MILLER INDUSTRIES INC TN

Previous wording

Our MD&A within this Form 10-K generally discusses fiscal 2023 and fiscal 2022 items and year-over-year comparisons between fiscal 2023 and fiscal 2022. Fiscal 2022 items and discussions of year-over-year comparisons between fiscal 2022 and fiscal 2021 that are not included in this Form 10-K can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 (the "Fiscal 2022 Form 10-K").

Current wording

Our MD&A within this Form 10-K generally discusses fiscal 2024 and fiscal 2023 items and year-over-year comparisons between fiscal 2024 and fiscal 2023. Fiscal 2023 items and discussions of year-over-year comparisons between fiscal 2023 and fiscal 2022 that are not included in this Form 10-K can be found in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023 (the“2023 Form 10-K”).

Previous wording

This report (including information incorporated by reference) includes forward-looking statements addressing expectations, prospects, estimates and other matters that are dependent upon future events or developments. Many forward-looking statements appear in MD&A and Risk Factors, but there are others throughout this report, which may be identified by words such as “may,” “will,” “should,” “could,” “continue,” “future,” “potential,” “believe,” “project,” “plan,” “intend,” “seek,” “estimate,” “predict,” “expect,” “anticipate” and variations of such words and similar expressions, and include statements reflecting future results or guidance, statements of outlook and expense accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated or implied. The most significant of these risks and uncertainties are described in “Risk Factors” in this report. Forward-looking statements in this report speak only as of the date of this report. Except to the extent required by applicable law, we undertake no obligation to update or revise any forward-looking statement.

Current wording

This report (including information incorporated by reference) includes forward-looking statements addressing expectations, prospects, estimates, and other matters that are dependent upon future events or developments. Many forward-looking statements appear in MD&A and Risk Factors, but there are others throughout this report, which may be identified by words such as “may”, “will”, “should”, “could”, “continue”, “future”, “potential”, “believe”, “project”, “plan”, “intend”, “seek”, “estimate”, “predict”, “expect”, “anticipate”, and variations of such words and similar expressions, and include statements reflecting future results or guidance, statements of outlook, and expense accruals. These matters are subject to risks and uncertainties that could cause actual results to differ materially from those projected, anticipated, or implied. The most significant of these risks and uncertainties are described in “Risk Factors” in this report. Forward-looking statements in this report speak only as of the date of this report. Except to the extent required by applicable law, we undertake no obligation to update or revise any forward-looking statements.

Previous wording

The Company develops innovative high-quality towing and recovery equipment worldwide. We design and manufacture bodies of car carriers and wreckers, which are installed on chassis manufactured by third parties, and resale to our customers under our Century®, Vulcan®, Chevron™, Holmes®, Challenger®, Champion®, Jige™, Boniface™, Titan® and Eagle® brand names.

Current wording

The Company develops innovative high-quality towing and recovery equipment worldwide. We design and manufacture bodies of car carriers and wreckers, which are installed on chassis manufactured by third parties, and sold to our customers under our Century®, Vulcan®, Chevron™, Holmes®, Challenger®, Champion®, Jige™, Boniface™, Titan®, and Eagle® brand names.

Previous wording

In 2023, we were presented with several ongoing challenges, such as supply chain constraints, freight challenges, intense inflation, rapidly increasing interest rates and labor shortages, all of which impacted our profitability and liquidity.

Current wording

In 2024, we were presented with several ongoing challenges, such as timing of supply chain deliveries, freight challenges, continued inflationary pressures, and increased interest rates, all of which impacted our profitability and liquidity.

Previous wording

We continue to see significant pressure on global supply chains due to a confluence of events from the pandemic to geopolitical tensions, and economic uncertainty. Logistic disruptions and supplier shortages have caused delays in shipping and freight cost increases. Increases in freight costs and supplier constraints due to workforce disruptions and material shortages have affected our ability to receive essential materials and component parts on time. These supply chain issues have had a direct impact on our production capabilities. Also affecting supply chain is the ongoing conflict in Ukraine and more recently in the Middle East. Given these challenges, we are maintaining focus on meeting the needs of our customers. Ongoing communication and prioritization continues with our suppliers in an effort to identify and mitigate such risks and to proactively manage inventory levels of materials and component parts to align with anticipated demand for our products.

Current wording

We continue to see significant pressure on global supply chains due to a confluence of events from the pandemic, geopolitical tensions, and economic uncertainty. Logistic disruptions and supplier shortages have caused delays in shipping and freight cost increases. Increases in freight costs and supplier constraints due to workforce disruptions and material shortages have affected our ability to receive essential materials and component parts on time. These supply chain issues have had a direct impact on our production capabilities. Also affecting supply chain are the ongoing conflicts in Ukraine and the Middle East. Given these challenges, we are maintaining focus on meeting the needs of our customers. Ongoing communication and prioritization continue with our suppliers in an effort to identify and mitigate such risks, and to proactively manage inventory levels of materials and component parts to align with anticipated demand for our products.

Previous wording

The global supply chain issues have also had a direct impact on our production capabilities including production delays and cost pressures. Production delays have affected product availability and delivery timelines and increased logistics costs have led to higher operating cost which resulted in price adjustments for our products. In 2022, we implemented several price increases and surcharges and announced an eight-percent price increase effective in the first quarter of 2023. We have also developed alternatives to some of the components used in our production process that incorporate raw materials, and our suppliers have implemented these alternatives in the production of our component parts. In addition, beginning in the first quarter of fiscal 2022, we sought additional production capabilities through capital deployment, such as our acquisition of SHC in the second quarter of 2023 and our purchase of an additional small facility in Ooltewah, TN to be used in the production of small carrier units.

Current wording

The global supply chain issues have also had a direct impact on our production capabilities including production delays and cost pressures. Production delays have affected product availability and delivery timelines, and increased logistics costs have led to higher operating cost which resulted in price adjustments for our products. In 2022, we implemented several price increases and surcharges and announced an eight-percent price increase effective in the first quarter of 2023. We have also developed alternatives to some of the components used in our production process that incorporate raw materials, and our suppliers have implemented these alternatives in the production of our component parts. In addition, beginning in the first quarter of fiscal 2022, we sought additional production capabilities through capital deployment, such as our acquisition from Southern Hydraulic Cylinder, Inc. in the second quarter of 2023, and our purchase of an additional small facility in Ooltewah, Tennessee to be used in the production of small carrier units.

Previous wording

Based on our strong backlog, the price increases and productivity improvements we have implemented, lessening supply chain disruptions and easing inflationary pressures, our operating results improved throughout fiscal 2023 and we believe we are well-positioned to continue enhancing our operating results. However, our performance will be heavily influenced by, among other things, whether supply chain constraints and inflationary pressures continue to lessen or worsen, the continuing impact of the wars in Ukraine and Middle East or other geopolitical factors, and the threat of recession and general economic factors. The impact of these factors remains largely out of our control, and we currently anticipate that these factors will continue to have an adverse impact on our production capabilities, financial results and cash flow to continue into fiscal 2024.

Current wording

Based on our strong backlog, the price increases and productivity improvements we have implemented, lessening supply chain disruptions and easing inflationary pressures, our operating results improved throughout fiscal 2024 and we believe we are well-positioned to continue enhancing our operating results. However, our performance will be heavily influenced by, among other things, whether supply chain constraints and inflationary pressures continue to lessen or worsen, ongoing changes in U.S. and foreign government trade policies, such as the imposition of new or additional tariffs, potential modifications to existing trade agreements and further restrictions on free trade, the continuing impact of the wars in Ukraine and Middle East or other geopolitical factors, and the threat of recession and general economic factors. The impact of these factors remains largely out of our control, and we currently anticipate that these factors will continue to have an adverse impact on our production capabilities, financial results, and cash flow to continue into fiscal 2025.

Previous wording

Impacts of current global supply chain disruptions, inflationary environment, geopolitical tensions and other macroeconomic factors can lead to foreign currency fluctuations. The impact of inflationary or deflationary pressues have caused and may continue to cause foreign currency translation gains or losses within our consolidated statement of comprehensive income/loss.

Current wording

Impacts of current global supply chain disruptions, inflationary environment, geopolitical tensions, and other macroeconomic factors can lead to foreign currency fluctuations. The impact of inflationary or deflationary pressures have caused and may continue to cause foreign currency translation gains or losses within our consolidated statement of comprehensive income/loss.

Previous wording

The information regarding the California Air Resources Board’s regulations is included under the heading “Government Regulations and Environmental Matters” in Part I, Item I and in Part I, Item 1A–“Risk Factors” of this Annual Report.

Current wording

The information regarding the California Air Resources Board’s regulations is included under the heading “Government Regulations and Environmental Matters” in Part I, Item 1 – “Business” and in Part I, Item 1A – “Risk Factors” of this Annual Report.

Previous wording

The following table sets forth the components of the consolidated statements of income expressed as a percentage of net sales for the years ended:

Current wording

The following table sets forth the components of the consolidated statements of income for the years ended:

Previous wording

Consolidated net sales in fiscal 2023 were $1,153.4 million compared to $848.5 million in fiscal 2022, an increase of 35.9%. The increase in net sales was primarily driven by increases in production volume due to supply chain improvements and continued strong customer demand, as well as pricing adjustments implemented in the first quarter.

Current wording

Consolidated net sales in fiscal 2024 were $1.26 billion compared to $1.15 billion in fiscal 2023, an increase of 9.0%. The increase in net sales was primarily driven by higher production volume as a result of stabilization of the supply chain and continued strong customer demand, as well as an annual price increase of 3% implemented throughout the first half of the year.

Previous wording

Net foreign sales in fiscal 2023 were $114.4 million compared to $83.1 million in fiscal 2022, an increase of 38.0%.

Current wording

Net foreign sales in fiscal 2024 were $125.7 million compared to $114.4 million in fiscal 2023, an increase of 9.9%.

Previous wording

Gross profit is equal to net sales less cost of sales. Gross profit in fiscal 2023 was $151.9 million compared to $82.4 million in fiscal 2022, an increase of 84.2%. Cost of sales includes the direct cost of manufacturing, including direct materials, labor and related overhead, physical inventory adjustments, as well as inbound and outbound freight.

Current wording

Cost of operations includes the direct cost of manufacturing, including direct materials, labor and related overhead, physical inventory adjustments, as well as inbound and outbound freight. Costs of operations in fiscal 2024 were $1.09 billion compared to $1.00 billion in fiscal 2023, an increase of 8.5%. The increase in cost of operations was primarily attributed to increased deliveries resulting from increased stabilization in our supply chain.

Previous wording

Selling, general and administrative expenses in fiscal 2023 were $73.1 million compared to $52.8 million in fiscal 2022, an increase of 38.4%. The increase in selling, general and administrative expenses was primarily due to additional executive compensation expense, investor relations activity, increased expenses associated with increased sales volume and increased investment in our workforce, specifically for training and more competitive compensation to improve employee retention. As a percentage of net sales, selling, general and administrative expenses increased to 6.3% in 2023 from 6.2% in 2022.

Current wording

Selling, general and administrative expenses in fiscal 2024 were $86.3 million compared to $73.1 million in fiscal 2023, an increase of 18.1%. The increase in selling, general and administrative expenses was primarily due to additional executive compensation expense, and increased investment in our workforce, specifically for training and more competitive compensation to improve employee retention. As a percentage of net sales, selling, general and administrative expenses increased to 6.9% in 2024 from 6.3% in 2023.

