What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-02-08 compared with 2023-11-09 · 104 added, 64 removed, 327 unchanged (34% of the section changed)

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The Company provides its customers full engineering services, materials management, worldwide manufacturing facilities, assembly services, in-house testing, and worldwide distribution.

Our customers include some of the world’s leading original equipment manufacturers.

Its customers include some of the world’s leading original equipment manufacturers.

Our combined capabilities and vertical integration are proving to be a desirable offering to our expanded customer base.

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Executive Summary

For the first quarter of fiscal year 2024, the Company reported total revenue of $147.8 million, up 8% from $137.3 million in the same period of fiscal year 2023.

During the first quarter of fiscal year 2024, the Company ramped up new programs produced in the Company’s U.S.

facilities and remained profitable, despite a softening of customer demand in the Company’s Mexico-based facilities.

As previously announced, the large program with a leading power equipment company is now expected to resume materially in fiscal 2025 rather than 2024, with a redesigned product.

As new customer programs ramp, the concentration of our top three customers’ net sales increased to 29.9 percent of total sales in the first quarter of fiscal year 2024 from 25.4 percent in the same period of the prior fiscal year.

For the second quarter of fiscal year 2024, the Company reported total revenue of $145.4 million, up 17.5 percent from $123.7 million in the same period of fiscal year 2023.

The Revenue growth for the second quarter of fiscal year 2024 was driven by increased production at the Company’s US-based and Vietnam-based facilities, as well as by the sale of approximately $8.1 million of inventory from a discontinued program.

As new customer programs ramp the concentration of our top three customers’ net sales increased to 37.5 percent of total sales in the second quarter of fiscal year 2024 from 27.7 percent in the same period of the prior fiscal year.

We expect that concentration to our top three customers will decrease during the fiscal year.

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In addition, our capacity and core competencies for printed circuit board assemblies, precision molding, sheet metal fabrication, tool making, assembly, and engineering can be applied to a wide variety of products.

Gross profit as a percent of net sales was 7.4 percent for the first quarter of fiscal year 2024 as compared to 7.6 percent for the same quarter of the prior fiscal year.

During the first quarter of fiscal year 2024, the results were impacted by unanticipated severance costs of $0.6 million, as the Company reduced its workforce by over 100 employees in Mexico and the U.S.

which adversely impacted gross profit.

Gross margin was also adversely impacted by the strength of the Mexican Peso, although the Mexican Peso has weakened during the second quarter.

Operating income as a percentage of net sales was 2.2 percent for the first quarter of fiscal year 2024 compared to 2.4 percent of operating income as a percentage of net sales for the first quarter of fiscal year 2023.

The decrease in operating income as a percentage of net sales was primarily driven by unanticipated severance costs and the strength of the Mexican Peso.

Net income for the first quarter of fiscal year 2024 was $0.3 million or $0.03 per diluted share, as compared to net income of $1.2 million or $0.11 per diluted share for the first quarter of fiscal year 2023.

The year-over-year decline in earnings was primarily a result of a $1.1 million increase in interest expense on higher interest rates.

Earnings were also adversely impacted by an unanticipated severance costs of $0.6 million, or approximately $0.04 to $0.05 per diluted share.

The workforce reduction reflects softening demand for a number of different programs and is expected to reduce operating expenses by more than $5 million annually.

During the first quarter of fiscal year 2024, we won new programs involving security equipment, sporting and outdoor products, environmental solutions, and industrial control systems.

Moving into the second quarter of fiscal year 2024, global logistics problems, the war in Europe, and China-US geopolitical tensions continue to drive OEM’s to examine their traditional outsourcing strategies.

Gross profit as a percent of net sales was 8.1 percent for the second quarter of fiscal year 2024 as compared to 7.2 percent for the same quarter of the prior fiscal year.

During the second quarter of fiscal year 2024, the results were favorably impacted by a temporary holiday closure of our Juarez production facility, partially offset by increased costs associated to ramping up new programs, sales of obsolete inventory and increased labor costs.

