What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2021-11-18 compared with 2020-11-19 · 27 added, 38 removed, 169 unchanged (28% of the section changed)

1 unchanged sentence

Our operations are affected by various risks, many of which are beyond our control.

In evaluating investment in the Company and the forward-looking information contained in this Annual Report on Form 10-K or presented elsewhere by management from time to time, you should carefully consider the risk factors discussed below.

In evaluating investment in the Company and the forward-looking information contained in this Annual Report on Form 10-K or presented elsewhere from time to time, you should carefully consider the risk factors discussed below.

Any of these risks could have a material adverse effect on our business, operating results, financial condition, and the actual outcome of matters as to which forward-looking statements are made and could adversely affect the value of an investment in our securities.

In addition to the following risks, there may be additional risks and uncertainties that adversely affect our business, performance, or financial condition in the future that are not presently known, are not currently believed to be significant, or are not identified below because they are common to all businesses.

The risks described below are not all inclusive but are designed to highlight what we believe are important factors to consider when evaluating our expectations.

In addition to such risks, there may be additional risks and uncertainties that adversely affect our business, performance, or financial condition in the future that are not presently known, are not currently believed to be significant, or are not identified below because they are common to all businesses.

Risks Related to Economic Conditions

The COVID-19 global pandemic may materially and adversely impact our business, financial condition and results of operations.

The COVID-19 global pandemic and efforts to reduce its spread have led to a significant decline of economic activity and significant disruption and volatility in global markets.

These factors have led to reduced demand for industrial gas products, particularly in our merchant business.

We expect demand to continue to be impacted as well as the timing of certain planned maintenance activities.

The COVID-19 global pandemic, including resurgences and variants of the virus that causes COVID-19, and efforts to reduce its spread have led, and may continue to lead to, significant changes in levels of economic activity and significant disruption and volatility in global markets.

These factors have led, and may continue to lead, to reduced demand for industrial gas products, particularly in our merchant business.

In addition, COVID-19 may result in reduced sales in our other businesses, lower returns for certain of our projects, and the potential delay or cancellation of certain projects in our pipeline.

In addition, we are monitoring the health of our employees and many of our employees, including those based at our headquarters, are working remotely in accordance with health safety guidance and applicable governmental orders.

Action by health or other governmental authorities requiring the closure of our facilities or recommending other physical distancing measures could negatively impact our business and those of our service providers and customers.

Action by health or other governmental authorities requiring the closure of our facilities, recommending other physical distancing measures, or mandating vaccination against COVID-19 could negatively impact our business and those of our service providers and customers.

Although we have business continuity and other safeguards in place, we cannot be certain that they will be fully effective for extended periods of time.

13 unchanged sentences

A decline in the industries served by our customers or adverse events or circumstances affecting individual customers can reduce demand for our products and services and impair the ability of such customers to satisfy their obligations to us, resulting in uncollected receivables, unanticipated contract terminations, project delays or the inability to recover plant investments, any of which may negatively impact our financial results.

Weak overall demand or specific customer conditions may also cause customer shutdowns or defaults or other inabilities to operate facilities profitably and may force sale or abandonment of facilities and equipment or prevent projects from coming on-stream when expected.

Weak overall demand or specific customer conditions may also cause customer shutdowns or defaults or otherwise make us unable to operate facilities profitably and may force sale or abandonment of facilities and equipment or prevent projects from coming on-stream when expected.

These or other events associated with weak economic conditions or specific market, product, or customer events may require us to record an impairment on tangible assets, such as facilities and equipment, or intangible assets, such as intellectual property or goodwill, which would have a negative impact on our financial results.

5 unchanged sentences

The occurrence of any of these risks could have a material adverse impact on our financial condition, results of operation, and cash flows.

Our growth strategies depend in part on our ability to further penetrate markets outside the United States, particularly in markets such as China, India, Indonesia, and the Middle East, and involve significantly larger and more complex projects, including gasification projects, some in regions where there is the potential for significant economic and political disruptions.

Our growth strategies depend in part on our ability to further penetrate markets outside the United States, particularly in markets such as China, India, Indonesia, and the Middle East, and involve significantly larger and more complex projects, including gasification and large-scale hydrogen projects, some in regions where there is the potential for significant economic and political disruptions.

We are actively investing large amounts of capital and other resources, in some cases through joint ventures, in developing markets, which we believe to have high growth potential.

12 unchanged sentences

Operational and project execution risks, particularly with respect to our largest projects, may adversely affect our operations or financial results.

A significant and growing portion of our business involves gasification and other large-scale projects that involve challenging engineering, procurement and construction phases that may last up to several years.

These projects are technically complex, often reliant on significant interaction with government authorities and face significant financing, development, operational and reputational risks.

5 unchanged sentences

All of these factors could also negatively impact our reputation or relationships with our customers, suppliers and other third parties, any of which could adversely affect our ability to secure new projects in the future.

The operation of our facilities, pipelines, and delivery systems inherently entails hazards that require continuous oversight and control, such as pipeline leaks and ruptures, fire, explosions, toxic releases, mechanical failures, or vehicle accidents.

If operational risks materialize, they could result in loss of life, damage to the environment, or loss of production, all of which could negatively impact our ongoing operations, reputation, financial results, and cash flows.

32 unchanged sentences

The security of our information technology systems could be compromised, which could adversely affect our ability to operate.

We depend on information technology to enable us to operate efficiently and interface with customers as well as to maintain our internal controls environment and financial reporting accuracy and efficiency.

We depend on information technology to enable us to operate safely and efficiently and interface with our customers as well as to maintain our internal control environment and financial reporting accuracy and efficiency.

Our information technology capabilities are delivered through a combination of internal and external services and service providers.

If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions, or the loss of or damage to our confidential business information due to a security breach.

If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology infrastructure, we could be subject to transaction errors, processing inefficiencies, the loss of customers, business disruptions, property damage, or the loss of or damage to our confidential business information due to a security breach.

In addition, our information technology systems may be damaged, disrupted or shut down due to attacks by computer hackers, computer viruses, employee error or malfeasance, power outages, hardware failures, telecommunication or utility failures, catastrophes or other unforeseen events, and in any such circumstances our system redundancy and other disaster recovery planning may be ineffective or inadequate.

8 unchanged sentences

damage customer and business partner relationships and our reputation;

result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws, or increased costs for security and remediation;

or raise concerns regarding our internal controls environment and internal controls over financial reporting.

result in defective products or services, physical damage to facilities, pipelines or delivery systems, including those we own or operate for third parties, legal claims and proceedings, liability and penalties under privacy laws, or increased costs for security and remediation;

or raise concerns regarding our internal control environment and internal control over financial reporting.

Each of these consequences could adversely affect our business, reputation and our financial statements.

9 unchanged sentences

Energy, including electricity, natural gas, and diesel fuel for delivery trucks, is the largest cost component of our business.

Because our industrial gas facilities use substantial amounts of electricity, energy price fluctuations could materially impact our revenues and earnings.

A disruption in the supply of energy, components, or raw materials, whether due to market conditions, legislative or regulatory actions, natural events, or other disruption, could prevent us from meeting our contractual commitments and harm our business and financial results.

Because our industrial gas facilities use substantial amounts of electricity, inflation and energy price fluctuations could materially impact our revenues and earnings.

A disruption in the supply of energy, components, or raw materials, whether due to market conditions, legislative or regulatory actions, the COVID-19 pandemic, natural events, or other disruption, could prevent us from meeting our contractual commitments and harm our business and financial results.

Our supply of crude helium for purification and resale is largely dependent upon natural gas production by crude helium suppliers.

Lower natural gas production resulting from natural gas pricing dynamics, supplier operating or transportation issues, or other interruptions in sales from crude helium suppliers, can reduce our supplies of crude helium available for processing and resale to customers.

We typically contract to pass-through cost increases in energy and raw materials to customers, but cost variability can still have a negative impact on our results.

We may be unable to raise prices as quickly as costs rise, or competitive pressures may prevent full recovery of such costs.

Increases in energy or raw material costs that cannot be passed on to customers for competitive or other reasons may negatively impact our revenues and earnings.

We typically contract to pass-through cost increases in energy and raw materials to customers, but such cost pass-through results in declining margins, and cost variability can negatively impact our other operating results.

For example, we may be unable to raise prices as quickly as costs rise, or competitive pressures may prevent full recovery of such costs.

In addition, increases in energy or raw material costs that cannot be passed on to customers for competitive or other reasons may negatively impact our revenues and earnings.

Even where costs are passed through, price increases can cause lower sales volume.

4 unchanged sentences

Failure of the technologies to work as predicted, or unintended consequences of new designs or uses, could lead to cost overruns, project delays, financial penalties, or damage to our reputation.

In addition, large scale gasification projects may contain processes or technologies that we have not operated at the same scale or in the same combination, and although such projects generally include technologies and processes that have been demonstrated previously by others, such technologies or processes may be new to us and may introduce new risks to our operations.

In addition, gasification and other large-scale projects may contain processes or technologies that we have not operated at the same scale or in the same combination, and although such projects generally include technologies and processes that have been demonstrated previously by others, such technologies or processes may be new to us and may introduce new risks to our operations.

Additionally, there is also a risk that our new technologies may become obsolete and replaced by other market alternatives.

10 unchanged sentences

We are the world’s leading supplier of hydrogen, the primary use of which is the production of ultra-low sulfur transportation fuels that have significantly reduced transportation emissions and helped improve human health.

To make the high volumes of hydrogen needed by our customers, we use steam methane reforming, which releases carbon dioxide.

In addition, although gasification enables the conversion of lower value feedstocks into cleaner energy and value-added products, our gasification projects will increase our carbon footprint because the gasification process produces carbon dioxide.

To make the high volumes of hydrogen needed by our customers, we use steam methane reforming, which produces carbon dioxide.

In addition, gasification enables the conversion of lower value feedstocks into cleaner energy and value-added products;

however, our gasification projects also produce carbon dioxide.

Some of our operations are within jurisdictions that have or are developing regulatory regimes governing GHG emissions, including CO 2 , which may lead to direct and indirect costs on our operations.

25 unchanged sentences

Changes to income tax laws and regulations in any of the jurisdictions in which we operate, or in the interpretation of such laws, could significantly increase our effective tax rate and adversely impact our financial condition, results of operations, or cash flows.

In December 2017, the U.S.

enacted the Tax Cuts and Jobs Act (the "Tax Act"), which significantly revised the U.S.

federal corporate income tax law by, among other things, lowering the corporate income tax rate, implementing a territorial tax system, and imposing a one-time tax on accumulated, unremitted non-U.S.

earnings of foreign subsidiaries.

Various levels of government are increasingly focused on tax reform and other legislative action to increase tax revenue.

Various levels of government, including the U.S.

federal government, are increasingly focused on tax reform and other legislative action to increase tax revenue.

Further changes in tax laws in the U.S.

or foreign jurisdictions where we operate could have a material adverse effect on our business, results of operations, or financial condition.

We could incur significant liability if the distribution of Versum common stock to our stockholders is determined to be a taxable transaction.

We have received an opinion from outside tax counsel to the effect that the spin-off of Versum qualifies as a transaction that is described in Sections 355(a) and 368(a)(1)(D) of the Internal Revenue Code.

The opinion relies on certain facts, assumptions, representations and undertakings from Versum and us regarding the past and future conduct of the companies’ respective businesses and other matters.

If any of these facts, assumptions, representations or undertakings are incorrect or not satisfied, our shareholders and we may not be able to rely on the opinion of tax counsel and could be subject to significant tax liabilities.

Notwithstanding the opinion of tax counsel we have received, the IRS could determine on audit that the spin-off is taxable if it determines that any of these facts, assumptions, representations or undertakings are not correct or have been violated or if it disagrees with the conclusions in the opinion.

If the spin-off is determined to be taxable for U.S.

federal income tax purposes, our shareholders that are subject to U.S.

federal income tax and we could incur significant U.S.

federal income tax liabilities.

General Risk Factors

5 unchanged sentences

The United Kingdom’s (“UK”) exit from European Union (“EU”) membership could adversely affect our European Operations.

The UK’s exit from EU membership may adversely affect customer demand, our relationships with customers and suppliers and our European business.

Although it is unknown what the terms of the United Kingdom’s future relationship with the EU will be, it is possible that there will be greater restrictions on imports and exports between the United Kingdom and EU members and increased regulatory complexities.

Although the UK’s exit from EU membership on 31 January 2021 ("Brexit") did not result in material disruptions to customer demand, our relationships with customers and suppliers, or our European business, the ultimate effects of Brexit on us are still difficult to predict.

Adverse consequences from Brexit may include greater restrictions on imports and exports between the UK and EU members and increased regulatory complexities.

Any of these factors could adversely affect customer demand, our relationships with customers and suppliers, and our European business overall.

6 unchanged sentences

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