SRR Holdings, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

December 31, 2025 and 2024

 

000's except share and per share data		2025				2024
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	5,802			$	1,516
Accounts receivable, net			34,517				34,448
Inventories			29,781				28,483
Prepaid expenses			3,701				2,417
Income taxes receivable			1,983				202
Total current assets			75,784				67,066
Property, plant and equipment, net			20,429				18,317
Right-of-use assets, finance leases, net			118				97
Right-of-use assets, operating leases, net			21,727				25,772
Investment in joint venture			1,373				1,787
Deferred tax assets			4,847				8,257
Intangible assets, net			58,725				66,743
Goodwill, net			11,685				11,685
Total assets		$	194,688			$	199,724
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable		$	14,084			$	14,217
Accrued liabilities			10,636				14,553
Current portion of long-term debt			42,029				6,228
Current portion of finance lease liability			47				35
Current portion of operating lease liability			3,785				3,547
Total current liabilities			70,581				38,580
NONCURRENT LIABILITIES
Long-term debt, less current maturities			33,298				77,650
Finance leases, less current maturities			64				64
Operating lease liability, less current maturities			19,509				23,599
Total liabilities			123,452				139,893
Commitments and contingencies (Notes 7 and 9)
SHAREHOLDERS' EQUITY
Capital stock:
Common stock, $0.01 par value; 1,000,000 shares authorized, 576,750 issued and outstanding as of December 31, 2025 and December 31, 2024, respectively			6				6
Additional paid-in capital			57,675				57,675
Accumulated other comprehensive loss			(40	)			(68	)
Retained earnings			13,595				2,218
Total shareholders’ equity			71,236				59,831
Total liabilities and shareholders’ equity		$	194,688			$	199,724

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

SRR Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

Years ended December 31, 2025 and 2024

 

000's		2025				2024
Net sales		$	265,023			$	271,328
Cost of goods sold			198,532				210,835
Gross profit			66,491				60,493
Selling, general and administrative expenses			43,454				42,818
Operating income			23,037				17,675
Other expense
Interest expense			(7,899	)			(9,502	)
Equity in earnings of joint venture			52				355
Gain (loss) on disposal of fixed assets			31				(718	)
Other expense, total			(7,816	)			(9,865	)
Earnings before income taxes			15,221				7,810
Income tax provision (benefit)			3,844				(5,010	)
NET INCOME		$	11,377			$	12,820
Foreign currency translation adjustment			28				(8	)
TOTAL COMPREHENSIVE INCOME		$	11,405			$	12,812

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

SRR Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

Years ended December 31, 2025 and 2024

000's except share and per share data

 

										Additional				Accumulated other				Retained earnings
		Common Stock								Paid-in				comprehensive				(accumulated
		Shares				Amount				Capital				loss				deficit)				Total
Balance, December 31, 2023			576,750			$	6			$	57,675			$	(60	)		$	(10,602	)		$	47,019
Net income																			12,820				12,820
Foreign currency translation adjustment			-				-				-				(8	)			-				(8	)
Balance, December 31, 2024			576,750			$	6			$	57,675			$	(68	)		$	2,218			$	59,831
Net income																			11,377				11,377
Foreign currency translation adjustment			-				-				-				28				-				28
Balance, December 31, 2025			576,750			$	6			$	57,675			$	(40	)		$	13,595			$	71,236

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

SRR Holdings, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2025 and 2024

 

000's		2025				2024
Cash flows from operating activities:
Net income		$	11,377			$	12,820
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation			2,949				3,032
Amortization of intangible assets			8,018				8,084
(Gain) loss on disposal of property, plant and equipment			(31	)			718
Change in allowance for doubtful accounts			(61	)			(73	)
Amortization of deferred debt issue costs			481				471
Amortization of operating ROU asset			4,093				3,802
Equity in earnings of joint venture			(52	)			(355	)
Deferred income taxes			3,410				(8,280	)
Changes in assets and liabilities:
Accounts receivable			(8	)			(3,288	)
Income taxes receivable			(1,781	)			(44	)
Inventories			(1,298	)			114
Prepaid expenses			(1,284	)			1,409
Accounts payable			(133	)			415
Accrued liabilities, other current liabilities and other noncurrent liabilities			(7,772	)			(6,560	)
Net cash provided by operating activities			17,908				12,265
Cash flows from investing activities:
Purchases of property, plant and equipment			(5,068	)			(3,851	)
Proceeds from the sale of property, plant and equipment			38				294
Distributions from joint venture			239				-
Equity repayment/(investment) in joint venture			227				(414	)
Net cash used in investing activities			(4,564	)			(3,971	)
Cash flows from financing activities:
Payment of debt issuance costs			-				(22	)
Repayments on term loan			(9,032	)			(7,210	)
Repayment of finance leases			(54	)			(26	)
Borrowings on revolving line of credit			24,916				59,188
Repayments on revolving line of credit			(24,916	)			(59,188	)
Net cash used in financing activities			(9,086	)			(7,258	)
Effect of exchange rate changes on cash, cash equivalents			28				(8	)
Net change in cash and cash equivalents			4,286				1,028
Cash and cash equivalents, beginning of period			1,516				488
Cash and cash equivalents, end of period		$	5,802			$	1,516
Supplemental disclosure - Cash paid for interest		$	7,435			$	9,182
Supplemental disclosure - Cash paid for income taxes		$	2,256			$	3,312
Supplemental disclosure - Capital asset purchases in accounts payable		$	-			$	15

 

The accompanying notes are an integral part of these consolidated financial statements

 

 

SRR Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025 and 2024

000's except share and per share data

 

NOTE 1 - NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

 

Organization and Nature of Business

SRR Holdings, Inc. and Subsidiaries (collectively, the “Company”) is a Delaware corporation. Through their wholly owned primary operating subsidiaries, the Company’s operations consist of the following:

 

•

Royston, LLC (“Royston”) - designing, manufacturing, selling, and installing convenience and grocery store equipment, including check stands, sales and customer service centers, preparation counters, coffee/beverage islands, beverage tower systems, heated food merchandising systems, counters and countertops, shelving and kiosks; and laboratory furniture and fume hoods sold under the Hamilton brand name; and

 

•	SignResource, LLC (“SignResource”) - designing, manufacturing, selling, installing and servicing outdoor signage, in-store sign solutions and related design elements; and

 

•	Southern CaseArts (“SCA”) - designing, manufacturing and selling refrigerated and heated display cases, refrigerated island merchandisers, self-service cases, and combination cases.

 

A summary of the Company’s significant accounting policies follows.

 

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Royston, SignResource and SCA. All intercompany transactions and balances have been eliminated in consolidation.

 

Revenue Recognition

The Company recognizes revenue using the five-step model prescribed by ASC 606, which requires us to: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when, or as, an entity satisfies a performance obligation.

 

A contract with a customer is identified when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable.

 

The Company accepts returns or claims for goods having quality defects or for other reasons such as disagreements or improper delivery. When revenue is recorded, estimates of returns are made and recorded as a reduction of revenue. 

 

Recognition of Material Performance Obligations

Product sales - This performance obligation is satisfied at a point in time when the control of the product passes to the customer. This is generally at a point in time upon shipment for product sales.

 

Project management services - Since the customer simultaneously receives and consumes the benefits throughout the process, this performance obligation is satisfied over the period of time the service is performed for the customer. There have been no significant contract assets or liabilities recorded as of December 31, 2025 and 2024.

 

Disaggregation of revenues - Timing of revenue recognition for the years ended December 31, 2025 and 2024 is shown below:

 

		2025				2024
Net sales transferred at a point in time			218,193				226,680
Net sales transferred over time			46,830				44,648
		$	265,023			$	271,328

 

 

SRR Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025 and 2024

000's except share and per share data

 

Fair Value of Financial Instruments

Because of their short maturities, the fair value of cash and cash equivalents, accounts receivable, accounts payable and other accrued liabilities are not materially different than their carrying amounts, as reported. The fair value of debt instruments is estimated to approximate carrying amounts since interest rates on these obligations adjust frequently and approximate the rates at which the Company could obtain similar financing at December 31, 2025 and 2024.

 

Cash and Cash Equivalents

For purposes of reporting the statements of cash flows, the Company considers all cash accounts and all highly liquid financial instruments purchased with an original maturity of three months or less to be cash and cash equivalents. Cash deposits are held in federally insured institutions.  Uninsured domestic held deposits as of December 31, 2025 and 2024 were $5,359 and $1,156, respectively, and China uninsured deposits were $105 and $0, respectively.

 

Management performs periodic evaluations of the relative credit standing of the financial institution and believes the risk of loss to be remote.

 

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are initially recognized at their sales price. Accounts receivable are considered past due or delinquent when payment is not received within the credit terms extended to the customer. An allowance for estimated credit losses on accounts receivable is provided based on analysis of historical losses and recoveries. Receivables are written off when deemed to be uncollectible. Accounts receivable are net of an allowance for doubtful accounts of $234 and $295 as of December 31, 2025 and 2024, respectively. The Company does not charge interest or late fees on past due accounts and generally does not require collateral.

 

While the relative significance of any particular customer varies from period to period, the loss of, or significant curtailments of, purchases of goods and services by one or more of the Company’s significant customers at any time would adversely affect revenues and cash flows. The following table summarizes customers generating significant revenues for the Company for the years ended December 31, 2025 and 2024, as well as those representing a significant portion of the accounts receivable balances as of December 31, 2025 and 2024:

 

		2025				2025				2024				2024
Customer		Revenues				Accounts Receivable				Revenues				Accounts Receivable
Customer A			20	%			16	%			30	%			52	%
Customer B			13	%			12	%			12	%			**
Customer C			11	%			13	%			*				**

 

* This customer did not have revenues in excess of 10% of the Company's total revenues in 2025.

** This customer did not have accounts receivable in excess of 10% of the Company's total accounts receivable balance.

 

Inventories

Inventories are valued at the lower of cost or net realizable value. Cost is determined on the basis of weighted average and first-in, first-out (FIFO) methods. The Company assesses inventory on hand periodically for slow moving, obsolete, or damaged product. The carrying value of the slow moving, obsolete, and damaged products are reduced to their estimated net realizable value.

 

Deferred Debt Issue Costs

Deferred debt issue costs are being amortized over the term of the underlying debt agreements using the effective interest method. Amortization expense of $481 and $471 for the years ended December 31, 2025 and 2024, respectively, is recognized in interest expense. As of December 31, 2025 and 2024, gross deferred debt issue costs were $3,619 and $3,619, respectively, and accumulated amortization was $3,249 and $2,768, respectively.

 

 

SRR Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025 and 2024

000's except share and per share data

 

Estimated amortization expense for deferred debt issue costs for the next three years is as follows:

 

		Amount
2026			318
2027			52
		$	370

 

Goodwill

Goodwill represents the excess of the cost of an acquired entity over the net amount assigned to assets acquired, including other identifiable intangible assets, and liabilities assumed in a business combination. Goodwill is not amortized; however, it is subject to review for impairment.  No impairment was recognized for the years ended December 31, 2025 and 2024. 

 

Long-Lived Assets

The Company reviews long-lived assets for impairment when events or changes in business conditions indicate that their full carrying value may not be recoverable. Intangible assets with definite lives, comprised primarily of trademarks, proprietary manufacturing processes, and customer relationships, are amortized over their estimated useful lives and evaluated for impairment consistent with other long-lived assets. Recoverability of long-lived assets is assessed by comparison of the carrying amount of the asset to the estimated future net cash flows expected to be generated by the asset. If estimated future net cash flows are less than the carrying amount of the asset, the asset is impaired, and an expense is recorded in an amount required to reduce the carrying amount of the asset to its fair value. There was no impairment recognized for the years ended December 31, 2025 and 2024.

 

Property, Plant and Equipment

Property, plant and equipment are stated at cost. Major additions and improvements are capitalized, while maintenance and repairs that do not improve the utility or extend the lives of the respective assets are expensed. The carrying amounts of assets that are sold or retired, and the related accumulated depreciation, are removed from the accounts in the year of disposal, and any resulting gain or loss is reflected in the statements of operations and comprehensive loss in other expenses.

 

Leases 

Under ASC Topic 842, a lease is a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration.  The Company primarily leases manufacturing plants, typically with office space, and equipment under lease agreements. The Company determines if an arrangement is a lease at inception. The Company elected an accounting policy by class of underlying asset to combine lease and non-lease components. 

 

For leases with terms greater than 12 months, the Company records the related asset and obligation at the present value of lease payments over the term. Leases expire at various dates from 2026 through 2035, with varying renewal and termination options. The length of lease terms include options to extend or terminate the lease when it is reasonably certain such option will be exercised. The Company has certain leases that contain lease and non-lease components and has elected the practical expedient to account for these components as a single lease component.  The Company also made an accounting policy election to forego capitalization of leases with an initial term of 12 months or less.  

 

Right-of-use (“ROU”) assets and lease liabilities are recognized based on the present value of lease payments over the lease term as of the commencement date. Because most of the Company’s leases do not provide an explicit or implicit rate of return, the incremental borrowing rate used is based on the information available at the commencement date in determining the present value of lease payments on an individual lease basis. The incremental borrowing rate for a lease is the rate of interest the Company would have to pay on a collateralized basis to borrow an amount equal to the lease payments for the asset under similar terms.  

 

 

SRR Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025 and 2024

000's except share and per share data

 

The Company monitors events or changes in circumstances that change the timing or amount of future lease payments which results in the remeasurement of a lease liability, with a corresponding adjustment to the ROU asset. ROU assets for operating and financing leases are periodically reviewed for impairment losses under ASC 360-10, Property, Plant, and Equipment, to determine whether a ROU asset is impaired, and if so, the amount of the impairment loss to recognize. There was no impairment recognized for the years ended December 31, 2025 and 2024.

 

Income Taxes

The Company follows the asset and liability method of accounting for income taxes. Under this method, current income taxes are recognized for the estimated income taxes payable for the current period. Deferred income tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and on unutilized tax losses carried forward and measured using enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is recognized to the extent that the recoverability of deferred income tax assets is not considered more likely than not.

 

Management believes that there is appropriate support for the income tax positions taken and to be taken on income tax returns and that income tax receivables and accruals for tax liabilities are adequate for all open years based on an assessment of many factors, including past experience and interpretations of tax laws applied to the facts of each matter. Accordingly, a liability has not been recognized as a result of applying the applicable authoritative standards on accounting for uncertainty in income taxes as of December 31, 2025 and 2024.

 

Tax years 2022 through 2025 remain open to examination by the tax authorities under the statute of limitations.

 

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Foreign Currency Translation

The Company’s subsidiary in China prepares their financial statements using the Chinese Yuan as the functional currency. Accordingly, the Company’s consolidated foreign currency translation gains and losses are included in accumulated other comprehensive loss. The consolidated translation loss included in equity amounted to ($28) and $8 for the years ended  December 31, 2025 and 2024, respectively. Deferred income taxes are not provided on currency translation adjustments as foreign earnings are considered to be permanently reinvested.

 

Investment in Joint Venture

The Company is part of a joint venture agreement with Tam-Mex, S.A. de C.V., a manufacturer located in Mexico City, Mexico, to market and distribute products in Mexico. The respective partners each own 50% of the corporate capital of the joint venture company, Royston Tammex S DE RL DE CV. The initial capital contribution to the joint venture by the Company was $31, which includes an initial capital contribution of $10, plus an additional $21 for 50% of the cost of start-up tooling. During 2024, the Company made an additional capital contribution of $414 of which $227 was repaid during 2025. The Company further received a dividend of $239 during 2025.  The Company has recognized $52 and $355 in income from the joint venture for the years ended December 31, 2025 and 2024, respectively.

 

 

SRR Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025 and 2024

000's except share and per share data

 

NOTE 2 - INVENTORIES

 

The components of inventories as of December 31, 2025 and 2024 are as follows:

 

		2025				2024
Raw materials		$	19,412			$	17,223
Work-in-process			5,200				5,572
Finished goods			8,332				8,800
			32,944				31,595
Less: Reserve for slow-moving, obsolete and damaged inventory			(3,163	)			(3,112	)
		$	29,781			$	28,483

 

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT, NET

 

Depreciation is computed for financial reporting purposes using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are depreciated using the straight-line method over the remaining life of the applicable lease when the life of the lease is less than the related useful life of the asset. 

 

Property, plant and equipment as of December 31, 2025 and 2024, are as follows:

 

		2025				2024				Useful Lives
Leasehold improvements			6,841				4,674			2 - 15 years
Machinery and equipment			31,170				28,402			2 - 19 years
Trucks and autos			367				401			3 - 5 years
Computer equipment and software			2,673				971			2 - 5 years
Furniture, fixtures and other			587				574			2 - 10 years
Construction in progress			195				2,155
			41,833				37,177
Less - Accumulated depreciation			(21,404	)			(18,860	)
		$	20,429			$	18,317

 

Depreciation expense was $2,949 and $3,032 for the years ended December 31, 2025 and 2024, respectively.

 

NOTE 4 - INTANGIBLE ASSETS

 

The components of intangible assets as of December 31, 2025 and 2024 are as follows:

 

		2025				2024				Useful Lives
Trade names		$	43,510			$	43,510			15 years
Trade names			1,440				1,440			Indefinite
Proprietary manufacturing process			7,680				7,680			3 - 12 years
Customer relationships			67,480				67,480			3 - 15 years
			120,110				120,110
Less - Accumulated amortization - Trade Names			(22,044	)			(19,143	)
Less - Accumulated amortization - Proprietary manufacturing process			(5,145	)			(4,537	)
Less - Accumulated amortization - Customer Relationships			(34,196	)			(29,687	)
		$	58,725			$	66,743

 

Amortization expense was $8,018 and $8,084 for the years ended December 31, 2025 and 2024.

 

 

SRR Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025 and 2024

000's except share and per share data

 

Estimated amortization expense, for the next five years and thereafter, as of December 31, 2025, is as follows:

 

		Amount
2026			7,974
2027			7,974
2028			7,974
2029			7,974
2030			7,467
Thereafter			17,922
		$	57,285

 

NOTE 5 - GOODWILL

 

The carrying values of goodwill are reviewed at least annually for possible impairment or whenever events or changes in circumstances indicate that goodwill may be impaired. The Company first assesses qualitative factors in order to determine if goodwill is impaired. If, through qualitative assessment, it is determined that it is more likely than not that the goodwill is not impaired, no further testing is required. If it is determined that it is more likely than not that the goodwill is impaired, or if the Company elects not to first assess qualitative factors, the Company’s impairment testing continues with the estimation of the fair value of the reporting unit using a combination of a market approach and an income (discounted cash flow) approach, at the reporting-unit level. The estimation of the fair value of the reporting unit requires significant management judgment with respect to revenue and expense growth rates, changes in working capital, and the selection and use of an appropriate discount rate. The estimates of the fair value of reporting units are based on the best information available as of the date of the assessment. The use of different assumptions could increase or decrease estimated future discounted operating cash flows and could increase or decrease an impairment charge. Company management uses its judgment in assessing whether assets may have become impaired between annual impairment tests. Indicators such as adverse business conditions, economic factors, and technological or competitive activities may signal that an asset has become impaired.

 

The Company identified its reporting units in conjunction with its annual goodwill impairment testing. The Company has a total of two reporting units that contain goodwill. The Company relies upon a number of factors, judgments, and estimates when conducting its impairment testing, including, but not limited to, the Company’s operating results, forecasts, anticipated future cash flows, and marketplace data. There are inherent uncertainties related to these factors and the judgments applied in the analysis of goodwill impairment.

 

The following presents information about the Company's goodwill on the dates or for the periods indicated:

 

		SignResource, LLC				Royston, LLC				Southern CaseArts				Total
Balance as at December 31, 2023
Goodwill		$	26,049			$	11,183			$	502			$	37,734
Goodwill acquired		$	-			$	-			$	-			$	-
Accumulated impairment losses		$	(26,049	)		$	-			$	-			$	(26,049	)
Balance as at December 31, 2024		$	-			$	11,183			$	502			$	11,685
Balance as at December 31, 2024
Goodwill		$	26,049			$	11,183			$	502			$	37,734
Goodwill acquired		$	-			$	-			$	-			$	-
Accumulated impairment losses		$	(26,049	)		$	-			$	-			$	(26,049	)
Balance as at December 31, 2025		$	-			$	11,183			$	502			$	11,685

 

 

SRR Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025 and 2024

000's except share and per share data

 

NOTE 6 - LONG-TERM DEBT

 

Please refer to Note 14 - Subsequent Events, regarding the current status of debt.

 

Credit Agreement

On March 9, 2018, the Company entered into a credit agreement (the “Credit Agreement”) with a third-party lending institution, which included a Term Loan and a Revolving Credit Facility.  The Credit Agreement was amended on July 28, 2022 and again on July 27, 2023 as discussed in more detail below.   The Credit Agreement is collateralized by a security interest in substantially all of the present and future assets of the Company.

 

Term Loan

The Company's initial Term Loan of $50,000 with maturity date of March 9, 2023, was revised on July 27, 2018 with an increase to $60,000 and the maturity date extended to July 27, 2023.  On July 27, 2023, the Company refinanced its senior debt, extending the maturity date to July 27, 2026. The revised Term Loan’s principal amount was $60,000, repayable in quarterly installments, with a balloon payment of the remaining principal due at maturity.

 

The loan bears interest at a rate equal to the Base Rate or Adjusted Term Secured Overnight Financing Rate (SOFR) for such interest period, as stipulated in the executed Credit Agreement and selected by the Company, plus the applicable margin. SOFR is a reference rate that is used by parties in commercial contracts that is outside their direct control, established as an alternative to LIBOR.  The applicable margin is based on the Company’s senior leverage ratio as defined by the Credit Agreement. The interest rate for the Term Loan as of December 31, 2025 and 2024 was 6.97% and 8.47%, respectively. Interest on the Term Loan determined using the SOFR Rate is paid monthly or quarterly dependent on the rate periodically selected by the Company.

 

Revolving Credit Facility

The Credit Agreement includes a revolving credit facility (“Revolver”), initially set at a borrowing limit of $15,000. This limit was raised to $25,000 following an amendment to the agreement on July 27, 2018 and to $30,000 following another amendment to the agreement on July 27, 2023. There were $0 outstanding borrowings as of December 31, 2025 and 2024, respectively. Total available for additional borrowings under the Revolver was $28,655 and $28,730 as of December 31, 2025 and 2024, respectively. The maturity date for the Revolver is July 27, 2026.

 

All Base Rate Advances of the Revolving Credit and Swing Line shall bear interest at a per annum interest rate equal to the Base Rate plus the Applicable Margin. All Term SOFR Advances of the Revolving Credit bear interest for each Interest Period at a per annum interest rate equal to Adjusted Term SOFR for such Interest Period plus the Applicable Margin and all Quoted Rate Advances of the Swing Line shall bear interest at a per annum interest rate equal to the Quoted Rate plus the Applicable Margin, if any. Interest accruing at the Base Rate shall be computed on the basis of a 360-day year and assessed for the actual number of days elapsed, and in such computation effect shall be given to any change in the interest rate resulting from a change in the Base Rate on the date of such change in the Base Rate. Interest on the Revolver is payable monthly.

 

Subordinated Note

The Company obtained a Subordinated Note worth $13,000 on March 9, 2018, with an initial maturity date of March 9, 2025. This note was modified on July 27, 2018, increasing the note’s value to $30,000 and extending the maturity date to July 27, 2024. A second amendment to the Subordinated Note was made on July 27, 2023, extending the maturity date further to July 27, 2027, without any other significant alterations to the note. The note accrues interest at an annual rate of 11% on the outstanding principal, payable quarterly in arrears.  The balance of the Subordinated Note, including paid-in-kind interest, was $33,439 on December 31, 2025 and 2024.

 

The Company was in compliance with the debt covenants (as amended) for all reporting periods.

 

 

SRR Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025 and 2024

000's except share and per share data

 

Derivatives and Hedging Activities

The Company is party to an interest rate swap agreement effective October 2023 to hedge the interest rate risk associated with the variable interest rates on a portion of its long-term debt.  The notional amount is $15,375 and $17,500 at December 31, 2025 and 2024, respectively, and is reduced quarterly through July 2026 to $13,500.  The fair value of the swap was not material at December 31, 2025 and 2024.

 

Letters of credit

As of December 31, 2025 and 2024, respectively, the outstanding letters of credit issued in terms of the credit agreement were $1,345 and $1,270. The beneficiaries are Hartford Fire Insurance Company, increasing from $830 to $905 and Great American Insurance Company $440.

 

The balances as of December 31, 2025 and 2024 were as follows:

 

		2025				2024
Term loan		$	42,258			$	51,290
Subordinated note			33,439				33,439
Less - unamortized deferred financing costs related to the term loan			(370	)			(851	)
			75,327				83,878
Less - current portion			(42,029	)			(6,228	)
		$	33,298			$	77,650

 

Scheduled maturities of the term loan, subordinated note, and revolving facility as of December 31, 2025, are as follows:

 

		Amount
2026			42,258
2027			33,439
		$	75,697

 

NOTE 7 - LEASES

 

The following table presents the carrying value of leases and the classification within the consolidated balance sheet:

 

	Classification		2025				2024
Operating lease liabilities	Current		$	3,785			$	3,547
Operating lease liabilities	Non-current		$	19,509			$	23,599
Right-of-use asset, operating leases	Non-current		$	21,727			$	25,772
Finance lease liabilities	Current		$	47			$	35
Finance lease liabilities	Non-current		$	64			$	64
Right-of-use asset, finance leases	Non-current		$	118			$	97

 

The following summarizes the lease costs included within the consolidated statements of operations and comprehensive income. Substantially all of the lease expenses are recorded in cost of goods sold, with an insignificant amount recorded in selling, general and administrative expenses, for the years ended December 31, 2025 and 2024, respectively.

 

		2025				2024
Finance leases		$	57			$	41
Operating leases		$	5,643			$	5,766
Short-term leases		$	608			$	522

 

 

SRR Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025 and 2024

000's except share and per share data

 

Future minimum payments under noncancelable operating leases, due in each of the next 5 years and thereafter as of December 31, 2025, are as follows:

 

Year Ending:
2026			5,331
2027			5,319
2028			4,292
2029			2,464
2030			2,068
Thereafter			10,083
Total minimum lease payments			29,557
Less: Imputed interest		$	(6,263	)
		$	23,294

 

Future minimum payments under noncancelable finance leases, due in each of the next 5 years and thereafter as of December 31, 2025, are as follows:

 

Year Ending:
2026			56
2027			44
2028			21
Total minimum lease payments			121
Less: Imputed interest		$	(10	)
		$	111

 

		2025				2024
The following table presents additional information about lease obligations:
Weighted-average Operating lease term (years)			7.14				7.62
Weighted-average Operating lease discount rate			7.33	%			7.49	%
Weighted-average Finance lease term (years)			2.43				2.87
Weighted-average Finance Lease discount rate			7.73	%			8.08	%

 

		2025				2024
The following table presents supplemental cash flow information:
Cash paid for amounts included in measurement of lease liabilities
Operating cash flows for operating leases		$	5,457			$	5,456
Cash flows for finance leases		$	54			$	26
Right-of-use assets obtained in exchange for lease obligations (non-cash)
Operating leases		$	86			$	6,916
Finance leases		$	66			$	82

 

NOTE 8 - EMPLOYEE BENEFIT PLANS

 

The Company has 401(k) retirement savings plans covering substantially all domestic full-time employees.  These Plans were merged into one plan on August 1, 2023. The Company makes contributions to these plans based on employee contributions. Related expenses were $1,125 and  $938 for the years ended December 31, 2025 and 2024, respectively.

 

 

SRR Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025 and 2024

000's except share and per share data

 

NOTE 9 - LITIGATION

 

The Company is involved in various legal proceedings encountered in the normal course of business. In the opinion of management, the resolution of these matters will not have a material adverse effect on the Company’s financial position.

 

NOTE 10 - INSURANCE RESERVES

 

The Company has insurance policies for medical and workers’ compensation benefits that contain significant deductibles. The cost of general medical and workers’ compensation claims, up to the deductibles, is accrued annually based on actual claims reported plus estimated amounts for claims not reported. These estimates are based on historical information, along with certain assumptions about future events, and are subject to change as additional information becomes available. As of December 31, 2025 and 2024, the Company accrued $1,640 and $1,875, respectively, for general medical and workers’ compensation claims within accrued liabilities in the consolidated balance sheets.

 

NOTE 11 - INCOME TAXES

 

The major components of income tax provision are as follows:

 

		2025				2024
Current income tax provision:
Federal		$	19			$	2,869
State			415				401
Deferred income tax (benefit) provision:
Federal			3,082				(7,201	)
State			328				(1,079	)
		$	3,844			$	(5,010	)
Reconcilition of effective tax rate:
Income tax provision at statutory rate			21.0	%			21.0	%
Increase (decrease) in income tax provision due to:
State and local taxes, net			4.3	%			-10.0	%
Permanent differences			-0.1	%			0.8	%
Change in valuation allowance			0.0	%			-76.1	%
Other			0.0	%			0.2	%
Total provision for income tax			25.2	%			-64.1	%
Total income tax (payable) receivable:
Federal			1,720				(209	)
State			263				411
		$	1,983			$	202

 

 

SRR Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025 and 2024

000's except share and per share data

 

Deferred income tax assets and liabilities result from differences between the carrying amount and the tax bases of the following:

 

		2025				2024
Deferred tax assets:
Inventories		$	1,041			$	901
Interest carryforward			3,060				3,740
Accrued expenses			619				265
Net operating losses			1,231				118
Intangibles			2,828				3,541
Lease liabilities			5,632				6,591
Capitalized research expenses			197				2,930
Other deferred tax assets			145				188
		$	14,753			$	18,274
Deferred tax liabilities:
Property and equipment			(3,862	)			(3,064	)
Right-of-use asset			(5,255	)			(6,257	)
Other deferred tax liabilities			(789	)			(696	)
			(9,906	)			(10,017	)
Net deferred tax assets		$	4,847			$	8,257

 

The Company recognizes the amount of taxes payable or refundable for the current year and recognizes deferred tax liabilities and assets for the expected future tax consequences of events and transactions that have been recognized in the Company’s financial statements or tax returns.

 

The Company's effective tax rate differs from the federal statutory rate primarily due to state income taxes.

 

The Company files tax returns in each jurisdiction where they are registered to do business. In the United States and many of the state jurisdictions, and in the foreign country where the Company files tax returns, a statute of limitations period exists. After a statute period expires, the tax authorities may no longer assess additional income tax for the expired period. In addition, the Company is no longer eligible to file claims for refund for any tax that it may have overpaid. Federal pre-tax NOL carryforwards at December 31, 2025 and December 31, 2024 were approximately $5.6 million and $0 for federal, respectively, and carryforward indefinitely. State pre-tax NOL carryforwards at December 31, 2025 and December 31, 2024 were approximately $1.1 million and $2.2 million and will begin expiring at various amounts and dates beginning in 2041.

 

Deferred income taxes are provided for the temporary differences between the financial reporting basis and the tax basis of the Company’s assets and liabilities. In assessing the recoverability of deferred income tax assets, management considers whether it is more likely than not that some portion or all of the deferred income tax assets will not be realized. The ultimate realization of deferred income tax assets is dependent upon the generation of future taxable income during the period in which the temporary differences become deductible. Management considers the projected future taxable income and tax planning strategies in making this assessment. Based on the cumulative historical income over the past three years and projected future income, management believes it is more likely than not that the Company will be able to realize the benefits of certain deferred income tax assets as of December 31, 2025. 

 

 

SRR Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025 and 2024

000's except share and per share data

 

On July 4, 2025, the One Big Beautiful Bill Act (“OBBBA”) was enacted into law and includes significant changes to U.S. federal income tax law, including the permanent extension of certain provisions originally enacted under the Tax Cuts and Jobs Act, the restoration or expansion of favorable tax treatment for certain business deductions, and modifications to the limitation on the deductibility of business interest expense. The Company evaluated the provisions of OBBBA applicable to its operations, including, among other items, changes related to the limitation on business interest expense, accelerated depreciation for qualified property, and the timing of deductions for domestic research and experimentation expenditures. Based on the Company’s evaluation, the enactment of the OBBBA did not have a material impact on the Company’s net income tax provision for the year ended December 31, 2025.

 

NOTE 12 - STOCK OPTION PLAN

 

The Company has a stock-based incentive plan for directors and key employees, which is administered by the Company’s Board of Directors. Stock options vest upon a sale of the Company or upon an initial public offering of the Company in which the holders of shares of common stock of the Company achieve a minimum internal rate of return as determined by the Board of Directors and set forth in the stock option agreement of each holder. As of December 31, 2025 and 2024, no options have vested, and no related compensation expense has been recorded.

 

Stock options terminate 10 years after the effective date of grant. Outstanding stock options as of December 31, 2025 are as follows:

 

		Number of Options				Weighted- Average Exercise Price				Remaining Contractual Term
Balance at December 31, 2023			43,526
Options granted			3,000			$	100			8.7 years
Options forfeited/reduced			(2,000	)			100
Balance at December 31, 2024			44,526
Options granted			-
Options forfeited/reduced			-
Balance at December 31, 2025			44,526
Vested and unvested expected to vest at December 31, 2025			-
Exercisable at December 31, 2025			-

 

NOTE 13 - RELATED-PARTY TRANSACTIONS

 

As of December 31, 2025 and 2024, the Company was party to a management agreement with its majority shareholder. Under the agreement, the majority shareholder performs certain services for the Company including, but not limited to, consultation on corporate strategy, budgeting of future corporate investments, acquisition and divestiture strategies, and debt and equity financings. Management fees expensed and paid during the years ended December 31, 2025 and 2024, were $769 and $753, respectively.  Management fees payable were $350 at December 31, 2025 and 2024, respectively.  The Company also receives management fees for similar services provided to a joint venture, Royston Tammex S DE RL DE CV. Management fees received during the years ended December 31, 2025 and 2024, were $255 and $641, respectively.

 

 

SRR Holdings, Inc. and Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2025 and 2024

000's except share and per share data

 

NOTE 14 - SUBSEQUENT EVENTS

 

On March 24, 2026, subsequent to the balance sheet date, LSI Industries Inc. acquired the Company in a transaction accounted for as a business combination under ASC 805, Business Combinations.

In connection with the closing of the merger, all outstanding indebtedness of the Company was repaid in full in accordance with the terms of the Merger Agreement.

In accordance with ASC 855‑10‑25, the merger represents a nonrecognized subsequent event, as the conditions giving rise to the transaction did not exist as of the balance sheet date. Accordingly, the accompanying financial statements have not been adjusted to reflect the effects of the merger or the related extinguishment of debt.

The Company has evaluated subsequent events through May 6, 2026, the date these financial statements were available to be issued.