Risk Factors.
+Added: Risks Related to the Coronavirus (COVID-19) Pandemic
+Added: 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.
+Added: Pandemics or disease outbreaks, such as COVID-19, have disrupted, and may continue to disrupt, the global economy.
+Added: 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.
+Added: The COVID-19 pandemic has negatively impacted 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.
+Added: 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, motorcycle and agricultural vehicles by end-consumers.
+Added: 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"
+Added: orders and similar mandates that have caused many businesses to modify normal operations.
+Added: During 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, obtaining a waiver on our existing 2019 Credit Facility through June 2021 and actively managing costs, capital spending and working capital to further strengthen our liquidity.
+Added: 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 impacting the availability of production materials and the loss or delay of customers’ sales.
+Added: COVID-19 continues to spread in most regions of the world and the extent to which our financial performance will be adversely affected will depend on future developments, which are highly uncertain and cannot be predicted, including, but not limited to, the duration and spread of the pandemic, its severity, the effectiveness of actions to contain the virus or treat its impact and how quickly and to what extent normal economic and operating conditions can resume.
+Added: Our business may also be affected by the ultimate impacts of the pandemic on economic activity and whether recessionary conditions will persist or reoccur, consumer demand and vehicle production schedules and the ability of our supply chain to deliver in a timely and cost-effective manner.
+Added: In addition, if a significant portion of our workforce or our customers’ workforce are affected by COVID-19, either directly or due to government closures or otherwise, associated work stoppages or facility closures could halt or further delay production in our facilities, including our manufacturing facilities in Juarez, Mexico and Manaus, Brazil which are currently producing at limited capacity due to governmental decrees.
+Added: Our full year 2020 results of operations and financial condition were adversely affected by COVID-19, and the full extent of the effect of COVID-19 on our customers, our supply chain and our business, in either scope or duration, cannot be assessed at this time.
+Added: Uncertain Economic and Market Conditions
Our business is cyclical and a downturn in the automotive, commercial, off-highway, motorcycle and agricultural vehicle markets as well as overall economic conditions could reduce the sales and profitability of our business.
2 unchanged sentences
Because the majority of our products are used principally in the production of vehicles for the automotive, commercial, off-highway, motorcycle 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.
−Removed: A decline in automotive, commercial, off-highway, motorcycle 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 2020, approximately 93% of our net sales were derived from automotive, commercial, off-highway, motorcycle and agricultural vehicle markets while approximately 7% were derived from aftermarket distributors, mass merchandisers and monitoring services markets.
−Removed: We have foreign currency translation and transaction risks that may materially adversely affect our operating results, financial condition and liquidity.
−Removed: The financial position and results of operations of our international subsidiaries are initially recorded in various foreign currencies and then translated into U.S.
−Removed: dollars at the applicable exchange rate for inclusion in our consolidated financial statements.
−Removed: The strengthening of the U.S.
−Removed: dollar against these foreign currencies ordinarily has a negative effect on our reported sales and operating margin (and conversely, the weakening of the U.S.
−Removed: dollar against these foreign currencies has a positive impact).
−Removed: The volatility of currency exchange rates may materially adversely affect our operating results.
−Removed: We are subject to risks related to our international operations.
−Removed: Approximately 45% of our net sales in 2019 were derived from sales outside of North America.
−Removed: At December 31, 2019, significant concentrations of net assets outside of North America included $38.3 million in South America and $207.4 million in Europe and Other.
−Removed: Non-current assets outside of North America accounted for approximately 68% of our non-current assets as of December 31, 2019.
−Removed: International sales and operations are subject to significant risks, including, among others:
−Removed: ● political and economic instability;
−Removed: ● restrictive trade policies;
−Removed: ● economic conditions in local markets;
−Removed: ● currency exchange controls;
−Removed: ● labor unrest;
−Removed: ● difficulty in obtaining distribution support and potentially adverse tax consequences;
−Removed: ● the imposition of product tariffs and the burden of complying with a wide variety of international and U.S.
−Removed: 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.
−Removed: We manufacture, sell and service products globally and rely upon a global supply chain to deliver the raw materials, components, systems and parts that we need to manufacture and service our products.
−Removed: Changes in government policies on foreign trade and investment can affect the demand for our products and services, cause non-U.S.
−Removed: customers to shift preferences toward domestically manufactured or branded products and impact the competitive position of our products or prevent us from being able to sell products in certain countries.
−Removed: Our business benefits from free trade agreements, such as the new United States-Mexico-Canada Agreement and the U.S.
−Removed: 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.
−Removed: Any of these consequences could have a material adverse effect on our results of operations, financial condition and cash flows.
−Removed: Our manufacturing and supply chain may be adversely impacted by an extended slowdown of our operations in China due to the recent coronavirus outbreak.
−Removed: Beginning in December 2019, a novel strain of coronavirus began to impact the population of Wuhan, China.
−Removed: The outbreak uncertainties continue and has resulted in travel disruption and has effected certain companies’ operations in China, including some of the Company’s suppliers located in China.
−Removed: We rely upon our suppliers to support our business in China, as well as to export components for use in products in other parts of the world.
−Removed: Further government restrictions or health concerns in China, or in other countries in which we operate, could result in supply and labor instability.
−Removed: While the closures and limitations on movement in the region are expected to be temporary, the duration of the production and supply chain disruption, and related financial impact, cannot be estimated at this time.
−Removed: Should the production and distribution closures continue for an extended period of time, the impact on our supply chain in China and globally could have a material adverse effect on our results of operations and cash flows.
−Removed: The prices that we can charge some of our customers are 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.
−Removed: Our supply agreements with some of our customers require us to provide our products at predetermined prices.
−Removed: In some cases, these prices decline over the course of the contract and may require us to meet certain productivity and cost reduction targets.
−Removed: In addition, our customers may require us to share productivity savings in excess of our cost reduction targets.
−Removed: The costs that we incur in fulfilling these contracts may vary substantially from our initial estimates.
−Removed: 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.
−Removed: In some cases, we are permitted to pass on to our customers the cost increases associated with specific materials.
−Removed: However, cost overruns that we cannot pass on to our customers could adversely affect our business, financial condition or results of operations.
−Removed: 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.
−Removed: We may be unable to generate sufficient production cost savings in the future to offset required price reductions.
−Removed: Additionally, OEMs have generally required component suppliers to provide more design engineering input at earlier stages of the product development process, the costs of which have, in some cases, been absorbed by the suppliers.
−Removed: Future price reductions, increased quality standards and additional engineering capabilities required by OEMs may reduce our profitability and have a material adverse effect on our business, financial condition or results of operations.
−Removed: We have limited or no redundancy for certain of our manufacturing facilities, and therefore damage or disruption to those facilities could interrupt our operations, increase our costs of doing business and impair our ability to deliver our products on a timely basis.
−Removed: If certain of our existing production facilities become incapable of manufacturing products for any reason, we may be unable to meet production requirements, we may lose revenue and we may not be able to maintain our relationships with our customers.
−Removed: Without operation of certain existing production facilities, we may be limited in our ability to deliver products until we restore the manufacturing capability at the particular facility, find an alternative manufacturing facility or arrange an alternative source of supply.
−Removed: We carry business interruption insurance to cover lost revenue and profits in an amount we consider adequate, this insurance does not cover all possible situations and may be insufficient.
−Removed: Also, our business interruption insurance would not compensate us for the loss of opportunity and potential adverse impact on relations with our existing customers resulting from our inability to produce products for them.
+Added: Due to the overall global economic conditions in 2020, largely as a result of COVID-19 pandemic, the automotive, commercial, off-highway, motorcycle and agricultural vehicle markets experienced a decline in global customer sales and production volumes.
+Added: As a result, we have experienced and may continue to experience reductions in orders from our customers in certain regions.
+Added: An economic downturn or other adverse industry conditions that result in a decline in automotive, commercial, off-highway, motorcycle 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.
Our business is very competitive and increased competition could reduce our sales and profitability.
6 unchanged sentences
We are dependent on several principal customers for a significant percentage of our net sales.
−Removed: In 2019, our top five customers were Ford Motor Company, Volvo, Daimler, MAN and American Axle which comprised 11%, 8%, 6%, 5% and 5% of our net sales, respectively.
+Added: In 2020, our top five customers were Ford Motor Company, Volvo, American Axle, Daimler and FCA Group which comprised 11%, 8%, 6%, 5% and 5% of our net sales, respectively.
In 2020, our top ten customers accounted for 56% of our net sales.
1 unchanged sentence
In addition, we have significant receivable balances related to these customers and other major customers that would be at risk in the event of their bankruptcy.
−Removed: The discontinuation of, loss of business or lack of commercial success, with respect to a particular vehicle model for which the Company is a significant supplier could reduce the Company’s sales and harm its profitability.
−Removed: Although the Company has purchase orders from many of its customers, these purchase orders generally provide for the supply of a customer’s annual requirements for a particular vehicle model and assembly plant, or in some cases, for the supply of a customer’s requirements for the life of a particular vehicle model, rather than for the purchase of a specific quantity of products.
−Removed: In addition, it is possible that our customers could elect to manufacture components internally that are currently produced by outside suppliers, such as our Company.
−Removed: The discontinuation of, the loss of business with respect to or a lack of commercial success of a particular vehicle model for which the Company is a significant supplier, could reduce the Company’s sales and have a material adverse effect on our business, financial condition or results of operations.
The Company’s estimated sourced future sales from awarded programs may not be realized.
3 unchanged sentences
Therefore, these arrangements do not represent firm orders.
−Removed: The Company’s estimated sourced future sales from awarded programs, also referred to as backlog, is the estimated remaining cumulative awarded life-of-program sales.
+Added: The Company’s estimated sourced future sales from awarded programs, also referred to as backlog, is the estimated remaining cumulative awarded life-of-program sales for up to a five year period.
Several factors may change forecasted revenue from awarded programs;
namely, new business wins, vehicle production volume changes, customer price reductions, foreign currency exchange rates, component take rates by customers and short cycled or cancelled models or platforms.
−Removed: Our inability to effectively manage the timing, quality and costs of new program launches could adversely affect our financial performance.
−Removed: In connection with the award of new business, we obligate ourselves to deliver new products and services that are subject to our customers’ timing, performance and quality standards.
−Removed: Additionally, as a Tier 1 supplier, we must effectively coordinate the activities of numerous suppliers in order for the program launches of our products to be successful.
−Removed: Given the complexity of new program launches, we may experience difficulties managing product quality, timeliness and associated costs.
−Removed: In addition, new program launches require a significant ramp up of costs;
−Removed: however, our sales related to these new programs generally are dependent upon the timing and success of our customers’ introduction of new vehicles.
−Removed: Our inability to effectively manage the timing, quality and costs of these new program launches could adversely affect our business, financial condition or results of operations.
+Added: We must implement and sustain a competitive technological advantage in producing our products to compete effectively.
+Added: Our products are subject to changing technology, which could place us at a competitive disadvantage relative to alternative products introduced by competitors.
+Added: 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.
+Added: Our business may, therefore, require significant recurring additional capital expenditures and investment in product development, manufacturing and management information systems.
+Added: We cannot assure that we will be able to achieve technological advances or introduce new products that may be necessary to remain competitive.
+Added: Our inability to continuously improve existing products, to develop new products and to achieve technological advances could have a material adverse effect on our business, financial condition or results of operations.
+Added: The discontinuation of, loss of business or lack of commercial success, with respect to a particular vehicle model for which the Company is a significant supplier could reduce the Company’s sales and harm its profitability.
+Added: Although the Company has purchase orders from many of its customers, these purchase orders generally provide for the supply of a customer’s annual requirements for a particular vehicle model and assembly plant, or in some cases, for the supply of a customer’s requirements for the life of a particular vehicle model, rather than for the purchase of a specific quantity of products.
+Added: In addition, it is possible that our customers could elect to manufacture components internally that are currently produced by outside suppliers, such as our Company.
+Added: The discontinuation of, the loss of business with respect to or a lack of commercial success of a particular vehicle model for which the Company is a significant supplier, could reduce the Company’s sales and have a material adverse effect on our business, financial condition or results of operations.
+Added: Financial Risks
+Added: We have foreign currency translation and transaction risks that may materially adversely affect our operating results, financial condition and liquidity.
+Added: The financial position and results of operations of our international subsidiaries are initially recorded in various foreign currencies and then translated into U.S.
+Added: dollars at the applicable exchange rate for inclusion in our consolidated financial statements.
+Added: The strengthening of the U.S.
+Added: dollar against these foreign currencies ordinarily has a negative effect on our reported sales and operating margin (and conversely, the weakening of the U.S.
+Added: dollar against these foreign currencies has a positive impact).
+Added: The volatility of currency exchange rates may materially adversely affect our business, financial condition or results of operations.
+Added: Our debt obligations could limit our flexibility in managing our business and expose us to risks.
+Added: As of December 31, 2020, there was $136.0 million in borrowings outstanding on our revolving credit facility, as amended, (the “2019 Credit Facility”).
+Added: In addition, we are permitted under our 2019 Credit Facility to incur additional debt, subject to specified limitations.
+Added: Our leverage and the terms of our indebtedness may have important consequences including the following:
+Added: ● we may have difficulty satisfying our obligations with respect to our indebtedness, and if we fail to comply with these requirements, an event of default could result;
+Added: ● we may be required to dedicate a substantial portion of our cash flow from operations to required payments on indebtedness, thereby reducing the availability of cash flow for working capital, capital expenditures and other general corporate activities;
+Added: ● covenants relating to our debt may limit our ability to obtain additional financing for working capital, capital expenditures and other general corporate activities;
+Added: ● covenants relating to our debt may limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
+Added: ● we may be placed at a competitive disadvantage against any less leveraged competitors.
+Added: These and other consequences of our leverage and the terms of our indebtedness could have a material adverse effect on our business, financial condition or results of operations.
+Added: Covenants in our 2019 Credit Facility may limit our ability to pursue our business strategies.
+Added: Our 2019 Credit Facility limits our ability to, among other things:
+Added: ● incur additional debt and guarantees;
+Added: ● pay dividends and repurchase our shares;
+Added: ● make other restricted payments, including investments;
+Added: ● create liens;
+Added: ● sell or otherwise dispose of assets, including capital shares of subsidiaries;
+Added: ● enter into agreements that restrict dividends from subsidiaries;
+Added: ● consolidate, merge or sell or otherwise dispose of all or substantially all of our assets;
+Added: ● substantially change the nature of our business.
+Added: During 2020 we amended the 2019 Credit Facility.
+Added: As amended the 2019 Credit Facility provides for certain covenant relief restrictions during the Covenant Relief Period (the period ending on the date that the Company delivers a compliance certificate for the quarter ending June 30, 2021 in form and substance satisfactory to the administrative agent).
+Added: During the Covenant Relief Period:
+Added: ● the maximum net leverage ratio is suspended;
+Added: ● the calculation of the minimum interest coverage ratio will exclude second quarter 2020 financial results effective for the quarters ended September 30, 2020 through March 31, 2021;
+Added: ● the minimum interest coverage ratio of 3.50 is reduced to 2.75 and 3.25 for the quarters ended December 31, 2020 and March 31, 2021, respectively;
+Added: ● the Company’s liquidity may not be less than $150,000;
+Added: ● the Company’s aggregate amount of cash and cash equivalents cannot exceed $130,000;
+Added: ● there are certain restrictions on Restricted Payments (as defined);
+Added: ● a Permitted Acquisition (as defined) may be not consummated unless otherwise approved in writing by the required lenders.
+Added: Following the Covenant Relief Period, the agreement governing our 2019 Credit Facility requires us to maintain a maximum leverage ratio of 3.50 to 1.00, and a minimum interest coverage ratio of 3.50 to 1.00 and places a maximum annual limit on capital expenditures.
+Added: 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.
+Added: A breach of any of the negative covenants under our indebtedness or our inability to comply with the leverage and interest ratio requirements in the 2019 Credit Facility could result in an event of default.
+Added: If an event of default occurs, the lenders under the 2019 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 2019 Credit Facility lenders could pursue foreclosure and other remedies against us and our assets.
+Added: 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.
+Added: Our overall effective tax rate is computed by dividing our total tax expense (benefit) by our total earnings (loss) before tax.
+Added: However, tax expense and benefits are not recognized on a global basis, but rather on a jurisdictional or legal entity basis.
+Added: 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.
+Added: Also, management periodically evaluates the realizability of our deferred tax assets which may result in the recognition and/or release of valuation allowances.
+Added: 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.
+Added: Risks Related to Products, Pricing and Supply
We are dependent on the availability and price of raw materials and other supplies.
2 unchanged sentences
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.
−Removed: At times, we have experienced difficulty obtaining adequate supplies of semiconductors and memory chips.
+Added: Currently, and at times in the past, we have experienced difficulty obtaining adequate supplies of semiconductors and memory chips.
In addition, there have been challenges at times in obtaining timely supply of nylon and resins for our Control Devices segment and audio component parts for our Stoneridge Brazil segment.
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.
−Removed: We use a variety of commodities, including copper, zinc, resins and certain other commodities.
−Removed: Increasing commodity costs could have a negative impact on our results.
−Removed: We have sought at times to alleviate the effect of increasing costs by selectively hedging a portion of our exposure.
−Removed: The inability to effectively hedge any commodity cost increase may have a material adverse effect on our business, financial condition or results of operations.
−Removed: We must implement and sustain a competitive technological advantage in producing our products to compete effectively.
−Removed: Our products are subject to changing technology, which could place us at a competitive disadvantage relative to alternative products introduced by competitors.
−Removed: 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.
−Removed: Our business may, therefore, require significant recurring additional capital expenditures and investment in product development and manufacturing and management information systems.
−Removed: We cannot assure that we will be able to achieve technological advances or introduce new products that may be necessary to remain competitive.
−Removed: Our inability to continuously improve existing products, to develop new products and to achieve technological advances could have a material adverse effect on our business, financial condition or results of operations.
−Removed: W e rely on independent dealers and distributors to sell certain products in the aftermarket sales channel and a disruption to this channel would harm our business.
+Added: 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.
+Added: This surge in demand led to a worldwide semiconductor supply shortage at the end of 2020 and into early 2021, as semiconductor suppliers have been unable to rapidly reallocate production lines to serve the transportation industry.
+Added: In addition, we have experienced longer lead-times, higher costs and delays in procuring other component parts and raw materials.
+Added: As a result, we are currently experiencing supply chain disruptions.
+Added: We are assessing the potential supply chain impacts, which may directly or indirectly impact various suppliers, and correspondingly, OEM production.
+Added: 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.
+Added: However, any direct or indirect supply chain disruptions may have an adverse impact on our financial condition, results of operations or cash flows.
+Added: 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.
+Added: Our supply agreements with our customers typically require us to provide our products at predetermined prices.
+Added: In some cases, these prices decline over the course of the contract and may require us to meet certain productivity and cost reduction targets.
+Added: In addition, our customers may require us to share productivity savings in excess of our cost reduction targets.
+Added: The costs that we incur in fulfilling these contracts may vary substantially from our initial estimates.
+Added: 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.
+Added: In some cases, we are permitted to pass on to our customers the cost increases associated with specific materials.
+Added: However, cost overruns that we cannot pass on to our customers could adversely affect our business, financial condition or results of operations.
+Added: 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.
+Added: We may be unable to generate sufficient production cost savings in the future to offset required price reductions.
+Added: Additionally, OEMs have generally required component suppliers to provide more design engineering input at earlier stages of the product development process, the costs of which have, in some cases, been absorbed by the suppliers.
+Added: Future price reductions, increased quality standards and additional engineering capabilities required by OEMs may reduce our profitability and have a material adverse effect on our business, financial condition or results of operations.
