Nathan Iles: Hi. Thank you, Jim. As we go through the numbers, I’ll first give some more color on key drivers of our results for the quarter and full year of 2023, and then provide an update on our financial outlook for the full year in 2024. First, looking at our vehicle control segment, you can see on this slide that net sales of $178.6 million in Q4 were down 5.9%, with the decrease driven by a general softness in sales across the industry. But for the full year sales and vehicle control were down 1.7% with the decline owing to a number of things, which occurred during the year including the impact of a customer bankruptcy early in the year, lower pipeline orders and the general slowness we saw in Q4. Vehicle controls adjusted EBITDA was 11.8% of net sales for both the quarter and full year with both periods down from last year.
Looking at the drivers of EBITDA for the quarter the gross margin rate for vehicle control in Q4 was down primarily due to lower sales volumes. Further SG&A expenses and vehicle control increased in the quarter from a use of about $1 million of additional expense related to the startup of a new distribution center. And that coupled with lost leverage due to lower sales resulted in lower adjusted EBITDA. Looking at vehicle control EBITDA for the full year. The EBITDA margin rate decreased one point, while the gross margin rate benefited from pricing and savings initiatives. This was more than offset by a combination of higher factoring costs and higher SG&A as a percentage of sales. For the full year, SG&A included about $2 million of additional expense for our new warehouse.
While vehicle controls adjusted EBITDA is down year-over-year, I would point out that we’ve made a lot of progress offsetting the headwinds we faced recently, as our gross margin improvements offset the rising cost of factoring programs for the full year. Turning to temperature control. Net sales in the quarter for that segment of $44.6 million were down 19% and sales for the full year were down by 3.8%. As we saw a very soft fourth quarter after the primary selling season ended. Temperature controls adjusted EBITDA in Q4 was lower than last year and was driven primarily by lower sales volumes which led to lower leverage of operating expenses in the quarter. Temp controlled adjusted EBITDA for the full year of 6.7% of net sales was down from last year, primarily as a result of lower sales volume, which put pressure on the gross margin rate and lead to loss of leverage on operating expenses.
But it was also due to the higher cost of customer factoring programs during the year. Sales for our Engineered Solutions segment in the quarter were up 6.7% and sales for the full year there were up 4.7%, as we were pleased to see our sales continue to increase as a result of strong demand and new business wins with both existing and new customers. Adjusted EBITDA for engineered solutions in the quarter was down from last year as the change in mix of sales during the quarter resulted in lower gross margin for the segment. As a reminder, this segment has a widely diversified portfolio of products and customers and therefore the gross margin rate can vary quarter to quarter. While the fourth quarter was down our Q3 rate was up significantly.
So it’s important to look at the full year margin rate for the segment. For the full year adjusted EBITDA for Engineered Solutions was 11.5% and up 0.2 points from last year. The improvement for the year was the result of strong sales growth and a slightly improved gross margin rate. Turning to our consolidated results. Net sales in the quarter were down 5.7% due to lower sales in the energy market. For the full year, sales were down 1%, as lower aftermarket sales were only partly offset by the growth in Engineered Solutions. Consolidated gross margin rate declined for the quarter mainly due to lower sales volume. However, our gross margin rate for the full year finished up 0.7 points as our pricing and savings initiatives overcame lower volumes and other headwinds we face.
Regarding SG&A expenses were up in Q4 due to costs related to our new DC and some timing between quarters, but overall, we’re well-controlled. SG&A costs for the full year were up, mainly due to distribution center startup costs and some inflation and overall costs and were higher as a percentage of net sales due to lower sales volumes. The cost of customer factoring programs increased by $14 million in 2023, but you can see the cost leveled out in the fourth quarter and we’re hopeful rates will begin to come down later this year. Looking at the bottom line, consolidated operating income and adjusted EBITDA in the quarter were lower than last year, as lower sales and higher factoring costs led to lower profit. For the full year, consolidated operating income and adjusted EBITDA were down as higher factoring costs and lower sales volumes were only partly offset by improvements in our gross margin.
Turning now to the balance sheet and cash flows. The key item here is our inventory level which finished the year at $507.1 million, down $21.6 million from December last year. Our cash flow statement reflects cash generated from operations for the year of $144.3 million as compared to cash used of $27.5 million last year. With the improvement driven by a $97 million improvement in cash flow from inventory and a $68.2 million improvement in cash used for accounts payable as operations normalize during the year. Financing activity shows significant progress made in paying down our credit facilities by $83.6 million as a result of our improved operating cash flows. We also paid $25.2 million of dividends during the year. Our borrowings of $156.2 million at the end of Q4 were much lower than last year and we finished the quarter with a leverage ratio of one times EBITDA 33% lower than last year’s ratio.
