What changed in this filing

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Item 1A. Risk Factors

2024-03-14 compared with 2023-03-06 · 48 added, 51 removed, 290 unchanged (25% of the section changed)

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In such case, the trading price of our common stock could decline and you may lose all or part of your investment.

Risks Related to COVID-19 Pandemic, health epidemics and Global Economy

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, 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.

Even after the COVID-19 pandemic subsides, we may experience adverse impacts to our business due to any resulting economic inflation, recession or depression that may continue to impact customer demand and the financial instability or operating viability of our suppliers and customers.

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.

Risks Related to Our Business and Industry

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.

Historically, the demand for MD/HD Truck commercial vehicles has declined during periods of weakness in the North American economy.

▪ Demand for our construction equipment products is dependent on vehicle demand for new commercial vehicles in the global construction equipment market.

▪ Demand in the medium and heavy-construction vehicle market, which is where our products are primarily used, is typically related to the level of larger-scale infrastructure development projects.

If we experience periods of low demand for our products or there is volatility in the commercial vehicle market in the future, it could have an adverse effect on our revenues, operating results and financial position.

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

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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.

In 2023, the countries in which we operate experienced heightened inflationary pressures.

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.

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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.

Similarly, disruptions in financial and/or credit markets have in the past impacted, and may in the future 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.

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.

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The commercial vehicle industry as a whole has been more adversely affected by volatile economic conditions than many other industries, as the purchase or replacement of commercial vehicles, which are durable items, may be deferred for many reasons.

Future changes in the regulatory and business environments in which we operate, including increased trade protectionism and tariffs, may adversely affect our ability to sell our products or source materials needed to manufacture our products.

Future changes in the regulatory and business environments in which we operate, including increased trade protectionism and

tariffs, may adversely affect our ability to sell our products or source materials needed to manufacture our products.

Furthermore, financial instability or bankruptcy at any of our suppliers or customers could disrupt our ability to manufacture our products and impair our ability to collect receivables, any or all of which may have an adverse effect on our business, results of operations and financial condition.

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Disruption in our supply chain has had and could continue to have an adverse effect on our ability to manufacture and deliver our products on a timely basis, and thereby affect our results of operations.

Risks Related to Our Business and Industry

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.

Historically, the demand for MD/HD Truck commercial vehicles has declined during periods of weakness in the North American economy.

▪ Demand for our construction equipment products is dependent on vehicle demand for new commercial vehicles in the global construction equipment market.

▪ Demand in the medium and heavy-construction vehicle market, which is where our products are primarily used, is typically related to the level of larger-scale infrastructure development projects.

We may be unable to successfully implement our business strategy and, as a result, our businesses and financial position and results of operations could be adversely affected.

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We may be unable to complete strategic acquisitions, or we may encounter unforeseen difficulties in integrating acquisitions.

We may pursue acquisition targets that will allow us to continue to expand into new geographic markets, add new customers, provide new products, manufacturing and service capabilities and increase penetration with existing customers.

We pursue acquisition targets that will allow us to continue to expand into new geographic markets, add new customers, provide new products, manufacturing and service capabilities and increase penetration with existing customers.

However, we expect to face competition for acquisition candidates, which may limit the number of our acquisition opportunities and may lead to higher acquisition prices.

Moreover, acquisition of businesses may require additional debt and/or equity financing, perhaps resulting in additional leverage and/or shareholder dilution.

The covenants relating to our debt instruments may further limit our ability to complete acquisitions.

The covenants in our debt instruments further limit our ability to complete acquisitions.

There can be no assurance we will find attractive acquisition candidates or successfully integrate acquired businesses into our existing business.

If the expected synergies from acquisitions do not materialize or we fail to successfully integrate such new businesses into our existing businesses, our results of operations could also be adversely affected.

Circumstances associated with our acquisition and divestiture strategy could adversely affect our results of operations and financial condition.

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We incur costs and make capital expenditures based in part upon estimates of production volumes for our customers’ vehicles.

While we attempt to establish a price for our components and systems that will compensate for variances in production volumes, if the actual production of these vehicles is significantly less than anticipated, our gross margin on these products would be adversely affected.

While we attempt to establish a price for our components and systems that will compensate for variances in production volumes, when the actual production of these vehicles is significantly less than anticipated, our gross margin on these products is adversely affected.

Our OEM customers have historically had a significant amount of leverage over us.

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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 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 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, 2022 and 2023.

We cannot predict our customers’ demands for our products.

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Our ability to implement customer price increases where margin on product is not meeting profitability targets is subject to a variety of factors, such as fluctuations in our material, freight and labor costs, inflation or other competitive conditions, which are beyond our control.

For example, customers may refuse to pay increased prices that meet our profitability targets, resource from other suppliers, or not issue purchase orders to us with large volumes.

For example, customers may refuse to pay increased prices that meet our profitability targets, re-source from other suppliers, or not issue purchase orders to us with large volumes.

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

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We are subject to certain risks associated with our foreign operations.

We have operations in the Mexico, China, United Kingdom, Czech Republic, Ukraine, Belgium, Australia, India and Thailand, which collectively accounted for approximately 24% of our total revenues for the year ended December 31, 2022.

We have operations in the Mexico, China, United Kingdom, Czech Republic, Morocco, Ukraine, Belgium, Australia, India and Thailand, which collectively accounted for approximately 24% of our total revenues for the year ended December 31, 2023.

There are certain risks inherent in our international business activities including, but not limited to:

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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.

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.

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

We cannot be certain that similar international tensions will not affect our facility in the Ukraine, including due to the Russian invasion of Ukraine, electrical outages, cyber-attacks and periodic battles with separatists closer to our facility.

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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.

Recently, there was 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.

In addition, freight costs associated with shipping and receiving product are impacted by fluctuations in freight tonnage, freight hauler availability or capacity and the cost of oil and gas.

Recently, we experienced freight related delays through the Suez Canal due to the Israel-Hamas war and through the Panama canal due to drought.

We are currently experiencing difficulty purchasing and obtaining timely delivery of certain raw materials required for our operations, which is having an adverse effect on our results of operations.

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In some cases, we compete with divisions of our OEM customers.

Our products primarily compete on the basis of price, breadth of product offerings, product quality, technical expertise, development capability, product delivery and product service.

Our products primarily compete on the basis of price, breadth of product offerings, product quality, technical

expertise, development capability, product delivery and product service.

Increased competition may lead to price reductions resulting in reduced gross margins and loss of market share.

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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.

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

We are currently experiencing difficulty sourcing certain raw materials, parts and components required for our operations, which is having an adverse effect on our results of operations.

We have recently experienced and may in the future experience difficulty sourcing certain raw materials, parts and components required for our operations, which has had and may in the future have an adverse effect on our results of operations.

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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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.

During 2021, 2022 and to a lesser degree during 2023, we experienced supply chain disruptions (including longer lead-times to procure parts from China) 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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Generally, we record asset impairment losses when we determine that our estimates of the future undiscounted cash flows from an operation will not be sufficient to recover the carrying value of that facility’s building, fixed assets and production tooling.

There can be no assurance that we will not incur charges in the future as changes in economic or operating conditions impacting the estimates and assumptions could result in additional impairment.

There can be no assurance that we will not incur charges in the future as changes in economic or operating conditions impacting

the estimates and assumptions could result in additional impairment.

Any future impairments may adversely affect our results of operations.

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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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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.

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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Our senior secured revolving and term loan credit facilities require us to maintain certain financial ratios and to comply with various operational and other covenants.

If we do not comply with those covenants, we would be precluded from borrowing under the senior secured revolving credit facility, which could have an adverse effect on our business, financial condition and liquidity.

If we are unable to borrow under our senior secured revolving credit facility, we will need to meet our capital requirements using other sources;

If we do not comply with those covenants, we are precluded from borrowing under the senior secured revolving credit facility, which could have an adverse effect on our business, financial condition and liquidity.

we are unable to borrow under our senior secured revolving credit facility, we will need to meet our capital requirements using other sources;

however, alternative sources of liquidity may not be available on acceptable terms.

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.

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

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These provisions could limit the price that certain investors might be willing to pay in the future for shares of our common stock, discourage potential acquisition proposals and delay, deter or prevent a change in control.

General Risk Factors

Other Risk Factors

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

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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.

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.

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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 take what we believe to be 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.

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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.

Unresolved Staff Comments

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

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 caused significant volatility and uncertainty and economic disruptions.

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

Even after the COVID-19 pandemic subsided, we continued to experience adverse impacts to our business due to resulting inflation and other economic conditions that impacted customer demand and the operations of our suppliers and customers.

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.

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