Commercial Vehicle Group, Inc. 10-Q

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 and nine months ended September 30, 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. Business Overview CVG is a global provider of systems, assemblies and components to the global commercial vehicle market and the electric vehicle market. We deliver real solutions to complex design, engineering and manufacturing problems while creating positive change for our customers, industries, and communities we serve. We have manufacturing operations in the United States, Mexico, China, United Kingdom, Czech Republic, Ukraine, Morocco, Thailand, India and Australia. 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 customers. We believe our products are used by a majority of the North American Commercial Truck markets and many construction vehicle OEMs, parts and service dealers, and distributors. Key Developments On July 31, 2024, the Company and SVO, LLC ("Buyer") entered into a purchase agreement pursuant to which the Company would sell substantially all of the assets of the Company's business of manufacturing and assembling structured products, including cabs for medium and heavy-duty vehicles, at its facility in Kings Mountain, North Carolina (the Cab Structures business). On September 6, 2024, the Company and Buyer entered into an Amendment to the Purchase Agreement whereby the transaction closed on September 6, 2024 with the Buyer paying the Company $20 million of the $40 million Purchase Price. Pursuant to the Amended Purchase Agreement, the Parties agreed (i) that the remaining $20 million of the Purchase Price would be paid on October 1, 2024, (ii) that the Assigned Contracts (as defined in the Purchase Agreement) and the employees of Seller would transfer to Buyer on October 1, 2024, and (iii) the inventory would be valued as of October 1, 2024, for purposes of determining any adjustment to the Purchase Price.The Company received the remaining portion of the Purchase Price on October 1, 2024. The net proceeds of the transaction were approximately $40 million. The Company used the proceeds for debt paydown and other general corporate purposes. The Company recorded an after-tax gain on the sale of the business of approximately $27.2 million for the three months ended September 30, 2024. On July 30, 2024, the Company and certain of its subsidiaries, as guarantors, entered into Amendment No. 3, to the Credit Agreement. Amendment No. 3 amended 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. The Company repaid $20 million in accordance with Amendment No.3 during the three months ended September 30, 2024. 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. On October 30, 2024, the Company entered into a purchase agreement to sell its First Source Electronics (FSE) business with operations in Elkridge, Maryland for approximately $1.5 million, with a note in the amount of $500 thousand and earn out potential of an additional $1.5 million subject to certain criteria. The Elkridge facility is the primary manufacturing facility of the Company's Industrial Automation segment. CVG recorded an estimated after-tax loss on the contemplated sale of the Industrial Automation business of approximately $7.8 million for the three months ended September 30, 2024. The cab structures and Industrial Automation segment divestitures represent a strategic shift in CVG's business and, in accordance with U.S. GAAP, qualified as discontinued operations. As a result, the operating results and cash flows related to the cab structures business and Industrial Automation segment have been reflected as discontinued operations in the Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Cash Flows. The assets and liabilities that are to be sold have met the requirements to be classified within the Condensed Consolidated Balance Sheets under a held for sale designation. See Note 18, Discontinued Operations, for additional information on the divestitures. Certain indirect corporate costs included within the selling, general and administrative expense caption of the Condensed Consolidated Statements of Operations that were previously allocated to the Kings Mountain facility and Industrial Automation segment do not qualify for classification within discontinued operations and are now reported as selling, general and 24 Table of Contents administrative expense within continuing operations on a consolidated basis and within the Corporate and other segment. CVG is implementing plans to eliminate these costs as part of its restructuring program. During the year ended December 31, 2023 and the nine months ended September 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 $9.8 million of expense during the nine months ended September 30, 2024, related to these programs. Consolidated Results of Operations Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023 The table below sets forth certain consolidated operating data for the three months ended September 30 (dollars are in thousands): 2024 2023 $ Change % Change Revenues $ 171,772 $ 202,897 $ (31,125) (15.3)% Gross profit 16,421 29,309 (12,888) (44.0) Selling, general and administrative expenses 17,481 20,389 (2,908) (14.3) Other (income) expense (1,033) 383 (1,416) NM 1 Interest expense 2,371 2,489 (118) (4.7) Provision (benefit) for income taxes (1,515) 1,367 (2,882) NM 1 Net income (loss) from continuing operations (883) 4,681 (5,564) NM 1 1. Not meaningful Revenues . The decrease in consolidated revenues resulted from: • a $28.4 million, or 16.8%, decrease in OEM and other revenues; • a $2.7 million, or 8.0%, decrease in aftermarket and OES sales; and The decrease in revenues of 15.3% is due primarily to a softening in customer demand in our Vehicle Solutions and Electrical Systems 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 $12.9 million decrease in gross profit is primarily attributable to the impact of lower sales volumes, unfavorable mix, operational inefficiencies and increased restructuring charges. Cost of revenues decreased $18.2 million, or 10.5%, as a result of a decrease in raw material and purchased component costs of $18.0 million, or 16.9%, and a decrease in labor and overhead expenses of $0.2 million, or 0.3%. As a percentage of revenues, gross profit margin was 9.6% for the three months ended September 30, 2024 compared to 14.4% for the three months ended September 30, 2023. The three months ended September 30, 2024 results include charges of $3.5 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 $2.9 million compared to the three months ended September 30, 2023, primarily as a result of the gain on the sale of a building of $3.5 million, offset by increased restructuring charges. As a percentage of revenues, SG&A expense was 10.2% for the three months ended September 30, 2024 compared to 10.0% for the three months ended September 30, 2023. The three months ended September 30, 2024 results include charges of $0.7 million associated with restructuring programs. Other Income . Other Income increased $1.4 million in the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase in other income primarily related to TSA fees of $2.0 million recognized during the three months ended September 30, 2024. Interest Expense . Interest associated with our debt was $2.4 million and $2.5 million for the three months ended September 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. 25 Table of Contents Provision (benefit) for Income Taxes. Income tax benefit of $1.5 million was recorded for the three months ended September 30, 2024 compared to an income tax expense of $1.4 million recorded for the three months ended September 30, 2023. The period over period change in income tax was primarily attributable to a $8.4 million decrease in pre-tax income versus the prior year period. Net Income (Loss) from continuing operations. Net loss from continuing operations was $0.9 million for the three months ended September 30, 2024 compared to net income of $4.7 million for the three months ended September 30, 2023. The decrease in net income is attributable to the factors noted above. Segment Results Vehicle Solutions Segment Results Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023 The table below sets forth certain Vehicle Solutions Segment operating data for the three months ended September 30 (dollars are in thousands): 2024 2023 $ Change % Change Revenues $ 97,296 $ 115,235 $ (17,939) (15.6)% Gross profit 8,774 15,050 (6,276) (41.7) Selling, general & administrative expenses 3,629 6,761 (3,132) (46.3) Operating income 5,145 8,289 (3,144) (37.9) Revenues. The decrease in Vehicle Solutions Segment revenues of $17.9 million was primarily driven by lower sales volume due to decreased customer demand and the wind-down of certain programs. Gross Profit. The decrease in gross profit of $6.3 million was primarily attributable to lower sales volumes, 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 $10.2 million, or 15.9%, and a decrease in labor and overhead expenses of $1.5 million, or 4.1%. As a percentage of revenues, gross profit margin was 9.0% for the three months ended September 30, 2024 compared to 13.1% for the three months ended September 30, 2023. The decrease in gross profit margin was primarily due to lower sales volumes, restructuring activities and increased freight costs. The three months ended September 30, 2024 results include charges of $1.5 million associated with the restructuring program. Selling, General and Administrative Expenses . SG&A expenses decreased $3.1 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily as a result of the gain on the sale of a building of $3.5 million. The three months ended September 30, 2024 results include charges of $0.7 million associated with the restructuring program. Electrical Systems Segment Results Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023 The table below sets forth certain Electrical Systems Segment operating data for the three months ended September 30 (dollars are in thousands): 2024 2023 $ Change % Change Revenues $ 43,380 $ 53,862 $ (10,482) (19.5)% Gross profit 2,213 7,881 (5,668) (71.9) Selling, general & administrative expenses 2,598 2,018 580 28.7 Operating income (loss) (385) 5,863 (6,248) (106.6) 26 Table of Contents Revenues. The decrease in Electrical Systems Segment revenues of $10.5 million primarily resulted from a global softening in the Construction & Agriculture end-markets. Gross Profit. The decrease in gross profit of $5.7 million is primarily attributable to lower sales volumes, restructuring activities, and unfavorable foreign exchange impacts. The decrease in cost of revenues was driven by a decrease in raw material and purchased component costs of $4.3 million, or 17.3%, and a decrease in labor and overhead expenses of $0.5 million, or 2.5%. As a percentage of revenues, gross profit margin was 5.1% for the three months ended September 30, 2024 compared to 14.6% for the three months ended September 30, 2023. The decrease in gross profit margin was primarily due to lower sales volumes, restructuring costs, and unfavorable foreign exchange impacts. The three months ended September 30, 2024 results include charges of $1.3 million associated with the restructuring program. Selling, General and Administrative Expenses . SG&A expenses increased $0.6 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. Aftermarket & Accessories Segment Results Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023 The table below sets forth certain Aftermarket & Accessories Segment operating data for the three months ended September 30 (dollars are in thousands): 2024 2023 $ Change % Change Revenues $ 31,096 $ 33,800 $ (2,704) (8.0)% Gross profit 5,474 6,416 (942) (14.7) Selling, general & administrative expenses 2,328 2,104 224 10.6 Operating income 3,146 4,312 (1,166) (27.0) Revenues. The decrease in Aftermarket & Accessories Segment revenues of $2.7 million primarily resulted from lower sales volume due to a reduction of backlog in the prior period as well as decreased customer demand. Gross Profit. The decrease in gross profit of $0.9 million is primarily attributable to lower sales volume, operational inefficiencies and restructuring related expenses. The cost of revenues decreased in line with the sales decrease of 8.0%, driven by a decrease in raw material and purchased component costs of $3.5 million, or 20.4%; offset by an increase in labor and overhead expenses of $1.8 million, or 17.6%. As a percentage of revenues, gross profit margin was 17.6% for the three months ended September 30, 2024 compared to 19.0% for the three months ended September 30, 2023. The decrease in gross profit margin was primarily due to lower sales volumes, operational inefficiencies and restructuring related expenses. The three months ended September 30, 2024 results include charges of $0.8 million associated with the restructuring program. Selling, General and Administrative Expenses . SG&A expenses increased $0.2 million for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. 27 Table of Contents Consolidated Results of Operations Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023 The table below sets forth certain consolidated operating data for the nine months ended September 30, (dollars are in thousands): 2024 2023 $ Change % Change Revenues $ 560,063 $ 641,747 $ (81,684) (12.7)% Gross profit 60,044 96,714 (36,670) (37.9) Selling, general and administrative expenses 55,531 60,910 (5,379) (8.8) Other (income) expense (615) 488 (1,103) NM 1 Interest expense 6,974 7,910 (936) (11.8) Provision (benefit) for income taxes (1,110) 6,345 (7,455) NM 1 Net income (loss) from continuing operations (736) 21,061 (21,797) NM 1 1. Not meaningful Revenues . The decrease in consolidated revenues resulted from: • a $72.9 million, or 13.6%, decrease in OEM and other revenues; and • a $8.7 million, or 8.2%, decrease in aftermarket and OES sales. The decrease in revenues of $81.7 million is primarily driven by a softening in customer demand across all segments, and the wind-down of certain programs in our Vehicle Solutions segment. Gross Profit . The $36.7 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 $45.0 million, or 8.3%, as a result of a decrease in raw material and purchased component costs of $44.2 million, or 13.1%, and a decrease in labor and overhead expenses of $0.8 million, or 0.4%. As a percentage of revenues, gross profit margin was 10.7% for the nine months ended September 30, 2024 compared to 15.1% for the nine months ended September 30, 2023. The nine months ended September 30, 2024 results include charges of $8.6 million associated with the restructuring programs. Selling, General and Administrative Expenses . SG&A expenses decreased $5.4 million compared to the nine months ended September 30, 2023, primarily as a result of the gain on the sale of a building of $3.5 million and 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 9.9% for the nine months ended September 30, 2024 compared to 9.5% for the nine months ended September 30, 2023. The nine months ended September 30, 2024 results include charges of $1.2 million associated with the restructuring programs. Other Income . Other Income increased $1.1 million in the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase in other income primarily related to TSA fees of $2.0 million recognized during the nine months ended September 30, 2024. Interest Expense . Interest associated with our debt was $7.0 million and $7.9 million for the nine months ended September 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 (benefit) for Income Taxes. An income tax benefit of $1.1 million and income tax expense of $6.3 million were recorded for the nine months ended September 30, 2024 and 2023, respectively. The period over period change in income tax was primarily attributable to the $29.3 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%. The OECD continues to release additional guidance, including administrative guidance on how Pillar Two rules should be interpreted and applied by jurisdictions as they adopt Pillar Two. These changes, when enacted by various countries in which we do business, may increase our taxes in these countries. Changes to these and other areas in relation to international tax reform, including 28 Table of Contents future actions taken by foreign governments in response to Pillar Two, could increase uncertainty and may adversely affect our tax rate and cash flow in future years. We continue to evaluate the potential impact on future periods of Pillar Two, pending legislative adoption by individual countries. Net Income (loss) from continuing operations. Net loss from continuing operations was $0.7 million for the nine months ended September 30, 2024 compared to net income of $21.1 million for the nine months ended September 30, 2023. The decrease in net income is attributable to the factors noted above. Segment Results Vehicle Solutions Segment Results Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023 The table below sets forth certain Vehicle Solutions Segment operating data for the nine months ended September 30, (dollars are in thousands): 2024 2023 $ Change % Change Revenues $ 312,785 $ 362,820 $ (50,035) (13.8)% Gross profit 32,177 49,263 (17,086) (34.7) Selling, general & administrative expenses 15,985 19,609 (3,624) (18.5) Operating income 16,192 29,654 (13,462) (45.4) Revenues. The decrease in Vehicle Solutions Segment revenues of $50.0 million was primarily driven by lower sales volume due to decreased customer demand and the wind-down of certain programs. Gross Profit. The decrease in gross profit of $17.1 million was primarily attributable to lower sales volume, 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 $24.0 million, or 12.0%, and a decrease in labor and overhead expenses of $8.9 million, or 7.9%. As a percentage of revenues, gross profit margin was 10.3% for the nine months ended September 30, 2024 compared to 13.6% for the nine months ended September 30, 2023, driven by lower sales volume, restructuring activities and increased freight costs. The nine months ended September 30, 2024 results include charges of $3.9 million associated with the restructuring program. Selling, General and Administrative Expenses . SG&A expenses decreased $3.6 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily as a result of the gain on the sale of a building of $3.5 million. The nine months ended September 30, 2024 results include charges of $1.0 million associated with the restructuring program. Electrical Systems Segment Results Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023 The table below sets forth certain Electrical Systems Segment operating data for the nine months ended September 30, (dollars are in thousands): 2024 2023 $ Change % Change Revenues $ 149,327 $ 172,236 $ (22,909) (13.3)% Gross profit 9,934 26,524 (16,590) (62.5) Selling, general & administrative expenses 7,799 6,932 867 12.5 Operating income 2,135 19,592 (17,457) (89.1) Revenues. The decrease in Electrical Systems Segment revenues of $22.9 million resulted from lower sales volume due to decreased customer demand and phase out of lower margin business. 29 Table of Contents Gross Profit. The decrease in gross profit of $16.6 million is primarily attributable to lower sales volume, restructuring activities, labor inflation and unfavorable foreign exchange impacts. The decrease in cost of revenues was driven by a decrease in raw material and purchased component costs of $11.7 million, or 14.4%; offset by an increase in labor and overhead expenses of $5.4 million, or 8.4%. As a percentage of revenues, gross profit margin was 6.7% for the nine months ended September 30, 2024 compared to 15.4% for the nine months ended September 30, 2023, driven by lower sales volume, restructuring activities, labor inflation, and unfavorable foreign exchange impacts. The nine months ended September 30, 2024 results include charges of $3.7 million associated with the restructuring program. Selling, General and Administrative Expenses . SG&A expenses increased $0.9 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to increased salaries. Aftermarket & Accessories Segment Results Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023 The table below sets forth certain Aftermarket & Accessories Segment operating data for the nine months ended September 30, (dollars are in thousands): 2024 2023 $ Change % Change Revenues $ 97,951 $ 106,691 $ (8,740) (8.2)% Gross profit 18,091 21,071 (2,980) (14.1) Selling, general & administrative expenses 6,228 6,017 211 3.5 Operating income 11,863 15,054 (3,191) (21.2) Revenues. The decrease in Aftermarket & Accessories Segment revenues of $8.7 million primarily resulted from lower sales volume due to an increase of backlog in the prior period as well as decreased customer demand. Gross Profit. The decrease in gross profit of $3.0 million is primarily attributable to the lower sales volume. The decrease in cost of revenues was driven by a decrease in raw material and purchased component costs of $8.5 million, or 15.6%, offset by an increase in labor and overhead expenses of $2.7 million, or 8.6%. As a percentage of revenues, gross profit margin was 18.5% for the nine months ended September 30, 2024 compared to 19.7% for the nine months ended September 30, 2023. This was primarily due to lower sales volume, product mix, higher labor and benefit costs, and restructuring related expenses. The nine months ended September 30, 2024 results include charges of $1.0 million associated with the restructuring program. Selling, General and Administrative Expenses . SG&A expenses increased $0.2 million for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. Liquidity and Capital Resources As of September 30, 2024, the Company had total liquidity of $177.2 million, including $30.9 million of cash and $146.3 million of availability from its U.S. and China credit facilities. Our primary sources of liquidity as of September 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. However, no assurance can be given that this will be the case. We also rely on the timely collection of receivables as a source of liquidity. As of September 30, 2024 , we had outstanding letters of credit of $1.1 million and borrowing availability of $146.3 million from our U.S. and China credit facilities. As of September 30, 2024, cash of $30.9 million was held by foreign subsidiaries. The Company had a $0.1 million deferred tax liability as of September 30, 2024 for the expected future income tax implications of repatriating cash from the foreign subsidiaries for which indefinite reinvestment is not expected. 30 Table of Contents Covenants and Liquidity 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; however, no assurances can be given that we will be able to comply. We base our forecasts on historical experience, industry forecasts and other assumptions that we believe are reasonable under the circumstances. If actual results are substantially different than our current forecast, we may not be able to comply with our financial covenants. Sources and Uses of Cash Nine Months Ended September 30, 2024 2023 (In thousands) Net cash provided by (used in) operating activities $ (6,835) $ 29,990 Net cash provided by (used in) investing activities 12,868 (15,196) Net cash provided by (used in) financing activities (12,927) 531 Effect of currency exchange rate changes on cash (69) (857) Net increase (decrease) in cash $ (6,963) $ 14,468 Operating activities. For the nine months ended September 30, 2024, net cash used in operating activities was $6.8 million compared to net cash provided by operating activities of $30.0 million for the nine months ended September 30, 2023. Net cash used in operating activities is primarily attributable to a lower net income from continuing and discontinued operations, including cash used to support restructuring programs for the nine months ended September 30, 2024 as compared to higher net income offset by an increase in working capital for the nine months ended September 30, 2023. Investing activities. For the nine months ended September 30, 2024, net cash provided by investing activities of $12.9 million compared to net cash used in investing activities of $15.2 million for the nine months ended September 30, 2023, primarily due to $23.0 million proceeds from sale of the Company's cab structures and FinishTEK businesses during the current period and $4.5 million proceeds from the sale of a building. In 2024, we expect capital expenditures to be in the range of $20 million to $25 million. Financing activities. For the nine months ended September 30, 2024, net cash used in financing activities was $12.9 million compared to net cash provided by financing activities of $0.5 million for the nine months ended September 30, 2023. Decrease in net cash provided by financing activities in the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023 is primarily attributable to the $20.0 million term loan repayment, offset by an increase in borrowings under the revolving credit facility to fund working capital. Debt and Credit Facilities The debt and credit facilities descriptions in Note 4, Debt are incorporated in this section by reference. Critical Accounting Policies and Estimates Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). For a comprehensive discussion of our significant accounting policies, see "Note 1. Significant Accounting Policies", to our consolidated financial statements in Item 8 in our 2023 Form 10-K. Critical accounting estimates are those that are most important to the portrayal of our financial condition and results. These estimates require management's most difficult, subjective, or complex judgments, often as a result of the need to estimate matters that are inherently uncertain. We review the development, selection, and disclosure of our critical accounting estimates with the Audit Com mittee of our board of directors. For information about critical accounting estimates, see Critical Accounting Estimates in "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2023 Form 10-K. At September 30, 2024, there have been no material changes to our critical accounting estimates from those disclosed in our 2023 Form 10-K. 31 Table of Contents 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 res pect to closing of the sale of its Industrial Automation 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. The important factors discussed in “Item 1A - Risk Factors”, among others, could cause actual results to differ materially from those indicated by forward-looking statements made herein and presented elsewhere by management from time to time. Such forward-looking statements represent management’s current expectations and are inherently uncertain. Investors are warned that actual results may differ from management’s expectations. Additionally, various economic and competitive factors could cause actual results to differ materially from those discussed in such forward-looking statements, including, but not limited to, factors which are outside our control. Any forward-looking statement that we make in this report speaks only as of the date of such statement, and we undertake no obligation to update any forward-looking statement or to publicly announce the results of any revision to any of those statements to reflect future events or developments. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless specifically expressed as such, and should only be viewed as historical data.