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Item 1A. Risk Factors

2022-02-28 compared with 2021-02-23 · 109 added, 125 removed, 138 unchanged (63% of the section changed)

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If any of the events or developments described below or elsewhere in this Annual Report on Form 10-K, or in any documents that we subsequently file publicly were to occur, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Risks Relating to COVID-19

Our financial condition and results of operations are expected to continue to be adversely affected by the coronavirus pandemic.

The novel strain of the coronavirus (“COVID-19”) pandemic is expected to 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.

It is very difficult to predict the extent of the impact which the pandemic will have on our business operations, financial performance, results of operations, and financial position.

We believe our operations and financial performance will continue to be negatively impacted by the COVID-19 pandemic which has caused a global slowdown of economic activity (including a decrease in demand for a broad variety of goods and services), disruptions in global supply chains and significant volatility and disruption of financial markets.

Because the severity, magnitude and duration of the COVID-19 pandemic and its economic consequences remain uncertain and rapidly changing, it is difficult to predict the extent of the pandemic’s impact on our operations and financial performance.

Further, the ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not limited to, governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic (including shutdown orders, border closings, restrictions on travel and transport and workforce pressures);

the impact of the pandemic and actions taken in response on global and regional economies, travel, and economic activity;

general economic uncertainty in key global markets and financial market volatility;

global economic conditions and levels of economic growth;

commodity prices such as oil and gas, and the pace of recovery when the COVID-19 pandemic subsides.

We continue to expect lower demand and volume for products and services, supply chain disruptions, delays of deliveries and other factors related directly and indirectly to the COVID-19 pandemic.

To the extent global vaccination programs do not achieve intended results and a longer period of economic and global supply chain and related disruption continues, the more adverse the impact will be on our business operations, financial performance and results of operations.

As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs.

A prolonged or worsening worldwide disruption could materially affect our future access to our sources of liquidity, particularly our cash flows from operations and access to credit markets, which could impact our financial condition, capitalization, and capital investments.

Additionally, a prolonged period of generating lower cash flows from operations could adversely affect our financial condition and the achievement of our strategic objectives.

Conditions in the financial and credit markets may also limit the availability of funding or increase the cost of funding, which could adversely affect our business, financial position and results of operations.

Risks Relating to Our Business

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 impacts associated with any economic sanctions imposed against Russia, including any territory within the Ukraine that Russia has occupied, in response to their recent invasion of 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 effects of the ongoing coronavirus (“COVID‐19”) pandemic on our business is uncertain and may adversely affect our results of operations and cash flows.

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.

The COVID-19 pandemic continues to present business challenges, and we continue to experience impacts related to COVID-19, primarily in disruptions in 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.

Further, the ultimate impact of the COVID-19 pandemic on our operations and financial performance depends on many factors that are not within our control, including, but not limited to, duration of the pandemic, potential subsequent waves of COVID-19 infection or potential new variants, the effectiveness and adoption of COVID-19 vaccines and therapeutics, governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic (including shutdown orders, border closings, restrictions on travel and transport and workplace restrictions);

and resulting supplier impacts.

In addition, to the extent global vaccination programs do not achieve intended results and a longer period of economic and global supply chain and related disruption continues, the more adverse the impact will be on our business operations, financial performance and results of operations.

As the impact of the COVID-19 pandemic on the economy and our operations evolves, we will continue to assess our liquidity needs.

Worsening worldwide disruption could materially affect our future access to our sources of liquidity, particularly our cash flows from operations and access to credit markets, which could impact our financial condition, capitalization, and capital investments.

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.

We are dependent on information technology networks and systems, including the Internet, to process, transmit and store electronic information, and, in the normal course of our business, we collect and retain certain types of personally identifiable and other information pertaining to our customers, stockholders and employees.

The legal, regulatory and contractual environment surrounding information security and privacy is constantly evolving and companies that collect and retain such information are under increasing attack by cyber-criminals around the world.

A theft, loss, fraudulent use or misuse of customer, stockholder, employee or our proprietary data by cybercrime or otherwise, non-compliance with our contractual or other legal obligations regarding such data or a violation of our privacy and security policies with respect to such data could

adversely impact our reputation and could result in costs, fines, litigation or regulatory action against us.

Security breaches can create system disruptions and shutdowns that could result in disruptions to our operations.

We cannot be certain that advances in criminal capabilities, new vulnerabilities or other developments will not compromise or breach the security solutions protecting our information technology, networks and systems.

A failure of or cyber-attack on our information systems technology or those of our partners, vendors, suppliers could adversely affect our ability to process orders, maintain proper levels of inventory, collect accounts receivable and pay expenses;

all of which could have an adverse effect on our results of operations, financial condition and cash flows.

Failure to effectively prevent, detect and recover from security breaches, including attacks on information technology and infrastructure by hackers;

breaches due to employee error or actions;

or other disruptions could seriously harm our operations as well as the operations of our customers and suppliers.

Such serious harm can involve, among other things, misuse of our assets, business disruptions, loss of data, unauthorized access to trade secrets and confidential business information, unauthorized access to personal information, legal claims or proceedings, reporting errors, processing inefficiencies, negative media attention, reputational harm, loss of sales, remediation and increased insurance costs, and interference with regulatory compliance.

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 are subject to numerous lawsuits for asbestos-related personal injury, and costs associated with these lawsuits may adversely affect our financial condition, results of operations and cash flows.

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• Uncertainties related to our net asbestos liability

In the fourth quarter of 2019, we updated the estimate of our asbestos liability and recorded a pre-tax charge of $229 million, net of insurance recoveries ($181 million after tax).

Our updated liability estimate is for pending and reasonably anticipated asbestos claims through the generally accepted end point of such claims in 2059.

Due to uncertainties in the tort system, as well as uncertainties inherent in the estimation process, future reviews may result in adjustments to our total asbestos-related liability.

The aggregate liability was $670 million as of December 31, 2020.

Security breaches can create system disruptions and shutdowns that could result in disruptions to our operations.

A failure of or cyber-attack on our information systems technology or those of our partners, vendors, supplier could adversely affect our ability to process orders, maintain proper levels of inventory, collect accounts receivable and pay expenses;

all of which could have an adverse effect on our results of operations, financial condition and cash flows.

Failure to effectively prevent, detect and recover from security breaches, including attacks on information technology and infrastructure by hackers;

breaches due to employee error or actions;

or other disruptions could seriously harm our operations as well as the operations of our customers and suppliers.

remediation and increased insurance costs, and interference with regulatory compliance.

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.

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.

Our operations require significant amounts of necessary components and raw materials.

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 global factors, our business has been experiencing, and may continue to experience, supply chain disruptions from an insufficient availability of certain components and raw materials and substantial freight delays in obtaining them.

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.

Nonetheless, reduced availability or interruption in supplies, whether resulting from more stringent regulatory requirements;

supplier financial condition;

increases in duties and tariff costs;

disruptions in transportation;

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

severe weather;

the occurrence or threat of wars, including Russia’s recent invasion of Ukraine or other conflicts, 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.

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

• Our Fluid Handling segment is dependent on global economic conditions, customer capital spending and commodity prices.

• 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 repair 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 (for example, the grounding of the 737 MAX and associated suspension of 737 MAX production announced by Boeing in December 2019 reduced our sales and operating profit in 2020), 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.

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In addition, our results in this segment are subject to significant variability due to the timing and size of contract awards by central banks for banknote production and actual order rates, particularly with the U.S.

In addition, our Aerospace & Electronics segment could also 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 (for example, the grounding of the 737 MAX and associated suspension of 737 MAX production announced by Boeing in December 2019 reduced our sales and operating profit in 2020), 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.

