−Removed: You should consider carefully the risks and uncertainties described below, as well as other information contained in this Annual Report, including our financial statements and the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” when evaluating our business.
+Added: You should carefully consider the risks and uncertainties described below, as well as other information contained in this Annual Report, including our financial statements and the section titled “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ,” when evaluating our business.
The risks described below are not the only ones facing us, and are not necessarily presented in the order of importance.
7 unchanged sentences
defense spending for the vast majority of our revenues.
−Removed: Disruptions or deteriorations in our relationships with the relevant customer agencies of the U.S.
+Added: Disruptions or deteriorations in our relationships with the relevant agencies of the U.S.
government could have a material adverse impact on our business, financial condition and results of operations.
5 unchanged sentences
government’s requirements, including the DoD’s National Industrial Security Program Operating Manual, for our facility security clearances, which are prerequisites to our ability to perform on classified contracts for the U.S.
−Removed: • We depend on U.S.
−Removed: government contracts, which often are only partially funded and are subject to immediate termination.
−Removed: The termination or failure to fund one or more of these contracts could have a material adverse impact on our business, financial condition and results of operations.
−Removed: • We operate in a highly regulated environment and are routinely audited and reviewed by the U.S.
−Removed: government and its agencies.
• We are subject to a number of procurement, international trade, and other rules, regulations and requirements related to our industry, our products, and the businesses we operate.
If we fail to comply with such rules, regulations or other requirements we may be subject to civil and/or criminal penalties and/or administrative sanctions.
−Removed: government’s organizational conflict of interest rules could limit our ability to successfully compete for new contracts or may require us to exit or wind down certain existing contracts, any of which could adversely affect our business, financial condition, results of operations and prospects.
−Removed: government has and may continue to implement initiatives focused on efficiencies, affordability and cost growth as well as other changes to its procurement practices.
−Removed: • We use estimates in pricing and accounting for many of our programs, and changes in our estimates could adversely impact our business, financial condition and results of operations.
−Removed: • We may not realize the full value of our total estimated contract value or bookings, including as a result of reduction of funding or cancellation of our U.S.
+Added: • We may not realize the full value of our total estimated remaining contract value or bookings, including as a result of reduction of funding or cancellation of our U.S.
government contracts, which could have a material adverse impact on our business, financial condition and results of operations.
−Removed: • Our business may be harmed if we are unable to appropriately manage our inventory.
• Our working capital requirements and cash flows are extremely variable and subject to fluctuation, which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: • We cannot predict future capital needs, the sufficiency of our current financing or our ability to obtain additional financing if we need it.
−Removed: • We cannot predict the effect of global and regional economic downturns and rising interest rates on our business.
−Removed: • As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did not incur as a private company.
−Removed: • As a public company we must maintain an effective system of internal control over financial reporting.
−Removed: • The agreements governing our debt may contain various covenants that limit our ability to take certain actions and also require us to meet financial maintenance tests, and failure to comply with these covenants could have an adverse impact on our business, financial condition and results of operations.
+Added: • We are subject to global and regional economic downturns, rising interest rates and related risks.
• To service indebtedness and fund other cash needs, we will require a significant amount of cash, and our ability to generate cash depends on many factors beyond our control.
• We face intense competition and may suffer losses if we fail to compete efficiently.
−Removed: • Preferences or set-asides for minority-owned, small and small disadvantaged businesses could impact our ability to be a prime contractor and limit our opportunity to work as a subcontractor on certain governmental procurements.
• We depend in part upon our relationships and alliances with industry participants in order to generate revenue, which involves risks and uncertainties.
• Contractual disputes with industry participants or the inability of our key suppliers to timely deliver our components, parts or services, could cause our products, systems or services to be produced or delivered in an untimely or unsatisfactory manner.
−Removed: • We are susceptible to a security breach, through cyber-attack, cyber intrusion, insider threats or otherwise, and to other significant disruptions of our IT networks and related systems or of those we operate for our customers.
+Added: • We are susceptible to a security breach, through cyber-attack, cyber-intrusion, insider threats or otherwise, and to other significant disruptions of our IT networks and related systems, or those of our customers, suppliers, vendors, subcontractors, partners, or other third parties.
• We may be at greater risk from terrorism and other threats to our physical security and personnel, than other companies.
−Removed: • Our future success will depend on our ability to respond to the rapid technological changes in the markets in which we compete, our ability to introduce new or enhanced products and to enter into new markets.
+Added: • Our future success will depend on our ability to respond to the rapid technological changes in the markets in which we compete, and our ability to introduce new or enhanced products and to enter into new markets.
• Many of our contracts contain performance obligations that require innovative design capabilities, are technologically complex, require state-of-the-art manufacturing expertise or are dependent upon factors not wholly within our control.
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• Third parties have claimed in the past and may claim in the future that we are infringing directly or indirectly upon their intellectual property rights, and third parties may infringe upon our intellectual property rights.
−Removed: • We remain subject to reputational and other risks as a result of the conviction of the chief executive officer of Leonardo S.p.A., our ultimate majority stockholder, on charges of false statements and market manipulation related to his previous role as chairman of the Italian banking entity, Banca Monte dei Paschi di Siena.
• Our reputation and ability to do business may be impacted by the improper conduct of our employees, agents, affiliates, subcontractors, suppliers, business partners or joint ventures in which we participate.
−Removed: • We are subject to environmental laws and regulations, and our ongoing operations may expose us to environmental liabilities affecting our reputation, business, financial condition and results of operations.
−Removed: • Our business, financial condition, and results of operations could be materially adversely affected by climate change regulations.
• The outcome of litigation, arbitration, investigations, claims, disputes, enforcement actions and other legal proceedings in which we are involved from time to time is unpredictable, and an adverse decision in any such matter could have a material adverse impact on our business, financial condition and results of operations.
−Removed: • Our international business exposes us to additional risks, including risks related to geopolitical and economic factors, laws and regulations.
−Removed: • We may not be successful in obtaining the export licenses necessary to conduct certain operations abroad, and Congress may prevent proposed sales to certain foreign governments.
+Added: • Our international business exposes us to additional risks, including risks related to geopolitical conflicts, including the war in Israel, and economic factors, laws and regulations.
• A failure to attract and retain technical and other key personnel could reduce our revenues and our operational effectiveness.
−Removed: • Our business could be harmed in the event of a prolonged work stoppage.
+Added: • Our business could be harmed in the event of difficulties with our unionized workforce, including the effects of a prolonged work stoppage.
• Our insurance coverage, customer indemnifications or other liability protections may be unavailable or inadequate to cover all of our significant risks or our insurers may deny coverage of or be unable to pay for material losses we incur, which could adversely affect our business, financial condition and results of operations.
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• Changes to financial accounting standards may affect our results of operations and cause us to change our business practices.
−Removed: • Changes in future business or other market conditions could cause business investments and/or recorded goodwill or other long-term assets to become impaired, resulting in substantial losses and write-downs that would adversely affect our business, financial condition and results of operations.
−Removed: • Our ability to use our net operating losses to offset future taxable income may be subject to certain limitations.
−Removed: • We could be liable for certain tax liabilities, including tax liabilities of US Holding and its subsidiaries, under tax law and the tax allocation agreement.
• Acquisitions could result in operating difficulties, dilution and other harmful consequences.
−Removed: • Failure to properly contain a global pandemic in a timely manner could materially affect how we and our business partners are operating.
• We have significant operations in locations that could be materially and adversely impacted in the event of a natural disaster or other significant disruption.
−Removed: • Our leases may be terminated or we may be unable to renew our leases on acceptable terms and if we wish to relocate, we may incur additional costs if we terminate a lease.
−Removed: • We cannot predict the consequences of future geopolitical events, but they may adversely affect the markets in which we operate, our ability to insure against risk, our operations or our results of operations.
+Added: • We cannot predict the consequences of future geopolitical events, but they may adversely affect the markets in which we operate, our ability to insure against risks, our operations or our results of operations.
• We operate under a proxy agreement with the DoD that regulates significant areas of our governance.
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• Our ultimate majority stockholder, Leonardo S.p.A., may have interests that are different from, or conflict with, those of our other stockholders, and their significant ownership in us may discourage change of control transactions.
−Removed: We also have ongoing obligations in favor of Leonardo S.p.A.
−Removed: • Our amended and restated certificate of incorporation provides that we waive any interest or expectancy in corporate opportunities presented to Leonardo S.p.A.
−Removed: • We are legally bound to provide certain services to Leonardo S.p.A., which may divert human and financial resources from our business, and to rely on the provision of certain services from Leonardo S.p.A., which we may be unable to replicate should the need arise.
−Removed: • Some of our contracts with the U.S.
−Removed: government are classified, which may limit investor insight into portions of our business.
