What changed in this filing

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Item 1A. Risk Factors

2024-02-22 compared with 2023-02-22 · 194 added, 194 removed, 164 unchanged (70% of the section changed)

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These risks and uncertainties are not the only ones we face.

Additional risks and uncertainties not presently known to us or other factors not perceived by

us to present significant risks to our business at this time also may impair our business and results of operations.

If any of the stated risks actually occur, they could materially and adversely affect our business, financial condition or

operating results.

Additional risks and uncertainties not presently known to us or other factors not perceived by us

to present significant risks to our business at this time also may impair our business and results of operations.

If any of the stated risks actually occur, they could materially and adversely affect our business, financial condition or operating

Risks Related to Our Operations

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Our three largest individual customers accounted for approximately 59% of our consolidated net sales in 2023.

During 2022, O’Reilly, AutoZone and NAPA accounted for 27%, 17% and 15% of our consolidated net sales, respectively.

The loss of one

or more of these customers or, a significant reduction in purchases of our products from any one of them could have a materially adverse impact on our business, financial condition and results of operations.

In addition, any consolidation among

our key customers may further increase our customer concentration risk.

We do not typically enter into long-term agreements with any of our customers.

Instead, we enter into a number of purchase order commitments with our customers, based on their current or projected needs.

We have in the past, and may in the

future, lose customers or lose a particular product line of a customer due to the highly competitive conditions in the automotive aftermarket industry, including pricing pressures, consolidation of customers, customer initiatives to buy direct

from foreign suppliers and/or to pursue a private brand strategy, or other business considerations.

A decision by any significant customer, whether motivated by competitive conditions, financial difficulties or otherwise, to materially decrease

the amount of products purchased from us, to change their manner of doing business with us, or to stop doing business with us, including a decision to source products directly from a low cost region such as Asia, could have a material adverse

effect on our business, financial condition and results of operations.

Because our sales are concentrated, and the market in which we operate is very competitive, we are under ongoing pressure from our customers to offer lower prices, extend

payment terms, increase marketing allowances and other terms more favorable to these customers.

These customer demands have put continued pressure on our operating margins and profitability, resulted in periodic contract renegotiation to provide

more favorable prices and terms to these customers, and significantly increased our working capital needs.

During 2023, O’Reilly Auto Parts, AutoZone and NAPA accounted for 29%, 16% and 14% of our consolidated net sales, respectively.

loss of one or more of these customers or, a significant reduction in purchases of our products from any one of them could have a materially adverse impact on our business, financial condition and results of operations.

In addition, any

consolidation among our key customers may further increase our customer concentration risk.

In our automotive aftermarket business, we do not typically enter into long-term agreements with any of our customers.

Instead, we enter into a number of purchase order commitments with our aftermarket customers, based on their current or

projected needs.

We have in the past, and may in the future, lose customers or lose a particular product line of a customer due to the highly competitive conditions in the automotive aftermarket industry, including pricing pressures, consolidation

of customers, customer initiatives to buy direct from foreign suppliers and/or to pursue a private brand strategy, or other business considerations.

A decision by any significant customer, whether motivated by competitive conditions, financial

difficulties or otherwise, to materially decrease the amount of products purchased from us, to change their manner of doing business with us, or to stop doing business with us, including a decision to source products directly from a low cost region

such as Asia, could have a material adverse effect on our business, financial condition and results of operations.

Because our sales are concentrated, and the markets in which we operate are very competitive, we are under ongoing pressure from our

customers to offer lower prices, extend payment terms, increase marketing allowances and other terms more favorable to these customers.

These customer demands have put continued pressure on our operating margins and profitability, resulted in

periodic contract renegotiation to provide more favorable prices and terms to these customers, and significantly increased our working capital needs.

Our industry is highly competitive, and our success depends on our ability to compete with suppliers of automotive products, some of which may have substantially greater financial, marketing and other resources

The automotive industry is highly competitive, and our success depends on our ability to compete with domestic and international suppliers of automotive products.

In the Engine Management Segment, we compete with:

ACDelco, Aptiv Plc, Denso

Corporation, Continental AG, Hitachi, Ltd., Motorcraft, Robert Bosch GmbH, Visteon Corporation, NGK Spark Plug Co., Ltd., Dorman Products, Inc.

and several privately-owned companies primarily importing products from Asia.

In the Temperature

Control Segment, we compete with:

ACDelco, MAHLE GmbH, Denso Corporation, Motorcraft, Sanden International (U.S.A.), Inc., Continental AG, Dorman Products, Inc., and several privately-owned companies.

In addition, automobile manufacturers supply

many of the replacement parts we sell.

In the automotive aftermarket, we compete primarily with full-line suppliers,

short- or value-line suppliers, tier suppliers and service part operations of original equipment manufacturers, including car dealerships, and the direct import programs of certain retailers.

In the diverse non-aftermarket end markets we supply, we

compete primarily with global and regional tier suppliers of original equipment manufacturers.

Some of our competitors may have larger customer bases and significantly greater financial, technical and marketing resources than we do.

These factors may allow our competitors to:

These factors

may allow our competitors to:

respond more quickly than we can to new or emerging technologies and changes in customer requirements by devoting greater resources than we can to the development, promotion and sale of automotive products and services;

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We also cannot assure you that additional entrants will not enter the automotive industry or that companies in the industry will not consolidate.

Any such competitive pressures could cause us to lose market share or could result in significant price decreases and could have a material adverse effect upon our business, financial condition and results of operations.

such competitive pressures could cause us to lose market share or could result in significant price decreases and could have a material adverse effect upon our business, financial condition and results of operations.

There is substantial price competition in our industry, and our success and profitability will depend on our ability to maintain a competitive cost and price structure .

There is substantial price competition in our industry, and our success and profitability will depend on our ability to maintain a competitive cost and price structure.

This is the result of a number of industry trends, including the impact

of offshore suppliers in the marketplace (particularly in China) which do not have the same infrastructure costs as we do, the consolidated purchasing power of large customers, and actions taken by some of our competitors in an effort to ‘‘win

over’’ new business.

This is the result of a number of industry trends, including the impact of

offshore suppliers in the marketplace (particularly in China) which do not have the same infrastructure costs as we do, the consolidated purchasing power of large customers, and actions taken by some of our competitors in an effort to ‘‘win over’’

new business.

We have in the past reduced prices to remain competitive and may have to do so again in the future.

Price reductions have impacted our sales and profit margins and may do so in the future.

Our future profitability will

depend in part upon our ability to respond to changes in product and distribution channel mix, to continue to improve our manufacturing efficiencies, to generate cost reductions, including reductions in the cost of components purchased from

outside suppliers, to maintain a cost structure that will enable us to offer competitive prices, and to pass through higher distribution, raw materials and labor costs to our customers.

Our inability to maintain a competitive cost structure

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

Our future profitability will depend in

part upon our ability to respond to changes in product and distribution channel mix, to continue to improve our manufacturing efficiencies, to generate cost reductions, including reductions in the cost of components purchased from outside

suppliers, to maintain a cost structure that will enable us to offer competitive prices, and to pass through higher distribution, raw materials and labor costs to our customers.

Our inability to maintain a competitive cost structure could have a

material adverse effect on our business, financial condition and results of operations.

Our business is seasonal and is subject to substantial quarterly fluctuations, which impact our quarterly performance and working capital requirements .

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It is in these quarters that demand

for our products is typically the highest, specifically in the Temperature Control Segment of our business.

In addition to this seasonality, the demand for our Temperature Control products during the second and third quarters of the year may vary significantly with the summer weather and customer inventories, as evidenced by the strong customer

demand in 2022 fueled by the record heat across the country in 2022 and the replenishment of customer inventory levels after very warm summer conditions in 2021.

While the COVID-19 pandemic caused large shifts in sales demand between quarters in

2020, our business has returned to a more normalized pattern of seasonality and variability in demand of our Temperature Control products in 2022 and 2021.

As such, our working capital typically peaks near the end of the second quarter, as the

inventory build‑up of air conditioning products was converted to sales, and payments on the receivables associated with such sales were yet to be received.

During this period, our working capital requirements were funded by borrowing from our

revolving credit facility in our Credit Agreement.

for our temperature control products is typically the highest.

The demand for our temperature control products during the second and third quarters of the year may vary significantly with the summer weather and customer inventories.

As such, our working capital requirements typically peak near the end of

the second quarter, as the inventory build‑up of air conditioning products is converted to sales, and payments on the receivables associated with such sales have yet to be received.

These increased working capital requirements are funded by

borrowing from our revolving credit facility in our Credit Agreement.

Climate-related physical risks, such as changes to weather patterns and conditions may also impact the pattern of seasonality and variability in demand for our Temperature Control products discussed above, which may impact our quarterly

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Many of our products carry a warranty ranging from a 90-day limited warranty to a lifetime limited warranty, which generally covers defects in

materials or workmanship, failure to meet industry published specifications and/or the result of installation error.

In the event that there are material deficiencies or defects in the design and manufacture of our products and/or installation

error, the affected products may be subject to warranty returns and/or product recalls.

Although we maintain a comprehensive quality control program, we cannot give any assurance that our products will not suffer from defects or other

deficiencies or that we will not experience material warranty returns or product recalls in the future.

materials or workmanship, and conformance to agreed upon specifications.

In the event that our products fail to conform to these warranties, the affected products may be subject to warranty returns and/or product recalls.

Although we maintain a

comprehensive quality control program, we cannot give any assurance that our products will not suffer from defects or other deficiencies or that we will not experience material warranty returns or product recalls in the future.

We accrue for warranty returns as a percentage of sales, after giving consideration to recent historical returns.

While we believe that we make reasonable estimates for warranty returns in accordance with our revenue recognition policies,

actual returns may differ from our estimates.

We have in the past incurred, and may in the future incur, material losses and significant costs as a result of our customers returning products to us for warranty-related issues in excess of

anticipated amounts.

Deficiencies or defects in our products in the future may result in warranty returns and product recalls in excess of anticipated amounts and may have a material adverse effect on our business, financial condition and results

of operations.

While we believe that we make reasonable estimates for warranty returns in accordance with our revenue recognition policies, actual

returns may differ from our estimates.

We have in the past incurred, and may in the future incur, material losses and significant costs as a result of our customers returning products to us for warranty-related issues in excess of anticipated

Our profitability may be materially adversely affected as a result of overstock inventory related returns by our customers in excess of anticipated amounts .

We permit overstock returns of inventory that may be either new or non-defective or non-obsolete but that we believe we can re-sell.

Customers are generally limited to returning overstocked inventory according to a specified percentage of

their annual purchases from us.

In our automotive aftermarket business, we permit overstock returns of inventory that may be either new or non-defective or non-obsolete but that we believe we can re-sell.

Customers are generally limited to returning overstocked inventory

according to a specified percentage of their annual purchases from us.

In addition, a customer’s annual allowance cannot be carried forward to the upcoming year.

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In 1986, we acquired a brake business, which we subsequently sold in March 1998.

When we originally acquired this brake business, we assumed future liabilities relating to any alleged exposure to asbestos-containing products manufactured by

the seller of the acquired brake business.

When we originally acquired this brake business, we assumed future liabilities relating to any alleged exposure to asbestos-containing products manufactured by the

seller of the acquired brake business.

In accordance with the related purchase agreement, we agreed to assume the liabilities for all new claims filed after September 2001.

Our ultimate exposure will depend upon the number of claims filed

against us on or after September 2001, and the amounts paid for settlements, awards of asbestos-related damages, and defense of such claims.

We do not have insurance coverage for the indemnity and defense costs associated with the claims we

Our ultimate exposure will depend upon the number of claims filed against

us on or after September 2001, and the amounts paid for settlements, awards of asbestos-related damages, and defense of such claims.

We do not have insurance coverage for the indemnity and defense costs associated with the claims we face.

At December 31, 2023, 1,390 cases were outstanding for which we may be responsible for any related liabilities.

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period through 2065.

Future legal costs, which are expensed as incurred and reported in earnings (loss) from discontinued operations in the accompanying statement of operations, are estimated, according to the August 31, 2022 study, to range

from $53.2 million to $105.7 million for the period through 2065.

$53.1 million to $105.2 million for the period through 2065.

Given the uncertainties associated with projecting asbestos-related matters into the future and other factors outside our control, we cannot give any assurance that significant increases in the number of claims filed against us will not occur,

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In addition to asbestos-related claims, our product sales entail the risk of involvement in other product liability actions.

We maintain product liability insurance coverage, but we cannot give any assurance that current or future policy

limits will be sufficient to cover all possible liabilities.

Further, we can give no assurance that adequate product liability insurance will continue to be available to us in the future or that such insurance may be maintained at a reasonable

We maintain product liability insurance coverage, but we cannot give any assurance that current or future policy limits

will be sufficient to cover all possible liabilities.

Further, we can give no assurance that adequate product liability insurance will continue to be available to us in the future or that such insurance may be maintained at a reasonable cost to

In the event of a successful product liability claim against us, a lack or insufficiency of insurance coverage could have a material adverse effect on our business, financial condition and results of operations.

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these benefits within the time frames we currently expect.

Our ability to achieve any anticipated cost savings could be affected by a number of factors such as changes in the amount, timing and character of charges related to such initiatives,

or a substantial delay in the completion of such initiatives.

Our ability to achieve any anticipated cost savings could be affected by a number of factors such as changes in the amount, timing and character of charges related to such initiatives, or

a substantial delay in the completion of such initiatives.

Failure to achieve the benefits of our cost saving initiatives could have a material adverse effect on us.

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Severe weather, natural disasters and other disruptions could adversely impact our operations at our manufacturing and distribution facilities.

Severe weather conditions and natural disasters, such as hurricanes, tornados, earthquakes and floods, could damage our properties and effect our operations, particularly our major manufacturing and distribution operations at foreign

facilities in Canada, China, Mexico, Poland, Germany and Hungary and at our domestic facilities in Florida, Indiana, Kansas, South Carolina, Texas, Virginia, and Wisconsin.

Moreover, global climate change may cause these natural disasters to

occur more frequently and/or with more intense effects, which could prevent us from, or cause delays in our ability to, manufacture and deliver products to our customers, and/or cause us to incur additional costs.

In addition, our business and operations could be materially adversely affected in the event of other serious disruptions at these facilities due to fire, electrical blackouts, power losses, telecommunications failures, terrorist attack or

in Canada, China, Mexico, Poland, Germany and Hungary and at our domestic facilities in Florida, Indiana, Kansas, South Carolina, Texas, Virginia, and Wisconsin.

Moreover, global climate change may cause these natural disasters to occur more

frequently and/or with more intense effects, which could prevent us from, or cause delays in our ability to, manufacture and deliver products to our customers, and/or cause us to incur additional costs.

similar events.

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Disruptions in the supply of raw materials, manufactured components, or equipment could materially and adversely affect our operations and cause us to incur significant cost increases.

We source various types of raw materials, finished goods, equipment, and component parts from suppliers as part of a global supply chain, and we may be materially and adversely affected by the failure of those suppliers to perform as

Although we have had an adequate supply of purchased supplier raw materials, finished goods, equipment and component parts, disruptions in the global economy have impeded global supply chains, resulting in longer lead times and delays

in procuring component parts and raw materials, and inflationary cost increases in certain raw materials, labor and transportation.

In response to the global supply chain volatility and inflationary cost increases, we have taken, and continue to

take, several actions to mitigate the impact by working closely with our suppliers and customers to minimize any potential adverse impacts on our business, including initiating cost savings initiatives and the pass through of higher costs to our

customers, which began in the fourth quarter of 2021.

We expect these inflationary trends to continue for some time, and while we believe that we will be able to somewhat offset the impact, there can be no assurances that unforeseen future

events in the global supply chain affecting the availability of materials and components, and/or increasing commodity pricing, will not have a material adverse effect on our business, financial condition and results of operations.

component parts and raw materials, and inflationary cost increases in certain raw materials, labor and transportation.

In response to the global supply chain volatility and inflationary cost increases, we have taken, and continue to take, several

actions to mitigate the impact by working closely with our suppliers and customers to minimize any potential adverse impacts on our business, including initiating cost savings initiatives and the pass through of higher costs to our customers.

cannot assure that unforeseen future events in the global supply chain affecting the availability of materials and components, and/or increasing commodity pricing, will not have a material adverse effect on our business, financial condition and

results of operations.

Additionally, supplier non-performance may consist of delivery delays or failures caused by production issues or delivery of non-conforming products.

Our suppliers’ ability to supply products to us is also subject to a number of risks,

including the availability and cost of raw materials, the destruction of their facilities, work stoppages, cyber attacks on their information technology systems or other limitations on their business operations, which could be caused by any

including the availability and cost of raw materials, the destruction of their facilities, work stoppages, cybersecurity incidents affecting their information systems or other limitations on their business operations, which could be caused by any

number of factors, such as labor disruptions, financial distress, severe weather conditions and natural disasters, social unrest, economic and political instability, and public health crises, including the occurrence of a contagious disease or

illness, such as the COVID-19 pandemic, war, terrorism or other catastrophic events.

In addition, our failure to promptly pay, or order sufficient quantities of inventory from our suppliers may increase the cost of products we purchase or may

lead to suppliers refusing to sell products to us at all.

In addition, our failure to promptly pay, or order sufficient quantities of inventory from our suppliers may increase the cost of products we purchase or may lead

to suppliers refusing to sell products to us at all.

Our efforts to protect against and to minimize these risks may not always be effective.

Our operations could be adversely affected by interruptions or breaches in the security of our computer and information technology systems.

We rely on information technology systems throughout our organization to conduct day-to-day business operations, including the management of our supply chain and our purchasing, receiving and distribution functions.

We also routinely use our

information technology systems to send, receive, store, access and use sensitive data relating to our Company and its employees, customers, suppliers, and business partners, including intellectual property, proprietary business information, and

other sensitive materials.

Additionally, we rely on our information technology systems to enable many of our employees to work remotely as a result of new policies and practices enacted by us.

Our information technology systems have been subject to cyber threats, including attempts to hack into our network and computer viruses.

Such hacking attempts and computer viruses have not significantly impacted or interrupted our business

While we implement security measures designed to prevent and mitigate the risk of cyber attacks, our information technology systems, and the systems of our customers, suppliers and business partners, may continue to be vulnerable to

computer viruses, attacks by hackers, or unauthorized access caused by employee error or malfeasance.

The exploitation of any such vulnerability could unexpectedly compromise our information security, or the security of our customers, suppliers

and other business partners.

Furthermore, because the techniques used to carry out cyber attacks change frequently and in many instances are not recognized until after they are used against a target, we may be unable to anticipate these changes

or implement adequate preventative measures.

If our information technology systems, or the systems of our customers, suppliers or business partners, are subject to cyber attacks, such as those involving significant or extensive system

interruptions, sabotage, computer viruses or unauthorized access, we could experience disruptions to our business operations and incur substantial remediation costs, which could have a material adverse effect on our business, financial condition

or results of operations.

Our Operations could be adversely affected by interruptions or breaches in the security of our computer and information systems.

We rely on information systems throughout our organization to conduct day-to-day business operations, including the management of our supply chain and our purchasing, receiving and distribution functions.

We also routinely use our information

systems to send, receive, store, access and use sensitive data relating to our Company and its employees, customers, suppliers, and business partners, including intellectual property, proprietary business information, and other sensitive

Additionally, we rely on our information systems to enable many of our employees to work remotely as a result of more recent policies and practices enacted by us.

Despite security measures designed to prevent and mitigate the risk of cybersecurity incidents, our information systems, and the systems of our customers, suppliers and business partners, may be vulnerable to such incidents, including

interruptions, outages, data breaches, phishing attacks, ransomware attacks, unauthorized access, attempts to hack into our network, and computer viruses.

Moreover, the technologies and techniques used to carry out cyber-attacks are continuously

evolving, making it difficult to detect these changes or implement adequate measures in time to prevent or mitigate the impact of an attack.

Due to the foregoing, though we have not experienced a material cybersecurity incident in 2023, we cannot

guarantee that there will be no future cybersecurity incident that causes a material adverse effect on our information systems, or that of our customers, suppliers and other business partners.

In the event that our information systems, or the systems of our customers, suppliers or business partners, are subject to such incidents, we could experience errors, interruptions, delays, and/or the cessation of services in key portions of our

information systems.

If critical information systems fail or otherwise become unavailable, our ability to process orders, maintain proper inventory levels, collect accounts receivable and disburse funds could be adversely affected.

The foregoing

matters could also cause significant damage to our business reputation, affect our relationships with our business partners, lead to claims against us, and/or subject us to fines or other penalties assessed by governmental authorities.

Additionally, we may be required to incur substantial costs to remediate the damage caused by these disruptions or protect us against future cybersecurity incidents.

Depending on the nature and magnitude of these events, they could have a material

and adverse effect on our business, financial condition or results of operations.

The transition risks associated with global climate change may cause us to incur significant costs.

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Failure to maintain the value of our brands could have an adverse effect on our reputation, cause us to incur significant costs and negatively impact our business.

Our brands are an important component of our value proposition, and serve to distinguish our premium engine management and temperature control products from those of our competitors.

We believe that our success depends, in part, on

maintaining and enhancing the value of our brands and executing our brand strategies, which are designed to drive end-user demand for our products and make us a valued business partner to our customers through the support of their marketing

Our brands are a key component of our value proposition, and serve to distinguish our premium products from those of our competitors.

In our automotive aftermarket business, we believe that our success depends, in part, on maintaining and

enhancing the value of our brands and executing our brand strategies, which are designed to drive end-user demand for our products and make us a valued business partner to our aftermarket customers through the support of their marketing

A decline in the reputation of our brands as a result of events, such as deficiencies or defects in the design or manufacture of our products, or from legal proceedings, product recalls or warranty claims resulting from such

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conditions, competition and other factors may adversely affect the solvency or creditworthiness of our customers.

Inflationary cost increases in raw materials, labor and transportation and a general worsening of economic conditions has put

financial pressure on many of our customers and may threaten certain customers’ ability to maintain liquidity sufficient to repay their obligations to us as they become due.

The bankruptcy, insolvency or other credit failure of any customer that

has a substantial amount owed to us could have a material adverse effect on our operating revenue and results of operations.

In January 2023, one of our customers filed a petition for bankruptcy.

In connection with the bankruptcy filing, we

recorded a $7 million charge in 2022 to reduce our outstanding accounts receivable balance from the customer to our estimated recovery amount.

Higher interest rates, inflationary cost increases in raw materials, labor and transportation and a general worsening of economic

conditions have put financial pressure on many of our customers and may threaten certain customers’ ability to maintain liquidity sufficient to repay their obligations to us as they become due.

The bankruptcy, insolvency or other credit failure of

any customer that has a substantial amount owed to us could have a material adverse effect on our operating revenue and results of operations.

We recorded a $7 million pre-tax charge in 2022 to reduce our outstanding accounts receivable balance

from a customer that filed for bankruptcy in the first quarter of 2023 to our estimated recovery amount.

In our Engineered Solutions business, our supply agreements with our customers are generally requirements contracts, and a decline in the production requirements of any of our significant customers

could adversely impact our revenues and profitability.

In our Engineered Solutions business, our customers generally agree to purchase their requirements for specific products, and we receive volume forecasts of their requirements, but not long-term firm volume commitments.

Furthermore, our customers typically reserve the right to change, delay or cancel their orders for products, and we have limited recourse in such events.

Changes, delays or cancellations by a significant customer or by a number of customers could

adversely impact our results of operations by reducing the volumes of products we manufacture and sell, by causing a delay in the recovery of expenditures for raw materials and component parts procured to satisfy such orders, or by reducing our

asset utilization, resulting in lower profitability.

We also make key decisions based on our estimates of our customers’ requirements, including in planning our production schedules, raw material and component part purchases, personnel needs and other resource requirements.

Changes in demand for our customers’ products would likely reduce our customers’ requirements and adversely impact our ability to accurately estimate their requirements in the future.

Any significant decrease or delay in customer orders could have

a material adverse effect on our business, financial condition and results of operations.

Our inability to attract or retain key employees may have an adverse effect on our business, financial condition and results of operations.

Our success is dependent upon our ability to attract, retain and motivate certain key employees, including our management and our skilled workforce of engineers, technically-trained salesforce employees and

other qualified personnel.

Many of our key employees have many years of experience with our Company and would be difficult to replace without allotment of a significant amount of time for knowledge transfer.

Furthermore, although w e believe our facilities are in labor markets with ready access to adequate numbers of skilled and unskilled workers, we compete with other businesses to fill many of our hourly

positions in our distribution facilities, which historically have had high turnover rates, which can lead to increased training and retention costs, particularly in a competitive and shrinking labor market.

We cannot be certain that we will be

able to continue to attract or retain our key employees, which could cause us to fail to execute our value proposition, fail to achieve operational efficiencies, and incur increased labor costs, which could have an adverse effect our business,

financial condition and results of operations.

Risks Related to Liquidity

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increases significantly, we may be negatively impacted as we may not be able to pass these added costs on to our customers, which could have a material and adverse effect upon our financial condition, results of operations and cash flows.

Depending upon the level of sales of receivables pursuant these agreements, a hypothetical, instantaneous and unfavorable change of 100 basis points in the reference rate may have an approximate $8.1 million negative impact on our earnings or

A significant increase in our indebtedness, or in interest rates, could negatively affect our financial condition, results of operations and cash flows.

We have a Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders, which we refer to throughout this Report as our Credit Agreement.

The Credit Agreement provides for a $500 million credit facility

comprised of a $100 million term loan facility (the “term loan”) and a $400 million multi-currency revolving credit facility available in U.S.

Dollars, Euros, Sterling, Swiss Francs, Canadian Dollars and other currencies as agreed to by the

administrative agent and the lenders (the “revolving facility”).

As of December 31, 2022, our total outstanding indebtedness was $239.6 million, including outstanding borrowings under the Credit Agreement of $239.5 million, consisting of

current borrowings of $55 million and long-term borrowings of $184.5 million.

We have a Credit Agreement with JPMorgan Chase Bank, N.A., as administrative agent, and a syndicate of lenders.

The Credit Agreement provides for a $500 million credit facility comprised of a $100 million term loan facility and a $400 million

multi-currency revolving credit facility available in U.S.

Dollars, Euros, Sterling, Swiss Francs, Canadian Dollars and other currencies as agreed to by the administrative agent and the lenders.

As of December 31, 2023, our total outstanding

indebtedness was $156.2 million, including outstanding borrowings under the Credit Agreement of $156 million, consisting of current borrowings of $5 million and long-term borrowings of $151 million.

Borrowings under our Credit Agreement bear interest, at the Company’s election, at a rate per annum equal to Term SOFR plus 0.10% plus an applicable margin, or an alternate base rate plus an applicable margin, where the alternate base rate is

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limit our ability to obtain additional financing or borrow additional funds;

require that a substantial portion of our cash flow from operations be used to pay principal and interest in our indebtedness, instead of funding working capital, capital expenditures, acquisitions, dividends, stock repurchases, or

other general corporate purposes;

general corporate purposes;

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

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future personal property of the Company and each Guarantor, subject to certain exceptions.

The collateral security described above also secures certain banking services obligations and interest rate swaps and currency or other hedging

obligations of the Company owing to any of the then existing lenders or any affiliates thereof.

Concurrently with the Company’s entry into the Credit Agreement, the Company also entered into a seven year interest rate swap agreement with Wells

Fargo Bank, N.A., Co-Syndication Agent and lender under the Credit Agreement, on $100 million of borrowings under the Credit Agreement.

The collateral security described above also secures certain banking services obligations and interest rate swaps and currency or other hedging obligations

of the Company owing to any of the then existing lenders or any affiliates thereof.

Concurrently with the Company’s entry into the Credit Agreement, the Company also entered into a seven year interest rate swap agreement with Wells Fargo Bank,

N.A., Co-Syndication Agent and lender under the Credit Agreement, on $100 million of borrowings under the Credit Agreement.

The interest rate swap agreement matures in May 2029.

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If we were default

on any of these covenants, or on any of our

indebtedness, if interest rates were to significantly increase, or the financial institution that is a party to our interest rate swap agreement were to default, or if we are unable to obtain necessary liquidity, our business could be

adversely affected.

on any of these covenants, or on any of our indebtedness, if interest rates were to significantly increase, or the financial institution that is a party to our interest rate swap agreement were to default, or if we are unable to obtain necessary

liquidity, our business could be adversely affected.

We may not be able to generate the significant amount of cash needed to satisfy our obligations or maintain sufficient liquidity through borrowing capacities.

Our ability either to make payments on or to refinance our indebtedness, or to fund planned capital expenditures and research and development efforts, will depend on our ability to generate cash in the future.

Our ability to generate cash is

in part subject to:

Our ability to generate cash is in

part subject to:

general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control;

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Based on our current level of operations, we believe our cash flow from operations, available cash and available borrowings under our Credit Agreement will be adequate to meet our future liquidity needs for at least the next twelve months.

Significant assumptions underlie this belief, including, among other things, that we will be able to mitigate the future impact, if any, of disruptions in the supply chain caused by the COVID-19 pandemic, Russia’s invasion of the Ukraine and the

resultant sanctions imposed by the U.S.

and other governments that may lead to a further increase in inventories to support our customers, and significant inflationary cost increases in raw materials, labor and transportation, and that there will

be no material adverse developments in our business, liquidity or capital requirements.

If we are unable to fund our operations through earnings or external financing, we will be forced to adopt an alternative strategy that may include actions

Significant assumptions underlie this belief, including, among other things, that we will be able to mitigate the future impact, if any, of disruptions in global supply chains, which have resulted in longer lead times and delays in procuring

component parts and raw materials, and significant inflationary cost increases in certain raw materials, labor and transportation, and that there will be no material adverse developments in our business, liquidity or capital requirements.

are unable to fund our operations through earnings or external financing, we will be forced to adopt an alternative strategy that may include actions such as:

deferring, reducing or eliminating future cash dividends;

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seeking additional funding.

We cannot assure you that, if material adverse developments in our business, liquidity or capital requirements should occur, our business will generate sufficient cash flow from operations, or that future borrowings will be available to us

under our Credit Agreement in amounts sufficient to enable us to pay the principal and interest on our indebtedness, or to fund our other liquidity needs.

In addition, if we default on any of our indebtedness, or breach any financial covenant in

our Credit Agreement, our business could be adversely affected.

our Credit Agreement in amounts sufficient to enable us to pay the principal and interest on our indebtedness, or to fund our other liquidity needs.

In addition, if we default on any of our indebtedness, or breach any financial covenant in our

Credit Agreement, our business could be adversely affected.

We have significant goodwill and other intangible assets, and future impairment of these assets could have a material adverse impact on our financial condition and results of operations.

A significant portion of our long-term assets consists of goodwill and other intangible assets recorded as a result of past acquisitions.

We do not amortize goodwill and certain other intangible assets having indefinite lives, but rather test

them for impairment on an annual basis or in interim periods if an event occurs or circumstances change that may indicate the fair value is below its carrying amount.

The process of evaluating the potential impairment of goodwill and other

intangible assets requires significant judgement, specifically with respect to applying assumptions and estimates to the analysis of identifiable intangibles and long‑lived asset impairment including projecting revenues, interest rates, tax rates

and the cost of capital.

Many of the factors used in assessing fair value are outside our control and it is reasonably likely that assumptions and estimates will change in future periods.

These changes could result in impairment charges against

our goodwill and other intangible assets.

In the event that we determine that our goodwill or other intangible assets are impaired, we may be required to record a significant charge to earnings that could adversely affect our financial condition

and results of operations.

Risks Related to External Factors

We conduct our manufacturing and distribution operations on a worldwide basis and are subject to risks associated with doing business outside the United States.

We have manufacturing and distribution facilities in many countries, including Canada, Mexico, Poland, Germany and Hungary, as well as a joint-venture in China.

Increasing our manufacturing footprint in low cost regions is an important

element of our strategy.

There are a number of risks associated with doing business internationally, including:

We have manufacturing and distribution facilities in many countries, including Canada, Mexico, Poland, Germany and Hungary, as well as joint-ventures in China.

There are a number of risks associated with doing business internationally,

(a) exposure to local economic and political conditions;

(b) social unrest such as risks of terrorism or other hostilities;

currency exchange rate fluctuations and currency controls;

(d) the effect of potential changes in U.S.

trade policy and international trade agreements;

policy and international trade agreements;

and (e) the potential for shortages of trained labor.

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Domestic and foreign political developments and government laws and regulations directly affect automotive consumer products in the United States and abroad.

In the United States, these laws and regulations include standards relating to

vehicle safety, fuel economy and emissions, among others.

Furthermore, increased public awareness and concern regarding climate change may result in new laws and regulations designed to reduce or mitigate the effects of greenhouse gas emissions

or otherwise effect the transition to a lower-carbon economy.

The modification of existing laws, regulations or policies, or the adoption of new laws, regulations or policies could have a material adverse effect on our business, financial

condition and results of operations.

In the United States, these laws and regulations include standards relating to vehicle

safety, fuel economy and emissions, among others.

Furthermore, increased public awareness and concern regarding climate change may result in new laws and regulations designed to reduce or mitigate the effects of greenhouse gas emissions or

otherwise effect the transition to a lower-carbon economy.

The modification of existing laws, regulations or policies, or the adoption of new laws, regulations or policies could have a material adverse effect on our business, financial condition

and results of operations.

Our operations and properties are subject to a wide variety of increasingly complex and stringent federal, state, local and international laws and regulations, including those governing the use, storage, handling, generation, treatment,

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conditions at properties at which wastes or other contamination attributable to an entity or its predecessors have been sent or otherwise come to be located.

The nature of our operations exposes us to the risk of claims with respect to such matters, and we can give no assurance that violations of such laws have not occurred or will not occur or that material costs or liabilities will not be

incurred in connection with such claims.

in connection with such claims.

We are currently monitoring our environmental remediation efforts at one of our facilities and our reserve balance related to the environmental clean-up at this facility is $1.4 million at December 31, 2023.

The environmental testing and any remediation costs at such facility may be covered by several insurance policies, although we can give no assurance that our insurance will cover any environmental remediation claims.

We also maintain

insurance to cover our existing U.S.

environmental testing and any remediation costs at such facility may be covered by several insurance policies, although we can give no assurance that our insurance will cover any environmental remediation claims.

