Cooper-Standard Holdings Inc.: Form 10-Q for the period ended Mar 31, 2025

This management’s discussion and analysis of financial condition and results of operations is intended to assist in understanding and assessing the trends and significant changes in our results of operations and financial condition. Our historical results may not indicate, and should not be relied upon as an indication of, our future performance. Our forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements. See “Forward-Looking Statements” below for a discussion of risks associated with reliance on forward-looking statements. Factors that may cause differences between actual results and those contemplated by forward-looking statements include, but are not limited to, those discussed below and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the U.S. Securities and Exchange Commission (“2024 Annual Report”), including Item 1A. “Risk Factors.” The following should be read in conjunction with our 2024 Annual Report and the other information included herein. Our discussion of trends and conditions supplements and updates such discussion included in our 2024 Annual Report. References in this quarterly report on Form 10-Q (the “Report”) to “we,” “our,” or the “Company” refer to Cooper-Standard Holdings Inc., together with its consolidated subsidiaries.

Executive Overview

Our Business

We design, manufacture and sell sealing systems and fluid handling systems (consisting of fuel and brake delivery systems and fluid transfer systems) for use primarily in passenger vehicles and light trucks manufactured by global original equipment manufacturers (“OEMs”). We are primarily a “Tier 1” supplier, with approximately 86% of our sales in 2024 made directly to major OEMs for installation on new vehicles.

Recent Trends and Conditions

General Economic Conditions and Outlook

The global automotive industry is susceptible to uncertain economic conditions that could adversely impact new vehicle demand and production. Business conditions may vary significantly from period to period or region to region. In 2024, light vehicle production slowed modestly due to rising inventory levels, relatively high interest rates and affordability concerns, and sustained geopolitical tensions throughout the world. Global commodity markets and pricing stabilized to a large degree in 2024, providing some support to the manufacturing environment. In 2025, we expect global production will slow further as inventory levels remain high, affordability concerns continue and global economic uncertainty persists. Ongoing changes in U.S. trade policy, including the imposition of significant tariffs on imported goods, is adding to economic risks and uncertainty globally, and could represent near-term challenges to the automotive industry.

In North America, U.S. consumer confidence has declined to the lowest levels since 2022. Uncertainty around U.S. trade policy, including the imposition of significant tariffs on imported goods, has unsettled the capital and consumer markets alike. Continuing high interest rates, stubbornly high prices on consumer goods, and increasing consumer debt continue to weigh on economic activity. Economists at the International Monetary Fund (IMF) are expecting the economies of the United States and Canada to grow by 1.8 percent and 1.4 percent, respectively, in 2025 while the Mexican economy is expected to contract by 0.3 percent in 2025.

In Europe, low unemployment, lower inflation and more stable energy costs are contributing to stronger household consumption. However, economic momentum slowed in the second half of 2024, especially in the manufacturing sector, due in part to declining export demand. In the first quarter of 2025, fresh concerns over tariffs and global trade relationships added another layer of uncertainty to the growth prospects in the region. Ongoing geopolitical tensions and the war in Ukraine also remain significant challenges to overall economic growth. Amid this uncertain environment, economists at the IMF are expecting the economy in the Eurozone region to grow by 0.8 percent in 2025.

In the Asia Pacific region, China’s economy continues to be burdened by a protracted property crisis, weak consumer and business confidence, and mounting local government debts. While year-over-year growth in the first quarter of 2025 was higher than expected on increased exports, tariffs and uncertainty around trade relationships with the United States are expected to weigh on economic activity and growth in the second quarter of 2025 and possibly beyond. Despite these risks, China’s economy could find strong footing with additional government stimulus actions, a rebound in private consumption and/or a favorable resolution to trade negotiations with the United States. Net of these factors, economists at the IMF are expecting the Chinese economy to grow at a rate of 4.0 percent in 2025.

In South America, the risks for the Brazilian economy worsened in the second half of 2024 as increased fiscal spending fueled higher than expected inflation. Brazil’s central bank has raised interest rates to stem inflation but the value of the national currency has fallen rapidly in recent months. In addition, the outlook for exports has softened due to moderating global demand and concerns over evolving global trade and tariff policies. In view of this uncertain and volatile landscape, economists at the IMF are expecting the growth rate of the Brazilian economy to slow modestly to 2.0 percent in 2025.

Production Levels

Our business is directly affected by the automotive vehicle production rates in North America, Europe, Asia Pacific and South America. These production rates can be impacted by changing macro-economic conditions, geopolitical actions, regional consumer sentiment, labor disruptions and changing regulatory and trade requirements, among other factors.

Light vehicle production by region for the three months ended March 31, 2025 and 2024 was as follows:

(in millions of units)

(1) Production data based on S&P Global, April 2025.

Current industry forecasts suggest global light vehicle production in the full year 2025 will be approximately 2% lower than full year 2024, followed by modest growth in 2026 and 2027. Ongoing changes in U.S. trade policy, including the imposition of significant tariffs on imported goods, is adding to economic risks and uncertainty globally, and could represent near-term challenges to the automotive industry. The anticipated growth in 2026 and 2027 is expected to be driven primarily by production increases in China, South Asia and South America. Actual production volumes have varied and may further vary from forecasted levels due to a number of factors including, but not limited to, consumer demand, the regulatory environment, incentives offered and industry competitiveness. The electric vehicle segment has been particularly challenged with regard to production volumes meeting forecasted levels.

Raw Materials

Our business is susceptible to inflationary pressures with respect to raw materials. Abrupt changes in the market prices or availability of certain key raw materials may result in operational and profitability challenges for the Company and the industry as a whole. Although global commodity markets and pricing largely stabilized in 2024, we continually work with our customers and suppliers to mitigate ongoing inflationary pressures and material-related cost exposures through a combination of expanded index-based agreements and other commercial enhancements.

General Inflation and Recovery Strategy

In response to inflationary cost pressures that we continue to experience, we have implemented aggressive lean and cost optimization initiatives that are helping to offset these cost pressures. In addition, we continue to actively pursue pricing adjustments from our customers to offset higher costs on our current business, where the higher costs are market driven and beyond our immediate control.

Results of Operations

(Dollar amounts in thousands)

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Sales

(Dollar amounts in thousands)

* Net of customer price adjustments, including recoveries.

Sales for the three months ended March 31, 2025 decreased 1.4% compared to the three months ended March 31, 2024. The decrease in sales was driven by the negative impact of foreign exchange, partially offset by favorable volume and mix, net of customer price adjustments including recoveries.

Gross Profit

(Dollar amounts in thousands)

* Net of customer price adjustments, including recoveries.

** Net of savings from 2024 restructuring initiatives.

Cost of products sold is primarily comprised of materials, labor, manufacturing overhead, freight, depreciation and other direct operating expenses. Among these, materials represent the largest component, accounting for approximately 52% and 50% of total cost of products sold for the three months ended March 31, 2025 and March 31, 2024, respectively. The change in cost of products sold was impacted by manufacturing and purchasing savings through lean initiatives, favorable foreign exchange and savings from prior year restructuring initiatives, partially offset by higher inflation of labor and overhead, higher volume and mix net of recovery, and tariff expense incurred but not yet recovered.

Gross profit for the three months ended March 31, 2025 increased $15.5 million compared to the three months ended March 31, 2024. The change was driven by manufacturing and purchasing savings through lean initiatives and savings from prior year restructuring initiatives, partially offset by higher inflation of labor and overhead and tariff expense incurred but not yet recovered.

Selling, Administration and Engineering Expenses. Selling, administration and engineering expenses include administrative expenses as well as product engineering and design and development costs. Selling, administration and engineering expenses for the three months ended March 31, 2025 were $51.2 million, or 7.7% of sales, compared to $55.4 million, or 8.2% of sales, for the three months ended March 31, 2024. The decrease as a percentage of sales was primarily due to lower compensation-related costs driven by savings from prior year restructuring initiatives.

Restructuring Charges. Restructuring charges for the three months ended March 31, 2025 increased $1.0 million compared to the three months ended March 31, 2024. The increase was primarily driven by higher restructuring costs related to employee severance and other related exit costs in our Sealing Systems segment.

Other Income (Expense), Net. Other income (expense), net, for the three months ended March 31, 2025 increased $12.5 million compared to the three months ended March 31, 2024. The increase was primarily driven by $10.0 million of income recognized in connection with certain royalty settlements, as well as the favorable impact of foreign currency exchange.

Income Tax Expense. Income tax expense for the three months ended March 31, 2025 was $2.7 million on earnings before income taxes of $4.3 million compared to an income tax expense of $4.1 million on losses before income taxes of $27.2 million for the three months ended March 31, 2024. The effective tax rate for the three months ended March 31, 2025 differed from the effective tax rate for the three months ended March 31, 2024 primarily due to the geographic mix of pre-tax losses, the inability to record a tax benefit for pre-tax losses in the U.S. and certain foreign jurisdictions due to valuation allowances and other permanent items.

Segment Results of Operations

Our business is organized in two reportable automotive segments: Sealing Systems and Fluid Handling Systems. All other business activities are reported in Corporate, eliminations and other. The Company uses segment adjusted EBITDA as the measure of earnings to assess the performance of each segment and determine the resources to be allocated to the segments. We have defined adjusted EBITDA as net income before interest, taxes, depreciation, amortization, restructuring expense, and special items.

The following tables present sales and segment adjusted EBITDA for each of the reportable segments.

Three Months Ended March 31, 2025 Compared with Three Months Ended March 31, 2024

Sales

(Dollar amounts in thousands)

* Net of customer price adjustments, including recoveries.

Sealing systems. The variance in volume and mix, including customer price adjustments, was driven by higher customer volumes. The unfavorable foreign currency exchange impact was driven by a $3.7 million impact of the Brazilian Real, a $3.6 million impact of the Euro, a $2.3 million impact of the Canadian Dollar, and a $1.1 million unfavorable impact of all other currencies.

Fluid handling systems. The variance in volume and mix, including customer price adjustments, was driven by higher customer volumes and customer recoveries. The unfavorable foreign currency exchange impact was driven by a $1.7 million impact of the Korean Won, a $1.4 million impact of the Brazilian Real, and a $1.3 million unfavorable impact of all other currencies.

Segment adjusted EBITDA

(Dollar amounts in thousands)

* Net of customer price adjustments, including recoveries.

** Net of savings from 2024 restructuring initiatives.

Sealing systems. The variance in volume and mix, including customer price adjustments, was driven by unfavorable mix. The unfavorable foreign currency exchange was driven by a $2.2 million impact of the Canadian Dollar. The cost decreases were primarily driven by $13.7 million of favorable manufacturing and purchasing savings through lean initiatives, and $3.4 million of all other operational savings, primarily from restructuring actions. These benefits were partially offset by $3.7 million of unfavorable inflationary costs (including salary, utilities and other operational costs).

Fluid handling systems. The variance in volume and mix, including customer price adjustments, was driven by higher customer volumes and customer recoveries. The favorable foreign currency exchange was primarily driven by a $6.0 million impact of the Mexican Peso. The cost decreases were driven by $4.3 million of favorable manufacturing and purchasing savings through lean initiatives and $2.8 million of all other operational savings, primarily from restructuring actions. These benefits were partially offset by $4.7 million of unfavorable inflationary costs (including salary, utilities, and other operational costs) and tariff expense incurred but not yet recovered.

Liquidity and Capital Resources

Short and Long-Term Liquidity Considerations and Risks

The sources to fund our ongoing working capital, capital expenditures, debt service and other funding requirements are a combination of cash flows from operations, cash on hand, borrowings under our senior asset-based revolving credit facility (“ABL Facility”) and receivables factoring. We utilize intercompany loans and equity contributions to fund our worldwide operations. However, certain country-specific regulations may impose restrictions or result in increased costs when repatriating funds. See Note 7. “Debt and Other Financing” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report for additional information.

We continue to actively preserve cash and enhance liquidity, including proactively managing our capital expenditures. We continuously monitor and forecast our liquidity situation in light of automotive industry, customer and economic factors, and take the necessary actions to preserve our liquidity and evaluate other financial alternatives that may be available to us should the need arise. Our ability to fund our working capital needs, debt payments and other obligations, and to comply with the financial covenants, including borrowing base limitations under our ABL Facility, depends on our future operating performance and cash flows. These may be impacted by many factors outside of our control, including but not limited to industry production levels, the costs of raw materials, the state of the overall automotive industry, general financial and economic conditions, including global trade and tariff policies, work stoppages, and potential public health events. Considering these factors, current projections for light vehicle production and customer demand for our products, we believe that our cash flows from operations, cash on hand, availability under our ABL Facility and receivables factoring will enable us to meet our ongoing working capital requirements, capital expenditures, debt service and other funding requirements for the foreseeable future, despite the challenges facing the industry.

Cash Flows

Operating Activities. Net cash used in operations was $14.9 million for the three months ended March 31, 2025, compared to net cash used in operations of $14.2 million for the three months ended March 31, 2024. The net change was primarily due to improved cash earnings.

Investing Activities. Net cash used in investing activities was $15.2 million for the three months ended March 31, 2025, compared to net cash used in investing activities of $16.7 million for the three months ended March 31, 2024. The net change was primarily due to proceeds of $2.4 million related to the 2024 divestiture of our non-core Canadian tooling business received during the three months ended March 31, 2025. We expect continued disciplined overall capital spending and anticipate that we will spend approximately $45.0 to $55.0 million on capital expenditures in 2025.

Financing Activities. Net cash used in financing activities totaled $2.5 million for the three months ended March 31, 2025, compared to net cash used in financing activities of $1.2 million for the three months ended March 31, 2024. The net change was primarily due to payments of tax withholding amounts related to employees’ share-based payment awards.

Share Repurchase Program

In June 2018, our Board of Directors approved a common stock repurchase program (the “2018 Program”) authorizing us to repurchase, in the aggregate, up to $150.0 million of our outstanding common stock. Under the 2018 Program, repurchases may be made on the open market, through private transactions, accelerated share repurchases, round lot or block transactions on the New York Stock Exchange or otherwise, as determined by us and in accordance with prevailing market conditions and federal securities laws and regulations. We expect to fund any future repurchases from cash on hand and future cash flows from operations. The specific timing and amount of any future repurchase will vary based on market and business conditions, changes in tax laws and other factors. We are not obligated to acquire a particular amount of securities, and the 2018 Program may be discontinued at any time at our discretion. The 2018 Program became effective in November 2018. As of March 31, 2025, we had approximately $98.7 million of repurchase authorization remaining under the 2018 Program. We did not make any repurchases under the 2018 Program during the three months ended March 31, 2025 or 2024.

Other Matters

We may, from time to time, seek to purchase our outstanding debt securities or loans, including the First Lien Notes, Third Lien Notes and 2026 Senior Notes. Such transactions could be privately negotiated or open market transactions, pursuant to tender offers or otherwise. Any such purchases will be made in our sole discretion in light of market conditions, applicable limitations contained in the agreements governing our indebtedness and other relevant factors. The amounts involved in any such purchase transactions, individually or in the aggregate, may be material. Any such purchases may equate to a substantial amount of a particular class or series of debt, which may reduce the trading liquidity of such class or series.

In the third quarter of 2023, we designated Liveline Technologies, Inc. (“Liveline”) an unrestricted subsidiary under the terms of certain of its debt agreements, but Liveline remains a wholly-owned subsidiary of Cooper-Standard Automotive Inc. Liveline incurred a net loss of $0.4 million and had net income of $0.3 million during the three months ended March 31, 2025 and March 31, 2024, respectively. As of March 31, 2025, Liveline had approximately $1.2 million of gross assets. Liveline will look to the Company for necessary funding until it is able to sustain itself through sales of its products and services.

Non-GAAP Financial Measures

In evaluating our business, management considers EBITDA and Adjusted EBITDA to be key indicators of our operating performance. Our management also uses EBITDA and Adjusted EBITDA:

• because similar measures are utilized in the calculation of the financial covenants and ratios contained in our financing arrangements;
• in developing our internal budgets and forecasts;
• as a significant factor in evaluating our management for compensation purposes;
• in evaluating potential acquisitions;
• in comparing our current operating results with corresponding historical periods and with the operational performance of other companies in our industry; and
• in presentations to the members of our board of directors to enable our board of directors to have the same measurement basis of operating performance as is used by management in their assessments of performance and in forecasting and budgeting for our company.

In addition, we believe EBITDA and Adjusted EBITDA and similar measures are widely used by investors, securities analysts and other interested parties in evaluating our performance. We define Adjusted EBITDA as net income (loss) plus income tax expense (benefit), interest expense, net of interest income, depreciation and amortization or EBITDA, as adjusted for items that management does not consider to be reflective of our core operating performance. These adjustments include, but are not limited to, restructuring costs, certain impairment charges, non-cash fair value adjustments and acquisition-related costs.

EBITDA and Adjusted EBITDA are not financial measurements recognized under U.S. GAAP, and when analyzing our operating performance, investors should use EBITDA and Adjusted EBITDA as a supplement to, and not as alternatives for, net income (loss), operating income, or any other performance measure derived in accordance with U.S. GAAP, nor as an alternative to cash flow from operating activities as a measure of our liquidity. EBITDA and Adjusted EBITDA have limitations as analytical tools, and they should not be considered in isolation or as substitutes for analysis of our results of operations as reported under U.S. GAAP. These limitations include the following:

• they do not reflect our cash expenditures or future requirements for capital expenditure or contractual commitments;
• they do not reflect changes in, or cash requirements for, our working capital needs;
• they do not reflect interest expense or cash requirements necessary to service interest or principal payments under our ABL Facility, First Lien Notes, Third Lien Notes, and 2026 Senior Notes;
• they do not reflect certain tax payments that may represent a reduction in cash available to us;
• although depreciation and amortization are non-cash charges, the assets being depreciated or amortized may have to be replaced in the future, and EBITDA and Adjusted EBITDA do not reflect cash requirements for such replacements; and
• other companies, including companies in our industry, may calculate these measures differently and, as the number of differences in the way companies calculate these measures increases, the degree of their usefulness as a comparative measure correspondingly decreases.

In addition, in evaluating Adjusted EBITDA, it should be noted that in the future, we may incur expenses similar to the adjustments in the below presentation. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by special items.

The following table provides a reconciliation of EBITDA and Adjusted EBITDA from net income (loss), which is the most comparable financial measure in accordance with U.S. GAAP:

(Dollar amounts in thousands)

(1) Gain on sale of businesses related to divestiture in 2024.

Contingencies and Environmental Matters

The information concerning contingencies, including environmental contingencies and the amount currently held in reserve for environmental matters, contained in Note 15. “Commitments and Contingencies” to the unaudited condensed consolidated financial statements included in Part I, Item 1 of this Report, is incorporated herein by reference.

Critical Accounting Estimates

There have been no significant changes in our critical accounting estimates during the three months ended March 31, 2025.

Forward-Looking Statements

This quarterly report on Form 10-Q includes “forward-looking statements” within the meaning of U.S. federal securities laws, and we intend that such forward-looking statements be subject to the safe harbor created thereby. Our use of words “estimate,” “expect,” “anticipate,” “project,” “plan,” “intend,” “believe,” “outlook,” “guidance,” “forecast,” or future or conditional verbs, such as “will,” “should,” “could,” “would,” or “may,” and variations of such words or similar expressions are intended to identify forward-looking statements. All forward-looking statements are based upon our current expectations and various assumptions. Our expectations, beliefs, and projections are expressed in good faith and we believe there is a reasonable basis for them. However, we cannot assure you that these expectations, beliefs and projections will be achieved. Forward-looking statements are not guarantees of future performance and are subject to significant risks and uncertainties that may cause actual results or achievements to be materially different from the future results or achievements expressed or implied by the forward-looking statements. Among other items, such factors may include: volatility or decline of the Company’s stock price, or absence of stock price appreciation; impacts and disruptions related to the wars in Ukraine and the Middle East; our ability to achieve commercial recoveries and to offset the adverse impact of higher commodity and other costs through pricing and other negotiations with our customers; work stoppages or other labor disruptions with our employees or our customers’ employees; prolonged or material contractions in automotive sales and production volumes; our inability to realize sales represented by awarded business; escalating pricing pressures; loss of large customers or significant platforms; our ability to successfully compete in the automotive parts industry; availability and increasing volatility in costs of manufactured components and raw materials; disruption in our supply base; competitive threats and commercial risks associated with our diversification strategy; possible variability of our working capital requirements; risks associated with our international operations, including changes in laws, regulations, and policies governing the terms of foreign trade such as increased trade restrictions and tariffs; foreign currency exchange rate fluctuations; our ability to control the operations of our joint ventures for our sole benefit; our substantial amount of indebtedness and rates of interest; our ability to obtain adequate financing sources in the future; operating and financial restrictions imposed on us under our debt instruments; the underfunding of our pension plans; significant changes in discount rates and the actual return on pension assets; effectiveness of continuous improvement programs and other cost savings plans; significant costs related to manufacturing facility closings or consolidation; our ability to execute new program launches; our ability to meet customers’ needs for new and improved products; the possibility that our acquisitions and divestitures may not be successful; product liability, warranty and recall claims brought against us; laws and regulations, including environmental, health and safety laws and regulations; legal and regulatory proceedings, claims or investigations against us; the potential impact of any future public health events on our financial condition and results of operations; the ability of our intellectual property to withstand legal challenges; cyber-attacks, data privacy concerns, other disruptions in, or the inability to implement upgrades to, our information technology systems; the possible volatility of our annual effective tax rate; the possibility of a failure to maintain effective controls and procedures; the possibility of future impairment charges to our goodwill and long-lived assets; our ability to identify, attract, develop and retain a skilled, engaged and diverse workforce; our ability to procure insurance at reasonable rates; and our dependence on our subsidiaries for cash to satisfy our obligations.

You should not place undue reliance on these forward-looking statements. Our forward-looking statements speak only as of the date of this quarterly report on Form 10-Q, and we undertake no obligation to publicly update or otherwise revise any forward-looking statement, whether as a result of new information, future events or otherwise, except where we are expressly required to do so by law.

This quarterly report on Form 10-Q also contains estimates and other information that is based on industry publications, surveys, and forecasts. This information involves a number of assumptions and limitations, and we have not independently verified the accuracy or completeness of the information.

There have been no material changes to the quantitative and qualitative information about the Company’s market risk from those previously disclosed in the Company’s 2024 Annual Report.

Evaluation of Disclosure Controls and Procedures

The Company has evaluated, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Based on that evaluation, the Company’s Chief Executive Officer along with the Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective at a reasonable assurance level as of the end of the period covered by this Report.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to affect, the Company’s internal control over financial reporting.

There have been no material changes to the risk factors reported or new risk factors identified since the filing of our 2024 Annual Report, except for the following:

Changes in U.S. or foreign trade policies, including the imposition of tariffs on imported goods and other trade restrictions, as well as uncertainty over such actions, may adversely impact our business and financial performance.

We obtain raw materials, components and other products and services from numerous suppliers and other vendors throughout the world. 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 products or from where we import products or raw materials could have an impact on our competitive position, business operations and financial performance.

Recently, the U.S. government announced substantial changes in U.S. trade policy and U.S. trade agreements, including the initiation of tariffs and trade restrictions on certain foreign goods. In response to these tariffs, certain foreign governments subject to such tariffs, including China, have retaliated by imposing tariffs on certain U.S. goods, which could represent near-term challenges to our industry. Increased retaliatory tariffs imposed by other countries on U.S. exports, further increases in U.S. tariffs, and the uncertainties surrounding domestic and foreign tariffs could require us to increase our prices, which could decrease demand for our products, and in certain cases, the Company may be unable to pass along such increased costs to our customers. We are actively monitoring and evaluating the development and potential impacts of tariffs on our supply chain and results of operations. While the Company continues to assess these developments, it may not be able to fully mitigate the effects of any prolonged tariffs or trade disputes.

Further, additional trade restrictions could be adopted with little to no advanced notice, and we may not be able to effectively mitigate the adverse impacts from those such measures. Political uncertainty surrounding trade or other international disputes also could have a negative impact on consumer confidence and willingness to spend money, which could impair our business. We cannot predict whether, and to what extent, there may be changes to international trade agreements, such as those between the U.S. and China, or whether, or to what extent, additional tariffs, taxes on imports or other restrictions will be changed or imposed by the U.S. or by other countries. Any of these events could increase the cost of our products, create disruptions to our supply chain and impair our ability to effectively operate and compete in the countries where we do business.