What changed in this filing

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Item 1A. Risk Factors

2022-03-09 compared with 2021-03-10 · 44 added, 42 removed, 231 unchanged (27% of the section changed)

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The ultimate significance of these disruptions to our business, financial condition, results of operations, and cash flows will depend greatly on how long the disruptions continue.

A continued delay of full recovery in our operations, and/or any similar delay with respect to resumption of operations by one or more of our key suppliers, would result in further challenges to our business and may negatively affect our business, financial condition, results of operations, and cash flows.

Any inability to operate at full capacity, and/or any similar delay with respect to resumption of operations by one or more of our key suppliers, would result in further challenges to our business and may negatively affect our business, financial condition, results of operations, and cash flows.

Customer-related risks :

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Our global sales and operations are subject to a variety of economic, market and financial risks and costs that could affect our profitability and operating results.

We do business around the world and are continuing our strategy of global expansion.

We do business around the world and are continuing our strategy of enhancing our global optimization.

Our international sales are primarily to customers in Europe, Canada and Asia-Pacific.

In addition, our manufacturing operations, suppliers and employees are located in many places around the world.

The future success of our business depends in large part on growth in our sales in non-U.S.

The future success of our business includes

growth in our sales in non-U.S.

Our global operations are subject to numerous financial, legal and operating risks, such as political and economic instability;

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Demand for our products and services is also sensitive to changes in customer order patterns, which may be affected by announced price changes, changes in incentive programs, new product introductions and customer inventory levels.

Any of these factors

could adversely affect our growth and results of operations in any given period.

Any of these factors could adversely affect our growth and results of operations in any given period.

We could experience a failure of a key information technology system, process or site or a breach of information security, including a cybersecurity breach or failure of one or more key information technology systems, networks, processes, associated sites or service providers .

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The data we store, and process may include customer payment information, personal information concerning our employees, confidential financial information, and other types of sensitive business-related information.

Numerous and evolving cybersecurity threats pose potential risks to the security of our IT systems, networks and services, as well as the confidentiality, availability and integrity of our data.

Numerous and evolving cybersecurity threats pose potential risks to the security of our IT systems, networks and services, as well as the confidentiality, availability and integrity of our technology systems and data.

In addition, the laws and regulations governing security of data on IT systems is evolving and adding another layer of complexity in the form of new requirements.

We have made, and continue to make investments, seeking to address these threats, including monitoring of networks and systems, hiring of experts, employee training and security policies for employees and third-party providers.

The techniques used in these attacks change frequently and may be difficult to detect for periods of time and we may face difficulties in anticipating and implementing adequate preventative measures.

While the breaches of our IT systems to date have not been material to our business or results of operations, the costs of attempting to protect IT systems and data will increase, and there can be no assurance that these added security efforts will prevent all breaches of our IT systems or thefts of our data.

If our IT systems are damaged or cease to function properly, the networks or service providers we rely upon fail to function properly, or we or one of our third-party providers suffer a loss or disclosure of our business or stakeholder information due to any number of causes ranging from catastrophic events or power outages to improper data handling or security breaches and our business continuity plans do not effectively address these failures on a timely basis, we may be exposed to potential disruption in operations, loss of customers, reputational, competitive and business harm as well as significant costs from remediation, litigation and regulatory actions.

In the past, we have had cybersecurity incidents and we have made, and continue to make investments, seeking to address these threats, including monitoring of networks and systems, hiring of experts to evaluate and test our systems, employee training and security policies for employees and third-party providers.

The frequency and the techniques used in these attacks has increased significantly and may be difficult to detect for periods of time and we may face difficulties in anticipating and implementing adequate preventative measures.

While the breaches of our IT systems to date have not been material to our business or results of operations, the costs of attempting to protect our IT systems and data will increase, and there can be no assurance that these added security efforts will prevent all breaches of our IT systems or thefts of our data.

If our IT systems are damaged or cease to function properly, the networks or service providers we rely upon fail to function properly, or we or one of our third-party providers suffer a loss or disclosure of our business or stakeholder information due to any number of causes ranging from catastrophic events or power outages to improper data handling or security breaches (including ransomware, denial-of-service attacks, a malicious website, the use of social engineering and other means to affect the confidentiality, integrity and availability of our technology systems and data) and our business continuity plans do not effectively address these failures on a timely basis, we may be exposed to potential disruption in operations, loss of customers, reputational, competitive and business harm as well as significant costs from remediation, ransom payments, litigation and regulatory actions.

We are also subject to an increasing number of evolving data privacy and security laws and regulations.

Failure to comply with such laws and regulations could result in the imposition of fines, penalties and other costs.

The European Union (“EU”) and United Kingdom’s General Data Protection Regulations and the EU’s pending ePrivacy Regulation could disrupt our ability to sell products and solutions or use and transfer data because such activities may not be in compliance with applicable laws.

The European Union (“EU”) and United Kingdom’s General Data Protection Regulations and the EU’s pending ePrivacy Regulation

could disrupt our ability to sell products and solutions or use and transfer data because such activities may not be in compliance with applicable laws.

Additionally, cybersecurity incidents related to export control technology information of our Aerospace & Defense customers could subject us to additional reporting requirements, could disrupt our ability to sell products to those customers and could subject us to additional costs, penalties, and fines all of which may be material to our operating results.

The Audit Committee of the Board of Directors is responsible for information security oversight and is comprised entirely of independent directors.

Additionally, three members of the Company’s Board of Directors have relevant information security and cybersecurity experience.

Additionally, two members of the Company’s Board of Directors have relevant information security and cybersecurity experience.

As part of their oversight, senior leadership meets with the Audit Committee at least annually to discuss information security and cybersecurity matters.

Over the last three years, nominal costs were incurred related to information security breaches, including penalties and settlements.

Over the last three years, the Company has experienced one known security breach, which occurred in June 2018.

On an annual basis, the Company is audited by an external security services provider to the National Institute of Standards and Technology (NIST) SP 800-171 standards and enhances its security framework based upon the results of those audits.

Over the last three years, the Company has experienced one known information security breach, in connection with a ransomware incident that occurred in June 2021.

Over the last three years, costs incurred related to information security breaches did not have a material adverse effect on our results of operations.

However, as cybersecurity incidents continue to increase in scope and frequency, we may be unable to prevent a significant incident in the future which may materially impact our results of operations.

Every two to three years, the Company is audited by an external security services provider to the National Institute of Standards and Technology (NIST) SP 800-171 standards and enhances its security framework based upon the results of those audits.

For new associates, and on an annual basis, the Company requires associates to take security awareness training and has an on-going phishing recognition training and testing programs.

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changes in the cost of these purchases due to inflation, exchange rates, tariffs, or other factors;

shortages of components, commodities or other materials, which could adversely affect our manufacturing

efficiencies and ability to make timely delivery.

shortages of components, commodities or other materials, which could adversely affect our manufacturing efficiencies and ability to make timely delivery.

Any of these uncertainties could adversely affect our profitability and ability to compete.

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We are also subject to risks associated with U.S.

and foreign legislation and regulations relating to imports, including quotas, duties, tariffs or taxes, and other charges or restrictions on imports, which could adversely affect our operations and our ability to import products at current or increased levels.

and foreign legislation and regulations relating to imports, including quotas, duties, tariffs or taxes, and other charges or restrictions

on imports, which could adversely affect our operations and our ability to import products at current or increased levels.

We cannot predict whether additional U.S.

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A significant portion of our revenues and trade receivables are concentrated with a small group of customers.

These customers have a variety of suppliers to choose from and therefore can make substantial demands on us, including demands on product pricing and on contractual terms, often resulting in the allocation of risk to us as the supplier.

These customers have a variety of suppliers to choose from and therefore can make substantial demands on us, including

demands on product pricing and on contractual terms, often resulting in the allocation of risk to us as the supplier.

Our ability to maintain strong relationships with our principal customers is essential to our future performance.

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STRATEGIC RISKS

We may explore additional acquisitions that complement, enhance or expand our business.

We may not be able to complete these transactions, and, if completed, we may experience operational and financial risks in connection with our acquisitions that may materially adversely affect our business, financial condition and operating results.

Our strong organic growth has been and will continue to be enhanced by strategic acquisitions that complement, enhance or expand our business.

We may not be able to find or complete these transactions, and, if completed, we may experience operational and financial risks in connection with our acquisitions that prevent us from realizing the anticipated benefits and may materially adversely affect our business, financial condition and operating results.

Acquisitions are part of our strategic growth plans.

We may have difficulty finding these opportunities, or if we do identify these opportunities, we may not be able to complete the transactions for various reasons including a failure to secure financing.

To the extent that we are able to complete the transactions, we will face the operational and financial risks commonly encountered with an acquisition strategy.

To the extent that we are able to complete the transactions (including our recent acquisitions of Dynamic Controls, ORMEC, ALIO and Spectrum Controls), we will face the operational and financial risks commonly encountered with an acquisition strategy.

These risks include the challenge of integrating acquired businesses while managing the ongoing operations of each business, the challenge of combining the business cultures of each company, and the need to retain key personnel of our existing business and the acquired business.

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We intend to expand into new markets and develop new and modified products based on our existing technologies and engineering capabilities, including the continued expansion of our controlled motion systems and integrated electronics.

These efforts have required and will continue to require us to make substantial investments, including significant

research, development and engineering expenditures and capital expenditures for new, expanded or improved manufacturing facilities.

These efforts have required and will continue to require us to make substantial investments, including significant research, development and engineering expenditures and capital expenditures for new, expanded or improved manufacturing facilities.

Specific risks in connection with expanding into new products and markets include longer product development cycles, the inability to transfer our quality standards and technology into new products, and the failure of our customers to accept the new or modified products.

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If any of these events occur, our sales and profits could be adversely affected.

Our competitiveness depends on successfully executing our growth initiatives and our globalization strategies.

We continue to invest in initiatives to support future growth, such as the creation of a more effective corporate structure, implementation of our enterprise resource planning system, launch of a new integrated website, implementation of a structured approach to identify target markets, and the expansion of our AST (continuous improvement initiatives in quality, delivery, and cost).

Our competitiveness depends on successfully executing our growth initiatives and our global optimization strategies.

We continue to invest in initiatives to support future growth, such as the creation of a more effective corporate structure,

implementation of our enterprise resource planning system, launch of a new integrated website, implementation of a structured approach to identify target markets, and the expansion of our AST (continuous improvement initiatives in quality, delivery, and cost).

The failure to achieve our objectives on these initiatives could have an adverse effect on our operating results and financial condition.

Our globalization strategy includes localization of our products and services to be closer to our customers and identified growth opportunities.

Our global optimization strategy includes localization of our products and services to be closer to our customers and identified growth opportunities.

Localization of our products and services includes expanding our capabilities, including supply chain and sourcing activities, product design, manufacturing, engineering, marketing and sales and support.

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reducing our flexibility in planning for or reacting to changes in our business and market conditions;

and exposing us to interest rate risk since a portion of our

debt obligations are at variable rates.

and exposing us to interest rate risk since a portion of our debt obligations are at variable rates.

In addition, certain of our indebtedness will have significant outstanding principal balances on their maturity dates, commonly known as balloon payments.

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We may incur more debt in the future, particularly to finance acquisitions, and there can be no assurance that our cost of funding will not substantially increase.

Our existing credit agreements contain, and any future debt agreements we may enter into may contain, certain financial tests and other covenants that limit our ability to incur indebtedness, acquire other businesses and impose various other restrictions.

Our existing credit agreements contain, and any future debt agreements we may enter into may contain, certain financial tests and other covenants that limit our ability to incur indebtedness, pay dividends, acquire other businesses and impose various other restrictions.

If we breach any of the covenants and do not obtain a waiver from the lenders, the outstanding indebtedness could be declared immediately due and payable.

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In addition, certain of our variable rate debt uses London Interbank Offer Rate ("LIBOR") as a benchmark for establishing the interest rate, a portion of which is hedged with LIBOR-based interest rate derivatives.

LIBOR has been the subject of recent proposals for reform, and is currently scheduled to be discontinued on June 30, 2023.

LIBOR has been the subject of proposals for reform, and is currently scheduled to be discontinued on June 30, 2023.

While all of our material financing arrangements indexed to LIBOR provide procedures for determining an alternative base rate when LIBOR is discontinued, there can be no assurances as to whether such alternative base rate will be more or less favorable than LIBOR.

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Our quarterly and annual operating results are affected by a wide variety of factors that could materially adversely affect revenues and profitability, including:

the timing of customer orders and the deferral or cancellation of orders previously received, the level of orders received which can be shipped in a quarter, fulfilling backlog on a timely basis, competitive pressures on selling prices, changes in the mix of products sold, the timing of investments in engineering and development, development of and response to new technologies, and delays in new product qualifications.

the timing of customer orders and the deferral or cancellation of orders previously received, the level of orders received which can be shipped in a quarter, fulfilling backlog on a timely basis, competitive pressures on selling prices, changes in the mix of products sold, the unavailability or delays in the receipt of critical inventories, the timing of investments in engineering and development, development of and response to new technologies, and delays in new product qualifications.

As a result of the foregoing and other factors, we may experience material fluctuations in future operating results on a quarterly or annual basis which could materially and adversely affect our business, financial condition, operating results and stock price.

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We provide health benefits to many of our employees and the costs to provide such benefits continue to increase annually.

The amount of any increase or decrease in the cost of Company-sponsored health plans will depend on a number of different factors including new governmental regulations mandating types of coverage and reporting and

other requirements.

We also sponsor defined benefit pension, defined contribution pension, and other postretirement benefit plans.

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Changes to these significant estimates could increase the cost of these plans, which could also have a material adverse effect on the Company’s financial condition and results of operations.

Failure of our internal control over financial reporting could limit our ability to report our financial results accurately and timely or prevent fraud.

Failure of our internal controls over financial reporting could limit our ability to report our financial results accurately and timely or prevent fraud.

We believe that effective internal controls are necessary to provide reliable financial reports and to assist in the effective prevention of fraud.

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Our operating results depend in part on our ability to contain or reduce costs.

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

Our efforts to maintain and improve profitability depend in part on our ability to reduce the costs of materials, components, supplies and labor, including establishing production capabilities at our low cost regional subcontractors.

While the failure of any single cost containment effort by itself would most likely not significantly impact our results, we cannot give any assurances that we will be successful in implementing cost reductions and maintaining a competitive cost structure.

There is substantial price competition in our industry and upward pressure on material and labor costs.

Our success and profitability will depend on our ability to maintain a competitive cost and price structure.

Our efforts to maintain and improve profitability depend in part on our ability to maintain or reduce the costs of materials, components, supplies and labor, including establishing production capabilities at our low cost regional subcontractors.

While the failure of any single cost containment effort by itself would most likely not significantly impact our results, we cannot give any assurances that we will be successful in controlling material and labor costs to maintain a competitive cost structure.

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

We may have to reduce prices in the future to remain competitive.

Also, our future profitability will depend in part upon our ability to continue to improve our manufacturing efficiencies and maintain a cost structure that will enable us to offer competitive prices.

Our inability to maintain a competitive cost structure could have a material adverse effect on our business, financial condition and results of operations.

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For example, the U.S.

Securities and Exchange Commission has adopted disclosure rules for

companies that use conflict minerals in their products, with substantial supply chain verification requirements in the event that the materials come from, or could have come from, the Democratic Republic of the Congo or adjoining countries.

Securities and Exchange Commission has adopted disclosure rules for companies that use conflict minerals in their products, with substantial supply chain verification requirements in the event that the materials come from, or could have come from, the Democratic Republic of the Congo or adjoining countries.

These rules and verification requirements impose additional costs on us and on our suppliers, and may limit the sources or increase the cost of materials used in our products.

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Our business is subject to environmental regulations that could negatively affect our operating results.

Federal, state and local regulations impose various environmental controls on the manufacturing, transportation, storage, use and disposal of hazardous chemicals and other materials used in, and hazardous waste produced by the manufacturing of our products.

Our worldwide operations are subject to environmental laws and regulations that impose various environmental controls on the manufacturing, transportation, storage, use and disposal of hazardous chemicals and other materials used in, and hazardous waste produced by the manufacturing of our products.

Conditions relating to our historical operations may require expenditures for clean-up in the future and changes in environmental laws and regulations may impose costly compliance requirements on us or otherwise subject us to future liabilities.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors