What changed in this filing

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Item 1A. Risk Factors

2024-02-28 compared with 2023-03-01 · 91 added, 86 removed, 286 unchanged (38% of the section changed)

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The size of the motor vehicle aftermarket industry depends, in part, upon the number of vehicles on the road, average vehicle age, change in total miles driven per year, new or modified environmental and vehicle safety regulations, including fuel-efficiency and emissions reduction standards, pricing of new and used vehicles and new vehicle quality and related warranties.

We believe the industry has been negatively impacted by the fact that the quality of more recent motor vehicles and their component parts (and related warranties) has improved, thereby lengthening the repair cycle.

We believe the motor vehicle aftermarket industry has been negatively impacted by the fact that the quality of certain motor vehicles and their component parts (and related warranties) has improved, thereby lengthening the repair cycle.

Generally, if parts last longer, there will be less demand for our products, and the average useful life of motor vehicle parts has been steadily increasing in recent years due to innovations in products and technology.

In addition, the introduction by original equipment manufacturers of

increased warranty and maintenance initiatives has the potential to decrease the demand for our products.

In addition, the introduction by original equipment manufacturers of increased warranty and maintenance initiatives has the potential to decrease the demand for our products.

These factors could have a material adverse effect upon our business, financial condition and results of operations.

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• make more attractive offers to existing and potential customers and strategic partners.

We cannot assure you that our competitors will not develop products or services that are equal or superior to our products or that achieve greater market acceptance than our products or that in the future other companies involved in our industry will not expand their operations into product lines produced and sold by us.

We cannot assure you that our competitors or others in our industry will not (i) adopt fast follower strategies based on the Company's new product launches, (ii) develop products or services that are equal or superior to our products or that achieve greater market acceptance than our products, or (iii) expand their operations into product lines produced and sold by us.

We also cannot assure you that additional entrants will not enter our industry or that companies in our industry will not consolidate.

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We anticipate that this concentration of sales among these customers will continue in the future.

The loss of a significant customer or a substantial decrease in sales to such a customer could have a material adverse effect on our sales and operating results.

The loss of a significant customer, changes in customer buying behaviors or a substantial decrease in sales to such a customer could have a material adverse effect on

our sales and operating results.

In addition, any consolidation among our key customers may further increase our customer concentration risk.

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We have in the past, and may in the future, lose customers or lose a particular product line of a customer due to the highly competitive conditions in the motor vehicle aftermarket industry, consolidation of customers and customer initiatives to buy direct from foreign suppliers or other business considerations.

doing business with us, or to stop doing business with us, could have a material adverse effect on our business, financial condition and results of operations.

In addition, given the size and scale of some of our customers, there is a risk that they may establish and grow direct relationships with our suppliers and reduce their purchases or cease purchasing from us.

A decision by any significant customer, whether motivated by competitive conditions, financial difficulties or otherwise, to materially decrease the amount of products purchased from us or the number of our product lines they choose to carry, to change their manner of doing business with us, or to stop doing business with us, could have a material adverse effect on our business, financial condition and results of operations.

Because our sales are concentrated, and the industry in which we operate is very competitive, we are under ongoing pressure from our customers to offer lower prices, extend payment terms, increase marketing and transportation allowances, provide enhanced rebates, discounts, rights of return and credits and offer other terms more favorable to these customers.

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Our inability to maintain a competitive cost structure or to pass through increases in costs to our customers could have a material adverse effect on our business, financial condition and results of operations.

Limited shelf space and the inability of our customers to expand into new locations may adversely affect our ability to grow.

Because the amount of space available to a retailer and other purchasers of our products is limited, our products compete with other motor vehicle aftermarket products, some of which are entirely dissimilar and otherwise non-competitive (such as car waxes and engine oil), for shelf and floor space.

Moreover, our growth depends, in part, on the ability of our customers to open and operate new locations in which our products may be sold.

No assurance can be given that additional space will be available in our customers' existing locations or that our customers will be able to expand into new locations that would support growth in the number of products and product lines that we offer.

Any failure to maintain and/or grow our shelf or floor space, and any failure of our customers to maintain and/or grow their number of locations, could have a material adverse effect on our business, financial condition and results of operations.

Limited shelf space and the inability of our customers who resell our products to expand into new locations may adversely affect our ability to grow.

Because the amount of space available to a retailer and other resellers of our products is limited, our products compete with other motor vehicle aftermarket products, some of which are entirely dissimilar and otherwise non-competitive (such as car waxes and engine oil), for shelf and floor space.

Moreover, our growth depends, in part, on the ability of those retailers and resellers to open and operate new locations in which our products may be sold.

No assurance can be given that additional space will be available in their existing locations or that they will be able to expand into new locations that would support growth in the number of products and product lines that we offer.

Any failure to maintain and/or grow our shelf or floor space, and any failure of our retailers and resellers to maintain and/or grow their number of locations, could have a material adverse effect on our business, financial condition and results of operations.

Customer consolidation in the motor vehicle aftermarket industry may lead to customer contract terms less favorable to us, which may negatively impact our financial results.

The motor vehicle aftermarket industry has been consolidating over the past several years.

As a result of such consolidations, many of our customers have grown larger and therefore have more leverage in the arms-length negotiations of agreements with us for the sale of our products.

Customers may require us to provide extended payment terms, issue customer credits and accept returns of slow-moving product to obtain new, or retain existing, business.

Although we attempt to avoid or minimize such concessions, in some cases payment terms to customers have been extended, enhanced customer credits have been issued and returns of product have exceeded historical levels.

As a result of such consolidations, many of our non-end user customers have grown larger and therefore have more leverage

in the arms-length negotiations of agreements with us for the sale of our products.

Such customers may require us to provide extended payment terms, issue customer credits and accept returns of slow-moving product to obtain new, or retain existing, business.

Although we attempt to avoid or minimize such concessions, in some cases for those customers payment terms have been extended, enhanced credits have been issued and returns of product have exceeded historical levels.

The product returns and customer credits primarily affect our net sales and profit levels while payment term extensions and additional factoring costs generally reduce operating cash flow and require additional capital to finance our business.

We expect these trends to continue for the foreseeable future.

Our growth in the specialty vehicle category depends upon our continued ability to expand our product sales into specialty vehicles that require performance-defining products and the continued expansion of the market for these vehicles.

Our growth in the specialty vehicle category is in part attributable to the expansion of the market for specialty vehicles, such as UTVs and ATVs, that require performance-defining products.

Our growth in the specialty vehicle category depends upon our continued ability to expand our product sales into specialty vehicles, including, but not limited to, those that require performance-defining products, and the expansion of the market for these vehicles.

With our acquisition of SuperATV, a portion of our sales are generated from providing aftermarket parts and accessories for specialty vehicles, such as UTVs and ATVs, that require performance-defining products.

Our success depends, in part, on the growth of the market for such vehicles.

Such market growth includes the creation of new classes of vehicles that can benefit from our products and our ability to create products for these vehicles.

With our acquisition of SuperATV, a growing portion of our sales are expected to be generated from providing aftermarket parts and accessories for these types of vehicles.

In the event these markets stop expanding or contract due to economic factors, changes in consumer preferences or other reasons, or we are unsuccessful in creating new products for these markets or other competitors successfully enter into these markets, we may fail to achieve future growth or our sales could decrease, which could have a material adverse effect upon our business, financial condition and results of operations.

Our business, results of operations and financial condition could be materially adversely affected by the effects of widespread public health pandemics, such as COVID-19, that are beyond our control.

Any outbreaks of contagious diseases, public health pandemics and other adverse public health developments in countries where we, our customers or our suppliers operate could have a material and adverse effect on our business, results of operations and financial condition.

The COVID-19 pandemic adversely impacted businesses around the world, adversely affected supply chain logistics and contributed to increases in raw material, freight labor and other costs.

Uncertain factors relating to pandemics such as COVID-19 include the duration, spread and severity of the pandemic, the efficacy and distribution of vaccines and treatments designed to combat the pandemic, the effects on our customers, vendors, suppliers and employees, and the actions, or perception of actions that may be taken, to contain or treat its impact, including declarations of states of emergency, workplace mandates, business closures, manufacturing restrictions and any prolonged period of travel, commercial and/or other similar restrictions and limitations.

Any such pandemic and the measures designed to contain its spread may negatively impact demand for our products, which could have a material and adverse effect on our business, results of operations and financial condition.

Similarly, our suppliers may not have the materials, capacity, or capability to manufacture our products according to our schedule and specifications.

If our suppliers’ operations are impacted, we may need to seek alternate suppliers, which may be more expensive, may not be available or may result in delays in shipments to us and subsequently to our customers, each of which would affect our results of operations.

Further, in the event any members of our workforce, or those of our suppliers, become sick as a result of any pandemic or are otherwise compelled to quarantine, or refuse to comply with any related workplace mandates, we may experience shortages in labor and services that we require for our operations.

