PART II OTHER KEY INFORMATION

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
PURCHASES OF EQUITY SECURITIES
Market Information
Our common stock is traded on the New York Stock Exchange under the symbol “MLR.”
Holders of Record
As of February 29, 2024, there were approximately 389 registered holders of record of our common stock. The number of record holders does not include
persons who held our common stock in nominee or “street name” accounts through brokers.
Dividends
During fiscal 2023, the Company’s Board of Directors declared the following dividends on its common stock:
Declaration Date Record Date Payable Date Per Share
March 6, 2023 March 20, 2023 March 27, 2023 $ 0.18
May 1, 2023 June 5, 2023 June 12, 2023 $ 0.18
August 7, 2023 September 1, 2023 September 11, 2023 $ 0.18
November 6, 2023 December 4, 2023 December 11, 2023 $ 0.18

The Company has paid consecutive quarterly cash dividends since May 2011. Any future determination as to the payment of cash dividends will depend
upon factors such as earnings, capital requirements, our financial condition, restrictions in financing agreements and other factors deemed relevant by our
Board of Directors. Covenants under our current credit facility restrict the payment of cash dividends if the Company would be in violation of the minimum
tangible net worth test or the leverage ratio test in the current loan agreement as a result of the dividend, among various other restrictions.
For more information on dividends, see Note 11 – Shareholders’ Equity, to our Consolidated Financial Statements.
Equity Compensation Plan Information
The information required by this item is incorporated by reference from the information to be included in our 2024 Proxy Statement under the section entitled
“Equity Compensation Plan Information,” which will be filed with the SEC within 120 days after December 31, 2023.
Sales of Unregistered Securities
None.
Stock Performance Graph
The following graph compares the performance of our common stock to the NYSE Composite index and two peer groups of issuers. Peer group 1 consists
of peers used by an investor’s services group and peer group 2 was developed by the Company with input from the compensation consultant of the
Compensation Committee of the Board of Directors.
In October 2023, peer, CIRCOR International, Inc., was acquired by a global investment firm. As a result, its shares ceased to trade on the NYSE.
Correspondingly, the Company removed CIRCOR International, Inc., from its performance data for all periods presented to allow for more meaningful
comparisons.

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 PART II OTHER KEY INFORMATION

The performance graph above assumes $100 was invested on December 31, 2018 in common stock of Miller Industries. Any dividends paid during the
period presented were assumed to be reinvested. The performance was plotted using the following data:
12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023
Miller Industries, Inc. $ 100 $ 138 $ 141 $ 124 $ 99 $ 157
NYSE Composite Index $ 100 $ 122 $ 128 $ 151 $ 133 $ 148
Peer Group 1 $ 100 $ 120 $ 135 $ 153 $ 126 $ 153
Peer Group 2 $ 100 $ 133 $ 132 $ 130 $ 95 $ 106
Peer Group 1 index consists of Albany International Corp. (AIN); Blue Bird Corp. (BLBD); Columbus McKinnon Corp. (CMCO); Commercial Vehicle Group,
Inc. (CVGI); Enerpac Tool Group Corp. (EPAC); ESCO Technologies Inc. (ESE); L.B. Foster Co. (FSTR); Gorman-Rupp Co. (GRC); Helios Technologies
Inc. (HLIO); Kadant Inc. (KAI); Lindsay Corp. (LNN); Luxfer Holdings PLC (LXFR); NN, Inc. (NNBR); Douglas Dynamics Inc. (PLOW); Proto Labs Inc.
(PRLB); Shyft Group Inc. (SHYF); and Standex International Corp (SXI).
Peer Group 2 index consists of Astec Industries, Inc. (ASTE); Blue Bird Corp. (BLBD); Commercial Vehicle Group, Inc. (CVGI); Enerpac Tool Group Corp.
(EPAC); L.B. Foster Co. (FSTR); Motorcar Parts of America, Inc. (MPAA); NN, Inc. (NNBR); Park-Ohio Holdings Corp (PKOH); Stoneridge, Inc. (SRI);
Douglas Dynamics Inc. (PLOW); and Shyft Group Inc. (SHYF).

ITEM 6.
Reserved.

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 PART II ITEM 7. MD&A

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
INTRODUCTION
As used in this report, "Miller Industries," the “Company,” "we," "our," “ours” "us," and similar pronouns refer to Miller Industries, Inc., and its consolidated
subsidiaries, unless the context requires otherwise. Our fiscal year ends on December 31. References to fiscal 2023, 2022 and 2021, are to the fiscal years
ended December 31, 2023, 2022, and 2021, respectively. Except as otherwise specified, information in this report is provided as of December 31, 2023.
To facilitate timely reporting, the consolidated financial statements include accounts of certain subsidiaries whose fiscal closing dates differ from
December 31st by 31 days (or less).
Management’s Discussion and Analysis of Financial Condition and Results of Operations
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").
Important Information Regarding Forward-Looking Statements
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.
Available Information
Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports are available free of
charge on our website ([Link]), under the “Investors — Filings — Annual Reports” caption, as soon as reasonably practicable after we
electronically file them with, or furnish them to, the SEC. The SEC also maintains a website ([Link]) where you can search for annual, quarterly and
current reports, proxy and information statements, and other information regarding us and other public companies.

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 PART II ITEM 7. MD&A

ABOUT MILLER INDUSTRIES

Miller Industries, headquartered in Ooltewah, Tennessee, was formed in 1990 and has become The World’s Largest Manufacturer of Towing and Recovery
Equipment®, with domestic manufacturing operations in Tennessee and Pennsylvania, and foreign manufacturing operations in France and the United
Kingdom.
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.
Our management focuses on a variety of key indicators to monitor our overall operating and financial performance. These indicators include measurements
of revenue, income from operations, gross margin, net income, earnings per share, capital expenditures and cash flow.
Our history of innovation in the towing and recovery industry has been an important factor behind our growth over the last decade and we believe that our
continued emphasis on research and development will be a key factor in our future growth.
SIGNIFICANT TRENDS AND OUTLOOK
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.
Supply Chain
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.
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.
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.
Inflation
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.
California’s Air Resources Board
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.

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 PART II ITEM 7. MD&A

RESULTS OF OPERATIONS
The following table sets forth the components of the consolidated statements of income expressed as a percentage of net sales for the years ended:
December 31,
(in thousands) 2023 2022 Change
Net Sales $ 1,153,354 $ 848,456 35.9%
Costs of operations 1,001,500 766,037 30.7%
Gross Profit 151,854 82,419 84.2%
Operating Expenses:
Selling, general and administrative 73,087 52,827 38.4%
Non-operating (income) expenses
Interest expense, net 5,974 3,379 76.8%
Other (income) expense, net (991) 481 (306.0)%
Total expenses, net 78,070 56,687 37.7%
Income before income taxes 73,784 25,732 186.7%
Income tax provision 15,493 5,386 187.7%
Net income $ 58,291 $ 20,346 186.5%

Comparison of the Years Ended December 31, 2023 and 2022

Net Sales
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.
Net foreign sales in fiscal 2023 were $114.4 million compared to $83.1 million in fiscal 2022, an increase of 38.0%.
Cost of Operations
Costs of operations in fiscal 2023 were $1,001.5 million compared to $766.0 million in fiscal 2022, an increase of 30.7%. The increase in cost of operations
was primarily attributed to increased deliveries resulting from increased stabilization in supply chain.
Gross Profit
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.
Selling, General and Administrative
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.
Interest Expense, Net
Interest expense, net in fiscal 2023 was $6.0 million compared to $3.4 million in fiscal 2022, an increase of 76.8%. Increases in interest expense, net were
primarily due to increased borrowings, increased interest rates and increases in floor plan interest payments, offset by interest income.
Other (Income) Expense
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.

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 PART II ITEM 7. MD&A

Provision for Income Taxes

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.
LIQUIDITY AND CAPITAL RESOURCES
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.
Cash and Temporary Investments
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.
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.
Working Capital
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.
Capital Expenditures
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.
Dividends
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.
Indebtedness
Credit Facility
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.
The Company pays a quarterly, non-usage fee under the current loan agreement at a rate per annum equal to between 0.15% and 0.35% of the unused
amount under the credit facility. The credit facility contains customary representations and warranties, events of default and financial, affirmative and
negative covenants for loan agreements of this kind.
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.

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 PART II ITEM 7. MD&A

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.
As of December 31, 2023, we were in compliance with all covenants under the credit facility.
Other Long-Term Obligations
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.
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.
Cash Flows
Information about our cash flows, by category, is presented in our consolidated statement of cash flows and is summarized below:
December 31,
(in thousands) 2023 2022 Change
Operating activities $ 10,963 $ (19,155) 157.2 %
Investing activities (29,075) (28,931) 0.5 %
Financing activities 6,751 36,765 (81.6)%
Effect of exchange rate changes on cash and temporary investments 1,117 (2,858) 139.1 %
Net increase / (decrease) in cash and temporary investments $ (10,244) $ (14,179) (27.8) %
Cash Flows provided by (used in) Operating Activities
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.
Cash used in operating activities during fiscal 2022, included purchases of materials, components and chassis to ramp up production to meet our historic
demand levels and to mitigate various supply chain disruptions. These purchases coupled with the increased costs of inventory and labor caused cash
provided by operating activities to be exceeded by cash used in operating activities.
Changes in working capital, which impact operating cash flow, can vary significantly depending on factors such as the timing of customer payments,
inventory purchases, payments to vendors and tax payments in the regular course of business.
Cash Flows provided by (used in) Investing Activities
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.
Cash used in investing activities during fiscal 2022 was primarily for the purchase of property, plant and equipment, including an aircraft purchased which
is used to enhance our marketing efforts, establish and maintain our relationships with key suppliers and visit our facilities that are not easily accessible via
commercial air travel. We also continued to invest in manufacturing automation, ERP system enhancements and employee safety initiatives.
Cash Flows provided by (used in) Financing Activities
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.
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.
CRITICAL ACCOUNTING POLICIES AND SENSITIVE ACCOUNTING ESTIMATES

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Critical accounting policies and estimates are those accounting policies that (i) can have a significant impact on our financial condition and results of
operations and (ii) require the use of complex and subjective estimates based upon past experience and management’s judgment. Because estimates are
inherently uncertain, actual results may differ. In this section, we describe the significant policies applied in preparing our consolidated financial statements
that management believes are the most dependent on estimates and assumptions. See Note 1 of the consolidated financial statements for further discussion
on significant accounting policies.
Allowance for Credit Losses
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.
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.
At this time, we are not aware of any analytical findings or customer issues that are likely to lead to a significant future increase in the allowance for credit
losses as a percentage of revenue. The following table presents information regarding our allowance for credit losses over the past three fiscal years:

(in thousands, except percentages) 2023 2022 2021

Allowance for credit losses, beginning of period $ 1,319 $ 1,155 $ 1,295
Charges to costs and expenses 208 174 (137)
Reduction to allowance for customer write-offs — (10) (3)
Allowance for credit losses, end of period $ 1,527 $ 1,319 $ 1,155
Allowance as a percentage of customer receivables 0.5% 0.7% 0.7%
Allowance as percentage of revenue 0.1% 0.2% 0.2%

Inventory
Inventories are valued at the lower of cost or net realizable value determined primarily on a moving average unit cost basis. As needed, we record an
inventory valuation adjustment for excess, slow moving and obsolete inventory that is equal to the excess of the cost of the inventory over the estimated
net realizable value. The inventory valuation adjustment to net realizable value establishes a new cost basis of the inventory that cannot be subsequently
reversed.
In developing inventory valuation adjustments for excess, slow moving, and obsolete inventory, we are required to use judgment and make estimates of
future sales demand and production requirements compared with current inventory levels.
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.
Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of these assets may not be fully
recoverable. When a determination has been made that the carrying amount of long-lived assets may not be fully recovered, the amount of impairment is
measured by comparing an asset’s estimated fair value to its carrying value. The determination of fair value is based on projected future cash flows
discounted at a rate determined by management, or if available, independent appraisals or sales price negotiations.
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.
Business Combinations
When applicable, we account for the acquisition of a business in accordance with ASC 805, Business Combinations, whereby the fair value of total
consideration transferred is allocated to the assets acquired and liabilities assumed, including amounts attributable to non-controlling interests, when
applicable, based on their respective estimated fair values as of the date of acquisition. Goodwill represents the excess of consideration transferred over
the estimated fair value of the net assets acquired.

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The allocation of purchase consideration requires management to make significant estimates and assumptions. Management’s estimates of fair value are
based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from
such estimates. During the measurement period, which is no longer than one year from the acquisition date, the Company may record adjustments to the
assets acquired and liabilities assumed. Upon the conclusion of the measurement period, any subsequent adjustments are recognized in operations.
While the ultimate responsibility for determining estimated fair values of the acquired net assets resides with management, for material acquisitions we may
retain the services of certified valuation specialists to assist with assigning estimated fair values to certain acquired assets and assumed liabilities.
Goodwill
Goodwill is initially recognized as a result of the excess of purchase consideration transferred over the estimated fair value of the net assets acquired in a
business combination. Goodwill is not amortized, but is tested at least annually for impairment during the fourth quarter of our fiscal year unless events or
changes in circumstances indicate that impairment may have occurred prior to our annual assessment.
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.
If performed due to identified impairment indicators under the qualitative assessment or our election to bypass the qualitative assessment and move directly
to the quantitative analysis, the quantitative impairment analysis for goodwill is conducted under the income approach. Under the income approach, we
calculate the fair value of our reporting unit’s assets using the present value of future cash flows. Assumptions utilized in determining fair value under the
income approach include forecasted operating results, terminal growth rates, and weighted-average cost of capital ("WACC") or discount rates.
Estimating the fair value of a reporting unit requires the use of estimates and significant judgments that are based on a number of factors including actual
operating results. The use of estimates and assumptions could materially affect the determination of fair value for a reporting unit and potentially result in
goodwill impairment. If a reporting unit fails to achieve expected earnings or operating cash flow, or otherwise fails to meet current financial plans, or if there
were changes to any other key assumptions used in the tests, the reporting unit could incur a goodwill impairment in a future period.
Warranty Reserves
Our products are warranted to provide assurance that the product will function as expected and to ensure customer confidence in design, workmanship,
and overall quality. Warranty coverage on our products is generally provided for specified periods of time and generally covers parts, labor, and other
expenses for non-maintenance repairs.
At the time of sale, we recognize expense and record a warranty accrual by product line for estimated costs in connection with forecasted future warranty
claims. Our estimate of the cost of future warranty claims is based primarily on the estimated number of products under warranty, historical average costs
incurred to service warranty claims, the trend in the historical ratio of warranty claims to sales, and the historical length of time between the sale and
resulting warranty claim. If applicable, historical claims experience may be adjusted for known product design improvements.
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.
Income Taxes
We estimate our deferred tax assets and liabilities, income taxes payable, provision for income taxes, and unrecognized tax benefit liabilities based upon
various factors including, but not limited to, historical pretax operating income, future estimates of pretax operating income, differences between book and
tax treatment of various items of income and expense, interpretation of tax laws and tax planning strategies. We are subject to income taxes in the U.S.
and foreign jurisdictions.
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

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 PART II ITEM 7. MD&A

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.
We recognize our deferred tax assets and liabilities based upon the expected future tax outcome of amounts recognized in our results of operations. If
necessary, we recognize a valuation allowance on deferred tax assets when it is more likely than not they will not be realized. We evaluate our ability to
realize the tax benefits associated with deferred tax assets by assessing the adequacy of future expected taxable income, historical and projected operating
results and the availability of prudent and feasible tax planning strategies. The realization of deferred tax assets is evaluated by jurisdiction and the
realizability of these assets can vary based on the character of the tax attribute and the carryforward periods specific to each jurisdiction. We believe it is
more likely than not the results of future operations will generate sufficient taxable income to realize our existing deferred tax assets, net of valuation
allowances. Changes in the realizability of our deferred tax assets will be reflected in our effective tax rate in the period in which they are determined.
Foreign Currency Translations
The functional currency of the Company's foreign operations is generally the applicable local currency. The functional currency is translated into U.S. dollars
using the respective current exchange rate in effect as of the balance sheet date for balance sheet accounts and the respective weighted-average exchange
rate during the period for revenue and expense accounts. The resulting translation adjustments are deferred as a component of other comprehensive
income within the Consolidated Statements of Comprehensive Income and the Consolidated Statements of Shareholders' Equity. Gains or losses resulting
from transactions denominated in foreign currencies are included in other income, net in the Consolidated Statements of Income.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1 to the consolidated financial statements for a discussion of recent accounting standards and pronouncements.

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 PART II ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to cash flow and earnings fluctuations as a result of certain market risks. These market risks relate to interest rate risks and foreign
currency exchange rate risks.
Interest Rate Sensitivity
Interest rate risk is significant given the potential effects on our earnings and cash flows. Annually, we perform sensitivity analysis on our exposure to
interest rates. In conducting this sensitivity analysis, we assumed a hypothetical 100 basis point change in interest rates on our outstanding amounts of
indebtedness under our credit facility, subject to variable interest rates. Under our credit facility, the non-default rate of interest is equal to the one-month
Term SOFR Rate plus 1.00% or 1.25% per annum, depending on the leverage ratio. For the year ended December 31, 2023, the effect of a hypothetical
100 basis point increase or decrease in overall interest rates on our variable rate debt would have changed interest expense by approximately $0.6 million.
The 100 basis point change on our variable rate debt would not have materially impacted our earnings or cash flows for fiscal 2023.
Foreign Exchange Rate Risk
The Company conducts operations in Europe that exposes us to foreign exchange rate risk, primarily with the British Pound and Euro. We are subject to
inherent foreign exchange rate risk when translating the financial statements of our foreign subsidiaries into the Company’s reporting currency. We actively
manage foreign currency translation risk through our operating and financing activities. From time to time, we may enter into forward foreign currency
exchange contracts to mitigate the effects of foreign currency exchange rate risk.
For the years ended December 31, 2023, 2022, and 2021 the impact of foreign currency exchange rate changes on our results of operations and cash
flows was a net foreign currency exchange gain of $0.8 million, and a loss of $0.7 million and $0.5 million, respectively.
For the years ended December 31, 2023, 2022 and 2021, we recognized a foreign currency translation gain of $3.2 million, and losses of $4.2 million and
$2.2 million, respectively because of the strengthening or weakening of the U.S. dollar against certain foreign currencies.

30 | FY 2023 FORM 10-K