• 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.

Our operations expose us to the risk of environmental liabilities, costs, litigation and violations that could adversely affect our financial condition, results of operations, cash flows and reputation.

Our operations are subject to extensive environmental and health and safety laws and regulations in the jurisdictions in which they operate, which impose limitations on the discharge of pollutants into the ground, air and water and establish standards for the generation, treatment, use, storage and disposal of solid and hazardous wastes.

We must also comply with various health and safety regulations in the U.S.

and abroad in connection with our operations.

The costs of compliance with these regulations results in ongoing costs that may increase over time.

Failure to comply with any of these laws could result in civil and criminal liability, substantial monetary and non-monetary penalties and damage to our reputation.

In addition, we cannot provide assurance that our costs related to remedial efforts or alleged environmental damage associated with past or current waste disposal practices or other hazardous materials handling practices will not exceed our estimates or adversely affect our financial condition, results of operations and cash flows.

For example, during the fourth quarter of 2019, we received conceptual agreement from the Environmental Protection Agency on an alternative remediation strategy which is expected to further reduce the contaminant plume at the former manufacturing site in Goodyear, Arizona.

Accordingly, we recorded a pre-tax charge of $18.9 million, net of reimbursements, to extend our forecast period through 2027 and reflect our revised workplan.

The total estimated gross liability was $39.8 million as of December 31, 2020.

Our businesses are subject to extensive governmental regulation;

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 our transactions with certain customers, particularly in our Aerospace & Electronics, Fluid Handling and Payment & Merchandising Technology segments, as discussed more fully under “Specific Risks Relating to Our Business Segments.” In certain circumstances, export control and economic sanctions 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 our transactions with certain customers, particularly in our Aerospace & Electronics, Process Flow Technologies and Payment & Merchandising Technology 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.

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

to us, and as a result, may cause us to incur additional expenses and may create challenges for us to obtain conflict-free minerals at competitive prices.

For example, compliance with regulations related to the sourcing of conflict-free minerals mined from the democratic Republic of Congo and adjoining countries could limit the pool of suppliers who can provide conflict-free minerals to us, and as a result, may cause us to incur additional expenses and may create challenges for us to obtain conflict-free minerals at competitive prices.

In addition, we are subject to the Foreign Corrupt Practices Act, which prohibits U.S.

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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.

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, electronic components, cotton, and flax.

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, 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 continue to increase or we are unable to pass increased costs of components and raw materials to customers, our operating profit could be adversely affected.

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.

Our business segments and corporate offices are dependent upon highly qualified personnel, and we generally are dependent upon the continued efforts of key management employees.

A number of factors may adversely affect the labor force available to us or increase labor costs, including high employment levels, federal unemployment subsidies, including enhanced or expanded unemployment benefits offered in response to the ongoing COVID-19 pandemic, and other government regulations.

We have recently observed an overall tightening and increasingly competitive labor market which could result in higher compensation costs..

While we believe we have a robust intellectual capital process, we may have difficulty retaining key personnel or locating and hiring additional qualified personnel.

The loss of the services of any of such personnel or our failure to attract and retain other qualified and experienced personnel on acceptable terms could impair our ability to successfully sustain and grow our business, which could have an adverse effect on our results of operations and financial condition.

We must also comply with various health and safety regulations in the U.S.

and abroad in connection with our operations.

The costs of compliance with these regulations results in ongoing costs that may increase over time.

Failure to comply with any of these laws could result in civil and criminal liability, substantial monetary and non-monetary penalties and damage to our reputation.

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

and face risks inherent in non-domestic operations.

Net sales and assets related to our operations outside the U.S.

Net sales by destination outside the U.S.

were 48% of our consolidated amounts in 2021.

