What changed in this filing

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Item 1A. Risk Factors

2022-02-22 compared with 2021-02-16 · 43 added, 45 removed, 128 unchanged (41% of the section changed)

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COVID-19 Pandemic Risks

Coronavirus Disease 2019 (COVID-19) - The COVID-19 pandemic, the governmental responses to the pandemic, and the resulting decline in global economic activity have adversely affected our business and results of operations, and could have a material and adverse effect on our business, results of operations and financial condition in the future.

In response to the COVID-19 pandemic, federal, provincial, state, county and local governments and public health organizations and authorities around the world implemented a variety of measures intended to control the spread of the virus, including quarantines, “shelter-in-place,” “stay-at-home” and similar orders, travel restrictions, school closures, business curtailments and closures, social distancing and hygiene requirements, and other measures.

While there has been a loosening of some of these measures in certain areas, the ongoing pandemic and outbreaks of COVID-19 and variants of the disease in various areas has resulted in, and may continue to result in, reinstatement of these measures or implementation of new or additional measures in certain areas.

We manufacture and provide essential products and services to a variety of critical infrastructure customers around the globe.

We have remained operational during the pandemic, and we intend to continue providing our products and services to our customers.

However, the COVID-19 pandemic and related governmental and business responses have had, and will likely continue to have, an adverse effect on our operations, supply chains, distribution channels, and end-user customers.

For example, as a result of the pandemic and various governmental orders, a significant number of our

employees are working from home, and we substantially altered our manufacturing operations to allow for appropriate social distancing and hygiene, which could lead to decreased efficiency and productivity in our workforce and our operations.

In our supply chain, we have experienced isolated instances of suppliers temporarily closing their operations, delaying order fulfillment or limiting their production due to the pandemic, and we have utilized and may continue to utilize alternative supply arrangements where appropriate or necessary.

This may lead to increased costs, delays, and difficulties sourcing certain products.

Similarly, we have experienced isolated instances of distributors reducing or closing their operations, impacting the ability of some of our end-user customers to procure our products through our traditional distribution channels.

Some of our end-user customers have deferred capital equipment purchases, and many have eliminated in-person sales meetings.

In addition, trade shows, industry events and product demonstrations have been cancelled and are continuing to be cancelled, postponed or reformatted as virtual events.

As a result, our selling activities and our ability to convert those activities into actual sales have been and will continue to be adversely impacted.

In addition, management is focused on mitigating the effects of the COVID-19 pandemic, which has required and will continue to require a large investment of time, energy and resources.

The COVID-19 pandemic, the governmental, business and societal responses to the pandemic, and the resulting impacts on global economic activity have adversely affected our business and results of operations, and could have a material and adverse effect on our business, results of operations and financial condition in the future.

The COVID-19 pandemic and related governmental, business and societal responses to the pandemic have had, and may continue to have, an adverse effect on our operations, employees, supply chains, distribution channels, and end-user customers.

In response to the pandemic, we invested in and implemented a variety of measures intended to protect the health and safety of our employees.

Implementation of these measures impacted the efficiency and productivity of our workforce and our operations, and the continuation or reinstatement of some or all of these measures, or the implementation of new or additional measures, could impact the efficiency and productivity of our workforce and our operations in the future.

Our ability to manufacture products and provide related services is dependent on the health, safety and availability of our employees.

Notwithstanding the health and safety measures we implemented in response to the pandemic, a number of our employees have been infected with or exposed to COVID-19, and in the future a number of our employees may be infected (or re-infected) with or exposed (or re-exposed) to COVID-19, which has impacted, and in the future may impact, our ability to manufacture products and provide related services in a timely manner.

We have experienced, and in the future may experience, certain supply chain disruptions related to the pandemic, including increased costs of raw materials and components, and delays, shortages and difficulties in sourcing raw materials and components.

Similarly, we have experienced, and in the future may experience, volatility in demand for certain of our products, inability to meet end-user customer demand, and distribution and logistics challenges, including increased freight costs, reduced freight capacity, and shipping delays.

We have also experienced, and in the future may experience, restrictions on our employees’ ability to meet customers in person and the cancellation, postponement and reformatting of trade shows, industry events and product demonstrations, which has impacted, and in the future may impact, our selling activities and our ability to convert those activities into actual sales.

Management has focused on mitigating the effects of the COVID-19 pandemic on our employees and our business, which has required a large investment of time, energy and resources.

The duration and extent to which management will be required to focus on mitigating the effects of the COVID-19 pandemic on our employees and our business in the future, including complying with existing, new or modified governmental rules, regulations or standards, could require significant additional investment of management’s time, energy and resources.

The extent to which the continuing COVID-19 pandemic impacts us will depend on numerous evolving factors and future developments that are uncertain and that we are not able to predict, including:

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whether there are continued increases or spikes in COVID-19 cases in the areas in which we or our suppliers, distributors or end-user customers operate;

governmental, business, individual and other actions taken in response to the pandemic;

governmental, business, societal, individual and other actions taken in response to the pandemic;

the effect on our suppliers and distributors, and disruptions to the global supply chain;

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the effect of any closures or other changes in operations of our and our suppliers’, distributors’ and end-user customers’ facilities;

the health of and the effect on our employees and our ability to meet staffing needs in our manufacturing and distribution facilities and other critical functions, particularly if a significant number of employees become ill, are quarantined as a result of exposure, or are reluctant to show up for work;

the health of and the effect on our employees and our ability to meet staffing needs in our manufacturing and distribution facilities and other critical functions, particularly if a significant number of employees are absent because they become ill, are quarantined as a result of exposure, are reluctant to show up for work, or resign or are restricted from working as a result of vaccine mandates;

our ability to sell our products and services and provide product support, including as a result of travel restrictions, work from home requirements and arrangements, and other restrictions or changes in behavior or preferences for interactions;

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and the effect on 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.

Even after the COVID-19 pandemic has subsided, we may continue to experience adverse impacts to our business as a result of ongoing or new economic recession that may occur in the future.

Even after the COVID-19 pandemic has subsided, we may continue to experience adverse effects to our business as a result of ongoing or new economic impacts that may occur in the future.

The COVID-19 pandemic could also exacerbate or trigger other risks discussed in this report, any of which could have a material and adverse effect on our business, results of operations and financial condition.

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Economic uncertainty and volatility in various geographies may adversely affect our net sales and earnings.

If our distributors and original equipment manufacturers are unable to purchase our products because of unavailable credit or unfavorable credit terms, depressed end-user demand, or are simply unwilling to purchase our products, our net sales and earnings will be adversely affected.

If our distributors and original equipment manufacturers are unable to purchase our products because of unavailable credit

or unfavorable credit terms, depressed end-user demand, or are simply unwilling to purchase our products, our net sales and earnings will be adversely affected.

An economic downturn may affect our ability to satisfy the financial covenants in the terms of our financing arrangements.

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Civil disturbances may harm our business.

Pension Plans – Declines in interest rates, asset values and investment returns could significantly increase our pension costs and required pension contributions.

The Company sponsors two qualified defined benefit pension plans for certain employees and retirees of the Company.

The pension plans are funded with trust assets invested in a diversified portfolio of equity, fixed income and other investments.

Pension Plan – Declines in interest rates, asset values and investment returns could significantly increase our pension costs and required pension contributions.

The Company sponsors a qualified defined benefit pension plan for certain U.S.

employees and retirees of the Company.

The pension plan is funded with trust assets invested in a diversified portfolio of equity, fixed income and other investments.

Declines in interest rates, the market value of plan assets, and investment returns could significantly increase our net periodic pension costs and our future pension contribution requirements and adversely affect our results of operations and financial condition.

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We cannot predict how customers, competitors, suppliers, distributors and employees will react to the acquisitions that we make.

Acquisitions may result in the assumption of undisclosed or contingent liabilities, the incurrence of increased indebtedness and expenses, and the diversion of management’s time and attention away from other business matters, any of which may have an adverse affect on our business, results of operations and financial condition.

We make significant investments in developing products that have innovative features and differentiated technology in their industries and in niche markets.

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Our profitability will be affected if we do not develop new products and technologies that meet our customers’ needs.

Our ability to develop, market and sell products that meet our customers’ needs depends upon a number of factors, including anticipating the features and products that our customers will need in the future, identifying and entering into new markets, and training our distributors.

Changes in industries that we serve, including consolidation of competitors and customers, could affect our success.

Changes in industries that we serve, including consolidation of competitors, distributors and customers, could affect our success.

Increases in the number of competitors, the market reach of competitors, and the quality of competitive products could also affect our success.

Price competition and competitor strategies could negatively impact our growth and have an adverse impact on our results of operations.

Impairment - If acquired businesses do not meet performance expectations, assets acquired could be subject to impairment.

Impairment - If acquired businesses do not meet performance expectations, acquired assets could be subject to impairment.

Our total assets reflect goodwill from acquisitions, representing the excess cost over the fair value of the identifiable net assets acquired.

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Our Contractor segment derives a significant amount of revenue from a few large customers.

Substantial decreases in purchases by these customers, difficulty in collecting amounts due or the loss of their business would adversely affect the

profitability of this segment.

Substantial decreases in purchases by these customers, difficulty in collecting amounts due or the loss of their business would adversely affect the profitability of this segment.

The business of these customers is dependent upon the economic vitality of the construction and home improvement markets.

If these markets decline, the business of our customers could be adversely affected and their purchases of our equipment could decrease.

If these markets decline, the business of our customers could be adversely affected and their purchases of our equipment could decrease which could have an adverse impact on our results of operations.

Variable Industries - Our success may be affected by variations in the construction, automotive, mining and oil and natural gas industries.

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Changes in exchange rates between the U.S.

dollar and other currencies and fluctuations in the price of commodities have impacted and may continue to impact the manufacturing costs of our products and affect our profitability.

dollar and other currencies and fluctuations in the price of raw materials and components have impacted and may continue to impact the manufacturing costs of our products and affect our profitability.

Protective tariffs, unpredictable changes in duty rates, and changes in trade policies, agreements, relations and regulations have made and may continue to make certain foreign-sourced parts no longer competitively priced.

Long supply chains may be disrupted by environmental events, public health crises or other political factors.

Long supply chains may be disrupted by environmental events, public health crises (such as the ongoing COVID-19 pandemic), political or other factors.

Raw materials may become limited in availability from certain regions.

Port labor disputes may delay shipments.

Port labor issues may delay shipments.

We source a large volume and a variety of electronic components, which exposes us to an increased risk of counterfeit components entering our supply chain.

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We may be subject to warranty claims and may need to recall products.

Shortages, delivery delays and price inflation in a wide variety of raw materials and components (including but not limited to electronic components, castings, engines and motors) and logistical challenges (including but not limited to increased freight costs, shipping container shortages, trucking shortages, ocean, railway and air freight capacity constraints, labor shortages and port delays) have adversely affected production and profitability and may continue to adversely affect production and profitability.

Information Systems - Interruption of or intrusion into information systems may impact our business.

We rely on information systems and networks, including the internet, to conduct and support our business.

Some of these systems and networks are managed by third parties.

Some of these systems and networks are managed, hosted and provided by third parties.

We use these systems and networks to record, process, summarize, transmit and store electronic information, and to manage or support our business processes and activities.

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To date, we have not experienced a material cybersecurity incident.

Security breaches or intrusion into our information systems or networks or the information systems or networks of the third parties with whom we do business pose a risk to the confidentiality, availability and integrity of our data, and could lead to any one or more of the following:

Security breaches or intrusion into our information systems or networks or the information systems or networks of the third parties with whom we do business

pose a risk to the confidentiality, availability and integrity of our data, and could lead to any one or more of the following:

the compromising of confidential information;

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We may also be required to develop an alternative, non-infringing product that could be costly and time-consuming, or acquire a license (if available) on terms that are not favorable to us.

Regardless of whether infringement claims against us are successful, defending against such claims could significantly increase our costs, divert

management’s time and attention away from other business matters, and otherwise adversely affect our results of operations and financial condition.

Regardless of whether infringement claims against us are successful, defending against such claims could significantly increase our costs, divert management’s time and attention away from other business matters, and otherwise adversely affect our results of operations and financial condition.

Foreign Operations - Conducting business internationally exposes our Company to risks that could harm our business.

In 2020, approximately 46 percent of our sales were generated by customers located outside the United States.

Operating and selling outside of the United States exposes us to certain risks that could adversely impact our sales volume, rate of growth or profitability.

In 2021, approximately 49 percent of our sales were generated by customers located outside the U.S.

Operating and selling outside of the U.S.

exposes us to certain risks that could adversely impact our sales volume, rate of growth or profitability.

These risks include:

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The loss of, or substantial damage to, one of our facilities, our information system infrastructure or the facilities of our suppliers could make it difficult to manufacture product, fulfill customer orders and provide our employees with work.

Flooding, tornadoes, hurricanes, unusually heavy precipitation or other severe weather events, earthquakes, tsunamis, fires, explosions, acts of war, terrorism, civil unrest or outbreaks, epidemics or pandemics of infectious diseases (such as the aforementioned COVID-19 pandemic) could adversely impact our operations.

Flooding, tornadoes, hurricanes, unusually heavy precipitation or other severe weather events, earthquakes, tsunamis, fires, explosions, acts of war, terrorism, civil unrest or outbreaks, epidemics or pandemics of infectious diseases (such as the ongoing COVID-19 pandemic) could adversely impact our operations.

Personnel - Our success may be affected if we are not able to attract, develop and retain qualified personnel.

Our success depends in large part on our ability to identify, recruit, develop and retain qualified personnel.

If we are unable to successfully identify, recruit, develop and retain qualified personnel, it may be difficult for us to meet our strategic objectives and grow our business, which could adversely affect our results of operations and financial condition.

If we are unable to successfully identify, recruit, develop and retain qualified personnel or adapt to changing worker expectations and working arrangements, it may be difficult for us to meet our strategic objectives and grow our business, which could adversely affect our results of operations and financial condition.

Legal, Regulatory and Compliance Risks

Changes in Laws and Regulations - Changes may impact how we can do business and the cost of doing business around the world.

The speed and frequency of implementation and the complexity of new or revised laws and regulations globally appear to be increasing.

In addition, as our business grows and expands geographically, we may become subject to laws and regulations previously inapplicable to our business.

These laws and regulations increase our cost of doing business, may affect the manner in which our products will be produced or delivered, may affect the locations and facilities from which we conduct business, and may impact our long-term ability to provide returns to our shareholders.

We are subject to many laws and regulations in the jurisdictions where we operate, and as our business grows and expands geographically, we may become subject to additional laws and regulations previously inapplicable to our business.

Changes to laws and regulations to which we are currently subject, and exposure to additional laws and regulations previously inapplicable to our business, increase our cost of doing business, may affect the manner in which our products will be produced or delivered, may affect the locations and facilities from which we conduct business, and may impact our long-term ability to provide returns to our shareholders.

Anti-Corruption and Trade Laws - We may incur costs and suffer damages if our employees, agents, distributors or suppliers violate anti-bribery, anti-corruption or trade laws and regulations.

Laws and regulations related to bribery, corruption and trade, and enforcement thereof, are increasing in frequency, complexity and severity on a global basis.

As a global manufacturer, we are subject to a variety of complex and stringent laws and regulations related to bribery, corruption and trade.

The continued geographic expansion of our business increases our exposure to, and cost of complying with, these laws and regulations.

If our internal controls and compliance program do not adequately prevent or deter our employees, agents, distributors, suppliers and other third parties with whom we do business from violating anti-corruption laws, we may incur defense costs, fines, penalties, reputational damage and business disruptions.

If our internal controls and compliance program do not adequately prevent or deter our employees, agents, distributors, suppliers and other third parties with whom we do business from violating anti-bribery, anti-corruption or trade laws and regulations, we may incur defense costs, fines, penalties, reputational damage and business disruptions.

Tax Rates and New Tax Legislation - Changes in tax rates or the adoption of new tax legislation may affect our results of operations, cash flows and financial condition.

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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