Quarterly Report for Quarter Ending July 4, 2026 (Form 10-Q)

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

This report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. The words "expects," "anticipates," "believes," "intends," "plans," "will" and similar expressions identify forward-looking statements. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. We undertake no obligation to publicly disclose any revisions to these forward-looking statements to reflect events or circumstances occurring subsequent to filing this Form 10-Q with the Securities and Exchange Commission. These forward-looking statements are subject to risks and uncertainties, including, without limitation, those discussed in this report and those identified in Part I, Item 1A, "Risk Factors" included in our Form 10-K. In addition, new risks emerge from time to time, and it is not possible for management to predict all such risk factors or to assess the impact of such risk factors on our business. Accordingly, our future results may differ materially from historical results or from those discussed or implied by these forward-looking statements. Given these risks and uncertainties, the reader should not place undue reliance on these forward-looking statements.

OVERVIEW

We are a global leader in highly engineered motion control and electronic controls technology for diverse end markets, including agriculture, construction, data centers, energy, health and wellness, industrial, marine, material handling, and recreational vehicles.

We operate under two business segments: Hydraulics and Electronics. The Hydraulics segment designs and manufactures hydraulic motion control and fluid conveyance technology products, including cartridge valves, manifolds, and quick release couplings, as well as engineers hydraulic solutions and in some cases complete systems. The Electronics segment designs and manufactures customized electronic controls systems, displays, wire harnesses, and software solutions.

With our global operating network, we have the advantages of leveraging sales, marketing, innovation, customer relationships and operational capabilities across all our businesses. We continue to drive best practices and are committed to leveraging resources to best serve our customers and explore new opportunities.

Restructuring Activities

In January 2025, the Company began restructuring the Helios Center of Engineering Excellence ("HCEE"). Consistent with the Company's previously announced restructuring plan, during the end of the second quarter 2025, management ceased operations at the San Antonio office and reassigned resources to the operations at our other major facilities across the business, and eliminated certain positions. As a result of this planned change in the HCEE business operations, the workforce intangible asset associated with the HCEE acquisition was reviewed by management and it was determined that the remaining net book value of the asset should be accelerated and amortized over a useful life ending June 2025.

We initiated some optimization activities at the beginning of 2026 that will result in the movement of production activities between locations in order to drive operational efficiencies and reduce costs. We have consolidated the North American operations of the Hydraulics Faster entity in Toledo, Ohio, and are closing the Faster operation in Quebec, Canada, that was obtained as part of the acquisition of the assets of Taimi R&D, Inc. in July 2022. The activities began in the first quarter of 2026 and were substantially completed at the end of the second quarter of 2026. Some wrap up activities remain that are expected to be completed in the third quarter of 2026. In addition, we are moving additional production activities within our Electronics segment to our low cost manufacturing Center of Excellence in Tijuana, Mexico. These activities were paused in 2025 as a result of the uncertain and changing tariff landscape and are now being re-initiated and expected to take place throughout 2026.

Restructuring costs totaled $1.8 and $1.2, for the six months ended July 4, 2026 and June 28, 2025, respectively.

Global Economic and Geopolitical Conditions

We expect the challenging macroeconomic conditions to continue, characterized by economic uncertainty and market disruption driven by inflationary pressures, volatile oil prices, political uncertainty, potential changes to current global

trade policies and modifications of existing trade agreements, the potential negotiation of new trade agreements and imposition of new (and retaliatory) tariffs, and the ongoing geopolitical conflicts in Ukraine and the Middle East. We are continuously monitoring these economic and geopolitical conditions and remain focused on liquidity management, pricing discipline, cost savings initiatives and production efficiency as ways to mitigate the risks associated with the uncertainty.

Refer to Item 1A "Risk Factors" of our Form 10-K for additional discussion of risks related to global economic conditions.

Tariffs

The global trade environment remains highly dynamic, with significant changes to U.S. tariff policy enacted during 2025 and continuing into 2026. These measures include new tariffs, modifications to existing programs, and ongoing legal and regulatory developments. Such tariffs were implemented under several legal frameworks, including the International Emergency Economic Powers Act ("IEEPA").

