What changed in this filing

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Item 1. Business

2024-03-14 compared with 2023-04-14 · 53 added, 69 removed, 230 unchanged (35% of the section changed)

31 unchanged sentences

Ice Resurfacing Equipment

Battery Packs

Transportation Trucks

4 unchanged sentences

Terminal and Utility Tractors

* In 2022, the Company renamed the Energy end market to Power Systems.

There were no changes to the product categories or equipment/products (end use).

The Company’s sourced and internally designed and manufactured engine blocks are engineered and integrated with associated components in a range of configurations that includes basic engine blocks integrated with appropriate fuel system parts as well as completely packaged power systems that include combinations of front accessory drives, cooling systems, electronic systems, air intake systems, fuel systems, housings, power takeoff systems, exhaust systems, hydraulic systems, enclosures, brackets, hoses, tubes, packaging, telematics and other assembled componentry.

1 unchanged sentence

The Company’s comprehensive power systems are tested and validated to meet quality, safety, durability and global environmental standards and regulations.

The Company’s engines and power systems include both emission-certified compression and spark-ignited internal combustion engines ranging from 0.99 liters (“L”) to 53L of displacement, which are enabled by advanced controls to run on a wide variety of clean, alternative fuels, including natural gas, propane, and biofuels, as well as gasoline and diesel options, within the power systems, industrial and transportation end markets.

The Company’s engines and power systems include both emission-certified compression and spark-ignited internal combustion engines which are enabled by advanced controls to run on a wide variety of clean, alternative fuels, including natural gas, propane, and biofuels, as well as gasoline and diesel options, within the power systems, industrial and transportation end markets.

Natural gas, gasoline, propane, and biofuel engines range from 0.99 liters (“L”) to 53L , while Diesel options range from 20L to 88L.

The Company also designs and fabricates power system enclosures and sources electrification components that are engineered and integrated into desired configurations deemed “New Energy” within the industrial end market.

Strategic Initiatives/Growth Strategies

The Company continues to execute against a comprehensive set of business objectives aimed at improving profitability, streamlining processes, strengthening the business and focusing on achieving growth in higher-return product lines.

The Company continues to execute a comprehensive set of business objectives aimed at improving profitability, streamlining processes, strengthening the business and focusing on achieving growth in higher-return product lines.

Key elements of these objectives and other initiatives are highlighted below.

Improve profitability

Sustained profitability

The Company continues to execute on its plan to enhance profitability through the review of its customer and product portfolio.

To date, this has resulted in strategic price increases in certain areas of the business, along with product redesign and the re-sourcing of certain components , to support improved margins.

This program is a multi-year effort and will entail a strategic assessment of certain areas in which profitability does not meet established thresholds.

The Company also continues to transform its manufacturing operations through the ongoing adoption of lean, agile and flexible lines, which provides opportunities for improved efficiency, margins and profitability, particularly as volume and sales improve.

The Company has also been investing heavily in the expansion of its heavy-duty engine product line, particularly through its collaboration with

Weichai America Corp., a wholly-owned subsidiary of Weichai Power Co., Ltd.

This program is a multi-year effort and will entail a strategic

assessment of certain areas in which profitability does not meet established thresholds.

The Company has also been investing heavily in the expansion of its heavy-duty engine product line, particularly through its collaboration with Weichai America Corp., a wholly-owned subsidiary of Weichai Power Co., Ltd.

(HK2338, 000338.SZ) (herein collectively referred to as “Weichai”).

1 unchanged sentence

Warranty expense mitigation efforts

The Company aims to curtail its warranty expense through various mitigation efforts.

As part of this, the Company is developing reimbursement and commercial remedies from key suppliers, where applicable.

Also, the Company is undergoing a continued evaluation and improvement of its engineering validation and reliability programs for products and applications.

The Company also continues to make investments in technology to further enhance its tools and processes.

The Company continues to limit its warranty expense through various mitigation efforts.

As part of this, the Company is developing reimbursement and commercial remedies from key suppliers for components supplied by third parties, where applicable, at the same time ensuring any contractual obligations with customers include more favorable warranty terms for the Company wherever possible.

Also, the Company continues to evaluate and improve its engineering validation and reliability programs for products and applications as well as make investments in technology to further enhance its tools and processes.

Streamlining of business processes and footprint rationalization

The Company has an ongoing program to review and identify cost reductions throughout the organization.

As part of this program, the Company has adopted tighter controls, monitors major areas of spending and is centralizing certain business processes.

During 2022, the Company continues to align its staffing with current needs and streamlining certain roles.

The Company has an ongoing program to review and identify cost reduction opportunities throughout the organization while simultaneously planning for strategic growth.

As part of this program, the Company has adopted tighter controls over spending and centralized certain business processes.

During 2023, the Company consolidated two of its leased facilities in the Chicago area to increase efficiencies and reduce overhead costs for engine manufacturing lines.

Strengthen the business through the optimization of business systems and technology

3 unchanged sentences

The Company has been a major participant in the power systems market for many years as a supplier to several of the world’s leading power generation companies and through its large custom genset enclosure business.

Building on its broad product offering the Company received EPA certification for its 32L and 40L heavy-duty engines in 2018 and for its 53L heavy-duty engines in 2019.

These heavy-duty engines provide a natural-gas-fueled power range from 500 kilowatt-electric (“kWe”) to 1.25 megawatt (“MW”), which is well above the Company’s prior capabilities, allowing it to serve a greater portion of the demand response, microgrid, combined heat and power, and oil and gas markets.

Continuing to build on its broad product offering the Company received EPA certification for its 32L and 40L heavy-duty engines in 2018 and for its 53L heavy-duty engines in 2019.

These heavy-duty engines provide a natural-gas-fueled power range from 500 kilowatt-electric (“kWe”) to 1.25 megawatt (“MW”), allowing it to serve a greater portion of the demand response, microgrid, combined heat and power, and oil and gas markets.

Additionally, in 2019, the Company received EPA emergency standby certification for its 20L, 40L and 53L diesel engines, which provide a power range of 550 kWe to 1.65 MW.

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By leveraging the deep industry experience of its engineering and new-product development teams, the Company is continuing to take steps to broaden the range of its power system product offerings, including engine classes, power ratings and the OEM and direct user market categories into which it supplies products.

The Company plans to capitalize on its technologically sophisticated, in-

house design, prototyping, testing and application engineering capabilities to further refine its superior power system te chnology.

The Company plans to capitalize on its technologically sophisticated, in-house design, prototyping, testing and application engineering capabilities to further refine its superior power system te chnology.

In 2023, due to increasing demand for new energy and latest market trends, the Company began to offer battery packs for its industrial market.

Leverage the Company’s relationship with Weichai

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The Company and Weichai also entered into a strategic collaboration agreement (the “Collaboration Agreement”) under which they have been working together to accelerate market opportunities for each company’s respective product lines across various geographic and end-user markets.

The Collaboration Agreement was extended for three years in March 2020 and was set to expire in March 2023 .

On March 22, 2023, the Collaboration Agreement was extended for an additional term of three years.

2 unchanged sentences

Also, through the Company’s relationship with Weichai, it has access to Weichai’s ‘New Energy’ product portfolio and is exploring product diversification opportunities in the areas of battery storage and electrification.

The Weichai stock purchase warrant, as last amended (the “Weichai Warrant”), was exercisable commencing on April 1, 2019 for such number of shares of the Company’s Common Stock as was sufficient to provide Weichai with majority ownership of the Company’s Common Stock.

On April 23, 2019, Weichai exercised the Weichai Warrant resulting in the Company issuing 4,049,759 shares of the Company’s Common Stock.

Summary of Significant Accounting Policies and Other Information–Stock Ownership and Control in Part II.

Financial Statements and Supplemental Information , for additional information.

Weichai is currently the Company’s majority stockholder, holding over 51% of the Company’s outstanding Common Stock, as of December 31, 2022 .

Expand global business

1 unchanged sentence

The Company sees long-term opportunity in continuing to grow its business worldwide with further R&D investment including new-product development and offerings.

In January 2022, PSI and Société Internationale des Moteurs Baudouin (“Baudouin”), a subsidiary of Weichai, entered into an international distribution and sales agreement which enables Baudouin to bring PSI’s power systems line of products into the European, Middle Eastern, and African markets, which resulted in over $2.0 million of sales.

In addition to sales, Baudouin will manage service, support, warranty claims, and technical requests.

28 unchanged sentences

Manufacturing

The Company manufactures and assembles its products at facilities in suburban Chicago, Illinois, and Darien, Wisconsin, and customizes its power systems to meet specific requirements of OEM applications and the needs of its OEM customers.

The Company manufactures and assembles its products at facilities in suburban Chicago, Illinois, as well as in Darien and Beloit, Wisconsin, and customizes its power systems to meet specific requirements of OEM applications and the needs of its OEM customers.

The Company has invested in precision computer numerical control (“CNC”) machining equipment to finish its internally designed engine blocks and cylinder heads, which are cast by various suppliers.

3 unchanged sentences

The ISO 9000 family of quality management standards, which must be met in order to become ISO certified, is designed to help organizations monitor and improve the quality and delivery of their products and/or services to their customers.

The Company also uses tools such as Six Sigma, Lean Manufacturing, 80/20, Value Stream Mapping and other manufacturing engineering strategies to help manage its business, build quality, and drive performance and a continuous improvement culture within the manufacturing operations’ teams.

The Company also uses tools such as Six Sigma, Lean Manufacturing, 80/20, Value Stream Mapping and other manufacturing engineering strategies to help manage its business, build quality, drive performance and continually improve culture within the manufacturing operations’ teams.

The Company also uses a customer relationship management database to help collect customer feedback and to track overall quality performance at its OEM customers.

14 unchanged sentences

(“Doosan”), a subsidiary of Doosan Group, Shenyang Aerospace Mitsubishi Motors Engine Manufacturing Co., Ltd.

(“SAME”), General Motors Company (“GM”) and Weichai.

(“SAME”) and Weichai.

The Company also sources other power system components and coordinates design efforts with third-party suppliers for some of its key components.

5 unchanged sentences

The Company is party to a supply agreement with Doosan, under which it purchases and distributes specified Doosan engines within a territory consisting of the United States, Canada and Mexico.

On October 1, 2019, the supply agreement with Doosan was amended and extended to December 31, 2023, after which the agreement will automatically be extended for additional one-year terms unless a notice of termination is provided by either party six months prior to the scheduled expiration.

The addendum also included minimum product purchase commitments for the period 2019 through 2023, subject to reductions based on market declines in oil prices and defined prescribed payments to Doosan triggered by shortfalls in purchases made by the Company during each annual calendar period.

On July 1, 2022, the supply agreement was amended to remove exclusivity and the minimum product purchase commitments.

The Company had an exclusive supply agreement with GM through December 31, 2019 to purchase and distribute GM 6.0L engines to on-highway customers.

With the GM announcement that it will discontinue its production of the GM 6.0L engine, the Company conducted last-time buys of this engine during 2019 through 2021 (including certain engines where prepayment was provided), to ensure adequate supply to certain transportation customers .

At December 31, 2022, the Company holds a small quantity of other GM 6.0L engines which it expects to deliver to customers throughout 2023.

The Company does not have a supply agreement with GM for its successor product to the GM 6.0L engine;

however, it will source the 6.0L through a GM designated third party manufacturer.

The Company was also party to a supply agreement with SAME through December 31, 2022, for the exclusive purchase and distribution of engines around the world, with the exception of China (including Hong Kong, Macao and Taiwan), within the forklift and marine markets.

The agreement included minimum purchase commitments which had no financial impact or monetary penalties for the year ended December 31, 2022 .

On October 1, 2019, the supply agreement with Doosan was amended and extended to December 31, 2023.

Following December 31, 2023 the supply agreement automatically extends for additional one-year terms unless a notice of termination is provided by either party six months prior to the scheduled expiration.

On July 1, 2022, th e supply agreement was amended to remove exclusivity and the minimum product purchase commitments.

The Company was also party to a supply agreement with SAME, for the exclusive purchase and distribution of engines around the world, with the exception of China (including Hong Kong, Macao and Taiwan), within the forklift market.

Near the end of 2023, the importing of SAME products was suspended as a result of the intensified enforcement and expansion of the UFLPA.

The Company is actively working to re-source these products through new channels as quickly as possible to minimize the effect on future sales while maintaining the Company’s high-quality standards.

Product Support

9 unchanged sentences

The Company monitors and manages attrition.

It approves, through its human

resources department, the replacement of key positions that it believes are critical to sustaining improved business performance and analyzes departure data to continually improve upon the experience of employees.

It approves, through its human resources department, the replacement of key positions that it believes are critical to sustaining improved business performance and analyzes departure data to continually improve upon the experience of employees.

Turnover for salaried employees in 2023 was approximately 17.0% .

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This ensures sustainability of the organization.

The Company’s short-term and long-term incentive plans are designed to provide a variable pay opportunity to reward the attainment of key financial and operational goals as well as shareholder value creation.

The Company’s short-term and long-term incentive plans are designed to provide a

variable pay opportunity to reward the attainment of key financial and operational goals as well as shareholder value creation.

In addition to the base and variable pay plans, the Company offers employees other benefits including medical, paid-time off, and retirement savings plans.

1 unchanged sentence

Employees participate in training sessions focused on these topics and are encouraged to promote behaviors that protect others from risk of injury.

The Company sets annual targets for its Total Recordable Incident Rate (“TRIR”) and Days Away, Restricted or Transferred (“DART”) and regularly reviews these metrics.

The Company sets annual targets for its Total Recordable Incident Rate (“TRIR”) and Days Away, Restricted or Transferred (“DART”) and regularly reviews these metric s.

For 2023, the Company achieved an overall TRIR of 5.9, meaning that for every 100 employees, 0.60 employees incurred an injury that resulted in recordable medical treatment.

The DART was 4.3 i n 2022, meaning that for every 100 employees, 0.43 individuals experienced an incident that resulted in days away from work or restricted work tasks.

The DART was 5.5 in 2023, meaning that for every 100 employees, 0.60 individuals experienced an incident that resulted in days away from work or restricted work tasks.

Environmental Matters

4 unchanged sentences

The Company is committed to producing high quality products that provide reduced emissions and to operating its facilities in a manner that mitigates their impact on the environment.

For the full year ended 2022, approximately 70% of the engines sold run on either propane or natural gas.

For the full year ended 2023, approximate ly 76% of the engines sold run on either propane or natural gas.

Also, the Company has taken the following steps to enhance its sustainability:

7 unchanged sentences

The Company’s power systems are subject to compliance with regulatory standards imposed by the EPA, state regulatory agencies in the United States, including the CARB, and other regulatory agencies around the world, such as the MEE.

Since its engines are sold into both off-road and on-road markets, the Company must ensure certification to the specific regulations within the applicable statutory segment.

Because its engines are sold into both off-road and on-road markets, the Company must ensure certification to the specific regulations within the applicable statutory segment.

For products sold into the U.S.

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Failure to comply with these standards could result in materially adverse effects on the Company’s future financial results.

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the “IRA”) into law.

The IRA contains several revisions to the Internal Revenue Code, including a 15% corporate minimum income tax and a 1% excise tax on corporate stock repurchases in tax years beginning after December 31, 2022.

While these tax law changes have no immediate effect and are not expected to have a material adverse effect on our results of operations going forward, we will continue to evaluate their impact as further information becomes available.

The IRA also includes incentives and other provisions for companies to address climate change, increase investment in renewable energy, and enhance energy efficiency.

The Company increased governance procedures with its Board of Directors (the “Board”) to monitor and identify opportunities and implications presented as a result of the IRA.

Information about the Company’s Executive Officers

The following selected information for each of the Company’s current executive officers was prepared as of April 10, 2023 .

The following selected information for each of the Company’s current executive officers was prepared as of March 7, 2024 .

Executive Officer Since

Present Position with the Company

(Dino) Xykis 63 2020 Interim Chief Executive Officer, Chief Technical Officer

(Dino) Xykis 64 2020 Chief Executive Officer, Chief Technical Officer

Xun (Kenneth) Li 54 2022 Chief Financial Officer

Sidong Shao 42 2022 Executive Vice President

(Dino) Xykis was appointed as the Interim Chief Executive Officer on June 1, 2022.

Lehner 52 2024 General Counsel

(Dino) Xykis was appointed as the Chief Executive Officer on April 24, 2023, after serving as Interim CEO since June 2, 2022.

Xykis was also appointed as the Company’s Chief Technical Officer on March 15, 2021.

He is responsible for the oversight of the Company’s advanced product development, engineering design and analysis, on-highway engineering, applied engineering, emissions and certification, Waterford, Michigan engineering operations, program management and product strategic planning.

Since joining the Company

in 2010 and until his appointment as Chief Technical Officer in March 2021, Mr.

He is responsible for the oversight of the Company and its advanced product development, engineering design and analysis, on-highway engineering, applied engineering, emissions and certification, Waterford, Michigan engineering operations, program management and product strategic planning.

Since joining the Company in 2010 and until his appointment as Chief Technical Officer in March 2021, Mr.

Xykis served as Vice President of Engineering for the Company.

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Li is also a certified public accountant in the state of Illinois.

Sidong Shao was appointed as the Executive Vice President on September 26, 2022.

He is responsible for the oversight of the Company’s product management, purchasing and supply chain.

Prior to being appointed to his current positions Mr.

Shao served on the Company’s Board from December 2020 to September 2022.

Shao served on the Board as a Weichai designee and was also a member of the Executive Committee.

Shao previously served as the President and Chairman of the Board of Directors of Weichai from 2019 to September 2022.

From May 2012 to April 2018, Mr.

Shao was President of Weichai Westport Inc., a joint venture between Weichai Power and Westport Fuel Systems Inc., a publicly traded company on the NASDAQ and Toronto Stock Exchanges, that manufactures and sells alternative-fuel engines for automobiles, heavy-duty trucks, power generation and shipping applications.

Shao has a Bachelor’s degree in Industrial Energy and Power Engineering from Shandong University.

Shao also holds a Master’s degree in Power Engineering from Tianjin University and a Masters of Business Administration degree from Missouri State University.

Lehner was appointed as the General Counsel on March 4, 2024.

Lehner is an accomplished Legal Counsel who has more than 20 years of legal experience in the areas of complex commercial litigation, arbitration, regulatory compliance, internal controls and strategy, among others.

Most recently, from May 2020 to February 2024, Mr.

Lehner served as associate general counsel for Guaranteed Rate, LLC, a leading mortgage company, where he was a member of the executive leadership management team with primary responsibility for litigation and legal risk management.

Prior to this role, from 2015 through 2020, Mr.

Lehner was a partner with Kelly, Drye & Warren, LLP, where his practice focused on commercial litigation, regulatory, internal investigations and government enforcement actions.

Prior to Kelly, Drye & Warren, LLP, from 1997 to 2014, Mr.

Lehner worked at several other prestigious law firms.

Lehner holds a Juris Doctor degree from Duke University with high honors.

He also holds a Bachelor of Arts degree in political science from the University of Michigan with high honors.

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

What changed 10-K

Item 1. Business