Omega Flex, Inc.

Previous wording

The Company’s cash and cash equivalents balance of $51,699,000 as of December 31, 2024 increased $5,343,000 or 11.5% from a $46,356,000 balance at December 31, 2023. The primary reason for the increase is due to income generated from operations during 2024. This was partially offset by dividend payments during 2024 totaling $13,527,000, as detailed in Note 12, Shareholders’ Equity, to the Consolidated Financial Statements included in this report. See the Company’s Consolidated Statements of Cash Flows for further details regarding the change in cash and cash equivalents.

Current wording

The Company’s cash and cash equivalents balance of $53,226,000 as of December 31, 2025 increased $1,527,000 or 3.0% from a $51,699,000 balance at December 31, 2024. The primary reason for the increase is due to income generated from operations during 2025. This was partially offset by dividend payments during 2025 totaling $13,729,000, as detailed in Note 12, Shareholders’ Equity, to the Consolidated Financial Statements included in this report. See the Company’s Consolidated Statements of Cash Flows for further details regarding the change in cash and cash equivalents.

Previous wording

Retained earnings were $72,880,000 and $68,493,000 as of December 31, 2024 and December 31, 2023, respectively, increasing $4,387,000 or 6.4%. The increase was primarily due to an increase from net income during the year, as provided on the Company’s Consolidated Statements of Operations, partially offset by dividends declared during 2024, as discussed in detail in Note 12, Shareholders’ Equity, to the Consolidated Financial Statements included in this report.

Current wording

Retained earnings were $73,979,000 and $72,880,000 as of December 31, 2025 and December 31, 2024, respectively, increasing $1,099,000 or 1.5%. The increase was primarily due to an increase from net income during the year, as provided on the Company’s Consolidated Statements of Income, partially offset by dividends declared during 2025, as discussed in detail in Note 12, Shareholders’ Equity, to the Consolidated Financial Statements included in this report.

Previous wording

Net Sales. The Company’s sales for the year were $101,681,000, reflecting a decrease of $9,784,000, or 8.8%, compared to $111,465,000 in the previous year. The decrease in sales is mainly due to lower sales unit volumes as a result of the overall market being suppressed because of, among other factors, a decline in housing starts.

Current wording

Net Sales. The Company’s sales for the year were $98,296,000, reflecting a decrease of $3,385,000, or 3.3%, compared to $101,681,000 in the previous year. The decrease in sales is mainly due to lower sales unit volumes as a result of the overall market being suppressed because of, among other factors, a decline in housing starts.

Previous wording

Gross Profit. The Company’s gross profit margins were 61.2% and 61.3% for the years ended December 31, 2024, and 2023, respectively.

Current wording

Gross Profit. The Company’s gross profit margins were 60.0% and 61.2% for the years ended December 31, 2025, and 2024, respectively.

Previous wording

Selling Expenses. Selling expenses consist primarily of employee salaries and associated overhead costs, commissions, and the cost of marketing programs such as advertising, trade shows and related communication costs, and freight. Selling expenses were $20,539,000 and $20,993,000 for 2024 and 2023, respectively, representing a decrease of $454,000, or 2.2%. The decrease is mostly related to commissions due to the lower net sales, which were partially offset by higher travel. As a percentage of net sales, selling expenses were 20.2% and 18.8% for the twelve months ended December 31, 2024 and 2023, respectively.

Current wording

Selling Expenses. Selling expenses consist primarily of employee salaries and associated overhead costs, commissions, and the cost of marketing programs such as advertising, trade shows and related communication costs, and freight. Selling expenses were $20,730,000 and $20,539,000 for 2025 and 2024, respectively, representing an increase of $191,000, or 0.9%. The increase is mostly related to higher sales incentive compensation. As a percentage of net sales, selling expenses were 21.1% and 20.2% for the twelve months ended December 31, 2025 and 2024, respectively.

Previous wording

General and Administrative Expenses. General and administrative expenses consist primarily of employee salaries, benefits for administrative, executive and finance personnel, legal and accounting, insurance, and corporate general and administrative services. General and administrative expenses were $16,085,000 and $17,705,000 for the years ended December 31, 2024 and 2023, respectively, decreasing $1,620,000, or 9.1% between periods. The incentive compensation component which is aligned with profitability decreased due to lower operating profit and due to changes in the executive management team at the beginning of the year. In addition, product liability reserves and expenses and stock based compensation, which moves in relation to the Company’s stock price, as detailed in Note 8, Stock Based Compensation Plans, were lower. These were partly offset by increases in staffing related costs, computer and information technology related expenses, and umbrella insurance premiums. As a percentage of net sales, general and administrative expenses were 15.8% and 15.9% for the twelve months ended December 31, 2024 and 2023, respectively.

Current wording

General and Administrative Expenses. General and administrative expenses consist primarily of employee salaries, benefits for administrative, executive and finance personnel, legal and accounting, insurance, and corporate general and administrative services. General and administrative expenses were $16,300,000 and $16,085,000 for the years ended December 31, 2025 and 2024, respectively, increasing $215,000, or 1.3% between periods. The increase is due to higher staffing related costs, mainly employee benefits, celebration activities associated with the Company’s fifty-year anniversary, and stock based compensation, which moves in relation to the Company’s stock price, as detailed in Note 8, Stock Based Compensation Plans. These were partly offset by lower product liability reserves and expenses and the incentive compensation component, which is aligned with profitability, due to lower operating profits. As a percentage of net sales, general and administrative expenses were 16.6% and 15.8% for the twelve months ended December 31, 2025 and 2024, respectively.

Previous wording

Engineering Expenses. Engineering expenses consist of development expenses associated with the development of new products, and costs related to enhancements of existing products and manufacturing processes. Engineering expenses increased $200,000 or 5.2% between periods, being $4,068,000 and $3,868,000 for the years ended December 31, 2024 and 2023, respectively, mainly associated with increases in consulting and staffing related costs. As a percentage of net sales for the year, engineering expenses were 4.0% in 2024 and 3.5% in 2023.

Current wording

Engineering Expenses. Engineering expenses consist of development expenses associated with the development of new products, and costs related to enhancements of existing products and manufacturing processes. Engineering expenses increased $973,000 or 23.9% between periods, being $5,041,000 and $4,068,000 for the years ended December 31, 2025 and 2024, respectively, mainly associated with increases in product development and certification related expenses, staffing related costs, and consulting. As a percentage of net sales for the year, engineering expenses were 5.1% in 2025 and 4.0% in 2024.

Previous wording

Operating Profit. Reflecting all the factors mentioned above, operating profits decreased $4,228,000, or 16.4%, between periods, reflecting a profit of $21,571,000 in 2024, as compared to $25,799,000 in 2023.

Current wording

Operating Profit. Reflecting all the factors mentioned above, operating profits decreased $4,640,000, or 21.5%, between periods, reflecting a profit of $16,931,000 in 2025, as compared to $21,571,000 in 2024.

Previous wording

Interest Income. Interest income is recorded on investments in cash equivalents, and interest expense is recorded at times when the Company has debt amounts outstanding on its line of credit. The Company recorded interest income of $2,278,000 for 2024, compared to $1,700,000 for 2023. The increase in interest income was mainly due to higher invested cash equivalent balances during 2024. There were no borrowings on its line of credit during 2024 or 2023.

Current wording

Interest Income. Interest income is recorded on investments in cash equivalents, and interest expense is recorded at times when the Company has debt amounts outstanding on its line of credit. The Company recorded interest income of $1,989,000 for 2025, compared to $2,278,000 for 2024. The decrease in interest income was mainly due to lower interest rates. There were no borrowings on its line of credit during 2025 or 2024.

Previous wording

Other Income (Expense). Other income (expense) primarily consists of foreign currency exchange gains (losses) on transactions settled in currencies other than the Company’s local currency, typically related to the Company’s foreign U.K. and France subsidiaries and Canada. The Company recognized other expense of $227,000 during 2024 and other income of $46,000 during 2023.

Current wording

Other Income (Expense). Other income (expense) primarily consists of foreign currency exchange gains (losses) on transactions settled in currencies other than the Company’s local currency, typically related to the Company’s foreign U.K. and France subsidiaries and Canada. The Company recognized other income of $331,000 during 2025 and other expense of $227,000 during 2024.

Previous wording

Income Tax Expense. Income tax expense was $5,707,000 for 2024, compared to $6,825,000 for 2023. The $1,118,000 or 16.4% decrease in tax expense was largely the result of the decrease in income before taxes. The effective tax rate for 2024 and 2023 was approximately 24% and 25% of income before taxes respectively.

Current wording

Income Tax Expense. Income tax expense was $4,667,000 for 2025, compared to $5,707,000 for 2024. The $1,040,000 or 18.2% decrease in tax expense was largely the result of the decrease in income before taxes. The effective tax rate for 2025 and 2024 was 24.2% of income before taxes respectively.

Previous wording

As of December 31, 2024, the Company had a cash and cash equivalents balance of $51,699,000. Additionally, the Company has a $15,000,000 line of credit available, as discussed in detail in Note 6, Line of Credit and Other Borrowings, which had no borrowings outstanding against it as of December 31, 2024. As of December 31, 2023, the Company had a cash and cash equivalents balance of $46,356,000, with no borrowings against the line of credit.

Current wording

As of December 31, 2025, the Company had a cash and cash equivalents balance of $53,226,000. Additionally, the Company has a $15,000,000 line of credit available, as discussed in detail in Note 6, Line of Credit and Other Borrowings, which had no borrowings outstanding against it as of December 31, 2025. As of December 31, 2024, the Company had a cash and cash equivalents balance of $51,699,000, with no borrowings against the line of credit.

Previous wording

For 2024, the Company’s cash provided from operating activities was $20,857,000, compared to $23,422,000 of cash provided during 2023. This illustrates a decrease of $2,565,000 during 2024. For details of the operating cash flows refer to the Consolidated Statements of Cash Flows in the Company’s Consolidated Financial Statements.

Current wording

For 2025, the Company’s cash provided from operating activities was $17,173,000, compared to $20,857,000 of cash provided during 2024. This illustrates a decrease of $3,684,000 during 2025. For details of the operating cash flows refer to the Consolidated Statements of Cash Flows in the Company’s Consolidated Financial Statements.

Previous wording

Cash used in investing activities during 2024 and 2023 was $2,006,000 and $1,642,000, respectively, all related to various capital expenditure projects.

Current wording

Cash used in investing activities during 2025 and 2024 was $1,822,000 and $2,006,000, respectively, all related to various capital expenditure projects.

Previous wording

All financing activities relate to dividend payments, which are detailed in Note 12, Shareholders’ Equity, in the Consolidated Financial Statements included in this report. Dividend payments for 2024 and 2023 amounted to $13,527,000 and $13,124,000, respectively. The Company had no borrowings or payments on its line of credit during 2024 or 2023 as described in Note 6, Line of Credit and Other Borrowings.

Current wording

All financing activities relate to dividend payments, which are detailed in Note 12, Shareholders’ Equity, in the Consolidated Financial Statements included in this report. Dividend payments for 2025 and 2024 amounted to $13,729,000 and $13,527,000, respectively. The Company had no borrowings or payments on its line of credit during 2025 or 2024 as described in Note 6, Line of Credit and Other Borrowings.

Previous wording

Product liability reserves represent the estimated unpaid amounts under the Company’s insurance policies with respect to existing claims. The Company uses the most current available data to estimate claims. As explained more fully under Note 7, Commitments and Contingencies, to the Consolidated Financial Statements included in this report for various product liability claims covered under the Company’s general liability insurance policies, the Company must pay certain defense and settlement costs within its deductible or self-insured retention limits, ranging primarily from $250,000 to $3,000,000 per claim, depending on the terms of the policy and the applicable policy year, up to an aggregate amount. The Company is vigorously defending against all known claims. It is possible that the Company may incur increased litigation costs in the future due to a variety of factors, including a higher number of claims, higher financial magnitude of claims, higher legal costs, and higher insurance deductibles or retentions. Litigation is subject to many uncertainties and management is unable to predict the outcome of the pending suits and claims. From time to time, depending upon the nature of a particular case, the Company may decide to spend more than a deductible or retention to enable more discretion regarding the defense, although this is not common. It is possible that the results of operations or liquidity of the Company, as well as the Company’s ability to procure reasonably priced insurance, could be adversely affected by the pending litigation, potentially materially. The Company is currently unable to estimate the ultimate liability, if any, that may result from the pending litigation, or potential litigation from future claims or claims that have not yet come to our attention, and accordingly, the liability in the Consolidated Financial Statements primarily represents an accrual for legal costs for services previously rendered, settlements for Claims not yet paid, and anticipated settlements for claims within the Company’s remaining retention under its insurance policies.

Current wording

Except for most product liability claims made for its yellow-jacketed TracPipe® CSST on or after September 1, 2025, for which the Company decided to self-insure (the “Self-Insured Claims”), product liability reserves represent the estimated unpaid amounts under the Company’s insurance policies with respect to existing claims. The Company uses the most current available data to estimate claims. As explained more fully under Note 7, Commitments and Contingencies, to the Consolidated Financial Statements included in this report for various product liability claims covered under the Company’s general liability insurance policies, the Company must pay certain defense and settlement costs within its deductible or self-insured retention limits, ranging primarily from $250,000 to $3,000,000 per claim, depending on the terms of the policy and the applicable policy year, up to an aggregate amount. The Company is vigorously defending against all known claims. It is possible that the Company may incur increased litigation costs in the future due to a variety of factors, including a higher number of claims, higher financial magnitude of claims, higher legal costs, and higher insurance deductibles or retentions. Litigation is subject to many uncertainties and management is unable to predict the outcome of the pending suits and claims. From time to time, depending upon the nature of a particular case, the Company may decide to spend more than a deductible or retention to enable more discretion regarding the defense, although this is not common. It is possible that the results of operations or liquidity of the Company, as well as the Company’s ability to procure reasonably priced insurance, could be adversely affected by the pending litigation, potentially materially. The Company is currently unable to estimate the ultimate liability, if any, that may result from the pending litigation, or potential litigation from future claims or claims that have not yet come to our attention, and accordingly, the liability in the Consolidated Financial Statements primarily represents an accrual for legal costs for services previously rendered, settlements for Claims not yet paid, and anticipated settlements for claims within the Company’s remaining retention under its insurance policies. There are no open Self-Insured Claims as of December 31, 2025.

Previous wording

In 2006, the Company adopted a Phantom Stock Plan (the “Plan”), which allows the Company to grant phantom stock units (“Units”) to certain key employees, officers, or directors. The Units each represent a contractual right to payment of compensation in the future based upon the market value of the Company’s common stock and are accordingly recorded as liabilities. The Units follow a vesting schedule over three years from the grant date and are then paid upon maturity. In accordance with FASB ASC Topic 718,Compensation - Stock Compensation(“Topic 718”), the Company uses the Black-Scholes option pricing model as its method for determining the fair value of the Units. The liabilities for the Units are adjusted to market value over time from the grant dates to the related maturity dates. The Company recognizes the reversal of any previously recognized compensation expense on forfeited nonvested Units in the period the Units are forfeited.

Current wording

In 2006, the Company adopted a Phantom Stock Plan (the “Phantom Plan”), which allows the Company to grant phantom stock units (“Units”) to certain key employees, officers, or directors. The Units each represent a contractual right to payment of compensation in the future based upon the market value of the Company’s common stock and are accordingly recorded as liabilities. The Units follow a vesting schedule over three years from the grant date and are then paid upon maturity. In accordance with FASB ASC Topic 718,Compensation - Stock Compensation(“Topic 718”), the Company uses the Black-Scholes option pricing model as its method for determining the fair value of the Units. The liabilities for the Units are adjusted to market value over time from the grant dates to the related maturity dates. The Company recognizes the reversal of any previously recognized compensation expense on forfeited nonvested Units in the period the Units are forfeited.

Previous wording

The Plan has been amended and restated, for all grants made starting January 1, 2023, to set the vesting method to three-year cliff vesting following the grant date, with full value paid upon maturity. Additionally, for grants made starting January 1, 2023, upon retirement at age 67 or greater, and with one year of continuous service prior to retirement, vesting of the issued grant(s) would accelerate on a pro-rata basis, 1/3 per year from the grant date. The amended and restated plan did not have a material impact upon compensation expense.

Current wording

The Phantom Plan has been amended and restated, for all grants made starting January 1, 2023, to set the vesting method to three-year cliff vesting following the grant date, with full value paid upon maturity. Additionally, for grants made starting January 1, 2023, upon retirement at age 67 or greater, and with one year of continuous service prior to retirement, vesting of the issued grant(s) would accelerate on a pro-rata basis, 1/3 per year from the grant date. The amended and restated plan did not have a material impact upon compensation expense.

Previous wording

Further details of the Plan are provided in Note 8, Stock Based Compensation Plans, to the Consolidated Financial Statements included in this report. Any significant changes in the Company’s stock price may have a material impact upon the valuation of the Units.

Current wording

Further details of the Phantom Plan are provided in Note 8, Stock Based Compensation Plans, to the Consolidated Financial Statements included in this report. Any significant changes in the Company’s stock price may have a material impact upon the valuation of the Units.

Previous wording

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize the benefit, or that future deductibility is uncertain. The Company’s accounting for deferred tax consequences represents the best estimate of those future events. Changes in estimates, due to unanticipated events or otherwise, could have a material effect on the financial condition and results of operations of the Company. The Company continually evaluates its deferred tax assets to determine if a valuation allowance is required.

Current wording

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities from a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize the benefit, or that future deductibility is uncertain. The Company’s accounting for deferred tax consequences represents the best estimate of those future events. The Company recognizes interest and penalties related to any uncertain tax positions in income tax expense. Changes in estimates, due to unanticipated events or otherwise, could have a material effect on the financial condition and results of operations of the Company. The Company continually evaluates its deferred tax assets to determine if a valuation allowance is required.

Previous wording

In December 2023, the FASB issued ASU No. 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU expands public entities tax disclosures including improving disclosures surrounding the company’s rate reconciliation, cash taxes paid, and disaggregation of income tax expense (or benefit) from continuing operations. The amendment is effective for annual periods beginning after December 15, 2024. The Company is in the process of evaluating the impact of ASU No. 2023-09 on its Consolidated Financial Statements.

Current wording

In December 2023, the FASB issued ASU No. 2023-09,Income Taxes (Topic 740): Improvements to Income Tax Disclosures. The ASU expands public entities tax disclosures including improving disclosures surrounding the company’s rate reconciliation, cash taxes paid, and disaggregation of income tax expense (or benefit) from continuing operations. The amendment is effective for annual periods beginning after December 15, 2024. In 2025, the Company adopted ASU No. 2023-09 retrospectively and reflected these improvements in Note 9. Income Taxes of the Consolidated Financial Statements.