What changed in this filing

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Item 1A. Risk Factors

2021-11-04 compared with 2021-08-05 · 69 added, 46 removed, 568 unchanged (17% of the section changed)

7 unchanged sentences

• our business, financial condition and results of operations have been and may continue to be adversely affected by global public health epidemics or pandemics, including the ongoing COVID-19 pandemic;

• our dependency on a limited number of suppliers for materials, product parts, and vehicle chassis could lead to an increase in material costs, disruptions in our supply chain, or reputational costs;

• failure to effectively compete against competitors, enhance existing products or develop, manufacture and market new products that respond to consumer needs and preferences and achieve market acceptance could result in a decrease in demand for our products and negatively impact our business and financial results;

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If our information systems fail to perform these functions adequately, if we or our vendors or commercial partners experience an interruption in our operations, or if we are impacted by cybersecurity attacks, our business could suffer;

• we have grown and may continue to grow in the future through acquisitions, and we may not be able to effectively integrate businesses we acquire or we may not be able to identify or complete any future acquisitions on favorable terms, or at all;

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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 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.

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

The impact of the COVID-19 pandemic, including changes in consumer behavior, COVID-19 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.

There have been extraordinary actions taken by international, federal, state, and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world, including travel bans, quarantines, “stay-at-home” orders, and similar mandates for many individuals to substantially restrict daily activities and for many businesses to curtail or cease normal operations.

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Despite our efforts to manage and remedy these impacts to the Company, the ultimate impact and the extent to which the COVID-19 pandemic will continue to affect our business, results of operation and financial condition is difficult to predict and depends on numerous evolving factors outside our control including:

the duration and scope of the pandemic;

government, social, business and other actions that have been and will be taken in response to the pandemic;

the duration and scope of the COVID-19 pandemic;

government, social, business and other actions that have been and will be taken in response to the COVID-19 pandemic;

increases in COVID-19 case counts;

any additional waves of the virus;

availability and ultimate efficacy of the vaccine on new variants of the virus;

and the effect of the pandemic on short- and long-term general economic conditions.

availability and ultimate efficacy of the vaccine on new variants of the virus, including the Delta variant;

and the effect of the COVID-19 pandemic on short- and long-term general economic conditions.

We depend on a limited number of suppliers for our materials and component parts for some of our products, and the loss of any of these suppliers or an increase in cost of raw materials could harm our business.

We depend on a limited number of suppliers for certain components.

If our current suppliers, in particular the minority of those that are "single-source" suppliers, are unable to timely fulfill orders, or if we are required to transition to other suppliers, we could experience significant production delays or disruption to our business.

We define a single-source supplier as a supplier from which we purchase all of a particular raw material or input used in our manufacturing operations, although other suppliers are available from which to purchase the same raw material or input or an equivalent substitute.

We do not maintain long-term supply contracts with any of our suppliers and instead purchase these components on a purchase order basis.

As a result, we cannot force any supplier to sell us the necessary components we use in creating our products and we could face significant supply disruptions should they refuse to do so.

As the majority of our bike component manufacturing occurs in Taiwan, we could experience difficulties locating qualified suppliers geographically located closer to these facilities.

Furthermore, such suppliers could experience difficulties in providing us with some or all of the materials we require, which could result in disruptions in our manufacturing operations.

Our business, financial condition or results of operations could be materially and adversely impacted if we experience difficulties with our suppliers or manufacturing delays caused by our suppliers, whether in connection with our manufacturing operations in the U.S.

or in Taiwan.

We also purchase various raw materials in order to manufacture our products.

The main commodity items purchased for production include aluminum, magnesium, steel and carbon.

Historically, price fluctuations for these components and raw materials have not had a material impact on our business.

In the future, however, if we experience material increases in the price of components or raw materials and are unable to pass on those increases to our customers, or there are shortages in the availability of such component parts or raw materials, it could negatively affect our business, financial condition or results of operations.

In addition to our various single-source suppliers, we also rely on one "sole-source" supplier, Miyaki Corporation, or Miyaki.

We define a sole-source supplier as a supplier of a raw material or input for which there is no other supplier of the same product or an equivalent substitute.

