What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-08 compared with 2023-05-02 · 173 added, 63 removed, 112 unchanged (68% of the section changed)

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion and analysis below describe material changes in financial condition and results of operations as reflected in our condensed consolidated financial statements for the three months ended March 31, 2023 and 2022.

The discussion and analysis below described material changes in financial condition and results of operations as reflected in our condensed consolidated financial statements for the three and six months ended June 30, 2023 and 2022.

This discussion and analysis should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2022 Form 10-K.

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Our products are primarily sold in North America, Europe, and the Asia-Pacific region.

We primarily manufacture customized products to meet the requirements of our customer.

We primarily manufacture customized products to meet the requirements of our customers.

We believe our products are used by a majority of the North American Commercial Truck markets, many construction vehicle OEMs parts and service dealers distributors, as well as top e-commerce retailers.

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one in Tangier, Morocco, and another in Aldama, Mexico.

Both locations are expected to be large scale facilities and production is targeted for third quarter of 2023.

These plants are a cornerstone in CVG's strategy of expanding its electrification systems business.

Both locations are expected to begin production in the third quarter of 2023.

These plants are a cornerstone in CVG's strategy of globally expanding its electrification systems business.

Consolidated Results of Operations

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

The table below sets forth certain consolidated operating data for the three months ended March 31 (dollars are in thousands):

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

The table below sets forth certain consolidated operating data for the three months ended June 30 (dollars are in thousands):

2023 2022 $ Change % Change

2 unchanged sentences

Selling, general and administrative expenses 22,457 15,652 6,805 43.5

Other (income) expense (202) 1,041 (1,243) NM 1

Interest expense 2,804 2,118 686 32.4

Loss on extinguishment of debt — 921 (921) (100.0)

Provision for income taxes 2,693 870 1,823 209.5

Net income 10,140 2,485 7,655 308.0

Not meaningful

The increase in consolidated revenues resulted from:

• a $40.0 million, or 24.1%, increase in sales to OEM;

• a $31.9 million, or 18.5%, increase in OEM;

• a $19.5 million, or 68.4%, decrease in industrial automation sales;

1 unchanged sentence

• a $0.3 million, or 161.7% increase in other revenues.

First quarter 2023 revenues were unfavorably impacted by foreign currency exchange translation of $3.6 million, which is reflected in the change in revenues above.

The increase in revenues was primarily driven by increased pricing to offset material cost increases and increased sales volume, offset by sales volume decreases in the Industrial Automation segment.

Second quarter 2023 revenues were favorably impacted by foreign currency exchange translation of $0.7 million, which is reflected in the change in revenues above.

The increase in revenues was primarily driven by increased pricing and volume from new Electrical Systems business, partially offset by lower volumes in the Industrial Automation segment.

Gross Profit .

Included in gross profit is cost of revenues, which consists primarily of raw materials and purchased components for our products, wages and benefits for our employees and overhead expenses such as manufacturing supplies, facility rent and utilities costs related to our operations.

The $9.8 million increase in gross profit is primarily attributable to the increase in sales volume.

Cost of revenues increased $8.5 million, or 3.9%, as a result of an increase in raw material and purchased component costs of $2.5 million, or 1.7%, and an increase in labor and overhead expenses of $6.0 million, or 8.1%.

As a percentage of revenues, gross profit margin was 13.4% for the three months ended March 31, 2023 compared to 10.4% for the three months ended March 31, 2022.

The $16.5 million increase in gross profit is primarily attributable to price increases with customers and cost reduction initiatives.

Cost of revenues decreased $5.2 million, or 2.3%, as a result of a decrease in raw material and purchased component costs of $8.2 million, or 5.5%, offset by an increase in labor and overhead expenses of $3.0 million, or 3.9%.

As a percentage of revenues, gross profit margin was 14.6% for the three months ended June 30, 2023 compared to 8.7% for the three months ended June 30, 2022.

The three months ended June 30, 2023 results include charges of $0.7 million associated with the restructuring program.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses ("SG&A”) consist primarily of wages and benefits and other expenses such as marketing, travel, legal, audit, rent and utility costs which are not directly associated with the manufacturing of our products.