In February 2026, the U.S. Supreme Court ruled that certain tariffs imposed under the IEEPA were not authorized. During the three months ended July 4, 2026, the Company received approximately $5.5 of refunds related to tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). Consistent with its accounting policy under ASC 450-30, Gain Contingencies, the Company did not recognize any benefit associated with the IEEPA tariff recoveries until realization was assured through receipt of the cash refunds. The refunds reduced cost of sales by approximately $5.3 and increased other income by approximately $0.2 for related interest. The Company also recorded an estimated reduction of revenue for amounts expected to be returned to certain customers in accordance with ASC 606. As a result, the net benefit recognized in gross profit was approximately $1.2.

Due to the fluidity of the tariff environment and potential subsequent changes to effective dates of certain tariffs, amounts of announced tariffs, and various exemptions for imports into the U.S. (especially in light of the recent decisions invalidating tariffs implemented under the IEEPA), we are unable to fully quantify the impact any tariffs will have on our results of operations when and if enacted. Our expectation, however, is to continue to leverage our regional production capabilities, source components from local suppliers, and take certain pricing actions, which we believe may mitigate the impact of higher tariff costs. We cannot provide any assurances that these or other actions that we take will be able to offset any or all tariff-related costs. Additionally, increased prices could impact demand for our products, including our ability to attract new customers or cause increases in existing customer attrition. If our attempts to mitigate tariff-related costs are not sufficient or executed in a timely manner, our business, results of operations, and our financial and/or operating costs may be adversely affected.

We export products from our U.S. locations to more than 40 countries. Our total U.S. exports were approximately $36.0 or 15.5% of total sales in the three months ended July 4, 2026. For the six months ended July 4, 2026, our total U.S. exports were approximately $81.0 or 17.6% of total sales.

We will continue to monitor developments in trade policy and assess the potential impact on our cost structure, supply chain, and customer demand.

Industry Conditions

The capital goods industries in general, and the Hydraulics and Electronics segments specifically, are subject to economic cycles. We utilize industry trend reports from various sources, as well as feedback from customers and distributors, to evaluate economic trends. We also rely on global government statistics such as Gross Domestic Product and Purchasing Managers Index to understand macroeconomic conditions.

Hydraulics

According to the National Fluid Power Association (the fluid power industry's trade association in the U.S.), the U.S. index of shipments of hydraulic products increased 3% during the first six months of 2026 compared to the first six months of the prior year while the U.S. index of orders of hydraulic products increased 18% during the same period. In Europe, the CEMA (European Agricultural Machinery Association) Business Barometer reported in June 2026 that the general business climate index for the European agricultural machinery industry has declined significantly, pushing the sector back into

recession after just over a year. The decline is driven by notable deterioration in both the current business evaluation and turnover expectations.

Electronics

The Federal Reserve's Industrial Production Index, which measures the real output of all relevant establishments located in the U.S., reports second quarter 2026 output of semiconductors and other electronics components increased from the prior quarter. The Institute of Printed Circuits Association ("IPC") reported that total North American printed circuit board ("PCB") shipments were up 12.0% in June compared with the same month last year. PCB bookings in 2026 were up 31.5% in June compared to the prior year and June year to date bookings increased 29.0% for the same period last year. The book to bill ratio, calculated as the value of orders booked over the past three months divided by the value of sales in the same period, was above 1.3 for June 2026, indicating the strong demand environment that started the year continues. The IPC also reported that North American electronics manufacturing services ("EMS") shipments increased 6.7% in June compared to the prior year while being up 5.2% and 3.1% year over year in May and April, respectively. EMS bookings increased 29.3% in June year over year after increasing 28.7% and 4.6% in May and April, respectively, highlighting the sector's strong demand in the quarter.

2026 Second Quarter Results and Comparison of the Three Months Ended July 4, 2026, and June 28, 2025

(In millions, except per share data)

The following is a discussion of our second quarter of 2026 results of operations and liquidity and capital resources. Comparisons are with the corresponding reporting period of 2025, unless otherwise noted.

