What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-05-04 · 155 added, 69 removed, 184 unchanged (55% of the section changed)

7 unchanged sentences

Supply Technologies, Assembly Components and Engineered Products.

As of March 31, 2023 and December 31, 2022, we determined that our Aluminum Products business met the held-for-sale and discontinued operations accounting criteria.

As of June 30, 2023 and December 31, 2022, we determined that our Aluminum Products business met the held-for-sale and discontinued operations accounting criteria.

Accordingly, the Company has reported the held-for-sale assets and liabilities, the operating results and the cash flows of Aluminum Products in discontinued operations for all periods presented throughout this Quarterly Report on Form 10-Q.

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The sale of the Aluminum Products business is subject to the entry into a definitive purchase agreement and other customary conditions.

See Note 10 to the condensed consolidated financial statements, included elsewhere herein.

See Note 10 to the condensed consolidated financial statements, included elsewhere herein, for further discussion of the MOU.

Supply Technologies provides our customers with Total Supply Management™, a proactive solutions approach that manages the efficiencies of every aspect of supplying production parts and materials to our customers’ manufacturing floor, from strategic planning to program implementation.

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bus and coaches;

automotive, agricultural and construction equipment;

agricultural and industrial equipment;

lawn and garden;

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Sales and operating income for these three segments are provided in Note 4 to the condensed consolidated financial statements, included elsewhere herein.

RESULTS FROM CONTINUING OPERATIONS

As of March 31, 2023 and December 31, 2022, we determined that our Aluminum Products business met the held-for-sale and discontinued operations accounting criteria.

RESULTS OF CONTINUING OPERATIONS

As of June 30, 2023 and December 31, 2022, we determined that our Aluminum Products business met the held-for-sale and discontinued operations accounting criteria.

Unless otherwise indicated, amounts and activity in this Quarterly Report on Form 10-Q are presented on a continuing operations basis.

See Note 5 to the condensed consolidated financial statements, included elsewhere herein.

Three Months Ended March 31, 2023 Compared with Three Months Ended March 31, 2022

Three Months Ended March 31,

See Note 5 to the condensed consolidated financial statements, included elsewhere herein, for more information about our discontinued operations.

Three Months Ended June 30, 2023 Compared with Three Months Ended June 30, 2022

Three Months Ended June 30,

2023 2022 $ Change % Change

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Selling, general and administrative (“SG&A”) expenses

46.8 40.5 6.3 15.6 %

SG&A expenses as a percentage of net sales 10.9 % 11.0 %

Restructuring and other special charges 4.1 2.3 1.8 78.3

Gain on sale of assets (0.8) — (0.8) *

Gains on sales of assets — (2.9) 2.9 *

Operating income 19.2 13.8 5.4 39.1

Other components of pension income and other postretirement benefits expense, net 0.6 2.8 (2.2) (78.6) %

Interest expense, net (11.1) (7.6) (3.5) 46.1 %

Income before income taxes 8.7 9.0 (0.3) (3.3) %

Income tax expense (2.1) (2.1) — — %

Income from continuing operations 6.6 6.9 (0.3) (4.3) %

Net loss (income) attributable to noncontrolling interest 0.5 (0.5) 1.0 *

Income from continuing operations attributable to Park-Ohio Holdings Corp.

common shareholders $ 7.1 $ 6.4 $ 0.7 10.9 %

Income per common share from continuing operations attributable to Park-Ohio Holdings Corp.

common shareholders:

Continuing operations $ 0.58 $ 0.53 $ 0.05 9.4 %

Continuing operations $ 0.57 $ 0.52 $ 0.05 9.6 %

*Calculation not meaningful

Net sales increased 15.8% to $428.1 million in the second quarter of 2023 compared to $369.8 million in the same period in 2022.

This increase was primarily due to higher customer demand in all three of our business segments and increased product pricing.

The factors explaining the changes in segment net sales for the three months ended June 30, 2023 compared to the corresponding 2022 period are contained within the “Segment Results” section below.

Cost of Sales and Gross Margin

Cost of sales increased 13.3% to $358.0 million in the second quarter of 2023 compared to $316.1 million in the same period in 2022.

The increase in cost of sales was primarily due to the increase in net sales for the 2023 period compared to the

corresponding period in 2022.

Gross margin was 16.4% in the 2023 period compared to 14.5% in the corresponding 2022 period, driven by profit flow-through from the higher sales levels and the impact of our profit-enhancement initiatives.

SG&A Expenses

SG&A expenses were $46.8 million in the second quarter of 2023 compared to $40.5 million in the comparable period in 2022, an increase of 15.6%.

As a percentage of net sales, SG&A expenses decreased to 10.9% in the second quarter of 2023 compared to 11.0% in corresponding 2022 period.

The improvement in SG&A expenses as a percentage of net sales was driven by the impact of fixed SG&A expenses over the higher revenue base in the 2023 period compared to the same period a year ago, which more than offset higher selling expenses as a result of higher sales levels;

higher costs due to ongoing inflation;

SG&A expenses of our 2022 acquisitions;

and higher employee costs.

Restructuring and Other Special Charges

During the three months ended June 30, 2023, the Company recorded restructuring and other special charges of $4.1 million compared to $2.3 million in 2022.

The charges in both periods relate primarily to plant closure and consolidation activities, including severance, and other initiatives in the Company’s Assembly Components and Engineered Products segments.

Gains on Sales of Assets

During the second quarter of 2022, in connection with the plant closure and consolidation initiatives, the Company sold real estate within its Engineered Products segment for cash proceeds of $3.6 million, resulting in a gain of $2.5 million, and within the Assembly Components segment for cash proceeds of $0.4 million, resulting in a gain of $0.4 million.

Other Components of Pension Income and Other Postretirement Benefits Expense (“OPEB”), Net

Other components of pension income and OPEB expense, net was $0.6 million in the three months ended June 30, 2023 compared to $2.8 million in the corresponding period in 2022.

This decrease was due to lower returns on plan assets impacting 2023 compared to 2022.

Interest Expense, Net

Interest expense, net was $11.1 million in the second quarter of 2023 compared to $7.6 million in the 2022 period.

The increase was due to higher average outstanding borrowings and higher interest rates during the 2023 period.

Income Tax Expense

In the three months ended June 30, 2023, income tax expense was $2.1 million on pre-tax income from continuing operations of $8.7 million, representing an effective income tax rate of 24%.

In the three months ended June 30, 2022, income tax expense was $2.1 million on pre-tax income of $9.0 million, an effective income tax rate of 23%.

Six Months Ended June 30, 2023 Compared with Six Months Ended June 30, 2022

Six Months Ended June 30,

2023 2022 $ Change % Change

(Dollars in millions, except per share data)

Net sales $ 851.6 $ 727.5 $ 124.1 17.1 %

Cost of sales 714.3 624.9 89.4 14.3 %

SG&A expenses 92.1 80.7 11.4 14.1 %

SG&A expenses as a percentage of net sales 10.8 % 11.1 %

Restructuring and other special charges 6.6 5.6 1.0 17.9 %

Gains on sales of assets (0.8) (2.9) 2.1 *

Operating income 39.4 19.2 20.2 105.2 %

Other components of pension income and other postretirement benefits expense, net

1.3 5.6 (4.3) (76.8) %

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Income from continuing operations 14.2 10.8 3.4 31.5 %

Income attributable to noncontrolling interests (0.1) (0.2) 0.1 (50.0) %

Loss (income) attributable to noncontrolling interests 0.4 (0.7) 1.1 *

Income from continuing operations attributable to Park-Ohio Holdings Corp.

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*Calculation not meaningful

Net sales increased 18.4% to $423.5 million in the first three months of 2023 compared to $357.7 million in the same period in 2022.

This increase was primarily due to higher customer demand in all three of our business segments.

The factors explaining the changes in segment net sales for the three months ended March 31, 2023 compared to the corresponding 2022 period are contained in the “Segment Results” section below.

Cost of Sales

Cost of sales increased 15.4% to $356.3 million in the first three months of 2023 compared to $308.8 million in the same period in 2022.

Net sales increased 17.1% to $851.6 million in the first six months of 2023 compared to $727.5 million in the same period in 2022.

This increase was primarily due to higher customer demand in all three of our business segments and increased product pricing.

The factors explaining the changes in segment net sales for the six months ended June 30, 2023 compared to the corresponding 2022 period are contained in the “Segment Results” section below.

Cost of Sales and Gross Margin

Cost of sales increased 14.3% to $714.3 million in the first six months of 2023 compared to $624.9 million in the same period in 2022.

The increase in cost of sales was primarily due to the increase in net sales described above.

Gross margin was 16.1% in the 2023 period compared to 14.1% in the corresponding 2022 period, driven by profit flow-through from the higher sales levels and the impact of our profit-enhancement initiatives.

SG&A Expenses

SG&A expenses were $45.3 million in the first three months of 2023, compared to $40.2 million in the same period in 2022, an increase of 12.7%.

As a percentage of net sales, SG&A expenses were 10.7% in first three months of 2023 compared to 11.2% in the comparable period in 2022.

SG&A expenses were $92.1 million in the first six months of 2023, compared to $80.7 million in the same period in 2022, an increase of 14.1%.

As a percentage of net sales, SG&A expenses decreased to 10.8% in the first six months of 2023 compared to 11.1% in the comparable period in 2022.

higher costs due to ongoing inflation;

SG&A expenses of our 2022 acquisitions;

and higher employee costs.

Restructuring and Other Special Charges

During the first three months of 2023, the Company recorded restructuring and other special charges of $2.5 million compared to $3.3 million in 2022.

The charges in both 2023 and 2022 related primarily to plant closure and consolidation in the Company's Assembly Components and Engineered Products segments;

other cost reduction initiatives in all three business segments;

and costs related to acquisitions.

During the first six months of 2023, the Company recorded restructuring and other special charges of $6.6 million compared to $5.6 million in 2022.

Gains on Sales of Assets

During the six months ended June, 30, 2023, in connection with the plant closure and consolidation initiatives, the Company sold real estate within its Engineered Products segment for cash proceeds of $1.4 million, resulting in a gain of $0.8 million.

During the six months ended June, 30, 2022, in connection with the plant closure and consolidation initiatives, the Company sold real estate within its Engineered Products segment for cash proceeds of $3.6 million, resulting in a gain of $2.5 million, and within the Assembly Components segment for cash proceeds of $0.4 million, resulting in a gain of $0.4 million.

Other Components of Pension Income and Other Postretirement Benefits Expense, Net

Other components of pension income and other postretirement benefits expense, net was $0.7 million in the first three months of 2023 compared to $2.8 million in the corresponding period in 2022.

Other components of pension income and other postretirement benefits expense, net was $1.3 million in the first six months of 2023 compared to $5.6 million in the corresponding period in 2022.

This decrease was due to lower returns on plan assets impacting 2023 compared to 2022.

Interest Expense, Net

Interest expense, net was $10.7 million in the first three months of 2023 compared to $7.1 million in the 2022 period.

Interest expense, net was $21.8 million in the first six months of 2023 compared to $14.7 million in the 2022 period.

The increase was due primarily to higher interest rates and higher average outstanding debt balances in the 2023 period compared to the same period a year ago.

Income Tax Expense/Benefit

In the three months ended March 31, 2023, income tax expense was $2.6 million on pre-tax income from continuing operations of $10.2 million, representing an effective income tax rate of 25%.

In the three months ended March 31, 2022, income tax benefit was $2.8 million, on pretax income of $1.1 million.

In the six months ended June 30, 2023, income tax expense was $4.7 million on pre-tax income from continuing operations of $18.9 million, representing an effective income tax rate of 24%.

In the six months ended June 30, 2022, income tax benefit was $0.7 million on pre-tax income of $10.1 million.

The benefit in 2022 included a discrete tax benefit of $3.2 million related to federal research and development tax credits.

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Supply Technologies Segment

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

(Dollars in millions)

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Segment operating income margin 7.8 % 7.2 % 7.5 % 7.2 %

Net sales increased 16% in the three months ended March 31, 2023 compared to the 2022 period due primarily to higher customer demand in nearly all end markets, with the largest increases in the power sports, heavy-duty truck, industrial and agricultural equipment, and civilian aerospace markets.

Segment operating income increased by $2.0 million and segment operating income margin was 10 basis points higher in the 2023 period compared to the same period a year ago.

These increases were driven by the higher sales levels, partially offset by higher supply chain costs.

Three months ended June 30:

Net sales increased 12.2% in the three months ended June 30, 2023 compared to the 2022 period due primarily to higher customer demand in many of the Company's key end markets, with the largest increases in the power sports, heavy-duty truck, industrial and agricultural equipment, and civilian aerospace markets, as well as the sales from our 2022 acquisitions.

Segment operating income increased $2.7 million to $15.4 million for the three months ended June 30, 2023 compared to the same period in 2022, and segment operating income margin increased 60 basis points in the 2023 period compared to the same period a year ago.

These increases were driven by the higher sales levels and the impact of profit-enhancement actions, partially offset by certain inflationary supply chain costs.

Six months ended June 30:

Net sales increased 14.1% in the six months ended June 30, 2023 compared to the 2022 period due primarily to higher customer demand in many of the Company's key end markets, with the largest increases in the power sports, heavy-duty truck, industrial and agricultural equipment, and civilian aerospace markets, as well as the sales from our 2022 acquisitions.

Segment operating income increased $4.7 million to $29.4 million for the six months ended June 30, 2023 compared to the same period in 2022, and segment operating income margin increased 30 basis points in the 2023 period compared to the same period a year ago.

These increases were driven by the higher sales levels and the impact of profit-enhancement actions, partially offset by certain inflationary supply chain costs.

Assembly Components Segment

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

(Dollars in millions)

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Segment operating income (loss) margin 7.5 % (1.5) % 7.1 % (1.0) %

Net sales increased 13% in the three months ended March 31, 2023 compared to the 2022 period.

The sales increase was driven by higher customer demand.

Segment operating income in the 2023 period increased by $7.7 million, and segment operating income margin increased by 700 basis points compared to the corresponding period of 2022.

The improvement in segment operating results in the 2023 period compared to the prior year was driven by profit flow-through from the higher sales levels and the benefit of plant consolidation and other profit-improvement initiatives, including product pricing, all of which more than offset the impacts of inflation and higher operating costs in 2023.

Charges related to plant consolidation were $0.3 million in the 2023 first quarter compared to $1.5 million in the 2022 first quarter.

Three months ended June 30:

Net sales increased 17.4% in the three months ended June 30, 2023 compared to the 2022 period.

The sales increase was driven by higher customer demand and increased product pricing.

Segment operating income was $8.4 million in the three months ended June 30, 2023 compared to a loss of $1.4 million in the 2022 period.

The improvement in segment operating results in the 2023 period compared to the same period in the prior year was driven by profit flow-through from the higher sales levels and the benefit of plant consolidation and other profit-improvement initiatives, including increased product pricing, all of which more than offset the impacts of inflation and higher

operating costs in 2023.

Restructuring and other special charges were $1.2 million in the 2023 first quarter compared to $1.5 million in the 2022 second quarter.

Six months ended June 30:

Net sales increased 15.1% in the six months ended June 30, 2023 compared to the 2022 period.

The sales increase was driven by higher customer demand and increased product pricing.

Segment operating income was $15.7 million in the 2023 period compared to a loss of $1.9 million in the 2022 period.

Restructuring and other special charges were $1.5 million in 2023 compared to $3.0 million in the 2022 period.

Engineered Products Segment

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2023 2022 2023 2022

(Dollars in millions)

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Segment operating income margin 2.7 % 7.2 % 3.5 % 4.7 %

Net sales increased 29% in the 2023 period compared to the 2022 period.

Three months ended June 30:

Net sales were 20.4% higher in the 2023 period compared to the 2022 period.

The increase was driven by strong customer demand in both our capital equipment business and our forged and machined products business.

Segment operating income in the 2023 period increased by $3.2 million compared to the corresponding 2022 period, and segment operating margin increased 230 basis points compared to the corresponding period in 2022.

The profitability improvement in 2023 was driven by the higher sales levels, implemented operational improvements, and benefits of profit-improvement initiatives, including plant closure and consolidation.

Segment operating income in the 2023 period decreased $3.9 million compared to the 2022 period.

In our capital equipment business, operating income increased year-over-year, as profit flow-through from higher sales levels and implemented operational improvement initiatives contributed to higher profit and margins in this business.

These increases were more than offset by operating losses in our forged and machined products business, which was impacted by equipment down-time and labor challenges, which impacted our two forging plants during the second quarter of 2023.

In addition, during the 2023 quarter, we incurred restructuring and other special charges of $2.9 million, compared to $0.8 million in the three months ended June 30, 2022.

These charges are primarily related to plant closure and consolidation activities, including severance.

Six months ended June 30:

Net sales were 24.5% higher in the 2023 period compared to the 2022 period.

The increase was driven by strong customer demand in both our capital equipment business and our forged and machined products business.

Segment operating income in the 2023 period decreased $0.7 million, driven primarily by restructuring and other special charges of $4.9 million in the 2023 period compared to $1.4 million in the same period a year ago.

These charges related to primarily to plant closure and consolidation activities, including severance.

Excluding these charges, operating income during the 2023 period increased due to strong results in our capital equipment business as discussed in the “Three months ended June 30” section above.

Liquidity and Capital Resources

The following table summarizes the major components of cash flow:

Three Months Ended March 31,

Six Months Ended June 30,

2023 2022 $ Change

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Operating Activities

In the first three months of 2023, we generated positive cash flow of $0.2 million compared to a use of $2.1 million in the same period of 2022.

The positive cash flow in the 2023 period was driven by higher income from continuing operations, partially offset by higher working capital levels in the first quarter of 2023.

In the six months ended June 30, 2023, we generated positive operating cash flow of $0.9 million compared to a use of $35.0 million in the same period of 2022.

The positive cash flow in the 2023 period was driven by higher income from continuing operations in the 2023 period and higher working capital usage in the 2022 period.

Investing Activities

Capital expenditures were $6.0 million in the three months ended March 31, 2023 and were primarily to provide increased capacity for future growth in our Engineered Products and Assembly Components segments, for facility consolidation in our Engineered Products segment and to maintain existing operations.

Additionally, in the first quarter 2023, the Company sold real estate for cash proceeds of $1.4 million and made cash payments related prior year acquisitions of $0.5 million.

The Company is schedule to pay the remaining balance of the Charter Automotive (Changzhou) Co.

acquisition throughout 2023 and 2024.

Capital expenditures were $5.5 million in the three months ended March 31, 2022 and were primarily to provide increased capacity for future growth in our Engineered Products and Assembly Components segments, for facility consolidation in our Engineered Products segment and to maintain existing operations.

Capital expenditures were $13.4 million in the six months ended June 30, 2023 and were primarily to provide increased capacity for future growth in our Engineered Products and Assembly Components segments, for facility consolidation in our Engineered Products segment and to maintain existing operations.

Capital expenditures were $12.7 million in the six months ended June 30, 2022 and were primarily to provide increased capacity for future growth in our Engineered Products and Assembly Components segments, for facility consolidation in our Engineered Products segment and to maintain existing operations.

Additionally, in the 2022 period, the Company sold real estate for cash proceeds of $4.0 million.

Financing Activities

During the three months ended March 31, 2023, we had net debt borrowings of $7.4 million to fund our higher working capital levels.

In addition, in the three months ended March 31, 2023, the Company made a contingent consideration payment related to a prior acquisition totaling $1.3 million and made cash dividend payments to shareholders totaling $1.6 million.

During the three months ended March 31, 2022, we had net debt borrowings of $27.8 million and paid dividends to shareholders of $1.6 million.

The borrowings were used to fund our higher working capital levels.

During the six months ended June 30, 2023, we had net debt borrowings of $18.5 million to fund a portion of our operating activities and capital expenditures.

In addition, in the six months ended June 30, 2023, the Company made scheduled payments related to prior acquisitions totaling $2.0 million and cash dividend payments to shareholders totaling $3.2 million.

The Company is scheduled to pay the remaining $2.1 million balance in connection with the Charter Automotive (Changzhou) Co.

acquisition on scheduled dates in 2023 and 2024.

During the six months ended June 30, 2022, we had net debt borrowings of $66.6 million to fund our higher working capital levels.

In addition, we made cash dividend payments to shareholders totaling $3.2 million.

We do not have off-balance sheet arrangements, financing or other relationships with unconsolidated entities or other persons, other than the letters of credits disclosed in Note 10 to the condensed consolidated financial statements, included elsewhere herein.

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Our existing financial resources (working capital and available bank borrowing arrangements) and anticipated cash flow from operations are expected to be adequate to meet anticipated cash requirements for at least the next twelve months and the foreseeable future thereafter, including but not limited to our ability to maintain current operations and fund capital expenditure requirements, service our debt, pursue acquisitions, pay dividends and repurchase common shares.

As of March 31, 2023, we had total liquidity of $171.1 million, which included $49.6 million of cash and cash equivalents and $121.5 million of unused borrowing availability under our credit agreements, which included $18.3 million of suppressed availability.

The Company had cash and cash equivalents held by foreign subsidiaries of $38.1 million at March 31, 2023 and $47.8 million at December 31, 2022.

As of June 30, 2023, we had total liquidity of $168.6 million, which included $53.4 million of cash and cash equivalents and $115.2 million of unused borrowing availability under our credit agreements, which included $24.3 million of suppressed availability.

The Company had cash and cash equivalents held by foreign subsidiaries of $41.9 million at June 30, 2023 and $47.8 million at December 31, 2022.

We do not expect restrictions on repatriation of cash held outside the U.S.

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Financing Arrangement with Third Party

On December 30, 2022, the Company entered into the MOU with a third party pursuant to which the third party would purchase our Aluminum Products business.

On December 30, 2022, the Company entered into a memorandum of understanding (the “MOU”) with a third party pursuant to which the third party would purchase our Aluminum Products business.

The sale of the Aluminum Products business is subject to the successful completion of a definitive purchase agreement and other customary conditions.

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The Company used the $20.0 million from this financing arrangement to repay indebtedness under its revolving credit facility.

If a definitive purchase agreement between the parties is not entered into or the sale is not successfully consummated, the promissory note will be cancelled and the Company will repay the third party $20.0 million, less a $0.8 million break-up fee.

Finance Leases

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The Lease Agreement provides the Company up to $50.0 million for finance leases.

Finance lease obligations of $4.5 million were borrowed under the Lease Agreement to acquire machinery and equipment as of March 31, 2023.

As of March 31, 2023, the Company had additional finance leases totaling $15.7 million.

The future availability of bank borrowings under the revolving credit facility provided by the Credit Agreement is based on (1) our calculated availability under the Credit Agreement and (2) if such calculated availability decreases below $50.625 million, our ability to meet a debt service ratio covenant.

Finance lease obligations of $4.0 million were borrowed under the Lease Agreement to acquire machinery and equipment as of June 30, 2023.

As of June 30, 2023, the Company had additional finance leases totaling $15.4 million.

million, our ability to meet a debt service ratio covenant.

If our calculated availability is less than $50.625 million, our debt service coverage ratio must be greater than 1.0.

At March 31, 2023, our calculated availability under the Credit Agreement was $98.4 million;

At June 30, 2023, our calculated availability under the Credit Agreement was $86.8 million;

therefore, the debt service ratio covenant did not apply.

Failure to maintain calculated availability of at least $50.625 million and meet the debt service ratio covenant could materially impact the availability and interest rate of future borrowings.

Our debt service coverage ratio could be materially impacted by negative economic trends, including the negative trends caused by the COVID-19 pandemic.

Our debt service coverage ratio could be materially impacted by negative economic trends.

To make certain permitted payments as defined under the Credit Agreement, including but not limited to acquisitions and dividends, we must meet defined availability thresholds ranging from $37.5 million to $50.625 million, and a defined debt service coverage ratio of 1.15.

As our calculated availability under the Credit Agreement was above $50.625 million, we were also in compliance with the other covenants contained in the revolving credit facility as of March 31, 2023.

While we expect to remain in compliance throughout 2023, declines in sales volumes in the future, including any declines caused by the COVID-19 pandemic, could adversely impact our ability to remain in compliance with certain of these financial covenants.

Additionally, to the extent our customers are adversely affected by declines in the economy in general, including the decline caused by the COVID-19 pandemic, they may be unable to pay their accounts payable to us on a timely basis or at all, which could make our accounts receivable ineligible for purposes of the revolving credit facility and could reduce our borrowing base and our ability to borrow under such facility.

The Company paid dividends to shareholders of $1.6 million during the three months ended March 31, 2023.

On April 21, 2023, the Company's Board of Directors declared a quarterly dividend of $0.125 per common share.

The dividend will be paid on May 19, 2023 to shareholders of record as of the close of business on May 5, 2023 and will result in a cash outlay of approximately $1.6 million.

While we expect to remain in compliance throughout 2023, declines in sales volumes in the future could adversely impact our ability to remain in compliance with certain of these financial covenants.

Additionally, to the extent our customers are adversely affected by declines in the economy in general, they may be unable to pay their accounts payable to us on a timely basis or at all, which could make our accounts receivable ineligible for purposes of the revolving credit facility and could reduce our borrowing base and our ability to borrow under such facility.

The Company paid dividends to shareholders of $3.2 million during the six months ended June 30, 2023.

On July 21, 2023, the Company's Board of Directors declared a quarterly dividend of $0.125 per common share.

The dividend will be paid on August 18, 2023 to shareholders of record as of the close of business on August 4, 2023 and will result in a cash outlay of approximately $1.6 million.

Although we currently intend to pay a quarterly dividend on an ongoing basis, all future dividend declarations will be at the discretion of our Board of Directors and dependent upon then-existing conditions, including our operating results and financial condition, capital requirements, contractual restrictions, business prospects and other factors that our Board of Directors may deem relevant.

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our ability to consummate the sale of our Aluminum Products business for any reason, including the inability to enter into a definitive purchase agreement;

the ultimate impact the COVID-19 pandemic has on our business, results of operations, financial position and liquidity, including, without limitation, supply chain issues such as the global semiconductor micro-chip shortage and logistic issues;

the impact supply chain issues such as the global semiconductor micro-chip shortage and logistic issues have on our business, results of operations, financial position and liquidity;

our substantial indebtedness;

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adverse impacts to us, our suppliers and customers from acts of terrorism or hostilities, including the conflict between Russia and Ukraine, or political unrest, including the rising tension between China and the United States;

public health issues, including the outbreak of COVID-19 and its impact on our facilities and operations and our customers and suppliers;

public health issues, including the outbreak of infectious diseases and any impact on our facilities and operations and our customers and suppliers;

our ability to meet various covenants, including financial covenants, contained in the agreements governing our indebtedness;

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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