0000093389-26-000050
SEC filingStrong start to fiscal 2026 with broad-based revenue growth and margin expansion, though operating cash flow remained negative due to working capital investment.
Consolidated net sales for the first quarter of 2026 were $451.2 million, up 9.1% from $413.4 million in the prior year period. The increase was driven by higher demand from existing customers and the benefit of foreign exchange conversion at Nissens Automotive, as well as customer expansion and the pass-through of tariffs implemented later in 2025 at Vehicle Control. These factors more than offset headwinds from unfavorable cost capitalization and inflationary pressures at Engineered Solutions.
Net cash used in operating activities was $41.9 million, an improvement from $60.2 million in the prior year, but still negative due to working capital investment to support higher sales. Capital expenditures decreased to $6.7 million from $9.1 million, returning to normal levels following the completion of the new distribution facility in Shawnee, Kansas. Free cash flow was negative $48.7 million. The company continues to pay quarterly cash dividends and expects to maintain this practice.
Management expects cash flow from operations, available cash, and borrowings under the 2024 Credit Agreement to be adequate for liquidity needs for at least the next twelve months. The company continues to monitor U.S. trade policy, with tariffs on imports from Canada, Mexico, China, and the EU posing a risk. More than half of U.S. sales are from North American manufacturing (mostly tariff-exempt under USMCA), while China-sourced products represent about one-quarter of U.S. sales. The company is taking cost and pricing actions to mitigate tariff impacts. The material weakness in internal controls over IT systems at Nissens Automotive, disclosed in the 10-K, remains un-remediated, though remediation efforts are ongoing.