What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-08-03 compared with 2021-05-04 · 164 added, 66 removed, 178 unchanged (56% of the section changed)

ITEM 2 – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The discussion and analysis below describes material changes in financial condition and results of operations as reflected in our condensed consolidated financial statements for the three months ended March 31, 2021 and 2020.

This discussion and analysis should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our 2020 Form 10-K.

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The medium-duty truck market is influenced by overall economic conditions but has historically been less cyclical than the North American Class 8 truck market, with highs and lows generally not as pronounced as the Class 8 truck market.

The Company is a new entrant into the last-mile delivery vehicle market.

This is a focus of business development activities and the Company has secured future business in 2022 and beyond.

Commercial Trends in Warehouse Automation Subsystems

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Demand for new vehicles in the global construction equipment market generally follows certain economic conditions around the world.

Our products are primarily

used in the medium- and heavy-duty construction equipment markets (vehicles weighing over 12 metric tons).

Our products are primarily used in the medium- and heavy-duty construction equipment markets (vehicles weighing over 12 metric tons).

Demand in the medium- and heavy-duty construction equipment market is typically related to the level of large scale infrastructure development projects, such as highways, dams, harbors, hospitals, airports and industrial development, as well as activity in the mining, forestry and commodities industries.

Other Key Developments

The COVID-19 pandemic has caused and continues to cause, significant volatility, uncertainty and economic disruptions to our business.

On April 30, 2021, the Company closed on $275 million in senior secured credit facilities, consisting of a $150 million Term Loan Facility and a $125 million Revolving Credit Facility.

The Company recognized a loss on extinguishment of debt of approximately $7.2 million, including non-cash write off relating to deferred financing costs and unamortized discount of the

2023 Term Loan Facility, a voluntary repayment premium, and certain fees related to the new Credit Facilities during the quarter ended June 30, 2021.

The Company deferred $1.8 million of fees related to the new Credit Facilities.

All amounts under the 2023 Term Loan Facility and ABL Revolving Credit Facility were repaid and discharged in full on April 30, 2021 and the TLS Agreement and Third ARLS Agreement were terminated.

Although the economy has begun to recover, the COVID-19 pandemic has caused and continues to cause, significant volatility, uncertainty and economic disruptions to our business.

While we continue to operate our facilities, we may experience production slowdowns and/or shutdowns at our manufacturing facilities in North America, Europe and Asia Pacific as a result of government orders, our inability to obtain component parts from suppliers and/or decreased customer demand.

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The extent of the adverse effect of the COVID-19 pandemic on our business results depends on future developments, including the severity and duration of the pandemic and its overall impact on the economy.

During the quarter ended March 31, 2021, we experienced supply constraints and material cost increases.

During the quarter ended June 30, 2021, while volume and demand is rebounding, we experienced supply constraints, labor constraints, material cost increases, and freight cost increases.

The impact of the pandemic and related economic recovery continue to be uneven from period to period and across our global footprint based on local and regional outbreaks.

We continue to proactively monitor, assess and minimize disruptions and delays in production, focus on cost control and recovery through pricing adjustments, and take reasonable measures to protect our workforce.

As we begin the second quarter, demand for our products is being negatively impacted by the global shortage of semiconductor chips.

We are proactively managing labor shortages due to local dynamics around our primary manufacturing facilities, material inflation, and global supply constraints including, foam supply shortages tied to recent storms in Texas and Mexico.

On April 30, 2021, the Company closed on $275 million in senior secured credit facilities, consisting of a $150 million Term Loan A and a $125 million Revolving Credit Facility.

The Company expects to recognize a loss on extinguishment of debt of approximately $7.2 million, including non-cash write off relating to deferred financing costs and unamortized discount of the 2023 Term Loan Facility and a voluntary repayment premium during the financial quarter ending June 30, 2021.

See Note 18, Subsequent Event in this Form 10-Q.

As we begin the third quarter, supply chains for our products continue to be negatively impacted by the global shortage of semiconductor chips.

We are proactively managing labor shortages due to local dynamics around our primary manufacturing facilities, material inflation, freight costs increases, and global supply constraints.

Specific to the comparative three and six month periods ended June 30, 2020, in late March 2020, the Company took action to right-size the business and working capital profile to protect profit margin and liquidity levels.

We implemented a comprehensive program of cost reduction initiatives and manufacturing capacity rationalization initiatives.

These actions continued through the end of 2020.

Actions included headcount reductions, reduction in recurring consulting expenses, re-prioritization and decrease in capital spending and reduction in sales and marketing expenses.

Additionally, the Company eliminated the Corporate Business Development, Aviation, Quality, Procurement and Operating Excellence departments.

The Company also implemented other temporary measures including pay reductions, plant shutdowns, furloughs, elimination of most annual incentive pay, suspension of the employer 401(k) match, and reduction in non-essential travel in an effort to mitigate the future risk of uncertainty.

Consolidated Results of Operations

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

The table below sets forth certain consolidated operating data for the three months ended March 31 (dollars are in thousands):

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

The table below sets forth certain consolidated operating data for the three months ended June 30 (dollars are in thousands):

2021 2020 $ Change % Change

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Goodwill and other impairment $ — $ 150 $ (150) (100.0)%

Interest expense $ 2,818 $ 5,309 $ (2,491) (46.9)%

Loss on extinguishment of debt $ 7,155 $ — $ 7,155 100.0%

Provision (benefit) for income taxes $ 1,546 $ (3,122) $ 4,668 NM 1

Net income (loss) $ 5,095 $ (12,497) $ 17,592 NM 1

Not meaningful

Note, overall fluctuations in results from operations during the three months ended June 30, 2021 compared to three months ended June 30, 2020 were primarily driven by a very weak second quarter of 2020 impacted by the COVID-19 pandemic.

The increase in consolidated revenues resulted from:

• a $60.4 million, or 191.1%, increase in OEM North American MD/HD Truck revenues;

• a $41.5 million, or 384.3%, increase in warehouse automation revenues;

• a $17.8 million, or 72.7%, increase in OEM construction equipment revenues;

• a $6.2 million, or 29.4%, increase in aftermarket and OES revenues;

• a $5.1 million, or 17.8% increase in other revenues.

Second quarter 2021 revenues were favorably impacted by foreign currency exchange translation of $6.8 million, which is reflected in the change in revenues above.

Gross Profit .

The $27.9 million increase in gross profit is primarily attributable to the increase in sales volume and improved cost structure, partially offset by material price increases and sales mix.

Included in gross profit is cost of revenues, which increased $103.2 million, or 85.7%, as a result of an increase in raw material and purchased component costs of $76.9 million, or 105.5%, and an increase in labor and overhead expenses of $26.3 million, or 55.3%.

As a percentage of revenues, gross profit margin was 13.3% for the three months ended June 30, 2021 compared to 5.1% for the three months ended June 30, 2020.

Selling, General and Administrative Expenses .

Selling, general and administrative expenses ("SG&A”) consist primarily of wages and benefits and other expenses such as marketing, travel, legal, audit, rent and utility costs which are not directly associated with the manufacturing of our products.

SG&A expenses increased $1.2 million compared to the three months ended June 30, 2020, primarily due to the reduced wages and benefits in 2020 as a result of the temporary actions taken in response to the COVID-19 pandemic.

The increase was offset by a $3.3 million decrease in charge for Contingent Consideration and $1.0 million decrease in charges associated with ongoing Restructuring Initiatives.

As a percentage of revenues, SG&A expense was 7.0% for the three months ended June 30, 2021 compared to 13.3% for the three months ended June 30, 2020.

Interest Expense .

Interest associated with our debt was $2.8 million and $5.3 million for the three months ended June 30, 2021 and 2020, respectively.

The decrease in interest expense primarily related to a $1.2 million decrease in Payment In Kind interest expense resulting from the loan amendment that occurred in the second quarter of 2020 and a lower interest expense of $1.0 million due to refinancing of the Company's long term debt.

Loss on extinguishment of debt.

On April 30, 2021, the Company refinanced its long-term debt, which resulted in a loss of $7.2 million, including a $3.7 million non-cash write off relating to deferred financing costs and unamortized discount of the 2023 Term Loan Facility, a voluntary repayment premium of $3.0 million and $0.5 million of other fees associated with the new debt.

Provision (Benefit) for Income Taxes.

An income tax provision of $1.5 million and an income tax benefit of $3.1 million were recorded for the three months ended June 30, 2021 and 2020, respectively.

The period over period change in income tax was primarily attributable to a $22.3 million increase in pre-tax income versus the prior year period.

Net Income (loss).

Net income was $5.1 million for the three months ended June 30, 2021 compared to a net loss of $12.5 million for the three months ended June 30, 2020.

