What changed in this filing

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Item 1A. Risk Factors

2020-08-05 compared with 2020-05-06 · 34 added, 32 removed, 33 unchanged (67% of the section changed)

Item 1A – Risk Factors (continued)

Our global operations subject us to various risks that may adversely affect our results of operations.

We are a leading global supplier of equipment and critical components used in process industries worldwide.

We sell our products globally, including sales to customers in China, South America, Russia and India, and operate multiple manufacturing operations worldwide, including operations in Canada, China, Europe, Mexico, and Brazil.

International revenues and operations are subject to a number of risks which vary by geographic region, including the following:

agreements may be difficult to enforce and receivables difficult to collect through a foreign country's legal system;

foreign customers may have longer payment cycles;

foreign countries may impose additional withholding taxes or otherwise tax our foreign income, impose tariffs, adopt other restrictions on foreign trade, impose currency restrictions or enact other protectionist or anti-trade measures;

economic sanctions, trade embargoes, or other adverse trade regulations;

environmental and other regulations can adversely impact our ability to operate our facilities;

disruption from climate change, natural disaster, including earthquakes and/or tornadoes, fires, war, terrorist activity, and other force majeure events beyond our control;

changes in zoning laws that may require relocation of our manufacturing operations;

disruption from fast-spreading health epidemics which have and may continue to result in widespread interruption of business operations;

worsening economic conditions may result in worker unrest, labor actions, and potential work stoppages;

political unrest may disrupt commercial activities of ours or our customers;

fluctuations in foreign currency exchange rates and foreign interest rates beyond our control;

it may be difficult to repatriate funds, due to unfavorable domestic and foreign tax consequences or other restrictions or limitations imposed by foreign governments;

the protection of intellectual property in foreign countries may be more difficult to enforce.

Operating globally subjects us to various risks that may adversely affect our results of operations in the future.

We have significant international sales and operations and face risks related to health epidemics, including the novel coronavirus (COVID-19) which has and continues to adversely affect our business and results of operations.

Our business and operations have been and may continue to be adversely affected by the effects of a widespread outbreak of a contagious disease and other adverse public health developments, including disruptions or restrictions on our employees’ and other service providers’ ability to travel, temporary closures of our facilities or the facilities of our customers, suppliers, or other vendors in our supply chain, potentially including single source suppliers, and other disruptions in the supply chain.

We have significant international sales and operations and face risks related to health epidemics and pandemics, including the coronavirus pandemic (COVID-19) which has and continues to adversely affect our business and results of operations.

Our business and operations have been and may continue to be adversely affected by the effects of a widespread outbreak of a contagious disease and other adverse public health developments, including disruptions or restrictions on our employees’ and other service providers’ ability to travel, reductions in our workforce, temporary closures of our facilities or the facilities of our customers, suppliers, or other vendors in our supply chain, potentially including single source suppliers, and other disruptions in the supply chain.

In addition, an outbreak of a contagious disease could impact global trade and reduce demand for our products, and adversely affect the U.S.

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In December 2019, COVID-19 was first reported in China, and in March 2020, COVID-19 was declared a pandemic by the World Health Organization and a national emergency by the U.S.

The pandemic has negatively affected the U.S.

and global economy, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets.

The COVID-19 pandemic has adversely affected, and may continue to adversely affect in the future, our business and results of operations, as government authorities have imposed temporary mandatory closures of our facilities, travel restrictions, work-from-home orders and social distancing protocols and other restrictions that have impacted our ability to adequately staff and maintain our operations at normal levels.

Additionally, our financial results have been adversely impacted and may be adversely impacted in the future by decreased levels of bookings and customer-requested delays on certain capital projects and service work, which has affected and may adversely affect in the future our ability to recognize revenue for sales of such products and services.

The pandemic has negatively affected the global economy, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets.

The COVID-19 pandemic has adversely affected, and may continue to adversely affect in the future, our business and results of operations, as government authorities have imposed, and may in the future impose, temporary mandatory closures of our facilities, travel restrictions, work-from-home orders and social distancing protocols and other restrictions that have impacted our ability to adequately staff and maintain our operations at normal levels.

Additionally, our financial results have been adversely impacted and may be adversely impacted in the future by decreased levels of bookings, customer-requested delays on certain capital projects and service work, customer downtime and shutdowns, and visitation restrictions at many customer facilities, all of which have affected and may adversely affect in the future our ability to recognize revenue for sales of our products and services.

We may also incur future costs related to COVID-19, such as increased employee benefit costs if a significant number of our employees contract COVID-19 and require hospitalization or other costly medical treatment, or expenses related to repeated cleaning and sanitizing of our facilities, which may also adversely affect our financial results.

In March 2020, we experienced a significant decrease in market capitalization due to a decline in our stock price, and the overall U.S.

stock market also declined significantly amid market volatility driven by the uncertainty surrounding the outbreak of COVID-19.

Although our stock price and the U.S.

stock market have since recovered, they could decline again in the future due to uncertainty surrounding COVID-19.

The COVID-19 pandemic has evolved and continues to evolve rapidly.

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A delay on our part of the production of our products may lead to liquidated damages owed to our customers.

Further implementation or extension of government-mandated closure or “shelter-in-place” orders related to the COVID-19 pandemic

Item 1A – Risk Factors (continued)

may create further disruption to our operations, our workforce, the supply chain, and our customer and vendor operations.

The effect of the COVID-19 pandemic on the global economy is uncertain, and we may be further adversely affected by general economic conditions, even as the spread of COVID-19 is contained and government mandates are repealed.

Further implementation, extension or renewal of government-mandated closures, or “shelter-in-place” orders related to the COVID-19 pandemic may create further disruption to our operations, our workforce, the supply chain, and our customer and vendor operations.

The effect of the COVID-19 pandemic on the global economy is uncertain, and we may be further adversely affected by general economic conditions, even if government mandates are repealed.

The impact of COVID-19 could worsen if there is an extended duration of any COVID-19 outbreak or a resurgence of COVID-19 infection in affected regions after they have begun to recover.

The future impact of COVID-19 could include further disruption and volatility in the global capital markets, which, depending on future developments, could impact our capital resources and liquidity in the future.

1 unchanged sentence

New information may emerge concerning the severity of COVID-19, the pace and method through which it is transmitted, contained and/or treated, and the nature of the approach of the local governments in the jurisdictions in which we operate to handling the outbreak, any of which could impact our employees, operations, suppliers, customers and/or operating and financial results, including our ability to determine our quarterly results.

Although we have worked and continue to work diligently to ensure that our global facilities can operate with minimal disruption, mitigate the impact of the outbreak on our employees’ health and safety, and address potential supply chain impact on ourselves and our customers, the full extent to which COVID-19 has affected and will affect the global economy and our results will depend on future developments and factors that cannot be predicted.

We operate in 20 countries and the government responses in each of those countries have differed and resulted in varying levels of containment of COVID-19, degree and duration of closures, and nature of safety precautions, all of which we have and will continue to manage.

Although we have worked and continue to work diligently to ensure that our global facilities can operate with minimal disruption, mitigate the impact of the outbreak on our employees’ health and safety, and address the potential supply chain impact on ourselves and our customers, the full extent to which COVID-19 has affected and will affect the global economy and our results will depend on future developments and factors that cannot be predicted.

Item 1A – Risk Factors (continued)

Operating globally subjects us to changes in government regulations and policies in multiple jurisdictions around the world, including those related to tariffs and trade barriers, taxation, exchange controls and political risks.

Changes in government policies, political unrest, economic sanctions, trade embargoes, or other adverse trade regulations can negatively impact our business.

markets contribute a substantial portion of our revenues, and we intend to continue expanding our presence in these regions.

For example, we operate businesses in Mexico and Canada, and we benefited from the North American Free Trade Agreement, which has been replaced by the United States-Mexico-Canada Agreement (USMCA), from which we also benefit.

If the United States were to withdraw from or materially modify the USMCA or impose significant tariffs or taxes on goods imported into the United States, the cost of our products could significantly increase or no longer be priced competitively, which in turn could have a material adverse effect on our business and results of operations.

In addition, the Office of the United States Trade Representative has imposed tariffs on a wide variety of products from China, including pulp and paper machinery equipment, pursuant to Section 301 of the Trade Act of 1974.

The tariffs on pulp and paper machinery are set at 25% and have been in effect since July 2018.

In addition, in March 2018, the U.S.

Department of Commerce imposed tariffs of 25% on numerous categories of steel imports, and 10% on numerous categories of aluminum imports, from most countries under Section 232 of the Trade Expansion Act of 1962.

While we are working to mitigate the impact of the existing and other proposed tariffs through pricing and sourcing strategies, we cannot be certain how our customers and competitors will react to the actions we take.

The tariffs have and could in the future negatively affect our ability to compete against competitors who do not manufacture in China and/or are not subject to the tariffs.

The United States has tightened trade sanctions targeting countries like China and Russia.

For example, in August 2017 and April 2018, the United States imposed new trade and economic sanctions targeting certain persons in, and certain types of business with, Russia, in addition to those that have been imposed since 2014.

In 2019, our sales to Russia were $16.8 million, or 2% of our revenue.

In 2019 and through 2020, the United States has continued to expand export control restrictions applicable to certain Chinese firms and commenced its assessment of new controls for “emerging foundational technologies,” escalating U.S.-China tension over technology competition.

In response, Russia and China have begun considering and, in some cases, implementing trade sanctions that could affect U.S.-owned businesses.

The imposition of trade sanctions may make it generally more difficult to do business in Russia and China and cause delays or prevent shipment of products or services performed by our personnel, or to receive payment for products or services.

Such restrictions could have a material adverse impact on our business and operating results going forward.

Item 6 – Exhibits

1 unchanged sentence

Description of Exhibit

Summary of non-employee director compensation of the Registrant.

Third Amendment, dated as of March 16, 2020, to the Amended and Restated Credit Agreement dated as of March 1, 2017 by and among the Registrant, the Foreign Subsidiary Borrowers from time to time parties thereto, the several banks and other financial institutions or entities from time to time parties thereto, Citizens Bank, N.A., as Administrative Agent and Multicurrency Administrative Agent.

Certification of the Principal Executive Officer of the Registrant Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

9 unchanged sentences

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

Indicates management contract or compensatory plan or arrangement.

Furnished herewith.

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

August 5, 2020

/s/ Michael J.

2 unchanged sentences

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

What changed 10-Q

Item 1A. Risk Factors