What changed in this filing

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Item 1A. Risk Factors

2022-03-11 compared with 2021-03-15 · 83 added, 36 removed, 219 unchanged (35% of the section changed)

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Risks Related to Our Operations

The COVID-19 pandemic and mitigation efforts to control the spread of the disease have and are expected to continue to materially impact our business, and our financial condition, results of operations and cash flows could be materially adversely affected by factors relating to COVID-19.

The COVID-19 pandemic has created significant volatility in the global economy and led to significant reduced market and economic activity and employment and has disrupted, and may continue to disrupt, the end markets we serve.

The spread of COVID-19 has created a disruption in the manufacturing, delivery and overall supply chain of automobile manufacturers and suppliers.

Global vehicle production has decreased, and as a result, we have modified our production schedules and have experienced, and may continue to experience, delays in the production and distribution of our products and the loss of sales to our customers.

During the pandemic, our production volumes may be volatile, and we will be required to modify our production environment to ensure the health and safety of our workers.

Additionally, if the global economic effects caused by the pandemic continue or increase, overall customer demand may continue to decrease, which could have a material and adverse effect on our business, results of operations, and financial condition.

COVID-19 vaccines have received emergency use authorization from the United States government, but vaccine distribution has been slower than public officials hoped.

Many jurisdictions continue to enforce orders restricting businesses’ normal operations, and reinstatement of broader “stay-at-home” directives and mandates remains a possibility.

Additionally, the federal emergency supplemental unemployment benefit is scheduled to expire in March 2021.

In addition, if a significant portion of our workforce or our customers’ workforces are affected by COVID-19 either directly or due to government closures or otherwise, associated work stoppages or facility closures would halt or delay production.

The full extent of the future effects of the pandemic on us, our customers, our supply chain, and our business cannot be assessed at this time, although we expect our 2021 results of operations are likely to be adversely affected.

Our business, results of operations and financial condition could continue to be affected even after the pandemic subsides.

In addition to the risks specifically described above, the impact of COVID-19 is likely to heighten other risks disclosed below.

The COVID-19 pandemic and mitigation efforts to control the spread of the disease have impacted, and are expected to continue to materially impact, our business and our financial condition, results of operations and cash flows could be materially adversely affected by factors directly or indirectly relating to the COVID-19 pandemic.

The COVID-19 pandemic has created significant volatility in the global economy, led to significant reduced market and economic activity, and disrupted, and may continue to disrupt, the end markets we serve.

In response, various governmental bodies and private enterprises implemented numerous measures to contain the pandemic, such as travel bans and restrictions, quarantines, “shelter-in-place” orders and shutdowns.

While many of the restrictions have eased across the globe, some areas have re-imposed closures and other restrictions due to increased rates of COVID-19 cases.

No assurance can be given that these new closures and restrictions will not continue to occur.

New and more easily transmitted variants of COVID-19, such as the Delta and Omicron variants, have emerged and spread in the U.S.

and across the globe.

The impact of these variants cannot be predicted at this time and could depend on numerous factors, including vaccination rates among the population, the efficacy of COVID-19 vaccines against the new variants, and the response by governmental bodies and regulators.

Further surges in COVID-19 infection rates could result in the reinstatement of directives and mandates requiring businesses to again curtail or cease normal operations.

The COVID-19 pandemic and the responses by governmental bodies and regulators thereto have created a disruption in our manufacturing, product distribution, overall supply chain, and other business activities, and that of our customers, suppliers, co-manufacturers, and distributors.

A significant number of our customers, suppliers, co-manufacturers, distributors, and manufacturing facilities are located in regions that have been affected by the pandemic and those operations have been, and may continue to be, materially affected by restrictive measures implemented in response to the pandemic.

As a result we have experienced, and may continue to experience, delays in the production and distribution of our products and the loss of sales to our customers.

Any delay or shortage in the supply of raw materials or delay in the manufacturing or distribution of our products may result in our inability to satisfy customer demand in a timely manner or at all, which could result in the loss of a portion of or all of the customer’s business and damage our reputation.

Additionally, if the global economic effects caused by

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the COVID-19 pandemic continue or increase, overall customer demand may continue to decrease, which could have a material and adverse effect on our business, results of operations, and financial condition.

Further, the COVID-19 pandemic could adversely impact our ability, and the ability of our suppliers, co-manufacturers, distributors, and customers, to retain key employees and ensure the continued service and availability of skilled personnel necessary to run our, and their, operations.

To the extent our management or other personnel, or the management or other personnel of our suppliers, co-manufacturers, distributors, and customers, are impacted in significant numbers by the pandemic and are not available to perform their job duties, we could experience delays in, or the suspension of, our manufacturing operations, distribution of our products, and other important corporate functions.

The ongoing COVID-19 pandemic and the current volatility in the global economy, reduced market and economic activity, and disruptions in the end markets we serve present material risks and uncertainties for us.

The extent of the impact that the COVID-19 pandemic will have on our business, results of operations, and financial condition will depend largely on future developments relating to the duration and scope of the COVID-19 pandemic, including the continued emergence, persistence, severity and transmissibility of variants of the virus, the efficacy of vaccines, the pace at which governmental restrictions are eased or lifted, and the implementation of new or additional mitigation efforts by governmental authorities to control the spread of the disease, such as “stay-at-home” orders, business closures, and vaccine mandates.

To the extent the COVID-19 pandemic adversely affects our business, financial condition, results of operation, and cash flows, it may also have the effect of heightening other risks disclosed below.

In addition, if in the future there is an outbreak of another highly infectious or contagious disease or similar public health crisis, we would be subject to similar risks as posed by the COVID-19 pandemic.

We depend heavily on a relatively limited number of customers, and the loss of any major customer would have a material adverse effect on our business.

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Also, if one or more of our customers were to experience a work stoppage, that customer would likely halt or limit purchases of our products.

For example, increased demand for semiconductor chips in 2020, due in part to the COVID-19 pandemic and an increased use of laptop computers, 5G phones, gaming systems and other IT equipment that use these chips, has resulted in a severe shortage of chips in early 2021.

These same chips are used in automobiles in a variety of parts and information and entertainment systems.

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We obtain a majority of our raw materials from overseas suppliers, actively participate in overseas manufacturing operations and sell to a large number of international customers.

During the year ended December 31, 2020, sales to customers located

outside of the U.S.

During the year ended December 31, 2021, sales to customers located outside of the U.S.

accounted for approximately 39% of our consolidated net sales.

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• changes in tariff regulations, which may make our products more costly to export or import;

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• changes in monetary and fiscal policies, laws and regulations, and other activities of governments, agencies and similar organizations;

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If we are found to be liable for FCPA, export control or sanction violations, we could suffer from criminal or civil penalties or other sanctions, including loss of export privileges or authorization needed to conduct aspects of our international business, which could have a material adverse effect on our business, prospects, financial condition, results of operations, or cash flows.

In addition, the prices we pay for raw materials used in our products may be impacted by tariffs.

The prices we pay for raw materials used in our products may be impacted by tariffs.

The tariffs initiated by the U.S.

government in 2018 under Section 232 of the Trade Expansion Act of 1962 resulted in increased metals prices in the United States.

Any future tariffs or quotas imposed on steel and aluminum imports may increase the price of metal, which could have a material adverse effect on our business, prospects, financial condition, results of operations, or cash flows.

We cannot predict whether, and to what extent, there may be changes to international trade agreements or whether quotas, duties, tariffs, exchange controls or other restrictions on our products will be changed or imposed.

In addition, an open conflict or war across any region could affect our ability to obtain raw materials.

The current military conflict between Russia and Ukraine, and related sanctions, export controls or other actions that may be initiated by nations could adversely affect our business and our supply chain or our business partners or customers in other countries.

Although we currently do not source raw materials directly from Russia or Ukraine, if we are unable to source our products from the countries where we wish to purchase them, either because of the occurrence or threat of wars or other conflicts, regulatory changes or for any other reason, or if the cost of doing so increases, it could have a material adverse effect on our business, financial condition and results of operations.

Disruptions in the supply of raw materials and components could temporarily impair our ability to manufacture our products for our customers or require us to pay higher prices to obtain these raw materials or components from other sources, which could have a material adverse effect on our business and our results of operations.

Failure of our products could result in a product recall.

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In many cases we face pressure from our customers to reduce prices, which could adversely affect our business, prospects, financial condition, results of operations, or cash flows.

In addition, our customers may choose to purchase products from one of our competitors rather than pay the prices we seek for our products, which could adversely affect our business, prospects, financial condition, results of operations, or cash flows.

In addition, our customers may choose to purchase products from one of our competitors rather

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than pay the prices we seek for our products, which could adversely affect our business, prospects, financial condition, results of operations, or cash flows.

Any loss of key personnel and the inability to attract and retain qualified employees could have a material adverse impact on our operations.

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If we are unable to attract and retain qualified individuals or our costs to do so increase significantly, our operations would be materially adversely affected.

Any breach or security failure of our information technology systems could materially adversely affect our business, financial condition, results of operations, and reputation.

We rely on proprietary and third-party information technology systems to process, transmit and store information and to manage or support our business processes.

We store and maintain confidential financial and business information regarding us and persons with whom we do business on our information technology systems.