Risks Relating to Our Business
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government represented approximately 80%, 84% and 86% of our total revenues for the years ended December 31, 2023, 2022, and 2021, respectively, with revenues principally derived directly or indirectly from contracts with the U.S.
−Removed: Army and U.S.
−Removed: Navy, which represented 37% and 32%, respectively, of our total revenues for the year ended December 31, 2022.
+Added: Navy and U.S.
+Added: Army, which represented 38% and 31%, respectively, of our total revenues for the year ended December 31, 2023.
Because our customer base is concentrated within the U.S.
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government funding for significant programs in which we participate may be impacted by a number of factors beyond our control including the overall federal budget, changes in spending priorities and defense spending levels, sequestration, the appropriations process, use of continuing resolutions (with restrictions, e.g., on starting new programs) and the permissible level of federal debt.
−Removed: These factors may also delay purchasing or payment decisions by our customers.
+Added: These factors may also delay or adversely impact purchasing or payment decisions by our customers.
In the event government funding for significant programs in which we participate becomes unavailable, or is reduced or delayed, our contract or subcontract under such programs may be terminated or adjusted by the U.S.
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We assume financial risk on fixed-price contracts due to the risk of potential cost overruns, particularly for firm-fixed price contracts in which we assume all of the cost burden.
−Removed: Our failure to anticipate risks or technical problems, estimate costs accurately or control costs during performance will reduce our profit or cause a loss on these contracts.
+Added: Our failure to anticipate or address risks or technical problems, estimate costs accurately or control costs during performance will reduce our profit or cause a loss on these contracts.
government contracts can expose us to potentially large losses because the U.S.
−Removed: government can hold us responsible for completing a project or, in certain circumstances, paying the entire cost of its replacement by another provider regardless of the size or foresee ability of any cost overruns that occur over the life of the contract.
+Added: government can hold us responsible for completing a project or, in certain circumstances, paying the entire cost of its replacement by another provider regardless of the size or foreseeability of any cost overruns that occur over the life of the contract.
Because many of these contracts involve new technologies and applications and can last for years, unforeseen events, such as technological difficulties, engineering or development challenges, fluctuations in raw materials prices, higher than expected inflation, increased labor costs, problems with our suppliers and cost overruns, can result in the contractual price becoming less favorable or even unprofitable to us over time.
−Removed: Furthermore, if we do not meet contract deadlines or specifications, we may need to renegotiate contracts on less favorable terms, be forced to pay penalties or liquidated damages or suffer significant losses if the customer terminates our contract.
+Added: Furthermore, if we do not meet contract deadlines or specifications, we may need to renegotiate contracts on less favorable terms, be forced to pay actual or liquidated damages or suffer significant losses if the customer terminates our contract.
In addition, some of our contracts have provisions relating to cost controls and audit rights, and if we fail to meet the terms specified in those contracts, we may not realize their full benefits.
−Removed: For further information, see “— We operate in a highly regulated environment and are routinely audited and reviewed by the U.S.
+Added: For further information, see “— Risks Relating to Our Business — We operate in a highly regulated environment and are routinely audited and reviewed by the U.S.
government and its agencies.” Our results of operations depend on our ability to maximize our earnings from our contracts.
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If we were to violate the terms and requirements of the NISPOM or such industrial security regulations (which apply to us under the terms of classified contracts), or if one or more of our facility or personnel security clearances is invalidated or terminated, we may not be able to continue to perform our existing classified contracts and may not be able to enter into new classified contracts, which could adversely affect our revenues.
−Removed: Failure to comply with the NISPOM or other security requirements may result in loss of access to classified information and subject us to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S.
+Added: Failure to comply with the NISPOM or other security requirements may result in loss of access to classified information and subject us to civil and criminal penalties and administrative sanctions, including termination of contracts,
+Added: forfeiture of profits, suspension of payments, fines and suspension or prohibition from doing business with the U.S.
government, which could have a material adverse impact on our business, financial condition and results of operations.
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Proxy agreements, including ours, typically have limited duration and need to be renewed on a regular basis.
−Removed: For additional information on the terms and requirements of the proxy agreement, see “— We operate under a proxy agreement with the DoD that regulates significant areas of our governance.
+Added: For additional information on the terms and requirements of the proxy agreement, see “— Risks Relating to Our Status under the Proxy Agreement — We operate under a proxy agreement with the DoD that regulates significant areas of our governance.
If we fail to comply with the proxy agreement our classified U.S.
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While we currently mitigate FOCI under the interim proxy agreement, the DoD reserves the right to impose such additional security safeguards as it believes necessary in order to prevent unauthorized access to classified and controlled unclassified information and any U.S.
−Removed: government agency may deny or revoke our access to classified and controlled unclassified information under its jurisdiction if it considers
−Removed: it necessary to protect national security.
+Added: government agency may deny or revoke our access to classified and controlled unclassified information under its jurisdiction if it considers it necessary to protect national security.
Failure to maintain an agreement with the DoD regarding the appropriate FOCI mitigation arrangement could result in invalidation or termination of our facility security clearances, which in turn would mean that we would not be able to perform under current or enter into future contracts with the U.S.
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If we fail to maintain an agreement with the DoD regarding the appropriate FOCI mitigation arrangement or otherwise fail to comply with the NISPOM, this could have a material adverse impact on our business, financial condition and results of operations.
−Removed: For further information, see “— We depend on U.S.
+Added: For further information, see “— Risks Relating to Our Business — We depend on U.S.
defense spending for the vast majority of our revenues.
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The loss of revenues from our possible failure to obtain renewal or follow-on contracts may be significant because we depend on the U.S.
−Removed: government for a significant portion of our revenues.
−Removed: For further information, see “— We depend on U.S.
+Added: government for the vast majority of our revenues.
+Added: For further information, see “— Risks Relating to Our Business — We depend on U.S.
defense spending for the vast majority of our revenues.
12 unchanged sentences
Termination by the U.S.
−Removed: government, or one of its prime contractors, of a
−Removed: contract due to default could in addition to the loss of future revenue obligate us to pay for re-procurement costs in excess of the original contract price, net of the value of work accepted from the original contract, as well as other damages.
+Added: government, or one of its prime contractors, of a contract due to default could, in addition to the loss of future revenue, obligate us to pay for re-procurement costs in excess of the original contract price, as well as other damages.
Termination of a contract due to our default could also impair our reputation and our ability to compete for other contracts which could have a material adverse impact on our business, financial condition and results of operations.
Additionally, our U.S.
−Removed: government contracts are heavily regulated and subject to audit and negative audit findings which could result in the termination of these or other contracts or the failure to receive future awards, see “— We operate in a highly regulated environment and are routinely audited and reviewed by the U.S.
+Added: government contracts are heavily regulated and subject to audit and negative audit findings which could result in the termination of these or other contracts or the failure to receive future awards, see “— Risks Relating to Our Business — We operate in a highly regulated environment and are routinely audited and reviewed by the U.S.
government and its agencies .”
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government, or one of its prime contractors, could invoke this ability across a limited or broad number of contracts.
−Removed: In the event of a stop work order, contractors are typically protected by provisions covering reimbursement for costs incurred on the contract to date and for costs associated with the temporary stoppage of work on the contract plus a reasonable fee.
−Removed: However, such temporary stoppages and delays could introduce inefficiencies and result in financial and other damages for which we may not be able to receive full recovery.
+Added: Such stoppages and delays could introduce inefficiencies and result in financial and other damages for which we may not be able to receive full recovery.
They could also ultimately result in termination of a contract (or contracts) for convenience or reduced future orders.
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government contracts, which are heavily regulated and subject to audit by the U.S.
−Removed: government and its agencies, such as the Defense Contract Audit Agency (“DCAA”), Defense Contract Management Agency (“DCMA”), the DoD Inspector General, and others.
−Removed: These agencies review performance on government contracts, direct and indirect rates and pricing practices, and compliance with applicable contracting and procurement laws, regulations and standards.
+Added: government and its agencies, such as the Defense Contract Audit Agency (“DCAA”), Defense Contract Management Agency, the DoD Inspector General, and others.
+Added: These agencies review performance on government contracts, direct and indirect rates and pricing practices, and compliance
+Added: with applicable contracting and procurement laws, regulations and standards.
They also review compliance with government standards for our business systems and the adequacy of our internal control systems and policies.
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As a result of certain cost reduction initiatives across our industry, we have experienced and may continue to experience an increased number of audits and/or a lengthened period of time required to close open audits.
−Removed: For example, the thresholds for certain allowable costs in the U.S., including compensation costs, have been significantly reduced;
−Removed: the allowability of other types of costs are being challenged, debated and, in certain cases, modified, all with potentially significant financial costs to the Company.
+Added: For example, the thresholds for certain allowable costs in the U.S., including compensation costs, have been significantly reduced and the allowability of other types of costs are being challenged, debated and, in certain cases, modified, all with potentially significant financial costs to the Company.
If an audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties, sanctions, termination of contracts, forfeiture of profits or suspension or debarment from doing business with the U.S.
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government, any of which could have a material adverse effect on our business, financial condition and results of operations.
−Removed: We (again, including our subcontractors and others with whom we do business) are also subject to, and expected to perform in compliance with, a vast array of federal, state, local and international laws, regulations and requirements related to our industry, our products and the businesses we operate.
−Removed: These laws and regulations include, but are not limited to, the Anti-Kickback Act, the Arms Export Control Act, including the ITAR, the Communications Act, the Defense Federal Acquisition Regulations, the EAR (which includes anti-boycott provisions), the False Claims Act, the Federal Acquisition Regulation, the FCPA, the Lobbying Disclosure Act, the Procurement Integrity Act, the Truthful Cost or Pricing Data Act, the Foreign Trade Regulations, the Foreign Investment Risk Review Modernization Act, the International Emergency Economic Powers Act, the Trading with the Enemy Act, and Executive Orders and regulations, administered by the U.S.
+Added: We (including our subcontractors and others with whom we do business) are also subject to, and expected to perform in compliance with, a vast array of federal, state, local and international laws, regulations and requirements related to our industry, our products and the businesses we operate.
+Added: These laws and regulations include, but are not limited to, the Anti-Kickback Act, the Arms Export Control Act, including the ITAR, the Communications Act, the Defense Federal Acquisition Regulations, the EAR
+Added: (which includes anti-boycott provisions), the False Claims Act, the Federal Acquisition Regulation, the FCPA, the Lobbying Disclosure Act, the Procurement Integrity Act, the Truthful Cost or Pricing Data Act, the Foreign Trade Regulations, the Foreign Investment Risk Review Modernization Act, the International Emergency Economic Powers Act, the Trading with the Enemy Act, and Executive Orders and regulations, administered by the U.S.
Department of the Treasury, Office of Foreign Assets Control, as well as rules and regulations administered by the U.S.
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While we have implemented compliance programs that are intended to avoid violations of these laws, regulations and requirements, given the nature of our operations and the constant evolution of applicable laws, regulations and requirements, we may not be able to prevent future violations.
−Removed: If we are found to have violated such laws, regulations or requirements, we may be subject to reductions of the value of contracts;
+Added: If we are found to have violated such laws, regulations or requirements, we may be subject to:
+Added: reductions of the value of contracts;
contract modifications or termination;
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Past efforts by the U.S.
−Removed: government to reform its procurement practices have focused, among other areas, on the separation of certain types of work to facilitate objectivity and avoid or mitigate
−Removed: organizational conflicts of interest, and the strengthening of regulations governing organizational conflicts of interest.
+Added: government to reform its procurement practices have focused, among other areas, on the separation of certain types of work to facilitate objectivity and avoid or mitigate organizational conflicts of interest, and the strengthening of regulations governing organizational conflicts of interest.
Organizational conflicts of interest may arise from circumstances in which a contractor has:
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Additionally, accounting for our contracts requires judgment relative to assessing costs, including costs associated with customer-directed delays and reductions in scheduled deliveries, unfavorable resolutions of claims and contractual matters, judgments associated with estimating contract revenue and costs and assumptions for schedule and technical issues.
−Removed: Due to the size, nature and performance period
−Removed: of many of our contracts, the estimation of total revenue and cost at completion is complicated and subject to many variables.
+Added: Due to the size, nature and performance period of many of our contracts, the estimation of total revenue and cost at completion is complicated and subject to many variables.
For example, we must make assumptions regarding:
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We evaluate bookings which we define as the total value of contract awards received from the U.S.
−Removed: government for which it has appropriated funds and legally obligated such funds to the Company through a contract or purchase order, plus the value of contract awards and orders received from customers other than the U.S.
+Added: government for which it has
+Added: appropriated funds and legally obligated such funds to the Company through a contract or purchase order, plus the value of contract awards and orders received from customers other than the U.S.
As of December 31, 2023, our total remaining contract value was approximately $7,751 million with bookings of $3,516 million.
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• the quantity of product and service sales revenue achieved;
+Added: • the timing of the delivery of products and services;
• the margins achieved on sales of products and services;
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We may also enter into other types of financings in the future, including bank and bond financing.
−Removed: Although we believe that our available cash resources, together with our retained earnings, are sufficient to meet our presently anticipated liquidity needs and capital expenditure requirements, we might in the future need to raise additional funds to, among other things:
+Added: Although we believe that our available cash resources, together with our access to credit facilities as described in Note 13:
+Added: Debt and future cash that we expect to generate from our operations, are sufficient to meet our presently anticipated liquidity needs and capital expenditure requirements, we might in the future need to raise additional funds to, among other things:
• fund our operations;
+Added: • support expansion of capacity;
• address fluctuations in cash flow (including negative cash flow periods);
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See “— Risks Relating to Our Status under the Proxy Agreement — Our ultimate majority stockholder, Leonardo S.p.A., may have interests that are different from, or conflict with, those of our other stockholders, and their majority ownership in us may discourage change of control transactions .” The existing debt obligations of Leonardo S.p.A., which contain restrictions applicable to subsidiaries of Leonardo S.p.A., including us, may also negatively impact our ability to obtain additional financing on terms acceptable to us, if at all.
−Removed: addition, any decline in the ratings of our corporate credit or any indications from the rating agencies that their ratings on our corporate credit are under surveillance or review with possible negative implications could adversely impact our ability to access capital.
+Added: In addition, any decline in the ratings of our corporate credit or any indications from the rating agencies that their ratings on our corporate credit are under surveillance or review with possible negative implications could adversely impact our ability to access capital.
These limitations could have a material adverse impact on our business, financial condition and results of operations.
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In 2022, we became a public company, and as such, have incurred, and will continue to incur, significant legal, accounting and other expenses that we did not incur as a private company.
−Removed: We are subject to the reporting requirements of the Exchange Act and are required to comply with the applicable requirements of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the rules and regulations subsequently implemented by the SEC and the listing standards of the Nasdaq Stock Exchange (the “Nasdaq”), including changes in corporate governance practices and the establishment and maintenance of effective disclosure and financial controls.
+Added: subject to the reporting requirements of the Exchange Act and are required to comply with the applicable requirements of the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”) and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as the rules and regulations subsequently implemented by the SEC and the listing standards of the Nasdaq Stock Exchange (the “Nasdaq”), including changes in corporate governance practices and the establishment and maintenance of effective disclosure and financial controls.
Compliance with these rules and regulations can be burdensome.
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We may need to hire additional accounting and financial staff, and engage outside consultants, all with appropriate public company experience and technical accounting knowledge and maintain an internal audit function, which will increase our operating expenses.
−Removed: We are evaluating these rules and regulations and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
+Added: We are evaluating these rules and regulations and their impact on our business and cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
Failure to maintain an effective system of internal control over financial reporting or to remediate weaknesses could materially harm our revenues, erode stockholder confidence in our ability to pursue business and report our financial results/condition, and negatively affect the trading price of our common stock.
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Any assessment by management that there are weaknesses in our internal control over financial reporting may raise concerns for investors.
−Removed: Any actual or perceived weaknesses and conditions that need to be addressed in the internal controls over financial reporting (including those weaknesses identified in
−Removed: periodic reports), or disclosure of management’s assessment of the internal controls over financial reporting may have an adverse impact on the price of our common stock.
+Added: Any actual or perceived weaknesses and conditions that need to be addressed in the internal controls over financial reporting (including those weaknesses identified in periodic reports), or disclosure of management’s assessment of the internal controls over financial reporting may have an adverse impact on the price of our common stock.
The agreements governing our debt contain various covenants that limit our ability to take certain actions and also require us to meet financial maintenance tests, and failure to comply with these covenants could have an adverse impact on our business, financial condition and results of operations.
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We expect that a majority of the business that we seek will be awarded through competitive bidding.
−Removed: government has increasingly relied on certain types of contracts that are subject to multiple competitive bidding processes, including multi-vendor Indefinite Delivery Indefinite Quantity (“IDIQ”), Government wide Acquisition Contracts, General Services Administration Schedule and other multi-award contracts, which has resulted in greater competition and increased pricing pressure.
+Added: government has increasingly relied on certain types of contracts that are
+Added: subject to multiple competitive bidding processes, including multi-vendor Indefinite Delivery Indefinite Quantity (“IDIQ”), Government wide Acquisition Contracts, General Services Administration Schedule and other multi-award contracts, which has resulted in greater competition and increased pricing pressure.
Many of our larger competitors have significantly greater financial resources than we do and have more extensive or more specialized engineering, manufacturing and marketing capabilities than we do in some areas, including as a result of substantial industry consolidation, which increased the market share of certain of our competitors and enabled them to take advantage of economies of scale and develop new technologies.
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Additionally, the U.S.
−Removed: Department of Justice and Federal Trade Commission have periodically and increasingly focused on ensuring competition in government acquisition and could challenge a teaming arrangement.
+Added: Department of
+Added: Justice and Federal Trade Commission have periodically and increasingly focused on ensuring competition in government acquisition and could challenge a teaming arrangement.
If any of our existing relationships with our industry partners were impaired or terminated, or if we are unable to enter into future arrangements, we could also experience significant delays in the development of new products ourselves, and we would incur additional development costs.
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We may have disputes with our contractual counterparts, including regarding the quality and timeliness of work performed by a subcontractor, customer concerns about a subcontract or subcontractor, our failure to extend existing task orders or issue new task orders under a subcontract, our hiring of personnel of a subcontractor or as a subcontractor or our counterpart’s failure to comply with applicable law.
−Removed: In addition, there are certain parts, components and services for many of our products,
−Removed: systems and services that we source from other manufacturers or vendors.
+Added: In addition, there are certain parts, components and services for many of our products, systems and services that we source from other manufacturers or vendors.
Some of our suppliers, from time to time, experience financial and operational difficulties, which may impair their ability to supply the materials, components, subsystems and services that we require.
−Removed: For example, we have recently witnessed shortages of electronic components that are used in automotive, cell phones and other electronics, in general, causing disruptions to multiple industries such as automotive manufacturing and personal electronics.
+Added: For example, we have recently witnessed shortages of castings as well as electronic components that are used in automotive, cell phones and other electronics.
Shortages of similar components that we use could negatively impact our supply chain and manufacturing processes, as well as our ability to deliver on our contracts.
−Removed: Impacts from the COVID-19 pandemic have created or exacerbated existing materials shortages, resulted in supplier business closures and disrupted our supply chain.
In addition, our supply chain may be disrupted by trade conflicts and tariffs imposed on products, as well as other external events, including natural disasters, extreme weather conditions, future medical epidemics or pandemics, acts of terrorism, cyber-attacks and labor disputes, governmental actions and legislative or regulatory changes, such as product certification or stewardship requirements, sourcing restrictions, product authenticity and climate change or greenhouse gas emission standards.
1 unchanged sentence
Any inability to develop alternative sources of supply on a cost-effective and timely basis could materially impair our ability to manufacture and deliver products, systems and services to our customers.
−Removed: We may have disputes with our subcontractors or suppliers;
−Removed: material supply constraints or problems;
−Removed: or component, subsystems or services problems in the future.
+Added: We may have disputes with our subcontractors or suppliers, material supply constraints or problems, or component, subsystems or services problems in the future.
Also, our subcontractors and other suppliers may not be able to acquire or maintain the quality of the materials, components, subsystems and services they supply, which might result in greater product returns, service problems and warranty claims and could harm our business, financial condition and results of operations.
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From time to time, we use components for which there is only one supplier, and that supplier may be unable to meet our needs.
−Removed: The inability of our suppliers to perform, or their inability to perform adequately, could also result in the need for us to transition to alternate suppliers, which could result in significant incremental cost and delay or the need for us to provide other resources to support our existing suppliers.
+Added: The inability of our suppliers to perform, or their inability to perform adequately, could also result in the need for us to transition to alternate suppliers, which could
+Added: result in significant incremental cost and delay or the need for us to provide other resources to support our existing suppliers.
Each of these subcontractor and supplier risks could have a material adverse impact on our business, financial condition and results of operations.
−Removed: We are susceptible to a security breach, through cyber-attack, cyber-intrusion, insider threats or otherwise, and to other significant disruptions of our IT networks and related systems or of those we operate for our customers.
+Added: We are susceptible to a security breach, through cyber-attack, cyber-intrusion, insider threats or otherwise, and to other significant disruptions of our IT networks and related systems, or those of our customers, suppliers, vendors, subcontractors, partners, or other third parties.
We store sensitive data, including information relating to national security and other sensitive government functions, intellectual property and technology, proprietary business information, and confidential employee information such as personally identifiable or protected health information on our servers and databases.
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We face the risk of a security breach with respect to that data, whether through cyber-attack, cyber-intrusion or insider threat via the Internet, malware, e-mail attachments, persons inside our organization or with access to systems inside our organization, threats to the physical security of our facilities and employees or other significant disruption of our IT networks and related systems or those of our suppliers or subcontractors.
−Removed: As an advanced technology-based solutions provider, and particularly as a government contractor with access to national security and other sensitive government information, we face a heightened risk of a security breach or disruption from threats to gain unauthorized access to our and our customers’ proprietary or classified information on our IT networks
−Removed: and related systems and to the IT networks and related systems that we operate and maintain for certain of our customers.
+Added: As an advanced technology-based solutions provider, and particularly as a government contractor with access to national security and other sensitive government information, we face a heightened risk of a security breach or disruption from threats to gain unauthorized access to our and our customers’ proprietary or classified information on our IT networks and related systems and to the IT networks and related systems that we operate and maintain for certain of our customers.
These types of information and IT networks and related systems are critical to the operation of our business and essential to our ability to perform day-to-day operations, and, in some cases, are critical to the operations of certain of our customers.
We make significant efforts to maintain the security and integrity of these types of information and IT networks and related systems and have implemented various measures to manage the risk of a security breach or disruption.
−Removed: As is the case with many other companies, we have experienced cyber-security incidents in the past, including denial of service attacks, ransomware, and attacks from suspected nation state actors.
+Added: As is the case with many other companies, we have experienced cybersecurity incidents in the past, including denial-of-service attacks, ransomware, and attacks from suspected nation state actors.
Our efforts and measures have not been effective in the case of every incident, but no incident has had a material negative impact on us to date.
−Removed: Sensitive data saved on networks, systems and facilities therefore remain vulnerable because of the risk that cybersecurity incidents, including, but not limited to, attempts to gain unauthorized access to data, potential security breaches, particularly cyber-attacks and cyber-intrusions, or disruptions, will occur in the future, and because the techniques used in such attempts are constantly evolving and generally are not recognized until launched against a target, and in some cases are designed not to be detected and, in fact, may not be detected.
+Added: Sensitive data saved on networks, systems and facilities therefore remain vulnerable because of the risk that cybersecurity incidents, including, but not limited to, attempts to gain unauthorized access to data;
+Added: potential security breaches, particularly cyber-attacks and cyber-intrusions;
+Added: or disruptions, will occur in the future, and because the techniques used in such attempts are constantly evolving and generally are not recognized until launched against a target.
+Added: In some cases these attempts are designed not to be detected and, in fact, may not be detected.
In some cases, the resources of foreign governments may be behind such attacks due to the nature of our business and the industries in which we operate.
Accordingly, we may be unable to anticipate these techniques or to implement adequate security barriers or other preventative measures.
−Removed: Thus, it is impossible for us to entirely mitigate this risk, and there can be no assurance that future cyber security incidents will not have a material negative impact on us.
+Added: Thus, it is impossible for us to entirely mitigate this risk, and there can be no assurance that future cybersecurity incidents will not have a material negative impact on us.
A security breach or other significant disruption involving these types of information and IT networks and related systems could:
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government) and the general public.
−Removed: Additionally, a failure to comply with the National Institute of Standards and Technology Special Publication 800-171 or other DoD cybersecurity requirements including the Cyber Security Material Model Certificate (“CMMC”), whether or not resulting in a security breach or disruption, could restrict our ability to bid for, be awarded and perform on DoD contracts.
+Added: Additionally, a failure to comply with the National Institute of Standards and Technology Special Publication 800-171 or other DoD cybersecurity requirements including the Cybersecurity Material Model Certificate (“CMMC”), whether or not resulting in a security breach or disruption, could restrict our ability to bid for, be awarded and perform on DoD contracts.
DoD requirements to comply with the CMMC now and in the future, and any obligations that may be imposed on us under the CMMC that may be different from or in addition to those otherwise required by applicable laws and regulations, may cause additional expense for compliance.
We must also rely on the safeguards put in place by customers, suppliers, vendors, subcontractors, partners in teaming arrangements or other third parties to minimize the impact of cyber threats, other security threats or business disruptions.
−Removed: These third parties may have varying levels of cybersecurity expertise and safeguards, and their relationships with government contractors, such as our company,
−Removed: may increase the likelihood that they are targeted by the same cyber threats, including from foreign governments.
+Added: These third parties may have varying levels of cybersecurity expertise and safeguards, and their relationships with government contractors, such as our company, may increase the likelihood that they are targeted by the same cyber threats, including from foreign governments.
In the event of a breach affecting these third parties, our business and financial results could suffer materially.
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These costs, which could be material, could adversely impact our results of operations in the period in which they are incurred and may not meaningfully limit the success of future attempts to breach our information technology systems.
+Added: Some of our contracts with the U.S.
+Added: government are classified, which may limit investor insight into portions of our business.
+Added: We derive a portion of our revenues from programs with the U.S.
+Added: government that are subject to security restrictions that preclude the dissemination of information that is classified for national security purposes.
+Added: We are limited in our ability to provide details about these classified programs, their risks or any disputes or claims relating to such programs, and may not disclose such information pursuant to SEC rules permitting confidential treatment of certain information.
+Added: As a result, investors and others might have less insight into our classified programs than our other businesses and, therefore, less ability to fully evaluate the risks related to our classified business.
We may be at greater risk from terrorism and other threats to our physical security and personnel, than other companies.
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Any of these events could have a material adverse effect on our business, financial condition and results of operations.
−Removed: Our future success will depend on our ability to respond to the rapid technological changes in the markets in which we compete, our ability to introduce new or enhanced products and to enter into new markets.
+Added: Our future success will depend on our ability to respond to the rapid technological changes in the markets in which we compete, and our ability to introduce new or enhanced products and to enter into new markets.
The markets in which we compete are characterized by rapid technological developments and frequent new product introductions, enhancements and modifications.
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Many of our contracts contain performance obligations that require innovative design capabilities, are technologically complex, require state-of-the-art manufacturing expertise or are dependent upon factors not wholly within our control.
−Removed: Failure to meet our contractual obligations could
−Removed: adversely affect our business, financial condition, results of operations, reputation and future prospects.
+Added: Failure to meet our contractual obligations could adversely affect our business, financial condition, results of operations, reputation and future prospects.
We design, develop and manufacture technologically advanced and innovative products and services, which are applied by our customers in a variety of environments, including some under highly demanding operating conditions, to accomplish challenging missions.
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In addition, our products cannot be tested and proven in all situations and are otherwise subject to unforeseen problems.
−Removed: Examples of unforeseen problems that could negatively affect revenue, schedule and results of operations include premature failure of products that cannot be accessed for repair or replacement, failure to perform in anticipated or unanticipated battlefield conditions, unintended explosions or similar events, problems with design, quality and workmanship, inadequate delivery of subcontractor components or services and degradation of product performance.
+Added: Examples of unforeseen problems that could negatively affect revenue, schedule and results of operations include premature failure of products that cannot be accessed for repair or replacement, failure to perform in anticipated or unanticipated battlefield conditions, unintended explosions or similar events, problems with design, quality and workmanship, inadequate delivery of
+Added: subcontractor components or services and degradation of product performance.
These failures could result, either directly or indirectly, in loss of life or property.
Among the factors that may affect revenue and results of operations could be inaccurate cost estimates, design issues, human factors, unforeseen costs and expenses not covered by insurance or indemnification from the customer, diversion of management focus in responding to unforeseen problems, loss of follow-on work, and, in the case of certain contracts, repayment to the government customer of contract cost and fee payments we previously received, or replacement obligations.
−Removed: See also Part I, Item 1A, “Risk Factors — Our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-plus and time-and-material type contracts.
−Removed: In particular, fixed-price contracts subject us to the risk of loss in the event of cost overruns or higher than anticipated inflation .” and Part I, Item 1A, “Risk Factors — We use estimates in pricing and accounting for many of our programs, and changes in our estimates could adversely impact our business, financial condition and results of operations .”
+Added: See also “ — Risks Relating to Our Business — Our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-plus and time-and-material type contracts.
+Added: In particular, fixed-price contracts subject us to the risk of loss in the event of cost overruns or higher than anticipated inflation .” and “ — Risks Relating to Our Business — We use estimates in pricing and accounting for many of our programs, and changes in our estimates could adversely impact our business, financial condition and results of operations .”
If we are unable to meet our obligations, including due to issues regarding the design, development or manufacture of our products or services, it could have a material adverse impact on our reputation, our ability to compete for other contracts and our business, financial condition and results of operations.
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We may be required to spend significant resources to monitor and enforce our intellectual property rights.
−Removed: Litigation to determine the scope of intellectual
−Removed: property rights, even if ultimately successful, could be costly and could divert management’s attention away from other aspects of our business.
−Removed: We remain subject to reputational and other risks as a result of the conviction of the chief executive officer of Leonardo S.p.A., our ultimate majority stockholder, on charges of false statements and market manipulation related to his previous role as chairman of the Italian banking entity, Banca Monte dei Paschi di Siena.
−Removed: In October 2020, an Italian court convicted Alessandro Profumo, the chief executive officer of our ultimate majority stockholder, Leonardo S.p.A., on charges of false statements and market manipulation related to his previous role as chairman of the Italian banking entity, Banca Monte dei Paschi di Siena.
−Removed: The conviction, if ultimately upheld by the Italian Supreme Court, would prevent Mr.
−Removed: Profumo from continuing his current role at Leonardo S.p.A.
−Removed: While we have been advised by Leonardo S.p.A.
−Removed: that this conviction has been appealed by Mr.
−Removed: Profumo, we remain subject to reputational risk as a result of this ongoing proceeding.
−Removed: Additionally, the loss of continuity of leadership at our majority stockholder, if the conviction is ultimately upheld, or when Profumo’s term has ended, our business could be disrupted in the short term.
−Removed: Any such disruption or reputational harm related to the proceeding could affect our ability to win new customer contracts and harm our existing relationships with customers, employees, suppliers, subcontractors and others with whom we do business, which could have an adverse impact on our business, financial condition and results of operations.
−Removed: For further discussion of risks relating to misconduct of our employees, business partners and other associated persons, see “— Our reputation and ability to do business may be impacted by the improper conduct of our employees, agents, affiliates, subcontractors, suppliers, business partners or joint ventures in which we participate .”
+Added: Litigation to determine the scope of intellectual property rights, even if ultimately successful, could be costly and could divert management’s attention away from other aspects of our business.
+Added: Further, in some cases the US government is unilaterally empowered to use, or allow our competitors to use, patented technology, subject only to the obligation to pay reasonable compensation.
Our reputation and ability to do business may be impacted by the improper conduct of our employees, agents, affiliates, subcontractors, suppliers, business partners or joint ventures in which we participate.
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Also, in the future, contamination may be found to exist at our current or former facilities or at off-site locations to which we or certain companies that we have acquired or previously owned may have sent waste, and we could be held liable for such contamination.
−Removed: For example, a government site within a national park for which we may be deemed a potentially responsible party has been subject to a government investigation since July 2000.
The remediation of such contamination, or the enactment of more stringent laws or regulations or more strict interpretation of existing laws and regulations, may require us to make additional expenditures, and could decrease the amount of free cash flow available to us for other purposes, including capital expenditures, R&D and other investments and could have a material adverse impact on our business, financial condition and results of operations.
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In addition, restrictions on carbon dioxide or other greenhouse gas emissions could result in significant costs such as higher energy costs and the passing down of carbon taxes, emission cap-and-trade programs, and renewable portfolio standards by utility companies.
−Removed: The cost of complying, or of failing to comply, with these and other climate change and emissions regulations could have an adverse impact on our business, financial condition and results of operations.
+Added: The cost of complying, or of failing to
+Added: comply, with these and other climate change and emissions regulations could have an adverse impact on our business, financial condition and results of operations.
The outcome of litigation, arbitration, investigations, claims, disputes, enforcement actions and other legal proceedings in which we are involved from time to time is unpredictable, and an adverse decision in any such matter could have a material adverse impact on our business, financial condition and results of operations.
−Removed: The size, nature and complexity of our business make us susceptible to investigations, claims, disputes, enforcement actions, litigation and other legal proceedings, particularly those involving governments.
−Removed: From time to time, we are and may become subject to investigations, claims, disputes, enforcement actions and administrative, civil or criminal litigation, arbitration or other legal proceedings
−Removed: globally and across a broad array of matters, including, but not limited to, government contracts, commercial transactions, false claims, false statements, mischarging, contract performance, fraud, procurement integrity, products liability, warranty liability, the use of hazardous materials, personal injury claims, environmental matters, shareholder-derivative actions, prior acquisitions and divestitures, intellectual property, tax, employees, export/import, anti-corruption, labor, health and safety, accidents, employee benefits and plans, including plan administration, and improper payments, as well as matters relating to our acquisition of assets or companies and other matters.
+Added: The size, nature and complexity of our business make us susceptible to investigations, claims, disputes, agency audits, enforcement actions, subpoenas, litigation and other legal proceedings, particularly those involving government authorities.
+Added: From time to time, we are and may become subject to investigations, claims, disputes, enforcement actions and administrative, civil or criminal litigation, arbitration or other legal proceedings globally and across a broad array of matters, including, but not limited to, government contracts, commercial transactions, false claims, false statements, mischarging, contract performance, fraud, procurement integrity, products liability, warranty liability, the use of hazardous materials, personal injury claims, environmental matters, shareholder-derivative actions, prior acquisitions and divestitures, intellectual property, tax, employees, export/import, anti-corruption, labor, health and safety, accidents, employee benefits and plans, including plan administration, and improper payments, as well as matters relating to our acquisition of assets or companies and other matters.
These actions may divert financial and management resources that would otherwise be used to benefit our operations.
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An adverse resolution or outcome of any of these investigations, claims, disputes, enforcement actions, litigation and other legal proceedings could have an adverse impact on our business, financial condition and results of operations.
+Added: From time to time, the Company may deem it appropriate to take legal action (or threaten to take such action) against a customer, supplier, former employee, subcontractor or other industry participant to protect its contractual and other legal rights.
+Added: The outcome of such litigation is inherently uncertain, often costly and could adversely impact the Company’s commercial relationships and reputation.
We cannot predict the outcome of legal proceedings and other contingencies with certainty.
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It is possible that the ultimate resolution of these matters could result in a material adverse impact on our financial condition, results of operations and/or cash flows from operating activities in a particular reporting period.
−Removed: Our international business exposes us to additional risks, including risks related to geopolitical and economic factors, laws and regulations.
+Added: Our international business exposes us to additional risks, including risks related to geopolitical conflicts, including the war in Israel, and economic factors, laws and regulations.
For the years ended December 31, 2023, 2022, and 2021, approximately 10%, 7% and 5%, respectively, of our revenue was derived from sales to customers located in foreign countries and foreign governments.
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generally have the ability to terminate contracts for default based on performance.
−Removed: Suspension or debarment, or termination of a contract due to default, in particular, could have a material adverse effect on our reputation, our ability to compete for other contracts and our
−Removed: financial position, results of operations and/or cash flows.
+Added: Suspension or debarment, or termination of a contract due to default, in particular, could have a material adverse effect on our reputation, our ability to compete for other contracts and our financial position, results of operations and/or cash flows.
New regulations and requirements, or changes to existing ones in the various countries in which we operate can significantly increase our costs and risks of doing business internationally.
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and foreign national policies and priorities, and geopolitical relationships, any of which may be influenced by changes in the threat environment, political leadership, geopolitical uncertainties, world events, acts of terrorism, bilateral and multi-lateral relationships, government budgets, and economic and political factors more generally, and any of which could impact funding for programs, alter export authorizations, or delay purchasing decisions or customer payments.
−Removed: These changes may affect export control laws as products or markets that were not previously subject to stringent controls may become subject to greater restrictions and oversight.
−Removed: These changes may also affect the defense spending priorities and procurement policies of foreign governments which may affect our international military sales.
+Added: These changes may affect the defense spending priorities and procurement policies of foreign governments which may affect our international military sales.
+Added: The Company is subject to risks associated with a dynamic geopolitical climate, including nation states that could take action to limit our access to key material and subcomponents used in our products.
+Added: Recently enacted export controls by foreign governments covering rare elements could have a material adverse impact on our business, financial condition and results of operations.
Global economic conditions and fluctuations in foreign currency exchange rates could further impact our business.
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customers may also include terms and reflect legal requirements that create additional risks including the risk of non-payment or delayed payment by foreign customers and governments.
−Removed: They may include industrial cooperation agreements requiring specific in-country purchases, investments, manufacturing agreements or other operational or financial obligations, including offset obligations, and provide for significant penalties if we fail to meet such requirements.
+Added: They may include industrial cooperation agreements requiring specific in-country purchases, investments, manufacturing agreements or other operational or financial obligations, including
+Added: offset obligations, and provide for significant penalties if we fail to meet such requirements.
They may also require us to enter into letters of credit, performance or surety bonds, bank guarantees and/or other financial arrangements to secure our performance obligations.
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This may increase the risk to our employees, subcontractors or other third parties, and/or increase the risk of a wide range of liabilities, as well as loss of property or damage to our products.
+Added: We are also closely monitoring developments in the war between Israel and Hamas that began on October 7, 2023.
+Added: At this time, the conflict has the potential to evolve quickly creating uncertainty in the broader Middle East region, along with the potential for disruptions to our Israeli operations in the region including, but not limited to workforce calls for duty, transportation and other logistical impacts and reduced customer confidence.
The occurrence and impact of these factors is difficult to predict, but one or more of them could negatively impact our business, financial condition and results of operations.
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Further, leadership changes have occurred and will continue to occur from time to time and we cannot predict whether significant resignations will occur or whether we will effectively manage leadership transitions.
−Removed: The term of the chief executive officer of our ultimate majority stockholder, Leonardo S.p.A.
−Removed: expires later this year.
−Removed: We may face risks related to that change and other transitions in both our leadership team and that of Leonardo S.p.A.’s.
+Added: We may face risks related to transitions in both our leadership team and that of Leonardo S.p.A.’s.
If we cannot effectively manage leadership transitions and management changes in the future, our reputation and future business prospects could be adversely affected.
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Competition for personnel in the defense industry is intense, and there is a limited number of persons with knowledge of and experience in this industry.
−Removed: Additionally, some of our businesses are located in regions where
−Removed: competition for personnel is particularly intense.
−Removed: Although we currently experience manageable rates of turnover for our technical personnel, the rate of turnover may increase in the future.
+Added: Additionally, some of our businesses are located in regions where competition for personnel is particularly intense.
+Added: The rate of turnover for our technical personnel may increase in the future.
Our ability to hire personnel in specific sectors may also be limited by non-disclosure or non-solicit agreements that we have entered into.
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If qualified personnel are scarce or difficult to attract or retain or if we experience a high level of attrition, generally or in particular areas, or if such personnel are unable to obtain security clearances on a timely basis, we could experience higher labor, recruiting or training costs in order to attract and retain necessary employees.
−Removed: Approximately 459 (or 7%) of our employees are covered by collective agreements.
+Added: Our business could be harmed in the event of difficulties with our unionized workforce, including the effects of a prolonged work stoppage.
+Added: As of December 31, 2023, approximately 470 (or 7%) of our employees were covered by collective bargaining agreements.
We generally have been able to renegotiate renewals to expiring agreements without significant disruption of operating activities.
−Removed: If we experience difficulties with renewals and renegotiations of existing collective agreements or if our employees pursue new collective representation, we could incur additional expenses and may be subject to work stoppages, slow-downs or other labor-related disruptions.
+Added: If we experience difficulties with renewals and negotiations of existing collective agreements or if our employees pursue new collective representation, we could incur additional expenses and may be subject to work stoppages, slow-downs or other labor-related disruptions.
Any such expenses or delays could adversely affect our programs served by employees who are covered by such agreements or representation.
−Removed: On September 9, 2021, President Biden released an executive order (“EO”) that required all employees of federal contractors to be vaccinated.
−Removed: As of August 2022, the three federal appellate courts that have reviewed the issue have found that the requirements outlined in the EO exceeded President Biden’s authority under the Federal Procurement Act.
−Removed: On October 19, 2022, the Office of Management and Budget (“OMB”) and the Safer Federal Workforce Task Force issued new guidance regarding implementation of the EO, confirming that the U.S government will not take action to enforce the requirements of the EO.
−Removed: In January 2023, the U.S.
−Removed: government announced it intends to end the public health emergency (and national emergency) declarations in May 2023.
−Removed: However, there can be no assurances that the federal government will not seek to enforce the requirements of this EO or subsequently issue a similar EO in response to COVID-19 or a future pandemic .
−Removed: If the EO or a similar EO is ultimately enforced, there is a risk that some of our employees will not comply and will need to be dismissed.
−Removed: Our employees are highly skilled, have critical knowledge, and in some cases have security clearances that allow them to work on highly sensitive programs.
−Removed: These employees will not be easy to replace.
−Removed: If we are unable to attract and retain a qualified workforce, we may be unable to maintain our competitive position and it could have a material adverse impact on our business, reputation, financial condition and results of operations.
−Removed: Our business could be harmed in the event of a prolonged work stoppage.
−Removed: As of December 31, 2022, approximately 459 (or 7%) of our employees were represented by labor unions.
−Removed: If we encounter difficulties with renegotiations or renewals of collective bargaining arrangements or are unsuccessful in those efforts, we could incur additional costs and experience work stoppages.
−Removed: Union actions at our suppliers could also affect us.
−Removed: We cannot predict how stable our union relationships will be or whether we will be able to successfully negotiate successor collective bargaining agreements without impacting our financial condition.
