MANITOWOC CO INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, including the financial statements, accompanying notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations therein, and the interim condensed consolidated financial statements and accompanying notes included in this Quarterly Report on Form 10-Q. All dollar amounts are in millions throughout the tables included in Management’s Discussion and Analysis of Financial Conditions and Results of Operations unless otherwise indicated. Cautionary Statements Regarding Forward-Looking Information All of the statements in this Quarterly Report on Form 10-Q, other than historical facts, are forward-looking statements, including, without limitation, the statements made in the “Management's Discussion and Analysis of Financial Condition and Results of Operations.” As a general matter, forward-looking statements are those focused upon anticipated events or trends, expectations and beliefs relating to matters that are not historical in nature. The words “could,” “should,” “may,” “feel,” “anticipate,” “aim,” “preliminary,” “expect,” “believe,” “estimate,” “intend,” “intent,” “plan,” “will,” “foresee,” “project,” “forecast,” or the negative thereof or variations thereon, and similar expressions identify forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for these forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that forward-looking statements are subject to known and unknown risks, uncertainties and other factors relating to the Company's operations and business environment, all of which are difficult to predict and many of which are beyond the control of the Company. These known and unknown risks, uncertainties and other factors could cause actual results to differ materially from those matters expressed in, anticipated by or implied by such forward-looking statements. These risks, uncertainties, and other factors include, but are not limited to: • Macroeconomic conditions, including inflation, high interest rates and recessionary concerns, as well as continuing global supply chain constraints, labor constraints, logistics constraints and cost pressures such as changes in raw material and commodity costs, have had, and may continue to have, a negative impact on Manitowoc’s ability to convert backlog into revenue which could, and has, impacted its financial condition, cash flows, and results of operations (including future uncertain impacts); • actions of competitors; • changes in economic or industry conditions generally or in the markets served by Manitowoc; • geopolitical events, including the ongoing conflicts in Ukraine and in the Middle East, other political and economic conditions and risks and other geographic factors, has had and may continue to lead to market disruptions, including volatility in commodity prices (including oil and gas), raw material and component costs, energy prices, inflation, consumer behavior, supply chain, and credit and capital markets, and could result in the impairment of assets; • changes in customer demand, including changes in global demand for high-capacity lifting equipment, changes in demand for lifting equipment in emerging economies and changes in demand for used lifting equipment including changes in government approval and funding of projects; • the ability to convert backlog, orders and order activity into sales and the timing of those sales; • failure to comply with regulatory requirements related to the products and aftermarket services the Company sells; • the ability to capitalize on key strategic opportunities and the ability to implement Manitowoc’s long-term initiatives; • impairment of goodwill and/or intangible assets; • changes in revenues, margins and costs; • the ability to increase operational efficiencies across Manitowoc and to capitalize on those efficiencies; • the ability to generate cash and manage working capital consistent with Manitowoc’s stated goals; • work stoppages, labor negotiations, labor rates and labor costs; • the Company’s ability to attract and retain qualified personnel; • changes in the capital and financial markets; • the ability to complete and appropriately integrate acquisitions, strategic alliances, joint ventures or other significant transactions; • issues associated with the availability and viability of suppliers; 22 • the ability to significantly improve profitability; • realization of anticipated earnings enhancements, cost savings, strategic options and other synergies, and the anticipated timing to realize those savings, synergies and options; • the ability to focus on customers, new technologies and innovation; • uncertainties associated with new product introductions, the successful development and market acceptance of new and innovative products that drive growth; • the replacement cycle of technologically obsolete products; • risks associated with high debt leverage; • foreign currency fluctuation and its impact on reported results; • the ability of Manitowoc's