AirBoss of America : Management’s Discussion and Analysis

AirBoss of America Corp

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following Management's Discussion and Analysis of Financial Condition and Results of Operations of AirBoss of America Corp. ("AirBoss" or the "Company") has been prepared as of March 6, 2024 and should be read in conjunction with the Consolidated Financial Statements and Notes for the year ended December 31, 2023 prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. All dollar amounts are shown in thousands of US dollars, except per share amounts, unless otherwise specified. Additional information regarding the Company, including its Annual Information Form, can be found on SEDAR+ at www.sedarplus.comand on the Company's website at www.airboss.com.

FORWARD-LOOKING INFORMATION

Certain statements contained or incorporated by reference herein, including those that express management's expectations or estimates of future developments or AirBoss' future performance, constitute "forward-looking information" or "forward-looking statements" within the meaning of applicable securities laws, and can generally be identified by words such as "will", "may", "could" "expects", "believes", "anticipates", "forecasts", "plans", "intends", "should" or similar expressions. These statements are not historical facts but instead represent management's expectations, estimates and projections regarding future events and performance.

Statements containing forward-looking information are necessarily based upon a number of opinions, estimates and assumptions that, while considered reasonable by management at the time the statements are made, are inherently subject to significant business, economic and competitive risks, uncertainties and contingencies. AirBoss cautions that such forward-looking information involves known and unknown contingencies, uncertainties and other risks that may cause AirBoss' actual financial results, performance or achievements to be materially different from its estimated future results, performance or achievements expressed or implied by the forward-looking information. Numerous factors could cause actual results to differ materially from those in the forward-looking information, including without limitation: impact of general economic conditions, notably including their impact on demand for rubber solutions and products; dependence on key customers; global defense budgets, notably in the Company's target markets, and success of the Company in obtaining new or extended defense contracts; cyclical trends in the tire and automotive, construction, mining and retail industries; sufficient availability of raw materials at economical costs; weather conditions affecting raw materials, production and sales; AirBoss' ability to maintain existing customers or develop new customers in light of increased competition; AirBoss' ability to successfully integrate acquisitions of other businesses and/or companies or to realize on the anticipated benefits thereof; AirBoss' ability to successfully develop and execute effective business strategies, including the implementation of strategic plans; changes in accounting policies and methods, including uncertainties associated with critical accounting assumptions and estimates; changes in the value of the Canadian dollar relative to the US dollar; changes in tax laws; current and future litigation; ability to obtain financing on acceptable terms and ability to satisfy the covenants set forth in such financing arrangements; environmental damage and non-compliance with environmental laws and regulations; impact of global health situations; potential product liability and warranty claims and equipment malfunction. There is increased uncertainty associated with future operating assumptions and expectations as compared to prior periods. This list is not exhaustive of the factors that may affect any of AirBoss' forward-looking information.

All of the forward-looking information in this Annual Report is expressly qualified by these cautionary statements. Investors are cautioned not to put undue reliance on forward-looking information. All subsequent written and oral forward-looking information attributable to AirBoss or persons acting on its behalf are expressly qualified in their entirety by this notice. Forward-looking information contained herein is made as of the date of this Annual Report and, whether as a result of new information, future events or otherwise, AirBoss disclaims any intent or obligation to update publicly the forward-looking information except as required by applicable laws. Risks and uncertainties about AirBoss' business are more fully discussed under the heading "Risk Factors" in our most recent Annual Information Form and are otherwise disclosed in our filings with securities regulatory authorities which are available on SEDAR at www.sedar.com.

Annual Report

1

2023

MD&A (cont'd)

OVERALL PERFORMANCE Recent Highlights

(In US dollars except as otherwise noted)

• Generated $40.9 million cash from operations during 2023 compared to consuming $30.8 million in 2022;
• 2023 Adjusted EBITDA1 of $26.8 million on Adjusted Profit1 of $(6.4) million and a loss of $41.7 million;
• Finished 2023 with a Net Debt to Adjusted EBITDA ratio1 of 3.30x; and
• Declared a quarterly dividend of C$0.07 per common share.

