ACME UNITED CORP
For the period ended Sep 30, 2026. Filed Nov 10, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Nov 10, 2026
ACU$70.28+1.5%Stored close · as of Nov 10, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-06-30; filed 2026-08-06.
0001193125-26-338211
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-11-10.
0001193125-26-455587
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 47 previous paragraphs and 48 current paragraphs.
20 unchanged; 22 reworded; 6 added; 5 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 1 previous and 1 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
Operating income for the three months ended September 30, 2026 was $4,463,000 compared with $3,007,000 in the same period of 2025. Operating income for the nine months ended September 30, 2026 was $13,037,000 compared with $11,824,000 in the same period of 2025. The increases in operating income for the three and nine months ended September 30, 2026 were primarily due to the benefit from the IEEPA tariff refund and higher sales partially offset by the costs to close the DMT facility and variable compensation directly attributable to the tariff refund.
Current report
Other expense (income), net
Current report
In September 2026, we approved a plan to close our DMT production facility in Marlborough, Massachusetts, and transition production of the DMT products to more cost-effective third-party manufacturers in China. As a result of this action, during the third quarter of 2026, we recorded pre-tax charges of $1.8 million, consisting of employee termination benefits, impairment of machinery and equipment and the write-down of inventory. We expect to complete the closure in the fourth quarter of 2026. We expect the closure of the DMT production facility to result in annual cost savings of more than $1.0 million beginning in 2027.
Current report
Tariff Refunds
Current report
Beginning in 2025, the Company paid duties on certain imported products under tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”). These duties were capitalized into inventory and recognized in cost of goods sold as the related products were sold.
Current report
On February 20, 2026, the U.S. Supreme Court issued a ruling invalidating tariffs imposed under the IEEPA. The ruling did not address potential refunds. The U.S. Court of International Trade (“CIT”) has ordered the U.S. Customs and Border Protection (“CBP”) to refund the collected IEEPA tariffs. The Company applied for and received refunds of IEEPA tariffs in the amount of $6.0 million. The Company applied the gain contingency model in accordance with ASC 450-30, Gain Contingencies, to account for recoveries of previously paid IEEPA tariffs. Under this model, a gain contingency is not recognized in the financial statements until the gain is realized or realizable. During the three months ended September 30, 2026, the Company recognized a pre-tax gain of $4.0 million as a reduction in cost of goods sold related to IEEPA tariff refunds. The remaining $2.0 million is recorded as an accrued liability on the condensed consolidated balance sheet as of September 30, 2026. As of September 30, 2026 the Company's IEEPA refund had been paid in full.
Removed paragraphs (5)
Previous report
Traditionally, the Company’s sales and profits are stronger in the second and third quarters and weaker in the first and fourth quarters of the fiscal year, due to the seasonal nature of the Westcott back-to-school market.
Previous report
Operating income for the three months ended June 30, 2026 was $6,830,000 compared with $6,390,000 in the same period of 2025. Operating income for the six months ended June 30, 2026 was $8,574,000 compared with $8,816,000 in the same period of 2025. The decrease in operating income for the six months ended June 30, 2026 was primarily due to higher cost of sales. Tariff expenses were recognized during the first six months as the Company sold inventory that had been subject to the high tariff rates imposed in 2025.
Previous report
Other income (expense), net
Previous report
Long-term debt consists of (i) borrowings under the Company’s revolving loan agreement with HSBC Bank USA, N.A. (“HSBC”) and (ii) amounts outstanding under the fixed rate mortgage on the Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA. Effective as of June 26, 2025, the Company entered into Amendment No. 11 to the Revolving Loan Agreement dated as of April 5, 2012, as amended (the ”Loan Agreement”), between the Company and HSBC. Amendment No. 11 extended the scheduled maturity of the $65 million secured revolving credit facility under the Loan Agreement to May 31, 2027. The terms of the Loan Agreement otherwise remain unchanged. The Loan Agreement provides for borrowings of up to $65 million at an interest rate of Secured Overnight Financing Rate (“SOFR”) plus a margin of +1.75%; interest is payable monthly. The Company must pay a facility fee, payable quarterly, in an amount equal to one eighth of one percent (.125%) per annum of the average daily unused portion of the revolving credit line. The facility is intended to provide liquidity for operating activities, growth, acquisitions, dividends, share repurchases and other business activities. Under the Loan Agreement, the Company is required to maintain a specific ratio of funded debt to EBITDA, a fixed charge coverage ratio and must have annual net income greater than $0, measured as of the end of each fiscal year. As of June 30, 2026, the Company was in compliance with the covenants under the Loan Agreement as then in effect.
Previous report
The higher tariff expenses incurred by the Company during the first six months of 2026 resulted from the Company selling inventory that had been subject to high tariff rates imposed in 2025. We expect that the impact of tariffs on the Company will gradually lessen over the balance of 2026 as the Company continues to sell inventory subject to lower tariffs set in November 2025 and February 2026. In addition, we have commenced purchasing a total of approximately $10 million of inventory for delivery in the second and third quarters of 2026 to mitigate the potential shortages or price increases as a result of the war in Iran or other regional conflicts.
Reworded paragraphs (22)
Previous wording
Consolidated net sales for the three months ended June 30, 2026 were $62,716,000 compared to $53,996,000 in the same period in 2025, an increase of 16%. Consolidated net sales for the six months ended June 30, 2026 were $115,017,000 compared to $99,954,000 in the same period in 2025, an increase of 15%. Excluding the incremental sales resulting from the acquisition of the assets of My Medic on January 15, 2026, sales increased 8% and 7%, for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025.
Current wording
Consolidated net sales for the three months ended September 30, 2026 were $58,013,000 compared to $49,063,000 in the same period in 2025, an increase of 18%. Consolidated net sales for the nine months ended September 30, 2026 were $173,030,000 compared to $149,018,000 in the same period in 2025, an increase of 16%. Excluding the incremental sales resulting from the acquisition of the assets of My Medic on January 15, 2026, sales increased 10% and 8%, for the three and nine months ended September 30, 2026, respectively, compared to the same periods in 2025.
Previous wording
Net sales in the U.S. for the three months ended June 30, 2026 increased 17% compared to the same period in 2025. Net sales in the U.S. for the six months ended June 30, 2026 increased 15% compared to the same period in 2025. The sales increases for the three and six months were due to strong sales across all product lines and contribution from the acquisition of the My Medic business.
Current wording
Net sales in the U.S. for the three months ended September 30, 2026 increased 20% compared to the same period in 2025. Net sales in the U.S. for the nine months ended September 30, 2026 increased 17% compared to the same period in 2025. The sales increases for the three and nine months were due to strong sales across all product lines and contribution from the acquisition of the My Medic business.
Previous wording
Net sales in Canada for the three months ended June 30, 2026 increased 1% in U.S. dollars and 3% in local currency compared to the same period in 2025. Net sales in Canada for the six months ended June 30, 2026 increased 7% in U.S. dollars and 6% in local currency compared to the same period in 2025. The increases in net sales for both periods were due to higher sales of first aid products.
Current wording
Net sales in Canada for the three months ended September 30, 2026 increased 9% in U.S. dollars and 12% in local currency compared to the same period in 2025. Net sales in Canada for the nine months ended September 30, 2026 increased 8% in both U.S. dollars and local currency compared to the same period in 2025. The increases in net sales for both periods were due to higher sales of first aid products.
Previous wording
European net sales for the three months ended June 30, 2026 increased 24% in U.S. dollars and 19% in local currency compared to the same period in 2025. European net sales for the six months ended June 30, 2026 increased 28% in U.S. dollars and 19% in local currency compared to the same period in 2025. The sales increases for the three and six months were due primarily to higher ecommerce sales and contribution from the line of cutting and sharpening products acquired in Germany on October 1, 2025.
Current wording
European net sales for the three months ended September 30, 2026 increased 5% in U.S. dollars and 7% in local currency compared to the same period in 2025. European net sales for the nine months ended September 30, 2026 increased 20% in U.S. dollars and 15% in local currency compared to the same period in 2025. The sales increases for the three and nine months were due primarily to higher ecommerce sales and contribution from the line of cutting and sharpening products acquired in Germany on October 1, 2025.
Previous wording
Gross profit for the three months ended June 30, 2026 was $26,688,000 (42.6% of net sales) compared to $22,149,000 (41.0% of net sales) in the same period in 2025. Gross profit for the six months ended June 30, 2026 was $47,473,000 (41.3% of net sales) compared to $40,066,000 (40.1% of net sales) in the same period of 2025. The increases for the three and six months were primarily due to the inclusion of the new My Medic direct to consumer business.
