Notes to Consolidated Financial Statements
(1) Summary of Significant Accounting Policies
UFP Technologies, Inc. (the “Company”) is a contract development and manufacturing organization that specializes in single-use and single-patient medical devices. The Company is a vital link in the medical device supply chain and a valued outsourcing partner to many of the world's top medical device manufacturers. Our single-use and single-patient devices and components are used in a wide range of medical devices and packaging for minimally invasive surgery, infection prevention, wound care, wearables, orthopedic soft goods, and orthopedic implants.
(a) Principles of Consolidation
The consolidated financial statements of the Company include the accounts and results of operations of UFP Technologies, Inc. and its wholly owned subsidiaries. For one joint venture where the Company is not the primary beneficiary, the joint venture is not consolidated and is accounted for under the equity method. All significant intercompany balances and transactions have been eliminated in consolidation. The Company consists of a single operating and reportable segment.
(b) Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, including allowance for doubtful accounts, the net realizable value of inventory, the fair value of goodwill, the fair value of intangible assets, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of net sales and expenses during the reporting period. Actual results could differ from those estimates.
(c) Fair Value Measurement
The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurement or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit risk.
(d) Fair Value of Financial Instruments
Cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and other liabilities are stated at carrying amounts that approximate fair value because of the short maturity of those instruments. The carrying amount of the Company’s long-term debt approximates fair value as the interest rate on the debt approximates the Company’s current incremental borrowing rate.
(e) Cash and Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2025 and 2024, the Company did not have any cash equivalents.
The Company maintains its cash in bank deposit accounts that at times exceed federally insured limits. The Company periodically reviews the financial stability of institutions holding its accounts and does not believe it is exposed to any significant custodial credit risk.
At December 31, 2025 and 2024, cash held by foreign subsidiaries was approximately $9.8 million and $6.9 million, respectively.
(f) Accounts Receivable
The Company periodically reviews the collectability of its accounts receivable. The Company is exposed to credit losses primarily through sales of products and services. The Company’s expected loss allowance methodology is developed using historical collection experience, current and future economic and market conditions, and a review of the status of customers' trade accounts receivable. The estimate of the amount of accounts receivable that may not be collected is based on the aging of the accounts receivable balances as well as the financial condition of customers. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. The Company’s monitoring activities include timely account reconciliation, dispute resolution, payment confirmation, consideration of customers' financial condition and macroeconomic conditions. Balances are written-off when determined to be uncollectible.
(g) Inventories
Inventories include material, labor, and manufacturing overhead and are valued at the lower of cost or net realizable value. Cost is determined using the first-in, first-out (“FIFO”) method.
The Company periodically reviews the realizability of its inventory for potential excess or obsolescence. Determining the net realizable value of inventory requires management’s judgment. Conditions impacting the realizability of the Company’s inventory could cause actual asset write-offs to be materially different than the Company’s current estimates as of December 31, 2025 and 2024.
(h) Property, Plant, and Equipment
Property, plant, and equipment are stated at cost and are depreciated or amortized using the straight-line method over the estimated useful lives of the assets or the related lease term, if shorter.
Estimated useful lives of property, plant, and equipment are as follows:
| | | | | |
| Leasehold improvements | Shorter of estimated useful life
or remaining lease term |
| Buildings and improvements (years) | 10 -30 |
| Machinery and equipment (years) | 7 – 10 |
| Furniture, fixtures, computers & software (years) | 3 – 7 |
Property, plant, and equipment amounts are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss would be recognized when the carrying amount of an asset exceeds the estimated undiscounted future cash flows expected to result from the use of the asset and its eventual disposition. The amount of the impairment loss to be recorded is calculated by the excess of the asset’s carrying value over its fair value. No events or changes in circumstances arose during the years ended December 31, 2025, 2024, and 2023 that required management to perform an impairment analysis.
(i) Goodwill
Goodwill is tested for impairment annually and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired. Impairment testing for goodwill is done at a reporting unit level. Reporting units are one level below the business segment level but can be combined when reporting units within the same segment have similar economic characteristics. An impairment loss generally would be recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit. The Company consists of a single reporting unit.
The Company performed a qualitative assessment (“Step 0”) as of October 1, 2025 and determined that it was more likely than not that the fair value of its reporting unit exceeded its’ carrying amount. As a result, the Company has not performed a “Step 1” impairment assessment.
(j) Intangible Assets
Intangible assets with a definite life are amortized on a straight-line basis, with estimated useful lives ranging from 5 to 20 years. Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that their carrying values may not be recoverable. No events or changes in circumstances arose during the year ended December 31, 2025, 2024, and 2023 that required management to perform an impairment analysis.
(k) Revenue Recognition
The Company recognizes revenue when a customer obtains control of a promised good or service. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to in exchange for promised goods or services. The Company recognizes revenue in accordance with the core principles of ASC 606 which include (1) identifying the contract with a customer, (2) identifying separate performance obligations within the contract, (3) determining the transaction price, (4) allocating the transaction price to the performance obligations, and (5) recognizing revenue. The Company recognizes a significant portion of its product sales upon shipment. The Company recognizes revenue from the sale of tooling and machinery primarily when the product is effectively manufactured using tooling and machinery. If customer acceptance is stipulated within the contract, the Company recognizes revenue from the sale of tooling and machinery when the acceptance is received. The Company recognizes revenue from engineering services, which are primarily product development services, as the services are performed or as otherwise determined based on the substance of the agreement.
Standard payment terms are net 30 days unless contract terms state otherwise. When determining the transaction price of a contract, an adjustment is made if payment from a customer occurs either significantly before or after performance, resulting in a significant financing component. The Company does not assess whether a significant financing component exists if the period between when we perform our obligations under the contract and when the customer pays is one year or less. The Company accepts sales returns from customers for defective goods, such amounts being immaterial. The Company warrants that goods sold to customers will conform to agreed upon specifications and that services will be performed in a reasonable and workmanlike manner. The Company does not provide a service as part this assurance warranty and its customers do not have the opportunity to purchase a warranty separately. Accordingly, any warranty activities are not considered to be a separate performance obligation. Although only applicable to an insignificant number of transactions, the Company has elected to exclude sales taxes from the transaction price. The Company has elected to account for shipping and handling activities for which the Company is responsible under the terms and conditions of the sale not as performance obligations but rather as fulfillment costs. These activities are required to fulfill the Company’s promise to transfer the goods and are expensed when revenue is recognized. Variable consideration to be included in the transaction price is estimated using either the expected value method or the most likely method based on facts and circumstances. Variable consideration is included in the transaction price if it is probable that a significant future reversal of cumulative revenue under the contract will not occur. The Company has elected to not disclose the aggregate amount of the transaction price allocated to unsatisfied performance obligations, as the Company’s contracts have an original expected duration of one year or less, or revenue has been recognized at the amount for which the Company has the right to invoice for engineering services performed.
(l) Share-Based Compensation
When accounting for equity instruments exchanged for employee services, share-based compensation cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity grant). Forfeitures are adjusted as they occur.
(m) Shipping and Handling Costs
Costs incurred related to shipping and handling are included in cost of sales. Amounts charged to customers pertaining to these costs are included in net sales.
(n) Income Taxes
The Company’s income taxes are accounted for under the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and operating loss and tax credit carry‐forwards. Deferred tax expense or benefit results from the net change during the year in deferred tax assets and liabilities. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company evaluates the need for a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. The Company has considered future taxable income and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance. Should the Company determine that it would not likely be able to realize all or part of its deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made.
The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. The Company recognizes interest and penalties accrued related to unrecognized tax benefits in tax expense.
(o) Segments and Related Information
The Company follows the provisions of Accounting Standards Codification (ASC) 280, Segment Reporting, which establish standards for the way public business enterprises report information and operating segments in annual financial statements (see Note 20).
(p) Treasury Stock
The Company accounts for treasury stock under the cost method, using the first-in, first out cost flow assumption, and includes treasury stock as a component of stockholders’ equity. The Company did not repurchase any shares of common stock during the years ended December 31, 2025, 2024, and 2023.
(q) Research and Development
On a routine basis, the Company incurs costs related to research and development activity. These costs are expensed as incurred and are largely included in cost of sales in the Consolidated Statements of Comprehensive Income. Approximately $8.6 million, $10.4 million, and $7.2 million were expensed in the years ended December 31, 2025, 2024 and 2023, respectively.
(r) Foreign Currency Translation
The Company has foreign operations in the Dominican Republic, Ireland, Costa Rica, and Mexico, which expose the Company to foreign currency exchange rate fluctuations due to transactions denominated in Dominican pesos, Euros, Costa Rican colones, and Mexican pesos. The Company translates all assets and liabilities of its foreign subsidiaries, where the U.S. dollar is not the functional currency, at the period-end exchange rate and translates income and expenses at the average exchange rates in effect during the period. The net effect of this translation is recorded in the consolidated financial statements as a component of Accumulated Other Comprehensive Income (Loss) (AOCI).
(s) Recent Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740)-Improvements to Income Tax Disclosures. The ASU requires additional quantitative and qualitative income tax disclosures to allow readers of the consolidated financial statements to assess how the Company’s operations, related tax risks and tax planning affect its tax rate and prospects for future cash flows. For public business entities, the ASU is effective for annual periods beginning after December 15, 2024. The Company adopted ASU 2023-09 retrospectively beginning with its annual
reporting period ending December 31, 2025. The adoption does not have a material impact on the Company's financial statements. The required disclosures are included in Note 12, "Income Tax".
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The ASU is intended to improve disclosures about a public business entity’s expenses and provide more detailed information to investors about the types of expenses in commonly presented expense captions. The ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact that the adoption of this ASU will have on its consolidated financial statements and related disclosures.
(2) Acquisitions
Techno Plastics Industries
On July 7, 2025, the Company purchased 100% of the outstanding membership interests of Techno Plastics Industries, Inc. (“TPI”) pursuant to a Securities Purchase Agreement, for an aggregate purchase price of $4.5 million in cash. The purchase price was subject to adjustment based upon TPI’s estimated working capital at closing. Subsequent purchase accounting opening balance sheet adjustments resulted in a decrease to the purchase price of approximately $0.2 million. A portion of the purchase price is being held by the Company to indemnify the Company against certain claims, losses, and liabilities. The Securities Purchase Agreement contains representations, warranties, and covenants customary for transactions of this type. As part of the Securities Purchase Agreement, the Sellers as well as certain restricted parties have agreed not to compete with the Company for a period of five years.
TPI, based in Anasco, Puerto Rico, is a specialty manufacturer of precision thermoplastic injection-molded components.
The following table summarizes the allocation of the total purchase price of approximately $4.3 million, net of cash acquired, to the acquisition date fair value of the assets acquired and liabilities assumed based on management's preliminary estimates of fair value (in thousands):
| | | | | |
| Purchase Price Allocation |
| Cash | $ | 2,281 | |
| Accounts Receivable | 1,448 | |
| Inventories | 1,306 | |
| Prepaid expenses | 135 | |
| PP&E | 2,422 | |
| Goodwill | 1,145 | |
| Intangible assets | 575 | |
| Other assets | 18 | |
| Total assets acquired | 9,330 | |
| Accounts payable | (429) | |
| Accrued expenses | (1,203) | |
| Deferred revenue | (661) | |
| Deferred income taxes | (461) | |
| Total liabilities assumed | (2,754) | |
| Total assets acquired, net of liabilities assumed | 6,576 | |
| Less: cash acquired | (2,281) | |
| Purchase price, net of cash acquired | $ | 4,295 | |
Acquisition costs associated with the transaction of approximately $0.2 million were charged to expense during the year ended December 31, 2025. These costs were primarily for legal services, which are included within “Acquisition costs” on the face of the Consolidated Statements of Comprehensive Income.
The amount of revenue and pre-tax income of TPI recognized since the acquisition date, which is included in the Consolidated Statements of Comprehensive Income for the year ended December 31, 2025, was approximately $5.9 million and $0.6 million, respectively.
None of the goodwill related to the TPI acquisition is expected to be deductible for tax purposes. Goodwill is primarily attributable to the workforce of TPI and the synergies that have been and are expected to further be realized post-acquisition.
Universal Plastics & Engineering Company
On July 2, 2025, the Company purchased 100% of the outstanding membership interests of Universal Plastics & Engineering Company, Inc. (“UNIPEC”) pursuant to a Securities Purchase Agreement, for an aggregate purchase price of $7.5 million in cash. The purchase price was subject to adjustment based upon UNIPEC’s estimated working capital at closing. Subsequent purchase accounting opening balance sheet adjustments resulted in an increase to the purchase price of approximately $0.1 million. A portion of the purchase price is being held in escrow to indemnify the Company against certain claims, losses, and liabilities. The Securities Purchase Agreement contains representations, warranties, and covenants customary for transactions of this type. As part of the Securities Purchase Agreement, the Sellers as well as certain restricted parties have agreed not to compete with the Company for a period of seven years.
UNIPEC, headquartered in Rockville, Maryland, develops and manufactures precision thermoformed and heat-sealed polymer components used primarily for shielding batteries in Class III implantable medical devices.
The following table summarizes the allocation of the total purchase price of approximately $7.6 million, net of cash acquired, to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s preliminary estimates of fair value (in thousands):
| | | | | |
| Purchase Price Allocation |
| Cash | $ | 194 | |
| Accounts Receivable | 676 | |
| Inventories | 284 | |
| PP&E | 432 | |
| Goodwill | 3,163 | |
| Intangible assets | 3,175 | |
| Total assets acquired | 7,924 | |
| Accounts payable | (4) | |
| Accrued expenses | (106) | |
| Total liabilities assumed | (110) | |
| Total assets acquired, net of liabilities assumed | 7,814 | |
| Less: cash acquired | (194) | |
| Purchase price, net of cash acquired | $ | 7,620 | |
Acquisition costs associated with the transaction of approximately $0.1 million were charged to expense during the year ended December 31, 2025. These costs were primarily for legal services, which are included within “Acquisition costs” on the face of the Consolidated Statements of Comprehensive Income.
The amount of revenue and pre-tax income of UNIPEC recognized since the acquisition date, which is included in the Consolidated Statements of Comprehensive Income for the year ended December 31, 2025, was approximately $2.1 million and $0.8 million, respectively.
100% of the goodwill related to the UNIPEC acquisition is expected to be deductible for tax purposes. The goodwill is primarily attributable to the workforce of UNIPEC and the synergies that have been and are expected to further be realized post-acquisition.
AJR Specialty Products and AJR Custom Foam Products
On April 25, 2025, the Company purchased 100% of the outstanding membership interests of AJR Specialty Products, LLC, (“AJR Specialty”) and AJR Custom Foam Products, LLC, (“AJR Custom Foam”) pursuant to a Securities Purchase Agreement, for an aggregate purchase price of $2.8 million in cash. The purchase price was subject to adjustment based upon AJR Specialty and AJR Custom Foam's estimated working capital at closing. A portion of the purchase price is being held in escrow to indemnify the Company against certain claims, losses, and liabilities. The Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type. As part of the Securities Purchase Agreement, the Sellers as well as certain restricted parties have agreed not to compete with the Company for a period of seven years.
AJR Specialty and AJR Custom Foam, are both headquartered in St. Charles, IL. AJR Specialty and AJR Custom Foam provide additional capacity in the growing single-use safe patient handling space, as well as additional expertise in specialty fabrics and foam fabrication.
Acquisition costs associated with the transaction of approximately $0.1 million were charged to expense during the year ended December 31, 2025. These costs were primarily for legal services, which are included within “Acquisition costs” on the face of the Consolidated Statements of Comprehensive Income.
As the revenues, earnings, balance sheet, and pro forma effects of the AJR Specialty and AJR Custom Foam acquisitions are not, and would not have been, material to the results of operations or financial position of the Company, the Company has elected to not disclose substantially all required disclosures of Accounting Standards Codification 805, Business Combinations, for this acquisition.
Marble Medical
On June 24, 2024, the Company purchased 100% of the outstanding shares of common stock of Marble Medical, Inc., (“Marble”) pursuant to a Stock Purchase Agreement and related agreements, for an aggregate purchase price of $4.5 million in cash, plus up to an additional $0.5 million based upon the achievement of sales targets of Marble for each of the 12-month periods ended December 31, 2024, and 2025. As of the opening balance sheet, the contingent consideration had a fair value of approximately $0.4 million. The purchase price was subject to an adjustment based upon Marble’s estimated working capital at closing, which resulted in an increase of approximately $0.1 million. A portion of the purchase price is being held by the Company to indemnify the Company against certain claims, losses, and liabilities. The Stock Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type.
Founded in 1988 and headquartered in Tallahassee, FL, Marble develops and manufactures adhesive based medical components and single-use devices. The purchase price includes certain real estate, which encompasses Marble’s manufacturing, warehouse and office facilities. Marble enhances the Company's adhesives expertise as well as precision die cutting capabilities.
The following table summarizes the allocation of the total purchase price of approximately $5.0 million, net of cash acquired, to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s estimates of fair value (in thousands):
| | | | | |
| Purchase Price Allocation |
| Cash | $ | 815 | |
| Accounts receivable | 872 | |
| Inventory | 494 | |
| Other current assets | 24 | |
| Property, plant, and equipment | 1,018 | |
| Customer lists | 250 | |
| Intellectual property | 300 | |
| Non-compete agreement | 50 | |
| Goodwill | 2,559 | |
| Total assets acquired | 6,382 | |
| Accounts payable | (41) | |
| Accrued expenses | (519) | |
| Total liabilities assumed | (560) | |
| Total assets acquired, net of liabilities assumed | 5,822 | |
| Less: cash acquired | (815) | |
| Purchase price, net of cash acquired | $ | 5,007 | |
Acquisition costs associated with the transaction of approximately $0.1 million were charged to expense during the year ended December 31, 2024. These costs were primarily for legal services, which are included within “Acquisition costs” on the face of the Consolidated Statements of Comprehensive Income.
The amount of revenue and pre-tax income of Marble recognized since the acquisition date, which is included in the Consolidated Statements of Comprehensive Income for the year ended December 31, 2024, was approximately $3.6 million and $0.6 million, respectively.
100% of the goodwill related to the Marble acquisition is expected to be deductible for tax purposes. The goodwill is attributable to the workforce of Marble and the synergies that have been and are expected to further be realized post-acquisition.
AJR Enterprises
On July 1, 2024, the Company purchased 100% of the issued and outstanding membership interests of AJR Enterprises, LLC, (“AJR”) pursuant to a Securities Purchase Agreement and related agreements, for an aggregate purchase price of $110 million in cash. The purchase price was subject to an adjustment based upon AJR’s estimated working capital at closing, a final working capital adjustment, and a reduction for certain AJR liabilities funded by the sellers, which together resulted in an increase to the purchase price of approximately $0.7 million. A portion of the purchase price is being held by the Company to indemnify the Company against certain claims, losses, and liabilities. The Securities Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type.
Founded in 1997 and headquartered in St. Charles, IL, with an additional manufacturing plant in Santiago, Dominican Republic, AJR develops and manufactures single-use patient handling systems. Patient surfaces and transfer devices are a growing market due in part to government guidelines and legislation around safe patient handling. AJR’s ‘cut and sew’ manufacturing capabilities and specialty fabrics expertise supplement the Company’s thermoplastic joining expertise, allowing the Company to offer a comprehensive suite of development, commercialization, and manufacturing services for this market.
The following table summarizes the allocation of the total purchase price of approximately $110.7 million, net of cash acquired, to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s estimates of fair value (in thousands):
| | | | | |
| Purchase Price Allocation |
| Cash | $ | 3,000 | |
| Accounts receivable | 17,138 | |
| Inventory | 9,229 | |
| Other current assets | 210 | |
| Property, plant, and equipment | 1,127 | |
| Customer lists | 46,667 | |
| Intellectual property | 8,245 | |
| Non-compete agreement | 661 | |
| Lease right of use assets | 2,129 | |
| Goodwill | 35,650 | |
| Total assets acquired | 124,056 | |
| Accounts payable | (1,103) | |
| Accrued expenses | (7,092) | |
| Lease liabilities | (2,129) | |
| Total liabilities assumed | (10,324) | |
| Total assets acquired, net of liabilities assumed | 113,732 | |
| Less: cash acquired | (3,000) | |
| Purchase price, net of cash acquired | $ | 110,732 | |
Acquisition costs associated with the transaction of approximately $0.6 million were charged to expense during the year ended December 31, 2024. These costs were primarily for legal, due diligence, and valuation services, which are included within “Acquisition costs” on the face of the Consolidated Statements of Comprehensive Income.
The amount of revenue and pre-tax income of AJR recognized since the acquisition date, which is included in the Consolidated Statements of Comprehensive Income for the year ended December 31, 2024, was approximately $53.8 million and $12.0 million, respectively.
100% of the goodwill related to the AJR acquisition is expected to be deductible for tax purposes. The goodwill is attributable to the workforce of AJR and the significant synergies that have been and are expected to further be realized post-acquisition.
Welch Fluorocarbon
On July 15, 2024, the Company purchased 100% of the outstanding shares of common stock of Welch Fluorocarbon, Inc., (“Welch”) pursuant to a Stock Purchase Agreement and related agreements, for an aggregate purchase price of $34.6 million in cash, plus up to an additional $6.0 million based upon the achievement of certain EBITDA (Earnings before Interest, Taxes, Depreciation and Amortization) targets of Welch for each of the 12-month periods ended 2024, 2025, and 2026. The contingent consideration had a fair value of approximately $0.8 million as of the opening balance sheet. The contingent consideration has no fair value as of December 31, 2025, as Welch did not achieve the EBITDA targets for the years ended December 31, 2024, and 2025. The Company has also determined that it is not probable that Welch will achieve the EBITDA targets for the year ended December 31, 2026. The purchase price was subject to an adjustment based upon Welch’s working capital at closing, the assumption by the sellers of certain liabilities and a final working capital adjustment which together resulted in a decrease in the purchase price of approximately $0.2 million. A portion of the purchase price is being held by the Company to indemnify the Company against certain claims, losses, and liabilities. The Stock Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type.
Founded in 1985 and headquartered in Dover, NH, Welch develops and manufactures thermoformed, and heat sealed implantable medical device components utilizing thin, high-performance films. Welch provides thin film thermoforming capabilities and expertise in developing and manufacturing components for implantable medical devices.
Also on July 15, 2024, pursuant to separate purchase and sale agreements (with separate legal parties), the Company purchased certain real estate in Dover, NH, which encompasses a majority of Welch’s manufacturing, warehousing and office facilities for an aggregate purchase of approximately $3.2 million.
The following table summarizes the allocation of the total purchase price of approximately $35.2 million, net of cash acquired, to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s estimates of fair value (in thousands):
| | | | | |
| Purchase Price Allocation |
| Cash | $ | 3,817 | |
| Accounts receivable | 1,506 | |
| Inventory | 1,969 | |
| Other current assets | 115 | |
| Property, plant, and equipment | 824 | |
| Customer lists | 4,209 | |
| Intellectual property | 9,707 | |
| Non-compete agreement | 186 | |
| Lease right of use assets | 166 | |
| Goodwill | 17,135 | |
| Total assets acquired | 39,634 | |
| Accounts payable | (215) | |
| Accrued expenses | (215) | |
| Lease liabilities | (166) | |
| Total liabilities assumed | (596) | |
| Total assets acquired, net of liabilities assumed | 39,038 | |
| Less: cash acquired | (3,817) | |
| Net assets acquired, net of cash acquired | $ | 35,221 | |
Acquisition costs associated with the transaction of approximately $0.3 million were charged to expense during the year ended December 31, 2024. These costs were primarily for legal and valuation services, which are included within “Acquisition costs” on the face of the Consolidated Statements of Comprehensive Income.
The amount of revenue and pre-tax income of Welch recognized since the acquisition date, which is included in the Consolidated Statements of Comprehensive Income for the year ended December 31, 2024, was approximately $6.9 million and $0.4 million, respectively.
100% of the goodwill related to the Welch acquisition is expected to be deductible for tax purposes. The goodwill is attributable to the workforce of Welch and the synergies that have been and are expected to further be realized post-acquisition.
AQF
On August 23, 2024, the Company purchased 100% of the issued and outstanding membership interests of the parent holding companies of AQF Limited, operating as AQF Medical, (“AQF”) pursuant to a Share Purchase Agreement and related agreements, for an aggregate purchase price of €43 million in cash (total purchase price in U.S. Dollars amounted to approximately $48.0 million). The purchase price was subject to an adjustment based upon AQF’s working capital at closing, the assumption by the sellers of certain liabilities and a final working capital adjustment, which resulted in a net decrease of approximately $0.3 million. A portion of the purchase price is being held by the Company to indemnify the Company against certain claims, losses, and liabilities. The Share Purchase Agreement contains customary representations, warranties, and covenants customary for transactions of this type.
Founded in 2005 and headquartered in Navan, Ireland with additional joint venture operations in Singapore, AQF develops and manufactures custom-engineered foam and thermoplastic components used in a wide range of medical devices and packaging. AQF enhances the Company's expertise in converting specialty foams and films, and provides an expanded European manufacturing presence, and an Asian market presence in Singapore.
The following table summarizes the allocation of the total purchase price of approximately $47.7 million, net of cash acquired, to the acquisition date fair value of the assets acquired and liabilities assumed based on management’s estimates of fair value (in thousands):
| | | | | |
| Purchase Price Allocation |
| Cash | $ | 3,381 | |
| Accounts receivable | 2,237 | |
| Inventory | 1,150 | |
| Other current assets | 204 | |
| Property, plant, and equipment | 976 | |
| Customer lists | 14,206 | |
| Intellectual property | 2,760 | |
| Non-compete agreement | 333 | |
| Tradename | 690 | |
| Lease right of use assets | 1,723 | |
| Equity Method Investment | 6,969 | |
| Goodwill | 22,925 | |
| Total assets acquired | 57,554 | |
| Accounts payable | (1,890) | |
| Accrued expenses | (535) | |
| Deferred taxes | (2,322) | |
| Lease liabilities | (1,723) | |
| Total liabilities assumed | (6,470) | |
| Total assets acquired, net of liabilities assumed | 51,084 | |
| Less: cash acquired | (3,381) | |
| Purchase price, net of cash acquired | $ | 47,703 | |
Acquisition costs associated with the transaction of approximately $1.5 million were charged to expense during the year ended December 31, 2024. These costs were primarily for legal, due diligence, and valuation services, which are included within “Acquisition costs” on the face of the Consolidated Statements of Comprehensive Income.
The amount of revenue and pre-tax income of AQF recognized since the acquisition date, which is included in the Consolidated Statements of Comprehensive Income for the year ended December 31, 2024, was approximately $6.0 million and $1.0 million, respectively.
None of the goodwill related to the AQF acquisition is expected to be deductible for tax purposes. The goodwill is attributable to the workforce of AQF and the significant synergies expected to arise after the acquisition.
Pro-forma Statements
The following table contains an unaudited pro forma consolidated statement of comprehensive income for the years ended December 31, 2025, 2024, and 2023, as if the collective acquisitions of TPI and UNIPEC had occurred on
January 1, 2024 and as if the collective acquisitions of Marble, AJR, Welch, and AQF had occurred on January 1, 2023 (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended December 31, |
| 2025 | | 2024 | | 2023 |
| (Unaudited) | | (Unaudited) | | (Unaudited) |
| Sales | $ | 610,536 | | | $ | 588,084 | | | $ | 505,840 | |
| Operating Income | $ | 94,076 | | | $ | 92,881 | | | $ | 67,966 | |
| Net Income | $ | 69,608 | | | $ | 64,260 | | | $ | 45,151 | |
| Earnings per share: | | | | | |
| Basic | $ | 9.03 | | | $ | 8.38 | | | $ | 5.92 | |
| Diluted | $ | 8.92 | | | $ | 8.25 | | | $ | 5.86 | |
The above unaudited pro forma information is presented for illustrative purposes only and may not be indicative of the results of operations that would have occurred had all of the 2024 and 2025 acquisitions occurred as presented. In addition, future results may vary significantly from the results reflected in such pro forma information. Pro-forma adjustments include depreciation adjustments on fixed asset step up/down; inventory step-up; amortization of intangibles; and estimated interest expense.
(3) Equity Method Investment
On August 23, 2024, in conjunction with the acquisition of AQF, the Company became 50% owners of the equity interest in AQF Asia PTE Ltd., located in Singapore (“AQF Asia”). While the Company owns 50% of the equity interest of AQF Asia and does have significant influence over the entity, the Company has concluded that it does not have control of AQF Asia due to certain veto rights held by the other joint venture partner with regard to management decision making.
