NN INC 10-K

Item 8. Financial Statements and Supplementary Data Index to Financial Statements Page Reports of Independent Registered Public Accounting Firm (PCAOB ID: 248 ) 32 Consolidated Statements of Operations and Comprehensive Income (Loss) 34 Consolidated Balance Sheets 35 Consolidated Statements of Cash Flows 36 Consolidated Statements of Changes in Stockholders’ Equity 38 Notes to Consolidated Financial Statements 39 Note 1. Significant Accounting Policies 39 Note 2 . Segment Information 42 Note 3 . Revenue from Contracts with Customers 45 Note 4 . Accounts Receivable 46 Note 5 . Inventories 46 Note 6 . Property, Plant and Equipment 47 Note 7 . Intangible Assets 47 Note 8 . Investment in Joint Venture 48 Note 9 . Debt 48 Note 1 0 . Preferred Stock 50 Note 1 1 . Leases 51 Note 1 2 . Commitments and Contingencies 52 Note 1 3 . Income Taxes 53 Note 1 4 . Net Income (Loss) Per Common Share 56 Note 1 5 . Share-Based Compensation 56 Note 1 6 . Accumulated Other Comprehensive Income 58 Note 1 7 . Fair Value Measurements 58 Note 18. Divestiture 60 Note 19. Plant Optimization Activities 60 31 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders NN, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of NN, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2024, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, 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, 2024, and our report dated March 5, 2025 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Charlotte, North Carolina March 5, 2025 32 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Board of Directors and Stockholders NN, Inc. Opinion on the financial statements We have audited the accompanying consolidated balance sheets of NN, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2024, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, 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, 2024, 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 5, 2025 expressed an unqualified opinion. Basis for opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical audit matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2020. Charlotte, North Carolina March 5, 2025 33 Table of Contents NN, Inc. Consolidated Statements of Operations and Comprehensive Income (Loss) Years Ended December 31, (in thousands, except per share data) 2024 2023 2022 Net sales $ 464,290 $ 489,270 $ 498,738 Cost of sales (exclusive of depreciation and amortization shown separately below) 394,812 419,175 421,105 Selling, general, and administrative expense 49,481 47,436 49,635 Depreciation and amortization 45,302 46,120 47,231 Other operating expense (income), net 2,243 ( 1,657 ) 1,859 Loss from operations ( 27,548 ) ( 21,804 ) ( 21,092 ) Interest expense 22,095 21,137 15,041 Loss on extinguishment of debt 349 — — Other expense (income), net ( 4,558 ) 10,730 ( 5,064 ) Loss before provision for income taxes and share of net income from joint venture ( 45,434 ) ( 53,671 ) ( 31,069 ) Provision for income taxes ( 2,410 ) ( 2,285 ) ( 1,621 ) Share of net income from joint venture 9,571 5,806 6,592 Net loss $ ( 38,273 ) $ ( 50,150 ) $ ( 26,098 ) Other comprehensive loss: Foreign currency translation gain (loss) $ ( 9,405 ) $ 1,410 $ ( 8,156 ) Interest rate swap: Change in fair value, net of tax — ( 230 ) 3,358 Reclassification adjustments included in net loss, net of tax ( 1,007 ) ( 1,815 ) ( 420 ) Other comprehensive loss $ ( 10,412 ) $ ( 635 ) $ ( 5,218 ) Comprehensive loss $ ( 48,685 ) $ ( 50,785 ) $ ( 31,316 ) Basic and diluted net loss per common share $ ( 1.11 ) $ ( 1.35 ) $ ( 0.83 ) Shares used to calculate basic and diluted net loss per share 48,653 46,738 44,680 See Notes to Consolidated Financial Statements. 34 Table of Contents NN, Inc. Consolidated Balance Sheets December 31, (in thousands, except per share data) 2024 2023 Assets Current assets: Cash and cash equivalents $ 18,128 $ 21,903 Accounts receivable, net 61,549 65,545 Inventories 61,877 71,563 Income tax receivable 12,634 11,885 Prepaid assets 2,855 2,464 Other current assets 10,519 9,194 Total current assets 167,562 182,554 Property, plant and equipment, net 162,034 185,812 Operating lease right-of-use assets 39,317 43,357 Intangible assets, net 44,410 58,724 Investment in joint venture 34,971 32,701 Deferred tax assets 1,329 734 Other non-current assets 7,270 7,003 Total assets $ 456,893 $ 510,885 Liabilities, Preferred Stock, and Stockholders’ Equity Current liabilities: Accounts payable $ 38,879 $ 45,480 Accrued salaries, wages and benefits 19,915 15,464 Income tax payable 659 524 Short-term debt and current maturities of long-term debt 5,039 3,910 Current portion of operating lease liabilities 6,038 5,735 Other current liabilities 13,382 10,506 Total current liabilities 83,912 81,619 Deferred tax liabilities 4,969 4,988 Long-term debt, net of current maturities 143,591 149,369 Operating lease liabilities, net of current portion 42,291 47,281 Other non-current liabilities 14,111 24,827 Total liabilities 288,874 308,084 Commitments and contingencies (Note 12) Series D perpetual preferred stock - $ 0.01 par value per share, 65 shares authorized, issued and outstanding at December 31, 2024 and 2023, respectively 93,497 77,799 Stockholders’ equity: Common stock - $ 0.01 par value per share, 90,000 shares authorized, 49,908 and 47,269 shares issued and outstanding at December 31, 2024 and 2023, respectively 499 473 Additional paid-in capital 455,811 457,632 Accumulated deficit ( 333,621 ) ( 295,348 ) Accumulated other comprehensive loss ( 48,167 ) ( 37,755 ) Total stockholders’ equity 74,522 125,002 Total liabilities, preferred stock, and stockholders’ equity $ 456,893 $ 510,885 See Notes to Consolidated Financial Statements. 35 Table of Contents NN, Inc. Consolidated Statements of Cash Flows Years Ended December 31, (in thousands) 2024 2023 2022 Cash flows from operating activities Net loss $ ( 38,273 ) $ ( 50,150 ) $ ( 26,098 ) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 45,302 46,120 47,231 Amortization of debt issuance costs and discount 2,288 1,941 1,361 Paid-in-kind interest 2,677 2,239 — Impairments of property, plant and equipment 6,546 — — Loss on extinguishment of debt 349 — — Total derivative loss (gain), net of cash settlements ( 1,036 ) 11,933 ( 5,265 ) Share of net income from joint venture, net of cash dividends received ( 3,311 ) ( 1,868 ) ( 347 ) Gain on sale of business ( 7,154 ) — — Share-based compensation expense 3,140 2,821 4,377 Deferred income taxes ( 690 ) ( 1,273 ) ( 1,814 ) Other ( 1,074 ) ( 785 ) ( 3,207 ) Changes in operating assets and liabilities: Accounts receivable ( 2,839 ) 9,087 ( 4,920 ) Inventories 4,210 9,997 ( 6,672 ) Other operating assets ( 1,558 ) ( 5,041 ) ( 1,825 ) Income taxes receivable and payable, net ( 662 ) ( 89 ) ( 1,457 ) Accounts payable ( 3,894 ) 1,142 8,619 Other operating liabilities 7,049 3,270 ( 2,266 ) Net cash provided by operating activities 11,070 29,344 7,717 Cash flows from investing activities Acquisition of property, plant and equipment ( 18,314 ) ( 20,496 ) ( 17,952 ) Proceeds from sale of property, plant, and equipment 306 2,898 460 Proceeds received from sale of business 17,000 — — Net cash used in investing activities ( 1,008 ) ( 17,598 ) ( 17,492 ) Cash flows from financing activities Proceeds from long-term debt 63,400 61,000 46,000 Repayments of long-term debt ( 96,031 ) ( 65,395 ) ( 47,958 ) Cash paid for debt issuance costs ( 2,011 ) ( 169 ) ( 136 ) Proceeds from sale-leaseback of equipment 8,324 — — Proceeds from sale-leaseback of land and buildings 16,863 — — Repayments of financing obligations ( 781 ) — — Proceeds from short-term debt — 3,648 — Other ( 3,009 ) ( 1,967 ) ( 3,092 ) Net cash used in financing activities ( 13,245 ) ( 2,883 ) ( 5,186 ) Effect of exchange rate changes on cash flows ( 592 ) 232 ( 887 ) Net change in cash and cash equivalents ( 3,775 ) 9,095 ( 15,848 ) Cash and cash equivalents at beginning of year 21,903 12,808 28,656 Cash and cash equivalents at end of year $ 18,128 $ 21,903 $ 12,808 See Notes to Consolidated Financial Statements. 36 Table of Contents NN, Inc. Consolidated Statements of Cash Flows Years Ended December 31, (in thousands) 2024 2023 2022 Supplemental schedule of non-cash investing activities: Non-cash additions to property, plant and equipment $ 3,119 $ 2,743 $ 1,266 Non-cash additions to debt issuance costs — 2,712 — Supplemental disclosures: Cash paid for interest, net of capitalized interest $ 17,988 $ 15,272 $ 13,344 Cash paid for income taxes 3,906 3,083 4,739 See Notes to Consolidated Financial Statements. 37 Table of Contents NN, Inc. Consolidated Statements of Changes in Stockholders’ Equity Common Stock Additional paid-in capital Accumulated deficit Accumulated other comprehensive loss (in thousands) Number of shares Par value Total 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 Net loss — — — ( 38,273 ) — ( 38,273 ) Dividends accrued for preferred stock — — ( 15,698 ) — — ( 15,698 ) Shares issued for warrants exercised 2,395 24 11,352 11,376 Shares issued under stock incentive plans, net of forfeitures 401 4 ( 4 ) — — — Share-based compensation expense — — 3,140 — — 3,140 Restricted shares surrendered for tax withholdings under stock incentive plans ( 157 ) ( 2 ) ( 611 ) — — ( 613 ) Other comprehensive loss — — — — ( 10,412 ) ( 10,412 ) Balance as of December 31, 2024 49,908 $ 499 $ 455,811 $ ( 333,621 ) $ ( 48,167 ) $ 74,522 See Notes to Consolidated Financial Statements. 38 Table of Contents NN, Inc. Notes to Consolidated Financial Statements Note 1. Significant Accounting Policies Nature of Business NN, Inc., a Delaware corporation, 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 of December 31, 2024, we had 26 facilities in North America, South America, Europe, and China. As used in the Notes to Consolidated Financial Statements, the terms the “Company,” “we,” “our,” or “us” refer to NN, Inc. and its subsidiaries. Basis of Presentation The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). Certain prior period amounts have been reclassified to conform to the current year’s presentation. Except for per share data or as otherwise indicated, all U.S. dollar amounts and share counts presented in the tables in these Notes to Consolidated Financial Statements are in thousands. Principles of Consolidation Our consolidated financial statements include the accounts of NN, Inc., and its wholly owned subsidiaries. We own a 49 % investment in a joint venture (the “JV”) which we account for using the equity method (see Note 8). All intercompany transactions and balances have been eliminated in consolidation. Use of Estimates in the Preparation of Consolidated Financial Statements The preparation of consolidated financial statements in accordance with U.S. GAAP requires management to use estimates and assumptions that affect the reported amounts of certain assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results may differ from those estimates. Accounting Standards Recently Adopted In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2023-07, Segment Reporting (Topic 832): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires additional disclosures related to reportable segments, including significant segment expenses and other segment items. ASU 2023-07 also permits entities to disclose more than one measure of a segment’s profit or loss and requires quarterly disclosure of certain information that is now only required annually. We have adopted ASU 2023-07 for the year ended December 31, 2024 on a retrospective basis, and will present the required interim disclosures beginning with our March 31, 2025 Form 10-Q. Accounting Standards Not Yet Adopted In December 2023, the FASB issued ASU 2023-09, “ Income Taxes (Topic 740): Improvements to Income Tax Disclosures ” (“ASU 2023-09”), which requires additional annual income tax disclosures. These include a tabular rate reconciliation comprised of eight specific categories, the disaggregation of income taxes paid between federal, state, and foreign jurisdictions, and to disaggregate income from continuing operations before income tax expense and income tax expense from continuing operations between domestic and foreign. ASU 2023-09 eliminates the disclosure of the nature and estimate of reasonably possible changes to unrecognized tax benefits in the next 12 months or that an estimated range cannot be made. ASU 2023-09 is effective for fiscal years beginning on or after December 15, 2024, with early adoption permitted, and can be applied on a prospective or retrospective basis. We plan to adopt ASU 2023-09 in our Form 10-K for the year ended December 31, 2025 and are in the process of assessing the impact on our disclosures. In November 2024, the FASB issued ASU 2024-03, “ Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses ” (“ASU 2024-03”), which requires disaggregated disclosures of certain categories of expenses that are included in income statement line items. ASU 2024-03 is effective for fiscal years beginning on or after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Companies may early adopt and can apply the guidance prospectively or retrospectively. The Company has not yet determined the potential impact of adopting this standard. 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. 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 $ 9.0 million and $ 13.5 million in cash and cash equivalents as of December 31, 2024 and 2023, respectively, held at foreign financial institutions. 39 Table of Contents Accounts Receivable and Allowance for Credit Losses Trade accounts receivable are recorded at their net realizable value. We maintain allowances for estimated losses resulting from the inability of our customers to make required payments. The allowances are based on the amount that we ultimately expect to collect from our customers. We evaluate the collectability of accounts receivable based on a combination of factors including number of days receivables are past due, historical collection experience, current market conditions, and forecasted direction of economic and business environment. Accounts receivable are written off at the time a customer receivable is deemed uncollectible. Inventories Inventories are stated at the lower of cost or net realizable value. Cost is determined using standard costs, which approximates the average cost method. Our policy is to expense abnormal amounts of idle facility expense, freight, handling cost, and waste included in cost of products sold. In addition, we allocate fixed production overheads based on the normal production capacity of our facilities. Inventory valuations were developed using normalized production capacities for each of our manufacturing locations. The costs from excess capacity or under-utilization of fixed production overheads were expensed in the period incurred and are not included as a component of inventory. Inventories also include tools, molds, and dies in progress that we are producing and will ultimately sell to our customers. These inventories are also carried at the lower of cost or net realizable value. Property, Plant and Equipment Property, plant and equipment are stated at cost less accumulated depreciation. Assets to be disposed of are stated at the lower of depreciated cost or fair market value less estimated selling costs. Expenditures for maintenance and repairs are charged to expense as incurred. Major renewals and improvements are capitalized. 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. 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 years to 40 years. Estimated useful lives for machinery and equipment generally range from 3 years to 12 years. Leases We determine whether an arrangement is a lease at inception. Lease right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term, and lease liabilities represent our obligation to make lease payments arising from the lease. Lease ROU assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. When the implicit rate is not readily determinable, we use the estimated incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. The lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Amortization of lease ROU assets is recognized in expense on a straight-line basis over the lease term. We recognize short-term leases, which have a term of twelve months or less, on a straight-line basis and do not record a related lease asset or liability for such leases. Finance lease ROU assets consist primarily of equipment used in the manufacturing process with terms of two years to eight years . Operating lease ROU assets consist of the following: • Equipment used in the manufacturing process as well as office equipment with terms of five years ; and • 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 and is recognized in the “Other operating expense (income), net” line in the Consolidated Statements of Operations and Comprehensive Income (Loss). Impairment of Long-Lived Assets Long-lived tangible and intangible assets subject to depreciation or amortization are tested for recoverability when changes in circumstances indicate the carrying value of these assets, or asset groups, may not be recoverable. A test for recoverability is also performed when management has committed to a plan to dispose of a reporting unit or asset group. 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. Assets to be disposed of are recorded at the lesser of carrying value or fair value less costs of disposal. 