Previous wording

The Company is exposed to foreign currency transaction risk when the Company has transactions that are denominated in a currency other than its functional currency. When the related balance sheet items are remeasured in the functional currency of the Company, gains and losses are recorded through other (income) expense. Other (income) expense, net is composed primarily of these foreign currency exchange gains and losses. The Company experienced a net foreign currency exchange gain of $0.8 million for 2023 compared to a net exchange loss of $0.7 million for 2022. Other (income) expense for fiscal 2023 includes $0.2 million of other income.

Current wording

The Company is exposed to foreign currency transaction risk when the Company has transactions that are denominated in a currency other than its functional currency. When the related balance sheet items are remeasured in the functional currency of the Company, gains and losses are recorded through other (income) expense. Other (income) expense, net is composed primarily of these foreign currency exchange gains and losses. The Company experienced a net foreign currency exchange loss of $0.6 million for 2024 compared to a net exchange gain of $0.8 million for 2023. Other (income) expense for fiscal 2024 includes $0.1 million of other income.

Previous wording

The provision for income taxes for the years ended December 31, 2023 and 2022 reflects a combined federal, state and foreign tax rate of 21.0% and 21.0%, respectively, which corresponds to a tax provision of $15.5 million in 2023 compared to $5.4 million for 2022. For more information on the effective tax rate, see Note 8 to our consolidated financial statements.

Current wording

The provision for income taxes for the years ended December 31, 2024 and 2023 reflects a combined federal, state, and foreign tax rate of 20.8% and 21.0%, respectively, which corresponds to a tax provision of $16.6 million in 2024 compared to $15.5 million for 2023. For more information on the effective tax rate, see Note 8 – “Income Taxes” to our consolidated financial statements.

Previous wording

We expect our primary sources of cash to be from cash and temporary investments, cash flow from operations and availability under our credit facility at December 31, 2023. We currently believe that, based on available capital resources and projected operating cash flow, we have adequate capital resources to fund our operations and expected future cash needs as described below. However, our ability to satisfy our cash needs will substantially depend upon a number of factors including our future operating performance, taking into account the economic, regulatory and other factors discussed elsewhere in this Annual Report, many of which are beyond our control.

Current wording

We expect our primary sources of cash to be from cash and temporary investments, cash flow from operations, and availability under our credit facility as of December 31, 2024. We currently believe that, based on available capital resources and projected operating cash flow, we have adequate capital resources to fund our operations and expected future cash needs for the next twelve months. However, our ability to satisfy our cash needs will substantially depend upon a number of factors including our future operating performance, taking into account the economic, regulatory, and other factors discussed elsewhere in this Annual Report, many of which are beyond our control.

Previous wording

At December 31, 2023 and 2022, we had consolidated cash and temporary investments of $29.9 million and $40.2 million, respectively. Our primary cash requirements include working capital, capital expenditures, the funding of any declared cash dividends and principal and interest payments on indebtedness.

Current wording

As of December 31, 2024 and 2023, we had consolidated cash and temporary investments of $24.3 million and $29.9 million, respectively. Our primary cash requirements include working capital, capital expenditures, the funding of any declared cash dividends and principal, and interest payments on indebtedness.

Previous wording

At December 31, 2023 and 2022, cash and temporary investments included $18.2 million and $18.3 million held by foreign subsidiaries based in the local currency, respectively. We do not currently have plans to repatriate undistributed foreign earnings to the United States and have not determined any timeline or amount for any such future distributions.

Current wording

Cash and temporary investments included $18.2 million held by foreign subsidiaries based in local currency for the years ended December 31, 2024 and 2023. We do not currently have plans to repatriate undistributed foreign earnings to the United States and have not determined any timeline or amount for any such future distributions.

Previous wording

Working capital at December 31, 2023 and 2022 was $275.8 million and $219.9 million, respectively. Changes in working capital, which impact operating cash flow, can vary significantly depending on factors such as the timing of customer payments, inventory purchases and payments to vendors. Management continually monitors working capital to ensure it remains at levels to support ongoing operations, meet obligations and pursue growth opportunities. See “Cash Flows” – “Cash Flows provided by (used in) Operating Activities” contained within this MD&A for additional discussion on working capital.

Current wording

Working capital as of December 31, 2024 and 2023 was $331.9 million and $275.8 million, respectively. Changes in working capital, which impact operating cash flow, can vary significantly depending on factors such as the timing of customer payments, inventory purchases, and payments to vendors. Management continually monitors working capital to ensure it remains at levels to support ongoing operations, meet obligations, and pursue growth opportunities. See “Cash Flows” – “Cash Flows Provided by (Used in) Operating Activities” contained within this MD&A for additional discussion on working capital.

Previous wording

Capital expenditures during fiscal 2023 and 2022 were $12.1 million and $28.9 million, respectively. We make ongoing capital investments in our property, plant and equipment, and continue to increase purchases of materials, components and chassis to ramp up production to meet demand, which has been at historic levels. We believe that in periods of normalized supply chain, our historical capital investments in our manufacturing facilities and other capital assets will increase the production capacity and efficiencies of our operations. See “Cash Flows” – “Cash Flows provided by (used in) Investing Activities” contained within this MD&A for additional discussion on capital expenditures.

Current wording

Capital expenditures during fiscal 2024 and 2023 were $15.4 million and $12.1 million, respectively. We make ongoing capital investments in our property, plant and equipment, and continue to increase purchases of materials, components, and chassis to ramp up production to meet demand, which has been at historic levels. We believe that in periods of normalized supply chain, our historical capital investments in our manufacturing facilities and other capital assets will increase the production capacity and efficiencies of our operations. See “Cash Flows” – “Cash Flows Provided by (Used in) Investing Activities” contained within this MD&A for additional discussion on capital expenditures.

Previous wording

Our Board of Directors declared quarterly cash dividends of $0.18 per share in fiscal 2023. Future common stock cash dividends will depend on our financial condition, results of operations, capital requirements and other factors deemed relevant by our Board of Directors. See Note 11, Shareholders’ Equity, for additional discussion on dividends.

Current wording

Our Board of Directors declared quarterly cash dividends of $0.19 per share in fiscal 2024. Future common stock cash dividends will depend on our financial condition, results of operations, capital requirements, and other factors deemed relevant by our Board of Directors. See Note 11 – “Shareholders’ Equity”, for additional discussion on dividends.

Previous wording

On October 28, 2022, we entered into a first amendment to the loan agreement with First Horizon Bank (“First Horizon”) that provides an unsecured revolving credit facility with a maturity date of May 31, 2027, to increase the credit facility from $50.0 million to $100.0 million, made certain technical and operational adjustments necessary to implement the one month Term SOFR Rate (as defined in the loan agreement) as the primary interest rate index under the credit facility and added a new asset coverage financial covenant test. All other material terms and conditions of the credit facility remained unchanged.

Current wording

On October 28, 2022, we entered into a first amendment to the loan agreement with First Horizon Bank (“First Horizon”) that provides an unsecured revolving credit facility with a maturity date of May 31, 2027, to increase the credit facility from $50.0 million to $100.0 million. We made certain technical and operational adjustments necessary to implement the one-month Term SOFR Rate (as defined in the loan agreement) as the primary interest rate index under the credit facility and added a new asset coverage financial covenant test. All other material terms and conditions of the credit facility remained unchanged.

Previous wording

Our ongoing operations have, to date, been funded by a combination of cash flow from operations and borrowings under our credit facility. As of December 31, 2023, the Company had $60.0 million in borrowings outstanding under the credit facility. In January 2024, the Company paid $5.0 million towards its credit facility and retains a balance of $55.0 million at February 29, 2024.

Current wording

Our ongoing operations have, to date, been funded by a combination of cash flow from operations and borrowings under our credit facility. As of December 31, 2024, the Company had $65.0 million in borrowings outstanding under the credit facility. Since December 2024, the Company drew net advances of $5.0 million from its credit facility for a balance of $70.0 million as of February 28, 2025.

Previous wording

Changes in interest rates affect the interest paid on indebtedness under our credit facility because the outstanding amounts of indebtedness under our current credit facility are subject to variable interest rates. Under our credit facility, the non-default rate of interest is equal to the one-month Term SOFR plus 1.00% or 1.25% per annum, depending on our leverage ratio, for a rate of interest of 6.47% at December 31, 2023.

Current wording

Changes in interest rates affect the interest paid on indebtedness under our credit facility because the outstanding amounts of indebtedness under our current credit facility are subject to variable interest rates. Under our credit facility, the non-default rate of interest is equal to the one-month Term SOFR plus 1.00% or 1.25% per annum, depending on our leverage ratio, for a rate of interest of 5.45% as of December 31, 2024.

Previous wording

Prior to applying a discount rate to our lease liabilities, we had approximately $0.9 million in non-cancellable operating lease obligations and no non-cancellable finance lease obligations for both years ended December 31, 2023 and 2022. Leases with original contractual terms less than one year were excluded from non-cancellable lease obligations.

Current wording

Prior to applying a discount rate to our lease liabilities, we had approximately $0.6 million in non-cancellable operating lease obligations for the year ended December 31, 2024 and approximately $0.9 million for the year ended December 31, 2023. There were no non-cancellable finance lease obligations for either year. Leases with original contractual terms less than one year were excluded from non-cancellable lease obligations.

Previous wording

During fiscal 2021, we completed phase one of our enterprise software solution implementation. During fiscal 2022 and fiscal 2023, we continued to implement additional functionality available in the enterprise software solution. We expect this software to substantially improve our administrative efficiency and customer service levels. We have $1.4 million in remaining contractual payments under our agreement with the software provider, which extends through 2025.

Current wording

During fiscal 2021, we completed phase one of our enterprise software solution implementation. Through fiscal 2024, we have continued to implement additional functionality available in the enterprise software solution. We expect this software to substantially improve our administrative efficiency and customer service levels. We have $0.5 million in remaining contractual payments under our agreement with the software provider, which extends through 2025.

Previous wording

Cash provided by operating activities during 2023 was $11.0 million, compared to $19.2 million of cash used in operating activities during 2022. Cash provided by operating activities is generally attributable to the receipt of payments from our customers as settlement of their contractual obligation once we have fulfilled all performance obligations related to our contracts with them. These cash receipts are netted with payments for purchases of inventory, payments for materials used in manufacturing and other payments that are necessary in the ordinary course of our operations, such as those for utilities and taxes. The change in operating activities is primarily due to increased net income and a stabilization of changes in operating assets and liabilities as a result of improved availability of purchased components.

Current wording

Cash provided by operating activities during 2024 was $16.9 million, compared to $11.0 million of cash provided by operating activities during 2023. Cash provided by operating activities is generally attributable to the receipt of payments from our customers as settlement of their contractual obligation once we have fulfilled all performance obligations related to our contracts with them. These cash receipts are netted with payments for purchases of inventory, payments for materials used in manufacturing, and other payments that are necessary in the ordinary course of our operations, such as those for utilities and taxes. During fiscal 2024, the change in operating activities was primarily due to increased net income and a further stabilization of changes in asset and liabilities as a result of the continued supply chain recovery. During fiscal 2023, the change in operating activities was primarily due to increased net income and a stabilization of changes in operating assets and liabilities as a result of improved availability of purchased components.

Previous wording

Cash used in investing activities during 2023 was $29.1 million, compared to $28.9 million used during 2022. The cash used in investing activities for 2023 was primarily for the purchase of SHC, Inc., (see Note 2) and purchases of property, plant and equipment.

Current wording

Cash used in investing activities during 2024 was $15.3 million, compared to $29.1 million used in investing activities during 2023. The cash used in investing activities for 2024 was primarily for purchases of plant, property and equipment; cash used in 2023 was primarily for the purchase of the assets and assumption of certain liabilities of Southern Hydraulic Cylinder, Inc., (see Note 2) as well as purchases of property, plant and equipment.

Previous wording

Cash provided by financing activities during 2023 was $6.8 million, compared to $36.8 million provided by 2022. The cash provided by financing activities in 2023 resulted from advances of $15.0 million under the Company’s primary credit facility, offset by the payment of cash dividends of $8.2 million.

Current wording

Cash used in financing activities during 2024 was $6.6 million, compared to $6.8 million provided by financing activities during 2023. The cash used in financing activities in 2024 resulted from advances of $5.0 million under the Company’s primary credit facility, offset by the payment of cash dividends of $8.7 million and stock repurchase of $2.9 million. See Note 11 – “Shareholders’ Equity” for more information.

Previous wording

Cash provided by financing activities during fiscal 2022 included advances on the credit facility of $45.0 million, offset by dividend payments of $8.2 million and an immaterial amount of payments on finance lease obligations.

Current wording

Cash provided by financing activities during fiscal 2023 included advances on the credit facility of $15.0 million, offset by dividend payments of $8.2 million and an immaterial amount of payments on finance lease obligations.

Previous wording

The allowance for credit losses includes general and specific reserves. We determine our allowance for credit losses by reviewing accounts receivable aging, historical write-off trends, payment history, pricing discrepancies, industry trends, customer financial strength, customer credit ratings or bankruptcies. We regularly evaluate how changes in economic conditions may affect credit risks.

Current wording

The allowance for credit losses includes general and specific reserves. We determine our allowance for credit losses by reviewing accounts receivable agings, historical write-off trends, payment history, pricing discrepancies, industry trends, customer financial strength, customer credit ratings or bankruptcies. We regularly evaluate how changes in economic conditions may affect credit risks.

Previous wording

A hypothetical 0.1 percent increase or decrease in the reserve as a percentage of trade receivables at December 31, 2023, would result in an increase or decrease in bad debt expense of $0.3 million. We believe the reserve maintained and expenses recorded in fiscal 2023 are appropriate.

Current wording

A hypothetical 0.1 percent increase or decrease in the reserve as a percentage of trade receivables as of December 31, 2024, would result in an increase or decrease in bad debt expense of $0.3 million. We believe the reserve maintained and expenses recorded in fiscal 2024 are appropriate.

Previous wording

Our estimate of forecasted sales demand and production requirements is primarily based on actual orders received, historical and projected sales trends, demand, product pricing, and economic trends and competitive factors. Forecasted sales demand and production requirements can also be affected by the significant redesign of our existing products. If actual conditions are less favorable than our assumptions, additional inventory reserves may be required.

Current wording

Our estimate of forecasted sales demand and production requirements is primarily based on actual orders received, historical and projected sales trends, demand, product pricing, economic trends, and competitive factors. Forecasted sales demand and production requirements can also be affected by the significant redesign of our existing products. If actual conditions are less favorable than our assumptions, additional inventory reserves may be required.

Previous wording

The estimation of fair value includes significant judgment regarding assumptions of revenue, operating costs, interest rates, property and equipment additions, and industry competition and general economic and business conditions among other factors. We believe that these estimates are reasonable; however, changes in any of these factors could affect these evaluations. Based on these estimates, we believe that our long-lived assets are appropriately valued.

Current wording

The estimation of fair value includes significant judgment regarding assumptions of revenue, operating costs, interest rates, property and equipment additions, industry competition, and general economic and business conditions among other factors. We believe that these estimates are reasonable; however, changes in any of these factors could affect these evaluations. Based on these estimates, we believe that our long-lived assets are appropriately valued.