customers to receive financing; • risks associated with data security and technological systems and protections; • the ability to direct resources to those areas that will deliver the highest returns; • risks associated with manufacturing or design defects; • natural disasters, other weather events, pandemics and other public health crises disrupting commerce in one or more regions of the world; • issues relating to the ability to timely and effectively execute on manufacturing strategies, general efficiencies and capacity utilization of the Company’s facilities; • the ability to focus and capitalize on product and service quality and reliability; • issues associated with the quality of materials, components and products sourced from third parties and the ability to successfully resolve those issues; • issues related to workforce reductions and potential subsequent rehiring; • changes in laws throughout the world, including governmental regulations on climate change; • the inability to defend against potential infringement claims on intellectual property rights; • the ability to sell products and services through distributors and other third parties; • issues affecting the effective tax rate for the year; • acts of terrorism; and • other risk factors detailed in Manitowoc's 2023 Annual Report on Form 10-K, as such may be amended or supplemented in Manitowoc’s subsequently filed Quarterly Reports on 10-Q (including this report), and its other filings with the United States Securities and Exchange Commission. These statements reflect the current views and assumptions of management with respect to future events. Except to the extent required by the federal securities laws, the Company does not undertake, and hereby disclaims, any duty to update these forward-looking statements, even though its situation and circumstances may change in the future. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date of this report. The inclusion of any statement in this report does not constitute an admission by the Company or any other person that the events or circumstances described in such statement are material. Orders and Backlog Orders and backlog are not measures defined by GAAP and our methodology for determining orders and backlog may vary from the methodology used by other companies. Management uses orders and backlog for capacity and resource planning. The Company believes this information is useful to investors to provide an indication of future revenues. Backlog represents the dollar value of orders which are expected to be recognized in net sales in the future. Orders are included in backlog when an executed binding contract with a price that has a floor has been received but has not been recognized in net sales. Orders for the three months ended September 30, 2024 decreased 20.0% to $424.7 million from $531.2 million for the same period in 2023. The decrease was primarily attributable to lower demand in the Americas. Demand was impacted by uncertainty related to the U.S. presidential election and the high-interest rate environment. Orders were favorably impacted by $1.5 million from changes in foreign currency exchange rates. Orders for the nine months ended September 30, 2024 decreased 12.4% to $1,407.2 million from $1,606.5 million for the same period in 2023. The decrease was primarily attributable to lower demand in the Americas and EURAF segments. Demand in 23 the Americas was impacted by uncertainty related to the U.S. presidential election and the high-interest rate environment. Orders were favorably impacted by $1.5 million from changes in foreign currency exchange rates. As of September 30, 2024, total backlog was $742.1 million, a 19.1% decrease from the December 31, 2023 backlog of $917.2 million, and a 27.8% decrease from the September 30, 2023 backlog of $1,028.1 million. The decrease in backlog from December 31, 2023, was primarily attributable to lower demand during the year. Backlog was favorably impacted from changes in foreign currency exchange rates by $1.4 million and $11.4 million from December 31, 2023 and September 30, 2023, respectively. Results of Operations For The Three and Nine Months Ended September 30, 2024 and 2023: Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 Percentage Change 2024 2023 Percentage Change Net sales 524.8 520.9 0.7 % 1,582.0 1,632.0 (3.1 )% Gross profit 87.6 96.8 (9.5 )% 279.8 326.1 (14.2 )% Gross profit % 16.7 % 18.6 % 17.7 % 20.0 % Engineering, selling and administrative expenses 78.9 77.4 1.9 % 238.6 240.1 (0.6 )% Interest expense 9.6 8.4 14.3 % 28.4 25.5 11.4 % Other income (expense) - net (4.9 ) 1.1 * (3.9 ) (10.0 ) (61.0 )% Provision (benefit) for income taxes (0.3 ) — * 3.2 (1.0 ) * *Measure not meaningful Net Sales Consolidated net sales for the three months ended September 30, 2024 were relatively flat at $524.8 million compared to $520.9 million in the same period in 2023. During the three months ended September 30, 2024, there were a lower number of new crane shipments in the EURAF segment, primarily in the Company’s tower crane product offerings. This was partially offset by a higher number of new crane shipments in the Americas segment. Non-new machine sales for the three months ended September 30, 2024 increased $14.5 million when compared to the same period for 2023, primarily due to higher used crane sales. Net sales were favorably impacted by $2.2 million from changes in foreign currency exchange rates. Consolidated net sales for the nine months ended September 30, 2024 decreased 3.1% to $1,582.0 million from $1,632.0 million for the same period in 2023. The decrease was primarily attributable to a lower number of tower crane shipments in the EURAF segment. Non-new machine sales for the nine months ended September 30, 2024 increased $4.8 million when compared to the same period for 2023. Net sales were favorably impacted by $1.9 million from changes in foreign currency exchange rates. Gross Profit Gross profit for the three months ended September 30, 2024 was $87.6 million, a decrease of $9.2 million as compared to $96.8 million for the same period in 2023. The decrease was primarily attributable to unfavorable product mix and lower absorbed costs due to lower manufacturing volume in the EURAF segment. Gross profit was favorably impacted by $0.4 million from changes in foreign currency exchange rates. Gross profit percentage decreased in the three months ended September 30, 2024 to 16.7% from 18.6% for the same period in 2023 primarily due to unfavorable product mix and lower absorbed costs due to lower manufacturing volume in the EURAF segment. Gross profit for the nine months ended September 30, 2024 was $279.8 million, a decrease of $46.3 million as compared to $326.1 million for the same period in 2023. The decrease was primarily attributable to the lower net sales, unfavorable product mix and lower absorbed costs due to lower manufacturing volume in the EURAF segment. Gross profit was favorably impacted by $0.4 million from changes in foreign currency exchange rates. Gross profit percentage decreased during the nine months ended September 30, 2024 to 17.7% from 20.0% for the same period in 2023 primarily due to unfavorable product mix and lower absorbed costs due to lower manufacturing volume in the EURAF segment. Engineering, Selling, and Administrative Expenses 24 Engineering, selling, and administrative expenses remained relatively flat at $78.9 million for the three months ended September 30, 2024 as compared to $77.4 million for the same period in 2023. During the three months ended September 30, 2024, there was $2.6 million of costs associated with a legal matter with the U.S. EPA, which was partially offset by lower employee related costs. Engineering, selling, and administrative expenses were unfavorably impacted by $0.4 million from changes in foreign currency exchange rates. Engineering, selling and administrative expenses remained relatively flat at $238.6 million for the nine months ended September 30, 2024 as compared to $240.1 million for the same period in 2023. The decrease is primarily due to $2.9 million of lower costs associated with a legal matter with the U.S. EPA when compared to the prior year. Engineering, selling, and administrative expenses were unfavorably impacted by $0.4 million from changes in foreign currency exchange rates. Interest Expense Interest expense for the three months ended September 30, 2024 was $9.6 million as compared to $8.4 million for the same period in 2023. Interest expense increased year-over-year primarily due to higher average debt during the period and higher interest rates on borrowings from the Company's ABL revolving credit facility. See further detail at Note 10, “Debt” to the Condensed Consolidated Financial Statements. Interest expense for the nine months ended September 30, 2024 was $28.4 million as compared to $25.5 million for the same period in 2023. Interest expense increased year-over-year primarily due to higher average debt during the period and higher interest rates on borrowings from the Company's ABL revolving credit facility. See further detail at Note 10, “Debt” to the Condensed Consolidated Financial Statements. Other Income (Expense) - Net Other income (expense) - net was $(4.9) million during the three months ended September 30, 2024 and $1.1 million for the same period in 2023. Other income (expense) – net during the three months ended September 30, 2024 was primarily composed of $3.2 million of currency loss and $1.1 million of non-cash losses associated with the refinancing of the Company’s 2026 Notes. Other income (expense) – net during the three months ended September 30, 2023 was primarily composed of $3.0 million of net foreign currency transaction gains, partially offset by $1.5 million of pension benefit and postretirement health costs. Other income (expense) - net was $(3.9) million during the nine months ended September 30, 2024 and $(10.0) million for the same period in 2023. Other income (expense) - net during the nine months ended September 30, 2024 was primarily composed of $2.2 million of pension related costs, $1.4 million of currency loss, and $1.1 million of non-cash losses associated with the refinancing of the Company’s 2026 Notes, partially offset by $0.7 million of interest income. Other income (expense) – net during the nine months ended September 30, 2023 was primarily composed of a $9.3 million non-cash write-off of foreign currency translation adjustments related to the curtailment of operations in Russia and $4.5 million of pension benefit and postretirement health costs, partially offset by $4.8 million of net foreign currency transaction gains. Provision (Benefit) for Income Taxes For the three months ended September 30, 2024, and 2023, the Company recorded a benefit for income taxes of $0.3 million and zero, respectively. The year-over-year increase in the Company’s benefit for income taxes for the three months ended September 30, 2024, is driven by the tax impact of lower income compared to the prior year. This was partially offset by $2.0 million of discrete tax expense recorded in the current year as compared to $3.1 million of discrete tax benefit recorded in the prior year. For the nine months ended September 30, 2024, and 2023, the Company recorded a provision for income taxes of $3.2 million and a benefit for income taxes of $1.0 million, respectively. The increase in the Company’s tax provision for the nine months ended September 30, 2024, relative to the prior year primarily relates to changes in the discrete tax recorded year over year, partially offset by lower income compared to the prior year. Segment Operating Performance The Company manages its business primarily on a geographic basis. The Company has three reportable segments: the Americas segment, EURAF segment and MEAP segment. Further information regarding the Company’s reportable segments can be found in Note 16, “Segments,” to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. 25 Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 Dollar Change Percentage Change 2024 2023 Dollar Change Percentage Change Net Sales Americas $ 287.1 $ 276.8 $ 10.3 3.7 % $ 867.0 $ 860.6 $ 6.4 0.7 % EURAF 126.8 150.6 (23.8 ) (15.8 )% 446.0 514.6 (68.6 ) (13.3 )% MEAP 110.9 93.5 17.4 18.6 % 269.0 256.8 12.2 4.8 % Segment Operating Income (Loss) Americas $ 23.1 $ 23.5 $ (0.4 ) (1.7 )% $ 76.5 $ 81.6 $ (5.1 ) (6.2 )% EURAF (14.9 ) (7.7 ) (7.2 ) 93.5 % (33.5 ) 2.3 (35.8 ) * MEAP 10.0 12.7 (2.7 ) (21.3 )% 27.5 40.3 (12.8 ) (31.8 )% *Measure not meaningful Americas Americas segment net sales increased 3.7% for the three months ended September 30, 2024 to $287.1 million from $276.8 million for the same period in 2023. The increase was primarily attributable to higher new crane shipments. Non-new machine sales for the three months ended September 30, 2024 increased $2.6 million when compared to the same period in 2023, primarily due to higher used crane shipments and remanufacturing work. Americas segment operating income remained relatively flat at $23.1 million for the three months ended September 30, 2024 as compared to $23.5 million for the same period in 2023. The decline was primarily due to unfavorable product mix, offset by higher net sales. Americas segment net sales for the nine months ended September 30, 2024 was $867.0 million as compared to the $860.6 million for the same period in 2023. The increase was primarily attributable to higher new crane shipments. Non-new machine sales for the nine months ended September 30, 2024 were flat when compared to the same period in 2023. Americas segment operating income decreased $5.1 million for the nine months ended September 30, 2024 to $76.5 million from $81.6 million for the same period in 2023. The decrease was primarily attributable to unfavorable product mix, $2.3 million of higher engineering, selling, and administrative expenses and $0.6 million of higher restructuring costs. This was partially offset by higher net sales. EURAF EURAF segment net sales decreased 15.8% for the three months ended September 30, 2024 to $126.8 million from $150.6 million for the same period in 2023. The decrease was primarily attributable to a lower number of new crane shipments, primarily in the Company’s tower crane product offering. Non-new machine sales for the three months ended September 30, 2024 increased $2.7 million when compared to the same period in 2023, primarily due to an increase in field service work. Segment net sales was favorably impacted by $1.6 million from changes in foreign currency exchange rates. EURAF segment operating loss increased $7.2 million for the three months ended September 30, 2024 to $14.9 million from $7.7 million for the same period in 2023. The increase in operating loss was primarily attributable to the lower net sales and lower absorbed costs due to lower manufacturing volume. EURAF segment net sales decreased 13.3% for the nine months ended September 30, 2024 to $446.0 million from $514.6 million for the same period in 2023. The decrease was primarily attributable to a lower number of new crane shipments. Non-new machine sales for the nine months ended September 30, 2024 declined $6.2 million when compared to the same period in 2023, primarily due to lower aftermarket parts and used crane shipments. Segment net sales was favorably impacted by $2.3 million from changes in foreign currency exchange rates. EURAF segment operating loss increased $35.8 million for the nine months ended September 30, 2024 to $33.5 million from operating income of $2.3 million for the same period in 2023. The increase in operating loss was primarily attributable to the lower net sales and lower absorbed costs due to lower manufacturing volume. MEAP MEAP segment net sales increased 18.6% for the three months ended September 30, 2024 to $110.9 million from $93.5 million for the same period in 2023. The increase was primarily attributable to $9.1 million of higher non-new machine sales, as a 26 result of higher used crane shipments. Segment net sales was favorably impacted by $0.8 million from changes in foreign currency exchange rates. MEAP segment operating income decreased $2.7 million for the three months ended September 30, 2024 to $10.0 million from $12.7 million for the same period in 2023. The decrease was primarily attributable to unfavorable product mix. MEAP segment net sales increased 4.8% for the nine months ended September 30, 2024 to $269.0 million from $256.8 million for the same period in 2023. The increase was primarily attributable to $11.2 million of higher non-new machine sales, as a result of higher used crane shipments. Segment net sales was unfavorably impacted by $0.6 million from changes in foreign currency exchange rates. MEAP segment operating income decreased $12.8 million for the nine months ended September 30, 2024 to $27.5 million from $40.3 million for the same period in 2023. The decrease was primarily attributable to higher manufacturing costs and unfavorable product mix. Financial Condition Cash Flows A summary of cash flows for the nine months ended September 30, 2024 and 2023 are as follows: Nine Months Ended September 30, 2024 2023 Dollar Change Net cash provided by (used for) operating activities $ (63.2 ) $ 23.2 $ (86.4 ) Net cash used for investing activities (29.1 ) (54.6 ) 25.5 Net cash provided by financing activities 81.0 7.4 73.6 Cash and cash equivalents 22.9 40.0 (17.1 ) Cash Flows From Operating Activities Cash flows used for operating activities of $63.2 million for the nine months ended September 30, 2024 increased $86.4 million from cash flows provided by operating activities of $23.2 million for the same period in 2023. The increase in net cash used for operating activities was primarily due to lower net income (loss) adjusted for non-cash items and an increase in net working capital primarily related to higher inventory. Cash Flows From Investing Activities Net cash used for investing activities of $29.1 million for the nine months ended September 30, 2024 decreased $25.5 million from $54.6 million for the same period in 2023. The decrease in net cash used for investing activities was due to $25.5 million of lower capital expenditures. Cash Flows From Financing Activities Net cash provided by financing activities of $81.0 million for the nine months ended September 30, 2024 increased $73.6 million from $7.4 million for the same period in 2023. The increase in net cash provided by financing activities was primarily due to $77.4 million of additional proceeds from the revolving credit facility and a $9.6 million increase of proceeds from other debt – net when compared to the prior year. This was partially offset by $6.7 million of payments for other financing activities and $6.2 million of payments for debt issuance costs related to the refinancing of the ABL Revolving Credit Facility and 2026 Notes. 27 Liquidity and Capital Resources The Company’s liquidity position as of September 30, 2024, December 31, 2023 and September 30, 2023 is summarized as follows: September 30, 2024 December 31, 2023 September 30, 2023 Cash and cash equivalents $ 22.9 $ 34.4 $ 40.0 Revolver borrowing capacity 325.0 275.0 275.0 Other debt availability 45.5 45.2 42.2 Less: Borrowings on revolver (128.6 ) (60.0 ) (70.0 ) Less: Borrowings on other debt (39.5 ) (11.2 ) (27.7 ) Less: Outstanding letters of credit (3.4 ) (3.4 ) (3.2 ) Total liquidity $ 221.9 $ 280.0 $ 256.3 The Company believes its liquidity and expected cash flows from operations are sufficient to meet expected working capital, capital expenditure, and other general ongoing operational needs in the subsequent twelve months. Cash Sources The Company has historically relied primarily on cash flows from operations, borrowings under revolving credit facilities and overdraft facilities, issuances of notes, and other forms of debt financing as its sources of cash. The maximum availability under the Company’s current ABL Revolving Credit Facility is $325.0 million. The borrowing capacity under the ABL Revolving Credit Facility is based on the value of inventory, accounts receivable and certain fixed assets of the Loan Parties. The Loan Parties’ obligations under the ABL Revolving Credit Facility are secured on a first-priority basis, subject to certain exceptions and permitted liens, by substantially all of the personal property and fee-owned real property of the Loan Parties. The liens securing the ABL Revolving Credit Facility are senior in priority to the second-priority liens securing the obligations under the 2031 Notes and the related guarantees. The ABL Revolving Credit Facility has a maturity date of September 18, 2029, and includes a $75.0 million letter of credit sub-facility, $10.0 million of which is available to the German Borrower. In addition to the ABL Revolving Credit Facility, the Company has access to committed and non-committed lines of credit to fund working capital in Europe and China. There are six lines of credit, of which five are denominated in Euros totaling €37.0 million and one denominated in Chinese Yuan for ¥30.0 million. Total U.S. dollar availability as of September 30, 2024 for the six lines of credit is $45.5 million, with $39.5 million outstanding. Debt Outstanding debt as of September 30, 2024 and December 31, 2023 is summarized as follows: September 30, 2024 December 31, 2023 Borrowings under senior secured asset based revolving credit facility $ 128.6 $ 60.0 Senior secured second lien notes due 2026 — 300.0 Senior secured second lien notes due 2031 300.0 — Other debt 43.9 13.7 Deferred financing costs (5.3 ) (1.6 ) Total debt 467.2 372.1 Short-term borrowings and current portion of long-term debt (40.5 ) (13.4 ) Long-term debt $ 426.7 $ 358.7 Both the ABL Revolving Credit Facility and 2031 Notes include customary covenants and events of default. Refer to Note 10, “Debt,” to the Condensed Consolidated Financial Statements for additional discussions of covenants for the ABL Revolving Credit Facility and 2031 Notes. Based upon management’s current plans and outlook, the Company believes it will be able to comply with these covenants during the subsequent twelve months. From time to time, the Company seeks to opportunistically raise capital in the debt capital markets and bank credit markets. 28 Non-GAAP Measures The Company uses EBITDA, adjusted EBITDA, adjusted operating income, Adjusted ROIC and free cash flows, which are financial measures that are not prepared in accordance with GAAP, as additional metrics to evaluate the Company’s performance. The Company believes these non-GAAP measures provide important supplemental information to readers regarding business trends that can be used in evaluating its results because these financial measures provide a consistent method of comparing financial performance and are commonly used by investors to assess performance. These non-GAAP financial measures should be considered together with, and are not substitutes for, the GAAP financial information provided herein. Adjusted ROIC Adjusted ROIC measures how efficiently the Company uses invested capital in its operations. Adjusted ROIC is not a measure defined by GAAP and the Company’s methodology for determining Adjusted ROIC may vary from the methodology used by other companies. Management and the Board of Directors use Adjusted ROIC as a measure to assess operational performance and capital allocation. The Company believes this information is useful to investors as it provides a measure of value creation as a percentage of capital invested. Adjusted ROIC is determined by dividing adjusted net operating profit after tax (“Adjusted NOPAT”) for the trailing twelve-months ended by the five-quarter average of invested capital. Adjusted NOPAT is calculated for each quarter by taking operating income plus the addback of amortization of intangible assets, and the addback or subtraction of restructuring expenses, other non-recurring items – net, and provision for income taxes, which is determined using a 15% tax rate. Invested capital is defined as net total assets less cash and cash equivalents and income tax assets - net plus short-term and long-term debt. Income taxes are defined as income tax payables/receivables, net deferred tax assets/liabilities, and uncertain tax positions. The Company’s Adjusted ROIC as of September 30, 2024 was 6.2%. Below is the calculation of Adjusted ROIC as of September 30, 2024. Three Months Ended September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 Trailing Twelve Months Operating income $ 7.5 $ 12.9 $ 15.2 $ 9.8 $ 45.4 Amortization of intangible assets 0.7 0.8 0.7 0.8 3.0 Restructuring expense 0.5 2.3 0.6 0.3 3.7 Other non-recurring items - net 1 2.6 5.4 0.1 10.8 18.9 Adjusted operating income 11.3 21.4 16.6 21.7 71.0 Provision for income taxes (1.7 ) (3.2 ) (2.5 ) (3.3 ) (10.7 ) Adjusted NOPAT $ 9.6 $ 18.2 $ 14.1 $ 18.4 $ 60.4 September 30, 2024 June 30, 2024 March 31, 2024 December 31, 2023 September 30, 2023 5-Quarter Average Total assets $ 1,776.7 $ 1,747.9 $ 1,780.6 $ 1,706.7 $ 1,692.2 $ 1,740.8 Total liabilities (1,169.1 ) (1,155.6 ) (1,184.6 ) (1,103.4 ) (1,119.2 ) (1,146.4 ) Net total assets 607.6 592.3 596.0 603.3 573.0 594.4 Cash and cash equivalents (22.9 ) (38.1 ) (31.5 ) (34.4 ) (40.0 ) (33.4 ) Short-term borrowings and current portion of long-term debt 40.5 21.4 42.5 13.4 30.3 29.6 Long-term debt 426.7 406.3 372.7 358.7 368.5 386.6 Income tax assets - net (10.1 ) (4.4 ) (3.4 ) (2.6 ) (4.3 ) (4.9 ) Invested capital $ 1,041.8 $ 977.5 $ 976.3 $ 938.4 $ 927.5 $ 972.3 Adjusted ROIC 6.2 % (1) Other non-recurring items - net for the three months ended September 30, 2024 relate to $2.6 million of costs associated with a legal matter with the U.S. EPA. Other non-recurring items – net for the trailing twelve months relate to $18.3 million of costs associated with a legal matter with the U.S. EPA and $0.6 million of one-time costs. Refer to the Company’s previously filed Form 10-K and Form 10-Qs for a description of other non-recurring items - net for the three months ended June 30, 2024, March 31, 2024, and December 31, 2023. 29 EBITDA and Adjusted EBITDA The Company defines EBITDA as net income (loss) before interest, taxes, depreciation, and amortization. The Company defines adjusted EBITDA as EBITDA plus the addback or subtraction of restructuring expense, other (income) expense - net, and other non-recurring items - net. The reconciliation of net income (loss) to EBITDA, and further to adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023 and trailing twelve months is summarized as follows. Three Months Ended September 30, Nine Months Ended September 30, Trailing Twelve 2024 2023 2024 2023 Months Net income (loss) $ (7.0 ) $ 10.4 $ (0.9 ) $ 47.1 $ (8.8 ) Interest expense and amortization of deferred financing fees 9.9 8.7 29.4 26.5 38.1 Provision (benefit) for income taxes (0.3 ) — 3.2 (1.0 ) 9.2 Depreciation expense 14.9 13.7 44.2 41.8 59.0 Amortization of intangible assets 0.7 0.7 2.2 2.4 3.0 EBITDA 18.2 33.5 78.1 116.8 100.5 Restructuring expense 0.5 0.7 3.4 1.0 3.7 Other non-recurring items - net (1) 2.6 0.2 8.1 11.0 18.9 Other (income) expense - net (2) 4.9 (1.1 ) 3.9 10.0 6.9 Adjusted EBITDA $ 26.2 $ 33.3 $ 93.5 $ 138.8 $ 130.0 Adjusted EBITDA margin percentage 5.0 % 6.4 % 5.9 % 8.5 % 6.0 % (1) Other non-recurring items - net for the three months ended September 30, 2024 relate to $2.6 million of costs associated with a legal matter with the U.S. EPA. Other non-recurring items - net for the nine months ended September 30, 2024 relate to $7.9 million of costs associated with a legal matter with the U.S. EPA and $0.2 million of one-time costs. Other non-recurring items - net for the three months ended September 30, 2023 relate to $0.2 million of one-time costs. Other non-recurring items - net for the nine months ended September 30, 2023 relate to $10.8 million of costs associated with a legal matter with the U.S. EPA and $0.2 million of one-time costs. Other non-recurring items – net for the trailing twelve months relate to $18.3 million of costs associated with a legal matter with the U.S. EPA and $0.6 million of one-time costs. (2) Other (income) expense - net includes net foreign currency gains (losses), other components of net periodic pension costs, and other items in the three, nine, and trailing twelve months ended September 30, 2024 and the three and nine months ended September 30, 2023. Other expense – net for the nine and trailing twelve months ended September 30, 2023 includes a $9.3 million write-off of non-cash foreign currency translation adjustments from the curtailment of operations in Russia. Free Cash Flows Free cash flows is defined as net cash provided by (used for) operating activities less cash outflow from investment in capital expenditures. The reconciliation of net cash used for operating activities to f ree cash flows for the nine months ended September 30, 2024 and 2023 is summarized as follows. Nine Months Ended September 30, 2024 2023 Net cash provided by (used for) operating activities $ (63.2 ) $ 23.2 Capital expenditures (34.4 ) (59.9 ) Free cash flows $ (97.6 ) $ (36.7 ) Critical Accounting Policies The Company's critical accounting policies have not materially changed since the 2023 Annual Report on Form 10-K was filed. Refer to the Critical Accounting Policies in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the Annual Report on Form 10-K for the year ended December 31, 2023 for information about the Company’s policies, methodology and assumptions related to critical accounting policies. 30 Item 3. Quantitative and Qualita tive Disclosure about Market Risk The Company’s market risk disclosures have not materially changed since the 2023 Annual Report on Form 10-K was filed. The Company’s quantitative and qualitative disclosures about market risk are incorporated by reference from Part II, Item 7A of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.