+Added: We have limited or no redundancy for certain of our manufacturing facilities, and therefore damage or disruption to those facilities could interrupt our operations, increase our costs of doing business and impair our ability to deliver our products on a timely basis.
+Added: If certain of our existing production facilities become incapable of manufacturing products for any reason, we may be unable to meet production requirements, we may lose revenue and we may not be able to maintain our relationships with our customers.
+Added: Without operation of certain existing production facilities, we may be limited in our ability to deliver products until we restore the manufacturing capability at the particular facility, find an alternative manufacturing facility or arrange an alternative source of supply.
+Added: We carry business interruption insurance to cover lost revenue and profits in an amount we consider adequate, however, this insurance does not cover all possible situations and may be insufficient.
+Added: Also, our business interruption insurance would not compensate us for the loss of opportunity and potential adverse impact on relations with our existing customers resulting from our inability to produce products for them.
+Added: We rely on independent dealers and distributors to sell certain products in the aftermarket sales channel and a disruption to this channel would harm our business.
Because we sell certain products such as security accessories and driver information products to independent dealers and distributors, we are subject to many risks, including risks related to their inventory levels and support for our products.
17 unchanged sentences
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.
−Removed: We may incur material product liability costs.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: A successful claim brought against us that exceeds available insurance coverage or a requirement to participate in any product recall could have a material adverse effect on our business, financial condition or results of operations.
+Added: Geopolitical Uncertainties
+Added: We are subject to risks related to our international operations.
+Added: Approximately 49% of our net sales in 2020 were derived from sales outside of North America.
+Added: At December 31, 2020, significant concentrations of net assets outside of North America included $221.3 million in Europe and Other and $30.3 million in South America.
+Added: Non-current assets outside of North America accounted for approximately 62% of our non-current assets as of December 31, 2020.
+Added: International sales and operations are subject to significant risks, including, among others:
+Added: ● political and economic instability;
+Added: ● restrictive trade policies;
+Added: ● economic conditions in local markets;
+Added: ● currency exchange rates and controls;
+Added: ● labor unrest;
+Added: ● difficulty in obtaining distribution support and potentially adverse tax consequences;
+Added: ● the imposition of product tariffs and the burden of complying with a wide variety of international and U.S.
+Added: 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.
+Added: We manufacture, sell and service products globally and rely upon a global supply chain to deliver the raw materials, components, systems and parts that we need to manufacture and service our products.
+Added: Changes in government policies on foreign trade and investment can affect the demand for our products and services, cause non-U.S.
+Added: customers to shift preferences toward domestically manufactured or branded products and impact the competitive position of our products or prevent us from being able to sell products in certain countries.
+Added: Our business benefits from free trade agreements, such as the new United States-Mexico-Canada Agreement and the U.S.
+Added: 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.
+Added: Any of these consequences could have a material adverse effect on our business, financial condition or results of operations.
+Added: Strategic Performance Risks
+Added: Our inability to effectively manage the timing, quality and costs of new program launches could adversely affect our financial performance.
+Added: In connection with the award of new business, we obligate ourselves to deliver new products and services that are subject to our customers’ timing, performance and quality standards.
+Added: Additionally, as a Tier 1 supplier, we must effectively coordinate the activities of numerous suppliers in order for the program launches of our products to be successful.
+Added: Given the complexity of new program launches, we may experience difficulties managing product quality, timeliness and associated costs.
+Added: In addition, new program launches require a significant ramp-up of costs;
+Added: however, our sales related to these new programs generally are dependent upon the timing and success of our customers’ introduction of new vehicles.
+Added: Our inability to effectively manage the timing, quality and costs of these new program launches could adversely affect our business, financial condition or results of operations.
+Added: We may not be able to successfully integrate acquisitions into our business or may otherwise be unable to benefit from pursuing acquisitions.
+Added: Failure to successfully identify, complete and/or integrate acquisitions could have a material adverse effect on us.
+Added: A portion of our growth in sales and earnings has been generated from acquisitions and subsequent improvements in the performance of the businesses acquired.
+Added: We expect to continue a strategy of selectively identifying and acquiring businesses with complementary products.
+Added: We cannot assure you that any business acquired by us will be successfully integrated with our operations or prove to be profitable.
+Added: We could incur substantial indebtedness in connection with our acquisition strategy, which could significantly increase our interest expense.
+Added: We anticipate that acquisitions could occur in foreign markets in which we do not currently operate.
+Added: As a result, the process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations.
+Added: Any failure to successfully integrate such acquisitions could have a material adverse effect on our business, financial condition or results of operations.
+Added: Product Liability Risks
Increased or unexpected product warranty claims could adversely affect us.
6 unchanged sentences
The costs of claims estimated to be due and payable could differ materially from what we may ultimately be required to pay.
−Removed: An increase in the rate of warranty claims or the occurrence of unexpected warranty claims could have a material adverse effect on our customer relations, our business, our financial condition or results of operations.
+Added: An increase in the rate of warranty claims or the occurrence of unexpected warranty claims could have a material adverse effect on our customer relations, our business, financial condition or results of operations.
+Added: We may incur material product liability costs.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: A successful claim brought against us that exceeds available insurance coverage or a requirement to participate in any product recall could have a material adverse effect on our business, financial condition or results of operations.
+Added: Intellectual Property Risks
If we fail to protect our intellectual property rights or maintain our rights to use licensed intellectual property or are found liable for infringing the rights of others, our business could be adversely affected.
9 unchanged sentences
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.
−Removed: Moreover, we may need to redesign some of our products to avoid future infringement liability.
+Added: 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.
1 unchanged sentence
These claims are being made by patent-holders seeking royalties and who may enter into litigation based on patent infringement allegations.
−Removed: Any of the foregoing could have a material adverse effect on our business, financial condition or results of operations.
−Removed: We may not be able to successfully integrate acquisitions into our business or may otherwise be unable to benefit from pursuing acquisitions.
−Removed: Failure to successfully identify, complete and/or integrate acquisitions could have a material adverse effect on us.
−Removed: A portion of our growth in sales and earnings has been generated from acquisitions and subsequent improvements in the performance of the businesses acquired.
−Removed: We expect to continue a strategy of selectively identifying and acquiring businesses with complementary products.
−Removed: We cannot assure you that any business acquired by us will be successfully integrated with our operations or prove to be profitable.
−Removed: We could incur substantial indebtedness in connection with our acquisition strategy, which could significantly increase our interest expense.
−Removed: We anticipate that acquisitions could occur in foreign markets in which we do not currently operate.
−Removed: As a result, the process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations.
−Removed: Any failure to successfully integrate such acquisitions could have a material adverse effect on our business, financial condition or results of operations.
−Removed: Our debt obligations could limit our flexibility in managing our business and expose us to risks.
−Removed: As of December 31, 2019, there was $126.0 million in borrowings outstanding on our revolving credit facility (the “2019 Credit Facility”).
−Removed: In addition, we are permitted under our 2019 Credit Facility to incur additional debt, subject to specified limitations.
−Removed: Our leverage and the terms of our indebtedness may have important consequences including the following:
−Removed: ● we may have difficulty satisfying our obligations with respect to our indebtedness, and if we fail to comply with these requirements, an event of default could result;
−Removed: ● we may be required to dedicate a substantial portion of our cash flow from operations to required payments on indebtedness, thereby reducing the availability of cash flow for working capital, capital expenditures and other general corporate activities;
−Removed: ● covenants relating to our debt may limit our ability to obtain additional financing for working capital, capital expenditures and other general corporate activities;
−Removed: ● covenants relating to our debt may limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;
−Removed: ● we may be placed at a competitive disadvantage against any less leveraged competitors.
−Removed: These and other consequences of our leverage and the terms of our indebtedness could have a material adverse effect on our business, financial condition or results of operations.
−Removed: Covenants in our 2019 Credit Facility may limit our ability to pursue our business strategies.
−Removed: Our 2019 Credit Facility limits our ability to, among other things:
−Removed: ● incur additional debt and guarantees;
−Removed: ● pay dividends and repurchase our shares;
−Removed: ● make other restricted payments, including investments;
−Removed: ● create liens;
−Removed: ● sell or otherwise dispose of assets, including capital shares of subsidiaries;
−Removed: ● enter into agreements that restrict dividends from subsidiaries;
−Removed: ● consolidate, merge or sell or otherwise dispose of all or substantially all of our assets;
−Removed: ● substantially change the nature of our business.
−Removed: The agreement governing our 2019 Credit Facility requires us to maintain a maximum leverage ratio of 3.50 to 1.00, and a minimum interest coverage ratio of 3.50 to 1.00 and places a maximum annual limit on capital expenditures.
−Removed: 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.
−Removed: A breach of any of the negative covenants under our indebtedness or our inability to comply with the leverage and interest ratio requirements in the 2019 Credit Facility could result in an event of default.
−Removed: If an event of default occurs, the lenders under the 2019 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 2019 Credit Facility lenders could pursue foreclosure and other remedies against us and our assets.
+Added: The Company has taken actions to mitigate this risk from new programs, however, significant indemnification claims related to these products could have a material adverse effect on our business, financial condition or results of operations.
+Added: Information Technology and Cybersecurity Risks
A failure of our information technology (IT) networks and systems, or the inability to successfully implement upgrades to our enterprise resource planning (ERP) systems, could adversely impact our business and operations.
1 unchanged sentence
The secure operation of these IT networks and systems and the proper processing and maintenance of this information are critical to our business operations.
−Removed: Despite the implementation of security measures, our IT networks and systems are at risk to damages from computer viruses, unauthorized access, cyber-attack and other similar disruptions.
−Removed: The occurrence of any of these events could compromise our IT networks and systems, and the information stored there could be accessed, publicly disclosed or lost.
−Removed: Any such access, disclosure, loss of information or disruption of our operations could cause significant damage to our reputation, affect our relationships with our customers, suppliers and employees, lead to claims against the Company and ultimately harm our business.
−Removed: We may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.
Also, 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.
2 unchanged sentences
We rely on information technology systems to process, transmit and store electronic information and manage and operate our business.
+Added: Despite the implementation of security measures, our IT networks and systems are at risk to damages from computer viruses, unauthorized access, cyber-attack and other similar disruptions.
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.
−Removed: While we have taken reasonable steps to protect the Company from cybersecurity risks and security breaches (including enhancing our firewall, workstation, email security and network monitoring 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.
+Added: 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 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.
+Added: We may be required to incur significant costs to protect against damage caused by these disruptions or security breaches in the future.
Privacy and security concerns relating to the Company’s current or future products and services could damage its reputation and deter current and potential users from using them.
We may gain access to sensitive, confidential or personal data or information that is subject to privacy and security laws, regulations and customer-imposed controls.
−Removed: Concerns about our practices with regard to the collection, use, disclosure, or security of personal information or other privacy related matters, even if unfounded, could damage our reputation and adversely affect our financial condition or operating results.
+Added: Concerns about our practices with regard to the collection, use, disclosure, or security of personal information or other privacy related matters, even if unfounded, could damage our reputation and adversely affect our business, our financial condition or operating results.
Furthermore, regulatory authorities around the world are considering a number of legislative and regulatory proposals concerning cybersecurity and data protection.
1 unchanged sentence
Complying with these various laws could cause the Company to incur substantial costs.
+Added: Environmental, Climate and Weather Risks
Compliance with environmental and other governmental regulations could be costly and require us to make significant expenditures.
8 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.
−Removed: 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.
−Removed: Our overall effective tax rate is computed by dividing our total tax expense (benefit) by our total earnings (loss) before tax.
−Removed: However, tax expense and benefits are not recognized on a global basis, but rather on a jurisdictional or legal entity basis.
−Removed: 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.
−Removed: Also, management periodically evaluates the realizability of our deferred tax assets which may result in the recognition and/or release of valuation allowances.
−Removed: 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.
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.