+Added: We cannot predict how stable our union relationships will be or whether we will be able to successfully negotiate successor collective bargaining agreements without impacting our financial
In addition, the presence of unions may limit our flexibility in dealing with our workforce.
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Changes in future business or other market conditions could cause business investments and/or recorded goodwill or other long-term assets to become impaired, resulting in substantial losses and write-downs that would adversely affect our business, financial condition and results of operations.
−Removed: As of December 31, 2022 and 2021, we had goodwill and other intangible assets of $1,408 and $1,123 million, respectively, net of accumulated amortization, which represented 38% and 37%, respectively, of our total assets.
+Added: As of December 31, 2023 and 2022, we had goodwill and other intangible assets, net of accumulated amortization, of $1,389 and $1,408 million, respectively, which represented 35% and 38%, respectively, of our total assets.
Our goodwill is subject to an impairment test on an annual basis and is also tested whenever events and circumstances indicate that goodwill may be impaired.
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Future acquisitions may require us to obtain additional equity or debt financing, which may not be available on favorable terms or at all.
−Removed: Finally, we may be required to obtain the consent of US Holding in order to pursue certain material transactions and there is no guarantee that their consent will be granted See “— Risks Relating to Our Status under the Proxy Agreement — Our ultimate majority stockholder, Leonardo S.p.A., may have interests that are different from, or conflict with, those of our other stockholders, and their significant ownership in us may discourage change of control transactions .”
−Removed: The COVID-19 pandemic, as well as other pandemics, health emergencies and related impacts, have had and are likely to continue to have an adverse impact on our business, financial condition and results of operations.
−Removed: The COVID-19 pandemic continued to cause significant volatility, uncertainty and economic disruption in 2022.
−Removed: The emergence of the Omicron variant in late 2021 and resulting increase in COVID-19 cases in early 2022 adversely affected, and may continue to adversely affect, our business operations, and could materially and adversely affect our business, financial condition and results of operations.
−Removed: The Company faces risks related to health epidemics and other outbreaks of communicable disease which could significantly disrupt operations, and may materially and adversely affects its business, financial conditions and results of operations.
+Added: Finally, we may be required to obtain various government approvals and/or the consent of US Holding in order to pursue certain material transactions and there is no guarantee that their consent will be granted See “— Risks Relating to Our Status under the Proxy Agreement — Our ultimate majority stockholder, Leonardo S.p.A., may have interests that are different from, or conflict with, those of our other stockholders, and their significant ownership in us may discourage change of control transactions .”
+Added: Pandemics, epidemics, disease outbreaks and health emergencies, such as the COVID-19 pandemic, have had, and future public health crises could have, an adverse impact on our business, financial condition and results of operations.
+Added: The Company faces risks related to pandemics, health epidemics and other outbreaks of communicable disease which could significantly disrupt operations, and may materially and adversely affects our business, financial conditions and results of operations.
The extent to which a pandemic or epidemic, will impact us in the future will depend on numerous evolving factors and developments that we are unable to predict, including:
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governmental, business and other actions (which could include limitations on our operations or mandates to provide products, systems or services);
−Removed: the continued success of measures taken by governmental authorities worldwide to stabilize the markets and support economic growth, which is unknown and may not be sufficient to address future market dislocations or avert severe and prolonged reductions in economic activity;
+Added: the continued success of measures taken by governmental authorities worldwide to stabilize the markets and support economic growth, which is unknown and may
+Added: not be sufficient to address future market dislocations or avert severe and prolonged reductions in economic activity;
the impacts on our supply chain;
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the health of and the effect on our workforce and our ability to meet staffing needs in our businesses and facilities, particularly if members of our workforce are quarantined as a result of exposure;
−Removed: any impairment in value of our
−Removed: tangible or intangible assets which could be recorded as a result of a weaker economic conditions;
+Added: any impairment in value of our tangible or intangible assets which could be recorded as a result of a weaker economic conditions;
and the potential effects on our internal controls, including those over financial reporting, as a result of remote working environments and other conditions such as shelter-in-place and similar orders that apply to our employees and business partners, among others.
In addition, disruptions in the credit or financial markets or impacts on our credit ratings from the pandemic could adversely affect our ability to access capital on favorable terms and continue to meet our liquidity needs, all of which are highly uncertain and cannot be predicted.
+Added: On September 9, 2021, President Biden released an executive order (“EO”) that required all employees of federal contractors to be vaccinated.
+Added: On October 19, 2022, the Office of Management and Budget (“OMB”) and the Safer Federal Workforce Task Force issued guidance confirming that the U.S government would not take action to enforce the EO.
+Added: In January 2023, the U.S.
+Added: government announced its intention to end the public health (and national) emergency declarations as of May 2023.
+Added: However, there can be no assurances that the federal government will not seek to enforce the requirements of the EO or subsequently issue a similar EO in response to COVID-19 or a future pandemic .
+Added: If the EO or a similar EO is ultimately enforced, there is a risk that some of our employees will not comply and will need to be dismissed.
+Added: Our employees are highly skilled, have critical knowledge, and in some cases have security clearances that allow them to work on highly sensitive programs.
+Added: These employees will not be easy to replace.
+Added: If we are unable to attract and retain a qualified workforce, we may be unable to maintain our competitive position and it could have a material adverse impact on our business, reputation, financial condition and results of operations.
We have significant operations in locations that could be materially and adversely impacted in the event of a natural disaster or other significant disruption.
−Removed: Our operations and the operations of our suppliers and customers could be subject to natural disasters or other significant disruptions, including hurricanes, typhoons, tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, medical epidemics, pandemics, acts of terrorism, power shortages and blackouts, telecommunications failures and other natural and manmade disasters or disruptions.
−Removed: We have significant business operations located in areas that are subject to these risks, for example our facilities in Florida and Texas.
−Removed: In the event of such a natural disaster or other disruption, we could experience disruptions or interruptions to our operations or the operations of our suppliers, subcontractors, distributors, resellers or customers, including inability of employees to work;
−Removed: destruction of facilities;
−Removed: and/or loss of life, all of which could materially increase our costs and expenses, delay or decrease orders and revenue from our customers and have a material adverse impact on our business, financial condition and results of operations.
+Added: Our operations and the operations of our suppliers and customers could be subject to natural disasters or other significant disruptions, including hurricanes, typhoons, tsunamis, floods, earthquakes, fires, water shortages, other extreme weather conditions, medical epidemics, pandemics, acts of terrorism, power shortages and blackouts, telecommunications failures and other natural and man-made disasters or disruptions.
+Added: We have significant business operations located in areas that are subject to these risks, for example our facilities in California, Florida and Texas.
+Added: In the event of such a natural disaster or other disruption, we could experience disruptions or interruptions to our operations or the operations of our suppliers, subcontractors, distributors, resellers or customers, including inability of employees to work, destruction of facilities, and/or loss of life, all of which could materially increase our costs and expenses, delay or decrease orders and revenue from our customers and have a material adverse impact on our business, financial condition and results of operations.
Our leases may be terminated or we may be unable to renew our leases on acceptable terms and if we wish to relocate, we may incur additional costs if we terminate a lease.
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If we are unable to renew our facility leases, we may close or relocate a facility, which could subject us to construction and other costs and risks, which in turn could have a material adverse effect on our business, financial condition and results of operations, including significant capital expenses that may materially impact our results of operations and ability to meet certain contractual schedule commitments.
−Removed: Additionally, we may have to seek qualification of any new facilities in order to meet customer or contractual requirements.
+Added: Additionally, we may have to seek qualification of any new facilities in order to
+Added: meet customer or contractual requirements.
We would also have to obtain facility security clearances for the new facility in order to continue to perform on classified contracts.
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Our inability to terminate a lease when we stop fully utilizing a facility could negatively impact our business, financial condition and results of operations.
−Removed: We cannot predict the consequences of future geo-political events, but they may adversely affect the markets in which we operate, our ability to insure against risks, our operations or our results of operations.
−Removed: Ongoing instability and current conflicts in global markets, including in Eastern Europe, the Middle East and Asia, and the potential for other conflicts and future terrorist activities and other recent geo-political events throughout the world, including the conflict in Ukraine, the U.S.
+Added: We cannot predict the consequences of future geopolitical events, but they may adversely affect the markets in which we operate, our ability to insure against risks, our operations or our results of operations.
+Added: Ongoing instability and current conflicts in global markets, including in Eastern Europe, the Middle East and Asia, and the potential for other conflicts and future terrorist activities and other recent geopolitical events throughout the world, including the conflict in Ukraine, the U.S.
military withdrawal from Afghanistan, new or increased tariffs or sanctions and potential trade wars have created and continue to create economic and political uncertainties and impacts that could have a material adverse impact on our business, financial condition and results of operations.
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government’s requirements, including the DoD’s National Industrial Security Program Operating Manual, for our facility security clearances, which are prerequisites to our ability to perform on classified contracts for the U.S.
−Removed: government .” Furthermore, the combination of the Italian state beneficially owning approximately 30.2% of Leonardo S.p.A.’s voting power (through its ownership of approximately 30.2% of the outstanding ordinary shares of Leonardo S.p.A.), and the governance of Leonardo S.p.A.
+Added: government .” Furthermore, the combination of the Italian state beneficially owning approximately 30.2% of Leonardo S.p.A.’s voting
+Added: power (through its ownership of approximately 30.2% of the outstanding ordinary shares of Leonardo S.p.A.), and the governance of Leonardo S.p.A.
itself, has led DRS to be deemed to be controlled by a foreign government by certain U.S.
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government, including defense-related programs with the DoD and a broad range of programs with the U.S.
−Removed: Army and U.S.
+Added: Navy and U.S.
See “— Risks Relating to Our Business — We depend on U.S.
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government could have a material adverse impact on our business, financial condition and results of operations.
−Removed: ” Therefore, if we fail to comply with the terms of the proxy agreement and the DoD imposes any of the above remedies, this could have a material adverse impact on our business, financial condition and results of operations.
+Added: ” Therefore, if we fail to comply with the terms of the proxy agreement and the DoD imposes any of the above remedies, this could have a material adverse impact on our business, financial
+Added: condition and results of operations.
See “— Risks Relating to Our Status under the Proxy Agreement — Our ultimate majority stockholder, Leonardo S.p.A., may have interests that are different from, or conflict with, those of our other stockholders, and their significant ownership in us may discourage change of control transactions .
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If a particular proposed acquisition or investment in a U.S.
−Removed: business falls
−Removed: within CFIUS’s jurisdiction, we may determine that we are required to make a mandatory filing or that we will submit a voluntary notice to CFIUS, or to proceed with the transaction without notifying CFIUS and risk CFIUS intervention, before or after closing the transaction.
+Added: business falls within CFIUS’s jurisdiction, we may determine that we are required to make a mandatory filing or that we will submit a voluntary notice to CFIUS, or to proceed with the transaction without notifying CFIUS and risk CFIUS intervention, before or after closing the transaction.
CFIUS may decide to block or delay an acquisition or investment by us, impose conditions to mitigate national security concerns with respect to such acquisition or investment or order us to divest all or a portion of a U.S.
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In exercising their power as proxy holders, the proxy holders are directed to act to protect the legitimate economic interests of our stockholders and in a manner consistent with their fiduciary duties, but they are not generally required to follow instructions of Leonardo S.p.A., US Holding or us.
−Removed: The proxy agreement provides that the proxy holders may vote for or consent to in, their sole and absolute discretion, without consultation with US Holding or Leonardo S.p.A., the election of additional directors who are not proxy holders (and who are selected from candidates proposed by US Holding after reasonable consultation with our nominating and corporate governance committee, and subject to DCSA’s approval in certain circumstances), any changes or amendments to our certificate of incorporation or by‑laws, the sale or disposal of our property, assets or business, our incurrence of debt or any pledge, mortgage or encumbrance of any of our assets, or any other matter affecting us, other than as described below.
+Added: The proxy agreement provides that the proxy holders may vote for or consent to in, their sole and absolute discretion, without consultation with US Holding or Leonardo S.p.A., the election of additional
+Added: directors who are not proxy holders (and who are selected from candidates proposed by US Holding after reasonable consultation with our nominating and corporate governance committee, and subject to DCSA’s approval in certain circumstances), any changes or amendments to our certificate of incorporation or bylaws, the sale or disposal of our property, assets or business, our incurrence of debt or any pledge, mortgage or encumbrance of any of our assets, or any other matter affecting us, other than as described below.
However, the proxy holders may only vote for or consent to the following matters with the express written approval of US Holding:
−Removed: • other than in the ordinary course of business with vendors, customers and suppliers, the sale or disposition of any of our subsidiaries, property, assets or business or those of our subsidiaries or the purchase by us or our subsidiaries of any business, properties, assets or entities, other than in the ordinary course of business, in any individual transaction where our investment (based on our share of the enterprise value) exceeds two percent (2)% of our revenues for the immediately preceding year or where our investment, in the aggregate for all such sales or dispositions in a
−Removed: calendar year, exceeds an amount equal to five percent (5)% of our revenues for the immediately preceding year;
+Added: • other than in the ordinary course of business with vendors, customers and suppliers, the sale or disposition of any of our subsidiaries, property, assets or business or those of our subsidiaries or the purchase by us or our subsidiaries of any business, properties, assets or entities, other than in the ordinary course of business, in any individual transaction where our investment (based on our share of the enterprise value) exceeds two percent (2)% of our revenues for the immediately preceding year or where our investment, in the aggregate for all such sales or dispositions in a calendar year, exceeds an amount equal to five percent (5)% of our revenues for the immediately preceding year;
• the incurrence of debt or pledge, mortgage, lease or other encumbrance of our assets of those of our subsidiaries in connection with the incurrence of debt if such incurrence would cause the aggregate outstanding principal amount of all debt of us and our subsidiaries to exceed a target leverage ratio set forth in our then-current operating plan, excluding current debt incurred for purposes of funding day-to-day working capital requirements in the ordinary course of business;
−Removed: • any merger, consolidation, reorganization or dissolution of us of any of our subsidiaries except as permitted above and excluding transactions solely among our wholly owned subsidiaries;
+Added: • any merger, consolidation, reorganization or dissolution of us or any of our subsidiaries except as permitted above and excluding transactions solely among our wholly owned subsidiaries;
• the filing or making of any petition by us or our subsidiaries under the federal bankruptcy laws or any similar law or statute of any state or any foreign country.
In addition, the proxy holders may only vote to declare or suspend dividends after prior consultation with US Holding.
−Removed: At all times subject to the proxy agreement, on November 28, 2022, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) as well as a cooperation agreement (the “Cooperation Agreement”) with Leonardo S.p.A and US Holding.
+Added: At all times subject to the proxy agreement, on November 28, 2022, the Company entered into the Registration Rights Agreement as well as the Cooperation Agreement with Leonardo S.p.A and US Holding.
The Registration Rights Agreement, among other things, provides Leonardo S.p.A.
and its affiliates with customary demand, shelf and piggy-back registration rights to facilitate a public offering of our common stock held by US Holding.
+Added: The Registration Rights Agreement was exercised in November 2023 and may be exercised in the future.
+Added: The requirements of the Registration Rights Agreement may burden management attention and resources.
The Cooperation Agreement, among other things, provides (a) Leonardo S.p.A.
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or its affiliates could pursue business interests that are detrimental to us but beneficial to themselves or to other companies in which they invest or with whom they have a material relationship.
−Removed: Conflicts of interest could also arise with respect to business opportunities that could be advantageous to Leonardo S.p.A., and they may pursue acquisition opportunities that may be complementary to our business.
+Added: Conflicts of interest could also arise with respect to business
+Added: opportunities that could be advantageous to Leonardo S.p.A., and they may pursue acquisition opportunities that may be complementary to our business.
As a result, those acquisition opportunities may not be available to us.
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This influence, including the requirement in our proxy agreement for approval by the proxy holders and our majority stockholder of mergers and consolidations, may also discourage change of control transactions.
−Removed: The term of the Leonardo S.p.A.
−Removed: Chief Executive Officer expires later this year.
Changes in the leadership at our ultimate majority stockholder could create uncertainty and potentially exacerbate these risks.
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and its affiliates with services in support of its U.S.
−Removed: operations (aside from us), including services related to tax, financial and accounting support, legal support, trade compliance, marketing and, communications on an arm’s-length basis.
+Added: operations (aside from us), including services related to tax,
+Added: financial and accounting support, legal support, trade compliance, marketing and, communications on an arm’s-length basis.
Under the tax allocation agreement, we are responsible for administering certain U.S.
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however, we cannot assure you that we will be able to obtain the services at the same or better levels or at the same or lower costs directly from third-party providers.
−Removed: Some of our contracts with the U.S.
−Removed: government are classified, which may limit investor insight into portions of our business.
−Removed: We derive a portion of our revenues from programs with the U.S.
−Removed: government that are subject to security restrictions that preclude the dissemination of information that is classified for national security purposes.
−Removed: We are limited in our ability to provide details about these classified programs, their risks or any disputes or claims relating to such programs, and may not disclose such information pursuant to SEC rules permitting confidential treatment of certain information.
−Removed: As a result, investors and others might have less insight into our classified programs than our other businesses and, therefore, less ability to fully evaluate the risks related to our classified business.
−Removed: UNRESOLVED STAFF COMMENTS
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.