MLR 10-K & 10-Q changes, risk factors and insider trading

In addition to the information discussed elsewhere in this Form 10-K, you should carefully consider the following risk factors, as well as additional factors not presently known to us or that we currently deem to be immaterial, which could materially affect our business, liquidity, financial condition, and/or results of operations in future periods.

Our dependence upon outside suppliers for component parts, chassis and raw materials, including aluminum, steel, and petroleum-related products, leaves us subject to changes in price and availability,availability (including as a result of tariffs), the cadence and quantity of deliveries from our suppliers, and delays in receiving supplies of such materials, component parts or chassis.

We are dependent upon outside suppliers for our raw material needs, other purchased component parts, and chassis. Prices, availability and the timing of delivery of these raw materials, purchased component parts, and chassis are subject to substantial fluctuations that are beyond our control due to factors such as changing economic conditions, the level of tariffs that the U.S. imposeimposes on imported steel, aluminum, and other commodities or component partsparts, any retaliatory actions taken by foreign governments and any resulting trade wars or trade restrictions,wars, inflation, governmental regulations (including CARB’s Advanced Clean Trucks regulation), currency and commodity price fluctuations, resource availability, transportation costs, weather conditions or events and natural disasters, civil and political unrest and instability, acts of terrorism, war (such as the ongoing military conflicts in Ukraine and the Middle East and Ukraine) and other factors impacting supply and demand pressures. Sporadic deliveries, significantly elevated delivery quantities, and delays in shipments of our raw materials, purchased component parts, including chassis, and government actions related to tariffs on imports and trade policies have previously adversely impacted, and have the potential to further impact our revenues, results of operations and financial condition.

As a result of our supply chain challenges,challenges in recent years, it has become more difficult to accurately forecast, purchase, warehouse, and transport - to our manufacturing facilities and to our distribution partners - purchased materials, component parts, and chassis at optimal volumes. If we are unable to accurately match the timing and quantities of component purchases, including chassis, to our actual needs or successfully manage our inventory or our workforce to adapt to the increased complexity in our supply chain, we may incur unexpected inventory buildup in our distribution channel. A mismatch in the timing and quantities of component purchases, including with respect to chassis, that results in a significant inventory buildup in our distribution channel has resulted, and could continue to result, in reduced sales, as our distribution partners work through any such inventory buildup in the field. In addition, if we experience shortages or delays in receiving raw materials, component parts, and chassis, we may also incur unexpected production disruption, as well as storage, transportation, and labor costs, which could have a material adverse effect on our financial condition and results of operations. In addition, we may not be able to meet our customers’ delivery schedules and could face the loss of orders or customers as a result of any resulting production disruptions.

Our third-party suppliers’ ability to supply us with component parts and chassis is limited by their available capacity to manufacture the component parts and chassis we require, and to secure adequate freight capacity to deliver them to our facilities. Various supply chain disruptions in 2024 continued to impact our ability to obtain certain raw materials, purchased component parts and chassis from third party supplierssuppliers, resultedresulting in substantial price increases.increases Inthrough addition,the third quarter of 2025. Additionally, in the fourth quarter of 2023 and during 2024, we and, in turn, our distribution partners, also experienced significantly elevated levels of chassis shipments earlier than expected that resulted in a buildup of inventory in our distribution channel during the first half of 2024. While we slowed chassis deliveries in the second half of 2024 and throughout 2025 to allow our distributor network to work through the inventory already in the distribution channel, we continuedcould continue to experience such difficulties throughout 2024 and in early 2025.2026. These supply chain difficulties have had, and are anticipated to continue to have, a material adverse impact on our profitability and results of operations.

Recently, the U.S. announced the implementation of new or increased tariffs, including tariffs on steel and aluminum products imported from various countries. The ultimate impact of these tariffs is unknown at this time. Additionally, ongoing changes in U.S. and foreign government trade policies, including potential modifications to existing trade agreements and further restrictions on free trade, could introduce additional uncertainty. Any escalation of trade tensions, additional tariffs, retaliatory measures by foreign governments, or shifts in U.S. or international trade policies could adversely impact our supply chain and increase costs of component parts, chassis and raw materials, such as steel, aluminum, and petroleum-related products. A trade war or other further significant changes in trade regulations could have an adverse effect on our business and results of operations. We also continue to monitor the impact of the conflictconflicts in Ukraine and the Middle East and Ukraine on our fuel costs and supply chain for materials and component parts, particularly with respect to steel and items with substantial steel content.

Shortages and price increases and/or delays or unexpected cadence or quantities in the deliveries of, our raw materials and purchased component parts, including chassis, have hadhad, and should be anticipated tocould continue to havehave, a material adverse effect on our profitability, financial performance, competitive position and reputation.

Demand from our customers and towing operators is affected by the availability of capital and access to credit, as well as rising costs of equipment ownership.ownership (including as a result of rising insurance costs).

The ability of our customers and of towing operators to purchase our products is affected by the availability of capital and credit to them. Our independent distributor customers rely on floor plan financing in connection with the purchase of our products, and the availability of that financing on acceptable terms has a direct effect on the volume of their purchases. More restrictive lending practices in conjunction with continuing increases in the cost of such financing can prevent distributors from carrying adequate levels of inventory, which limits product offerings available to the end customerend-customer and could lead to reduced sales of our products. Additionally, in many cases, a towing operator’s decision to purchase our products from one of our distributors is dependent upon their ability to obtain financing uponon acceptable terms. Volatility in the capital markets and changing interest rates have increased the cost of borrowing for our customers and towing operators. In the past, such volatility and disruptions to the capital and credit markets, principally in the U.S. and Europe, in the past hashave decreased the availability of capital to, and credit capacity of, our customers and towing operators. In addition, in the past, certain providers of floor plan financing have exited the market, which made floor plan financing increasingly difficult for our independent distributor customers to secure at those times. This reduced availability of capital and credit has negatively affected the ability and capacity of our customers and of towing operators to purchase towing and related equipment. This, in turn, has negatively impacted sales of our products. If interest rates continue to rise and our customers are unable to access capital or credit, it could materially and adversely affect our ability to sell our products, and as a result, could negatively affect our business and operating results.

In addition, the rising costs of equipment ownership have been, and could continue to be, a significant challenge for end-market users that could in the future impact customer demand for our products. For example, insurance premiums on our end users’end-users’ trucks have increased, interest rates on new equipment have risen, and the value of used trucks has fluctuated, affecting trade-in values and new equipment purchases. These rising costs of equipment ownership continue to pressure our customers. Any continuation or worsening of the costs of equipment ownership could negatively impact customer demand for our products and have a material adverse impact on our profitability and results of operations.

Macroeconomic trends, availability of financing, and changing interest rates, have and could continue to, adversely affect our business, results of operationoperations or financial condition, as well as our customers’ ability to fund purchases of our products.

Worldwide economic and political conditions and other factors, such as changes in trade policies and tariffs, restrictive monetary and fiscal policy, political instability, military hostilities (such as the conflicts in Ukraine and the Middle East), domestic and global inflationary trends, global supply shortages, interest rate volatility, government shutdowns, and potential instability in the global banking system,system havehave, from time to timetime, contributed to significant domestic and global inflation. For example, from 2021 to 2023, there was a significant rise in 2022,inflation, and the global economy experienced elevated levels of inflation. In response to higher than historical average inflationary pressures and challenging macroeconomic conditions, the U.S. Federal Reserve,Reserve Board, along with other central banks, includingraised incertain the U.K., maintainedbenchmark interest rates atin elevatedan levels throughout 2023. In 2024, inflation beganeffort to returncombat toit. historical norms, and, as a result,Although the U.S. Federal Reserve and the Bank of England loweredhave theirreduced benchmark interest rates bybetween 100September 2024 and 50December basis2025, points,such respectively.benchmark rates remain elevated relative to recent historical standards. The impact of the lowering of interest rates on the levels of inflation in the U.S., U.K. and Europe is uncertain. In Europe, rising energy costs as a result of supply disruptions and increased winter demand for heating could place strain on our operations and our suppliers’ ability to maintain current production levels. Across the U.K. and Europe, rising energy costs as a result of supply disruptions could result in nations or regions enacting emergency energy related policies, limiting energy availability for our manufacturing facilities in the United KingdomKingdom, Italy and France. The impact of these macroeconomic developments on our operations cannot be predicted with certainty. While we have attempted to pass increased costs on to our customers in the past, there can be no assurances that we will be able to continue doing so in the future. It is possible that sustainedSustained price increases, surcharges or price inflation (or inflation pressure generally), in turn, may lead to declines in volume, and while we seek to project tradeoffs between price increases, surcharges and inflation, on the one hand, and volume, on the other, there can be no assurance that our projections will prove to be accurate.

Historically, a portion of our net sales occur outside the United States, primarily in Europe. We also have manufacturing operations in Norfolk, England, Cuneo, Italy, and in the Lorraine region of France. As such, our operations are subject to various international political, economic and other uncertainties, including risks of restrictive taxation policies, changing political conditions and governmental regulations and trade policies, including tariffs and or trade restrictions. For example, in Februaryfiscal 2025, the UnitedU.S. Statesgovernment imposed additional tariffs on importsa significant number of Chinese-origincountries, goods,including aswith wellrespect asto certaintariffs on steel and aluminum importsimports, fromand variousthreatened countries.to further increase the scope and amount of tariffs in the event of retaliatory countermeasures. These additional tariffs,tariffs ashave wellintroduced, asand a government’s future adoption of “buy national” policies or retaliation by another government against such tariffs or policies may havecontinue introducedto introduce, significant uncertainty into the market and may affect the prices of and supply of component parts, chassis and raw materials, including aluminum, steel, and petroleum-related products.

In addition, political and civil unrest, terrorist acts, military conflict,conflicts, including the ongoing military conflicts in Ukraine and the Middle East, and public health crises and disease outbreaks, such as the COVID-19 pandemic, have increased the risks of doing business abroad in general.

The market for qualified talent continues to be competitive and we must ensure that we continue to offer competitive wages, benefits and workplace conditions to retain qualified employees. SinceIn 2022,recent years we have experienced substantial increases in employee wages in order to retain and recruit a talented workforce. This trend may continue over the near term, and possibly longer. We continue to monitor our labor costs and attempt to mitigate the risk associated with employee turnover through increased recruiting, trainingtraining, and retention efforts. The impact of these disruptions remains largely out of our control, and these factors may continue to have a material adverse impact on our profitability and results of operations.

The towing and recovery industry is cyclical in nature. Historically, the overall demand for our products and our resulting revenues have at times been negatively affected by wavering levels of consumer confidence, volatility and disruption in domestic and international capital and credit markets andmarkets, the resulting decrease in the availability of financing for our customers and towing operatorsoperators, and the overall effects of global economic conditions. We remain concerned about the potential effects of these factors on the towing and recovery industry, and we continue to monitor our overall cost structure to see that it remains in line with business conditions. A prolonged economic downturn, including as a result of civil or political unrest, terrorist acts, military conflicts, weather events, natural disasters, outbreaks of disease, or other public health crises, and slow or negative growth in the domestic and global economy, could have a material adverse effect on our business, financial condition and results of operations for the foreseeable future.

We act as a subcontractor for certain U.S. and other government programs. As a result, we are subject to extensive regulations and requirements of the U.S. and other government agencies and entities that govern these programs, including with respect to the award, administrationadministration, and performance of contracts under such programs. Our U.S. and other government business is subject to the following risks, among others: (i) this business is susceptible to decreases in government spending, which may reduce future revenues; (ii) most of our contracts with governmental entities through prime contractors are fixed-price contracts, and our actual costs on any of these contracts could exceed our projected costs,costs; (iii) competition for the award of these contracts is intense, and we may not be successful in bidding on future contracts,contracts; and (iv) the products we sell to governmental entities are subject to highly technical requirements, and any failure to comply with these requirements could result in unanticipated retrofit costs, delayed acceptance of products, late or reduced paymentpayment, or cancellation of the contract. Our inability to address any of the foregoing concerns could seriously harm our business, financial condition and results of operations.

Overall demand from our customers may be affected by increases in their fuel and insurance costs and changes in weather conditions.

The towing and recovery equipment manufacturing industry is highly competitive. Capital requirements for entry into the towing and recovery manufacturing industry have been relatively low, which could result in an increase in the number of competitors entering the industry. Competition for sales exists domestically and internationally at the manufacturer, distributordistributor, and towing-operator levels and is based primarily on product quality and innovation, reputation, technology, customer service, product availability and price. Competition for sales also comes from the market for used towing and recovery equipment. CertainSome of our competitors may have substantially greater financial and other resources and may provide more attractive dealer and retail customer financing alternatives than us. If these competitors are able to make it more difficult for us to attract or retain customers, it could have a negative impact on our sales, revenue and financial performance.

While we manufacture our products in severalmanufacturing facilities located in the United States, France, Italy, and the United Kingdom and we maintain insurance covering our manufacturing facilities, including business interruption insurance to mitigate losses resulting from any production interruption or shutdown caused by an insured loss, a catastrophic loss of the use of all or a portion of any one of our manufacturing facilities due to accident, labor issues, weather conditions,conditions or events, natural disaster, fire, civil or political unrest, terrorist acts, military conflictconflict, disease outbreaks or diseaseother outbreaks,public health crises, or otherwise, whether shortshort- or long-term, could materially harm our business, financial condition, and results of operations. Any recovery under our insurance policies may not offset the lost sales or increased costs that may be experienced during the disruption of operations.

Risks Related to Legal, RegulatoryRegulatory, and Compliance Matters

In addition, laws and regulations intended to achieve the goal of significantly reducing engine emissions associated with the operation of commercial vehicles are alsowere being phased in byprior theto U.S.June Environmental Protection Agency and state regulators.2025. For example, the California Air Resources Board’s (“CARB”), Advanced Clean Trucks regulation, which haswas beenalso adopted by several other states, requires manufacturers, including truck body chassis manufacturers that supply to us, to sell an increasing percentage of zero-emission or near zero-emission medium and heavy-duty trucks into the California market starting in calendarthe year2024-2026 2024.model years, ending with a 100% sales requirement in the 2036 model year.

Relatedly, CARB’s Advanced Clean Fleets regulation sets requirements for organizations to reduce the overall emissions of the vehicle fleets they operate, which affects our customers who own and operate fleets in California. These regulations are intended to drive larger market penetration of zero-emission commercial trucks. There are currently multiple efforts underway which seek to prevent or delay some or all of these regulations from taking effect or otherwise seek relief from CARB’s regulations. However, compliance with the regulations as currently written, or new or more stringent laws or regulations, or stricter interpretations of existing laws or regulations have negatively impacted customer demand during 2024 and early 2025, and are expected to continue to negatively impact customer demand, which has had, and could continue to have, a material adverse effect on our results of operations, financial condition and cash flows.

Environmental and health-related requirements are complex, subject to changechange, and have tended to become more andstringent moreat stringent.the state level in recent years. Future developments could cause us to incur various expenditures and could also subject us to fines or sanctions, obligations to investigate or remediate contamination or restore natural resources, liability for third-party property damage or personal injury claimsclaims, and the imposition of new permitting requirements and/or the modification or revocation of our existing operating permits, among other effects. These and other developments could materially harm our business, financial condition and results of operations.

Our facilities and operations couldcould, in the futurefuture, be subject to regulations related to climate changechange, and climate change (or events caused by climate change) may also have some impact on the Company’s operations. However, theseAny impacts from new laws and regulations that may be adopted in the future are currently uncertain, and the Company cannot presently predict the nature and scope of those impacts.

Third parties may claim that our products infringe their patents or other intellectual property rights. If a competitor were to challenge our patents or assert that our products or processes infringe itstheir patent or other intellectual property rights, we could incur substantial litigation costs, be forced to design around their patents, pay substantial damages or even be forced to cease our operations, any of which could be expensive and/or have an adverse effect on our operating results. Third-party infringement claims, regardless of their outcome, would not only consume our financial resources, but also would divert the time and effort of our management and could result in our customers or potential customers deferring or limiting their purchase or use of the affected products or services until resolution of the litigation.

The imposition of new tariffs, any increases in existing tariffs, changes in or the repeal of trade agreements or the imposition of any other trade restrictions may increase costs of component parts and raw materials, such as chassis, steel and aluminum, and cause disruptions onin our supply chain. Any such developments may also weaken the economies of the countries in which we operate, resulting in lower economic growth rates and weakened demand for our products.

In addition, the provisions of the Inflation Reduction Act,Act (“IRA”), which was enacted in August 2022, include a minimum tax equal to 15% of the adjusted financial statement income of certain large corporations, as well as a 1% excise tax on certain share buybacks by public corporations that would be imposed on such corporations. It is possible that changes under the Tax Cuts and Jobs Act, which was enacted in December 2017, the IRA or other tax legislation could increase our future tax liability, which couldcould, in turnturn, adversely impact our business and future profitability.

In addition, we seek to actively engage with shareholders and consider their views on business and strategy. However, we could be subject to actions or proposals from shareholders or others that do not align with our business strategies or the interests of our other shareholders. And publiclyPublicly traded companies have increasingly become subject to campaigns by activist investors advocating corporate actions such as governance changes, financial restructurings, increased borrowings, special dividends, stock repurchases or even sales of assets or entire companies to third parties or to the activists themselves. Responding to activist investors could be costly and time-consuming, disrupt our business and operations, adversely affect our relationships with our employees, customers, or service providers, and divert the attention of our Board of Directors and senior management. Further, we may be required to incur significant fees and other expenses related to such matters, including fees and expenses for third-party advisors. Perceived uncertainties associated with such activities could interfere with our ability to effectively execute our strategic plan, impact long-term growth, and limit our ability to hire and retain qualified personnel, business partners, customers, and others important to our success. In addition, actions of these shareholders may cause periods of fluctuation in our

We incurred significant additional indebtedness during 2022 and 2023. As of December 31, 2024,2025, we had $65.0$30.0 million in outstanding borrowings outstanding under our credit facility. Since December 2024,2025, we drewmade netadditional advancespayments of $5.0$10.0 million fromon our credit facility for a balance of $70.0$20.0 million as of February 28,27, 2025.2026. Our credit facility contains customary representations and warranties, events of default, and financial, affirmative and negative covenants for loan agreements of this kind. In addition, covenants under our current credit facility restrict our ability to pay cash dividends if the Company would be in violation of the minimum tangible net worth test or the leverage ratio test in the current loan agreement as a result of the dividend, among various restrictions. We have been in compliance with these covenants throughout 20242025 and anticipate that we will continue to be in compliance during 2025.2026. If we fail to comply with the requirements of our current credit facility, such non-compliance would result in an event of default. If not waived by the bank, such event of default would result in the acceleration of any amounts due under the current credit facility.

A disruption in, or breach in security of, our information technology (“IT”) systems that we use, or any violation of data protection lawslaws, could adversely impact our business and operations.

We rely on the accuracy, capacitycapacity, and security of IT systems, some of which are owned and managed by us and some of which are owned and managed by third parties, to process, summarize, transmit, and store electronic information that is critical to operating our ITbusiness systemsefficiently and effectively. In the ordinary course of business, we directly or indirectly maintain confidential, proprietary and personal information about, or on behalf of, our business and our abilitypotential, to update these systems in response to the changing needs of our business. We use our IT systems to collectcurrent and store confidential and sensitive data, including information about our business, ourformer customers, our suppliers and our employees. We rely on these IT systems to protect this information and to keep financial records, process orders, manage inventory, coordinate shipments to customers, and operate other critical functions. OurThese IT systems may be disrupted or fail for a number of reasons, including natural disasters, such as fires; power loss; software “bugs”, hardware defectsdefects, or humanemployee error and/or malfeasance; compromised or irretrievable backups; wire fraud; or security breaches caused byby, among other things, individual and group criminal hacking, computer viruses,viruses or malicious codes, malware, ransomwareransomware, unauthorized access attempts, denial of service attacks, social engineering schemes, credential theft, phishing scams, exploitation of vulnerabilities in third-party software and systems, or other cyberattacks. IT systems that we use, including those owned and managed by us and those owned and managed by third parties, have experienced cybersecurity threats, attacks and, from time to time, incidents in the past, and we expect that we will continue to be subject to cybersecurity risks in the future. However, to date, based on the information available to us, we believe that these incidents have not had a material impact on our business, operations, or reputation.

As technology continues to evolve, we anticipate that we will collect and store even more data in the future and that our systems will increasingly use remote communication features that are susceptible to both willful and unintentional security breaches. We have incurred costs and expect to incur significant additional costs in order to implement security measures that we feel are appropriate to protect our IT systems. DespiteHowever, there is no guarantee that these efforts,enhancements and steps will be adequate to mitigate future attackslosses coulddue resultto IT system disruptions or breaches, or that we will be able to prevent, detect or respond to future incidents in oura systems or data being breachedtimely and/or damagedeffective by computer viruses or unauthorized physical or electronic access.manner. Such a breach could result in theft of our intellectual property or trade secrets and/or unauthorized access to controlled data and personal information, including current and former employee personal information stored in connection with our human resources function. In addition, although we require third party providers to maintain certain levels of security, such providers remain vulnerable to breaches, security incidents, system unavailability or other malicious attacks that could compromise sensitive information.

Any disruption, outage or breach of our IT systems that we use could result in interruption of our business operations, damage to our reputation and a loss of confidence in our security measures, all of which could adversely affect our business. In addition, if our systems are improperly implemented, breached, damaged or cease to function properly, we may have to make significant investments to fix or replace them. To the extent that any data is lost or destroyed or any confidential information is inappropriately disclosed or used, it could adversely affect our competitive position or customer relationships, harm our business and possibly lead to significant claims, liability, or fines based upon alleged breaches of contract or applicable laws, which liabilities may not be covered by insurance. The Company is also required to comply with increasingly complex and changing laws and regulations enacted to protect business and personal data in the United States and other jurisdictions regarding privacy, data protection and data security, including those related to the collection, storage, use, transmission and protection of personal information and other customer, vendor or employee data. Regulators globally are also imposing greater monetary fines for privacy violations including the GDPR that became effective in the European Union in 2018. The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information, could increase our cost of providing our products and services.

Miller Industries, headquartered in Ooltewah, Tennessee, was formed in 1990 and has become The World’s Largest Manufacturer of Towing and Recovery Equipment®, with domestic manufacturing operations in Tennessee and Pennsylvania, and foreign manufacturing operations in FranceFrance, Italy, and the United Kingdom. Miller Industries operates as a single reportable segment and management evaluates performance on a consolidated basis. For more information, see Note 1 – “Organization and Summary of Significant Accounting Policies”.

TheWe Company developsdevelop innovative high-quality towing and recovery equipment worldwide. We design and manufacture bodies of car carriers and wreckers, which are installed on chassis manufactured by third parties, and sold to our customers under our Century®, Vulcan®, Chevron™, Holmes®, Challenger®, Champion®, Jige™, Boniface™, Omars™, Titan®, and Eagle® brand names.

OurWe management focusesfocus on a variety of key indicators to monitor our overall operating and financial performance. These indicators include measurements of revenue, incomeoperating from operations,income, gross margin, net income, earnings per share, capital expenditures, and cash flow.

WeIn continuerecent toyears, see significant pressure on global supply chains due to a confluence of events from the pandemic, geopolitical tensions, and economic uncertainty. Logisticlogistic disruptions and supplier shortages have caused delays in shipping and freight cost increases. IncreasesIn addition, these increases in freight costs and supplier constraints due to workforce disruptions and material shortages have affected our ability to receive essential materials and component parts on time. These supply chain issuesissues, haveat times, had a direct impact on our production capabilities. Also affecting supply chain are the ongoing conflicts in Ukraine and the Middle East. GivenDespite these challenges, we are maintainingmaintain focus on meeting the needs of our customers. Ongoing communication and prioritization continue with our suppliers in an effort to identify and mitigate suchany future and continuing risks, and to proactively manage inventory levels of materials and component parts to align with anticipated demand for our products.

Impacts of currentinflation, global supply chain disruptions, inflationary environment, geopolitical tensions, including new and ongoing military conflicts in the Middle East and Ukraine, and any resulting rise in fuel costs, and other macroeconomic factors can lead to foreign currency fluctuations. The impact of inflationary or deflationary pressures have caused and may continue to cause foreign currency translation gains or losses within our consolidated statement of comprehensive income/loss.

Emissions Regulations and California’s Air Resources Board

TheFurther information regarding federal and state laws and regulations governing commercial vehicle engine emissions, including the California Air Resources Board’s regulationsregulations, is included under the heading “Government Regulations and Environmental Matters” in Part I, Item 1 – “Business” and “Environmental and health and safety liabilities and requirements could require us to incur material costs” in Part I, Item 1A – “Risk Factors” of this Annual Report.

As of December 31, 2024,2025, we had $65.0$30.0 million in outstanding borrowings outstanding under our credit facility. Since December 2024,2025, we drewhave netmade advancesadditional ofpayments $5.0totaling $10.0 million fromon our credit facility for a balance of $70.0$20.0 million as of February 28,27, 2025.2026.

Consolidated net sales in fiscal 20242025 were $1.26$790.3 billionmillion compared to $1.15$1.26 billion in fiscal 2023,2024, ana increasedecrease of 9.0%.37.2%. The increasedecrease in net sales was primarily driven by higherlower production volumelevels asto amitigate resultinventory ofbuildup stabilizationin ofour thedistribution supply chain and continued strong customer demand, as well as an annual price increase of 3% implemented throughout the first half of the year.channel.

Cost of operations includes the direct cost of manufacturing, including direct materials, labor and related overhead, physical inventory adjustments, as well as inbound and outbound freight. Costs of operations in fiscal 20242025 were $1.09$669.9 billionmillion compared to $1.00$1.09 billion in fiscal 2023,2024, ana increasedecrease of 8.5%.38.4%. The increasedecrease in cost of operations was primarilyconsistent attributedwith tothe increased deliveries resulting from increased stabilizationdecrease in our supply chain.sales.

Gross profit is equal to net sales less cost of sales.operations. Gross profit in fiscal 20242025 was $170.8$120.4 million compared to $151.9$170.8 million in fiscal 2023,2024, ana increasedecrease of 12.5%.29.5%. The decrease was primarily due to a decrease in net sales. Gross profit as a percentage of sales increasedwas to 13.6%15.2% for fiscal 2024 compared to 13.2% in fiscal 2023 as a result of our continuous investment in robotics and automation.

The Company is exposed to foreign currency transaction risk when the Company has transactions that are denominated in a currency other than its functional currency. When the related balance sheet items are remeasured in the functional currency of the Company, gains and losses are recorded through other (income) expense. Other (income) expense, net is composed primarily of these foreign currency exchange gains and losses. The Company experienced a net foreign currency exchange lossgain of $0.6$0.2 million for 20242025 compared to a net exchange gainloss of $0.8$0.6 million for 2023.2024. Other (income) expense for fiscal 20242025 includes $0.1$0.5 million of other income.

We expect our primary sources of cash to be from cash and temporarycash investments,equivalents, cash flow from operations, and availability under our credit facility as of December 31, 2024.2025. We currently believe that, based on available capital resources and projected operating cash flow, we have adequate capital resources to fund our operations and expected future cash needs for the next twelve months. However, our ability to satisfy our cash needs will substantially depend upon a number of factors including our future operating performance, taking into account the economic, regulatory, and other factors discussed elsewhere in this Annual Report, many of which are beyond our control.

Cash and TemporaryCash InvestmentsEquivalents

As of December 31, 20242025 and 2023,2024, we had consolidated cash and temporarycash investmentsequivalents of $24.3$44.7 million and $29.9$24.3 million, respectively. Our primary cash requirements include working capital, capital expenditures, the funding of any declared cash dividends and principal, and interest payments on indebtedness.

Cash and temporarycash investmentsequivalents included $30.0 million and $18.2 million held by foreign subsidiaries based in local currency for the years ended December 31, 20242025 and 2023.2024, respectively. We do not currently have plans to repatriate undistributed foreign earnings to the United States and have not determined any timeline or amount for any such future distributions.

Capital expenditures during fiscal 20242025 and 20232024 were $15.4$13.7 million and $12.1$15.4 million, respectively. We make ongoing capital investments in our property, plant and equipment, and continue to increase purchases of materials, components, and chassis to ramp up production to meet demand, which has been at historic levels. We believe that in periods of normalized supply chain, our historical capital investments in our manufacturing facilities and other capital assets willto increase the production capacity and efficiencies of our operations. See “Cash Flows” – “Cash Flows Provided by (Used in) Investing Activities” contained within this MD&A for additional discussion on capital expenditures.

On October 28,In 2022, we entered into a firstan amendment to theour loan agreement with First Horizon Bank (“First Horizon”) that provides an unsecured revolving credit facility with a maturity date of May 31, 2027, to increase the credit facility from $50.0 million to $100.0 million. We made certain technical and operational adjustments necessary to implement the one-month Term SOFR Rate (as defined in the loan agreement) as the primary interest rate index under the credit facility and added a new asset coverage financial covenant test. All other material terms and conditions of the credit facility remained unchanged.

TheWe Company payspay a quarterly,quarterly non-usage fee under the current loan agreement at a rate per annum equal to between 0.15% and 0.35% of the unused amount under the credit facility. The credit facility contains customary representations and warranties, events of default, and financial, affirmative, and negative covenants for loan agreements of this kind.

Our ongoing operations have, to date, been funded by a combination of cash flowflows from operations and borrowings under our credit facility. As of December 31, 2024,2025, the Company had $65.0$30.0 million in outstanding borrowings outstanding under the credit facility. Since December 2024,2025, thewe Companymade drewadditional netpayments advancestotaling of $5.0$10.0 million fromon itsour credit facility for a balance of $70.0$20.0 million as of February 28,27, 2025.2026.

Cash provided by operating activities during 20242025 was $16.9$98.7 million, compared to $11.0$16.9 million of cash provided by operating activities during 2023.2024. Cash provided by operating activities is generally attributable to the receipt of payments from our customers as settlement of their contractual obligation once we have fulfilled all performance obligations related to our contracts with them. These cash receipts are netted with payments for purchases of inventory, payments for materials used in manufacturing, and other payments that are necessary in the ordinary course of our operations, such as those for utilities and taxes. During fiscal 2024,2025, the change in operating activities was primarily due to increasedreduction netof incomeaccounts receivable as the inventory buildup in our distribution channel decreased and aflowed furtherthrough stabilization of changes in asset and liabilities as a result ofto the continued supply chain recovery. During fiscal 2023, the change in operating activities was primarily due to increased net income and a stabilization of changes in operating assets and liabilities as a result of improved availability of purchased components.end-customer.

Changes in working capital, which impact operating cash flow,flows, can vary significantly depending on factors such as the timing of customer payments, inventory purchases, payments to vendors, and tax payments in the regular course of business.

Cash used in investing activities during 20242025 was $15.3$30.8 million, compared to $29.1$15.3 million used in investing activities during 2023.2024. The cash used in investing activities for 2025 was primarily for the acquisition of Omars and purchases of property, plant, and equipment; cash used in 2024 was primarily for purchases of plant, property and equipment; cash used in 2023 was primarily for the purchase of the assets and assumption of certain liabilities of Southern Hydraulic Cylinder, Inc., (see Note 2) as well as purchases of property, plant and equipment.

Cash used in financing activities during 20242025 was $6.6$50.7 million, compared to $6.8$6.6 million providedused byin financing activities during 2023.2024. The cash used in financing activities in 20242025 resulted from advancesrepayments of $5.0$35.0 million under the Company’s primary credit facility, offset by the payment of cash dividends of $8.7$9.2 million and stock repurchase of $2.9$6.0 million. See Note 11 – “Shareholders’ Equity” for more information.

Cash providedused byin financing activities during fiscal 20232024 included advances on the credit facility of $15.0$5.0 million, offset by dividend payments of $8.2$8.7 million and anstock immaterial amountrepurchase of payments$2.9 on finance lease obligations.million.

Critical accounting policies and estimates are those accounting policies that (i) can have a significant impact on our financial condition and results of operations and (ii) require the use of complex and subjective estimates based upon past experience and management’s judgment. Because estimates are inherently uncertain, actual results may differ. In this section, we describe the significant policies applied in preparing our consolidated financial statements that management believes are the most dependent on estimates and assumptions. See Note 1 – “Organization and Summary of Significant Accounting Policies” of the consolidated financial statements for further discussion on significant accounting policies.

We may elect to first perform a qualitative assessment to determine whether changes in events or circumstances (since our most recent quantitative test for impairment) indicate that it is more likely than not that the fair value of a reporting unit is less than its respective carrying amount. We have an unconditional option to bypass the qualitative assessment for a reporting unit and proceed directly to performing the quantitative analysis. If elected, in conducting the initial qualitative assessment, we analyze our most recent estimates of the fair value of a reporting unit by assessing actual and projected growth trends for operating results, as well as historical operating results versus planned performance. Additionally, a reporting unit is assessed for critical areas that may impact its operating performance, including macroeconomic conditions, industry and market considerations, cost factors such as products and component parts and labor, market-related exposures such as fluctuations in our company’s market capitalization and share price, and/or any other potential risks to operating performance, such as regulatory and environmental changes. If, after evaluating the weight of the changes in events and circumstances, both positive and negative, we conclude that an impairment of goodwill may exist, a quantitative test for impairment is performed.

At the time of sale, we recognize expense and record a warranty accrual byfor productmanufactured lineitems for estimated costs in connection with forecasted future warranty claims. Our estimate of the cost of future warranty claims is based primarily on the estimated number of products under warranty, historical average costs incurred to service warranty claims, the trend in the historical ratio of warranty claims to sales, and the historical length of time between the sale and resulting warranty claim. If applicable, historical claims experience may be adjusted for known product design improvements.

To facilitate timely reporting, the condensed consolidated financial statements include accounts of certain subsidiaries whose closing dates differ from the applicable period end (December 31st or MarchJune 31st30th) by 31 days (or less).

Our products are primarily marketed and sold through a network of distributors that serve all 50 states, Canada, Mexico and other foreign markets, and through prime contractors to governmental entities. Furthermore, we have substantial distribution capabilities in Europe as a result of our ownership of Jige International S.A., Omars – S.p.A., and Boniface Engineering, Ltd, and Omars – S.p.A.Ltd. While most of our distributor agreements do not generally contain exclusivity provisions, management believes our independent distributors do not offer products of any other towing and recovery equipment manufacturer. We believe this is a testament of their loyalty to our brands.

During 2025 and atfirst the starthalf of 2026, we were presented with several ongoing challenges, such as the residual effect of recent years’ supply chain disruptions, inflationary pressures, and uncertainty around tariffs, all of which have impacted our profitability. In addition, beginningBeginning in the second half of 2025, we beganstarted to experience demand headwinds, including reduced retail sales and lower order intake, which we believe arewere attributable to the continued high cost of equipment ownership in the elevated interest rate environment, escalating insurance costs for our customers, and the imposition of and ongoing uncertainty involving tariffs. As a result of these challenges, we strategically decreased production in 2025 to reduce field inventory in our distribution channel, we implemented certain cost savings initiatives and we continued to secure our supply chain to mitigate the long-term impacts of current and potential future tariffs. These actions during 2025 included the reduction in workforce, which we announced in August 2025, as part of our comprehensive cost reduction plan. Under this plan, we reduced our headcount by approximately 150 positions across three of our U.S. manufacturing facilities during the third quarter of 2025.a

During the first quarter of 2026 and into the second quarterhalf of 2026, we are continuingcontinued to see significant pressure on global supply chains due to economic uncertainty and geopolitical tensions, including militaryhostilities conflictsamong the United States, Israel, and Iran, and the ongoing military conflict in the Middle East and UkraineUkraine, resulting in significant increases in fuel costs. This global rise in fuel costs mayhas subsequently resultresulted in fewer miles driven which has, and may continue to, adversely impact the demand for our products. Accordingly, during the first half of 2026, we continued to face demand headwinds, which we believe are attributable to increased fuel costs, as well continued high cost of equipment ownership in the elevated interest rate environment, escalating insurance costs for our customers, and the imposition of and ongoing uncertainty involving tariffs. We continue to assess current and ongoing macroeconomic trends and closely monitor our production schedules and cost structure as they may be materially impacted by the effects of these pressures. We implemented a surcharge in April 2025 to partially offset these pressures,pressures; however, continued cost increases have exceeded the coverage provided by that surcharge. As a result, in May 2026, we have announced that the existing surcharge willwould be rolled into our standard pricing structure. In addition, we have announced a 3% price increase on all domestic manufactured products, which went into effect on all domestic manufactured products invoiced after July 31, 2026. These actions are intended to better align our pricing with the current cost environment while supporting our continued investment in U.S. manufacturing, product quality, safety, and regulatory compliance.

Despite these past and present challenges, we believe we are well-positioned to enhance our operating results. We remain focused on meeting the needs of our customers. Ongoing communication and prioritization continue with our suppliers in an effort to identify and mitigate any future and continuing risks, and to proactively manage inventory levels of materials and component parts to align with anticipated demand for our products. However, our performance will be heavily influenced by, among other things, whether supply chain constraints and inflationary pressures continue to lessen or worsen, the continuing impact of ongoing military conflicts in the Middle East and Ukraine or other geopolitical events and developments, and the threat of recession and general economic conditions. We are actively monitoring the impact the military conflict in the Middle East may have on our fuel costs and petroleum-related products, given the recent surgesurges in fuel prices. There remains global uncertainty as to the impact these military campaigns may have on oil-producing countries in the Middle East. In addition, this military conflict has disrupted oil distribution globally, as Iran has also retaliated against ships in the Strait of Hormuz, through which approximately 20% of the world’s oil and gas is transported. A prolongedcontinued conflict with Iran could drive fuel prices even higher. While we believe the impacts of the conflict between the United States, Israel, and Iran will continue to have an effect on our business, financial condition and results of operations, we are unable to predict the extent or nature of these impacts at this time. In addition, while we have attempted to pass increased costs on to our customers, including through our recent surcharge and price increases on manufactured products, there can be no assurance that we will be able to continue to do so in the future.

In addition, we acquired Omars in the fourth quarter of fiscal 2025. Based on preliminary valuation estimates, non-cash acquisition-related expenses associated with Omars— - primarily tied to the sale of equipment adjusted to fair market value and amortization of the estimated intangible value of customer relationships— - negatively impacted the Company’s financial results for the firstsecond fiscal quarter of 2026 by approximately $0.13$0.11 per diluted share. We currently anticipate that this amount represents roughlythe one halfmajority of the total acquisition-related expenses expected to be recognized over the remainder ofin 2026. We remain confident that the acquisition will be accretive in the first year after recognizing these non-cash acquisition-related expenses. The Company continues to work with its third-party valuation consultants, and the final amount to be expensedamounts will be finalizedadjusted upon the completion of their analysis.

Our condensed consolidated financial statements are prepared in accordance with GAAP, which require us to make estimates. Certain accounting policies are deemed “critical”, as they require management’s highest degree of judgment, estimations, and assumptions. The accounting policies deemed to be most critical to our financial position and results of operations are those related to allowance for credit losses, inventory, long-lived assets, business combinations, goodwill, warranty reserves, income taxes, and foreign currency translations. There have been no significant changes in our critical accounting policies during the threesix months ended MarchJune 31,30, 2026, from the information provided under the heading “Critical Accounting Policies and Sensitive Accounting Estimates” in Part II, Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Form 10-K.

Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025

Net foreign sales for the three months ended MarchJune 31,30, 2026 were $49.2$240.0 million compared to $39.3$214.0 million for the corresponding period in fiscal 2025, an increase of 25.1%.12.1%. The primary reason for the increase in net sales was primarily due to increased chassis deliveries and the inclusion of Omars sales for the full second quarter inof 20262026, whichoffset totaledby $7.6lower million.domestic production levels.

Cost of operations includes the direct cost of manufacturing, including direct materials, labor and related factory overhead, physical inventory adjustments, as well as inbound and outbound freight. Cost of operations for the three months ended MarchJune 31,30, 2026 was $155.2$204.1 million compared to $191.7$179.4 million for the corresponding period in fiscal 2025, aan decreaseincrease of 19.1%.13.7%. The decreaseincrease in cost of operations was consistent with the decreaseincrease in sales.

Gross profit is equal to net sales less cost of operations. Gross profit for the three months ended MarchJune 31,30, 2026 was $25.7$35.9 million compared to $33.9$34.6 million for the corresponding period in fiscal 2025, aan decreaseincrease of 24.3%.3.9%. This decreaseincrease was primarily due to the decreaseincrease in sales. As a percentage of sales, gross profit was 14.2%15.0% for the three months ended MarchJune 31,30, 2026, compared to 15.0%16.2% in the corresponding period in fiscal 2025, a decrease of 5.6%,7.3%, primarily as a result of increased chassis deliveries and continued impact of Section 232 tariffs imposed on imported specialty steel and aluminum.

Selling, general and administrative expenses for the three months ended MarchJune 31,30, 2026 were $23.9$25.2 million compared to $23.3$23.4 million for the corresponding period in fiscal 2025, an increase of 3.0%.7.6%. While the Company was successful in reducing the historical expense base, the reduction was offset by the inclusion of Omars for the full firstsecond quarter of 2026. In addition to the recurring expense for Omars, the current quarter also includes $0.6$0.5 of amortization expense related to intangible assets that were recognized on the preliminary opening balance.

As a percentage of net sales, selling, general and administrative expenses increaseddecreased to 13.2%10.5% for the three months ended MarchJune 31,30, 2026, from 10.3%10.9% for the comparable period in fiscal 2025.

Interest expense, net for the three months ended MarchJune 31,30, 2026 was $145.4$0.4 thousandmillion compared to $95.0$0.3 thousandmillion for the corresponding period in fiscal 2025, aan increase of 52.6%.19.7%. Interest expense for the three months ended MarchJune 31,30, 2026 was $0.9 million and $2.4$2.1 million for the comparable period in 2025, offset by interest income of $0.7$0.6 million for the three months ended MarchJune 31,30, 2026, compared to interest income of $2.3$1.8 million for the comparable period in 2025.

The Company is exposed to foreign currency transaction risks when the Company has transactions that are denominated in a currency other than its functional currency. When the related balance sheet items are remeasured in the functional currency of the Company, gains and losses are recorded through other (income) expense. Other (income) expense, net is composed primarily of these foreign currency exchange gains and losses. The Company experienced a net foreign currency exchange loss of $0.2 million and gain of $0.2$0.5 million for the three months ended MarchJune 31,30, 2026 and 2025, respectively.

The provision for income taxes for the three months ended MarchJune 31,30, 2026 and 2025 reflects a combined federal, state, and foreign tax rate of 65.4%27.8% and 25.3%,25.6%, respectively. The increase was primarily due to the reversal of Omars fair-value adjustments and amortization of intangible assets that were recognized as part of the acquisition accounting. These expenses may or may not be deductible under Italian tax law, sowhich nois reflected in the related tax benefit was recognized for these expenses. The tax provision will be revised when the final valuation is completed, and definitive tax treatment of these expenses is determined. Adjustments to tax expense will be recognized in current period earnings. The remaining differences between the federal statutory tax rate and the effective tax rate consist primarily of non-deductible executive compensation, state taxes, domestic tax credits, and tax differences on other foreign earnings.

As of MarchJune 31,30, 2026, we had cash and cash equivalents of $53.0$55.6 million, and $80.0$100.0 million in availability for borrowing under our credit facility. Our primary cash requirements include working capital, capital expenditures, the funding of any declared cash dividends, purchases pursuant to our stock repurchase program, and principal and interest payments on indebtedness.

The cash and temporarycash investmentsequivalents balance as of MarchJune 31,30, 2026 included $40.2$34.9 million of cash held by subsidiaries outside of the United States.

During the threesix months ended MarchJune 31,30, 2026, net cash provided by operating activities was $30.7$63.0 million compared to net cash provided by operating activities of $2.7$30.0 million in the comparable period in fiscal 2025. Cash provided by operating activities is generally attributable to the receipt of payments from our customers as settlement of their contractual obligation, once we have fulfilled all performance obligations related to our contracts with them. These cash receipts are netted with payments for purchases of inventory, payments for materials used in manufacturing, and other payments that are necessary in the ordinary course of our operations, such as those for utilities and taxes. The cash provided by operating activities was primarily driven by decreases in accounts receivable and inventory, as well as increases in accounts payable, offset by increases in accounts receivable, resulting in net positive change in working capital and signifying further stabilization of changes in assets and liabilities as a result of continued supply chain recovery.recovery and distributor inventory reductions.

During the threesix months ended MarchJune 31,30, 2026, cash used in investing activities was $7.9$12.1 million compared to cash used in investing activities of $5.1$6.8 million for the comparable period in fiscal 2025. The cash used in investing activities was primarily for purchases of property, plant and equipment, as well as our continued investment in manufacturing automation and enterprise resource planning (ERP) system enhancements, offset by proceeds fromand the saleinitial phase of assets.our expansions in Tennessee and France.

During the threesix months ended MarchJune 31,30, 2026, cash used in financing activities was $14.6$39.4 million compared to cash providedused byin financing activities of $5.6$17.2 million for the comparable period in fiscal 2025. The cash used in financing activities was primarily due to payments on the credit facility, repurchases of common stock, and cash payments for dividends, and repurchases of common stock.dividends.

As of MarchJune 31,30, 2026 and December 31, 2025, we had commitments of approximately $9.4$14.0 million and $15.5 million, respectively, for the acquisition of property, plant and equipment. This decrease in commitments for acquisition of property, plant and equipment was primarily due to progress payments made during the quarter on our continued investments in automation and the use of robotics in our production processes to streamline efficiency.efficiency and expand our manufacturing facilities. There have been no other material changes to our contractual obligations from what was previously disclosed in our 2025 Form 10-K.

The Company had no outstanding borrowings of $20.0 million and $30.0 million under the credit facility as of MarchJune 31,30, 2026 and $30.0 million as of December 31, 2025, respectively.2025. See the disclosure under the heading “Credit Facility” in Note 5 of the Notes to Condensed Consolidated Financial Statements in this Quarterly Report on Form 10-Q for additional information regarding the Company’s credit facility.

As of MayJuly 1,31, 2026, thewe had no outstanding balance on our credit facility was $20.0 million.facility.

Prior to applying a discount rate to our lease liabilities, we had approximately $2.0$2.9 million and $0.3 million in non-cancellable operating lease obligations as of MarchJune 31,30, 2026 and December 31, 2025, respectively. We had no non-cancellable finance lease obligations as of MarchJune 31,30, 2026 and December 31, 2025.

Capital expenditures during the threesix months ended MarchJune 31,30, 2026 and 2025 were $7.9$12.1 million and $5.1$6.8 million, respectively. We make ongoing capital investments in our property, plant and equipment to increase our production capacity and efficiencies, as well as the sustainability and safety of our operations. This includes capital investments during the threesix months ended MarchJune 31,30, 2026 in the use of robotics and automation in our production processes to streamline efficiency.

In March 2025, our Board of Directors authorized approximately $9.1 million (€8.0 million) for an expansion at one of our facilities in France. During the second half of 2025, work was performed to prepare the site and finalize the design. Construction for this project isbegan expected to commence duringin the second quarter of 2026.

In March 2026, our Board of Directors authorized a plant expansion at our Ooltewah, TN facility, which we expect will improve our flexibility and enhance production capacity. We anticipate the cost of this project to be approximately $100.0 millionmillion. The site preparation for this project began in the second quarter of 2026, and forconstruction of the building projectis expected to commencebegin in lateearly 2026.2027.