What changed in this filing

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Item 1A. Risk Factors

2023-09-26 compared with 2022-09-14 · 27 added, 25 removed, 234 unchanged (18% of the section changed)

13 unchanged sentences

• longer customer payment cycles and difficulty collecting accounts receivable;

• cash liquidity, the ability to acquire new debt capacity, and capital constraints;

• export duties, import controls and trade barriers (including quotas);

3 unchanged sentences

• our locations are subject to physical and operational risks from natural disasters, severe weather events, and climate change;

• our locations may also be impacted by future temporary closures and labor constraints as a result of COVID-19.

• our locations may also be impacted by future temporary closures and labor constraints as a result of local mandates for medical, climate, and unforeseen emergencies.

Our operations in certain foreign locations receive favorable income tax treatment in the form of tax credits or other incentives.

15 unchanged sentences

Operating results can also fluctuate if changes are made to significant estimates and assumptions.

Significant estimates and assumptions include the allowance for doubtful receivables, provision for obsolete and non-saleable inventory, stock-based compensation, the valuation allowance on deferred tax assets, impairment of long-lived assets, long-term incentive compensation accrual, the provision for warranty costs, and the impact of hedging activities.

Significant estimates and assumptions include the allowance for doubtful receivables, net realizable inventory, revenue recognition, and the valuation allowance on deferred tax assets.

Due to the COVID-19 pandemic, we have seen extreme shifts in demand from our customer base.

4 unchanged sentences

Additionally, the financial strength of our customers and suppliers and their ability to obtain and rely on credit financing may affect their ability to fulfill their obligations to us and have an adverse effect on our financial results.

Adverse macroeconomic conditions as a result of COVID-19 have and may continue to affect our business.

Adverse macroeconomic conditions, such as those that were a result of COVID-19 have and may continue to affect our business.

The conditions affect the Company’s ability to predict and plan for future supply chain disruptions, fluctuations in customer demand and costs, and the ability to operate as there is uncertainty over future temporary closures.

27 unchanged sentences

If we were unable to provide comparable or better manufacturing services at a lower cost than our competitors, it could cause sales to decline.

In addition, competitors can copy our non-proprietary designs and processes after we have invested in development of products for customers, thereby enabling such competitors to offer lower prices on such products due to savings in development costs.

In addition, competitors can copy our non-proprietary designs and processes after

we have invested in development of products for customers, thereby enabling such competitors to offer lower prices on such products due to savings in development costs.

Fluctuations in foreign currency exchange rates could increase our operating costs.

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The primary impact of currency exchange fluctuations is on the cash, receivables, payables and expenses of our operating entities.

As part of our hedging strategy, we currently use Mexican peso forward contracts to hedge foreign currency fluctuations for a portion of our Mexican peso denominated expenses.

As part of our hedging strategy, we may use Mexican peso forward contracts to hedge future foreign currency fluctuations for a portion of our Mexican peso denominated expenses.

We currently do not hedge expenses denominated in RMB.

Unexpected losses could occur from increases in the value of these currencies relative to the United States dollar.

As a result of COVID-19, significant currency exchange fluctuations can occur causing unexpected losses.

Global economic and political events, including as a result of COVID-19, can lead to significant currency exchange fluctuations can occur causing unexpected losses.

Future temporary closures of production facilities in Mexico could also cause significant changes in our ability to qualify for hedge accounting treatment of our forward contracts to hedge foreign currency fluctuations.

21 unchanged sentences

We may need to transfer production to other facilities, acquire new facilities, or outsource production which could negatively impact gross margin.

The Company has been able to manage the arrival of components in an effort to control inventory levels of customers that have seen sharp decreases in demand as a result of COVID-19.

The Company has been able to manage the arrival of components in an effort to control inventory levels of customers that have seen sharp decreases in demand as a result of market conditions.

Compliance or the failure to comply with current and future environmental and health laws or regulations could cause us significant expense.

20 unchanged sentences

maintain customer, supplier and other favorable business relationships during possible transition periods;

manage appropriate inventory levels;

continue to develop the management skills of our managers and supervisors;

15 unchanged sentences

We routinely monitor our systems for cyber threats and have processes in place to detect and remediate vulnerabilities.

Nevertheless, we have experienced attempted security breaches, such as phishing emails and other targeted attacks.

Nevertheless, we have experienced security breaches, such as phishing emails and other targeted attacks.

We expect that our operations will continue to be subject to cyber threats, and any future cybersecurity incident could significantly disrupt our operations.

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Our ability to secure and maintain sufficient credit arrangements is key to our continued operations.

There is no assurance that we will be able to retain or renew our credit agreements in the future.

There is no assurance that we will be able to retain or replace our credit agreements in the future or obtain sufficient capital for operating requirements.

In the event the business grows rapidly or there is uncertainty in the macroeconomic climate, additional financing resources could be necessary.

There is no assurance that we will be able to obtain equity or debt financing at acceptable terms, or at all in the future.

There is no assurance that we will be able to obtain equity or debt financing at acceptable terms, maintain sufficient borrowing capacity on the existing revolver, or at all in the future.

In addition, we have restrictive covenants with our financial institution which could impact how we manage our business.

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For a summary of our debt obligations, see Footnote “Long-Term Debt” of the “Notes to Consolidated Financial Statements.”

In addition, the U.K.’s Financial Conduct Authority, which regulates LIBOR, has confirmed that LIBOR-indexed rates will cease after June 30, 2023, with the remaining IBOR-indexed rates ceasing on December 31, 2021.

The Federal Reserve Board and the Federal Reserve Bank of New York identified Secured Overnight Financing Rate (“SOFR”) as its preferred alternative rate for LIBOR for debt and derivative financial instruments.

Our stock price is volatile.

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RISKS RELATED TO OUR CONTROLS AND PROCEDURES AND THE INTERNAL INVESTIGATION

We identified a material weakness in our internal control over financial reporting and concluded that our disclosure controls and procedures were not effective as of December 26, 2020 and April 3, 2021.

If we fail to properly remediate any future deficiencies or material weaknesses or to maintain proper and effective internal controls, our business and financial condition could be materially adversely impacted.

As described in Item 9a, “Controls and Procedures,” of this Annual Report on Form 10-K, in fiscal year 2022, we concluded that our disclosure controls and procedures were not effective as of December 26, 2020 and April 3, 2021, due to the existence of a material weakness in our internal control over financial reporting.

While we undertook remediation efforts to address the identified deficiencies and have concluded that the material weakness was remediated as of July 3, 2021, we cannot provide assurance that we will be able to conclude that our controls will be effective in the future.

We also cannot guarantee that additional significant deficiencies or material weaknesses in our internal control over financial reporting will not arise or be identified in the future.

If additional deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results and incur the additional costs and expenses associated therewith.

If we fail to maintain proper and effective internal controls, our business and financial condition could be materially adversely impacted.

We have previously identified a material weakness in our internal control over financial reporting, and undertook remediation efforts to address the identified deficiencies and concluded that the material weakness was remediated as of July 3, 2021.

If other deficiencies in our internal control over financial reporting are discovered or occur in the future, our consolidated financial statements may contain material misstatements and we could be required to restate our financial results and incur the additional costs and expenses associated therewith.

Moreover, because of the inherent limitations of any control system, material misstatements due to error or fraud may not be prevented or detected on a timely basis, or at all.

As of July 2, 2023, we are a non-accelerated filer under the Exchange Act and are not required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act).

Therefore, our internal controls over financial reporting will not receive the level of review provided by the process relating to the auditor attestation included in annual reports of issuers that are subject to the auditor attestation requirements.

If we are unable to provide reliable and timely financial reports in the future, our business and reputation may be further harmed.

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We have incurred, and may continue to incur, significant expenses related to legal, accounting and other professional services in connection with matters relating to or arising from the subject of the Audit Committee’s internal investigation.

We have taken and continue to take a number of steps in order to remediate identified deficiencies in our internal control over financial reporting and attempt to reduce the risk of future recurrence.

The validation of the efficacy of these remedial steps will result in us incurring additional near term expenses, and to the extent these steps are not successful, we may incur significant additional time and expense.

We have taken steps in order to remediate identified deficiencies in our internal control over financial reporting and attempt to reduce the risk of future recurrence.

To the extent these steps were not successful, we may incur significant additional time and expense.

In addition, we are cooperating with the Securities and Exchange Commission (the “SEC”) regarding matters related to the internal investigation.

The completion of the internal investigation will not automatically resolve the SEC’s inquiries.

The completion of the internal investigation did not automatically resolve the SEC’s inquiries.

If the SEC or any other regulator were to commence legal action against us, we could be required to pay significant penalties and become subject to injunctions, cease and desist orders or other remedies.

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Any litigation or dispute resolution, even where a claim is without merit, could result in substantial costs and diversion of resources.

Accordingly, the resolution or adjudication of such disputes, even those encountered in the ordinary course of business, could have a material effect on our business, consolidated financial conditions and results of operations.

Accordingly, the resolution or adjudication of such disputes,

even those encountered in the ordinary course of business, could have a material effect on our business, consolidated financial conditions and results of operations.

Changes in securities laws and regulations will increase our costs and risk of noncompliance.

We are subject to additional requirements contained in the Sarbanes-Oxley Act of 2002 (the Sarbanes-Oxley Act) and more recently the Dodd-Frank Act.

We are subject to requirements contained in the U.S.

federal securities laws, including provisions of the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act (the Dodd-Frank Act).

The Sarbanes-Oxley and Dodd-Frank Acts required or will require changes in some of our corporate governance, securities disclosure and compliance practices.

In response to the requirements of the Sarbanes-Oxley and Dodd-Frank Acts, the SEC and NASDAQ promulgated new rules and additional rulemaking is expected in the future.

Compliance with these new rules and future rules has increased and may increase further our legal, financial and accounting costs as well as a potential risk of noncompliance.

The SEC and NASDAQ Global Market (“Nasdaq”) have promulgated new rules and additional rulemaking is expected in the future.

Compliance with these new rules and future rules has increased and is expected to increase further our legal, financial and accounting costs as well as a potential risk of noncompliance.

Absent significant changes in related rules, which we cannot assure, we anticipate some level of increased costs related to these new regulations to continue indefinitely.

28 unchanged sentences

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