As a result, the Company accounts for its ownership interest in AQF Asia following the equity method of accounting, in accordance with ASC 323, Investments —Equity Method and Joint Ventures. Under this method, the carrying cost is initially recorded at fair value and then increased or decreased by recording its percentage of gain or loss in the consolidated statement of comprehensive income and a corresponding change to the carrying value of the asset. The initial fair value of this equity method investment as of August 2024 was approximately $7.0 million. The following table provides a roll-forward of the equity method investment for the years ended December 31, 2025 and 2024:
| | | | | | | | | | | |
| Years Ended
December 31, |
| 2025 | | 2024 |
| Equity Method Investment - beginning of period | $ | 6,808 | | | $ | — | |
| Acquired in AQF Medical acquisition | — | | | 6,969 | |
| Dividend distribution | — | | | (250) | |
50% share of AQF Asia net income | 239 | | | 129 | |
| Amortization of basis differences | (120) | | | (40) | |
| Equity Method Investment - end of period | $ | 6,927 | | | $ | 6,808 | |
(4) Revenue Recognition
Disaggregated Revenue
The following table presents the Company’s revenue disaggregated by the major types of goods and services sold to our customers (in thousands) (See Note 20 for further information regarding net sales by market):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Net sales of: | | | | | |
| Products | $ | 591,355 | | | $ | 491,382 | | | $ | 391,460 | |
| Tooling and Machinery | 4,501 | | | 8,320 | | | 3,468 | |
| Engineering services | 6,941 | | | 4,719 | | | 5,144 | |
| Total net sales | $ | 602,797 | | | $ | 504,421 | | | $ | 400,072 | |
Contract balances
The timing of revenue recognition may differ from the timing of invoicing to customers. When invoicing occurs prior to revenue recognition, the Company has deferred revenue (contract liabilities) included within “deferred revenue” on the consolidated balance sheet. The following table presents opening and closing balances of contract liabilities for the years ended December 31, 2025, and 2024 (in thousands):
| | | | | | | | | | | |
| Contract Liabilities |
| Years Ended
December 31, |
| 2025 | | 2024 |
| Deferred revenue - beginning of period | $ | 4,667 | | | $ | 6,616 | |
| Acquired in business combinations | 661 | | | 8 | |
| Increases due to consideration received from customers | 6,796 | | | 4,439 | |
| Revenue recognized | (7,884) | | | (6,396) | |
| Deferred revenue - end of period | $ | 4,240 | | | $ | 4,667 | |
Revenue recognized during the years ended December 31, 2025 and 2024 from amounts included in deferred revenue at the beginning of the period was approximately $2.7 million and $4.6 million, respectively.
When invoicing occurs after revenue recognition, the Company has unbilled receivables (contract assets) included within “receivables” on the consolidated balance sheet. The following table presents opening and closing balances of contract assets for the years ended December 31, 2025 and 2024 (in thousands):
| | | | | | | | | | | |
| Contract Assets |
| Years Ended
December 31, |
| 2025 | | 2024 |
| Unbilled Receivables - beginning of period | $ | 192 | | | $ | 114 | |
| Increases due to revenue recognized, not invoiced to customers | 4,149 | | | 2,135 | |
| Decreases due to customer invoicing | (3,950) | | | (2,057) | |
| Unbilled Receivables - end of period | $ | 391 | | | $ | 192 | |
(5) Supplemental Cash Flow Information
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2025 | | 2024 | | 2023 |
| | | (in thousands) | | |
| Cash paid for: | | | | | |
| Interest | $ | 9,855 | | | $ | 7,893 | | | $ | 3,537 | |
| Income taxes, net of refunds: | | | | | |
| Federal | 2,780 | | $ | 10,089 | | | $ | 8,660 | |
| State: | | | | | |
| CA | 251 | | | — | | | — | |
| IL | 393 | | | 762 | | | — | |
| MA | — | | | 657 | | | — | |
| MN | 255 | | | — | | | — | |
| IA | (408) | | | — | | | — | |
| Other States | 287 | | | 1,321 | | | 1,908 | |
| Total income taxes, net of refunds | $ | 3,558 | | | $ | 12,829 | | | $ | 10,568 | |
| | | | | |
| Non-cash investing and financing activities: | | | | | |
| Capital additions accrued but not yet paid | $ | 248 | | | $ | 130 | | | $ | 536 | |
| Acquisition date contingent consideration | — | | | 1,191 | | | — | |
(6) Receivables and Allowance for Credit Losses
Receivables consist of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| December 31, |
| 2025 | | 2024 | | 2023 |
| Accounts receivable–trade | $ | 83,809 | | | $ | 85,562 | | | $ | 65,176 | |
| Less allowance for credit losses | (895) | | | (885) | | | (727) | |
| Receivables, net | $ | 82,914 | | | $ | 84,677 | | | $ | 64,449 | |
The following table provides a roll-forward of the allowance for credit losses that is deducted from accounts receivable to present the net amount expected to be collected for the years ended December 31, 2025 and 2024 (in thousands):
| | | | | | | | | | | |
| Allowance for Credit Losses |
| Year Ended December 31, |
| 2025 | | 2024 |
| Allowance - beginning of period | $ | 885 | | | $ | 727 | |
| Provision for expected credit losses | 31 | | | 213 | |
| Amounts written off against the allowance, net of recoveries | (23) | | | (55) | |
| Recoveries | 2 | | | — | |
| Allowance - end of period | $ | 895 | | | $ | 885 | |
(7) Inventories
Inventories consist of the following (in thousands):
| | | | | | | | | | | |
| December 31, |
| 2025 | | 2024 |
| Raw materials | $ | 68,075 | | | $ | 65,511 | |
| Work in process | 3,903 | | | 5,966 | |
| Finished goods | 14,878 | | | 16,059 | |
| Total Inventory | $ | 86,856 | | | $ | 87,536 | |
(8) Goodwill and Other Intangible Assets
The changes in the carrying amount of goodwill for the years ended December 31, 2025 and 2024 are as follows (in thousands):
| | | | | | | | | | | |
| 2025 | | 2024 |
| Opening balance | $ | 189,657 | | | $ | 113,263 | |
| Acquisitions | 4,308 | | | 78,252 | |
| Measurement period adjustments | 17 | | | — | |
| Foreign currency translation | 3,421 | | | (1,858) | |
| Ending balance | $ | 197,403 | | | $ | 189,657 | |
The carrying values of the Company’s definite-lived intangible assets as of December 31, 2025 and 2024 are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2025 | Customer
List | | Intellectual Property | | Tradename & Brand | | Non-
Compete | | Total |
| Weighted-average amortization period (years) | 20 | | 12.3 | | 13.3 | | 8.3 | | |
| Gross amount | $ | 134,374 | | | $ | 28,811 | | | $ | 1,094 | | | $ | 6,944 | | | $ | 171,223 | |
| Accumulated amortization | (22,327) | | | (4,775) | | | (353) | | | (2,919) | | | $ | (30,374) | |
| Net balance | $ | 112,047 | | | $ | 24,036 | | | $ | 741 | | | $ | 4,025 | | | $ | 140,849 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| December 31, 2024 | Customer
List | | Intellectual Property | | Tradename & Brand | | Non-
Compete | | Total |
| Weighted-average amortization period (years) | 20 | | 12.3 | | 13.2 | | 8.8 | | |
| Gross amount | $ | 129,527 | | | $ | 27,482 | | | $ | 1013 | | | $ | 6,699 | | | $ | 164,721 | |
| Accumulated amortization | (15,655) | | | (2,401) | | | (268) | | | (2,145) | | | $ | (20,469) | |
| Net balance | $ | 113,872 | | | $ | 25,081 | | | $ | 745 | | | $ | 4,554 | | | $ | 144,252 | |
Amortization expense related to intangible assets was approximately $9.8 million, $6.7 million, and $4.4 million for the years ended December 31, 2025, 2024, and 2023, respectively. The estimated remaining amortization expense as of December 31, 2025 is as follows (in thousands):
| | | | | |
| 2026 | $ | 9,928 | |
| 2027 | 9,872 | |
| 2028 | 9,824 | |
| 2029 | 9,793 | |
| 2030 | 9,739 | |
| Thereafter | 91,693 | |
| Total | $ | 140,849 | |
(9) Property, Plant and Equipment
Property, plant, and equipment consist of the following (in thousands):
| | | | | | | | | | | |
| December 31, |
| 2025 | | 2024 |
| Land and improvements | $ | 5,900 | | | $ | 5,759 | |
| Buildings and improvements | 38,602 | | | 37,895 | |
| Leasehold improvements | 12,642 | | | 11,216 | |
| Machinery & equipment | 74,005 | | | 65,244 | |
| Furniture, fixtures, computers & software | 10,361 | | | 8,314 | |
| Construction in progress | 10,941 | | | 6,506 | |
| Property, plant and equipment | $ | 152,451 | | | $ | 134,934 | |
| Accumulated depreciation | (73,342) | | | (64,370) | |
| Net property, plant and equipment | $ | 79,109 | | | $ | 70,564 | |
Depreciation expense of Property, Plant and Equipment for the years ended December 31, 2025, 2024, and 2023 was approximately $9.4 million, $8.0 million, and $7.0 million, respectively.
(10) Debt
On June 27, 2024, the Company, as the borrower, entered into a secured $275 million Amended and Restated Credit Agreement (the “Third Amended and Restated Credit Agreement”) with certain of the Company’s subsidiaries (the “Subsidiary Guarantors”) and Bank of America, N.A., in its capacity as the initial lender, Administrative Agent, Swingline Lender and L/C Issuer, and certain other lenders from time-to-time party thereto.