Current wording
Gross profit for the three months ended September 30, 2026 was $26,300,000 (45.3% of net sales) compared to $19,195,000 (39.1% of net sales) in the same period in 2025. Gross profit for the nine months ended September 30, 2026 was $73,773,000 (42.6% of net sales) compared to $59,262,000 (39.8% of net sales) in the same period of 2025. The increases in gross profit for the three and nine months were primarily due to the IEEPA tariff refund ($4.0 million) as well as the inclusion of the new My Medic direct to consumer business partially offset by the costs to close the DMT manufacturing facility ($1.8 million). The IEEPA tariff refund increased gross profit as a percentage of net sales by 690 basis points and 230 basis points for the three and nine months ended September 30, 2026, respectively, partially offset by DMT closing costs, which reduced gross profit as a percentage of net sales by 310 basis points and 105 basis points, respectively.
Previous wording
Selling, general and administrative ("SG&A") expenses for the three months ended June 30, 2026 were $19,858,000 (31.7% of net sales) compared with $15,759,000 (29.2% of net sales) in the same period in 2025, an increase of $4,099,000. Selling, general and administrative ("SG&A") expenses for the six months ended June 30, 2026 were $38,899,000 (33.8% of net sales) compared with $31,250,000 (31.3% of net sales) in the same period in 2025, an increase of $7,649,000. The increases in SG&A expenses for the three and six months were primarily due to the acquisition of the assets of My Medic as well as higher personnel related expenses. The increase in SG&A expenses as a percentage of sales was due to the higher amount of advertising needed for the direct to consumer My Medic business.
Current wording
Selling, general and administrative ("SG&A") expenses for the three months ended September 30, 2026 were $21,837,000 (37.6% of net sales) compared with $16,188,000 (33.0% of net sales) in the same period in 2025, an increase of $5,649,000. SG&A expenses for the nine months ended September 30, 2026 were $60,736,000 (35.1% of net sales) compared with $47,438,000 (31.8% of net sales) in the same period in 2025, an increase of $13,298,000. The increases in SG&A expenses for the three and nine months were primarily due to the acquisition of the assets of My Medic as well as higher personnel related expenses which included $1.0 million of variable compensation related to the tariff refund. The increase in SG&A expenses as a percentage of sales was due to the higher amount of advertising needed for the direct to consumer My Medic business.
Previous wording
Operating income in the U.S. segment decreased by $24,000 for the three months ended June 30, 2026 compared to the same period in 2025. Operating income in the U.S. segment decreased by $1,344,000 for the six months ended June 30, 2026 compared to the same period in 2025.
Current wording
Operating income in the U.S. segment increased by $1,306,000 for the three months ended September 30, 2026 compared to the same period in 2025. The increase in the three months ended September 30, 2026 was primarily due to the benefit from the IEEPA tariff refund and higher sales partially offset by the costs incurred to close the DMT facility and variable compensation related to the tariff refund. Operating income in the U.S. segment decreased by $58,000 for the nine months ended September 30, 2026 compared to the same period in 2025.
Previous wording
Operating income in the Canadian segment increased by $11,000 and $215,000 for the three and six months ended June 30, 2026, compared to the same periods in 2025. The increase in operating income for the three and six months ended June 30, 2026 was primarily due to higher sales of first aid products.
Current wording
Operating income in the Canadian segment increased by $95,000 and $308,000 for the three and nine months ended September 30, 2026, compared to the same periods in 2025. The increases in operating income for the three and nine months ended September 30, 2026 were primarily due to higher sales of first aid products.
Previous wording
Operating income in the European segment increased by $453,000 for the three months ended June 30, 2026, compared to the same period in 2025. Operating income in the European segment increased by $887,000 for the six months ended June 30, 2026 compared to the same period in 2025. The increases in operating income for the three and six months ended June 30, 2026 were primarily due to higher sales.
Current wording
Operating income in the European segment increased by $55,000 for the three months ended September 30, 2026, compared to the same period in 2025. Operating income in the European segment increased by $963,000 for the nine months ended September 30, 2026 compared to the same period in 2025. The increases in operating income for the three and nine months ended September 30, 2026 were primarily due to higher sales.
Previous wording
Interest expense, net for the three months ended June 30, 2026 was $532,000 compared with $401,000 in the same period of 2025, a $131,000 increase. Interest expense, net for the six months ended June 30, 2026 was $1,018,000 compared with $798,000 in the same period of 2025, a $220,000 increase. The increase in interest expense for the three and six months ended June 30, 2026 resulted from higher average outstanding borrowings.
Current wording
Interest expense, net for the three months ended September 30, 2026 was $594,000 compared with $422,000 in the same period of 2025, a $172,000 increase. Interest expense, net for the nine months ended September 30, 2026 was $1,612,000 compared with $1,222,000 in the same period of 2025, a $390,000 increase. The increase in interest expense for the three and nine months ended September 30, 2026 resulted from higher average outstanding borrowings.
Previous wording
Other income, net was $5,000 in the three months ended June 30, 2026 compared to $99,000 in the same period of 2025. Other expense, net was $11,000 in the six months ended June 30, 2026 compared to Other income, net of $188,000 in the same period of 2025.
Current wording
Other expense, net was $6,000 in the three months ended September 30, 2026 compared to other expense of $146,000 in the same period of 2025. Other expense, net was $17,000 in the nine months ended September 30, 2026 compared to Other income, net of $44,000 in the same period of 2025.
Previous wording
The effective income tax rate for the three and six months ended June 30, 2026 was 20% compared to 22% in the same periods of 2025.
Current wording
The effective income tax rate for the three and nine months ended September 30, 2026 was 11% and 17%, respectively, compared to 22% in the same periods of 2025. The lower effective tax rate for the three and nine months is primarily due to a tax benefit resulting from the exercise of stock options.
Previous wording
During the first six months of 2026, working capital increased approximately $4.2 million. Inventory turnover, calculated using a twelve-month average inventory balance, was 1.9 at June 30, 2026 and 2.0 at December 31, 2025. Receivables increased approximately $9.6 million at June 30, 2026 compared to December 31, 2025. The average number of days sales outstanding in accounts receivable was 52 days at June 30, 2026 compared to 54 days at December 31, 2025. Accounts payable and other current liabilities increased by approximately $12.0 million at June 30, 2026 compared to December 31, 2025.
Current wording
During the first nine months of 2026, working capital increased approximately $13.5 million. Inventory turnover, calculated using a twelve-month average inventory balance, was 1.9 at September 30, 2026 and 2.0 at December 31, 2025. The increase in inventory at September 30, 2026 was primarily due to a deliberate increase of the Company’s top-selling products in response to the conflict in the Middle East and the related risk of product shortages and higher shipping costs. Also contributing to the increase was additional inventory resulting from the acquisition of My Medic and purchases made in anticipation of expected future growth. Receivables increased approximately $7.1 million at September 30, 2026 compared to December 31, 2025 primarily due to higher sales. The average number of days sales outstanding in accounts receivable was 55 days at September 30, 2026 compared to 54 days at December 31, 2025. Accounts payable and other current liabilities increased by approximately $7.4 million at September 30, 2026 compared to December 31, 2025.
Previous wording
On July 15, 2026, the Company entered into a new $65 million syndicated credit facility with HSBC and City National Bank, a U.S. subsidiary of Royal Bank of Canada. The new facility, which replaces the Company’s prior $65 million credit facility with HSBC that was scheduled to expire on May 31, 2027, is intended to provide liquidity for growth, acquisitions, dividends, and other business activities. The new agreement expires on July 15, 2029. HSBC serves as the administrative agent for the syndicate.
Current wording
Long-term debt consists of (i) borrowings under the Company’s revolving credit facility (the "Loan Agreement") with HSBC Bank USA, N.A. (“HSBC”) and City National Bank and (ii) amounts outstanding under the fixed rate mortgage on the Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA. On July 15, 2026 the Company entered into the Loan Agreement, a new $65 million syndicated credit facility with HSBC and City National Bank, a U.S. subsidiary of Royal Bank of Canada. The new facility, which replaces the Company’s prior $65 million credit facility with HSBC that was scheduled to expire on May 31, 2027, is intended to provide liquidity for growth, acquisitions, dividends, and other business activities. The new Loan Agreement expires on July 15, 2029. HSBC serves as the administrative agent for the syndicate.
Previous wording
Borrowings bear interest at Term SOFR plus an applicable margin (ranging from 2.00%–2.75%) determined by the Company’s Net Funded Debt to EBITDA ratio. A commitment fee of 0.25% per annum accrues on unused commitments and is paid monthly. The Credit Agreement is secured by a first-priority lien on substantially all assets of the Company.
Current wording
Borrowings bear interest at Term SOFR plus an applicable margin (ranging from 2.00%–2.75%) determined by the Company’s Net Funded Debt to EBITDA ratio. A commitment fee of 0.25% per annum accrues on unused commitments and is paid monthly. The Loan Agreement is secured by a first-priority lien on substantially all assets of the Company.