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

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

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, the British pound, the Canadian dollar and the Japanese yen, could adversely affect our reported results, primarily in our Process Flow Technologies and Payment & Merchandising Technologies segments, 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.

government has also initiated tariffs on certain foreign goods from a variety of countries and regions, most notably China, and has raised the possibility of imposing significant, additional tariff increases or expanding the tariffs to capture other types of goods in other countries.

In response, many of these foreign governments have imposed retaliatory tariffs on goods that their countries import from the U.S.

Changes in U.S.

trade policy have and may continue to result in one or more foreign governments adopting responsive trade policies that make it more difficult or costly for us to do business in or import our products from those countries.

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 risks of fluctuations in foreign currency exchange rates, primarily the euro, the British pound, the Canadian dollar and the Japanese yen, could adversely affect our reported results, primarily in our Fluid Handling and Payment & Merchandising Technologies segments, as amounts earned in other countries are translated into U.S.

dollars for reporting purposes;

• economic and political instability in the countries and regions in which we operate.

This includes, for example, the uncertainty surrounding the United Kingdom’s exit from the European Union (Brexit) on January 31, 2020, including the effects of the Trade and Cooperation Agreement between the European Union, the European Atomic Energy Community and the United Kingdom signed on December 30, 2020.

The political and economic instability created by Brexit has caused and may continue to cause volatility in global stock markets, currency exchange rate fluctuations and global economic uncertainty, which could adversely affect customer demand, our relationships with customers and suppliers, our business and financial statements.

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

Our operations require significant amounts of necessary parts and raw materials.

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

If we are unable to source these parts or raw materials, our operations may be disrupted, or we could experience a delay or halt 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.

Nonetheless, reduced availability or interruption in supplies, whether resulting from more stringent regulatory requirements;

supplier financial condition;

increases in duties and tariff costs;

disruptions in transportation;

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

severe weather;

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

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

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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 potential 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, such as our 2020 acquisition of I&S or 2019 acquisition of Cummins-Allison, involves significant risks and uncertainties, including:

Integrating acquired operations involves significant risks and uncertainties, including:

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

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

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

The costs of certain 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, cotton, and flax.

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 raw materials increase, our operating costs could be adversely affected.

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

Certain of our business segments and corporate offices are dependent upon highly qualified personnel, and we generally are dependent upon the continued efforts of key management employees.

While we believe we have a robust intellectual capital process, we may have difficulty retaining such personnel or locating and hiring additional qualified personnel.

The loss of the services of any of our key personnel or our failure to attract and retain other qualified and experienced personnel on acceptable terms could impair our ability to successfully sustain and grow our business, which could have an adverse effect on our results of operations and financial condition.

We may be unable to improve productivity, reduce costs and align manufacturing capacity with customer demand.

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For example, we recorded pre-tax restructuring charges of $32.1 million for the 2020 repositioning program related to actions to reduce our global workforce in response to the adverse economic impact of COVID-19 and integration actions related to the Cummins-Allison acquisition.

We expect to achieve annualized savings of approximately $100 million.

While these are proactive actions to increase our productivity and operating effectiveness, our failure to respond to potential declines in global demand for our products and services and properly align our cost base could have an adverse effect on our financial condition, results of operations and cash flows.

While these are proactive actions to increase our productivity and operating effectiveness, our inability to adequately respond to potential declines in global demand for our products and services and properly align our cost base could have an adverse effect on our financial condition, results of operations and cash flows.

We could face potential product liability or warranty claims, we may not accurately estimate costs related to such claims, and we may not have sufficient insurance coverage available to cover such claims.

Our products are used in a wide variety of commercial applications and certain residential applications.

Our products are used in a wide variety of commercial applications and certain residential applications, including, in many cases, in severe service or mission critical applications.

We face an inherent business risk of exposure to product liability or other claims in the event our products are alleged to be defective or that the use of our products is alleged to have resulted in harm to others or to property.

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We estimate our future warranty costs based on historical trends and product sales, but we may fail to accurately estimate those costs and thereby fail to establish adequate warranty reserves for them.

While we maintain insurance coverage with respect to certain liability claims, that insurance coverage may not be adequate to cover all claims that may arise or we may not be able to maintain adequate insurance coverage in the future at an acceptable cost.

Any liabilities not covered by insurance or that exceed our established reserves could have an adverse effect on our financial condition, results of operations and cash flows.

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Specific Risks Relating to Our Reportable Segments

Fluid Handling

Our Fluid Handling segment competes in markets that are fragmented and highly competitive.

The business competes against large, well established global companies, as well as smaller regional and local companies.

We compete based on our products’ quality, reliability and safety, our brand reputation, value-added technical expertise and customer support and consistent on-time delivery.

However, pricing can be highly competitive, particularly in regions and end markets with weakening levels of demand, or in markets where our value proposition - quality, reliability, and safety - is not valued as highly.

Additionally, our results in this segment could be adversely impacted if our recently acquired I&S business is not integrated successfully.

Demand for our Fluid Handling products is heavily dependent on our customers’ level of new capital investment and planned maintenance expenditures.

Customer spending typically depends on general economic conditions, availability of credit, and expectations of future demand.

Slowing global economic growth, volatility in commodity prices, including continued weakness in oil prices could all contribute to lower levels of customer spending, and project delays or cancellations.

A portion of this segment’s business is subject to government contracting rules and regulations.

Failure to comply with these requirements could result in suspension or debarment from government contracting or subcontracting, civil and criminal liability, monetary and non-monetary penalties, disruptions to our business, limitations on our ability to export products and services, or damage to our reputation.

At our foreign operations, results could also be adversely impacted by a weakening of local currencies against the U.S.

Our Fluid Handling business has the greatest exposure to the euro, British pound and Canadian dollar, and lesser exposure to several other currencies.

Payment & Merchandising Technologies

Our Payment & Merchandising Technologies segment sales are dependent on capital spending in a variety of end markets and across numerous geographies.

The level of capital expenditures by our customers depends on general economic conditions, availability of credit, and expectations of future demand.

Our results in this segment could also be adversely impacted if our recently acquired Cummins-Allison business is not integrated successfully, including achieving expected synergies.

This business regularly develops and markets new products.

Delays in the product development process, or the inability of new products to meet targeted performance measures, could hurt future sales.

This business is also directly and indirectly exposed to changes in government regulations;

for example, changes in gaming regulations could influence the spending patterns of our casino operator customers, or changes in anti-money laundering regulations could result in additional technical requirements for our products.

We are also subject to investigation and audit for compliance with the requirements governing government contracts, including requirements related to procurement integrity, manufacturing practices and quality procedures, export control, employment practices, the accuracy of records and the recording of costs and information security requirements.

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

Failure to comply with any of these 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.

At our foreign operations, results could also be adversely impacted by a weakening of local currencies against the U.S.

this business has the greatest exposure to the euro, British pound, the Japanese yen, the Mexican peso, and the Canadian dollar, although there is lesser exposure to several other currencies.

In addition, our facility in Mexico operates under the

Mexican Maquiladora program.

This program provides for reduced tariffs and eased import regulations;

we could be adversely affected by changes in such program, or by our failure to comply with its requirements.

Aerospace & Electronics

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Demand for our commercial aftermarket business is closely tied to total aircraft flight hours.

Any decrease in demand for new aircraft or equipment, or use of existing aircraft and equipment, would likely result in decreased sales of our products and services.

Any decrease in demand for new aircraft or equipment, or use of existing aircraft and equipment, would likely result in decreased

sales of our products and services.

In addition, our commercial business could also 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 (for example, the grounding of the 737 MAX and associated suspension of 737 MAX production announced by Boeing in December 2019 reduced our sales and operating profit in 2020), or if pricing pressure from aircraft customers caused the manufacturers to press their suppliers to lower prices and/or extend payment terms.

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Demand for our products could also be adversely impacted by industry consolidation that could result in greater acceptance of competitors' products.

Process Flow Technologies

Our Process Flow Technologies segment competes in markets that are fragmented and highly competitive.

The business competes against large, well established global companies, as well as smaller regional and local companies.

We compete based on our products’ quality, reliability and safety, our brand reputation, value-added technical expertise and customer support and consistent on-time delivery.

Demand for our Process Flow Technologies products is heavily dependent on our customers’ level of new capital investment and planned maintenance expenditures.

Customer spending typically depends on general economic conditions, availability of credit, and expectations of future demand.

Slowing global economic growth, volatility in commodity prices, including the price of oil could all contribute to lower levels of customer spending, and project delays or cancellations.

A portion of this segment’s business is subject to government contracting rules and regulations.

At our foreign operations, results could also be adversely impacted by a weakening of local currencies against the U.S.

Our Process Flow Technologies business has the greatest exposure to the euro, British pound and Canadian dollar, and lesser exposure to several other currencies.

Payment & Merchandising Technologies

Our Payment & Merchandising Technologies segment sales are dependent on capital spending in a variety of end markets and across numerous geographies.

The level of capital expenditures by our customers depends on general economic conditions, availability of credit, and expectations of future demand.

This business regularly develops and markets new products.

Delays in the product development process, the inability of new products to meet targeted performance measures, or the discovery of a successful counterfeit of our security technology products could hurt future sales.

This business is also directly and indirectly exposed to changes in government regulations;

practices, the accuracy of records and the recording of costs and information security requirements.

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

At our foreign operations, results could also be adversely impacted by a weakening of local currencies against the U.S.

this business has the greatest exposure to the euro, British pound, the Japanese yen, and the Mexican peso, although there is lesser exposure to several other currencies.

In addition, our facility in Mexico operates under the Mexican Maquiladora program.

This program provides for reduced tariffs and eased import regulations;

we could be adversely affected by changes in such program, or by our failure to comply with its requirements.

Engineered Materials

Our Engineered Materials segment manufactures and sells FRP panels and coils, primarily for use in the manufacturing of RVs, trucks, and trailers, with additional applications in commercial and industrial building construction.

Our Engineered Materials segment manufactures and sells fiberglass reinforced plastic (“FRP”) panels and coils, primarily for use in the manufacturing of RVs, trucks, and trailers, with additional applications in commercial and industrial building construction.

Demand in these end markets is dependent on general economic conditions, credit availability, and consumer and corporate spending levels.

A decline in demand in any of these end markets, including a significant change in RV industry capacity, including, the recent overproduction by RV OEMs that occurred mostly in 2017 which has unfavorably impacted our results of operations and cash flows in 2018 and 2019;

a loss of market share;

A decline in demand in any of these end markets, including a significant change in RV industry capacity;

a loss of market share to alternative materials such as, for example, non-reinforced plastic, PVC, tile, stainless steel, epoxy paint, wood, and aluminum;

or customer pricing pressure would result in lower sales and profits for this business.

Profitability could also be adversely affected by an increase in the price of resin or fiberglass if we are unable to pass the incremental costs on to our customers.

Additional risks include the loss of a principal supplier, and potential loss of market share to competing materials, such as wood or aluminum.

Additional risks include the loss of a principal supplier.

In the second quarter of 2021, the Engineered Materials segment met the criteria to be reported as discontinued operations.

Risks associated with the divestiture of the Engineered Materials segment include any regulatory approval that may be required for such divestiture is delayed or is not obtained, that the Engineered Materials divestiture does not close or that the related transaction agreement is terminated, or that the benefits expected from the Engineered Materials divestiture will not be realized or will not be realized within the expected time period.

See Part II, Item 8 under Note 3, “Discontinued Operations,” in the Notes to Consolidated Financial Statements for additional details.

Unresolved Staff Comments

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What changed 10-K

Item 1A. Risk Factors