The following table presents our consolidated results of operations:

Second quarter consolidated net sales increased $19.4, 9.1%, above the prior-year first quarter. Changes in foreign currency exchange rates had a favorable impact on our second quarter sales of $2.9, 1.3%.

Consolidated net sales for the year-to-date period were higher by $52.3, 12.8%. Changes in foreign currency exchange rates had a favorable impact on our year-to-date quarter sales of $8.5, 1.8%.

Consolidated net sales for the three and six months ended July 4, 2026 included a $4.1 reduction resulting from expected customer credits associated with IEEPA tariff refunds.

Second quarter sales were positively impacted by increased demand across several of our end markets, including mobile, recreational, agriculture, and health and wellness end markets. Demand in the industrial end market decreased compared to the prior year period while sales focused on the marine category within recreational have remained depressed. Sales in the EMEA, Americas and APAC regions were up during the second quarter compared to the prior year. The year over year smaller increase in sales in the APAC region is due to the business disposed of in the Divestiture. Excluding the Divestiture related sales of $15.0 in the second quarter of 2025, sales in the APAC region increased more significantly compared to the prior year.

Second quarter gross profit increased $12.7, 18.8%, above the prior year second quarter primarily from the impact of higher volume and net tariff impacts. Gross margin increased by 280 basis points primarily due to higher fixed costs leverage on higher volume and net tariff impacts partially offset by higher material, freight, and utilities costs as well as higher direct labor costs as a percentage of sales. The increase in direct labor costs were attributed to increased overtime and benefit related expenses compared to the prior year period.

Year-to-date gross profit increased $27.7, 21.7%, while gross margin increased by 250 basis points primarily due to the impact of higher volume and net tariff impacts.

Gross profit for the three and six months ended July 4, 2026 included a $1.2 benefit related to IEEPA tariff refunds.

Second quarter operating income as a percentage of sales increased 370 basis points to 14.0%. The increase is due to the gross margin changes and lower operating expenses as a percentage of revenue. Operating expenses were $2.2 higher than the prior year period, mainly due to higher benefit costs, research & development expenses, and bad debt expense partially offset by lower wages and lower amortization. The higher amortization in the prior year period is primarily attributable to the HCEE restructuring activities in the prior year.

Year-to-date operating income as a percentage of sales increased 400 basis points to 13.6%. The increase is due to the gross margin changes and lower operating expenses as a percentage of revenue. Operating expenses were $4.3 higher than the prior year period, primarily from higher benefit costs, research & development expenses, travel expenses, marketing expenses, and bad debt expense, partially offset by lower wages and lower amortization.

Net interest expense decreased by $0.4 to $4.7 in the second quarter of 2026 primarily due to lower debt outstanding compared to the prior year period and a lower spread on our credit facility borrowings because of reduced leverage. Average net debt decreased to $273.9 during the second quarter of 2026 compared with $391.4 during the second quarter of 2025. Year to date interest expense totaled $9.8, a decrease of $4.6. Average net debt for the year-to-date period decreased to $296.3 compared with $394.3 during the prior-year period. The reduction in average net debt is due to the paying down of debt incurred from prior year acquisitions.

The provision for income taxes for the second quarter of 2026 was 22.1% of pretax income compared to 23.8% for the prior-year second quarter. The year-to-date provision was 22.6% and 23.7% of pretax income for 2026 and 2025, respectively. These effective rates fluctuate relative to the levels of income and different tax rates in effect among the countries in which we sell our products.

On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. While we expect certain provisions of the OBBBA to change the timing of cash payments in the current fiscal year and future periods, we do not currently expect the legislation to have a material impact on our consolidated financial statements.

SEGMENT RESULTS

Hydraulics

The following table presents the results of operations for the Hydraulics segment:

Second quarter net sales for the Hydraulics segment increased by $5.5, 3.9%, compared with the prior year second quarter. The increase in sales in the second quarter was driven by improved demand in the mobile and agriculture end markets. Prior year sales included $15.0 in sales related to the Divestiture. Changes in foreign currency exchange rates had a favorable impact of $2.4, 1.7%.

Year-to-date net sales for the Hydraulics segment increased by $18.3, 6.8%, compared with the prior year period. The increase in sales was driven by stronger demand in mobile and agriculture end markets. Changes in foreign currency exchange rates had an favorable impact of $7.7, 2.9%.

Net sales in the Hydraulics segment for the three and six months ended July 4, 2026 included a $2.9 reduction resulting from expected customer credits associated with IEEPA tariff refunds.

The following table presents net sales based on the geographic region of the sale for the Hydraulics segment:

Regional sales performance in the second quarter compared to the prior year quarter was driven by:

Americas - sales increased $2.9, 5.3%, primarily from stronger demand in the mobile end market.

EMEA - excluding favorable changes in foreign currency rates of $1.2, sales increased $4.5, 9.8%, driven by generally stronger demand in the mobile and agriculture end markets.

APAC - excluding favorable changes in foreign currency rates of $1.1, sales decreased $6.4, 15.7%. The primary driver of the year over year decline was the Divestiture.

Second quarter gross profit increased $4.1, 8.8% compared to the prior year first quarter primarily due to higher volume and net tariff impacts, partially offset by higher freight and energy costs. Gross margin improved 160 basis points, primarily due to the Divestiture and lower material costs partially offset by higher direct labor and variable overhead costs as a percentage of sales.

Year-to-date gross profit increased $11.0, 13.1%, primarily due to higher volume and net tariff impacts. Gross margin increased 180 basis points primarily due to the Divestiture and lower material costs as a percentage of sales partially offset by higher direct labor and variable overhead costs as a percentage of sales.

Gross profit in the Hydraulics segment for the three and six months ended July 4, 2026 included a $0.8 benefit related to IEEPA tariff refunds.

Operating income as a percentage of sales increased 200 basis points to 19.7% in the second quarter of 2026 due to the gross margin level improvement and fixed cost leverage as a result of higher volume. Operating expenses were $0.4 higher than the prior year period, primarily due to higher benefit costs and research and development expenses.

Year-to-date operating income as a percentage of sales increased 240 basis points to 18.3% compared to the prior year period. This is primarily due to higher gross margin and higher fixed cost leverage as a result of higher volume. Operating expenses increased by $1.3 year over year primarily due to an increase in benefit costs and research and development expenses.

Electronics

The following table presents the results of operations for the Electronics segment:

Second quarter net sales for the Electronics segment increased $13.9, 19.4%, compared with the prior year period. Compared to the prior year period, the second quarter sales increase was driven by the recreational, health and wellness, and mobile end markets. Sales in the industrial end markets increased slightly, while sales to the agriculture end market decreased slightly. Changes in foreign currency exchange rates had $0.5 impact.

Year-to-date net sales for the Electronics segment increased $34.0, 24.2%, compared with the prior year period. Overall strength in the recreational, health and wellness, mobile, and industrial end markets more than offset the slight decrease in agricultural end markets. Changes in foreign currency exchange rates had $0.8 impact.

Net sales in the Electronics segment for the three and six months ended July 4, 2026 included a $1.2 reduction resulting from expected customer credits associated with IEEPA tariff refunds.

The following table presents net sales based on the geographic region of the sale for the Electronics segment:

Sales increased across most end markets in both the Americas and EMEA regions in the second quarter and year-to-date period. APAC sales increased over the comparable second quarter and year-to-date period in APAC driven by the health and wellness end market.

Second quarter gross profit increased $8.6, 41.0% compared to the prior year second quarter, primarily due to higher volume and net tariff impacts. Gross margin improved 530 basis points, primarily due to the impact of higher fixed costs leverage on higher volume, lower direct labor costs as a percentage of sales, and lower material costs as a percentage of sales, partially offset by unfavorable customer mix. The prior year period included a $2.4 freight and duties expense related to a product import classification change.

Year-to-date gross profit increased $16.6, 38.2%, primarily due to higher volume in current year and net tariff impacts. Gross margin increased 350 basis points over the same period to 34.4%, primarily due to the impact of higher fixed costs leverage on higher volume, lower direct labor costs as a percentage of sales, and lower material costs as a percentage of sales, partially offset by an unfavorable customer mix.

Gross profit in the Electronics segment for the three and six months ended July 4, 2026 included a $0.4 benefit related to IEEPA tariff refunds.

Operating income as a percentage of sales increased 490 basis points to 13.1% in the second quarter of 2026 compared to the prior year period due to the higher gross margin partially offset by an increase in operating expenses as a percentage of sales. Operating expenses were $3.3 higher than the prior year period primarily due to an increase in benefit costs, research and development expenses, and bad debt expense.

Year-to-date operating income as a percentage of sales increased 460 basis points to 14.5% compared to the prior year period. This is primarily due to higher gross margin and higher fixed cost leverage as a result of higher volume. Operating expenses increased by $5.3 year over year primarily due to an increase in benefit costs, research and development expenses and bad debt expense.

Corporate and Other

Certain costs are excluded from business segment results as they are not used in evaluating the results of, or in allocating resources to, our operating segments. For the second quarter of 2026, these costs totaled $7.6 for amortization of acquisition-related intangible assets of $7.5 and $0.1 for costs related to the divestiture and officer transition costs. Compared to the second quarter of 2025, these costs decreased by $1.4, primarily due to reduction of amortization related to acquired intangible assets and officer transition costs. Year-to-date, corporate and other costs totaled $15.3 for amortization of acquisition related intangible assets of $15.1 and $0.2 related to the divestiture and officer transition

costs. This compared to $17.4 in the 2025 year-to-date period that included amortization of acquisition related intangible assets of $16.5, $0.5 for officer transition costs, and $0.4 for divestiture activities.

LIQUIDITY AND CAPITAL RESOURCES

Historically, our primary source of capital has been cash generated from operations. We also use borrowings on our credit facilities to fund acquisitions. During the first six months of 2026, cash provided by operating activities totaled $65.8. At the end of the second quarter, we had $68.0 of available cash and cash equivalents on hand and $393.8 of available credit on our revolving credit facilities. We also have a $400.0 accordion feature available under our Third Amended and Restated Credit Agreement, subject to certain pro forma compliance requirements, that is intended to support potential future acquisitions.

Our principal uses of cash are operating expenses, capital expenditures, servicing debt, acquisition-related payments, dividends to shareholders, and share repurchases.

We believe that cash generated from operations and our borrowing availability under our credit facilities will be sufficient to satisfy our operating expenses for the foreseeable future. In the event that economic conditions were to severely worsen for a protracted period of time, we would have several options available to ensure liquidity in addition to increased borrowings. Capital expenditures could be postponed since they primarily pertain to long-term improvements in operations, operating expense reductions could be made, acquisition activity could be delayed and finally, the dividend to shareholders as well as share repurchases could be reduced or suspended.

Cash Flows

The following table summarizes our cash flows for the periods:

Cash on hand decreased $5.0 in the first two quarters of 2026 to $68.0 as of July 4, 2026. Changes in exchange rates during the six months ended July 4, 2026, negatively impacted cash and cash equivalents $1.0. Cash balances on hand are a result of our cash management strategy, which focuses on maintaining sufficient cash to fund operations while reinvesting cash in the Company and paying down borrowings on our credit facilities.

Operating activities

Year-to-date cash from operations increased by $9.8 to $65.8. Cash earnings (calculated as net income plus adjustments to reconcile net income to net cash provided by operating activities, excluding changes in net operating assets and liabilities) increased by $24.7 in the first two quarters of 2026 compared to the same period in 2025. Changes in net operating assets and liabilities negatively impacted cash flow by $15.0 in the second quarter, compared to the prior year period, primarily from a higher increase in accounts receivable and inventory, a smaller increase in accounts payable partially and offset by an increase in other current assets driven by prepayments. Changes in inventory decreased cash by $7.9 in comparison to an increase of cash by $1.7 in the first two quarters of 2026 and 2025, respectively. Days of inventory on hand decreased to 115 days as of July 4, 2026, compared with 130 days as of June 28, 2025. Changes in accounts receivable reduced cash by $27.3 and $23.4 in the first two quarters of 2026 and 2025, respectively. Days sales outstanding decreased slightly to 55 days as of July 4, 2026, compared with 62 days as of June 28, 2025. Changes in accounts payable increased cash by $13.0 and $21.4 in the first two quarters of 2026 and 2025, respectively. Days payables outstanding increased to 53 days in 2026 from 53 days in 2025.

Investing activities

Cash used in investing activities totaled $19.2 in the first two quarters of 2026, compared to $13.2 in the first two quarters of the prior year. The year-over-year increase reflects an increase in capital expenditures to support organic growth opportunities.

Capital expenditures totaled $18.0, 3.9%, of sales for the first two quarters of 2026, an increase of $6.5 over the prior year comparable period. Capital expenditures for 2026 are forecasted to be approximately 3.8% to 4.8% of sales, for investments in machinery and equipment, improvements to manufacturing technology and maintaining or replacing existing machine capabilities.

Financing activities

Net cash used in financing activities totaled $50.6 during the first two quarters of 2026, compared to $38.5 in the same period of the prior year. In the first two quarters of 2026, repayments, net of borrowings, totaled $33.1 compared to $25.6 in the first two quarters of 2025.

Borrowings on our term loans and revolving credit facilities as of July 4, 2026, totaled $226.9 and $105.4, respectively. See Note 9 - Credit Facilities, for additional information regarding our credit facilities.

Scheduled principal payments under the Term Loan Facility were payable in quarterly installments beginning on September 28, 2024 and continuing on the last day of each following fiscal quarter, beginning at $3.75 before increasing to $5.6 in June 2026 and $7.5 in June 2028. The Company voluntarily prepaid all principal amounts scheduled to be due in 2026, 2027 and a portion of the principal amounts scheduled to be due in 2028. As a result, the remaining scheduled principal payments due in 2028 are $20.6. All remaining principal is due on the maturity date of June 25, 2029.

During the second quarter of 2026, we declared a quarterly cash dividend of $0.12 per share payable on July 24, 2026, to shareholders of record as of July 10, 2026. The declaration and payment of future dividends is subject to the sole discretion of the Board of Directors of the Company (the "Board"), and any determination as to the payment of future dividends will depend upon our profitability, financial condition, capital needs, future prospects and other factors deemed pertinent by the Board.

Share Repurchase Program

On February 20, 2025, the Board approved and publicly announced a multi-year share repurchase program (the "Share Repurchase Program"), authorizing the Company to repurchase up to $100.0 of our outstanding common stock. The Company may purchase shares at management's discretion from time to time in the open market, through privately negotiated transactions, through investment banking institutions or through other means in accordance with applicable federal securities laws, including Rule 10b5-1 trading plans. To the extent that the Company repurchases its shares, the amount and timing of any repurchases are subject to a variety of factors including, but not limited to, general business

and market conditions, share price, regulatory and legal requirements and capital availability. The program does not obligate the Company to acquire a minimum number of shares. We expect the Share Repurchase Program to be funded with cash on hand and cash generated from operations. During the six months ended July 4, 2026, the Company repurchased 149,378 shares of its common stock for $10.7, including applicable excise tax to be paid in a future period. As of July 4, 2026, the Company has repurchased a total of 479,378 shares of its common stock for $24.3, including applicable $0.1 excise tax, and has $75.9 of remaining availability to repurchase outstanding common stock under its Share Repurchase Program.

Off Balance Sheet Arrangements

We do not engage in any off-balance sheet financing arrangements. In particular, we do not have any material interest in variable interest entities, which include special purpose entities and structured finance entities.

Critical Accounting Policies and Estimates

We currently apply judgment and estimates that may have a material effect on the eventual outcome of assets, liabilities, revenues and expenses for impairment of long-lived assets, inventory, goodwill, accruals, income taxes and fair value measurements. Our critical accounting policies and estimates are included in our Form 10-K, and any material changes made during the first six months of 2026, are disclosed in Note 2 of the Notes to the Consolidated Unaudited Financial Statements included in this Quarterly Report on Form 10-Q.