What changed in this filing

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Item 1A. Risk Factors

2023-03-06 compared with 2022-03-02 · 71 added, 31 removed, 270 unchanged (27% of the section changed)

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Our financial condition and results of operations have been and will continue to be adversely affected by the coronavirus pandemic.

The global spread of COVID-19 that was declared a pandemic by the World Health Organization and the preventative measures taken to contain or mitigate the outbreak have caused, and are continuing to cause, significant volatility and uncertainty and economic disruptions.

The outbreak has resulted in governments around the world implementing increasingly stringent measures to contain or mitigate the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, vaccine mandates and other measures.

While we continue to operate, consistent with applicable government guidelines, we are experiencing, and may continue to 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 unpredictable customer demand.

The global spread of COVID-19 that was declared a pandemic by the World Health Organization and the preventative measures taken to contain or mitigate the outbreak have caused, significant volatility and uncertainty and economic disruptions.

The outbreak resulted in governments around the world implementing increasingly stringent measures to contain or mitigate the spread of the virus, including quarantines, “shelter in place” and “stay at home” orders, travel restrictions, business curtailments, vaccine mandates and other measures.

While we continue to operate, consistent with applicable government guidelines, we have experienced, and may continue to 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 unpredictable customer demand.

In addition, many of our suppliers and customers are also experiencing, and may continue to experience, production slowdowns and/or shutdowns, which may further impact our business, sales and results of operation.

During 2022, we experienced shutdowns at our plant in Shanghai, China due to the COVID-19 pandemic.

The resulting financial impact of COVID-19 has adversely affected our business, supply chain, sales, results of operations, financial condition and cash flows.

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Additionally, a significant outbreak of any other contagious diseases in the human population could result in a widespread health crisis that could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect demand for our products and adversely impact our operating results.

We face risks related to heightened inflation, recession, financial and credit market disruptions and other economic conditions.

Our financial results, operations and prospects depend significantly on worldwide economic and geopolitical conditions, the demand for our products, and the financial condition of our customers and suppliers.

Economic weakness and geopolitical uncertainty have in the past resulted, and may result in the future, in reduced demand for products resulting in decreased sales, margins and earnings.

In 2022, the countries in which we operate experienced significantly heightened inflationary pressures which we expect to continue into 2023.

We may not be able to fully mitigate the impact of inflation through price increases, productivity initiatives and cost savings, which could have an adverse effect on our results of operations.

In addition, if the U.S.

economy enters a recession, we may experience sales declines which could have an adverse effect on our business, operating results and financial condition.

Similarly, disruptions in financial and/or credit markets may impact our ability to manage normal commercial relationships with our customers, suppliers and creditors.

Further, in the event of a recession or threat of a recession, our customers and suppliers may suffer their own financial and economic challenges and as a result they may demand pricing accommodations, delay payment, or become insolvent, which could harm our ability to meet our customer demands or collect revenue or otherwise could harm our business.

An economic or credit crisis could occur and impair credit availability and our ability to raise capital when needed.

A disruption in the financial markets could impair our banking or other business partners, on whom we rely for

access to capital.

In addition, changes in tax or interest rates in the U.S.

or other nations, whether due to recession, economic disruptions or other reasons, could have an adverse effect on our operating results.

Economic weakness and geopolitical uncertainty may also lead us to impair assets, take restructuring actions or adjust our operating strategy and reduce expenses in response to decreased sales or margins.

We may not be able to adequately adjust our cost structure in a timely fashion, which could have an adverse effect on our operating results and financial condition.

Uncertainty about economic conditions may increase foreign currency volatility in markets in which we transact business, which could have an adverse effect on our operating results.

Volatility in and disruption to the global economic environment and changes in the regulatory and business environments in which we operate may have an adverse effect on our business, results of operations and financial condition.

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Risks Related to Our Business and Industry

Our results of operations could be adversely affected by downturns in the U.S.

and global economy which are naturally accompanied by related declines in new truck orders by fleets, freight tonnage hauled and in infrastructure development and other construction projects.

Our results of operations are directly impacted by changes in the U.S.

and global economic conditions, which are accompanied by related declines in freight tonnage hauled and in infrastructure development and other construction projects because, among other things:

Our results of operations could be adversely affected by declines in new truck orders by fleets, freight tonnage hauled and in infrastructure development and other construction projects as a result of a downturn in the U.S.

and/or global economy or other reasons.

Our results of operations are directly impacted by declines in freight tonnage hauled and in infrastructure development and other construction projects resulting from U.S.

and/or other global economic conditions or other reasons because, among other things:

▪ Demand for our MD/HD Truck products is generally dependent on the number of new MD/HD Truck commercial vehicles manufactured in North America.

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Our ability to achieve our business and financial objectives is subject to a variety of factors, many of which are beyond our control.

For example, we may not be successful in implementing our strategy if unforeseen factors emerge diminishing the current levels or any future expected growth in the commercial vehicle, warehouse automation or electric vehicle markets we supply or expect to penetrate, or we experience increased pressure on our margins.

For example, we may not be successful in implementing our strategy if unforeseen factors emerge diminishing the current levels or any future expected growth in the commercial vehicle or electric vehicle markets we supply or expect to penetrate, or we experience increased pressure on our margins.

Any failure to successfully implement our business strategy could have an adverse effect on our business, results of operations and growth potential.

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The loss of any of our large customers or the loss of significant business from any of these customers could have an adverse effect on our business, financial condition and results of operations.

On October 25, 2021, the Company provided notice to the Volvo Group (“Volvo”) of the Company’s intention to terminate its agreement with Volvo, with such termination to become effective twelve months from the date of notice, absent the parties reaching mutually agreeable terms upon which to continue their relationship.

If no such agreement is reached, the loss of business from Volvo could h ave an adverse effect on our business, financial condition and results of operations as sales to Volvo represented more than 10% of reported consolidated net sales during each of the three most recent years.

Our profitability could be adversely affected if the actual production volumes for our customers’ vehicles are significantly lower than expected or our costs are higher than expected.

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Once we enter into such agreements, fulfillment of the supply requirements is our obligation for the entire production life of the platform, with terms generally ranging from five to seven years, and we have limited provisions to terminate such contracts.

We may become committed to supplying products to our customers at selling prices that are not sufficient to cover the direct cost to produce such products, which may be as a result of inflation or increased employment costs as a result of current labor markets or other factors.

We are committed to supplying products to our customers at selling prices that may, with the benefit of hindsight, not be sufficient to cover the direct cost to produce such products, which may be as a result of among other factors, inflation or increased employment costs due to current labor markets or other factors, as we experienced in 2020, 2021 and 2022.

We cannot predict our customers’ demands for our products.

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In other cases, we share the design costs with the customer and thereby have some risk that not all the costs will be covered if the project does not go forward or if it is not as profitable as expected.

Many of our new and targeted customers are start-up or early-stage companies and these customers are at substantial risk that their businesses will not succeed.

Our success depends, in part, upon our ability to maintain or increase our market share.

Many of our new business wins and targeted prospects are early-stage or start-up companies.

Early-stage or start-up companies are at substantial risk that the company’s business will not succeed.

If the customer’s business does not succeed or the customer experiences cash flow problems, the customer may not be able to find financing or may not be able to pay us for our products and services, which may adversely affect our results of operations and financial condition.

In addition, our future estimates and projections contemplate a continued business relationship and sales to these early-stage or start-up companies.

If one or more of these customers no longer purchase products or services from us in the future, our sales and revenue will be adversely effected.

Finally, we may incur significant initial costs in order to meet the production demands of these new customers, and our ability to recoup those costs requires a longer-term business relationship with the customer.

Therefore, a failure of an early-stage or start-up customer may result in our inability to recoup the initial costs we incurred to prepare for production of products for that customer, which could adversely affect our business, results of operations, growth prospects and financial condition.

We may be unable to successfully implement price increases to offset inflation and, as a result, our businesses and financial position and results of operations could be adversely affected.

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Any failure to successfully implement price increases could have an adverse effect on our business, results of operations and growth potential.

Our inability to compete effectively in the highly competitive warehouse automation industry could result in loss of market share and reduced gross margins, which could have an adverse effect on our revenues and operating results.

The warehouse automation industry is highly competitive.

Our inability to compete effectively in the highly competitive industrial automation industry could result in loss of market share and reduced gross margins, which could have an adverse effect on our revenues and operating results.

The industrial automation industry is highly competitive.

Some of our competitors are companies that are larger and have greater financial and other resources than we do.

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If we fail to comply with applicable laws and regulations, we could suffer civil and criminal penalties that could have an adverse effect on our results of operations and financial condition.

Recently, Russian troops invaded Ukraine.

The invasion of Ukraine by Russia and the retaliatory measures taken by the U.S., NATO and other countries have created global security concerns and economic uncertainty that could have a lasting impact on regional and global economies.

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We may be assessed surcharges on certain purchases of steel, copper and other raw materials.

There is currently a well-publicized global shortage of semiconductor chips and several of the raw materials we use that could impact the Company and our customers.

There is currently a well-publicized global shortage of semiconductor chips and several of the raw materials we use.

Inflationary and other increases in costs or shortages of the various materials that are needed for us to produce our products are currently having an impact on our business which may continue for the foreseeable future.

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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.

Our future growth is dependent in part on us making the right investments at the right time in people, technology, product development, manufacturing capacity, and to expand into new markets including in warehouse automation and electric vehicle markets.

If we fail to realize expected rates of return on our investments, we may incur losses on such investments and be unable to timely redeploy the invested capital to take advantage of other markets, potentially resulting in lost market share to our competitors.

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Product innovations have been and will continue to be a part of our business strategy.

We believe it is important we continue to meet our customers’ demands for product innovation, improvement and enhancement, including the continued development of new-generation products, and design improvements and innovations that improve the quality and efficiency of our products including manufacturing seats with airbags, seatbelts and other safety devices and improvements.

We believe it is important for us to continue to meet our customers’ demands for product innovation, improvement and enhancement, including the continued development of new-generation products, and design improvements and innovations that improve the quality and efficiency of our products including manufacturing seats with airbags, seatbelts and other safety devices and improvements.

However, such development will require us to continue to invest in research and development and sales and marketing.

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In addition, our competitors may develop new products before us or may produce similar products that compete with our new products.

We may, as a result of these factors, be unable to meaningfully focus on product innovation as a strategy and may therefore be unable to meet our customers’ demands for product innovation, which could have an adverse effect on our business, operating results and financial condition.

We may, as a result of these factors, be unable to meaningfully focus on

product innovation as a strategy and may therefore be unable to meet our customers’ demands for product innovation, which could have an adverse effect on our business, operating results and financial condition.

We rely on third parties for raw materials, parts, and components.

We may source a variety of systems, components, raw materials and parts, including but not limited to top covers, fabricated steel, semiconductor chips, chemicals, seat-foam, air bag, air bag inflators, seat belts, and other components from third parties.

From time to time these third-party items may not meet the quality standards that we desire, which could harm our reputation, cause delays and cause us to incur significant costs.

We source a variety of systems, components, raw materials and parts, including but not limited to top covers, fabricated steel, semiconductor chips, chemicals, seat-foam, air bag, air bag inflators, seat belts, and other components from third parties.

From time to time these third-party items do not meet the quality standards that we desire, which could harm our reputation, cause delays and cause us to incur significant costs.

Furthermore, we may be unable to source third-party items in sufficient quantities or at acceptable prices.

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Our suppliers (external suppliers as well as our own production sites) also sometimes use a similar method.

This just-in-time method makes the logistics supply chain in the industries we serve very complex and very vulnerable to disruptions.

This just-in-time method makes the logistics supply chain in the industries we serve complex and vulnerable to disruptions.

The potential loss of one of our suppliers or our own production sites could be caused by a myriad of factors.

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Where a customer halts production because of another supplier failing to deliver on time, we may not be fully compensated, if at all, and therefore our business and financial results could be adversely affected.

During 2021 and 2022, we experienced supply chain disruptions (including longer lead-times to procure parts from China and due to port backups) that caused volatility on our customers' production schedules and had a negative impact on our results.

If we are unable to recruit or retain senior management and other skilled personnel, our business, operating results and financial condition could be adversely affected.

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Our results could be adversely impacted by significant changes in our effective tax rate.

Additionally, any changes to manufacturing activities could result in significant changes to our effective tax rate related to products manufactured either in the United States or in international jurisdictions.

Additionally, any changes to manufacturing activities could result in significant changes to our effective tax

rate related to products manufactured either in the United States or in international jurisdictions.

If the United States or another international jurisdiction implements a tax change related to products manufactured in a particular jurisdiction where we do business, our results could be adversely affected.

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We may be subject to product liability claims, recalls or warranty claims, which could be expensive, damage our reputation and result in a diversion of management resources.

As a supplier of products and systems, we face an inherent business risk of exposure to product liability claims in the event that our products, or the equipment into which our products are incorporated, malfunction and result in injury to person or property

Product liability claims could result in significant losses as a result of expenses incurred in defending claims or the award of damages.

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We warrant the workmanship and materials of many of our products under limited warranties and have entered into warranty agreements with certain customers that warranty certain of our products in the hands of customers of our customers, in some cases for many years.

From time to time, we receive product warranty claims from our customers, pursuant to which we may be required to bear costs of repair or replacement of certain of our products.

Accordingly, we are subject to risk of warranty claims in the event that our products do not conform to our customers’ specifications or, in some cases in the event that our products do not conform to their customers’ expectations.

From time to time, we receive product warranty claims from our customers, pursuant to which we have or may be required to bear costs of repair or replacement of certain of our products.

Accordingly, we are subject to risk of warranty claims in the event that our products do not conform to our customers’ specifications or, in some cases in the event

that our products do not conform to their customers’ expectations.

It is possible for warranty claims to result in costly product recalls, significant repair costs and damage to our reputation, all of which could adversely affect our results of operations.

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In addition, if we fail to comply with the covenants set forth in our credit facilities the lenders thereunder could declare an event of default and cause all amounts outstanding thereunder to be due and payable immediately.

We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding credit facilities or other debt instruments we

may have in place from time to time, either upon maturity or if accelerated, upon an event of default, or that we would be able to refinance or restructure the payments on the credit facilities or such other debt instruments on acceptable terms.

We cannot assure you that our assets or cash flow would be sufficient to fully repay borrowings under our outstanding credit facilities or other debt instruments we may have in place from time to time, either upon maturity or if accelerated, upon an event of default, or that we would be able to refinance or restructure the payments on the credit facilities or such other debt instruments on acceptable terms.

In addition, the agreements governing the senior secured revolving and term loan credit facilities contain covenants that, among other things, restrict our ability to:

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Our operating results, revenues and expenses have in the past varied and may in the future vary significantly from quarter-to-quarter or year-to-year.

These fluctuations could have an adverse effect on the market price of our common stock.

These fluctuations have in the past and could have in the future an adverse effect on the market price of our common stock.

We base our operating expense budgets in large part on expected revenue trends.

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Security breaches and other disruptions could compromise our information systems and expose us to liability, which could cause our business and reputation to suffer.

We rely on technology for the operation of our business.

Systems failures or outages could compromise our ability to conduct business and hurt our relationships with our business partners and customers.

In the event of a disaster such as a natural catastrophe, a pandemic, civil unrest, an industrial accident, a cyber-attack, a blackout, a terrorist attack (including conventional, nuclear, biological, chemical or radiological) or war, systems upon which we rely may be inaccessible to our employees for an extended period of time.

While technology can streamline many business processes and ultimately reduce the costs of operations, technology initiatives present short-term cost and also have implementation and operational risks.

In addition, we may have inaccurate expense projections, implementation schedules or expectations regarding the effectiveness of the end product.

These issues could escalate over time.

If we were unable to find and retain associates with key technical knowledge, our ability to develop and deploy key technology solutions could be hampered.

In the ordinary course of our business, we collect and store sensitive data, including intellectual property, financial information, our proprietary business information and that of our customers, suppliers and business partners, and personally identifiable information of our customers and employees, in our data centers and on our networks.

Threats to data security, including unauthorized access and cyberattacks, rapidly emerge and change, exposing us to additional costs for protection or remediation and competing time constraints to secure our data in accordance with customer expectations and statutory and regulatory requirements.

The secure processing, maintenance and transmission of this information is critical to our operations and business strategy.

Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfunction, malfeasance or other disruptions.

Like most companies, our systems are under attack on a routine basis.

At times there are breaches of our security measures.

While past breaches have not been material, there is no guarantee that future breaches could not have a material impact.

Our systems have been, and will likely continue to be, subject to viruses or other malicious codes, unauthorized access, cyber attacks, cyber frauds or other computer related penetrations.

While we take commercially reasonable measures to keep our systems and data secure, it is difficult or impossible to defend against every risk being posed by changing technologies as well as criminal and state-sponsored cybercrime and cyber threats.

While we are not aware of having experienced a material breach of our cybersecurity systems in the recent past, administrative, internal accounting and technical controls as well as other preventative actions may be insufficient to prevent security breaches to our systems or those of third parties with whom we do business.

Increasing sophistication of cyber criminals and terrorists make keeping up with new threats difficult and could result in a breach.

Patching and other measures to protect existing systems and servers could be inadequate, especially on systems that are being retired.

Controls employed by our U.S., off-shore and cloud vendors could prove inadequate.

We could also experience a breach by intentional or negligent conduct on the part of associates or other internal sources.

Our systems and those of our third-party vendors may become vulnerable to damage or disruption due to circumstances beyond our or their control, such as from catastrophic events, power anomalies or outages, natural disasters, network failures, and viruses, ransomware and malware.

Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, regulatory penalties, disrupt our operations and the services we provide to customers, damage our reputation, and cause a loss of confidence in our products and services, which could adversely affect our business and our results of operations.

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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-K

Item 1A. Risk Factors