The increased use of remote work environments and virtual platforms in response to any such pandemic may also increase our risk of cyber-attacks and data security breaches.

The duration of the disruption to our customers, our supply chain and our employees, and the related financial and operational impacts to us, as a result of any such pandemic, cannot be estimated at this time.

Should any such disruption continue for an extended period, the impact could have a material adverse effect on our business, results of operations and financial condition.

If these markets do not expand or if they contract due to economic factors, changes in consumer preferences or other reasons, or we are unsuccessful in creating new products for these markets or other competitors successfully enter into these markets, we may fail to achieve future growth or our sales could decrease, which could have a material adverse effect upon our business, financial condition and results of operations.

If we fail to maintain sufficient inventory to meet current customer demands, or if we fail to anticipate future changes in customer demands, our financial results could be adversely affected.

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As a result of these and other factors, we have experienced and expect to continue to experience fluctuating levels of demand that require us to monitor, and, where appropriate, adjust our operations, including our inventory levels and staffing at our facilities.

If we are unable to forecast accurately future reductions in demand, we may accumulate excess or obsolete inventory and be forced to

reduce hours or lay off or furlough employees.

If we are unable to forecast accurately future reductions in demand, we may accumulate excess or obsolete inventory and be forced to reduce hours or lay off or furlough employees.

Conversely, if we are unable to forecast accurately future increases in demand, we may have inventory shortfalls or inadequate staffing levels to meet demand, which may result in our inability to fill orders on a timely basis or at all and could result in penalties owed to our customers and the loss of net sales.

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Our operations would be materially and adversely affected if our suppliers fail to perform or if we are unable to manage our supply chain effectively.

Because we purchase various types of raw materials, finished goods, equipment, and manufactured component parts from suppliers, we may be materially and adversely affected by the failure of those suppliers to perform as expected.

perform as expected.

This non-performance may consist of delivery delays, or failures caused by production issues or delivery of non-conforming products.

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Our suppliers’ ability to supply products to us is also subject to a number of risks, including, but not limited to, availability and cost of raw materials, political instability, military conflict, destruction of their facilities caused by natural and other disasters, work stoppages and health crises.

For example, the automotive industry is currently recovering from a shortage in the supply of semiconductors.

For example, the motor vehicle industry previously experienced a shortage in the supply of semiconductors.

We utilize semiconductors in our products and have at times encountered material shortages in semiconductor supply.

If we are unable to source semiconductors on a timely basis or at all, we may be unable to produce some of our products, which could adversely affect our ability to develop new products and fill orders on existing products.

If such a shortage were to occur again and if we were unable to source semiconductors on a timely basis or at all, we may be unable to produce some of our products, which could adversely affect our ability to develop new products and fill orders on existing products.

Furthermore, because certain products we sell contain parts that are or can be recycled and remanufactured -- parts more commonly referred to in our industry as “core” – our ability to sell those products may be materially and adversely affected if we are unable to obtain those core parts from our suppliers on favorable terms, if at all.

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For example, we may experience delays as new suppliers are qualified or as tooling is moved or replaced.

Furthermore, the replacement of a key supplier or transitioning to a new supplier in a different geography may result in increased expenses, which could result in lower profit margins and could have a material adverse effect on our business, financial condition and results of operations.

Furthermore, the replacement of a key supplier or transitioning to a new supplier in a different geography may result in production delays or increased expenses, which could result in inventory shortages or lower profit margins and could have a material adverse effect on our business, financial condition and results of operations.

Our operating results are sensitive to the availability and cost of third-party transportation providers, which are important in the manufacture and transport of our products.

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Our access to third-party transportation providers is not guaranteed, and, even if we have access to transportation providers, we may be unable to transport our products at economically attractive rates in certain circumstances, particularly in cases of adverse market conditions or disruptions to transportation infrastructure.

adverse weather conditions, congestion, increases in fuel prices, public health issues, including the COVID-19 pandemic, and other events, may impact the availability of third-party transportation providers to ship our products or the cost to ship our products.

For example, during 2022, like many other companies, we experienced significantly higher freight and transportation costs as a result of global transportation and logistics constraints following the height of the COVID-19 pandemic.

To the extent we enter into long-term agreements with any of these transportation providers, our forecasts of expected capacity needed in future periods may be inaccurate as a result of unforeseen fluctuations in demand for these transportation services, which could result in us paying for capacity that is not needed or result in us having to purchase additional capacity on a spot-market basis.

To the extent our transportation mix changes between contracted and market volume, driven by market conditions or other variables, we may observe impacts that create favorability or unfavourability in our end-to-end logistics cost structure.

Fluctuations in demand for third-party transportation providers and other events impacting transportation capacity and costs, such as strikes, political events, international trade disputes, war, terrorism, natural disasters, adverse weather conditions, congestion, increases in fuel prices, public health issues, including the COVID-19 pandemic, and other events, may impact the availability of third-party transportation providers to ship our products or the cost to ship our products.

For example, logistics costs and transit times for product from our suppliers were adversely impacted during 2023 by drought conditions in the Panama Canal and disruptive conflict around the Suez Canal, resulting in changes to our shipping routes and increased shipping costs.

To the extent we enter into long-term agreements with transportation providers, our forecasts of expected capacity needed in future periods may be inaccurate as a result of unforeseen fluctuations in demand for these transportation services, which could result in us paying for capacity that is not needed or result in us having to purchase additional capacity on a spot-market basis.

To the extent our transportation mix changes between contracted and market volume, driven by market conditions or other variables, we may observe impacts that create favorability or unfavorability in our end-to-end logistics cost structure.

In addition, our business, financial position, results of operations or cash flows could be materially and adversely affected if we are unable to pass along increased transportation costs to our customers, or if third-party transportation capacity were to decline significantly or otherwise become unavailable.

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Inflation can adversely affect us by increasing our operating costs, which could have an adverse impact on our business or financial results.

For example, we experienced broad-based inflationary impacts during the year ended December 31, 2022 due primarily to global transportation and logistics constraints, which resulted in significantly higher transportation costs, tariffs, material costs, and wage inflation from an increasingly competitive labor market.

For example, we experienced broad-based inflationary impacts during the year ended December 31, 2023 due primarily to global transportation and logistics constraints, which resulted in

significantly higher transportation costs, tariffs, material costs, and wage inflation from an increasingly competitive labor market.

In a highly inflationary environment, we may attempt to offset inflationary pressures with cost-saving initiatives, price increases to customers or the use of alternative suppliers.

Although we have implemented pass-through price increases to offset recent inflationary cost impacts, the price increases have often been implemented after we experienced higher costs, resulting in a lag effect to the full recovery of these costs.

Furthermore, pricing increases that we implemented to pass through the increased costs had no added profit dollars and consequently did not fully offset the impact that the increased costs had on our gross and operating margin percentages.

Moreover, these pricing actions may have a negative impact on customers’ willingness to purchase our products.

There can be no assurance that we will be successful in implementing pricing increases in the future to recover increased inflationary costs, and such inflationary pressures could have a material adverse effect on our business, financial condition, and results of operations .

Although we have implemented pass-through price increases to offset inflationary cost impacts, the price increases have often been implemented after we experienced higher costs, resulting in a lag effect to the full recovery of these costs.

Furthermore, in general, pricing increases that we implemented to pass through the increased costs had no added profit dollars and consequently did not fully offset the impact that the increased costs had on our gross and operating margin percentages.

Moreover, pricing actions such as these may have a negative impact on customers’ willingness to purchase our products.

There can be no assurance that inflationary pressures will ease or that we will be successful in implementing pricing increases in the future to recover increased inflationary costs, and such inflationary pressures could have a material adverse effect on our business, financial condition, and results of operations.

Changes in U.S.

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The resulting environment of retaliatory trade or other practices could have a material adverse effect on our business, financial condition, results of operations, customers, suppliers and the global economy.

Our business, results of operations and financial condition could be materially adversely affected by the effects of widespread public health pandemics, such as COVID-19, that are beyond our control.

The COVID-19 pandemic adversely impacted businesses around the world, adversely affected supply chain logistics and contributed to increases in raw material, freight labor and other costs.

Similarly, our suppliers may not have the materials, capacity, or capability to manufacture our products according to our schedule and specifications.

The increased use of remote work environments and virtual platforms in response to any such pandemic may also increase our risk of cyber-attacks and data security breaches.

Should any such disruption continue for an extended period, the impact could have a material adverse effect on our business, results of operations and financial condition.

Product Development, Acceptance and Quality

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Our historical growth and profitability have depended, in part, on the introduction of new parts to the motor vehicle aftermarket industry.

We invest in research and development to sustain or enhance our existing product portfolio.

In addition to growth through acquisitions, we invest in research and development to sustain or enhance our existing product portfolio.

In certain circumstances, there may be a lengthy period between commencing these development initiatives and bringing new or improved products to market.

In other instances, factors beyond

our control may impact our ability to further our research and development activities.

For example, new product activity was adversely impacted in the first half of 2020 due to COVID-19.

Although new product development and commercialization rebounded towards the end of 2020, we ended 2020 with lower new product introductions than the prior year.

In other instances, factors beyond our control may impact our ability to further our research and development activities.

During any period of delay in research and development activities, technology advancements, customer demand and the markets for our products may move in directions that we had not anticipated.

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Such attacks, which include the use of malware, encryption, computer viruses and other means for disruption or unauthorized access, on companies have increased in frequency, scope and potential harm in recent years.

In addition, the rapid evolution and increased adoption of artificial intelligence technologies may intensify our cybersecurity risks.

We take preventive actions to reduce the risk of cyber incidents and protect our information technology and networks, including the data that is maintained within them.

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Furthermore, because the techniques used to carry out cyber-attacks change frequently and in many instances are not recognized until after they are used against a target, we may be unable to anticipate these changes or implement adequate preventative measures.

Moreover, we utilize third-party vendors that provide information technology services for various areas, including human resources functions (e.g., payroll).

While we generally require these vendors to monitor and protect their information technology systems against cyber-attacks and other breaches, their efforts may not be effective.

To the extent that any cyber-attack or other security breach of one of our vendors’ systems causes a disruption in its operations or results in a loss or damage to our data, loss or theft of our intellectual property, or unauthorized disclosure of confidential information, including information regarding our customers and the ultimate purchasers of our products, it could disrupt our operations or cause significant damage to our reputation, affect our relationship with our customers, suppliers and employees, and lead to claims against us and ultimately harm our business.

Moreover, we utilize third-party vendors that provide information technology services for various areas, including human resources functions (e.g., payroll), and parts of our operations rely upon third-party logistics providers that maintain their own information technology systems on which we rely.

While we generally require these third parties to monitor and protect their information technology systems against cyber-attacks and other breaches, their efforts may not be effective.

To the extent that any cyber-attack or other security breach of one of these third-party systems causes a disruption in a third-party’s operations or results in a loss or damage to our data, loss or theft of our intellectual property, or unauthorized disclosure of confidential information, including information regarding our customers and the ultimate purchasers of our products, it could disrupt our operations or cause significant damage to our reputation, affect our relationship with our customers, suppliers and employees, and lead to claims against us and ultimately harm our business.

Moreover, intruders that gain access to our intellectual property and trade secrets may attempt to use that information to harm our business, by developing competing or counterfeit products.

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If we are not able to protect our proprietary rights or if those rights are invalidated or circumvented, our business may be adversely affected.

Our business is dependent, in part, on our ability to innovate, and, as a result, we are reliant on our intellectual property.

Our business is dependent, in part, on our ability to innovate, and, as a result, we rely on our intellectual property.

We generally protect our intellectual property through patents, trademarks, copyrights, trade secrets, confidentiality and nondisclosure agreements, information security practices, and other measures to the extent our budget permits.

There can be no assurance that patents will be issued from pending applications that we have filed or that our patents will be sufficient to protect our key technology from misappropriation or falling into the public domain, nor can assurances be made that any of our patents, patent applications, trademarks or our other intellectual property or proprietary rights will not be misappropriated, challenged, invalidated or circumvented.

In addition, the level of protection of our proprietary technology varies by country and may be uncertain in countries that do not have well-developed judicial systems or laws that adequately protect intellectual property rights.

Patent litigation and other challenges to our patents and other proprietary rights are costly and unpredictable and may prevent us from marketing and selling a product in a particular geographic area.

In addition, the level of protection of our proprietary technology varies by country and may be

uncertain in countries that do not have well-developed judicial systems or laws that adequately protect intellectual property rights.

Patent litigation and other challenges to our patents and other proprietary rights are costly and unpredictable and may prevent us from gaining and/or maintaining market exclusivity for a product in a particular geographic area.

Financial considerations may also preclude us from seeking patent protection in every country where infringement litigation could arise.

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Claims of intellectual property infringement by original equipment manufacturers and others could adversely affect our business and negatively impact our ability to develop new products.

From time to time in the ordinary course of our business, we are subject to claims that we are infringing the intellectual property rights of original equipment manufacturers, non-practicing entities, or others.

From time to time in the ordinary course of our business, we are subject to claims that we are infringing the intellectual property rights of original equipment manufacturers, competitors, non-practicing entities, or others.

Any such infringement claim could have a material adverse effect on our business, financial condition and results of operations due to an increase in legal expense, a time burden on employees involved in defense of such claim or slowed development and/or production of an accused product.

This may be true whether they are with or without merit and whether they are covered by insurance or not.

An adverse finding against us in these or similar intellectual property disputes may have a material adverse effect on our business, financial condition and results of operations if we are not able to successfully develop or license non-infringing alternatives.

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We have a credit agreement with Bank of America, N.A., as administrative agent, under which we borrowed $500 million in the form of a term loan and through which we have a $600 million revolving credit facility.

As of December 31, 2022, there was $496.9 million in outstanding borrowings under the term loan and $239.4 in outstanding borrowings under the revolving portion of the credit agreement, and as of such date we had three outstanding letters of credit for $1.0 million in the aggregate.

As of December 31, 2023, there was $484.4 million in outstanding borrowings under the term loan and $92.8 million in outstanding borrowings under the revolving portion of the credit agreement, and as of such date we had three outstanding letters of credit for $1.3 million in the aggregate.

Our outstanding indebtedness and any additional indebtedness we incur may have negative consequences on our business, including, among others:

requiring us to use cash to pay the principal of and interest on our indebtedness, thereby reducing the amount of cash available for other purposes;

requiring us to use cash to pay the principal of and

interest on our indebtedness, thereby reducing the amount of cash available for other purposes;

limiting our ability to obtain additional financing for working capital, capital expenditures, acquisitions, stock repurchases, and general corporate or other purposes;

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If we do not enter into these agreements, our financial condition, results of operations and cash flows could be materially and adversely affected by delays or failures in collecting trade accounts receivables.

In addition, if any of the financial institutions with which we have these agreements experiences financial difficulties or otherwise modifies or terminates these agreements, we may experience material and adverse economic losses due to the loss of such arrangements and the impact of such loss on our liquidity.

The modification, termination or other loss of these arrangements could have a material and adverse effect on our financial condition, results of operations and cash flows.

In addition, the financial institutions with which we have these agreements may experience financial difficulties or may modify or terminate these agreements because of changes in our customers’ credit profiles, market conditions or otherwise.

The modification, termination or other loss of these arrangements could have a material and adverse effect on our liquidity and our financial condition, results of operations and cash flows.

Interest rate increases may adversely affect our financial condition and results of operations.

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We regularly extend credit to our customers.

A significant percentage of our accounts receivable have been, and are expected to continue to be, concentrated among a relatively small number of automotive parts retailers and distributors in the United States.

A significant percentage of our accounts receivable have been, and are expected to continue to be, concentrated among a relatively small number of retailers, dealers and distributors in the United States.

Our four largest customers accounted for 74% of total accounts receivable as of December 31, 2023 and 69% of total accounts receivable as of December 31, 2022.

In the ordinary course of business, management monitors, among other things, credit terms and credit limits for these

and other customers.

In the ordinary course of business, management monitors, among other things, credit terms and credit limits for these and other customers.

In addition, from time to time, some of our customers request increases in their credit limits.

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If these risks limit or prevent us from acquiring products from foreign suppliers or significantly increase the cost of our products, our operations could be seriously disrupted until alternative suppliers are found, which could have a material adverse effect upon our business, financial condition and results of operations.

Dorman’s Executive Chairman and his family members own a significant portion of the Company.

Dorman’s Non-Executive Chairman and his family members own a significant portion of the Company.

As of February 22, 2024, Steven L.

Berman, our Executive Chairman, and his family members beneficially owned approximately 17% of the Company’s outstanding common stock.

Berman and his family members can influence matters requiring the approval of shareholders, including the election of the Board of Directors and the approval of significant transactions.

Berman, our Non-Executive Chairman, and his family members beneficially owned approximately 16% of the Company’s outstanding common stock.

Berman and his family members could influence matters requiring the approval of shareholders, including the election of the Board of Directors and the approval of significant transactions.

Such concentration of ownership may have the effect of delaying, preventing or deterring a change in control of the Company, could deprive shareholders of an opportunity to receive a premium for their common stock as part of a sale of the Company and might ultimately affect the market price of our common stock.

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Adverse changes in economic conditions, including inflation, recession, increases in fuel prices, decreased transportation capacity, rising interest rates, tariffs, labor shortages and unemployment levels, availability of consumer credit, taxation or instability in the financial markets or credit markets may either lower demand for our products or increase our operational costs, or both.

Such conditions may also materially impact our customers, suppliers and other parties with whom we do business.

Such conditions may also materially impact our customers, suppliers, dealers and other parties with whom we do business.

Our revenue will be adversely affected if demand for our products declines.

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Our operations, revenues and operating results, and the operations of our third-party manufacturers, suppliers, warehouse and distribution providers, and customers, may be subject to quarter-over-quarter fluctuations and disruptions from events beyond our or their control.

Our operations, revenues and operating results, as well as the operations of our third-party manufacturers, suppliers, warehouse and distribution providers, and customers, may be subject to quarter-over-quarter fluctuations and disruptions from a variety of causes outside of our or their control, including work stoppages, market volatility, fuel and transportation prices, acts of war, terrorism, cyber incidents, pandemics, power outages, fire, earthquake, flooding, changes in weather patterns, weather or seasonal fluctuations or other climate-based changes, including hurricanes or tornadoes, or other natural disasters.

Our operations, revenues and operating results, as well as the operations of our third-party manufacturers, suppliers, warehouse, distribution and logistics providers, and customers, may be subject to quarter-over-quarter fluctuations and disruptions from a variety of causes outside of our or their control, including work stoppages, market volatility, fuel and transportation prices, acts of war, terrorism, cyber incidents, pandemics, power outages, fires, earthquakes, flooding, changes in weather patterns, weather or seasonal fluctuations or other climate-based changes, including hurricanes or tornadoes, or other natural disasters.

If a major disruption were to occur at our operations or the operations of our third-party manufacturers, suppliers, warehouse and distribution providers, or customers, it could result in harm to people or the natural environment, delays in shipments of products to customers or suspension of operations.

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There can be no assurance regarding the outcome of current or future legal proceedings, claims or investigations.

The market price of our common stock may be volatile and could expose us to securities class action litigation.

The market price of our common stock may be volatile and could expose us to securities class action litigation and increased shareholder activism.

The stock market and the price of our common stock may be subject to wide fluctuations based upon general economic and market conditions.

The market price for our common stock also may be affected by our

ability to meet analysts’ expectations.

The market price for our common stock also may be affected by our ability to meet analysts’ expectations.

Failure to meet such expectations, even slightly, could negatively affect the market price of our common stock.

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If similar litigation were instituted against us, it could result in substantial costs and a diversion of our management’s attention and resources, which could have a material adverse effect on our business, financial condition and results of operations.

In addition, market price volatility may attract shareholder activism, which could take many forms, including potential proxy contests and public information campaigns.

Shareholder activism could result in substantial costs to the Company, adversely affect our relationships with suppliers, customers, and regulators, and adversely impact our stock price.

Losing the services of our executive officers or other highly qualified and experienced employees or failing to attract and retain any of such officers or employees could adversely affect our business.

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Although we periodically conduct compensation benchmarking and surveys, competition for qualified personnel is often intense, our compensation programs may not be adequately designed, and we may not be successful in hiring and retaining these people.

To the extent we experience increases in demand for labor, as a result of competition, the impacts of pandemics such as COVID-19 or otherwise, such increase in demand may drive higher wages for impacted roles and our ability to attract talent and maintain a competitive cost structure may be challenged.

To the extent we experience increases in demand for labor, as a result of competition or otherwise, such increase in demand may drive higher wages for impacted roles and our ability to attract talent and maintain a competitive cost structure may be challenged.

If we lose the services of our key employees, cannot attract and retain other qualified personnel or cannot maintain a competitive cost structure as a result of any of the foregoing, it could have a material adverse effect on our business, financial condition and results of operations.

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We may not be able to identify suitable acquisition candidates, complete acquisitions or integrate acquisitions successfully.

Our future growth is likely to depend to some degree on our ability to acquire and successfully integrate new businesses.

Our future growth may depend in part on our ability to acquire and successfully integrate new businesses.

We may not be able to identify suitable acquisition candidates, complete acquisitions, or integrate acquisitions, such as SuperATV, successfully.

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There are no assurances, however, that we will be able to successfully identify suitable candidates, negotiate appropriate terms, obtain financing on acceptable terms, complete proposed acquisitions, successfully integrate acquired businesses, or expand into new geographies or markets.

Once acquired, operations may not achieve anticipated levels of revenues or profitability.

Once acquired, operations may not achieve

anticipated levels of revenues or profitability.

Acquisitions involve risks, including difficulties in the integration of the operations, technologies, services and products of the acquired companies and the diversion of management's attention from other business concerns.

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Tax authorities may disagree with certain positions we have taken and assess additional taxes.

We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision.

We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provisions.

However, there can be no assurance that we will accurately predict the outcomes of these audits, and the actual outcomes of these audits could have a material adverse effect upon our business, financial condition and results of operations.

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For example, the demand for our products may be affected by unseasonable weather conditions.

effects of climate change could also disrupt our operations by impacting the availability and cost of materials needed for manufacturing and could increase insurance and other operating costs.

The effects of climate change could also disrupt our operations by impacting the availability and cost of materials needed for manufacturing and could increase insurance and other operating costs.

We could also face indirect financial risks passed through the supply chain and disruptions that could result in increased prices for our products and the resources needed to produce them.

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Many scientists, legislators and others attribute climate change to increased levels of greenhouse gases, including carbon dioxide, which could lead to additional legislative and regulatory efforts to limit greenhouse gas emissions.

For example, new federal or state restrictions on emissions of carbon dioxide that may be imposed on vehicles and automobile fuels could adversely affect demand for vehicles, annual miles driven or the products we sell or lead to changes in automotive technology.

Compliance with any new or more stringent laws or regulations, or stricter interpretations of existing laws, could require increased capital expenditures to improve our product portfolio to meet such new laws, regulations and standards.

While we have been committed to continuous improvements to our product portfolio to meet and exceed anticipated regulatory standard levels, there can be no assurance that our commitments will be successful, that our products will be accepted by the market, that proposed regulation or deregulation will not have a negative competitive impact or that economic returns will reflect our investments in new product development.

New international, federal or state legislative or regulatory restrictions or standards adopted regarding emissions of carbon dioxide that may be imposed on motor vehicles and related fuels could adversely affect demand for motor vehicles, annual miles driven or the products we sell and could lead to or require changes in motor vehicle technology or increased costs.

For example, California recently enacted a climate focused disclosure law and the SEC has proposed climate change related regulations.

We will be required to spend significant time and resources to comply with these types of new laws and regulations.

Compliance with any new or more stringent laws, regulations or standards, or stricter interpretations of existing laws, regulations or standards, could require us to incur increased capital expenditures.

While we have been committed to continuous improvements to our product portfolio to meet and exceed anticipated laws, regulations and standards, there can be no assurance that our actions will be successful, that our products will be accepted by the market, that proposed regulation or deregulation will not have a negative competitive impact or that economic returns will reflect our investments in new product development.

We could be adversely affected by violations of the U.S.

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We cannot assure you that our internal control policies and procedures will always protect us from reckless or criminal acts committed by our employees or third-party intermediaries.

In the event that we believe or have reason to believe that our employees or agents have or may have violated applicable anti-corruption laws, or if we are subject to allegations of any such violations, we may be required to investigate or have outside counsel investigate the relevant facts and circumstances, which can be expensive and require significant time and attention from senior management.

In the event that we believe or have reason to believe that our employees or agents have or may have violated applicable anti-corruption laws, or if we are subject to

allegations of any such violations, we may be required to investigate or have outside counsel investigate the relevant facts and circumstances, which can be expensive and require significant time and attention from senior management.

Violations of these laws may result in criminal or civil sanctions, which could disrupt our business and result in a material adverse effect on our reputation, business, financial condition and results of operations.

In addition, we could be subject to commercial impacts such as lost revenue from customers who decline to do business with us as a result of such compliance matters, or we could be subject to lawsuits brought by private litigants, each of which could have a material adverse effect on our reputation, business, financial condition, and results of operations.

Our products are subject to import and export controls in the jurisdictions in which we distribute or sell our products.

Our products are subject to import and export controls and economic sanctions laws and regulations in various jurisdictions, and violations could adversely affect us.

Import and export controls and economic sanctions laws and regulations include restrictions and prohibitions on the sale or supply of certain products and on our transfer of parts, components, and related technical information and know-how to certain countries, regions, governments, persons and entities.

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sanctions or export control laws, or similar laws in other jurisdictions, we and the individuals working for us could incur substantial fines and penalties.

Changes in export, sanctions or import laws or regulations may delay

the introduction and sale of our products in the U.S.

Changes in export, sanctions or import laws or regulations may delay the introduction and sale of our products in the U.S.

and international markets, require us to spend resources to seek necessary government authorizations or to develop different versions of our products, or, in some cases, prevent the export or import of our products to certain countries, regions, governments, persons or entities, which could adversely affect our business, financial condition and operating results.

Unresolved Staff Comments .

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