What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2023-03-10 compared with 2022-03-11 · 355 added, 607 removed, 907 unchanged (51% of the section changed)

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Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Statements of Operations and Comprehensive Income (Loss)

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Property, Plant and Equipment

Intangible Assets, Net

Intangible Assets

Investment in Joint Venture

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Fair Value Measurements

Subsequent Event

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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March 10, 2023

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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We have audited the accompanying consolidated balance sheets of NN, Inc.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

(a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated March 10, 2023 expressed an unqualified opinion.

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We believe that our audits provide a reasonable basis for our opinion.

Critical audit matter

The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

Classification of Series D Perpetual Preferred Stock and the bifurcated detachable warrants

As described further in Note 14 to the financial statements, the Company completed a private placement of 65 thousand shares of newly designated Series D Perpetual Preferred Stock at a price of $1,000 per share, together with detachable warrants to purchase up to 1.9 million shares of common stock at an exercise price of $0.01 per share on March 22, 2021.

The Series D Perpetual Preferred Stock had an initial liquidation preference of $1,000 per share and is redeemable at the Company’s option in cash at a redemption price equal to the liquidation preference then in effect.

Certain features were bifurcated and accounted for separately from the Series D Perpetual Preferred Stock and were recorded as derivatives.

We identified the classification of the Series D Perpetual Preferred Stock and the bifurcated detachable warrants as a critical audit matter.

The determination of the classification of the Series D Perpetual Preferred Stock and the bifurcated detachable warrants involves an evaluation of the relevant terms and provisions within the Securities Purchase Agreement and Common Stock Warrant Agreement.

The relevant accounting literature is complex;

therefore, the interpretation and application of the accounting literature is subjective and requires specialized skills and knowledge.

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management’s conclusions related to the classification of the Series D Perpetual Preferred Stock and the bifurcated detachable warrants involved especially challenging auditor judgment to determine the proper classification.

Our audit procedures related to the classification issuance of the Series D Perpetual Preferred Stock and the bifurcated detachable warrants included the following, among others.

• We obtained an understanding, evaluated the design, and tested the operating effectiveness of controls related to the accounting for the issuance of the Series D Perpetual Preferred Stock, which included classification of the Series D Perpetual Preferred Stock and the bifurcated detachable warrants.

• We utilized personnel with specialized skill and knowledge to assist in evaluating the appropriateness of management’s conclusions by (1) inspecting and assessing the relevant terms and provisions of the Securities Purchase Agreement and Common Stock Warrant Agreement;

(2) comparing the relevant terms and provisions to management’s analysis;

and (3) assessing the appropriateness of management’s application of the relevant accounting literature.

Critical audit matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ GRANT THORNTON LLP

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March 10, 2023

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of NN, Inc.

Opinion on the Financial Statements

We have audited the consolidated statements of operations and comprehensive income (loss), of changes in stockholders’ equity and of cash flows of NN, Inc.

and its subsidiaries (the “Company”) for the year ended December 31, 2019, including the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for the year ended December 31, 2019 in conformity with accounting principles generally accepted in the United States of America.

Change in Accounting Principle

As discussed in Note 12, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit of these consolidated financial statements in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audit provides a reasonable basis for our opinion.

Emphasis of Matter

As disclosed in Note 1 (not presented herein) to the consolidated financial statements appearing under Item 8 of the Company’s 2019 Annual Report on Form 10-K, the Company is required to comply with a financial ratio covenant pursuant to its Credit Agreement which becomes more restrictive over time and will require the Company to improve financial performance or take other measures to maintain compliance with its debt agreements.

/s/ PricewaterhouseCoopers LLP

Atlanta, Georgia

March 16, 2020, except for the effect of discontinued operations discussed in Note 2 to the consolidated financial statements, as to which the date is March 15, 2021, and except for the 2019 summarized financial information of the unconsolidated joint venture in Note 9 to the consolidated financial statements, as to which the date is March 11, 2022.

We served as the Company's auditor from 2003 to 2020.

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Consolidated Statements of Operations and Comprehensive Income (Loss)

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Depreciation and amortization 47,231 46,195 45,680

Restructuring and integration expense, net — — ( 12 )

Goodwill impairment — — 92,942

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Loss on interest rate swap — 2,033 11,669

Other expense (income), net ( 5,366 ) ( 213 ) 962

Other income, net ( 5,064 ) ( 5,366 ) ( 213 )

Loss from continuing operations before benefit (provision) for income taxes and share of net income from joint venture ( 31,069 ) ( 22,442 ) ( 152,088 )

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Loss from continuing operations ( 26,098 ) ( 14,425 ) ( 139,490 )

Income (loss) from discontinued operations, net of tax (Note 2) 1,200 38,898 ( 15,992 )

Income from discontinued operations, net of tax (Note 2) — 1,200 38,898

Net loss $ ( 26,098 ) $ ( 13,225 ) $ ( 100,592 )

Other comprehensive income (loss):

Reclassification adjustment for discontinued operations $ — $ 5,961 $ —

Foreign currency translation loss $ ( 8,156 ) $ ( 1,135 ) $ ( 1,683 )

Reclassification adjustment for discontinued operations — — 5,961

Interest rate swap:

Change in fair value, net of tax 3,358 59 ( 12,443 )

Reclassification adjustment for losses included in net loss, net of tax 2,906 18,987 1,084

Reclassification adjustment for (gains) losses included in net loss, net of tax ( 420 ) 2,906 18,987

Other comprehensive income (loss) $ ( 5,218 ) $ 1,830 $ 10,822

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Loss from continuing operations per common share $ ( 0.83 ) $ ( 0.82 ) $ ( 3.60 )

Income (loss) from discontinued operations per common share 0.03 0.92 ( 0.38 )

Income from discontinued operations per common share — 0.03 0.92

Net loss per common share $ ( 0.83 ) $ ( 0.79 ) $ ( 2.68 )

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Loss from continuing operations per common share $ ( 0.83 ) $ ( 0.82 ) $ ( 3.60 )

Income (loss) from discontinued operations per common share 0.03 0.92 ( 0.38 )

Income from discontinued operations per common share — 0.03 0.92

Net loss per common share $ ( 0.83 ) $ ( 0.79 ) $ ( 2.68 )

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See Notes to Consolidated Financial Statements.

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Consolidated Balance Sheets

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Cash and cash equivalents $ 12,808 $ 28,656

Accounts receivable, net 71,419 84,615

Accounts receivable, net of allowances of $ 1,469 and $ 1,352 at December 31, 2022 and 2021, respectively

74,129 71,419

Inventories 80,682 75,027

Income tax receivable 12,164 11,808

Prepaid assets 2,794 2,172

Other current assets 9,123 7,200

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Commitments and contingencies (Note 13)

Series D perpetual preferred stock - $ 0.01 par value per share, 65 shares authorized, issued and outstanding at December 31, 2021

Series B convertible preferred stock - $ 0.01 par value per share, 100 shares authorized, issued and outstanding at December 31, 2020

Series D perpetual preferred stock - $ 0.01 par value per share, 65 shares authorized, issued and outstanding at December 31, 2022 and 2021, respectively

64,701 53,807

Stockholders’ equity:

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See Notes to Consolidated Financial Statements.

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Consolidated Statements of Changes in Stockholders’ Equity

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capital Warrants Total

Balance, December 31, 2018 42,104 $ 421 $ 508,655 $ — $ ( 58,491 ) $ ( 31,314 ) $ 419,271

Balance as of December 31, 2019 42,313 $ 423 $ 501,615 $ 1,076 $ ( 105,283 ) $ ( 44,554 ) $ 353,277

Net loss — — — — ( 100,592 ) — ( 100,592 )

Dividends declared or accrued for common stock — — ( 8,933 ) — — — ( 8,933 )

Dividends accrued for preferred stock — — ( 12,373 ) — — — ( 12,373 )

Shares issued for option exercises 5 — 21 — — — 21

Shares issued under stock incentive plans, net of forfeitures 417 4 ( 4 ) — — — —

Share-based compensation expense — — 4,251 — — — 4,251

Restricted shares forgiven for taxes ( 44 ) — ( 157 ) — — — ( 157 )

Change in estimate of share-based award vesting — — ( 1,052 ) — — — ( 1,052 )

Proceeds from issuance of warrants — — — 1,076 — — 1,076

Change in fair value of interest rate swap, net of tax of $ 3,166

— — — — — ( 10,479 ) ( 10,479 )

Reclassification of interest rate swap settlement to net loss, net of tax of $ 327

— — — — — 1,084 1,084

Foreign currency translation loss — — — — — ( 3,845 ) ( 3,845 )

Adoption of new accounting standard — — — — ( 51 ) — ( 51 )

Balance, December 31, 2019 42,313 $ 423 $ 501,615 $ 1,076 $ ( 105,283 ) $ ( 44,554 ) $ 353,277

Reclassification of warrants to liabilities — — — ( 1,076 ) — — ( 1,076 )

Other comprehensive income — — — — — 10,822 10,822

Balance as of December 31, 2020 42,686 $ 427 $ 493,332 $ — $ ( 205,875 ) $ ( 33,732 ) $ 254,152

Net loss — — — — ( 13,225 ) — ( 13,225 )

Dividends accrued for preferred stock — — ( 21,478 ) — — — ( 21,478 )

Shares issued under stock incentive plans, net of forfeitures 387 4 ( 4 ) — — — —

Share-based compensation expense — — 3,221 — — — 3,221

Restricted shares forgiven for taxes ( 52 ) ( 1 ) ( 362 ) — — — ( 363 )

Change in estimate of share-based award vesting — — ( 718 ) — — — ( 718 )

Reclassification of warrants to liabilities (Note 19) — — — ( 1,076 ) — — ( 1,076 )

Change in fair value of interest rate swap, net of tax of $ 3,764

— — — — — ( 12,443 ) ( 12,443 )

Reclassification of interest rate swap settlement to net loss, net of tax of $ 5,742

— — — — — 18,987 18,987

Foreign currency translation loss — — — — — ( 1,683 ) ( 1,683 )

Sale of discontinued operations — — — — — 5,961 5,961

Balance, December 31, 2020 42,686 $ 427 $ 493,332 $ — $ ( 205,875 ) $ ( 33,732 ) $ 254,152

Shares issued for option exercises 6 — 48 — — — 48

Other comprehensive income — — — — — 1,830 1,830

Balance as of December 31, 2021 43,027 $ 430 $ 474,757 $ — $ ( 219,100 ) $ ( 31,902 ) $ 224,185

Net loss — — — — ( 26,098 ) — ( 26,098 )

Dividends accrued for preferred stock — ( 10,894 ) — — — ( 10,894 )

Shares issued for option exercises 6 — 48 — — — 48

Shares issued under stock incentive plans, net of forfeitures 860 9 ( 9 ) — — — —

Share-based compensation expense 4,377 — — — 4,377

Restricted shares forgiven for taxes ( 31 ) — ( 88 ) — — — ( 88 )

Change in estimate of share-based award vesting — — ( 618 ) — — — ( 618 )

Change in fair value of interest rate swap, net of tax of $ 19

— — — — — 59 59

Reclassification of interest rate swap settlement to net loss, net of tax of $ 879

— — — — — 2,906 2,906

Foreign currency translation loss — — — — — ( 1,135 ) ( 1,135 )

Balance, December 31, 2021 43,027 $ 430 $ 474,757 $ — $ ( 219,100 ) $ ( 31,902 ) $ 224,185

Other comprehensive loss — — — — — ( 5,218 ) ( 5,218 )

Balance as of December 31, 2022 43,856 $ 439 $ 468,143 $ — $ ( 245,198 ) $ ( 37,120 ) $ 186,264

See Notes to Consolidated Financial Statements.

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Consolidated Statements of Cash Flows

Year Ended December 31,

Years Ended December 31,

(in thousands) 2022 2021 2020

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Goodwill impairment of discontinued operations — — 146,757

Other impairments — 4,148 643

Impairments of property, plant and equipment — — 4,148

Loss on extinguishment of debt and write-off of debt issuance costs — 2,390 1,532

Total derivative loss (gain), net of cash settlements ( 5,265 ) ( 3,259 ) 15,309

Share of net income from joint venture ( 6,261 ) ( 3,626 ) ( 1,681 )

Share of net income from joint venture, net of cash dividends received ( 347 ) ( 6,261 ) ( 3,626 )

Gain on disposal of discontinued operations, net of tax and cost to sell — ( 1,200 ) ( 233,824 )

Compensation expense from issuance of share-based awards 3,216 4,226 2,822

Share-based compensation expense 4,377 3,216 4,226

Deferred income taxes ( 1,814 ) ( 4,845 ) ( 21,697 )

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Acquisition of property, plant and equipment ( 17,952 ) ( 18,221 ) ( 23,773 )

Proceeds from liquidation of short-term investment — — 8,000

Proceeds from (cash paid for post-closing adjustments on) sale of business, net of cash sold — ( 3,880 ) 743,178

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Cash paid for debt issuance costs ( 136 ) ( 7,360 ) ( 661 )

Dividends paid — — ( 8,879 )

Proceeds from issuance of preferred stock — 61,793 —

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Net change in cash and cash equivalents ( 15,848 ) ( 19,482 ) 16,435

Cash and cash equivalents at beginning of period (1) 48,138 31,703 17,988

Cash and cash equivalents at end of period (1) $ 28,656 $ 48,138 $ 31,703

Supplemental schedule of non-cash operating, investing and financing activities:

Cash and cash equivalents at beginning of year (1) 28,656 48,138 31,703

Cash and cash equivalents at end of year 12,808 28,656 48,138

See Notes to Consolidated Financial Statements.

Consolidated Statements of Cash Flows

Years Ended December 31,

(in thousands) 2022 2021 2020

Supplemental schedule of non-cash investing activities:

Non-cash additions to property, plant and equipment 1,266 4,438 9,644

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_______________________________

(1) Cash and cash equivalents include $ 13.8 million and $ 10.2 million of cash and cash equivalents that were included in current assets of discontinued operations as of December 31, 2019 and December 31, 2018, respectively.

(1) Cash and cash equivalents include $ 13.8 million of cash and cash equivalents that were included in current assets of discontinued operations as of December 31, 2019.

See Notes to Consolidated Financial Statements.

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Notes to Consolidated Financial Statements

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Accounting Standards Recently Adopted

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740) - Simplifying the Accounting for Income Taxes, (“ASU 2019-12”) as part of its initiative to reduce complexity in accounting standards.

ASU 2019-12 removes certain exceptions and provides simplification to specific tax items to improve consistent application.

This standard was effective for us beginning January 1, 2021.

The adoption of ASU 2019-12 did not have a material impact on our consolidated financial statements and related disclosures.

Accounting Standards Not Yet Adopted

In August 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity.

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Further, for the diluted earnings-per-share calculation, the new guidance requires entities to use the if-converted method for all convertible instruments and generally requires entities to include the effect of share settlement for instruments that may be settled in cash or shares, among other things.

We plan to adopt ASU 2020-06 effective January 1, 2022 using the modified retrospective adoption method.

We do not anticipate that the adoption will have a material impact on our consolidated financial statements and related disclosures.

The adoption of ASU 2020-06 effective January 1, 2022 did not have a material impact on our consolidated financial statements and related disclosures.

In May 2021, the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”), which clarifies the accounting for modifications or exchanges of freestanding equity-classified written call options that remain equity classified after modification or exchange.

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The difference between the fair value of the modified warrant and the fair value of the warrant immediately before modification is then recognized as an issuance cost or discount of the related transaction.

ASU 2021-04 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted.

ASU 2021-04 should be applied prospectively to modifications or exchanges occurring after the effective date.

Either the full or modified retrospective adoption method is allowed.

We do not have any equity-classified written call options that would be subject to this guidance.

Therefore, we do not expect any impact on our consolidated financial statements and related disclosures.

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Since we do not have any equity-classified written call options that would be subject to this guidance, the adoption of ASU 2021-04 did not have any impact on our consolidated financial statements and related disclosures during the year ended December 31, 2022.

In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance (“ASU 2021-10”), which requires business entities to provide certain annual disclosures when they have received government assistance and use a grant or contribution accounting model by analogy to other accounting guidance.

Such disclosures include the nature of the transactions, significant terms and conditions, accounting policies, and affected financial statement line items.

ASU 2021-10 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted.

ASU 2021-10 may be applied either prospectively or retrospectively.

We are in the process of assessing the impact ASU 2021-10 may have on our annual disclosures.

We have adopted ASU 2021-10 prospectively for the year ended December 31, 2022.

Cash and Cash Equivalents

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Although we maintain balances that exceed the federally insured limit, we have not experienced any losses related to these balances, and we believe credit risk to be minimal.

We had approximately $ 17.6 million and $ 17.0 million in cash and cash equivalents as of December 31, 2021 and 2020, respectively, held at foreign financial institutions.

We had $ 12.5 million and $ 17.6 million in cash and cash equivalents as of December 31, 2022 and 2021, respectively, held at foreign financial institutions.

Fair Value Measurements

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Estimated useful lives for leasehold improvements are based on the life of the lease.

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Goodwill was tested for impairment on an annual basis in the fourth quarter and between annual tests if a triggering event occurred.

The impairment analysis was performed at the reporting unit level.

As of December 31, 2021 and 2020, there was no remaining goodwill balance due to impairments recognized during the year ended December 31, 2020.

We determine whether an arrangement is a lease at inception.

Lease right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease.

Lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

When the implicit rate is not readily determinable, we use the estimated incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Amortization of lease ROU assets is recognized in expense on a straight-line basis over the lease term.

We recognize short-term leases, which have a term of twelve months or less, on a straight-line basis and do not record a related lease asset or liability for such leases.

Finance lease ROU assets consist primarily of equipment used in the manufacturing process with terms of four years to eight years .

Operating lease ROU assets consist of the following:

• Equipment used in the manufacturing process as well as office equipment with terms of two years to five years ;

• Manufacturing plants and office facilities with terms of four years to 20 years.

Impairment of Long-Lived Assets

Long-lived tangible and intangible assets subject to depreciation or amortization are tested for recoverability when changes in circumstances indicate the carrying value of these assets may not be recoverable.

A test for recoverability is also performed when management has committed to a plan to dispose of a reporting unit or asset group.

Assets to be held and used are tested for recoverability when indications of impairment are evident.

Recoverability of a long-lived tangible or intangible asset is evaluated by comparing its carrying value to the future estimated undiscounted cash flows expected to be generated by the asset or asset group.

Recoverability of a long-lived tangible or

intangible asset, or asset group, is evaluated by comparing its carrying value to the future estimated undiscounted cash flows expected to be generated by the asset or asset group.

If the asset is deemed not recoverable, then the asset is considered impaired and adjusted to fair value which is then depreciated or amortized over its remaining useful life.

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Revenue Recognition

We recognize revenues when control of the good or service is transferred to the customer either at a point in time or, in limited circumstances, as our services are rendered over time.

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or services.

We generally transfer control and recognize revenue when we ship the product from our manufacturing facility to our customer at a point in time, as this is when our customer obtains the ability to direct use of, and obtain substantially all of the remaining benefits from, the product.

In limited circumstances, we recognize revenue over time as services are rendered.

We have elected to recognize the cost for freight and shipping when control over products has transferred to the customer as a component of cost of sales.

We use an observable price to determine the stand-alone selling price for separate performance obligations or a cost-plus-margin approach when an observable price is not available.

The expected duration of our contracts is one year or less, and we have elected to apply the practical expedient that allows entities to disregard the effects of financing when the contract length is less than one year.

The amount of consideration we receive and the revenue we recognize varies with volume rebates and incentives we offer to our customers.

We estimate the amount of variable consideration that should be included in the transaction price utilizing the expected value method or the most likely amount method depending on the nature of the variable consideration.

Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

We utilize the portfolio approach practical expedient to evaluate sales-related discounts on a portfolio basis to contracts with similar characteristics.

The effect on our consolidated financial statements of applying the portfolio approach would not differ materially from evaluation of individual contracts.

We give our customers the right to return only defective products in exchange for functioning products or rework of the product.

These transactions are evaluated and accounted for under ASC Topic 460, Guarantees , and we estimate the impact to the transaction price based on an analysis of historical experience.

Share Based Compensation

5 unchanged sentences

When we have an accumulated deficit, dividends are recorded as a reduction of additional paid-in capital.

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Foreign Currency Translation

6 unchanged sentences

Transaction gains or losses on intercompany loan transactions are recognized as incurred in the “Other expense (income), net” line in the Consolidated Statements of Operations and Comprehensive Income (Loss).

For the years ended December 31, 2021, 2020, and 2019, transaction gains or losses on intercompany loan transactions were $ 0.5 million, $ 0.8 million, and $ 0.4 million, respectively.

For the years ended December 31, 2022, 2021, and 2020, transaction gains (losses) on intercompany loan transactions were $ 0.2 million, $( 0.5 ) million, and $( 0.8 ) million, respectively.

Net Income (Loss) Per Common Share

We are required to allocate earnings or losses for a reporting period to common stockholders and participating securities using the two-class method to compute earnings per share.

In accordance with ASC 260, Earnings Per Share, we allocate earnings or losses to common stockholders and participating securities using the two-class method to compute earnings per share (“EPS”) unless the treasury stock method results in a lower EPS.

The two-class method is an earnings allocation formula that treats participating securities as having rights to earnings that otherwise would have been available to common stockholders.

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Under the two-class method, our net income (loss) is reduced (or increased) by the amount that has been or will be distributed to our participating security holders.

Preferred shares are participating securities that participate in earnings but do not participate in losses.

We have elected to allocate undistributed income to participating securities based on year-to-date results.

Our participating securities, which include preferred stock, do not participate in losses.

Basic net income (loss) per common share is computed by dividing net income (loss) allocable to common shares by the weighted average number of common shares outstanding.

Diluted net income (loss) per common share includes the effect of warrants, convertible preferred stock, stock options and the respective tax benefits unless inclusion would not be dilutive.

Diluted net income (loss) per common share includes the effect of warrants, convertible preferred stock, and stock options unless inclusion would not be dilutive.

Government Assistance

For the year ended December 31, 2022, we received $ 1.4 million in grants and other programs from various governments outside of the U.S.

These amounts were received as employment programs, rent abatements, and incentives for capital expenditures in specific locations.

Amounts received were recognized as reductions to the underlying expense or capital assets.

Discontinued Operations

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The sale of the Life Sciences business furthered management’s strategy to improve liquidity and create the financial flexibility to pursue key growth areas in the Mobile Solutions and Power Solutions segments.

The SPA includes a potential earnout payment of up to $ 70.0 million based on the performance of the Life Sciences business during the year ending December 31, 2022, measured by Adjusted EBITDA targets, as defined by the SPA.

The SPA included a potential earnout payment of up to $ 70.0 million based on the performance of the Life Sciences business during the year ended December 31, 2022.

Since the sold Life Sciences business did not meet the minimum threshold as defined by the SPA, no earnout payment will be received.

After working capital and other closing adjustments, we received cash proceeds at closing of $ 757.2 million in 2020 and paid $ 3.9 million to the buyer during the year ended December 31, 2021, for post-closing adjustments.

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In accordance with the terms of the SPA, we agreed to indemnify the buyer for certain tax liabilities on its consolidated federal income tax return related to the Life Sciences business during the portion of the year ended December 31, 2020, prior to the change in ownership on October 6, 2020.

We recognized a tax indemnification of $ 1.2 million during the year ending December 31, 2020.

During the year ended December 31, 2021, we recognized a gain on disposal of discontinued operations of $ 1.2 million related to the tax indemnification as the actual tax liability was determined to be $ 0 .

We recognized a tax indemnification of $ 1.2 million during the year ended December 31, 2020 which was reversed during the year ended December 31, 2021, as the actual tax liability was determined to be $ 0 .

In accordance with ASC 205-20, Presentation of Financial Statements - Discontinued Operations, the operating results of the Life Sciences business are classified as discontinued operations.

The presentation of discontinued operations includes revenues and expenses of the discontinued operations and the gain on the disposition of the business, all net of tax, as one line item on the Consolidated Statements of Operations and Comprehensive Income (Loss).

The Consolidated Statements of Operations and Comprehensive Income (Loss) for all periods presented have been revised to reflect this presentation.

The Consolidated Statements of Operations and

Comprehensive Income (Loss) for all periods presented have been revised to reflect this presentation.

Accordingly, the results of the Life Sciences business have been excluded from continuing operations and segment results for all periods presented in the consolidated financial statements and the accompanying notes unless otherwise stated.

The Consolidated Statements of Cash Flows include cash flows of the Life Sciences business in each line item unless otherwise stated.

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The following table presents the results of operations of the discontinued operations.

Years Ended December 31,

2021 2020 2019

Net sales $ — $ 225,255

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Other operating expense, net — 41

Income (loss) from operations — ( 138,517 ) 27,482

Income from operations — ( 138,517 )

Interest expense — 48,893

Loss on extinguishment of debt and write-off of debt issuance costs — 1,388

Other expense (income), net — ( 322 ) 178

Other expense, net — ( 322 )

Loss from discontinued operations before costs of disposal and benefit for income taxes — ( 188,476 )

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Total interest expense of discontinued operations $ — $ 48,893

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The following table presents the significant noncash items and cash paid for capital expenditures of discontinued operations for each period presented.

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• Power Solutions.

Power Solutions is focused on growth in the electrical, general industrial, automotive, aerospace, defense, and medical end markets.

Within this group we combine materials science expertise with advanced engineering and production capabilities to design and manufacture a broad range of high-precision metal and plastic components, assemblies, and finished devices used in applications ranging from power control to flight control and for military devices.

Power Solutions is focused on growth in the electrical, general industrial, automotive, and medical end markets.

We manufacture a variety of products including electrical contacts, connectors, contact assemblies, and precision stampings for the electrical end market and high precision products for the aerospace and defense end market utilizing our extensive process technologies for optical grade plastics, thermally conductive plastics, titanium, Inconel, magnesium, and electroplating.

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These divisions are considered our two operating segments as each has engaged in business activities for which it earns revenues and incurs expenses, discrete financial information is available for each, and this is the level at which the chief operating decision maker reviews discrete financial information for purposes of allocating resources and assessing performance.

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The following tables present results of continuing operations by reportable segment.

Solutions Power

Solutions Corporate

Consolidations Total

Year Ended December 31, 2021

Net sales $ 285,863 $ 191,800 $ ( 79 ) (a) $ 477,584

Depreciation and amortization 28,769 15,892 1,534 46,195

Income (loss) from operations 9,039 6,493 ( 24,536 ) $ ( 9,004 )

Interest expense ( 12,664 )

Other ( 774 )

Loss from continuing operations before income taxes and share of net income from joint venture $ ( 22,442 )

Share of net income from joint venture $ 6,261 $ — $ — $ 6,261

Expenditures for long-lived assets 15,411 2,200 610 18,221

Total assets 357,171 (b) 184,196 37,734 579,101

Solutions Power

Solutions Corporate

Consolidations Total

The following table presents our financial performance by reportable segment.

Year Ended December 31,

Net sales $ 256,360 $ 171,269 $ ( 95 ) (a) $ 427,534

Depreciation and amortization 28,298 15,730 1,652 45,680

Goodwill impairment — 92,942 — 92,942

2022 2021 2020

Mobile Solutions $ 293,536 $ 285,863 $ 256,360

Power Solutions 205,204 191,800 171,269

Corporate and Consolidations (1) ( 2 ) ( 79 ) ( 95 )

Total $ 498,738 $ 477,584 $ 427,534

Income (loss) from operations:

Interest expense ( 18,898 )

Other ( 15,733 )

Loss from continuing operations before income taxes and share of net income from joint venture $ ( 152,088 )

Share of net income from joint venture $ 3,626 $ — $ — $ 3,626

Expenditures for long-lived assets 12,400 2,754 203 15,357

Total assets 370,985 (b) 197,348 56,629 624,962

Solutions Power

Solutions Corporate

Consolidations Total

Year Ended December 31, 2019

Net sales $ 297,749 $ 192,100 $ ( 335 ) (a) $ 489,514

Mobile Solutions $ ( 2,165 ) $ 9,039 $ 5,228

Power Solutions 3,536 6,493 ( 85,983 )

Corporate and Consolidations ( 22,463 ) ( 24,536 ) ( 36,702 )

Total $ ( 21,092 ) $ ( 9,004 ) $ ( 117,457 )

Depreciation and amortization:

Income (loss) from operations 9,553 13,881 ( 41,027 ) $ ( 17,593 )

Interest expense ( 13,030 )

Other ( 1,502 )

Loss from continuing operations before income taxes and share of net income from joint venture $ ( 32,125 )

Share of net income from joint venture $ 1,681 $ — $ — $ 1,681

Mobile Solutions $ 28,192 $ 28,769 $ 28,298

Power Solutions 17,483 15,892 15,730

Corporate and Consolidations 1,556 1,534 1,652

Total $ 47,231 $ 46,195 $ 45,680

Expenditures for long-lived assets:

Mobile Solutions $ 14,590 $ 15,411 $ 12,400

Power Solutions 2,401 2,200 2,754

Corporate and Consolidations 961 610 203

Total $ 17,952 $ 18,221 $ 15,357

_______________________________

(a) Includes eliminations of intersegment transactions which occur during the ordinary course of business.

(b) Total assets in Mobile Solutions includes $ 34.0 million and $ 27.0 million as of December 31, 2021 and 2020, respectively, related to the investment in our 49 % owned joint venture (Note 9).

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The following table summarizes long-lived tangible assets by geographical region.

Property, Plant, and Equipment, Net

(1) Includes eliminations of intersegment transactions which occur during the ordinary course of business.

The following table summarizes total assets by reportable segment.

As of December 31,

Mobile Solutions (1) $ 338,338 $ 357,171

Power Solutions 178,129 184,196

Corporate and Consolidations 29,660 37,734

Total $ 546,127 $ 579,101

_______________________________

(1) Total assets in Mobile Solutions includes $ 31.8 million and $ 34.0 million as of December 31, 2022 and 2021, respectively, related to the investment in our 49 % owned joint venture (Note 9).

The following table summarizes long-lived tangible assets by country.

As of December 31,

United States $ 104,360 $ 112,430

Europe $ 36,972 $ 40,663

Asia 32,605 33,854

China 29,603 32,605

France 24,536 26,977

Mexico 15,235 12,056

South America 15,042 17,866

All foreign locations $ 85,663 $ 93,613

Brazil 14,829 15,042

Poland 9,074 9,995

All foreign countries $ 93,277 $ 96,675

Total $ 197,637 $ 209,105

Accounts Receivable

Accounts receivable, net, are comprised of the following amounts:

As of December 31,

Trade $ 72,771 $ 86,659

Less—allowance for credit losses 1,352 2,044

Accounts receivable, net $ 71,419 $ 84,615

The following table presents changes in allowance for credit losses.

The following table presents changes in the allowance for credit losses.

Years Ended December 31,

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Balance at end of year $ 1,469 $ 1,352 $ 2,044

As of December 31, 2021, no customer represented greater than 10% of consolidated accounts receivable.

As of December 31, 2020, one customer represented 11 % of consolidated accounts receivable, which is primarily related to Mobile Solutions.

As of December 31, 2022 and 2021, no customer represented greater than 10% of our consolidated accounts receivable balance.

Accounts Receivable Sales Programs

We participate in programs established by our customers which allows us to sell certain receivables from that customer on a non-recourse basis to a third-party financial institution.

During the year ended December 31, 2022, we incurred fees of $ 0.6 million related to the sale of receivables which is recorded in the Other income, net line item on the Consolidated Statements of Operations and Comprehensive Income (Loss).

Inventories are comprised of the following amounts:

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Total inventories $ 80,682 $ 75,027

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Property, Plant and Equipment

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Property, plant and equipment, net $ 197,637 $ 209,105

We monitor property, plant and equipment for any indicators of potential impairment.

We recognized impairment charges of $ 4.1 million and $ 0.6 million for the years ended December 31, 2020 and 2019, respectively, related to the early retirement of identified fixed assets.

There were no impairment charges for the year ended December 31, 2021.

The impairment charges were recorded to the “Other operating expense (income), net,” line item on the Consolidated Statements of Operations and Comprehensive Income (Loss).

The impairment charges were determined by writing the assets down to the estimated salvage value, less disposal costs.

For the years ended December 31, 2022, 2021, and 2020, we recorded depreciation expense of $ 31.4 million, $ 31.8 million, and $ 31.3 million, respectively.

All of our net goodwill was recorded in the Power Solutions reportable segment.

The following table shows changes in the carrying amount of Power Solutions goodwill.

Balance as of December 31, 2019 $ 94,779

Currency impact and other ( 1,837 )

Impairments ( 92,942 )

Balance as of December 31, 2020 $ —

We monitor property, plant and equipment for any indicators of potential impairment.

There were no impairment charges for the years ended December 31, 2022 and 2021.

We recognized an impairment charge of $ 4.1 million for the year ended December 31, 2020, related to the early retirement of identified fixed assets.

The impairment charge was recorded to the “Other operating expense (income), net,” line item on the Consolidated Statements of Operations and Comprehensive Income (Loss).

The impairment charge was determined by writing the assets down to the estimated salvage value, less disposal costs.

During the first quarter of 2020, our market capitalization declined to a level that was less than the net book value of our stockholders’ equity.

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The goodwill impairment analysis required significant judgments to calculate the fair value for the Power Solutions reporting unit, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term growth rate for each operating segment, and determination of weighted average cost of capital.

Our forecasts used in the goodwill impairment analysis reflected our expectations of declines in sales resulting from COVID-19.

Significant assumptions and estimates are involved in the application of the discounted cash flow model to forecast operating cash flows, including market growth and market share, sales volumes and prices, costs to produce, discount rate, and estimated capital needs.

Our forecasts used in the goodwill impairment analysis reflected our expectations of declines in sales resulting from the COVID-19 pandemic.

Significant assumptions and estimates are involved in the application of the discounted cash flow model

to forecast operating cash flows, including market growth and market share, sales volumes and prices, costs to produce, discount rate, and estimated capital needs.

Management considers historical experience and all available information at the time the fair values of its reporting units are estimated.

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As of December 31, 2022 and 2021, there was no remaining goodwill balance.

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Intangible Assets, Net

Intangible Assets

The following table shows changes in the carrying amount of intangible assets, net, by reportable segment.

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December 31, 2022 December 31, 2021

Life in Years Gross

Date Accumulated

Gross Carrying Value as of Acquisition Date Accumulated

Amortization Net

Date Accumulated

Value Gross Carrying Value as of Acquisition Date Accumulated

Amortization Net

Customer relationships $ 173,746 $ ( 103,021 ) $ 70,725 $ 173,746 $ ( 87,895 ) $ 85,851

$ 173,746 $ ( 87,895 ) $ 85,851 $ 173,746 $ ( 74,250 ) $ 99,496

Trademark and trade name 7,527 ( 5,361 ) 2,166 7,527 ( 4,660 ) 2,867

7,527 ( 4,660 ) 2,867 7,527 ( 3,958 ) 3,569

Total identified intangible assets $ 181,273 $ ( 108,382 ) $ 72,891 $ 181,273 $ ( 92,555 ) $ 88,718

At December 31, 2022, the estimated useful life of customer relationships and trademarks and trade names was 5.3 years and 5.7 years, respectively.

Intangible assets that are fully amortized are removed and no longer represented in the gross carrying value or accumulated amortization.

The following table shows estimated future amortization expense for the next five years and thereafter.

The following table shows estimated future amortization expense for each of the next five years.

Year Ending December 31,

2023 $ 14,167

Thereafter 18,352

Total $ 88,718

Intangible assets are reviewed for impairment when changes in circumstances indicate the carrying value of those assets may not be recoverable.

At December 31, 2021, our market capitalization declined to a level that was less than the net book value of our stockholders’ equity.

The decline in market capitalization was a triggering event that caused us to perform an impairment analysis on our long-lived assets as of December 31, 2021.

Based on our analysis, the carrying values of the long-lived assets were recoverable and no impairment charge was recorded during the year ended December 31, 2021.

As of December 31, 2022, our market capitalization was at a level that was less than the net book value of our stockholders’ equity, which was deemed a triggering event that caused us to perform impairment analyses on our long-lived assets.

Based on our analyses, the carrying values of the long-lived assets were recoverable and no impairment charge was recorded during the year ended December 31, 2022.

Investment in Joint Venture

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(the “JV”), a joint venture located in Wuxi, China.

The JV is jointly controlled and managed, and we account for it under the equity method.

The JV is jointly controlled and managed, and we account for it under the equity method, with the share of net income from the joint venture recorded in the Mobile Solutions segment.

The following table shows changes in our investment in the JV.

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Share of earnings 6,592

Foreign currency translation gain 801

Dividends paid by joint venture ( 6,245 )

Foreign currency translation loss ( 2,590 )

Balance as of December 31, 2022 $ 31,802

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The following tables show summarized financial information of the unconsolidated JV.

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We recognized sales to the JV of $ 0.1 million, $ 0.4 million, and $ 0.1 million during the years ended December 31, 2022, 2021, and 2020, respectively.

Amounts due to us from the JV as of December 31, 2021 were $ 4.4 million, which includes a $ 4.0 million dividend declared by the JV in 2021 and paid to us in January 2022.

The following table summarizes the loss from continuing operations before benefit (provision) for income taxes and share of net income from joint venture.

Amounts due to us from the JV as of December 31, 2022 were $ 0.1 million.

The following table summarizes the income (loss) from continuing operations before benefit (provision) for income taxes and share of net income from joint venture.

Years Ended December 31,

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Foreign 4,576 3,014 2,250

Total current tax expense (benefit) 2,380 6,550 ( 2,045 )

Total current tax expense 3,406 2,380 6,550

Deferred taxes:

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Foreign ( 986 ) ( 154 ) ( 1,852 )

federal and foreign valuation allowance 5,538 2,066 ( 592 )

Total deferred tax expense (benefit) ( 4,136 ) ( 15,522 ) 2,350

federal, state and foreign valuation allowance 5,376 5,538 2,066

Total deferred tax benefit ( 1,785 ) ( 4,136 ) ( 15,522 )

Total income tax expense (benefit) $ 1,621 $ ( 1,756 ) $ ( 8,972 )

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The following table presents a reconciliation of income taxes based on the U.S.

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Goodwill impairment — % — % ( 12.7 ) %

Nondeductible asset loss — % — % ( 2.2 ) %

Deferred true-up ( 6.4 ) % — % — %

Research and development tax credit 1.5 % 2.3 % 0.4 %

Change in uncertain tax positions — % 0.7 % 2.2 %

Impact of 2019 Treasury regulations — % — % ( 18.4 ) %

CARES Act — % — % 2.7 %

Interest on CARES Act refund 1.8 % — % — %

Return to provision 1.3 % 0.8 % ( 0.5 ) %

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Effective tax rate ( 5.2 ) % 7.8 % 5.9 %

Our effective tax rate was ( 5.2 )% for 2022 which differed from the U.S.

federal statutory tax rate of 21 % primarily due to the impact of our valuation allowance change during the year.

Our effective tax rate for continuing operations was 7.8 % for 2021.

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The 2020 effective tax rate for continuing operations differs from the U.S.

federal statutory tax rate of 21 % primarily due to (1) the impact of the impairment of nondeductible goodwill which is treated as a permanent difference and (2) the accrual of taxes on unremitted earnings of foreign subsidiaries which may be repatriated.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted.

Among other provisions, the CARES Act allows for the carryback of certain tax losses and favorably impacts the deductibility of interest expense and depreciation.

The CARES Act had a material impact on our consolidated financial statements, primarily due to a higher enacted federal rate in the carryback periods, and has been accounted for in the benefit for income taxes for the year ended December 31, 2020.

The CARES Act had a material impact on our consolidated financial statements, primarily due to enacted federal rate difference in the carryback periods, and has been accounted for in the benefit for income taxes for the year ended December 31, 2020.

On October 6, 2020, we sold our Life Sciences business via a sale of our equity interest in Precision Engineered Products Holdings, Inc., a wholly owned U.S.

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federal, state, and foreign tax impacts are reflected in the tables within this footnote.

Our effective tax rate for continuing operations was ( 1.0 )% for 2019.

The 2019 effective tax rate for continuing operations differs from the U.S.

federal statutory tax rate of 21 % principally due to a discrete tax charge of $ 6.0 million related to final tax regulations published by the Department of the Treasury and Internal Revenue Service on February 4, 2019.

The tax rate was also impacted by valuation of its state tax attributes.

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The following table summarizes the principal components of the deferred tax assets and liabilities.

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Inventories 2,292 3,368

Interest rate swap — 3,611

Section 174 research and development costs 1,859 —

Pension and personnel accruals 1,717 2,422

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Net operating loss carryforwards 24,299 23,629

Unrealized losses 2,143 1,529

Credit carryforwards 2,803 3,044

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Management believes that certain of the state NOL carryovers will more likely than not expire prior to utilization.

As such, a valuation allowance of $ 13.1 million (net of federal benefit) has been established to reduce the state attribute balance to the amount expected to be utilized before expiration.

As such, a valuation allowance of $ 15.8 million (prior to federal benefit) has been established to reduce the state attribute balance to the amount expected to be utilized before expiration.

We also have $ 4.8 million, tax-effected, of foreign NOL carryovers at December 31, 2022.

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We have recognized a valuation allowance of $ 1.9 million for the foreign tax credits.

In addition, we have $ 1.0 million of state deferred tax assets for which we believe recognition is not appropriate.

In addition, we have $ 2.1 million (prior to federal benefit) of state deferred tax assets for which we believe recognition is not appropriate.

We have a U.S.

federal and state deferred tax asset related to currency losses on intercompany loans and interest expense carryforwards.

Management believes it is more likely than not that the benefit for these assets will not be realized based on timing of expected repayment of the intercompany loans.

We have established a valuation allowance of $ 2.1 million and $ 4.0 million, respectively, to eliminate the carrying value of these assets.

federal and state deferred tax asset related to interest expense carryforwards.

Management believes it is more likely than not that the benefit for this assets will not be realized.

We have established a valuation allowance of $ 8.0 million to eliminate the carrying value of this asset.

Management assesses available positive and negative evidence to estimate whether it is more likely than not sufficient future taxable income will be generated to provide use of the existing deferred tax assets.

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On the basis of this evaluation, as of December 31, 2022, a valuation allowance of $ 30.2 million has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized without consideration of future earnings growth.

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Management believes all remaining tax assets will more likely than not be realized.

However, the amount of the deferred tax asset realized will change based on future conditions, and the amount considered realizable will be adjusted if objective negative evidence in the form of cumulative losses is no longer present allowing additional weight to be given to subjective evidence such as our projections for growth.

However, the amount of the deferred tax asset realized will change based on future conditions, and the amount considered realizable will be adjusted if objective

negative evidence in the form of cumulative losses is no longer present allowing additional weight to be given to subjective evidence such as our projections for growth.

During 2022, the valuation allowance increased by $ 4.4 million, primarily due to allowances recorded against U.S.

federal net operating loss carryforwards and carryforwards of disallowed interest expense which are subject to certain annual deduction limitations.

The increase was partially offset by utilization of previously reserved net operating loss carryforwards in certain foreign jurisdictions.

The increase was partially offset by utilization of previously reserved net operating loss carryforwards in certain foreign jurisdictions, the write-off of deferred tax assets and adjustments to state net operating losses resulting from amended returns for which a full valuation allowance was recorded.

As a result of the deemed mandatory repatriation provisions in the U.S.

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income tax purposes.

However, we continue to evaluate quarterly the impact that repatriation of foreign earnings would have on withholding and other taxes.

As of December 31, 2021, we have recorded a liability of $ 5.6 million for the anticipated withholding taxes that would be due upon repatriation of the unremitted earnings of those subsidiaries for which management does not intend to permanently reinvest all earnings.

However, we continue to evaluate the impact that repatriation of foreign earnings would have on withholding and other taxes.

As of December 31, 2022, we have recorded a liability of $ 5.0 million for the anticipated withholding taxes that would be due upon repatriation of the unremitted earnings of those subsidiaries for which management does not intend to permanently reinvest.

In 2021, the Company asserted that it was permanently reinvested in certain jurisdictions for which it previously was unable to assert permanent reinvestment.

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Accrued interest and penalties of $ 0.5 million, $ 0.5 million, and $ 0.6 million are included in other non-current liabilities as of December 31, 2022, 2021, and 2020, respectively.

In 2022, we accrued $ 0.6 million of interest on IRS refunds relating to the CARES Act.

We initially filed refund claims in 2021 and will be accruing interest quarterly until refunds are received.

The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties.

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Additions for tax positions of prior years — — 121

Settlements for tax positions of prior years — — ( 275 )

Reductions for tax positions of prior years ( 7 ) ( 122 ) ( 2,463 )

Balance at end of year $ 118 $ 125 $ 247

The reduction to unrecognized tax benefits in 2021 is related to the remeasurement of previously unrecognized tax benefits.

The reduction to unrecognized tax benefits in 2022 is related to the foreign currency remeasurement of previously unrecognized tax benefits.

As of December 31, 2022, the unrecognized tax benefits would, if recognized, impact our effective tax rate by $ 0.6 million, inclusive of the impact of interest and penalties.

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The tax holidays are conditional upon our meeting certain employment and investment thresholds.

The tax holidays did not impact our 2022 foreign taxes.

The impact of these tax holidays decreased foreign taxes by $ 0.2 million and $ 0.2 million for 2021 and 2020, respectively.

The tax holidays had no impact on our 2019 foreign taxes.

On March 22, 2021, we entered into a new $ 150.0 million term loan facility (the “Term Loan Facility”) and a new $ 50.0 million asset backed credit facility (the “ABL Facility”).

The proceeds from the Term Loan Facility were used to prepay the

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amounts outstanding on our previous term loans.

The previous credit facility was terminated and consisted of a Senior Secured Term Loan, Incremental Term Loan, and Senior Secured Revolver.

No amounts were outstanding on the Senior Secured Revolver at the time of termination.

The following table presents outstanding debt balances as of December 31, 2021 and 2020.

The following table presents the outstanding debt balances.

As of December 31,

Term Loan Facility $ 147,375 $ 148,875

Senior Secured Term Loan — 47,728

Incremental Term Loan — 22,716

International lines of credit and other loans 10,930 14,418

ABL Facility 1,000 —

International loans 8,729 10,930

Total principal 157,104 159,805

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_______________________________

(1) In addition to this amount, costs of $ 0.7 million related to the ABL Facility were recorded in other non-current assets as of December 31, 2021, and $ 1.8 million related to the Senior Secured Revolver are recorded in other non-current assets as of December 31, 2020.

(1) In addition to this amount, costs of $ 0.6 million and $ 0.7 million related to the ABL Facility were recorded in other non-current assets as of December 31, 2022 and 2021, respectively.

We capitalized interest costs of $ 0.6 million, $ 0.3 million, and $ 0.2 million in the years ended December 31, 2022, 2021, and 2020, respectively, related to construction in progress.

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At December 31, 2022, the Term Loan Facility bore interest, based on one-month LIBOR, at 11.259 %.

We have an interest rate swap, which expires in July 2024, that changes the one-month LIBOR to a fixed rate of 1.291 % on $ 60.0 million of the outstanding balance of the Term Loan Facility.

Refer to Note 19 for further discussion of the interest rate swap agreement.

The Term Loan Facility requires quarterly principal payments of $ 0.4 million with the remaining unpaid principal amount due on the final maturity date of September 22, 2026.

We may be required to make additional principal payments annually that are calculated as a percentage of our excess cash flow, as defined by the lender, based on our net leverage ratio.

The Term Loan Facility is collateralized by all of our assets.

The Term Loan Facility has a first lien on all assets other than accounts receivable and inventory and has a second lien on accounts receivable and inventory.

On March 3, 2022, we amended our Term Loan Facility, which increased the quarterly maximum consolidated net leverage ratio.

We were in compliance with all requirements under the Term Loan Facility as of December 31, 2022.

On March 3, 2022, we amended our Term Loan Facility, which increases the quarterly maximum consolidated net leverage ratio beginning with the first quarter of 2022 (see Note 20).

The Term Loan Facility was issued at a $ 3.8 million discount.

We capitalized an additional $ 2.8 million in new debt issuance costs related to the Term Loan Facility.

Debt issuance costs and original issue discount related to the Term Loan Facility are recorded as a direct reduction to the carrying amount of the associated long-term debt and amortized over the term of the debt.

The Term Loan Facility was issued at a $ 3.8 million discount and we capitalized an additional $ 2.8 million in new debt issuance costs.

These costs are recorded as a direct reduction to the carrying amount of the associated long-term debt and amortized over the term of the debt.

The ABL Facility provides for a senior secured revolving credit facility in the amount of $ 50.0 million, of which $ 30.0 million is available in the form of letters of credit and $ 5.0 million is available for the issuance of short-term swingline loans.

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Interest payments are due monthly on borrowings that utilize one-month LIBOR and quarterly on borrowings that utilize three-month or six-month LIBOR.

At December 31, 2021, using one-month LIBOR plus a 1.75 % spread, the weighted average interest rate on outstanding borrowings under the ABL Facility would have been 2.25 % if there had been any balance outstanding.

At December 31, 2022, using one-month LIBOR plus a 1.75 % spread, the weighted average interest rate on outstanding borrowings under the ABL Facility was 6.00 %.

We pay a commitment fee of 0.375 % for unused capacity under the ABL Facility and a 1.875 % fee on the amount of letters of credit outstanding.

The final maturity date of the ABL Facility is March 22, 2026.

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As of December 31, 2021, we had no outstanding borrowings under the ABL Facility, $ 11.2 million of outstanding letters of credit, and $ 36.0 million available for future borrowings under the ABL Facility.

As of December 31, 2022, we had $ 1.0 million of outstanding borrowings under the ABL Facility, $ 11.0 million of outstanding letters of credit, and $ 35.3 million available for future borrowings under the ABL Facility.

The ABL Facility has a first lien on accounts receivable and inventory.

We were in compliance with all requirements under the ABL Facility as of December 31, 2022.

We capitalized a total of $ 0.8 million in new debt issuance costs related to the ABL Facility.

Costs related to the ABL Facility are recorded in other non-current assets and amortized over the term of the agreement.

Senior Secured Term Loan

Outstanding borrowings under the Senior Secured Term Loan bore interest at one-month LIBOR (subject to a 0.75 % floor) plus an applicable margin of 5.75 %.

During 2021 until termination, the Senior Secured Term Loan bore interest at 6.50 %.

Incremental Term Loan

Outstanding borrowings under the Incremental Term Loan bore interest at one-month LIBOR plus an applicable margin of 5.75 %.

During 2021 until termination, the Incremental Term Loan bore interest at 5.90 %.

Senior Secured Revolver

Outstanding borrowings under the Senior Secured Revolver bore interest on a variable rate structure at either 1) one-month LIBOR plus an applicable margin of 4.00 % or 2) the prime lending rate plus an applicable margin of 3.00 %.

We had no outstanding borrowings under the Senior Secured Revolver during 2021.

We incurred a commitment fee of 0.50 % for unused capacity under the Senior Secured Revolver until it was terminated.

Loan Amendments

On March 3, 2023, we amended our Term Loan Facility (the “Term Loan Amendment”) and ABL Facility (the “ABL Amendment”) to adjust certain covenants under the agreements, as well as to change the applicable base rate on which interest expense is determined.

The Term Loan Amendment increases the quarterly maximum consolidated net leverage ratio covenant beginning in 2023 and waived the required excess cash flow payment that would have been paid in 2023.

The Term Loan Amendment provides for increased utilization of customer programs to accelerate payment terms and also introduces a quarterly domestic liquidity covenant.

Interest under the Term Loan Amendment is increased on a paid-in-kind basis at a rate dependent on the Company’s leverage ratio and whether the Company completes a qualifying junior equity raise by June 30, 2023.

The Company also issued penny warrants in connection with the Term Loan Amendment.

In addition, the base rate for interest expense has been changed from LIBOR to the secured overnight financing rate (“SOFR”).

The ABL Amendment provides for increased utilization of customer programs to accelerate payment terms and also introduces a quarterly domestic liquidity covenant.

In addition, the base rate for interest expense has been changed from LIBOR to SOFR.

Future Maturities

The following table lists aggregate maturities of long-term debt for the next five years.

Years Ending December 31,

Debt Issuance Costs

We recognized a $ 2.4 million loss on extinguishment for unamortized debt issuance costs that were written off in the year ended December 31, 2021, in connection with the termination of our previous credit facility.

Interest Rate Swaps

On July 22, 2021, we entered into a fixed-rate interest rate swap agreement to change the LIBOR-based component of the interest rate on a portion of the Term Loan Facility to a fixed rate of 1.291 %.

The interest rate swap has a notional amount of $ 60.0 million and a maturity date of July 31, 2024.

A portion of the proceeds from the Term Loan Facility was used to settle and terminate our previous fixed-rate interest rate swap agreement with a cash payment of $ 13.7 million during the first quarter of 2021.

Refer to Note 19 for further discussion of the interest rate swap agreements.

Future Maturities

The following table lists aggregate maturities of long-term debt for the next five years and thereafter.

Years Ending December 31, Aggregate

Total outstanding principal $ 159,805

We adopted ASC 842 on January 1, 2019, and elected the modified retrospective approach in which the new standard is applied to all leases existing at the date of adoption through a cumulative-effect adjustment of $ 0.1 million to accumulated deficit.

As part of the adoption, we elected the package of practical expedients, the short-term lease exemption, and the practical expedient to not separate lease and non-lease components.

Accordingly, we accounted for our existing operating leases as operating leases under the new standard, without reassessing (a) whether the contracts contain a lease under ASC 842, (b) whether

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classification of the operating leases would be different in accordance with ASC 842, or (c) whether any unamortized initial direct costs would have met the definition of initial direct costs in ASC 842 at lease commencement.

We determine whether an arrangement is a lease at inception.

Right-of-use (“ROU”) lease assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease.

ROU lease assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term.

The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option.

Amortization of ROU lease assets is recognized in expense on a straight-line basis over the lease term.

Short-term leases are leases having a term of twelve months or less.

We recognize short-term leases on a straight-line basis and do not record a related lease asset or liability for such leases.

Finance lease ROU assets consist primarily of equipment used in the manufacturing process with terms three years to eight years .

Operating lease ROU assets consist of the following:

• Equipment used in the manufacturing process as well as office equipment with terms two years to five years ;

• Manufacturing plants and office facilities with terms three years to 20 years.

The following table presents components of lease expense:

Years Ended December 31,

Financial Statement Line Item 2021 2020 2019

2022 2021 2020

Finance lease cost:

Amortization of right-of-use assets Depreciation and amortization $ 1,451 $ 1,272 $ 1,229

Interest expense Interest expense 213 192 226

Operating lease cost Cost of sales and selling, general, and administrative expense 8,014 8,396 9,108

Short-term lease cost (1) Cost of sales and selling, general, and administrative expense 655 591 479

Variable lease cost (2) Cost of sales and selling, general, and administrative expense 1 1 1

Amortization of right-of-use assets $ 1,318 $ 1,451 $ 1,272

Interest expense 351 213 192

Operating lease cost 8,285 8,015 8,397

Short-term lease cost (1) 438 655 591

Sublease income ( 195 ) — —

Total lease cost $ 10,197 $ 10,334 $ 10,452

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(1) Excludes expenses related to leases with a lease term of one month or less.

(2) Represents changes to index-based lease payments.

The following table presents lease-related assets and liabilities recorded on the balance sheet.

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Total lease liabilities $ 63,143 $ 65,556

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The following table contains supplemental cash flow information related to leases of continuing operations.

The following table contains supplemental cash flow information related to leases.

Years Ended December 31,

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(1) Includes new leases, renewals, and modifications.

As of December 31, 2021, the weighted average remaining lease term and weighted-average discount rate for finance and operating leases of continuing operations were as follows:

Years Ended December 31,

2021 2020 2019

Weighted-average remaining lease term - finance leases 3.3 years 3.2 years 4.0 years

Weighted-average remaining lease term - operating leases 11.1 years 11.7 years 11.0 years

The weighted average remaining lease term and weighted-average discount rate for finance and operating leases were as follows:

As of December 31,

Weighted-average remaining lease term - finance leases 3.1 years 3.3 years

Weighted-average remaining lease term - operating leases 10.1 years 11.1 years

Weighted-average discount rate - finance leases 5.3 % 3.0 %

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Total lease liabilities $ 56,705 $ 6,438

In August 2022, we began subleasing a portion of our leased corporate headquarters office space.

Since the Company retains the obligation to the lessor, the underlying lease continues to be accounted for as operating leases.

Sublease income is recognized on a straight-line basis over the lease terms.

In March 2020, we amended the lease of our corporate headquarters building to exit over half of the previously leased space and reduce annual base rent payments.

The amendment was accounted for as a lease modification, and the remeasurement of the lease resulted in an $ 8.1 million decrease in the operating lease right-of-use (“ROU”) asset, a $ 10.5 million decrease in the noncurrent portion of the operating lease liability, and a $ 0.6 million decrease in the current portion of the operating lease liability.

The amendment was accounted for as a lease modification, and the remeasurement of the lease resulted in an $ 8.1 million decrease in the operating lease ROU asset, a $ 10.5 million decrease in the noncurrent portion of the operating lease liability, and a $ 0.6 million decrease in the current portion of the operating lease liability.

The $ 3.0 million difference between the change in the operating lease ROU asset and the operating lease liabilities was recognized in “Other operating expense (income), net,” on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2020.

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During the second quarter of 2020 and as part of our overall plan to improve liquidity during the COVID-19 pandemic, we negotiated with certain lessors to defer rent payments on leased buildings.

In total, $ 0.5 million of operating lease payments for continuing operations were deferred over a period ranging from April 2020 to December 2020 and are being repaid over a period ranging from June 2020 through December 2022.

In total, $ 0.5 million of operating lease payments were deferred over a period ranging from April 2020 to December 2020 and were repaid from June 2020 through December 2022.

The deferral of rent payments did not result in a substantial change in total lease payments over the individual lease terms.

We elected to apply lease accounting relief announced by the FASB in April 2020 and treated these lease concessions as if they existed in the original contracts rather than applying lease modification accounting.

The net impact on cash flows from operating activities on the Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020, was $( 0.2 ) million and $ 0.7 million, respectively.

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The net impact on cash flows from operating activities on the Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021, and 2020, was $( 0.3 ) million, $( 0.2 ) million, and $ 0.7 million, respectively.

Commitments and Contingencies

Brazil ICMS Tax Matter

Prior to the acquisition of Autocam Corporation (“Autocam”) in 2014, Autocam’s Brazilian subsidiary (“Autocam Brazil”) received notification from the Brazilian tax authority regarding ICMS (state value added tax or “VAT”) tax credits claimed on intermediary materials (e.g., tooling and perishable items) used in the manufacturing process.

Prior to the acquisition of Autocam Corporation (“Autocam”) in 2014, Autocam’s Brazilian subsidiary (“Autocam Brazil”) received notification from the Brazilian tax authority regarding ICMS (state value added tax) tax credits claimed on intermediary materials (e.g., tooling and perishable items) used in the manufacturing process.

The Brazilian tax authority notification disallowed state ICMS tax credits claimed on intermediary materials based on the argument that these items are not intrinsically related to the manufacturing processes.

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Management believes the indemnification would include amounts owed for the tax, interest, and penalties related to this matter.

Accordingly, we don’t expect to incur a loss related to this matter even in the event of an unfavorable decision and, therefore, have not accrued an amount for the remaining matters as of December 31, 2021.

Accordingly, we do not expect to incur a loss related to this matter even in the event of an unfavorable decision and, therefore, have not accrued an amount for the remaining matters as of December 31, 2022.

Securities Offering Matter

On November 1, 2019, Erie County Employees’ Retirement System, on behalf of a purported class of plaintiffs, filed a complaint in the Supreme Court of the State of New York, County of New York, against the Company, certain of the Company’s current and former officers and directors, and each of the underwriters involved in the Company’s public offering and sale of 14.4 million shares of its common stock pursuant to a preliminary prospectus supplement, dated September 10, 2018, a final prospectus supplement, dated September 13, 2018, and a base prospectus, dated April 19, 2017, relating to the Company’s effective shelf registration statement on Form S-3 (File No.

333-216737) (the “Offering”), which complaint was amended on January 24, 2020.

The complaint alleges violations of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933 in connection with the Offering.

The plaintiffs seek to represent a class of stockholders who purchased shares of the Company’s common stock in the Offering.

The complaint seeks unspecified monetary damages and other relief.

The Company believes the complaint and allegations to be without merit and intends to vigorously defend itself against these actions.

The Company is unable at this time to determine whether the outcome of the litigation would have a material impact on the Company’s financial position, results of operations, or cash flows.

On November 1, 2019, Erie County Employees’ Retirement System, on behalf of a purported class of plaintiffs, filed a complaint in the Supreme Court of the State of New York, County of New York against us, certain of our current and former officers and directors, and each of the underwriters involved in our public offering and sale of 14.4 million shares of our common stock pursuant to a preliminary prospectus supplement, dated September 10, 2018, a final prospectus supplement, dated September 13, 2018, and a base prospectus, dated April 19, 2017, relating to our effective shelf registration statement on Form S-3 (File No.

333-216737) (the “Offering”).

The amended complaint alleged violations of Sections 11, 12(a)(2), and 15 of the Securities Act in connection with the Offering.

On July 25, 2022, the parties filed a Stipulation of Settlement to settle the securities offering action.

Under the terms of the Stipulation of Settlement, which was approved and finalized by the court on December 1, 2022, the Company and/or its insurance carriers were to make cash payments to the plaintiff in the amount of $ 9.5 million (the “Settlement Amount”), in exchange for which the Company and the other named defendants were released from all claims related to the securities offering action.

Since we had previously paid covered expenses totaling $ 1.0 million meeting our directors' and officers' retention requirement, the Settlement Amount was covered and paid by our directors' and officers' insurance carriers during the fourth quarter of 2022.

Other Legal Matters

On October 26, 2020, Corre Opportunities Qualified Master Fund, LP, and Corre Horizon Fund, LP, (collectively, “Corre Partners”) filed a complaint in the Chancery Court of the State of Delaware against the Company.

The complaint alleged that the Company’s sale of its Life Sciences business without obtaining the prior consent of the plaintiffs was a breach of the terms of the Series B Preferred Stock.

On May 13, 2021, the Company entered into a cooperation agreement with Corre Partners.

In connection with the cooperation agreement, on May 13, 2021, the Company also entered into a settlement agreement with Corre Partners, which resolved the complaint.

On April 25, 2022, we reached an agreement to settle breach of contract claims brought by a former customer regarding the sale of products by us in 2016.

Under the agreement, we are paying $ 1.8 million to the customer in specified installments through July 2023.

The $ 1.8 million settlement is included in the “Other operating expense (income), net” line in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss).

All other legal proceedings are of an ordinary and routine nature and are incidental to our operations.

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In making that determination, we analyze the facts and circumstances of each case at least quarterly in consultation with our attorneys and determine a range of reasonably possible outcomes.

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Preferred Stock and Stockholders' Equity

Series D Perpetual Preferred Stock

On March 22, 2021, we completed a private placement of 65 thousand shares of newly designated Series D Perpetual Preferred Stock, with a par value of $ 0.01 per share (the “Series D Preferred Stock”), at a price of $ 1,000 per share, together with detachable warrants (the “2021 Warrants”) to purchase up to 1.9 million shares of our common stock at an exercise price of $ 0.01 per share.

On March 22, 2021, we completed a private placement of 65,000 shares of newly designated Series D Perpetual Preferred Stock, with a par value of $ 0.01 per share (the “Series D Preferred Stock”), at a price of $ 1,000 per share, together with detachable warrants (the “2021 Warrants”) to purchase up to 1.9 million shares of our common stock at an exercise price of $ 0.01 per share.

The Series D Preferred Stock has an initial liquidation preference of $ 1,000 per share and is redeemable at our option in cash at a redemption price equal to the liquidation preference then in effect.

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As of December 31, 2022, the carrying value of the Series D Preferred Stock shares was $ 64.7 million, which included $ 18.0 million of accumulated unpaid and deemed dividends.

The following table presents the change in the Series D Preferred Stock carrying value during the year ended December 31, 2021.

Year Ended December 31,

Beginning balance $ —

The following table presents the change in the Series D Preferred Stock carrying value.

Years Ended December 31,

Balance at beginning of year $ 53,807 $ —

Proceeds from issuance of shares, net of issuance costs — 61,793

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Amortization 1,933 913

Ending balance $ 53,807

Balance at end of year $ 64,701 $ 53,807

Net cash proceeds of $ 61.8 million from the issuance of the Series D Preferred Stock, along with part of the proceeds from the Term Loan Facility, were used to redeem all of the outstanding shares of the Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”).

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Deemed dividends adjust retained earnings (or in the absence of retained earnings, additional paid-in capital).

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At redemption on March 22, 2021, the carrying value of the Series B Preferred Stock shares included $ 14.3 million of accumulated unpaid and deemed dividends.

The following table presents the change in the Series B Preferred Stock carrying value during the years ended December 31, 2021, 2020 and 2019.

The following table presents the change in the Series B Preferred Stock carrying value.

Years Ended December 31,

2021 2020 2019

Beginning balance $ 105,086 $ 93,012 $ —

Gross proceeds from issuance of shares — — 100,000

Relative fair value of Warrants issued — — ( 1,076 )

Recognition of bifurcated embedded derivative — — ( 2,295 )

Allocation of issuance costs to Preferred Stock — — ( 4,259 )

Balance at beginning of year $ 105,086 $ 93,012

Accrual of in-kind dividends 14,008 11,121

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Redemption ( 119,429 ) —

Ending balance $ — $ 105,086 $ 93,012

Preferred Share Purchase Rights

On April 15, 2020, our Board of Directors authorized and declared a dividend of one preferred share purchase right for each outstanding share of common stock to shareholders of record on April 27, 2020.

The rights expired on March 31, 2021.

Balance at end of year $ — $ 105,086

Revenue from Contracts with Customers

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Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or services.

During the year ended December 31, 2022, we received equipment from a customer as part of the selling price of goods transferred.

This noncash consideration was recognized as revenue equal to the fair value of the equipment received.

The following tables summarize revenue by customer geographical region.

Year Ended December 31, 2021

Year Ended December 31, 2022 Mobile

Solutions Power

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Total net sales $ 293,536 $ 205,204 $ ( 2 ) $ 498,738

Year Ended December 31, 2020

Year Ended December 31, 2021 Mobile

Solutions Power

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Total net sales $ 285,863 $ 191,800 $ ( 79 ) $ 477,584

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Year Ended December 31, 2019

Year Ended December 31, 2020 Mobile

Solutions Power

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Total net sales $ 256,360 $ 171,269 $ ( 95 ) $ 427,534

The following tables summarize revenue by customer industry for the years ended December 31, 2021 and 2020.

Comparable sales data by customer industry is not available prior to 2020.

The following tables summarize revenue by customer industry.

Our products in the automotive industry include high-precision components and assemblies for electric power steering systems, electric braking, electric motors, fuel systems, emissions control, transmissions, moldings, stampings, sensors, and electrical contacts.

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While many of the industries we serve include electrical components, our products in the residential/commercial electrical industry category in the following tables include components used in smart meters, charging stations, circuit breakers, transformers, electrical contact assemblies, precision stampings, welded contact assemblies, and specification plating and surface finishing.

Year Ended December 31, 2021

Year Ended December 31, 2022 Mobile

Solutions Power

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Total net sales $ 293,536 $ 205,204 $ ( 2 ) $ 498,738

Year Ended December 31, 2020

Year Ended December 31, 2021 Mobile

Solutions Power

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Total net sales $ 285,863 $ 191,800 $ ( 79 ) $ 477,584

Product Sales

We generally transfer control and recognize a sale when we ship the product from our manufacturing facility to our customer, at a point in time, as this is when our customer obtains the ability to direct use of, and obtain substantially all of the remaining benefits from, the goods.

We have elected to recognize the cost for freight and shipping when control over products has transferred to the customer as a component of cost of sales.

We use an observable price to determine the stand-alone selling price for separate performance obligations or a cost-plus-margin approach when an observable price is not available.

The amount of consideration we receive and the revenue we recognize varies with volume rebates and incentives we offer to our customers.

We estimate the amount of variable consideration that should be included in the

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transaction price utilizing the expected value method or the most likely amount method depending on the nature of the variable consideration.

Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur.

We utilize the portfolio approach practical expedient to evaluate sales-related discounts on a portfolio basis to contracts with similar characteristics.

The effect on our consolidated financial statements of applying the portfolio approach would not differ materially from evaluation of individual contracts.

We give our customers the right to return only defective products in exchange for functioning products or rework of the product.

These transactions are evaluated and accounted for under ASC Topic 460, Guarantees , and we estimate the impact to the transaction price based on an analysis of historical experience.

Year Ended December 31, 2020 Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

Automotive $ 170,389 $ 31,422 $ — $ 201,811

General Industrial 75,610 52,714 — 128,324

Residential/Commercial Electrical — 58,143 — 58,143

Other 10,361 28,990 ( 95 ) 39,256

Total net sales $ 256,360 $ 171,269 $ ( 95 ) $ 427,534

Other Sources of Revenue

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These contracts generally have an original expected duration of less than one year.

The following table provides information about contract liabilities from contracts with customers.

Balance at December 31, 2020 $ 766

Balance at December 31, 2021 $ 489

Deferred Revenue

The timing of revenue recognition, billings, and cash collections results in billed accounts receivable and customer advances and deposits (e.g.

contract liability) on the Consolidated Balance Sheets.

These contract liabilities are reported on the Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period as deferred revenue.

These contract liabilities are reported on the

Consolidated Balance Sheets on a contract-by-contract basis at the end of each reporting period as deferred revenue, which is reported in the “Other current liabilities” line on the Consolidated Balance Sheets.

Deferred revenue relates to payments received in advance of performance under the contract and recognized as revenue as (or when) we perform under the contract.

Changes in the contract liability balances during the year ended December 31, 2022, were not materially impacted by any other factors.

Revenue recognized for the year ended December 31, 2021, from amounts included in deferred revenue at the beginning of the period for performance obligations satisfied or partially satisfied during the period was $ 0.8 million.

Deferred revenue is reported in the “Other current liabilities” line on the Consolidated Balance Sheets.

The balance of deferred revenue was $ 0.7 million and $ 0.5 million as of December 31, 2022 and December 31, 2021, respectively.

Revenue recognized for performance obligations satisfied or partially satisfied during the year ended December 31, 2022 included $ 0.5 million that was included in deferred revenue as of December 31, 2021.

Transaction Price Allocated to Future Performance Obligations

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Sales Concentration

We recognized sales from a single customer of $ 49.7 million, or 10 % of consolidated net sales, during the year ended December 31, 2019.

Revenues from this customer are in our Mobile Solutions segment and were less than 10 % of consolidated net sales during the years ended December 31, 2021 and 2020.

No single customer accounted for 10% or more of consolidated net sales, during the years ended December 31, 2022, 2021, and 2020.

Share-Based Compensation

We recognize compensation expense of all employee and non-employee director share-based compensation awards in the consolidated financial statements based upon the grant-date fair value of the awards over the requisite service or vesting period, less any expense incurred for estimated forfeitures.

As of December 31, 2021, we have 2.2 million maximum shares available

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that can be issued as options, stock appreciation rights, and other share-based awards.

As of December 31, 2022, we have 3.4 million shares available that can be issued to employees and non-executive directors under the 2022 Omnibus Incentive Plan as options, stock appreciation rights, and other share-based awards.

Shares of our common stock delivered upon exercise or vesting may consist of newly issued shares of our common stock or shares acquired in the open market.

Share-based compensation expense is recognized in the “Selling, general, and administrative expense” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) except for $ 0.8 million and $ 0.4 million attributable to discontinued operations for the years ended December 31, 2020, and 2019, respectively.

Share-based compensation expense is recognized in the “Selling, general, and administrative expense” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) except for $ 0.8 million attributable to discontinued operations for the year ended December 31, 2020.

The following table lists the components of share-based compensation expense by type of award.

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2022 2021 2020

Stock options $ 253 $ 741 $ 881

Restricted stock 3,635 2,166 3,393

Performance share units 602 797 199

Change in estimate of share-based award vesting (1)

( 623 ) ( 743 ) ( 1,111 )

Share-based compensation expense $ 3,216 $ 4,226 $ 2,822

_______________________________

(1) Amounts reflect the decrease in share-based compensation expense based on the change in estimate of the probability of vesting of share-based awards.

Unrecognized compensation cost related to unvested awards was $ 3.8 million as of December 31, 2021.

We expect that cost to be recognized over a weighted-average period of 1.7 years.

Stock options $ 140 $ 253 $ 634

Option awards were typically granted to key employees on an annual basis by the Compensation Committee of the Board of Directors.

All options have an exercise price equal to the closing price of our stock on the date of grant.

The term life of options is generally ten years with a vesting period of generally three years .

During the years ended 2020 and 2019, we granted options to purchase 159 thousand, and 210 thousand shares, respectively, to certain key employees.

The weighted average grant-date fair value of the options granted during 2020 and 2019 was $ 4.76 , and $ 2.77 per share, respectively.

No options were granted in 2021.

The fair value of our options cannot be determined by market value because they are not traded in an open market.

Accordingly, we utilized the Black Scholes financial pricing model to estimate the fair value.

The following table shows the weighted average assumptions relevant to determining the fair value of stock options granted in each year.

Expected term 6 years 6 years

Average risk-free interest rate 1.42 % 2.47 %

Expected dividend yield — % 3.53 %

Expected volatility 52.80 % 49.53 %

Expected forfeiture rate — % 4.00 %

The expected term is derived from using the simplified method of determining stock option terms as described under the SAB Topic 14, Share-based payment .

The simplified method was used because sufficient historical stock option exercise experience was not available, primarily due to the transformation of the management structure over the past several years.

The average risk-free interest rate is derived from United States Department of Treasury published interest rates of daily yield curves for the same time period as the expected term.

The expected dividend yield is derived by a mathematical formula which uses the expected annual dividends over the expected term divided by the fair market value of our common stock at the grant date.

The expected dividend yield for 2020 grants reflects no expected annual dividends over the expected term because we discontinued dividends in 2019.

The expected volatility rate is derived from our actual common stock historical volatility over the same time period as the expected term.

The expected volatility rate is derived by a mathematical formula utilizing daily closing price data.

The expected forfeiture rate is determined from examining the historical pre-vesting forfeiture patterns of past option issuances to key employees.

While the expected forfeiture rate is not an input of the Black Scholes financial pricing model for determining the fair value of the options, it is an important determinant of stock option compensation expense to be recorded.

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The following table presents stock option activity for the year ended December 31, 2021.

Number of Options

(in thousands) Weighted-

(per share) Weighted-

Term (years) Aggregate

Outstanding at January 1, 2021 871 $ 12.41

Exercised ( 6 ) 7.93 $ 8

Forfeited ( 22 ) 9.29

Expired ( 222 ) 13.31

Outstanding at December 31, 2021 621 $ 12.24 3.8 years $ — (1)

Exercisable at December 31, 2021 532 $ 12.80 3.2 years $ — (1)

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(1) The aggregate intrinsic value is the sum of intrinsic values for each exercisable individual option grant.

The intrinsic value is the amount by which the closing market price of our stock at December 31, 2021, was greater than the exercise price of any individual option grant.

Share-based compensation expense $ 4,377 $ 3,216 $ 4,226

Unrecognized compensation cost related to unvested awards was $ 3.1 million as of December 31, 2022, which will be recognized over a weighted-average period of 1.7 years.

Restricted Stock

During the years ended December 31, 2021, 2020, and 2019, we granted 459 thousand, 460 thousand, and 339 thousand shares of restricted stock to non-executive directors, officers, and certain other key employees.

The shares of restricted stock granted during the years ended December 31, 2021, 2020, and 2019, vest pro-rata generally over three years for officers and certain other key employees and over one year for non-executive directors and certain key employees.

We determined the fair value of the shares awarded by using the closing price of our common stock as of the date of grant.

During the years ended December 31, 2022, 2021, and 2020, we granted 897,000 , 459,000 , and 460,000 shares of restricted stock to non-executive directors, officers, and certain other key employees.

Shares of restricted stock vest pro-rata generally over three years for employees and over one year for non-executive directors.

The fair value of restricted stock awards is based on the closing price of our common stock as of the date of grant.

The weighted average grant-date fair value of restricted stock granted in the years ended December 31, 2022, 2021, and 2020, was $ 3.31 , $ 6.84 , and $ 9.35 per share, respectively.

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The following table presents the status of unvested restricted stock awards as of December 31, 2022 and changes during the year then ended.

(in thousands) Weighted

Shares Weighted Average Grant-Date

Unvested at January 1, 2022 469,000 $ 7.28

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Performance Share Units (“PSUs”) are a form of long-term incentive compensation awarded to executive officers and certain other key employees designed to directly align the interests of employees to the interests of our stockholders, and to create long-term stockholder value.

PSUs granted in 2021 and 2020 were made pursuant to the NN, Inc.

2019 Omnibus Incentive Plan and a Performance Share Unit Agreement (the “2019 Omnibus Agreement”).

PSUs granted in 2019 were made pursuant to the NN, Inc.

2016 Omnibus Incentive Plan and a Performance Share Unit Agreement (the “2016 Omnibus Agreement”).

Some PSUs are based on total shareholder return (“TSR Awards”), and other PSUs are based on return on invested capital (“ROIC Awards”).

The TSR Awards vest, if at all, upon our achieving a specified relative total shareholder return, which will be measured against the total shareholder return of the S&P SmallCap 600 Index during specified performance periods as defined in the 2019 Omnibus Agreement and the 2016 Omnibus Agreement.

The ROIC Awards will vest, if at all, upon our achieving a specified average return on invested capital during the performance periods.

Each performance period generally begins on January 1 of the year of grant and ends 36 months later on December 31.

We recognize compensation expense over the performance period in which the performance and market conditions are measured.

TSR Awards granted in 2022, 2021, and 2020 were made pursuant to the 2019 Omnibus Plan and a Performance Share Unit Agreement (the “2019 Omnibus Agreement”).

ROIC Awards granted in 2022 were made pursuant to the 2022 Omnibus Incentive Plan and a Performance Share Unit Agreement.

ROIC Awards granted in 2021 and 2020 were made pursuant to the 2019 Omnibus Agreement.

The TSR Awards vest, if at all, upon our achieving a specified relative total shareholder return, which will be measured against the total shareholder return of a specified index during specified performance periods as defined in the 2019 Omnibus Agreement.

The ROIC Awards vest, if at all, upon our achieving a specified average return on invested capital during the performance periods.

Each performance period generally begins on January 1 of the year of grant and ends 3 years later on December 31.

If the PSUs do not vest at the end of the performance periods, then the PSUs will expire automatically.

Upon vesting, the PSUs will be settled by the issuance of shares of our common stock, subject to the award recipient’s continued

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The actual number of shares of common stock to be issued to each award recipient at the end of the performance periods will be interpolated between a threshold and maximum payout amount based on actual performance results.

PSUs that vest will be settled by the issuance of shares of our common stock with the actual number of shares interpolated between a threshold and maximum payout amount based on actual performance results.

No dividends will be paid on outstanding PSUs during the performance period;

however, dividend equivalents will be paid based on the number of shares of common stock that are ultimately earned at the end of the performance periods.

With respect to the TSR Awards, a participant will earn 50 % of the target number of PSUs for “Threshold Performance,” 100 % of the target number of PSUs for “Target Performance,” and 150 % of the target number of PSUs for “Maximum Performance.” With respect to the ROIC Awards, a participant will earn 35 % or 50 % of the target number of PSUs for “Threshold Performance,” 100 % of the target number of PSUs for “Target Performance,” and 150 % of the target number of PSUs for “Maximum Performance.” For performance levels falling between the values shown below, the percentages will be determined by interpolation.

A participant will earn 25 % or 50 % of the target number of PSUs for “Threshold Performance,” 100 % of the target number of PSUs for “Target Performance,” and 150 % of the target number of PSUs for “Maximum Performance.” For performance levels falling between the values shown below, the percentages will be determined by interpolation.

The following tables present the goals with respect to TSR Awards and ROIC Awards granted in 2022, 2021, and 2020.

Threshold Performance

(50% of Shares) Target Performance

(25% or 50% of Shares) (1)

Target Performance

(100% of Shares) Maximum Performance

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Threshold Performance

(35% or 50% of Shares) (1)

Target Performance

(50% of Shares) Target Performance

(100% of Shares) Maximum Performance

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(1) Threshold performance for the 2021 grants and 2020 grants will earn 50 % of the target number of PSUs.

Threshold performance for the 2019 grants is 35 % of the target number of PSUs.

(2) The performance levels for 2020 grants were modified by the compensation committee of the board of directors in the first quarter of 2021 to adjust for the sale of the Life Sciences business and the ongoing effects of the COVID-19 pandemic.

Threshold Performance was changed to 6.7 % to earn 50 % of Shares, Target Performance was changed to 7.9 % to earn 100 % of Shares, and Maximum Performance was changed to 8.7 % to earn 150 % of Shares.

We estimate the grant-date fair value of TSR Awards using the Monte Carlo simulation model, as the total shareholder return metric is considered a market condition under ASC Topic 718, Compensation – stock compensation .

The grant-date fair value of ROIC Awards is based on the closing price of a share of our common stock on the date of grant.

(1) Threshold performance will earn 25 % of the target number of PSUs for the 2022 grants and 50 % for the 2021 grants and 2020 grants.

The following table presents the number of PSUs granted and the grant-date fair value of each award in the periods presented.

TSR Awards ROIC Awards

Award Year Shares

(in thousands) Grant-Date

(per share) Shares

(in thousands) Grant-Date

Award Year Performance Units Grant-Date

Fair Value Performance Units Grant-Date

2022 382,000 $ 2.53 408,000 $ 2.62

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2020 139,000 $ 10.88 157,000 $ 9.44

We recognize expense for ROIC Awards based on the probable outcome of the associated performance condition.

We generally recognize an expense for ROIC Awards based on the Target Performance threshold of 100 % because, at the date of grant, the Target Performance is the probable level of performance achievement.

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The grant-date fair value of TSR Awards is determined using the Monte Carlo simulation model, as the total shareholder return metric is considered a market condition under ASC Topic 718, Compensation – stock compensation , and expense is recognized over the performance period regardless of actual award payout.

The grant-date fair value of ROIC Awards is based on the closing price of a share of our common stock on the date of grant and compensation expense is recognized over the performance period based on the estimated outcome of the performance condition.

The following table presents the status of unvested PSUs as of December 31, 2022 and changes during the year then ended.

Nonvested TSR Awards Nonvested ROIC Awards

(in thousands) Weighted

Fair Value Number of

(in thousands) Weighted

Number of Performance Units Weighted Average Grant-Date

Fair Value Number of Performance Units Weighted Average Grant-Date

Nonvested at January 1, 2022 194,000 $ 9.59 228,000 $ 8.14

Granted 382,000 2.53 408,000 2.62

Forfeited ( 61 ) 9.61 ( 71 ) 8.17

Expired ( 84,000 ) 10.88 ( 96,000 ) 9.44

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None of the PSUs that were granted in 2018, 2019, and 2020 vested in 2020, 2021, and 2022, respectively, because the actual performance achieved was below the “Threshold Performance” level as defined by the grant agreements.

Change in Vesting Estimates

During the year ended December 31, 2021, we recognized a decrease in share-based compensation expense of $ 0.6 million in the “Selling, general, and administrative expense” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) to reverse cumulative expense for restricted stock and PSU awards that were forfeited upon termination of employment in excess of our estimated forfeiture rate and for ROIC Awards that were granted in 2020 and are now expected to achieve threshold performance rather than the target performance level.

During the year ended December 31, 2020, we recognized a decrease in share-based compensation expense in continuing operations of $ 0.3 million in the “Selling, general, and administrative expense” line of the Consolidated Statements of Operations and Comprehensive Income (Loss) to reverse cumulative expense for option, restricted stock, and PSU awards that were forfeited upon termination of employment and for ROIC Awards that were granted in 2019 and are not expected to achieve Threshold Performance.

In 2020 we also recognized a decrease in share-based compensation expense of $ 0.5 million in the “Income (loss) from discontinued operations, net of tax” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) to reverse cumulative expense for option, restricted stock, and PSU awards that were forfeited upon termination of employees related to the Life Sciences business.

During the year ended December 31, 2019, we recognized a decrease in share-based compensation expense in continuing operations of $ 1.1 million in the “Selling, general, and administrative expense” line in the Consolidated Statements of Operations and Comprehensive Income (Loss) to reverse cumulative expense for option, restricted stock, and PSU awards that were forfeited upon termination of employment.

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Stock Options

Stock options have an exercise price equal to the closing price of our stock on the date of grant, an exercise term of ten years with a vesting period of three years .

No options were granted in 2022 or 2021.

We granted 159,000 options during the year ended December 31, 2020 with a weighted average grant-date fair value of $ 4.76 per share.

The following table presents stock option activity for the year ended December 31, 2022.

Number of Options Weighted-Average

Exercise Price Weighted-Average Remaining Contractual Term Aggregate

Outstanding at January 1, 2022 621,000 $ 12.24

Forfeited ( 4,000 ) 9.44

Expired ( 79,000 ) 9.71

Outstanding at December 31, 2022 538,000 $ 12.63 3.0 years $ — (1)

Exercisable at December 31, 2022 515,000 $ 12.77 2.8 years $ — (1)

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(1) The aggregate intrinsic value is the sum of intrinsic values for each exercisable individual option grant.

The intrinsic value is the amount by which the closing market price of our stock at December 31, 2022, was greater than the exercise price of any individual option grant.

Accumulated Other Comprehensive Income

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Foreign Currency Translation Interest rate swap Income taxes (1) Total

Balance at December 31, 2018 $ ( 31,314 ) $ — $ — $ ( 31,314 )

Balance as of December 31, 2019 $ ( 35,159 ) $ ( 12,234 ) $ 2,839 $ ( 44,554 )

Other comprehensive income (loss) before reclassifications ( 1,683 ) ( 16,207 ) 3,764 ( 14,126 )

Amounts reclassified from AOCI to interest expense (2) — 8,906 ( 2,068 ) 6,838

Amounts reclassified from AOCI to loss on interest rate swap (3) — 15,823 ( 3,674 ) 12,149

Sale of discontinued operations 5,961 — — 5,961

Net other comprehensive income (loss) 4,278 8,522 ( 1,978 ) 10,822

Balance at December 31, 2019 $ ( 35,159 ) $ ( 12,234 ) $ 2,839 $ ( 44,554 )

Balance as of December 31, 2020 $ ( 30,881 ) $ ( 3,712 ) $ 861 $ ( 33,732 )

Other comprehensive income (loss) before reclassifications ( 1,135 ) 78 ( 19 ) ( 1,076 )

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Amounts reclassified from AOCI to loss on interest rate swap (3) — 3,712 ( 861 ) 2,851

Sale of discontinued operations 5,961 — — 5,961

Net current-period other comprehensive income (loss) 4,278 8,522 ( 1,978 ) 10,822

Balance at December 31, 2020 $ ( 30,881 ) $ ( 3,712 ) $ 861 $ ( 33,732 )

Net other comprehensive income (loss) ( 1,135 ) 3,863 ( 898 ) 1,830

Balance as of December 31, 2021 $ ( 32,016 ) $ 151 $ ( 37 ) $ ( 31,902 )

Other comprehensive income (loss) before reclassifications ( 8,156 ) 3,426 ( 68 ) ( 4,798 )

Amounts reclassified from AOCI to interest expense (2) — ( 428 ) 8 ( 420 )

Amounts reclassified from AOCI to loss on interest rate swap (3) — 3,712 ( 861 ) 2,851

Net current-period other comprehensive income (loss) ( 1,135 ) 3,863 ( 898 ) 1,830

Balance at December 31, 2021 $ ( 32,016 ) $ 151 $ ( 37 ) $ ( 31,902 )

Net other comprehensive income (loss) ( 8,156 ) 2,998 ( 60 ) ( 5,218 )

Balance as of December 31, 2022 $ ( 40,172 ) $ 3,149 $ ( 97 ) $ ( 37,120 )

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Net Income (Loss) Per Common Share

In accordance with ASC 260, Earnings Per Share, a company that has participating securities is required to utilize the two-class method for calculating earnings per share (“EPS”) unless the treasury stock method results in lower EPS.

The two-class method is an allocation of earnings between the holders of common stock and a company’s participating securities.

Basic EPS is calculated by dividing income or loss attributable to common stockholders by the weighted average number of shares of common stock outstanding.

To calculate diluted EPS, basic EPS is further adjusted to include the effect of potentially dilutive stock options, warrants, and convertible preferred stock.

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The following table summarizes the computation of basic and diluted net income (loss) per common share.

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Loss from continuing operations $ ( 26,098 ) $ ( 14,425 ) $ ( 139,490 )

Preferred stock cumulative dividends and deemed dividends ( 21,478 ) ( 12,373 ) ( 642 )

Numerator for basic and diluted loss from continuing operations per common share (1) ( 35,903 ) ( 151,863 ) ( 31,391 )

Income (loss) from discontinued operations, net of tax (Note 2) 1,200 38,898 ( 15,992 )

Numerator for basic and diluted undistributed net loss per common share (1) $ ( 34,703 ) $ ( 112,965 ) $ ( 47,383 )

Adjustment for preferred stock cumulative dividends and deemed dividends ( 10,894 ) ( 21,478 ) ( 12,373 )

Numerator for basic and diluted net loss from continuing operations per common share ( 36,992 ) ( 35,903 ) ( 151,863 )

Income from discontinued operations, net of tax — 1,200 38,898

Numerator for basic and diluted net loss per common share $ ( 36,992 ) $ ( 34,703 ) $ ( 112,965 )

Weighted average common shares outstanding 43,738 42,991 42,692

Adjustment for unvested restricted common stock ( 461 ) ( 493 ) ( 269 )

Adjustment for participating securities ( 951 ) ( 461 ) ( 493 )

Adjustment for 2021 Warrants outstanding (1) 1,893 1,481 —

Shares used to calculate income (loss) per share, basic and diluted 44,011 42,199 42,030

Per common share net loss:

Basic loss from continuing operations per common share $ ( 0.82 ) $ ( 3.60 ) $ ( 0.75 )

Basic income (loss) from discontinued operations per common share 0.03 0.92 ( 0.38 )

Basic net loss per common share $ ( 0.79 ) $ ( 2.68 ) $ ( 1.13 )

Diluted loss from continuing operations per common share $ ( 0.82 ) $ ( 3.60 ) $ ( 0.75 )

Diluted income (loss) from discontinued operations per common share 0.03 0.92 ( 0.38 )

Diluted net loss per common share $ ( 0.79 ) $ ( 2.68 ) $ ( 1.13 )

Shares used to calculate basic and diluted net loss per share 44,680 44,011 42,199

Per common share net income (loss):

Basic and diluted net loss from continuing operations per common share $ ( 0.83 ) $ ( 0.82 ) $ ( 3.60 )

Basic and diluted net income from discontinued operations per common share — 0.03 0.92

Basic and diluted net loss per common share $ ( 0.83 ) $ ( 0.79 ) $ ( 2.68 )

Cash dividends declared per common share $ — $ — $ —

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(1) Preferred Stock does not participate in losses.

(1) Weighted average 2021 Warrants outstanding are included in shares outstanding for calculation of basic earnings per share because they are exercisable at an exercise price of $ 0.01 per share, subject to certain adjustments (see Note 19).

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2,057 2,266 21,392

We have elected to allocate undistributed income to participating securities based on year-to-date results.

As there was no undistributed income for the years ended December 31, 2021, 2020, and 2019, no such allocation was necessary.

In addition, given the undistributed loss from continuing operations in the years ended December 31, 2021, 2020, and 2019, all options and the 2019 Warrants are considered anti-dilutive and were excluded from the calculation of diluted net income (loss) per share.

Stock options excluded from the calculations of diluted net income (loss) per share had a per share exercise price ranging from $ 7.93 to $ 25.16 for the year ended December 31, 2021 and 2020, and $ 8.54 to $ 25.16 for the year ended December 31, 2019.

The 2019 Warrants excluded from the calculation of diluted net income (loss) per share for the year ended December 31, 2021 had a per share exercise price of $ 11.49 , and for the years ended December 31, 2020 and 2019, had a per share exercise price of $ 12.00 .

Series B Preferred Stock excluded from the calculation of diluted net income (loss) per share for the years ended December 31, 2020 and 2019, was calculated on an as-converted basis.

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Stock options excluded from the EPS calculations had a per share exercise price ranging from $ 7.93 to $ 25.16 for the year ended December 31, 2022.

The 2019 Warrants excluded from the EPS calculations for the year ended December 31, 2022 had a per share exercise price of $ 11.49 .

Fair Value Measurements

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We followed consistent methods and assumptions to estimate fair values as more fully described in Note 1.

Fair value principles prioritize valuation inputs across three broad levels.

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.

Level 3 inputs are unobservable inputs based on the assumptions used to measure assets and liabilities at fair value.

An asset or liability’s classification within the various levels is determined based on the lowest level input that is significant to the fair value measurement.

Our financial instruments that are subject to fair value disclosure consist of cash and cash equivalents, accounts receivable, accounts payable, derivatives, and long-term debt.

As of December 31, 2021, the carrying values of these financial instruments approximated fair value.

Derivative Financial Instruments

Preferred Stock Related Derivatives

Certain features were bifurcated and accounted for separately from the Series B Preferred Stock.

The following features were recorded as derivatives.

• Leverage ratio put feature.

The Series B Preferred Stock included a redemption option based on a leverage ratio threshold that provided the preferred holder the option to convert the Series B Preferred Stock to a variable number of shares of common stock at a discount to the then fair value of our common stock.

The conversion feature was considered a redemption right at a premium which was not clearly and closely related to the debt host.

The conversion feature was terminated upon redemption of the Series B Preferred Stock in March 2021.

• Dividends withholding.

The Series B Preferred Stock bore a feature that could require us to make an effective distribution to purchasers which is indexed to the tax rate of the purchasers.

This distribution would be partially offset by an adjustment to the redemption price and/or conversion rate.

The dividends withholding feature was not clearly and closely related to the debt host.

Upon redemption of the Series B Preferred Stock in March 2021, we made a net cash distribution of $ 3.0 million to settle this withholding feature after effectively receiving a $ 1.0 million offset from the purchasers upon redemption of the Series B Preferred Stock.

In conjunction with our placement of the Series B Preferred Stock, we issued detachable warrants to purchase up to 1.5 million shares of our common stock (the “2019 Warrants”), which are exercisable, in full or in part, at any time prior to December 11, 2026.

at any time prior to December 11, 2026.

The original exercise price was $ 12.00 per share, subject to anti-dilution adjustments in the event of future below market issuances, stock splits, stock dividends, combinations or similar events.

The issuance of the 2021 Warrants resulted in an adjusted exercise price of $ 11.49 per share for the 2019 Warrants because the new warrants have an exercise price below market value.

Certain features were bifurcated and accounted for separately from the Series D Preferred Stock that was issued on March 22, 2021.

Certain features were bifurcated and accounted for separately from the Series D Preferred Stock.

The following features were recorded as derivatives.

In conjunction with our placement of the Series D Preferred Stock, we issued detachable warrants to purchase up to 1.9 million shares of our common stock.

The 2021 Warrants are exercisable, in full or in part, at any time prior to March 22, 2027, at an exercise price of $ 0.01 per share, subject to anti-dilution adjustments in the event of certain future equity issuances, stock splits, stock dividends, combinations or similar events.

• Change-in-control put feature.

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The put feature is considered a redemption right at a premium and is not clearly and closely related to the debt host.

In conjunction with our placement of the Series D Preferred Stock, we issued detachable warrants to purchase up to 1.9 million shares of our common stock.

The following tables show the liabilities measured at fair value for the above derivatives above as of December 31, 2021, and 2020.

Fair Value Measurements as of December 31, 2021

Description Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs

Derivative liability - other non-current liabilities 7,771 — 453

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Fair Value Measurements as of December 31, 2020

Description Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs

Derivative liability - other current liabilities $ — $ — $ 2,453

Derivative liability - other non-current liabilities — — 664

Total $ — $ — $ 3,117

The following table presents the change in the Preferred Stock derivatives during the years ended December 31, 2021 and 2020.

The following table presents the changes in liability balance of the preferred stock related derivatives.

Years Ended December 31,

Beginning balance $ 3,117 $ 2,295

Balance at beginning of year $ 8,224 $ 3,117

Issuances — 15,121

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Settlements — ( 3,005 )

Other (2) — 1,315

Ending balance $ 8,224 $ 3,117

Balance at end of year $ 2,959 $ 8,224

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(1) Changes in the fair value are recognized in the “Other expense (income), net” line in the Consolidated Statements of Operations and Comprehensive Income (Loss).

(2) In 2020, we determined that certain anti-dilution provisions of the Warrants require liability accounting;

therefore, we reclassified the $ 1.1 million value of the Warrants recorded in Stockholders’ Equity as of December 31, 2019, to a liability during the year ended December 31, 2020.

The fair value of the change-in-control put feature utilizes unobservable inputs based on the Company’s assessment of the probability of a change-in-control event occurring in a future period.

The probability of a change-in-control event ranged from 1 % to 10 % as of December 31, 2021.

The leverage ratio put feature and the dividends withholding feature utilized unobservable inputs based on the best information available to determine the probability of the Series B Preferred Stock remaining outstanding for future periods.

These inputs included probability assessments of how long the Series B Preferred Stock would remain outstanding and whether the leverage ratio threshold would be exceeded.

Inputs also included the percentage of Series B Preferred Stock held by non-U.S.

resident holders and the applicable tax withholding rates for those holders.

The probability of the Series B Preferred Stock remaining in future periods ranged from 3 % to 2 % as of December 31, 2020.

The leverage ratio put feature also utilized unobservable inputs to determine the probability of the leverage ratio put being exercisable as of March 31, 2023, which ranged from 10 % to 1 % as of December 31, 2020.

These probabilities were determined based on management’s assessment of facts and circumstances at each reporting date.

An increase in these probabilities would have resulted in an increase in the derivative liability fair value.

Given the Series B Preferred Stock value changed by period as a result of dividends and redemption premiums, weighted average values for these assumptions are not meaningful.

(1) Changes in the fair value are recognized in the “Other income, net” line in the Consolidated Statements of Operations and Comprehensive Income (Loss).

The following tables show the fair values of the preferred stock related derivatives within the fair value hierarchy.

December 31, 2022 Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

Derivative liability - other non-current liabilities 2,831 — 128

December 31, 2021 Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

Derivative liability - other non-current liabilities 7,771 — 453

The fair value of the 2019 Warrants is determined using a valuation model that utilizes unobservable inputs to determine the probability that the 2019 Warrants will remain outstanding for future periods.

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The fair value of the 2021 Warrants is determined using the observable market price of a share of our common stock, less the $ 0.01 per share exercise price.

The fair value of the change-in-control put feature utilizes unobservable inputs based on the Company’s assessment of the probability of a change-in-control event occurring in a future period.

The probability of a change-in-control event ranged from 3 % to 10 % as of December 31, 2022 and 1 % to 10 % as of December 31, 2021.

Interest Rate Swaps

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The 2021 Swap has a notional amount of $ 60.0 million and a maturity date of July 31, 2024.

The objective of the 2021 Swap is to eliminate the variability of

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cash flows in interest payments on the first $ 60.0 million of variable rate debt attributable to changes in benchmark one-month LIBOR interest rates.

The objective of the 2021 Swap is to eliminate the variability of cash flows in interest payments on the first $ 60.0 million of variable rate debt attributable to changes in benchmark one-month

LIBOR interest rates.

The hedged risk is the interest rate risk exposure to changes in interest payments, attributable to changes in benchmark one-month LIBOR interest rates over the interest rate swap term.

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2022 2021 2020

Interest expense (1) $ 73 $ 8,906 $ 1,411

Interest expense (benefit) (1) $ ( 428 ) $ 73 $ 8,906

Derivative payments on interest rate swap (2) — 1,717 4,133

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(2) Represents settlements and changes in fair value on the 2019 Swap while the hedge was ineffective.

As of December 31, 2021 and 2020, we reported a $ 0.1 million gain and a $ 2.9 million loss, respectively, net of tax, in accumulated other comprehensive income related to the interest rate swap.

The following tables present the assets and liabilities measured at fair value on a recurring basis for the interest rate swap as of December 31, 2021 and 2020.

Fair Value Measurements as of December 31, 2021

Description Quoted Prices in Active Markets for Identical Assets

As of December 31, 2022 and 2021, we reported a $ 3.1 million gain and a $ 0.1 million gain, respectively, net of tax, in accumulated other comprehensive income related to the interest rate swap.

The following tables show the fair values of the interest rate swaps within the fair value hierarchy.

December 31, 2022 Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

Derivative asset - other current assets $ — $ 2,130 $ —

Derivative asset - other non-current assets — 1,023 —

Derivative liability - other current liabilities — ( 129 ) —

Total $ — $ 3,153 $ —

Fair Value Measurements as of December 31, 2020

Description Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs

December 31, 2021 Quoted Prices in Active Markets for Identical Assets

(Level 1) Significant Other Observable Inputs

(Level 2) Significant Unobservable Inputs

Derivative asset - other non-current assets $ — $ 284 $ —

Derivative liability - other current liabilities — ( 129 ) —

Derivative liability - other non-current liabilities — ( 4,357 ) —

Total $ — $ 155 $ —

The inputs for determining fair value of the interest rate swap are classified as Level 2 inputs.

Level 2 fair value is based on estimates using standard pricing models.

These standard pricing models use inputs which are derived from or corroborated by observable market data such as interest rate yield curves, index forward curves, discount curves, and volatility surfaces.

Counterparty to this derivative contract is a highly rated financial institution which we believe carries only a minimal risk of nonperformance.

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Fixed Rate Debt

The fair value of our outstanding fixed-rate debt included in the “International lines of credit and other loans” line item within Note 11 to these Notes to Consolidated Financial Statements approximated carrying value as of December 31, 2021 and 2020, respectively.

These fair values represent Level 2 under the three-tier hierarchy described above.

The carrying value of this fixed-rate debt was $ 10.9 million and $ 14.4 million as of December 31, 2021 and 2020, respectively.

Subsequent Event

Debt Amendment

On March 3, 2022, we amended the Term Loan Facility to adjust certain covenants under the agreement.

The amendment increases the maximum total leverage ratio for all quarters of 2022 and 2023.

The fair value of the interest rate swap is calculated through standard pricing models which use inputs derived from or corroborated by observable market data such as interest rate yield curves, index forward curves, discount curves, and volatility surfaces.

The counterparty to these derivative contracts is a highly rated financial institution which we believe carries only a minimal risk of nonperformance.

Fair Value Disclosures

Our financial instruments that are subject to fair value disclosure consist of cash and cash equivalents, accounts receivable, accounts payable, and debt.

As of December 31, 2022, the carrying values of these financial instruments, except for debt, approximated fair value.

The fair value of our debt was $ 155.2 million with a carrying amount of $ 152.7 million as of December 31, 2022.

The fair value of debt was calculated by discounting the future cash flows to its present value using prevailing market interest rates for debt with similar creditworthiness, terms and maturities and is considered a Level 3 fair value measurement.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Dismissal of Previous Independent Registered Public Accounting Firm

On May 29, 2020, the Audit Committee of our Board of Directors dismissed PricewaterhouseCoopers LLP (“PwC”) as our independent registered public accounting firm.

The reports of PwC on our consolidated financial statements as of and for the year ended December 31, 2019, did not contain an adverse opinion or a disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope, or accounting principles.

During the year ended December 31, 2019, and during the interim period through May 29, 2020, there were (i) no disagreements within the meaning of Item 304(a)(1)(iv) of Regulation S-K between the Company and PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, any of which, if not resolved to PwC’s satisfaction, would have caused PwC to make reference thereto in their reports, and (ii) no “reportable events” within the meaning of Item 304(a)(1)(v) of Regulation S-K, except as noted below.

For the year ended December 31, 2019, the material weaknesses in the Company’s internal control over financial reporting previously reported in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2019, filed on March 16, 2020, related to (a) an ineffective control environment due to a lack of a sufficient complement of personnel with an appropriate level of knowledge, experience and training commensurate with our financial reporting requirements and (b) ineffective design and maintenance of monitoring controls over our Paragon Medical business.

These material weaknesses contributed to additional material weakness in that we (1) did not design and maintain effective internal controls over the accounting for transactions in the revenue and receivables business process within our Paragon Medical business to determine whether the transactions occurred and were complete and accurate, and (2) did not design and maintain effective controls over certain information technology general controls within our Paragon Medical business for information systems that are relevant to the preparation of our financial statements.

Additionally, for the fiscal year ended December 31, 2019, we did not maintain effective control activities at one of our smaller foreign subsidiaries in which certain employees intentionally did not operate the controls related to inventory quantities as designed that resulted in the creation of unsupported physical inventory counts and inventory quantity adjustments.

Appointment of New Independent Registered Public Accounting Firm

On May 29, 2020, the Audit Committee approved the engagement of Grant Thornton LLP (“Grant Thornton”) as our independent registered public accounting firm for the year ending December 31, 2020, effective immediately.

During the year ended December 31, 2019, and during the interim period through May 29, 2020, neither the Company nor anyone acting on its behalf consulted with Grant Thornton regarding any of the matters described in Items 304(a)(2)(i) and (ii) of Regulation S-K.

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data