What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-11-16 compared with 2022-11-22 · 40 added, 26 removed, 178 unchanged (27% of the section changed)

5 unchanged sentences

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, 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.

These effects may be exacerbated by actions by health or other governmental authorities to attempt to reduce the transmission of COVID-19.

Further, to the extent COVID-19 adversely affects our business, financial condition, and results of operations and global economic conditions more generally, it may also have the effect of heightening many of the other risks described herein.

Changes in global and regional economic conditions, the markets we serve, or the financial markets may adversely affect our results of operations and cash flows.

1 unchanged sentence

Demand for our products and services depends in part on the general economic conditions affecting the countries and markets in which we do business.

Weak economic conditions in certain geographies and changing supply and demand balances in the markets we serve have negatively impacted demand for our products and services in the past, including most recently due to COVID-19, and may do so in the future.

In addition, our growth strategy is largely based on demand for technologies and projects that limit the impact of global climate change.

1 unchanged sentence

Reduced demand for our products and services would have a negative impact on our revenues and earnings.

In addition, reduced demand could depress sales, reduce our margins, constrain our operating flexibility or reduce efficient utilization of our manufacturing capacity, or result in charges which are unusual or nonrecurring.

In addition, reduced demand could depress sales, decrease our margins, constrain our operating flexibility or reduce efficient utilization of our manufacturing capacity, or result in charges which are unusual or nonrecurring.

Excess capacity in our manufacturing facilities or those of our competitors could decrease our ability to maintain pricing and generate profits.

4 unchanged sentences

Our extensive international operations can be adversely impacted by operational, economic, political, security, legal, and currency translation risks that could decrease profitability.

In fiscal year 2022, over 60% of our sales were derived from customers outside the United States and many of our operations, suppliers, and employees are located outside the United States.

In fiscal year 2023, approximately 60% of our sales were derived from customers outside the United States and many of our operations, suppliers, and employees are located outside the United States.

Our operations in foreign jurisdictions may be subject to risks including exchange control regulations, import and trade restrictions, trade policy and other potentially detrimental domestic and foreign governmental practices or policies affecting U.S.

2 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 and large-scale hydrogen projects, some in regions where there is the potential for significant economic and political disruptions.

Table of Conte n t s

Our growth strategies depend in part on our ability to further penetrate markets outside the United States, such as China, India, 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.

16 unchanged sentences

Delays in receiving required approvals or related to litigation could require us to delay or abandon certain projects, which may result in the incurrence of additional expense, the loss of invested proceeds and reputational damage.

We may encounter difficulties in engineering, delays in designs or materials provided by the customer or a third party, equipment and materials delivery delays, schedule changes, customer scope changes, delays related to obtaining regulatory permits and rights-of-way, inability to find adequate sources of labor in the locations where we are building new plants, weather-related delays, delays by customers' contractors in completing their portion of a project, technical or transportation difficulties, cost overruns, supply difficulties, geopolitical risks and other factors, many of which are beyond our control, that may impact our ability to complete a project within the original delivery schedule.

In some cases, delays and additional costs may be substantial, and we may be required to cancel a project and/or compensate the customer for the delay.

We may not be able to recover any of these costs.

We have in the past and may in the future encounter difficulties related to the development of projects that may result in delays, scope changes and additional costs.

Such difficulties may relate to engineering, delays in designs or materials provided by the customer or a third party, equipment and materials delivery delays, schedule changes, customer scope changes, delays related to obtaining regulatory permits and rights-of-way, inability to find adequate sources of labor in the locations where we are building new plants, weather-related delays, delays by customers' contractors in completing their portion of a project, technical or transportation difficulties, cost overruns, supply difficulties, geopolitical risks and other factors, many of which are beyond our control, that may impact our ability to complete a project within the original delivery schedule.

In some cases, delays and additional costs may be substantial and could have a material adverse effect on our financial condition and results of operations.

We also may be required to cancel a project and/or compensate the customer for the delay, which may also cause us to incur material costs that we may be unable to recover.

In addition, in some cases we seek financing for large projects and face market risk associated with the availability and terms of such financing.

1 unchanged sentence

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.

In addition, several of our large-scale projects are being built before finalization of offtake agreements, which may create uncertainty regarding future pricing and other commercial terms.

If we are unable to enter into favorable commercial agreements with prospective customers, our projected returns could be adversely impacted, which may harm our business and financial performance.

Table of Conte n t s

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, vehicle accidents, or cyber incidents.

31 unchanged sentences

These risks may be augmented when the joint venture is operating outside the United States due to differences in language, culture, and regulation, as well as the factors listed above that are relevant to our international operations.

Table of Conte n t s

We continually assess the strategic fit of our existing businesses and may divest businesses that are deemed not to fit with our strategic plan or are not achieving the desired return on investment.

9 unchanged sentences

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.

Security breaches of our systems (or the systems of our customers, suppliers or other business partners) could result in the misappropriation, destruction or unauthorized disclosure of confidential information or personal data belonging to us or to our employees, partners, customers or suppliers, and may subject us to legal liability.

Security breaches of our systems (or the systems of our customers, suppliers or other business partners) could result in the misappropriation, destruction or unauthorized access or disclosure of confidential information or personal data belonging to us or to our employees, partners, customers or suppliers, and may subject us to legal liability.

As with most large systems, our information technology systems have in the past been, and in the future likely will be subject to computer viruses, malicious codes, unauthorized access and other cyber-attacks, and we expect the sophistication and frequency of such attacks to continue to increase.

19 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, 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.

Because our industrial gas facilities use substantial amounts of electricity, inflation and energy price fluctuations have impacted our revenues and earnings and may continue to do so in the future.

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

Table of Conte n t s

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

11 unchanged sentences

In addition, certain 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.

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

Performance difficulties on these larger projects may have a material adverse effect on our operations and financial results.

9 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 produces carbon dioxide.

To make the high volumes of hydrogen needed by our customers, we have historically used steam methane reforming to produce hydrogen without carbon capture (i.e., "gray hydrogen"), which results in the emission of 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 CO2, which may lead to direct and indirect costs on our operations.

Furthermore, some jurisdictions have various mechanisms to target the power sector to achieve emission reductions, which often result in higher power costs.

Some of our operations are within jurisdictions that have or are developing regulatory regimes governing disclosure of GHG emissions, including CO 2 , such as the European Union's CSRD, California’s Climate Corporate Data Accountability Act and Climate Related Financial Risk Act, and similar regulations under consideration by the SEC, which may lead to direct and indirect costs on our operations.

We could also face scrutiny from stakeholders regarding our reporting under various frameworks for disclosing GHG emissions-related data, including those we use currently in our sustainability reporting.

If our GHG emissions-related data, processes, and reporting are incomplete or inaccurate, or if we fail to comply with relevant reporting frameworks from newly emerging regulations, we may incur monetary penalties and reputational harm, and we could become subject to litigation or government investigations, which may also adversely affect our reputation and business.

Table of Conte n t s

Increased public concern and governmental action may result in more international, U.S.

federal and/or regional requirements to reduce or mitigate the effects of GHG emissions or increased demand for technologies and projects to limit the impact of global climate change.

Although uncertain, these developments could increase our costs related to consumption of electric power, hydrogen production and application of our gasification technology.

Although uncertain, these developments could increase our costs related to consumption of electric power, hydrogen production, and application of our gasification technology, although these developments may be mitigated by our growth strategy focused on world-scale clean hydrogen projects.

We believe we will be able to mitigate some of the increased costs through contractual terms, but the lack of definitive legislation or regulatory requirements prevents an accurate estimate of the long-term impact these measures will have on our operations.

Any legislation or governmental action that limits or taxes GHG emissions could negatively impact our growth, increase our operating costs, or reduce demand for certain of our products.

Any legislation or governmental action that limits or taxes GHG emissions could negatively impact our growth, increase our operating costs, or reduce demand for certain of our products, particularly for our core industrial gases business.

In addition, our growth strategy is partially dependent on a regulatory environment that favors technologies focused on limiting the impact of climate change, in particular toward the production and distribution of clean hydrogen.

For example, we anticipate benefits from tax incentives created by the U.S.

Inflation Reduction Act of 2022 for carbon sequestration and clean hydrogen production in future years once our projects in these areas come on-stream in the U.S.

If there is a reversal in the regulatory environment or a discontinuation or reduction of incentives or benefits for the development of technologies limiting the impact of climate change, particularly those focused on low- and zero-carbon hydrogen production, demand for our products may be less than we anticipate and certain projects and our long-term growth strategy could be adversely affected, which could adversely affect our business and financial performance.

Our operations may present a safety risk to our employees.

3 unchanged sentences

Changes to federal, state, and local employee health and safety regulations, and legislative, regulatory, or societal responses to safety incidents may result in heightened regulations or public scrutiny that may increase our compliance costs or result in reputational damage.

Our business depends on our ability to attract, develop, engage, and retain qualified employees.

Our success depends on our ability to attract, develop, engage, and retain employees with the skills necessary to our business.

Competitive labor market conditions have resulted in increased demand for qualified personnel, which makes it difficult to attract, hire, and retain employees with specialized technical experience.

In addition, the increasing number of experienced employees becoming retirement-eligible and our company headcount growth further amplify this challenge.

The number of our employees has grown both internationally and in the United States, with our total headcount increasing from approximately 16,300 at the end of fiscal 2018 to approximately 23,000 at the end of fiscal 2023.

Our results of operations have been and in the future could be adversely affected by increased costs due to increased competition for skilled talent in the market.

In addition, increased turnover and decreased tenure of employees may impact productivity, costs, and organizational culture.

We undertake significant efforts to hire, engage, and retain our employees and to effectively manage workforce costs, even with rapid political, social, and economic shifts in our markets.

If these efforts are unsuccessful, our growth may be limited and we may suffer financial or reputational harm that could have a material adverse effect on our business, financial condition, or results of operations.

Our financial results may be affected by various legal and regulatory proceedings, including antitrust, tax, environmental, or other matters.

4 unchanged sentences

A future adverse ruling, settlement, or unfavorable development could result in charges that could have a material adverse effect on our financial condition, results of operations, and cash flows in any particular period.

Table of Conte n t s

Costs and expenses resulting from compliance with environmental regulations may negatively impact our operations and financial results.

22 unchanged sentences

Any such occurrence could have a negative impact on our operations and financial results.

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

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.

Inability to compete effectively in a segment could adversely impact sales and financial performance.

4 unchanged sentences

We have not received any written comments from the Commission staff that remain unresolved.

Table of Conte n t s

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