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Item 1A. Risk Factors

2024-02-16 compared with 2023-02-16 · 43 added, 48 removed, 195 unchanged (32% of the section changed)

21 unchanged sentences

The Company may also discover liabilities or deficiencies associated with the companies or assets it acquires that were not identified in advance, which may result in significant unanticipated costs.

The effectiveness of the Company’s due diligence review and its ability to evaluate the results of such due diligence are dependent upon the accuracy and completeness of statements and disclosures made or actions taken by the companies acquired or their representatives, as well as the limited

amount of time in which acquisitions are executed.

In addition, the Company may fail to accurately forecast the financial impact of an acquisition transaction, including tax and accounting charges.

9 unchanged sentences

The end markets for the Company’s products are characterized by technological change, frequent new product introductions and enhancements, changes in customer requirements and emerging industry standards.

The introduction of products embodying new technologies and the emergence of new industry standards could render its existing products obsolete and unmarketable before it can recover any or all of its research, development, and commercialization expenses on capital investments.

The introduction of products embodying new technologies and the emergence of new industry standards could render its existing products obsolete and

unmarketable before it can recover any or all of its research, development, and commercialization expenses on capital investments.

Furthermore, the life cycles of its products may change and are difficult to estimate.

28 unchanged sentences

Climate-related events have the potential to disrupt our business, including the business of our suppliers and customers, and may cause us to experience higher attrition, and additional costs to resume operations.

Increased government or governmental bodies contemplating legislative and regulatory changes in response to the potential impact of climate change could impose significant costs on us and our suppliers and customers, including increased cost of materials and natural resources, sources and supply of energy, capital equipment, environmental monitoring and reporting, or other costs to comply with such regulations.

materials and natural resources, sources and supply of energy, capital equipment, environmental monitoring and reporting, or other costs to comply with such regulations.

Potential regulations or standards could mandate more restrictive manufacturing requirements, such as stricter limits on greenhouse gas emissions and material used in production.

Some jurisdictions have already passing such laws.

For example, California enacted legislation in 2023 requiring disclosure of certain companies' greenhouse gas (GHG) emissions, climate-related financial risks, voluntary carbon offsets (VCOs), and certain climate-related emission claims.

Any future climate change regulations could also adversely impact our ability to compete with companies not subject to such regulations.

13 unchanged sentences

Sales to customers outside the U.S.

constituted approximately 64% of the Company's net sales in fiscal 2022.

constituted approximately 65% of the Company's net sales in fiscal 2023, including approximately 23% to China, which decreased from 25% in fiscal 2022.

Economic conditions in China have been, and may continue to be, volatile and uncertain.

In addition, the legal and regulatory system in China continues to evolve and is subject to change.

There also continues to be significant uncertainty about the relationship between the U.S.

and China, including with respect to geopolitics, trade policies, treaties, government regulations, and tariffs.

Further deterioration of economic conditions or outlook, such as lower economic growth, recession or fears of recession in China may adversely affect the demand for or profitability of our products and services.

Many of the Company's key customers are located outside of U.S.

21 unchanged sentences

Any of these factors could have a material adverse effect on the Company’s consolidated results of operations, financial position and cash flows.

The effects of the COVID-19 pandemic could adversely affect our business, results of operations and financial condition.

The coronavirus (COVID-19) pandemic and related measures to reduce its spread have impacted, and may continue to impact, our operations across markets in which the Company operates and those of our suppliers, customers and distributors.

Although COVID-19 had less of an effect on fiscal year 2022 as compared to fiscal year 2021, the extent to which the COVID-19 pandemic will continue to affect our business, results of operations and financial condition is difficult to predict and depends on numerous evolving factors including the duration and scope of the pandemic;

government, social, business and other actions that have been and will be taken in response to the pandemic including lockdowns and travel restrictions;

appearance of new variants of COVID-19;

the availability, adoption and efficacy of vaccines and treatments.

In addition, any economic downturn or recession brought on by the COVID-19 pandemic or other public health crises could adversely affect demand for our products and impact our results of operations and financial condition.

These effects, alone or taken together, could have a material adverse effect on our business, results of operations, or financial condition.

Environmental liabilities could adversely impact the Company’s financial position.

15 unchanged sentences

3) Financial Risks:

Reorganization activities may lead to additional costs and material adverse effects.

In the past, the Company has taken actions to restructure and optimize its production and manufacturing capabilities and efficiencies through relocations, consolidations, plant closings or asset sales.

In the future, the Company may take additional restructuring actions including the consolidating, closing or selling of additional facilities.

These actions could result in impairment charges and various charges for such items as idle capacity, disposition costs and severance costs, in addition to normal or attendant risks and uncertainties.

The Company may be unsuccessful in any of its current or future efforts to restructure or consolidate its business.

Plans to minimize or eliminate any loss of revenues during restructuring or consolidation may not be achieved.

These activities may have a material adverse effect upon the Company’s business, financial condition and results of operations.

The Company’s ability to manage currency or commodity price fluctuations or supply shortages is limited.

As a resource-intensive manufacturing operation, the Company is exposed to a variety of market and asset risks, including the effects of changes in commodity prices, foreign currency exchange rates, and interest rates.

The Company has multiple sources of supply for the majority of its commodity requirements.

The Company saw a reduction in supply chain constraints and costs during the second half of 2022, including material availability and transportation costs and expects to see further supply chain improvements during 2023.

The Company increased its prices during both 2022 and 2021 to help mitigate the impact of rising input costs.

However, if future significant shortages disrupt the supply of raw materials or result in price increases, this could affect prices the Company charges its customers, its product costs, and the competitive position of its products and services.

The Company monitors and manages exposures in changes in commodity prices, foreign currency exchange rates, and interest rates as an integral part of its overall risk management program, which recognizes the unpredictability of markets and seeks to reduce the potentially adverse effects on its results.

Nevertheless, changes in currency exchange rates, commodity prices and interest rates cannot always be predicted.

In addition, because of intense price competition and the Company’s high level of fixed costs, it may not be able to address such changes even if they are foreseeable.

Substantial changes in these rates and prices could have a material adverse effect on the Company’s results of operations and financial condition.

In addition, significant portions of its revenues and earnings are exposed to changes in foreign currency rates.

As it operates in multiple foreign currencies, changes in those currencies relative to the U.S.

dollar will impact its revenues and expenses.

The impact of possible currency devaluation in countries experiencing high inflation rates or significant exchange fluctuations can impact the Company’s results and financial guidance.

For additional discussion of interest rate, currency or commodity price risk, see Item 7A, Quantitative and Qualitative Disclosures about Market Risk .

The Company’s effective tax rate could materially increase as a consequence of various factors, including U.S.

9 unchanged sentences

In December of 2022, the European Union reached an agreement pursuant to which all European Union countries agreed to enact laws based upon the OECD-led minimum tax proposals.

Such law changes, if enacted, would be effective beginning in 2024.

Other countries outside the European Union are also expected to enact rules that will incorporate the OECD-led minimum tax proposals and go into effect beginning in 2024.

As of the end of 2023, many of the European Union countries have already enacted these rules effective for years beginning on or after December 31, 2023.

Similar legislation was adopted, or is expected to be adopted, in other countries with widespread implementation of the global minimum tax anticipated by the end of 2025.

The Company’s income tax rate in certain non-U.S.

jurisdictions is lower than 15%.

Enactment of these minimum tax proposals, and the other proposals discussed above, could have a material adverse effect on the Company’s future effective tax rate and cash flows.

Once these minimum tax rules are effective, they could have a significant adverse effect on the Company’s future effective tax rate and cash flows.

The Company has two subsidiaries in China which benefit from lower income tax rates due to “tax holidays” which apply for three-year periods.

The tax holiday for one of the subsidiaries expired at the end of 2022, and for the other subsidiary the tax holiday will expire at the end of 2023.

The Company intends to apply for renewals of these tax holidays, but future year tax benefits will depend upon the Company’s ability to obtain extensions, after the three-year periods expire.

The tax holiday for one of the subsidiaries expired at the end of 2022 but was later extended for an additional three years, retroactive to include all of 2023, as well as 2024 and 2025, and for the other subsidiary the tax holiday expired at the end of 2023.

Future year tax benefits will depend upon the Company’s ability to obtain extensions, after the three-year periods expire.

There can be no assurance that future extensions will be granted.

6 unchanged sentences

However, there can be no assurance as to the outcome of these examinations.

A decline in expected profitability of the Company or individual reporting units of the Company could result in the impairment of assets, including goodwill and other long-lived assets.

The Company continues to hold material amounts of goodwill and other long-lived assets on its balance sheet.

A decline in expected profitability, particularly if there is a decline in the global economy, could call into question the recoverability of the Company’s related goodwill and other long-lived tangible and intangible assets and require the write-down or write-off of these

Such an occurrence could have a material adverse effect on the Company’s consolidated results of operations, financial position and cash flows.