What changed in this filing

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Item 1A. Risk Factors

2025-02-13 compared with 2024-02-20 · 72 added, 49 removed, 360 unchanged (25% of the section changed)

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Despite our implementation of firewalls, switchgear, and other network security measures, our servers, databases, and other systems may be vulnerable to various cyber and other security threats, including those caused by computer hackers, physical or electronic break-ins, sabotage, computer viruses, malware, worms, and similar disruptions from unauthorized access and tampering with our computer systems, including through social engineering such as phishing attacks, coordinated denial-of-service attacks, and similar incidents .

To the extent artificial intelligence capabilities improve and are increasingly adopted, they may be used to identify vulnerabilities and produce advanced cybersecurity attacks, and vulnerabilities may be introduced from the use of artificial intelligence by us, our customers, suppliers and other business partners and third-party providers.

The occurrence of some of these risks may be increased due to the work-from-home arrangements that we have implemented for many of our office-based employees.

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At times subcontractors perform services that we provide to our customers.

Our supply chain has been and may continue to be impacted by a wide variety of factors, including labor and material shortages as well as geopolitical events, such as China’s relationship with the United States and Taiwan.

Our supply chain has been and may continue to be impacted by a wide variety of factors, including labor and material shortages as well as geopolitical events, such as the Russia-Ukraine war, and China’s relationship with the United States and Taiwan.

Because we strive to limit the volume of raw materials and component parts on hand, our business could be adversely affected if we were unable to obtain these raw materials and components from our suppliers in the quantities that we require.

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Many of our products and services are sold in highly competitive markets, and are affected by varying degrees of competition, including competition for hiring and retaining skilled labor.

We compete against companies that often have higher sales volumes and greater financial, technological, research and development, human, and marketing resources than we have.

We compete against companies that often have higher sales volumes and greater financial, technological, research and development, human, and marketing resources, and larger customer bases than we have.

These companies may also price their products and services below our selling prices, which could exert downward pressure on our product pricing and margins.

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In addition, some of our largest customers could develop the capability to manufacture products or provide services similar to products that we manufacture or services that we provide.

This would result in these customers supplying their own products or

services and competing directly with us for sales of these products or services, all of which could significantly reduce our revenues.

Furthermore, we are facing increased international competition and cross-border consolidation of competition.

This would result in these customers supplying their own products or services and competing directly with us for sales of these products or services, all of which could significantly reduce our revenues.

Furthermore, we are facing increased international competition and cross-border

consolidation of competition.

If consolidation of our competition continues to occur, we would expect the competitive pressures we face to increase.

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defense programs.

defense spending has historically been cyclical, and defense budgets tend to rise when perceived threats to national security increase the level of concern over the country’s safety.

defense spending has historically been cyclical and is subject to periodic congressional action.

The level of U.S.

defense spending can vary and may be impacted by numerous outside factors, such as changes in the perceived threat environment, the U.S.

Government’s budget deficits, spending priorities, and possible political pressure to reduce U.S.

Government military spending, each of which could cause the Department of Defense budget to remain unchanged or to decline.

Generally, an increase in the level of concern over the country’s safety tends to increase defense budgets.

However, we cannot provide assurance that an increase in defense spending would benefit our business.

At other times, spending by the military can decrease.

In August 2011, Congress enacted the Budget Control Act of 2011 (BCA), which imposed spending caps and certain reductions in defense spending over a ten-year period through 2021.

These spending caps and reductions, referred to as sequestration, went into effect in March 2013.

Through a series of bipartisan agreements, Congress has been able to temporarily lift discretionary spending limits every year through 2019.

On August 2, 2019, the Bipartisan Budget Act of 2019 (BBA) was signed into law, which raised the BCA budget caps for both defense and non-defense discretionary spending in 2020 and 2021 and extended the mandatory BCA spending reductions through 2029.

Absent additional legislative or other remedial action, the sequestration could require reduced U.S.

federal government spending through fiscal 2029.

As a result of this uncertainty, a decrease in U.S.

Government defense spending or changes in spending allocation could result in one or more of our programs being reduced, delayed, or terminated.

In the event that one or more of our programs are reduced, delayed, or terminated for which we provide products and services, we may experience a reduction in our revenues and earnings and a material adverse effect on our business, financial condition, and results of operations.

lawmakers on several occasions have passed legislation to raise the federal debt ceiling, including the most recent suspension to the federal debt ceiling in June 2023, which is expected to allow the U.S.

government to cover its debt obligations until at least January 1, 2025.

Failure by Congress to further suspend or increase the debt ceiling could delay or result in the loss of contracts for the procurement of our products and services, and we may be asked or required to continue to perform for some period of time on certain of our U.S.

Decreases in U.S.

defense spending, changes in the allocation of defense spending, or the expiration or termination of certain aerospace and defense programs on which we have content could result in a reduction in our revenues and earnings and could have a material adverse effect on our business, financial condition, and results of operations.

lawmakers on several occasions have passed legislation to raise the federal debt ceiling, including the suspension to the federal debt ceiling in June 2023, which allowed the U.S.

government to cover its debt obligations until January 1, 2025.

Because Congress failed to further suspend or increase the debt ceiling, the debt ceiling was reinstated on January 1, 2025.

Department of the Treasury has announced that, since then, it has been using extraordinary measures to prevent the U.S.

government’s default on its payment obligations, and to extend the time that the U.S.

government has to raise its statutory debt limit, reinstate a suspension or otherwise resolve its funding situation.

If extraordinary measures are exhausted prior to legislation being enacted to resolve the funding situation, the U.S.

government may not be able to fulfill its funding obligations.

This could delay or result in the loss of contracts for the procurement of our products and services, and we may be asked or required to continue to perform for some period of time on certain of our U.S.

government contracts, even if the U.S.

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A downturn in the aircraft market could adversely affect our business.

Our sales to large commercial aircraft manufacturers are cyclical in nature, and can be adversely affected by a number of factors, including current and future passenger traffic levels, increasing fuel and labor costs, environmental concerns (inclusive of climate change), intense price competition, the retirement of older aircraft, regulatory changes, outbreak of infectious disease such as COVID-19, terrorist attacks, geopolitical events, conflicts and wars (including the Russia-Ukraine war and the Hamas-Israel war), general economic conditions (including cost inflation), worldwide airline profits, and backlog levels, all of which can be unpredictable and are outside our control.

Our sales to large commercial aircraft manufacturers, such as Boeing, Airbus, and related OEM suppliers, as well as manufacturers of business jets, are cyclical in nature, and can be adversely affected by a number of factors, including current and future passenger traffic levels, increasing fuel and labor costs, environmental concerns (inclusive of climate change), intense price competition, high interest rates, the retirement of older aircraft, regulatory changes, outbreak of infectious disease such as COVID-19, terrorist attacks, labor strikes such as the International Association of Machinists and Aerospace workers union work stoppage at Boeing, geopolitical events, conflicts and wars (including the Russia-Ukraine war), general economic conditions (including cost inflation), worldwide airline profits, and backlog levels, all of which can be unpredictable and are outside our control.

For example, the COVID-19 pandemic drastically reduced air traffic as travel restrictions and social distancing measures were implemented to help control the spread of the virus.

The reduced air traffic applied financial pressures on airlines, who, in order to preserve cash and liquidity, dramatically reduced flight hours and delayed the purchases of new aircraft.

The reduced air traffic applied financial pressures on airlines, who, in order to preserve cash and liquidity, dramatically reduced flight hours and cancelled or delayed the purchases of new aircraft.

Furthermore, as companies and employees become accustomed to working remotely, there is a risk that business travel and the associated flight hours may not fully reach pre-pandemic levels.

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These regulations and other requirements regularly evolve, and new laws, regulations or procurement requirements or changes to current ones could significantly increase our costs and risks and reduce our profitability.

For example, changes to the FAR requirements for federal contractors proposed in November 2022 would require companies to make disclosure of annual greenhouse gas emissions and other disclosures to be deemed a responsible bidder on future government contracts.

Such additional requirements could result in additional expense.

A violation of specific laws and regulations could also result in the imposition of fines and penalties, the termination of our contracts, or debarment from bidding on contracts.

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Government contracts typically span one or more base years and multiple option years.

Government generally has the right to not exercise option periods and may not exercise an option period if the agency is not satisfied with our performance on the contract or does not receive funding to continue the program.

Government generally has the right to not exercise option periods and may not exercise an option period if the agency is not satisfied with

our performance on the contract or does not receive funding to continue the program.

Government procurement may adversely affect our cash flow or program profitability.

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Our failure, or failure by our sales representatives or consultants to comply with these laws and regulations could result in administrative, civil, or criminal liabilities and could, in the extreme case, result in suspension or debarment from government contracts or suspension of our export privileges, which could have a material adverse effect on our business.

Any significant disruption in the commercial nuclear power industry could adversely affect our business .

Market demand for, and our ability to supply products and services to the commercial nuclear industry is dependent on the continued operation of nuclear power plants globally and, to a lesser extent, on the construction of new nuclear power plants.

A wide range of factors affect the continued operation and construction of nuclear power plants, including the political, regulatory and legal environment in which they operate, the availability and cost of alternative means of power generation, the occurrence of future nuclear incidents, such as the one which occurred at the Fukushima Daiichi nuclear plant in 2011, and general economic conditions.

Any reduction in demand for our commercial nuclear products and services in the U.S.

or abroad could adversely affect our business, financial condition, and results of operations.

Our nuclear business subjects us to various regulatory and financial risks.

Our Naval & Power segment manufactures components for, and provide services to, customers in the nuclear power market, including utilities and certain governmental entities, and subjects us to various safety related requirements imposed by the U.S.

Government, the Department of Energy, the Nuclear Regulatory Commission, and other agencies in foreign jurisdictions.

In the event of non-compliance, these agencies might increase regulatory oversight, impose fines or shut down operations, depending on their assessment of the severity of the noncompliance.

In addition, new or revised security and safety requirements promulgated by these agencies could necessitate substantial capital and other expenditures.

The Price-Anderson Act (“PPA”) promotes the nuclear industry by offering broad indemnification to commercial nuclear power plant operators and U.S.

Department of Energy (“DOE”) contractors for liabilities arising out of nuclear incidents at power plants licensed by the Nuclear Regulatory Commission (“NRC”) and at DOE nuclear facilities.

That indemnification protects not only the NRC licensee or DOE prime contractor, but also others like us who may be doing work under contract or subcontract for a licensed power plant or under a DOE prime contract.

The Price-Anderson Act indemnification provisions may not apply to all liabilities that we might incur while performing services as a contractor for the DOE and the nuclear power industry.

If an incident or evacuation is not covered under the Price-Anderson Act’s indemnification provisions, we could be

held liable for damages, regardless of fault.

In addition, if such indemnification authority is not applicable in the future, for instance, our business could be adversely affected if the owners and operators of nuclear power plants fail to retain our services in the absence of commercially adequate insurance and indemnification.

We offer similar services in other jurisdictions outside the U.S.

For those jurisdictions, varying levels of nuclear liability protection is provided by international treaties, and/or domestic laws, such as the Nuclear Liability and Compensation Act of Canada and the Nuclear Installations Act of the United Kingdom, insurance and/or assets of the nuclear installation operators (some of which are backed by governments) as well as under appropriate enforceable contractual indemnifications and hold-harmless provisions.

These protections and indemnifications, however, may not cover all of our liability that could arise in the performance of these services.

The airline industry is heavily regulated, and if we fail to comply with applicable requirements, our results of operations could suffer.

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We are subject to liability under environmental and health and safety laws and regulations.

including criminal sanctions, as well as facility shutdowns to address violations, and may require the installation of costly pollution control equipment or operational changes to limit emissions or discharges .

Our business and facilities are subject to numerous federal, state, local, and foreign laws and regulations relating to the use, manufacture, storage, handling, and disposal of hazardous materials and other waste products used in the manufacturing of certain of our products or providing certain of our services, and we are subject to potentially significant fines or penalties, including criminal sanctions, as well as facility shutdowns to address violations, and may require the installation of costly pollution control equipment or operational changes to limit emissions or discharges .

W e may also be subject to increasingly stringent environmental standards in the future, particularly as greenhouse gas emissions and climate change regulations and initiatives increase.

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These actions and proceedings may involve claims for, among other things, compensation for alleged personal injury, workers’ compensation, employment discrimination, or breach of contract.

We also may be subject to class action lawsuits, such as those involving allegations of violations of the Fair Labor Standards Act and state wage and hour laws.

Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of any such actions or proceedings.

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Regulators, stockholders, and other interested constituencies have focused increasingly on corporate responsibility, specifically related to the environmental, social, and governance (ESG) or sustainability practices of companies, including climate change, over the past few years, and expectations in this area are rapidly evolving .

The criteria used to evaluate ESG practices may continue to evolve, which could result in greater expectations and may cause us to undertake costly initiatives to satisfy new

criteria and abide by any new disclosure requirements.

The criteria used to evaluate ESG practices may continue to evolve, which could result in greater expectations and may cause us to undertake costly initiatives to satisfy new criteria and abide by any new disclosure requirements.

Some investors have used, and may continue to use, ESG criteria to guide their investment strategies, and may not invest in us, or divest their holdings of us, if they believe our policies relating to ESG matters are inadequate.

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Political and economic changes in foreign countries and markets, including foreign currency fluctuations, may have a material effect on our operating results.

During 2023, approximat ely 28% of ou r total net sales were to customers outside of the United States.

During 2024, approximat e ly 27% of ou r total net sales were to customers outside of the United States.

Additionally, we also have operating facilities located in foreign countries.

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(i) economic conditions in local markets, including changes in inflation;

(j) health concerns (including COVID-19 or any of its variants);

(j) health concerns

(including COVID-19 or any of its variants);

(k) complying with foreign regulatory and tax requirements that are subject to change;

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Certain of these proposals involve an incre ase in the domestic corporate tax rate, which if implemented could have a material impact on our future results of operations and cash flows.

On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) was signed into law, with tax provisions primarily focused on implementing a 15% minimum tax on global adjusted financial statement income and a 1% excise tax on share repurchases.

On August 16, 2022, the Inflation Reduction Act of 2022 (IRA) was signed into law, with tax provisions primarily focused on implementing a 15% minimum corporate tax on global adjusted financial statement income and a 1% excise tax on share repurchases.

Certain provisions of the IRA became effective in the beginning of fiscal 2023.

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Further, changes in the tax laws of foreign jurisdictions where we operate could arise as a result of the base erosion and profit shifting project undertaken by the Organization for Economic Co-operation and Development (OECD).

In December 2022, the European Union (EU) member states reached an agreement to implement the minimum tax component (Pillar Two) of the OECD’s tax reform initiative with certain aspects effective January 1, 2024, and other aspects effective January 1, 2025.

While it is uncertain whether the U.S.

will enact legislation to adopt Pillar Two, legislative changes to address Pillar Two are being adopted by taxing authorities in

other countries where we do business.

In December 2022, the European Union (EU) member states reached an agreement to implement the 15% minimum corporate tax component (Pillar Two) of the OECD’s tax reform initiative with certain aspects effective January 1, 2024, and other aspects effective January 1, 2025.

Legislative changes to address Pillar Two are being adopted by taxing authorities in countries where we do business.

Based on the Corporation’s preliminary assessments, it does not expect Pillar Two to have a material impact on its effective tax rate nor on its consolidated results of operation, financial position, and cash flows.

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A breach of these covenants or our inability to comply with the restrictions could result in an event of default under our debt arrangements which, in turn, could result in an event of default under the terms of our other indebtedness.

Upon the occurrence of an event of default under our debt arrangements, after the expiration of any grace periods, our lenders could elect to declare

all amounts outstanding under our debt arrangements, together with accrued interest, to be immediately due and payable.

Upon the occurrence of an event of default under our debt arrangements, after the expiration of any grace periods, our lenders could elect to declare all amounts outstanding under our debt arrangements, together with accrued interest, to be immediately due and payable.

If this were to happen, we cannot ensure that our assets would be sufficient to repay in full the payments due under those arrangements or our other indebtedness or that we could find alternative financing to replace that indebtedness.

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In addition, we are required to make an annual measurement of plan assets and liabilities, which may result in a significant change to equity through a reduction or increase to other comprehensive income.

For a discussion regarding how our financial statements can be affected by pension and other postretirement benefit plans accounting policies, see “Management’s Discussion and Analysis—Critical Accounting Estimates and Policies—Pension and Other Postretirement Benefits” in Part II, Item 7 of this Form 10-K.

For a discussion regarding how our financial statements can be affected by pension and other

postretirement benefit plans accounting policies, see “Management’s Discussion and Analysis—Critical Accounting Estimates and Policies—Pension and Other Postretirement Benefits” in Part II, Item 7 of this Form 10-K.

Although U.S.

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A significant portion of our business activities are conducted in foreign countries, including Mexico and Canada.

Our business benefits from free trade agreements such as the United States-Mexico-Canada Trade Agreement (USMCA) and relies on

Our business benefits from free trade agreements such as the United States-Mexico-Canada Trade Agreement (USMCA) and relies on various U.S.

corporate tax provisions related to international commerce as we build, market, and sell our products globally.

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Some of our products are included in these tariffs.

All of this could lead to increased costs and diminished sales opportunities in the U.S.

Media and political reactions in the affected countries could potentially exacerbate the impact on our operations in those countries.

The imposition of new or increased tariffs, duties, border adjustment taxes or other trade restrictions by the United States could also result in the adoption of new or increased tariffs or other trade restrictions by other countries.

The tariffs may in the future increase our cost of materials and may cause us to increase prices to our customers which we believe may reduce demand for our products.

The tariffs may in the future increase our cost of materials and may cause us to increase prices to our customers which we believe may reduce demand for our products in the U.S.

Media and political reactions in the affected countries could potentially exacerbate the impact on our operations in those countries.

Our price increases may not be sufficient to fully offset the impact of the tariffs and result in lowering our margin on products sold.

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Global economic conditions may adversely affect our business, operating results and financial condition.

Although we currently generate significant operating cash flows, which combined with access to the credit markets provides us with significant discretionary funding capacity, global macroeconomic uncertainty, the ongoing trade disputes between the United States and China, the United Kingdom’s withdrawal from the European Union, armed conflicts around the world, such as those in Ukraine and Israel, and any conflict or threatened conflict between China and Taiwan (including the imposition of related sanctions by the United States and other countries as well as measures taken in response to such sanctions), inflationary pressures, rising interest rates, labor shortages, global supply chain disruptions, and uncertainty regarding the stability of global credit and financial markets could affect our ability to fund our operations.

Although we currently generate significant operating cash flows, which combined with access to the credit markets provides us with significant discretionary funding capacity, global macroeconomic uncertainty, the ongoing trade disputes between the United States and China, armed conflicts around the world, such as those in Ukraine and Israel, and any conflict or threatened conflict between China and Taiwan (including the imposition of related sanctions by the United States and other countries as well as measures taken in response to such sanctions), inflationary pressures, rising interest rates, labor shortages, global supply chain disruptions, and uncertainty regarding the stability of global credit and financial markets could affect our ability to fund

our operations.

In addition, certain of our customers and suppliers could be affected directly by an economic downturn and could face credit issues or cash flow problems that could give rise to payment delays, increased credit risk, bankruptcies, and other financial hardships, which could impact customer demand for our products as well as our ability to manage normal commercial relationships with our customers and suppliers.

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Although we have generally enjoyed good relations with both our unionized and non-unionized employees, we may experience an adverse impact on our operating results if we are subject to labor actions.

Future terror attacks, war (including the Russia-Ukraine war and Israel-Hamas war), natural disasters, climate change-related events, pandemic diseases (such as COVID-19), or other events beyond our control could adversely impact our businesses.

Despite our concerted effort to minimize risk to our production capabilities and corporate information systems and to reduce the effect of unforeseen interruptions through insurance or other risk transfer mechanisms, such as our business continuity planning and disaster recovery plans, we could be adversely impacted by terror attacks, war (including the Russia-Ukraine war and Israel-Hamas war), natural disasters such as earthquakes, hurricanes, floods, tornadoes, ice storms, climate change-related events, pandemic diseases such as COVID-19, or other events such as strikes by the workforce of a significant customer or supplier.

Several of our facilities, because of their locations, could be subject to catastrophic loss caused by the aforementioned natural disasters.

Future terror attacks, war (including the Russia-Ukraine war), natural disasters, climate change-related events, or other events beyond our control could adversely impact our businesses.

Despite our concerted effort to minimize risk to our production capabilities and corporate information systems and to reduce the effect of unforeseen interruptions through insurance or other risk transfer mechanisms, such as our business continuity planning and disaster recovery plans, we could be adversely impacted by terror attacks, war (including the Russia-Ukraine war), natural disasters such as earthquakes, hurricanes, floods, tornadoes, ice storms, climate change-related events, or other events such as strikes by the workforce of a significant customer or supplier (e.g., the International Association of Machinists and Aerospace workers union work stoppage at Boeing).

Several of our facilities, because of their locations, could be subject to catastrophic loss caused by the above mentioned natural disasters.

G lobal climate change may aggravate natural disasters and increase severe weather events that affect our business operations.

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As a result, any business disruption could negatively affect our business, operating results, or financial condition.

The COVID-19 pandemic adversely impacted, and may in the future adversely impact, our business, operations, and financial results.

The COVID-19 pandemic disrupted the global economy and adversely impacted certain elements of our business, including our supply chain, transportation networks, and production levels.

Although the World Health Organization and the U.S.

federal government declared an end to COVID-19 as a global and national health emergency in May 2023, any future resurgence or development of new strains or variants of COVID-19, together with preventative measures taken to contain or mitigate such crises, could impact our business, operations and financial condition in a variety of ways, such as:

Pandemics, epidemics or other public health emergencies, such as the outbreak of COVID-19 may adversely impact our business, operations, and financial results.

A pandemic, including COVID-19 or other epidemic or public health emergency, together with preventative measures taken to contain or mitigate such crises, could impact our business, operations and financial condition in a variety of ways, such as:

(i) impact our customers such that the demand for our products and services could change;

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and (vi) result in closures of our facilities or the facilities of our customers or suppliers.

Even after a public health crisis subsides, there may be long-term effects on our business practices and customers in economies in which we operate that could severely disrupt our operations and could have a material adverse effect on our business, operations, and financial results.

As we cannot predict the duration, scope or severity of future public health crises, the negative financial impact to our results cannot be reasonably estimated and could be material.

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