What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2024-03-01 compared with 2023-03-02 · 46 added, 71 removed, 190 unchanged (38% of the section changed)

Risk Factors.

Risks Related to the Coronavirus (COVID-19) Pandemic

Pandemics or disease outbreaks, such as COVID-19, have disrupted, and may continue to disrupt our business, which could adversely affect our results of operation and financial condition.

Pandemics or disease outbreaks, such as COVID-19, have disrupted, and may continue to disrupt, the global economy.

In late 2019, a novel strain of the coronavirus (COVID-19) was reported to have been detected in Wuhan, China and on March 11, 2020 it was declared by the World Health Organization to be a global pandemic.

The COVID-19 pandemic has negatively affected the global economy, disrupting the financial markets and increasing volatility, and has impeded global supply chains, restricted manufacturing operations and resulted in significantly reduced economic activity and higher unemployment rates.

It has disrupted, and may continue to disrupt for an indefinite period of time, the global vehicle industry and customer sales, production volumes and purchases of automotive, commercial, off-highway and agricultural vehicles by end-consumers.

International, federal, state and local public health and governmental authorities have taken and may continue to take actions to contain the outbreak and spread of COVID-19 throughout most regions of the world, including travel bans, quarantines, "work-from-home" orders and similar mandates that have caused many businesses to modify normal operations.

Beginning in 2020 we took actions to enhance our financial flexibility and minimize the impact on our business, such as the ramping down of certain production facilities in response to customer plant closures and changes in vehicle production schedules, imposing certain travel restrictions, amending our existing Credit Facility three times providing covenant relief through September 2023 and actively managing costs, capital spending and working capital to further strengthen our liquidity.

Despite these measures, the ultimate impact to our business continues to remain highly uncertain and we have experienced, and may continue to experience, delays in the production and distribution of our products, supply chain disruptions affecting the availability of production materials and the loss or delay of customers’ sales.

Uncertain Economic and Market Conditions

Uncertain Business, Economic and Market Conditions

Our business is cyclical and a downturn in the automotive, commercial, off-highway and agricultural vehicle markets as well as overall economic conditions could reduce our sales and profitability.

2 unchanged sentences

Because the majority of our products are used principally in the production of vehicles for the automotive, commercial, off-highway and agricultural vehicle markets, our net sales, and therefore our results of operations, are significantly dependent on the general state of the economy and other factors which affect these markets.

In 2022, approximately 94% of our net sales were derived from automotive, commercial, off-highway and agricultural vehicle markets while approximately 6% were derived from aftermarket distributors, mass merchandisers and monitoring services markets.

Due to the overall global economic conditions in 2022 and 2021, largely as a result of supply chain issues and the impact of the COVID-19 pandemic and resulting supply chain issues, the automotive, commercial, off-highway and agricultural vehicle markets experienced volatility in global customer sales and production volumes.

As a result, we have experienced and may continue to experience reductions in orders from our customers in certain regions.

An economic downturn or other adverse industry conditions that result in a decline in automotive, commercial, off-highway or agricultural vehicle production, or a

material decline in market share by our significant customers, could adversely affect our results of operations and financial condition.

In 2023, approximately 94% of our net sales were derived from automotive, commercial, off-highway and agricultural vehicle markets while approximately 6% were derived from aftermarket distributors and monitoring services markets.

An economic downturn or other adverse industry conditions that result in a decline in automotive, commercial, off-highway or agricultural vehicle production, or a material decline in market share by our significant customers, could adversely affect our results of operations and financial condition.

Public health crises and other global health pandemics, epidemics or disease outbreaks could adversely impact our business, results of operation and financial condition.

A significant public health crisis, pandemic or disease outbreak, such as COVID-19, could adversely impact our business as well as those of our suppliers and customers.

For example, the COVID-19 pandemic disrupted the global vehicle industry and customer sales, production volumes, supply of components critical to our business, and purchases of automotive, commercial, off-highway and agricultural vehicles by end-consumers.

Any future significant public health crisis could adversely impact the global economy, our industry and the overall demand for our products.

In addition, preventative or reactionary measures taken by governmental authorities may disrupt the ability of our employees, suppliers and other business partners to perform their respective functions and obligations relative to the conduct of our business.

Our ability to predict and respond to future changes resulting from potential health crises is uncertain as are the ultimate potential impacts on our business.

The extent to which a pandemic or similar significant health crises will impact our business in the future is uncertain.

In addition, to the extent such significant health crises may adversely affect our business, financial condition, results of operations and cash flows, they may also have the effect of heightening many of the other risk factors in this section.

The loss or insolvency of any of our principal customers would adversely affect our future results.

We are dependent on several principal customers for a significant percentage of our net sales.

In 2022, our top five customers were PACCAR, Volvo, VW Group, Ford Motor Company and Daimler AG, which comprised 15%, 11%, 9%, 7% and 7% of our net sales, respectively.

In 2023, our top five customers were PACCAR, Traton, Volvo, Daimler Truck and Ford, which comprised 16%, 15%, 10%, 8% and 6% of our net sales, respectively.

In 2023, our top ten customers accounted for 66% of our net sales.

12 unchanged sentences

Our success will depend on our ability to continue to meet customers’ changing specifications with respect to technological innovation, price, quality, performance, service and delivery by implementing and sustaining competitive technological advances.

Our business may, therefore, require significant recurring additional capital expenditures and investment in product development, manufacturing and management information systems.

Our business may, therefore, require significant recurring additional capital expenditures and investment in product development, manufacturing and information technology systems.

We cannot assure that we will be able to achieve technological advances or introduce new products that may be necessary to remain competitive.

13 unchanged sentences

Our debt obligations could limit our flexibility in managing our business and expose us to risks.

As of December 31, 2022, there was $167.8 million in borrowings outstanding on our Fourth Amended and Restated Credit Agreement, as amended, (the “Credit Facility”).

In addition, we are permitted under our Credit Facility to incur additional

debt, subject to specified limitations.

As of December 31, 2023, there was $189.3 million in borrowings outstanding on our Fifth Amended and Restated Credit Agreement (the “Credit Facility”).

In addition, we are permitted under our Credit Facility to incur additional debt, subject to specified limitations.

Our leverage and the terms of our indebtedness may have important consequences including the following:

15 unchanged sentences

• substantially change the nature of our business.

On March 1, 2023, we amended the Credit Facility.

As amended the Credit Facility provides for certain financial covenant relief and additional covenant restrictions during the “Amendment No.

4 Specified Period” (the period from March 1, 2023 until the date that the Company delivers a compliance certificate for the quarter ending September 30, 2023 in form and substance satisfactory to the administrative agent).

During the Amendment No.

4 Specified Period:

• the maximum net leverage ratio was changed to 4.75 to 1.00 for the quarter ended March 31, 2023 and 4.25 to 1.00 for the quarter ended June 30, 2023;

• the minimum interest coverage ratio of 3.50 was reduced to 3.00 for the quarters ended March 31, 2023 and June 30, 2023;

• drawing on the Credit Facility continues to be restricted if the Company's total of 100% of domestic and 65% of foreign cash and cash equivalents exceeds $70.0 million;

• there continue to be certain additional restrictions on Restricted Payments (as defined);

• consistent with Amendment No.

3, a Permitted Acquisition (as defined) may not be consummated unless the net leverage ratio is below 3.50 to 1.00 during the Amendment No.

4 Specified Period.

Our ability to comply with these covenants as well as the negative covenants under the terms of our indebtedness may be affected by events beyond our control.

1 unchanged sentence

If an event of default occurs, the lenders under the Credit Facility could elect to declare all outstanding borrowings, together with accrued interest and other fees, to be immediately due and payable and terminate any commitments they have to provide further borrowings, and the Credit Facility lenders could pursue foreclosure and other remedies against us and our assets.

Our annual effective tax rate could be volatile and materially change as a result of changes in the mix of earnings and other factors including changes in the recognition and/or release of valuation allowances against deferred tax assets.

Our overall effective tax rate is computed by dividing our total tax expense (benefit) by our total earnings (loss) before tax.

However, tax expense and benefits are not recognized on a global basis, but rather on a jurisdictional or legal entity basis.

Losses in certain jurisdictions may not provide a current financial statement tax benefit as a result of the need to maintain a valuation allowance against the associated deferred tax asset.

Also, management periodically evaluates the realizability of our deferred tax assets which may result in the recognition and/or release of valuation allowances.