We also maintain insurance to

cover our existing U.S.

and Canadian facilities.

We can give no assurance that the future cost of compliance with existing environmental laws and the liability for known environmental claims pursuant to such environmental laws will

not give rise to additional significant expenditures or liabilities that would be material to us.

In addition, future events, such as new information, changes in existing environmental laws or their interpretation, and more vigorous enforcement

policies of federal, state or local regulatory agencies, may have a material adverse effect on our business, financial condition and results of operations.

We can give no assurance that the future cost of compliance with existing environmental laws and the liability for known environmental claims pursuant to such environmental laws will not give rise to

additional significant expenditures or liabilities that would be material to us.

In addition, future events, such as new information, changes in existing environmental laws or their interpretation, and more vigorous enforcement policies of federal,

state or local regulatory agencies, may have a material adverse effect on our business, financial condition and results of operations.

Our future performance may be materially adversely affected by changes in technologies and improvements in the quality of new vehicle parts .

If we do not respond appropriately to changes in automotive technologies, such as the adoption of new technologies and systems to make traditional, ICE vehicles more efficient, or the adoption of electric or hybrid electric vehicle

architectures, we could experience less demand for our products thereby causing a decline in our results of operations or deterioration in our business and financial condition, and we may have a material adverse effect on our long-term

In addition, the size of the automobile replacement parts market depends, in part, upon the growth in number of vehicles on the road, increase in average vehicle age, change in total miles driven per year, new or modified environmental and

vehicle safety regulations, including fuel economy and emissions reduction standards, increase in pricing of new cars and new car quality and related warranties.

The automobile replacement parts market has been negatively impacted by the fact

that the quality of more recent automotive vehicles and their component parts (and related warranties) has improved, thereby lengthening the repair cycle.

Generally, if parts last longer, there will be less demand for our products and the

average useful life of automobile parts has been steadily increasing in recent years due to innovations in products and technology.

In addition, the introduction by original equipment manufacturers of increased warranty and maintenance

initiatives has the potential to decrease the demand for our products.

If we do not respond appropriately to changes in automotive technologies, such as the adoption of new technologies and systems to make traditional, internal-combustion-engine vehicles more efficient, or the adoption of electric or hybrid

electric vehicle architectures, we could experience less demand for our products thereby causing a decline in our results of operations or deterioration in our business and financial condition, and we may have a material adverse effect on our

long-term performance.

In addition, the size of the automotive aftermarket depends, in part, upon the growth in number of vehicles on the road, increase in average vehicle age, change in total miles driven per year, new or modified environmental and vehicle safety

regulations, including fuel economy and emissions reduction standards, increase in pricing of new cars and new car quality and related warranties.

The automotive aftermarket has been negatively impacted by the fact that the quality of more recent

automotive vehicles and their component parts (and related warranties) has improved, thereby lengthening the repair cycle.

Generally, if parts last longer, there will be less demand for our aftermarket products and the average useful life of

automotive parts has been steadily increasing in recent years due to innovations in products and technology.

In addition, the introduction by original equipment manufacturers of increased warranty and maintenance initiatives has the potential to

decrease the demand for our aftermarket products.

When proper maintenance and repair procedures are followed, newer air conditioning (A/C) systems in particular are less prone to leak resulting in fewer A/C system repairs.

These factors could have a material adverse effect on our business, financial condition and results of operations.

Our business, results of operations and financial condition could be materially adversely affected by the effects of widespread public health crises, including the novel coronavirus (COVID-19) pandemic, that are

beyond our control.

The global outbreak of the novel coronavirus (COVID-19) pandemic created significant volatility, uncertainty and economic disruption in many countries in which we operate, including the United States, Mexico, Canada, Poland, Germany, Hungary

We believe customer demand for our products and customer preferences regarding product mix and distribution channels were also impacted as a result of the pandemic, and significant uncertainty exists with respect to the general

economic conditions as we emerge from the pandemic, including rising inflation, disruptions in the supply chain and a possible national or global recession.

If customer demand were to decrease in future periods, or if customer preferences

regarding product mix and distribution channels were to change, we may be required to adjust and reduce production volumes and implement cost reduction and cash preservation initiatives, including potential reductions in capital expenditures and

employee furloughs, which could have a material adverse impact on our business, results of operations and financial condition.

In certain countries in which we operate, national, state and local governments implemented a variety of measures in response to the COVID-19 pandemic.

Many of these restrictions have been eased, however, there can be no guarantee that they

will not be implemented in the future.

Any restrictions or limitations on our ability to perform such operations could have a material adverse effect on our business, results of operations and financial condition.

Furthermore, the COVID-19 pandemic and other public health crises could have a material adverse effect on the business, operations and financial condition of our customers, suppliers and other supply chain partners as a result of the

governmental measures described above, disruptions to their business and operations for reasons similar to those described above, and their ability to manage and mitigate the adverse effects of these and other risks unique to their business and

operations that may arise as a result of the pandemic.

UNRESOLVED STAFF COMMENTS

These factors could

have a material adverse effect on our business, financial condition and results of operations.

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