What changed in this filing

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Item 1A. Risk Factors

2021-08-05 compared with 2021-05-06 · 24 added, 27 removed, 590 unchanged (8% of the section changed)

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Risks Related to Our Indebtedness and Liquidity

• our First Amended and Restated Credit Facility places operating restrictions on us and creates default risks, and the variable rate makes us more vulnerable to increases in interest rates;

• our Credit Facility places operating restrictions on us and creates default risks, and the variable rate makes us more vulnerable to increases in interest rates;

• we will continue to have the ability to incur debt and our levels of debt may affect our operations and our ability to pay the principal of and interest on our debt;

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• unpredictability in increasingly stringent emission standards and increasing focus on environmental, social and governance responsibility, including climate change, may impose additional costs and new risks on us;

• we are subject to employment practice laws and regulations, and, as such, are exposed to litigation risks;

and we may incur higher employee costs in the future;

• we are subject to employment practice laws and regulations, and, as such, are exposed to litigation risks, and we may incur higher employee costs in the future;

• we retain certain personal information about individuals and are subject to various privacy and consumer protection laws;

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The global outbreak of COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S.

Government in March 2020 and has resulted in over two and a half million deaths worldwide, as of the date of filing this Quarterly Report, and continues to spread in major markets in which we operate.

Government in March 2020 and has resulted in over four million deaths worldwide, as of the date of filing this Quarterly Report, and continues to spread in major markets in which we operate.

The impact of the COVID-19 pandemic, including changes in consumer behavior, pandemic fears and market downturns, and restrictions on business and individual activities, has created significant volatility in the global economy and led to reduced economic activity.

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• significant reductions in demand or significant future volatility in demand for one or more of our products, which may be caused by, among other things:

the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, store closures, or financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products, supply chain and shipping constraints, reduced options for marketing and promotion of products or other restrictions in connection with the COVID-19 pandemic;

the temporary inability of consumers to purchase our products due to illness, quarantine or other travel restrictions, store closures, financial hardship, shifts in demand away from one or more of our more discretionary or higher priced products, supply chain and shipping constraints, reduced options for marketing and promotion of products or other restrictions in connection with the COVID-19 pandemic;

if prolonged, such impacts can further increase the difficulty of operating our business, including accurately planning and forecasting, planning for operations and may adversely impact our results;

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Furthermore, the COVID-19 pandemic has impacted and may further impact the broader economies of affected countries, including negatively impacting economic growth, the proper functioning of financial and capital markets, foreign currency exchange rates, interest rates, and liquidity.

The recent volatility in capital markets has also increased the cost of capital and adversely impacted access to capital.

We have modified, and might further modify, our business practices in response to the COVID-19 pandemic, related third-party responses, including from government authorities and our suppliers, customers and distributors, and the economic and social ramifications of the disease and societal responses across the markets in which the Company operates.

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Such market growth includes the creation of new classes of vehicles that can benefit from our products, such as trucks that are up-fitted with products to enhance their off-road capability, and our ability to create products for these vehicles.

Additionally, with our acquisitions of SCA Performance and Tuscany, a growing portion of our sales are expected to be generated from providing up-fitting solutions.

Additionally, with our acquisitions of SCA Performance, Tuscany and Outside Van, a growing portion of our sales are expected to be generated from providing up-fitting solutions.

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, and our business, financial condition or results of operations could be negatively affected.

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Dennison or any other key employees.

We believe that the top eight members of our senior management team are key to establishing our focus and executing our corporate strategies as they have extensive knowledge of our systems and processes.

We believe that the top nine members of our senior management team are key to establishing our focus and executing our corporate strategies as they have extensive knowledge of our systems and processes.

Given our senior management team’s knowledge of our industry and the limited number of direct competitors in the industry, we believe that it could be difficult to find replacements should any of the members of our senior management team leave.

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Additionally, we have registered or have applied for trademarks and service marks with the U.S.

Patent and Trademark Office and a number of foreign countries, including the marks FOX ® , FOX RACING SHOX ® , RACE FACE ® and REDEFINE YOUR LIMITS ® , to be used with certain goods and services.

Patent and Trademark Office and a number of foreign countries, including the marks FOX ® and RACE FACE ® , to be used with certain goods and services.

When appropriate, we may from time to time assert our rights against those who infringe on our patents, trademarks, trade dress, or other intellectual property.

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If any of our products are or are alleged to be defective, we may be required to participate in a recall involving such products.

Our products and items where our product is incorporated as original equipment on the purchased item are subject to regulation by various agencies, including the NHTSA, the CPSC and similar state and international regulatory authorities.

Our products and items where our product are incorporated as original equipment on the purchased item are frequently subject to regulation by various agencies, including, for example, the National Highway Traffic Safety Administration ("NHTSA"), the Consumer Product Safety Commission ("CPSC") and/or similar state and international regulatory authorities.

We have had in the past, and may have in the future, recalls (both voluntary and involuntary) of our products or of items that incorporate our products.

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We are subject to certain risks in our manufacturing and in the testing of our products.

As of April 2, 2021, we employed approximately 3,240 full-time employees worldwide, a large percentage of which work at our manufacturing facilities.

As of July 2, 2021, we employed approximately 3,730 full-time employees worldwide, a large percentage of which work at our manufacturing facilities.

Our business involves complex manufacturing processes that can be inherently dangerous.

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RISKS RELATED TO OUR INDEBTEDNESS AND LIQUIDITY

Our First Amended and Restated Credit Facility places operating restrictions on us and creates default risks.

Our First Amended and Restated Credit Facility with Bank of America and other named lenders contains covenants that place restrictions on our operating activities.

The Credit Facility places operating restrictions on us and creates default risks.

The Credit Facility with Bank of America and other named lenders contains covenants that place restrictions on our operating activities.

These covenants, among other things, limit our ability to:

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These restrictions may interfere with our ability to obtain financing or to engage in other business activities, which may have a material adverse effect on our business, financial condition or results of operations.

If we are unable to comply with the covenants contained in our First Amended and Restated Credit Facility, it could constitute an event of default and our lenders could declare all borrowings outstanding, together with accrued and unpaid interest, to be immediately due and payable.

If we are unable to repay or otherwise refinance these borrowings when due, our lenders could sell the collateral securing our First Amended and Restated Credit Facility, which constitutes substantially all of our assets.

If we are unable to comply with the covenants contained in the Credit Facility, it could constitute an event of default and our lenders could declare all borrowings outstanding, together with accrued and unpaid interest, to be immediately due and payable.

If we are unable to repay or otherwise refinance these borrowings when due, our lenders could sell the collateral securing the Credit Facility, which constitutes substantially all of our assets.

We will continue to have the ability to incur debt and our levels of debt may affect our operations and our ability to pay the principal of and interest on our debt.

In the future, we and our subsidiaries may be able to incur substantial additional debt from amendments to our First Amended and Restated Credit Facility, additional lending sources subject to the restrictions contained in the First Amended and Restated Credit Facility, or because of certain debt instruments we may issue.

As of April 2, 2021, we had $392.5 million of indebtedness, excluding loan fees, and $235.0 million in revolving credit available to borrow under the First Amended and Restated Credit Facility.

Our ability to borrow under the First Amended and Restated Credit Facility fluctuates from time to time due to, among other factors, our borrowings under the First Amended and Restated Credit Facility.

In the future, we and our subsidiaries may be able to incur substantial additional debt from amendments to the Credit Facility, additional lending sources subject to the restrictions contained in the Credit Facility, or because of certain debt instruments we may issue.

As of July 2, 2021, we had $388.5 million of indebtedness, and $231.8 million in revolving credit available to borrow under the Credit Facility.

