What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-03-12 compared with 2023-03-10 · 434 added, 646 removed, 616 unchanged (64% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Consolidated Statements of Changes in Stockholders’ Equity

Notes to Consolidated Financial Statements

2 unchanged sentences

Segment Information

Revenue from Contracts with Customers

Accounts Receivable

2 unchanged sentences

Investment in Joint Venture

Preferred Stock

Commitments and Contingencies

Preferred Stock and Stockholders' Equity

Revenue from Contracts with Customers

Net Income (Loss) Per Common Share

Share-Based Compensation

Accumulated Other Comprehensive Income

Net Income (Loss) Per Common Share

Fair Value Measurements

5 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, based on criteria established in the 2013 Internal Control—Integrated Framework issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, 2022, and our report dated March 10, 2023 expressed an unqualified opinion on those consolidated financial statements.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the financial statements of the Company as of and for the year ended December 31, 2023, and our report dated March 12, 2024 expressed an unqualified opinion on those consolidated financial statements.

Basis for opinion

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In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2023, 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.

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, 2023, 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 12, 2024 expressed unqualified opinion.

Basis for opinion

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Depreciation and amortization 46,120 47,231 46,195

Goodwill impairment — — 92,942

Other operating expense (income), net ( 1,657 ) 1,859 ( 1,091 )

4 unchanged sentences

Loss on interest rate swap — — 2,033

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

Other expense (income), net 10,730 ( 5,064 ) ( 5,366 )

Loss from continuing operations before benefit (provision) for income taxes and share of net income from joint venture ( 53,671 ) ( 31,069 ) ( 22,442 )

5 unchanged sentences

Other comprehensive income (loss):

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

Reclassification adjustment for discontinued operations — — 5,961

Foreign currency translation gain (loss) $ 1,410 $ ( 8,156 ) $ ( 1,135 )

Interest rate swap:

Change in fair value, net of tax ( 230 ) 3,358 59

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

Reclassification adjustments included in net loss, net of tax ( 1,815 ) ( 420 ) 2,906

Other comprehensive income (loss) $ ( 635 ) $ ( 5,218 ) $ 1,830

Comprehensive loss $ ( 50,785 ) $ ( 31,316 ) $ ( 11,395 )

Basic net loss per common share:

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

Income from discontinued operations per common share — 0.03 0.92

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

Weighted average common shares outstanding 44,680 44,011 42,199

Diluted net loss per common share:

Basic and diluted net loss per common share:

Loss from continuing operations per common share $ ( 1.35 ) $ ( 0.83 ) $ ( 0.82 )

Income from discontinued operations per common share $ — $ — $ 0.03

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

Weighted average common shares outstanding 44,680 44,011 42,199

Basic and diluted net loss per common share $ ( 1.35 ) $ ( 0.83 ) $ ( 0.79 )

Shares used to calculate basic and diluted net loss per share 46,738 44,680 44,011

See Notes to Consolidated Financial Statements.

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Cash and cash equivalents $ 21,903 $ 12,808

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

74,129 71,419

Accounts receivable, net 65,545 74,129

Inventories 71,563 80,682

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Income tax payable 524 926

Current maturities of long-term debt 3,321 3,074

Short-term debt and current maturities of long-term debt 3,910 3,321

Current portion of operating lease liabilities 5,735 5,294

2 unchanged sentences

Deferred tax liabilities 4,988 5,596

Long-term debt, net of current portion 149,389 151,052

Long-term debt, net of current maturities 149,369 149,389

Operating lease liabilities, net of current portion 47,281 51,411

12 unchanged sentences

See Notes to Consolidated Financial Statements.

Consolidated Statements of Changes in Stockholders’ Equity

Common Stock Accumulated deficit Accumulated other comprehensive income (loss)

(in thousands) Number

value Additional

capital Warrants Total

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

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 )

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 )

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 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 )

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.

Consolidated Statements of Cash Flows

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Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization of continuing operations 47,231 46,195 45,680

Depreciation and amortization of discontinued operations — — 35,731

Depreciation and amortization 46,120 47,231 46,195

Amortization of debt issuance costs and discount 1,941 1,361 1,381

Goodwill impairment of continuing operations — — 92,942

Goodwill impairment of discontinued operations — — 146,757

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

Paid-in-kind interest 2,239 — —

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

1 unchanged sentence

Share of net income from joint venture, net of cash dividends received ( 1,868 ) ( 347 ) ( 6,261 )

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

Gain on disposal of discontinued operations, net of tax — — ( 1,200 )

Share-based compensation expense 2,821 4,377 3,216

10 unchanged sentences

Acquisition of property, plant and equipment ( 20,496 ) ( 17,952 ) ( 18,221 )

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

Proceeds from sale of property, plant, and equipment 2,898 460 1,418

Cash paid for post-closing adjustments on sale of business — — ( 3,880 )

Cash settlements of interest rate swap — — ( 15,420 )

Other — — 695

Net cash provided by (used in) investing activities ( 17,492 ) ( 36,103 ) 719,284

Net cash used in investing activities ( 17,598 ) ( 17,492 ) ( 36,103 )

Cash flows from financing activities

Proceeds from long-term debt 61,000 46,000 171,000

Repayments of long-term debt ( 65,395 ) ( 47,958 ) ( 93,729 )

Cash paid for debt issuance costs ( 169 ) ( 136 ) ( 7,360 )

1 unchanged sentence

Redemption of preferred stock — — ( 122,434 )

Proceeds from long-term debt 46,000 171,000 66,195

Repayments of long-term debt ( 47,958 ) ( 93,729 ) ( 776,331 )

Repayments of short-term debt, net — ( 1,563 ) ( 924 )

Proceeds from (repayments of) short-term debt 3,648 — ( 1,563 )

Other ( 1,967 ) ( 3,092 ) ( 5,150 )

10 unchanged sentences

Non-cash additions to property, plant and equipment 2,743 1,266 4,438

Non-cash additions to debt issuance costs 2,712 — —

Supplemental disclosures:

Cash paid for interest 13,344 10,739 51,542

Cash paid for interest, net of capitalized interest 15,272 13,344 10,739

Cash paid for income taxes 3,083 4,739 7,624

_______________________________

(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.

Consolidated Statements of Changes in Stockholders’ Equity

Common Stock Additional

capital Accumulated deficit Accumulated other comprehensive income (loss)

(in thousands) Number of shares Par

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 surrendered for tax withholdings under stock incentive plans ( 52 ) ( 1 ) ( 362 ) — — ( 363 )

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

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

Restricted shares surrendered for tax withholdings under stock incentive plans ( 31 ) — ( 88 ) — — ( 88 )

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

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

Net loss — — — ( 50,150 ) — ( 50,150 )

Dividends accrued for preferred stock — — ( 13,098 ) — — ( 13,098 )

Shares issued under stock incentive plans, net of forfeitures and tax withholdings 3,561 36 ( 57 ) — — ( 21 )

Share-based compensation expense — — 2,821 — — 2,821

Restricted shares surrendered for tax withholdings under stock incentive plans ( 148 ) ( 2 ) ( 177 ) — — ( 179 )

Other comprehensive loss — — — — ( 635 ) ( 635 )

Balance as of December 31, 2023 47,269 $ 473 $ 457,632 $ ( 295,348 ) $ ( 37,755 ) $ 125,002

See Notes to Consolidated Financial Statements.

Notes to Consolidated Financial Statements

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Nature of Business

is a diversified industrial company that combines in-depth materials science expertise with advanced engineering and production capabilities to design and manufacture high-precision metal and plastic components and assemblies for a variety of end markets on a global basis.

As used in this Annual Report on Form 10-K (this “Annual Report”), the terms “NN,” the “Company,” “we,” “our,” or “us” refer to NN, Inc., and its subsidiaries.

We have 31 facilities in North America, Europe, South America, and Asia.

is a diversified industrial company that combines advanced engineering and production capabilities with in-depth materials science expertise to design and manufacture high-precision components and assemblies for a variety of end markets on a global basis.

As used in the Notes to Consolidated Financial Statements, the terms the “Company,” “we,” “our,” or “us” refer to NN, Inc., and its subsidiaries.

As of December 31, 2023, we had 27 facilities in North America, South America, Europe, and China.

Basis of Presentation

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Our consolidated financial statements include the accounts of NN, Inc., and its wholly owned subsidiaries.

We own a 49 % interest in a joint venture which we account for using the equity method (see Note 9).

We own a 49 % investment in a joint venture (the “JV”) which we account for using the equity method (see Note 9).

All intercompany transactions and balances have been eliminated in consolidation.

3 unchanged sentences

Actual results may differ from those estimates.

Accounting Standards Recently 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.

Specifically, ASU 2020-06 simplifies accounting for convertible instruments by removing major separation models required under current U.S.

In addition, ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for the exception.

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.

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.

Specifically, ASU 2021-04 requires the issuer to treat a modification of an equity-classified warrant as an exchange of the original warrant.

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.

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.

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

Cash and Cash Equivalents

Cash and cash equivalents include cash and highly liquid investments with original maturities of three months or less.

We maintain cash balances in transaction accounts with various financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”).

We maintain cash balances in transaction accounts with various financial institutions that are insured by the Federal Deposit Insurance Corporation.

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 $ 13.5 million and $ 12.5 million in cash and cash equivalents as of December 31, 2023 and 2022, respectively, held at foreign financial institutions.

Fair Value Measurements

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.

Accounts Receivable and Allowance for Credit Losses

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When a property item is retired, its cost and related accumulated depreciation are removed from the property accounts and any gain or loss is recorded in the Consolidated Statements of Operations and Comprehensive Income (Loss).

We review the carrying values of long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

We review the carrying values of long-lived assets for

impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable.

Property, plant and equipment also includes tools, molds, and dies used in manufacturing.

Depreciation is calculated based on historical cost using the straight-line method over the estimated useful lives of the depreciable assets.

Estimated useful lives for buildings and land improvements generally range from 10 to 40 years.

Estimated useful lives for machinery and equipment generally range from 3 to 12 years.

Estimated useful lives for buildings and land improvements generally range from 10 years to 40 years.

Estimated useful lives for machinery and equipment generally range from 3 years to 12 years.

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

8 unchanged sentences

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 ;

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

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

We sublease certain leased buildings or portions of leased buildings when no longer needed for our current operational needs.

Since we retain the obligation to the lessor, the underlying leases continue to be accounted for as operating leases.

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

Impairment of Long-Lived Assets

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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, 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.

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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If management considers the decline to be other than temporary, we would write down the investment to its estimated fair market value.

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 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.

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

Revenue Recognition

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Share Based Compensation

The cost of stock options, restricted stock, and performance share units is recognized as compensation expense over the vesting periods based on the grant date fair value, net of expected forfeitures.

We determine grant date fair value using the Black Scholes financial pricing model for stock options and a Monte Carlo simulation for performance share units that include a market condition for vesting because these awards are not traded in open markets.

We determine grant date fair value using the closing price of our common stock on the date of grant for restricted stock and performance share units that include performance conditions for vesting.

The cost of restricted stock awards, performance share units, and stock options is recognized as compensation expense over the vesting periods based on the grant date fair value, as determined under ASC Topic 718, Compensation – stock compensation .

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

We use a Monte Carlo simulation for performance share units that include a market condition.

The grant-date fair value of performance share units that include performance conditions is based on the closing price of our common stock on the date of grant and compensation expense is recognized based on the estimated outcome of the performance condition.

Stock options are valued using the Black Scholes financial pricing model.

Common Stock and Preferred Stock Dividends

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The balances are adjusted to the current exchange rate as of each balance sheet date and as of the date when the transaction is consummated.

Transaction gains or losses, excluding intercompany loan transactions, are expensed as incurred in either cost of sales or selling, general and administrative expense in the Consolidated Statements of Operations and Comprehensive Income (Loss) and were immaterial to the years ended December 31, 2022, 2021, and 2020.

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, 2022, 2021, and 2020, transaction gains (losses) on intercompany loan transactions were $ 0.2 million, $( 0.5 ) million, and $( 0.8 ) million, respectively.

Transaction gains or losses 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, 2023, 2022, and 2021, transaction gains (losses) were $ 0.3 million, $ 0.2 million, and $( 0.5 ) million, respectively.

Net Income (Loss) Per Common Share

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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, and stock options unless inclusion would not be dilutive.

Our participating securities, which include restricted stock awards and 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, adjusted for participating securities and certain outstanding warrants.

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

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

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 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.

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

Fair Value Measurements

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 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.

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.

For the years ended December 31, 2023 and 2022, we received $ 0.7 million and $ 1.4 million, respectively, 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.

2 unchanged sentences

In October 2020, we sold our Life Sciences business under the terms of a Stock Purchase Agreement (the “SPA”) with affiliates of American Securities LLC for $ 753.3 million cash.

The Life Sciences business included facilities that were engaged in the production of a variety of components, assemblies, and instruments, such as surgical knives, bioresorbable implants, surgical staples, cases and trays, orthopaedic implants and tools, laparoscopic devices, and drug delivery devices for the orthopaedics and medical/surgical end markets.

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 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.

Under the terms of a transition services agreement, we provided certain support services after the sale.

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 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.

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.

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

Years Ended December 31,

Net sales $ — $ 225,255

Cost of sales (exclusive of depreciation and amortization shown separately below) — 160,464

Selling, general, and administrative expense — 20,779

Depreciation and amortization — 35,731

Goodwill impairment — 146,757

Other operating expense, net — 41

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, net — ( 322 )

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

Benefit for income taxes — 12,468

Loss from discontinued operations before costs of disposal — ( 176,008 )

Gain on disposal of discontinued operations 1,200 212,319

Benefit for income taxes on costs of disposal — 2,587

Income (loss) from discontinued operations, net of tax $ 1,200 $ 38,898

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.

The decline in market capitalization was a triggering event that caused us to perform a goodwill impairment analysis as of March 31, 2020.

The carrying value of the Life Sciences reporting unit exceeded its estimated fair value as of March 31, 2020.

As a result of our analysis, we recorded an impairment loss on goodwill of $ 146.8 million for Life Sciences during the year ended December 31, 2020.

The judgments, assumptions, and estimates involved in the goodwill impairment analysis for the Life Sciences reporting unit are consistent with those discussed in Note 7.

Our previous credit facility, which was in place at the time, required us to use proceeds from the sale of the Life Sciences business to prepay a portion of our previous debt.

We paid $ 700.0 million in the aggregate on our term loans during the fourth quarter of 2020.

The prepayment was applied to debt in accordance with the prepayment provisions of the previous credit agreement, which was in place at the time.

Average quarterly interest rates were multiplied by the required prepayment amounts to calculate interest expense to be reclassified to discontinued operations for historical periods presented.

The following table summarizes the amount of interest expense related to the previous credit facility that was reclassified to discontinued operations .

Years Ended December 31,

Interest on debt $ — $ 35,147

Amortization of debt issuance costs — 13,990

Capitalized interest and other — ( 244 )

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

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

Years Ended December 31,

Depreciation and amortization $ — $ 35,731

Goodwill impairment — 146,757

Amortization of debt issuance costs — 13,990

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

Acquisition of property, plant and equipment — 8,416

Right-of-use assets obtained in exchange for new finance lease liabilities — 695

Right-of-use assets obtained in exchange for new operating lease liabilities (1) — 6,174

_______________________________

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

Segment Information

1 unchanged sentence

• Mobile Solutions.

Mobile Solutions is focused on growth in the automotive and general industrial end markets.

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

We have developed an expertise in manufacturing highly complex, tight tolerance, system critical components.

13 unchanged sentences

Power Solutions 185,948 205,204 191,800

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

Intersegment sales eliminations ( 13 ) ( 2 ) ( 79 )

Total $ 489,270 $ 498,738 $ 477,584

2 unchanged sentences

Power Solutions 11,096 3,536 6,493

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

Corporate ( 21,151 ) ( 22,463 ) ( 24,536 )

Total $ ( 21,804 ) $ ( 21,092 ) $ ( 9,004 )

2 unchanged sentences

Power Solutions 15,318 17,483 15,892

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

Corporate 1,646 1,556 1,534

Total $ 46,120 $ 47,231 $ 46,195

2 unchanged sentences

Power Solutions 3,643 2,401 2,200

Corporate and Consolidations 961 610 203

Corporate 1,466 961 610

Total $ 20,496 $ 17,952 $ 18,221

_______________________________

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

The following table summarizes total assets by reportable segment.

2 unchanged sentences

Power Solutions 147,155 178,129

Corporate and Consolidations 29,660 37,734

Corporate 34,120 29,660

Total $ 510,885 $ 546,127

_______________________________

(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).

(1) Total assets in Mobile Solutions includes $ 32.7 million and $ 31.8 million as of December 31, 2023 and 2022, respectively, related to our investment in the JV.

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

8 unchanged sentences

Total $ 229,169 $ 244,350

The following table summarizes revenue by country, based on our customers’ shipping destination.

Year Ended December 31,

2023 2022 2021

United States $ 294,045 $ 301,823 $ 293,235

China 58,195 51,556 56,972

Brazil 48,696 48,216 35,455

Mexico 26,683 40,645 35,697

Germany 8,700 5,506 5,776

Poland 6,161 5,042 3,761

Other 46,790 45,950 46,688

Total net sales $ 489,270 $ 498,738 $ 477,584

Revenue from Contracts with Customers

Revenue is recognized 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.

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 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.

Our products in the general industrial industry include high-precision metal and plastic components for a variety of industrial applications including diesel industrial motors, heating and cooling systems, fluid power systems, power tools, and more.

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, specification plating, and surface finishing.

Year Ended December 31, 2023 Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

Automotive $ 212,582 $ 34,959 $ — $ 247,541

General Industrial 73,350 52,276 — 125,626

Residential/Commercial Electrical — 67,546 — 67,546

Other 17,403 31,167 ( 13 ) 48,557

Total net sales $ 303,335 $ 185,948 $ ( 13 ) $ 489,270

Year Ended December 31, 2022 Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

Automotive $ 197,341 $ 40,890 $ — $ 238,231

General Industrial 78,142 61,828 — 139,970

Residential/Commercial Electrical — 70,055 — 70,055

Other 18,053 32,431 ( 2 ) 50,482

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

Year Ended December 31, 2021 Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

Automotive $ 182,094 $ 38,779 $ — $ 220,873

General Industrial 90,290 60,312 — 150,602

Residential/Commercial Electrical — 61,748 — 61,748

Other 13,479 30,961 ( 79 ) 44,361

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

Other Sources of Revenue

We provide pre-production activities related to engineering efforts to develop molds, dies, and machines that are owned by our customers.

We may receive advance payments from customers which are deferred until satisfying our performance obligations by compliance with customer-specified milestones, recognizing revenue at a point in time.

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

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, 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, 2023, were not materially impacted by any other factors.

The balance of deferred revenue was $ 0.4 million and $ 0.7 million as of December 31, 2023 and December 31, 2022, respectively.

Revenue recognized for performance obligations satisfied or partially satisfied during the year ended December 31, 2023 included $ 0.7 million that was included in deferred revenue as of December 31, 2022.

Transaction Price Allocated to Future Performance Obligations

We are required to disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of December 31, 2023, unless our contracts meet one of the practical expedients.

Our contracts met the practical expedient for a performance obligation that is part of a contract that has an original expected duration of one year or less.

Costs to Obtain and Fulfill a Contract

We recognize commissions paid to internal sales personnel that are incremental to obtaining customer contracts as an expense when incurred since the amortization period is less than one year.

Costs to obtain a contract are expensed as selling, general and administrative expense.

Sales, VAT, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.

Incidental items that are immaterial in the context of the contract are recognized as expense.

Sales Concentration

No single customer accounted for 10% or more of consolidated net sales, during the years ended December 31, 2023, 2022, and 2021.

Accounts Receivable

7 unchanged sentences

Balance at end of year $ 1,241 $ 1,469 $ 1,352

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

As of December 31, 2023, one 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).

During the years ended December 31, 2023 and 2022, we incurred fees of $ 1.1 million and $ 0.6 million, respectively, related to the sale of receivables which is recorded in the Other expense (income), net line item on the Consolidated Statements of Operations and Comprehensive Income (Loss).

Inventories are comprised of the following amounts:

10 unchanged sentences

Construction in progress 3,466 11,063

Total 422,683 407,041

Gross cost 439,825 422,683

Accumulated depreciation 254,013 225,046

3 unchanged sentences

There were no impairment charges for the years ended December 31, 2023, 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.

The decline in market capitalization was a triggering event that caused us to perform a goodwill impairment analysis as of March 31, 2020.

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 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.

Assumptions in estimating future cash flows are subject to a high degree of judgment and complexity.

The carrying value of the Power Solutions reporting unit exceeded the estimated fair value as of the March 31, 2020, analysis.

As a result of our analysis, we recorded an impairment loss on goodwill of $ 92.9 million to the “Goodwill impairment” line on the Consolidated Statements of Operations and Comprehensive Income (Loss) for the year ended December 31, 2020.

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

Intangible Assets

15 unchanged sentences

Total identified intangible assets $ 179,373 $ ( 120,649 ) $ 58,724 $ 181,273 $ ( 108,382 ) $ 72,891

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.

3 unchanged sentences

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

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.

There were no impairment charges for the years ended December 31, 2023, 2022 and 2021.

Investment in Joint Venture

We own a 49 % investment in Wuxi Weifu Autocam Precision Machinery Company, Ltd.

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

We own a 49 % investment in Wuxi Weifu Autocam Precision Machinery Company, Ltd., a joint venture located in Wuxi, China.

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.

16 unchanged sentences

Noncurrent liabilities 8,662 8,695

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, 2022 were $ 0.1 million.

We recognized sales to the JV of $ 0 , $ 0.1 million, and $ 0.4 million during the years ended December 31, 2023, 2022, and 2021, respectively.

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

On March 3, 2023, we amended the Term Loan Facility (the “Term Loan Amendment”) and ABL Facility to adjust certain covenants under the agreements, as well as to replace references to LIBOR with secured overnight finance rate (“SOFR”) for interest rate calculations.

The following table presents the outstanding debt balances.

As of December 31,

Term Loan Facility $ 148,114 $ 147,375

ABL Facility — 1,000

International loans 10,655 8,729

Unamortized debt issuance costs and discount (1) ( 5,490 ) ( 4,394 )

Total debt $ 153,279 $ 152,710

_______________________________

(1) In addition to this amount, costs of $ 0.5 million and $ 0.6 million related to the ABL Facility were recorded in other non-current assets as of December 31, 2023 and 2022, respectively.

We capitalized interest costs of $ 1.3 million, $ 0.6 million, and $ 0.3 million in the years ended December 31, 2023, 2022, and 2021, respectively, related to construction in progress.

Term Loan Facility

Effective March 31, 2023, outstanding borrowings under the Term Loan Facility bear interest at either 1) one-month, three-month, or six-month SOFR with a duration adjustment (“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 was increased on a paid-in-kind basis at a rate between 1.00 % and 2.00 % (“PIK interest”), dependent on the Company’s leverage ratio.

The PIK interest is payable on the loan maturity date of September 22, 2026.

At December 31, 2023, the Term Loan Facility bore interest, including PIK interest, based on one-month Adjusted SOFR, at 14.331 %.

The Term Loan Facility requires quarterly principal payments of $ 0.4 million with the remaining unpaid principal amount due at the loan maturity date.

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 domestic assets other than accounts receivable and inventory and has a second lien on domestic accounts receivable and inventory.

We were in compliance with all requirements under the Term Loan Facility as of December 31, 2023.

The Term Loan Facility was issued at a $ 3.8 million discount and we capitalized an additional $ 5.4 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.

We had an interest rate swap that changed the one-month LIBOR to a fixed rate of 1.291 % on $ 60.0 million of the outstanding balance of the Term Loan Facility.

During the first quarter of 2023, we terminated the interest rate swap and received cash proceeds of $ 2.5 million which was equal to its fair value.

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

The availability of credit under the ABL Facility is limited by a borrowing base calculation derived from accounts receivable and inventory held in the United States.

The maximum commitment amount may be increased or decreased from time to time based on the terms of conditions of the ABL Facility.

Outstanding borrowings under the ABL Facility bear interest on a variable rate structure plus an interest rate spread that is based on the average amount of aggregate revolving commitment available.

Effective March 3, 2023, the variable borrowing rate is 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 may elect whether to use one-month, three-month, or six-month Adjusted SOFR.

At December 31, 2023, using one-month Adjusted SOFR plus a 2.00 % margin, the interest rate on outstanding borrowings under the ABL Facility would have been 7.445 %.

We pay a commitment fee of 0.375 % for unused capacity under the ABL Facility and a 2.125 % fee on the amount of letters of credit outstanding.

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

As of December 31, 2023, we had no outstanding borrowings under the ABL Facility, $ 10.9 million of outstanding letters of credit, and $ 26.4 million available for future borrowings under the ABL Facility.

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

We were in compliance with all requirements under the ABL Facility as of December 31, 2023.

Future Maturities

The following table lists aggregate maturities of debt for each of the next five years.

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.

Preferred Stock

Series D Perpetual Preferred Stock

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.

Series D Preferred Stock shares earn cash dividends at a rate of 10.0 % per year, payable quarterly in arrears, accruing whether or not earned or declared.

If no cash dividend is paid, then the liquidation preference per share effective on the dividend date increases by 12.0 % per year.

On March 22, 2026, the cash dividend rate and in-kind dividend rate increase by 2.5 % per year.

Cash dividends are required beginning on September 30, 2027.

The Series D Preferred Stock is classified as mezzanine equity, between liabilities and stockholders’ equity, because certain features of the Series D Preferred Stock could require redemption of the Series D Preferred Stock upon a change of control event that is considered not solely within our control.

For initial recognition, the Series D Preferred Stock was recognized at a discounted value, net of issuance costs and allocation to warrants and a bifurcated embedded derivative.

The aggregate discount is amortized as a deemed dividend through March 22, 2026, which is the date the dividend rate begins to increase by 2.5 % per year.

Deemed dividends adjust additional paid-in capital due to the absence of retained earnings.

In accordance with ASC 815-15, Derivatives and Hedging - Embedded Derivatives, certain features of the Series D Preferred Stock were bifurcated and accounted for as derivatives separately.

Note 18 discusses the accounting for these features.

As of December 31, 2023, the carrying value of the Series D Preferred Stock shares was $ 77.8 million, which included $ 31.1 million of accumulated unpaid and deemed dividends.

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

Years Ended December 31,

2023 2022 2021

Balance at beginning of year $ 64,701 $ 53,807 $ —

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

Fair value of 2021 Warrants issued — — ( 14,839 )

Recognition of bifurcated embedded derivative — — ( 282 )

Accrual of in-kind dividends 10,085 8,961 6,222

Amortization 3,013 1,933 913

Balance at end of year $ 77,799 $ 64,701 $ 53,807

Series B Convertible Preferred Stock

On December 11, 2019, we issued 100,000 shares of contingently redeemable Series B convertible preferred stock (the “Series B Preferred Stock”), together with detachable warrants (the “2019 Warrants”) to purchase up to 1.5 million shares of our common stock at an original exercise price of $ 12.00 per share.

The Series B Preferred Stock had a liquidation preference of $ 1,000 per share and earned cumulative dividends at a rate of 10.625 % per year, and accrued whether or not earned or declared.

On March 22, 2021, we used the 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, to redeem all of the outstanding shares of the Series B Preferred Stock.

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

Balance as of December 31, 2020 $ 105,086

Accrual of in-kind dividends 14,008

Amortization 335

Redemption ( 119,429 )

Balance as of December 31, 2021 $ —

The following table presents components of lease expense:

Years Ended December 31,

2023 2022 2021

Operating lease cost $ 8,077 $ 8,285 $ 8,015

Finance lease cost:

Amortization of right-of-use assets 1,600 1,318 1,451

Interest expense 345 351 213

Short-term lease cost (1) 604 438 655

Sublease income ( 2,284 ) ( 195 ) —

Total lease cost $ 8,342 $ 10,197 $ 10,334

_______________________________

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

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

As of December 31,

Financial Statement Line Item 2023 2022

Operating lease assets Operating lease right-of-use assets $ 43,357 $ 46,713

Finance lease assets Property, plant and equipment, net 13,599 12,989

Total lease assets $ 56,956 $ 59,702

Current liabilities:

Operating lease liabilities Current portion of operating lease liabilities $ 5,735 $ 5,294

Finance lease liabilities Other current liabilities 2,047 2,610

Non-current liabilities:

Operating lease liabilities Operating lease liabilities, net of current portion 47,281 51,411

Finance lease liabilities Other non-current liabilities 4,488 3,828

Total lease liabilities $ 59,551 $ 63,143

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

Years Ended December 31,

2023 2022 2021

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows used in operating leases $ 8,462 $ 14,214 $ 13,434

Operating cash flows used in finance leases 345 351 213

Financing cash flows used in finance leases 1,766 3,003 4,836

Right-of-use assets obtained in exchange for new operating lease liabilities (1) 1,028 5,181 —

Right-of-use assets obtained in exchange for new finance lease liabilities 1,619 1,263 2,814

_______________________________

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

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

As of December 31,

Weighted-average remaining lease term - operating leases 9.2 years 10.1 years

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

Weighted-average discount rate - operating leases 7.7 % 7.5 %

Weighted-average discount rate - finance leases 5.2 % 5.3 %

The maturities of lease liabilities as of December 31, 2023, is as follows:

Operating Leases Finance Leases

2024 $ 9,524 $ 2,341

2025 8,683 2,225

2026 8,524 1,647

2027 8,327 868

2028 6,782 96

Thereafter 30,697 —

Total future minimum lease payments 72,537 7,177

imputed interest 19,521 642

Total lease liabilities $ 53,016 $ 6,535

We have entered into subleases for certain leased buildings or portions of leased buildings when no longer needed for our current operational needs.

The weighted-average remaining lease term of our subleases is 10.9 years.

In June 2023, we began subleasing our Taunton and Irvine sites, under subleases that extend through the lease termination dates of the respective head leases.

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

The undiscounted cash flows to be received under operating subleases subsequent to December 31, 2023, is as follows:

Thereafter 22,603

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) 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.

Autocam Brazil filed an administrative defense with the Brazilian tax authority arguing, among other matters, that it should qualify for an ICMS tax credit, contending that the intermediary materials are directly related to the manufacturing process.

We believe that we have substantial legal and factual defenses, and we plan to defend our interests in this matter vigorously.

The matter encompasses several lawsuits filed with the Brazilian courts requesting declaratory actions that no tax is due or seeking a stay of execution on the collection of the tax.

In 2018, we obtained a favorable decision in one of the declaratory actions for which the period for appeal has expired.

We have filed actions in each court requesting dismissal of the matter based on the earlier court action.

In May 2020, we received an unfavorable decision in one of the lawsuits, and as a result have recorded a liability to the Brazilian tax authorities and a receivable from the former shareholders of Autocam for the same amount.

Although we anticipate a favorable resolution to the remaining matters, we can provide no assurances that we will be successful in achieving dismissal of all pending cases.

dollar amount that would be owed in the event of an unfavorable decision is subject to interest, penalties, and currency impacts and therefore is dependent on the timing of the decision.

For the remaining open lawsuits, we currently believe the cumulative potential liability in the event of unfavorable decisions on all matters will be less than $ 5.0 million, inclusive of interest and penalties.

We are entitled to indemnification from the former shareholders of Autocam, subject to the limitations and procedures set forth in the agreement and plan of merger relating to the Autocam acquisition.

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

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, 2023.

Other Legal Matters

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

Management believes that such proceedings should not, individually or in the aggregate, have a material adverse effect on our business, financial condition, results of operations, or cash flows.

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.

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

27 unchanged sentences

earnings taxed at different rates 1.1 % 0.7 % 3.0 %

GILTI ( 3.9 ) % ( 6.0 ) % ( 0.1 ) %

Goodwill impairment — % — % ( 12.7 ) %

Global intangible low-taxed income ( 2.3 ) % ( 3.9 ) % ( 6.0 ) %

Deferred true-up ( 0.8 ) % ( 6.4 ) % — %

1 unchanged sentence

Change in uncertain tax positions — % — % 0.7 %

CARES Act — % — % 2.7 %

Interest on CARES Act refund 1.1 % 1.8 % — %

1 unchanged sentence

Taxes on unremitted foreign earnings ( 2.4 ) % ( 3.9 ) % 2.0 %

Restructuring gain — % — % ( 2.6 ) %

Intercompany lending ( 1.3 ) % ( 2.7 ) % ( 5.3 ) %

2 unchanged sentences

Effective tax rate ( 4.3 ) % ( 5.2 ) % 7.8 %

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

Our effective tax rate was ( 4.3 )% and ( 5.2 )% for the years ended December 31, 2023 and 2022, respectively.

The effective tax rates 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.

The 2021 effective tax rate for continuing operations differs from the U.S.

Our effective tax rate for continuing operations was 7.8 % for the year ended December 31, 2021, 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 5.9 % for 2020.

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 the 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 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.

domestic subsidiary.

Prior to the sale, we completed tax restructuring in which Precision Engineered Products Holdings, Inc., distributed to NN, Inc., all of its asset and equity holdings related to the Power Solutions segment.

The restructuring process created a deferred gain, required to be realized upon the third party equity sale, equal to the fair market value of the distributed assets over tax basis.

The associated U.S.

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

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

During the years ended December 31, 2023 and 2022, we accrued $ 0.6 million and $ 0.6 million, respectively, of interest on the CARES Act refund.

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 at December 31, 2023.

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

16 unchanged sentences

Net operating loss carryforwards 32,043 24,299

Interest rate swap 251 —

Credit carryforwards 3,235 2,803

8 unchanged sentences

The federal NOL has an indefinite life, but utilization within any tax year is limited to 80% of taxable income.

Therefore, a valuation allowance of $ 4.4 million has been established to reduce the attribute balance to the amount expected to be utilized.

As of December 31, 2022, we had $ 239.5 million of state NOL carryovers, which begin to expire in 2030.

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

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.

Management has determined it is more likely than not this NOL will not be realized and has established a full valuation allowance against the deferred tax asset.

As of December 31, 2023, we had $ 16.2 million of tax effected, state NOL carryovers, which begin to expire in 2030.

Management has determined it is more likely than not these state NOL’s will not be realized and has established a full valuation allowance against these deferred tax assets.

We also have $ 11.3 million, tax-effected, of foreign NOL carryovers at December 31, 2023.

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federal tax credits and tax credits in foreign jurisdictions, respectively, as of December 31, 2023.

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

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 recognized a full valuation allowance against these tax credits.

In addition, we have other federal and state deferred tax assets of $ 2.0 million that we believe it is more likely than not will not be realized for which we have established a full valuation allowance.

We have a U.S.

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.

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

We have established a valuation allowance of $ 14.9 million to eliminate the carrying value of this asset.

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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 2023, the valuation allowance increased by $ 17.3 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 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.

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

The increase was partially offset by the release of valuation allowance in Brazil.

As of December 31, 2023, Brazil had emerged from a recent history of cumulative losses and management has confidence in the operations ability to sustain profits in the future.

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

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federal examination for periods before 2017.

We are currently under federal examination for tax years 2017, 2018 and 2019.

We regularly assess the outcomes of both ongoing and future examinations for the current or prior years to ensure our provision for income taxes is sufficient.

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Interest and penalties related to federal, state, and foreign income tax matters are recorded as a component of the provision for income taxes in our Consolidated Statements of Operations and Comprehensive Income (Loss).

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.

Accrued interest and penalties of $ 0.5 million and $ 0.5 million are included in other non-current liabilities as of December 31, 2023 and 2022, respectively.

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

5 unchanged sentences

Balance at end of year $ 121 $ 118 $ 125

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

The increase to unrecognized tax benefits in 2023 is related to the foreign currency remeasurement of previously unrecognized tax benefits.

As of December 31, 2023, the unrecognized tax benefits would, if recognized, impact our effective tax rate by $ 0.7 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.

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 following table presents the outstanding debt balances.

As of December 31,

Term Loan Facility $ 147,375 $ 148,875

ABL Facility 1,000 —

International loans 8,729 10,930

Total principal 157,104 159,805

Less-current maturities of long-term debt 3,321 3,074

Principal, net of current portion 153,783 156,731

Less-unamortized debt issuance costs and discount (1) 4,394 5,679

Long-term debt, net of current portion $ 149,389 $ 151,052

_______________________________

(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.

Term Loan Facility

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 %.

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.

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.

The availability of credit under the ABL Facility is limited by a borrowing base calculation derived from accounts receivable and inventory held in the United States.

Outstanding borrowings under the ABL Facility bear interest on a variable rate structure plus an interest rate spread that is based on the average amount of aggregate revolving commitment available.

The variable borrowing rate is either 1) LIBOR 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 may elect whether to use one-month, three-month, or six-month LIBOR, subject to a 0.50 % floor.

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, 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.

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.

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

The following table presents components of lease expense:

The tax holidays did not impact our 2023 or 2022 foreign taxes and decreased foreign taxes by $ 0.2 million for the year ended December 31, 2021.

Net Income (Loss) Per Common Share

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

Years Ended December 31,

2023 2022 2021

Finance lease cost:

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

Loss from continuing operations $ ( 50,150 ) $ ( 26,098 ) $ ( 14,425 )

Adjustment for preferred stock cumulative dividends and deemed dividends ( 13,098 ) ( 10,894 ) ( 21,478 )

Numerator for basic and diluted net loss from continuing operations per common share ( 63,248 ) ( 36,992 ) ( 35,903 )

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

Numerator for basic and diluted net loss per common share $ ( 63,248 ) $ ( 36,992 ) $ ( 34,703 )

Weighted average common shares outstanding 46,174 43,738 42,991

Adjustment for participating securities ( 2,636 ) ( 951 ) ( 461 )

Adjustment for warrants outstanding (1) 3,200 1,893 1,481

Shares used to calculate basic and diluted net loss per share 46,738 44,680 44,011

Basic and diluted net loss from continuing operations per common share $ ( 1.35 ) $ ( 0.83 ) $ ( 0.82 )

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

Basic and diluted net loss per common share $ ( 1.35 ) $ ( 0.83 ) $ ( 0.79 )

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

_______________________________

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

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

As of December 31,

Financial Statement Line Item 2022 2021

Operating lease assets Operating lease right-of-use assets $ 46,713 $ 46,443

Finance lease assets Property, plant and equipment, net 12,989 13,641

Total lease assets $ 59,702 $ 60,084

Current liabilities:

Operating lease liabilities Current portion of operating lease liabilities $ 5,294 $ 5,704

Finance lease liabilities Other current liabilities 2,610 3,111

Non-current liabilities:

Operating lease liabilities Operating lease liabilities, net of current portion 51,411 51,295

Finance lease liabilities Other non-current liabilities 3,828 5,446

Total lease liabilities $ 63,143 $ 65,556

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

(1) Outstanding warrants that are exercisable at an exercise price of $ 0.01 per share, are included in shares outstanding for calculation of basic earnings per share (see Note 18).

The following table presents potentially dilutive securities that were excluded from the calculation of diluted net income (loss) per common share because they had an anti-dilutive effect.

Years Ended December 31,

2023 2022 2021

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows used in finance leases $ 351 $ 213 $ 192

Operating cash flows used in operating leases 14,214 13,434 13,498

Financing cash flows used in finance leases 3,003 4,836 2,018

Right-of-use assets obtained in exchange for new finance lease liabilities $ 1,263 $ 2,814 $ 728

Right-of-use assets obtained in exchange for new operating lease liabilities (1) 5,181 — 8,682

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

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 %

Weighted-average discount rate - operating leases 7.5 % 7.0 %

The maturities of lease liabilities as of December 31, 2022, is as follows:

Operating Leases Finance Leases

2023 $ 9,250 $ 2,913

2024 8,419 1,819

2025 8,352 1,017

2026 8,193 950

Options 381 557 766

2019 Warrants 1,500 1,500 1,500

1,881 2,057 2,266

Thereafter 37,655 —

Total future minimum lease payments 79,852 7,208

imputed interest 23,147 770

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 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.

In connection with the discontinued use of the previously leased space, we also recognized a $ 4.4 million termination charge and a $ 2.9 million impairment charge on the associated leasehold improvements, all of which were also recognized in “Other operating expense (income), net” for the year ended December 31, 2020.

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 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, 2022, 2021, and 2020, was $( 0.3 ) million, $( 0.2 ) million, and $ 0.7 million, respectively.

Commitments and Contingencies

Brazil ICMS Tax Matter

We believe that we have substantial legal and factual defenses, and we plan to defend our interests in this matter vigorously.

The matter encompasses several lawsuits filed with the Brazilian courts requesting declaratory actions that no tax is due or seeking a stay of execution on the collection of the tax.

In 2018, we obtained a favorable decision in one of the declaratory actions for which the period for appeal has expired.

We have filed actions in each court requesting dismissal of the matter based on the earlier court action.

Although we anticipate a favorable resolution to the remaining matters, we can provide no assurances that we will be successful in achieving dismissal of all pending cases.

dollar amount that would be owed in the event of an unfavorable decision is subject to interest, penalties, and currency impacts and therefore is dependent on the timing of the decision.

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

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 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 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.

Management believes that such proceedings should not, individually or in the aggregate, have a material adverse effect on our business, financial condition, results of operations, or cash flows.

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.

Preferred Stock and Stockholders' Equity

Series D Perpetual Preferred Stock

Series D Preferred Stock shares earn cash dividends at a rate of 10.0 % per year, payable quarterly in arrears, accruing whether or not earned or declared.

If no cash dividend is paid, then the liquidation preference per share effective on the dividend date increases by 12.0 % per year.

On March 22, 2026, the cash dividend rate and in-kind dividend rate increase by 2.5 % per year.

Cash dividends are required beginning on September 30, 2027.

For initial recognition, the Series D Preferred Stock was recognized at a discounted value, net of issuance costs and allocation to warrants and a bifurcated embedded derivative.

The aggregate discount is amortized as a deemed dividend through March 22, 2026, which is the date the dividend rate begins to increase by 2.5 % per year.

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

In accordance with ASC 815-15, Derivatives and Hedging - Embedded Derivatives, certain features of the Series D Preferred Stock were bifurcated and accounted for as derivatives separately.

Note 19 discusses the accounting for these features.

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.

Years Ended December 31,

Balance at beginning of year $ 53,807 $ —

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

Fair value of 2021 Warrants issued — ( 14,839 )

Recognition of bifurcated embedded derivative — ( 282 )

Accrual of in-kind dividends 8,961 6,222

Amortization 1,933 913

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”).

Series B Convertible Preferred Stock

The Series B Preferred Stock had a liquidation preference of $ 1,000 per share and was redeemable in cash at our option, subject to the applicable redemption premium.

Series B Preferred Stock shares earned cumulative dividends at a rate of 10.625 % per year, and accrued whether or not earned or declared.

The Series B Preferred Stock was recognized at a discounted value, net of issuance costs and allocation to warrants and bifurcated embedded derivatives.

The aggregate discount was amortized as a deemed dividend through December 31, 2023, which is the date the holders had a non-contingent conversion option into a variable number of common shares equal to the liquidation preference plus accrued and unpaid dividends.

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

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.

Years Ended December 31,

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

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

Amortization 335 953

Redemption ( 119,429 ) —

Balance at end of year $ — $ 105,086

Revenue from Contracts with Customers

Revenue is recognized 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.

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, 2022 Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 140,931 $ 160,894 $ ( 2 ) $ 301,823

China 46,045 5,511 — 51,556

Brazil 47,266 950 — 48,216

Mexico 23,348 17,297 — 40,645

Germany 5,158 348 — 5,506

Poland 5,031 11 — 5,042

Other 25,757 20,193 — 45,950

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

Year Ended December 31, 2021 Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 140,383 $ 152,931 $ ( 79 ) $ 293,235

China 52,227 4,745 — 56,972

Brazil 34,644 811 — 35,455

Mexico 19,520 16,177 — 35,697

Germany 5,230 546 — 5,776

Poland 3,743 18 — 3,761

Other 30,116 16,572 — 46,688

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

Year Ended December 31, 2020 Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

United States and Puerto Rico $ 129,147 $ 139,499 $ ( 95 ) $ 268,551

China 46,442 5,563 — 52,005

Brazil 27,055 689 — 27,744

Mexico 16,465 13,400 — 29,865

Germany 5,846 378 — 6,224

Poland 4,913 14 — 4,927

Other 26,492 11,726 — 38,218

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

The following tables summarize revenue by customer industry.

Year Ended December 31, 2022 Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

Automotive $ 197,341 $ 40,890 $ — $ 238,231

General Industrial 78,142 61,828 — 139,970

Residential/Commercial Electrical — 70,055 — 70,055

Other 18,053 32,431 ( 2 ) 50,482

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

Year Ended December 31, 2021 Mobile

Solutions Power

Solutions Intersegment

Eliminations Total

Automotive $ 182,094 $ 38,779 $ — $ 220,873

General Industrial 90,290 60,312 — 150,602

Residential/Commercial Electrical — 61,748 — 61,748

Other 13,479 30,961 ( 79 ) 44,361

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

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

We provide pre-production activities related to engineering efforts to develop molds, dies, and machines that are owned by our customers.

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

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, 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.

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

We are required to disclose the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of December 31, 2022, unless our contracts meet one of the practical expedients.

Our contracts met the practical expedient for a performance obligation that is part of a contract that has an original expected duration of one year or less.

Costs to Obtain and Fulfill a Contract

We recognize commissions paid to internal sales personnel that are incremental to obtaining customer contracts as an expense when incurred since the amortization period is less than one year.

Costs to obtain a contract are expensed as selling, general and administrative expense.

Sales, VAT, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.

Incidental items that are immaterial in the context of the contract are recognized as expense.

Sales Concentration

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

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, 2023.

The 2019 Warrants excluded from the EPS calculations for the year ended December 31, 2023 had a per share exercise price of $ 11.03 .

Share-Based Compensation

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.

As of December 31, 2023, we have 1.5 million shares available that can be issued to employees and non-executive directors under the NN, Inc.

2022 Omnibus Incentive Plan and prior plans (collectively, the “Incentive Plans”), 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 attributable to discontinued operations for the year ended December 31, 2020.

Share-based compensation expense is recognized in the “Selling, general, and administrative expense” line in the Consolidated Statements of Operations and Comprehensive Income (Loss).

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

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Restricted Stock

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.

During the years ended December 31, 2023, 2022, and 2021, we granted 3,782,000 , 897,000 , and 459,000 shares of restricted stock with weighted average grant-date fair values of $ 1.37 , $ 3.31 , and $ 6.84 per share, respectively.

The total grant-date fair value of restricted stock that vested in the years ended December 31, 2023, 2022, and 2021, was $ 4.2 million, $ 2.1 million, and $ 2.8 million, respectively.

6 unchanged sentences

Unvested at December 31, 2023 3,405 $ 1.41

During the year ended December 31, 2023, we granted 1,952,000 shares of restricted stock to non-executive directors, officers and certain other employees under the Incentive Plans.

These shares vest pro-rata generally over three years for employees and over one year for non-executive directors.

During the year ended December 31, 2023, we granted 1,830,000 shares of restricted stock, outside of the Incentive Plans, to new executive officers as inducement awards, which vest pro-rata over five years .

Performance Share Units

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.

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

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.

PSUs vest upon achieving specified performance targets over a performance period, which are based on total shareholder return (“TSR Awards”), return on invested capital (“ROIC Awards”), or on the Company’s stock price meeting specified thresholds.

If the performance metric thresholds are not met at the end of performance period, the PSUs expire automatically.

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, as defined by the Incentive Plans, during the performance periods.

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.

The performance periods for TSR Awards and ROIC Awards begins on January 1st of the year of grant and ends three years later on December 31st.

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.

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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.

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

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

Target Performance

(100% of Shares) Maximum Performance

(150% of Shares)

2022 grants 25 th Percentile 55 th Percentile 75 th Percentile

2021 grants 35 th Percentile 50 th Percentile 75 th Percentile

2020 grants 35 th Percentile 50 th Percentile 75 th Percentile

Threshold Performance

(50% of Shares) Target Performance

(100% of Shares) Maximum Performance

(150% of Shares)

2022 grants 6.4 % 8.6 % 10.0 %

2021 grants 6.3 % 7.0 % 8.6 %

2020 grants 6.7 % 7.9 % 8.7 %

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(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 Performance Units Grant-Date

Fair Value Performance Units Grant-Date

2022 382,000 $ 2.53 408,000 $ 2.62

2021 142,000 $ 8.58 172,000 $ 7.20

2020 139,000 $ 10.88 157,000 $ 9.44

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

Number of Performance Units Weighted Average Grant-Date

Fair Value Number of Performance Units Weighted Average Grant-Date

The following table presents the status of unvested PSUs as of December 31, 2023 and activity during the year then ended.

Nonvested PSU Awards Weighted Average Grant-Date

Nonvested at January 1, 2023 1,032 $ 3.80

Granted 3,621 1.14

Vested ( 67 ) 4.63

Forfeited ( 635 ) 2.47

Expired ( 162 ) 7.82

Nonvested at December 31, 2023 3,789 $ 1.29

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.

During the year ended December 31, 2023, we granted 561,000 TSR Awards to executive officers under the Incentive Plans for the 2023 to 2025 performance period.

During the year ended December 31, 2023, we granted 3,060,000 PSUs, outside of the Incentive Plans, to new executive officers as inducement awards.

The inducement award PSUs cliff-vest after five years and are contingent on the Company’s stock price meeting specified thresholds.

During the years ended December 31, 2022 and 2021, we granted 790,000 and 314,000 PSUs with weighted average grant-date fair values of $ 2.58 and $ 7.82 per share, respectively.

