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Item 7. Management’s Discussion and Analysis

2024-03-12 compared with 2023-03-10 · 107 added, 134 removed, 104 unchanged (70% of the section changed)

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The following discussion should be read in conjunction with, and is qualified in its entirety by, the Consolidated Financial Statements and the Notes thereto and the Selected Financial Data included elsewhere in this Annual Report.

operating results and percentage relationships among any amounts included in the Consolidated Financial Statements are not necessarily indicative of trends in operating results for any future period.

Historical operating results and percentage relationships among any amounts included in the Consolidated Financial Statements are not necessarily indicative of trends in operating results for any future period.

Unless otherwise noted herein, all amounts are in thousands, except per share numbers.

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Overview and Management Focus

Our strategy and management focus are based upon the following long-term objectives

• Organic growth within our segments;

• Improved operating margins;

• Cost reduction;

• optimization of manufacturing footprint;

• Efficient capital deployment;

• Debt leverage ratio improvement;

• Capital management initiatives;

• Employee health, safety, and satisfaction;

During 2023, the Company initiated an enterprise transformation plan to grow sales, profits, free cash flow and shareholder value.

The main tenets of the Company’s transformation plan are:

• Empowered leadership team that is accountable to outcomes;

• Supplementing the team with added talent and experienced professionals;

• Investing $100 million of capex over a five year period with strategic intentions;

• Strategic footprint overlay to blend down the Company’s cost structure to lower total-cost product offerings;

• Building and converting upon a high-probability pipeline of new business opportunities that fit the Company’s capacity and forward direction;

• Deliver excellent customer service and quality in a safe and sustainable manner;

• Expand margins through a variety of contemporary approaches, but especially continuous improvement algorithms;

• Annually generate free cash flow;

• Face reality and address underperforming areas of the Company;

• Recruit, retain and incent the best possible team of employees globally.

We are a strategic partner to a diversified and global customer base with long standing business relationships and long-running business streams.

We participate in growing and attractive end markets, including global automotive parts and passenger vehicles, commercial vehicles, grid and electrical investment, and medical components.

Management generally focuses on these trends and relevant market indicators:

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• Changes in tariff regulations.

Management generally focuses on the following key indicators of operating performance

• Sales growth;

• Cost of sales;

• Gross margin;

• Selling, general and administrative expense;

• Earnings before interest, taxes, depreciation and amortization;

• Return on invested capital;

• Income from operations;

• Net income;

• Leverage ratio

• Cash flow from operations and capital spending;

• Certain non-GAAP measures as defined in our quarterly earnings releases and investor presentations;

• Customer service reliability;

• External and internal quality indicators;

• Employee development.

Critical Accounting Estimates

Our significant accounting policies, including the assumptions and judgment underlying them, are disclosed in Note 1 of the Notes to Consolidated Financial Statements.

As disclosed in Note 1, the preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes.

Actual results could differ significantly from those estimates.

We believe that the following discussion addresses our most critical accounting estimates, which are those that are most important to the portrayal of our financial condition and results of operations and require management’s most difficult, subjective, and complex judgments.

Income taxes are accounted for under the asset and liability method.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized.

Provision has been made for income taxes on unremitted earnings of certain foreign subsidiaries as these earnings are not deemed to be permanently reinvested.

We recognize income tax positions that meet the more likely than not threshold and accrue interest and potential penalties related to unrecognized income tax positions which are recorded as a component of the provision (benefit) for income taxes.

We eliminate disproportionate tax effects from accumulated other comprehensive income (loss) when the circumstances upon which they are premised cease to exist.

The calculation of tax assets, liabilities, and expenses under U.S.

GAAP is largely dependent on management judgment of the current and future deductibility and utilization of taxable expenses and benefits using a more likely than not threshold.

Specifically, the realization of deferred tax assets and the certainty of tax positions taken are largely dependent upon management weighting the current positive and negative evidence for recording tax benefits and expenses.

A significant piece of objective negative evidence evaluated is cumulative losses incurred over the three-year period ended December 31, 2022.

Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future earnings growth.

We have recorded a U.S.

deferred tax liability for foreign earnings which are not indefinitely reinvested.

We treat global intangible low-taxed income (“GILTI”) as a periodic charge in the year in which it arises and therefore do not record deferred taxes for basis differences associated with GILTI.

In the event that the actual outcome from future tax consequences differs from management estimates and assumptions or management plans and positions are amended, the resulting change to the provision for income taxes could have a material impact on the consolidated results of operations and financial position.

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.

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.

Assets to be disposed of are recorded at the lesser of carrying value or fair value less costs of disposal.

In assessing potential impairment for long-lived assets, we consider forecasted financial performance based, in large part, on management business plans and projected financial information which are subject to a high degree of management judgment and complexity.

Future adverse changes in market conditions or adverse operating results of the underlying assets could result in having to record additional impairment charges not previously recognized.

Fair Value Measurements

Fair value is an exit price representing the expected amount that an entity would receive to sell an asset or pay to transfer a liability in an orderly transaction with market participants at the measurement date.

Fair value principles prioritize valuation inputs across three broad levels.

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.

Results of Operations

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Macroeconomic Conditions

We continue to monitor the ongoing impacts of current macroeconomic and geopolitical events, including changing conditions from the COVID-19 pandemic, the ongoing Russia-Ukraine conflict, inflationary cost pressures, rising interest rates, supply chain disruptions, and labor shortages.

The COVID-19 pandemic and governmental responses thereto, including COVID-19 lockdowns in China, continue to impact our business operations and our customers' and suppliers' ability to operate at normal levels.

Disruptions in normal operating levels continue to create supply chain disruptions and inflationary cost pressures within our end-markets.

We anticipate that supply chain constraints and the inflationary environment, as impacted by the COVID-19 pandemic, will continue into 2023.

The Russia-Ukraine conflict also continues to create volatility in global financial and energy markets, creating energy and supply chain shortages, which has added to the inflationary pressures experienced by the global economy.

We continue to monitor the ongoing impacts of current macroeconomic and geopolitical events, including changing conditions from ongoing global conflicts, inflationary cost pressures, elevated interest rates, supply chain disruptions, and labor shortages and disruptions.

The ongoing global conflicts continue to create volatility in global financial and energy markets, creating energy and supply chain shortages, which has added to the inflationary pressures experienced by the global economy.

We continue to actively work with our suppliers to minimize impacts of supply shortages on our manufacturing capabilities.

Although our business has not been materially impacted by the ongoing Russia-Ukraine conflict we cannot predict the extent to which our operations, or those of our customers or suppliers, will be impacted in the future, or the ways in which the conflict may impact our business, financial condition, results of operations and cash flows.

economy is experiencing broad and rapid inflation and rising interest rates, as well as supply issues in materials, services, and labor due to economic policy, the COVID-19 pandemic and, more recently, the Russia-Ukraine conflict.

These impacts are likely to persist into 2023 and beyond.

We cannot predict the impact on the Company’s end-markets or input costs nor the ability of the Company to recover cost increases through pricing.

Although our business has not been materially impacted by these ongoing global conflicts as of the date of this filing, we cannot reasonably predict the extent to which our operations, or those of our customers or suppliers, will be impacted in the future, or the ways in which the conflicts may impact our business, financial condition, results of operations and cash flows.

economy has experienced inflationary increases and elevated interest rates, as well as supply issues in materials, services, and labor due to economic policy, the COVID-19 pandemic and global conflicts.

While these impacts stabilized during 2023, we cannot predict the future impact on our end-markets or input costs nor our ability to recover cost increases through pricing.

Footprint Optimization

We have taken specific steps to consolidate our footprint by identifying less profitable end markets and focusing our strategic growth initiatives in markets where we believe we will be able to maximize profitability.

During the first half of 2023, we closed our Taunton and Irvine sites in the Power Solutions group and three underutilized Mobile Solutions sites to reduce operating costs.

Additionally, we continue to evaluate our global footprint, which may result in further consolidation or expansion actions to further improve our overall cost structure.

Sales Concentration

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Depreciation and amortization 9.4 % 9.5 % 9.7 %

Goodwill impairment — % — % 21.7 %

Other operating expense (income), net (0.3) % 0.4 % (0.2) %

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Loss on interest rate swap — % — % 0.4 %

Other income, net (1.0) % (1.1) % — %

Loss from continuing operations before benefit (provision) for income taxes and share of net income from joint venture (6.2) % (4.7) % (35.6) %

Benefit (provision) for income taxes (0.3) % 0.4 % 2.1 %

Other expense (income), net 2.2 % (1.0) % (1.1) %

Loss from continuing operations before provision for income taxes and share of net income from joint venture (11.0) % (6.2) % (4.7) %

Provision for income taxes (0.5) % (0.3) % 0.4 %

Share of net income from joint venture 1.2 % 1.3 % 1.3 %

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Interest expense 21,137 15,041 6,096

Loss on extinguishment of debt and write-off of debt issuance costs — 2,390 (2,390)

Derivative payments on interest rate swap — 1,717 (1,717)

Loss on interest rate swap — 2,033 (2,033)

Other income, net (5,064) (5,366) 302

Loss from continuing operations before benefit (provision) for income taxes and share of net income from joint venture (31,069) (22,442) (8,627)

Benefit (provision) for income taxes (1,621) 1,756 (3,377)

Other expense (income), net 10,730 (5,064) 15,794

Loss from continuing operations before provision for income taxes and share of net income from joint venture (53,671) (31,069) (22,602)

Provision for income taxes (2,285) (1,621) (664)

Share of net income from joint venture 5,806 6,592 (786)

Loss from continuing operations (26,098) (14,425) (11,673)

Income from discontinued operations, net of tax — 1,200 (1,200)

Net loss $ (50,150) $ (26,098) $ (24,052)

Net sales increased by $21.2 million, or 4.4%, during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to increased pricing partially offset by lower volume and unfavorable foreign exchange effects of $4.2 million.

Net sales decreased by $9.5 million, or 1.9%, during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to reduced volume, including the impact from the closure of the Taunton and Irvine facilities, lower customer settlements and unfavorable foreign exchange effects of $0.6 million.

These decreases were partially offset by higher customer pricing.

Cost of Sales.

Cost of sales increased by $31.1 million, or 8.0%, during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to inflationary costs and unfavorable overhead absorption, partially offset by lower sales volume and favorable foreign exchange effects.

Cost of sales decreased by $1.9 million, or 0.5%, during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to lower sales volume associated with facility closures.

These decreases were partially offset by higher material and labor costs, increased costs due to inefficient manufacturing processes associated with product launches, and unfavorable foreign exchange effects.

Selling, General, and Administrative Expense.

Selling, general, and administrative expense decreased by $1.9 million during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to lower incentive compensation, severance and retention expense.

These decreases were partially offset by higher stock compensation expense, higher professional fees and increased travel costs.

Selling, general, and administrative expense decreased by $2.2 million during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to lower stock compensation expense and lower professional fees, partially offset by higher incentive compensation expense.

Other Operating Expense (Income), Net.

Other operating expense (income), net changed unfavorably by $3.0 million primarily due to a legal settlement reached during the first quarter of 2022 and the gain on the sale of a facility that was recognized in the third quarter of 2021.

Other operating expense (income), net changed favorably by $3.5 million primarily due to sublease income recognized in 2023 and a legal settlement recorded in 2022.

Interest Expense.

Interest expense increased by $2.4 million during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to higher interest rates and a larger average debt balance as a result of the credit facility and preferred stock refinance that occurred during the first quarter of 2021.

In addition, borrowings on the ABL Facility during the year ended December 31, 2022 contributed to higher interest expense.

These increases were partially offset by a

higher amount of interest expense that was capitalized in 2022 compared with the prior year and the positive impact of the interest rate swap.

Interest expense increased by $6.1 million during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to higher interest rates and the addition of a 2.00% paid-in-kind interest component on the Term Loan subsequent to the amendment in the first quarter of 2023.

These increases were partially offset by the recognition of gains from the interest rate swap and a higher amount of interest expense that was capitalized in the current year compared with 2022.

Years Ended December 31,

Interest on debt $ 21,638 $ 14,071

Interest rate swap settlements (428) 77

Gain recognized on interest rate swap (1,815) (428)

Amortization of debt issuance costs and discount 1,941 1,361

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Total interest expense $ 21,137 $ 15,041

Loss on Extinguishment of Debt and Write-off of Debt Issuance Costs.

We recognized $2.4 million in the first quarter of 2021 for the write-off of unamortized debt issuance costs associated with the credit facility that was terminated in March 2021.

Derivative Payments on Interest Rate Swap.

Derivative payments on interest rate swap represent cash settlements of an interest rate swap which was terminated in the first quarter of 2021.

We entered into a new interest rate swap in the third quarter of 2021, which is designated as a cash flow hedge with the impact of settlements recognized in interest expense.

Loss on Interest Rate Swap .

We recognized a $2.0 million loss in the first quarter of 2021 related to the termination of the previous interest rate swap in March 2021.

Other Income, Net.

Other income, net changed unfavorably by $0.3 million during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to lower derivative mark-to-market gains recognized in 2022, partially offset by the impact of a litigation settlement in 2021 and more favorable foreign exchange effects associated with intercompany borrowings.

Benefit (Provision) for Income Taxes.

Other Expense (Income), Net.

Other expense (income), net changed unfavorably by $15.8 million during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to noncash derivative mark-to-market losses recognized during 2023 compared to gains recognized during 2022.

Provision for Income Taxes.

Our effective tax rate was (4.3)% for the year ended December 31, 2023, compared to (5.2)% for the year ended December 31, 2022.

Our effective tax rate for the year ended December 31, 2022 was unfavorably impacted by the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by the limitation on the amount of tax benefit recorded for loss carryforwards in certain jurisdictions where we believe it is more likely than not that a portion of the future tax benefit may not be realized.

Our effective tax rate for the year ended December 31, 2023 was unfavorably impacted by the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by the limitation on the amount of tax benefit recorded for loss carryforwards in certain jurisdictions where we believe it is more likely than not that a

portion of the future tax benefit may not be realized.

The effective tax rate for the year ended December 31, 2023 was favorably impacted by the recording of interest income on the Company’s federal income tax refund requested as a result of the Coronavirus Aid, Relief, and Economic Security Act, as well as the recording of a benefit of a pending state refund claim.

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Share of Net Income from Joint Venture.

Share of net income from the JV increased by $0.3 million during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to higher sales partially offset by higher operating costs in the current year.

The JV, in which we own a 49% investment, recognized net sales of $101.6 million and $94.8 million for the years ended December 31, 2022 and 2021, respectively.

Income from Discontinued Operations, Net of Tax .

We recognized a gain of $1.2 million during the year ended December 31, 2021, due to the favorable resolution of a tax indemnity that resulted from the sale of our Life Sciences business in 2020.

Share of net income from the joint venture decreased by $0.8 million during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to higher fixed costs and increased depreciation and interest expense, partially offset by higher revenue.

The joint venture, in which we own a 49% investment, recognized net sales of $109.6 million and $101.6 million for the year ended December 31, 2023 and 2022, respectively.

Results by Segment

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Net sales $ 303,335 $ 293,536 $ 9,799

Income (loss) from operations $ (2,165) $ 9,039 $ (11,204)

Net sales increased by $7.7 million, or 2.7%, during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to increased pricing, partially offset by lower sales of diesel components due to lower European demand which was impacted by the war in Ukraine, COVID-19 interruptions in China, lost sales associated with certain fuel systems reaching end of production, and unfavorable foreign exchange effects of $4.1 million.

Income (loss) from operations decreased by $11.2 million during the year ended December 31, 2022 compared to the prior year, primarily due to inflationary costs not fully recovered in customer pricing, unfavorable overhead absorption, start-up costs associated with Mexico new business launches, and variable cost inefficiencies associated with supply chain interruptions,

uneven customer ordering patterns, and labor constraints caused by pandemic interruptions.

These decreases were partially offset by lower incentive compensation expense.

Loss from operations $ (11,749) $ (2,165) $ (9,584)

Net sales increased by $9.8 million, or 3.3%, during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to higher customer pricing, partially offset by lower volume, and lower customer settlements.

Loss from operations changed unfavorably by $9.6 million during the year ended December 31, 2023 compared to the prior year, primarily due to higher material and labor costs, lower sales volume, lower customer settlement and unfavorable foreign exchange effects.

In addition, costs increased due to production challenges associated with new business launches.

POWER SOLUTIONS

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Income from operations $ 11,096 $ 3,536 $ 7,560

Net sales increased by $13.4 million, or 7.0%, during the year ended December 31, 2022, compared to the year ended December 31, 2021, primarily due to higher customer pricing.

Income from operations decreased by $3.0 million during the year ended December 31, 2022 compared to the same period in the prior year, primarily due to a $1.8 million litigation settlement to resolve a claim from 2016, an increase in amortization expense, and the absence of a gain on the sale of a facility in the third quarter of 2021.

These decreases were partially offset by the impact of higher customer pricing.

Net sales decreased by $19.3 million, or 9.4%, during the year ended December 31, 2023, compared to the year ended December 31, 2022, primarily due to lower volumes, including the impact from the closure of the Taunton and Irvine facilities.

These decreases were partially offset by higher customer pricing and premium pricing on a certain customer project.

Income from operations increased by $7.6 million during the year ended December 31, 2023 compared to the same period in the prior year, primarily due to lower costs associated with the facilities that closed in the second quarter of 2023, premium pricing on a certain customer project in the first quarter of 2023, a legal settlement reached during the first quarter of 2022, and sublease income earned on closed facilities.

These increases were partially offset by lower sales volume.

Changes in Financial Condition from December 31, 2022 to December 31, 2023

From December 31, 2021 to December 31, 2022, total assets decreased by $33.0 million primarily due to normal depreciation and amortization of fixed assets and intangible assets.

These decreases were partially offset by increases in accounts receivable and inventories during the year ended December 31, 2022.

The increase in accounts receivable is due to higher sales during the end of the current year compared with the end of 2021.

The value of inventory increased due to higher material and labor costs as well as higher quantities to maintain customer safety stock due to ongoing supply chain interruptions, especially in China.

From December 31, 2021 to December 31, 2022, total liabilities decreased by $5.9 million, primarily due to lower employee incentive compensation accruals and a decrease in the valuation of certain derivatives.

These decreases were offset by an increase in accounts payable attributed to higher inventory balances at December 31, 2022.

From December 31, 2022 to December 31, 2023, total assets decreased by $35.2 million primarily due to decreases in accounts receivable, inventory, property, plant and equipment and intangible assets.

The closure of two Power Solutions facilities contributed to the decrease in inventory and property, plant and equipment, and the decline in intangible assets is due to amortization.

From December 31, 2022 to December 31, 2023, total liabilities increased by $12.9 million, primarily due to an increase in other non-current liabilities due to fair value adjustments of outstanding warrants.

Working capital, which consists of current assets less current liabilities, was $100.9 million as of December 31, 2023, compared to $112.9 million as of December 31, 2022.

The decrease was primarily due to increases in accounts payable and other current liabilities, partially offset by increases in accounts receivable and inventory.

The decrease in working capital was primarily due to a decrease in accounts receivable and inventory and increases in accrued salaries, wages and benefits.

Cash provided by operations was $29.3 million for the year ended December 31, 2023, compared with cash provided by operations of $7.7 million for the year ended December 31, 2022.

The decrease was primarily due to an increase in net loss and increases in accounts receivable and inventory, partially offset by dividends received from our unconsolidated joint venture and lower income tax payments in 2022.

Cash used in investing activities was $17.5 million for the year ended December 31, 2022, compared with cash used in investing activities of $36.1 million for the year ended December 31, 2021.

The decrease was primarily due to cash paid to settle the interest rate swap in the first quarter of 2021.

Cash used in financing activities was $5.2 million for the year ended December 31, 2022, compared with cash provided by financing activities of $2.6 million for the year ended December 31, 2021.

The difference was primarily due to the debt and preferred stock refinancing in the first quarter of 2021.

The difference was primarily due to decreases in accounts

receivable and inventory during the year ended 2023 compared to increases in these balance during the corresponding period of 2022.

Cash used in investing activities during the year ended December 31, 2023 changed minimally from the prior year as higher expenditures for property, plant and equipment was partially offset by the proceeds from the sale of equipment at the Taunton and Irvine facilities in the first half of 2023.

Cash used in financing activities was $2.9 million for the year ended December 31, 2023, compared with $5.2 million for the year ended December 31, 2022.

The decrease was primarily due to an increase in international loans during 2023.

Liquidity and Capital Resources

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As of December 31, 2023, we had $26.4 million available for future borrowings under the ABL Facility.

This amount of borrowing capacity is net of $1.0 million of outstanding borrowings and $11.0 million of outstanding letters of credit at December 31, 2022, which are considered as usage of the ABL Facility.

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.

This amount of borrowing capacity is net of $10.9 million of outstanding letters of credit at December 31, 2023, which are considered as usage of the ABL Facility.

The Term Loan Facility requires quarterly principal payments of $0.4 million with the remaining unpaid principal amount, including accrued paid-in-kind interest, 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.

Outstanding borrowings under the Term Loan Facility bear interest at either 1) one-month LIBOR (subject to a 1.000% floor) plus an applicable margin of 6.875% or 2) the greater of various benchmark rates plus an applicable margin of 5.875%.

interest rate in effect at December 31, 2022, and the fixed rate on the 2021 interest rate swap, annual interest payments would be approximately $14.7 million.

The ABL Facility bears interest on a variable rate structure with borrowings bearing interest at one-month LIBOR plus an applicable margin of 1.75%.

The interest rate in effect at December 31, 2022, was 6.00%.

Outstanding borrowings under the Term Loan Facility bear interest at either 1) one-month, three-month, or six-month Adjusted SOFR, subject to a 1.000% floor, plus an applicable margin of 6.875% or 2) the greater of various benchmark rates plus an applicable margin of 5.875%.

Beginning in the second quarter of 2023, interest expense was increased on a paid-in-kind basis at a rate between 1.00% and 2.00%, dependent on the Company’s leverage ratio.

Based on the interest rate in effect at December 31, 2023, annual cash interest payments would be approximately $18.3 million, with an additional $2.9 million accrued as paid-in-kind interest.

On March 5, 2024, we entered into a Purchase and Sale and Escrow Agreement to sell and leaseback three of our properties (the “Properties”).

The sale is expected to close on or around March 15, 2024, with the buyer’s obligation to close subject to inspection, due diligence and other customary closing conditions.

The aggregate purchase price for the Properties is $16.8 million, the net proceeds from which will be used to repay a portion of the outstanding borrowings under the Term Loan Facility.

The ABL Facility bears interest on a variable borrowing rate based on either 1) Adjusted SOFR plus an applicable margin of 1.75% or 2.00%, depending on availability, or 2) the greater of the federal funds rate or prime, plus an applicable margin of 0.75% or 1.00%, depending on availability.

We pay a commitment fee of 0.375% for unused capacity under the ABL Facility.

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Both credit facilities allow for optional expansion of available borrowings, subject to certain terms and conditions.

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

See Note 11 of the Notes to Consolidated Financial Statements.

Accounts Receivable Sales Programs

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Our participation in these programs is based on our specific cash needs throughout the year, the discount charged to receive payment earlier, the length of the payment terms with our customers, as well being subject to limits in our ABL Facility and Term Loan Facility agreements.

Other Receivables

In 2021, we filed a refund claim with the IRS as a result of the Coronavirus Aid, Relief, and Economic Security Act.

Including interest accrued on the initial refund amount, we have a $11.6 million tax refund receivable at December 31, 2023, which is in the process of IRS review and approval.

The timing of the receipt of the refund remains uncertain.

Functional Currencies

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However, as a whole, we are not materially impacted by seasonality.