What changed in this filing

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Item 1A. Risk Factors

2025-10-17 compared with 2024-10-21 · 48 added, 35 removed, 236 unchanged (26% of the section changed)

The risks and uncertainties described below are those that we have identified as material but are not the only risks and uncertainties facing the Company.

If any of the events contemplated by the following risks occurs, our business, financial condition, or results of operations could be materially adversely affected.

If any of the events contemplated by the following risks occurs, our business, financial

condition, or results of operations could be materially adversely affected.

Additional risks and uncertainties not currently known to us, or that we currently believe are immaterial, also may adversely impact our business, including our ability to execute our strategic growth and profitability objectives.

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Supply chain issues, including shortages of adequate component supply or 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 rely 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.

We rely on our supply chain for components and raw materials to manufacture our products and provide services to our customers.

We may experience a reduction or interruption in supply due to factors beyond our control, including as a result of 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 or unwilling 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, Further, vendors may impose significant increases in the price of critical components and raw materials that we may be unable to pass along to our customers.

Our vendors may be unable or unwilling to meet our demand for raw materials or components, or significantly increase lead times for deliveries, which we may be unable to offset through alternate sources of supply, Further, vendors may 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.

These supply chain issues, and others, 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, energy shortages or other causes.

Further, we procure a 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, including tariffs and other trade restrictions;

geopolitical risks;

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 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.

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.

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.

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When facing component supply-related challenges, we may also increase our inventories and purchase commitments to shorten lead times and increase the likelihood of maintaining adequate inventories to meet customer expectations.

If the demand for our products is less than our expectations or if we otherwise fail to anticipate customer demand properly, an

oversupply of components could result in inventory levels that could also lead to significant excess and obsolete inventory charges and adversely affect our operating and financial results.

If the demand for our products is less than our expectations or if we otherwise fail to anticipate customer demand properly, an oversupply of components could result in inventory levels that could also lead to significant excess and obsolete inventory charges and adversely affect our operating and financial results.

Deterioration of, or instability in, the domestic and international economy and challenging end-market conditions could impact our ability to grow the business and adversely impact our financial condition, results of operations and cash flows and our ability to execute our strategy.

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Disruptions in the global oil & gas markets (such as those due to the Ukraine/Russia conflict and the resulting international sanctions and the armed conflicts in the Middle East) 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.

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.

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We have developed and implemented strategies to mitigate previously implemented and, in some cases, proposed tariff increases, but there is no assurance we will be able to continue to mitigate prolonged tariffs.

The outcome of the 2024 U.S.

presidential elections may have a significant impact on U.S.

domestic and global tariffs.

Uncertainties about future tariff changes could result in mitigation actions that prove to be ineffective or detrimental to our business.

In the past year, the U.S.

government has imposed significant tariffs impacting a wide variety of goods across multiple countries and indicated that additional tariffs may be imposed in the near future.

In response, some countries have announced or imposed tariffs on goods made in the U.S, along with other trade restrictions, such as export restrictions on certain goods, including critical minerals, produced in their countries.

These actions could depress demand for our products or increase the cost to manufacture our products, which may affect the competitiveness of our products relative to manufacturers not affected by such actions.

Moreover, protracted trade disputes and uncertainty with respect to tariffs and trade agreements can adversely affect general economic conditions.

All of these outcomes could have a material adverse effect on our business, financial condition, results of operations and cash flow.

Risks Related to Our Business and Operations

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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.

For example, the armed conflicts in the Middle East and the associated attacks on commercial ships in the Red Sea has caused global increases in shipping costs, as well as significant delays for some shipments.

For example, the armed conflicts in the Middle East and the associated attacks on commercial ships in the Red Sea have caused global increases in shipping costs, as well as significant delays for some shipments.

Globally, the shipping industry faces other challenges, including labor disputes at major ports and railways and weather-related disruptions, such as droughts in Panama reducing capacity in the Panama Canal.

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

These issues could delay the delivery of our 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.

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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.

For example, during the year ended August 31, 2022, we recognized a $13.2 million bad debt reserve as a result of the continued payment delinquency of one of our agents.

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, which has occurred in the past and may occur again.

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

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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.

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, including the errors of third-party software providers, 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 an inability to recover lost data, software and key documentation, 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, reputational harm, including loss of confidence by our customers, suppliers and employees in our ability to adequately protect their information, fines, production downtimes and operational disruptions.

Increased global cybersecurity threats, computer viruses and more sophisticated and targeted cyber-related attacks pose risks to our systems, networks and operations.

Similarly, cybersecurity failures re sulting from human error, vulnerabilities and technological errors, including the errors of third-party software providers, can also pose a risk to our systems, including third-party vendor operated systems, operations and products and potentially those of our business partners.

