What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-08-05 compared with 2024-05-06 · 182 added, 73 removed, 109 unchanged (70% of the section changed)

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

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 months ended March 31, 2024 and 2023.

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 2023 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 and top e-commerce retailers

Key Developments

During the year ended December 31, 2023, management approved restructuring programs to align the Company’s cost structure to support margin expansion.

The programs include workforce reductions and footprint optimization across segments.

We incurred $1.9 million expense during the three months ended March 31, 2024 related to these programs.

On July 31, 2024, the Company and SVO, LLC entered into a purchase agreement pursuant to sell its Cab Structures business with operations in Kings Mountain, North Carolina to a Volvo Group company, effective July 31, 2024.

The net proceeds of the transaction are expected to be$40 million, with closure expected in the second half of 2024.

The Company expects the majority of proceeds to be used for debt paydown and other general corporate purposes.

On July 30, 2024, the Company and certain of its subsidiaries, as guarantors, entered into an Amendment No.

3, which amends the Credit Agreement.

Amendment No.3 amends the terms of the existing Credit Agreement to limit the mandatory prepayment requirements for certain specified asset dispositions of the Company and certain of its subsidiaries.

During the quarter ended June 30, 2024, the Company announced that it has retained an investment banking firm to explore strategic alternatives for its Industrial Automation business.

During the year ended December 31, 2023 and the six months ended June 30, 2024, management approved restructuring programs to align the Company’s cost structure to support margin expansion in key focus areas.

The programs include workforce reductions, footprint optimization, and fundamental reorganization initiatives that were implemented to drive efficiencies and reduce operating costs in line with our go-forward business and financial objectives.

We incurred $6.8 million expense during the six months ended June 30, 2024, related to these programs.

Consolidated Results of Operations

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

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, 2024 Compared to Three Months Ended June 30, 2023

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

2024 2023 $ Change % Change

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Selling, general and administrative expenses 20,219 22,457 (2,238) (10.0)

Other expense (income) 212 (202) 414 NM 1

Interest expense 2,488 2,804 (316) (11.3)

Provision for income taxes 1,170 3,256 (2,086) (64.1)

Net income 2,939 8,700 (5,761) (66.2)

Provision (benefit) for income taxes (334) 2,693 (3,027) NM 1

Net income (loss) (1,601) 10,140 (11,741) NM 1

Not meaningful

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• a $4.0 million, or 44.6%, decrease in industrial automation sales.

The decrease in revenues of 11.7% is due primarily to a softening in customer demand, the wind-down of certain programs in our Vehicle Solutions segment, and a further decline in our Industrial Automation and Aftermarket segments, partially offset by increased pricing in our Electrical Systems segment.

The decrease in revenues of 12.3% is due primarily to a softening in customer demand in our Electrical Systems and Vehicle Solutions segments, the wind-down of certain programs in our Vehicle Solutions segment, and a decline in our Industrial Automation and Aftermarket segments.

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 $8.5 million decrease in gross profit is primarily attributable to the impact of lower sales volumes partially offset by increased pricing.

The $17.4 million decrease in gross profit is primarily attributable to the impact of lower sales volumes, unfavorable mix and increased restructuring charges.

Cost of revenues decreased $14.9 million, or 6.6%, as a result of a decrease in raw material and purchased component costs of $16.3 million, or 11.4%, offset by an increase in labor and overhead expenses of $1.4 million, or 1.7%.

As a percentage of revenues, gross profit margin was 11.5% for the three months ended March 31, 2024 compared to 13.4% for the three months ended March 31, 2023.

As a percentage of revenues, gross profit margin was 9.1% for the three months ended June 30, 2024 compared to 14.6% for the three months ended June 30, 2023.

The three months ended June 30, 2024 results include charges of $4.7 million associated with restructuring programs.

Selling, General and Administrative Expenses .

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

SG&A expenses decreased $0.5 million compared to the three months ended March 31, 2023, primarily as a result of reduced incentive compensation expense, partially offset by an increase in salary expense during the 2024 period.

As a percentage of revenues, SG&A expense was 8.7% for the three months ended March 31, 2024 compared to 7.8% for the three months ended March 31, 2023.

Other Expense.

Other expenses increased $0.4 million in the three months ended March 31, 2024 as compared to the three months ended March 31, 2023 due primarily to an unfavorable change in the fair value of foreign currency forward exchange contracts.

SG&A expenses decreased $2.2 million compared to the three months ended June 30, 2023, primarily as a result of reduced incentive compensation expense, partially offset by an increase in salary expense and consulting spend during the 2024 period.

As a percentage of revenues, SG&A expense was 8.8% for the three months ended June 30, 2024 compared to 8.6% for the three months ended June 30, 2023.

The three months ended June 30, 2024 results include charges of $0.2 million associated with restructuring programs.

Interest Expense .

Interest associated with our debt was $2.3 million and $2.9 million for the three months ended March 31, 2024 and 2023, respectively.

The decrease in interest expense primarily related to lower average debt balances and lower interest rates on variable rate debt during the respective comparative periods.

Interest associated with our debt was $2.5 million and $2.8 million for the three months ended June 30, 2024 and 2023, respectively.

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

Provision for Income Taxes.

Income tax expense of $1.2 million and $3.3 million was recorded for the three months ended March 31, 2024 and 2023, respectively.

Income tax benefit of $0.3 million was recorded for the three months ended June 30, 2024 compared to an income tax expense of $2.7 million recorded for the three months ended June 30, 2023.

The period over period change in income tax was primarily attributable to a $14.8 million decrease in pre-tax income versus the prior year period.

Net loss was $1.6 million for the three months ended June 30, 2024 compared to net income of $10.1 million for the three months ended June 30, 2023.

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

Segment Results

Vehicle Solutions Segment Results

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

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

2024 2023 $ Change % Change

Revenues $ 140,904 $ 152,730 $ (11,826) (7.7)%

Gross profit 11,557 20,904 (9,347) (44.7)

Selling, general & administrative expenses 6,480 6,769 (289) (4.3)

Operating income 5,077 14,135 (9,058) (64.1)

The decrease in Vehicle Solutions Segment revenues of $11.8 million was primarily driven by a lower customer demand and the wind-down of certain programs.

Gross Profit.

The decrease in gross profit of $9.3 million was primarily attributable to lower customer demand, operational remediation investments and increased freight offset by a decrease in cost of revenues.

The decrease in cost of revenues was driven by a decrease in raw material and purchased component costs of $2.2 million, or 2.5%, and a decrease in labor and overhead expenses of $0.3 million, or 0.7%.

As a percentage of revenues, gross profit margin was 8.2% for the three months ended June 30, 2024 compared to 13.7% for the three months ended June 30, 2023.

The decrease in gross profit margin was primarily due to lower customer demand, restructuring activities and increased freight costs.

The three months ended June 30, 2024 results include charges of $3.0 million associated with the restructuring program.

Selling, General and Administrative Expenses .

SG&A expenses decreased $0.3 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

The three months ended June 30, 2024 results include charges of $0.3 million associated with the restructuring program.

Electrical Systems Segment Results

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

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

2024 2023 $ Change % Change

Revenues $ 50,152 $ 63,625 $ (13,473) (21.2)%

Gross profit 3,167 10,345 (7,178) (69.4)

Selling, general & administrative expenses 2,660 2,686 (26) (1.0)

Operating income 507 7,659 (7,152) (93.4)

The decrease in Electrical Systems Segment revenues of $13.5 million primarily resulted from a global softening in the Construction & Agriculture end-markets and phase out of certain lower margin business.

Gross Profit.

The decrease in gross profit of $7.2 million is primarily attributable to lower customer demand, restructuring activities, labor inflation and unfavorable foreign exchange impacts.

Cost of revenues decrease was driven by a decrease in raw material and purchased component costs of $7.1 million, or 22.8%;

partially offset by an increase in labor and overhead expenses of $0.8 million, or 3.5%.

As a percentage of revenues, gross profit margin was 6.3% for the three months ended June 30, 2024 compared to 16.3% for the three months ended June 30, 2023.

The decrease in gross profit margin was primarily due to lower customer demand, restructuring costs, labor inflation, and unfavorable foreign exchange impacts.

The three months ended June 30, 2024 results include charges of $1.4 million associated with the restructuring program.

Selling, General and Administrative Expenses .

SG&A expenses remained flat within the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Aftermarket & Accessories Segment Results

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

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

2024 2023 $ Change % Change

Revenues $ 33,860 $ 36,829 $ (2,969) (8.1)%

Gross profit 6,447 7,788 (1,341) (17.2)

Selling, general & administrative expenses 1,993 2,262 (269) (11.9)

Operating income 4,454 5,526 (1,072) (19.4)

The decrease in Aftermarket & Accessories Segment revenues of $3.0 million primarily resulted from lower sales volume due to decreased customer demand and the reduction of backlog in the prior period.

Gross Profit.

The decrease in gross profit of $1.3 million is primarily attributable to lower sales volume.

Cost of revenues decreased in line with the sales decrease of 8.1%, driven by a decrease in raw material and purchased component costs of $2.6 million, or 14.3%;

offset by an increase in labor and overhead expenses of $1.0 million, or 9.1%.

As a percentage of revenues, gross profit margin was 19.0% for the three months ended June 30, 2024 compared to 21.1% for the three months ended June 30, 2023.

The decrease in gross profit margin was primarily due to lower sales volumes, product mix and higher labor and benefit costs.

The three months ended June 30, 2024 results include charges of $0.2 million associated with the restructuring program.

Selling, General and Administrative Expenses .

SG&A expenses decreased $0.3 million for the three months ended June 30, 2024 compared to the three months ended June 30, 2023.

Industrial Automation Segment Results

Three Months Ended June 30, 2024 Compared to Three Months Ended June 30, 2023

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

2024 2023 $ Change % Change

Revenues $ 4,990 $ 9,010 $ (4,020) (44.6)%

Gross profit (loss)

(192) (636) 444 (69.8)

Selling, general & administrative expenses 823 1,425 (602) (42.2)

Operating loss (1,015) (2,061) 1,046 (50.8)

The decrease in Industrial Automation Segment revenues of $4.0 million primarily resulted from lower sales volume due to decreased customer demand.

The decrease in negative gross profit of $0.4 million was primarily attributable to benefits from restructuring programs implemented in 2023.

Cost of revenues decreased in line with the sales decrease of 44.6%, driven by a decrease in raw material and purchased component costs of $4.4 million, or 58.0%;

and a decrease in labor and overhead expenses of $0.1 million, or 4.6%.

As a percentage of revenues, negative gross profit margin was 3.8% for the three months ended June 30, 2024 compared to 7.1% for the three months ended June 30, 2023.

The decrease in negative gross profit margin is primarily due to benefits from restructuring programs implemented in 2023.

The three months ended June 30, 2024 results include charges of $0.1 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, 2024 compared to the three months ended June 30, 2023 primarily attributable to restructuring the business to be in line with decreased demand.

Consolidated Results of Operations

Six Months Ended June 30, 2024 Compared to Six Months Ended June 30, 2023

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

2024 2023 $ Change % Change

Revenues $ 461,974 $ 524,903 $ (62,929) (12.0)%

Gross profit 47,644 73,610 (25,966) (35.3)

Selling, general and administrative expenses 40,312 43,022 (2,710) (6.3)

Interest expense 4,739 5,694 (955) (16.8)

Provision for income taxes 836 5,949 (5,113) (85.9)

Net income 1,338 18,840 (17,502) (92.9)

The decrease in consolidated revenues resulted from:

• a $46.9 million, or 10.9%, decrease in OEM and other revenues;

• a $6.5 million, or 8.8%, decrease in aftermarket and OES sales;

• a $9.5 million, or 50.5%, decrease in industrial automation sales.

The decrease in revenues of $62.9 million is primarily driven by a softening in customer demand in our Electrical Systems and Vehicle Solutions segments, the wind-down of certain programs in our Vehicle Solutions segment, and a further decline in our Industrial Automation and Aftermarket segments.

Gross Profit .

The $26.0 million decrease in gross profit is primarily attributable to the impact of lower sales volumes, unfavorable mix, and increased restructuring charges.

Cost of revenues decreased $37.0 million, or 8.2%, as a result of a decrease in raw material and purchased component costs of $39.1 million, or 13.5%, offset by an increase in labor and overhead expenses of $2.1 million, or 1.3%.

As a percentage of revenues, gross profit margin was 10.3% for the six months ended June 30, 2024 compared to 14.0% for the six months ended June 30, 2023.

The six months ended June 30, 2024 results include charges of $6.4 million associated with the restructuring programs.

Selling, General and Administrative Expenses .

SG&A expenses decreased $2.7 million compared to the six months ended June 30, 2023, primarily as a result of reduced incentive compensation expense, partially offset by an increase in salary expense and consulting spend during the 2024 period.

As a percentage of revenues, SG&A expense was 8.7% for the six months ended June 30, 2024 compared to 8.2% for the six months ended June 30, 2023.

The six months ended June 30, 2024 results include charges of $0.4 million associated with the restructuring programs.

Interest Expense .

Interest associated with our debt was $4.7 million and $5.7 million for the six months ended June 30, 2024 and 2023, respectively.

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

Provision for Income Taxes.

An income tax provision of $0.8 million and $5.9 million were recorded for the six months ended June 30, 2024 and 2023, respectively.

The period over period change in income tax was primarily attributable to the $22.6 million decrease in pre-tax income versus the prior year period.

In 2021, as part of the Organization for Economic Co-operation and Development's ("OECD") Inclusive Framework, 140 member countries agreed to the implementation of the Pillar Two Global Minimum Tax ("Pillar Two") of 15%.

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We continue to evaluate the potential impact on future periods of Pillar Two, pending legislative adoption by individual countries.

Net income was $2.9 million for the three months ended March 31, 2024 compared to $8.7 million for the three months ended March 31, 2023.

Net income was $1.3 million for the six months ended June 30, 2024 compared to $18.8 million for the six months ended June 30, 2023.

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

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Vehicle Solutions Segment Results

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

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, 2024 Compared to Six Months Ended June 30, 2023

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

2024 2023 $ Change % Change

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Gross Profit.

The decrease in gross profit of $3.2 million was primarily attributable to lower customer demand and increased freight offset by a decrease in cost of revenues driven by a decrease in raw material and purchased component costs of $15.6 million, or 16.4%, and a decrease in labor and overhead expenses of $3.8 million, or 8.4%.

As a percentage of revenues, gross profit margin was 11.8% for the three months ended March 31, 2024 compared to 12.1% for the three months ended March 31, 2023.

The decrease in gross profit margin was primarily due to lower customer demand and increased freight.

The three months ended March 31, 2024 results include charges of $0.5 million associated with the restructuring program.

The decrease in gross profit of $12.6 million was primarily attributable to lower customer demand, restructuring activities and increased freight costs.

The decrease in cost of revenues was driven by a decrease in raw material and purchased component costs of $17.8 million, or 9.8%;

and a decrease in labor and overhead expenses of $4.1 million, or 4.5%.

As a percentage of revenues, gross profit margin was 10.0% for the six months ended June 30, 2024 compared to 12.9% for the six months ended June 30, 2023, driven by lower customer demand, restructuring activities and increased freight costs.

The six months ended June 30, 2024 results include charges of $3.5 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, 2024 compared to the three months ended March 31, 2023.

SG&A expenses decreased $0.5 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

The six months ended June 30, 2024 results include charges of $0.3 million associated with the restructuring program.

Electrical Systems Segment Results

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

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, 2024 Compared to Six Months Ended June 30, 2023

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

2024 2023 $ Change % Change

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Operating income 2,519 13,729 (11,210) (81.7)

The increase in Electrical Systems Segment revenues of $1.0 million primarily resulted from increased pricing to offset material cost pass-through and labor inflationary items.

The decrease in Electrical Systems Segment revenues of $12.4 million resulted from lower customer demand and phase out of lower margin business.

Gross Profit.

The decrease in gross profit of $3.7 million is primarily attributable to restructuring activities, labor inflation and unfavorable foreign exchange impacts, partially offset by increased pricing to offset material cost through and labor inflationary items.

Cost of revenues increase was driven by an increase in labor and overhead expenses of $5.1 million, or 24.5%;

partially offset by a decrease in raw material and purchased component costs of $0.3 million, or 1.3%.

As a percentage of revenues, gross profit margin was 8.2% for the three months ended March 31, 2024 compared to 15.2% for the three months ended March 31, 2023.

The decrease in gross profit margin was primarily due to restructuring activities, labor inflation, and unfavorable foreign exchange impacts.

The three months ended March 31, 2024 results include charges of $1.1 million associated with the restructuring program.

The decrease in gross profit of $10.9 million is primarily attributable to lower customer demand, restructuring activities, labor inflation and unfavorable foreign exchange impacts.

Cost of revenues decrease was driven by a decrease in raw material and purchased component costs of $7.4 million, or 13.1%;

offset by an increase in labor and overhead expenses of $5.9 million, or 13.7%.

As a percentage of revenues, gross profit margin was 7.3% for the six months ended June 30, 2024 compared to 15.7% for the six months ended June 30, 2023, driven by lower customer demand, restructuring activities, labor inflation, and unfavorable foreign exchange impacts.

The six months ended June 30, 2024 results include charges of $2.5 million associated with the restructuring program.

Selling, General and Administrative Expenses .

SG&A expenses increased $0.3 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

SG&A expenses increased $0.3 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023.

Aftermarket & Accessories Segment Results

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

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, 2024 Compared to Six Months Ended June 30, 2023

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

2024 2023 $ Change % Change

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Gross Profit.

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

Cost of revenues decreased in line with the sales decrease of 9.5%, driven by a decrease in raw material and purchased component costs of $2.7 million, or 13.6%;

and a decrease in labor and overhead expenses of $0.1 million, or 1.1%.

As a percentage of revenues, gross profit margin was 18.9% for the three months ended March 31, 2024 compared to 19.2% for the three months ended March 31, 2023.

The decrease in gross profit margin was primarily due to lower sales volume and product mix.

The decrease in gross profit of $2.1 million is primarily attributable to the lower sales volume.

Cost of revenues decrease was driven by a decrease in raw material and purchased component costs of $5.3 million, or 13.9%, offset by an increase in labor and overhead expenses of $0.9 million, or 4.0%.

As a percentage of revenues, gross profit margin was 19.0% for the six months ended June 30, 2024 compared to 20.2% for the six months ended June 30, 2023.

This was primarily due to lower sales volume, product mix, and higher labor and benefit costs.

The six months ended June 30, 2024 results include charges of $0.2 million associated with the restructuring program.

Selling, General and Administrative Expenses .

SG&A expenses increased $0.3 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

SG&A expenses for the six months ended June 30, 2024 remained consistent with the expenses incurred in the six months ended June 30, 2023.

Industrial Automation Segment Results

Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

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, 2024 Compared to Six Months Ended June 30, 2023

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

2024 2023 $ Change % Change

Revenues $ 9,292 $ 18,757 $ (9,465) (50.5)%

Gross profit (556) 214 (770) NM 1

Gross profit (loss) (748) (422) (326) 77.3

Selling, general & administrative expenses 2,262 2,501 (239) (9.6)

Operating loss (1,995) (862) (1,133) 131.4

Not meaningful

Operating (loss) income

(3,010) (2,923) (87) 3.0

The decrease in Industrial Automation Segment revenues of $9.5 million primarily resulted from lower sales volume due to decreased customer demand.

Gross Profit.

The decrease in gross profit of $0.8 million was primarily attributable to lower sales volume.

Cost of revenues decreased in line with the sales decrease of 55.9%, driven by a decrease in raw material and purchased component costs of $4.2 million, or 62.2%;

and a decrease in labor and overhead expenses of $0.4 million, or 15.8%.

As a percentage of revenues, gross profit margin was (12.9)% for the three months ended March 31, 2024 compared to 2.2% for the three months ended March 31, 2023.

The decrease in gross profit margin is primarily due to the previously noted lower sales volume.

The three months ended March 31, 2024 results include charges of $0.1 million associated with the restructuring program.

The increase in negative gross profit of $0.3 million is primarily attributable to lower sales volume.

Cost of revenues decrease was driven by a decrease in raw material and purchased component costs of $8.6 million, or 60.0%, and a decrease in labor and overhead expenses of $0.5 million, or 10.9%.

As a percentage of revenues, negative gross profit margin was 8.0% for the six months ended June 30, 2024 compared to 2.2% for the six months ended June 30, 2023 due to the previously noted lower sales volume and fixed cost absorption.

The six months ended June 30, 2024 results include charges of $0.2 million associated with the restructuring program.

Selling, General and Administrative Expenses .

SG&A expenses increased $0.4 million for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 primarily attributable to investment in new product development.

SG&A expenses decreased $0.2 million for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily driven by restructuring to be in line with the size of business partially offset by an investment in new product development.

Liquidity and Capital Resources

As of March 31, 2024, the Company had total liquidity of $189.3 million, including $46.8 million of cash and $142.5 million of availability from its U.S.

As of June 30, 2024, the Company had total liquidity of $192.2 million, including $39.3 million of cash and $152.9 million of availability from its U.S.

and China credit facilities.

Our primary sources of liquidity as of March 31, 2024 were operating income, cash and availability under our credit facility.

Our primary sources of liquidity as of June 30, 2024 were operating income, cash and availability under our credit facility.

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.

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We also rely on the timely collection of receivables as a source of liquidity.

As of March 31, 2024 , we had outstanding letters of credit of $1.1 million and borrowing availability of $142.5 million from our U.S.

As of June 30, 2024 , we had outstanding letters of credit of $1.1 million and borrowing availability of $152.9 million from our U.S.

and China credit facilities.

As of March 31, 2024, cash of $46.8 million was held by foreign subsidiaries.

The Company had a $0.5 million deferred tax liability as of March 31, 2024 for the expected future income tax implications of repatriating cash from the foreign subsidiaries for which indefinite reinvestment is not expected.

As of June 30, 2024, cash of $39.3 million was held by foreign subsidiaries.

The Company had a $0.6 million deferred tax liability as of June 30, 2024 for the expected future income tax implications of repatriating cash from the foreign subsidiaries for which indefinite reinvestment is not expected.

Covenants and Liquidity

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Sources and Uses of Cash

Three Months Ended March 31,

Six Months Ended June 30,

(In thousands)

Net cash (used in) provided by operating activities $ (2,356) $ 58

Net cash provided by operating activities $ 10,232 $ 11,522

Net cash used in investing activities (8,066) (9,179)

3 unchanged sentences

Operating activities.

For the three months ended March 31, 2024, net cash used in operating activities was $2.4 million compared to net cash provided by operating activities of $0.1 million for the three months ended March 31, 2023.

Net cash used in operating activities is primarily attributable to a smaller increase in working capital offset by the decrease in net income from the three months ended March 31, 2024 as compared to the three months ended March 31, 2023.

For the six months ended June 30, 2024, net cash provided by operating activities was $10.2 million compared to $11.5 million for the six months ended June 30, 2023.

Net cash provided by operating activities is primarily attributable to a decrease in working capital for the six months ended June 30, 2024 as compared to higher net income offset by an increase in working capital for the six months ended June 30, 2023.

Investing activities.

For the three months ended March 31, 2024, net cash used in investing activities of $1.9 million compared to $3.3 million for the three months ended March 31, 2023 was mainly due to an increase in capital expenditures, offset by $3.2 million proceeds from sale of the Company's FinishTEK business during the quarter.

For the six months ended June 30, 2024, net cash used in investing activities of $8.1 million compared to $9.2 million for the six months ended June 30, 2023 was mainly due to a decrease in capital expenditures, offset by $3.2 million proceeds from sale of the Company's FinishTEK business during the current period.

In 2024, we expect capital expenditures to be in the range of $25 million to $30 million.

Financing activities.

For the three months ended March 31, 2024, net cash provided by financing activities was $14.2 million compared to $12.4 million for the three months ended March 31, 2023.

Net cash provided by financing activities for the three months ended March 31, 2024 is attributable to borrowings under the revolving credit facility to fund the working capital increase.

For the six months ended June 30, 2024, net cash provided by financing activities was $0.4 million compared to $7.9 million for the six months ended June 30, 2023.

Decrease in net cash provided by financing activities in the six months ended June 30, 2024 as compared to the six months ended June 30, 2023 is primarily attributable to a decrease in borrowings under the revolving credit facility to fund the working capital.

Debt and Credit Facilities

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Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2023 Form 10-K.

At March 31, 2024, there have been no material changes to our critical accounting estimates from those disclosed in our 2023 Form 10-K.

At June 30, 2024, there have been no material changes to our critical accounting estimates from those disclosed in our 2023 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, 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 res pect to closing of the recently-announced sale of its Cab Structures Business, 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 and agricultural 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.

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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