The increase in net income is attributable to the factors noted above.

Segment Results

Electrical System Segment Results

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

The table below sets forth certain Electrical Systems Segment operating data for the three months ended June 30 (dollars are in thousands):

2021 2020 $ Change % Change

Revenues $ 175,104 $ 74,210 $ 100,894 136.0%

Gross profit $ 23,776 $ 1,144 $ 22,632 1,978.3%

Selling, general & administrative expenses $ 5,224 $ 7,309 $ (2,085) (28.5)%

Operating income (loss) $ 18,552 $ (6,165) $ 24,717 NM 1

Not meaningful

The increase in Electrical System Segment revenues resulted from:

• a $45.3 million, or 255.9%, increase in OEM North American MD/HD Truck revenues;

• a $41.2 million, or 381.5% increase in warehouse automation revenues;

• a $9.2 million, or 87.6%, increase in OEM construction equipment revenues;

• a $4.7 million, or 66.2% increase in aftermarket and OES revenue;

• a $0.5 million, or 1.8%, increase in other revenues.

Electrical System Segment revenues were favorably impacted by foreign currency exchange translation of $2.7 million, which is reflected in the change in revenues above.

Gross Profit.

The increase in gross profit was primarily attributable to the increase in sales volume.

Included in gross profit is cost of revenues, which increased $78.3 million, or 107.1%, as a result of an increase in raw material and purchased component costs of $60.0 million, or 139.2%, and an increase in labor and overhead expenses of $18.3 million, or 61.0%.

As a percentage of revenues, gross profit margin was 13.6% for the three months ended June 30, 2021 compared to 1.5% for the three months ended June 30, 2020.

Selling, General and Administrative Expenses .

SG&A expenses decreased $2.1 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, primarily due to a $3.3 million decrease in charge for Contingent Consideration and $0.4 million decrease in charges associated with ongoing Restructuring Initiatives, offset by an increase in wages and benefits reduced in 2020 due to the temporary actions taken in response to the COVID-19 pandemic.

Global Seating Segment Results

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

The table below sets forth certain Global Seating Segment operating data for the three months ended June 30 (dollars are in thousands):

2021 2020 $ Change % Change

Revenues $ 84,898 $ 53,862 $ 31,036 57.6%

Gross profit $ 10,594 $ 5,345 $ 5,249 98.2%

Selling, general & administrative expenses $ 5,611 $ 3,810 $ 1,801 47.3%

Operating income $ 4,983 $ 1,535 $ 3,448 224.6%

The increase in Global Seating Segment revenues resulted from:

• a $15.1 million, or 108.6%, increase in OEM North American MD/HD Truck revenues;

• a $8.6 million, or 61.4%, increase in OEM construction equipment revenues;

• a $1.5 million, or 10.7%, increase in aftermarket and OES sales;

• a $5.8 million, or 48.3%, increase in other revenues.

Global Seating Segment revenues were favorably impacted by foreign currency exchange translation of $4.1 million, which is reflected in the change in revenues above.

Gross Profit.

The increase in gross profit is primarily attributable to the increase in sales volume.

Included in gross profit is cost of revenues, which increased $25.8 million, or 53.2%, as a result of an increase in raw material and purchased component costs of $17.8 million, or 57.5%, and an increase in labor and overhead expenses of $8.0 million, or 45.5%.

As a percentage of revenues, gross profit margin was 12.5% for the three months ended June 30, 2021 compared to 9.9% for the three months ended June 30, 2020.

Selling, General and Administrative Expenses .

SG&A expenses increased $1.8 million for the three months ended June 30, 2021 compared to the three months ended June 30, 2020, primarily due to the reduced wages and benefits in 2020 due to the temporary actions taken in response to the COVID-19 pandemic, and are consistent with the prior year amount on a percent of sales basis.

Consolidated Results of Operations

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

The table below sets forth certain consolidated operating data for the six months ended June 30, (dollars are in thousands):

2021 2020 $ Change % Change

Revenues $ 503,063 $ 314,001 $ 189,062 60.2%

Gross profit $ 65,489 $ 26,778 $ 38,711 144.6%

Selling, general and administrative expenses $ 33,757 $ 34,799 $ (1,042) (3.0)%

Goodwill and other impairment $ — $ 29,017 $ (29,017) (100.0)%

Other (income) expense $ (941) $ 536 $ (1,477) NM 1

Interest expense $ 7,859 $ 9,933 $ (2,074) (20.9)%

Loss on extinguishment of debt $ 7,155 $ — $ 7,155 100.0%

Provision (benefit) for income taxes $ 4,074 $ (10,416) $ 14,490 NM 1

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Not meaningful

Note, overall fluctuations in results from operations during the six months ended June 30, 2021 compared to six months ended June 30, 2020 were primarily driven by a very weak second quarter of 2020 impacted by the COVID-19 pandemic.

The increase in consolidated revenues resulted from:

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• a $29.0 million, or 51.1%, increase in OEM construction equipment revenues;

• a $0.9 million, or 3.0%, decrease in aftermarket and OES revenues.

First quarter 2021 revenues were favorably impacted by foreign currency exchange translation of $4.3 million, which is reflected in the change in revenues above.

• a $5.2 million, or 10.3%, increase in aftermarket and OES revenues;

• a $5.2 million, or 10.4% increase in other revenues.

Six months ended 2021 revenues were favorably impacted by foreign currency exchange translation of $10.7 million, which is reflected in the change in revenues above.

Gross Profit .

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Included in gross profit is cost of revenues, which increased $150.4 million, or 52.3%, as a result of an increase in raw material and purchased component costs of $116.8 million, or 65.8%, and an increase in labor and overhead expenses of $33.6 million, or 30.5%.

As a percentage of revenues, gross profit margin was 12.7% for the three months ended March 31, 2021 compared to 10.9% for the three months ended March 31, 2020.

As a percentage of revenues, gross profit margin was 13.0% for the six months ended June 30, 2021 compared to 8.5% for the six months ended June 30, 2020.

Selling, General and Administrative Expenses .

SG&A expenses decreased $2.2 million compared to the three months ended March 31, 2020, primarily due to the decrease in non-recurring payments relating to CEO transition and investigation expenses incurred during the prior year quarter of $4.7 million.

As a percentage of revenues, SG&A expense was 6.4% for the three months ended March 31, 2021 compared to 9.6% for the three months ended March 31, 2020.

SG&A expenses decreased $1.0 million compared to the six months ended June 30, 2020, primarily due to the decrease in non-recurring payments relating to CEO transition and investigation expenses incurred during the six months ended June 30, 2020 of $4.7 million, a $3.1 million decrease in charge for Contingent Consideration, and a $1.0 million decrease in charges associated with ongoing Restructuring Initiatives.

The decrease was offset by an increase in wages and benefits that were reduced in 2020 due to the temporary actions taken in response to the COVID-19 pandemic.

As a percentage of revenues, SG&A expense was 6.7% for the six months ended June 30, 2021 compared to 11.1% for the six months ended June 30, 2020.

Impairment Expense .

As a result of the Company's market capitalization maintaining a value less than the carrying value of its equity for a period of time, the Company determined it had an impairment indicator during the first quarter of 2020.

Accordingly, we recognized a $27.1 million impairment of goodwill and impairment of long-lived assets of $1.8 million for the quarter ended March 31, 2020.

As a result of the Company's market capitalization having a value less than the carrying value of its equity for a period of time, the Company determined it had an impairment indicator during the six months ended June 30, 2020.

Accordingly, we recognized a $27.1 million impairment of goodwill and impairment of long-lived assets of $1.9 million for the six months ended June 30, 2020.

Other Expense.

Other expenses decreased $1.4 million in the quarter ended March 31, 2021 as compared to the quarter ended March 31, 2020 due primarily to a favorable change in foreign currency of $1.1 million.

Other expenses decreased $1.5 million in the six months ended June 30, 2021 as compared to the six months ended June 30, 2020 due primarily to a favorable change in foreign currency of $1.1 million.

Interest Expense .

Interest associated with our debt, and other expense was $5.0 million and $4.6 million for the three months ended March 31, 2021 and 2020, respectively.

The increase in interest expense primarily related to a $1.7 million Payment In Kind interest expense resulting from the loan amendment that occurred in the second quarter of 2020, offset by favorable change in interest rate swap adjustments of $1.0 million and a lower interest expense of $0.5 million due to declining interest rates.

Interest associated with our debt, and other expense was $7.9 million and $9.9 million for the six months ended June 30, 2021 and 2020, respectively.