Miyaki is the exclusive producer of the Kashima coating for our suspension component tubes.

As part of our agreement with Miyaki, we have been granted the exclusive right to use the trademark "KASHIMACOAT" on products comprising the aluminum finished parts for suspension components (e.g., tubes) and on related sales and marketing material worldwide, subject to certain exclusions.

Although we believe we could obtain other coatings of comparable utility from other sources if necessary, we could no longer obtain this specific Kashima coating or use the trademark "KASHIMACOAT" if Miyaki were to stop supplying us with this coating.

The need to replace the Kashima coating could temporarily disrupt our business and harm our business, financial condition or results of operations.

We also have OEM partners that supply vehicle chassis used in our upfitting operations.

An OEM may encounter difficulties and may be unable to deliver chassis according to our production needs, or an OEM may choose to discontinue supplying chassis for other reasons.

Any interruption or discontinuation in the availability of chassis may result in increased production costs, delays in the delivery of our products, and lost sales, which could have an adverse effect on our business and financial condition.

If we are unable to continue to enhance existing products and develop, manufacture and market new products that respond to consumer needs and preferences and achieve market acceptance, we may experience a decrease in demand for our products, and our business and financial results could suffer.

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In connection with this move, we are utilizing, and expect to continue to use, suppliers who are located closer to our facility in Taichung, Taiwan for a number of materials and components.

With the transition of our entire bike suspension component manufacturing to Taichung, Taiwan, we converted the Watsonville manufacturing facility to be a powered vehicle suspension products manufacturing facility exclusively.

In 2020, we substantially completed the first phase of construction of an approximately 336,000 square foot state-of-the-art facility in Hall County, Georgia to diversify our manufacturing platform and provide additional long-term capacity to support growth in our Powered Vehicles Group.

The first phase will be used for manufacturing, warehousing, distribution and office space.

In the future, we may move additional manufacturing operations as we re-balance existing facilities or expand to new manufacturing locations.

We are in the process of moving additional manufacturing operations as we re-balance existing facilities or expand to new manufacturing locations.

As a result, we have incurred, and expect to continue to incur, costs associated with some duplication of facilities, equipment and personnel, the amount of which could vary materially from our projections.

Significant construction delays or other unforeseen difficulties in our Georgia expansion project and future expansion projects, whatever the cause, could have a material adverse effect on our business, customer relationships, financial condition, operating results, cash flow, and liquidity.

Unforeseen difficulties in our Georgia expansion project and future expansion projects, whatever the cause, could have a material adverse effect on our business, customer relationships, financial condition, operating results, cash flow, and liquidity.

Equipment failures, delays in deliveries or catastrophic loss at any of our facilities could lead to production or service disruptions, curtailments or shutdowns.

9 unchanged sentences

While the West Coast ports labor agreement has been extended until July 2022, the 2015 strike lasted longer than we forecasted, and any similar labor dispute in the future could potentially have a negative effect on both our financial condition and results of operations.

Furthermore, the ongoing coronavirus pandemic has only increased uncertainty for global supply chains.

Furthermore, the ongoing COVID-19 pandemic has only increased uncertainty for global supply chains, as port congestion and shipping container shortages have become exacerbated, which could adversely affect our operating results.

The proposed new regulation concerning mandatory COVID-19 vaccination of employees could have a material adverse impact on our business and results of operations.

On September 9, 2021, President Biden announced a proposed new rule requiring all employers with at least 100 employees to ensure that their employees are fully vaccinated or require unvaccinated workers to get a negative test at least once a week.

The Department of Labor’s Occupational Safety and Health Administration is drafting an emergency regulation to carry out this mandate, which is expected to take effect in the coming weeks.

It remains unclear, among other things, if the vaccine mandate will apply to all employees or only to employees who work in the office, and how compliance will be documented.

It is currently not possible to predict with certainty the exact impact the new regulation would have on us.

As a company with more than 100 employees, we would be required to mandate COVID-19 vaccination of our workforce or our unvaccinated employees would require weekly testing.

This may result in employee attrition, which could be material as a substantial number of our employees are based in states where vaccination rates are below the national average.

