What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-03-05 compared with 2023-03-07 · 84 added, 97 removed, 218 unchanged (45% of the section changed)

10 unchanged sentences

● Revenue was $578,634 for 2023 compared with $502,988 in 2022.

The increase in revenues reflects improved sales in certain markets we serve, specifically Industrial and A&D.

The increase reflects the economic growth and increases in demand from many of our served markets, as certain markets were negatively affected in the prior year period due to the economic environment brought on by the COVID-19 pandemic .

The increase in revenues reflects the economic growth and increases in demand from many of our served markets.

Certain markets, primarily Industrial, experienced supply-chain constraints in the prior year period impacting customer order patterns and lead times, which began to normalize in 2023.

The acquisitions completed in 2022 and 2023 contributed an incremental $10,057 of revenues in 2023.

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As a percentage of revenue, gross margin increased 40 basis points to 31.7% in 2023 from 31.3% in 2022.

The gross margin increase was largely driven by volume increases of higher margin products in our Industrial and A&D markets compared to lower volumes of pandemic related Medical market products with lower margins, combined with pricing and margin accretive acquisitions.

The margin expansion was muted by higher material and labor costs as well as costs associated with addressing the challenging global supply chain environment to meet the needs of our customers.

● Operating income was $31,656 for 2022 compared with $26,026 for 2021, or 6% of revenue in each year.

The gross margin increase was largely driven by volume increases of higher margin products primarily in our Industrial and A&D markets compared to lower volumes of pandemic related Medical market products with lower margins, combined with pricing and margin accretive acquisitions.

The margin expansion continues to be muted, to some extent, by higher material and labor costs as well as costs associated with addressing the challenging global supply chain environment to meet the needs of our customers.

● Operating income was $42,314 for 2023 compared with $31,656 for 2022, or 7.3% and 6.3% of revenue in 2023 and 2022, respectively.

● Net income was $24,097 for 2023, or $1.48 per diluted share, compared with $17,389, or $1.09 per diluted share, for 2022.

Net income was 28% lower in 2022 compared to 2021, and earnings per diluted share decreased by 34% as the 2021 results include the impact of a $7,373 (or $0.51 per diluted share) discrete tax benefit in the first quarter of 2021.

● Bookings were a record $566,226 for 2022 compared with $468,449 for 2021, an increase of 21%.

Backlog as of December 31, 2022 was $330,078, an increase of 32% from $249,927 at year end 2021.

Included in backlog as of December 31, 2022 is $21,222 contributed by 2022 business acquisitions.

● Debt of $235,454, net of cash of $30,614, increased by $68,343 to $204,840 at December 31, 2022 from debt of $158,960, net of cash of $22,463 of $136,497 at December 31, 2021, primarily as a result of debt to fund acquisitions completed in 2022 and a finance lease obligation in connection with a manufacturing facility expansion.

● We declared and paid a dividend of $0.025 in each quarter of 2022 and declared and paid a dividend of $0.02 in the first quarter of 2021 and $0.025 per quarter for the remainder of 2021 pursuant to our quarterly dividend program.

Net income was 39% higher in 2023 compared to 2022, and earnings per diluted share increased by 36% as compared to 2022.

● Bookings were $520,275 for 2023 compared with $566,226 for 2022, a decrease of 8%.

Decreases in bookings are primarily due to a normalization of customer order patterns as lead times are reducing due to improvement in the global supply chain environment, and, to a lesser extent, economic softening in some European markets.

Backlog as of December 31, 2023 was $276,093, a decrease of 16% from $330,078 at year end 2022.

Included in backlog as of December 31, 2023 is $2,344 contributed by the 2023 business acquisition.

● Debt of $218,402, net of cash of $31,901, decreased by $18,339 to $186,501 at December 31, 2023 from debt of $235,454, net of cash of $30,614 of $204,840 at December 31, 2022, primarily as a result of payments made on debt from cash flows generated by operations, offset in part by borrowings to fund acquisition activities and capital expenditures.