Previous wording

We may elect to first perform a qualitative assessment to determine whether changes in events or circumstances since our most recent quantitative test for impairment indicate that it is more likely than not that the fair value of a reporting unit is less than its respective carrying amount. We have an unconditional option to bypass the qualitative assessment for a reporting unit and proceed directly to performing the quantitative analysis. If elected, in conducting the initial qualitative assessment, we analyze our most recent estimates of the fair value of a reporting unit by assessing actual and projected growth trends for operating results, as well as historical operating results versus planned performance. Additionally, a reporting unit is assessed for critical areas that may impact its operating performance, including macroeconomic conditions, industry and market considerations, cost factors such as products and component parts and labor, as well as market-related exposures such as fluctuations in our company's market capitalization and share price, and/or any other potential risks to operating performance, such as regulatory and environmental changes. If, after evaluating the weight of the changes in events and circumstances, both positive and negative, we conclude that an impairment of goodwill may exist, a quantitative test for impairment is performed.

Current wording

We may elect to first perform a qualitative assessment to determine whether changes in events or circumstances since our most recent quantitative test for impairment indicate that it is more likely than not that the fair value of a reporting unit is less than its respective carrying amount. We have an unconditional option to bypass the qualitative assessment for a reporting unit and proceed directly to performing the quantitative analysis. If elected, in conducting the initial qualitative assessment, we analyze our most recent estimates of the fair value of a reporting unit by assessing actual and projected growth trends for operating results, as well as historical operating results versus planned performance. Additionally, a reporting unit is assessed for critical areas that may impact its operating performance, including macroeconomic conditions, industry and market considerations, cost factors such as products and component parts and labor, market-related exposures such as fluctuations in our company’s market capitalization and share price, and/or any other potential risks to operating performance, such as

Previous wording

We believe that our analysis of historical warranty claim trends and knowledge of potential manufacturing and/or product design improvements provide sufficient information to establish a reasonable estimate for the cost of future warranty claims at the time of sale and our warranty accruals as of the date of our consolidated balance sheets. However, due to the inherent uncertainty in the accrual estimation process, including forecasting future warranty claims and costs associated with servicing future warranty claims, our actual warranty costs incurred may differ from our warranty accrual estimate. An unexpected increase in warranty claims and/or in the costs associated with servicing those claims would result in an increase in our warranty accruals and a decrease in our net earnings.

Current wording

We believe that our analysis of historical warranty claims trends and knowledge of potential manufacturing and/or product design improvements provide sufficient information to establish a reasonable estimate for the cost of future warranty claims at the time of sale and our warranty accruals as of the date of our consolidated balance sheets. However, due to the inherent uncertainty in the accrual estimation process, including forecasting future warranty claims and costs associated with servicing future warranty claims, our actual warranty costs incurred may differ from our warranty accrual estimate. An unexpected increase in warranty claims and/or in the costs associated with servicing those claims would result in an increase in our warranty accruals and a decrease in our net earnings.

Previous wording

50 percent likelihood of being realized upon ultimate settlement. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. In addition, changes in existing tax laws or rates could significantly change our current estimate of our unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined. Changes in current estimates, if significant, could have a material adverse impact on our financial statements.

Current wording

We recognize tax assets and liabilities in accordance with ASC 740, Income Taxes, for income tax accounting. Accordingly, we recognize a tax benefit from an uncertain tax position when it is more likely than not the position will be sustained upon examination based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement. Due to the complexity of some of these uncertainties, the ultimate resolution may result in a payment that is materially different from our current estimate of the unrecognized tax benefit liabilities. In addition, changes in existing tax laws or rates could significantly change our current estimate of our unrecognized tax benefit liabilities. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined. Changes in current estimates, if significant, could have a material adverse impact on our financial statements.