What changed in this filing

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Item 1A. Risk Factors

2022-02-17 compared with 2021-02-18 · 59 added, 49 removed, 184 unchanged (37% of the section changed)

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Therefore, an investment in us involves some risks, including the risks described below.

Although the risks are organized by headings, and each risk is discussed separately, many

are interrelated.

Although the risks are organized by headings, and each risk is discussed separately, many are interrelated.

You should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.

The risks discussed below are not the only risks that we may experience.

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Risks Relating to the COVID-19 Pandemic

Our business, results of operations, financial position, and cash flows have been and are expected to continue to be adversely affected by the coronavirus (COVID-19) pandemic.

In December 2019, there was an outbreak of a novel strain of COVID-19 in China that has since spread to the majority of the regions of the world.

The outbreak was subsequently declared a pandemic by the World Health Organization in March 2020.

To date, the COVID-19 outbreak and preventative measures taken to contain or mitigate the outbreak have caused, and are continuing to cause, business slowdowns or shutdowns in affected areas and significant disruption in global financial markets.

Although we are unable to predict the ultimate impact of the COVID-19 outbreak at this time, the pandemic has adversely affected, and is expected to continue to adversely affect, our business, results of operations, financial position, and cash flows.

Such effects may be material and the potential impacts include, but are not limited to:

• disruptions to our facilities, including as a result of facility closures, reductions in operating hours, labor shortages, and changes in operating procedures, including additional cleaning and disinfecting procedures;

• disruptions in our supply chain due to transportation delays, travel restrictions, raw material cost increases, and closures of businesses or facilities;

• reductions in our operating effectiveness due to workforce disruptions resulting from “shelter in place,” “stay at home” orders, the need for social distancing, and the unavailability of key personnel necessary to conduct our business activities;

• volatility in the global financial markets, which could have a negative impact on our ability to access capital and additional sources of financing in the future.

In addition, we cannot predict the impact that COVID-19 will have on our customers, employees, suppliers, and distributors, and any adverse impacts on these parties may have a material adverse impact on our business.

The COVID-19 pandemic has had, and may continue to have, an adverse impact on our business.

We have continued to closely monitor the impact of the COVID-19 pandemic on our business, including how it has impacted our customers, employees, supply chain and distribution network.

While our business was adversely affected by the COVID-19 pandemic in 2020, we have seen recovery over the course of 2021.

The scope and duration of the pandemic continue to be uncertain, and evolving factors such as the level and timing of vaccine distribution across the world and the extent of any resurgences of the virus or emergence of new variants could impact the stability of the economic recovery and growth.

The COVID-19 pandemic could negatively impact our business, results of operations, financial position or cash flows in a number of ways in the future, including but not limited to:

• disruptions to our facilities, including shutdowns or slowdowns as a result of facility closures, reductions in operating hours or labor shortages;

• disruptions in our supply chain and our ability to obtain raw materials, packaging and other sourced materials due to labor shortages, governmental restrictions or the failure of our suppliers, distributors or manufacturers to meet their obligations to us;

• increases in raw material and commodity costs;

• the inability of a significant portion of our workforce, including our management team, to work as a result of illness or government restrictions;

and reduced liquidity of customers, which could negatively impact the collectability of outstanding receivables and our cash flows.

The extent to which our business, results of operations, financial position or cash flows may ultimately be adversely impacted by the COVID-19 pandemic will depend largely on these future developments, which are highly uncertain and cannot be accurately predicted.

The impact of COVID-19 may also exacerbate other risks discussed below, any of which could have a material effect on us.

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These contracts may be suspended, canceled, or delayed, which could have an adverse impact on our revenues.

In 2020, 13% of our value-added sales was derived from sales to customers in the aerospace and defense end market.

In 2021, 12% of our value-added sales were to customers in the aerospace and defense end market.

A portion of these customers operate under contracts with the U.S.

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We may not be able to introduce new products successfully or do so on a timely basis.

If we fail to develop new products that are appealing to our customers or fail to develop products on time and within budgeted amounts, we may be unable to recover our research and development costs, which could adversely affect our margins and profitability.

If we fail to develop new products that are appealing to our customers or fail to develop products on time and within budgeted amounts, we may lose customers or otherwise be unable to recover our research and development costs, which could adversely affect our margins and profitability.

The availability of competitive substitute materials for beryllium-containing products may reduce our customers’ demand for these products and reduce our sales.

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The availability and prices of some raw materials we use in our manufacturing operations fluctuate, and increases in raw material costs can adversely affect our operating results and our financial condition.

We manufacture advanced engineered materials using various precious and non-precious metals, including aluminum, beryllium, cobalt, copper, gold, nickel, palladium, platinum, ruthenium, silver, and tin.

The availability of, and prices for, these raw materials are subject to volatility and are influenced by worldwide economic conditions, speculative action, world supply and demand balances, inventory levels, availability of substitute metals, the U.S.

We manufacture advanced engineered materials using various precious and non-precious metals, including beryllium, tantalum, aluminum, cobalt, copper, gold, nickel, palladium, platinum, ruthenium, silver, and tin.

The availability of, and prices for, these raw materials are volatile and are influenced by worldwide economic conditions, speculative action, world supply and demand balances, inventory levels, availability of substitute metals, the U.S.

dollar exchange rate, production costs of U.S.

and foreign competitors, anticipated or perceived shortages, and other factors.

Precious metal prices, including prices for gold and silver, have fluctuated significantly in recent years.

Higher prices can cause adjustments to our inventory carrying values,

whether as a result of quantity discrepancies, normal manufacturing losses, differences in scrap rates, theft or other factors, which could have a negative impact on our profitability and cash flows.

Precious metal prices have fluctuated significantly in recent years and the inflationary impact of the COVID-19 pandemic has added to the volatility.

Higher prices can cause adjustments to

our inventory carrying values, whether as a result of quantity discrepancies, normal manufacturing losses, differences in scrap rates, theft or other factors, which could have a negative impact on our profitability and cash flows.

Also, the price of our products will generally increase in tandem with rising metal prices, as a result of changes in precious metal prices that are passed through to our customers, which could deter them from purchasing our products and adversely affect our net sales and operating profit.

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Additionally, our Reading, Pennsylvania and Tucson, Arizona manufacturing facilities are dependent on materials produced by our Elmore, Ohio manufacturing facility, and our Wheatfield, New York manufacturing facility is dependent on our Buffalo, New York manufacturing facility.

The destruction or closure of our mine, any of our manufacturing facilities, or to critical pieces of equipment within these facilities for a significant period of time as a result of harsh weather, fire, explosion, act of war or terrorism, or other natural disaster or unexpected event may interrupt our manufacturing capabilities, increase our capital expenditures and our costs of doing business, and impair our ability to deliver our products on a timely basis.

The destruction or closure of our mine, any of our manufacturing facilities, or to critical pieces of equipment within these facilities for a significant period of time as a result of harsh weather (including that caused by climate change), fire, explosion, act of war or terrorism, or other natural disaster or unexpected event may interrupt our manufacturing capabilities, increase our capital expenditures and our costs of doing business, and impair our ability to deliver our products on a timely basis.

In addition, many of our manufacturing facilities depend on one source for electric power and natural gas, which could be interrupted due to equipment failures, terrorism, or another cause.

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Increased global information technology (IT) security threats and more sophisticated and targeted computer crime pose a risk to the security of our systems and networks and the confidentiality, availability, and integrity of our data.

We protect our sensitive information and confidential personal data, our facilities, and information technology systems, but we may be vulnerable to future security breaches.

Despite our security measures, our IT systems and infrastructure may be vulnerable to customer viruses, cyber-attacks, security breaches caused by employee error or malfeasance, or other disruptions.

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A security breach of our computer systems could interrupt or damage our operations or harm our reputation, resulting in a loss of sales, operating profits, and assets.

The Company has taken steps to protect our computer systems however there is always a risk of undetected successful intrusions.

Intrusions could pose a risk of undetected data loss or theft that could later be used to harm the Company.

In addition, we could be subject to legal claims or proceedings and/or liability under laws that protect the privacy of personal information and regulatory penalties if confidential information relating to customers, suppliers, employees, or other parties is misappropriated from our computer systems.

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A security breach of those computer systems could result in the loss, theft, or disclosure of confidential information and could also interrupt or damage our operations, harm our reputation, and subject us to legal claims.

Data privacy breaches and the evolving global governmental regulation relating to data privacy could adversely affect our results of operations and profitability.

We collect, store, access and otherwise process certain confidential or sensitive data, including proprietary customer and business information, personal data or other information that is subject to privacy and security laws, regulations and customer-imposed requirements.

The data privacy laws of the specific jurisdictions in which we operate may vary and potentially conflict.

As such, we cannot predict the cost of compliance with future data privacy laws, regulations and standards, future interpretations of current laws, regulations and standards, or the potential effects on our business.

Government enforcement actions can be costly and interrupt the regular operation of our business, and a violation of data privacy laws or a security breach involving personal data can result in fines, reputational damage and civil lawsuits, any of which may adversely affect our results of operations and profitability.

Our defined benefit pension plans and other post-employment benefit plans are subject to financial market risks that could adversely impact our financial performance.

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For retiree health accounting purposes, we have used a graded assumption schedule to assume the rate at which health care costs will increase.

We cannot predict whether changing market or economic conditions, regulatory changes, or other factors will further increase our retiree health care expenses or obligations, diverting funds we would otherwise apply to other uses.

Unexpected events and natural disasters at our mine could increase the cost of operating our business.

Unexpected events and natural disasters at our mine or manufacturing facilities could increase the cost of operating our business.

A portion of our production costs at our mine are fixed regardless of current operating levels.

Our operating levels are subject to conditions beyond our control that may increase the cost of mining for varying lengths of time.

These conditions include, among other things, weather, fire, natural disasters, pit wall failures, and ore processing changes.

Our mining operations also involve the handling and production of potentially explosive materials.

It is possible that an explosion could result in death or injuries to employees and others and material property damage to third parties and us.

These conditions include, among other things, weather (including severe weather caused by climate change), fire, natural disasters, pit wall failures, and ore processing changes.

Our operations also involve the handling and production of potentially explosive materials.

It is possible that an explosion at our mine or other manufacturing facilities could result in death or injuries to employees and others and material property damage to third parties and us.

Any explosion could expose us to adverse publicity or liability for damages and materially adversely affect our operations.

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We conduct our sales and distribution operations on a worldwide basis and are subject to the risks associated with doing business outside the United States.

We sell to customers outside of the United States from our United States and international operations.

We sell to customers outside of the United States from our domestic and international operations.

Revenue from international operations (principally Europe and Asia) accounted for approximately 47% in 2021, 45% in 2020, and 37% in 2019 of Net sales.

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There are a number of risks associated with international business activities, including:

requirements concerning privacy and data security, including the European Union's General Data Protection Regulation, and unexpected changes in any of these factors;

• burdens to comply with multiple and potentially conflicting foreign laws and regulations, including export requirements, tariffs and other barriers, environmental health and safety requirements, increasingly complex requirements concerning privacy and data security, including the European Union's General Data Protection Regulation, and unexpected changes in any of these factors;

• difficulty in obtaining export licenses from the U.S.

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• fluctuations in currency exchange rates;

• disruptions in our business or the businesses of our suppliers or customers due to cyber security incidents, public health concerns (including viral outbreaks, such as the coronavirus) or natural disasters.

• disruptions in our business or the businesses of our suppliers or customers due to cyber security incidents, public health concerns (including viral outbreaks, such as COVID-19) or natural disasters.

Any of these risks could have an adverse effect on our international operations by reducing the demand for our products or reducing the prices at which we can sell our products, which could result in an adverse effect on our business, financial position, results of operations, or cash flows.

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In particular, there may be significant changes in U.S.

laws and regulations and existing international trade agreements by the current U.S.

presidential administration that could affect a wide variety of industries and businesses, including those businesses we own and operate.

If the current U.S.

presidential administration materially modifies U.S.

laws and regulations and international trade agreements, our business, financial condition, and results of operations could be adversely affected.

laws and regulations and international trade agreements that could affect a wide variety of industries and businesses, including those businesses we own and operate.

We may be exposed to certain regulatory and financial risks related to climate change.

Growing concerns about climate change may result in the imposition of additional regulations or restrictions to which we may become subject.

A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to climate change, including regulating greenhouse gas emissions.

The outcome of new legislation or regulation in the U.S.

and other jurisdictions in which we operate may result in new or additional requirements, additional charges to fund energy efficiency activities, and fees or restrictions on certain activities.

Compliance with these climate change initiatives may also result in additional costs to us, including, among other things, increased production costs, additional taxes, reduced emission allowances or additional restrictions on production or operations.

Any adopted future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations.

Even without such regulation, increased public awareness and adverse publicity about potential impacts on climate change emanating from us or our industry could harm us.

We may not be able to recover the cost of compliance with new or more stringent laws and regulations, which could adversely affect our results of operations, financial position or cash flows.

We are exposed to lawsuits in the normal course of business, which could harm our business.

During the ordinary conduct of our business, we may become involved in certain legal proceedings, including those involving product liability claims, third-party lawsuits relating to exposure to beryllium, claims against us of infringement of intellectual property rights of third parties, or other litigation matters.

Due to the uncertainties of litigation, we can give no assurance that we will prevail at the resolution of future claims.

Due to the uncertainties of litigation, we can give no assurance that we will prevail in the resolution of future claims.

Certain of these matters involve types of claims that, if they result in an adverse ruling to us, could give rise to substantial liability, which could have a material adverse effect on our business, operating results, or financial condition.

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Health issues, litigation, and government regulations relating to our beryllium operations could significantly reduce demand for our products, limit our ability to operate, and adversely affect our profitability.

If exposed to respirable beryllium fumes, dusts, or powder, some individuals may demonstrate an allergic reaction to beryllium and may later develop a chronic lung disease known as chronic beryllium disease (CBD).

Some people who are diagnosed with

CBD do not develop clinical symptoms at all.

If exposed to respirable beryllium fumes, dusts, or powder, some individuals may demonstrate an allergic reaction and may later develop a chronic lung disease known as chronic beryllium disease (CBD).

Some people who are diagnosed with CBD do not develop clinical symptoms at all.

In others, the disease can lead to scarring and damage of lung tissue, causing clinical symptoms that include shortness of breath, wheezing, and coughing.

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In addition, adverse media coverage relating to our beryllium-containing products could damage our reputation or cause a decrease in demand for beryllium-containing products, which could adversely affect our profitability.

Our bertrandite ore mining and beryllium-related manufacturing operations and some of our customers’ businesses are subject to extensive health and safety regulations that impose, and will continue to impose, significant costs and liabilities, and future regulation could increase those costs and liabilities, or effectively prohibit production or use of beryllium-containing products.

and future regulation could increase those costs and liabilities, or effectively prohibit production or use of beryllium-containing products.

We, as well as our customers, are subject to laws regulating worker exposure to beryllium.

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Our working capital line of credit includes variable-rate obligations, which expose us to interest rate risks.

If interest rates increase, our debt service obligations on our variable-rate indebtedness would increase even if the amount borrowed remained

the same, resulting in a decrease in our net income.

If interest rates increase, our debt service obligations on our variable-rate indebtedness would increase even if the amount borrowed remained the same, resulting in a decrease in our net income.

Additional information regarding our market risks is contained in Item 7A "Quantitative and Qualitative Disclosures About Market Risk."

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The terms of our credit facilities require us to comply with various covenants, including financial covenants.

In the event of a global economic downturn, it could have a material adverse impact on our earnings and cash flow, which could adversely affect our ability to comply with our financial covenants and could limit our borrowing capacity.

Our ability to comply with these covenants depends, in part, on factors over that we may have no control.

A global economic downturn could have a material adverse impact on our earnings and cash flow, which could adversely affect our ability to comply with our financial covenants and could limit our borrowing capacity.

Our ability to comply with these covenants depends, in part, on factors over which we may have no control.

A breach of any of these covenants could result in an event of default under one or more of the agreements governing our indebtedness which, if not cured or waived, could give the holders of the defaulted indebtedness the right to terminate commitments to lend and cause all amounts outstanding with respect to the indebtedness to be due and payable immediately.

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The terms of our credit facilities contain a number of restrictive covenants, including restrictions in our ability to, among other things, borrow and make investments, acquire other businesses, and consign additional precious metals.

These covenants could adversely affect our business by limiting our ability to plan for or react to market conditions or to meet our capital needs, as well as adversely affect our ability to pursue our growth, acquisition strategies, and other strategic initiatives.

These covenants could adversely affect our business by limiting our ability to plan for or react to market conditions or to meet our capital needs, as well as adversely affect our ability to pursue our growth and acquisition strategies, and other strategic initiatives.

Risks Related to the Execution of Our Strategy

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We intend to continue to consider further growth opportunities through the acquisition of assets or companies and routinely review acquisition opportunities.

We cannot predict whether we will be successful in pursuing any acquisition opportunities or what the consequences of any acquisition would be.

We cannot predict whether we will be successful in pursuing any acquisition opportunities or whether we will be able to achieve the strategic and other objectives related to any acquisitions, including our recent acquisition of HCS-Electronic Materials, including the achievement of any expected synergies.

Future acquisitions may involve the expenditure of significant funds and management time.

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In addition, there may be liabilities that we fail, or are unable, to discover in the course of performing due diligence investigations on the assets or companies we have already acquired or may acquire in the future.

We cannot assure that rights to indemnification by the sellers of these assets or companies to us, even if obtained, will be enforceable, collectible, or sufficient in amount, scope, or duration to fully offset the possible liabilities associated with the business or property acquired.

We cannot assure that rights to indemnification by the sellers of these assets or companies to us, even if obtained, or applicable representation and warranty insurance, will be enforceable, collectible, or sufficient in amount, scope, or duration to fully offset the possible liabilities associated with the business or property acquired.

Any such liabilities, individually or in the aggregate, could have a materially adverse effect on our business, financial condition, and results of operations.

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In addition to the risk of unanticipated warranty or recall expenses, our customer contracts may contain provisions that could cause us to incur penalties, be liable for damages, including liquidated damages, or incur other expenses, if we experience difficulties with respect to the functionality, deployment, operation, and availability of our products and services.

In the event of late deliveries, late or improper installations or operations, failure to meet product or performance specifications or other

product defects, or interruptions or delays in our managed service offerings, our customer contracts may expose us to penalties, liquidated damages, and other liabilities.

In the event of late deliveries, late or improper installations or operations, failure to meet product or performance specifications or other product defects, or interruptions or delays in our managed service offerings, our customer contracts may expose us to penalties, liquidated damages, and other liabilities.

In the event we were to incur contractual penalties, such as liquidated damages or other related costs that exceed our expectations, our business, financial condition, and operating results could be materially and adversely affected.

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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