What changed in this filing

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Item 1A. Risk Factors

2025-03-13 compared with 2024-02-16 · 68 added, 19 removed, 219 unchanged (28% of the section changed)

26 unchanged sentences

Disruptions in the Company’s manufacturing, supply or distribution chain could result in an adverse impact on results of operations.

The Company sources materials and sells product through various global network channels.

The Company sources materials and sells products through various global networks.

A disruption could occur within the Company’s manufacturing, distribution or supply chain network.

This could include damage or destruction due to various causes including natural disasters or political instability which would cause one or more of these network channels to become non-operational.

This could include damage or destruction due to various causes including natural disasters or political instability which would cause one or more of these networks to become non-operational.

This could adversely affect the Company’s ability to manufacture or deliver its products in a timely manner, impair its ability to meet customer demand for products and result in lost sales or damage to its reputation.

12 unchanged sentences

A work stoppage could occur at certain Company facilities, most likely as a result of disputes under collective bargaining agreements or in connection with negotiations of new collective bargaining agreements.

Further, our reliance on international supply chain systems exposes us to potential interruptions and delays cause by transportation labor shortages, including dock worker stoppages and freight carrier disruptions.

In addition, the Company may experience a shortage of supplies for various reasons, such as financial distress, work stoppages, natural disasters, or production difficulties that may affect one of its suppliers.

4 unchanged sentences

Competition for qualified employees among companies that rely heavily upon engineering and technology is at times intense, and the loss of qualified employees could hinder the Company’s ability to conduct research activities successfully and develop marketable products.

The Company may not be successful protecting its intellectual property.

The Company may not be successful in protecting its intellectual property.

The Company considers its intellectual property, including patents, trade names, and trademarks, to be of significant value to its business as a whole.

4 unchanged sentences

however, multiple losses or expirations could have a material adverse effect upon the Company’s consolidated results of operations, financial position and cash flows.

The Company may incur material losses and costs as a result of defects in its products, including as a result of warranty claims, product recalls, and product liability.

The Company has been notified by one of its customers of a product recall potentially due to certain fuses provided by the Company and incorporated in the customer’s products.

The Company is working with its customer to investigate the cause and level of responsibility for this recall.

Given the highly complex products that the Company manufactures, it is possible that those products, including third-party components contained in those products, may contain defects or fail to work properly or as intended when integrated with customer products.

This could subject the Company to product liability or warranty claims, which could lead to significant expenses, including recall, repair, and/or replacement costs and, potentially breach of contract or other damage claims, all of which could materially adversely affect the Company’s financial results.

This is particularly true if the Company does not discover these issues until after the products have been sold and deployed.

In addition to expenses directly attributable to product defects, the Company’s reputation and ability to attract and retain customers may be harmed.

Further, significant warranty and product liability claims may, among other things, result in the need for significant reserves, divert management’s and other personnel’s attention, cause production delays, impact on-time delivery of products to other customers, reduce margins, and delay recognition of revenues.

It is also possible that end users of customers’ products may make claims against the Company, resulting in additional defense costs and potential damages.

Although, the Company generally attempts to limit its liability through standard contract terms and conditions and maintains insurance in connection with product defects and warranty claims, it is possible that the Company may not be able to enforce contractual limitations on

damages and/or that a successful claim against the Company may exceed the Company’s applicable insurance policy limits or be excluded from coverage.

2) Regulatory Risks:

7 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.

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

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.

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.

Some jurisdictions have already passed 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.

In addition, the European Union ("EU") enacted the Corporate Sustainability Reporting Directive ("CSRD") and Corporate Sustainability Due Diligence ("CS3D") in 2023 and 2024, respectively.

We are further assessing our compliance and reporting strategies under CSRD and CS3D, but our obligations under these and other EU climate directives may incur substantial effort in the future.

Changes in U.S.

4 unchanged sentences

These measures may materially increase costs for goods imported into the U.S.

This in turn could require us to materially increase prices to our customers which may reduce demand, or, if we do not or are unable to increase prices, could result in lower margins on products sold.

Further, the global trade policies and tensions could create additional complexities.