40 Table of Contents Equity Method Investments Our equity method investment is subject to a review for impairment if, and when, circumstances indicate that a decline in value below its carrying amount may have occurred. Examples of such circumstances include, but are not limited to, a significant deterioration in the earnings performance or business prospects of the investee; a significant adverse change in the regulatory, economic or technological environment of the investee; a significant adverse change in the general market condition of either the geographic area or the industry in which the investee operates; and recurring negative cash flows from operations. If management considers the decline to be other than temporary, we would write down the investment to its estimated fair market value. Revenue Recognition We generally transfer control and recognize revenue when we ship the product from our manufacturing facilities to our customer at a point in time, as this is when our customer obtains the ability to direct use of, and obtain substantially all of the remaining benefits from, the product. In limited circumstances, we recognize revenue over time as services are rendered. We have elected to recognize the cost for freight and shipping when control over products has transferred to the customer as a component of cost of sales. We use an observable price to determine the stand-alone selling price for separate performance obligations or a cost-plus-margin approach when an observable price is not available. The expected duration of our contracts is one year or less, and we have elected to apply the practical expedient that allows entities to disregard the effects of financing when the contract length is less than one year. The amount of consideration we receive and the revenue we recognize varies with volume rebates and incentives we offer to our customers. We estimate the amount of variable consideration that should be included in the transaction price utilizing the expected value method or the most likely amount method depending on the nature of the variable consideration. Variable consideration is included in the transaction price if, in our judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. We utilize the portfolio approach practical expedient to evaluate sales-related discounts on a portfolio basis to contracts with similar characteristics. The effect on our consolidated financial statements of applying the portfolio approach would not differ materially from evaluation of individual contracts. We give our customers the right to return only defective products in exchange for functioning products or rework of the product. These transactions are evaluated and accounted for under ASC Topic 460, Guarantees , and we estimate the impact to the transaction price based on an analysis of historical experience. Share Based Compensation 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 Dividends are recorded as a reduction to retained earnings. When we have an accumulated deficit, dividends are recorded as a reduction of additional paid-in capital. Foreign Currency Translation Assets and liabilities of our foreign subsidiaries are translated at current exchange rates. Revenue, costs, and expenses are translated at average rates prevailing during each reporting period. Translation adjustments arising from the translation of foreign subsidiary financial statements are reported as a component of other comprehensive income (loss) and accumulated other comprehensive income (loss) within stockholders’ equity. Transactions denominated in foreign currencies, including intercompany transactions, are initially recorded at the current exchange rate at the date of the transaction. 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 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, 2024, 2023, and 2022, transaction gains (losses) were $( 1.3 ) million, $ 0.3 million, and $ 0.2 million, respectively. Net Income (Loss) Per Common Share In accordance with ASC 260, Earnings Per Share, we allocate earnings or losses to common stockholders and participating securities using the two-class method to compute earnings per share (“EPS”) unless the treasury stock method results in a lower EPS. The two-class method is an earnings allocation formula that treats participating securities as having rights to earnings that 41 Table of Contents otherwise would have been available to common stockholders. Participating securities may participate in undistributed earnings with common stock whether or not that participation is conditioned upon the occurrence of a specified event. Under the two-class method, our net income (loss) is reduced (or increased) by the amount that has been or will be distributed to our participating security holders. We have elected to allocate undistributed income to participating securities based on year-to-date results. 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 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. 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. Government Assistance For the year ended December 31, 2024, we received $ 1.0 million in grants and other programs from various governments outside of the U.S. These amounts were received as rent abatements and incentives for capital expenditures in specific locations. Amounts received were recognized as reductions to the underlying expense or capital assets. Note 2. Segment Information Our business is aggregated into the following two reportable segments. • Mobile Solutions. 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. Our technical capabilities can be utilized in numerous applications including for use in battery electric, hybrid electric, and internal combustion engine vehicles. The group currently manufactures components on a high-volume basis for use in power steering, braking, transmissions, and gasoline fuel system applications, along with components utilized in heating, ventilation and air conditioning and diesel injection and diesel emissions treatment applications. This expertise has been gained through investment in technical capabilities, processes and systems, and allows us to provide skilled program management and product launch capabilities. • Power Solutions. Power Solutions is focused on growth in the electrical, general industrial, automotive, and medical end markets. Within this group we combine materials science expertise with advanced engineering and production capabilities to design and manufacture a broad range of high-precision metal and plastic components, assemblies, and finished devices used in applications ranging from power control to transportation electrification. We manufacture a variety of products including electrical contacts, connectors, contact assemblies, and precision stampings for the electrical end market and high precision products for the aerospace and defense end market utilizing our extensive process technologies for optical grade plastics, thermally conductive plastics, titanium, Inconel, magnesium, and electroplating. Our medical business includes the production of a variety of tools and instruments for the orthopaedics and medical/surgical end markets. 42 Table of Contents These divisions are considered our two operating segments as each has engaged in business activities for which it earns revenues and incurs expenses, discrete financial information is available for each, and this is the level at which the chief operating decision maker (“CODM”) reviews discrete financial information for purposes of allocating resources and assessing performance. The CODM, who is our President and Chief Executive Officer, uses segment operating income (loss) to evaluate the performance of our segments each quarter and for annual forecasting purposes. Operating income (loss) is used to make key operating decisions, such as the amount and timing of capital expenditures, plant optimization actions, and allocation of management resources. In addition to our two reportable segments, we report a Corporate category which includes corporate costs and unallocated expenses. The following tables reconcile segment revenues to consolidated loss before provision for income taxes and share of net income from joint venture. Year Ended December 31, 2024 Mobile Solutions Power Solutions Corporate and Eliminations Total Sales $ 283,944 $ 180,545 ( 199 ) $ 464,290 Cost of sales 251,847 143,197 ( 232 ) 394,812 Selling, general, and administrative expense 14,672 12,987 21,822 49,481 Depreciation expense 26,027 3,994 1,558 31,579 Other segment items (1) 9,476 7,256 ( 766 ) 15,966 Segment operating income (loss) $ ( 18,078 ) $ 13,111 $ ( 22,581 ) $ ( 27,548 ) Interest expense 22,095 Loss on extinguishment of debt 349 Other income, net ( 4,558 ) Loss before provision for income taxes and share of net income from joint venture $ ( 45,434 ) Year Ended December 31, 2023 Mobile Solutions Power Solutions Corporate and Eliminations Total Sales $ 303,335 $ 185,948 ( 13 ) $ 489,270 Cost of sales 271,110 148,096 ( 31 ) 419,175 Selling, general, and administrative expense 14,471 13,104 19,861 47,436 Depreciation expense 25,803 4,504 1,646 31,953 Other segment items (1) 3,700 9,148 ( 338 ) 12,510 Segment operating income (loss) $ ( 11,749 ) $ 11,096 $ ( 21,151 ) $ ( 21,804 ) Interest expense 21,137 Other expense, net 10,730 Loss before provision for income taxes and share of net income from joint venture $ ( 53,671 ) Year Ended December 31, 2022 Mobile Solutions Power Solutions Corporate and Eliminations Total Sales $ 293,536 $ 205,204 ( 2 ) $ 498,738 Cost of sales 253,906 167,206 ( 7 ) 421,105 Selling, general, and administrative expense 13,559 15,147 20,929 49,635 Depreciation expense 24,839 5,009 1,556 31,404 Other segment items (1) 3,397 14,306 ( 17 ) 17,686 Income (loss) from operations $ ( 2,165 ) $ 3,536 $ ( 22,463 ) $ ( 21,092 ) Interest expense 15,041 Other income, net ( 5,064 ) Loss before provision for income taxes and share of net income from joint venture $ ( 31,069 ) _______________________________ (1) Other segment items includes amortization expense and other operating expenses and income. 43 Table of Contents The following table presents capital expenditures and depreciation and amortization by reportable segment. Year Ended December 31, 2024 2023 2022 Capital expenditures: Mobile Solutions $ 13,438 $ 15,387 $ 14,590 Power Solutions 3,252 3,643 2,401 Corporate 1,624 1,466 961 Total $ 18,314 $ 20,496 $ 17,952 Depreciation and amortization: Mobile Solutions $ 29,381 $ 29,156 $ 28,192 Power Solutions 14,363 15,318 17,483 Corporate 1,558 1,646 1,556 Total $ 45,302 $ 46,120 $ 47,231 The following table summarizes total assets by reportable segment. As of December 31, 2024 2023 Mobile Solutions (1) $ 294,204 $ 329,610 Power Solutions 124,460 147,155 Corporate 38,229 34,120 Total $ 456,893 $ 510,885 _______________________________ (1) Total assets in Mobile Solutions includes $ 35.0 million and $ 32.7 million as of December 31, 2024 and 2023, respectively, related to our investment in the JV. The following table summarizes long-lived tangible assets by country. As of December 31, 2024 2023 United States $ 113,846 $ 127,186 China 39,909 36,188 France 20,713 24,298 Brazil 12,585 17,088 Poland 9,131 10,371 Mexico 5,167 14,038 All foreign countries $ 87,505 $ 101,983 Total $ 201,351 $ 229,169 The following table summarizes revenue by country, based on our customers’ shipping destination. Year Ended December 31, 2024 2023 2022 United States $ 265,020 $ 294,045 $ 301,823 China 67,957 58,195 51,556 Brazil 44,302 48,696 48,216 Mexico 25,663 26,683 40,645 Germany 10,083 8,700 5,506 Poland 4,120 6,161 5,042 Other 47,145 46,790 45,950 Total net sales $ 464,290 $ 489,270 $ 498,738 44 Table of Contents Note 3. 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. The other category includes products sold in aerospace, defense, medical, and other industries. Year Ended December 31, 2024 Mobile Solutions Power Solutions Intersegment Sales Eliminations Total Automotive $ 192,277 $ 28,915 $ — $ 221,192 General Industrial 71,244 46,490 — 117,734 Residential/Commercial Electrical — 80,545 — 80,545 Other 20,423 24,595 ( 199 ) 44,819 Total net sales $ 283,944 $ 180,545 $ ( 199 ) $ 464,290 Year Ended December 31, 2023 Mobile Solutions Power Solutions Intersegment Sales 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 Sales 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 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, 2024, were not materially impacted by any other factors. The balance of deferred revenue was $ 0.2 million, $ 0.4 million and $ 0.7 45 Table of Contents million as of December 31, 2024, 2023 and 2022, respectively. Revenue recognized for performance obligations satisfied or partially satisfied during the years ended December 31, 2024, 2023 and 2022, included $ 0.4 million, $ 0.7 million and $ 0.5 million, respectively, that was included in deferred revenue as of the prior year-end. 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, 2024, 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, 2024, 2023, and 2022. Note 4. Accounts Receivable The following table presents changes in the allowance for credit losses. Years Ended December 31, 2024 2023 2022 Balance at beginning of year $ 1,241 $ 1,469 $ 1,352 Additions 615 118 326 Write-offs and other ( 308 ) ( 353 ) ( 182 ) Currency impact ( 33 ) 7 ( 27 ) Balance at end of year $ 1,515 $ 1,241 $ 1,469 As of December 31, 2024 and 2023, one customer represented 11 % and 13 %, respectively, of our consolidated accounts receivable balance. Amounts due from this customer are primarily related to Mobile Solutions. 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 years ended December 31, 2024, 2023 and 2022, we incurred fees of $ 1.1 million, $ 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). Note 5. Inventories Inventories are comprised of the following amounts: As of December 31, 2024 2023 Raw materials $ 20,664 $ 25,456 Work in process 22,139 22,942 Finished goods 19,074 23,165 Total inventories $ 61,877 $ 71,563 46 Table of Contents Note 6. Property, Plant and Equipment Property, plant and equipment are comprised of the following amounts: As of December 31, 2024 2023 Land and buildings $ 56,205 $ 61,007 Machinery and equipment 339,792 375,352 Construction in progress 6,569 3,466 Gross cost 402,566 439,825 Less: Accumulated depreciation 240,532 254,013 Property, plant and equipment, net $ 162,034 $ 185,812 For the years ended December 31, 2024, 2023, and 2022, we recorded depreciation expense of $ 31.6 million, $ 32.0 million, and $ 31.4 million, respectively. During the year ended 2024, we recognized $ 0.9 million of accelerated depreciation expense due to changes in the estimated remaining useful life of certain machinery and equipment. We monitor property, plant and equipment for any indicators of potential impairment. We recognized an impairment of $ 6.5 million for the year ended December 31, 2024, related to machinery and equipment located at a plant that will close in 2025. The machinery and equipment were adjusted down to their fair value, which was determined based on quoted market prices for similar assets. The impairment loss, which was reported within our Mobile Solutions group, is recognized in the “Other expense (income), net” line in the Consolidated Statements of Operations and Comprehensive Income (Loss). There were no impairment charges for the years ended December 31, 2023, and 2022. Note 7. Intangible Assets The following table shows changes in the carrying amount of intangible assets, net, by reportable segment. Mobile Solutions Power Solutions Total Balance as of December 31, 2022 $ 22,356 $ 50,535 $ 72,891 Amortization ( 3,353 ) ( 10,814 ) ( 14,167 ) Balance as of December 31, 2023 19,003 39,721 58,724 Amortization ( 3,354 ) ( 10,369 ) ( 13,723 ) Intangible assets sold (1) — ( 591 ) ( 591 ) Balance as of December 31, 2024 $ 15,649 $ 28,761 $ 44,410 _______________________________ (1) Represents customer relationships associated with the Industrial Molding Corporation business, which was sold during the year ended December 31, 2024 (see Note 18). The following table shows the cost and accumulated amortization of our intangible assets as of December 31, 2024 and 2023. December 31, 2024 December 31, 2023 Gross Carrying Value as of Acquisition Date Accumulated Amortization Net Carrying Value Gross Carrying Value as of Acquisition Date Accumulated Amortization Net Carrying Value Customer relationships $ 169,416 $ ( 126,281 ) $ 43,135 $ 171,846 $ ( 114,671 ) $ 57,175 Trademark and trade name 4,100 ( 2,825 ) 1,275 7,527 ( 5,978 ) 1,549 Total identified intangible assets $ 173,516 $ ( 129,106 ) $ 44,410 $ 179,373 $ ( 120,649 ) $ 58,724 Intangible assets that are fully amortized are removed and no longer represented in the gross carrying value or accumulated amortization. The following table shows estimated future amortization expense for each of the next five years. Year Ending December 31, 2025 $ 13,621 2026 13,621 2027 11,579 2028 3,353 2029 2,236 47 Table of Contents Intangible assets are reviewed for impairment when changes in circumstances indicate the carrying value of those assets may not be recoverable. There were no impairment charges for the years ended December 31, 2024, 2023, and 2022. Note 8. Investment in Joint Venture 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. The following table shows changes in our investment in the JV. Balance as of December 31, 2023 $ 32,701 Share of earnings 9,571 Dividends paid by joint venture ( 6,260 ) Foreign currency translation loss ( 1,041 ) Balance as of December 31, 2024 $ 34,971 The following tables show summarized financial information of the unconsolidated JV. Year Ended December 31, 2024 2023 2022 Net sales 130,807 109,630 101,565 Cost of sales 106,166 93,609 84,654 Income from operations 22,790 14,175 15,111 Net income 19,533 11,848 13,453 December 31, 2024 2023 Current assets 84,409 68,508 Noncurrent assets 73,399 77,554 Current liabilities 76,859 68,665 Noncurrent liabilities 7,639 8,662 We recognized sales to the JV of $ 0 , $ 0 , and $ 0.1 million during the years ended December 31, 2024, 2023, and 2022, respectively. Note 9. Debt The following table presents amounts outstanding on our debt facilities. As of December 31, 2024 2023 Term Loan Facility $ 114,397 $ 148,114 ABL Facility 5,400 — Financing obligations from sale-leaseback transactions 24,496 — International loans 8,485 10,655 Unamortized debt issuance costs and discount (1) ( 4,148 ) ( 5,490 ) Total debt $ 148,630 $ 153,279 _______________________________ (1) In addition to this amount, costs of $ 1.2 million and $ 0.5 million related to asset backed credit facilities were recorded in other non-current assets as of December 31, 2024 and 2023, respectively. We capitalized interest costs of $ 1.2 million, $ 1.3 million, and $ 0.6 million in the years ended December 31, 2024, 2023, and 2022, respectively, related to construction in progress. Term Loan Facility On March 22, 2021, we entered into a $ 150.0 million term loan facility (as amended from time to time, the “Term Loan Facility”), on which outstanding borrowings bear interest at either: 1) one-month, three-month, or six-month term secured overnight finance rate (“SOFR”) with a duration adjustment (“Adjusted Term 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 48 Table of Contents 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 our net leverage ratio for the most recently reported fiscal quarter and subject to reduction upon the occurrence of certain conditions as set forth in the credit agreement governing the Term Loan Facility. The PIK interest is payable on the loan maturity date of September 22, 2026. At December 31, 2024, the Term Loan Facility bore interest, including PIK interest, based on one-month Adjusted Term SOFR, at 12.332 %. 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, 2024. The Term Loan Facility was issued at a $ 3.8 million discount and we capitalized an additional $ 5.5 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 applicable variable base rate 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. ABL Facility On December 30, 2024, we entered into a new asset backed credit facility (the “ABL Facility”) which provides for a senior secured revolving credit facility in the amount of $ 50.0 million, of which $ 15.0 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 at either: 1) the one, three or six month SOFR plus 1.50 %, plus an adjustment of 0.10 % (“Term SOFR Rate”); or 2) the highest of the base commercial lending rate of the lender or various benchmark rates plus an applicable margin of 0.50 % or 1.00 %, depending on the benchmark (“Alternative Base Rate”). At December 31, 2024, based on a one-month Term SOFR Rate, the interest rate on outstanding borrowings under the ABL Facility was 5.94 %. We incur a commitment fee of 0.25 % for unused capacity under the ABL Facility and a 1.85 % fee on the amount of letters of credit outstanding. The final maturity date of the ABL Facility is the earlier of: 1) December 30, 2029; or 2) 91 days prior to the loan maturity date of the Term Loan Facility. We capitalized a total of $ 1.2 million in new debt issuance costs related to the ABL Facility. As of December 31, 2024, we had $ 5.4 million outstanding borrowings under the ABL Facility, $ 10.4 million of outstanding letters of credit, and $ 15.0 million available for future borrowings under the ABL Facility. The ABL Facility is secured by a perfected lien over substantially all of the Company’s assets. We were in compliance with all requirements under the ABL Facility as of December 31, 2024. 2021 ABL Facility On March 22, 2021, we entered into an asset backed credit facility (as amended from time to time, the “2021 ABL Facility”) which provided for a $ 50.0 million senior secured revolving credit facility, of which a maximum of $30.0 million was available in the form of letters of credit and a maximum of $ 5.0 million was available for the issuance of short-term swingline loans. On December 30, 2024, we terminated the 2021 ABL Facility and paid down the $ 12.0 million of outstanding borrowings. The availability of credit under the 2021 ABL Facility was limited by a borrowing base calculation derived from accounts receivable and inventory held in the United States. Outstanding borrowings under the 2021 ABL Facility bore interest on a variable rate structure plus an interest rate spread that was based on the average amount of aggregate revolving commitment available. The variable borrowing rate was either: 1) Adjusted Term 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. At December 30, 2024, using one-month Adjusted Term SOFR plus a 2.00 % margin, the interest rate on outstanding borrowings under the 2021 ABL Facility was 6.568 %. We incurred a commitment fee of 0.375 % for unused capacity under the 2021 ABL Facility and a 2.125% fee on the amount of letters of credit outstanding. During the year ended December 31, 2024, we recognized a $ 0.3 million loss on extinguishment in connection with the termination of the 2021 ABL Facility. Sale-Leaseback Transactions In March 2024, we sold three of our properties for an aggregate sales price of $ 16.9 million, with the net proceeds used to repay a portion of the outstanding borrowings under the Term Loan Facility. Concurrent with the sale, we entered into a 20-year lease agreement for these properties. Since the lease agreement allows for us to exercise renewal options that extend for substantially all of the remaining economic life, we have the ability to maintain the risks and rewards of ownership. Since the transaction did not transfer control of the assets, it cannot be accounted for as a sale under ASC 606. As a result, the properties 49 Table of Contents remain on our Consolidated Balance Sheets and the non-land assets will continue to be depreciated over their remaining useful lives. The $ 16.9 million of gross proceeds was recognized as a financing obligation as a component of long-term debt. The monthly lease payments, which increase 3.0% each year, are being amortized as principal payments and interest expense based on an effective interest rate of 9.715 %. We incurred $ 0.6 million in debt issuance costs related to this transaction, which are being amortized over the term of the debt. In March 2024, we sold multiple pieces of manufacturing equipment for an aggregate sales price of $ 4.9 million. Concurrent with the sale, we entered into a 5-year lease agreement that includes a repurchase option for this equipment. In May 2024, we sold additional pieces of manufacturing equipment for an aggregate sales price of $ 3.4 million and entered into 5-year and 6-year lease agreements for the equipment. Since the three lease agreements allow for us to exercise an early buyout option, we have the ability to maintain the risks and rewards of ownership. Since the transactions did not transfer control of the assets, they cannot be accounted for as sales under ASC 606. As a result, the assets remain on our Consolidated Balance Sheets and will continue to be depreciated over their remaining useful lives. The $ 8.3 million of gross proceeds was recognized as a financing obligation as a component of long-term debt. The monthly lease payments are being amortized as principal payments and interest expense on a weighted average effective interest rate of 10.540 %. International Loans We have fixed rate debt with various financial institutions in France, Poland and China, with maturity dates between 2025 and 2033. These loans, which were obtained to fund working capital and equipment purchases, had a weighted average interest rate of 2.320% at December 31, 2024. Future Maturities The following table lists aggregate maturities of debt for each of the next five years. 2025 $ 5,039 2026 122,018 2027 3,245 2028 3,599 2029 700 Note 10. 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. 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 and are limited based on terms and conditions of the Term Loan Agreement. 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. As of December 31, 2024, the carrying value of the Series D Preferred Stock shares was $ 93.5 million, which included $ 46.8 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, 2024 2023 2022 Balance at beginning of year $ 77,799 $ 64,701 $ 53,807 Accrual of in-kind dividends 11,351 10,085 8,961 Amortization 4,347 3,013 1,933 Balance at end of year $ 93,497 $ 77,799 $ 64,701 50 Table of Contents Note 11. Leases The following table presents components of lease expense: Years Ended December 31, 2024 2023 2022 Operating lease cost $ 7,995 $ 8,077 $ 8,285 Finance lease cost: Amortization of right-of-use assets 1,596 1,600 1,318 Interest expense 359 345 351 Short-term lease cost (1) 477 604 438 Sublease income ( 3,845 ) ( 2,284 ) ( 195 ) Total lease cost $ 6,582 $ 8,342 $ 10,197 _______________________________ (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 2024 2023 Assets: Operating lease assets Operating lease right-of-use assets $ 39,317 $ 43,357 Finance lease assets Property, plant and equipment, net 16,579 13,599 Total lease assets $ 55,896 $ 56,956 Liabilities: Current liabilities: Operating lease liabilities Current portion of operating lease liabilities $ 6,038 $ 5,735 Finance lease liabilities Other current liabilities 3,565 2,047 Non-current liabilities: Operating lease liabilities Operating lease liabilities, net of current portion 42,291 47,281 Finance lease liabilities Other non-current liabilities 5,469 4,488 Total lease liabilities $ 57,363 $ 59,551 The following table contains supplemental cash flow information related to leases. Years Ended December 31, 2024 2023 2022 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows used in operating leases $ 8,511 $ 8,462 $ 14,214 Operating cash flows used in finance leases 359 345 351 Financing cash flows used in finance leases 2,400 1,766 3,003 Right-of-use assets obtained in exchange for new operating lease liabilities (1) 692 1,028 5,181 Right-of-use assets obtained in exchange for new finance lease liabilities 5,170 1,619 1,263 _______________________________ (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, 2024 2023 Weighted-average remaining lease term - operating leases 8.5 years 9.2 years Weighted-average remaining lease term - finance leases 2.6 years 3.1 years Weighted-average discount rate - operating leases 7.7 % 7.7 % Weighted-average discount rate - finance leases 5.8 % 5.2 % 51 Table of Contents The maturities of lease liabilities as of December 31, 2024, is as follows: Operating Leases Finance Leases 2025 $ 8,675 $ 4,004 2026 8,516 3,398 2027 8,319 2,141 2028 6,773 167 2029 6,909 78 Thereafter 25,227 — Total future minimum lease payments 64,419 9,788 Less: imputed interest 16,090 754 Total lease liabilities $ 48,329 $ 9,034 Subleases 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 9.7 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. We are subleasing a portion of our leased corporate headquarters office space under two separate subleases that expire in 2027 and 2029, respectively. The undiscounted cash flows to be received under operating subleases subsequent to December 31, 2024, is as follows: 2025 $ 3,820 2026 3,937 2027 3,920 2028 3,626 2029 3,374 Thereafter 19,261 Note 12. 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. We have obtained multiple favorable decisions and one unfavorable decision. 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. The U.S. 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 $ 2.0 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. Accordingly, we do not expect such losses, if any, to have a material impact on our business, operations or financial results. 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. 52 Table of Contents Note 13. Income Taxes The following table summarizes income (loss) before benefit (provision) for income taxes and share of net income from joint venture. Years Ended December 31, 2024 2023 2022 United States $ ( 54,703 ) $ ( 64,394 ) $ ( 40,543 ) Foreign 9,269 10,723 9,474 Loss before provision for income taxes and share of net income from joint venture $ ( 45,434 ) $ ( 53,671 ) $ ( 31,069 ) The following table summarizes total income tax expense (benefit) recognized in each year. Years Ended December 31, 2024 2023 2022 Current taxes: U.S. Federal $ ( 583 ) $ ( 580 ) $ ( 545 ) State ( 378 ) 126 ( 625 ) Foreign 4,292 3,901 4,576 Total current tax expense 3,331 3,447 3,406 Deferred taxes: U.S. Federal $ ( 10,421 ) $ ( 9,057 ) $ ( 6,245 ) State ( 2,262 ) ( 1,833 ) 70 Foreign ( 1,138 ) ( 721 ) ( 986 ) U.S. federal, state and foreign valuation allowance 12,900 10,449 5,376 Total deferred tax benefit ( 921 ) ( 1,162 ) ( 1,785 ) Total income tax expense $ 2,410 $ 2,285 $ 1,621 The following table presents a reconciliation of income taxes based on the U.S. federal statutory income tax rate. Years Ended December 31, 2024 2023 2022 U.S federal statutory income tax rate 21.0 % 21.0 % 21.0 % Change in valuation allowance, exclusive of state ( 23.4 ) % ( 16.1 ) % ( 17.5 ) % State taxes, net of federal taxes, exclusive of tax reform 0.7 % ( 0.2 ) % 1.6 % Non-U.S. earnings taxed at different rates 1.9 % 1.1 % 0.7 % Global intangible low-taxed income ( 3.9 ) % ( 2.3 ) % ( 3.9 ) % Deferred true-up ( 0.3 ) % ( 0.8 ) % ( 6.4 ) % Research and development tax credit — % 0.2 % 0.3 % Interest on CARES Act refund 1.6 % 1.1 % 1.8 % Return to provision 0.4 % 0.1 % 1.3 % Taxes on unremitted foreign earnings ( 3.8 ) % ( 2.4 ) % ( 3.9 ) % Intercompany lending ( 0.5 ) % ( 1.3 ) % ( 2.7 ) % Warrant revaluation — % ( 4.3 ) % 3.6 % Other adjustments, net 1.0 % ( 0.4 ) % ( 1.1 ) % Effective tax rate ( 5.3 ) % ( 4.3 ) % ( 5.2 ) % Our effective tax rate was ( 5.3 )% for the year ended December 31, 2024. The effective tax rate differed from the U.S. federal statutory tax rate of 21 % primarily due to the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries, foreign tax rate differences and the limitation on the amount of tax benefit recorded for losses in certain jurisdictions where we believe it is more likely than not that a future tax benefit may not be realized. Our effective tax rate was ( 4.3 )% and ( 5.2 )% for the years ended December 31, 2023 and 2022, respectively, which differed from the U.S. federal statutory tax rate of 21 % primarily due to the impact of our valuation allowance changes during each year. 53 Table of Contents 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, 2024 and 2023, we accrued $ 0.7 million and $ 0.6 million, respectively, of interest on the CARES Act refund. Including interest accrued on the initial refund amount, we have a $ 12.3 million tax refund receivable at December 31, 2024, which is in the process of IRS review. The timing of the receipt of the refund is expected in the first half of 2025. The following table summarizes the principal components of the deferred tax assets and liabilities. As of December 31, 2024 2023 Deferred income tax liabilities: Tax in excess of book depreciation $ 11,917 $ 21,497 Intangible assets 10,533 13,659 Operating leases 9,005 9,970 Taxes on unremitted foreign earnings 4,488 4,658 Other deferred tax liabilities 682 725 Total deferred income tax liabilities 36,625 50,509 Deferred income tax assets: Interest expense limitation 18,571 14,920 Goodwill 18,393 20,419 Inventories 5,062 2,456 Section 174 research and development costs 3,123 2,400 Pension and personnel accruals 2,297 1,818 Operating leases 11,154 12,238 Net operating loss carryforwards 29,304 32,043 Interest rate swap — 251 Credit carryforwards 3,099 3,235 Accruals and reserves 341 904 Other deferred tax assets 981 3,099 Deferred income tax assets before valuation allowance 92,325 93,783 Valuation allowance on deferred tax assets ( 59,340 ) ( 47,528 ) Total deferred income tax assets 32,985 46,255 Net deferred income tax liabilities $ 3,640 $ 4,254 As of December 31, 2024, we had a $ 28.4 million U.S. federal net operating loss (“NOL”) carryover. The federal NOL has an indefinite life, but utilization within any tax year is limited to 80% of taxable income. 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, 2024, we had $ 16.3 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 $ 10.5 million, tax-effected, of foreign NOL carryovers at December 31, 2024. The foreign NOLs have an indefinite life; however, management believes that benefit for certain of the foreign NOLs may not be realized. Therefore, we have established a valuation allowance of $ 7.7 million to reduce the carrying value of the asset related to foreign NOLs to the amount that has been determined to be more likely than not realized. We have $ 0.4 million and $ 2.7 million of U.S. federal tax credits and tax credits in foreign jurisdictions, respectively, as of December 31, 2024. We have recognized a full valuation allowance against these tax credits. In addition, we have other federal and state deferred tax assets of $ 11.7 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 asset will not be realized. We have established a valuation allowance of $ 18.6 million to eliminate the carrying value of this asset. Management assesses available positive and negative evidence to estimate whether it is more likely than not sufficient future taxable income will be generated to provide use of the existing deferred tax assets. A significant piece of objective negative evidence evaluated is cumulative losses incurred over the three-year period ended December 31, 2024. Such objective evidence limits the ability to consider other subjective evidence, such as our projections for future earnings growth. On the basis of this 54 Table of Contents evaluation, as of December 31, 2024, a valuation allowance of $ 59.3 million has been recorded to recognize only the portion of the deferred tax asset that is more likely than not to be realized without consideration of future earnings growth. 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. During 2024, the valuation allowance increased by $ 11.8 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. As a result of the deemed mandatory repatriation provisions in the U.S. Tax Cuts and Jobs Act of 2017 and subsequent recognition in income of GILTI, we do not have material basis differences related to cumulative unremitted earnings for U.S. income tax purposes. However, we continue to evaluate the impact that repatriation of foreign earnings would have on withholding and other taxes. As of December 31, 2024, we have recorded a liability of $ 4.5 million for the anticipated withholding taxes that would be due upon repatriation of the unremitted earnings of those subsidiaries for which management does not intend to permanently reinvest. We are subject to U.S. federal income tax as well as tax in several foreign jurisdictions. We are also subject to tax by various state authorities. The tax years subject to examination vary by jurisdiction. We are no longer subject to U.S. federal examination for periods before 2021. 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. We recognize liabilities based on estimates of whether additional taxes will be due, and we believe our reserves are adequate in relation to any potential assessments. The outcome of any one examination, some of which may conclude during the next twelve months, is not expected to have a material impact on our financial position or results of operations. 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 and $ 0.5 million are included in other non-current liabilities as of December 31, 2024 and 2023, respectively. The following table presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits, excluding interest and penalties. Years Ended December 31, 2024 2023 2022 Balance at beginning of year $ 121 $ 118 $ 125 Additions for tax positions of prior years — 3 — Reductions for tax positions of prior years ( 4 ) — ( 7 ) Balance at end of year $ 117 $ 121 $ 118 The decrease to unrecognized tax benefits in 2024 is related to the foreign currency remeasurement of previously unrecognized tax benefits. As of December 31, 2024, the unrecognized tax benefits would, if recognized, impact our effective tax rate by $ 0.7 million, inclusive of the impact of interest and penalties. Management believes that it is reasonably possible that the amount of unrecognized income tax benefits, including interest and penalties, may not decrease during the next twelve months as no statutes are expected to lapse within the period. 55 Table of Contents Note 14. 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, 2024 2023 2022 Numerator: Net loss $ ( 38,273 ) $ ( 50,150 ) $ ( 26,098 ) Adjustment for preferred stock cumulative dividends and deemed dividends ( 15,698 ) ( 13,098 ) ( 10,894 ) Numerator for basic and diluted net loss per common share $ ( 53,971 ) $ ( 63,248 ) $ ( 36,992 ) Denominator: Weighted average common shares outstanding 49,596 46,174 43,738 Adjustment for participating securities ( 2,724 ) ( 2,636 ) ( 951 ) Adjustment for warrants outstanding (1) 1,781 3,200 1,893 Shares used to calculate basic and diluted net loss per share 48,653 46,738 44,680 Basic and diluted net loss per common share $ ( 1.11 ) $ ( 1.35 ) $ ( 0.83 ) _______________________________ (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 17). 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, 2024 2023 2022 Stock options 212 381 557 Warrants 1,500 1,500 1,500 Performance share units 802 133 — Total antidilutive securities 2,514 2,014 2,057 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, 2024. The 2019 Warrants excluded from the EPS calculations for the year ended December 31, 2024 had a per share exercise price of $ 11.03 (see Note 17). Performance share units are potentially dilutive when the related performance criterion has been met. Note 15. Share-Based Compensation As of December 31, 2024, we have 3.4 million shares available that can be issued to employees and non-executive directors under the NN, Inc. 2022 Amended and Restated 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). The following table lists the components of share-based compensation expense by type of award. Years Ended December 31, 2024 2023 2022 Restricted stock $ 2,119 $ 2,237 $ 3,635 Performance share units 1,021 570 602 Stock options — 14 140 Share-based compensation expense $ 3,140 $ 2,821 $ 4,377 Unrecognized compensation cost related to unvested awards was $ 7.4 million as of December 31, 2024, which will be recognized over a weighted-average period of 3.4 years. 56 Table of Contents Restricted Stock During the years ended December 31, 2024, 2023, and 2022, we granted 660,000 , 3,782,000 , and 897,000 shares of restricted stock with weighted average grant-date fair values of $ 4.25 , $ 1.37 , and $ 3.31 per share, respectively. The total grant-date fair value of restricted stock that vested in the years ended December 31, 2024, 2023, and 2022, was $ 2.0 million, $ 4.2 million, and $ 2.1 million, respectively. The following table presents the status of unvested restricted stock awards as of December 31, 2024 and changes during the year then ended. Nonvested Restricted Shares Weighted Average Grant-Date Fair Value Unvested at January 1, 2024 3,405 $ 1.41 Granted 660 4.25 Vested ( 1,480 ) 1.33 Forfeited ( 259 ) 2.13 Unvested at December 31, 2024 2,326 $ 2.18 During the year ended December 31, 2024, we granted 390,000 shares of restricted stock to non-executive directors, officers and certain other employees which vest pro-rata over three years for employees and over one year for non-executive directors. In addition, we granted 270,000 shares of restricted stock to new executive officers as inducement grants, during the year ended December 31, 2024, 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. 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 (“Inducement Awards”). PSUs cliff-vest at the end of the performance period and expire automatically if the performance metric thresholds are not met during the performance period. 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. 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. The Inducement Awards are earned upon our stock price meeting specified thresholds for any 20 consecutive trading days during the five-year performance period. PSUs that vest will be settled by the issuance of shares of our common stock with the actual number of shares interpolated between a threshold and maximum payout amount based on actual performance results. No dividends will be paid on outstanding PSUs during the performance period; however, dividend equivalents will be paid based on the number of shares of common stock that are ultimately earned at the end of the performance periods. The following table presents the status of unvested PSUs as of December 31, 2024 and activity during the year then ended. Nonvested PSU Awards Weighted Average Grant-Date Fair Value Nonvested at January 1, 2024 3,789 $ 1.29 Granted 590 3.71 Vested ( 12 ) 2.53 Forfeited ( 427 ) 2.40 Expired ( 269 ) 2.58 Nonvested at December 31, 2024 3,671 $ 1.45 During the year ended December 31, 2024, we granted 175,000 TSR Awards to executive officers under the Incentive Plans for the 2023 to 2025 performance period, and 415,000 Inducement Awards to new executive officers. During the years ended December 31, 2023 and 2022, we granted 3,621,000 and 790,000 PSUs with weighted average grant-date fair values of $ 1.14 and $ 2.58 per share, respectively. The total grant-date fair value of PSU’s that vested in the years ended December 31, 2024, 2023, and 2022, was $ 0.1 million, $ 0.3 million, and $ 0 , respectively. 57 Table of Contents Stock Options 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 , and a vesting period of three years . The following table presents stock option activity for the year ended December 31, 2024. Number of Options Weighted-Average Exercise Price Weighted-Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at January 1, 2024 296 $ 14.46 Expired ( 127 ) 15.07 Outstanding and exercisable at December 31, 2024 169 $ 13.99 2.6 years $ — (1) _______________________________ (1) The aggregate intrinsic value is the sum of intrinsic values for each exercisable individual option grant. The intrinsic value is the amount by which the closing market price of our stock at December 31, 2024, was greater than the exercise price of any individual option grant . Note 16. Accumulated Other Comprehensive Income The components of accumulated other comprehensive income (loss) (“AOCI”) are as follows: Foreign Currency Translation Interest rate swap Income taxes (1) Total Balance as of December 31, 2021 $ ( 32,016 ) $ 151 $ ( 37 ) $ ( 31,902 ) Other comprehensive income (loss) before reclassifications ( 8,156 ) 3,426 ( 68 ) ( 4,798 ) Amounts reclassified from AOCI to interest expense (2) — ( 428 ) 8 ( 420 ) Net other comprehensive income (loss) ( 8,156 ) 2,998 ( 60 ) ( 5,218 ) Balance as of December 31, 2022 $ ( 40,172 ) $ 3,149 $ ( 97 ) $ ( 37,120 ) Other comprehensive income (loss) before reclassifications 1,410 ( 327 ) 97 1,180 Amounts reclassified from AOCI to interest expense (2) — ( 1,815 ) — ( 1,815 ) Net other comprehensive income (loss) 1,410 ( 2,142 ) 97 ( 635 ) Balance as of December 31, 2023 $ ( 38,762 ) $ 1,007 $ — $ ( 37,755 ) Other comprehensive income (loss) before reclassifications ( 9,405 ) — — ( 9,405 ) Amounts reclassified from AOCI to interest expense (2) — ( 1,007 ) — ( 1,007 ) Net other comprehensive income (loss) ( 9,405 ) ( 1,007 ) — ( 10,412 ) Balance as of December 31, 2024 $ ( 48,167 ) $ — $ — $ ( 48,167 ) _______________________________ (1) Income tax effect of changes in interest rate swap. (2) Represents gain recognized in interest expense on effective interest rate swap. Note 17. Fair Value Measurements Fair value is an exit price representing the expected amount that an entity would receive to sell an asset or pay to transfer a liability in an orderly transaction with market participants at the measurement date. We followed consistent methods and assumptions to estimate fair values as more fully described in Note 1. 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 an amendment to our Term Loan in 2023, 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. During the year ended December 31, 2024, 500,000 of the 2023 Warrants were exercised on a cashless basis, resulting in the issuance of 499,000 shares. In conjunction with our placement of the Series D Preferred Stock in 2021, we issued warrants to purchase up to 1.9 million shares of our common stock (the “2021 Warrants”). The 2021 Warrants were exercisable, in full or in part, at an exercise price 58 Table of Contents 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. During the year ended December 31, 2024, all of the 2021 Warrants were exercised on a cashless basis, resulting in the issuance of 1,896,000 shares. In conjunction with our placement of the Series B Preferred Stock in 2019, we issued warrants to purchase up to 1.5 million shares of our common stock (the “2019 Warrants”). 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, 2024 2023 Balance at beginning of year $ 16,556 $ 2,959 Issuances — 2,712 Change in fair value (1) 12 10,885 Settlements ( 11,376 ) — Balance at end of year $ 5,192 $ 16,556 _______________________________ (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, 2024 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative liability - other non-current liabilities 4,776 — 416 December 31, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Derivative liability - other non-current liabilities 15,421 — 1,135 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 (Level 1). 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 (Level 3). The probabilities resulted in a weighted average term of 2.0 years as of December 31, 2024 and 2.9 years as of December 31, 2023. Interest Rate Swap On July 22, 2021, we entered into a fixed-rate interest rate swap agreement to change the applicable variable base rate 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 had a notional amount of $ 60.0 million and a maturity date of July 31, 2024. 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 remain probable of occurring, the gain was recognized as a reduction to interest expense through the original maturity date of July 31, 2024. During the years ended December 31, 2024, 2023, and 2022, we recognized an interest benefit of $ 1.0 million, $ 1.8 million, and $ 0.4 million, respectively, from gains recognized in interest expense on the effective interest rate swap in the Consolidated Statements of Operations and Comprehensive Income (Loss). As of December 31, 2024 and 2023, we reported $ 0 and $ 1.0 million gains, respectively, net of tax, in accumulated other comprehensive loss related to the interest rate swap. 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, 2024 and 2023, the carrying values of these financial instruments, except for debt, approximated fair value. The fair value of our debt was $ 147.8 million and $ 162.2 million, with a carrying amount of $ 148.6 million and $ 153.3 million, as of December 31, 2024 and 2023, respectively. The fair value of debt was calculated by 59 Table of Contents discounting the future cash flows to its present value using prevailing market interest rates for debt with similar creditworthiness, terms and maturities (Level 3). Note 18. Divestiture On July 2, 2024, we completed the sale of our Lubbock operations, known as Industrial Molding Corporation (“IMC”), for $ 17.0 million in cash, subject to customary purchase price adjustments. We received net proceeds of $15.4 million after paying certain transaction costs, which was used to repay a portion of the outstanding borrowings under the Term Loan Facility. We determined that the sale of IMC did not represent a strategic shift that will have a major effect on the consolidated results of operations, therefore the results of this business will continue to be reported within our Power Solutions segment. The gain on sale of business is recognized in the “ Other expense (income), net ” line in the Consolidated Statements of Operations and Comprehensive Income (Loss). The following is a summary of the net gain recognized in connection with the divestiture: Net proceeds $ 17,000 Net assets disposed 8,281 Direct costs to sell 1,565 Gain on sale of business $ 7,154 Note 19. Plant Optimization Activities During the second half of 2024, we took specific steps to consolidate our footprint by identifying two manufacturing facilities to close due to volume rationalization which will reduce costs and improve operational efficiency. In January 2025, we ceased production activities at our Mobile Solutions plant in Juarez, Mexico. We plan to stop production activity at our Mobile Solutions plant in Dowagiac, Michigan by the end of the first quarter of 2025. In addition, we implemented operational and cost optimization actions to reduce indirect and overhead costs. We expect the facility closures and organizational changes to be completed in the first half of 2025. We estimate incurring $ 13.6 million in charges which will be recognized in 2024 and 2025. Once fully implemented, we expect to recognize annual benefits of approximately $ 5.4 million. All costs incurred have been recognized in the Mobile Solutions segment. The following is a summary of costs incurred and amounts accrued during the year ended December 31, 2024. Severance and employee related Impairment of property and equipment Costs associated with exit or disposal activities Total Balance as of December 31, 2023 $ — $ — $ — $ — Restructuring costs 3,267 6,546 2,787 12,600 Amounts paid ( 581 ) — ( 257 ) ( 838 ) Charges against assets — ( 6,546 ) ( 2,530 ) ( 9,076 ) Balance as of December 31, 2024 $ 2,686 $ — $ — $ 2,686 Of the $ 12.6 million incurred during the year ended December 31, 2024, $ 5.0 million are recognized in the “Cost of sales” line, $ 1.1 million in the “Selling, general, and administrative expense” line, and $ 6.5 million in the “ Other expense (income), net ” line in the Consolidated Statements of Operations and Comprehensive Income (Loss). Voluntary Early Retirement Program During the year ended December 31, 2024, we recognized $ 1.2 million related to an early retirement incentive program (“ERIP”) that was open to to certain U.S. employees that met specified age and service requirements, and who terminated employment in 2024. We plan to recognize an additional $ 0.5 million under the ERIP for employees that will terminate during the first quarter of 2025. The estimated total cost of the ERIP is $ 1.7 million with all benefit payments expected to be made in 2025. 60 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.