Operating income as a percentage of net sales was 2.7 percent for the second quarter of fiscal year 2024 compared to 2.9 percent of operating income as a percentage of net sales for the second quarter of fiscal year 2023.

The decrease in operating income as a percentage of net sales was primarily driven by the non recurring reported gain on insurance claim that occurred in the prior year quarter.

Net income for the second quarter of fiscal year 2024 was $1.1 million or $0.10 per diluted share, as compared to net income of $1.0 million or $0.09 per diluted share for the second quarter of fiscal year 2023.

The year-over-year increase in earnings was primarily a result of the $0.1 million income tax benefit.

During the second quarter of fiscal year 2024, we won new programs involving security equipment, aerospace and defense technology, and smart medication dosing devices, among various other programs.

Moving into the third quarter of fiscal year 2024, while we continue to see favorable trend of contract manufacturing returning to North America, the strength of the Mexican peso and continued wage increases in Mexican wages, particularly along the US-Mexico border, have reduced the competitive advantage of Mexico-based manufacturing compared to US-based manufacturing.

In response to this sustained trend, we are currently reducing our workforce in Mexico and will incur $1.0 million to $2.5 million of severance in the third quarter.

We currently expect the payback period for these severance costs to be less than six months, and our US and Vietnam facilities to contribute a growing portion of our revenue in coming periods.

Global logistics problems, the war in Europe, and China-US geopolitical tensions continue to drive OEMs to examine their traditional outsourcing strategies.

We believe these customers increasingly realize they have become overly dependent on their China-based contract manufacturers not only for products, but also for design and logistics services.

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At the same time, these price reductions are offset by increasing wages at our North American facilities.

In our second quarter of fiscal 2024, the Company is beginning to see the Peso weaken to the US dollar which may translate into improving conditions moving forward.

We maintain a strong balance sheet with a current ratio of 2.5 and a debt-to-equity ratio of 0.9 as of September 30, 2023.

Total cash provided by operating activities as defined on our cash flow statement was $5.6 million for the three months ended September 30, 2023, the Company focuses on inventory reductions and other working capital improvements.

We believe we maintain sufficient liquidity for our expected future operations and had $110.5 million in borrowings on our revolving credit facility and $9.5 million remained available at September 30, 2023.

In the third quarter of fiscal 2024, the Company sees the Peso weakening to the US dollar which may translate into improving conditions moving forward.

We maintain a strong balance sheet with a current ratio of 2.6 and a debt-to-equity ratio of 0.91 as of December 30, 2023.

Total cash provided by operating activities as defined on our cash flow statement was $9.1 million for the six months ended December 30, 2023.

We maintain sufficient liquidity for our expected future operations and had $105.6 million in borrowings on our revolving credit facility with $14.4 million remained available and 3.9 million in borrowings on our line of credit facility with $2.0 million remained available as of December 30, 2023.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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RESULTS OF OPERATIONS

Comparison of the Three Months Ended September 30, 2023 with the Three Months Ended October 1, 2022

Comparison of the Three Months Ended December 30, 2023 with the Three Months Ended December 31, 2022

The financial information and discussion below should be read in conjunction with the Consolidated Financial Statements and Notes.

The following table sets forth certain information regarding the components of our condensed consolidated statements of income for the three months ended September 30, 2023 as compared to the three months ended October 1, 2022.

The following table sets forth certain information regarding the components of our condensed consolidated statements of income for the three months ended December 30, 2023 as compared to the three months ended December 31, 2022.

It is provided to assist in assessing differences in our overall performance (in thousands):

Three Months Ended

September 30, 2023 % of

net sales October 1, 2022 % of

December 30, 2023 % of

net sales December 31, 2022 % of

net sales $ change % point

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Income before income taxes 987 0.7 % 1,101 0.9 % (114) (0.2) %

Income tax provision (benefit) (97) (0.1) % 134 0.1 % (231) (0.2) %

Net income $ 1,084 0.7 % $ 967 0.8 % $ 117 (0.1) %

Net sales of $145.4 million for the second quarter of fiscal year 2024 increased by 17.5 percent as compared to net sales of $123.7 million for the second quarter of fiscal year 2023.

