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Item 1A. Risk Factors

2021-02-25 compared with 2020-02-27 · 146 added, 133 removed, 128 unchanged (69% of the section changed)

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The risks and uncertainties described below are those that we have identified as material, but are not the only risks and uncertainties facing us.

Although the risks are organized by headings, and each risk is discussed separately, many of the risks are interrelated.

Additional risks and uncertainties not currently known to us or that we currently believe are immaterial may also impact our business operations, financial results and liquidity.

Risks Relating to the COVID-19 Pandemic

The COVID-19 pandemic has had, and is expected to continue to have, a significant impact on the Company's operations and results.

Since late January 2020, we have been managing matters related to the global COVID-19 pandemic, including impacts to our operations and strategic supplier-partners in Asia, as well as our manufacturing operations in Europe and North America.

We have experienced temporary disruptions in the operation of certain of our facilities due to elevated levels of absenteeism, which has impacted workforce staffing.

In response, we were early adopters of many of the workplace guidelines published by the U.S.

Centers for Disease Control and Prevention ("CDC") and implemented other precautionary measures as necessary to maintain social distancing.

COVID-19 has also affected our customers and suppliers, and we have been and will continue to collaborate with them to minimize supply chain disruptions.

We have also implemented pandemic and business continuity plans, as well as other precautionary measures on behalf of our customers and employees, including supporting remote work opportunities for certain of our employees.

While we believe that all of these measures have been necessary and appropriate, they have resulted in additional costs and may adversely impact our business and financial performance in the future or expose us to additional unknown risks.

The COVID-19 pandemic has impacted our results of operations, and we expect it will continue to impact us in the future at varying levels.

For example, due in part to the impact of the COVID-19 pandemic, sales for our dispensing and closure products increased, while sales in our Aerospace and Specialty Products segments decreased in 2020.

Although it is not possible to predict the ultimate impact of COVID-19, including on our business, results of operations, financial position or cash flows, such impacts that may be material and include, but are not limited to:

(i) shifting customer demand for many of our products, including those used in cosmetic, personal care, pharmaceutical, home care, food and beverage, and industrial markets, as well as aerospace markets;

(ii) increased credit risk, including increased failure by customers experiencing business disruptions to make timely payments;

(iii) reduced availability and productivity of employees, as well as increased costs associated with our high-deductible medical insurance plan if our employees become ill;

(iv) increased operational risks as a result of manufacturing facility disruptions or remote work arrangements, including the potential effects on internal controls and procedures, as well as cybersecurity risks and increased vulnerability to security breaches, information technology disruptions and other similar events;

(v) delays and disruptions in the availability of and timely delivery of materials and components used in our operations, as well as increased costs for such materials and components;

(vi) customer requirements to accelerate the relocation of certain of our production lines to North America, which may increase our capital investment needs and launch costs;

(vii) a negative impact on liquidity position;

(viii) any impairment in value of tangible or intangible assets which could be recorded as a result of weaker economic conditions;

and (ix) increased costs and less ability to access amounts available under our existing credit facility or more generally, access to and the availability of capital markets.

The extent of the COVID-19 pandemic's effect on our operational and financial performance will depend in large part on future developments, which cannot be predicted with confidence at this time.

Future developments include the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, and the resumption of widespread economic activity.

In addition, because we cannot predict the impact that COVID-19 will ultimately have, the actual impact may also exacerbate other risks discussed in this Item 1A.

Risks Relating to Our Business

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and global economies.

Although with the sale of Lamons we have significantly reduced our future exposure to the oil and gas end market, we still are exposed to highly cyclical end markets for industrial goods (including our remaining exposure in oil and gas), and to a lesser extent, aerospace and consumer products.

Although with the sale of Lamons in December 2019 we significantly reduced our exposure to the oil and gas end market, we still are exposed to highly cyclical end markets for industrial goods (including our remaining exposure in oil and gas), and to a lesser extent, aerospace and consumer products.

