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Item 1A. Risk Factors

2025-02-27 compared with 2024-02-26 · 89 added, 98 removed, 118 unchanged (61% of the section changed)

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Macroeconomic fluctuations may harm our business, results of operations and stock price.

Our business, financial condition, operating results and cash flows may be adversely affected by changes in global economic conditions and geopolitical risks, including credit market conditions, trade policies, levels of consumer and business confidence, commodity prices and availability, inflationary pressures, exchange rates, levels of government spending and deficits, political conditions, and other challenges that could affect the global economy, including the ongoing conflict in the Middle East as well as impacts associated with any economic sanctions imposed against Russia, in response to their invasion of the Ukraine.

Our business, financial condition, operating results and cash flows may be adversely affected by changes in global economic conditions and geopolitical risks, including credit market conditions, trade policies, including recently announced and threatened tariffs on certain raw materials, levels of consumer and business confidence, commodity prices and availability, inflationary pressures, exchange rates, levels of government spending and deficits, political conditions, and other challenges that could affect the global economy, including the ongoing conflict in the Middle East as well as impacts associated with any economic sanctions imposed against Russia, in response to their invasion of the Ukraine.

These economic and geopolitical conditions could affect businesses such as ours in a number of ways.

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See “Specific Risks Related to Our Business Segments.”

The prices of our components and raw materials could fluctuate dramatically, which may adversely affect our profitability.

The costs of certain components and raw materials that are critical to our profitability can be volatile, which can have a significant impact on our profitability.

The costs in our business segments are affected by fluctuations in the price of metals such as steel and copper as well as other raw materials such as resin and electronic components.

We have seen a period of sustained price increases for components and raw materials that may continue into the future as demand increases and supply may remain constrained, notably in our A&E segment, which has resulted in, and may continue to result in, increased costs for us.

While we have taken actions aimed at securing an adequate supply of raw materials at prices which are favorable to us, if the prices of critical components and raw materials increase or we are unable to pass increased costs of components and raw materials to customers, our operating profit could be adversely affected.

The COVID-19 pandemic had and may continue to have an adverse impact on our operations and financial performance, as well as on the operations and financial performance of many of the customers and suppliers in industries that we serve.

Our operations have generally stabilized since the peak of the COVID-19 pandemic and in May 2023, the World Health Organization declared an end to COVID-19 as a public health emergency.

However, a resurgence of COVID-19, or other public health emergencies, could result in unpredictable responses by health authorities around the world which could negatively impact our global operations, customers and suppliers.

Any future pandemics or public health emergencies could result in disruptions to global supply chains, delays in supplier deliveries, higher raw material prices, delays in deliveries to customers, travel restrictions, site access and quarantine restrictions, and employee absences.

Demand for our products is variable and subject to factors beyond our control, which could result in unanticipated events significantly impacting our results of operations.

A substantial portion of our sales is subject to market conditions which may cause customer demand for our products to fluctuate.

Reductions in demand from these industries would reduce the sales and profitability of the affected business segments.

• In our Aerospace & Electronics segment, a significant decline in demand for air travel, or a decline in airline profitability generally, could result in reduced orders for aircraft and could also cause airlines to reduce their purchases of spare parts from our businesses.

In addition, our Aerospace & Electronics segment could be impacted to the extent that our major aircraft manufacturing customers encounter problems which impact their production rates and, correspondingly, reduce purchases of our products, or if pricing pressure from aircraft customers caused the manufacturers to press their suppliers to lower prices and/or extend payment terms;

in addition, demand for military and defense products is dependent upon government spending in certain areas which can vary year to year.

• Our Process Flow Technologies segment is dependent on global economic conditions, customer capital spending and commodity prices.

Deterioration in any of these economic factors could result in sales and profits falling below our current outlook.

In addition, a major hurricane, earthquake, tornado, wildfire, flood, drought or other natural disaster or severe weather event could seriously disrupt our business and impact our results of operations and cash flows.

We conduct a substantial portion of our business outside the U.S.

and face risks inherent in non-domestic operations.

Net sales by destination outside the U.S.

from continuing operations were 43.2% of our consolidated amounts in 2024.

We expect that non-U.S.

sales will continue to account for a significant portion of our revenues for the foreseeable future.

In addition, our operations outside the U.S.

are subject to the risks associated with conducting business internationally, including, but not limited to:

• Changes in the U.S.

government's approach to trade policy, including in some cases renegotiating and terminating certain existing bilateral or multi-lateral trade agreements.

The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies (such as those recently announced or threatened by various countries) has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S.

economy, which in turn could have a material adverse effect on our business, financial condition, results of operations and cash flows.

• Economic and political instability, including the risk of geopolitical conflict or territorial incursions, in the countries and regions in which we operate;

• The risks of fluctuations in foreign currency exchange rates, primarily the euro and the British pound, could adversely affect our reported results, primarily in our Process Flow Technologies segment, as amounts earned in other countries are translated into U.S.

dollars for reporting purposes;

• Any pandemics or public health emergencies could result in disruptions to global supply chains, delays in supplier deliveries, higher raw material prices, delays in deliveries to customers, travel restrictions, site access and quarantine restrictions, and employee absences.

The extent to which public health emergencies could impact our operations and financial performance is highly uncertain and would depend on future developments, including the duration of any such public health emergency, potential actions taken by governmental authorities, and how quickly economic conditions stabilize;

We may be unable to identify or to complete acquisitions, or to successfully integrate the businesses we acquire.

We have evaluated, and expect to continue to evaluate, a wide array of potential acquisition transactions.

Our acquisition program attempts to address the potential risks inherent in assessing the value, strengths, weaknesses, contingent or other liabilities, systems of internal control and profitability of acquisition candidates, as well as other challenges such as retaining the employees and integrating the operations of the businesses we acquire.

Integrating acquired operations involves significant risks and uncertainties, including:

• Maintenance of uniform standards, controls, policies and procedures;

• Unplanned expenses associated with the integration efforts;

• Inability to achieve planned facility repositioning savings or related efficiencies from recent and ongoing investments;

• Unidentified issues not discovered in the due diligence process, including legal contingencies.

There can be no assurance that suitable acquisition opportunities will be available in the future, that we will continue to acquire businesses or that any business acquired will be integrated successfully or prove profitable, which could adversely impact our growth rate.

Our ability to achieve our growth goals depends in part upon our ability to identify and successfully acquire, finance and integrate companies and businesses at appropriate prices and realize anticipated cost savings.

Our ability to source components and raw materials from our suppliers could be disrupted or delayed in our supply chain, which could adversely affect our results of operations.

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We deploy a continuous, company-wide process to source our components and raw materials from fewer suppliers, and to obtain parts from suppliers in low-cost countries where possible.

Due to a variety of factors, our A&E business has been experiencing, and may continue to experience, supply chain disruptions from an insufficient availability of certain components and raw materials.

Consistent with the rest of the aerospace and defense industry, our A&E business has been experiencing, and may continue to experience, supply chain disruptions from an insufficient availability of certain components and raw materials.

If we are unable to timely source these components or raw materials, our operations may be disrupted, or we could experience a delay or temporary stoppage in certain of our manufacturing operations.

We believe that our supply management and production practices are based on an appropriate balancing of the foreseeable risks and the costs of alternative practices.

reduced availability or interruption in supplies, whether resulting from significant changes in demand;

Nonetheless, reduced availability or interruption in supplies, whether resulting from significant changes in demand;

more stringent regulatory requirements;

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disruptions in transportation;

an outbreak of a severe public health pandemic, such as the COVID-19 pandemic;

an outbreak of a severe public health pandemic;

severe weather;

and the occurrence or threat of wars, could have an adverse effect on our financial condition, results of operations and cash flows.

Demand for our products is variable and subject to factors beyond our control, which could result in unanticipated events significantly impacting our results of operations.

A substantial portion of our sales is concentrated in industries that are cyclical in nature or subject to market conditions which may cause customer demand for our products to be volatile.

Reductions in demand by these industries would reduce the sales and profitability of the affected business segments.

in addition, demand for military and defense products is dependent upon government spending in certain areas which can vary year to year.

• Our Process Flow Technologies segment is dependent on global economic conditions, customer capital spending and commodity prices.

Deterioration in any of these economic factors could result in sales and profits falling below our current outlook.

• In our Engineered Materials segment, sales and profits could be affected by declines in demand for RVs, building materials or truck trailers;

results could also be impacted by unforeseen changes in capacity or price increases related to certain raw materials, in particular, resin.

The prices of our components and raw materials could fluctuate dramatically, which may adversely affect our profitability.

The costs of certain components and raw materials that are critical to our profitability can be volatile, which can have a significant impact on our profitability.

The costs in our business segments are affected by fluctuations in the price of metals such as steel and copper as well as other raw materials such as resin and electronic components;

cost are also impacted by imposed tariffs, which are often unpredictable.

Any pandemics or public health emergencies could result in disruptions to global supply chains, delays in supplier deliveries, higher raw material prices, delays in deliveries to customers, travel restrictions, site access and quarantine restrictions, and

employee absences.

We may be unable to successfully develop and introduce new products, which would limit our ability to grow and maintain our competitive position and adversely affect our financial condition, results of operations and cash flow.

Our growth depends, in part, on continued sales of existing products, as well as the successful development and introduction of new products or technologies, which face the uncertainty of customer acceptance and reaction from competitors.

Any delay in the development or launch of a new product could result in our not being the first to market, which could compromise our competitive position.

Further, the development and introduction of new products may require us to make investments in specialized personnel and capital equipment, increase marketing efforts and reallocate resources away from other uses.

We also may need to modify our systems and strategy in light of new products that we develop.

If we are unable to develop and introduce new products in a cost-effective manner or otherwise manage effectively the operations related to new products, our financial condition, results of operations and cash flows could be adversely impacted.

We face significant competition which may adversely impact our financial condition, results of operations, and cash flows in the future.

While we are a principal competitor in most of our markets, all of our markets are highly competitive.

The competitors in many of our business segments can be expected in the future to improve technologies, reduce costs and develop and introduce new products.

The ability of our business segments to achieve similar advances will be important to our competitive positions.

Competitive pressures, including those discussed above, could cause one or more of our business segments to lose market share or could result in significant price erosion, either of which could have an adverse effect on our financial condition, results of operations and cash flows.

We compete with other manufacturing businesses for highly qualified employees in the countries in which we operate, and we may not be able to retain our personnel or hire and retain additional personnel needed for us to sustain and grow our business as planned.

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failure to comply with those regulations could adversely affect our financial condition, results of operations, cash flows and reputation.

We are required to comply with various import and export control laws, which may affect transactions with certain customers, particularly in our Aerospace & Electronics and Process Flow Technologies segments, as discussed more fully under “Specific Risks Relating to Our Business Segments.” In certain circumstances, export control and economic sanctions, and other trade-related regulations may prohibit the export of certain products, services and technologies, and in other circumstances we may be required to obtain an export license before exporting the controlled item.

We are required to comply with various import and export control laws, which may affect transactions with certain customers.

In certain circumstances, export control and economic sanctions, and other trade-related regulations may prohibit the export of certain products, services and technologies, and in other circumstances we may be required to obtain an export license before exporting the controlled item.

A failure to comply with these requirements might result in suspension of associated contracts and suspension or debarment from government contracting or subcontracting.

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Failure to comply with any of these and similar regulations could result in civil and criminal liability, monetary and non-monetary penalties, fines, disruptions to our business, limitations on our ability to export products and services, and damage to our reputation.

Our business could be harmed if we are unable to protect our intellectual property.

We rely on a combination of trade secrets, patents, trademarks, copyrights and confidentiality procedures to protect our products and technology.

Existing trade secret, patent, trademark and copyright laws offer only limited protection.

Our patents could be invalidated or circumvented.

In addition, others may develop substantially equivalent, or superseding

proprietary technology, or competitors may offer equivalent non-infringing products in competition with our products, thereby substantially reducing the value of our proprietary rights.

The laws of some foreign countries in which our products are or may be manufactured or sold may not protect our products or intellectual property rights to the same extent as do the laws of the U.S.

We cannot assure that the steps we take to protect our intellectual property will be adequate to prevent misappropriation of our technology.

We could incur significant and/or unexpected costs in our efforts to successfully avoid, manage, defend and litigate intellectual property matters.

Our inability to protect our intellectual property could have an adverse effect on our financial condition, results of operations and cash flows.

Information systems and technology networks failures and breaches in data security, personally identifiable and other information, non-compliance with our contractual or other legal obligations regarding such information, or a violation of our privacy and security policies with respect to such information, could adversely affect us.

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We have experienced and expect to continue to experience some of these types of cybersecurity threats and incidents, which could be material in the future.

We conduct a substantial portion of our business outside the U.S.

and face risks inherent in non-domestic operations.

Net sales by destination outside the U.S.

were 39.6% of our consolidated amounts in 2023.

We expect that non-U.S.

sales will continue to account for a significant portion of our revenues for the foreseeable future.

In addition, our operations outside the U.S.

are subject to the risks associated with conducting business internationally, including, but not limited to:

• economic and political instability, including the risk of geopolitical conflict or territorial incursions, in the countries and regions in which we operate;

• the risks of fluctuations in foreign currency exchange rates, primarily the euro and the British pound, could adversely affect our reported results, primarily in our Process Flow Technologies segment, as amounts earned in other countries are translated into U.S.

dollars for reporting purposes;

• changes in the U.S.

government's approach to trade policy, including in some cases renegotiating and terminating certain existing bilateral or multi-lateral trade agreements.

The adoption and expansion of trade restrictions, the occurrence of a trade war, or other governmental action related to tariffs or trade agreements or policies has the potential to adversely impact demand for our products, our costs, our customers, our suppliers, and the U.S.

economy, which in turn could have a material adverse effect on our business, financial condition, results of operations and cash flows.

• The COVID-19 pandemic had an adverse impact on our operations and financial performance, as well as on the operations and financial performance of many of the customers and suppliers in industries that we serve.

Our operations have substantially recovered since the peak of the COVID-19 pandemic and in May 2023, the World Health Organization declared an end to COVID-19 as a public health emergency.