During the year ended December 31, 2023, 67,000 PSUs were subject to accelerated vesting upon a participant’s termination that was a qualifying event under the terms of the Incentive Plans.

The total grant date fair value of PSUs that vested in the year ended December 31, 2023, was $0.3 million.

No other PSUs were vested during the years ended December 31, 2023, 2022 and 2021.

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.

Stock options, which were last granted in 2020, 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 .

The following table presents stock option activity for the year ended December 31, 2023.

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Outstanding at January 1, 2023 538 $ 12.63

Forfeited ( 4,000 ) 9.44

Expired ( 242 ) 10.39

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)

Outstanding and exercisable at December 31, 2023 296 $ 14.46 2.9 years $ — (1)

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

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

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(1) Income tax effect of changes in interest rate swap.

(2) Represents interest rate swap settlements of effective hedge.

(2) Represents (gain) loss recognized in interest expense on effective interest rate swap.

(3) Represents reclassification of derivative loss and settlements after discontinuation of hedge accounting.

See Note 19 for further discussion of the interest rate swap.

Net Income (Loss) Per Common Share

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

Years Ended December 31,

2022 2021 2020

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

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 participating securities ( 951 ) ( 461 ) ( 493 )

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

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) 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).

The following table presents potentially dilutive securities that were excluded from the calculation of diluted net income (loss) per common share because they had an anti-dilutive effect.

Years Ended December 31,

2022 2021 2020

Options 557 766 871

2019 Warrants 1,500 1,500 1,500

Series B Preferred Stock, as-converted — — 19,021

2,057 2,266 21,392

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.

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.

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.

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.

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.

Embedded Derivatives

In accordance with ASC 815-15, Derivatives and Hedging - Embedded Derivatives , certain features of our preferred stock and long-term debt were bifurcated and accounted for as derivatives separately.

In conjunction with the Term Loan Amendment, we issued warrants to purchase up to 2.0 million shares of our common stock at an exercise price of $ 0.01 per share (the “2023 Warrants”).

The 2023 Warrants are exercisable, in full or in part, at any time prior to June 30, 2033.

The 2023 Warrants include anti-dilution adjustments in the event of certain future equity issuances, stock splits, stock dividends, combinations or similar events.

In conjunction with our placement of the Series D Preferred Stock, we issued the 2021 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.

On February 5, 2024, all of the 2021 Warrants were exercised on a cashless basis, resulting in the issuance of 1,896,000 shares.

The Series D Preferred Stock includes a put feature that allows the holder to redeem the Series D Preferred Stock upon a change in control at the greater of 1) the liquidation preference plus accrued dividends or 2) 140 % of the liquidation preference.

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

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

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

Since the liquidation preference plus accrued dividends was greater than 140% of the liquidation preference at December 31, 2023, the put feature is no longer applicable.

In conjunction with our placement of the Series B Preferred Stock, we issued the 2019 Warrants to purchase up to 1.5 million shares of our common stock.

The 2019 Warrants, are exercisable, in full or in part, at any time prior to December 11, 2026, at an exercise price of $ 11.03 per share, and are subject to anti-dilution adjustments in the event of future below market issuances, stock splits, stock dividends, combinations or similar events.

The following table presents the changes in the liability balance of the embedded derivatives.

Years Ended December 31,

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Change in fair value (1) 10,885 ( 5,265 )

Settlements — ( 3,005 )

Balance at end of year $ 16,556 $ 2,959

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(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.

(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).

The following tables show the fair values of the embedded derivatives within the fair value hierarchy.

December 31, 2023 Quoted Prices in Active Markets for Identical Assets

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Derivative liability - other non-current liabilities 2,831 — 128

The fair value of the 2023 Warrants and 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 utilized 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 was 3 % to 10 % as of December 31, 2022.

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.

The probabilities resulted in a weighted average term of 2.9 years as of December 31, 2022 and 3.6 years as of December 31, 2021.

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.

The probabilities resulted in a weighted average term of 2.9 years as of December 31, 2023 and 2022.

Interest Rate Swaps

We manage our exposure to fluctuations in interest rates using a mix of fixed and variable rate debt.

We utilize fixed-rate interest rate swap agreements to change the variable interest rate to a fixed rate on a portion of our variable rate debt.

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 our variable rate debt to a fixed rate of 1.291 % (the “2021 Swap”).

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 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.

The changes in cash flows of the interest rate swap are expected to exactly offset changes in cash flows of the variable rate debt.

We designated the 2021 Swap as a cash flow hedge at inception.

Cash settlements of the 2021 Swap are recognized in interest expense.

We designated the 2021 Swap as a cash flow hedge at inception with cash settlements recognized in interest expense.

During the first quarter of 2023, we terminated the 2021 Swap and received cash proceeds of $ 2.5 million which was the fair value of the 2021 Swap.

Since the 2021 Swap was an effective cash flow hedge and the forecasted interest payments remaining probable of occurring, the gain will be recognized as a reduction to interest expense through the original maturity date of July 31, 2024.

On February 8, 2019, we entered into a $ 700.0 million fixed-rate interest rate swap agreement that changed the LIBOR-based portion of the interest rate on a portion of our variable rate debt to a fixed rate of 2.4575 % (the “2019 Swap”).

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However, in the fourth quarter of 2020, the 2019 Swap no longer qualified as an effective hedge, and subsequent changes in fair value of the 2019 Swap were recognized in earnings.

Amounts recognized in earnings related to the 2019 Swap are recorded in the “Loss on interest rate swap” line on the Consolidated Statements of Operations and Comprehensive Income (Loss) except that cash settlements prior to termination are recognized in “Derivative payments on interest rate swap.” Cash settlements during 2021 and the fourth quarter of 2020 are presented in investing activities on the Consolidated Statements of Cash Flows.

Cash settlements during 2021 are presented in investing activities on the Consolidated Statements of Cash Flows.

The following table presents the effect of the interest rate swaps on the Consolidated Statements of Operations and Comprehensive Income (Loss).

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(1) Represents settlements on the interest rate swaps while the hedges are effective.

(1) Represents (gain) loss recognized in interest expense on effective interest rate swap.

(2) Represents settlements and changes in fair value on the 2019 Swap while the hedge was ineffective.

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.

As of December 31, 2023 and 2022, we reported $ 1.0 million and $ 3.1 million gains, respectively, net of tax, in accumulated other comprehensive income related to the interest rate swap.

The following table shows the fair values of the interest rate swaps within the fair value hierarchy.

December 31, 2022 Quoted Prices in Active Markets for Identical Assets

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Total $ — $ 3,153 $ —

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 ) —

Total $ — $ 155 $ —

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.

The fair value of the interest rate swap was calculated through standard pricing models which used 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 the derivative contract is a highly rated financial institution which we believe carried 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.

As of December 31, 2023 and 2022, the carrying values of these financial instruments, except for debt, approximated fair value.

The fair value of our debt was $ 162.2 million and $ 155.2 million, with a carrying amount of $ 153.3 million and $ 152.7 million, as of December 31, 2023 and 2022, respectively.

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.

Subsequent Event

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.

We plan to continue operations at the Properties uninterrupted by entering into a 20 year lease upon the closing of the sale.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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