Our international presence subjects us to risks associated with international trade conflicts between the United States and its trade partners, including, without limitation, China, Mexico and Canada, particularly with regard to tariffs and import/export controls.

These factors in turn could require us to materially increase prices to our customers which may reduce demand, or, if we do not or are unable to increase prices, could result in lower margins on products sold.

Changes in U.S.

1 unchanged sentence

trading partners adopting responsive trade policies making it more difficult or costly for us to export our products to those countries.

Additionally, continued geo-political issues may result in customers in China seeking to source products from local suppliers, which could result in lower sales or lost customers.

Additionally, continued geopolitical issues may result in customers outside the U.S.

seeking to source products from local suppliers, which could result in lower sales or lost customers.

The Company is exposed to political, economic, and other risks that arise from operating a multinational business.

1 unchanged sentence

Sales to customers outside the U.S.

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

constituted approximately 63% of the Company's net sales in fiscal 2024, including approximately 23% to China.

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

1 unchanged sentence

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.

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

The result of the recent U.S.

elections may compound this uncertainty.

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

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

and maintain global operations.

20 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.

In addition, the effects on the global economy of the Russia-Ukraine and Israel-Hamas wars, particularly if they escalate, are uncertain.

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

3 unchanged sentences

The Company may be subject to additional common law claims if it releases substances that damage or harm third parties.

In addition, future changes in environmental laws or regulations may require additional investments in capital equipment or the implementation of additional compliance programs.

Future environmental laws, regulations, standards and other obligations as well as changes in the interpretation of existing environmental laws, regulations, standards and other obligations could impair our ability to operate our business, such as through increased compliance costs and procedures, additional investments in capital equipment and distraction of management from other operational and strategic matters.

For example, in June 2024 in Loper Bright Enterprises v.

Raimondo ("Loper"), the Supreme Court’s holding that courts need not defer to a governmental agency’s interpretation of an ambiguous statute that it administers may result in increased challenges, changes to existing agency regulations, and uncertainty as to how courts may interpret agency regulations in the future.

Any failure to comply with new or existing environmental laws or regulations could subject the Company to significant liabilities and could have a material adverse effect on its consolidated results of operations, financial position and cash flows.

Further, the Trump administration and newly elected Congress and appointed agency chairs may seek sweeping changes in environmental regulation.

In the conduct of manufacturing operations, the Company has handled and does handle materials that are considered hazardous, toxic or volatile under federal, state, and local laws.

15 unchanged sentences

Therefore, it is subject to changes in tax laws in each of these jurisdictions, including changes discussed in the paragraphs below.

Further, the results of the recent U.S.

elections could create additional complexities in the U.S.'s and other countries' tax policies.

The outcome of these and other legislative developments, including changes to interpretations of recently enacted legislation, could have a material adverse effect on the Company’s future effective tax rate and cash flows.

2 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.

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.

During 2024, these rules became effective for most European jurisdictions.

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.

2 unchanged sentences

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 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.

The Company has two subsidiaries in China which benefit from lower 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 2023 but was later extended for an additional three years, retroactively to include all of 2024, as well as 2025 and 2026;

and for the other subsidiary, the tax holiday will expire at the end of 2025.

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

24 unchanged sentences

The Company’s most significant net long exposure is to the euro.

The Company’s most significant net short exposures are to the Chinese renminbi, Mexican peso, and Philippine peso.

Company’s most significant net short exposures are to the Chinese renminbi, Mexican peso, and Philippine peso.

Changes in foreign exchange rates could have an adverse effect on the Company's results of operations, financial position and cash flows.

24 unchanged sentences

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

As a result of the 2024 annual goodwill impairment test, the Company recorded non-cash charges of $36.1 million and $8.6 million to reflect the impairment of goodwill for the Industrial controls and sensors reporting unit within the Industrial segment and the Automotive sensors reporting unit within the Transportation segment, respectively.

There were no impairment charges recorded during the fiscal years of 2023 and 2022.

In addition, during the fourth quarter of 2024, the Company recorded non-cash impairment charges of $47.8 million for the impairment of intangible assets, including $47.6 million related to the impairment of certain acquired customer relationships, developed technology, and tradename intangible assets in the Industrial controls and sensors reporting unit within the Industrial segment.

We have identified a material weaknesses in our internal control over financial reporting, and ineffective internal controls could impact the accuracy and timely reporting of our business and financial results.

Our disclosure controls or our internal control over financial reporting may not prevent or detect all errors, including simple errors or mistakes, and all incidents of non-compliance, which may result in misstatements.

A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met with respect to the preparation and accurate presentation of financial statements.

If we fail to maintain the adequacy of our internal controls, including any failure to timely and appropriately implement new, required or improved controls, such failure

may result in the loss of investor confidence in our financial reports, and we may incur significant expenses to remediate any resulting internal control deficiencies.

Such failure may, ultimately, have an adverse effect on the trading price of our common stock.

Further, controls may become inadequate over time because of changes in conditions or the degree of compliance with the policies may deteriorate.

The design of a control system must reflect the fact there are resource constraints, and the benefits of controls must be considered relative to their costs.

The Company’s management has identified the material weaknesses described below.

In making this assessment, management has concluded that we did not design and maintain an effective control environment commensurate with our financial reporting requirements.

Specifically, at certain of our non-U.S.

manufacturing locations, we lacked sufficiently skilled operational and accounting personnel to ensure that internal control responsibilities were performed and aligned with internal control objectives.

The material weakness in the control environment contributed to an additional material weakness related to the design and operating effectiveness of control activities over the existence of inventory at these locations.

The Company did not maintain effective controls related to inventory cycle counts to validate existence of inventory, and consequently, the completeness and accuracy of the data used in evaluating the appropriateness of the valuation of inventory and related reserves.

These material weaknesses resulted in corrections through cumulative out-of-period adjustments as described in notes to the consolidated financial statements as of and for the year ended December 28, 2024.

The Company evaluated the impact of the error and out-of-period adjustment and concluded it was not material to any previously issued financial statements and the adjustment was not material to the year ended December 28, 2024.

Further, we have incurred additional costs and risks, including costs for accounting and legal fees in connection with the ongoing process of remediating the material weaknesses.

We could also be subject to regulatory, stockholder or other actions in connection with the material weaknesses, and such actions would divert management’s time and attention.

For a description of the material weaknesses identified by management and the remediation efforts being implemented to address the material weaknesses, see “Part II, Item 9A - Controls and Procedures.” If the enhanced controls implemented to address the material weaknesses and to strengthen our overall internal control do not operate effectively, if we are unsuccessful in implementing or following these enhanced processes, or if we are otherwise unable to remediate this material weaknesses, such failures may result in delayed or inaccurate reporting of our financial results.

The bankruptcy or insolvency of a major customer could adversely affect the Company.

12 unchanged sentences

Between December 30, 2023 and December 28, 2024, the closing sale price of the Company’s common stock ranged between a low of $222.9 and a high of $275.6.

The volatility of the stock price may be related to any number of factors, such as volatility in the financial markets, general macroeconomic conditions, industry conditions, market expectations concerning the Company’s results of operations, or the volatility of its revenues as discussed above under “The Company’s revenues may vary significantly from period to period.” The historic market price of the Company’s common stock may not be indicative of future market prices.

market price of the Company’s common stock may not be indicative of future market prices.

The Company may not be able to sustain or increase the value of its common stock.

12 unchanged sentences

Information technology security threats, including security breaches, computer malware, and other cyber-attacks are increasing in both frequency and sophistication and could create financial liability, subject the Company to legal or regulatory sanctions or damage the Company’s reputation with customers, dealers, suppliers, and other stakeholders.

In addition, the widespread adoption and rapid evolution of artificial intelligence technologies may increase our cybersecurity risk, including the use of generative artificial intelligence to augment existing or to create new malware.

The Company continuously seeks to maintain a robust program of information security and controls, but the impact of a material information technology event could have a material adverse effect on the Company’s competitive position, reputation, results of operations, financial position and cash flows.

Customer demands and regulations related to conflict-free minerals may force the Company to incur additional expenses.

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires disclosure of use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries and efforts to prevent the use of such minerals.

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires disclosure of the use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries and efforts to prevent the use of such minerals.

In the semiconductor industry, these minerals are most commonly found in metals.

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-K

Item 1A. Risk Factors