If we were to lose employees, it could have an adverse effect on future revenues and costs, which could be material.

Accordingly, the proposed new regulation when implemented could have a material adverse effect on our business and results of operations.

Our business depends substantially on our ability to attract and retain experienced and qualified talent, including our senior management team.

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For instance, we rely on skilled and well-trained engineers for the design and production of our products, as well as in our research and development functions.

Competition for such individuals is intense, particularly in California where several of our facilities are located.

Competition for such individuals is intense, particularly in California and Georgia where several of our facilities are located.

Our inability to attract or retain qualified employees in our design, production or research and development functions or elsewhere in our Company could result in diminished quality of our products and delinquent production schedules or impede our ability to develop new products.

58 unchanged sentences

• geopolitical regional conflicts, terrorist activity, political unrest, civil strife, acts of war and other political uncertainty;

• political, economic, or other actions from China could impact Taiwan and its economy, and may adversely affect our operations in Taiwan, our customers, and our supply chain;

• changes in tariffs, quotas, trade barriers and other similar restrictions on sales;

67 unchanged sentences

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

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

As of October 1, 2021, we employed approximately 3,870 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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Additionally, if we do not effectively implement the ERP system as planned or the system does not operate as intended, the effectiveness of our internal control over financial reporting could be adversely affected.

We could be negatively impacted by cybersecurity attacks.

We could be negatively impacted by cybersecurity attacks and are subject to evolving privacy laws in the U.S.

and other jurisdictions that could adversely impact our business and require that we incur substantial costs.

We use a variety of information technology systems in the ordinary course of business, which are potentially vulnerable to unauthorized access, computer viruses and cyber-attacks, including cyber-attacks to our information technology infrastructure and attempts by others to gain access to our propriety or sensitive information, and ranging from individual attempts to advanced persistent threats.

2 unchanged sentences

Any remedial costs or other liabilities related to cybersecurity incidents may not be fully insured or indemnified by other means.

Moreover, we or our third-party vendors or business partners may be more vulnerable to such attacks in remote work environments, which have increased in response to the COVID-19 pandemic.

Additionally, security breaches could result in a violation of applicable U.S.

and international privacy and other laws and subject us to governmental investigations and proceedings, which could result in our exposure to material civil or criminal liability.

For example, the European Union adopted a new regulation that became effective in May 2018, called the General Data Protection Regulation (“GDPR”).

For example, the European Union adopted a regulation that became effective in May 2018, called the General Data Protection Regulation (“GDPR”).

GDPR requires companies to meet new requirements regarding the handling of personal data, including its use, protection and the ability of persons whose data is stored to correct or delete such data about themselves.

1 unchanged sentence

It also provides a new private right of action for data breaches.

Failure to meet GDPR and CCPA requirements could result in financial penalties.

The CCPA has been amended several times, including by the California Privacy Rights Act (the "CPRA"), a California ballot initiative that passed in November 2020, and takes effect on January 1, 2023, which, among other things, significantly modifies the CCPA, including by expanding consumers' rights with respect to certain personal information and creating a new state agency to oversee implementation and enforcement efforts.

Failure to meet GDPR, CCPA and CPRA requirements could result in financial penalties.

Furthermore, the CCPA and CPRA could mark the beginning of a trend toward more stringent privacy legislation in the U.S., as other states across the country are considering and proposing similar laws, and states like Virginia and Colorado have recently enacted CCPA-like laws to provide their respective residents with similar rights.

Privacy laws, both domestically and internationally, are changing rapidly, including a discussion in Congress of a new federal data protection and privacy law, all of which may add additional complexity, variation in requirements, restrictions and potential legal risk, require additional investment in resources for compliance programs, and result in increased compliance costs and/or changes in business marketing practices and policies.

Our vendors’ and commercial partners’ information technology systems may fail or suffer security breaches, which could result in a material disruption of our operations.

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To the extent that any disruption or security breach were to result in a loss of, or damage to, our data, or inappropriate disclosure of confidential or propriety information, we could be subject to litigation and reputational harm, which could materially adversely affect our financial condition, business or results of operations.