The credit facilities under the Third Amended and Restated Credit Agreement consist of a secured term loan to the Company of $125 million and a secured revolving credit facility, under which the Company may borrow up to $150 million. The Third Amended and Restated Credit Facilities mature on June 27, 2029. This maturity date is subject to acceleration, and the Company could be subject to additional fees and expenses in certain circumstances should one or more events of default described in the Third Amended and Restated Credit Agreement occur. The secured term loan requires quarterly principal payments of $3,125,000 that commenced on December 31, 2024. The proceeds of the Third Amended and Restated Credit Agreement may be used for general corporate purposes, including funding certain acquisitions (see Note 2 for more information regarding this acquisition), as well as certain other permitted acquisitions. The Company’s obligations under the Third Amended and Restated Credit Agreement are guaranteed by Subsidiary Guarantors and secured by substantially all assets of the Company.
The Third Amended and Restated Credit Facilities call for interest at Secured Overnight Financing Rate (“SOFR”) plus a margin that ranges from 1.25% to 2.25% or, at the discretion of the Company, the bank’s prime rate plus a
margin that ranges from .25% to 1.25%. In both cases the applicable margin is dependent upon Company performance. Under the Third Amended and Restated Credit Agreement, the Company is subject to a minimum fixed-charge coverage financial covenant as well as a maximum total funded debt to EBITDA financial covenant. The Third Amended and Restated Credit Agreement contains other covenants customary for transactions of this type, including restrictions on certain payments, permitted indebtedness and permitted investments.
At December 31, 2025, the Company had approximately $135.5 million in outstanding borrowings under the Third Amended and Restated Credit Agreement and also had approximately $0.7 million in standby letters of credit outstanding, drawable as a financial guarantee on worker’s compensation insurance policies. At December 31, 2025, the weighted average interest rate was approximately 5.1% and the Company was in compliance with all covenants under the Third Amended and Restated Credit Agreement.
Long-term debt consists of the following (in thousands):
| | | | | | | | | | | |
| December 31, 2025 | | December 31, 2024 |
| Revolving credit facility | $ | 26,080 | | | $ | 67,500 | |
| Term loan | 109,375 | | | 121,875 | |
| Total long-term debt | 135,455 | | | 189,375 | |
| Current portion | (12,500) | | | (12,500) | |
| Long-term debt, excluding current portion | $ | 122,955 | | | $ | 176,875 | |
Future maturities of long-term debt at December 31, 2025 are as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Term Loan | | Revolving credit facility | | Total |
| 2026 | $ | 12,500 | | | $ | — | | | $ | 12,500 | |
| 2027 | 12,500 | | | — | | | 12,500 | |
| 2028 | 12,500 | | | — | | | 12,500 | |
| 2029 | 71,875 | | | 26,080 | | | 97,955 | |
| | | | | |
| $ | 109,375 | | | $ | 26,080 | | | $ | 135,455 | |
(11) Accrued Expenses
Accrued expenses consist of the following (in thousands):
| | | | | | | | | | | |
| December 31, |
| 2025 | | 2024 |
| Compensation | $ | 11,714 | | | $ | 11,290 | |
| Current portion of contingent consideration | 5,250 | | | 5,250 | |
| Current portion of present value of non-competition payments | 1,797 | | | 1,933 | |
| Temporary labor accrual | 1,685 | | | — | |
| Accrued rebates | 1,606 | | | 4,260 | |
| Other | 6,744 | | | 7,677 | |
| $ | 28,796 | | | $ | 30,410 | |
(12) Income Tax
The Company’s domestic and foreign net income before provision for income taxes for the years ended December 31, 2025, 2024, and 2023 consists of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Domestic | $ | 31,495 | | | $ | 30,266 | | | $ | 26,545 | |
| Foreign | 51,018 | | | 42,759 | | | 27,357 | |
| Total | $ | 82,513 | | | $ | 73,025 | | | $ | 53,902 | |
The Company’s income tax provision for the years ended December 31, 2025, 2024, and 2023 consists of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Current | | | | | |
| Federal | $ | 3,347 | | | $ | 6,841 | | | $ | 6,099 | |
| State | 402 | | | 2,471 | | | 1,784 | |
| Foreign | 5,328 | | | 3,449 | | | 272 | |
| Total Current | 9,077 | | | 12,761 | | | 8,155 | |
| Deferred | | | | | |
| Federal | 4,536 | | | 1,044 | | | 841 | |
| State | 852 | | | 230 | | | 2 | |
| Foreign | (265) | | | 9 | | | (20) | |
| Total Deferred | 5,123 | | | 1,283 | | | 823 | |
| Total income tax provision | $ | 14,200 | | | $ | 14,044 | | | $ | 8,978 | |
The approximate tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are as follows (in thousands):
| | | | | | | | | | | |
| December 31, |
| 2025 | | 2024 |
| Deferred tax assets: | | | |
| Accruals | $ | 846 | | | $ | 753 | |
| Tax credits | 499 | | | 183 | |
| Compensation programs | 2,167 | | | 2,202 | |
| Equity-based compensation | 1,024 | | | 928 | |
| Lease liability | 5,040 | | | 4,306 | |
| Intangible assets | 434 | | | 2,558 | |
| Deferred revenue | 627 | | | 705 | |
| Other | 21 | | | 12 | |
| Gross deferred tax assets | 10,658 | | | 11,647 | |
| Valuation allowance | — | | | — | |
| Net deferred tax assets | 10,658 | | | 11,647 | |
| | | |
| Deferred tax liabilities: | | | |
| Excess of book over tax basis of fixed assets | $ | (3,115) | | | $ | (2,846) | |
| Goodwill | (7,643) | | | (4,975) | |
| Right of use asset | (4,887) | | | (4,175) | |
| Intangible assets | (3,703) | | | (2,882) | |
| Tax on unremitted foreign earnings | (406) | | | — | |
| Inventory capitalization | (115) | | | (65) | |
| Total deferred tax liabilities | (19,869) | | | (14,943) | |
| Net long-term deferred tax liabilities | $ | (9,211) | | | $ | (3,296) | |
The amounts recorded as deferred tax assets as of December 31, 2025 and 2024 represent the amount of tax benefits of existing deductible temporary differences that are more likely than not to be realized through the generation of sufficient future taxable income. The Company had gross deferred tax assets of approximately $10.7 million on December 31, 2025, which it believes are more likely than not to be realized. Management reviews the recoverability of deferred tax assets during each reporting period.
The actual tax provision for the years presented differs from that derived from using a U.S federal statutory rate of 21% to income before income tax expense as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2025 | | 2024 | | 2023 |
| U.S. federal statutory rate | $ | 17,328 | | | 21.0 | % | | $ | 15,335 | | | 21.0 | % | | $ | 11,321 | | | 21.0 | % |
| Increase (decrease) in income taxes resulting from: | | | | | | | | | | | |
| State and local income tax, net of federal income tax effect | 1,897 | | | 2.3 | | | 2,104 | | | 2.9 | | | 1,304 | | | 2.4 | |
| Foreign Tax Effects: | | | | | | | | | | | |
| Dominican Republic: | | | | | | | | | | | |
| Statutory tax rate difference | 2,494 | | | 3.0 | | | 2,417 | | | 3.3 | | | 1,038 | | | 1.9 | |
| Withholding taxes | 4,611 | | | 5.6 | | | 2,789 | | | 3.8 | | | 322 | | | 0.6 | |
| Free trade zone impact | (11,223) | | | (13.5) | | | (10,265) | | | (14.0) | | | (6,609) | | | (12.2) | |
| Other items | — | | | — | | | — | | | — | | | — | | | — | |
| Other foreign jurisdictions | (1,532) | | | (1.9) | | | (463) | | | (0.6) | | | (246) | | | (0.5) | |
| Effect of cross border transactions: | | | | | | | | | | | |
| Global Intangible low-taxed income | 693 | | | 0.8 | | | 617 | | | 0.7 | | | 2,124 | | | 4.0 | |
| Foreign-derived intangible income | (120) | | | (0.1) | | | 37 | | | 0.1 | | | (1,522) | | | (2.8) | |
| Nontaxable or Nondeductible Items: | | | | | | | | | | | |
| Stock Compensation | (915) | | | (1.1) | | | (1,291) | | | (1.8) | | | (1,041) | | | (1.9) | |
| 162m Limitations | 1,685 | | | 2.0 | | | 1,957 | | | 2.7 | | | 1,043 | | | 1.9 | |
| Tax credits | — | | | — | | | — | | | — | | | 264 | | | 0.5 | |
| Other | (718) | | | (0.9) | | | 650 | | | 0.9 | | | 310 | | | 0.6 | |
| Change in uncertain tax positions | — | | | — | | | 157 | | | 0.2 | | | 670 | | | 1.2 | |
| Change in valuation allowance | — | | | — | | | — | | | — | | | — | | | — | |
| Effective tax rate | $ | 14,200 | | | 17.2 | % | | $ | 14,044 | | | 19.2 | % | | $ | 8,978 | | | 16.7 | % |
The state and local tax jurisdictions that make up the majority of the effect of the state and local income tax line item in 2025 are Illinois and Massachusetts. The state and local tax jurisdictions that make up the majority of the effect of the state and local income tax line item in 2024 are Massachusetts, California, and Texas. The state and local tax jurisdictions that make up the majority of the effect of the state and local income tax line item in 2023 are Massachusetts, California, and Michigan.
The Company’s foreign subsidiary earnings are subject to current U.S. taxation under the Tax Cuts and Jobs Act of 2017, which also repealed U.S. taxation on the subsequent repatriation of those earnings. The Company intends to repatriate substantially all of its future foreign subsidiary earnings. The repatriation of earnings outside of the U.S. generally does not represent a material net tax impact to the Company. The withholding taxes associated with the Company’s earnings in the Dominican Republic are creditable against the Company US tax liability and therefore do not produce any material incremental tax consequences. The earnings of the Company’s other foreign subsidiaries, and therefore the withholding taxes associated with those earnings, are not material for the year ended December 31, 2025.
