What changed in this filing

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Item 1A. Risk Factors

2022-02-22 compared with 2021-02-22 · 131 added, 90 removed, 236 unchanged (48% of the section changed)

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The risks described below are not the only risks we face.

Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially affect our business, financial conditions or results of operations.

Additional risks and uncertainties not currently known to us or that

we currently deem to be immaterial also may materially affect our business, financial conditions or results of operations.

The risks are listed below in no particular order.

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Our business is impacted by the age, condition and number of vehicles that need servicing and by improvements in the quality of new vehicle parts.

The size of the automobile aftermarket industry depends, in part, upon the growth in number of vehicles on the road, increase in 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, increase in pricing of new cars and new car quality and related warranties.

The size of the automobile 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 cars and new car quality and related warranties.

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

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Due to the diversity of our product offering, we compete against a large cross section of aftermarket companies and brands, including, but not limited to, Cardone Industries, Inc., Standard Motor Products, Inc., Tenneco, Inc., Bosch Auto Parts, First Brands Group, LLC, Gates Corporation, Continental Automotive Systems, Inc.

(VDO), MevoTech LP, ACDelco (owned by General Motors Company), Motorcraft (owned by Ford Motor Company) and numerous category specific competitors.

(VDO), MevoTech LP, ACDelco (owned by General Motors Company), Motorcraft (owned by Ford Motor Company), Meritor, Inc., Automann Inc.

and numerous category specific competitors.

In addition, we face competition from original equipment manufacturers, which, through their automotive dealerships, supply many of the same types of replacement parts we sell.

Further, some of our private label customers also compete with us.

Some of our competitors may have larger customer bases and significantly greater financial, technical and m arketing resources than we do.

These factor s may allow our competitors to:

Some of our competitors may have larger customer bases and significantly greater financial, technical and marketing resources than we do.

These factors may allow our competitors to:

respond more quickly than we can to new or emerging technologies and changes in customer requirements by devoting greater resources than we can to the development, promotion and sale of automotive aftermarket products;

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A significant percentage of our sales has been, and is expected to be, concentrated among a relatively small number of customers.

During fiscal 2020, three customers (Advance, AutoZone and O’Reilly) each accounted for more than 10% of net sales and in the aggregate accounted for approximately 56% of net sales.

During fiscal 2021, three customers each accounted for more than 10% of net sales and in the aggregate accounted for approximately 54% of net sales.

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

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Price reductions may be required to remain competitive in light of such industry trends, and such reductions may impact our sales and profit margins.

Our future profitability will depend in part upon our ability to respond to changes in product and distribution channel mix, to continue to improve our manufacturing and distribution efficiencies, to generate cost reductions, including reductions in the cost of components purchased from outside suppliers, and to maintain a cost

structure that will enable us to offer competitive prices.

Our inability to maintain a competitive cost structure could have a material adverse effect upon our business, financial condition and results of operations.

Our inability to maintain a competitive cost structure or to pass through increases in costs to our customers could have a material adverse effect upon 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.

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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.

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 upon our business, financial condition and results of operations.

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The COVID-19 pandemic has adversely impacted, and is expected to continue to adversely impact, our business, and the nature and extent of the impact may be highly uncertain and beyond our control.

Uncertain factors relating to COVID-19 include the duration, spread and severity of the virus, the impact of potential mutations to the virus, the efficacy and distribution of vaccines designed to combat COVID-19, the effects of the COVID-19 pandemic 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, business closures, manufacturing restrictions and a prolonged period of travel, commercial and/or other similar restrictions and limitations.

Uncertain factors relating to COVID-19 include the duration, spread and severity of the virus, the impact of mutations to the virus, the efficacy and distribution of vaccines and treatments designed to combat COVID-19, the effects of the COVID-19 pandemic 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 a prolonged period of travel, commercial and/or other similar restrictions and limitations.

COVID-19 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.

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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, contract COVID-19 or are otherwise compelled to quarantine, we may experience shortages in labor and services that we require for our operations.

Further, in the event any members of our workforce, or those of our suppliers, contract COVID-19 or are otherwise compelled to quarantine, or refuse to comply with any COVID-19 workplace mandates, we may experience shortages in labor and services that we require for our operations.

Our increased use of remote work environments and virtual platforms in response to the COVID-19 pandemic may also increase our risk of cyber-attacks and data security breaches.

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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 layoff 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 timely basis or at all and could result in penalties owed to our customers and the loss of net sales.

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.

Our profitability may be materially adversely affected as a result of overstock inventory-related returns by our customers in excess of anticipated amounts .

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For example, the automotive industry is currently experiencing a shortage in the supply of semi-conductors.

We utilize semi-conductors in our products and, to date, have not encountered a shortage in semi-conductors.

We utilize semi-conductors in our products and, to date, have not encountered a material shortage in semi-conductors.

However, if we are unable to source semi-conductors 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.

The COVID-19 pandemic may have a lasting impact on global production and industrial supply chains.

For example, certain suppliers in China have been or may in the future be impacted by power shortages and rolling blackouts as a result of increased demand on factories that export products from China to economies beginning to reopen after following COVID-19 closures.

In addition, our failure to promptly pay, or order sufficient quantities of inventory from our suppliers may increase the cost of products we purchase or may lead to suppliers refusing to sell products to us at all.

Furthermore, because certain products we sell contain parts that can be recycled and remanufactured, which parts are 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.

be materially and adversely affected if we are unable to obtain those core parts from our suppliers on favorable terms, if at all.

Our efforts to protect against and to minimize these risks may not always be effective.

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We depend upon third-party transportation providers for shipments to and from our suppliers and for delivery of our products to us and to our customers.

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.

Fluctuations in demand for third-party transportation providers and other events, such as strikes, political events, international trade disputes, war, terrorism, natural disasters, adverse weather conditions, 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.

O ur 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.

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.

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, during 2021, like many other companies, we experienced significantly higher freight and transportation costs as a result of global transportation and logistics constraints primarily resulting from the COVID-19 pandemic, which also impacted our ability to readily transport our products.

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.

Significant inflation could adversely affect our business and financial results.

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

Inflation also can have a negative impact on customers’ willingness to purchase our products.

In a highly inflationary environment, we may be unable to raise the sales prices of our products at or above the rate of inflation, which could reduce our profit margins.

Changes in U.S.

trade policy, including the imposition of tariffs and the resulting consequences, could adversely affect our results of operations.

In fiscal 2021, approximately 74% of our products were purchased from suppliers in a variety of non-U.S.

government has adopted a new approach to trade policy and in some cases has attempted to renegotiate or terminate certain existing bilateral or multi-lateral trade agreements.

It has also imposed tariffs on certain foreign goods, including steel and certain commercial vehicle parts, which have resulted in increased costs for goods imported into the United States.

In response to these tariffs, a number of U.S.

trading partners have imposed retaliatory tariffs on a wide range of U.S.

If we are unable to pass price increases on to our customer base or otherwise mitigate the costs, or if demand for our products decreases due to the higher cost, our results of operations could be materially adversely affected.

In addition, further tariffs have been proposed by the United States and its trading partners and additional trade restrictions could be implemented on a broader range of products or raw materials.

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

Product Development, Acceptance and Quality

If we do not continue to develop new products and bring them to market, our business, financial condition and results of operations could be materially impacted.

Our historical growth and profitability has depended, in part, on the introduction of new parts to the automotive aftermarket industry.

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

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

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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 the year with lower new product introductions than the prior year.

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

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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This in turn could limit our ability to design, manufacture and sell new products and could have a material adverse effect upon our business, financial condition and results of operations.

These trends have led to an increase in the significance of technology to our current and future products and the amount of capital we need to invest to develop these new technologies, as well as an increase in the amount of

competition we face from technology focused new market entrants.

If we misjudge the amount of capital to invest or are otherwise unable to continue providing products that meet our customers’ needs in this environment of rapid technological change, our market competitiveness could be adversely affected, which could have a material adverse effect upon our business, financial condition and results of operations.

Quality problems with our products could damage our reputation and adversely affect our business.

be adversely affected, which could have a material adverse effect upon our business, financial condition and results of operations.

Design and quality problems with our products could damage our reputation and adversely affect our business.

We have experienced, and in the future may experience, reliability, quality, or compatibility problems in products after their production and sale to customers.

Product quality problems and any associated product recalls could result in damage to our reputation, loss of customers, a decrease in revenue, litigation, unexpected expenses, and a loss of market share.

Product design and quality problems and any associated product recalls could result in damage to our reputation, loss of customers, a decrease in revenue, litigation, unexpected expenses, and a loss of market share.

We have invested and will continue to invest in our engineering, design, and quality infrastructure to help reduce these problems;

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Our Intellectual Property and Information Security

Cyber-attacks or other breaches of information technology security could adversely impact our business and operations.

Cyber-attacks or other breaches of network or information technology security may cause equipment failure, disruption to our operations or the loss or theft of sensitive data relating to our Company and our employees, customers, suppliers, and business partners, including intellectual property, proprietary business information, and other sensitive material.

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.

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.

However, such preventative actions may be insufficient to repel a cyber-attack or other network breach in the future.

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, 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.

Additionally, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.

Any such cyber-attacks and loss or theft of our intellectual property or unauthorized disclosure of confidential information could have a material adverse effect upon our business, financial condition and results of operations.

We are dependent, in part, on our intellectual property.

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We generally protect our intellectual property through patents, trademarks, trade secrets, confidentiality and nondisclosure agreements 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 challenged, invalidated or circumvented.

intellectual property or proprietary rights will not be challenged, invalidated or circumvented.

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

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If we are unable to protect our proprietary rights, we may be at a disadvantage to others who do not incur the substantial time and expense we incur to create our products.

Preventing unauthorized use or infringement of our intellectual property rights is inherently difficult.

Preventing unauthorized use or infringement of our intellectual property is inherently difficult.

Moreover, it may be difficult or practically impossible to detect theft or unauthorized use of our intellectual property.

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We believe that our success depends, in part, on maintaining and enhancing the value of our brands and executing our brand strategies, which are designed to drive end-user demand for our products and make us a valued business partner to our customers through the support of their marketing initiatives.

A decline in the reputation of our brands as a result of events, such as deficiencies or defects in the design or manufacture of our

products, or from legal proceedings, product recalls or warranty claims resulting from such deficiencies or defects, may harm our reputation, reduce demand for our products and adversely affect our business.

A decline in the reputation of our brands as a result of events, such as deficiencies or defects in the design or manufacture of our products, or from legal proceedings, product recalls or warranty claims resulting from such deficiencies or defects, may harm our reputation, reduce demand for our products and adversely affect our business.

Moreover, our business may be adversely affected if we fail to develop adequate branding strategies following acquisitions of companies with their own established brands.

In addition to the foregoing, certain of our customer agreements require us to supply them with private-label branded products.

To the extent we use our own products to promote the brands of our customers over our own brands, our business may be adversely affected.

Cyber-attacks or other breaches of information technology security could adversely impact our business and operations.

Cyber-attacks or other breaches of network or information technology security may cause equipment failure, disruption to our operations or the loss or theft of sensitive data relating to our Company and its employees, customers, suppliers, and business partners, including intellectual property, proprietary business information, and other sensitive material.

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.

However, such preventative actions may be insufficient to repel a cyber-attack or other network breach in the future.

Moreover, we utilize third-party vendors that provide information technology services for areas such as customer order processing and 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 disruption or security breach of one of our vendors’ systems 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 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.

Additionally, we may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.

Risks Related to Our Capital Structure and Finances

Our business may be negatively impacted by foreign currency fluctuations and our dependence on foreign suppliers .

In fiscal 2020, approximately 77% of our products were purchased from suppliers in a variety of foreign countries, with the largest portion of our overseas purchases being made in China.

In fiscal 2021, approximately 74 % of our products were purchased from suppliers in a variety of non-U.S.

countries, with the largest portion of our overseas purchases being made in China.

The products generally are purchased through purchase orders with the purchase price specified in U.S.

Accordingly, we generally do not have direct exposure to fluctuations in the relationship between the U.S.

Accordingly, we generally do not have exposure to fluctuations in the relationship between the U.S.

dollar and various foreign currencies between the time of execution of the purchase order and payment for the product.

The Chinese yuan to U.S.

dollar exchange rate has fluctuated over the past several years, and, to the extent that the U.S.

dollar decreases in value relative to the Chinese yuan or any other foreign currencies in the future, the prices of products in U.S.

dollars for new purchase orders may increase.

To the extent that the U.S.

dollar changes in value relative to those foreign currencies in the future,

the prices charged by our suppliers under new purchase orders may change in equivalent U.S.

For example, the Chinese yuan to U.S.

dollar exchange rate has fluctuated over the past several years.

Any future changes in the value of the Chinese yuan relative to the U.S.

dollar may result in a change in the cost of products that we purchase from China in the future.

As a result of the magnitude of our foreign sourcing, our business may be subject to various risks, including the following:

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restrictions on the transfer of funds to or from foreign countries;

political instability, military conflict or terrorism involving the United States or any of the countries where our products are manufactured or sold, which could cause a delay in transportation or an increase in costs of transportation, raw materials or finished product or otherwise disrupt our business operations;

political instability, military conflict or terrorism involving the United States or any of the countries where our products are manufactured or sold, which could cause labor shortages, a delay in transportation or an increase in costs of transportation, labor, raw materials or finished product or otherwise disrupt our business operations;

disease, epidemics and health-related concerns could result in closed factories, reduced workforces, scarcity of raw materials and scrutiny and embargoing of goods produced in infected areas.

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Our four largest customers accounted for 71% of total accounts receivable as of December 25, 2021 and 82% of total accounts receivable as of December 26, 2020.

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

In addition, from time to time, some of the Company’s customers request increases in their credit limits.

Such requests may pose incremental risks to the Company, either by increasing the credit limit for a customer and accepting additional financial risk of non-payment, or maintaining the credit limit and risking the customer redirecting business to another supplier offering better credit terms.

If any of the Company’s customers were unable to pay, or if any of those customers redirect their business to other suppliers offering better credit terms, it could have a material adverse effect upon our business, financial condition and results of operations.

Changes in U.S.

trade policy, including the imposition of tariffs and the resulting consequences, could adversely affect our results of operations.

In fiscal 2020, approximately 77% of our products were purchased from suppliers in a variety of foreign countries.

government has adopted a new approach to trade policy and in some cases has attempted to renegotiate or terminate certain existing bilateral or multi-lateral trade agreements.

It has also imposed tariffs on certain foreign goods, including steel and certain commercial vehicle parts, which have resulted in increased costs for goods imported into the United States.

In response to these tariffs, a number of U.S.

trading partners have imposed retaliatory tariffs on a wide range of U.S.

In addition, further tariffs have been proposed by the United States and its trading partners and additional trade restrictions could be implemented on a broader range of products or raw materials.

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.

Such requests may pose incremental risks to us, either by increasing the credit limit for a customer and accepting additional financial risk of non-payment or maintaining the credit limit and risking the customer redirecting business to another supplier offering better credit terms.

If any of our customers were unable to pay, or if any of those customers redirect their business to other suppliers offering better credit terms, it could have a material adverse effect upon our business, financial condition and results of operations.

Increasing our indebtedness could negatively affect our financial health.

We have an existing revolving credit facility of $100 million with Wells Fargo Bank, National Association, as administrative agent and lender, which, subject to certain requirements, gives us the ability to request increases of up to an incremental $100 million.

As of December 26, 2020, although we did not have any borrowings outstanding, there were $0.8 million of issued but undrawn letters of credit outstanding under the credit agreement.

Our growth strategy includes reviewing and evaluating potential acquisitions, and we may utilize borrowings under our credit agreement to consummate transactions.

Any significant increase in our indebtedness, whether in connection with acquisitions or otherwise, could increase our vulnerability to general adverse economic and industry conditions and limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate.

Any such issue could have a material adverse effect upon our business, financial condition and results of operations

We have a credit agreement with Bank of America, N.A., as administrative agent, which provides for a $600 million revolving credit facility.

As of December 25, 2021, there was $239.4 million in outstanding borrowings under the credit agreement and two outstanding letters of credit for $0.8 million in the aggregate.

Borrowings under our credit agreement are at variable rates of interest and expose us to interest rate risk.

If interest rates increase, our debt service obligations on the variable rate indebtedness will increase even though the amount borrowed remains the same, and, as a result, our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.

Furthermore, 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;

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

and limiting our flexibility in planning for, or reacting to, changes in our business, industries or the market.

Our ability to make payments of principal and interest on our indebtedness depends upon our future performance, which is subject to economic and political conditions, industry cycles and financial, business and other factors, many of which are beyond our control.

If we are unable to generate sufficient cash flow from operations to service our indebtedness, we may be required to, among other things:

refinance or restructure all or a portion of our indebtedness;

reduce or delay planned capital or operating expenditures;

reduce, suspend or eliminate our stock repurchase program;

or sell selected assets.

Such measures might not be sufficient to enable us to service our indebtedness.

In addition, any such refinancing, restructuring or sale of assets might not be available on economically favorable terms or at all, and if prevailing interest rates at the time of any such refinancing or restructuring are higher than our current rates, interest expense related to such refinancing or restructuring would increase.

The occurrence of any of such events c ould have a material adverse effect upon our business, financial condition, results of operations.

Our credit agreement contains covenants that will restrict our operational flexibility.

If we cannot comply with these covenants, we may be in default under our credit agreement.

Our credit agreement contains affirmative and negative covenants, including with regard to requirements that we maintain specified financial ratios, which limit and restrict our operations and may hamper our ability to engage in activities that may be in our long-term best interests.

Events beyond our control could affect our ability to meet these and other covenants under the credit agreement.

Moreover, our credit agreement is guaranteed by our material domestic subsidiaries and is supported by a security interest in substantially all of our and their personal property and assets, subject to certain exceptions.

Our failure to comply with our covenants and other obligations under the credit agreement may result in an event of default thereunder.

A default, if not cured or waived, may permit acceleration of our indebtedness and provide our lenders with the ability to foreclose on the collateral securing their loans .

If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds available to pay down the indebtedness (together with accrued interest and fees), or that we will have the ability to refinance the accelerated indebtedness on terms favorable to us or at all.

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

We are exposed to risks related to accounts receivable sales agreements.

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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 experience financial difficulties or otherwise modify or terminate 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 .

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 upon our financial condition, results of operations and cash flows.

The utility of these arrangements also depends upon LIBOR, as it is a component of the discount rate applicable to each arrangement.

If LIBOR increases such that the cost of these arrangements becomes more than the cost of servicing our receivables with existing debt, we may not be able to rely on such arrangements, which could have a material adverse effect upon our business, financial condition and results of operations.

If LIBOR increases such that the cost of these arrangements becomes more than the cost of servicing our receivables with existing debt, we may

not be able to rely on such arrangements, which could have a material adverse effect upon our business, financial condition and results of operations.

The phaseout of the London Interbank Offered Rate (LIBOR), or the replacement of LIBOR with a different reference rate, may have an adverse effect on our business.

In July 2017, the United Kingdom Financial Conduct Authority (the authority that regulates LIBOR) announced that it would phase out LIBOR by the end of 2021.

Financial Conduct Authority, which regulates LIBOR, has announced that, after specified dates, LIBOR settings will cease to be provided by any administrator or will no longer be representative of the underlying market and economic reality that such settings are intended to measure.

Accordingly, many existing LIBOR obligations will transition to another benchmark after June 30, 2023.

Regulators have also stated that, for certain purposes, market participants should transition away from U.S.

dollar LIBOR sooner.

It is unclear whether new methods of calculating LIBOR will be established or if alternative rates or benchmarks will be adopted.

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As of February 17, 2022, Steven L.

Berman, our Executive Chairman, and his family members beneficially own approximately 18% of the Company’s outstanding common stock.

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 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.

Moreover, sales of substantial amounts of the shares beneficially owned by Mr.

Berman and his family members, including shares held in family trusts and foundations, or the perception that such sales could occur, may lower the prevailing market price of our common stock.

General Risk Factors

Unfavorable economic conditions may adversely affect our business.

Adverse changes in economic conditions, including inflation, recession, increases in fuel prices, tariffs, 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.

Adverse changes in economic conditions, including inflation, recession, increases in fuel prices, decreased transportation capacity, 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.

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As a result, reserves for doubtful accounts and write-offs of accounts receivables may increase and failure to collect a significant portion of amounts due on those receivables could have a material adverse effect upon our business, financial condition and results of operations.

Our operations, revenues and operating results, and the operations of our third-party manufacturers, suppliers 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 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 prices, acts of war, terrorism, cyber incidents, pandemics, fire, earthquake, 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 or customers, it could result in harm to people or the natural environment, delays in shipments of products to customers or suspension of operations, any of which could have a material adverse effect upon our business, financial condition and results of operations.

We rely extensively on our computer systems to manage inventory, process transactions and timely provide products to our customers.

Our systems are subject to damage or interruption from power outages, telecommunications failures, computer viruses, security breaches, cyber-attacks or other catastrophic events.

If our systems are damaged or fail to function properly, we may experience loss of critical data and interruptions or delays in our ability to manage inventories or process customer transactions.

Such a disruption of our systems could negatively impact revenue and could have a material adverse effect upon our business, financial condition and results of operations.

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.

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.

In addition, such events could result in our inability to fill orders on a timely basis or at all and result in penalties owed to our customers and the loss of net sales.

Any of the foregoing could have a material adverse effect upon our business, financial condition and results of operations.

We rely extensively on computer systems to manage inventory, process transactions and timely provide products to our customers.

These systems are subject to damage or interruption from power outages, telecommunications failures, computer viruses, security breaches, cyber-attacks or other catastrophic events.

If these systems are damaged or fail to function properly, we may experience loss of critical data and interruptions or delays in our ability to manage inventories or process customer transactions.

Such a disruption to these systems could negatively impact revenue and could have a material adverse effect upon our business, financial condition and results of operations.

Unfavorable results of legal proceedings could materially adversely affect us.

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Our future success depends upon the continued contributions of our executive officers and senior management, many of whom have numerous years of experience and would be extremely difficult to replace.

We must also attract and retain experienced and highly skilled engineering, sales and marketing, finance, logistics, and operations personnel.

Competition for qualified personnel is often intense, and we may not be successful in hiring and retaining these people.

In addition, we have seen an increase in demand for qualified workers in distribution centers, and, to the extent that drives higher wages for those roles versus other roles, our ability to attract talent and maintain a competitive cost structure may be challenged.

We must also attract and retain experienced and highly skilled engineering, sales and marketing, finance, logistics, information technology and operations personnel.

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.

In addition, we have seen increased demand and competition for qualified workers in our manufacturing and distribution centers, where we have experienced labor shortages resulting from COVID-19 and other economic factors.

To the extent such increase in demand or competitive conditions drives higher wages for those roles, 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 upon our business, financial condition and results of operations.

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Our future growth is likely to depend to some degree 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 successfully.

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

We may seek additional acquisition opportunities, both to further diversify our businesses and to penetrate or expand important product offerings, geographies or markets.

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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.

Although our management will endeavor to evaluate the risks inherent in any particular transaction, there are no

assurances that we will properly ascertain all such risks.

Although our management will endeavor to evaluate the risks inherent in any particular transaction, there are no assurances that we will properly ascertain all such risks.

Difficulties encountered with acquisitions could have a material adverse effect upon our business, financial condition and results of operations.

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

Import and exports control 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.

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.

Various countries regulate the importation of certain products through import permitting and licensing requirements and have enacted laws that could limit our ability to distribute our products.

4 unchanged sentences

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.

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