What changed in this filing

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Item 1A. Risk Factors

2022-05-18 compared with 2021-06-02 · 33 added, 27 removed, 181 unchanged (25% of the section changed)

1 unchanged sentence

Shareholders are cautioned that these and other factors may affect future performance and cause actual results to differ materially from those that may be anticipated.

Additionally, the impact of the global coronavirus (“COVID-19”) pandemic could further exacerbate many of the risk factors as described below or elsewhere in this report.

COMPETITIVE AND REPUTATIONAL RISKS

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If we are unable to maintain our profitability or competitive position, we could lose market share to our competitors and experience reduced profitability.

Adverse publicity or negative public perception regarding particular ingredients or products or the nutraceuticals industry in general could adversely affect the financial performance of those portions of our business.

Purchasing decisions made by consumers of products that contain our ingredients may be affected by adverse publicity or negative public perception regarding particular ingredients or products or the nutraceuticals industry in general.

This negative public perception may include publicity regarding the risks, efficacy, legality or quality of particular ingredients or products in general or of other companies or our products or ingredients specifically.

Negative public perception may also arise from regulatory investigations, regardless of whether those investigations involve us.

We are highly dependent upon consumers’ perception of the safety and quality of products that contain our ingredients as well as similar products distributed by other companies.

Thus, the mere publication of reports asserting that such products may be harmful could have a material adverse effect on us, regardless of whether these reports are scientifically supported.

Publicity related to dietary supplements or food ingredients may also result in increased regulatory scrutiny of our industry.

Adverse publicity may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Our businesses expose us to potential product liability claims and recalls, which could adversely affect our financial condition and performance.

The repackaging, blending, mixing and distribution of products by us, including chemical products and products used in food or food ingredients or with medical, pharmaceutical or dietary supplement applications, involve an inherent risk of exposure to product liability claims, product recalls, product seizures and related adverse publicity, including, without limitation, claims for exposure to our products, spills or escape of our products, personal injuries, food-related claims and property damage or environmental claims.

The repackaging, blending, mixing and distribution of products by us, including chemical products and products used in food or food ingredients or with medical, pharmaceutical or dietary supplement applications, involve an inherent risk of exposure to product liability claims, product recalls, product seizures and related adverse publicity, including, without limitation, claims for exposure to our products, spills or release of our products, personal injuries, food-related claims and property damage or environmental claims.

A product liability claim, judgment or recall against our customers could also result in substantial and unexpected expenditures for us, affect consumer confidence in our products and divert management’s attention from other responsibilities.

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Reductions in demand for our products could adversely affect our sales and financial results and result in facility closures.

Adverse publicity or negative public perception regarding particular ingredients or products or the dietary supplement industry in general could adversely affect the financial performance of those portions of our business.

Negative public perception may also arise from regulatory investigations, regardless of whether those investigations involve us.

We are highly dependent upon consumers’ perception of the safety and quality of products that contain our ingredients as well as similar products distributed by other companies.

Thus, the mere publication of reports asserting that such products may be harmful could have a material adverse effect on us, regardless of whether these reports are scientifically supported.

Publicity related to dietary supplements or food ingredients may also result in increased regulatory scrutiny of our industry.

Adverse publicity may have a material adverse effect on our business, financial condition, results of operations and cash flows.

Failure to adequately protect critical data and technology systems could materially affect our operations.

Information technology system failures, network disruptions and breaches of data security due to internal or external factors including cyber-attacks could disrupt our operations by causing delays or cancellation of customer orders, impede the manufacture or shipment of products or cause standard business processes to become ineffective, resulting in the unintentional disclosure of information or damage to our reputation.

While we have taken steps to address these concerns by implementing network security and internal control measures, including employee training, comprehensive monitoring of our networks and systems, maintenance of backup and protective systems and disaster recovery and incident response plans, our employees, systems, networks, products, facilities and services remain potentially vulnerable to sophisticated cyber-assault, especially while certain employees are working remotely during the COVID-19 pandemic, and, as such, there can be no assurance that a system failure, network disruption or data security breach will not have a material adverse effect on our business, financial condition, operating results or cash flows.

Information technology system failures, network disruptions and breaches of data security due to internal or external factors including phishing or cyber-attacks could disrupt our operations by causing delays or cancellation of customer orders, impede the manufacture or shipment of products or cause standard business processes to become ineffective, resulting in the unintentional disclosure of information or damage to our reputation.

While we have taken steps to address these concerns by implementing network security and internal control measures, including employee training, comprehensive monitoring of our networks and systems, maintenance of backup and protective systems and disaster recovery and incident response plans, our employees, systems, networks, products, facilities and services remain vulnerable to phishing attacks and cyber-assault, and, as such, there can be no assurance that a system failure, network disruption or data security breach will not have a material adverse effect on our business, financial condition, operating results or cash flows.

RISKS RELATED TO OUR INDUSTRY

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We cannot predict whether the markets for our raw materials will favorably impact or negatively impact the margins we can realize.

The prices we pay for our principal chemical raw materials generally lag the market prices of the underlying raw material and the cost of inventory we have on hand, particularly inventories of our bulk commodity chemicals where we have significant volumes stored at our facilities, generally will lag the current market pricing of such inventory.

The prices we pay for our principal chemical raw materials generally lag the market prices of the underlying raw material.

The cost of inventory we have on hand, particularly inventories of our bulk commodity chemicals where we have significant volumes stored at our facilities, generally will lag the current market pricing of such inventory.

The pricing within our supply contracts generally adjusts quarterly or monthly.

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Although we sell to areas traditionally considered non-cyclical, such as water treatment, food products and health and nutritional ingredients, many of our customers are in businesses that are cyclical in nature, such as the industrial manufacturing and energy industries which include the ethanol and agriculture industries.

In addition, due to the extreme pressures of the current economic environment driven by the COVID-19 pandemic, even markets that had seemed stable may no longer be stable and may experience significant downturns and variability in demand for our products.

Downturns in these industries could adversely affect our sales and our financial results by affecting demand for and pricing of our products.

As the country emerges from the COVID-19 pandemic, our business results, particularly in our Health and Nutrition segment, could be adversely impacted if demand for health and immunity products that contain our ingredients decreases.

Our business is subject to hazards common to chemical businesses, any of which could interrupt our production and adversely affect our results of operations.

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OPERATIONAL RISKS

Disruptions within our supply chain have negatively impacted, and could continue to negatively impact, our production, financial condition and results of operations.

We have been, and could continue to be, adversely affected by disruptions within our supply chain and transportation network.

The raw materials we need are transported by truck, rail, barge or ship by third-party providers.

The costs of transporting our products or necessary raw materials could be negatively affected by factors outside of our control, including rail service interruptions or rate increases, extreme weather events, tariffs, rising fuel costs and capacity constraints.

Recently, the unprecedented congestion in ocean shipping has, and will continue to, adversely impact the reliability of our imported raw materials, and transport driver shortages have caused extended lead times for domestic shipments.

In addition, rail shipments have become increasingly unreliable, with significant delays in service and increased costs.

Significant delays or increased costs relating to transportation could materially affect our financial condition and results of operations.

Similar supply chain issues have impacted and could continue to impact both our suppliers and our customers.

The supply of our necessary raw materials could be interrupted due to shortages of raw materials, effects of economic, political or financial market conditions on a supplier's operations, labor disputes or weather conditions affecting products or shipments, transportation disruptions, natural disasters, outbreaks of disease, information system disruptions or other reasons beyond our control.

Similar disruptions at our customers could reduce demand for our products, reducing our sales and profitability.

Product shortages or delays in deliveries, along with other factors such as price inflation and higher transportation costs, have also resulted in price increases from our suppliers.

We may be unable to pass these price increases on to our customers, which could erode our profit margins.

These supply chain constraints, increased product costs and inflationary pressures could continue or escalate in the future, which would have an adverse impact on our business and results of operations.

We are highly dependent upon transportation infrastructure to ship and receive our products and delays in these shipments could adversely affect our results of operations.

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Disruptions in transportation are common, are often out of our control, and can happen suddenly and without warning.

Rail limitations, such as limitations in rail capacity, availability of railcars and adverse weather conditions have disrupted or delayed rail shipments in the past and could do so in the future.

Rail limitations, such as limitations in rail capacity, availability of railcars, workforce shortages and adverse weather conditions have disrupted or delayed rail shipments in the past and could do so in the future.

Barge shipments are delayed or impossible under certain circumstances, including during times of high or low water levels, when waterways are frozen and when locks and dams are inoperable.

Truck transportation has been negatively impacted by a number of factors, including limited availability of qualified drivers and equipment, and limitations on drivers’ hours of service.

The availability and reliability of truck transportation has been negatively impacted by a number of factors, including limited availability of qualified drivers and equipment, and limitations on drivers’ hours of service.

The volumes handled by, and operating challenges at, ocean ports have at times been volatile and can delay the receipt of goods, or cause the cost of shipping goods to be more expensive.

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Broader restrictions on hazardous material movements could lead to additional investment and could change where and what products we provide.

The occurrence of extraordinary events, including future terrorist attacks, global health developments and pandemics (including the COVID-19 outbreak), or escalation of hostilities, cannot be predicted, but their occurrence can be expected to negatively affect the economy in general, and specifically the markets for our products.

The occurrence of extraordinary events, including future terrorist attacks, wars, global health developments and pandemics (including the COVID-19 outbreak), or escalation of hostilities, cannot be predicted, but their occurrence can be expected to negatively affect the economy in general, and specifically the markets for our products.

The resulting damage from a direct attack on our assets, or assets used by us, could include loss of life and property damage.

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Our food, pharmaceutical and health and nutrition products are subject to government regulation, both in the United States and abroad, which could increase our costs significantly and limit or prevent the sale of such products.

The manufacture, packaging, labeling, advertising, promotion, distribution and sale of our food, pharmaceutical and health and nutrition products are subject to regulation by numerous national and local governmental agencies in the United States and other countries.

The primary regulatory bodies in the United States are the Food and Drug Administration (the “FDA”), the United States Department of Agriculture and the Federal Trade Commission, and we are also subject to similar regulators in other countries.

The manufacture, packaging, labeling, advertising, promotion, distribution and sale of our food, pharmaceutical pesticide and health and nutrition products are subject to regulation by numerous national and local governmental agencies in the United States and other countries.

The primary regulatory bodies in the United States are the Food and Drug Administration (the “FDA”), the Environmental Protection Agency, the United States Department of Agriculture and the Federal Trade Commission, and we are also subject to similar regulators in other countries.

Failure to comply with these regulatory requirements may result in various types of penalties or fines.

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Any of these government agencies, as well as legislative bodies, can change existing regulations, or impose new ones, or could take aggressive measures, causing or contributing to a variety of negative consequences, including:

• stopping the sale of products,

• requirements for the reformulation of certain or all products to meet new standards,

20 unchanged sentences

The Revolving Loan Facility includes a $10.0 million letter of credit subfacility and $25.0 million swingline subfacility.

At March 28, 2021, we had $99.0 million outstanding under the Revolving Loan Facility.

At April 3, 2022, we had $126.0 million outstanding under the Revolving Loan Facility.

We may make payments on the Revolving Loan Facility from time to time.

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Goodwill is tested at least annually for impairment and is tested for impairment more frequently if events or changes in circumstances indicate that the asset might be impaired.

Our annual test for impairment is as of the first day of our fourth fiscal quarter, or December 29, 2020 for fiscal 2021.

Goodwill impairment testing is at the reporting unit level.

For each of our reporting units, we performed an analysis of qualitative factors to determine if it is more likely than not that the fair value of the reporting unit is less than its carrying amount.

If that qualitative analysis indicates that an impairment may exist, then we would calculate the amount of the impairment by comparing the fair value of the assets and liabilities to the fair value of the reporting unit.

For each of our reporting units, this qualitative analysis did not indicate an impairment, and therefore additional analysis was not performed.

In fiscal 2018, however, we recorded an impairment charge in our Health and Nutrition reporting unit of $39.1 million.

A significant amount of judgment is involved in determining if an indication of impairment exists.

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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