The $21.7 million increase in net sales from the prior year period was primarily due to the successful ramp of new customer programs and increased component sales for a large customer.

However, the Company’s revenue was constrained by tightening worldwide supply chain and transportation and logistics issues.

Gross profit as a percentage of net sales for the three months ended December 30, 2023 was 8.1 percent compared to 7.2 percent for the three months ended December 31, 2022.

Gross profits percentages was favorably impacted by a temporary holiday closure of our Juarez production facility, partially offset by increased costs associated to ramping up new programs, sales of obsolete inventory and increased labor costs.

The level of gross margin is impacted by facility utilization, product mix, timing, severity and steepness of new program ramps, pricing within the electronics industry and material costs, which can fluctuate significantly from quarter to quarter.

Included in gross profit are charges related to reductions in the carrying value of our inventory due to obsolescence.

We did not record any impairment for obsolete inventory during the three months ended December 30, 2023.

Approximately $175,000 of an impairment for obsolete inventory was recorded during the three months ended December 31, 2022.

We adjust the carrying value for estimated obsolescence as necessary in an amount equal to the difference between the cost of inventory and its net realizable value based on assumptions as to future demand and market conditions.

The provisions are established for inventory that we have determined customers are not contractually responsible for and for inventory that we believe customers will be unable to purchase.

Operating Expenses

There were no significant changes to operating expenses during the presented quarters.

Total research, development, and engineering (RD&E) expenses were $1.8 million during the three months ended December 30, 2023 and $2.3 million during the three months ended December 31, 2022, respectively.

Total RD&E expenses as a percent of net sales were 1.2 percent during the three months ended December 30, 2023 and 1.8 percent during the three months ended December 31, 2022.

Total selling, general and administrative (SG&A) expenses were $6.1 million during the three months ended December 30, 2023 compared to $5.7 million for the three months ended December 31, 2022.

Total SG&A expenses as a percentage of net sales were 4.2 percent for the three months ended December 30, 2023 and 4.6 percent for the three months ended December 31, 2022.

Interest expense was $3.0 million during the three months ended December 30, 2023 and $2.5 million during the three months ended December 31, 2022.

The increase in interest expense is primarily related to increased interest rates and an increase in the average balance outstanding on our line of credit.

The effective tax rate for the three months ended December 30, 2023 was (9.8) percent compared to 12.2 percent for the three months ended December 31, 2022.

The decrease was primarily due to federal research and development tax credits constituting a higher percentage of income before taxes and the impact of fluctuations in foreign exchange rates.

For further information on taxes see Note 5 of the “Notes to Consolidated Financial Statements.”

Our judgments regarding deferred tax assets and liabilities may change due to changes in market conditions, changes in estimates, changes in tax laws or other factors.

If assumptions and estimates change in the future the deferred tax assets and liability will be adjusted accordingly and any increase or decrease will result in an additional deferred income tax expense or benefit in subsequent periods.

Comparison of the Six Months Ended December 30, 2023 with the Six Months Ended December 31, 2022

The financial information and discussion below should be read in conjunction with the Consolidated Financial Statements and Notes.

The following table sets forth certain information regarding the components of our condensed consolidated statements of income for the six months ended December 30, 2023 as compared to the six months ended December 31, 2022.

It is provided to assist in assessing differences in our overall performance (in thousands):

Six Months Ended

December 30, 2023 % of

net sales December 31, 2022 % of

net sales $ change % point

Net sales $ 293,180 100.0 % $ 260,971 100.0 % $ 32,209 — %

Cost of sales 270,555 92.3 % 241,672 92.6 % 28,883 (0.3) %

Gross profit 22,625 7.7 % 19,299 7.4 % 3,326 0.3 %

Research, development and engineering 3,999 1.4 % 4,583 1.8 % (584) (0.4) %

Selling, general and administrative 11,841 4.0 % 11,391 4.4 % 450 (0.4) %

Gain on insurance proceeds, net of losses (431) (0.1) % (3,644) (1.4) % 3,213 1.3 %

Total operating expenses 15,409 5.3 % 12,330 4.8 % 3,079 0.5 %

Operating income 7,216 2.5 % 6,969 2.7 % 247 (0.2) %

Interest expense, net 5,972 2.0 % 4,394 1.7 % 1,578 0.3 %

Income before income taxes 1,244 0.4 % 2,575 1.0 % (1,331) (0.6) %

Income tax provision (175) (0.1) % 456 0.2 % (631) (0.3) %

Net income $ 1,419 0.5 % $ 2,119 0.8 % $ (700) (0.3) %

Net sales of $147.8 million for the first quarter of fiscal year 2024 increased by 7.6 percent as compared to net sales of $137.3 million for the first quarter of fiscal year 2024.

Net sales of $293.2 million for the six months ended December 30, 2023 increased by 12.3 percent as compared to net sales of $261.0 million for the six months ended December 31, 2022.

The $32.2 million increase in net sales from the prior year period was primarily due to the successful ramp of new customer programs and increased component sales for a large customer.

However, the Company’s revenue was constrained by tightening worldwide supply chain and transportation and logistics issues.

Gross profit as a percentage of net sales for the three months ended September 30, 2023 was 7.4 percent compared to 7.6 percent for the three months ended October 1, 2022.

This 0.2 percentage point decrease was primarily a result of unanticipated severance costs related to a reduction of the Company’s workforce in Mexico and the United States.

Gross profit as a percentage of net sales for the six months ended December 30, 2023 was 7.7 percent compared to 7.4 percent for the six months ended December 31, 2022.

This 0.3 percent increase was primarily a result of the temporary closure of our Juarez production facility, partially offset by increased costs associated to ramping up new programs, sales of obsolete inventory and increased labor costs.

Included in gross profit are charges related to reductions in the carrying value of our inventory due to obsolescence.

We recorded an impairment of approximately $265,000 and $175,000 for obsolete inventory during the three months ended September 30, 2023 and October 1, 2022, respectively.

We recorded an impairment of approximately $2,000 and $355,000 for obsolete inventory during the six months ended December 30, 2023 and December 31, 2022, respectively.

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Operating Expenses

There were no significant changes to operating expenses during the presented quarters, other than the gain on insurance proceeds of $0.4 million recorded in the first quarter of fiscal year 2024.

Total research, development, and engineering (RD&E) expenses were $2.2 million during the three months ended September 30, 2023 and $2.3 million during the three months ended October 1, 2022, respectively.

Total RD&E expenses as a percent of net sales were 1.5 percent during the three months ended September 30, 2023 and 1.7 percent during the three months ended October 1, 2022.

Total selling, general, and administrative (SG&A) expenses were $5.8 million during the three months ended September 30, 2023 compared to $5.7 million for the three months ended October 1, 2022.

Total SG&A expenses as a percentage of net sales were 3.9 percent for the three months ended September 30, 2023 and 4.1 percent for the three months ended October 1, 2022.

Interest expense was $3.0 million during the three months ended September 30, 2023 and $1.9 million during the three months ended October 1, 2022.

Total research, development, and engineering (RD&E) expenses were $4.0 million during the six months ended December 30, 2023 and $4.6 million during the six months ended December 31, 2022, respectively.

Total RD&E expenses as a percent of net sales were 1.4 percent during the six months ended December 30, 2023 and 1.8 percent during the six months ended December 31, 2022.

Total selling, general and administrative (SG&A) expenses were $11.8 million during the six months ended December 30, 2023 compared to $11.4 million for the six months ended December 31, 2022.

Total SG&A expenses as a percentage of net sales were 4.0 percent for the six months ended December 30, 2023 and 4.4 percent for the six months ended December 30, 2023.

Interest expense was $6.0 million during the six months ended December 30, 2023 and $4.4 million during the six months ended December 31, 2022.

The increase in interest expense is primarily related to increased interest rates and an increase in the average balance outstanding on our line of credit.

The effective tax rate for the three months ended September 30, 2023 was (30.4) percent compared to 21.8 percent for the three months ended October 1, 2022.

The decrease is primarily due to the impact of discrete foreign exchange benefits and the relatively low amount of income before income taxes for the three months ended September 30, 2023.

The effective tax rate for the six months ended December 30, 2023 was (14.1) percent compared to 17.7 percent for the six months ended December 31, 2022.

The decrease was primarily due to federal research and development tax credits constituting a higher percentage of income before taxes and the impact of fluctuations in foreign exchange rates.

For further information on taxes see Note 5 of the “Notes to Consolidated Financial Statements.”

Our judgments regarding deferred tax assets and liabilities may change due to changes in market conditions, changes in estimates, changes in tax laws or other factors.

On September 30, 2023, we had an order backlog of approximately $319.8 million.

This compares with a backlog of approximately $380.0 million on October 1, 2022.

On December 30, 2023, we had an order backlog of approximately $264.1 million.

This compares with a backlog of approximately $404.0 million on December 31, 2022.

The decrease in order backlog is related to some softening on demand for a number of our Mexico-based programs, partially offset by an increase in demand for our U.S.

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Operating Cash Flow

Net cash provided by operating activities for the three months ended September 30, 2023 was $5.6 million, compared to net cash used in operating activities of $5.8 million during the same period of the prior fiscal year.

The $5.6 million of net cash provided by operating activities for the three months ended September 30, 2023 is primarily related to $0.3 million in net income adjust for 2.8 million of depreciation and amortization, a $9.2 million decrease in accounts receivable, a $10.9 million decrease in inventory, partially off set by a $1.5 million decrease in accrued compensation and vacation, a $14.3 million decrease in accounts payable, a $1.0 million decrease in other liabilities and a $3.0 million increase in contract assets.

The $5.8 million of net cash used in operating activities for the three months ended October 1, 2022 is primarily related to $1.2 million in net income for the period adjusted for $2.4 million of depreciation and amortization, a $4.4 million increase in contract assets, a $1.8 million increase in accounts receivable, a $13.7 million increase in inventory, a $2.8 million decrease in accrued compensation and vacation partially offset by a $12.7 million increase in accounts payable.

Net cash provided by operating activities for the six months ended December 30, 2023 was $9.1 million.

Net cash used by operating activities was $10.0 million during the same period of the prior fiscal year.

The $9.1 million of net cash provided by operating activities for the six months ended December 30, 2023 is primarily related to $1.4 million in net income for the period adjusted for $5.5 million of depreciation and amortization, a $15.7 million decrease

in accounts receivable, a $13.8 million decrease in inventory, a $7.7 million decrease in accrued compensation and vacation, a $0.4 million decrease in other assets, partially offset by a $24.5 million decrease in accounts payable, a $0.5 million decrease in other liabilities and a $2.2 million decrease in contract assets.

The $10.0 million of net cash used in operating activities for the six months ended December 31, 2022 is primarily related to $2.1 million in net income for the period adjusted for $4.7 million of depreciation and amortization, a $1.6 million decrease in accounts receivable, a $16.4 million increase in inventory, a $4.0 million decrease in accrued compensation and vacation, a $0.7 million decrease in other assets, partially offset by a $19.3 million increase in accounts payable, and a $6.4 million increase in contract assets.

Accounts receivable fluctuates based on the timing of shipments, terms offered and collections that occurred during the quarter.

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Investing Cash Flow

Cash provided by investing activities was $1.7 million during the three months ended September 30, 2023 as compared to cash used in investing activities of $2.5 million during the three months ended October 1, 2022.

Our primary investing activity during the three months ended September 30, 2023 and October 1, 2022, was purchasing equipment to support increased production levels for new programs.

The Company also received $2.2 million related to insurance proceeds as a result of previously disclosed storm damage to the Company’s Arkansas facility.

Cash used in investing activities was $0.4 million during the six months ended December 30, 2023 as compared to $0.4 million during the six months ended December 31, 2022.

Our primary investing activity during the six months ended December 30, 2023 and December 31, 2022, was purchasing equipment to support increased production levels for new programs.

Leases are often utilized when potential technical obsolescence and funding requirement advantages outweigh the benefits of equipment ownership.

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Financing Cash Flow

Cash used in financing activities was $7.4 million during the three months ended September 30, 2023 as compared to cash provided by financing activities of $8.8 million in the same period of the previous fiscal year.

Our primary financing activities during the three months ended September 30, 2023 and October 1, 2022, were borrowings and repayments under our revolving line of credit facility and term loans.

As of September 30, 2023, approximately $9.5 million was available under the asset-based revolving credit facility.

Cash used in financing activities was $9.4 million during the six months ended December 30, 2023 as compared to $9.5 million provided by financing activities in the same period of the previous fiscal year.

Our primary financing activities during the six months ended December 30, 2023 and six months ended December 31, 2022, were borrowings and repayments under our revolving line of credit facility and term loans.

As of December 30, 2023, approximately $14.4 million was available under the asset-based revolving credit facility and $2.0 million was available under asset-based line of credit facility.

Our cash requirements are affected by the level of current operations and new programs.

We believe that projected cash from operations, funds available under the revolving credit facility and leasing capabilities will be sufficient to meet our working and fixed capital requirements for the foreseeable future.

We believe that projected cash from operations, funds available under the revolving credit facility and Banorte line of credit, and leasing capabilities will be sufficient to meet our working and fixed capital requirements for the foreseeable future.

The Company further notes projected cash from operations from increased demand from certain customers will be partially offset by an anticipated slowdown in collections from other customers and increasing inventory levels in efforts to mitigate supply chain constraint risks.

As of September 30, 2023, we had approximately $3.6 million of cash held by foreign subsidiaries.

As of December 30, 2023, we had approximately $2.9 million of cash held by foreign subsidiaries.

If cash is to be repatriated in the future from these foreign subsidiaries, the Company would be subject to certain withholding taxes in the foreign jurisdictions.

The total amount of tax payments required for the amount of foreign subsidiary cash on hand as of September 30, 2023 would approximate $56,000.

The total amount of tax payments required for the amount of foreign subsidiary cash on hand as of December 30, 2023 would approximate $59,000.

We have accrued withholding taxes for expected future repatriation of foreign earnings as discussed in Note 5 of the “Notes to Consolidated Financial Statements.”

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• 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);

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• 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 local mandates for medical, climate, and unforeseen emergencies.

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

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

In the event that such tax incentives are not extended, are repealed, or we no longer qualify for such programs, our taxes may increase, which would reduce our net income.

Additionally, certain foreign jurisdictions restrict the amount of cash that can be transferred to the U.S or impose taxes and penalties on such transfers of cash.

Additionally, certain foreign jurisdictions restrict the amount of cash that can be transferred to the U.S.

or impose taxes and penalties on such transfers of cash.

To the extent we have excess cash in foreign locations that could be used in, or is needed by, our operations in the United States, we may incur significant penalties and/or taxes to repatriate these funds.

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

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

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.

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

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

Adverse macroeconomic conditions as 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.

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In addition, our suppliers' facilities may also experience earthquakes, tsunamis and other natural disasters which may cause a shortage of components.

This can result in longer lead times and the inability to meet our customers request for flexible production and extended

shipment dates.

This can result in longer lead times and the inability to meet our customers request for flexible production and extended shipment dates.

If demand for components outpaces supply, capacity delays could affect future operations.

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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 may use Mexican peso forward contracts to hedge future foreign currency fluctuations for a portion of our Mexican peso denominated expenses.

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.

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.

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

Global economic and political events, including as a result of COVID-19, 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.

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We have not historically hedged the interest rate on our credit facility;

therefore, unless we do so, significant changes in interest rates could adversely affect our

results of operations.

therefore, unless we do so, significant changes in interest rates could adversely affect our results of operations.

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

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In addition, holders of our common stock will suffer immediate dilution to the extent outstanding equity awards are exercised to purchase common stock.

RISKS RELATED TO OUR CONTROLS AND PROCEDURES

RISKS RELATED TO OUR CONTROLS AND PROCEDURES AND THE INTERNAL INVESTIGATION

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.

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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 2. Management’s Discussion and Analysis