As a result, changes in the mix of earnings between jurisdictions and changes in the recognition and/or release of valuation allowances, among other factors, could have a significant effect on our overall effective tax rate.

Unanticipated changes in our effective tax rate, the adoption of U.S.

or international tax legislation, or exposure to additional tax liabilities could adversely affect our profitability.

Our effective tax rate and future cash tax liability could be impacted by various factors, such as changes in the mix of earnings between jurisdictions, changes in the recognition and/or release of valuation allowances, and the enactment of tax laws or changes in tax laws, regulations, or accounting principles.

The Organization for Economic Cooperation and Development (“OECD”) issued new guidelines to implement a 15% global corporate minimum tax to ensure that large multinational enterprises pay a minimum level of tax in the countries they operate.

Our effective tax rate and cash tax liabilities could increase in future years, depending on which countries enact the legislation and in what manner.

As a result of future changes in our effective tax rate our business, financial condition or results of operations could be materially adversely affected.

Risks Related to Products, Pricing and Supply

We are dependent on the availability and price of raw materials and other supplies.

We require substantial amounts of raw materials and other supplies, and substantially all such materials we require are purchased from outside sources.

The availability and prices of raw materials and other supplies may be subject to curtailment or change due to, among other things, new laws or regulations, suppliers’ allocations to other purchasers and interruptions in production by suppliers, weather emergencies, natural disasters, commercial disputes, acts of terrorism or war, changes in exchange rates and worldwide price levels.

We require substantial amounts of raw materials, components and other supplies, and substantially all such materials we require are purchased from outside sources.

The availability and prices of raw materials, components and other supplies may be subject to curtailment or change due to, among other things, new laws or regulations, suppliers’ allocations to other purchasers and interruptions in production by suppliers, weather emergencies, natural disasters, commercial disputes, acts of terrorism or war, changes in exchange rates and worldwide price levels.

If demand for raw materials we require increases, we may have difficulties obtaining adequate raw materials and other supplies from our suppliers to satisfy our customers.

2 unchanged sentences

If we cannot obtain adequate raw materials and other supplies, or if we experience an increase in the price of raw materials and other supplies, our business, financial condition or results of operations could be materially adversely affected.

The adverse impacts of the COVID-19 pandemic led to a significant vehicle production slowdown in the first half of 2020, which was followed by increased consumer demand and vehicle production schedules in the second half of 2020.

This surge in demand led to a worldwide semiconductor supply shortage at the end of 2020 and through 2022, as semiconductor suppliers have been unable to rapidly reallocate production lines to serve the transportation industry.

In addition, we have experienced longer lead-times, higher costs and delays in procuring other component parts and raw materials.

As a result, we are currently experiencing supply chain disruptions.

We are assessing the potential supply chain impacts, which may directly or indirectly impact various suppliers, and correspondingly, OEM production.

We are working closely with our suppliers and customers to minimize any potential adverse impacts, and we continue to closely monitor the availability of semiconductor microchips and other component parts and raw materials, customer vehicle production schedules and any other supply chain inefficiencies that may arise, due to this or any other issue.

However, any direct or indirect supply chain disruptions may have an adverse impact on our business, financial condition, results of operations or cash flows.

The prices that we can charge our customers are typically predetermined and we bear the risk of costs in excess of our estimates, in addition to the risk of adverse effects resulting from general customer demands for cost reductions and quality improvements.

3 unchanged sentences

The costs that we incur in fulfilling these contracts may vary substantially from our initial estimates.

Unanticipated cost increases or the inability to meet certain cost reduction targets may occur as a result of several factors, including increases in the costs of labor, components or materials.

Unanticipated cost increases or the inability to meet certain cost reduction targets may occur as a result of several factors, including increases in the costs of labor, components or materials and operating inefficiencies.

In some cases, we are permitted to pass on to our customers the cost increases associated with specific materials.

However, cost overruns that we cannot pass on to our customers could adversely affect our business, financial condition or results of operations.

However, cost overruns that we cannot pass on to our customers and the inability to achieve productivity and cost reduction targets could adversely affect our business, financial condition or results of operations.

OEM customers have exerted and continue to exert considerable pressure on component suppliers to reduce costs, improve quality and provide additional design and engineering capabilities and continue to demand and receive price reductions and measurable increases in quality through their use of competitive selection processes, rating programs and various other arrangements.

26 unchanged sentences

government agencies may become involved in the administration or the regulation of the use of GPS signals.

Any of the foregoing factors could affect the willingness of buyers of our products to select GPS-based products instead of products based on competing technologies, which could adversely affect our operational revenues, financial condition and results of operation.

Any of the foregoing factors could affect the willingness of buyers of our products to select GPS-based products instead of products based on competing technologies, which could adversely affect our business, financial condition and results of operation.

Geopolitical Uncertainties

1 unchanged sentence

Approximately 49% of our net sales in 2023 were derived from sales outside of North America.

At December 31, 2022, significant concentrations of net assets outside of North America included $226.8 million in Europe and Other and $39.4 million in South America.

At December 31, 2023, significant concentrations of net assets outside of North America included $228.7 million in Europe, $43.9 million in Asia Pacific and $51.0 million in South America.

Non-current assets outside of North America accounted for approximately 63% of our non-current assets as of December 31, 2023.

International sales and operations are subject to significant risks, including, among others:

• political and economic instability;

• political and economic instability and conflicts;

• restrictive trade policies;

1 unchanged sentence

• currency exchange rates and controls;

• labor unrest;

• labor or social unrest;

• difficulty in obtaining distribution support and potentially adverse tax consequences;

• the imposition of product tariffs and the burden of complying with a wide variety of international and U.S.

Because of the interconnectedness of the global economy, a financial crisis, economic downturn or recession, natural disaster, war, geopolitical crises, or other significant events in one area of the world can have an immediate and material adverse impact on markets around the world.

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

We operate our business on a global basis and policy changes affecting international trade could adversely impact the demand for our products and our competitive position.

3 unchanged sentences

Our business benefits from free trade agreements, such as the United States-Mexico-Canada Agreement and the U.S.

trade relationship with China and Brazil and efforts to withdraw from, or substantially modify such agreements or arrangements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs import or export licensing requirements, exchange controls or new barriers to entry, could adversely impact our production costs, customer demand and our relationships with customers and suppliers.

trade relationships with China and Brazil and efforts to withdraw from, or substantially modify such agreements or arrangements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs import or export licensing requirements, exchange controls or new barriers to entry, could adversely impact our production costs, customer demand and our relationships with customers and suppliers.

Any of these consequences could have a material adverse effect on our business, financial condition or results of operations.

10 unchanged sentences

A portion of our growth in sales and earnings has been generated from acquisitions and subsequent improvements in the performance of the businesses acquired.

We expect to continue a strategy of selectively identifying and acquiring businesses with complementary products.

We expect to follow a strategy of selectively identifying and acquiring businesses with complementary products.

We cannot assure you that any business acquired by us will be successfully integrated with our operations or prove to be profitable.

23 unchanged sentences

We may be subject to product liability claims in the event that the failure of any of our products results in personal injury or death and we cannot assure that we will not experience material product liability losses in the future.

We cannot assure that

our product liability insurance will be adequate for liabilities ultimately incurred or that it will continue to be available on terms acceptable to us.

We cannot assure that our product liability insurance will be adequate for liabilities ultimately incurred or that it will continue to be available on terms acceptable to us.

In addition, if any of our products prove to be defective, we may be required to participate in government-imposed or customer OEM-instituted recalls involving such products.

6 unchanged sentences

We cannot assure that any intellectual property will provide us with any competitive advantage or will not be challenged, rejected, cancelled, invalidated, or declared unenforceable.

In the case of pending patent applications, we may not be successful in securing issued patents, or securing patents that provide us with a competitive advantage for our businesses.

In the case of pending patent applications, we may not be successful in securing issued patents or securing patents of a scope that provide us with a competitive advantage for our businesses.

In addition, our competitors may design products around our patents that avoid infringement and violation of our intellectual property rights.

We cannot be certain that we have rights to all intellectual property currently used in the conduct of our businesses or that we have complied with the terms of agreements by which we acquire such rights, which could expose us to infringement, misappropriation or other claims alleging violations of third party intellectual property rights.

Third parties have asserted and may assert or prosecute infringement claims against us in connection with the services and products that we offer, and we may or may not be able to successfully defend these claims.

Third parties have asserted and may assert or prosecute infringement claims against us or our customers in connection with the services and products that we offer, and we may or may not be able to successfully defend these claims.

Litigation, either to enforce our intellectual property rights or to defend against claims regarding intellectual property rights of others, could result in substantial costs and a diversion of our resources.

Any such claims and resulting litigation could require us to enter into licensing agreements (if available on acceptable terms or at all), pay damages and cease making or selling certain products and could result in a loss of our intellectual property protection.

As a result of such claims, we could enter into licensing agreements (if available on acceptable terms or at all), be forced to pay damages or cease making or selling certain products, lose our intellectual property protection, or suffers some combination of these effects.

Moreover, in such a situation, we may need to redesign some of our products to avoid future infringement liability.

We also may be required to indemnify customers or other third parties at significant expense in connection with such claims and actions.

The Company has seen an increase in customer requests for indemnification in connection with third party patent claims related to connectivity-enabled products.

These claims are being made by patent-holders seeking royalties and who may enter into litigation based on patent infringement allegations.

The Company is aware of claims being made against manufacturers of vehicles by alleged owners of patents related to connectivity-enabled products (frequently referred to as "standard essential patents").

Customers may seek indemnification related to such claims from the Company.

The Company has taken actions to mitigate this risk from new programs;

3 unchanged sentences

We rely upon information technology networks and systems to process, transmit and store electronic information, and to manage or support a variety of business processes and/or activities.

The secure operation of these IT networks and systems and the proper processing and maintenance of this information are critical to our business operations.

In addition, we continually expand and update our IT networks and systems in response to the changing needs of our business and periodically upgrade our ERP systems.

Should our networks or systems not be implemented successfully, or if the systems do not perform in a satisfactory manner once implementation is complete, our business and operations could be disrupted and our results of operations could be adversely affected, including our ability to report accurate and timely financial results.

The secure operation of these IT networks and systems and the proper processing and maintenance of this electronic information are critical to our business operations.

In addition, we continually update our IT networks and systems in response to the changing needs of our business and periodically upgrade our ERP systems.

Should our networks or systems not be implemented or upgraded successfully, or if the systems do not perform in a satisfactory manner once implementation or upgrade is complete, our business and operations could be disrupted and our results of operations could be adversely affected, including our ability to report accurate and timely financial results.

We may be subject to risks relating to our information technology systems and cybersecurity.

2 unchanged sentences

A breach in security could expose us and our customers and suppliers to risks of misuse of confidential information, manipulation and destruction of data, production downtimes and operations disruptions, which in turn could adversely affect our reputation, competitive position, business or results of operations.

While we have taken steps to protect the Company from cybersecurity risks and security breaches (including enhancing our firewall, workstation, email security and network monitoring with managed detection and response (MDR) and alerting capabilities, and training employees around phishing, malware and other cybersecurity risks), and we have policies and procedures to prevent or limit the impact of systems failures, interruptions, and security breaches, there

can be no assurance that such events will not occur or that they will be adequately addressed if they do.

Although we rely on commonly used security and processing systems to provide the security and authentication necessary to effect the secure transmission of data, these precautions may not protect our systems from all potential compromises or breaches of security.

4 unchanged sentences

Furthermore, regulatory authorities around the world are considering a number of legislative and regulatory proposals concerning cybersecurity and data protection.

In addition, the interpretation and application of consumer and data protection laws in the U.S., Europe and elsewhere are often uncertain and in flux.

In addition, the interpretation and application of consumer and data protection laws in the U.S., Europe and elsewhere are often uncertain and frequently change.

Complying with these various laws could cause the Company to incur substantial costs.

10 unchanged sentences

Changes in environmental, health and safety laws, regulations and requirements or other governmental regulations could increase our cost of doing business or adversely affect the demand for our products.

An emphasis on global climate change and other ESG matters by various stakeholders could negatively affect our business.

An emphasis on global climate change and other environmental, social, and corporate governance ("ESG") matters by various stakeholders could negatively affect our business.

Customer, investor, employee and other stakeholder expectations of us and our supply base in areas such as the environment, social matters and corporate governance have been rapidly evolving and increasing.

1 unchanged sentence

Our failure, or that of our supply base, to adequately meet stakeholder expectations may result in, among other things, the loss of business, diluted market valuation, an inability to attract customers or an inability to attract and retain top talent that could adversely affect our business, financial condition or results of operations.

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