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions, as well as in Ireland, Puerto Rico, and Costa Rica. It currently does not have a local filing obligation with respect to its subsidiaries in the Dominican Republic. The Company has been audited by the following states: income tax returns
filed in Michigan through 2004, income tax returns filed in Massachusetts through 2021, income tax returns filed in Florida through 2019, income tax returns filed in New Jersey through 2012, income tax returns in Colorado through 2017, income tax returns in Iowa through 2019, and income tax returns in Illinois through 2021. The Company has been audited by the Internal Revenue Service for income tax returns filed from 2019 through 2021. Federal and state tax returns for the years 2022 through 2024 remain open to examination by the IRS and various state jurisdictions. The Company’s non-US tax returns in Ireland, Puerto Rico, and Costa Rica remain open for the years 2021 through 2024.
The Company applies the accounting guidance in ASC 740 to accounting for uncertainty in income taxes. The Company’s reserves related to taxes are based on determination of whether, and how much of, a tax benefit taken by the Company in its tax filings or positions, is more likely than not to be realized following resolution of any potential contingencies present related to the tax benefit. The following is a roll forward of the Company’s unrecognized tax benefits (“UTB”) (in thousands):
| | | | | | | | | | | |
| December 31, |
| 2025 | | 2024 |
| Gross UTB balance at beginning of fiscal year | $ | — | | | $ | 670 | |
| Gross increases - tax positions of prior years | — | | | 106 | |
| Settlement of tax positions | — | | | (776) | |
| Gross UTB balance at end of fiscal year | $ | — | | | $ | — | |
As of December 31, 2025, the Company had recorded zero unrecognized tax benefits. For the year ended December 31, 2024, the Company recorded zero unrecognized tax benefits. The Company closed audits with the IRS and the state of Massachusetts during the year ended December 31, 2024 and reduced previously recorded uncertain tax benefits to zero as a result of closing those audits.
(13) Net Income Per Share
Basic income per share is based on the weighted average number of shares of common stock outstanding. Diluted income per share is based upon the weighted average number of common shares outstanding and dilutive common stock equivalent shares outstanding during each period.
The weighted average number of shares used to compute basic and diluted net income per share consisted of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Basic weighted average common shares outstanding during the year | 7,705 | | | 7,668 | | | 7,624 | |
| Weighted average common equivalent shares due to stock options and restricted stock units | 99 | | | 117 | | | 77 | |
| Diluted weighted average common shares outstanding during the year | 7,804 | | | 7,785 | | | 7,701 | |
The computation of diluted earnings per share excludes the effect of the potential exercise of stock awards, including stock options, when the average market price of the common stock is lower than the exercise price of the related stock options during the period. These outstanding stock options are not included in the computation of diluted income per share because the effect would be antidilutive.
For the years ended December 31, 2025, 2024, and 2023, the number of stock awards excluded from the computation were 2,958, 2,958, and 4,218, respectively.
(14) Share-Based Compensation
The Company issues share-based awards through several plans that are described in detail below.
Incentive Plan
In June 2003, the Company formally adopted the 2003 Incentive Plan (the “Plan”). As amended and restated to date, the Plan is intended to benefit the Company by offering equity-based and other incentives to certain of the Company’s executives and employees who are in a position to contribute to the long-term success and growth of the Company, thereby encouraging the continuance of their involvement with the Company and/or its subsidiaries.
Two types of equity awards may be granted to participants under the Plan: restricted shares and other stock awards. Restricted shares are shares of common stock awarded subject to restrictions and to possible forfeiture upon the occurrence of specified events. Other stock awards are awards that are denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, shares of common stock. Such awards may include Restricted Stock Unit Awards (“RSUs”), incentive and non-qualified stock options, performance shares, or stock appreciation rights. The Company determines the form, terms, and conditions, if any, of any awards made under the Plan.
Through December 31, 2025, 1,408,674 shares of common stock were issued under the Plan, none of which have been restricted. These shares of common stock include the vesting of RSUs, stock options exercised, and shares of common stock granted under the Plan. For year the year ended December 31, 2025, 856 shares of common stock were granted under the Plan. For year the year ended December 31, 2025, 49,305 RSUs were granted under the Plan. At December 31, 2025, 75,851 RSUs are outstanding under the Plan. For year the year ended December 31, 2025, no stock options were granted under the Plan. At December 31, 2025, 7,935 stock options are outstanding under the Plan. At December 31, 2025, 671,821 shares, RSUs, or stock options are available for future issuance under the Plan.
Director Plan
Effective July 15, 1998, the Company adopted the 1998 Director Plan, which was amended and renamed on June 3, 2009 as the 2009 Non-Employee Director Stock Incentive Plan (the “Director Plan”). The Director Plan was amended on March 7, 2013, to (i) prohibit the repricing of stock options or other equity awards without the consent of the Company’s shareholders, and (ii) prohibit the Company from buying out underwater stock options. The Director Plan was amended on June 8, 2022, to increase the maximum number of shares issuable under the Director Plan from 975,000 to 1,075,000. The Director Plan, as amended, provides for the issuance of stock options, RSUs, and other equity-based securities to non-employee members of the Company’s board of directors.
For the year ended December 31, 2025, 3,750 RSUs were granted under the Director Plan. At December 31, 2025, 3,750 RSUs are outstanding under the Director Plan. For the year ended December 31, 2025, no stock options were granted under the Director Plan. At December 31, 2025, 54,034 stock options are outstanding under the Director Plan. At December 31, 2025, 115,937 shares, RSUs, or stock options are available for future issuance under the Plan.
Share-based compensation
Share-based compensation is measured at the grant date based on the fair value of the award and is recognized as an expense over the requisite service period (generally the vesting period of the equity grant). Share-based compensation is included in selling, general & administrative expenses as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| Share-based compensation related to: | 2025 | | 2024 | | 2023 |
| Common stock grants | $ | 400 | | | $ | 400 | | | $ | 400 | |
| Stock option grants | 173 | | | 485 | | | 432 | |
| RSUs | 8,281 | | | 5,957 | | | 3,809 | |
| Total share-based compensation | $ | 8,854 | | | $ | 6,842 | | | $ | 4,641 | |
The total income tax benefit recognized in the consolidated statements of comprehensive income for share-based compensation arrangements was approximately $4.8 million, $2.4 million, and $2.2 million for the years ended December 31, 2025, 2024, and 2023, respectively.
Common stock grants
The compensation expense for common stock granted during the years ended December 31, 2025, 2024, and 2023, was determined based on the market price of the shares on the date of grant.
Stock option grants
No stock options were granted during the year ended December 31, 2025. The compensation expense for stock options granted during the years ended December 31, 2024 and 2023, was determined as the fair value of the options using the Black Scholes valuation model. The range of assumptions are noted as follows:
| | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2024 | | 2023 | |
| Expected volatility | 39.7% | | 36.6% - 40.6% | |
| Expected dividends | None | | None | |
| Risk-free interest rate | 4.3% | | 3.6% - 3.9% | |
| Exercise price | $260.92 | | $111.54 - $167.98 | |
| Expected term (years) | 6.3 | | 6.2 - 6.8 | |
| Weighted-average grant date fair value | $121.61 | | $37.81 - $71.17 | |
The stock volatility for each grant is determined based on a review of the experience of the weighted average of historical daily price changes of the Company’s common stock over the expected option term, and the risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected term of the option. The expected term is estimated based on historical option exercise activity.
The following is a summary of stock option activity for the year ended December 31, 2025:
| | | | | | | | | | | | | | | | | | | | | | | |
| Shares Under Options | | Weighted Average Exercise Price
(per share) | | Weighted Average Remaining Contractual Life
(in years) | | Aggregate Intrinsic Value
(in thousands) |
| Outstanding December 31, 2024 | 73,232 | | $ | 67.15 | | | | | |
| Exercised | (11,263) | | 36.02 | | | | | |
| Outstanding December 31, 2025 | 61,969 | | $ | 72.80 | | | 4.10 | | $ | 9,362 | |
| Exercisable at December 31, 2025 | 61,969 | | $ | 72.80 | | | 4.10 | | $ | 9,362 | |
| Vested and expected to vest at December 31, 2025 | 61,969 | | $ | 72.80 | | | 4.10 | | $ | 9,362 | |
During the years ended December 31, 2025, 2024, and 2023, the total intrinsic value of all options exercised (i.e., the difference between the market price and the price paid by the employees to exercise the options) was approximately $2.1 million, $1.5 million, and $3.0 million, respectively, and the amount of consideration received from the exercise of these options was approximately $0.2 million, $0.2 million, and $0.7 million, respectively. At its discretion, the Company allows option holders to surrender previously owned common stock in lieu of paying the exercise price and withholding taxes. During the years ended December 31, 2025, 2024 and 2023, 748 shares, 653 shares and 861 shares were redeemed for this purpose at an average market price of $282.42, $162.93 and $127.05, respectively.
RSUs
The Company grants RSUs to its directors, executive officers and employees. The stock unit awards are subject to various time-based vesting requirements, and certain portions of these awards are subject to performance criteria of the Company. Compensation expense on these awards is recorded based on the fair value of the award at the date of grant, which is equal to the Company’s closing stock price, and is charged, to expense ratably over the requisite service period for time-based awards, and to expense utilizing the accelerated attribution method for performance-based awards. No compensation expense is taken on awards that do not become vested, and the amount of compensation expense recorded is adjusted based on management’s determination of the probability that these awards will become vested.
The following table summarizes information about stock unit award activity during the year ended December 31, 2025:
| | | | | | | | | | | |
| Restricted Stock Units | | Weighted Average Award Date Fair Value |
| Outstanding at December 31, 2024 | 80,827 | | $ | 98.79 | |
| Awarded | 53,055 | | 259.69 | |
| Shares vested | (43,296) | | 119.05 | |
| Forfeitures | (10,985) | | 243.39 | |
| Outstanding at December 31, 2025 | 79,601 | | $ | 175.06 | |
At the Company’s discretion, RSU holders are given the option to net-share settle to cover the required minimum withholding tax, and the remaining amount is converted into the equivalent number of common shares. During the years ended December 31, 2025, 2024 and 2023, 18,152 shares, 21,914 shares and 20,457 shares were redeemed for this purpose at an average market price of $215.60, $216.80 and $117.95, respectively.
The following summarizes the future share-based compensation expense the Company will record as the equity securities granted through December 31, 2025, vest (in thousands):
| | | | | | | | | | | |
| Restricted
Stock Units | | Total |
| 2026 | $ | 5,186 | | | $ | 5,186 | |
| 2027 | 2,746 | | | 2,746 | |
| 2028 | 292 | | | 292 | |
| Total | $ | 8,224 | | | $ | 8,224 | |
(15) Leases
The Company has operating and finance leases for offices, manufacturing plants, vehicles and certain office and manufacturing equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet. The Company accounts for each separate lease component of a contract and its associated non-lease components as a single lease component, thus causing all fixed payments to be capitalized. Variable lease payment amounts that cannot be determined at the commencement of the lease such as increases in lease payments based on changes in index rates or usage, are not included in the right of use (“ROU”) assets or lease liabilities. These are expensed as incurred and recorded as variable lease expense. The Company determines if an arrangement is a lease at the inception of a contract. Operating and finance lease ROU assets and operating and finance lease liabilities are stated separately in the condensed consolidated balance sheet.
ROU assets represent the Company's right to use an underlying asset during the lease term and lease liabilities represent the Company's obligation to make lease payments pursuant to the lease. ROU assets and lease liabilities are recognized at commencement date based on the net present value of fixed lease payments over the lease term. The lease term assumed in the determination of the ROU assets and lease liabilities includes options to extend or
terminate the lease when it is reasonably certain that the Company will exercise that option. ROU assets are also adjusted for any deferred or accrued rent. As the Company's leases do not typically provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
The Company leases one of its owned properties to a third party. The lease descriptions, terms, and variable lease payments are generally the same as those described above.
ROU assets and lease liabilities consist of the following (in thousands):
| | | | | | | | | | | |
| December 31, |
| 2025 | | 2024 |
| Operating lease ROU assets | $ | 18,847 | | | $ | 16,056 | |
| Finance lease ROU assets | 32 | | | 92 | |
| Total ROU assets | $ | 18,879 | | | $ | 16,148 | |
| | | |
| Operating lease liabilities - current | $ | 5,005 | | | $ | 4,165 | |
| Finance lease liabilities - current | 32 | | | 61 | |
| Total lease liabilities - current | $ | 5,037 | | | $ | 4,226 | |
| | | |
| Operating lease liabilities - long-term | $ | 13,988 | | | $ | 12,398 | |
| Finance lease liabilities - long-term | 2 | | | 34 | |
| Total lease liabilities - long-term | $ | 13,990 | | | $ | 12,432 | |
The components of lease costs consist of the following (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended
December 31, |
| 2025 | | 2024 | | 2023 |
| Lease Cost: | | | | | |
| Finance lease cost: | | | | | |
| Amortization of right of use assets | $ | 60 | | | $ | 86 | | | $ | 60 | |
| Interest on lease liabilities | 2 | | | 5 | | | 4 | |
| Operating lease cost | 4,993 | | | 3,851 | | | 3,132 | |
| Variable lease cost | 711 | | | 329 | | | 324 | |
| Short-term lease cost | 201 | | | 190 | | | 68 | |
| Total lease cost | $ | 5,967 | | | $ | 4,461 | | | $ | 3,588 | |
| | | | | |
| Weighted-average remaining lease term (years): | | | | | |
| Finance | 1.05 | | 1.54 | | 2.54 |
| Operating | 5.75 | | 4.27 | | 4.42 |
| Weighted-average discount rate: | | | | | |
| Finance | 2.18 | % | | 2.12 | % | | 2.11 | % |
| Operating | 5.51 | % | | 4.97 | % | | 3.42 | % |
The components of lease income were as follows:
| | | | | | | | | | | | | | | | | |
| Year Ended
December 31, |
| 2025 | | 2024 | | 2023 |
| Lease income: | | | | | |
| Operating lease income | $ | 342 | | | $ | 331 | | | $ | 317 | |
| Total lease income | $ | 342 | | | $ | 331 | | | $ | 317 | |
The following table provides additional details of cash flow information related to the Company's leases (in thousands):
| | | | | | | | | | | | | | | | | |
| Year Ended
December 31, |
| 2025 | | 2024 | | 2023 |
| Cash paid for amounts included in measurement of lease liabilities: | | | | | |
| Operating cash flows from operating leases | $ | 5,355 | | | $ | 3,784 | | | $ | 2,979 | |
| Financing cash flows from finance leases | 63 | | | 73 | | | 63 | |
| | | | | |
| ROU assets obtained in exchange for lease liabilities | $ | 6,575 | | | $ | 4,900 | | | $ | 2,492 | |
Maturities of lease liabilities and receipts as of December 31, 2025 were as follows (in thousands):
| | | | | | | | | | | | | | | | | |
| December 31, 2025 |
| Lease Liabilities | | Lease Receipts |
| Operating | | Finance | | Operating |
| 2026 | $ | 5,132 | | | $ | 29 | | | $ | 354 | |
| 2027 | 5,113 | | | 6 | | | 363 | |
| 2028 | 3,973 | | | — | | | 372 | |
| 2029 | 3,041 | | | — | | | — | |
| 2030 | 1,676 | | | — | | | — | |
| Thereafter | 3,059 | | | — | | | — | |
| Total lease payments | 21,994 | | | 34 | | | $ | 1,090 | |
| Less: Interest | (2,839) | | | — | | | |
| Present value of lease liabilities | $ | 19,155 | | | $ | 34 | | | |
Rent expense amounted to approximately $5.0 million, $3.7 million, and $2.9 million in 2025, 2024, and 2023, respectively.
(16) Other Long-Term Liabilities
Other long-term liabilities consist of the following (in thousands):
| | | | | | | | | | | |
| December 31, |
| 2025 | | 2024 |
| Present value of non-competition payments | $ | 3,204 | | | $ | 4,938 | |
| Accrued contingent consideration (earn-out) | — | | | 4,989 | |
| Other | 321 | | | 1,217 | |
| $ | 3,525 | | | $ | 11,144 | |
(17) Commitments and Contingencies
(a)Legal – From time to time, the Company may be a party to various suits, claims and complaints arising in the ordinary course of business. In the opinion of management, these suits, claims and complaints should not result in final judgments or settlements that, in the aggregate, would have a material adverse effect on the Company’s financial condition or results of operations.
(b)Contingent Consideration – In connection with the acquisitions of Welch and Marble in 2024, and DAS Medical in 2021, the Company is required to make contingent payments, subject to the entities achieving certain financial performance thresholds. Also, in connection with the DAS Medical and Advant Medical acquisitions, the Company incurred a liability for contingent consideration related to the present value of non-competition payments. The Company re-measures contingent liabilities each reporting period and records changes in fair value through a separate line item within our Consolidated Statements of Comprehensive Income. Increases or decreases in the fair value of the contingent consideration liability can result from changes in discount rates, periods, timing and amount of projected revenue or timing or likelihood of achieving regulatory, revenue or commercialization-based milestones. The use of alternative valuation assumptions, including estimated revenue projections, growth rates, cash flows, discount rates, useful life, or probability of achieving clinical, regulatory, or revenue-based milestones could result in different purchase price allocations and recognized amortization expense and contingent consideration expense or benefit in current and future periods.
(18) Employee Benefit Plans
The Company maintains 401(k) and profit-sharing plans for eligible employees. Contributions to the Plans are made in the form of matching contributions to employee 401(k) deferrals. Contributions to the Plan were approximately $2.1 million, $1.6 million, and $1.3 million for the years 2025, 2024, and 2023, respectively.
The Company has a partially self-insured health insurance program that covers all eligible participating employees. The maximum liability is limited by a stop loss of $0.2 million per insured person, along with an aggregate stop loss determined by the number of participants.
The Company has an Executive, Non-qualified “Excess” Plan (“the Plan”), which is a deferred compensation plan available to certain executives. The Plan permits participants to defer receipt of part of their current compensation to a later date as part of their personal retirement or financial planning. Participants have an unsecured contractual commitment from the Company to pay amounts due under the Plan.
The compensation withheld from Plan participants, together with gains or losses determined by the participants’ deferral elections is reflected as a deferred compensation obligation to participants and is classified within the liabilities section in the accompanying balance sheets. At December 31, 2025 and 2024, the balance of the deferred compensation liability totaled approximately $6.7 million and $6.2 million, respectively. The related assets, which are held in the form of a Company-owned, variable life insurance policy that names the Company as the beneficiary, are classified within the other assets section of the accompanying balance sheets and are accounted for based on the underlying cash surrender values of the policies and totaled approximately $7.5 million and $6.2 million as of December 31, 2025 and 2024, respectively.
(19) Fair Value of Financial Instruments
Financial instruments recorded at fair value in the consolidated balance sheets, or disclosed at fair value in the footnotes, are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels defined by ASC 820, Fair Value Measurements and Disclosures, and directly related to the amount of subjectivity associated with inputs to fair valuation of these assets and liabilities, are as follows:
Level 1
Valued based on unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2
Valued based on either directly or indirectly observable prices for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.
Level 3
Valued based on management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.
The following table presents the fair value and hierarchical levels, for financial assets that are measured at fair value on a recurring basis (in thousands):
| | | | | | | | | | | |
| Level 3 | December 31, 2025 | | December 31, 2024 |
| Purchase price contingent consideration (Note 2): | | | |
| Accrued contingent consideration (earn-out) | $ | 5,250 | | | $ | 10,239 | |
| Present value of non-competition payments | 5,001 | | | 6,871 | |
| Total contingent consideration | $ | 10,251 | | | $ | 17,110 | |
The following table presents the changes in the estimated fair values of the Company’s liabilities for contingent consideration measured using significant unobservable inputs (Level 3) (in thousands):
| | | | | |
| December 31, 2023 | $ | 21,570 | |
| Fair value of earnouts from acquisitions | 1,191 | |
| Fair value measurement adjustments | 1,155 | |
| Payments | (6,806) | |
| December 31, 2024 | $ | 17,110 | |
| Fair value measurement adjustments | 418 | |
| Payments | (7,277) | |
| December 31, 2025 | $ | 10,251 | |
Significant unobservable inputs include revenue and EBITDA projections and risk-free discount rates.
The total potential contingent consideration payments for the Welch, Marble and DAS Medical acquisitions were $6.0 million, $0.5 million, and $20.0 million, respectively, as of each acquisition date. The fair value of the liability for the contingent consideration payments recognized upon the acquisition as part of the purchase accounting opening balance sheets totaled approximately $0.8 million, $0.4 million and $5.2 million for the Welch, Marble and the DAS Medical acquisitions, respectively, and was estimated by discounting to present value the probability-weighted contingent payments expected to be made. Assumptions used in the initial calculation were management’s financial forecasts, discount rate and various volatility factors. The ultimate settlement of contingent consideration could deviate from current estimates based on the actual results of these financial measures. The contingent consideration for the Welch acquisition has no fair value as of December 31, 2025, as Welch did not achieve the
EBITDA targets for the years ended December 31, 2024, and 2025. The Company has also determined that it is not probable that Welch will achieve the EBITDA targets for the year ended December 31, 2026. Contingent consideration is considered to be a Level 3 financial liability that is re-measured each reporting period. The Company paid approximately $5.3 million during the year ended December 31, 2025. The fair value of the liability for the contingent consideration payments recognized at December 31, 2025 totaled approximately $5.3 million out of the remaining potential payments of $7.3 million. The change in fair value of contingent consideration for the Welch, Marble, and DAS Medical acquisitions resulted in an expense of approximately $0.3 million and $1.0 million, respectively, for the years ended December 31, 2025 and 2024. The change in fair value of contingent consideration for the acquisitions is included in change in fair value of contingent consideration in the condensed consolidated statements of comprehensive income.
The Company entered into Non-Competition Agreements with certain previous owners of DAS Medical and Advant Medical which includes an aggregate of $10.0 million in payments to certain previous owners of DAS Medical over a ten-year period, and an aggregate of €0.4 million in payments to the previous owner of Advant Medical over a three-year period. The Company paid approximately $2.0 million during 2025 related to non-competition agreements. The present value of the Non-Competition Agreements at December 31, 2025 totaled approximately $5.0 million. This liability is considered to be a Level 3 financial liability that is re-measured each reporting period.
The Company has financial instruments, such as accounts receivable, accounts payable, and accrued expenses, which are stated at carrying amounts that approximate fair value because of the short maturity of those instruments. The carrying amount of the Company’s long-term debt approximates fair value as the interest rate on the debt approximates the estimated borrowing rate currently available to the Company.
(20) Segment Data
The Company consists of a single operating and reportable segment and uses consolidated net income as its measure of segment profit and loss. The chief operating decision maker of the Company is the Chairman and Chief Executive Officer (CEO). The Chairman and CEO reviews consolidated operating results to make decisions about how to allocate resources to the segment and assess its performance as a whole. The Company has identified the following significant segment expenses (SSEs) due to their relevance to the overall consolidated operating results (in thousands):
| | | | | | | | | | | | | | | | | |
| Years Ended December 31, |
| 2025 | | 2024 | | 2023 |
| Net sales from external customers | $ | 602,797 | | | $ | 504,421 | | | $ | 400,072 | |
| | | | | |
| Significant segment expenses: | | | | | |
| Materials | 244,316 | | | 219,755 | | | 181,434 | |
| Salaries and Benefits | 183,349 | | | 133,984 | | | 103,387 | |
| Depreciation and amortization | 19,150 | | | 14,715 | | | 11,407 | |
| Interest expense, net | 9,804 | | | 8,061 | | | 3,645 | |
| Other segment items (a) | 63,665 | | | 54,881 | | | 46,297 | |
| Income before income tax provision | 82,513 | | | 73,025 | | | 53,902 | |
| Income tax provision | 14,200 | | | 14,044 | | | 8,978 | |
| | | | | |
| Segment net income | $ | 68,313 | | | $ | 58,981 | | | $ | 44,924 | |
| | | | | |
| Segment total assets (b) | $ | 655,077 | | | $ | 628,995 | | | $ | 404,136 | |
(a)Other segment items include (production overhead, stock compensation, professional fees, and other SG&A expenses)
(b)See Consolidated Balance Sheet for details
Information about Geographic Areas
Net sales shipped to customers outside of the United States comprised approximately 16.0%, 16.7%, and 20.8% of the Company’s consolidated net sales for the years ended December 31, 2025, 2024, and 2023, respectively. Approximately 36.7% of all long-lived assets are located outside of the United States.
Information about Major Customers
Net sales to two customers comprised approximately 24.3% and 21.5%, respectively, of the Company’s consolidated net sales for the year ended December 31, 2025. Net sales to two customers comprised approximately 29.2% and 15.4%, respectively, of the Company’s consolidated net sales for the year ended December 31, 2024. Net sales to one customer comprised approximately 28.1% of the Company’s consolidated net sales for the year ended December 31, 2023.
On December 31, 2025, one customer represented approximately 32.1% of gross accounts receivable. On December 31, 2024, one customer represented approximately 34.0% of gross accounts receivable.
The Company’s products are primarily sold to customers within the Medical and Non-medical markets. Net sales by market for the years ended December 31, 2025, 2024 and 2023 are as follows (in thousands):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | 2025 | | 2024 | | 2023 |
| Market | | Net Sales | | % | | Net Sales | | % | | Net Sales | | % |
| | | | | | | | | | | | |
| Medical | | $ | 555,323 | | | 92.1 | % | | $ | 450,767 | | | 89.4 | % | | $ | 346,355 | | | 86.6 | % |
| Non-medical | | 47,474 | | | 7.9 | % | | 53,654 | | | 10.6 | % | | 53,717 | | | 13.4 | % |
| Net Sales | | $ | 602,797 | | | 100.0 | % | | $ | 504,421 | | | 100.0 | % | | $ | 400,072 | | | 100.0 | % |
(21) Quarterly Financial Information (unaudited)
Summarized quarterly financial data is as follows (in thousands, except per share data):
| | | | | | | | | | | | | | | | | | | | | | | |
| 2025 | Q1 | | Q2 | | Q3 | | Q4 |
| Net sales | $ | 148,148 | | | $ | 151,176 | | | $ | 154,558 | | | $ | 148,915 | |
| Gross profit | 42,151 | | | 43,544 | | | 42,747 | | | 41,968 | |
| Net income | 17,184 | | | 17,180 | | | 16,383 | | | 17,566 | |
| Basic net income per share | 2.24 | | | 2.23 | | | 2.12 | | | 2.28 | |
| Diluted net income per share | 2.21 | | | 2.21 | | | 2.11 | | | 2.25 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 2024 | Q1 | | Q2 | | Q3 | | Q4 |
| Net sales | $ | 105,009 | | | $ | 110,177 | | | $ | 145,165 | | | $ | 144,070 | |
| Gross profit | 30,083 | | | 33,031 | | | 41,523 | | | 42,056 | |
| Net income | 12,693 | | | 13,552 | | | 16,361 | | | 16,375 | |
| Basic net income per share | 1.66 | | | 1.77 | | | 2.13 | | | 2.13 | |
| Diluted net income per share | 1.64 | | | 1.75 | | | 2.11 | | | 2.10 | |
| | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | Q1 | | Q2 | | Q3 | | Q4 |
| Net sales | $ | 97,753 | | | $ | 100,037 | | | $ | 100,784 | | | $ | 101,498 | |
| Gross profit | 28,701 | | | 29,645 | | | 27,750 | | | 26,129 | |
| Net income | 9,739 | | | 11,883 | | | 11,694 | | | 11,607 | |
| Basic net income per share | 1.28 | | | 1.56 | | | 1.53 | | | 1.52 | |
| Diluted net income per share | 1.27 | | | 1.55 | | | 1.52 | | | 1.51 | |
(22) Subsequent Event
On or about February 14, 2026, the Company detected suspicious activity involving its information technology (“IT”) systems. Upon detecting the issue, the Company began taking steps to assess, contain, and remediate the unauthorized activity, including isolating the affected systems and launching an investigation with the assistance of external cybersecurity advisors.
Through the Company’s efforts, the Company believes that the third party responsible for this incident has been removed from the Company’s IT systems, and the Company’s ability to access information impacted by this incident has been restored in all material respects. The Company’s operations have continued throughout the period since the detection of the cybersecurity incident in all material respects. The Company continues to investigate the nature and scope of the unauthorized access. The Company currently expects that a significant portion of its direct costs incurred relating to containing, investigating and remediating the cybersecurity incident will be reimbursed through insurance recoveries.
While the Company’s investigation and assessment of this incident is ongoing, as of the date of this filing, the Company does not believe the incident is reasonably likely to materially impact the Company’s financial condition or results of operations.