The decrease in interest expense primarily related to a lower interest expense of $1.5 million due to refinancing of the Company's long term debt and a favorable change in interest rate swap adjustments of $1.0 million, offset by a $0.4 million increase in Payment In Kind interest expense resulting from the loan amendment that occurred in the second quarter of 2020.

Loss on extinguishment of debt.

Provision (Benefit) for Income Taxes.

An income tax provision of $2.5 million and an income tax benefit of $7.3 million were recorded for the three months ended March 31, 2021 and 2020, respectively.

An income tax provision of $4.1 million and an income tax benefit of $10.4 million were recorded for the six months ended June 30, 2021 and 2020, respectively.

The period over period change in income tax was primarily attributable to a $65.2 million increase in pre-tax income versus the prior year period.

Net Income (loss).

Net income was $8.5 million for the three months ended March 31, 2021 compared to $24.6 million net loss for the three months ended March 31, 2020.

Net income was $13.6 million for the six months ended June 30, 2021 compared to a net loss of $37.1 million for the six months ended June 30, 2020.

The increase in net income is attributable to the factors noted above.

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Electrical System Segment Results

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

The table below sets forth certain Electrical Systems Segment operating data for the three months ended March 31 (dollars are in thousands):

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

The table below sets forth certain Electrical Systems Segment operating data for the six months ended June 30, (dollars are in thousands):

2021 2020 $ Change % Change

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Not meaningful

The increase in Electrical System Segment revenues resulted from:

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• a $5.7 million, or 30.5% increase in aftermarket and OES revenue;

• a $0.2 million, or 0.6%, decrease in other revenues.

• a $0.3 million, or 0.5%, increase in other revenues.

Electrical System Segment revenues were favorably impacted by foreign currency exchange translation of $3.8 million, which is reflected in the change in revenues above.

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Included in gross profit is cost of revenues, which increased $119.1 million, or 68.4%, as a result of an increase in raw material and purchased component costs of $94.6 million, or 89.9%, and an increase in labor and overhead expenses of $24.5 million, or 35.5%.

As a percentage of revenues, gross profit margin was 12.5% for the three months ended March 31, 2021 compared to 9.8% for the three months ended March 31, 2020.

As a percentage of revenues, gross profit margin was 13.1% for the six months ended June 30, 2021 compared to 6.5% for the six months ended June 30, 2020.

Selling, General and Administrative Expenses .

SG&A expenses increased $0.7 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, related to a $0.2 million charge for milestone payments related to the performance of the FSE business.

SG&A expenses decreased $1.4 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, primarily as a result of a $3.1 million decrease in charge for Contingent Consideration offset by an increase in wages and benefits that were reduced in 2020 due to the temporary actions taken in response to the COVID-19 pandemic.

Impairment Expense .

Accordingly, we recognized a $22.3 million impairment of goodwill and an impairment of long-lived assets of $1.1 million for the three months ended March 31, 2020.

Accordingly, we recognized a $22.3 million impairment of goodwill and an impairment of long-lived assets of $1.1 million for the six months ended June 30, 2020.

Global Seating Segment Results

Three Months Ended March 31, 2021 Compared to Three Months Ended March 31, 2020

The table below sets forth certain Global Seating Segment operating data for the three months ended March 31 (dollars are in thousands):

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

The table below sets forth certain Global Seating Segment operating data for the six months ended June 30, (dollars are in thousands):

2021 2020 $ Change % Change

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Goodwill and other impairment $ — $ 4,809 $ (4,809) (100.0)%

Operating income (loss) $ 5,544 $ (361) $ 5,905 NM 1

Not meaningful

Operating income $ 10,527 $ 1,172 $ 9,355 798.2%

The increase in Global Seating Segment revenues resulted from:

• a $1.2 million, or 4.0%, decrease in OEM North American MD/HD Truck revenues;

• a $13.9 million, or 31.4%, increase in OEM North American MD/HD Truck revenues;

• a $16.5 million, or 56.3%, increase in OEM construction equipment revenues;

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Included in gross profit is cost of revenues, which increased $39.4 million, or 34.2%, as a result of an increase in raw material and purchased component costs of $30.3 million, or 40.8%, and an increase in labor and overhead expenses of $9.1 million, or 22.2%.

As a percentage of revenues, gross profit margin was 12.0% for the three months ended March 31, 2021 compared to 12.3% for the three months ended March 31, 2020.

As a percentage of revenues, gross profit margin was 12.2% for the six months ended June 30, 2021 compared to 11.3% for the six months ended June 30, 2020.

Selling, General and Administrative Expenses .

SG&A expenses increased $0.4 million for the three months ended March 31, 2021 compared to the three months ended March 31, 2020, consistent with the prior year amount on a percent of sales basis.

SG&A expenses increased $2.2 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020, consistent with the prior year amount on a percent of sales basis.

Impairment Expense .

As a result of the Company's market capitalization maintaining a value less than the carrying value of its equity, the Company determined it had an impairment indicator during the first quarter of 2020.

Accordingly, we recognized a $4.8 million impairment of goodwill for the three months ended March 31, 2020.

As a result of the Company's market capitalization having a value less than the carrying value of its equity, the Company determined it had an impairment indicator during the six months ended June 30, 2020.

Accordingly, we recognized a $4.8 million impairment of goodwill for the six months ended June 30, 2020.

Liquidity and Capital Resources

During the three months ended March 31, 2021, the Company borrowed $6.8 million under its revolving credit facility.

At March 31, 2021, the Company had liquidity of $120.0 million;

$38.1 million of cash and $81.9 million of availability from the revolving credit facility.

Our primary sources of liquidity during the three months ended March 31, 2021 were cash reserves and availability under our revolving credit facility.

During the six months ended June 30, 2021, the Company borrowed $35.5 million under its revolving credit facility.

At June 30, 2021, the Company had liquidity of $129.1 million, consisting of $41.0 million of cash and $88.1 million of availability from the revolving credit facility.

Our primary sources of liquidity as of June 30, 2021 were cash reserves and availability under our revolving credit facility.

We believe that these sources of liquidity will provide adequate funds for our working capital needs, capital expenditures and debt service throughout the next twelve months.

However, no assurance can be given that this will be the case.

As of March 31, 2021, cash of $38.1 million was held by foreign subsidiaries.

The Company had a $0.3 million deferred tax liability as of March 31, 2021 for the expected future income tax implications of repatriating cash from the foreign subsidiaries for which no indefinite reinvestment assertion has been made.

As of June 30, 2021, cash of $40.9 million was held by foreign subsidiaries.

The Company had a $0.5 million deferred tax liability as of June 30, 2021 for the expected future income tax implications of repatriating cash from the foreign subsidiaries for which no indefinite reinvestment assertion has been made.

Covenants and Liquidity

Our ability to comply with the covenants in the TLS Agreement and the Third ARLS Agreement, as discussed in Note 4, Debt, may be affected by economic or business conditions beyond our control.

Based on our current forecast, we believe that we will be able to maintain compliance with the financial maintenance covenants and the fixed charge coverage ratio covenant, if applicable, and other covenants in the TLS Agreement and the Third ARLS Agreement for the next twelve months as amended in accordance with Note 4, Debt;

Our ability to comply with the covenants in the Credit Agreement, as discussed in Note 4, Debt, may be affected by economic or business conditions beyond our control.

Based on our current forecast, we believe that we will be able to maintain compliance with the financial maintenance covenants and the fixed charge coverage ratio covenant, if applicable, and other covenants in the Credit Agreement for the next twelve months in accordance with Note 4, Debt;

however, no assurances can be given that we will be able to comply.

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If actual results are substantially different than our current forecast we may not be able to comply with our financial covenants.

If we do not comply with the financial and other covenants in the TLS Agreement and the Third ARLS Agreement, the lenders could declare an event of default under the TLS Agreement and the Third ARLS Agreement and our indebtedness thereunder could be declared immediately due and payable.

The TLS Agreement and the Third ARLS Agreement contain cross default provisions.

If we are unable to borrow under the Third ARLS Agreement, we will need to meet our capital requirements using alternative sources of liquidity which may not be available on acceptable terms.

If we do not comply with the financial and other covenants in the Credit Agreement, the lenders could declare an event of default under the Credit Agreement and our indebtedness thereunder could be declared immediately due and payable.

The Credit Agreement contain cross default provisions.

If we are unable to borrow under the Credit Agreement, we will need to meet our capital requirements using alternative sources of liquidity which may not be available on acceptable terms.

Any of these events would have a material adverse effect on our business, financial condition and liquidity.

Sources and Uses of Cash

March 31, 2021 March 31, 2020

June 30, 2021 June 30, 2020

(In thousands)

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Operating activities.

