What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2025-05-07 compared with 2024-11-07 · 32 added, 31 removed, 3 unchanged (95% of the section changed)

In addition to other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A.

“Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 10-K”), which could materially affect our business, financial condition or results of operations.

In addition to other information set forth in this report, you should carefully consider the factors discussed in Part I, Item 1A, “Risk Factors,” in the 2024 10-K, which could materially affect our business, financial condition or results of operations.

Our risk factors have not changed materially from those risk factors previously disclosed in our 2024 10-K, except as set forth below.

1 unchanged sentence

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or results of operations.

Our ABL Revolving Credit Facility and Term Loan Facility contain financial and restrictive covenants that we may be unable to satisfy, and that, if not satisfied, could result in the acceleration of any outstanding indebtedness thereunder and limit our ability to borrow additional funds.

In addition, the terms of our ABL Revolving Credit Facility and Term Loan Facility contain covenants that restrict our current and future operations, particularly our ability to take certain actions.

Our ABL Revolving Credit Facility and Term Loan Facility each subject us to various financial and other affirmative and negative covenants with which we must comply on an ongoing or periodic basis.

These include financial covenants pertaining to minimum excess availability and minimum fixed charge coverage ratio requirements.

An unexpected decline in our revenues or operating income, including occurring as a result of events beyond our control, could cause us to violate our financial covenants.

A covenant violation could result in a default under the ABL Revolving Credit Facility and Term Loan Facility.

If any such default occurs, the lenders may elect to declare all outstanding borrowings, together with accrued interest and other amounts payable thereunder, to be immediately due and payable.

Further, as the amount available to us under our credit facilities is subject to borrowing base calculations determined by the value of accounts receivable, inventory, real estate and machinery and equipment (under our ABL Revolving Credit Facility), an unexpected decline in the value of these assets would require a mandatory prepayment.

If any of these events were to occur, we may not be able to pay our debts and other monetary obligations as they come due, and our ability to continue to operate as a going concern could be impaired, which could in turn cause a significant decline in our stock price and could result in a significant loss of value for our shareholders.

Furthermore, the lenders also have the right in these circumstances to terminate any commitments they have to provide further borrowings, which could leave us without access to sufficient liquidity to operate our business.

In addition, following an event of default, the lenders under the ABL Revolving Credit Facility and Term Loan Facility will have the right to proceed against the collateral granted to them to secure the debt, which includes our available accounts receivable, inventory, machinery and equipment, real estate and intellectual property.

If the debt under the ABL Revolving Credit Facility and Term Loan Facility were to be accelerated, we cannot assure you that our assets would be sufficient to repay in full our debt.

Additionally, our ABL Revolving Credit Facility and Term Loan Facility also contain a number of restrictive covenants that impose significant operating and financial restrictions on the Company and our subsidiaries and may limit our ability to engage in acts that we believe to be in our long-term best interests.

The ABL Revolving Credit Facility and Term Loan Facility include covenants restricting, among other things, the ability of the Company and our subsidiaries to:

• incur additional indebtedness;

• pay dividends on or repurchase our capital stock;

• make certain acquisitions or investments;

• sell assets;

• engage in certain business activities.

Currently, our AES subsidiary is a defendant in actions filed in various jurisdictions by Lufthansa Technik AG relating to an allegation of patent infringement and based on rulings to date we have concluded that losses related to these proceedings are probable and the amounts of such losses could be substantial.

Lufthansa Technik AG (“Lufthansa”) filed actions in Germany, the United Kingdom (“UK”) and France.

These matters are more fully discussed in Note 19 in Item 8, Financial Statements and Supplementary Data of our Form 10-K, and in Note 14 of our Consolidated Financial Statements in Item 1, Financial Information of this report.

In both Germany and the UK, the Company has been found to infringe the patents of Lufthansa and will be subject to monetary damages, estimates of which have been accrued as liabilities in our financial statements, but the actual amount of damages that may be addressed in the future could be substantially higher.

In the matter before the UK High Court of Justice, Lufthansa has pleaded its case for monetary compensation at a separate trial which was

conducted in October 2024.

Lufthansa is seeking damages significantly higher than the amount which has been accrued as a liability by the Company.

Lufthansa has calculated its loss as up to $107 million, excluding interest.

While we believe we have valid defenses and are vigorously defending all such litigation and proceedings, if the monetary damages award is decided adversely against the Company, the associated damages could have a material adverse effect on our results of operations, financial condition, cash flows, or business, and, based upon the amount of such damages award, there could be scenarios in which it could be difficult for the Company to satisfy the amount of such damages, in whole or in part.

While the Company is performing scenario planning and is engaged with its lenders to seek to be in a position to cover the range of possible outcomes and satisfy any potential damages, these activities and other activities that the Company may undertake may not be successful or may not be sufficient to cover the full amount of any damages assessed.

Trade policies, treaties, and tariffs could materially adversely affect our business.

Our business is dependent on the availability of raw materials and components for our products, particularly electrical components common in the semiconductor industry.

There is continued uncertainty about the future relationship between the United States and various other countries, most significantly China, with respect to trade policies, treaties, tariffs, and taxes.

government has, and continues to make, significant changes in U.S.

trade policy and has taken certain actions that could negatively impact U.S.

trade, including imposing tariffs on certain goods imported into the United States.

In retaliation, China has implemented, and continues to evaluate imposing, additional tariffs on a wide range of American products, and other countries, including Canada and Mexico, have done the same.

There is also a concern that the imposition of additional tariffs by the United States could result in the adoption of additional tariffs by other countries as well, leading to a global trade war.

These developments, or the perception that any of them could occur, could materially adversely affect global economic conditions and the stability of global financial markets, and could significantly reduce global trade and, in particular, trade between the impacted nations and the United States.

In addition, these developments may cause the Company’s customers to reduce their operating or capital expenditure budgets or forgo expansion plans or projects, which could cause them to defer, reduce, or forgo purchases of the Company’s products or services.

More specifically, the uncertainty with respect to U.S.

trade policy includes:

(i) the possibility of further altering of the existing tariffs or penalties on products manufactured outside of the United States;

(ii) the effects stemming from the removal of such previously imposed tariffs;

(iii) subsequent tariffs imposed by the United States on any other countries;

and (iv) potential tariffs imposed by trading partners on U.S.

The institution of trade tariffs on items imported by us from other countries could increase our costs, either directly from tariffs incurred on foreign-produced products and components we directly purchase and import into the U.S.

or indirectly as a result of our suppliers passing increased tariff-related costs onto us in the form of product and component price increases, which, in either such case, could have a negative impact on our business.

If we attempt to renegotiate prices with suppliers or diversify our supply chain in response to tariffs, such efforts may not yield immediate results or may be ineffective.

We may also consider increasing prices to customers;

however, this could reduce the competitiveness of our products and adversely affect sales.

If we fail to manage these dynamics successfully, our gross margins and profitability could be materially adversely affected.

We cannot predict what actions may ultimately be taken with respect to tariffs or trade relations between the United States and China or other countries, what products may be subject to such actions, or what actions may be taken by the other countries in retaliation.

Any further deterioration in the relations between the United States and China could exacerbate these actions and lead to additional governmental intervention in global trade markets.

We also cannot predict whether, and to what extent, there may be changes to international trade agreements or whether new or additional quotas, duties, tariffs, exchange controls or other restrictions on our products will be changed or imposed.

In addition, an open conflict or war across any region could affect our ability to obtain raw materials.

For example, the current military conflict between Russia and Ukraine, and related sanctions, export controls or other actions that may be initiated by nations, including the United States, the European Union or Russia (e.g., potential cyberattacks, disruption of energy flows, etc.) or potential sanctions or relevant export controls related to China or Taiwan could adversely affect our business and/or our

Table of Content

supply chain or our business partners or customers in other countries beyond Russia and Ukraine.

Although we currently maintain alternative sources for raw materials, if we are unable to source our products from the countries where we wish to purchase them, either because of the occurrence or threat of wars or other conflicts, regulatory changes or for any other reason, or if the cost of doing so increases, it could materially adversely affect our business, financial condition and results of operations.

Disruptions in the supply of raw materials and components could temporarily impair our ability to manufacture our products for our customers or require us to pay higher prices to obtain these raw materials or components from other sources, which could materially adversely affect our business and our results of operations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors