9 unchanged sentences
A decline in economic activity, such as a recession or economic downturn, in the U.S.
−Removed: and other regions in the world in which we do business, could adversely affect consumer confidence and spending patterns which could result in decreased demand for the products we sell, a delay in purchases, increased price competition, slower adoption of energy-efficient water heaters and boilers, or high-quality water treatment products, which could negatively impact our profitability and cash flows.
+Added: and other regions in the world in which we do business, could further adversely affect consumer confidence and spending patterns which could result in decreased demand for the products we sell, a delay in purchases, increased price competition, slower adoption of energy-efficient water heaters and boilers, or high-quality water treatment products, which could negatively impact our profitability and cash flows.
Such deterioration in economic conditions could arise from many factors or fears including public health crises, political instability or risk of government default.
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Any of these disruptions or other extraordinary events outside of our control that impact our operations or the operations of our suppliers and key distributors could affect our business negatively, harming operating results.
−Removed: The COVID-19 pandemic continues to cause disruption to the global economy.
−Removed: We continue to monitor the pandemic, and while periodic local increases and decreases in COVID-19 cases are likely, generally the restrictions due to and in response to the pandemic continue to relax in most locations.
−Removed: However, the COVID-19 pandemic and efforts to manage it, including those by governmental authorities, could have a material adverse effect on our financial condition, results of operations and cash flows.
Natural disasters and extreme weather conditions may disrupt the productivity of our facilities.
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We maintain insurance coverage and have taken steps to mitigate these physical risks related to natural disasters and extreme weather conditions.
−Removed: Pricing for our insurance program has remained at the prevailing market rate with no significant change in the current year’s premium rates from the prior year.
−Removed: Also, to mitigate the risk of flooding, we recently completed an approximately 7,000-foot-long berm, flood gates, and pumping stations around our Ashland City, Tennessee facility, our largest manufacturing facility.
−Removed: Despite our mitigation efforts, there is still the potential for natural disasters and extreme weather conditions to disrupt the productivity of our facilities.
+Added: Although we installed an approximately 7,000-foot-long berm, flood gates, and pumping stations around our Ashland City, Tennessee facility, our largest manufacturing facility, to mitigate the risk of flooding, there is still the potential for natural disasters and extreme weather conditions to disrupt the productivity of our facilities.
Apart from the potential impact on our operations, these types of events also could negatively impact consumer spending in the impacted regions or depending on the severity, globally, which could materially and adversely affect our financial condition, results of operations and cash flows.
2 unchanged sentences
Consumer purchasing behavior may shift the product mix in the markets in which we participate or result in a shift to other distribution channels, for example e-commerce.
−Removed: Consumer preferences and broader trends, such as decarbonization and electrification efforts in response to climate change, may result in increased demand for higher efficiency products and/or more electric powered products.
+Added: Consumer preferences and broader trends, such as decarbonization and electrification efforts in response to climate change, may result in reduced demand for gas or fossil fuel-powered products and increased demand for higher efficiency products and/or more electric powered products.
In addition, technologies are ever changing.
3 unchanged sentences
The market prices for certain materials and components we purchase, primarily steel, have been volatile.
−Removed: We have also experienced inflation related increases in our transportation costs.
+Added: In recent years we have also experienced inflation-related increases in our transportation and other costs.
Significant increases in the cost of any of the key materials and components we purchase would increase our cost of doing business and ultimately could lead to lower operating earnings if we are not able to recover these cost increases through price increases to our customers.
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others may invest little in technology or product development but compete on price and the rapid replication of features, benefits, and technologies, and some are increasingly expanding beyond their existing manufacturing or geographic footprints.
−Removed: In North America, the gas tankless portion of the water heating market has for many years increased as a percentage of the overall market.
−Removed: While we have many gas tankless products, our market share for gas tankless products is lower than our market share for the remainder of the water heating market.
−Removed: Further expansion of the gas tankless portion of the North America market, which we believe was approximately 11 percent of the residential market segment in 2022, could have an impact on our operating results.
−Removed: We cannot assure that our products will continue to compete successfully with those of our competitors.
−Removed: There could be new market participants that change the dynamics of those markets and it is possible that we will not be able to retain our customer base or improve or maintain our profit margins on sales to our customers, all of which could materially and adversely affect our financial condition, results of operations and cash flows.
+Added: New technologies and new competitors have developed and continue to develop in certain markets in which we participate, such as gas tankless and heat pump technologies in North America.
+Added: While we design and manufacture these and other products, we cannot assure that our products will continue to compete successfully with those of our current competitors and new market participants and it is possible that we will not be able to retain our customer base or improve or maintain our profit margins on sales to our customers.
+Added: There is also increasing use of data analytics, machine learning, and artificial intelligence software, which our competitors may be able to use more effectively or implement more successfully than we are able to do.
+Added: Failure to adapt to the evolving competitive environment could materially and adversely affect our financial condition, results of operations and cash flows.
■ Because approximately 22 percent of our sales in 2023 were attributable to China, adverse economic conditions or changes in consumer behavior in China could impact our business
−Removed: Our sales in China decreased five percent in local currency in 2022 compared to 2021.
+Added: Our sales in China increased four percent in local currency in 2023 compared to 2022.
Our 2022 sales in China were impacted by lower consumer demand driven by COVID-19 related disruptions.
−Removed: Certain COVID-19 restrictions were lifted at the end of 2022 but could return.
We derive a substantial portion of our sales in China from premium-tier products.
−Removed: Changes in consumer preferences and purchasing behaviors including preferences for e-commerce, weakening consumer confidence and sentiment as well as economic uncertainty, socio-political risks, increased competition from Chinese-based companies, and potential future COVID-19 related impacts, may prompt Chinese consumers to postpone purchases, choose lower-priced products or different alternatives, or lengthen the cycle of replacement purchases.
+Added: Changes in consumer preferences and purchasing behaviors including preferences for e-commerce and manufacturer emphasis on brand ecosystems and connectivity, weakening consumer confidence and sentiment, as well as economic uncertainty, sociopolitical and demographic risks, and increased competition from Chinese-based companies may prompt Chinese consumers to postpone purchases, choose lower-priced products or different alternatives, or lengthen the cycle of replacement purchases.
Further deterioration in the Chinese economy may adversely affect our financial condition, results of operations and cash flows.
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The loss of one or more of our largest customers, any material reduction or delay in sales to these customers, or our inability to successfully develop relationships with additional customers could have a material adverse effect on our financial position, results of operations and cash flows.
−Removed: ■ A portion of our business could be adversely affected by a further decline in North American new residential or commercial construction or a decline in replacement-related volume of water heaters and boilers, including a decline in demand for commercial spaces
−Removed: Residential new construction activity in North America and industry-wide replacement-related volume of water heaters had growth in 2020 and 2021, and then declined in 2022.
+Added: ■ A portion of our business could be adversely affected by a decline in North American new residential or commercial construction or a decline in replacement-related volume of water heaters and boilers, including a decline in demand for commercial spaces
+Added: Residential new construction activity in North America and industry-wide replacement-related volume of water heaters had growth in 2023 after a decline in 2022.
New residential housing starts in the U.S.
−Removed: are projected to decrease further in 2023 compared to 2022.
−Removed: Commercial construction activity in North America grew in 2022 and 2021 after declining in 2020.
−Removed: We believe that the significant majority of the markets we serve are for the replacement of existing products, and residential water heater replacement volume was strong in 2022 and 2021.
+Added: are projected to be approximately flat in 2024 compared to 2023.
+Added: Commercial construction activity in North America grew in 2023, although at a slower rate than 2022.
+Added: We believe that the significant majority of the markets we serve are for the replacement of existing products, and residential water heater replacement volume have been strong.
As a result of the COVID-19 pandemic, businesses and commercial spaces have experienced and may experience in the future, fluctuation in demand and in occupancy that may reduce demand for our products, and commercial sectors, such as the restaurant and hospitality industries in which we have customers, may experience long-term shifts in consumer behavior which could negatively impact demand or capacity and may not return to pre-pandemic levels.
5 unchanged sentences
Like many companies, we, and some third parties upon which we rely, have experienced cybersecurity incidents and attacks on information technology networks and systems, products and services in the past but, to date, none have resulted in a material breach or had a material adverse impact on our financial condition, results of operations, or cash flows.
−Removed: We may experience them in the future, potentially with increasing frequency from increasingly
−Removed: sophisticated cyber threats.
+Added: We may experience such incidents and attacks in the future, potentially with increasing frequency
+Added: from increasingly sophisticated cyber threats.
In addition, as a result of the COVID-19 pandemic, remote work and remote access to our systems have increased, which may heighten these risks.
−Removed: A successful attack in the future could result in operations failure or breach of security that could lead to disruptions of our business activities, the loss or disclosure of both our and our customers’ financial, product and other confidential information and could result in regulatory actions, litigation and have a material adverse effect on our financial condition, results of operations and cash flows and our reputation.
−Removed: We have a response plan in place in the event of a data breach and we have an active program to maintain and improve data security and address these risks and uncertainties by implementing and improving internal controls, security technologies, insurance programs, network and data center resiliency and recovery processes.
+Added: Use of artificial intelligence software may also create risks from unintentional disclosure of proprietary, confidential, personal or otherwise sensitive information.
+Added: Although we have a response plan in place in the event of a data breach and we have an active program to maintain and improve data security and address these risks and uncertainties by implementing and improving internal controls, security technologies, insurance programs, network and data center resiliency and recovery processes, a successful attack in the future could result in operations failure or breach of security that could lead to disruptions of our business activities and the loss or disclosure of both our and our customers’ financial, product and other confidential information and could result in regulatory actions, significant expense and litigation and have a material adverse effect on our financial condition, results of operations and cash flows and our reputation.
■ Our international operations are subject to risks related to foreign currencies
3 unchanged sentences
Furthermore, typically our products are priced in foreign countries in local currencies.
−Removed: As a result, we are subject to risks associated with operating in foreign countries, including fluctuations in currency exchange rates and interest rates, hyperinflation in some foreign countries such as Turkey, where we currently have minor operations, or global exchange rate instability or volatility that strengthens the U.S.
+Added: As a result, we are subject to risks associated with operating in foreign countries, including fluctuations in currency exchange rates and interest rates, or global exchange rate instability or volatility that strengthens the U.S.
dollar against foreign currencies.
An increase in the value of the U.S.
−Removed: dollar relative to the local currencies of our foreign markets, as experienced globally in the second half of 2022, has negatively affected our sales, profitability, and cash and cash equivalents balances and could have such effects in the future.
+Added: dollar relative to the local currencies of our foreign markets, particularly in China, has negatively affected our sales, profitability, and cash and cash equivalents balances and could have such effects in the future.
In 2023, the change in foreign currencies negatively impacted our sales and cash and cash equivalents by approximately $56 million and $13 million, respectively.
10 unchanged sentences
■ Potential acquisitions could use a significant portion of our capital and we may not successfully integrate future acquisitions or operate them profitably or achieve strategic objectives
−Removed: We acquired Giant, a Canada-based manufacturer of residential and commercial water heaters, on October 19, 2021, for $199 million subject to customary adjustments using a combination of cash and debt.
We will continue to evaluate potential acquisitions, and we could use a significant portion of our available capital to fund future acquisitions.
−Removed: We may not be able to successfully integrate Giant or any future acquired businesses or operate them profitably or accomplish our strategic objectives for those acquisitions.
+Added: We may not be able to successfully integrate future acquired businesses or operate them profitably or accomplish our strategic objectives for those acquisitions.
If we complete any future acquisitions in new geographies, our unfamiliarity with relevant regulations and market conditions may impact our ability to operate them profitably or achieve our strategic objectives for those acquisitions.
3 unchanged sentences
■ Changes in regulations or standards, such as those associated with climate change, could adversely affect our business
−Removed: Our products are subject to a wide variety of statutory, regulatory and industry standards and requirements related to, among other items, energy and water efficiency, environmental emissions, labeling and safety.
+Added: Our products are subject to a wide variety of statutory, regulatory, codes and industry standards and requirements related to, among other items, energy and water efficiency, environmental emissions, labeling and safety.
+Added: For example, the Department of Energy (DOE) has adopted a new efficiency rule for commercial water heaters that will take effect in 2026.
+Added: In addition, there are proposed federal rule makings that would require our residential water heater product line to be more energy efficient as well as the establishment of a national drinking water standard regulating per- and poly-fluoroalkyl substances (PFAS), which could affect the demand for our water filtration products.
+Added: There are also a number of federal, foreign, state and local governments adopting laws, regulations and codes in response to climate change that require a transition to non-fossil fuel based sources of energy production as well as significantly reducing or eliminating the on-site combustion of fossil fuels in the building sector, such as limiting or prohibiting the delivery of natural gas in new construction.
We believe our products are currently efficient, safe and environment-friendly.
−Removed: However, a limited number of federal, foreign, state and local governments are adopting laws, regulations and codes in response to climate change that require a transition to non-fossil fuel based sources of energy production as well as significantly reducing or eliminating the on-site combustion of fossil fuels in the building sector, such as limiting or prohibiting the delivery of natural gas in new construction.
−Removed: A significant change to regulatory requirements that promote a transition to alternative energy sources as a replacement for gas, or a significant shift in industry standards, could substantially increase manufacturing costs, capital expenditures, transportation costs and raw material costs, impact the size and timing of demand for our products, affect the types of products we are able to offer or put us at a competitive disadvantage, any of which could harm our business and have a material adverse effect on our financial condition, results of operations and cash flow.
+Added: However, a significant change to regulatory or code requirements that promote a transition to alternative energy sources as a replacement for gas, or a significant shift in industry standards, could substantially increase manufacturing costs, capital expenditures, transportation costs and raw material costs, alter distribution channels, attract new competitors, impact the size and timing of demand for our products, affect the types of products we are able to offer or put us at a competitive disadvantage, any of which could harm our business and have a material adverse effect on our financial condition, results of operations and cash flow.
■ We are subject to U.S.
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■ Our Environmental, Social, and Governance (ESG) commitments could result in additional costs, and our inability to achieve them could have an adverse impact on our reputation and performance
−Removed: We periodically communicate our strategies, commitments and targets related to ESG matters, including carbon emissions, diversity and inclusion, and human rights through the issuance of our ESG report.
+Added: We periodically communicate our strategies, commitments and targets related to ESG matters, including carbon emissions, water usage, diversity and inclusion, and human rights through the issuance of our ESG report.
Although we intend to meet these strategies, commitments and targets and are committed to advancing sustainable innovations in our industry, we may be unable to achieve them due to impacts on resources, operational costs, and technological advancements.
11 unchanged sentences
We assess whether there have been impairments in the value of our goodwill or indefinite-lived intangible assets during the fourth quarter of each calendar year or sooner if triggering events warrant.
−Removed: If future operating performance at our businesses does not meet expectations, we may be required to reflect non-cash charges to operating results for goodwill or indefinite-lived intangible asset impairments.
+Added: If future operating performance at our businesses does not meet expectations, we may be required to reflect non-cash charges to operating results for goodwill or
+Added: indefinite-lived intangible asset impairments.
The recognition of an impairment of a significant portion of goodwill or indefinite-lived intangible assets would negatively affect our results of operations and total capitalization, the effect of which could be material.
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As a result, the Smith Family members that are parties to the voting trust agreement have the ability to maintain their collective voting rights in our company even if certain members of the Smith Family decide to transfer their shares.
−Removed: ITEM 1B – UNRESOLVED STAFF COMMENTS
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.