Previous wording
The new Loan Agreement contains customary affirmative and negative covenants, representations and warranties and other terms which are materially similar to those of the prior credit agreement. These provisions include the following quarterly financial maintenance covenants: (i) maximum Net Funded Debt to EBITDA ratio of 3.75 to 1.00 and (ii) minimum Fixed Charge Coverage Ratio of 1.10 to 1.00. It also contains customary events of default, including payment defaults, covenant breaches, cross-default with material indebtedness, bankruptcy events, and a change of control, upon which payment of outstanding amounts may be accelerated.
Current wording
The new Loan Agreement contains customary affirmative and negative covenants, representations and warranties and other terms which are materially similar to those of the prior credit agreement. These provisions include the following quarterly financial maintenance covenants: (i) maximum Net Funded Debt to EBITDA ratio of 3.75 to 1.00 and (ii) minimum Fixed Charge Coverage Ratio of 1.10 to 1.00. It also contains customary events of default, including payment defaults, covenant breaches, cross-default with material indebtedness, bankruptcy events, and a change of control, upon which payment of outstanding amounts may be accelerated. As of September 30, 2026, the Company was in compliance with the covenants under the Loan Agreement as then in effect.
Previous wording
During the first six months of 2026, total debt outstanding under the Company’s revolving credit facility increased by approximately $10.8 million, compared to total debt thereunder at December 31, 2025. As of June 30, 2026, $22,637,000 was outstanding and $42,363,000 was available for borrowing under the Company’s credit facility.
Current wording
During the first nine months of 2026, total debt outstanding under the Company’s revolving credit facility increased by approximately $16.2 million, compared to total debt thereunder at December 31, 2025. As of September 30, 2026, $28,453,036 was outstanding and $36,546,964 was available for borrowing under the Company’s credit facility.
Previous wording
On January 15, 2026, the Company acquired the assets of SLED Distribution, LLC. (d/b/a "My Medic") a leading supplier of tactical, trauma and emergency response products sold primarily through the direct-to-consumer channel, for approximately $18.5 million. At closing, the Company paid $14.4 million in cash to My Medic. Payment of the $4.1 million balance of the purchase price is subject to certain contingencies as follows: (a) $1,000,000, the payment of which is contingent upon the achievement of certain revenue milestones during the twelve months ended December 31, 2027; and (b) $3.1 million, which is subject to a holdback as a non-exclusive source of recovery primarily to satisfy indemnification claims under the Asset Purchase Agreement, which claims must be made within various time periods depending on the nature of the claim. The $3.1 million holdback and $1.0 million contingent payment are reported in other long term liabilities on the condensed consolidated balance sheet.
Current wording
On January 15, 2026, the Company acquired the assets of SLED Distribution, LLC. (d/b/a "My Medic") a leading supplier of tactical, trauma and emergency response products sold primarily through the direct-to-consumer channel, for approximately $18.5 million. At closing, the Company paid $14.4 million in cash to My Medic. Payment of the $4.1 million balance of the purchase price is subject to certain contingencies as follows: (a) $1,000,000, the payment of which is contingent upon the achievement of certain revenue milestones during the twelve months ended December 31, 2027; and (b) $3.1 million, which is subject to a holdback as a non-exclusive source of recovery primarily to satisfy indemnification claims under the Asset Purchase Agreement, which claims must be made within various time periods depending on the nature of the claim. During the three months ended September 30, 2026, the Company paid approximately $0.2 million of the holdback. The remaining $2.9 million of the holdback and the $1.0 million contingent payment are reported in other long-term liabilities on the condensed consolidated balance sheet.
Previous wording
On July 15, 2025, the Company purchased a manufacturing and distribution center in Mt. Pleasant, TN for approximately $6.0 million. The property consists of 77,000 square feet of manufacturing and warehouse space on 12 acres and is designed to be expanded by up to an additional 60,000 square feet. The facility will primarily be used to manufacture our Spill Magic line of bodily fluid and spill clean up solutions.
Current wording
On July 15, 2025, the Company purchased a manufacturing and distribution center in Mt. Pleasant, TN for approximately $6.0 million. The property consists of 77,000 square feet of manufacturing and warehouse space on 12 acres and is designed to be expanded by up to an additional 60,000 square feet. The facility is being used primarily to manufacture our Spill Magic line of bodily fluid and spill clean up solutions.
Previous wording
The Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA were financed by a fixed rate mortgage with HSBC at a rate of 3.8%. The Company entered into the agreement on December 1, 2021. Payments of principal and interest are due monthly, with all amounts outstanding due on maturity on December 1, 2031. At June 30, 2026, there was approximately $9.8 million outstanding on the mortgage.
Current wording
The Company’s manufacturing and distribution facilities in Rocky Mount, NC and Vancouver, WA were financed by a fixed rate mortgage with HSBC at a rate of 3.8%. The Company entered into the agreement on December 1, 2021. Payments of principal and interest are due monthly, with all amounts outstanding due on maturity on December 1, 2031. At September 30, 2026, there was approximately $9.7 million outstanding on the mortgage.
Previous wording
Our operations, supply chains, and financial performance are impacted by evolving global trade policies and tariffs, and geopolitical tensions and wars, including ongoing conflicts and instability in the Middle East and its effects on global energy prices. In particular, our global operations and international sales expose us to risks associated with trade conflicts between the United States and other governments, as well as broader regional instability in the Middle East that can disrupt global shipping routes and energy markets. These factors have resulted in and could continue to result in inflationary costs to produce and sell our products, both domestically and in foreign markets.
Current wording
Our operations, supply chains, and financial performance are impacted by evolving global trade policies and tariffs, and geopolitical tensions and wars, including ongoing conflicts and instability in the Middle East and its effects on global energy prices. In particular, our global operations and international sales expose us to risks associated with trade conflicts between the United States and other governments, as well as broader regional instability in the Middle East that can disrupt global shipping routes and energy markets. These factors have resulted in and could continue to result in inflationary costs to produce and sell our products, both domestically and in foreign markets. Since the outbreak of hostilities involving Iran, we have experienced supplier price increases and significantly higher freight costs, including ocean freight costs on shipments from China that have approximately tripled. We have partially offset these cost increases through, among other things, improved efficiencies from automation and new equipment, and we increased our inventory of top-selling products to reduce the risk of shortages. If these conditions continue or worsen, they could further increase our costs and affect our ability to obtain products on a timely basis.
Previous wording
We have been actively diversifying our supply base for many years and source products and components in a number of countries. A significant portion of the products we sell (and components used in our products) are sourced from suppliers located in China. The United States government has imposed, and may continue to impose or adjust, significant tariffs on a range of Chinese goods. These tariffs have increased our costs of goods sold and could further escalate depending on changes in trade policy, negotiations, or retaliatory measures by China or by other countries similarly impacted. The indirect impact on demand for our products as a result of these developments has become more uncertain. The Company has taken and continues to take steps to mitigate the potential impact on our business and operations through strategic sourcing adjustments, price adjustments and supply chain diversification, but such efforts have not been able to fully mitigate the effects of the imposition of tariffs and related developments. Any further increases of existing tariffs, the imposition of new tariffs, the potential modifications to existing trade agreements, new restrictions on free trade and the responses by other governments to changes in trade policy by the United States may further adversely impact demand for our products, increase our costs, and disrupt our supply chain. These risks, in turn, could have a material adverse effect on our business, results of operations, and financial condition.
Current wording
We have been actively diversifying our supply base for many years and source products and components in a number of countries. A significant portion of the products we sell (and components used in our products) are sourced from suppliers located in China. The United States government has imposed, and may continue to impose or adjust, significant tariffs on a range of Chinese goods, most recently through tariffs imposed in July 2026 under Section 301 of the Trade Act of 1974. These tariffs replaced the tariffs imposed under section 122 of that Act and which had expired, did not have a material incremental impact on our cost of goods sold however, tariffs could further escalate depending on changes in trade policy, negotiations, or retaliatory measures by China or by other countries similarly impacted. The indirect impact on demand for our products as a result of these developments has become more uncertain. The Company has taken and continues to take steps to mitigate the potential impact on our business and operations through strategic sourcing adjustments, price adjustments and supply chain diversification, but such efforts have not been able to fully mitigate the effects of the imposition of tariffs and related developments. Any further increases of existing tariffs, the imposition of new tariffs, the potential modifications to existing trade agreements, new restrictions on free trade and the responses by other governments to changes in trade policy by the United States may further adversely impact demand for our products, increase our costs, and disrupt our supply chain. These risks, in turn, could have a material adverse effect on our business, results of operations, and financial condition.