Our ability to borrow under the Credit Facility fluctuates from time to time due to, among other factors, our borrowings under the Credit Facility.

Our indebtedness could be costly or have adverse consequences, such as:

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If we incur substantial additional indebtedness in the future, these higher levels of indebtedness may affect our ability to pay the principal of and interest on existing indebtedness and our creditworthiness generally.

Our outstanding indebtedness under the First Amended and Restated Credit Facility bears interest at a variable rate, which makes us more vulnerable to increases in interest rates and could cause our interest expense to increase and decrease cash available for operations and other purposes.

Borrowings under our First Amended and Restated Credit Facility bear interest on a variable rate, which increases and decreases based upon changes in the underlying interest rate and/or our leverage ratio.

Any such increases in the interest rate or increases of our borrowings under the First Amended and Restated Credit Facility will increase our interest expense.

Our outstanding indebtedness under the Credit Facility bears interest at a variable rate, which makes us more vulnerable to increases in interest rates and could cause our interest expense to increase and decrease cash available for operations and other purposes.

Borrowings under the Credit Facility bear interest on a variable rate, which increases and decreases based upon changes in the underlying interest rate and/or our leverage ratio.

Any such increases in the interest rate or increases of our borrowings under the Credit Facility will increase our interest expense.

Recent interest rates in the U.S.

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Refer to Note 10- Derivatives and Hedging for additional information regarding the interest rate swap arrangement.

As of April 2, 2021, we had $392.5 million of indebtedness outstanding under the First Amended and Restated Credit Facility.

Based on the $192.5 million of variable interest rate indebtedness that was outstanding as of April 2, 2021, after giving effect to our interest rate swap, a hypothetical 100 basis point increase in the interest rate would have resulted in an approximately $0.5 million increase in interest expense for the three months ended April 2, 2021.

A hypothetical 100 basis point decrease in the interest rate would not impact interest expense given that the current borrowing rate reflects the floor rate of 0.50%.

As of July 2, 2021, we had $388.5 million of indebtedness outstanding under the Credit Facility.

Based on the $188.5 million of variable interest rate indebtedness that was outstanding as of July 2, 2021, after giving effect to our interest rate swap, a hypothetical 100 basis point increase or decrease in the interest rate would have resulted in an approximately $0.5 million increase in interest expense for the three months ended July 2, 2021.

We may incur losses on interest rate swap and hedging arrangements.

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Certain of our products are subject to extensive statutory and regulatory requirements governing emission and noise, including standards imposed by the EPA, the EU, state regulatory agencies (such as the CARB) and other regulatory agencies around the world.

We have made, and continue to make, capital and research expenditures to ensure our certain of our products comply with these emission standards.

We have made, and continue to make, capital and research expenditures to ensure certain of our products comply with these emission standards.

Developing products to meet numerous changing government regulatory requirements, with different implementation timelines and emission requirements, makes developing products efficiently for multiple markets complicated and could result in additional costs that may be difficult to recover in certain markets.

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Future issuances and sales of our shares, or the perception that such sales may occur, could cause our stock price to decline.

The issuance of additional shares of our common stock, such as the secondary offering of 2.8 million shares of common stock that we completed in June 2020, could dilute the ownership interest of our common stockholders and could depress the market price of shares of our common stock.

Our Amended and Restated Certificate of Incorporation authorizes us to issue 90,000,000 shares of common stock, 41,963,975 of which shares were outstanding as of April 2, 2021.

The issuance of additional shares of our common stock, such as the follow-on offering of 2.8 million shares of common stock that we completed in June 2020, could dilute the ownership interest of our common stockholders and could depress the market price of shares of our common stock.

Our Amended and Restated Certificate of Incorporation authorizes us to issue 90,000,000 shares of common stock, 42,082,564 of which shares were outstanding as of July 2, 2021.

In the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with financings, acquisitions, registration statements or otherwise.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors