Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
Other than as noted below, there have been no material changes to the risk factors presented in our Annual Report on Form 10-K for the fiscal year ended June 28, 2024. For further discussion of our risk factors, refer to the section titled Risk Factors in our 2024 Annual Report on Form 10-K. See also Part I Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations, of this Quarterly Report on Form 10-Q for additional information regarding risks related to tariffs.
Current trade policies could increase the cost of our manufacturing operations, potentially reducing our gross margins and demand for our products.
There is substantial current uncertainty with respect to trade policies and treaties between the U.S. and other countries. The U.S. has recently announced a broad increase in tariffs on imported components, subject to limited exceptions. Major U.S. trading partners have announced retaliatory tariffs in response. As a result, we are exposed to increased tariffs with respect to products and components that we import into the U.S. Our gross margins could be reduced, potentially significantly, in the event we are unable to recover tariffs or duties from our customers. Further, although we are required to pay tariffs upon importation of the components, we may not be able to recover these amounts from our customers until sometime later, if at all, which could materially adversely impact our operating cash flow in a given period. Any significant increase in the price of our products due to increased costs may result in a reduction in demand from our customers at such higher prices. The impact of any tariff increases will depend on various factors, including if such increases are ultimately implemented, the timing of implementation, contractual terms and the amount, scope and nature of the tariffs.
Tariffs and other restrictive trade measures may require us to take various actions, including changing suppliers and altering business relationships. Changing our operations in accordance with new or evolving trade restrictions can be expensive, time-consuming, disruptive to our operations and distracting to management. Tariffs and trade restrictions can be announced with little or no advanced notice, and we may not be able to effectively mitigate all adverse impacts from such measures.
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