● We declared and paid a dividend of $0.025 in the first quarter of 2023 and $0.03 in each of the second, third, and fourth quarters of 2023 and declared and paid a dividend of $0.025 in each quarter of 2022 pursuant to our quarterly dividend program.

Dividends to shareholders for 2023 and 2022 were $0.115 and $0.10 per share, respectively.

The dividend payout ratio was 8% and 9% for 2023 and 2022, respectively when compared with the diluted earnings per share of $1.48 and $1.09, respectively.

We remain focused on executing our strategy for growth while streamlining the organization and emphasizing continuous improvement in quality, delivery, cost and innovation as we drive the One Allied approach and expand our value proposition for our customers.

We remain focused on executing our strategy for growth while streamlining the organization and emphasizing continuous improvement in quality, delivery, cost and innovation as we drive the One Allient approach and expand our value proposition for our customers.

Solid strides continue to be made with our multi-product, fully integrated solutions that are leading to increased business.

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Sales cycles are long and the time from being selected for the solution development to full rate production can be longer, yet we believe we continue to build a scalable foundation which can deliver strong returns on those investments.

Our growth strategy is focused on becoming a leading global controlled motion solution provider in our selected target markets by further developing our products and services platform to utilize multiple Allied Motion technologies which create increased value solutions for our customers.

Our strategy further defines Allied Motion as being a “technology/know-how” driven company and to be successful, we continue to invest in our areas of excellence.

Our growth strategy is focused on becoming a leading global controlled motion solution provider in our selected target markets by further developing our products and services platform to utilize multiple Allient technologies which create increased value solutions for our customers.

Our strategy further defines Allient as being a “technology/know-how” driven company and to be successful, we continue to invest in our areas of excellence.

We have set growth targets for our Company and we will focus and align our resources to meet those targets.

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The majority of the critical issues are focused on growth and profitability initiatives for the Company.

One of these initiatives includes product line platform development to meet the emerging needs of our target markets.

Our platform development emphasizes a combination of our technologies to create increased value solutions for our customers.

The emphasis with new opportunities has evolved from being an individual component provider to becoming a solutions provider whereby the new opportunities utilize multiple Allied Motion technologies in a system solution approach.

We believe this approach will allow us to provide increased value to our customers and improved margins for our Company, and are demonstrated in our acquisitions completed in the second quarter of 2022 as well as the fourth quarter of 2021.

One of these initiatives includes product line platform development and rationalization to meet the emerging needs of our target markets.

Our platform development emphasizes a combination of our technologies to create increased value solutions for our customers while seeking operating efficiencies.

The emphasis on new opportunities has evolved from being an individual component provider to becoming a solutions provider whereby the new opportunities utilize multiple Allient technologies in a system solution approach.

We believe this approach will allow us to provide increased value to our customers and improved margins for our Company and are demonstrated in our acquisitions completed in 2023 and 2022.

Our strong financial condition, along with AST continuous improvement initiatives in quality, delivery, and cost allow us to have a positive outlook for the continued long-term growth of our Company.

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In recent years, we navigated a difficult environment related to the COVID-19 pandemic, while advancing our strategic priorities and delivering solid results.

We experienced record orders in 2022, reflecting increases in our Vehicle and Industrial markets.

We experienced record orders in 2023, reflecting increases in our Industrial and Vehicle markets.

This demand, combined with supply chain constraints, resulted in some inefficiencies and additional costs as our teams worked hard to support and meet customer demand and schedules.

While the economic outlook for 2023 remains uncertain and we expect continued upward pressure on material and labor costs, we believe we are in a strong operational, financial and reputational position.

Our record level of backlog, diversified end market penetration and demonstrated agility position us well to perform across varied market trends and give us confidence that we can drive further efficiency, profitable growth and increased free cash flow while delivering long-term value for our shareholders.

Our record level of backlog, diversified end market penetration and demonstrated agility position us well to perform across varied market trends and

give us confidence that we can drive further efficiency, profitable growth and increased free cash flow while delivering long-term value for our shareholders.

In 2024, we will focus on leveraging our resources to expand our business in our selected target markets.

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3) Strengthen our balance sheet by improving working capital turns and driving margin improvement.

Allied Motion is an applied technology/know-how motion company, and to grow, we will continue to invest in the technical resources to ensure we can move forward with our mantra to “ create controlled motion solutions that change the game ” and to meet the emerging needs of our customers in our served market segments.

Allient is an applied technology/know-how motion company, and to grow, we will continue to invest in the technical resources to ensure we can move forward with our mantra to “ create controlled motion solutions that change the game ” and to meet the emerging needs of our customers in our served market segments.

We anticipate that our investment in these key resources will continue to drive our growth now and in the future.

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The Company satisfies its performance obligations under a contract with a customer by transferring goods and services generally in exchange for monetary consideration from the customer.

The Company considers the customer’s purchase order, and the Company’s corresponding sales order acknowledgment as the contract with the customer.

The Company considers the customer’s purchase

order, and the Company’s corresponding sales order acknowledgment as the contract with the customer.

In the normal course of business, the Company does not accept product returns unless the item is defective as manufactured.

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Inventory costing requires complex calculations that include assumptions for overhead absorption, scrap, sample calculations, manufacturing yield estimates, costs to sell, and the determination of which costs may be capitalized.

The valuation of inventory requires us to estimate obsolete or excess inventory, as well as inventory that is not of saleable quality.

The Company’s estimate of the appropriate amount of obsolete or excess inventory, as well as inventory that is not of saleable quality, uses certain inputs and involves judgment.

Such inputs include data associated with historic trends, the demand forecast for inventory on-hand which includes customer orders, and item specific estimates about the timing or level of demand for a specific part.

Historically, our inventory adjustment has been adequate to cover our losses.

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We test the reporting unit’s goodwill for impairment as of October 31 st of each fiscal year and between annual tests if an event occurs or circumstances change that may indicate that the fair value of the reporting unit is below its carrying value.

In conducting this annual impairment test, we may first perform a qualitative assessment of whether it is more-likely-than-not that a reporting unit’s fair value is less than its carrying value.

In conducting this annual impairment test, we may first perform a qualitative assessment of whether it is more-likely-than-not that the reporting unit’s fair value is less than its carrying value.

If we determine that it is not more-likely-than-not that the fair value of the reporting unit is less than its carrying amount, no further goodwill impairment testing is required.

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As of December 31, 2023, we have $131,338 of goodwill recorded on our consolidated balance sheet, representing approximately 22% of total assets.

A 1% write-down of our goodwill would decrease our 2022 net income approximately $924, or $0.06 per diluted share.

A 1% write-down of our goodwill would decrease our 2023 net income by approximately $1,000, or $0.06 per diluted share.

Business Combinations

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These estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

During the year ended December 31, 2022, we completed three business combinations for an aggregate purchase price of $57,658.

We identified and assigned value to identifiable intangible assets of customer lists, technology, and trade names, and estimated the useful lives over which these intangible assets would be amortized.

The estimated fair values

of these identifiable intangible assets were based upon discounted cash flow models, which include assumptions such as forecasted cash flows, customer attrition rates, discount rates, and royalty rates.

The fair value estimates resulted in identifiable intangible assets, in the aggregate, of $28,611.

The resulting goodwill, in the aggregate, from these three acquisitions was $21,556.

Stock-based Compensation

Compensation expense for time-based restricted stock units is measured at the grant date and recognized ratably over the vesting period.

We determine the fair value of time-based and performance-based restricted stock units based on the closing market price of our common stock on the grant date.

The recognition of compensation expense associated with performance-based restricted stock units requires judgment in assessing the probability of meeting the performance goals, as well as defined criteria for assessing achievement of the performance-related goals.

For purposes of measuring compensation expense, the number of shares ultimately expected to vest is estimated at each reporting date based on management’s expectations regarding the relevant performance criteria.

The performance shares begin vesting only upon the achievement of the performance criteria.

The achievement of the performance goals can impact the valuation and associated expense of the restricted stock units.

The assumptions used in accounting for the share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment.

As a result, if circumstances change and we use different assumptions, our stock-based compensation expense could be materially different in the future.

Impact of Recently Issued Accounting Pronouncements

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Interest expense

Other expense (income), net

Total other expense

Other expense, net

Total other expense, net

Income before income taxes

Income tax (provision) benefit

Income tax provision

Effective tax rate

1 unchanged sentence

The increase in revenues in 2023 reflects improved sales in certain markets we serve, specifically Industrial and A&D.

The increase reflects the economic recovery and the increases in demand from many of our served markets, as certain markets were negatively affected in the prior year period due to the economic environment brought on by the COVID-19 pandemic.

The increase reflects the economic recovery and the increases in demand from many of our served markets, as certain markets continued to experience supply chain constraints in the prior year period impacting customer order patterns and lead times .

Our sales for 2023 were comprised of 59% to U.S.

customers and 41% to customers primarily in Europe, Canada and Asia-Pacific.

The overall increase in revenue was due to a 30% volume increase partially offset by a 5% unfavorable currency impact.

The overall increase in revenue was due to a 15% volume increase and a minimal foreign currency impact.

The acquisitions completed in 2022 and 2023 contributed an incremental $10,057 of revenues in 2023.

1 unchanged sentence

ORDER BOOKINGS AND BACKLOG:

The 22% increase in orders in 2022 compared to 2021 is due to a 27% increase in volume partially offset by a 5% unfavorable currency impact.

The increase in bookings during 2022 compared to 2021 is largely due to increases in our Industrial and A&D markets reflecting improvements in the general economy along with growth in our core businesses.

The overall increase in orders was due to a 27% volume increase partially offset by a 6% unfavorable currency impact.

The 8% decrease in orders in 2023 compared to 2022 is due to an 8% decrease in volume with minimal foreign currency impact.

Decreases in bookings are primarily due to a normalization of customer order patterns as lead times are reducing due to improvement in the global supply chain environment and, to a lesser extent, economic softening in some European markets.

The acquisitions completed in 2022 and 2023 contributed an incremental $7,380 of orders in 2023.

The increase in backlog as of December 31, 2022, compared to December 31, 2021 includes incremental backlog of $21,222 from the three acquisitions that were completed during 2022.

The decrease in backlog as of December 31, 2023, compared to December 31, 2022 includes incremental backlog of $2,344 from the acquisition that was completed during 2023.

GROSS PROFIT AND GROSS MARGIN:

Gross margins improved to 31.7% for 2023, compared to 31.3% for 2022.

The increase in gross margin percentage was largely driven by volume increases of higher margin products in our Industrial and A&D markets compared to lower volumes of pandemic related Medical market products with lower margins, combined with pricing and margin accretive acquisitions.

The margin expansion was muted by higher material and labor costs as well as costs associated with addressing the challenging global supply chain environment to meet the needs of our customers.

The increase in gross margin percentage was largely driven by volume increases of higher margin products primarily in our Industrial and A&D markets combined with pricing and margin accretive acquisitions.

The margin expansion continues to be muted, to some extent, by the continued increases in material and labor costs..

SELLING EXPENSES:

Selling expenses increased 27% during 2022 compared to 2021 primarily due to increased costs in connection with our acquisitions as well as sales commissions related to the revenue growth.

Selling expenses increased 13% during 2023 compared to 2022 primarily due to sales commissions related to the revenue growth as well as increased costs in connection with our acquisitions.

Selling expenses as a percentage of revenues were comparable at 4% during 2023 and 2022.

GENERAL AND ADMINISTRATIVE EXPENSES:

General and administrative expenses increased by 19% during 2022 compared to 2021 due primarily to increased costs in connection with our acquisitions.

As a percentage of revenues, general and administrative expenses were 10% and 11% in 2022 and 2021, respectively.

General and administrative expenses increased by 15% during 2023 compared to 2022 due primarily to incentive compensation-related expenses due to current year Company performance and increased costs in connection with our acquisitions.

As a percentage of revenues, general and administrative expenses were comparable at 10% in both 2023 and 2022.

ENGINEERING AND DEVELOPMENT EXPENSES:

Engineering and development expenses increased by 8% in 2023 compared to 2022.

The increase is primarily due to increased costs in connection with our acquisitions and the continued ramp up of development projects to meet the future needs of target markets, as well as supporting growing customer application development needs.

As a percentage of revenues, engineering and development expenses were comparable at 8% and 7% for the years ended December 31, 2022 and 2021, respectively.

The increase is primarily due to the continued ramp up of development projects to meet the future needs of target markets and supporting growing customer application development needs, as well as increased costs in connection with our acquisitions.

As a percentage of revenues, engineering and development expenses were 7% and 8% for the years ended December 31, 2023 and 2022, respectively.

BUSINESS DEVELOPMENT COSTS:

The increase in business development costs in 2022 compared to 2021 is due to additional acquisition related costs due to increased merger and acquisition activity and costs related to manufacturing footprint rationalization.

The increase in business development costs in 2023 compared to 2022 is largely due to fair value changes of contingent consideration of $1.9 million related to acquisitions, manufacturing footprint rationalization, and costs incurred due to current period acquisition activities, offset by lower acquisition-related costs in 2023.

AMORTIZATION OF INTANGIBLE ASSETS:

Amortization of intangible assets increased 79% in 2022 compared to 2021, due to the inclusion of the full year of intangible asset amortization of the 2021 acquisitions and the incremental intangible asset amortization from the 2022 acquisitions.

Amortization of intangible assets increased 10% in 2023 compared to 2022, due to the inclusion of the full year of intangible asset amortization of the 2022 acquisitions and, to a lesser extent, the incremental intangible asset amortization from the 2023 acquisition.

INTEREST EXPENSE:

Interest expense increased by 138% in 2022 compared to 2021 primarily due to higher debt levels in 2022 compared to 2021, largely relating to business acquisition activity, and, to a lesser extent, higher interest rates, offset in part by interest rate swaps.

Interest expense increased by 61% in 2023 compared to 2022 primarily due to higher interest rates, offset in part by the impact of interest rate swaps.

INCOME TAXES:

For 2023 and 2022, the effective income tax rate was 18.9% and 26.6%, respectively.

The effective rate differs from the statutory rate primarily due to state income taxes, the impact of foreign tax provisions in the US, the impact of the mix of foreign and domestic income and foreign tax rates, section 162(m) compensation limits, and the benefit of Research and Development tax credits.

The effective tax rate for 2021 includes a tax benefit of 32.3% related to the recognition of net operating loss carryforwards primarily resulting from tax legislation enacted in New Zealand and 5.6% related to investment tax credits recorded in 2021.

The effective rate for 2021 is partially offset by a 7.2% discrete tax provision related to a valuation allowance recorded on a foreign subsidiary’s deferred tax assets.

The effective rate differs from the statutory rate primarily due to state income taxes, the impact of foreign tax provisions in the U.S., foreign tax rate differences, Section 162(m) compensation limits, and the benefit of Research and Development tax credits and incentives.

The effective tax rate for 2023 was lower than the effective tax rate for 2022 primarily due to increases in certain credits and incentives, the realization of certain deferred income tax assets that had been reserved in prior years, as well as the impact of the mix of foreign and domestic income.

NET INCOME AND ADJUSTED NET INCOME:

Net income decreased during 2022 compared to 2021, reflecting the impact of the effect of a $7,373 discrete income tax benefit in the first quarter of 2021 .

Operating income increased, reflecting increased revenues and higher gross margin, partially offset by an increase in operating expenses.

Net income increased during 2023 compared to 2022, primarily due to operating income increases, reflecting increased revenues and higher gross margin, partially offset by an increase in operating expenses and interest expense.

Adjusted net income for the years ended December 31, 2023 and 2022 was $37,458 and $29,971, respectively.

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EBITDA and Adjusted EBITDA are non-GAAP measures.

EBITDA consists of income before interest expense, provision (benefit) for income taxes, and depreciation and amortization.

Adjusted EBITDA also excludes stock-based compensation expense, foreign currency gain/loss and

certain other items.

EBITDA consists of income before interest expense, provision for income taxes, and depreciation and amortization.

Adjusted EBITDA also excludes stock-based compensation expense, foreign currency gain/loss and certain other items.

Refer to information included in “Non-GAAP Measures” below for a discussion of the non-GAAP measure and a reconciliation of net income to EBITDA and Adjusted EBITDA.

Non-GAAP Measures

Revenue excluding foreign currency exchange impacts, EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted diluted earnings per share are provided for information purposes only and are not measures of financial performance under GAAP.

Organic growth, EBITDA, Adjusted EBITDA, Adjusted net income and Adjusted diluted earnings per share are provided for information purposes only and are not measures of financial performance under GAAP.

Management believes the presentation of these financial measures reflecting non-GAAP adjustments provides important supplemental information to investors and other users of our financial statements in evaluating the operating results of the Company as distinct from results that include items that are not indicative of ongoing operating results.

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This measure adjusts net income determined in accordance with GAAP to reflect changes in financial results associated with the highlighted expense and income items.

The Company’s calculation of revenue excluding foreign currency exchange impacts for 2022 is as follows (in thousands):

For the year ended December 31,

Revenue as reported

Currency impact unfavorable (favorable)

Revenue excluding foreign currency exchange impacts

Organic growth is reported revenues adjusted for the impact of foreign currency and the revenue contribution from acquisitions.

The Company’s calculation of organic growth for 2023 is as follows:

December 31, 2023

Revenue increase over prior year

Impact of acquisitions and foreign currency

Organic growth

The Company’s calculation of EBITDA and Adjusted EBITDA for 2023 and 2022 is as follows (in thousands):

1 unchanged sentence

Interest expense

Provision (benefit) for income tax

Provision for income tax

Depreciation and amortization

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Non-GAAP adjustments, net of tax (1)

Discrete income tax benefit

Amortization of intangible assets – net

Income tax valuation allowance

Foreign currency loss – net

Business development costs – net

Non-GAAP adjusted net income and diluted earnings per share

Non-GAAP adjusted net income and adjusted diluted earnings per share

(1) Applies a blended federal, state, and foreign tax rate of approximately 21% in 2023 and 23% in 2022 applicable to the non-GAAP adjustments.

Liquidity and Capital Resources

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Year Ended December 31,

(in thousands):

Net cash provided by operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net cash (used in) provided by financing activities

Effect of foreign exchange rates on cash

Net increase (decrease) in cash and cash equivalents

Net increase in cash and cash equivalents

Of the $31,901 cash and cash equivalents on hand at December 31, 2023, $20,704 was located at our foreign subsidiaries and may be subject to withholding tax if repatriated to the U.S.

During 2022, the cash provided by operating activities decreased from 2021 due largely to increases in working capital, primarily inventory, due to strategic decisions to secure critical components given the supply chain environment.

The cash used in investing activities in 2022 remained consistent with 2021, as similar capital expenditures and acquisition-related cash outflows occurred in each year.

During 2023, the cash provided by operating activities increased from 2022 primarily due to increases in net income, adjusted for non-cash items, as well as improvements in working capital, most notably receivables and inventories, due to improvement in 2023 of supply chains as inventories had been significantly impacted by supply chain disruptions during 2022.

The cash used in investing activities in 2023 decreased as compared with 2022, due to less acquisition activity and, to a lesser extent, timing of capital expenditures.

The Company expects 2024 capital expenditures to be approximately $16,000 to $20,000.

The increase in cash provided by financing activities in 2022 from 2021 includes Amended Revolving Facility borrowings of $71,000 to fund business acquisition activity in the second quarter of 2022, as compared to the $50,500 to fund the three acquisitions in the fourth quarter of 2021.

Cash used in financing activities in 2023 as compared to cash provided from financing activities in 2022 reflects the increase in debt payments made during 2023 due to cash generated from operations, as well as lower debt borrowings due to less acquisition activity as compared to 2022.

The 2023 activity includes Amended Revolving Facility borrowings of $7,000 to fund business acquisition activity in the third quarter of 2023, as compared to the $71,000 to fund the three acquisitions in the second quarter of 2022 and, to a lesser extent, inventory requirements during uncertain supply chain environments in 2022.

Debt payments of $28,395 and $7,585 were made during 2023 and 2022, respectively.

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The Amended Credit Agreement contains financial covenants that require that the Company maintain a minimum interest coverage ratio of at least 3.0 to 1.0 at the end of each fiscal quarter.

In addition, the Company’s Leverage Ratio at the end of any fiscal quarter shall not be greater than 4.0 to 1.0 ratio (reduced to 3.5:1.0 for quarters ending on or after December 31, 2023);

In addition, the Company’s Leverage Ratio at the end of any fiscal quarter shall not be greater than 3.5 to 1.0 ratio;

provided that the Company may elect to temporarily increase the Leverage Ratio by 0.5x during the twelve-month period following a material acquisition under the Amended Credit Agreement (“acquisition leverage increase”), subject to certain exceptions.

The Company was in compliance with all covenants at December 31, 2022.

The Company was in compliance with all covenants at December 31, 2023 as well as at each quarter end during 2023.

As of December 31, 2023, the unused Amended Revolving Facility was $69,880.

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There were no borrowings under the China Facility during 2023 or 2022.

The Company closed the China Facility during 2023.

The Company declared dividends, in total, of $0.115 and $0.10 per share during 2023 and 2022, respectively.

The Company’s working capital, capital expenditure and dividend requirements are expected to be funded from cash provided by operations and amounts available under the Amended Credit Agreement (refer to Note 7, Debt Obligations , of the notes to consolidated financial statements for definition and terms).

Although there is ongoing uncertainty related to the continued impact of COVID-19 and variants on our future results, we believe our diverse markets, our strong market position in many of our businesses, and the steps we have taken to

strengthen our balance sheet, such as retaining cash to support shorter term needs and amending our revolving credit facility in 2022 leaves us well-positioned to manage our business through the ongoing impacts of the pandemic as it continues to unfold.

We continually assess our liquidity and cash positions and have assessed the impact of COVID-19 on our Company.

Based on our analysis, we believe our existing balances of cash, the flexibility of our Amended Credit Agreement and our currently anticipated operating cash flows will be more than sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months.

We believe our diverse markets, our strong market position in many of our businesses, and the steps we have taken to strengthen our balance sheet, such as retaining cash to support shorter term needs and amending our revolving credit facility leaves us well-positioned to manage our business.

We continually assess our liquidity and cash positions taking geopolitical and other uncertainties into consideration.

Based on our analysis, we believe our existing balances of cash, our currently anticipated operating cash flows, and our available financing under agreements in place will be more than sufficient to meet our cash needs arising in the ordinary course of business for the next twelve months.

Qualitative and Quantitative Disclosures about Market Risk

Foreign Currency

We have international operations in The Netherlands, Sweden, Germany, China, Portugal, Canada, Czech Republic, Mexico, the United Kingdom and New Zealand which expose us to foreign currency exchange rate fluctuations due to transactions denominated in Euros, Swedish Krona, Chinese Renminbi, Canadian dollar, Czech Krona, Mexican pesos, British Pound Sterling, and New Zealand dollar, respectively.

transactions denominated in Euros, Swedish Krona, Chinese Renminbi, Canadian dollar, Czech Krona, Mexican pesos, British Pound Sterling, and New Zealand dollar, respectively.

We continuously evaluate our foreign currency risk and we take action from time to time in order to best mitigate these risks.

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We estimate that foreign currency exchange rate fluctuations decreased sales in 2023 compared to 2022 by approximately $258.

We translate all assets and liabilities of foreign operations, where the U.S.

We translate all assets and liabilities of our foreign operations, where the U.S.

dollar is not the functional currency, at the period-end exchange rate and translate sales and expenses at the average exchange rates in effect during the period.

The net effect of these translation adjustments is recorded in the consolidated financial statements as comprehensive income.

The translation adjustment were losses of $9,516 and $7,193 for 2022 and 2021, respectively.

The net effect of these translation adjustments is recorded in the consolidated financial statements as comprehensive (loss) income.

The translation adjustment was a gain of $3,669 and a loss of $9,516 for the years ended December 31, 2023 and 2022, respectively.

Translation adjustments are not adjusted for income taxes as they relate to permanent investments in our foreign subsidiaries.

A hypothetical 10% change in the value of the U.S.

dollar in relation to our most significant foreign currency net assets would have had an impact of approximately $15,335 and $11,000 on our foreign net assets as of December 31, 2022 and 2021, respectively.

Beginning in the first quarter of 2021, we began entering into contracts to hedge our short-term balance sheet exposure, primarily intercompany, that are denominated in currencies (Euro, Mexican Peso, Canadian Dollar, New Zealand Dollar, Chinese Renminbi, Swedish Krona) other than the subsidiary’s functional currency and are adjusted to current values using period-end exchange rates.

The resulting gains or losses are recorded in other (income) expense, net in the consolidated statements of income and comprehensive income.

dollar in relation to our most significant foreign currency net assets would have had an impact of approximately $16,280 on our foreign net assets as of December 31, 2023.

We have contracts to hedge our short-term balance sheet exposure, primarily intercompany, that are denominated in currencies (Euro, Mexican Peso, Canadian Dollar, New Zealand Dollar, Chinese Renminbi, Swedish Krona) other than the subsidiary’s functional currency and are adjusted to current values using period-end exchange rates.

The resulting gains or losses are recorded in other expense (income), net in the consolidated statements of income and comprehensive income.

To minimize foreign currency exposure, the Company had foreign currency contracts with notional amounts of $22,193 and $18,981 at December 31, 2023 and 2022, respectively.

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During the years ended December 31, 2023 and 2022, we recorded losses of $115 and $1,109, respectively, which is included in other expense (income), net and generally offset the gains or losses from the foreign currency adjustments on the intercompany balances that are also included in other expense (income), net.

Net foreign currency transaction gains and losses included in total other expense (income), net amounted to gains of $298 in 2022 and losses of $21 in 2021.

Net foreign currency transaction gains and losses included in total other expense (income), net amounted to a loss of $281 and a gain of $298 in 2023 and 2022, respectively.

Interest Rates

9 unchanged sentences

A hypothetical one percentage point (100 basis points) change in the Base Rate on the $110,120 of unhedged floating rate debt outstanding at December 31, 2023 would have an impact of approximately $1,101 on our interest expense for 2023.

A hypothetical one percentage point (100 basis points) change in the Base Rate on the $99,395 of unhedged floating rate debt outstanding at December 31, 2021 would have an impact of approximately $994 on our interest expense for 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis