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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2024-10-31 · 71 added, 121 removed, 94 unchanged (67% of the section changed)

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Management’s Discussion and Analysis of Financial Condition and Results of Operations is intended to help the reader understand the results of operations and financial condition of NN, Inc.

and its consolidated subsidiaries for the three and nine months ended September 30, 2024.

The financial information as of September 30, 2024, should be read in conjunction with the consolidated financial statements for the year ended December 31, 2023, contained in our 2023 Annual Report, and the Condensed Consolidated Financial Statements included in this Quarterly Report.

and its consolidated subsidiaries for the three months ended March 31, 2025.

The financial information as of March 31, 2025, should be read in conjunction with the consolidated financial statements for the year ended December 31, 2024, contained in our 2024 Annual Report, and the Condensed Consolidated Financial Statements included in this Quarterly Report.

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.

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These statements may discuss goals, intentions and expectations as to future trends, plans, events, results of operations or financial condition, or state other information relating to the Company, based on current beliefs of management as well as assumptions made by, and information currently available to, management.

Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or expressions.

Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “forecast,” “growth,” “guidance,” “intend,” “may,” “will,” “possible,” “potential,” “predict,” “project,” “trajectory” or other similar words, phrases or expressions.

Forward-looking statements involve a number of risks and uncertainties that are outside of management’s control and that may cause actual results to be materially different from such forward-looking statements.

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the impacts of pandemics, epidemics, disease outbreaks and other public health crises on our financial condition, business operations and liquidity;

the potential impacts of tariffs on the U.S.

economy, the economy of other countries in which we conduct operations and our industry, as well as the potential implications and ramifications of tariffs on our business and the local and global supply chains supporting the same, and our ability to mitigate any adverse impacts of such;

competitive influences;

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the impact of climate change on our operations;

uncertainty of government policies and actions after recent U.S.

elections in respect to global trade, tariffs and international trade agreements;

and cyber liability or potential liability for breaches of our or our service providers’ information technology systems or business operations disruptions.

Any forward-looking statement speaks only as of the date of this Quarterly Report, and the Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

New risks and uncertainties may emerge from time to time, and it is not possible for the Company to predict their occurrence or how they will affect the Company.

The Company qualifies all forward-looking statements by these cautionary statements.

The foregoing factors should not be construed as exhaustive and should be read in conjunction with the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2024 Annual Report and in this Quarterly Report.

Any forward-looking statement speaks only as of the date of this Quarterly Report, and we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

New risks and uncertainties may emerge from time to time, and it is not possible for us to predict their occurrence or how they will affect the Company.

We qualify all forward-looking statements by these cautionary statements.

For additional information concerning such risk factors and cautionary statements, please see the sections titled “Item 1A.

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Factors That May Influence Results of Operations

The following paragraphs describe factors that have influenced results of operations for the nine months ended September 30, 2024, that management believes are important to provide an understanding of the business and results of operations or that may influence operations in the future.

The following paragraphs describe factors that have influenced results of operations for the three months ended March 31, 2025, that management believes are important to provide an understanding of the business and results of operations or that may influence operations in the future.

Macroeconomic Conditions

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

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

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

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economy has experienced inflationary increases and elevated interest rates, as well as supply issues in materials, services, and labor due to economic policy and military conflicts.

We cannot predict the future impact on our end-markets or input costs nor our ability to recover cost increases through pricing.

Three Months Ended September 30, 2024 compared to the Three Months Ended September 30, 2023

Consolidated Results

Three Months Ended September 30,

2024 2023 $ Change

Net sales $ 113,587 $ 124,443 $ (10,856)

Cost of sales (exclusive of depreciation and amortization shown separately below) 97,131 104,543 $ (7,412)

Selling, general, and administrative expense 10,257 11,693 (1,436)

Depreciation and amortization 10,844 11,577 (733)

Other operating income, net (895) (631) (264)

Loss from operations (3,750) (2,739) (1,011)

Interest expense 5,404 5,739 (335)

Other income, net (5,315) (1,463) (3,852)

Loss before benefit (provision) for income taxes and share of net income from joint venture (3,839) (7,015) 3,176

Benefit (provision) for income taxes (903) 245 (1,148)

Share of net income from joint venture 2,185 1,713 472

Net loss $ (2,557) $ (5,057) $ 2,500

Net sales decreased by $10.9 million, or 8.7%, during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to the sale of our Lubbock operations, rationalized volume at plants undergoing turnarounds, a customer settlement received in 2023 and unfavorable foreign exchange effects of $1.1 million.

Cost of Sales.

Cost of sales decreased by $7.4 million, or 7.1%, during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to the decrease in sales.

Selling, General, and Administrative Expense.

Selling, general, and administrative expense decreased by $1.4 million during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to lower incentive compensation expense.

Other Operating Income, Net.

Other operating income, net changed favorably by $0.3 million during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due the loss on sales of machinery and equipment recognized in 2023.

Interest Expense.

Interest expense decreased by $0.3 million during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to a reduction in the Term Loan balance due to the partial pay down of the outstanding balance with proceeds from the sale of our Lubbock operations.

Three Months Ended September 30,

Interest on debt $ 4,990 $ 5,779

Gain recognized on interest rate swap (150) (449)

Amortization of debt issuance costs and discount 612 529

Capitalized interest (224) (350)

Other 176 230

Total interest expense $ 5,404 $ 5,739

Other Income, Net.

Other income, net increased by $3.9 million during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to the $7.2 million gain on sale of our Lubbock operations, partially offset by noncash derivative mark-to-market loses recognized during the current quarter compared to derivative gains recognized in the third quarter of 2023.

Benefit (Provision) For Income Taxes .

Our effective tax rate was (23.5)% for the three months ended September 30, 2024, compared to 3.5% for the three months ended September 30, 2023.

The rate for the three months ended September 30, 2024 was unfavorably impacted due to the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by the limitation on the amount of tax benefit recorded for losses in certain jurisdictions where we believe it is more likely than not that a future tax benefit may not be realized.

Share of Net Income from Joint Venture.

Share of net income from the JV increased by $0.5 million during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to higher sales and increased gross margins, partially offset by higher fixed costs.

The JV, in which we own a 49% investment, recognized net sales of $32.4 million and $30.3 million for the three months ended September 30, 2024 and 2023, respectively.

Results by Segment

MOBILE SOLUTIONS

Three Months Ended September 30,

2024 2023 $ Change

Net sales $ 70,678 $ 78,961 $ (8,283)

Loss from operations $ (1,441) $ (1,283) $ (158)

Net sales decreased by $8.3 million, or 10.5%, during the three months ended September 30, 2024, compared to the three months ended September 30, 2023, primarily due to rationalized volume at plants undergoing turnarounds, contractual reduction in customer pass-through material pricing, a customer settlement received in 2023 and unfavorable foreign exchange effects of $1.0 million.

Loss from operations changed unfavorably by $0.2 million during the three months ended September 30, 2024, compared to the same period in the prior year, primarily due to the lower revenue and impact of the customer settlement in the 2023, partially offset by lower depreciation expense.

POWER SOLUTIONS

Three Months Ended September 30,

2024 2023 $ Change

Net sales $ 42,935 $ 45,484 $ (2,549)

Income from operations $ 2,505 $ 3,936 $ (1,431)

Net sales decreased by $2.5 million, or 5.6%, during the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily due to the sale of our Lubbock operations, partially offset by higher precious metals pass-through pricing and pricing.

Income from operations decreased by $1.4 million during the three months ended September 30, 2024 compared to the same period in the prior year, primarily due to the lower revenue resulting from the sale of the Lubbock operations and unfavorable product mix.

Nine Months Ended September 30, 2024 compared to the Nine Months Ended September 30, 2023

We cannot predict the future impact on our end-markets or input costs, including tariffs and their potential implications and ramifications, nor our ability to recover cost increases through pricing.

Footprint Optimization

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

During the second half of 2024, we identified two manufacturing facilities to close due to volume rationalization which will reduce costs and improve operational efficiency.

During the first quarter of 2025, we ceased production activities at our Mobile Solutions plants in Juarez, Mexico and Dowagiac, Michigan.

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

Three Months Ended March 31, 2025 compared to the Three Months Ended March 31, 2024

Consolidated Results

Nine Months Ended September 30,

Three Months Ended March 31,

2025 2024 $ Change

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Net loss $ (6,685) $ (12,537) $ 5,852

Net sales decreased by $19.0 million, or 5.0%, during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to he sale of our Lubbock operations, customer settlements received in 2023, rationalized volume at plants undergoing turnarounds and unfavorable foreign exchange effects of $1.9 million.

These decreases were partially offset by the net impact of contractual pass-through material pricing provisions.

Net sales decreased by $15.5 million, or 12.8%, during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to the rationalization of underperforming business and plants, the sale of our Lubbock operations in 2024, lower volumes and unfavorable foreign exchange effects of $2.8 million.

These decreases were partially offset by higher precious metals pass-through pricing.

Cost of Sales.

Cost of sales decreased by $21.2 million, or 6.6%, during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to lower sales volume and lower labor costs associated with facility closures.

Cost of sales decreased by $9.4 million, or 9.3%, during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to the decrease in sales.

Selling, General, and Administrative Expense.

Selling, general, and administrative expense increased by $1.3 million during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to higher travel and stock compensation expense, partially offset by lower salaries due to a reduction in headcount.

Selling, general, and administrative expense decreased by $2.2 million during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to lower incentive compensation expense.

Depreciation and amortization .

Depreciation and amortization decreased by $3.8 million during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to impact of historical purchase accounting step-up basis becoming fully depreciated.

Other Operating Income, Net.

Other operating income, net changed favorably by $2.8 million primarily due to increased sublease income earned on closed facilities.

Other operating income, net increased by $0.1 million during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to an increase in gains on sale of equipment and higher sublease income.

Interest Expense.

Interest expense increased by $1.2 million during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to higher average interest rates, a decrease in the gain recognized on interest rate swap and an increase in the amortization of debt issuance costs.

Nine Months Ended September 30,

Interest expense decreased by $0.2 million during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to lower average debt balances and lower interest rates.

These reductions were partially offset by a decrease in the gain recognized on interest rate swap and an increase in the amortization of debt issuance costs and a lower amount of capitalized interest.

Three Months Ended March 31,

Interest on debt $ 4,405 $ 5,676

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Other Expense (Income), Net.

Other expense (income), net changed favorably by $6.6 million during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to the $7.2 million gain on sale of the Lubbock operations, partially offset by unfavorable foreign exchange effects associated with intercompany borrowings.

Benefit (Provision) for Income Taxes.

Our effective tax rate was (5.3)% for the nine months ended September 30, 2024, compared to (4.4)% for the nine months ended September 30, 2023.

The rate for the nine months ended September 30, 2024 was unfavorably impacted due to the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by the limitation on the amount of tax benefit recorded for losses in certain jurisdictions where we believe it is more likely than not that a future tax benefit may not be realized.

The effective tax rate was favorably impacted by return to provision adjustments in certain foreign jurisdictions and an amended return in a state jurisdiction.

Other expense (income), net changed favorably by $6.3 million during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to noncash derivative mark-to-market gains recognized during the current quarter compared to derivative losses recognized in the first quarter of 2024.

Provision For Income Taxes .

Our effective tax rate was (16.8)% for the three months ended March 31, 2025, compared to (3.5)% for the three months ended March 31, 2024.

The rate for the three months ended March 31, 2025 was unfavorably impacted due to the accrual of tax on non-permanently reinvested unremitted earnings of foreign subsidiaries and by the limitation of 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.

Share of Net Income from Joint Venture.

Share of net income from the JV increased by $3.5 million during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to higher sales and increased margin partially offset by higher fixed costs, depreciation and interest expense.

The JV, in which we own a 49% investment, recognized net sales of $95.1 million and $75.9 million for the nine months ended September 30, 2024 and 2023, respectively.

Share of net income from the JV increased by $0.2 million during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to higher sales.

The JV, in which we own a 49% investment, recognized net sales of $32.7 million and $31.1 million for the three months ended March 31, 2025 and 2024, respectively.

Results by Segment

MOBILE SOLUTIONS

Nine Months Ended September 30,

Three Months Ended March 31,

2025 2024 $ Change

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Loss from operations $ (2,687) $ (2,143) $ (544)

Net sales decreased by $17.5 million, or 7.5%, during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due rationalized volume at plants undergoing turnarounds, contractual reduction in customer pass-through material pricing, a customer settlement received in 2023 and unfavorable foreign exchange effects of $1.8 million.

Loss from operations changed favorably by $0.8 million during the nine months ended September 30, 2024 compared to the same period in the prior year, primarily due to a reduction of indirect manufacturing costs related to actions taken in 2023 to optimize plant operations.

These decreases were partially offset by the impact of lower sales, impact of the customer settlement in the 2023 and higher depreciation expense.

Net sales decreased by $10.8 million, or 14.8%, during the three months ended March 31, 2025, compared to the three months ended March 31, 2024, primarily due to the closure of our Juarez, Mexico plant, lower volumes and unfavorable foreign exchange effects of $1.9 million.

Loss from operations increased by $0.5 million during the three months ended March 31, 2025, compared to the same period in the prior year, primarily due to the lower revenue, partially offset by lower depreciation expense.

POWER SOLUTIONS

Nine Months Ended September 30,

Three Months Ended March 31,

2025 2024 $ Change

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Income from operations $ 3,023 $ 3,979 $ (956)

Net sales decreased by $1.3 million, or 0.9%, during the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, primarily due to the sale of our Lubbock operation and premium pricing received on a certain customer project during the first quarter of 2023.

These decreases were partially offset by higher precious metals pass-through pricing and higher volumes.

Income from operations increased by $3.5 million during the nine months ended September 30, 2024 compared to the same period in the prior year, primarily due to lower costs associated with the facilities that closed in the second quarter of 2023 and increased sublease income earned on those closed facilities in 2024.

Changes in Financial Condition from December 31, 2023 to September 30, 2024

From December 31, 2023 to September 30, 2024, total assets decreased by $27.8 million primarily due to decreases in property, plant and equipment and intangible assets due to depreciation and amortization.

Additionally, accounts receivable, inventory and property, plant and equipment decreased due to the sale of our Lubbock operations during the quarter.

These decreases were partially offset by increases in our investment in a joint venture.

From December 31, 2023 to September 30, 2024, total liabilities decreased by $20.8 million, primarily due to a decrease in other non-current liabilities due to the exercise of warrants in 2024 and a reduction in long-term debt due to the partial pay down of the outstanding balance with proceeds from the sale of our Lubbock operations.

These decreases were partially offset by an increase in other current liabilities.

Working capital, which consists of current assets less current liabilities, was $85.3 million as of September 30, 2024, compared to $100.9 million as of December 31, 2023.

The decrease in working capital was primarily due to increases in the current maturities of long-term debt and an increase in other current liabilities.

Cash provided by operations was $4.4 million for the nine months ended September 30, 2024, compared with $23.9 million for the nine months ended September 30, 2023.

The decrease was due to an increase in accounts receivable, a decrease in inventory during the first half of 2023 and an increase in accounts payable during the first half of 2023.

In addition, the Company received a $3.9 million dividend from the JV in the third quarter of 2023.

Cash provided by investing activities was $1.9 million for the nine months ended September 30, 2024, compared with cash used in investing activities of $13.4 million for the nine months ended September 30, 2023.

The favorable change is primarily due to the $17.0 million received for the sale of the Lubbock operations during 2024.

Cash used in financing activities increased by $14.4 million during the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to higher repayments of long-term debt and debt issuance costs in 2024, partially offset by proceeds from the sale-leaseback transactions in 2024 and proceeds from international loans in 2023.

Net sales decreased by $4.7 million, or 9.8%, during the three months ended March 31, 2025 compared to the three months ended March 31, 2024, primarily due to the sale of our Lubbock operations in 2024, lower volumes and unfavorable foreign exchange effects of $0.8 million.

These decreases were partially offset by higher precious metals pass-through pricing.

Income from operations decreased by $1.0 million during the three months ended March 31, 2025 compared to the same period in the prior year, primarily due to the lower revenues and unfavorable product mix, partially offset by lower operating costs due to the sale of the Lubbock operations in 2024.

Changes in Financial Condition from December 31, 2024 to March 31, 2025

From December 31, 2024 to March 31, 2025, total assets increased by $3.8 million primarily due to increases in accounts receivable, prepaid assets and our investment in a joint venture.

These increases were partially offset by decreases in intangible assets due to amortization.

From December 31, 2024 to March 31, 2025, total liabilities increased by $6.6 million, primarily due to increases in accounts payable, other current liabilities and long-term debt.

These increases were partially offset by the decrease other noncurrent liabilities due to a decrease in the fair value of outstanding warrants.

Working capital, which consists of current assets less current liabilities, was $82.9 million as of March 31, 2025, compared to $83.7 million as of December 31, 2024.

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

Cash used in operations was $3.3 million for the three months ended March 31, 2025, compared with cash provided of $0.7 million for the three months ended March 31, 2024.

The unfavorable change is primarily due to lower gross margin contributions due to lower sales, and an increase in working capital.

Cash used in investing activities decreased by $1.6 million during the three months ended March 31, 2025, compared with the same period in 2024, due to lower expenditures for property, plant and equipment.

Cash provided by financing activities decreased by $3.0 million during the three months ended March 31, 2025 compared with the same period in 2024, primarily due to proceeds from the sale-leaseback transactions in 2024, partially offset by lower repayments of long-term debt.

Liquidity and Capital Resources

Credit Facilities

The principal amount outstanding under our Term Loan Facility as of September 30, 2024, was $114.2 million, without regard to unamortized debt issuance costs and discount.

As of September 30, 2024, we had $21.9 million available for future borrowings under the ABL Facility.

This amount of borrowing capacity is net of $9.9 million of outstanding letters of credit at September 30, 2024, which are considered as usage of the ABL Facility.

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

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

Outstanding borrowings under the Term Loan Facility bear interest at either:

1) one-month, three-month, or six-month Adjusted Term SOFR, subject to a 1.00% floor, plus an applicable margin of 6.875%;

or 2) the greater of various benchmark rates plus an applicable margin of 5.875%.

Beginning with the second quarter of 2023, interest is increased on a paid-in-kind basis at a rate between 1.00% and 2.00%, 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.

Based on the interest rate in effect at September 30, 2024, annual cash interest payments would be approximately $16.9 million.

The principal amount outstanding under our 2021 Term Loan Facility as of March 31, 2025, was $114.3 million, without regard to unamortized debt issuance costs and discount.

As of March 31, 2025, we had $8.0 million outstanding borrowings under the ABL Facility and $18.3 million available for future borrowings under the ABL Facility.

This amount of borrowing capacity is net of $10.4 million of outstanding letters of credit at March 31, 2025, which are considered as usage of the ABL Facility.

The ABL Facility bears interest on a variable borrowing rate based on 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.

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 1.0%, depending on the benchmark.

We pay a commitment fee of 0.25% for unused capacity under the ABL Facility.

We were in compliance with all requirements under our Term Loan Facility and ABL Facility as of September 30, 2024.

We were in compliance with all requirements under our 2021 Term Loan Facility and ABL Facility as of March 31, 2025.

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

On April 16, 2025, we repaid all of our outstanding obligations under the 2021 Term Loan Facility with the proceeds from a new term loan arrangement that has an initial principal balance of $118.0 million.

See Note 18 to the Condensed Consolidated Financial Statements.

Sale Leaseback Transactions

During the nine months ended September 30, 2024, we entered into several sale-leaseback transactions.

During 2024, we entered into several sale-leaseback transactions.

We received $16.9 million from the sale and leaseback of three properties, with the net proceeds used to repay a portion of the outstanding borrowings under the 2021 Term Loan Facility.

The effective interest rate of the transaction, which terminates in 20 years, is lower than the current borrowings on the Term Loan Facility.

We received $8.3 million from the sale and leaseback of equipment, with $3.4 million of the net proceeds used to repay a portion of the outstanding borrowings under the Term Loan Facility and the balance used for ongoing operational investments.

This financing obligation has an effective fixed interest rate of 9.715%, requires monthly payments and terminates in 2044.

In addition, we received $8.3 million from the sale and leaseback of equipment, with $3.4 million of the net proceeds used to repay a portion of the outstanding borrowings under the 2021 Term Loan Facility and the balance used for ongoing operational investments.

These financing obligations have a weighted average effective interest rate of 10.540%, require monthly payments and have a weighted average remaining term of 3.6 years.

Accounts Receivable Sales Programs

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Our access to these programs is dependent on our customers’ ongoing agreements with the third-parties.

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

Our participation in these programs is based on our

specific cash needs throughout the year, the discount charged to receive payment earlier, the length of the payment terms with our customers, as well being subject to limits in our ABL Facility and 2021 Term Loan Facility agreements.

Other Receivables

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

Including interest accrued on the initial refund amount, we have a $12.1 million tax refund receivable at September 30, 2024, which is in the process of IRS review and approval.

Including interest accrued on the initial refund amount, we have a $12.4 million tax refund receivable at March 31, 2025, which is in the process of IRS review.

The timing of the receipt of the refund is expected in the first half of 2025.

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Our most critical accounting estimates are discussed in the Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the 2024 Annual Report.

There have been no material changes to our significant accounting policies or critical accounting estimates during the nine months ended September 30, 2024.

There have been no material changes to our significant accounting policies or critical accounting estimates during the three months ended March 31, 2025.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis