What changed in this filing

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Item 1A. Risk Factors

2023-02-24 compared with 2022-02-24 · 113 added, 63 removed, 253 unchanged (41% of the section changed)

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Our services are substantially dependent upon the condition of the oil and gas market, and in particular, the willingness of oil and gas companies to make capital and other expenditures for offshore exploration, development, drilling and production operations.

Although our services are used for other operations during the entire lifecycle of a well, when industry conditions are unfavorable, oil and gas companies typically reduce their budgets for expenditures on all types of operations and defer certain activities to the extent possible.

The price war among members of the Organization of Petroleum Exporting Countries (“OPEC”) and other non-OPEC producer nations (collectively with OPEC members, “OPEC+”) during the first quarter 2020 and global storage considerations significantly contributed to the slowdown and uncertainty in the global economy.

The ongoing COVID-19 pandemic has caused uncertainty and volatility in oil prices, which has led to reduced operating and capital spending by our oil and gas production customers.

Continued oil and gas volatility and the responses thereto will continue to adversely impact our financial condition and results of operations.

Although our services are used for other operations during the entire life cycle of a well, when industry conditions are unfavorable, oil and gas companies typically reduce their budgets for expenditures on all types of operations and defer certain activities to the extent possible.

The levels of both capital and operating expenditures largely depend on the prevailing view of future oil and gas prices, which is influenced by numerous factors, including:

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● political and economic uncertainty and geopolitical unrest, including regional conflicts and economic and political conditions in oil-producing regions;

● actions taken by OPEC and/or OPEC+;

● actions taken by the Organization of Petroleum Exporting Countries (“OPEC”) and other non-OPEC producer nations (collectively with OPEC members, “OPEC+”) ;

● the occurrence or threat of an epidemic or pandemic disease and any related governmental response, including the COVID-19 pandemic and related governmental response ;

● the availability and discovery rate of new oil and natural gas reserves in offshore areas;

● the exploration and production of onshore shale oil and natural gas;

● the cost of offshore exploration for and production and transportation of oil and natural gas;

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● technological advances affecting energy exploration, production, transportation and consumption;

● the exploration and production of onshore shale oil and natural gas;

● potential acceleration of the development of alternative fuels;

● shifts in end-customer preferences toward fuel efficiency and the use of natural gas or renewable energy alternatives;

● weather conditions, natural disasters, and epidemic and pandemic diseases, including the ongoing COVID-19 pandemic;

● weather conditions and natural disasters with respect to marine operations;

● laws, regulations and policies directly related to the industries in which we provide services, including restrictions on oil and gas leases, and their interpretation and enforcement;

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● tax laws, regulations and policies.

A prolonged period of low level of activity by offshore oil and gas operators may continue to adversely affect demand for our services, the utilization and/or rates we can achieve for our assets and services, and the outlook for our industry in general, all of which could lead to lower utilization of available vessels or similar assets and correspondingly downward pressure on the rates we can charge for our services.

Given that our business is adversely affected by low oil prices, especially the willingness of oil and gas companies to make capital and other expenditures for offshore exploration, development, drilling and production operations, the persistence of such conditions would negatively impact those companies’ willingness and ability to make those expenditures.

Additionally, our customers, in reaction to negative market conditions, may continue to seek to negotiate contracts at lower rates, both during and at the expiration of the term of our contracts, to cancel earlier work and shift it to later periods, or to cancel their contracts with us even if cancellation involves their paying a cancellation fee.

The extent of the impact of these conditions on our results of operations and cash flows depends on the length and severity of an unfavorable industry environment and the potential decreased demand for our services.

The ongoing COVID-19 pandemic could continue to disrupt our operations and adversely impact our business and financial results.

A period of low levels of activity by offshore oil and gas operators may adversely affect demand for our services, the utilization and/or rates we can achieve for our assets and services, and the outlook for our industry in general, all of which could lead to lower utilization of available vessels or similar assets and correspondingly downward pressure on the rates we can charge for our services.

Given that our business is adversely affected by low oil prices, such conditions would negatively impact oil and gas companies’ willingness and ability to make capital and other expenditures.

Additionally, our customers, in reaction to negative market conditions, may seek to negotiate contracts at lower rates, both during and at the expiration of the term of our contracts, to cancel earlier work and shift it to later periods, or to cancel their contracts with us even if cancellation involves their paying a cancellation fee.

The extent of the impact of these conditions on our results of operations and cash flows depends on the strength of our industry environment and the demand for our services.

We continue to actively monitor ongoing military hostilities in Ukraine and applicable laws, sanctions and trade control restrictions resulting from the conflict.

Any sanctions measures and increased governmental oversight and enforcement activities could adversely affect the global economy and supply chains as well as the oil and gas sector generally.

The extent to which our operations and financial results may be affected by the ongoing conflict in Ukraine will depend on various factors, including the extent and duration of the conflict and its related effects on operating and capital spending by our oil and gas production customers.

We are subject to the effects of changing prices.

Inflation rates have been relatively low and stable over the previous three decades;

however, inflation rates have risen significantly since 2021 due in part to supply chain disruptions and the effects of the COVID-19 pandemic.

We bear the costs of operating and maintaining our assets, including labor and material costs as well as recertification and dry dock costs.

Although we may be able to reduce some of our exposure to price increases through the rates we charge, competitive market pressures may affect our ability to pass along price adjustments, which may result in reductions in our operating margins and cash flows in the future .

The COVID-19 pandemic could continue to disrupt our operations and adversely impact our business and financial results.

In March 2020, the World Health Organization classified the outbreak of COVID-19 as a pandemic.

The nature of COVID-19 led to worldwide shutdowns and halting of commercial and interpersonal activity, as governments around the world imposed regulations such as shelter-in-place orders, quarantines, travel bans and similar restrictions in efforts to control its spread.

As of December 31, 2021, despite the rollout of vaccines and the successes of mitigation efforts, the global pandemic remains ongoing.

New strains of coronavirus have arisen and may continue to be identified that may be more contagious, more severe, and for which vaccinations may not be effective.

although vaccines have been identified, their efficacy and rollout pose logistical and other challenges.

The pandemic resulted in the global economy experiencing a significant slowdown and uncertainty in 2020, which led to a precipitous decline in oil prices in response to demand concerns, as further discussed throughout these Risk Factors.

As of December 31, 2022, despite the rollout of vaccines and the successes of mitigation efforts, new strains of coronavirus have arisen and may continue to be identified that may be more contagious, more severe, and for which vaccinations may not be effective.

Furthermore, although vaccines have been identified, their efficacy and rollout pose logistical and other challenges.

These events resulted in reduced operating and capital spending by oil and gas producers.

Although the oil and gas market has recovered since 2020, we expect that the ongoing nature of the pandemic will continue to create market disruption and uncertainty that may undermine the confidence in overall industry viability.

Although the oil and gas market has recovered since 2020, we expect that the uncertainty surrounding the spread of COVID-19 will continue to create market disruption that may undermine the confidence in overall industry viability.

We are currently unable to predict the duration or severity of the ongoing pandemic or the responses thereto, and these events may continue to adversely impact our financial condition and results of operations.

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Further, we have been and may continue to be impacted by a decline in the available offshore workforce, whether due to the spread of COVID-19, considerations related to our protocols, attrition from our industry, or a combination of the foregoing.

We are subject to the effects of changing prices.

Inflation rates have been relatively low and stable over the previous three decades;

however, in 2021 due in part to supply chain disruptions and the effects of the COVID-19 pandemic, inflation rates began to rise significantly.

We bear the costs of operating and maintaining our assets, including labor and material costs as well as recertification and dry dock costs.

Although we are able to reduce some of our exposure to price increases through the rates we charge, competitive market pressures may affect our ability to pass along price adjustments, which may result in reductions in our operating margins and cash flows in the future .

Business and Operational Risks

Our backlog may not be ultimately realized for various reasons, and our contracts may be terminated early.

Our backlog may not be ultimately realized for various reasons, our contracts may be terminated early, and our call-off work may be terminated earlier than expected.

As of December 31, 2022, backlog for our services supported by written agreements or contracts totaled $847 million, of which $533 million is expected to be performed in 2023.

We may not be able to perform under our contracts for various reasons giving our customers certain contractual rights under their contracts with us, which ultimately could include termination of a contract.

In addition, our customers may seek to cancel, terminate, suspend or renegotiate our contracts in the event of our customers’ diminished demand for our services due to global or industry conditions affecting our customers and their own revenues.

Some of these contracts provide for a cancellation fee that is substantially less than the expected rates from the contracts.

In addition, our customers may seek to cancel, terminate, suspend or renegotiate our contracts, or our projects in Helix Alliance subject to call-off orders may be able to be terminated earlier than expected, in the event of our customers’ diminished demand for our services due to global or industry conditions affecting our customers and their own revenues.

Some of these contracts provide for no cancellation fee or a cancellation fee that is substantially less than the expected rates from the contracts.

In addition, some of our customers could experience liquidity issues or could otherwise be unable or unwilling to perform under a contract, in which case a customer may repudiate or seek to cancel or renegotiate the contract.

The repudiation, early cancellation, termination or renegotiation of our contracts by our customers could have a material adverse effect on our financial position, results of operations and cash flows.

The repudiation, early cancellation, termination or renegotiation of our contracts by our customers, or the termination of call-off work, could have a material adverse effect on our financial position, results of operations and cash flows.

Furthermore, we may incur capital costs, we may charter vessels for the purpose of performing these contracts, and/or we may forgo or not seek other contracting opportunities in light of these contracts.

A large portion of our current backlog is concentrated in a small number of long-term contracts that we may fail to renew or replace.

Although historically our service contracts were of relatively short duration, over the past few years we performed a number of long-term contracts, including the five-year contract with BP for work in the Gulf of Mexico, the four-year contracts with Petrobras for well intervention services offshore Brazil and the seven-year contract for the HP I .

We completed the contracts with BP and with Petrobras for the Siem Helix 1 during 2021 and extended the contract with Petrobras for the Siem Helix 2 at reduced rates for one year until December 2022.

As of December 31, 2021, the Petrobras contract for the Siem Helix 2 and the contract for the HP I represented approximately 44% of our total backlog.

Although historically our service contracts were of relatively short duration, over the past few years we performed a number of long-term contracts.

We currently have contracts with four customers that represent approximately 69% of our total backlog as of December 31, 2022.

Any cancellation, termination or breach of those contracts would have a larger impact on our operating results and financial condition than of our shorter-term contracts.

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The nature of offshore operations requires our offshore crew members as well as our customers and vendors to periodically travel to and from the vessels.

The occurrence or threat of an epidemic or pandemic disease, including the ongoing COVID-19 pandemic and any related governmental regulations or other travel restrictions or safety measures, may impede our ability to execute such crewing or crew changes, which could lead to vessel downtime or suspension of operations, which may be beyond our control.

The occurrence or threat of an epidemic or pandemic disease, including the COVID-19 pandemic and any related governmental regulations or other travel restrictions or safety measures, may impede our ability to execute such crewing or crew changes, which could lead to vessel downtime or suspension of operations, which may be beyond our control.

Failure to perform in accordance with contract specifications can result in reduced rates (or zero rates), contractual penalties, and ultimately, termination in the event of sustained non-performance.

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Continued industry uncertainty and domestic and global economic conditions, including the financial condition of our customers, lenders, insurers and other financial institutions generally, could jeopardize the ability of such parties to perform their obligations to us, including obligations to pay amounts owed to us.

In the event one or more of our customers is adversely affected by the ongoing COVID-19 pandemic or otherwise, our business with them may be affected.

In the event one or more of our customers is adversely affected by the COVID-19 pandemic or otherwise, our business with them may be affected.

We may face an increased risk of customers deferring work, declining to commit to new work, asserting claims of force majeure and/or terminating contracts, or our customers’, subcontractors’ or partners’ inability to make payments or remain solvent.

Although we assess the creditworthiness of our counterparties, a variety of conditions and factors could lead to changes in a counterparty’s liquidity and increase our exposure to credit risk and bad debts.

In particular, our robotics business unit tends to do business with smaller customers that may not be capitalized to the same extent as larger operators and/or that may be more exposed to financial loss in an uncertain economic environment.

In particular, our Robotics and Helix Alliance businesses tend to do business with smaller customers that may not be capitalized to the same extent as larger operators and/or that may be more exposed to financial loss in an uncertain economic environment.

In addition, we may offer favorable payment or other contractual terms to customers in order to secure contracts.

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If other companies relocate or acquire assets for operations in the regions in which we operate, levels of competition may increase further and our business could be adversely affected.

Climate change might adversely impact our business operations and/or our supply chain.

Scientific consensus shows that carbon dioxide and other greenhouse gases in the atmosphere have caused and will in the future cause changes in weather patterns around the globe.

Climatologists predict these changes will result in the increased frequency of extreme weather events and natural disasters which could disrupt our business operations or those of our customers or suppliers.

In addition, concern about climate change and greenhouse gases may result in new or additional legal, legislative, and/or regulatory requirements to reduce or mitigate the effects of climate change on the environment.

Any such new requirements could increase our operating costs and impede our ability to provide services to our customers.

The actual or perceived lack of sustainability of the oil and gas sector, or our failure to adequately implement and communicate ESG initiatives that demonstrate our own sustainability, may adversely affect our business.

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As a result we may experience diminished reputation or sentiment, reduced access to capital markets and/or increased cost of capital, an inability to attract and retain talent, and loss of customers or vendors.

Failure to protect our intellectual property or other technology may adversely affect our business.

Our industry is highly technical.

We utilize and rely on a variety of advanced assets and other tools, such as our vessels, DP systems, intervention systems, ROVs and trenchers, to provide customers with services designed to meet the technological challenges of their subsea activities worldwide.

In some instances we hold intellectual property (“IP”) rights related to our business.

We rely significantly on proprietary technology, processes and other information that are not subject to IP protection, as well as IP licensed from third parties.

We employ confidentiality agreements to protect our IP and other proprietary information, and we have management systems in place designed to protect our legal and contractual rights.

We may be subject to, among other things, theft or other misappropriation of our IP and other proprietary information, challenges to the validity or enforceability of our or our licensors’ IP rights, and breaches of confidentiality obligations.

These risks are heightened by the global nature of our business, as effective protections may be limited in certain jurisdictions.

Although we endeavor to identify and protect our IP and other confidential or proprietary information as appropriate, there can be no assurance that these measures will succeed.

Such a failure could result in an interruption in our operations, increased competition, unplanned capital expenditures, and exposure to claims.

Any such failure could have a material adverse effect on our business, competitive position, financial position, results of operations and cash flows.

Our North Sea business typically declines in the winter, and weather can adversely affect our operations.

Marine operations conducted in the North Sea are seasonal and depend, in part, on weather conditions.

Our North Sea and Helix Alliance businesses typically decline in the winter, and weather can adversely affect our operations.

Marine operations conducted in the North Sea and the Gulf of Mexico shelf are seasonal and depend, in part, on weather conditions.

Historically, we have enjoyed our highest North Sea vessel utilization rates during the summer and fall when weather conditions are more favorable for offshore operations, and we typically have experienced our lowest North Sea utilization rates in the first quarter.

As is common in our industry, we may bear the risk of delays caused by adverse weather conditions.

Helix Alliance experiences slower winter season in its diving and certain vessel operations.

As is common in our industry, where we do have utilization in these seasonal markets, we may bear the risk of delays caused by adverse weather conditions.

Our results in any one quarter are not necessarily indicative of annual results or continuing trends.

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● limited market access;

● trade and labor unions as well as local content requirements;

● other uncertainties arising out of foreign government sovereignty over our international operations.

Certain countries have in place or are in the process of developing complex laws for foreign companies doing business in these countries, such as local content requirements.

Certain countries have in place or are in the process of developing complex laws for foreign companies doing business in these countries.

Some of these laws are difficult to interpret, making compliance uncertain, and others increase the cost of doing business, which may make it difficult for us in some cases to be competitive.

The combination of such laws with the local requirements and logistics necessitated by the ongoing COVID-19 pandemic have further increased the challenges of doing business in these countries.

The combination of such laws with the local requirements and logistics necessitated by the COVID-19 pandemic have further increased the challenges of doing business in these countries.

In addition, laws and policies of the U.S.

affecting foreign trade, taxation and other commercial activity may adversely affect our international operations.

Failure to protect our intellectual property or other technology may adversely affect our business.

Our industry is highly technical.

In some instances we hold intellectual property (“IP”) rights related to our business.

We rely significantly on proprietary technology, processes and other information that are not subject to IP protection, as well as IP licensed from third parties.

We employ confidentiality agreements to protect our IP and other proprietary information, and we have management systems in place designed to protect our legal and contractual rights.

These risks are heightened by the global nature of our business, as effective protections may be limited in certain jurisdictions.

Although we endeavor to identify and protect our IP and other confidential or proprietary information as appropriate, there can be no assurance that these measures will succeed.

Such a failure could result in an interruption in our operations, increased competition, unplanned capital expenditures, and exposure to claims.

Any such failure could have a material adverse effect on our business, competitive position, financial position, results of operations and cash flows.

Financial and Liquidity Risks

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● limiting our ability to refinance maturing debt or to obtain additional financing on satisfactory terms to fund our working capital requirements, capital expenditures, acquisitions, investments, debt service requirements and other general corporate requirements;

● increasing our vulnerability to a continued general economic downturn, competition and industry conditions, which could place us at a disadvantage compared to our competitors that are less leveraged;

● increasing our exposure to potential rising interest rates for the portion of our borrowings at variable interest rates;

● reducing the availability of our cash flows to fund our working capital requirements, capital expenditures, acquisitions, investments and other general corporate requirements because we will be required to use a substantial portion of our cash flows to service debt obligations;

● increasing our vulnerability to a general economic downturn, competition and industry conditions, which could place us at a disadvantage compared to our competitors that are less leveraged;

● increasing our exposure to potential rising interest rates for any portion of our borrowings that may be at variable interest rates;

● reducing the availability of our cash flows to fund our working capital requirements, capital expenditures, acquisitions, investments and other general corporate requirements for that portion of our cash flows that may be needed to service debt obligations;

● limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

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● limiting our ability to use, or post security for, bonds or similar instruments required under the laws of certain jurisdictions with respect to, among other things, the temporary importation of vessels, systems and other equipment and the decommissioning of offshore oil and gas properties;

● limiting our ability to sell assets or use proceeds from certain asset sales for purposes other than debt repayment.

A prolonged period of weak economic or industry conditions and other events beyond our control may make it increasingly difficult to comply with our covenants and other restrictions in agreements governing our debt.

● limiting our ability to sell or pledge assets or use proceeds from certain asset sales for purposes other than debt repayment.

A prolonged period of weak economic or industry conditions and other events beyond our control may make it difficult to comply with our covenants and other restrictions in agreements governing our debt.

If we fail to comply with these covenants and other restrictions, it could lead to reduced liquidity, an event of default, the possible acceleration of our repayment of outstanding debt and the exercise of certain remedies by our lenders, including foreclosure against our collateral.

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Continued lower levels of economic activity and weakness in the financial markets could also adversely affect our ability to implement our strategic objectives.

A further decline in the offshore energy services market could result in additional impairment charges.

A further decline in the offshore energy services market could result in impairment charges.

Prolonged periods of low utilization and low rates for our services could result in the recognition of impairment charges for our assets if future cash flow estimates, based on information available to us at the time, indicate that their carrying value may not be recoverable.

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As a multi-national organization, we are subject to taxation in multiple jurisdictions.

Tax laws are dynamic and continue to evolve as new legislation is enacted and interpretive guidance issued.

Additionally, the EU and organizations such as the Organization for Economic Co-operation and Development continue to promote increased disclosure and transparency, which may increase our overall compliance costs or have other adverse effects on us.

The Organization for Economic Co-operation and Development, the EU and individual taxing jurisdictions are focused on tax base erosion and profit shifting as well as minimum tax directives.

These initiatives and directives continue to evolve with country specific implementation legislation forthcoming.

Additionally, we anticipate increased disclosure and information reporting to facilitate compliance with these rules and initiatives when enacted.

While the impact of these proposed and future rules cannot be determined, they may have adverse effects on us, including increased administrative and compliance costs.

Our business would be adversely affected if we failed to comply with the Jones Act foreign ownership provisions or if these provisions were modified or repealed .

We are subject to the Jones Act and other federal laws that restrict maritime cargo transportation between points in the U.S.

As a result of the Alliance acquisition, we acquired 21 vessels registered under the U.S.

flag which operate in the U.S.

Gulf of Mexico coastwise trade.

In order to operate vessels in the Jones Act trade and to be qualified to document vessels for coastwise trade, we must maintain U.S.

citizen status for Jones Act purposes.

We could cease being a U.S.

citizen if certain events were to occur, including if non-U.S.

citizens were to own 25% or more of our common stock.

We are responsible for monitoring our ownership to ensure compliance with the Jones Act.

The consequences of our failure to comply with the Jones Act provisions on coastwise trade, including failing to qualify as a U.S.

citizen, would have an adverse effect on our results of operations as we may be prohibited from operating certain of our vessels in the U.S.

coastwise trade or, under certain circumstances, permanently lose U.S.

coastwise trading rights or be subject to fines or forfeiture of certain our vessels.

There have been attempts to repeal or amend restrictions contained in the Jones Act, and such attempts are expected to continue in the future.

Our business could be adversely affected if the Jones Act were to be modified or repealed so as to permit foreign competition that is not subject to the same U.S.

government imposed burdens.

Enhanced regulations for deepwater offshore drilling may reduce the need for our services.

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Department of the Interior issued Order No.

3395, “Temporary Suspension of Delegated Authority” (“Order 3395”), suspending the authority of the Department of Interior’s Bureaus and Offices to, among other things, issue any fossil fuel authorization including a lease, contract, or other agreement or drilling permit, and thereafter President Biden signed Executive Order 14008 (“EO 14008” and together with Order 3395, the “Orders”) which, among other things, established a moratorium on new oil and gas leasing of public lands and offshore waters pending the completion of a comprehensive review and reconsideration of federal oil and gas permitting and

lease practices.

While certain portions of the Orders have subsequently been challenged in the court system and the ultimate interpretation and enforcement of the Orders remains uncertain at this time, they appear reflective of a broader regulatory agenda that may pose additional challenges for the industries we serve.

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General Risks

The loss of the services of one or more of our key employees, or our failure to attract and retain other highly qualified personnel in the future, could disrupt our operations and adversely affect our financial results.

Our industry has lost a significant number of experienced professionals over the years due to its cyclical nature, including recently in connection with industry downturn, the effects of the ongoing COVID-19 pandemic, and a decline in sentiment towards fossil fuels.

Many companies, including us, have had employee layoffs as a result of reduced business activities in an industry downturn.

The loss of the services of one or more of our key employees, or our failure to attract and retain other highly qualified personnel and other skilled workers in the future, could disrupt our operations and adversely affect our financial results.

Our industry has lost a significant number of experienced professionals over the years due to its cyclical nature, including recently in connection with industry downturn, the effects of the COVID-19 pandemic, and a decline in sentiment towards fossil fuels.

Our success depends on the active participation of our key employees.

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The delivery of our services also requires personnel with specialized skills, qualifications and experience.

The demand for skilled workers can be high and the supply may be limited.

A significant increase in the wages paid by competing employers could result in a reduction of our skilled labor force, increases to our cost structures, or both.

As a result, our ability to remain productive and profitable will depend upon our ability to employ and retain skilled, qualified and experienced workers, and we may have competition for personnel with the requisite skill set.

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Similar to other companies, our systems and networks, and those of third parties with whom we do business, may be subject to cybersecurity breaches caused by, among other things, illegal hacking, insider threats, computer viruses, phishing, malware, ransomware, or acts of vandalism or terrorism, or those perpetrated by criminals or nation-state actors.

Furthermore, we may also experience increased cybersecurity risk as some of our onshore personnel continue to work remotely as a result of the ongoing COVID-19 pandemic.

Furthermore, we may also experience increased cybersecurity risk as some of our onshore personnel may periodically work remotely.

In addition to our own systems and networks, we use third-party service providers to process certain data or information on our behalf.

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Any such breach, or our delay or failure to make adequate or timely disclosures to the public, regulatory or law enforcement agencies or affected individuals following such an event, could have a material adverse effect on our business, reputation, financial position, results of operations and cash flows, and cause reputational damage.

We may execute a strategic transaction that may not achieve intended results, could increase our debt or the number of our shares outstanding, or result in a change of control.

We have executed acquisitions and divestitures in the past, and in the future we may evaluate and potentially enter into additional strategic transactions.

Any such transaction could be material to our business, could occur at any time and could take any number of forms, including, for example, an acquisition, merger, joint venture, strategic alliance, equity investment, divestiture or an asset sale.

The success of any transaction may depend on, in part, our ability to integrate an acquired business and realize the financial growth or synergies expected from the transaction.

Any such transaction may not be successful, may not be accretive to shareholders or may not achieve expected benefits within an expected timeframe.

Acquired businesses may also have unanticipated liabilities, contingencies or negative tax consequences.

In addition, acquisitions are accompanied by the risk that the obligations of an acquired business may not be adequately reflected in the historical financial statements of that company and the risk that those historical financial statements may be based on assumptions which are incorrect or inconsistent with our assumptions or approach to accounting policies.

Any of these material obligations, unanticipated liabilities or incorrect or inconsistent assumptions could have a material adverse effect on our growth strategy, business, financial condition, prospects and results of operations.

Furthermore, evaluating potential transactions and integrating completed transactions could be time-consuming, involve significant transaction related expenses, create unexpected costs, involve difficulties assimilating the operations and personnel of an acquired business, make evaluating our business and future financial prospects difficult and may divert the attention of our management from ordinary operating matters.

Any such transaction may require additional financing that could result in an increase in the number of our outstanding shares or the aggregate amount of our debt, and the number of shares of our common stock or the aggregate principal amount of our debt that we may issue may be significant.

Certain transactions may not be permitted under our existing asset-based credit facility, requiring either waivers, amendments, or terminating such facility.

Furthermore, a strategic transaction may result in a change in control of our company or otherwise materially and adversely affect our business.

Our ability to repurchase shares through any share repurchase program is subject to certain considerations, including availability of free cash flow, and any repurchases could affect the price of our common stock and increase volatility, which may result in a decrease in the trading price of our common stock.

Our Board has in the past and may from time to time in the future authorize share repurchase programs.

On February 20, 2023, we announced that our Board approved a new share repurchase program authorizing the repurchase of up to $200 million issued and outstanding shares of our common stock.

The timing and amount of repurchases, if any, under such program would depend upon several factors.

Our ability to successfully effect a share repurchase program requires us to generate consistent Free Cash Flow and have available capital in the years ahead in amounts sufficient to enable us to also continue to fund our working capital requirements, capital expenditures, acquisitions, investments, debt service requirements and other general corporate requirements.

Our cash flow typically fluctuates seasonally and the amount of Free Cash Flow returned in any quarter during the year may vary.

We may not have available Free Cash Flow to repurchase shares if we use our available cash to satisfy other priorities such as strategic opportunities and acquisitions, or if our Board determines to change or discontinue the repurchase program.

There is no guarantee that we would carry out repurchases in the same manner as they may have been announced.

Furthermore, a share repurchase program could diminish our cash reserves, which may impact our ability to finance future growth or engage in alternative activities that could generate greater shareholder value.

In addition, repurchases of our common stock pursuant to a share repurchase program could cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock.

Although share repurchase programs are intended to enhance long-term shareholder value, there is no assurance that it will do so.

Any failure to repurchase our common stock after we have announced our intention to do so may negatively impact our stock price and short-term stock price fluctuations could reduce the program’s effectiveness.

Certain provisions of our corporate documents, financial arrangements and Minnesota law may discourage a third party from making a takeover proposal.

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We are also subject to certain anti-takeover provisions of the Minnesota Business Corporation Act.

We have employment arrangements with all of our executive officers that could require cash payments, terms in our convertible senior notes that could increase the applicable conversion rate and covenants in our asset-based credit agreement (the “ABL Facility”) that could put in breach, in the event of a “change of control.” Any or all of these provisions or factors may discourage a takeover proposal or tender offer not approved by management and our Board and could result in shareholders who may wish to participate in such a proposal or tender offer receiving less in return for their shares than otherwise might be available in the event of a takeover attempt.

We have employment arrangements with all of our executive officers that could require cash payments, terms in our convertible senior notes that could increase the applicable conversion rate and covenants in our asset-based credit agreement (the “ABL Facility”) that could put us in breach, in the event of a “change of control.” Any or all of these provisions or factors may discourage a takeover proposal or tender offer not approved by management and our Board and could result in shareholders who may wish to participate in such a proposal or tender offer receiving less in return for their shares than otherwise might be available in the event of a takeover attempt.

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.

What changed 10-K

Item 1A. Risk Factors