SG&A expenses for the three months ended March 31, 2023 increased $3.6 million compared to the three months ended March 31, 2022, primarily as a result of higher incentive compensation expenses.

As a percentage of revenues, SG&A expense was 7.8% for the three months ended March 31, 2023 compared to 7.0% for the three months ended March 31, 2022.

SG&A expenses increased $6.8 million compared to the three months ended June 30, 2022, primarily as a result of increased employee benefit costs and salaries including an increase in incentive compensation expenses.

As a percentage of revenues, SG&A expense was 8.6% for the three months ended June 30, 2023 compared to 6.2% for the three months ended June 30, 2022.

Interest Expense .

Interest associated with our debt was $2.8 million and $2.1 million for the three months ended June 30, 2023 and 2022, respectively.

The increase in interest expense primarily related to higher interest rates on variable rate debt, offset by lower average debt balances during the respective comparative periods.

Loss on extinguishment of debt.

On May 12, 2022, the Company refinanced its long-term debt, which resulted in a loss of $0.9 million, including a $0.6 million non-cash write off relating to deferred financing costs of the Term loan facility due 2026 and $0.3 million of other fees associated with the new debt.

Provision for Income Taxes.

An income tax provision of $2.7 million and $0.9 million were recorded for the three months ended June 30, 2023 and 2022, respectively.

The period over period change in income tax was primarily attributable to a $9.5 million increase in domestic pre-tax income versus the prior year period.

Net income was $10.1 million for the three months ended June 30, 2023 compared to $2.5 million for the three months ended June 30, 2022.

The increase in net income is attributable to the factors noted above.

Segment Results

Vehicle Solutions Segment Results

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

The table below sets forth certain Vehicle Solutions Segment operating data for the three months ended June 30 (dollars are in thousands):

2023 2022 $ Change % Change

Revenues $ 152,730 $ 142,785 $ 9,945 7.0%

Gross profit 20,904 8,912 11,992 134.6

Selling, general & administrative expenses 6,769 7,403 (634) (8.6)

Operating income 14,135 1,509 12,626 836.7

The increase in Vehicle Solutions Segment revenues primarily resulted from increased pricing.

Gross Profit.

The increase in gross profit was primarily attributable to price increases with customers and cost reduction initiatives.

Included in gross profit is cost of revenues, which decreased $2.0 million, or 1.5%, as a result of a decrease in raw material and purchased component costs of $5.1 million, or 5.6%, offset by an increase in labor and overhead expenses of $3.1 million, or 7.1%.

As a percentage of revenues, gross profit margin was 13.7% for the three months ended June 30, 2023 compared to 6.2% for the three months ended June 30, 2022, driven by lower startup costs, improved manufacturing efficiencies, increased pricing to offset material cost inflation and freight costs.

The three months ended June 30, 2023 results include charges of $0.3 million associated with the restructuring program.

Selling, General and Administrative Expenses .

SG&A expenses decreased $0.6 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, primarily due nonrecurring legal expenses related to a customer dispute in the prior year period.

Electrical Systems Segment Results

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

The table below sets forth certain Electrical Systems Segment operating data for the three months ended June 30 (dollars are in thousands):

2023 2022 $ Change % Change

Revenues $ 63,625 $ 47,345 $ 16,280 34.4%

Gross profit 10,345 7,245 3,100 42.8

Selling, general & administrative expenses 2,686 1,303 1,383 106.1

Operating income (loss) 7,659 5,942 1,717 28.9

The increase in Electrical Systems Segment revenues primarily resulted from increased sales volume and pricing.

Gross Profit.

The increase in gross profit is primarily attributable to increase in sales volume and pricing.

Included in gross profit is cost of revenues, which increased $13.2 million, or 32.9%, as a result of an increase in raw material and purchased component costs of $9.7 million, or 45.3%, and an increase in labor and overhead expenses of $3.5 million, or 18.7%.

As a percentage of revenues, gross profit margin was 16.3% for the three months ended June 30, 2023 compared to 15.3% for the three months ended June 30, 2022, driven by sales volume, increased pricing and manufacturing efficiencies.

Selling, General and Administrative Expenses .

SG&A expenses increased $1.4 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022, driven by increased incentive compensation expense.

Aftermarket & Accessories Segment Results

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

The table below sets forth certain Aftermarket & Accessories Segment operating data for the three months ended June 30 (dollars are in thousands):

2023 2022 $ Change % Change

Revenues $ 36,829 $ 32,172 $ 4,657 14.5%

Gross profit 7,788 2,867 4,921 171.6

Selling, general & administrative expenses 2,262 1,735 527 30.4

Operating income 5,526 1,132 4,394 388.2

The increase in Aftermarket & Accessories Segment revenues primarily resulted from increased pricing.

Gross Profit.

The increase in gross profit is primarily attributable to increased pricing and cost reduction.

Included in gross profit is cost of revenues, which decreased $0.3 million, or 0.9%, as a result of an increase in raw material and purchased component costs of $0.1 million, or 0.4%, offset by a decrease in labor and overhead expenses of $0.4 million, or 3.2%.

As a percentage of revenues, gross profit margin was 21.1% for the three months ended June 30, 2023 compared to 8.9% for the three months ended June 30, 2022.

This was primarily due to increased pricing offsetting moderating cost inflation.

Selling, General and Administrative Expenses .

SG&A expenses increased $0.5 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.

Industrial Automation Segment Results

Three Months Ended June 30, 2023 Compared to Three Months Ended June 30, 2022

The table below sets forth certain Industrial Automation Segment operating data for the three months ended June 30 (dollars are in thousands):

2023 2022 $ Change % Change

Revenues $ 9,010 $ 28,547 $ (19,537) (68.4)%

Gross profit (636) 2,855 (3,491) (122.3)

Selling, general & administrative expenses 1,425 1,547 (122) (7.9)

Operating income (loss) (2,061) 1,308 (3,369) NM 1

Not meaningful

The decrease in Industrial Automation Segment revenues primarily resulted from lower sales volume due to

decreased customer demand.

Gross Profit.

The decrease in gross profit is primarily attributable to lower sales volume and an inventory charge of $1.6 million.

Included in gross profit is cost of revenues, which decreased $16.0 million, or 62.5%, as a result of a decrease in

raw material and purchased component costs of $12.9 million, or 63.2%, and a decrease in labor and overhead expenses of $3.1 million, or 59.5%.

As a percentage of revenues, gross profit loss was 7.1% for the three months ended June 30, 2023 compared to gross profit margin of 10.0% for the three months ended June 30, 2022.

The decrease in gross profit margin is primarily due to volume reduction, inventory adjustments and restructuring expenses.

The three months ended June 30, 2023 results include charges of $0.4 million associated with the restructuring program.

Selling, General and Administrative Expenses .

SG&A expenses decreased $0.1 million for the three months ended June 30, 2023 compared to the three months ended June 30, 2022.

Consolidated Results of Operations

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

The table below sets forth certain consolidated operating data for the six months ended June 30, (dollars are in thousands):

2023 2022 $ Change % Change

Revenues $ 524,903 $ 495,223 $ 29,680 6.0%

Gross profit 73,610 47,262 26,348 55.7

Selling, general and administrative expenses 43,022 32,651 10,371 31.8

Other (income) expense 105 874 (769) (88.0)

Other expenses decreased $1.2 million in the quarter ended March 31, 2023 as compared to the quarter ended March 31, 2022 due primarily to a favorable change in the fair value of foreign currency forward exchange contracts in 2023 versus an unfavorable change in the fair value of foreign currency forward exchange contracts in 2022.

Interest expense 5,694 4,079 1,615 39.6

Interest associated with our debt, and other expense was $2.9 million and $2.0 million for the three months ended March 31, 2023 and 2022, respectively.

The increase in interest expense primarily related to higher interest rates on variable rate debt.

Loss on extinguishment of debt — 921 (921) (100.0)

Provision for income taxes 5,949 2,270 3,679 162.1

An income tax provision of $3.3 million and $1.4 million were recorded for the three months ended March 31, 2023 and 2022, respectively.

The period over period change in income tax was primarily attributable to a $6.6 million increase in pre-tax income versus the prior year period.

Net income was $8.7 million for the three months ended March 31, 2023 compared to $4.0 million for the three months ended March 31, 2022.

Net income 18,840 6,467 12,373 191.3

The increase in consolidated revenues resulted from:

• a $74.4 million, or 22.1%, increase in OEM;

• a $43.9 million, or 70.1%, decrease in industrial automation sales;

• a $1.8 million, or 1.9%, decrease in aftermarket and OES sales;

• a $0.9 million, or 27.6% increase in other revenues.

Six months ended 2023 revenues were unfavorably impacted by foreign currency exchange translation of $2.7 million, which is reflected in the change in revenues above.

The increase in revenues is primarily driven by increased pricing to offset material cost increases and increased sales volume, offset by sales volume decreases in the Industrial Automation segment.

Gross Profit .

The $26.3 million increase in gross profit is primarily attributable to price increases with customers and cost reduction initiatives.

Cost of revenues increased $3.3 million, or 0.7%, as a result of a decrease in raw material and purchased component costs of $5.8 million, or 1.9%, offset by an increase in labor and overhead expenses of $9.1 million, or 6.0%.

As a percentage of revenues, gross profit margin was 14.0% for the six months ended June 30, 2023 compared to 9.5% for the six months ended June 30, 2022.

The six months ended June 30, 2023 results include charges of $1.4 million associated with the restructuring program.

Selling, General and Administrative Expenses .

SG&A expenses increased $10.4 million compared to the six months ended June 30, 2022, primarily as a result of increased employee benefit costs and salaries including an increase in incentive compensation expenses.

As a percentage of revenues, SG&A expense was 8.2% for the six months ended June 30, 2023 compared to 6.6% for the six months ended June 30, 2022.

Other (Income) Expense.

Other expenses decreased $0.8 million in the six months ended June 30, 2023 as compared to the six months ended June 30, 2022 due primarily to a favorable change in foreign currency of $0.6 million.

Interest Expense .

Interest associated with our debt was $5.7 million and $4.1 million for the six months ended June 30, 2023 and 2022, respectively.

The increase in interest expense primarily related to higher interest rates on variable rate debt, offset by lower average debt balances during the respective comparative periods.

Loss on extinguishment of debt.

Provision for Income Taxes.

An income tax provision of $5.9 million and $2.3 million were recorded for the six months ended June 30, 2023 and 2022, respectively.

The period over period change in income tax was primarily attributable to the $16.1 million increase in domestic pre-tax income versus the prior year period.

Net income was $18.8 million for the six months ended June 30, 2023 compared to $6.5 million for the six months ended June 30, 2022.

The increase in net income is attributable to the factors noted above.

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Vehicle Solutions Segment Results

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

The table below sets forth certain Vehicle Solutions Segment operating data for the three months ended March 31 (dollars are in thousands):

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

The table below sets forth certain Vehicle Solutions Segment operating data for the six months ended June 30, (dollars are in thousands):

2023 2022 $ Change % Change

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Operating income 27,527 7,827 19,700 251.7

The increase in Vehicle Solutions Segment revenues primarily resulted from increased sales volume and increased pricing to offset material cost increases.

The increase in Vehicle Solutions Segment revenues primarily resulted from increased sales volume and increased

pricing to offset material cost increases.

Gross Profit.

The increase in gross profit was primarily attributable to the increase in sales volume.

The increase in gross profit was primarily attributable to price increases with customers and cost reduction initiatives.

Included in gross profit is cost of revenues, which increased $11.8 million, or 4.5%, as a result of an increase in raw material and purchased component costs of $5.0 million, or 2.8%, and an increase in labor and overhead expenses of $6.8 million, or 8.0%.

As a percentage of revenues, gross profit margin was 12.1% for the three months ended March 31, 2023 compared to 9.2% for the three months ended March 31, 2022, driven by lower startup costs, improved manufacturing efficiencies, increased pricing to offset material cost inflation and freight costs.

As a percentage of revenues, gross profit margin was 12.9% for the six months ended June 30, 2023 compared to 7.7% for the six months ended June 30, 2022, driven by lower startup costs, improved manufacturing efficiencies, increased pricing to offset material cost inflation and freight costs.

The six months ended June 30, 2023 results include charges of $0.4 million associated with the restructuring program.

Selling, General and Administrative Expenses .

SG&A expenses decreased $0.5 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily due to overhead reductions.

SG&A expenses decreased $1.1 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily due to nonrecurring legal expenses related to a customer dispute in the prior year period.

Electrical Systems Segment Results

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

The table below sets forth certain Electrical Systems Segment operating data for the three months ended March 31 (dollars are in thousands):

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

The table below sets forth certain Electrical Systems Segment operating data for the six months ended June 30, (dollars are in thousands):

2023 2022 $ Change % Change

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Operating income 13,729 7,705 6,024 78.2

The increase in Electrical Systems Segment revenues primarily resulted from volume, increased pricing to offset material cost pass-through and new business.

The increase in Electrical Systems Segment revenues resulted from sales volume, increased pricing to offset material cost pass-through.

Gross Profit.

The increase in gross profit was primarily attributable to the increase in sales volume.

The increase in gross profit is primarily attributable to the increase in sales volume and increased pricing to offset material cost pass-through.

Included in gross profit is cost of revenues, which increased $23.2 million, or 30.2%, as a result of an increase in raw material and purchased component costs of $14.9 million, or 35.8%, and an increase in labor and overhead expenses of $8.3 million, or 23.6%.

As a percentage of revenues, gross profit margin was 15.2% for the three months ended March 31, 2023 compared to 8.5% for the three months ended March 31, 2022, driven by volume, increased pricing and manufacturing efficiencies.

As a percentage of revenues, gross profit margin was 15.7% for the six months ended June 30, 2023 compared to 12.2% for the six months ended June 30, 2022, driven by sales volume, increased pricing and manufacturing efficiencies.

Selling, General and Administrative Expenses .

SG&A expenses increased $0.6 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, consistent with the prior year amount on a percent of sales basis.

SG&A expenses increased $2.0 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, driven by increased incentive compensation expense.

Aftermarket & Accessories Segment Results

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

The table below sets forth certain Aftermarket & Accessories Segment operating data for the three months ended March 31 (dollars are in thousands):

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

The table below sets forth certain Aftermarket & Accessories Segment operating data for the six months ended June 30, (dollars are in thousands):

2023 2022 $ Change % Change

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Gross Profit.

The increase in gross profit is primarily attributable to the increase in sales volume.

The increase in gross profit is primarily attributable to the increased pricing to offset material cost inflation and freight costs.

Included in gross profit is cost of revenues, which increased $4.0 million, or 7.2%, as a result of an increase in raw material and purchased component costs of $3.0 million, or 8.7%, and an increase in labor and overhead expenses of $1.0 million, or 4.8%.

As a percentage of revenues, gross profit margin was 19.2% for the three months ended March 31, 2023 compared to 13.5% for the three months ended March 31, 2022.

As a percentage of revenues, gross profit margin was 20.2% for the six months ended June 30, 2023 compared to 11.1% for the six months ended June 30, 2022.

This was primarily due to increased pricing offsetting moderating cost inflation.

Selling, General and Administrative Expenses .

SG&A expenses increased $0.2 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022.

SG&A expenses increased $0.7 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, consistent with the prior year amount on a percent of sales basis.

Industrial Automation Segment Results

Three Months Ended March 31, 2023 Compared to Three Months Ended March 31, 2022

The table below sets forth certain Industrial Automation Segment operating data for the three months ended March 31 (dollars are in thousands):

Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022

The table below sets forth certain Industrial Automation Segment operating data for the six months ended June 30, (dollars are in thousands):

2023 2022 $ Change % Change

Revenues $ 18,757 $ 62,673 $ (43,916) (70.1)%

Gross profit 214 4,991 (4,777) (95.7)

Gross profit (422) 7,846 (8,268) NM 1

Selling, general & administrative expenses 2,501 2,871 (370) (12.9)

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Not meaningful

The modest decrease in Industrial Automation Segment revenues primarily resulted from lower sales volume due to decreased customer demand which was commensurate with market contraction.

The decrease in Industrial Automation Segment revenues primarily resulted from lower sales volume due to decreased customer demand.

Gross Profit.

The decrease in gross profit is primarily attributable to lower sales volume.

The decrease in gross profit is primarily attributable to lower sales volume and an inventory charge of $1.6 million.

Included in gross profit is cost of revenues, which decreased $35.6 million, or 65.0%, as a result of a decrease in raw material and purchased component costs of $28.7 million, or 66.7%, and a decrease in labor and overhead expenses of $6.9 million, or 59.0%.

As a percentage of revenues, gross profit margin was 2.2% for the three months ended March 31, 2023 compared to 14.6% for the three months ended March 31, 2022 due to volume reduction and restructuring expenses.

As a percentage of revenues, gross profit loss was 2.2% for the six months ended June 30, 2023 compared to gross profit margin of 12.5% for the six months ended June 30, 2022 due to volume reduction, inventory adjustments and restructuring expenses.

The six months ended June 30, 2023 results include charges of $1.0 million associated with the restructuring program.

Selling, General and Administrative Expenses .

SG&A expenses decreased $0.2 million for the three months ended March 31, 2023 compared to the three months ended March 31, 2022, primarily driven by overhead reduction.

SG&A expenses decreased $0.4 million for the six months ended June 30, 2023 compared to the six months ended June 30, 2022, primarily driven by overhead reduction.

Liquidity and Capital Resources

As of March 31, 2023, the Company had total liquidity of $188.0 million, including $41.5 million of cash and $146.5 million of availability from its US and China credit facilities.

Our primary sources of liquidity as of March 31, 2023 were cash reserves and availability under our credit facilities.

As of June 30, 2023, the Company had total liquidity of $190.5 million, including $42.4 million of cash and $148.1 million of availability from its U.S.

and China credit facilities.

Our primary sources of liquidity as of June 30, 2023 were operating income, cash reserves and availability under our credit facilities.

We believe that these sources of liquidity will provide adequate funds for our working capital needs, capital expenditures and debt service throughout the next twelve months.

However, no assurance can be given that this will be the case.

As of March 31, 2023, cash o f $41.5 million was held by foreign subsidiaries.

The Company had a $1.3 million deferred tax liability as of March 31, 2023 for the expected future income tax implications of repatriating cash from the foreign subsidiaries for which no indefinite reinvestment assertion has been made.

As of June 30, 2023, cash of $42.4 million was held by foreign subsidiaries.

The Company had a $0.6 million deferred tax liability as of June 30, 2023 for the expected future income tax implications of repatriating cash from the foreign subsidiaries for which no indefinite reinvestment assertion has been made.

Covenants and Liquidity

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Our ability to comply with the covenants in the Credit Agreement, as discussed in Note 4, Debt, may be affected by economic or business conditions beyond our control.

Based on our current forecast, we believe that we will be able to maintain compliance with the financial maintenance covenants and the fixed charge coverage ratio covenant and other covenants in the

Credit Agreement for the next twelve months;

Based on our current forecast, we believe that we will be able to maintain

compliance with the financial maintenance covenants and the fixed charge coverage ratio covenant and other covenants in the Credit Agreement for the next twelve months;

however, no assurances can be given that we will be able to comply.

2 unchanged sentences

Sources and Uses of Cash

March 31, 2023 March 31, 2022

June 30, 2023 June 30, 2022

(In thousands)

Net cash (used in) provided by operating activities $ 58 $ (21,398)

Net cash provided by (used in) operating activities $ 11,522 $ (4,507)

Net cash used in investing activities (9,179) (8,616)

1 unchanged sentence

Effect of currency exchange rate changes on cash 380 (1,994)

Net increase in cash $ 9,659 $ 3,250

Net increase (decrease) in cash $ 10,616 $ (6,458)

Operating activities.

For the three months ended March 31, 2023, net cash provided by operating activities was $0.1 million compared to net cash used in operating activities of $21.4 million for the three months ended March 31, 2022.

Net cash provided by operating activities is primarily attributable to a smaller increase in working capital for the three months ended March 31, 2023 as compared to the three months ended March 31, 2022.

For the six months ended June 30, 2023, net cash provided by operating activities was $11.5 million compared to net cash used in operating activities of $4.5 million for the six months ended June 30, 2022.

Net cash provided by operating activities is primarily attributable to a smaller increase in working capital for the six months ended June 30, 2023 as compared to the six months ended June 30, 2022.

Investing activities.

For the three months ended March 31, 2023, net cash used in investing activities was mainly due to capital expenditures and was $3.3 million compared to $3.6 million for the three months ended March 31, 2022.

For the six months ended June 30, 2023, net cash used in investing activities was mainly due to capital expenditures and was $9.2 million compared to $8.6 million for the six months ended June 30, 2022.

In 2023, we expect capital expenditures to be in the range of $25 million to $30 million.

Financing activities.

For the three months ended March 31, 2023, net cash provided by financing activities was $12.4 million compared to $28.4 million for the three months ended March 31, 2022.

Net cash provided by financing activities for the three months ended March 31, 2023 is attributable to borrowings under the revolving credit facility to fund the working capital increase.

For the six months ended June 30, 2023, net cash provided by financing activities was $7.9 million compared $8.7 million for the six months ended June 30, 2022.

Debt and Credit Facilities

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Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2022 Form 10-K.

At March 31, 2023, there have been no material changes to our critical accounting estimates from those disclosed in our 2022 Form 10-K.

At June 30, 2023, there have been no material changes to our critical accounting estimates from those disclosed in our 2022 Form 10-K.

Forward-Looking Statements

This Quarter Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended.

For this purpose, any statements contained herein that are not statements of historical fact, including without limitation, certain statements under “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” and located elsewhere herein regarding industry outlook, the Company’s expectations for future periods with respect to its plans to improve financial results, the future of the Company’s end markets, including the short-term and long-term impact of the COVID-19 pandemic on our business and the global supply chain, changes in the Class 8 and Class 5-7 North America truck build rates, performance of the global construction equipment business, the Company’s prospects in the wire harness, warehouse automation and electric

vehicle markets, the Company’s initiatives to address customer needs, organic growth, the Company’s strategic plans and plans to focus on certain segments, competition faced by the Company, volatility in and disruption to the global economic environment, including inflation and labor shortages, financial covenant compliance, anticipated effects of acquisitions, production of new products, plans for capital expenditures and our results of operations or financial position and liquidity, may be deemed to be forward-looking statements.

For this purpose, any statements contained herein that are not statements of historical fact, including without limitation, certain statements under “Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations” and located elsewhere herein regarding industry outlook, the Company’s expectations for future periods with respect to its plans to improve financial results, the future of the Company’s end markets, changes in the Class 8 and Class 5-7 North America truck build rates, performance of the global construction equipment business, the Company’s prospects in the wire harness, warehouse automation and electric vehicle markets, the Company’s initiatives to address customer needs, organic growth, the Company’s

strategic plans and plans to focus on certain segments, competition faced by the Company, volatility in and disruption to the global economic environment, including inflation and labor shortages, financial covenant compliance, anticipated effects of acquisitions, production of new products, plans for capital expenditures and our results of operations or financial position and liquidity, may be deemed to be forward-looking statements.

Without limiting the foregoing, the words “believe”, “anticipate”, “plan”, “expect”, “intend”, “will”, “should”, “could”, “would”, “project”, “continue”, “likely”, and similar expressions, as they relate to us, are intended to identify forward-looking statements.

6 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis