STONERIDGE INC

Previous wording

The Company had net loss of $6.1 million, or $(0.22) per diluted share, for the three months ended March 31, 2024.

Current wording

The Company had net income of $2.8 million, or $0.10 per diluted share, for the three months ended June 30, 2024.

Previous wording

Net loss for the quarter ended March 31, 2024 improved by $1.3 million, or $0.05 per diluted share, from net loss of $7.4 million, or $(0.27) per diluted share, for the three months ended March 31, 2023. Net loss improved due to contribution from higher sales partially offset by increased selling, general and administrative expenses ("SG&A") and design and development ("D&D") spending, higher interest costs, the incremental unfavorable impact of non-operating foreign currency losses and an increase in the provision for income taxes. Net sales decreased by $2.2 million, or 0.9%, primarily from lower volumes in our North American automotive market for Control Devices and lower required electronic component spot buy purchases in our Electronics segment, partially offset by higher volumes in our Electronics segment commercial vehicle market.

Current wording

Net income for the quarter ended June 30, 2024 improved by $5.8 million, or $0.21 per diluted share, from net loss of $3.0 million, or $(0.11) per diluted share, for the three months ended June 30, 2023. Net income improved due to lower D&D costs from higher customer reimbursements and the favorable impact of non-operating foreign currency gains. Net sales decreased by $29.8 million, or 11.2%, compared to the three months ended June 30, 2023, primarily from lower volumes in our North American automotive market for Control Devices and lower volumes in our European and North American commercial vehicle markets for Electronics. Gross margin as a percent of sales remained consistent at 22.7% driven by lower contribution from lower sales offset by favorable sales mix and a reduction in adverse foreign exchange related material variances.

Previous wording

Our Control Devices segment net sales decreased by 10.2% compared to the first quarter of 2023 primarily as a result of decreases in our North American automotive market. The decrease in our North American automotive market was primarily due to the expected wind down of end-of-life programs and reduced demand for electric vehicles impacting actuation product revenue during the quarter. These decreases were offset by increases in our China commercial vehicle and automotive markets. Segment gross margin as a percentage of sales increased due to favorable mix resulting in lower direct material costs. Segment operating income increased due to higher gross margin and slightly lower D&D and SG&A spending, partially offset by the gain on sale of disposed assets recognized in the first quarter of 2023.

Current wording

Our Control Devices segment net sales decreased by 13.3% compared to the second quarter of 2023 primarily as a result of decreases in our North American and China automotive markets. The decrease in our North American automotive market was due to lower customer volumes and the expected wind down of end-of-life programs. These decreases were offset by increases in our China commercial vehicle market. Segment gross margin as a percentage of sales decreased slightly due to lower contribution from lower sales levels. Segment operating income decreased due to lower contribution from lower sales volumes offset by lower D&D and SG&A spending.

Previous wording

Our Electronics segment net sales increased by 6.1% compared to the first quarter of 2023 primarily due to higher sales volumes in our European and North American commercial vehicle markets, including our recently launched SE 5000 Smart 2 tachograph, as well as an increase in our North American off-highway vehicle market. These increases were offset by relatively less spot buy purchases, which are material purchases reimbursed by customers and recorded as both revenue and offsetting material cost. As such, spot buy purchases do not impact gross profit. In addition, we experienced lower sales volumes in our European off-highway vehicle market. Segment gross margin as a percent of sales increased primarily due to higher contribution from higher sales levels, a reduction in material purchase variances, including the effect of foreign currency, and the impact of lower required electronic component spot buy purchases offset by an increase in overhead costs. Operating income for the segment increased compared to the first quarter of 2023 primarily due to higher gross margin offset by higher SG&A and D&D spending, including support for new product launches.

Current wording

Our Electronics segment net sales decreased by 8.9% compared to the second quarter of 2023 primarily due to lower sales volumes in our European and North American commercial vehicle markets, partially mitigated by the ramp-up of recently launched programs, including our next generation tachograph. Net sales also decreased due to a reduction in pricing actions including the impact of retroactive pricing and lower electronic component spot buy purchases, which are material purchases reimbursed by customers and recorded as both revenue and offsetting material cost. As such, spot buy purchases do not impact gross profit. We experienced higher sales volumes in our European off-highway vehicle market which offset the aforementioned reductions. Segment gross margin as a percent of sales remained consistent with the prior year second quarter as lower contribution from lower sales levels was offset by a reduction in foreign exchange related material variances. Operating income for the segment increased compared to the second quarter of 2023 primarily due to lower D&D from higher customer reimbursements and lower SG&A from 2023 business realignment costs offset by lower contribution from lower sales levels.

Previous wording

At March 31, 2024 and December 31, 2023, we had cash and cash equivalents balances of $48.4 million and $40.8 million, respectively, and we had $194.4 million and $189.3 million, respectively, in borrowings outstanding on our Credit Facility. The 2024 increase in cash and cash equivalents was mostly due to cash generated from operating activities, including the reduction of inventory levels.

Current wording

At June 30, 2024 and December 31, 2023, we had cash and cash equivalents balances of $42.1 million and $40.8 million, respectively, and we had $187.4 million and $189.3 million, respectively, in borrowings outstanding on our Credit Facility. The 2024 increase in cash and cash equivalents was mostly due to cash generated from operating activities including a reduction in inventory balances.

Previous wording

The Company believes that focusing on products that address industry megatrends has had and will continue to have a positive effect on both our top-line growth and underlying margins. For example, the Company is aligned with platforms likely to perform well against overall market dynamics including light-trucks, SUVs and crossover vehicles and our continued focus on safety, vehicle intelligence and connectivity based products, such as the recent release of our next generation tachograph in Europe as well as current and future launches of our MirrorEye programs in North America and Europe for both OEM and aftermarket applications.

Current wording

The Company believes that focusing on products that address industry megatrends has had and will continue to have a positive effect on both our top-line growth and underlying margins. Expanding on our existing products and technology platforms with advanced capabilities, applications and data services is core to our long-term strategy. For example, the Company is aligned with platforms likely to perform well against overall market dynamics including light-trucks, SUVs and crossover vehicles and our continued focus on safety, vehicle intelligence and connectivity based products, such as our ongoing launches of our OEM MirrorEye® programs in North America and Europe as well as our next generation tachograph in Europe. In addition, we are partnering with an OEM to develop advanced system capabilities based on data services, software and AI in bus applications.

Previous wording

Based on IHS Market production forecasts, the North American automotive market is expected to increase from 15.6 million units in 2023 to 16.0 million units in 2024 as this market continues to recover from economic headwinds. In our Control Devices segment, we expect lower than previously anticipated growth rates for sales of products used in electric vehicle platforms due to reduced production expectations with some of our key customers. We continue to focus on improved manufacturing execution, supply chain strategy, material cost improvement actions and enterprise-wide cost improvement plans and will continue to react to changes in our end-markets as needed to maintain and improve our margins. During 2024, our Control Devices segment has incurred $0.7 million of support costs for a troubled supplier. We expect these costs to moderate for the remainder of 2024. We will continue to focus on growing our core product portfolio aligned with industry megatrends by investing in our actuation and system-level sensor products as we anticipate greater opportunities as powertrains become increasingly electrified and efficient.

Current wording

Based on IHS Market production forecasts, the North American automotive market is expected to increase from 15.6 million units in 2023 to 15.8 million units in 2024. In our Control Devices segment, we expect modest sales growth of products used in electric vehicle platforms, however, lower than initially expected due to reduced production expectations with some of our key customers. We continue to focus on improved manufacturing execution, supply chain strategies, material cost improvement actions and enterprise-wide cost improvement plans and will continue to react to changes in our end markets as needed to maintain and improve our margins. During 2024, our Control Devices segment has incurred $1.0 million of support costs for a troubled supplier. We do not expect these costs to be material for the remainder of 2024. We remain focused on drivetrain agnostic technologies to drive new business awards as our markets evolves.

Previous wording

In 2024, our European and North American commercial vehicle end market volumes are forecasted to decrease 10.5% and 7.6%, respectively. We expect our Electronics’ segment sales to outperform forecasted changes in production volumes due to strong demand for our existing products and the ramp-up of recently launched programs, including our next generation tachograph product in Europe for both OEM and aftermarket applications and our first North American OEM MirrorEye program, as well as expected program launches, including our next OEM MirrorEye program launch in Europe in 2024. Based on European regulatory requirements and the competitive landscape for our tachograph product, we expect significant growth over the next several years. We continue to work with all of our OEM customers, their dealer networks and the fleets to drive MirrorEye adoption. We expect continued growth as we launch new OEM programs, increase take rates for existing OEM programs and continue to expand our fleet activities. Recovery from customers related to spot buys of materials purchased by the Company on behalf of those customers, which is recognized as revenue and material costs, increased net sales by$14.6 million for the full year 2023. As a result of supply chains normalizing and material availability improving, the Company did not incur any spot buy material purchases in the first quarter 2024 and does not expect to incur additional spot buy material purchases.

Current wording

In 2024, our European and North American commercial vehicle end market volumes are forecasted to decrease 11.5% and 3.0%, respectively. We expect our Electronics’ segment sales to outperform forecasted changes in production volumes due to strong demand for our existing products and the impact of ongoing launches of our OEM MirrorEye programs in North America and Europe as well as our next generation tachograph in Europe. Driven by European regulatory requirements we expect significant growth of our next generation tachograph product over the next several years. We expect continued growth in MirrorEye as our OEM programs continue to launch and as take rates continue to increase for existing OEM programs. Recovery from customers related to spot buys of materials purchased by the Company on behalf of those customers, which is recognized as revenue and material costs, increased net sales by$14.6 million for the full year 2023. As a result of supply chains normalizing and material availability improving, the Company did not incur any spot buy material purchases in the first half of 2024 and does not expect to incur additional spot buy material purchases in the future based on current market conditions. During 2024, our Electronics segment has incurred $0.5 million of support costs for a troubled supplier. We expect to continue to incur these costs in the second half of 2024.

Previous wording

In 2024, we expect net D&D spend to increase modestly driven by spend for the development of next generation products as we expect new product launch related spend to decrease in the second half of 2024. As a result of reduced launch activities we expect lower customer reimbursements and capitalization of software development costs. We continue to evaluate and optimize our engineering footprint to enhance capabilities and capacity for the most efficient return on our engineering spend.

Current wording

In the second half of 2024, we expect net D&D spending to remain relatively stable driven by operating cost control reduced launch activities, and as a result, we expect lower customer reimbursements and capitalization of software development costs. We continue to execute our strategy to optimize our engineering footprint to enhance capabilities and capacity for the most efficient return on our engineering spend including the reorganization of our Solna, Sweden location which resulted in business realignment expense of $1.4 million in the second quarter of 2024.

Previous wording

In April 2024, the International Monetary Fund forecasted the Brazil gross domestic product to grow 2.2% in 2024. We expect our served market channels to remain relatively stable in 2024 based on current market conditions. Stoneridge Brazil will focus on continuing to grow our OEM capabilities in-region to better support our global customers. This focus will provide opportunities for future growth and provide a platform to continue to rotate our local portfolio to more closely align with our global business.

Current wording

In July 2024, the International Monetary Fund forecasted the Brazil gross domestic product to grow 2.1% in 2024. We expect our served market channels to remain relatively stable in 2024 based on current market and economic conditions, however our sales of in region OEM products have been lower than expected due to lower customer demand. Stoneridge Brazil continues to focus on growing our OEM capabilities in-region to better support our global customers. We expect this strategy will provide opportunities for future growth and a platform to continue to rotate our local portfolio to more closely align with our global products. In addition, we continue to align our global engineering capabilities and footprint by expanding our Brazilian engineering center.

Previous wording

We remain focused on improving cash generation and the reduction of debt through efficient operating performance and targeted actions to reduce net working capital, particularly our inventory levels, as the impacts from product launches and material availability normalizes.

Current wording

We remain focused on improving cash generation and the reduction of debt through targeted actions to reduce net working capital, particularly our inventory levels, as the impacts from our Electronics segment product launches normalize.

Previous wording

A significant portion of our sales are outside of the United States. These sales are generated by our non-U.S. based operations, and therefore, movements in foreign currency exchange rates can have a significant effect on our results of operations, which are presented in U.S. dollars. A significant portion of our raw materials purchased by our Electronics and Stoneridge Brazil segments are denominated in U.S. dollars, and therefore movements in foreign currency exchange rates can also have a significant effect on our results of operations. The U.S. Dollar strengthened against the euro, Swedish krona, Chinese yuan, Brazilian real and Argentine peso in 2024 and the Argentine peso in 2023, unfavorably impacting our reported results.

Current wording

A significant portion of our sales are outside of the United States. These sales are generated by our non-U.S. based operations, and therefore, movements in foreign currency exchange rates can have a significant effect on our results of operations, which are presented in U.S. dollars. A significant portion of our raw materials purchased by our Electronics and Stoneridge Brazil segments are denominated in U.S. dollars, and therefore movements in foreign currency exchange rates can also have a significant effect on our results of operations. The U.S. Dollar strengthened against the euro, Swedish krona, Chinese yuan, Mexican peso, Brazilian real and Argentine peso in 2024 and the Swedish krona, Chinese yuan and Argentine peso in 2023, unfavorably impacting our reported results.

Previous wording

We regularly evaluate the performance of our businesses and their cost structures, including personnel, and make necessary changes thereto in order to optimize our results. We also evaluate the required skill sets of our personnel and periodically make strategic changes. As a consequence of these actions, we incur severance and resignation related costs that we refer to as business realignment charges. No business realignment costs were incurred during the three months ended March 31, 2024. Business realignment costs of $1.3 million were incurred during the three months ended March 31, 2023.

Current wording

We regularly evaluate the performance of our businesses and their cost structures, including personnel, and make necessary changes thereto in order to optimize our results. We also evaluate the required skill sets of our personnel and periodically make strategic changes. As a consequence of these actions, we incur severance and resignation related costs that we refer to as business realignment charges. Business realignment costs of $1.9 million were incurred in both the three months ended June 30, 2024 and 2023, respectively.

Previous wording

The increase in net sales in Europe and Other was due to an increase in our European commercial vehicle and automotive markets of $11.9 million and $1.8 million, respectively, as wells as increases in our China commercial vehicle and automotive markets of $1.2 million and $0.6 million, respectively. These increases were offset by decreased customer recoveries of electronic component spot buys of $7.4 million, decreases in our European off-highway market of $1.1 million and a decrease in negotiated price increases of $1.3 million.

Current wording

The decrease in net sales in Europe and Other was due to decreases in customer production volumes in our European commercial vehicle and China automotive markets of $5.9 million and $1.4 million, respectively, as well as a decrease in electronic component spot buys of $3.7 million and a decrease in negotiated price increases of $2.1 million. These decreases were offset by higher sales in our European off-highway market of $2.3 million. Net sales were adversely impacted by an increase in unfavorable foreign currency translation of $1.5 million.

Previous wording

Operating Income (loss). Operating income (loss) by segment is summarized in the following table (in thousands):

Current wording

Operating Income. Operating income (loss) by segment is summarized in the following table (in thousands):

Previous wording

Our Electronics segment operating income increased primarily due to higher contribution from higher sales and lower business realignment expense offset by higher SG&A and D&D spending.

Current wording

Our Electronics segment operating income increased primarily because of lower D&D from higher customer reimbursements and lower SG&A from 2023 business realignment costs offset by lower contribution from lower sales levels.

Previous wording

Our unallocated corporate operating loss increased slightly from higher SG&A incentive compensation offset by lower business realignment costs.

Current wording

Our unallocated corporate operating loss increased from higher SG&A and D&D spending.

Previous wording

Our North American operating loss decreased due to favorable margin offset by higher SG&A and D&D spending. Operating income in South America decreased due to lower sales levels offset by lower direct material costs. Our operating results in Europe and Other increased primarily due to contribution from higher sales levels and lower business realignment expense offset by higher SG&A and D&D spending.

Current wording

Our North American operating loss increased due to higher SG&A and D&D spending. Operating loss in South America increased due to lower contribution from lower sales levels offset by favorable product mix. Our operating results in Europe and Other increased primarily due to lower D&D and SG&A spending.

Previous wording

Interest Expense, net. Interest expense, net was $3.6 million and $2.7 million for the three months ended March 31, 2024 and 2023, respectively. The increase for the quarter ended March 31, 2024, was the result of higher outstanding balance on the Credit Facility and higher benchmark rates affecting the Company’s floating rate Credit Facility debt.

Current wording

Interest Expense, net. Interest expense, net was $3.8 million and $3.1 million for the three months ended June 30, 2024 and 2023, respectively. The increase for the quarter ended June 30, 2024, was the result of higher outstanding balances and higher benchmark rates affecting our floating rate Credit Facility debt.

Previous wording

Equity in Loss of Investee. Equity loss for Autotech Fund II was $0.3 million and $0.2 million for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Equity in Loss of Investee. Equity loss for Autotech Fund II was $0.1 million and $0.3 million for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Other Expense, net. We record certain foreign currency transaction losses (gains) as a component of other expense, net on the condensed consolidated statement of operations. Other expense, net of $2.0 million increased by $0.9 million compared to the first quarter of 2023 due to foreign currency transaction losses in our Electronics and Control Devices segments from the weakening of the U.S. dollar.

Current wording

Other (Income) Expense, net. We record certain foreign currency transaction (gains) losses as a component of other (income) expense, net on the condensed consolidated statement of operations. Other (income) expense, net of $(2.3) million increased by $4.7 million compared to the second quarter of 2023 due to foreign currency transaction gains in our Electronics and SRB segments from the strengthening of the U.S. dollar.

Previous wording

For the three months ended March 31, 2023, income tax benefit of $(0.7) million was attributable to the mix of earnings among tax jurisdictions as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions. The effective tax rate of 8.7% varies from the statutory tax rate primarily due to U.S. taxes on foreign earnings and non-deductible expenses offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives.

Current wording

For the three months ended June 30, 2023, income tax expense of $1.5 million was attributable to the mix of earnings among tax jurisdictions as well as tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions. The effective tax rate of (98.8)% varies from the statutory tax rate primarily due to U.S. taxes on foreign earnings and non-deductible expenses offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives.

Previous wording

The decrease in North American net sales was mostly attributable to a decrease in sales volume in our automotive and agricultural markets of $12.5 million and $1.1 million, respectively, and a decrease in negotiated price increases of $1.9 million as well as decreased customer recoveries of electronic component spot buys of $1.5 million. These decreases were offset by higher sales in our commercial vehicle and off-highway markets of $6.9 million and $4.5 million, respectively.

Current wording

The decrease in North American net sales was mostly attributable to decreases in sales volume in our automotive market including the impact of expected end of life production for certain programs and lower demand for electric vehicle related products and our agricultural market of $21.2 million and $0.6 million, respectively, as well as the 2023 impact of required electronic component spot buy purchases of $2.2 million. These decreases were offset by higher sales volume in our North American off-highway and commercial vehicle markets of $2.8 million and $1.8 million, respectively.

Previous wording

Cost of Goods Sold and Gross Margin. Cost of goods sold decreased compared to the first quarter of 2023 and our gross margin increased from 17.7% in the first quarter of 2023 to 20.2% in the first quarter of 2024. Our material cost as a percentage of net sales decreased to 58.9% in the first quarter of 2024 from 62.6% in the first quarter of 2023. The decrease in material cost percentage was mostly due to the impact of required electronic component spot buy purchases in 2023, reimbursed by customers. The impact of these spot buy purchases increased cost of goods sold by $9.1 million, or 3.8% of net sales, for the first quarter of 2023, which reduced gross margin percent by 0.7%. Other factors contributing to the reduction in material costs were favorable product mix and material cost improvement actions. Overhead as a percentage of net sales was 16.2% and 14.8% for the first quarter of 2024 and 2023, respectively. The increase in overhead as a percentage of sales was attributable to higher indirect wage inflation.

Current wording

Cost of Goods Sold and Gross Margin. Cost of goods sold decreased compared to the six months ended June 30, 2023 and our gross margin increased from 20.3% in the first six months of 2023 to 21.4% in the first six months of 2024. Our material cost as a percentage of net sales decreased from 60.3% in the first six months of 2023 to 57.4% in the first six months of 2024. The decrease in material cost percentage was partially due to the impact of required electronic component spot buy purchases, reimbursed by customers. The impact of these spot buy purchases increased cost of goods sold by $13.5 million, or 2.7% of sales, for the first six months of 2023, which reduced gross margin percent by 0.6% in 2023. Other factors contributing to the reduction in material costs were favorable product mix and material cost improvement actions. Overhead as a percentage of net sales was 16.4% and 14.4% for the first six months of 2024 and 2023, respectively. The increase in overhead as a percentage of sales was attributable to higher indirect wage inflation and adverse leverage from lower sales levels.

Previous wording

Our Control Devices segment gross margin increased primarily due to lower direct material costs.

Current wording

Our Control Devices segment gross margin increased primarily as a result of favorable sales mix.

Previous wording

Our Electronics segment gross margin increased due to the contribution from higher sales levels, the reduction of the adverse effect of required electronic component spot buy purchases, net of customer recoveries and lower direct material and labor costs relative to sales.

Current wording

Our Electronics segment gross margin increased because of the reduction of the adverse effect of required electronic component spot buy purchases, net of customer recoveries, favorable sales mix and material cost improvement actions.

Previous wording

Provision (Benefit) for Income Taxes. For the three months ended March 31, 2024, income tax expense of $0.5 million was attributable to the mix of earnings among tax jurisdictions as well as U.S. taxes on foreign earnings, offset by tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives. The effective tax rate of (9.1)% varies from the statutory tax rate primarily due to U.S. taxes on foreign earnings offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives.

Current wording

(Benefit) Provision for Income Taxes. For the six months ended June 30, 2024, income tax benefit of $0.4 million was attributable to the mix of earnings among tax jurisdictions and U.S. taxes on foreign earnings offset by tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives. The effective tax rate of 11.3% varies from the statutory tax rate primarily due to U.S. taxes on foreign earnings offset by the impact of tax losses for which no benefit is recognized due to valuation allowances in certain jurisdictions and tax credits and incentives.

Previous wording

Cash provided by operating activities increased compared to 2023 primarily dueto a reduction in cash used foraccounts receivables. Cash provided by inventory improved compared to 2023 due to the impact in the prior year of new product launches and mitigation of historical supply chain disruptions, as well as the impact of our current inventory reduction actions.

Current wording

Cash provided by operating activities increased compared to 2023 primarily dueto a reduction in cash used to support working capital levels. Cash provided by receivables was favorable to 2023 as the result of lower sales levels while collection terms remained consistent. Cash provided by inventory improved from the prior year due to the 2023 ramp up of new product launches, the mitigation of supply chain disruptions and the impact of our inventory reduction actions.

Previous wording

Net cash used for investing activities decreased compared to 2023 due to lower capital expenditures.

Current wording

Net cash used for investing activities decreased compared to 2023 due to lower capital expenditures and capitalized software development costs as well as the 2023 impact of cash proceeds from the sale of equipment.

Previous wording

Net cash provided by financing activities increased compared to 2023 due to higher net Credit Facility borrowings.

Current wording

Net cash used for financing activities increased compared to 2023 due to an increase in Credit Facility payments net of borrowings.

Previous wording

As outlined in Note 7 to our condensed consolidated financial statements, the Credit Facility permits borrowing up to a maximum level of $275.0 million. This variable rate facility provides the flexibility to refinance other outstanding debt or finance acquisitions through November 2026. The Credit Facility contains certain financial covenants that require the Company to maintain less than a maximum leverage ratio and more than a minimum interest coverage ratio. The Credit Facility also contains affirmative and negative covenants and events of default that are customary for credit arrangements of this type including covenants that place restrictions and/or limitations on the Company’s ability to borrow money, make capital expenditures and pay dividends. The Credit Facility had an outstanding balance of $194.4 million at March 31, 2024.

Current wording

As outlined in Note 7 to our condensed consolidated financial statements, the Credit Facility permits borrowing up to a maximum level of $275.0 million. This variable rate facility provides the flexibility to refinance other outstanding debt or finance acquisitions through November 2026. The Credit Facility contains certain financial covenants that require the Company to maintain less than a maximum leverage ratio and more than a minimum interest coverage ratio. The Credit Facility also contains affirmative and negative covenants and events of default that are customary for credit arrangements of this type including covenants that place restrictions and/or limitations on the Company’s ability to borrow money, make capital expenditures and pay dividends. The Credit Facility had an outstanding balance of $187.4 million at June 30, 2024.

Previous wording

The Company’s wholly owned subsidiary located in Stockholm, Sweden, has an overdraft credit line that allows overdrafts on the subsidiary’s bank account up to a daily maximum level of 20.0 million Swedish krona, or $1.9 million and $2.0 million at March 31, 2024 and December 31, 2023, respectively. At March 31, 2024 and December 31, 2023 there were no borrowings outstanding on this overdraft credit line. During the three months ended March 31, 2024, the subsidiary borrowed and repaid 81.0 million Swedish krona, or $7.6 million.

Current wording

The Company’s wholly owned subsidiary located in Stockholm, Sweden, has an overdraft credit line that allows overdrafts on the subsidiary’s bank account up to a daily maximum level of 20.0 million Swedish krona, or $1.9 million and $2.0 million at June 30, 2024 and December 31, 2023, respectively. At June 30, 2024 and December 31, 2023 there were no borrowings outstanding on this overdraft credit line. During the six months ended June 30, 2024, the subsidiary borrowed and repaid 186.5 million Swedish krona, or $17.6 million.

Previous wording

The Company’s wholly owned subsidiary located in Suzhou, China, has lines of credit that allow up to a maximum borrowing level of 20.0 million Chinese yuan, or $2.8 million at both March 31, 2024 and December 31, 2023. At March 31, 2024 and at December 31, 2023 there was $2.1 million and $2.1 million, respectively, in borrowings outstanding on the Suzhou credit line with a weighted-average interest rate of 3.25%. The Suzhou credit line is included on the condensed consolidated balance sheet within current portion of debt. In addition, the Suzhou subsidiary has a bank acceptance draft line of credit which facilitates the extension of trade payable payment terms by 180 days. The bank acceptance draft line of credit allows up to a maximum borrowing level of 60.0 million Chinese yuan, or $8.3 million and $8.5 million at March 31, 2024 and December 31, 2023, respectively. There was $2.1 million and $2.4 million utilized on the Suzhou bank acceptance draft line of credit at March 31, 2024 and December 31, 2023, respectively. The Suzhou bank acceptance draft line of credit is included on the condensed consolidated balance sheet within accounts payable.

Current wording

The Company’s wholly owned subsidiary located in Suzhou, China, has lines of credit that allow up to a maximum borrowing level of 20.0 million Chinese yuan, or $2.8 million at both June 30, 2024 and December 31, 2023. At June 30, 2024 and at December 31, 2023 there was $2.1 million and $2.1 million, respectively, in borrowings outstanding on the Suzhou credit line with a weighted-average interest rate of 3.25%. The Suzhou credit line is included on the condensed consolidated balance sheet within current portion of debt. In addition, the Suzhou subsidiary has a bank acceptance draft line of credit which facilitates the extension of trade payable payment terms by 180 days. The bank acceptance draft line of credit allows up to a maximum borrowing level of 60.0 million Chinese yuan, or $8.3 million and $8.5 million at June 30, 2024 and December 31, 2023, respectively. There was $0.0 million and $2.4 million utilized on the Suzhou bank acceptance draft line of credit at June 30, 2024 and December 31, 2023, respectively. The Suzhou bank acceptance draft line of credit is included on the condensed consolidated balance sheet within accounts payable.

Previous wording

In December 2018, the Company entered into an agreement to make a $10.0 million investment in Autotech Fund II managed by Autotech, a venture capital firm focused on ground transportation technology. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten-year life of the fund. As of March 31, 2024, the Company’s cumulative investment in the Autotech Fund II was $8.4 million. The Company did not contribute to Autotech Fund II during the three months ended March 31, 2024 or 2023.

Current wording

In December 2018, the Company entered into an agreement to make a $10.0 million investment in Autotech Fund II managed by Autotech, a venture capital firm focused on ground transportation technology. The Company’s $10.0 million investment in the Autotech Fund II will be contributed over the expected ten-year life of the fund. As of June 30, 2024, the Company’s cumulative investment in the Autotech Fund II was $8.7 million. The Company contributed $0.3 million to Autotech Fund II during the six months ended June 30, 2024 and made no contributions during the six months ended June 30, 2023.

Previous wording

At March 31, 2024, we had a cash and cash equivalents balance of approximately $48.4 million, of which 87.6% was held in foreign locations. The Company has approximately $80.6 million of undrawn commitments under the Credit Facility as of March 31, 2024, which results in total undrawn commitments and cash balances of more than $129.0 million. However, it is possible that future borrowing flexibility under our Credit Facility may be limited as a result of our financial performance.

Current wording

At June 30, 2024, we had a cash and cash equivalents balance of approximately $42.1 million, of which 84.7% was held in foreign locations. The Company has approximately $87.6 million of undrawn commitments under the Credit Facility as of June 30, 2024, which results in total undrawn commitments and cash balances of more than $129.7 million. However, it is possible that future borrowing flexibility under our Credit Facility may be limited as a result of our financial performance.

Previous wording

The Company’s critical accounting policies, which include management’s best estimates and judgments, are included in Part II, Item 7, to the consolidated financial statements of the Company’s 2023 Form 10-K. These accounting policies are considered critical as disclosed in the Critical Accounting Policies and Estimates section of Management’s Discussion and Analysis of the Company’s 2023 Form 10-K because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates. There have been no material changes in our significant accounting policies or critical accounting estimates during the first quarter of 2023.

Current wording

The Company’s critical accounting policies, which include management’s best estimates and judgments, are included in Part II, Item 7, to the consolidated financial statements of the Company’s 2023 Form 10-K. These accounting policies are considered critical as disclosed in the Critical Accounting Policies and Estimates section of Management’s Discussion and Analysis of the Company’s 2023 Form 10-K because of the potential for a significant impact on the financial statements due to the inherent uncertainty in such estimates. There have been no material changes in our significant accounting policies or critical accounting estimates during the second quarter of 2024.