We also collect and hold personally identifiable information of our employees in connection with their employment.

In addition, we engage third-party service providers that may collect and hold personally identifiable information of our employees in connection with providing business services to us, including web hosting, accounting, payroll and benefit services.

The protection of the information technology systems on which we rely is critically important to us.

We take steps, and generally require third-party service providers to take steps, to protect the security of the information maintained in our and our service providers’ information technology systems, including the use of systems, software, tools, and monitoring to provide security for processing, transmitting, and storing of the information.

However, we face risks associated with breaches or security failures of the information technology systems on which we rely, which could result from, among other incidents, cyber-attacks or cyber-intrusions over the internet, malware, computer viruses, or employee error or misconduct.

This risk of a data breach or security failure, particularly through cyber-attacks or cyber-intrusion, has generally increased due to the rise in new technologies and the increased sophistication and activities of the perpetrators of attempted attacks and intrusions.

The security measures put in place by us and our service providers cannot provide absolute security and there can be no assurance that we or our service providers will not suffer a data security incident in the future, that unauthorized parties will not gain access to sensitive information stored on our or our service providers’ systems, that such access will not, whether temporarily or permanently, impact, interfere with, or interrupt our operations, or that any such incident will be discovered in a timely manner.

Even the most well-protected information, networks, systems, and facilities remain potentially vulnerable as the techniques used in such attempted security breaches evolve and generally are not recognized until launched against a target, and in some cases are designed to not be detected and, in fact, may not be detected.

In addition, third-party information technology providers may not provide us with fixes or updates to hardware or software in a manner as to avoid an unauthorized loss or disclosure or to address a known vulnerability, which may subject us to known threats or downtime as a result of those delays.

Accordingly, we and our service providers may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures.

Further, we may be required to expend significant additional resources to continue to enhance information security measures and internal processes and procedures or to investigate and remediate any information security vulnerabilities.

A data security incident could compromise our or our service providers’ information technology systems, and the information stored by us or our service providers, including personally identifiable information of employees, could be accessed, misused, publicly disclosed, corrupted, lost, or stolen.

Any failure to prevent a data breach or a security failure of our or our service providers’ information technology systems could interrupt our operations, result in downtime, divert our planned efforts and resources from other projects, damage our reputation and brand, damage our competitive position, subject us to liability claims or regulatory penalties, and could materially and adversely affect our business, financial condition, or results of operations.

Similarly, if our service providers fail to use adequate security or data protection processes, or use personal data in an unpermitted or improper manner, we may be liable for certain losses and it may damage our reputation.

Physical effects of climate change or legal, regulatory or market measures intended to address climate change could materially adversely affect our business and operations.

Risks associated with climate change are subject to increasing societal, regulatory and political focus in the U.S.

and globally.

Shifts in weather patterns caused by climate change could increase the frequency, severity, or duration of certain adverse weather conditions and natural disasters, such as hurricanes, tornadoes, earthquakes, wildfires, droughts, extreme temperatures, or flooding, which could result in more significant business and supply chain interruptions, damage to our products and facilities as well as the infrastructure of our customers, reduced workforce availability, increased costs of raw materials and

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components, increased liabilities, and decreased revenues than what we have experienced in the past from such events.

In addition, increased public concern over climate change could result in new legal or regulatory requirements designed to mitigate the effects of climate change, which could include the adoption of more stringent environmental laws and regulations or stricter enforcement of existing laws and regulations.

Such developments could result in increased compliance costs and adverse impacts on raw material sourcing, manufacturing operations, and the distribution of our products, which could adversely affect our business and operations.

Risks Related to Legal and Regulatory Compliance

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The risks of substantial costs, liabilities, and limitations on our operations related to compliance with these laws and regulations are an inherent part of our business, and future conditions may develop, arise or be discovered that create substantial environmental compliance or remediation liabilities and costs.

Our business activities are subject to various laws and regulations relating to pollution control and protection of the environment.

These laws and regulations govern, among other things, discharges to air or water, the generation, storage, handling, and use of automotive hazardous materials, and the handling and disposal of hazardous waste generated at our facilities.

Under such laws and regulations, we are required to obtain permits from governmental authorities for some of our operations.

If we violate or fail to comply with these laws, regulations, or permits, we could be fined or otherwise sanctioned by regulators.

Under some environmental laws and regulations, we could also be held responsible for all the costs relating to any contamination at our past or present facilities and at third-party waste disposal sites.

We maintain a compliance program to assist in preventing and, if necessary, correcting environmental problems.

Compliance with environmental, health, and safety legislation and regulatory requirements may prove to be more limiting and costly than we anticipate.

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The FDA has also significantly increased the number of warning letters issued to companies.

If the FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical devices are ineffective or pose an unreasonable health risk, the FDA could ban such medical devices, detain or seize adulterated or misbranded medical devices, order a recall, repair, replacement or refund of such devices, refuse to grant pending pre-market approval applications or require certificates of foreign governments for exports, and/or require us to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health.

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health professionals and others that the devices present unreasonable risks of substantial harm to the public health.

The FDA may also impose operating restrictions on a company-wide basis, enjoin and/or restrain certain conduct resulting in violations of applicable law pertaining to medical devices, and assess civil or criminal penalties against our officers, employees, or us.

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Our indebtedness could adversely affect our business, prospects, financial condition, results of operations, or cash flows.

As of December 31, 2020, we had approximately $84.9 million of indebtedness outstanding and an additional $45.4 million of unused borrowing capacity under our debt agreements.

As of December 31, 2021, we had approximately $159.8 million of indebtedness outstanding and $36.0 million available for future borrowings under the ABL Facility.

Our debt obligations could have important consequences, including:

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• consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets;

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• alter our existing businesses;

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In addition, the covenants in our debt agreements require us to meet specified financial ratios and satisfy other financial condition tests.

Our ability to meet those financial ratios and tests will depend on our ongoing financial and operating

performance, which, in turn, will be subject to economic conditions and to financial, market, and competitive factors, many of which are beyond our control.

Our ability to meet those financial ratios and tests will depend on our ongoing financial and operating performance, which, in turn, will be subject to economic conditions and to financial, market, and competitive factors, many of which are beyond our control.

A breach of any of these covenants could result in a default under one or more of our debt agreements and permit our lenders to cease making loans to us under our credit facility (as defined below) or to accelerate the maturity date of the indebtedness incurred thereunder.

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In 2021, the U.S.

dollar strengthened against foreign currencies which unfavorably affected our revenue by $6.2 million.

In contrast, a weakening of the U.S.

dollar may beneficially affect our business, prospects, financial condition, results of operations, or cash flows.

dollar weakened against foreign currencies which favorably affected our revenue by $2.2 million.

In contrast, a strengthening of the U.S.

dollar may unfavorably affect our business, prospects, financial condition, results of operations, or cash flows.

The price of our common stock may be volatile.

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• loss of a major customer;

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• the declaration and payment of a dividend.

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These broad market fluctuations may adversely affect the trading price of our common stock.

due to the market capitalization of our stock, our stock tends to be more volatile than large capitalization stocks that comprise the Dow Jones Industrial Average or Standard and Poor’s 500 Index.

In addition, due to the market capitalization of our stock, our stock tends to be more volatile than large capitalization stocks that comprise the Dow Jones Industrial Average or Standard and Poor’s 500 Index.

Provisions in our charter documents and Delaware law may inhibit a takeover, which could adversely affect the value of our common stock.

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• the inability to implement effective internal controls, procedures, and policies for acquired businesses as required by the Sarbanes-Oxley Act of 2002 within the time periods prescribed thereby;

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• the exposure to potential unknown liabilities and unforeseen increased expenses or delays associated with acquired businesses;

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Our ability to attract and retain customers, suppliers, investors, and employees is impacted by our reputation.

Harm to our reputation can arise from various sources, including employee misconduct, security breaches, unethical behavior, litigation, or regulatory outcomes.

Harm to our reputation can arise from various sources, including employee misconduct, security breaches, unethical behavior, litigation, or

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regulatory outcomes.

The consequences of damage to our reputation include, among other things, increasing the number of litigation claims and the size of damages asserted or subjecting us to enforcement actions, fines, and penalties, all of which would cause us to incur significant defense related costs and expenses.

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tax laws could have a material adverse effect on our business, cash flow, results of operations, and financial condition.

tax laws and regulations, as well as the administrative interpretations of those laws and regulations, are constantly under review and may be changed at any time, possibly with retroactive effect.

No assurance can be given as to whether, when, or in what form changes to the U.S.

tax laws applicable to us may be enacted.

Changes in U.S.

tax laws, tax rulings, or interpretations of existing laws could materially affect our business, cash flow, results of operations, and financial condition.

In particular, on December 22, 2017, the U.S.

government enacted comprehensive Federal tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (the “U.S.

Tax Cuts and Jobs Act of 2017”).

Tax Cuts and Jobs Act of 2017 introduces significant changes to U.S.

income tax law that have a meaningful impact on our provision for income taxes.

Accounting for the income tax effects of the U.S.

Tax Cuts and Jobs Act of 2017 requires significant judgments and estimates in the interpretation and calculations of the provisions of the U.S.

Tax Cuts and Jobs Act of 2017.

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