What changed in this filing

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Item 1A. Risk Factors

2025-03-17 compared with 2024-03-14 · 74 added, 57 removed, 281 unchanged (32% of the section changed)

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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 for our construction and agriculture equipment products is dependent on vehicle demand for new commercial vehicles in the global construction and agriculture 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.

When we experience periods of low demand for our products or volatility in the commercial vehicle markets our revenues, operating results and financial position are adversely affected.

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 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.

In addition to inflationary pressures, we may not be able to fully mitigate the impact of inflation or increased tariffs 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.

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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 such as those recently announced by President Trump, and any retaliatory counter measures by affected countries, may adversely affect our ability to sell our products and source materials needed to manufacture our products.

In addition, tariffs could increase our costs for materials sourced outside the US which we may not be able to pass along to our customers and would therefore adversely affect our results of operations.

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.

government has taken actions or made proposals that are intended to address trade imbalances or trade practices, specifically with China, among other countries, which include encouraging increased production in the United States.

Furthermore, the current administration has begun implementing a more protectionist trade environment, including through measures such as the imposition of higher tariffs on imports into the U.S., the renegotiation of some U.S.

trade agreements and other government regulations affecting trade between the U.S.

and other countries where we conduct our business, including announced tariffs on imports from China and Mexico, and threatened tariffs on imports from the EU.

These actions and proposals have resulted or could result in retaliatory actions by affected countries.

Such changes could increase the price we pay for certain raw materials we import from such countries, for which we may not able to obtain alternative supply at equivalent or lower prices, reduce demand for our products in other countries and adversely impact the U.S.

economy or certain sectors thereof or the economy of other countries in which we conduct operations, our industry and supply chain, all of which could have a material adverse effect on our business, financial condition and results of operations.

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

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

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 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 be adversely affected.

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

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

From time to time we evaluate the performance and strategic fit of our businesses and may decide to sell a business or product line based on such an evaluation.

Any divestitures may result in significant write-offs, including those related to goodwill and other tangible and intangible assets, which could have an adverse effect on our results of operations and financial condition.

Divestitures, have in the past, and may in the future, result in significant write-offs, including those related to goodwill and other tangible and intangible assets, and such write offs can have an adverse effect on our results of operations and financial condition.

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.

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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, 2022 and 2023.

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, new tariffs or increased employment costs due to increasingly competitive labor markets or other factors.

We cannot predict our customers’ demands for our products.

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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.

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, 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.

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.

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

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

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

We may not be able to implement customer price increases where margin on product is not meeting profitability targets.

Failure to meet our profitability target may be the result of a variety of factors, such as fluctuations in our material, freight and labor costs, inflation, new or increased tariffs or other competitive conditions, which are beyond our control.

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 in order to meet profitability targets could have an adverse effect on our business, results of operations and growth potential.

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

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.

We have operations in the Mexico, China, United Kingdom, Czech Republic, Morocco, Ukraine, Australia, India and Thailand, which collectively accounted for approximately 30% of our total revenues for the year ended December 31, 2024.

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, 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.

In addition, certain of our employees in Ukraine are routinely conscripted into the military and/or sent to fight in the ongoing conflict.

Furthermore, most of our products manufactured in Ukraine are shipped across the border from Ukraine to the Czech Republic for further delivery to our customers.

If that border crossing were to be closed or restricted for any reason, or if our customers decide to stop ordering from us or shift orders to our competitors, we would experience a loss of the use of our Ukrainian facility, which could have an adverse effect on our results of operations and financial condition.

Our business has been impacted and may continue to be impacted by geopolitical conditions such as international trade wars (including between the United States and China, Mexico and Canada), the military conflict in Israel and Gaza, the Russia-Ukraine conflict, cyber-attacks and increased political tensions in Europe, the Middle East and Asia.

Currently, significant uncertainty surrounds the future trade relationships among the United States, China, Mexico and Canada.

government continues to make significant changes in U.S.

trade policies that could negatively affect our business.

Additionally, policies made by other countries, such as China, Mexico and Canada or their allies, could have an adverse effect on our results of operations and financial condition.

Decreased availability or increased costs of materials could affect both our ability to produce products as well as the cost of producing our products.

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

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.

Inflationary and other increases in costs, including as a result of new or increased tariffs, 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.

We occasionally experience difficulty purchasing and obtaining timely delivery of certain raw materials required for our operations, which could have an adverse effect on our results of operations.

In addition, to the extent we are unable to pass on the increased costs of raw materials, freight and labor to our customers, it could adversely affect our results of operations and financial condition.

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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 the event of a reduction or stoppage in production at any of our facilities, even if only temporary, or if we experience delays as a result of events that are beyond our control, delivery times to our customers could be severely affected.

Any significant delay in deliveries to our customers could lead to increased returns or cancellations.

significant delay in deliveries to our customers could lead to increased returns or cancellations.

Similarly, a potential quality issue could force us to halt deliveries.

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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, 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.

In recent years, 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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In the event that one or more of our customers or their suppliers experience a material work stoppage, such work stoppage could have an adverse effect on our business.

Additionally, the rapid recovery of certain COVID-19-impacted markets and locales and the low unemployment rate is causing spot shortages of labor.

The Company has exposure to cost premiums as we use temporary labor during demand ramp-ups which carries with it a temporary premium cost.

The Company is currently at high levels of temporary labor which could have an adverse effect on our business.

Our earnings may be adversely affected by changes to the carrying values of our tangible and intangible assets as a result of recording any impairment charges deemed necessary.

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A significant amount of judgment is involved in determining if an indication of impairment exists.

Factors that may be considered in assessing whether goodwill or other long-lived assets may not be recoverable include a decline in our stock price or market capitalization, reduced estimates of future cash flows, the general economic environment, changes or downturns in our industry as a whole, termination of any of our customer contracts, restructuring efforts and general workforce reductions.

A continued decline in our stock price may trigger an evaluation of the recoverability of the recorded goodwill and other long-lived assets.

Factors that may be considered in assessing whether long-lived assets may not be recoverable include a decline in our stock price or market capitalization, reduced estimates of future cash flows, the general economic environment, changes or downturns in our industry as a whole, termination of any of our customer contracts, restructuring efforts and general workforce reductions.

A continued decline in our stock price

may trigger an evaluation of the recoverability of the recorded goodwill and other long-lived assets.

Any charge for impairment could adversely affect our reported net income and our stockholders’ equity.

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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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The environmental laws to which we are subject have become more stringent over time, and we could incur material costs or expenses in the future to comply with environmental laws.

If we violate or fail to comply with these laws and regulations or do not have the requisite permits, we could be fined or otherwise sanctioned by regulators.

If we violate or fail to comply with these laws and regulations or do

not have the requisite permits, we could be fined or otherwise sanctioned by regulators.

In some instances, such a fine or sanction could have an adverse effect on our financial condition and results of operations.

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

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 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.

Risks Related to Our Indebtedness

A credit rating downgrade could impair our ability to obtain additional debt financing on favorable terms, if at all, and significantly reduce the trading price of our common stock.

We recently experienced a credit rating downgrade which is likely to affect the amount, type and terms of capital financings we obtain.

Factors affecting our credit rating include, among others, our financial performance, success in raising sufficient equity capital, adverse changes in our debt and fixed charge coverage ratios, our capital structure, level of indebtedness and future changes in the regulatory framework applicable to our operators and industry.

We may be unable to maintain our current credit ratings, and in the event that our current credit ratings deteriorate, a ratings agency downgrades our credit rating or places our rating under watch or review for possible downgrade, we would likely incur higher borrowing costs, which would make it more difficult or expensive to obtain additional financing or refinance existing obligations and commitments and the trading price of our common stock may decline.

The agreements governing our credit facilities contain covenants that may restrict our current and future operations, particularly our ability to respond to changes in our business or to take certain actions.

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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;

If 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.

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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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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.

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 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.

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.

Our implementation of a new ERP system may adversely affect our business and results of operations or the effectiveness of our internal control over financial reporting.

We are in the process of implementing a new enterprise resource planning ("ERP") system, as part of a plan to integrate and upgrade our systems and processes.

ERP implementations are complex, labor intensive, and time-consuming projects and involve substantial expenditures on system software and implementation activities.

The ERP system is critical to our ability to provide important information to our management, obtain and deliver products, provide services and customer support, fulfill contractual obligations, accurately maintain books and records, provide accurate, timely and reliable reports on our financial and operating results, and otherwise operate our business.

ERP implementations also require transformation of business and financial processes in order for the company to benefit from a robust ERP system.

Any such implementation involves risks inherent in the conversion to a new computer system, including, but not limited to, loss of information and potential disruption to our normal operations.

The implementation and maintenance of the new ERP system has required, and will continue to require, the investment of significant financial and human resources, the re-engineering of processes of our business, and the attention of many employees who would otherwise be focused on other aspects of our business.

Our results of operations could be adversely affected if we experience time delays or cost overruns during the ERP implementation process.

Any significant weakness in the design and implementation of the new ERP system could also result in potentially significantly higher costs than we anticipate spending and could adversely affect our ability to operate our business and otherwise negatively impact our financial reporting and internal control.

Any of these consequences could have a material adverse effect on our results of operations and financial condition.

Pandemics, epidemics, disease outbreaks and other public health crises have disrupted our business and operations, and future public health crises could materially adversely impact our business, financial condition, liquidity and results of operations.

Pandemics, epidemics or disease outbreaks in the U.S.

or globally, such as the COVID-19 pandemic, have previously disrupted, and may in the future disrupt, our business, which could materially affect our results of operations, financial condition, liquidity and future expectations.

Any such events may adversely impact our global supply chain and global manufacturing operations and cause us to suspend our operations in the affected markets.

In particular, we could experience, among other things:

(1) continued or additional global supply disruptions;

(2) labor disruptions or shortages;

(3) an inability to manufacture;

(4) an inability to sell to our customers;

(5) a decline in customer demand;

and (6) an impaired ability to access credit and the capital markets.

Any new public health crisis could have a material impact on our business, financial condition and results of operations going forward.

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