For the three months ended March 31, 2021, net cash used in operating activities was $15.4 million compared to net cash provided by operating activities of $10.3 million for the three months ended March 31, 2020.

Net cash used in operating activities is primarily attributable to the increase in working capital for the three months ended March 31, 2021 as compared to the prior year period.

For the six months ended June 30, 2021, net cash used in operating activities was $24.8 million compared to net cash provided by operating activities of $20.5 million for the six months ended June 30, 2020.

Net cash used in operating activities is primarily attributable to the increase in working capital for the six months ended June 30, 2021 as compared to the prior year period.

Investing activities.

For the three months ended March 31, 2021, net cash used in investing activities was $1.7 million compared to $3.5 million for the three months ended March 31, 2020.

For the six months ended June 30, 2021, net cash used in investing activities was $6.9 million compared to $4.4 million for the six months ended June 30, 2020.

In 2021, we expect capital expenditures to be in the range of $20 million to $25 million.

Financing activities.

For the three months ended March 31, 2021, net cash provided by financing activities was $5.5 million compared to $13.8 million for the three months ended March 31, 2020.

Net cash provided by financing activities for the three

months ended March 31, 2021 is attributable to $6.8 million of borrowings under the revolving credit facility offset by a repayment of the senior secured term loan credit facility.

Net cash used in financing activities for the three months ended March 31, 2020 is attributable to $15.0 million of borrowings under the revolving credit facility offset by a repayment of the senior secured term loan credit facility.

For the six months ended June 30, 2021, net cash provided by financing activities was $22.2 million compared to $10.0 million for the six months ended June 30, 2020.

Net cash provided by financing activities for the six months ended June 30, 2021 is attributable to $35.5 million of borrowings under the revolving credit facility offset by $8.0 million of costs attributed to debt amendment and extinguishment completed during the six months ended June 30, 2021 and a $5.0 million Contingent Consideration payment.

Net cash provided by financing activities for the six months ended June 30, 2020 is attributable to $15.0 million of borrowings under the revolving credit facility offset by a repayment of the senior secured term loan credit facility and loan amendment costs.

Debt and Credit Facilities

The debt and credit facilities descriptions in Note 4, Debt are incorporated in this section by reference.

On April 30, 2021, the Company refinanced its outstanding debt.

See Note 18, Subsequent Event in this Form 10-Q.

Critical Accounting Policies and Estimates

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Management's Discussion and Analysis of Financial Condition and Results of Operations" in our 2020 Form 10-K.

At March 31, 2021, there have been no material changes to our critical accounting estimates from those disclosed in our 2020 Form 10-K.

At June 30, 2021, there have been no material changes to our critical accounting estimates from those disclosed in our 2020 Form 10-K.

Forward-Looking Statements

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(ix) our customer base is concentrated and the loss of business from a major customer or the discontinuation of particular commercial vehicle platforms could reduce our revenues;

(x) our profitability could be adversely affected if the actual production volumes for our customers’ vehicles are significantly lower than expected;

(x) our profitability could be adversely affected if the actual production volumes for our customers’ vehicles are

significantly lower than expected;

(xi) our major OEM customers may exert significant influence over us;

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(xvi) we have invested substantial resources in markets where we expect growth and we may be unable to timely alter our strategies should such expectations not be realized;

(xvii) our inability to compete effectively in the highly competitive

commercial vehicle component supply industry could result in lower prices for our products, loss of market share and reduced gross margins, which could have an adverse effect on our revenues and operating results;

(xvii) our inability to compete effectively in the highly competitive commercial vehicle component supply industry could result in lower prices for our products, loss of market share and reduced gross margins, which could have an adverse effect on our revenues and operating results;

(xviii) we may be unable to successfully introduce new products and, as a result, our business, and financial condition and results of operations could be materially and adversely affected (xix) we could experience disruption in our supply or delivery chain, which could cause one or more of our customers to halt or delay production;

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(xxxvi) security breaches and other disruptions could compromise our information systems and expose us to liability, which could cause our business and reputation to suffer;

and (xxxvii) we face risks related to health epidemics that could impact our sales and operating results as outlined under the heading "Risk Factors" in the Company's Annual Report on Form 10-K for fiscal year ending December 31, 2020 and the Company's fillings with the SEC.

There can be no assurance that statements made in this Form 10-Q relating to future events will be achieved.

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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 2. Management’s Discussion and Analysis