Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

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

The information in this Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") should be read in conjunction with the Company's condensed consolidated financial statements and the related notes set forth in Item 1 of Part I of this Quarterly Report on Form 10-Q, our MD&A set forth in Item 7 of Part II of our 2024 Annual Report on Form 10-K and our consolidated financial statements and related notes set forth in Item 8 of Part II of our 2024 Annual Report on Form 10-K. See Part II, Item 1A, "Risk Factors," below and "Cautionary Notice Regarding Forward-Looking Information," above, and the information referenced therein, for a description of risks that we face and important factors that we believe could cause actual results to differ materially from those in our Forward-Looking Statements. All amounts and percentages are approximate due to rounding and all dollars in the text are in millions, except per share amounts or where otherwise noted. When we cross-reference to a "Note," we are referring to our "Notes to Condensed Consolidated Financial Statements" included in Part I, Item 1, of this Quarterly Report on Form 10-Q, unless the context indicates otherwise. All amounts noted within the tables are in thousands and amounts and percentages are approximate due to rounding.

Overview

Our Company

We design, manufacture and market a broad array of products that power, protect and connect electronic circuits. These products are primarily used in the defense, commercial aerospace, networking, telecommunications, computing, general industrial, high-speed data transmission, transportation and eMobility industries. Our portfolio of products also finds application in the automotive, medical and consumer electronics markets.

We operate through three product group segments. In the six months ended June 30, 2025, 53% of our revenues were derived from Power Solutions and Protection, 34% from our Connectivity Solutions and 13% from our Magnetic Solutions operating segment.

Our operating expenses are driven principally by the cost of labor where the factories that we use are located, the cost of the materials that we use and our ability to effectively and efficiently manage overhead costs. As labor and material costs vary by product line and region, any significant shift in product mix can have an associated impact on our costs of sales. Costs are recorded as incurred for all products manufactured. Such amounts are determined based upon the estimated stage of production and include materials, labor cost and fringes and related allocations of factory overhead.Our products are manufactured at various facilities in the United States, Mexico, Dominican Republic, United Kingdom, Slovakia, Israel, India and the People's Republic of China (PRC).

We have little visibility into the ordering habits of our customers and we can be subjected to large and unpredictable variations in demand for our products. Accordingly, we must continually recruit and train new workers to replace those lost to attrition and be able to address peaks in demand that may occur from time to time. These recruiting and training efforts and related inefficiencies, and overtime required in order to meet any increase in demand, can add volatility to the labor costs incurred by us.

Key Factors Affecting our Business

We believe that in addition to recent global tariffs and inflationary pressures on the costs of goods and services in general, and ongoing conflicts/political unrest including in or near the countries in which Bel operates, the key factors affecting and/or potentially affecting ourresults for the six months ended June 30, 2025 and/or future results include the following:

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Acquisition of Enercon - In November 2024, Bel acquired an 80% stake in Enercon. As a result, we will benefit from a full year of Enercon's sales in 2025 within our Power Solutions and Protection segment. Enercon is a global supplier of power supplies primarily into defense markets, and its sales and results of operations may vary depending on government spending on defense.

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Backlog - Our backlog of orders amounted to $414 million at June 30, 2025, an increase of $32.6 million, or 9%, from December 31, 2024. From year-end 2024 to June 30, 2025, we experienced a 5% rise in backlog within our Power Solutions and Protection segment, a 14% increase in our Magnetic Solutions segment and a 14% increase within our Connectivity Solutions segment. Factors that could cause the Company to fail to ship all such orders include unanticipated supply difficulties, changes in customer demand and new customer designs. Due to these factors, backlog may not be a reliable indicator of the timing of future sales. The preceding two sentences regarding the Company's backlog contain Forward-Looking Statements. See "Cautionary Notice Regarding Forward-Looking Information."

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Product Mix - Material and labor costs vary by product line and any significant shift in product mix between higher- and lower-margin product lines will have a corresponding impact on our gross margin percentage. In general, our Connectivity products have historically had the highest contribution margins of our three product groups given the harsh environment and high-reliability nature of these products and the end markets they serve. Our Power products have a higher-cost bill of materials and are impacted to a greater extent by changes in material costs. As our Magnetic Solutions products are more labor-intensive in nature, margins on these products are impacted to a greater extent by minimum and market-based wage increases in the PRC and fluctuations in foreign exchange rates between the U.S. dollar and the Chinese renminbi. Fluctuations in revenue volume among our product groups will have a corresponding impact on our profit margins. See "Results of Operations - Summary by Operating Segment - Revenue and Gross Margin"below for further details.

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Pricing and Availability of Materials - Raw material pricing has somewhat stabilized since 2024, though costs remain elevated. Supply constraints for key components like capacitors, resistors, and integrated circuits ("ICs") have eased, with suppliers meeting delivery deadlines more consistently despite extended lead times. Metal commodity prices, particularly copper and gold, continue to impact cost structures and supplier pricing. Trade restrictions have limited access to certain parts and suppliers, notably affecting Power sales due to restrictions on a former supplier in mid-2024 that historically supported $3-$4 million per quarter in consumer end market sales. We are actively identifying alternative manufacturing options for these components. Regulatory changes affecting suppliers in the PRC could disrupt our supply chain, leading to increased costs, shortages, or other adverse impacts on our business and operating results. Additionally, tariffs imposed by the U.S. or foreign governments on imports and exports could reduce margins or increase prices, potentially decreasing customer demand. See "Global Tariffs" below. The preceding discussion in this paragraph contains Forward-Looking Statements. See "Cautionary Notice Regarding Forward-Looking Information."

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Global Tariffs- On April 5, 2025, the Trump Administration enacted reciprocal tariffs on U.S. imports from a number of countries in which Bel's manufacturing sites and/or suppliers are located. We currently estimate, based on information available today and our sales patterns at the present time, that approximately 75% of our global sales are not currently subject to these newly-enacted U.S. tariffs as the goods are either manufactured outside the U.S. and shipped to a customer who is located outside the U.S. or the goods are manufactured within the U.S. for local consumption. Of the approximately 25% of our consolidated global sales that we estimate are currently subject to the new tariffs, the countries of origin are the PRC (approximately 10% of Bel's global sales), Israel (8%), Slovakia (3%), Dominican Republic (1.5%), and other countries that each represent less than 1% of our U.S. imports. Imports into the U.S. from Mexico are currently exempt from tariffs as our products fall within the scope of the USMCA agreement as presently in force and are therefore not included in the aforementioned 25%. While global tariffs did not have a material financial impact on our second quarter 2025 financial results, we continue to closely monitor the evolving tariff landscape and are assessing possible alternatives aimed at potentially mitigating the impact of tariffs on Bel and our customers. The imposition of tariffs on our U.S. imports could result in reduced demand for our products and/or higher material costs. Our future sales and/or gross margins could be impacted as a result. The preceding discussion of "Global Tariffs" contains Forward-Looking Statements, including our estimates regarding our approximation of our global sales subject to the new tariffs, statements about the possible effects and impacts of tariffs, and statements about our present plans and intentions in connection therewith or in response thereto. See "Cautionary Notice Regarding Forward-Looking Information."

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Labor Costs - Labor costs represented 8.1% of revenue during the first six months of 2025, as compared to 7.9% for the same period in 2024. The increase reflects wage adjustments across multiple regions: - Slovakia: A 5% wage increase took effect in 2025 with an approximate $0.2 million expected annual impact. Additionally, a 12% minimum wage increase is expected in 2026 due to recent legislation, with potential future increases tied to EU27 wage equalization efforts. - China: Throughout the first half of 2025, minimum wage increases went into effect at two of our factories in the PRC, which are expected to result in approximately $0.8 million of incremental annual labor costs. - Dominican Republic: Minimum wage increases of 25% phased in over two years (13% effective June 1, 2025, and 12% effective June 1, 2026) with an approximate $0.1 million expected annual impact related to the 2025 increase. - Mexico: A 10.7% wage increase effective January 1, 2025, adding an expected $0.7 million of labor costs annually. These increases, along with any future upward wage adjustments, are expected to have an unfavorable impact on profit margins. The foregoing statements regarding labor costs, including without limitation statements about anticipated future wage increase enactments and statements about estimated costs including projected impact of the wage increases, constitute Forward-Looking Statements. See "Cautionary Notice Regarding Forward-Looking Information" for details.

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Inflationary Pressures- Inflationary pressures could continue to result in higher input costs, including those related to our raw materials, labor, freight, utilities, healthcare and other expenses. Our future operating results will depend, in part, on our continued ability to manage these fluctuations through pricing actions, cost savings initiatives and sourcing decisions. The preceding two sentences contain Forward-Looking Statements. See "Cautionary Notice Regarding Forward-Looking Information."

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Impact of Foreign Currency - During the six months ended June 30, 2025, labor and overhead costs were approximately $0.7 million lower than the corresponding 2024 period, primarily due to favorable foreign exchange rates involving the Mexican peso and Chinese renminbi, partially offset by unfavorable fluctuations in the Israeli shekel. We realized a foreign exchange transactional gain of $11.8 million during this period, driven by currency spot rate fluctuations when translating balance sheet accounts as of June 30, 2025, versus December 31, 2024. As a U.S.-domiciled company, foreign currency-denominated financial results are translated into U.S. dollars, and fluctuations in exchange rates can impact our consolidated statements of operations and cash flows. In the first half of 2025, the depreciation of the Mexican peso and Chinese renminbi against the U.S. dollar resulted in labor and overhead cost savings of approximately $0.9 million in Mexico and $0.2 million in the PRC compared to the prior year period. We monitor foreign currency changes and may continue to use forward contracts or implement pricing actions to mitigate currency-related impacts on operating results. The preceding discussion contains Forward-Looking Statements. See "Cautionary Notice Regarding Forward-Looking Information."

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Effective Tax Rate - Our effective tax rate will fluctuate based on the geographic regions in which our pretax profits are earned. Of the geographic regions in which we operate, the U.S. and Europe's tax rates are generally equivalent; and Asia has the lowest tax rates of our three geographical regions. See Note 12, "Income Taxes".

Results of Operations - Summary by Operating Segment

Revenue and Gross Margin

Our revenue and gross margin by operating segment for the three and six months ended June 30, 2025 and 2024 were as follows:

		Three Months Ended																Six Months Ended
		June 30,																June 30,
		Revenue								Gross Margin								Revenue								Gross Margin
		2025				2024				2025				2024				2025				2024				2025				2024
Power solutions and protection		$	86,799			$	58,551				41.9	%			45.7	%		$	169,853			$	118,798				42.2	%			44.8	%
Connectivity solutions			59,202				57,822				39.2	%			38.9	%			109,932				112,107				38.6	%			37.6	%
Magnetic solutions			22,298				16,832				28.7	%			26.4	%			40,752				30,390				26.9	%			21.8	%
		$	168,299			$	133,205				38.7	%			40.1	%		$	320,537			$	261,295				38.7	%			38.8	%

Power Solutions and Protection:

Sales of our Power Solutions and Protection products increased by $28.2 million (48.2%) during the three months ended June 30, 2025, compared to the same period in 2024. For the six months ended June 30, 2025, sales rose by $51.1 million (43.0%) compared to the first half of 2024. This growth was primarily driven by sales in aerospace and defense applications, which contributed $32.6 million during the second quarter of 2025 and $65 million during the first half of 2025. These applications represent a new end market within Bel's Power segment, introduced through the acquisition of Enercon in November 2024. Sales of networking applications increased by $3.7 million during the second quarter of 2025 and by $3.0 million during the first half of 2025, relative to the same periods in 2024. Additional contributors to the revenue increase included higher sales of Fuse products, which rose by $1.7 million during the three months and $2.3 million during the six months ended June 30, 2025, compared to the same periods in 2024.

However, these gains were partially offset by declines in several categories. Railway applications saw a decline of $3.2 million during the second quarter and $4.7 million during the first half of 2025. eMobility applications fell by $2.3 million and $4.0 million during the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024. Additionally, sales in Other Industrial applications dropped by $1.7 million and $5.4 million during the three and six months ended June 30, 2025, respectively, compared to the same periods in 2024, while consumer applications declined by $1.7 million in the second quarter of 2025 and by $4.3 million in the first six months of 2025, in each case relative to the comparable 2024 periods.

The declines in gross margin for the Power segment for the 2025 periods compared to the 2024 periods as presented above are primarily due to non-recurring items. In the first full half of 2024, there were non-recurring items, such as cancellation fees, which were recorded at a 100% gross margin. However, during 2025, there was a shift in the product mix toward lower-margin offerings within the legacy Bel power segment, which further contributed to the decline in gross margin. This decline was partially offset by favorable foreign exchange conditions in the first half of 2025.

Connectivity Solutions:

Sales of Connectivity Solutions products increased by $1.4 million (2.4%) in the second quarter of 2025 compared to second quarter of 2024, driven by higher volumes sold into commercial aerospace applications, which grew by $5.1 million (33.5%), and defense applications, which increased by $1.5 million (12.2%). These gains were partially offset by a decline in distribution sales of $3.6 million (16.6%) during the second quarter of 2025 compared to the second quarter of 2024.

For the six months ended June 30, 2025, total Connectivity Solutions sales decreased by $2.2 million (1.9%), compared to the same period in 2024. However, the commercial aerospace sector experienced growth, increasing by $3.4 million (11.4%), and defense applications rose by $2.9 million (12.6%), during the first half of 2025 compared to the same period in 2024. These gains were offset by declines in sales within distribution channels of $4.5 million (10.7%) and the balance of the decline is in industrial applications during the first half of 2025 when compared to the first six months of 2024.

Gross margins for the 2025 periods presented above were favorably impacted by favorable product mix, favorable fluctuation in exchange rates between the U.S. dollar and Mexican peso in the 2025periods as compared to the 2024periods presented, and operational efficiencies from the facility consolidations completed in 2024, partially offset by higher wage rates in Mexico.

Magnetic Solutions:

Sales of Magnetic Solutions products increased by $5.5 million (32.5%) in the second quarter of 2025 and $10.4 million (34.1%) in the first half of 2025 compared to the same periods in 2024. This growth was primarily driven by higher demand from networking customers and increased sales through distribution channels. Gross margin improvements for this product group during the first half of 2025 were supported by recent facility consolidations in the PRC, effective cost management, and beneficial exchange rates between the Chinese renminbi and the U.S. dollar.

Cost of Sales

Cost of sales as a percentage of revenue for the three and six months ended June 30, 2025 and 2024consisted of the following:

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2025				2024				2025				2024
Material costs			31.8	%			27.8	%			30.7	%			28.0	%
Labor costs			7.8	%			7.7	%			8.1	%			7.9	%
Other expenses			21.7	%			24.4	%			22.6	%			25.3	%
Total cost of sales			61.3	%			59.9	%			61.3	%			61.2	%

Material costs as a percentage of sales increased during the three and six months ended June 30, 2025, compared to the same periods in 2024, primarily due to a shift in production mix driven by higher sales of Power products, which typically have greater material content. Labor costs as a percentage of sales also rose in the 2025 relative to the comparable 2024 periods, reflecting increased sales of labor-intensive Magnetic products and higher minimum wage rates, partially offset by favorable exchange rate fluctuations in the Chinese renminbi and Mexican peso versus the U.S. dollar.

Other expenses, including fixed costs such as support labor and fringe, depreciation and amortization, and facility costs (rent, utilities, insurance), remained relatively stable aside from the inclusion of Enercon's overhead expenses in the 2025 periods. However, as a percentage of sales, these expenses decreased during the three and six months ended June 30, 2025, compared to the same periods in 2024, benefiting from higher sales volumes in the 2025 periods.

Research and Development ("R&D") Expense

R&D expenses totaled $8.1 million in the second quarter of 2025, up from $6.0 million in the second quarter of 2024, and totaled $15.3 million for the six months ended June 30, 2025, compared to $11.2 million for the same period in 2024. These increases were primarily driven by the inclusion of Enercon's R&D costs, which contributed $1.7 million in the second quarter of 2025 and $3.4 million for the six-month period ended June 30, 2025.

Selling, General and Administrative Expense ("SG&A")

SG&A expenses totaled $30.9 million in the second quarter of 2025, an increase of $6.8 million compared to $24.1 million in the second quarter of 2024. For the six months ended June 30, 2025, SG&A expenses rose to $60.4 million, up from $49.1 million in the same period of 2024. The increase was primarily driven by Enercon's SG&A expenses, which contributed $6.0 million in the second quarter of 2025 and $11.9 million for the first half of 2025. This was partially offset by a $0.6 million reduction in expenses of the legacy Bel business, stemming from an adjustment in variable compensation during the six-month period ended June 30, 2025, compared to the same period in 2024.

Interest Expense

Interest expenses were $4.0 million for the three months ended June 30, 2025, compared to $0.4 million for the same period in 2024. For the six months ended June 30, 2025, interest expenses totaled $8.1 million, up from $0.8 million in the same period of 2024, reflecting increases of $3.6 million and $7.3 million for the three- and six-month periods, respectively. These increases were primarily driven by higher outstanding borrowings under the Company's Credit Agreement, including those incurred to finance the Enercon acquisition and related costs (refer to Note 3, "Acquisition" for additional details). For further information on the Company's outstanding debt, see "Liquidity and Capital Resources" below and Note 11, "Debt."

Interest Income

Interest income for the three months ended June 30, 2025 was $0.3 million, compared to $1.1 million for the same period in 2024. For the six months ended June 30, 2025, interest income was $0.5 million, down from $2.3 million in the comparable period of 2024. These declines were primarily attributable to reduced investments in U.S. Treasury Bills during the 2025 periods compared to those in 2024.

Other Income (Expense), Net

Other income (expense), net was $7.6 million for the three months ended June 30, 2025, compared to ($0.5) million for the same period in 2024. This year-over-year change was primarily driven by foreign exchange transactional gains of $7.6 million during the three months ended June 30, 2025 compared to a loss of $0.3 million for the same period in 2024, due to fluctuations in spot rates of certain currencies when translating balance sheet accounts as of June 30 of each year. SERP investments resulted in a gain of $0.7 million in the second quarter of 2025 versus a gain of $0.1 million in the second quarter of 2024. Earnout adjustment losses related to the Enercon acquisition were $0.5 million for the three months ended June 30, 2025 and additionally, the Company recorded losses of $0.3 million related to its investment in innolectric during each of the second quarters of 2025 and 2024.

For the six months ended June 30, 2025, other income (expense), net totaled $10.2 million, compared to $1.3 million for the same period in 2024. This change was largely driven by foreign exchange transactional gains of $11.8 million during the first half of 2025, driven by currency spot rate fluctuations when translating balance sheet accounts as of June 30, 2025, compared to December 31, 2024. This compares to a foreign exchange transactional gain of $0.4 million recorded during the six months ended June 30, 2024. SERP investment market fluctuations resulted in a gain of $0.4 million in the 2025 period versus a gain of $0.8 million in the 2024 period. Earnout adjustment losses related to the Enercon acquisition were $1.1 million for the six months ended June 30, 2025. The Company recorded losses of $0.1 million from its investment in innolectric during both the first half of 2025 and 2024.

Provision for Income Taxes

The Company's effective tax rate will fluctuate based on the geographic regions in which the pretax profits are earned. Of the jurisdictions in which the Company operates, the U.S. and Europe's tax rates are generally equivalent; and Asia has the lowest tax rates of the Company's three geographic regions. See Note 12, "Income Taxes".

The provision for income taxes for the three months ended June 30, 2025 and 2024 was $6.9 million and $4.1 million, respectively. Earnings before income taxes for the three months ended June 30, 2025 increased by $10.8 million compared to the same period in 2024, primarily due to higher income from the Europe and Asia regions, partially offset by a decrease in income from the North America region. The Company's effective tax rate for the three months ended June 30, 2025 was 20.5%, compared to 17.8% for the same period in 2024. The increase in the effective tax rate was primarily driven by a reduction in the tax benefit from the reversal of uncertain tax positions due to statute expirations, as well as changes in foreign taxes and the relative amounts of income earned in those jurisdictions. See Note 12, "Income Taxes."

The provision for income taxes for the six months ended June 30, 2025 and 2024 was $12.4 million and $8.6 million, respectively. Earnings before income taxes for the six months ended June 30, 2025 increased by $14.3 million compared to the same period in 2024, primarily due to higher income from the Europe and Asia regions, partially offset by a decrease in income from the North America region. The Company's effective tax rate for the six months ended June 30 2025, was 21.5% compared to 19.8% for the same period in 2024. The increase in the effective tax rate was attributable to the same factors noted above. See Note 12, "Income Taxes".

Liquidity and Capital Resources

Our principal sources of liquidity include $59.3 million of cash and cash equivalents at June 30, 2025, cash provided by operating activities and borrowings available under our credit facility. We expect to use this liquidity for operating expenses, investments in working capital, capital expenditures, interest, taxes, lease and purchase obligations, pension benefit obligations, dividends, purchases of common stock under our Repurchase Program, and debt obligations and other long-term liabilities. Our liquidity may also be utilized to fund potential acquisitions in future periods, as well as potential future cash requirements related to the Enercon acquisition, including potential Earnout Payments that may become due and the put-call options under the Enercon shareholders' agreement, pursuant to which Bel has the current intention to purchase the remaining 20% interest by early 2027. See the "Liquidity and Capital Resources" discussion appearing in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. We believe that our current liquidity position and future cash flows from operations will enable us to fund our operations, both in the next twelve months and in the longer term.

Cash Flow Summary

During the six months ended June 30, 2025, our cash and cash equivalents decreased by $9.0 million. This decrease was primarily due to the following:

	•	net repayments of long-term debt of $37.5 million;
	•	dividend payments of $1.7 million.
	•	purchases of property, plant and equipment of $6.7 million;
	•	deferred financing costs of $0.7 million; partially offset by
	•	net cash provided by operating activities of $28.9 million;
	•	proceeds from sale of property of $4.9 million; and
	•	proceeds from held to maturity securities of $1.0 million

During the six months ended June 30, 2025, our accounts receivable increased by $8.2 million due to higher sales volume in the second quarter. Days sales outstanding (DSO) was 66 days at June 30, 2025 and 68 days at December 31, 2024. Inventory increased by $0.1 million at June 30, 2025 compared to December 31, 2024, primarily driven by an increase in raw materials and work in progress, partially offset by a decline in finished goods. Inventory turns were 2.2 at June 30, 2025 as compared to 2.1 at December 31, 2024.

Cash and cash equivalents, held to maturity U.S. Treasury securities and accounts receivable comprised approximately 19.0% of our total assets at each June 30, 2025 and at December 31, 2024. Our current ratio (i.e., the ratio of current assets to current liabilities) was3.1 to 1 at June 30, 2025 and 2.9 to 1 at December 31, 2024. At June 30, 2025 and December 31, 2024, $45.1 million and $48.4 million, respectively (or 76% and 71%, respectively), of our cash and cash equivalents was held by our foreign subsidiaries. We repatriated $15.0 million of funds from outside of the U.S. during the six months ended June 30, 2025. We continue to analyze our global working capital and cash requirements and the potential tax liabilities attributable to further repatriation, and we have yet to make any further determination regarding repatriation of funds from outside the U.S. to fund our U.S. operations in the future. In the event these funds were needed for our U.S. operations, we would be required to accrue and pay U.S. state taxes and any applicable foreign withholding taxes to repatriate these funds.

Future Cash Requirements

We expect foreseeable liquidity and capital resource requirements in the ordinary course to be met through existing cash and cash equivalents and anticipated cash flows from operations, as well as borrowings available under our revolving credit facility, if needed. Our material cash requirements arising in the normal course of business are outlined in Item 7A, "Management's Discussion and Analysis of Financial Condition and Results of Operations," in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. There were no material changes to our future cash requirements during the six months ended June 30, 2025.

Credit Facility

The Company had $150 million of available borrowings under its revolving credit facility at June 30, 2025, as further described below and in Note 11, "Debt". There are no mandatory principal payments due on the credit facility borrowings during 2025. The current balance of $250 million is due upon expiration of the credit facility on September 1, 2028. Anticipated interest payments due amount to $47.4 million, of which $7.5 million is expected to be paid in 2025 based on our debt balance and interest rate in place at June 30, 2025. At June 30, 2025, we were in compliance with our debt covenants, including the most restrictive covenant, the Fixed Charge Coverage Ratio. The unused credit available under the credit facility at June 30, 2025 was $150 million, all of which we had the ability to borrow without violating our Leverage Ratio covenant based on our existing consolidated EBITDA.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements include certain amounts that are based on management's best estimates and judgments. We base our estimates on historical experience and on various other assumptions, including in some cases future projections, that are believed to be reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. Different assumptions and judgments could change the estimates used in the preparation of the condensed consolidated financial statements, which, in turn, could change the results from those reported. Management evaluates its estimates, assumptions and judgments on an ongoing basis.

Based on the above, we have determined that our most critical accounting estimates are those related to business combinations, inventory valuation, goodwill and other indefinite-lived intangible assets, and those related to our pension benefit obligations. For a detailed discussion of our critical accounting estimates, refer to "Critical Accounting Estimates" in Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024. There have been no material changes in our critical accounting policies, judgments and estimates, including assumptions or estimation techniques utilized, as compared to those disclosed in our 2024 Annual Report on Form 10-K.

Recent Accounting Pronouncements

The discussion of new financial accounting standards applicable to our Company is incorporated herein by reference to Note 1, "Basis of Presentation and Accounting Policies".