PARK OHIO HOLDINGS CORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)


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Our condensed consolidated financial statements include the accounts of
Park-Ohio Holdings Corp. and its subsidiaries (collectively, "we," "our," or the
"Company"). All significant intercompany transactions have been eliminated in
consolidation.

EXECUTIVE OVERVIEW

We are a diversified international company providing world-class customers with
a supply chain management outsourcing service, capital equipment used on their
production lines, and manufactured components used to assemble their products.
We operate through three reportable segments: Supply Technologies, Assembly
Components and Engineered Products.

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. Total Supply Management™
includes such services as engineering and design support, part usage and cost
analysis, supplier selection, quality assurance, bar coding, product packaging
and tracking, just-in-time and point-of-use delivery, electronic billing
services and ongoing technical support. Our Supply Technologies business
services customers in the following principal industries: heavy-duty truck;
sports and recreational equipment; aerospace and defense; semiconductor
equipment; electrical distribution and controls; consumer electronics; bus and
coaches; automotive, agricultural and construction equipment; HVAC; lawn and
garden; plumbing; and medical.

Assembly Components manufactures products oriented towards fuel efficiency and
reduced emission standards. Assembly Components designs, develops and
manufactures aluminum products and highly efficient, high pressure direct fuel
injection fuel rails and pipes; fuel filler pipes that route fuel from the gas
cap to the gas tank; flexible multi-layer plastic and rubber assemblies used to
transport fuel from the vehicle's gas tank and then, at extreme high pressure,
to the engine's fuel injector nozzles. Our product offerings include gasoline
direct injection systems and fuel filler assemblies, and industrial hose and
injected molded rubber and plastic components. Additional products include cast
and machined aluminum engine, transmission, brake, suspension and other
components, such as pump housings, clutch retainers/pistons, control arms,
knuckles, master cylinders, pinion housings, brake calipers, oil pans and
flywheel spacers. Our products are primarily used in the following industries:
automotive, including automotive and light-vehicle; agricultural equipment;
construction equipment; heavy-duty truck; and marine original equipment
manufacturers ("OEMs"), on a sole-source basis.

Engineered Products operates a diverse group of niche manufacturing businesses
that design and manufacture a broad range of highly-engineered products,
including induction heating and melting systems, pipe threading systems and
forged and machined products. Engineered Products also produces and provides
services and spare parts for the equipment it manufactures. The principal
customers of Engineered Products are OEMs, sub-assemblers and end users in the
following industries: ferrous and non-ferrous metals; silicon; coatings;
forging; foundry; heavy-duty truck; construction equipment; automotive; oil and
gas; locomotive and rail manufacturing; and aerospace and defense.

The sales and operating income of these three segments are presented in note 4 of the condensed consolidated financial statements, included elsewhere in this document.

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RESULTS OF OPERATIONS

Three Months Ended September 30, 2022 Compared with Three Months Ended
September 30, 2021

                                                       Three Months Ended September
                                                                    30,
                                                           2022              2021            $ Change            % Change
                                                                   (Dollars in millions, except per share data)
Net sales                                              $  435.8           $ 358.5          $    77.3                 21.6  %
Cost of sales                                             385.4             318.4               67.0                 21.0  %
Gross profit                                               50.4              40.1               10.3                 25.7  %
Gross margin                                               11.6   %          11.2  %
Selling, general and administrative ("SG&A") expenses      43.4              45.1               (1.7)                (3.8) %
SG&A expenses as a percentage of net sales                 10.0   %         

12.6%

Operating income (loss)                                     7.0              (5.0)              12.0                       *
Other components of pension income and other
postretirement benefits expense, net                        2.7               2.4                0.3                 12.5  %
Interest expense, net                                      (9.6)             (7.6)              (2.0)                26.3  %

Income (loss) before income taxes                           0.1             (10.2)              10.3                       *
Income tax benefit                                          3.0               2.8                0.2                  7.1  %

Net income (loss)                                           3.1              (7.4)              10.5                       *
Net (income) loss attributable to noncontrolling
interest                                                   (0.4)              0.2               (0.6)                      *

Net income (loss) attributable to Park-Ohio Holdings Corp. ordinary shareholders

                              $    2.7           $  (7.2)         $     9.9                       *

Income (loss) per common share attributable to
Park-Ohio Holdings Corp. common shareholders:
Basic                                                  $   0.22           $ (0.60)         $    0.82                       *

Diluted                                                $   0.22           $ (0.60)         $    0.82                       *


*Calculation not meaningful

Net Sales

Net sales increased by 21.6% to $435.8 million in the third quarter of 2022 compared to $358.5 million during the same period in 2021. This increase is mainly due to increased customer demand and an increase in the net realized price in our three business segments.

The factors explaining the changes in segment net sales for the three months
ended September 30, 2022 compared to the corresponding 2021 period are contained
within the "Segment Results" section below.

Cost of sales and gross margin

Cost of sales increased 21.0% to $385.4 million in the third quarter of 2022
compared to $318.4 million in the same period in 2021. The increase in cost of
sales was primarily due to the increase in net sales for the 2022 period
compared to the corresponding period in 2021, as well as the factors listed
below that impacted gross margin.

Gross margin was 11.6% in the third quarter of 2022 compared to 11.2% in the
same period in 2021. The higher margin in the 2022 was driven by increased net
price realization and profit flow-through from higher volumes, which more than
offset the ongoing impact of inflation, higher labor costs and supply chain
constraints. The third quarter of 2022 included expenses of $2.5 million related
to plant closure and consolidation and other actions to improve profitability.
The third quarter of 2021 included expenses of $1.8 million related to plant
closure and consolidation actions.

General and administrative costs

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SG&A expenses decreased to $43.4 million in the third quarter of 2022 compared
to $45.1 million in the comparable period in 2021, a decrease of 3.8%. The
decrease in SG&A expenses is primarily attributable to the lower personnel
related expenses. As a percentage of net sales, SG&A expenses were 10.0% in
third quarter of 2022 compared to 12.6% in the comparable period in 2021. The
improvement in SG&A expenses as a percentage of net sales was also driven by the
impact of fixed SG&A expenses over the higher revenue base in the 2022 quarter
compared to the same quarter a year ago. SG&A expenses in the 2022 period
included $1.9 million of charges related to plant closure and consolidation,
severance and other actions to improve future profitability and $0.4 million of
acquisition-related costs. The third quarter of 2021 included $2.5 million of
expenses related to plant closure and consolidation and other costs.

Other components of retirement income and other post-employment benefit expense (“OPEB”), net

Other components of pension income and OPEB expense, net was $2.7 million in the
three months ended September 30, 2022 compared to $2.4 million in the
corresponding period in 2021. This increase was driven by estimated higher
returns on plan assets and lower actuarial loss in the 2022 period compared to
the same period a year ago.

Interest Expense, Net

Net interest charges were $9.6 million in the third quarter of 2022 compared to
$7.6 million in the 2021 period. The increase is explained by the increase in the average outstanding borrowings and the increase in interest rates during the 2022 period.

Tax benefit

In the three months ended September 30, 2022, income tax benefit was $3.0
million on pre-tax income of $0.1 million. The overall benefit included a
discrete benefit of $2.4 million due primarily to changes in estimates related
to prior year federal research and development credits, Global Intangible
Low-Taxed Income ("GILTI"), Foreign-Derived Intangible Income ("FDII") and
foreign tax credits. In the three months ended September 30, 2021, income tax
benefit was $2.8 million, representing an effective income tax rate of 27%. This
rate is higher than the U.S. statutory rate of 21% due primarily to the
additional tax benefit recorded as result of stock compensation that vested and
state and local taxes during the quarter.


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RESULTS OF OPERATIONS

Nine Months Ended September 30, 2022 Compared with Nine Months Ended
September 30, 2021

                                                       Nine Months Ended September 30,
                                                           2022                   2021            $ Change            % Change
                                                                     (Dollars in millions, except per share data)
Net sales                                           $       1,282.8           $ 1,068.1          $  214.7                  20.1  %
Cost of sales                                               1,128.9               936.1             192.8                  20.6  %
Gross profit                                                  153.9               132.0              21.9                  16.6  %
Gross margin                                                   12.0   %            12.4  %
SG&A expenses                                                 134.2               128.1               6.1                   4.8  %
SG&A expenses as a percentage of net sales                     10.5   %            12.0  %
Gain on sale of assets                                         (2.9)                  -              (2.9)                       *

Operating income                                               22.6                 3.9              18.7                        *
Other components of pension income and other
postretirement benefits expense, net                            8.3                 7.3               1.0                  13.7  %
Interest expense, net                                         (25.7)              (22.4)             (3.3)                 14.7  %

Income (loss) before income taxes                               5.2               (11.2)             16.4                        *
Income tax benefit                                              5.7                 3.7               2.0                  54.1  %

Net income (loss)                                              10.9                (7.5)             18.4                        *
Net (income) loss attributable to noncontrolling
interests                                                      (1.1)                0.5              (1.6)                       *
Net income (loss) attributable to Park-Ohio
Holdings Corp. common shareholders                  $           9.8           $    (7.0)         $   16.8                        *

Income (loss) per common share attributable to
Park-Ohio Holdings Corp. common shareholders:
Basic                                               $          0.81           $   (0.58)         $   1.39                        *

Diluted                                             $          0.80           $   (0.58)         $   1.38                        *


*Calculation not meaningful

Net Sales

Net sales increased 20.1% to $1,282.8 million in the first nine months of 2022
compared to $1,068.1 million in the same period in 2021. This increase was
primarily due to higher customer demand and increased net price realization in
all three of our business segments.

Factors explaining variations in segment net sales for the nine months ended September 30, 2022 compared to the corresponding period of 2021 are shown in the “Segment results” section below.

Cost of sales and gross margin

Cost of sales increased 20.6% to $1,128.9 million in the first nine months of
2022 compared to $936.1 million in the same period in 2021. The increase in cost
of sales was primarily due to the increase in net sales described above.

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Gross margin was 12.0% in the first nine months of 2022 compared to 12.4% in the
corresponding period in 2021. The margin decline was due to charges of $8.4
million in the 2022 period related to plant closure can consolidation and other
actions to improve future profitability, compared to similar charges of $2.9
million in the 2021 period.

SG&A Expenses

SG&A expenses were $134.2 million in the first nine months of 2022, compared to
$128.1 million in the same period in 2021, an increase of 4.8%. As a percentage
of net sales, SG&A expenses were 10.5% in first nine months of 2022 compared to
12.0% in the comparable period in 2021. 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 2022 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, and expenses related to plant
closure and consolidation. SG&A expenses in the 2022 period included $4.5
million of expenses related to plant closure and consolidation, severance and
other costs and $0.7 million of acquisition-related expenses. SG&A expenses in
the 2021 period included expenses of $4.1 million for plant closure and
consolidation, severance and other costs and $0.4 million of acquisition-related
costs.

Gain on Sale of Assets

During the second quarter of 2022, in connection with the plant closure and
consolidation initiatives, the Company sold real estate within the 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 OPEB, net

Other components of pension income and OPEB expense, net was $8.3 million in the
first nine months of 2022 compared to $7.3 million in the corresponding period
in 2021. This increase was driven by estimated higher returns on plan assets and
lower actuarial loss in the 2022 period compared to the same period a year ago.

Interest expense, net

Interest expense, net was $25.7 million in the first nine months of 2022
compared to $22.4 million in the 2021 period. The increase was due primarily to
higher average outstanding debt balances and higher interest rates in the 2022
period compared to the same period a year ago.

Tax benefit

In the nine months ended September 30, 2022, income tax benefit was $5.7 million
on pre-tax income of $5.2 million. The overall benefit included discrete tax
benefits totaling $6.5 million related primarily to changes in estimates related
to prior year federal research and development credits, GILTI, FDII and foreign
tax credits. In the nine months ended September 30, 2021, income tax benefit was
$3.7 million, representing an effective income tax rate of 33%. This rate is
higher than the U.S. statutory rate of 21% primarily due to the additional
benefit recorded as result of the net operating loss carryback claim under the
Coronavirus Aid, Relief, and Economic Security Act and the composition of
earnings.

SECTOR RESULTS

For the purpose of measuring business segment performance, the Company uses segment operating profit, which is defined as revenue less expenses identifiable to each segment’s product lines. The Company does not allocate items that are unrelated to operations or of an unusual nature or that are business costs, which include, but are not limited to, executive and shares and corporate office costs.

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Supply Technologies Segment

                                               Three Months Ended September         Nine Months Ended September
                                                            30,                                 30,
                                                   2022              2021              2022              2021
                                                                     (Dollars in millions)
Net sales                                      $  185.9           $ 154.0          $  530.5           $ 466.7
Segment operating income                       $   10.7           $  10.7          $   35.4           $  33.2
Segment operating income margin                     5.8   %           6.9  %            6.7   %           7.1  %



Three months completed September 30:

Net sales increased 20.7% in the three months ended September 30, 2022 compared
to the 2021 period due primarily to higher customer demand in many of the
Company's key end markets, with the largest increases in semiconductor, power
sports, heavy-duty truck and civilian aerospace, as well as due to increased net
price realization.

Segment operating income was flat and segment operating income margin decreased
110 basis points in the 2022 period compared to the same period a year ago. The
decrease in margin was driven primarily by higher supply chain costs including
premium freight.

End of nine months September 30:

Net sales increased 13.7% in the nine months ended September 30, 2022 compared
to the 2021 period due primarily to higher customer demand in many of the
Company's key end markets, with the largest increases in heavy-duty truck,
semiconductor, industrial and agricultural equipment and civilian aerospace, as
well as due to increased net price realization.

Segment operating income increased by $2.2 million driven by profit flow-through
from higher sales. Segment operating income margin was 40 basis points lower in
the 2022 period compared to the same period a year ago due to higher supply
chain costs.

Assembly Components Segment

                                               Three Months Ended September         Nine Months Ended September
                                                            30,                                 30,
                                                   2022              2021              2022              2021
                                                                     (Dollars in millions)
Net sales                                      $  153.0           $ 120.2          $  465.8           $ 355.7
Segment operating (loss) income                $   (2.0)          $  (8.9)         $   (7.5)          $  (8.6)
Segment operating (loss) income margin             (1.3)  %          (7.4) %           (1.6)  %          (2.4) %



Three months completed September 30:

Net sales increased 27.3% in the three months ended September 30, 2022 compared
to the 2021 period due primarily to higher customer demand driven by
fuel-related products launched in 2021 and increased net price realization. In
addition, sales in the 2021 period were negatively impacted by the semiconductor
micro-chip shortage and supply chain disruptions in the automobile industry.

Segment operating loss was $2.0 million in the 2022 period compared to $8.9
million in the 2021 period. The improvement in segment operating results in the
2022 period was driven by profit flow-through from the higher sales levels and
benefit of profit improvement initiatives in the last two years, both of which
together more than offset the negative impacts of
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inflation in the current year. In addition, the loss in the 2022 period included
expenses of $1.7 million related to restructuring charges and related expenses,
compared to similar expenses of $3.4 million in the 2021 period.

End of nine months September 30:

Net sales increased 31.0% in the nine months ended September 30, 2022 compared
to the 2021 period due primarily to higher customer demand driven by
fuel-related products launched in 2021; increased net price realization; and the
pass-through of higher aluminum and rubber compound prices in the 2022 period.
In addition, sales in the 2021 period were negatively impacted by the
semiconductor micro-chip shortage and supply chain disruptions in the automobile
industry.

Segment operating loss was $7.5 million in the 2022 period compared to $8.6
million in the 2021 period. The improvement in segment operating results in the
2022 period was driven by profit flow-through from the higher sales levels and
benefit of profit improvement initiatives in the last two years, both of which
together more than offset the negative impacts of inflation in the current year.
In addition, the loss in the 2022 period included expenses of $7.9 million
related to restructuring charges and related expenses, compared to similar
expenses of $4.7 million in the 2021 period.

Engineered Products Segment

                                                Three Months Ended September          Nine Months Ended September
                                                             30,                                  30,
                                                    2022               2021              2022              2021
                                                                      (Dollars in millions)
Net sales                                      $    96.9            $  84.3          $  286.5           $ 245.7
Segment operating income (loss)                $     5.8            $   0.6          $   14.7           $  (1.3)
Segment operating income (loss) margin               6.0    %           0.7  %            5.1   %          (0.5) %



Three months completed September 30:

Net sales were 14.9% higher in the 2022 period compared to the 2021 period. The
increase was due to stronger demand in the 2022 period in both our capital
equipment products business and our forged and machined products business as key
end markets continue to recover from the COVID-19 pandemic.

Segment operating income in the 2022 period increased $5.2 million and segment
operating income increased by 530 basis points compared to the corresponding
2021 period. The profit improvement in the 2022 third quarter compared to the
prior year period was driven by the higher sales levels, operational
improvements, and benefits of profit improvement actions. Expenses related to
plant closure and consolidation were $1.4 million and $0.6 million in the third
quarter of 2022 and 2021, respectively.

End of nine months September 30:

Net sales were 16.6% higher in the 2022 period compared to the 2021 period. The
increase was due to stronger demand in the 2022 period in both our capital
equipment products business and our forged and machined products business as key
end markets continue to recover from the COVID-19 pandemic.

Segment operating income in the 2022 period increased $16.0 million and segment
operating income increased by 560 basis points compared to losses in the
corresponding 2021 period. The profit improvement in 2022 period compared to the
prior period was driven by the higher sales levels, operational improvements,
and benefits of profit improvement actions. Expenses related to plant closure
and consolidation were $2.8 million and $1.9 million in the first nine months of
2022 and 2021, respectively.


Cash and capital resources

The following table summarizes the main components of cash flows:

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                                                        Nine Months Ended September 30,
                                                            2022               2021             $ Change
Net cash (used) provided by:                                              (In millions)
Operating activities                                    $    (31.4)         $  (25.9)         $    (5.5)
Investing activities                                         (41.6)            (30.3)             (11.3)
Financing activities                                          78.5              62.0               16.5
Effect of exchange rate changes on cash                       (5.9)             (1.2)              (4.7)

(Decrease) increase in cash and cash equivalents $(0.4) $4.6 $(5.0)


Operating Activities

In the first nine months of 2022, we had cash usage of $31.4 million compared to
$25.9 million in the same period of 2021. The usage of cash was driven by higher
working capital levels in the nine months ended September 30, 2022 compared to
the same period a year ago. In the 2022 period, working capital increased $67.2
million, compared to $45.1 million in the 2021 period, with the higher amount in
2022 driven by an increase in inventories of $52.7 million resulting from higher
sales levels and supply chain constraints and an increase in accounts receivable
of $35.5 million resulting from higher sales.

Investing activities

Capital expenditures were $23.7 million in the nine months ended September 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, the Company sold real estate for total proceeds of $4.0 million
and made two acquisitions, which utilized cash of $21.9 million.

Capital expenditures were $24.9 million in the nine months ended September 30,
2021 and were primarily to provide increased capacity for future growth in our
Engineered Products and Assembly Components segments and to maintain existing
operations. Also in the 2021 period, the Company acquired NYK Component
Solutions Limited ("NYK") for $5.4 million.

Fundraising activities

During the nine months ended September 30, 2022, we had net debt borrowings of
$85.1 million to fund our higher working capital levels and complete two
acquisitions. In addition, in the nine months ended September 30, 2022, we made
cash dividend payments to shareholders totaling $4.8 million.

During the nine months ended September 30, 2021, we had net debt borrowings of
$71.8 million and paid dividends to shareholders of $4.7 million. The borrowings
were used to fund our higher working capital levels and the acquisition of NYK.

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.

Liquidity

Our liquidity needs are primarily for working capital, capital expenditures,
dividends and acquisitions. Our primary sources of liquidity have been funds
provided by operations, funds available from existing bank credit arrangements
and the sale of our debt securities. 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.

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As of September 30, 2022, we had total liquidity of $163.6 million, which
included $53.7 million of cash and cash equivalents and $109.9 million of unused
borrowing availability under our credit agreements, which included $23.6 million
of suppressed availability.

The Company had cash and cash equivalents held by foreign subsidiaries of $43.1
million at September 30, 2022 and $44.2 million at December 31, 2021. We do not
expect restrictions on repatriation of cash held outside the U.S. to have a
material effect on our overall liquidity, financial condition or results of
operations for the foreseeable future.

The Company has two components to its assertion regarding reinvestment of
foreign earnings outside of the United States.  First, for all foreign
subsidiaries except RB&W Corporation of Canada ("RB&W"), all earnings are
permanently reinvested outside of the United States.  Second, for RB&W, dividend
distributions may be made, but only to the extent of current earnings in excess
of cash required to fund its business operations; all accumulated earnings are
permanently reinvested.

Senior Notes

In April 2017, Park-Ohio Industries, Inc. ("Park-Ohio"), the operating
subsidiary of Park-Ohio Holdings Corp., completed the sale, in a private
placement, of $350.0 million aggregate principal amount of 6.625% Senior Notes
due 2027 (the "Notes"). The net proceeds from the issuance of the Notes were
used to repay in full our previously outstanding 8.125% Senior Notes due 2021
and our outstanding term loan, and to repay a portion of the borrowings then
outstanding under our revolving credit facility.

credit agreement

Park-Ohio's Seventh Amended and Restated Credit Agreement (as amended, the
"Credit Agreement") provides for a revolving credit facility in the amount of
$405.0 million, including a $40.0 million Canadian revolving subcommitment and a
European revolving subcommitment in the amount of $30.0 million. Pursuant to the
Credit Agreement, Park-Ohio has the option to increase the availability under
the revolving credit facility by an aggregate incremental amount up to $70.0
million. The Credit Agreement matures on November 26, 2024.

Finance leases

In August 2015, the Company entered into a Capital Lease Agreement (the "Lease
Agreement"). The Lease Agreement provides the Company up to $50.0 million for
finance leases. Finance lease obligations of $13.0 million were borrowed under
the Lease Agreement to acquire machinery and equipment as of September 30, 2022.

pacts

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. If our
calculated availability is less than $50.625 million, our debt service coverage
ratio must be greater than 1.0. At September 30, 2022, our calculated
availability under the Credit Agreement was $78.8 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. 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 September 30, 2022. While we expect to remain in
compliance throughout 2022, declines in sales volumes in the future, including
any declines caused by the COVID-19
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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.

Dividends

The Company paid dividends to shareholders of $4.8 million during the nine
months ended September 30, 2022. On November 4, 2022, the Company's Board of
Directors declared a quarterly dividend of $0.125 per common share. The dividend
will be paid on December 2, 2022 to shareholders of record as of the close of
business on November 18, 2022 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.

Seasonality; Variability of operating results

The timing of orders placed by our customers has varied with, among other
factors, orders for customers' finished goods, customer production schedules,
competitive conditions and general economic conditions. The variability of the
level and timing of orders has, from time to time, resulted in significant
periodic and quarterly fluctuations in the operations of our businesses. Such
variability is particularly evident in our capital equipment business, included
in the Engineered Products segment, which typically ships large systems at a
relatively lower pace than our other businesses.

Critical accounting policies

Our critical accounting policies are described in "Item. 7 Management's
Discussion and Analysis of Financial Condition and Results of Operations," and
in the notes to our consolidated financial statements for the year ended
December 31, 2021, both contained in our Annual Report on Form 10-K for the year
ended December 31, 2021. There were no new critical accounting policies or
updates to existing critical accounting policies as a result of new accounting
pronouncements in this Quarterly Report on Form 10-Q.

The application of our critical accounting policies may require management to
make judgments and estimates about the amounts reflected in the condensed
consolidated financial statements. Management uses historical experience and all
available information to make these estimates and judgments, and different
amounts could be reported using different assumptions and estimates.

Forward-looking statements

This Quarterly Report on Form 10-Q contains certain statements that are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act. The words "believes", "anticipates",
"plans", "expects", "intends", "estimates" and similar expressions are intended
to identify forward-looking statements.

These forward-looking statements, including statements regarding future
performance of the Company, that are subject to known and unknown risks,
uncertainties and other factors that may cause our actual results, performance
and achievements, or industry results, to be materially different from any
future results, performance or achievements expressed or implied by such
forward-looking statements. These factors that could cause actual results to
differ materially from expectations include, but are not limited to, the
following: 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; our substantial indebtedness; the uncertainty of
the global economic environment, including any recession; general business
conditions and competitive factors, including pricing pressures and product
innovation; demand for our products and services; the impact of labor
disturbances affecting our customers; raw material availability and pricing;
fluctuations in energy costs; component part availability and pricing; changes
in our relationships with customers and suppliers;
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Contents

the financial condition of our customers, including the impact of any
bankruptcies; our ability to successfully integrate recent and future
acquisitions into existing operations; the amounts and timing, if any, of
purchases of our common stock; changes in general economic conditions such as
inflation rates, interest rates, tax rates, unemployment rates, higher labor and
healthcare costs, recessions and changing government policies, laws and
regulations, including those related to the current global uncertainties and
crises, such as tariffs and surcharges; adverse impacts to us, our suppliers and
customers from acts of terrorism or hostilities, including the evolving
situation with Russia and Ukraine; public health issues, including the outbreak
of COVID-19 and its 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; disruptions,
uncertainties or volatility in the credit markets that may limit our access to
capital; potential disruption due to a partial or complete reconfiguration of
the European Union; increasingly stringent domestic and foreign governmental
regulations, including those affecting the environment or import and export
controls and other trade barriers; inherent uncertainties involved in assessing
our potential liability for environmental remediation-related activities; the
outcome of pending and future litigation and other claims and disputes with
customers; our dependence on the automotive and heavy-duty truck industries,
which are highly cyclical; the dependence of the automotive industry on consumer
spending; our ability to negotiate contracts with labor unions; our dependence
on key management; our dependence on information systems; our ability to
continue to pay cash dividends, and the timing and amount of any such dividends;
and the other factors we describe under "Item 1A. Risk Factors" included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2021. Any
forward-looking statement speaks only as of the date on which such statement is
made, and we undertake no obligation to update any forward-looking statement,
whether as a result of new information, future events or otherwise, except as
required by law. In light of these and other uncertainties, the inclusion of a
forward-looking statement herein should not be regarded as a representation by
us that our plans and objectives will be achieved.

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