An attack or information system failure also could result in losses due to an inability to recover lost data;

software and key documentation;

ransomware payments;

security breaches;

lost or corrupted data;

misappropriation of sensitive, confidential or personal data or information;

loss of trade secrets and commercially valuable information;

reputational harm, including loss of confidence by our customers, suppliers and employees in our ability to adequately protect their information;

and production downtimes

and operational disruptions.

The development and adoption of generative artificial intelligence ("AI") technologies exacerbates these risks and may give rise to new tools for threat actors to attack and disrupt our systems.

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We may not be able to maintain operational improvements from our ASCEND transformation program and from restructuring actions.

In March 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 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, we implemented other plans that incurred 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 did not meet targeted profitability metrics.

Although we expect that the improved operating profit, cost savings and realization of efficiencies will continue to provide annual benefit, we may not fully maintain these improvements (see Note 3.

As of August 31, 2024, ASCEND, a transformation program focused on driving accelerated earnings growth and efficiency across the business with the goal of delivering improved annual operating profit was completed, with total program costs of $75 million.

The ASCEND program focused on accelerating organic growth strategies, improving operational excellence and production efficiency by utilizing a lean approach and driving greater efficiency and productivity in selling, general and administrative expenses.

In addition, we implemented other plans that incurred restructuring costs to eliminate redundancies in our corporate or regional structures, eliminate excess capacity in our facilities as a result of integration of acquisitions or divestitures of product lines, and eliminate product or service lines that did not meet targeted profitability metrics.

Although we expect that the improved operating profit, cost savings and realization of efficiencies from these programs will continue to provide annual benefits, we may not fully maintain these improvements (see Note 3.

"ASCEND Transformation Program" and Note 4, "Restructuring Charges," 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).

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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 pandemics like COVID-19), power outages, fires, explosions, terrorism, adverse weather conditions, labor disputes or other events could create a material disruption.

Equipment failures, natural disasters, health issues (including pandemics), power outages, fires, explosions, terrorism, adverse weather conditions, labor disputes or other events 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.

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We expect sales from and into foreign markets to continue to represent a significant portion of our revenue.

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

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

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

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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.

Imposition of climate-related laws and regulations that disadvantage the oil & gas industry compared to other industries or consumer behavior that reduces demand for petroleum products may have an adverse impact on our results of operations.

A significant portion of our revenues are derived from the sale of products and services to end users in the oil & gas industry.

Imposition of laws and regulations that disadvantage the oil & gas industry or other energy industries may have an adverse impact on our results of operations.

A portion of our revenues are derived from the sale of products and services to end users in the oil & gas industry.

Accordingly, our results of operations may be adversely affected by the imposition of climate-related laws and regulations that disadvantage the oil & gas industry compared to other industries and have the effect of reducing the production of petroleum products.

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.

Similarly, actions by the U.S.

Government that disadvantage the wind industry may adversely affect demand for certain of our products and adversely affect our results of operations.

Risks Related to the Execution of Our Strategy

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The process of integrating acquired businesses into our existing operations also may require additional financial resources and attention from management that would otherwise be available for the ongoing development or expansion of our existing operations.

Although we expect to successfully integrate any acquired businesses, we may not achieve the desired net benefit in the timeframe planned.

Although we expect to successfully integrate any acquired businesses, we may not achieve the desired net benefit in the timeframe planned or at all.

If acquired businesses do not operate as we anticipate, it could materially impact our business, financial condition and results of operations.

The indemnification provisions of acquisition agreements may result in unexpected liabilities.

Certain acquisition agreements from past acquisitions require the former owners to indemnify us against certain liabilities related to the operation of each of their companies.

Certain acquisition agreements from past acquisitions require the former owners to indemnify us against certain liabilities related to the operation of such acquired companies.

In most of these agreements, the liability of the former owners is limited to specific warranties given in the agreement as well as in amount and duration.

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Divestitures and discontinued operations could negatively impact our business, and retained liabilities from businesses that we have sold could adversely affect our financial results.

In connection with the execution of our strategy to become a pure-play industrial tools and services company, we have completed several divestitures, including the divestiture of our former EC&S segment.

In connection with the execution of our strategy to become a pure-play industrial tools and services company, we have completed several divestitures.

These divestitures pose risks and challenges that could negatively impact our business, including retained liabilities related to divested businesses, obligations to indemnify buyers against contingent liabilities and potential disputes with buyers.

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Examples of laws or regulations that may have an adverse effect on our operations, financial condition and growth strategies include tax law, export and import controls, anti-corruption law, competition law, data privacy regulations, currency controls and economic or political sanctions.

In addition, changes in laws or regulations, for example, the proposed regulations of the Securities and Exchange Commission with respect to climate-related disclosures, may significantly increase our costs, adversely affecting our results of operations.

Legal compliance risks could result in significant costs to our business or cause us to restrict current activities or curtail growth plans.

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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, the armed conflicts in the Middle East, or any conflict or threatened conflict between China and Taiwan, may cause general economic conditions in the U.S.

or abroad to deteriorate.

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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