When combined with ongoing customer consolidation activity and periodic inventory reduction initiatives, an uncertain macro-economic and political climate could lead to reduced demand from our customers, variations in timing of sales to our customers, increased price competition for our products, increased risk of excess and obsolete inventories, uncollectible receivables, and higher overhead costs as a percentage of revenue, all of which could impact our operating margins.

If our customers are adversely affected by these factors, we may experience lower product volume orders, which could have an unfavorable impact on our revenue and operating profit.

Our inability to forecast precisely the level of our customers’ orders can cause inefficiencies within our installed manufacturing capacity and result in sub-optimal business and financial results.

Our ability to precisely forecast the level of our customers’ orders is limited and can result in inefficiencies in scheduling our installed manufacturing capacity and result in sub-optimal business and financial results.

Many of the markets we serve are highly competitive, which could limit sales volumes and reduce our operating margins.

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We may have insufficient resources in the future to continue to make such investments and, even if we make such investments, we may not be able to maintain or improve our competitive position.

We also face the risk of lower-cost foreign manufacturers located in China, India and other regions competing in the markets for our products and we may be driven as a consequence of this competition to increase our investment overseas.

We also face the risk of lower-cost manufacturers located in China, India and other regions competing in the markets for our products and we may be driven as a consequence of this competition to increase our investment overseas.

Making overseas investments can be highly complicated and we may not always realize the advantages we anticipate from any such investments.

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Moreover, the effect of dispositions over time will reduce our cash flow and earnings capacity and result in a less diversified portfolio of businesses, and we will have a greater dependency on remaining businesses for our financial results.

Accordingly, risks related to strategic acquisitions or dispositions may result in the disruption of our ongoing business, diversion of management’s attention, the failure of such transactions to be completed, or the failure to realize the financial and strategic benefits contemplated at the time of a transaction, some or all of which could materially and adversely affect our business strategy and financial condition and results of operations.

We have significant goodwill and intangible assets, and future impairment of our goodwill and intangible assets could have a material negative impact on our financial results.

At December 31, 2020, our goodwill and intangible assets were approximately $510.2 million and represented approximately 42.7% of our total assets.

If we experience declines in sales and operating profit or do not meet our current and forecasted operating budget, we may be subject to goodwill and/or other intangible asset impairments in the future.

While the fair value of our remaining goodwill exceeds its carrying value, significantly worse financial performance of our businesses, significantly different assumptions regarding future performance of our businesses or significant declines in our stock price could result in future impairment losses.

Because of the significance of our goodwill and intangible assets, and based on the magnitude of historical impairment charges, any future impairment of these assets could have a material adverse effect on our financial results.

Increases in our raw material or energy costs or the loss of critical suppliers could adversely affect our profitability and other financial results.

We are sensitive to price movements in our raw materials supply base.

Our largest material purchases are for resins (such as polypropylene and polyethylene), steel, aluminum and other oil and metal-based purchased components.

Prices for these products fluctuate with market conditions, and have generally increased over time.

We may be unable to offset the impact with price increases on a timely basis due to outstanding commitments to our customers, competitive considerations or our customers’ resistance to accepting such price increases and our financial performance could be adversely impacted.

A failure by our suppliers to continue to supply us with certain raw materials or component parts on commercially reasonable terms, or at all, could have a material adverse effect on us.

To the extent there are energy supply disruptions or material fluctuations in energy costs, our margins could be materially adversely impacted.

Our business may be exposed to risks associated with an increasingly concentrated customer base.

While no individual customer accounted for 10% or more of our consolidated net sales for 2020, 2019 or 2018, our customer base has become, and may further become, increasingly concentrated as a result of our smaller revenue base following the 2019 sale of Lamons, or due to customer consolidations and/or through sales growth to existing customers.

In 2020, our Packaging and Aerospace segments each had customers that comprised more than 10% of its segment revenue.

As a result of these factors, changes to or reductions in the buying patterns of these larger customers may expose our business and results of operations to greater volatility.

For example, prior to the outbreak of COVID-19, a large commercial aircraft manufacturer announced significant production delays and/or reductions on certain of its platforms for which we provide products, which has impacted our sales, profit and production efficiencies compared with historical levels and is expected to continue into the foreseeable future until and if these delays and/or reductions are lifted.

The mix and type of customers, and sales to any single customer, may vary significantly from quarter to quarter and from year to year, and have a significant impact on our financial condition, results of operations and cash flows.

If customers do not place orders, or they substantially reduce, delay or cancel orders, we may not be able to replace the business, which may have a significant adverse impact on our results of operations and financial condition.

Major customers may require that we localize manufacturing and supply capacity rather than sourcing from lower cost countries, or seek pricing, payment, intellectual property-related, or other commercial terms that are less favorable to us, which may have a negative impact on our business.

The concentration of our customer base also increases our risks related to the financial condition of our customers, and the deterioration in financial condition of customers or the failure of customers to perform their obligations could have a material adverse effect on our results of operations and cash flows.

We are dependent on our manufacturing facilities for the production of our highly engineered products, which subjects us to risks associated with disruptions and changing technology and manufacturing techniques that could place us at a competitive disadvantage.

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however, we may be unable to address technological advances, implement new and more cost-effective manufacturing techniques, or introduce new or improved products, whether in existing or new markets, so as to maintain our businesses’ competitive positions or to grow our businesses as desired.

Significant developments from the recent and potential changes in U.S.

trade policies could have a material adverse effect on us and our financial condition and results of operations.

Free trade laws and regulations provide certain duties and tariffs on qualifying imports and exports, subject to compliance with the applicable classification and other requirements.

government has indicated its intent to alter its approach to international trade policy and in some cases to renegotiate, or potentially terminate, certain existing bilateral or multi-lateral trade agreements and treaties with foreign countries.

For example, in the past two years, the U.S.

government implemented additional tariffs on certain goods imported from China.

These tariffs, and other governmental actions relating to international trade agreements or policies, the adoption and expansion of trade restrictions, or the occurrence of a trade war may adversely impact demand for our products, costs, customers, suppliers and/or the U.S.

economy or certain sectors thereof and, as a result, adversely impact our business.

These tariffs and actions may, directly or indirectly, lead to higher costs and cause us to increase prices to our customers which may reduce demand, or, if we are unable to increase prices, result in lowering our margin on products sold.

For example, in the past two years, we experienced higher input costs as a direct result of recently imposed tariffs on certain raw materials and components imported from China.

In certain cases, we have passed-through these incremental costs to the customer, while in some cases we have not changed pricing to retain or expand volume, and in other cases we are working to install capacity in facilities where there currently is no tariff.

In addition, our U.S.

suppliers raised prices for certain components in response to an overall increase in demand for domestic sources as a result of recently imposed tariffs.

It remains unclear what the U.S.

or foreign governments will or will not do with respect to tariffs, international trade agreements and policies on a short-term or long-term basis.

Additional changes in laws or policies governing the terms of foreign trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture or purchase products could have a material adverse effect on our business and financial results.

Increases in our raw material or energy costs or the loss of critical suppliers could adversely affect our profitability and other financial results.

We are sensitive to price movements in our raw materials supply base.

Our largest material purchases are for steel, polypropylene, polyethylene and other resins, aluminum, titanium and copper.

Prices for these products fluctuate with market conditions, and have generally increased over time.

A failure by our suppliers to continue to supply us with certain raw materials or component parts on commercially reasonable terms, or at all, could have a material adverse effect on us.

To the extent there are energy supply disruptions or material fluctuations in energy costs, our margins could be materially adversely impacted.

Our business may be exposed to risks associated with an increasingly concentrated customer base.

While no individual customer accounted for 10% or more of our consolidated net sales for 2019, 2018 or 2017, our customer base has become, and may further become, increasingly concentrated as a result of our smaller revenue base following the sale of Lamons, or due to customer consolidations and/or through our sales growth to existing customers.

In 2019, our Packaging and Aerospace reportable segments each had customers that comprised more than 10% of its segment revenue.

As a result of these factors, certain customers may expose our business and results of operations to greater volatility.

For example, a large commercial aircraft manufacturer recently announced significant production delays and/or reductions on certain of its platforms for which we provide products, which we expect will at least temporarily impact our sales, profit and production efficiencies compared with 2019 levels until and if these delays and/or reductions are lifted.

Major customers may also seek pricing, payment, intellectual property-related, localizing supply rather than sourcing from Asia, or other commercial terms that are less favorable to us, which may have a negative impact on our business.

A major failure of our information systems could harm our business;

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Any service disruption from one of these suppliers, either due to circumstances beyond the supplier’s control, such as geopolitical developments or logistical complications due to weather, global climate change, earthquakes or other natural disasters, or as a result of performance problems or financial difficulties, could have a material adverse effect on our ability to meet commitments to our customers or increase our operating costs.

We have significant goodwill and intangible assets, and future impairment of our goodwill and intangible assets could have a material negative impact on our financial results.

At December 31, 2019 , our goodwill and intangible assets were approximately $496.0 million and represented approximately 41.6% of our total assets.

Trends in oil and natural gas prices may affect the demand for, and profitability of, our energy-related products and services, which could have an adverse effect on our business, consolidated results of operations, and consolidated financial condition.

The oil and gas industry historically has experienced periodic downturns.

Demand for our energy-related products, such as pump jack engines and compressors, is sensitive to the level of production activity of, and the corresponding capital spending by, oil and natural gas companies.

The level of production activity is directly affected by trends in oil (and related derivatives) and natural gas prices, which have been at lower levels over the past four years, and may continue to remain at depressed levels and be subject to future volatility.

Prices for oil and natural gas are subject to large fluctuations in response to changes in the supply of and demand for oil and natural gas, market uncertainty, geopolitical developments, alternative production methods and a variety of other factors that are beyond our control.

Even the perception of longer-term lower oil and natural gas prices can reduce or defer major capital expenditures by our customers in the oil and gas industry.

A growing portion of our sales may be derived from international sources, which exposes us to certain risks which may adversely affect our financial results and impact our ability to service debt.

We have operations outside of the United States.

Approximately 22.7% of our net sales for the year ended December 31, 2020 were derived from sales by our subsidiaries located outside of the U.S.

In addition, we may expand our international operations through internal growth or acquisitions.

International operations, particularly sales to emerging markets and manufacturing in non-U.S.

countries, are subject to risks that are not present within U.S.

markets, which include, but are not limited to, the following:

• volatility of currency exchange between the U.S.

dollar and currencies in international markets;

• changes in local government regulations and policies including, but not limited to, foreign currency exchange controls or monetary policy, governmental embargoes, repatriation of earnings, expropriation of property, duty or tariff restrictions, investment limitations and tax policies;

• political and economic instability and disruptions, including labor unrest, civil strife, public health crises (including viral outbreaks such as the coronavirus), acts of war, guerrilla activities, insurrection and terrorism;

• legislation that regulates the use of chemicals;

• disadvantages of competing against companies from countries that are not subject to U.S.

laws and regulations, including the Foreign Corrupt Practices Act ("FCPA");

• compliance with international trade laws and regulations, including export control and economic sanctions, such as anti-dumping duties;

• difficulties in staffing and managing multi-national operations;

• limitations on our ability to enforce legal rights and remedies;

• tax inefficiencies in repatriating cash flow from non-U.S.

subsidiaries that could affect our financial results and reduce our ability to service debt;

• reduced protection of intellectual property rights;

• other risks arising out of foreign sovereignty over the areas where our operations are conducted.

In addition, we could be adversely affected by violations of the FCPA and similar worldwide anti-bribery laws as well as export controls and economic sanction laws.

The FCPA and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S.

officials for the purpose of obtaining or retaining business.

Our acquisition and disposition agreements by which we have acquired or sold companies, include indemnification provisions that may not fully protect us and may result in unexpected liabilities.

Certain of the agreements related to the acquisition and disposition of businesses require indemnification against certain liabilities related to the operations of the company for the previous owner.

We cannot be assured that any of these indemnification provisions will fully protect us, and as a result we may incur unexpected liabilities that adversely affect our profitability and financial position.

Regulatory, Legal and Environmental Risks

Significant developments from the recent and potential changes in U.S.

trade policies could have a material adverse effect on us and our financial condition and results of operations.

Free trade laws and regulations provide certain duties and tariffs on qualifying imports and exports, subject to compliance with the applicable classification and other requirements.

For example, beginning in October 2018, the U.S.

government implemented additional tariffs on certain goods imported from China.

economy or certain sectors thereof and, as a result, adversely impact our business.

For example, in the past two years, we experienced higher input costs as a direct result of recently imposed tariffs on certain raw materials and components imported from China.

In addition, our U.S.

suppliers raised prices for certain components in response to an overall increase in demand for domestic sources as a result of recently imposed tariffs.

It remains unclear what the U.S.

or foreign governments will or will not do with respect to tariffs, international trade agreements and policies on a short-term or long-term basis.

Compliance with and changes in tax laws, including tax reform legislation in the United States, could materially and adversely impact our financial condition, results of operations and cash flows.

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New tax laws and regulations and changes in existing tax laws and regulations could result in increased expenditures by us for tax liabilities in the future and could materially and adversely impact our financial condition, results of operations and cash flows.

The 2017 Tax Cuts and Jobs Act included substantial changes to U.S.

tax law, including a reduction in the corporate tax rate, a limitation on deductibility of interest expense, a limitation on the use of net operating losses to offset future taxable income, the allowance of immediate expensing of capital expenditures and deemed repatriation of foreign earnings.

The Company recorded charges of approximately $12.3 million, net, between 2017 and 2018 as a result of adopting the 2017 Tax Cuts and Jobs Act.

Any future clarification of the tax law or required change in these charges could adversely affect the Company's business and financial condition.

We have debt principal and interest payment requirements that may restrict our future operations and impair our ability to meet our obligations.

As of December 31, 2019 , we have approximately $294.7 million of outstanding debt.

We are subject to variable interest rates on our revolving credit facility.

Such interest rates are based on the London Interbank Offered Rate ("LIBOR") plus 1.50%.

We may experience increases in our interest expense as a result of general increases in interest rate levels, which could be affected by the replacement of LIBOR as the benchmark interest rate.

We have no amounts outstanding under our revolving credit facility as of December 31, 2019 .

Our degree of leverage and level of interest expense may have important consequences, including:

should our leverage increase, it may place us at a competitive disadvantage as compared with our less leveraged competitors and make us more vulnerable in the event of a downturn in general economic conditions or in any of our businesses;

our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate may be limited;

a substantial portion of our cash flow from operations will be dedicated to the payment of annual interest and future principal obligations on our indebtedness, thereby reducing the funds available to us for operations, capital expenditures, acquisitions, future business opportunities or obligations to pay rent in respect of our operating leases;

our operations are restricted by our debt instruments, which contain certain financial and operating covenants, and those restrictions may limit, among other things, our ability to borrow money in the future for working capital, capital expenditures, acquisitions, rent expense or other purposes.

Our ability to service our debt and other obligations will depend on our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors, many of which are beyond our control.

Our business may not generate sufficient cash flow, and future financings may not be available to provide sufficient net proceeds, to meet these obligations or to successfully execute our business strategies.

See " Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.

Restrictions in our debt instruments limit our ability to take certain actions and breaches thereof could impair our liquidity.

Our revolving credit facility and the indenture governing our senior notes contain covenants that restrict our ability to:

pay dividends or redeem or repurchase capital stock;

incur additional indebtedness and grant liens;

make acquisitions and joint venture investments;

Our debt instruments also require us to comply with financial covenants relating to, among other things, interest coverage and leverage.

We may not be able to satisfy these covenants in the future or be able to pursue our strategies within the constraints of these covenants.

Substantially all of the assets of our domestic subsidiaries are pledged as collateral.

Borrowings under the foreign currency sub limit are secured by a pledge of the assets of the foreign subsidiary borrowers that are party to our revolving credit facility.

A breach of a covenant contained in our debt instruments could result in an event of default under one or more of our debt instruments and our lease financing arrangements.

Such breaches would permit the lenders to declare all amounts borrowed thereunder to be due and payable, and the commitments of such lenders to make further extensions of credit could be terminated.

Each of these circumstances could materially and adversely impair our liquidity.

We may face liability associated with the use of products for which patent ownership or other intellectual property rights are claimed.

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Some of these environmental laws hold owners or operators of land or businesses liable for their own and for previous owners’ or operators’ releases of hazardous or toxic substances or wastes.

Other environmental laws and regulations require the obtainment and compliance with environmental permits.

Other environmental laws and regulations require obtaining and complying with environmental permits.

To date, costs of complying with environmental, health and safety requirements have not been material.

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Future events, including those relating to climate change or greenhouse gas regulation, could require us to incur expenses related to the modification or curtailment of operations, installation of pollution control equipment or investigation and cleanup of contaminated sites.

Economic conditions and regulatory changes following the United Kingdom's exit from the European Union could have a material adverse effect on our business and results of operations.

The United Kingdom's exit from the European Union and the resulting significant change to the United Kingdom's relationship with the European Union and with countries outside the European Union (and the laws, regulations and trade deals impacting business conducted between them) could disrupt the overall economic growth or stability of the United Kingdom and the European Union and negatively impact our operations.

The United Kingdom exited the European Union on January 31, 2020.

These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets.

Any of these factors could depress economic activity and restrict our access to capital, which could have a material adverse effect on our business, financial condition and results of operations and reduce the price of our equity shares.

We operate manufacturing facilities internationally, including in the United Kingdom.

Accordingly, the United Kingdom's withdrawal from the European Union may have an adverse impact on our international operations, particularly in the United Kingdom.

Our reputation, ability to do business, and results of operations may be impaired by legal compliance risks.

While we strive to maintain high standards, our internal controls and compliance systems may not always protect us from acts committed by our employees, agents, or business partners that would violate U.S.

and/or non-U.S.

laws or adequately protect our confidential information, including the laws governing payments to government officials, bribery, fraud, anti-kickback and false claims rules, competition, export and import compliance, money laundering, and data privacy laws, as well as the improper use of proprietary information or social media.

Any such allegations, violations of law or improper actions could subject us to civil or criminal investigations in the U.S.

and in other jurisdictions, could lead to substantial civil or criminal, monetary and non-monetary penalties, and related shareholder lawsuits, could lead to increased costs of compliance, could damage our reputation and could have a material effect on our financial statements.

Risks Related to our Debt and Other Financial Obligations

We have debt principal and interest payment requirements that may restrict our future operations and impair our ability to meet our obligations.

As of December 31, 2020, we have approximately $346.3 million of outstanding debt.

We are subject to variable interest rates on our revolving credit facility.

Such interest rates are based on the London Interbank Offered Rate ("LIBOR") plus 1.50%.

We may experience increases in our interest expense as a result of general increases in interest rate levels, which could be affected by the replacement of LIBOR as the benchmark interest rate.

We had $50.5 million outstanding under our revolving credit facility as of December 31, 2020.

Our degree of leverage and level of interest expense may have important consequences, including:

• should our leverage increase, it may place us at a competitive disadvantage as compared with our less leveraged competitors and make us more vulnerable in the event of a downturn in general economic conditions or in any of our businesses;

• our flexibility in planning for, or reacting to, changes in our businesses and the industries in which we operate may be limited;

• a substantial portion of our cash flow from operations will be dedicated to the payment of annual interest and future principal obligations on our indebtedness, thereby reducing the funds available to us for operations, capital expenditures, acquisitions, future business opportunities or obligations to pay rent in respect of our operating leases;

• our operations are restricted by our debt instruments, which contain certain financial and operating covenants, and those restrictions may limit, among other things, our ability to borrow money in the future for working capital, capital expenditures, acquisitions, rent expense or other purposes.

See " Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.

Restrictions in our debt instruments limit our ability to take certain actions and breaches thereof could impair our liquidity.

Our revolving credit facility and the indenture governing our senior notes contain covenants that restrict our ability to:

• pay dividends or redeem or repurchase capital stock;

• incur additional indebtedness and grant liens;

• make acquisitions and joint venture investments;

• sell assets.

Our debt instruments also require us to comply with financial covenants relating to, among other things, interest coverage and leverage.

We may not be able to satisfy these covenants in the future or be able to pursue our strategies within the constraints of these covenants.

Substantially all of the assets of our domestic subsidiaries are pledged as collateral.

Borrowings under the foreign currency sub limit are secured by a pledge of the assets of the foreign subsidiary borrowers that are party to our revolving credit facility.

A breach of a covenant contained in our debt instruments could result in an event of default under one or more of our debt instruments and our lease financing arrangements.

Such breaches would permit the lenders to declare all amounts borrowed thereunder to be due and payable, and the commitments of such lenders to make further extensions of credit could be terminated.

Each of these circumstances could materially and adversely impair our liquidity.

Our borrowing costs may be impacted by our credit ratings developed by various rating agencies.

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These leases are categorized as operating leases and are not considered indebtedness for purposes of our debt instruments.

The oil and gas industry historically has experienced periodic downturns.

Even the perception of longer-term lower oil and natural gas prices can reduce or defer major capital expenditures by our customers in the oil and gas industry.

Human Capital Risks

We may be subject to further unionization and work stoppages at our facilities or our customers may be subject to work stoppages, which could seriously impact the profitability of our business.

As of December 31, 2019 , approximately 22% of our work force was unionized under several different unions and bargaining agreements.

We have collective bargaining agreements covering five facilities worldwide, one of which is in the United States.

As of December 31, 2020, we have one facility, located in Commerce, California (USA) where our hourly employees operate under a collective bargaining agreement, and which represents approximately 14% of our U.S.

We have four facilities outside of the United States where our employees are affiliated with state-controlled or trade unions, which covers approximately 41% of our non-U.S.

Our labor agreement with the United Automobile, Aerospace and Agricultural Implement Workers of America at our TriMas Aerospace facility in Commerce, California expires in 2021.

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Many of our direct or indirect customers have unionized work forces.

Strikes, work stoppages or slowdowns experienced by these customers or their suppliers could result in slowdowns or closures of assembly plants where our products are included.

Strikes, work stoppages or slowdowns experienced by these customers or their suppliers could result in slowdowns or closures of assembly plants where our products are utilized.

In addition, organizations responsible for shipping our customers' products may be impacted by occasional strikes or other activity.

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Additionally, foreign competitors and many domestic competitors provide fewer benefits to their employees, and this difference in cost could adversely impact our competitive position.

A growing portion of our sales may be derived from international sources, which exposes us to certain risks which may adversely affect our financial results and impact our ability to service debt.

We have operations outside of the United States.

Approximately 18.2% of our net sales for the year ended December 31, 2019 were derived from sales by our subsidiaries located outside of the U.S.

In addition, we may expand our international operations through internal growth or acquisitions.

International operations, particularly sales to emerging markets and manufacturing in non-U.S.

countries, are subject to risks that are not present within U.S.

markets, which include, but are not limited to, the following:

volatility of currency exchange between the U.S.

dollar and currencies in international markets;

changes in local government regulations and policies including, but not limited to, foreign currency exchange controls or monetary policy, governmental embargoes, repatriation of earnings, expropriation of property, duty or tariff restrictions, investment limitations and tax policies;

political and economic instability and disruptions, including labor unrest, civil strife, public health crises (including viral outbreaks such as the coronavirus), acts of war, guerrilla activities, insurrection and terrorism;

legislation that regulates the use of chemicals;

disadvantages of competing against companies from countries that are not subject to U.S.

laws and regulations, including the Foreign Corrupt Practices Act ("FCPA");

compliance with international trade laws and regulations, including export control and economic sanctions, such as anti-dumping duties;

difficulties in staffing and managing multi-national operations;

limitations on our ability to enforce legal rights and remedies;

tax inefficiencies in repatriating cash flow from non-U.S.

subsidiaries that could affect our financial results and reduce our ability to service debt;

reduced protection of intellectual property rights;

other risks arising out of foreign sovereignty over the areas where our operations are conducted.

In addition, we could be adversely affected by violations of the FCPA and similar worldwide anti-bribery laws as well as export controls and economic sanction laws.

The FCPA and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from making improper payments to non-U.S.

officials for the purpose of obtaining or retaining business.

Our acquisition and disposition agreements by which we have acquired or sold companies, include indemnification provisions that may not fully protect us and may result in unexpected liabilities.

Certain of the agreements related to the acquisition and disposition of businesses require indemnification against certain liabilities related to the operations of the company for the previous owner.

We depend on the services of key individuals and relationships, the loss of which could materially harm us.

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The loss of the services of any of our key employees or the failure to retain or attract employees could have a material adverse effect on us.

Economic conditions and regulatory changes following the United Kingdom's exit from the European Union could have a material adverse effect on our business and results of operations.

The United Kingdom exited the European Union on January 31, 2020.

The United Kingdom is currently in a transition period that will expire on December 31, 2020.

We operate manufacturing facilities internationally, including in the United Kingdom.

Accordingly, the United Kingdom's withdrawal from the European Union may have an adverse impact on our international operations, particularly in the United Kingdom.

Our reputation, ability to do business, and results of operations may be impaired by legal compliance risks.

and/or non-U.S.

Any such allegations, violations of law or improper actions could subject us to civil or criminal investigations in the U.S.

If the Cequent spin-off does not qualify as a tax-free transaction, the Company and its shareholders could be subject to substantial tax liabilities.

The separation of our former Cequent businesses from TriMas in 2015 was conditioned on our receipt of an opinion from our tax advisors, in form and substance satisfactory to us, that the distribution of shares of our Cequent businesses in the spin-off qualifies as tax-free to the Cequent businesses, the Company and our shareholders for U.S.

federal income tax purposes under Sections 355 and 368(a)(1)(D) and related provisions of the U.S.

Internal Revenue Code of 1986, as amended (the “Code”), the Company and other members of our consolidated tax reporting group.

The opinion relied on, among other things, various assumptions and representations as to factual matters made by the Company and the Cequent businesses which, if inaccurate or incomplete in any material respect, could jeopardize the conclusions reached by our advisor in its opinion.

The opinion is not binding on the Internal Revenue Service (“IRS”), or the courts, and there is no assurance that the IRS or the courts will not challenge the qualification of the spin-off as a transaction under Sections 355 and 368(a) of the Code or that any such challenge would not prevail.

If the spin-off were determined not to qualify under Section 355 of the Code, each U.S.

holder of our common shares who received shares of the Cequent businesses in connection with the spin-off would generally be treated as having received a taxable distribution of property in an amount equal to the fair market value of the shares of the Cequent businesses that were received.

That distribution would be taxable to each such shareholder as a dividend to the extent of our current and accumulated earnings and profits.

For each such shareholder, any amount that exceeded our earnings and profits would be treated first as a non-taxable return of capital to the extent of such shareholder’s tax basis in his or her common shares of the Company with any remaining amount being taxed as a capital gain.

We would be subject to tax as if we had sold common shares in a taxable sale for their fair market value and we would recognize taxable gain in an amount equal to the excess of the fair market value of such common shares over our tax basis in such common shares, which could have a material adverse impact on our financial condition, results of operations and cash flows.

Unresolved Staff Comments

1 unchanged sentence

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What changed 10-K

Item 1A. Risk Factors