Selected Financial Information

In thousands of US dollars, except share data

For years ended December 31	2023	2022	2021
Financial results:
Net sales	426,025	477,155	586,858
Profit (loss)	(41,749)	(31,892)	46,703
Adjusted Profit1	(6,424)	12,558	47,374
Earnings (loss) per share (US$)
- Basic	(1.54)	(1.18)	1.73
- Diluted	(1.54)	(1.18)	1.65
Adjusted earnings per share1 (US$)
- Basic	(0.24)	0.46	1.76
- Diluted	(0.24)	0.45	1.67
EBITDA1	(11,177)	(12,769)	79,591
Adjusted EBITDA1	26,758	45,336	80,341
Net cash from (used in) operating activities	40,917	(30,775)	2,023
Free cash flow1	32,453	(40,964)	(15,961)
Dividends declared per share (CAD$)	0.37	0.40	0.37
Capital additions	9,863	10,212	22,585
Financial position:
Total assets	356,656	440,766	443,264
Debt2	131,092	143,642	80,563
Net Debt1	88,213	110,083	56,033
Shareholders' equity	148,857	196,997	235,148
Outstanding shares*	27,130,556	27,092,041	26,993,181

*27,130,556 at March 6, 2024

• See Non-IFRS Financial Measures

• Debt includes $13,890 of lease liabilities (2022: $15,007; 2021: $17,399)

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AirBoss of America Corp.

MD&A (cont'd)

NON-IFRS FINANCIAL MEASURES

This MD&A is based on consolidated financial statements prepared in accordance with IFRS and uses Non-IFRS Financial Measures. Management believes that these measures provide useful information to investors in measuring the financial performance of the Company. These measures do not have a standardized meaning prescribed by IFRS and therefore they may not be comparable to similarly titled measures presented by other companies and should not be construed as an alternative to other financial measures determined in accordance with IFRS. These terms are not a measure of performance under IFRS and should not be considered in isolation or as a substitute for profit or loss under IFRS.

EBITDA and Adjusted EBITDA are non-IFRS measures used to measure the Company's ability to generate cash from operations for debt service, to finance working capital and capital expenditures, potential acquisitions and to pay dividends. EBITDA is defined as earnings before income taxes, finance costs, depreciation and amortization. Adjusted EBITDA is defined as EBITDA excluding impairment costs, acquisition costs, and non-recurring costs. A reconciliation of profit (loss) to EBITDA and Adjusted EBITDA is below.

In thousands of US dollars	2023	2022	2021
EBITDA:
Profit (loss)	(41,749)	(31,892)	46,703
Finance costs	5,233	5,738	4,178
Depreciation and amortization	22,345	21,905	20,881
Income tax expense (recovery)	2,994	(8,520)	7,829
EBITDA	(11,177)	(12,769)	79,591
Professional fees related to AEP negotiations	152	1,104	445
Write-down of inventory	8,031	57,001	-
Restructuring costs	3,104	-	-
Impairment of intangible assets	26,648	-	-
Prospectus fees	-	-	305
Adjusted EBITDA	26,758	45,336	80,341

In 2023, the Company underwent a series of cost saving initiatives and staff reductions. Costs related to these restructuring activities are included in Other Costs on the Statement of Profit and Loss.

In 2022, the Company negotiated improved arrangements with automotive business' key suppliers and customers to improve profitability. Professional fees related to these activities are included in General & Administrative Costs on the Statement of Profit and Loss.

In 2021, the Company filed a base shelf prospectus. Costs related to preparing the Company's documentation to be eligible to file a prospectus are included in General & Administrative Costs in the Statement of Profit and Loss.

Adjusted profit is a non-IFRS measure defined as profit (loss) before impairment costs, acquisition costs and non-recurring costs. This measure and Adjusted earnings per share are used to evaluate operating results of the Company. A reconciliation of Profit (loss) to Adjusted profit and Adjusted earnings per share is below.

In thousands of US dollars	2023	2022	2021
Adjusted Profit:
Profit (loss)	(41,749)	(31,892)	46,703
Professional fees related to AEP negotiations (after tax)	116	844	445
Write-down of inventory (after tax)	6,264	43,606	-
Restructuring costs (after tax)	2,297	-	-
Impairment of intangible assets (after tax)	26,648	-	-
Prospectus fees (after tax)	-	-	226
Adjusted profit	(6,424)	12,558	47,374
Basic weighted average number of shares outstanding	27,118	27,071	26,970
Diluted weighted average number of shares outstanding	27,118	28,109	28,298
Adjusted earnings per share (in US dollars):	(0.24)	0.46	1.76
Basic
Diluted	(0.24)	0.45	1.67
Annual Report			3

2023

MD&A (cont'd)

Net Debt measures the financial indebtedness of the Company assuming that all cash on hand is used to repay a portion of the outstanding debt. A reconciliation of loans and borrowings to Net Debt is below.

In thousands of US dollars	2023	2022	2021
Net Debt:
Loans and borrowings - current	2,437	2,286	2,356
Loans and borrowings - non-current	128,655	141,356	78,207
Leases included in loans and borrowings	(13,890)	(15,007)	(17,399)
Cash and cash equivalent	(28,989)	(18,552)	(7,131)
Net Debt	88,213	110,083	56,033

The Company has a Net Debt to trailing twelve-month Adjusted EBITDA ratio of 3.30x (2022: 2.43x, 2021: 0.70x)

Free cash flow is a non-IFRS measure used to evaluate cash flow after investing in the maintenance or expansion of the Company's business. It is defined as cash provided by operating activities, less cash expenditures on long-term assets. A reconciliation of net cash provided by (used in) operating activities to free cash flow is below.

In thousands of US dollars	2023	2022	2021
Free cash flow:
Net cash provided by (used in) operating activities	40,917	(30,775)	2,023
Acquisition of property, plant and equipment	(7,256)	(8,800)	(16,912)
Acquisition of intangible assets	(1,249)	(1,392)	(1,081)
Proceeds from disposition	41	3	9
Free cash flow	32,453	(40,964)	(15,961)
Basic weighted average number of shares outstanding	27,118	27,071	26,970
Diluted weighted average number of shares outstanding	27,439	27,071	26,970
Free cash flow per share (in US dollars):	1.20	(1.51)	(0.59)
Basic
Diluted	1.18	(1.51)	(0.59)

OVERVIEW

2023 was a challenging year for AirBoss as economic headwinds impacted each segment to varying degrees, and the Company continued to navigate significant and extensive obstacles related to labor, supply chain and logistics challenges. The Company focused on managing costs and risk mitigation plans in response to these challenges, which were particularly pronounced in the fourth quarter of 2023 ("Q4 2023"), and undertook a strategic review of each of its business units. This review has resulted in its new strategic transition, including a shift in reportable segments commencing with results for Q4 2023 and year ended December 31, 2023. AirBoss now reports results under two segments: (1) AirBoss Rubber Solutions ("ARS"), and (2) AirBoss Manufactured Products ("AMP"). The ARS segment consists of the former rubber solutions segment and the rubber compounding operations at Acton Vale, Quebec (previously included in the AirBoss Defense Group segment). The new AMP segment consists of AirBoss Engineered Products, formerly a standalone segment, and AirBoss Defense Group, formerly a standalone segment (other than the rubber compounding operations at Acton Vale, Quebec).

Both ARS and AMP experienced residual softness in Q4 2023. The rubber molded products operations at AMP were impacted by the tail end of the union strike related to the OEMs which was settled in the quarter. The ability to recover in volumes in 2024 for each segment will remain subject to the ongoing challenges related to continued inflation pressure and the ongoing global geopolitical challenges, and successful conversion of key opportunities.

Although ARS experienced some retraction in most business lines compared to 2022, which was a record year from both a sales and EBITDA perspective, 2023 remained a solid year with respect to sales and EBITDA. Despite strong performance during the earlier part of 2023, there was pronounced softness experienced at the end of Q4 2023 as sales were impacted by customers focused on reducing inventory levels. Despite these headwinds, the segment remains focused on executing on its strategy to deliver strong results with specialized products, expanded production of a broader array of compounds (white and color) and enhanced flexibility in attracting and fulfilling new business through identified synergies and margin expansion. As a segment, Rubber Solutions continued to invest in research and development to support enhanced collaboration with customers.

AMP experienced strong traction in the rubber molded product lines despite challenges towards the latter part of the year due to labor disruptions with the OEMs, while the defense product lines experienced softness across the product portfolio throughout the entire year. Management continued its focus on operational improvements including managing costs and a commitment to drive efficiencies and best-in-class automation, as well as diversification of its product lines into adjacent sectors. In addition, the

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AirBoss of America Corp.

MD&A (cont'd)

defense business continued to work with its key customers to leverage opportunities aligned with its growth initiatives, subject to timing as delays in the conversion of these opportunities continued through the fourth quarter of 2023. Further, although West African Husky order has been completed, execution on the balance of the previously announced awards for Husky 2G vehicles has been delayed further due to ongoing delays in funding, creating a lack of certainty to the scope, timing and the terms and conditions of these awards which cannot reasonably be determined.

The Company's long-term priorities consist of the following:

1. Growing the core Rubber Solutions segment by emphasizing rubber compounding as the core driver for sustainable growth and productivity, focusing on innovation in custom rubber compounding while aiming to expand market share through organic and inorganic means, while striving to achieve enhanced diversification by a broadening of product breadth through technological advancements and investments in specialty compound niches;
2. Manufactured Products growth strategy will be focused on diversifying and expanding its range of rubber molded products while simultaneously narrowing the range of defense products through a renewed focus on core competencies; and
3. Undertaking a strategic review of all product lines currently manufactured and sold by the Company in its Manufactured Products segment while targeting additional acquisition opportunities with a focus on adding new compounds and products, technical capabilities, and geographic reach into selected North American and international markets.

AirBoss continues to focus on these long-term priorities while investing in core areas of the business to expand a solid foundation that will support long-term growth.

RESULTS OF OPERATIONS - For year ended December 31, 2023 compared to 2022

NET SALES

Consolidated net sales for the year ended December 31, 2023 decreased by 10.7% to $426,025, compared with 2022 primarily due to decreased sales at Rubber Solutions across the majority of sectors and Manufactured Products' delivery of nitrile gloves to the U.S. Department for Health and Human Services ("HHS") in the prior year, partially offset by improved performance in other produce lines in that segment.

In thousands of US dollars		Rubber	Manufactured	Inter-segment	Total
	Solutions	Products	net sales
Net sales	2023	248,395	202,290	(24,660)	426,025
	2022	283,181	218,475	(24,501)	477,155
Increase (decrease) $		(34,786)	(16,185)	(159)	(51,130)
Increase (decrease) %		(12.3)	(7.4)	0.6	(10.7)

Rubber Solutions

Net sales in the Rubber Solutions segment decreased by 12.3%, to $248,395 in 2023, from $283,181 in 2022. This was due to softness across most sectors driven by economic headwinds. Volume was down 17.5% with decreases across the majority of sectors given softness in many customer sectors.

Tolling volumes for the year ended December 31, 2023 decreased by 59.6%, compared with 2022. Non-tolling volumes for the year ended December 31, 2023 decreased by 7.4% compared with 2022. The overall decrease in volume was across many sectors with strong increases in industrial, conveyor belt applications and specialty applications.

Manufactured Products

Net sales in the Manufactured Products segment decreased by 7.4%, to $202,290 in 2023, from $218,475 in 2022. This is primarily due to a decrease in the defense products lines from the delivery of nitrile gloves to HHS in the part of the previous year partly offset by an increase in the rubber molded products lines due to increased volume.

GROSS PROFIT

For the year ended December 31, 2023, consolidated gross profit was up by $34,279 to $58,410. Gross profit as a percentage of net sales increased to 13.7% from 5.1% in 2022. The increase in margin percentage was driven by a $57.0 million non-cashwrite-down related to nitrile glove inventory in 2022 and improvements at the Rubber Solutions segment in addition to cost improvements that took place in the latter part of 2023 in each segment, partially offset by an $8.0 million non-cashwrite-down related to nitrile glove inventory in 2023.

Annual Report

5

2023

MD&A (cont'd)

In thousands of US dollars		Rubber	Manufactured	Total
	Solutions	Products
Gross Profit	2023	34,947	23,463	58,410
	2022	36,645	(12,514)	24,131
Increase (decrease) $		(1,698)	35,977	34,279
% of net sales	2023	14.1	11.6	13.7
	2022	12.9	(5.7)	5.1

Rubber Solutions

For the year ended December 31, 2023, gross profit for Rubber Solutions was $34,947 (14.1% of net sales), down $1,698 compared to $36,645 (12.9% of net sales) in 2022. The decrease was primarily as a result of decreased tolling and non-tolling volumes compared to the same period in 2022 and partially offset by managing controllable overhead costs.

Manufactured Products

Gross profit for the year ended December 31, 2023 in the Manufactured Products segment was $23,463, up $35,977 compared with $(12,514) in 2022. The increase was primarily a result of a $57.0 million non-cashwrite-down related to nitrile glove inventory in 2022, in addition to increased volume and improved arrangements in 2023 within the rubber molded products lines with key suppliers and customers. In addition, there was a continued focus on controllable operational cost containment and managing overhead costs, partially offset by an $8.0 million non-cashwrite-down related to nitrile glove inventory in 2023.

OPERATING EXPENSES

Consolidated operating expenses for the year ended December 31, 2023 increased by $33,127 to $91,932 compared with 2022. The increase was primarily due to a $26,648 goodwill impairment charge, $3,104 of restructuring costs and increased stock- based compensation expense due to cost recoveries in 2022, offset by a foreign exchange gain (compared to a loss in 2022) and lower administrative costs. As a percentage of net sales, operating expenses for the year ended December 31, 2023 increased to 21.6% from 12.3% in 2022.

In thousands of US dollars		Rubber	Manufactured	Corporate	Total
	Solutions	Products
Operating Expenses	2023	18,621	60,507	12,804	91,932
	2022	15,192	40,537	3,076	58,805
Increase (decrease) $		3,429	19,970	9,728	33,127
% of net sales	2023	7.5	29.9	N/A	21.6
	2022	5.4	18.6	N/A	12.3

Rubber Solutions

Rubber Solutions' operating expenses for the year ended December 31, 2023 increased by 22.6%, to $18,621, compared with $15,192 in 2022. The increase was primarily due to a foreign exchange loss compared to a gain in the comparative period, restructuring costs recorded in 2023, and higher administrative costs in 2023.

Manufactured Products

Manufactured Products' operating expenses for the year ended December 31, 2023 increased by 49.3% to $60,507. The increase was due to a $26,648 goodwill impairment charge and restructuring costs recorded in 2023 related to defense operations, partially offset by lower administrative and selling costs.

Unallocated Corporate Costs

Unallocated corporate costs for the year ended December 31, 2023 increased by $9,728 from 2022. The increase was primarily due to cost recoveries from stock-based compensation in 2022, higher legal costs in 2023, and restructuring costs recorded in 2023, partially offset by foreign exchange gain compared to a loss in the comparative period.

FINANCE COST

Finance costs in 2023 were $5,233 (2022: $5,738). The decrease was primarily due to the reduction of an earn out liability payable to former owners of an acquired business and gains on the interest rate swaps, partially offset by increased borrowing costs due to higher average borrowings and higher interest rates under the Company's credit facility.

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AirBoss of America Corp.

MD&A (cont'd)

INCOME TAX EXPENSE

For the year ended December 31, 2023, the Company recorded an income tax expense of $2,994 (2022: recovery of $8,520) or

an effective income tax rate of (7.7)% (2022: 21.1%). The effective tax rate changed primarily due to the derecognition of temporary differences recognized in prior years.

	Tax expense/(recovery)	Rate
In thousands of US dollars	2023	2022	2023	2022
Expected statutory rate	(10,272)	(10,709)	26.50 %	26.50%
Foreign rate differential	1,436	2,137	(3.71)%	(5.29%)
Effect of permanent differences	(225)	225	0.58 %	(0.56%)
Change in tax rates and new legislation	-	259	0.00 %	(0.64%)
Filing differences	5	(309)	(0.01)%	0.76%
Deductible temporary differences not recognized	12,051	(14)	(31.10)%	0.03%
Other	(1)	(109)	0.00 %	0.27%
Effective tax rate	2,994	(8,520)	(7.74)%	21.07%

PROFIT (LOSS) AND EARNINGS (LOSS) PER SHARE

Net loss in 2023 amounted to $41,749, compared with a loss of $31,892 in 2022. The basic and fully diluted net loss per share was $1.54 (2022: $1.18). The increased loss was due to a $26.6 million goodwill and inventory impairment charges in the current year, and lower gross margin (excluding the inventory impairment charges), partially offset by a $57.0 million inventory write- down in 2022.

QUARTERLY INFORMATION

In thousands of US dollars			Earnings (loss) per share
Quarter Ended	Net Sales	Profit (loss)	Basic	Diluted
2023
December 31, 2023	92,696	(35,958)	(1.33)	(1.33)
September 30, 2023	102,195	(4,633)	(0.17)	(0.17)
June 30, 2023	114,058	(2,613)	(0.10)	(0.10)
March 31, 2023	117,076	1,455	0.05	0.05
2022
December 31, 2022	117,453	11,997	0.44	0.43
September 30, 2022	104,682	(55,957)	(2.07)	(2.07)
June 30, 2022	110,547	2,492	0.09	0.09
March 31, 2022	144,473	9,576	0.35	0.34

Fourth Quarter 2023 Results

NET SALES

Consolidated net sales for Q4 2023 decreased by 21.1% to $92,696, from $117,453 in Q4 2022, with decreases at both Rubber Solutions and Manufactured Products for the reasons outlined below.

Rubber Solutions

Net sales for Q4 2023 in the Rubber Solutions segment decreased by 21.1% to $54,464, from $68,990 in Q4 2022. The decrease in net sales for Q4 2023 was primarily due to softness across most sectors. Volume was down 17.5% with decreases across the majority of sectors given softness in many customer sectors. Tolling volume was down 63.0%, while non-tolling volume was down 9.9% driven by decreases in most sectors. In tolling applications, the Company only realizes net sales on the provision of compounding services for customer-supplied material, versus non-tolling where AirBoss also supplies the raw material inputs that are reflected in net sales.

Manufactured Products

Manufactured Products net sales for Q4 2023 decreased by 19.9% to $44,029 compared with Q4 2022. The decrease is a result of lower volumes in the defense product lines and across the rubber molded product lines, in particular the muffler hangers, bushings, and spring insulator product lines.

GROSS PROFIT

Consolidated gross profit for Q4 2023 decreased to $5,122 (5.5% of net sales) from $24,767 (21.1% of net sales) in Q4 2022, due to decreases in Manufactured Products' defense product lines and rubber molded product lines.

Annual Report

7

2023

MD&A (cont'd)

Rubber Solutions

Gross profit at Rubber Solutions for Q4 2023 was $7,845 (14.4% of net sales), compared with $7,699 (11.2% of net sales) in Q4 2022. The increase in gross profit was principally due to product mix, managing overhead costs offset by a reduction in volume.

Manufactured Products

Gross profit at Manufactured Products for Q4 2023 decreased by $19,791 to a loss of $2,723 compared with income of $17,068 in Q4 2022. The decrease was primarily a result of an $8.0 million non-cashwrite-down related to nitrile glove inventory and retroactive pricing from improved arrangements with key suppliers and customers recognized in comparable period in the prior year and lower volumes in the defense product lines and across the rubber molded product lines, partially offset by operational cost improvements in the segment.

OPERATING EXPENSES

Consolidated operating expenses for Q4 2023 increased by $24,752, compared with Q4 2022. The increase was primarily due to the $26,648 goodwill impairment charge note above and higher stock-based compensation costs, partially offset by lower administration costs.

INCOME TAX EXPENSE

Tax expense for Q4 2023 increased by $8,275 compared to Q4 2022. Income tax expense increased due to the derecognition of temporary differences recognized in prior years.

REPORTING SEGMENTS UPDATE

On December 31, 2023, the Company realigned the organizational and governance structures of its businesses to focus on rubber compounding as a key product driver for sustainable growth and productivity. Such realignment gave rise to changes in how the Company presents information for financial reporting and management decision-making purposes and resulted in a change in the Company's reporting segments. The Company's operating segments are organized into the following reportable segments:

• ARS - Includes manufacturing and distribution of rubber compounds and distribution of rubber compounding related chemicals.
• AMP - Includes the manufacture and distribution of anti-noise, vibration and harshness dampening parts, and personal protection and safety products, primarily for CBRN-E threats.
• Unallocated Corporate Costs - Includes corporate activities and certain unallocated costs.

ARS consists of AirBoss' custom rubber compounding operations in Kitchener, Ontario, Rock Hill, South Carolina, Scotland Neck, North Carolina, plus the Company's rubber compounding business in Acton Vale, Quebec (formerly part of the AirBoss Defense Group Segment). AMP consists of the Company's rubber molded product operations in Auburn Hills, Michigan and the

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AirBoss of America Corp.

MD&A (cont'd)

Company's defense businesses in Jessup, Maryland, Acton Vale, Quebec, Rochester, New York and Charleston, South Carolina.

Updated historical financial information regarding the results of each reportable segment is included below.

Three-months ended March 31	Rubber	Manufactured	Unallocated	Total
Solutions	Products	Corporate costs
In thousands of US dollars	2023	2022	2023	2022	2023	2022	2023	2022
Segment net sales	67,556	69,483	57,399	81,924	-	-	124,955	151,407
Inter-segment net sales	(6,969)	(6,395)	(910)	(539)	-	-	(7,879)	(6,934)
External net sales	60,587	63,088	56,489	81,385	-	-	117,076	144,473
Depreciation and amortization	1,980	2,019	3,495	3,417	62	61	5,537	5,497
Segment measure of profit (loss)	4,067	5,027	3,715	9,801	(3,151)	(630)	4,631	14,198
Finance costs							(2,729)	(952)
Income tax expense							(447)	(3,670)
Net income							1,455	9,576
Segment assets	188,152	182,981	241,818	306,380	6,917	9,397	436,887	498,758
Segment liabilities	42,649	42,491	126,606	124,477	70,868	89,210	240,123	256,178
Capital additions	634	933	211	930	260	278	1,105	2,141
Three-months ended June 30	Rubber	Manufactured	Unallocated	Total
Solutions	Products	Corporate costs
In thousands of US dollars	2023	2022	2023	2022	2023	2022	2023	2022
Segment net sales	67,916	75,491	52,615	40,855	-	-	120,531	116,346
Inter-segment net sales	(6,250)	(5,799)	(223)		-	-	(6,473)	(5,799)
External net sales	61,666	69,692	52,392	40,855	-	-	114,058	110,547
Depreciation and amortization	2,101	2,017	3,571	3,412	62	63	5,734	5,492
Segment measure of profit (loss)	5,191	7,446	(2,282)	(4,664)	(3,476)	2,186	(567)	4,968
Finance costs							(2,613)	(1,533)
Income tax expense							567	(943)
Net income							(2,613)	2,492
Segment assets	175,487	192,157	230,350	260,920	8,207	9,344	414,044	462,421
Segment liabilities	41,051	44,755	118,413	82,190	62,067	92,040	221,531	218,985
Capital additions	999	1,385	1,053	517	358	253	2,410	2,155

Annual Report

9

2023

MD&A (cont'd)

Three-months ended September 30

In thousands of US dollars

Segment net sales

Inter-segment net sales

External net sales

Depreciation and amortization

Segment measure of profit (loss)

Finance costs

Income tax expense

Net income

Segment assets

Segment liabilities

Capital additions

Three-months ended December 31

In thousands of US dollars

Segment net sales

Inter-segment net sales

External net sales

Depreciation and amortization

Segment measure of profit (loss)

Finance costs

Income tax expense

Net income

Segment assets

Segment liabilities

Capital additions

LIQUIDITY AND CAPITAL RESOURCES

Overview

	Rubber	Manufactured	Unallocated	Total
	Solutions	Products	Corporate costs
2023	2022	2023	2022	2023	2022	2023	2022
58,459	69,216	48,247	40,729	-	-	106,706	109,945
(4,371)	(5,200)	(140)	(63)	-	-	(4,511)	(5,263)
54,088	64,016	48,107	40,666	-	-	102,195	104,682
2,023	1,992	3,561	3,357	61	63	5,645	5,412
3,887	5,739	(1,062)	(64,883)	(3,980)	(2,662)	(1,155)	(61,806)
							(2,637)	(1,282)
							(841)	7,131
							(4,633)	(55,957)
166,205	208,531	229,903	211,633	5,779	2,159	401,887	422,323
37,423	57,852	117,767	87,939	60,123	90,586	215,313	236,377
1,036	1,890	481	231	697	566	2,214	2,687
	Rubber	Manufactured	Unallocated	Total
	Solutions	Products	Corporate costs
	2023	2022	2023	2022	2023	2022	2023	2022
	54,464	68,991	44,029	54,967	-	-	98,493	123,958
	(4,753)	(5,934)	(1,044)	(571)	-	-	(5,797)	(6,505)
	49,711	63,057	42,985	54,396	-	-	92,696	117,453
	2,142	2,054	3,226	3,386	61	64	5,429	5,504
3,181	3,242	(37,415)	6,694	(2,197)	(1,970)	(36,431)	7,966
							2,746	(1,971)
							(2,273)	6,002
							(35,958)	11,997
	174,745	200,339	179,695	235,789	2,216	4,638	356,656	440,766
	37,924	46,776	107,979	121,674	61,896	75,319	207,799	243,769
	2,652	2,558	1,452	278	30	393	4,134	3,229

The Company expects to fund its 2024 operating cash requirements, including required working capital investments, capital expenditures and scheduled debt repayments from cash on hand, cash flow from operations and committed borrowing capacity. The Company's operating revolving loan facility provides financing up to $250,000 (2022: $250,000). As at December 31, 2023, $119,100 was drawn against the credit facility.

For the year ended December 31, 2023, $40,917 of cash was provided by operations (2022: $30,775 cash used), $8,464 was

used for investing activities (2022: $10,189) and $22,196 was used by financing activities (2022: $52,202 cash provided). Cash and cash equivalents increased by $10,437 from $18,552 to $28,989, adjusted for the effect of exchange rate fluctuations on cash held.

Operating activities

For the year ended December 31, 2023, cash provided by operating activities increased by $71,692 compared to 2022. The increase was due to a $85,183 increase in cash provided by net working capital, a $9,857 decrease in profit and a 4,349 decrease in tax payments, partially offset by a 2,761 decrease in non-cash expenses and a $5,222 increase in interest payments.

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