million, respectively, during the three and six months ended June 30, 2025, related to contingent consideration. The fair value of the liability for the contingent consideration payments recognized at June 30, 2025, totaled approximately $5.5 million out of the remaining potential payments of $9.3 million. The change in fair value of contingent consideration for the acquisitions is included in change in fair value of contingent consideration in the condensed consolidated statements of comprehensive income.

The Company entered into Non-Competition Agreements with certain previous owners of DAS Medical and Advant Medical which includes, an aggregate of $10.0 million in payments to certain previous owners of DAS Medical over a ten-year period, and an aggregate of €375 thousand in payments to the previous owner of Advant Medical over a three-year period. The Company paid approximately $0.1 million and $1.8 million, respectively, during the three and six months ended June 30, 2025, related to non-competition agreements. The present value of the Non-Competition Agreements at June 30, 2025, totaled approximately $5.1 million. This liability is considered to be a Level 3 financial liability that is re-measured each reporting period.

The Company has financial instruments, such as accounts receivable, accounts payable, and accrued expenses, that are stated at carrying amounts that approximate fair value because of the short maturity of those instruments. The carrying amount of the Company’s long-term debt approximates fair value as the interest rate on the debt approximates the estimated borrowing rate currently available to the Company.

(8) Share-Based Compensation

Share-based compensation is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant).

The Company issues share-based awards through several plans that are described in detail in the notes to the consolidated financial statements for the year ended December 31, 2024. The compensation cost charged against income from those plans is included in selling, general & administrative expenses as follows (in thousands):

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The total income tax benefit recognized in the condensed consolidated statements of comprehensive income for share-based compensation arrangements was approximately $0.8 million and $2.0 million for the three and six months ended June 30, 2025, respectively, and approximately $0.5 million and $1.5 million for the three and six months ended June 30, 2024.

Common Stock Grants

The compensation expense for common stock granted during the six months ended June 30, 2025, was determined based on the market price of the shares on the date of grant.

Stock Option Grants

The following is a summary of stock option activity under all plans for the six months ended June 30, 2025:

During the six months ended June 30, 2025 and 2024, the total intrinsic value of all options exercised (i.e., the difference between the market price and the price paid by the employees to exercise the options) was approximately $2.2 million and $1.5 million, respectively, and the total amount of consideration received by the Company from the exercised options was approximately $376 thousand and $212 thousand, respectively. At its discretion, the Company allows option holders to surrender previously owned common stock in lieu of paying the exercise price and withholding taxes. During the six months ended June 30, 2025, 748 shares were surrendered at an average market price of $282.42. During the six months ended June 30, 2024, 653 shares were surrendered at an average market price of $162.93.

Restricted Stock Unit awards

The following table summarizes information about RSU activity during the six months ended June 30, 2025:

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At the Company’s discretion, upon vesting, RSU holders are given the option to net-share settle to cover the required minimum withholding tax and the remaining amount is converted into the equivalent number of common shares and issued to the RSU holder. During the six months ended June 30, 2025 and 2024, 18,152 and 21,914 shares were surrendered at an average market price of $215.60 and $216.80, respectively.

As of June 30, 2025, the Company had approximately $13.2 million of unrecognized compensation expense that is expected to be recognized over a period of 2.8 years.

(9) Inventories

Inventories are stated at the lower of cost (determined using the first-in, first-out method) or net realizable value, and consist of the following at the stated dates (in thousands):

(10) Property, Plant and Equipment

Property, plant, and equipment consist of the following (in thousands):

(11) Leases

The Company has operating and finance leases for offices, manufacturing plants, vehicles and certain office and manufacturing equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company accounts for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the right of use (“ROU”) assets or lease liabilities. These are expensed as incurred and recorded as variable lease expense. The Company determines if an arrangement is a lease at the inception of a contract. Operating and finance lease ROU assets and operating and finance lease liabilities are stated separately in the condensed consolidated balance sheet.

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ROU assets represent the Company's right to use an underlying asset during the lease term and lease liabilities represent the Company's obligation to make lease payments pursuant to the lease. ROU assets and lease liabilities are recognized at commencement date based on the net present value of fixed lease payments over the lease term. The Company's assumed lease term includes options to extend or terminate the lease when it is reasonably certain that it will exercise that option. ROU assets are also adjusted for any deferred or accrued rent. As the Company's leases do not typically provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

ROU assets and lease liabilities consist of the following (in thousands):

The components of lease costs for the six months ended June 30, 2025 and 2024 consist of the following (in thousands):

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The aggregate future lease payments for leases as of June 30, 2025 are as follows (in thousands):

(12) Income Per Share

Basic income per share is based on the weighted average number of shares of common stock outstanding. Diluted income per share is based upon the weighted average number of common shares outstanding and dilutive common stock equivalent shares outstanding during each period.

The weighted average number of shares used to compute basic and diluted net income per share consisted of the following (in thousands):

The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock options, when the average market price of the common stock is lower than the exercise price of the related options during the period. These outstanding stock awards are not included in the computation of diluted income per share because the effect would be antidilutive. For the three and six months ended June 30, 2025, 2,958 were excluded from the computation of diluted earnings per share for this reason. For the three and six months ended June 30, 2024, there were no stock awards excluded from the computation of diluted earnings per share for this reason.

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(13) Segment Data

The Company consists of a single operating and reportable segment and uses consolidated net income as its measure of segment profit and loss. The chief operating decision maker of the Company is the Chairman and Chief Executive Officer (CEO). The Chairman and CEO reviews consolidated operating results to make decisions about how to allocate resources to the segment and assess its performance as a whole. The Company has identified the following significant segment expenses (SSEs) due to their relevance to the overall consolidated operating results (in thousands):

(a) Other segment items include (production overhead, stock compensation, professional fees, and other SG&A expenses)

(b) See Condensed Consolidated Balance Sheet for details

Information about Geographic Areas

Net sales shipped to customers outside of the United States comprised approximately 17.0%, and 17.1% of the Company’s consolidated net sales for the three and six months ended June 30, 2025, respectively. Net sales shipped to customers outside of the United States comprised approximately 18.8% and 18.6% of the Company’s consolidated net sales for the three and six months ended June 30, 2024, respectively. Approximately 36.6% of all long-lived assets are located outside of the United States.

Information about Major Customers

Net sales to two customers comprised approximately 27.4% and 20.3% of the Company’s consolidated net sales for the three months ended June 30, 2025, respectively. Net sales to two customers comprised approximately 24.4% and 22.1% of the Company’s consolidated net sales for the six months ended June 30, 2025, respectively. Net sales to one customer comprised approximately 33.9% and 33.1% of the Company’s consolidated net sales for the three and six months ended June 30, 2024, respectively.

On June 30, 2025, two customers represented approximately 20.7% and 19.1% of gross accounts receivable, respectively. On December 31, 2024, one customer represented approximately 34.0% of gross accounts receivable.

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The Company’s products are primarily sold to customers within the Medical and Non-medical markets. Sales by market for the three and six months ended June 30, 2025 and 2024 are as follows (in thousands):

(a) Note – This table has been updated to conform to the current year presentation.

(14) Goodwill and Other Intangible Assets

The changes in the carrying amount of goodwill for the six months ended June 30, 2025 are as follows (in thousands):

The carrying values of the Company’s definite lived intangible assets as of June 30, 2025 are as follows (in thousands):

Amortization expense related to intangible assets was approximately $2.4 million and $4.8 million for the three and six months ended June 30, 2025, respectively, $1.0 million and $2.0 million for the three and six months ended June 30, 2024, respectively. The estimated remaining amortization expense as of June 30, 2025 is as follows (in thousands):

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(15) Other Long-Term Liabilities

Other long-term liabilities consist of the following (in thousands):

(16) Income Taxes

The determination of income tax expense in the accompanying unaudited condensed consolidated statements of income is based upon the estimated effective tax rate for the year, adjusted for the impact of any discrete items which are accounted for in the period in which they occur. The Company recorded income tax expense of approximately 20.6% and 18.0% of income before income tax expense for the three and six months ended June 30, 2025, respectively, and 22.0% and 19.8% of income before income tax expense for the three and six months ended June 30, 2024, respectively.

(17) Debt

On June 27, 2024, the Company, as the borrower, entered into a secured $275 million Amended and Restated Credit Agreement (the “Third Amended and Restated Credit Agreement”) with certain of the Company’s subsidiaries (the “Subsidiary Guarantors”) and Bank of America, N.A., in its capacity as the initial lender, Administrative Agent, Swingline Lender and L/C Issuer, and certain other lenders from time-to-time party thereto. The Third Amended and Restated Credit Agreement amends and restates the Company’s prior credit agreement, originally dated as of December 22, 2021.

The credit facilities under the Third Amended and Restated Credit Agreement consist of a secured term loan to the Company of $125 million and a secured revolving credit facility, under which the Company may borrow up to $150 million. The Third Amended and Restated Credit Facilities mature on June 27, 2029. This maturity date is subject to acceleration and the Company could be subject to additional fees and expenses in certain circumstances should one or more events of default described in the Third Amended and Restated Credit Agreement occur. The secured term loan requires quarterly principal payments of $3,125,000 that commenced on December 31, 2024. The proceeds of the Third Amended and Restated Credit Agreement may be used for general corporate purposes, including funding certain acquisitions, as well as certain other permitted acquisitions. The Company’s obligations under the Third Amended and Restated Credit Agreement are guaranteed by Subsidiary Guarantors and secured by substantially all assets of the Company.

The Third Amended and Restated Credit Facilities call for interest at Secured Overnight Financing Rate (“SOFR”) plus a margin that ranges from 1.25% to 2.25% or, at the discretion of the Company, the bank’s prime rate plus a margin that ranges from .25% to 1.25%. In both cases the applicable margin is dependent upon Company performance. Under the Third Amended and Restated Credit Agreement, the Company is subject to a minimum fixed-charge coverage financial covenant as well as a maximum total funded debt to EBITDA financial covenant. The Third Amended and Restated Credit Agreement contains other covenants customary for transactions of this type, including restrictions on certain payments, permitted indebtedness and permitted investments.

At June 30, 2025, the Company had approximately $163.6 million in outstanding borrowings under the Third Amended and Restated Credit Agreement and also had approximately $0.7 million in standby letters of credit outstanding, drawable as a financial guarantee on worker’s compensation insurance policies. At June 30, 2025, the weighted average interest rate was approximately 5.7% and the Company was in compliance with all covenants under the Third Amended and Restated Credit Agreement.

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Long-term debt consists of the following (in thousands):

Future maturities of long-term debt at June 30, 2025 are as follows (in thousands):

(18) Subsequent Events

Acquisition of Universal Plastics & Engineering Company, Inc.

On July 2, 2025, the Company purchased 100% of the outstanding membership interests of Universal Plastics & Engineering Company, Inc. (“UNIPEC”) pursuant to a Securities Purchase Agreement, for an aggregate purchase price of $7.5 million in cash. The purchase price was subject to adjustment based upon UNIPEC’s estimated working capital at closing, and further adjustment when the final working capital is determined. A portion of the purchase price is being held in escrow to indemnify the Company against certain claims, losses, and liabilities. The Securities Purchase Agreement contains representations, warranties, and covenants customary for transactions of this type. As part of the Securities Purchase Agreement, the Sellers as well as certain restricted parties have agreed not to compete with the Company for a period of seven years.

UNIPEC, headquartered in Rockville, Maryland, develops and manufactures precision thermoformed and heat-sealed polymer components used primarily for shielding batteries in Class III implantable medical devices.

Acquisition costs associated with the transaction were approximately $75 thousand which was charged to expense in the three and six months ended June 30, 2025. These costs were primarily for legal services, which are included within “Acquisition costs” on the face of the Condensed Consolidated Statements of Comprehensive Income.

Due to the timing of the UNIPEC acquisition, the accounting for this business combination is incomplete. As a result, it is impracticable for the Company to disclose substantially all required disclosures of Accounting Standards Codification 805, Business Combinations, for this acquisition.

Acquisition of Techno Plastics Industries, Inc.

On July 7, 2025, the Company purchased 100% of the outstanding membership interests of Techno Plastics Industries, Inc. (“TPI”) pursuant to a Securities Purchase Agreement, for an aggregate purchase price of $4.5 million in cash. The purchase price was subject to adjustment based upon UNIPEC’s estimated working capital at closing, and further adjustment when the final working capital is determined. A portion of the purchase price is being held by the Company to indemnify the Company against certain claims, losses, and liabilities. The Securities Purchase Agreement contains representations, warranties, and covenants customary for transactions of this type. As part of the Securities Purchase Agreement, the Sellers as well as certain restricted parties have agreed not to compete with the Company for a period of five years.

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TPI, based in Anasco, Puerto Rico, is a specialty manufacturer of precision thermoplastic injection-molded components.

Acquisition costs associated with the transaction were approximately $9 thousand and $186 thousand, respectively, which was charged to expense in the three and six months ended June 30, 2025. These costs were primarily for legal services, which are included within “Acquisition costs” on the face of the Condensed Consolidated Statements of Comprehensive Income.

Due to the timing of the TPI acquisition, the accounting for this business combination is incomplete. As a result, it is impracticable for the Company to disclose substantially all required disclosures of Accounting Standards Codification 805, Business Combinations, for this acquisition.

Enactment of the “One Big Beautiful Bill Act” (OBBBA)

On July 4, 2025, President Donald Trump signed the “One Big Beautiful Bill Act” (OBBBA) into law, which is considered the enactment date under U.S. GAAP. Key corporate tax provisions include the restoration of 100% bonus depreciation, immediate expensing for domestic research and experimental expenditures, changes to Section 163(j) interest limitations, updates to GILTI and FDII rules, amendments to energy credits, and expanded Section 162(m) aggregation requirements. In accordance with ASC 740, the effects of the new tax law will be recognized in the period of enactment. The Company is currently evaluating the impact of the OBBBA on its condensed consolidated financial statements. The Company does not expect this to have a material impact on income tax expense.

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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Overview

UFP Technologies is a contract development and manufacturing organization that specializes in single-use and single-patient medical devices. UFP is a vital link in the medical device supply chain and a valued outsourcing partner to many of the world's top medical device manufacturers. The Company’s single-use and single-patient devices and components are used in a wide range of medical devices and packaging for minimally invasive surgery, infection prevention, wound care, wearables, orthopedic soft goods, and orthopedic implants.

The Company’s current strategy includes further organic growth and growth through strategic acquisitions.

Net sales for the Company for the six months ended June 30, 2025 increased 39.1% to $299.3 million from $215.2 million in the same period last year. The increase was primarily attributable to 48.2% growth in sales to customers in the medical market, which was largely due to sales from the 2024 acquisitions (See Note 2 for further information regarding the 2024 acquisitions). These companies collectively contributed approximately $76.3 million in sales during the first half of 2025. Organic sales growth for the second quarter was 4.9%. Net sales from our largest two customers, Intuitive Surgical SARL and Stryker Corporation, were 27.4% and 20.3% of our total net sales in the three months ended June 30, 2025, respectively, and 24.4% and 22.1% of our total net sales in the six months ended June 30, 2025, respectively.

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Impact of Tariffs

In 2025, the United States imposed increased tariffs on foreign imports into the United States, including all the countries in which we manufacture goods outside the United States and also the countries in which our customers operate. Although agreements have been made with various countries, the tariff policy environment remains dynamic, and we cannot predict what additional actions may ultimately be taken by the United States or other governments with respect to tariffs or trade relations, including retaliatory trade measures taken by other countries in response to existing or future United States tariffs or other measures.

To date, such tariffs have not had a material direct impact on our business, financial condition or results of operations. However, based upon tariffs being passed through by our raw material suppliers, we estimate an increase of approximately $9 million in annual price increases. It is our intention to pass these costs on to our customers. This remains a very dynamic changing environment and tariffs may cause (i) further increases in manufacturing costs, (ii) disruptions or delays to our supply chain, (iii) limitations on our ability to sell our products domestically or abroad, and (iv) reductions in sales volumes and gross margins for our products, any of which could negatively affect our business, results of operations and financial condition. We cannot anticipate, for example, whether there will be an adverse impact on demand for our products from customers who are responsible for payment of the tariffs on our shipments.

Results of Operations

Net Sales

Net sales for the three months ended June 30, 2025 increased approximately 37.2% to $151.2 million from sales of $110.2 million for the same period in 2024. The increase in net sales is primarily due to increased sales to customers in the medical market of 46.0%, primarily due to sales from the 2024 and 2025 acquisitions, which collectively contributed approximately $35.7 million in sales during the second quarter. Organic sales growth for the second quarter was 4.9%. Organic growth in the medical market was approximately 10% and was fueled by strong sales virtually all segments including the robot assisted surgery market.

Net sales for the six months ended June 30, 2025 increased approximately 39.1% to $299.3 million from sales of $215.2 for the same period in 2024. The increase in net sales is primarily due to increased sales to customers in the medical market of 48.2%, primarily due to sales from the 2024 and 2025 acquisitions, which collectively contributed approximately $76.3 million in sales during the first half of the year. Organic sales growth for the first half of the year was 3.6%.

Gross Profit

Gross margin decreased to 28.8% for the three months ended June 30, 2025, from 30.0% for the same period in 2024. As a percentage of sales, material and labor costs collectively increased 0.4% and overhead costs increased 0.8%. As anticipated, we had significant inefficiency in our newly acquired AJR operations related to onboarding many new direct and indirect labor associates. We estimate this added $1.2 million to our cost-of-sales in the second quarter. It is anticipated that the inefficiency at AJR will continue but gradually improve for the balance of this year.

Gross margin decreased slightly to 28.6% for the six months ended June 30, 2025, from 29.3% for the same period in 2024. As a percentage of sales, material and labor costs collectively increased 0.3% and overhead costs increased 0.4%.

Selling, General and Administrative Expenses

Selling, general, and administrative expenses (“SG&A”) increased approximately 34.4% to $18.7 million for the three months ended June 30, 2025, from $13.9 million for the same period in 2024. The increase is primarily attributable to SG&A from the Company’s 2024 acquisitions. As a percentage of sales, SG&A decreased to 12.4% for the three months ended June 30, 2025, from 12.6% for the same three months in 2024.

SG&A increased approximately 34.5% to $37.4 for the six months ended June 30, 2025, from $27.8 million for the same period in 2024, which we primarily attribute to SG&A from the Company’s 2024 acquisitions. As a percentage of sales, SG&A decreased to 12.5% for the six months ended June 30, 2025, from 12.9% for the same six months in 2024.

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Change in fair value of contingent consideration

In connection with the acquisitions of Welch and Marble in 2024, and DAS Medical in 2021, the Company is required to make contingent payments, subject to the entities achieving certain financial performance thresholds. The contingent consideration payments for the Welch, Marble and DAS Medical acquisitions are up to $6 million, $500 thousand and $20 million, respectively. The fair value of the liability for the contingent consideration payments recognized upon the acquisition as part of the purchase accounting opening balance sheets totaled approximately $800 thousand, $400 thousand and $5.2 million for the Welch, Marble and DAS Medical acquisitions, respectively, and was estimated by discounting to present value the probability-weighted contingent payments expected to be made. Assumptions used in the initial calculation were management’s financial forecasts, a discount rate and various volatility factors. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. Contingent consideration is considered to be a Level 3 financial liability that is re-measured each reporting period. The Company paid approximately $5.0 million and $5.3 million, respectively, during the three and six months ended June 30, 2025, related to contingent consideration. The fair value of the liability for the contingent consideration payments recognized at June 30, 2025, totaled approximately $5.5 million out of the remaining potential payments of $9.3 million. The change in fair value of contingent consideration for the Welch, Marble, and DAS Medical acquisitions for the three and six months ended June 30, 2025, resulted in an expense of approximately $0.3 million and $0.5 million, respectively. The change in fair value of contingent consideration for the DAS Medical acquisition for the three and six months ended June 30, 2024, resulted in an expense of approximately $0.2 million and $0.5 million, respectively. The change in fair value of contingent consideration for the acquisitions is included in change in fair value of contingent consideration in the condensed consolidated statements of comprehensive income.

Interest expense, net

Net interest expense was approximately $2.7 million and $0.6 million for the three months ended June 30, 2025, and 2024, respectively. The increase in net interest expense for the three months ended June 30, 2025, was primarily due to higher debt related to borrowings for the 2024 acquisitions. Interest income was immaterial.

Net interest expense was approximately $5.5 million and $1.2 million for the six months ended June 30, 2025, and 2024, respectively. The increase in net interest expense for the six months ended June 30, 2025 was primarily due to higher debt related to borrowings for the 2024 acquisitions. Interest income was immaterial.

Other expense (income)

Other expenses were approximately $32 thousand and $2 thousand for the three months ended June 30, 2025 and 2024, respectively. The changes in other expense/income are primarily generated by equity method investment income in 2025 and foreign currency transaction losses in 2025 and gains in 2024.

Other expense was approximately $68 thousand and other income was approximately $39 thousand for the six months ended June 30, 2025 and 2024, respectively. The changes in other expense/income are primarily generated by equity method investment income in 2025 and foreign currency transaction losses in 2025 and gains in 2024.

Income Taxes

The Company recorded tax expense of approximately 20.6% and 22.0% of income before income tax expense, for the three months ended June 30, 2025 and 2024, respectively. The decrease in the effective tax rate for the second quarter of 2025 is largely due to higher anticipated income from operations in the Dominican Republic where the Company pays lower taxes.

The Company recorded tax expense of approximately 18.0% and 19.8% of income before income tax expense, for each of the six months ended June 30, 2025 and 2024, respectively. The decrease in the effective tax rate for the current period as compared to the prior period is largely due to increased discrete tax benefits associated with vested equity and a state tax refund.

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Liquidity and Capital Resources

The Company generally funds its operating expenses, capital requirements, and growth plan through internally generated cash and bank credit facilities.

Cash Flows

Net cash provided by operations for the six months ended June 30, 2025 was approximately $39.1 million and was primarily a result of net income generated of approximately $34.4 million, depreciation and amortization of approximately $9.4 million, share-based compensation of approximately $4.5 million, a change in the fair value of contingent consideration of approximately $0.5 million, an increase in deferred taxes of approximately $1.7 million, a decrease in accounts receivable of approximately $1.3 million due to lower days sales outstanding (DSO) driven by customer sales mix, a decrease in inventory of approximately $3.9 million due to strategic reductions of raw material stock, and an increase in income taxes payable of approximately $3.2 million due to the timing of payment of tax estimates.

These cash inflows and adjustments to income were partially offset by an increase in prepaid expenses of approximately $0.3 million primarily due to the payment of current year insurance policies, an increase in other assets of approximately $3.7 million primarily due to the payment of an exclusivity fee on a long term contract, a decrease in accounts payable of approximately $2.3 million due to the timing of vendor payments in the ordinary course of business, a decrease in accrued expenses of approximately $6.1 million due primarily to the payment of accrued compensation, and a decrease in other long-term liabilities of approximately $7.1 million due primarily to earn-out, non-compete and acquisition holdback payments.

Net cash used in investing activities during the six months ended June 30, 2025 was approximately $8.5 million and was primarily the result of additions of manufacturing machinery and equipment and various building improvements across the Company, as well as the acquisitions of AJR Specialty and AJR Custom Foam.

Net cash used for financing activities was approximately $29.8 million during the six months ended June 30, 2025 and was primarily the result of payments on the revolving line of credit of approximately $36.0 million, principal payments of long-term debt of approximately $6.3 million, payments of contingent consideration of approximately $0.3 million and payments of statutory withholding for stock options exercised and restricted stock units vested of approximately $3.9 million. These payments were partially offset by borrowings under our revolving line of credit of approximately $16.5 million and proceeds from the exercise of stock options of approximately $0.2 million.

Outstanding and Available Debt

On June 27, 2024, the Company, as the borrower, entered into a secured $275 million Amended and Restated Credit Agreement (the “Third Amended and Restated Credit Agreement”) with certain of the Company’s subsidiaries (the “Subsidiary Guarantors”) and Bank of America, N.A., in its capacity as the initial lender, Administrative Agent, Swingline Lender and L/C Issuer, and certain other lenders from time-to-time party thereto. The Third Amended and Restated Credit Agreement amends and restates the Company’s prior credit agreement, originally dated as of December 22, 2021.

The credit facilities under the Third Amended and Restated Credit Agreement consist of a secured term loan to the Company of $125 million and a secured revolving credit facility, under which the Company may borrow up to $150 million. The Third Amended and Restated Credit Facilities mature on June 27, 2029. This maturity date is subject to acceleration and the Company could be subject to additional fees and expenses in certain circumstances should one or more events of default described in the Third Amended and Restated Credit Agreement occur. The secured term loan requires quarterly principal payments of $3,125,000 that commenced on December 31, 2024. The proceeds of the Third Amended and Restated Credit Agreement may be used for general corporate purposes, including funding certain acquisitions, as well as certain other permitted acquisitions. The Company’s obligations under the Third Amended and Restated Credit Agreement are guaranteed by Subsidiary Guarantors and secured by substantially all assets of the Company.

The Third Amended and Restated Credit Facilities call for interest at the Secured Overnight Financing Rate (“SOFR”) plus a margin that ranges from 1.25% to 2.25% or, at the discretion of the Company, the bank’s prime rate plus a margin that ranges from .25% to 1.25%. In both cases the applicable margin is dependent upon Company performance. Under the Third Amended and Restated Credit Agreement, the Company is subject to a minimum fixed-charge coverage financial covenant as well as a maximum total funded debt to EBITDA financial covenant. The Third Amended and Restated Credit Agreement contains other covenants customary for transactions of this type, including restrictions on certain payments, permitted indebtedness and permitted investments.

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At June 30, 2025, the Company had approximately $163.6 million in outstanding borrowings under the Third Amended and Restated Credit Agreement and also had approximately $0.7 million in standby letters of credit outstanding, drawable as a financial guarantee on worker’s compensation insurance policies. At June 30, 2025, the weighted average interest rate was approximately 5.7% and the Company was in compliance with all covenants under the Third Amended and Restated Credit Agreement.

Long-term debt consists of the following (in thousands):

Future maturities of long-term debt at June 30, 2025 are as follows (in thousands):

Future Liquidity

The Company requires cash to pay its operating expenses, purchase capital equipment, and to service its contractual obligations. The Company’s principal sources of funds are its operations and its Third Amended and Restated Credit Agreement. The Company generated cash of approximately $39.1 million from operations during the six months ended June 30, 2025. The Company cannot guarantee that its operations will generate cash in future periods. The Company’s longer-term liquidity is contingent upon future operating performance and the availability of draws on its revolving credit facility. Further, the economic uncertainty resulting from events including inflation, tariffs, bank failures, and other factors beyond the control of the Company could affect the Company’s long-term ability to access the public markets and obtain necessary capital in order to properly capitalize and continue operations.

The Company plans to continue to add capacity to enhance operating efficiencies in its manufacturing plants and accommodate anticipated growth in demand. The Company may consider additional acquisitions of companies, technologies, or products that are complementary to its business. The Company believes that its existing resources, including its revolving credit facility, together with cash expected to be generated from operations, will be sufficient to fund its cash flow requirements, including capital expenditures, through the next twelve months.

The Company may also require additional capital in the future to fund capital expenditures, acquisitions, or other investments. These capital requirements could be substantial. The Company anticipates that any future expansion of its business will be financed through existing resources, cash flow from operations, the Company's revolving credit facility, or other new financing. The Company cannot guarantee that it will be able to meet existing financial covenants or obtain other new financing on favorable terms, if at all.

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Enactment of the “One Big Beautiful Bill Act” (OBBBA)

On July 4, 2025, President Donald Trump signed the “One Big Beautiful Bill Act” (OBBBA) into law, which is considered the enactment date under U.S. GAAP. Key corporate tax provisions include the restoration of 100% bonus depreciation, immediate expensing for domestic research and experimental expenditures, changes to Section 163(j) interest limitations, updates to GILTI and FDII rules, amendments to energy credits, and expanded Section 162(m) aggregation requirements. In accordance with ASC 740, the effects of the new tax law will be recognized in the period of enactment. The Company is currently evaluating the impact of the OBBBA on its condensed consolidated financial statements. The Company does not expect this to have a material impact on income tax expense.

Critical Accounting Estimates

There have been no material changes to the Company’s Critical Accounting Estimates, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

Commitments and Contractual Obligations

There have been no material changes outside the ordinary course of business to our contractual obligations and commitments, as disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Item 3. Quantitative and Qualitative Disclosures About Market Risk

There have been no material changes in our market risks as previously disclosed in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2024.

ITEM 4: CONTROLS AND PROCEDURES Item 4. Controls and Procedures

The Company carried out an evaluation, under the supervision and with the participation of its management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s “disclosure controls and procedures” (as defined in Exchange Act Rule 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Report (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is (i) recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

The Company closed on the acquisitions of AJR, Welch and AQF all in the third quarter of 2024, and closed on the acquisitions of AJR Specialty and AJR Custom Foam in the second quarter of 2025. The 2024 and 2025 acquisitions’ total assets and net sales constituted approximately 33.3% and 24.3%, respectively, of the Company’s consolidated total assets and net sales as shown on our condensed consolidated financial statements as of and for the period ended June 30, 2025. As the acquisitions occurred in the third quarter of fiscal 2024 and second quarter of fiscal 2025, the Company excluded all of the acquired businesses internal control over financial reporting from the scope of the assessment of the effectiveness of the Company’s disclosure controls and procedures. This exclusion is in accordance with the general guidance issued by the Staff of the Securities and Exchange Commission that an assessment of a recently acquired business may be omitted from the scope within the first year of acquisition if specified conditions are satisfied.

PART II: OTHER INFORMATION

ITEM 1: LEGAL PROCEEDINGS Item 1. Legal Proceedings

The Company is not a party to any material litigation or other material legal proceedings. From time to time, the Company may be a party to various suits, claims and complaints arising in the ordinary course of business. In the opinion of management of the Company, these suits, claims and complaints should not result in final judgments or settlements that, in the aggregate, would have a material adverse effect on the Company’s financial condition or results of operations.

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ITEM 1A: RISK FACTORS Item 1A. Risk Factors

The Company faces a number of uncertainties and risks that are difficult to predict and many of which are outside of the Company's control. For a detailed discussion of the risks that affect our business, you should consider carefully the risks and uncertainties described in this Quarterly Report on Form 10-Q as well as our other public filings with the SEC including Part I, Item IA, “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024.

ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

ITEM 3: DEFAULTS UPON SENIOR SECURITIES Item 3. Defaults upon Senior Securities

None.

ITEM 4: MINE SAFETY DISCLOSURES Item 4. Mine Safety Disclosures

Not Applicable.

ITEM 5: OTHER INFORMATION Item 5. Other Information

During the second quarter of fiscal 2025, none of our directors or executive officers adopted Rule 10b5-1 trading plans and none of our directors or executive officers terminated a Rule 10b5-1 trading plan or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).

ITEM 6: EXHIBITS Item 6. Exhibits

• Filed herewith.

** Furnished herewith.

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SIGNATURES

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