What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-10-20 compared with 2022-10-25 · 85 added, 43 removed, 175 unchanged (42% of the section changed)

3 unchanged sentences

Risks Related to Economic Conditions

Supply chain issues, including shortages of adequate component supply that increase our costs or cause delays in our ability to fulfill orders, and our failure to estimate customer demand properly may result or could have an adverse impact on our business and operating results and our relationships with customers.

Supply chain issues, including shortages of adequate component supply, that increase our costs or cause delays in our ability to fulfill orders, or a failure by us to estimate customer demand properly, could have an adverse impact on our business and operating results and our relationships with customers.

We are reliant on our supply chain for components and raw materials to manufacture our products and provide services to our customers, and this reliance could have an adverse impact on our business and operating results.

A reduction or interruption in supply, including disruptions due to the COVID-19 pandemic, geopolitical conflicts such as the invasion of Ukraine by Russia and the imposition of international sanctions in response thereto, a significant natural disaster, shortages in global freight capacity, significant increases in the price of critical components and raw materials, a failure to appropriately forecast or adjust our requirements for components or raw materials based on our business needs, or volatility in demand for our products could materially adversely affect our business, operating results, and financial condition and could materially damage customer relationships.

Our vendors also may be unable to meet our demand, significantly increase lead times for deliveries, or impose significant price increases that we may be unable to offset through alternate sources of supply, price increases to our customers or increased productivity in our operations.

We may experience a reduction or interruption in supply due to factors beyond our control, including as a geopolitical conflicts and the imposition of international sanctions in response thereto, a significant natural disaster, pandemics, or shortages in global freight capacity.

Our vendors may be unable to meet our demand for raw materials or components, or significantly increase lead times for deliveries, which may be unable to offset through alternate sources of supply, or impose significant increases in the price of critical components and raw materials that we may be unable to pass along to our customers.

In addition, a failure by us to appropriately forecast or adjust our requirements for components or raw materials based on our business needs and volatility in demand for our products may impact our ability to timely procure raw materials and components necessary to maintain desired productivity in our operations.

These supply chain issues could materially adversely affect our business, operating results, and financial condition and could materially damage customer relationships.

We procure certain components for our products from single or limited suppliers.

In the event of supply disruptions from these suppliers, we may not be able to diversify our supply base for such components in a timely manner or may experience quality issues with alternate sources.

Further, we procure a significant portion of our components from suppliers located in China, and we are therefore exposed to potential disruptions in deliveries from these suppliers due to political tensions with China, geopolitical risks, government-mandated facility closures in China due to COVID-19 outbreaks, energy shortages or other causes.

Further, we procure a significant portion of our components from suppliers located in China, and we are therefore exposed to potential disruptions in deliveries from these suppliers due to political tensions with China, geopolitical risks, government-mandated facility closures in China due to public health matters (such as the COVID-19 outbreaks), energy shortages or other causes.

Our growth and ability to meet customer demand depend in large part on our ability to obtain timely deliveries of components and raw materials from our suppliers, and significant disruptions in their supply could materially adversely affect our business, operating results, and financial condition and could materially damage customer relationships.

We currently are experiencing supply shortages and inflationary pressures for certain components and raw materials that are important to our manufacturing proc ess.

Growth in the global economy may exacerbate these pressures on us and our

suppliers, and we expect these supply chain challenges and cost impacts to continue for the foreseeable future.

We have in the recent past experienced supply shortages and inflationary pressures for certain components and raw materials that were important to our manufacturing proc ess due to a number of the factors described above.

Growth in the global economy may exacerbate these pressures on us and our suppliers, and we expect these supply chain challenges and cost impacts may continue to impact us in the future.

Although we have generally secured additional supply from existing or alternate suppliers or taken other mitigating actions when such disruptions have occurred in past periods, there is no guarantee we can continue to do so in the future, and our business, results of operations, and financial condition could be adversely affected.

6 unchanged sentences

In such periods, our customers may experience deterioration of their businesses, which may reduce or delay our sales.

We have experienced contraction and challenging demand conditions in many of our served markets historically, and it is reasonably possible that we could experience such conditions in the future which may adversely affect the results of our operations and financial condition.

We have experienced contraction and challenging demand conditions in many of our served markets historically, and it is reasonably possible that we could experience such conditions in the future which may adversely affect our ability to execute our strategy, financial condition, results of operations and cash flows.

Disruptions in global oil markets have adversely affected our business and results of operations and similar events in the future may adversely affect our business and results.

A portion of our revenues is derived from customers in the midstream and downstream oil & gas industry.

Changes in demand for oil due to the disruption caused by the COVID-19 pandemic, the Russia-Ukraine conflict and related sanctions, or other factors can negatively affect oil prices, and negatively affect cash flows for many of those customers.

This has resulted in, and in the future could result in, lower capital expenditures and project modifications, delays or cancellations in that end market that may adversely affect the results of our operations and financial condition.

Disruptions in the global oil & gas markets (such as those due to the COVID-19 pandemic and the Ukraine/Russia conflict and the resulting international sanctions) and other changes in demand for oil can negatively affect oil prices and negatively affect cash flows for many of those customers.

This has resulted in, and in the future could result in, lower capital expenditures and project modifications, delays or cancellations by those customers, reducing the demand for certain of our products serving that end market, which could adversely affect our results of operations and financial condition.

Uncertainty over global tariffs, or the financial impact of tariffs, may negatively affect our results.

5 unchanged sentences

We may not be able to fully realize expected cost savings from our ASCEND transformation program and from restructuring actions.

On March 23, 2022, we announced the launch of ASCEND, a new transformation program focused on driving accelerated earnings growth and efficiency across the business with the goal of delivering improved annual operating profit once fully implemented.

The ASCEND program focuses on the following key initiatives:

(i) accelerating organic growth go-to-market strategies, (ii) improving operational excellence and production efficiency by utilizing a lean approach and (iii) driving greater efficiency and productivity in selling, general and administrative expenses.

On March 23, 2022, we announced the launch of ASCEND, a transformation program focused on driving accelerated earnings growth and efficiency across the business with the goal of delivering improved annual operating profit once fully implemented.

The ASCEND program has focused on the following key initiatives:

(i) accelerating organic growth strategies, (ii) improving operational excellence and production efficiency by utilizing a lean approach and (iii) driving greater efficiency and productivity in selling, general and administrative expenses.

In addition, from time to time, we implement other plans that incur restructuring costs to (i) eliminate redundancies in our corporate or regional structures (ii) eliminate excess capacity in our facilities as a result of integration of acquisitions or divestitures of product lines, or (iii) eliminate product or service lines that do not meet targeted profitability metrics.

1 unchanged sentence

"ASCEND Transformation Program" in the notes to the consolidated financial statements and "Business Update" within Item 7 for further discussion of the ASCEND program and other current restructuring activities).

Logistics challenges, including global freight capacity shortages or significant increases in freight costs, could continue to increase our freight costs or cause delays in our ability to fulfill orders and could have an adverse impact on our business and operating results.

The Company’s ability to import products in a timely and cost-effective manner has been, and may continue to be, adversely affected by the current global shortage of freight capacity, delays at ports, port strikes, and other issues that otherwise affect transportation and warehousing providers.

Logistics challenges, including global freight capacity shortages, could increase our freight costs or cause delays in our ability to fulfill orders and could have an adverse impact on our business and operating results.

The Company’s ability to import products in a timely and cost-effective manner has been, and may continue to be, adversely affected by shortages of freight capacity, delays at ports, port strikes, and other issues that otherwise affect transportation and warehousing providers.

These issues could delay importation of products or require the Company to locate alternative ports or warehousing providers to avoid disruption to customers.

These alternatives may not be available on

short notice or could result in higher freight and logistics costs, which could have an adverse impact on the Company’s business and financial condition.

These alternatives may not be available on short notice or could result in higher freight and logistics costs, which could have an adverse impact on the Company’s business and financial condition.

Collection risk for receivables in foreign jurisdictions.

2 unchanged sentences

Collection times for receivables in many foreign jurisdictions may often be substantially longer than those in the United States (though less than one year).

Further, for certain of our services business agency relationships, we utilize an intermediary agent and are dependent on our agents to collect payment on our behalf.

Further, for certain of our services business agency relationships, we utilize intermediary agents and are dependent on our agents to collect payment on our behalf.

The indirect sales channels expose us to the credit risk of both our channel partners and end customers and increase the risk of delayed payments or uncollectible balances.

A liquidity event or dispute involving one of these channel partners may adversely affect our results of operations and financial condition .

If we fail to retain the agents and distributors upon whom we rely to market our products and services, we may be unable to effectively market our products and services and our revenue and profitability may decline.

The marketing success of many of our businesses in the U.S.

and abroad depends largely upon our independent agents’ and distributors’ sales and service expertise and relationships with customers in our end markets.

Many of these agents have developed strong ties to existing and potential customers because of their detailed knowledge of our products.

A loss of a significant number of these agents or distributors, or of a particular agent or distributor in a key market or with key customer relationships, could significantly inhibit our ability to effectively market our products, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Cybersecurity vulnerabilities, threats and more sophisticated and targeted computer crime could pose a risk to our systems, networks, operations, products, solutions, services and data.

Increased global cybersecurity threats, computer viruses and more sophisticated and targeted cyber-related attacks, as well as cybersecurity failures re sulting from human error, vulnerabilities and technological errors pose a risk to our systems, operations and products and potentially those of our business partners.

Increased global cybersecurity threats, computer viruses and more sophisticated and targeted cyber-related attacks, as well as cybersecurity failures re sulting from human error, vulnerabilities and technological errors pose a risk to our systems, including third-party vendor operated systems, operations and products and potentially those of our business partners.

An attack also could result in losses due to ransomware payments, security breaches, theft, lost or corrupted data, misappropriation of sensitive, confidential or personal data or information, loss of trade secrets and commercially valuable information, production downtimes and operational disruptions.

3 unchanged sentences

Our financial performance could be adversely affected due to our inability to meet customer demand for our products or services in the event of a material disruption at one of our significant manufacturing or services facilities.

Equipment failures, natural disasters, health issues (including COVID-19), power outages, fires, explosions, terrorism, adverse weather conditions, labor disputes or other influences could create a material disruption.

Equipment failures, natural disasters, health issues (including pandemics like COVID-19), power outages, fires, explosions, terrorism, adverse weather conditions, labor disputes or other influences could create a material disruption.

Interruptions to production could increase our cost of sales, harm our reputation and adversely affect our ability to attract or retain our customers.

10 unchanged sentences

In addition, many of our manufacturing operations and suppliers are located outside the United States, including China, the United Kingdom and the Netherlands.

Our international operations present significant and varied risks, such as from political tensions among China and the United States, potential temporary closures of our manufacturing and sourcing operations in China, currency exchange rate fluctuations, exposure to local economic and political conditions, export and import restrictions and controls on repatriation of cash.

Foreign currency exchange rates result in volatility in our financial results, as over one-third of our sales are generated outside of the United States in currencies other than the U.S.

Our sales and operating activities outside of the U.S.

are, and will continue to be, subject to a number of risks, including:

• unfavorable fluctuations in foreign currency exchange rates;

• adverse changes in foreign tax, legal and regulatory requirements;

• export and import restrictions and controls on repatriation of cash;

• political and economic instability;

• difficulty in protecting intellectual property;

• government embargoes, tariffs and trade protection measures, such as “anti-dumping” duties applicable to classes of products, and import or export licensing requirements, as well as the imposition of trade sanctions against a class of products imported from or sold and exported to, or the loss of “normal trade relations” status with, countries in which we conduct business, that could significantly increase our cost of products or otherwise reduce our sales and harm our business;

• cultural norms and expectations that may sometimes be inconsistent with our Code of Conduct and our requirements about the manner in which our employees, agents and distributors conduct business;

• differing labor regulations;

• acts of hostility, terror or war.

Our operations outside the United States require us to comply with a number of United States and international regulations.

For example, we are subject to the Foreign Corrupt Practices Act (the “FCPA”), which prohibits United States companies or their agents and employees from providing anything of value to a foreign official for the purposes of influencing any act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person or corporate entity, or obtain any unfair advantage.

Our activities in countries outside the United States create the risk of unauthorized payments or offers of payments by one of our employees or agents that could be in violation of the FCPA, even though these parties are not always subject to our control.

We have internal control policies and procedures and have implemented training and compliance programs with respect to the FCPA.

However, we cannot assure that our policies, procedures and programs always will protect us from reckless or criminal acts committed by our employees or agents.

In the event that we believe or have reason to believe that our employees or agents have or may have violated applicable anti-corruption laws, including the FCPA, we may be required to investigate or have outside counsel investigate the relevant facts and circumstances.

In addition, we are subject to and must comply with all applicable export controls and economic sanctions laws and embargoes imposed by the United States and other various governments.

Changes in export control or trade sanctions laws may restrict our business practices, including cessation of business activities in sanctioned countries or with sanctioned entities, and may result in modifications to compliance programs and increase compliance costs, and violations of these laws or regulations may subject us to fines, penalties and other sanctions, such as loss of authorizations needed to conduct aspects of our international business or debarments from export privileges.

Violations of the FCPA or export controls or sanctions laws and regulations may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, financial condition, results of operations, and cash flows.

We intend to continue to pursue international growth opportunities, which could increase our exposure to risks associated with international sales and operations.

As we expand our international operations, we may also encounter new risks that could adversely affect our revenues and profitability.

Failure to properly manage these risks could adversely affect our business, financial condition, results of operations and cash flows.

In addition, United States tax reform has significantly changed how foreign operations are taxed in the United States.

Therefore, we continue to review our organizational structure, and changes to where income is generated, may have a material adverse effect on our liquidity and results of operations.

To the extent that we expand our international presence, these risks may increase.

Our customers and other business partners often require terms and conditions that expose us to significant risks and liabilities.

We operate in end markets and industries in which our customers and business partners seek to contractually shift significant risks associated with their operations or projects to us.

We structure our commercial and contracting practices to

assess and manage the risks we are assuming, but we cannot assure that material liabilities will not arise from our contracts with our business partners.

We structure our commercial and contracting practices to assess and manage the risks we are assuming, but we cannot assure that material liabilities will not arise from our contracts with our business partners.

Also, our contracting standards may be more stringent than those of certain competitors, and as a result, we may experience market share losses or the reduction in growth opportunities.

3 unchanged sentences

In addition, a reduction in the production of petroleum products as a result of consumer behavior that embraces alternative sources of energy over oil & gas could similarly adversely affect our results of operations by reducing the demand for our products and services.

Risks Related to COVID-19

We have been and continue to be negatively impacted by the COVID-19 pandemic and its related impacts to our employees, operations, customers and suppliers.

The COVID-19 pandemic first had a significant impact on our global operations in the third quarter of fiscal 2020, continues to adversely impact our business and may continue to affect our business in the future.

Such impacts include, and could continue to include, reductions in demand for certain of our products and services, the inability of our global teams and suppliers to meet our customers’ demand, other disruptions of supply chain, restrictions on our employees’ ability to visit customers, our service technicians’ ability to travel to job sites, or labor constraints resulting from employee turnover or departures due to resistance to vaccine mandates.

Other adverse effects could result from government-imposed mandatory closures of job sites, manufacturing facilities or other important business locations, work-from-home orders, or other such restrictions.

Should such conditions occur, persist or increase in severity, they could materially affect our ability to adequately staff and maintain our operations and impact our financial results.

The duration and ultimate impact of the COVID-19 pandemic on our business, results of operations and financial condition, including liquidity, capital and financing resources, will depend on numerous evolving factors and future developments.

Such factors and developments may include the geographic spread, severity and duration of the COVID-19 pandemic, including whether there are periods of increased COVID-19 cases, disruption to our operations resulting from employee illnesses, the long-term efficacy of vaccines or their effectiveness against variants such as the Omicron variant, governmental responses to outbreaks including health and safety measures, such as mandatory facility closures of non-essential businesses, stay-at-home orders or similar restrictions, social distancing mandates and travel bans, and import and export restrictions, which could disrupt our relationship with customers.

If we are unable to respond to and manage the impact of these events, our business and results of operations may be adversely affected.

Although our current accounting estimates contemplate current and expected future conditions, as applicable, it is reasonably possible that actual conditions could differ from our expectations, which could materially affect our results of operations and financial position.

In particular, a number of estimates have been and will continue to be affected by the ongoing COVID-19 pandemic.

The severity, magnitude and duration of the pandemic, as well as its economic consequences, are uncertain, result in significant volatility for our business and are difficult to predict.

As a result, our accounting estimates and assumptions may change over time in response to COVID-19.

Such changes could result in future impairments of goodwill, intangible assets, long-lived assets, incremental credit losses on accounts receivable, the valuation of our inventory, or a decrease in the carrying amount of our deferred tax assets.

Any of these events could amplify the other risks and uncertainties described herein and could have an adverse effect on our business and financial results.

Risks Related to the Execution of Our Strategy

38 unchanged sentences

If future operating performance at one or more of our reporting units were to fall below current levels, we could be required to recognize a non-cash charge to operating earnings to impair the related goodwill or other intangible assets.

We recognized $1 million and $6 million in impairment charges in fiscal 2022 and 2021, respectively, related to the goodwill in our Cortland Industrial operating segment (Other Segment) (see Note 7, "Goodwill, Intangible Assets and Long-Lived Assets" in the notes to the consolidated financial statements and "Critical Accounting Estimates" for further discussion on goodwill, intangible asset and long-lived asset impairments).

We recognized $1 million in impairment charges in fiscal 2022 related to the goodwill in our Cortland Industrial operating segment (Other Segment) (see Note 6, "Goodwill, Intangible Assets and Long-Lived Assets" in the notes to the consolidated financial statements and "Critical Accounting Estimates" for further discussion on goodwill, intangible asset and long-lived asset impairments).

Any future goodwill or intangible asset impairments could negatively affect our financial condition and results of operations.

46 unchanged sentences

Borrowings under our senior credit facility are secured by most domestic personal property assets and are guaranteed by most of our domestic subsidiaries and by a pledge of the stock of most of our domestic and certain foreign subsidiaries.

If borrowings under our senior credit facility were declared or became due and payable immediately as the result of an event of default and we were unable to repay or refinance those borrowings, our lenders could foreclose on the pledged assets and stock.

If borrowings under our senior credit facility were declared or became due and payable immediately as the

result of an event of default and we were unable to repay or refinance those borrowings, our lenders could foreclose on the pledged assets and stock.

Any event that requires us to repay any of our debt before it is due could require us to borrow additional amounts at unfavorable borrowing terms, cause a significant reduction in our liquidity and impair our ability to pay amounts due on our indebtedness.

Moreover, if we are required to repay any of our debt before it becomes due, we may be unable to borrow additional amounts or otherwise obtain the cash necessary to repay that debt, when due, which could have a material adverse effect on our business, financial condition and liquidity.

We may incur increased interest expense as a result of our variable rate debt.

Borrowings under our revolving line of credit and our $200 million term loan incur interest which is variable based on fluctuations in the referenced SOFR ("Secured Overnight Financing Rate").

Increases in the referenced SOFR will increase our borrowing costs and negatively impact financial results and cash flows.

Risks Related to Ownership of Our Common Stock

The market price of our common stock may be volatile.

A relatively small number of shares are normally traded in any one day and higher volumes could have a significant effect on the market price of our common stock.

The market price of our common stock could fluctuate significantly for many reasons, including in response to the risks described in this section and elsewhere in this report or for reasons unrelated to our operations, such as reports by industry analysts, investor perceptions or negative announcements by our customers, competitors or suppliers regarding their own performance, as well as industry conditions and general financial, economic and political instability.

Because our quarterly revenues and operating results may vary significantly in future periods, our stock price may fluctuate.

Our revenue and operating results may vary significantly from quarter to quarter.

A high proportion of our costs are fixed, due in part to significant selling and manufacturing costs.

Small declines in revenues could disproportionately affect operating results in a quarter and the price of our common stock may fall.

Other factors that could significantly affect quarterly operating results include, but are not limited to:

• demand for our products and services;

• the timing of sales of our products and services;

• changes in foreign currency exchange rates;

• changes in applicable tax rates;

• an impairment of goodwill or other intangible assets;

• the occurrence of restructuring charges;

• unanticipated delays or problems in introducing new products;

• announcements by competitors of new products, services or technological innovations;

• changes in our pricing policies or the pricing policies of our competitors;

• increased expenses, whether related to sales and marketing, raw materials or supplies, labor matters, product development or administration;

• major changes in the level of economic activity in major regions of the world in which we do business;

• costs related to possible future acquisitions or divestitures of technologies or businesses;

• an increase in the number or magnitude of product liability or environmental claims;

• our ability to expand our operations and the amount and timing of expenditures related to expansion of our operations, particularly outside the U.S.

Various provisions and laws could delay or prevent a change of control.

The anti-takeover provisions of our articles of incorporation and bylaws and provisions of Wisconsin corporation law could delay or prevent a change of control or may impede the ability of the holders of our common stock to change our management.

In particular, our articles of incorporation and bylaws, among other things:

• require a supermajority shareholder vote to approve a merger of the Company with another entity;

• regulate how shareholders may present proposals or nominate directors for election at shareholders’ meetings;

• authorize our board of directors to issue preferred stock in one or more series, without shareholder approval.

General Risk Factors

2 unchanged sentences

Terrorist attacks against targets in the U.S.

or abroad, rumors or threats of war, other geopolitical activity or trade disruptions, such as those caused by the Russia-Ukraine conflict or any conflict or threatened conflict between China and Taiwan, may cause general economic conditions in the U.S.

or abroad, rumors or threats of war, other geopolitical activity or trade disruptions, such as those caused by the Russia-Ukraine conflict, the armed conflict involving Hamas and Israel, or any conflict or threatened conflict between China and Taiwan, may cause general economic conditions in the U.S.

or abroad to deteriorate.

18 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors