What changed in this filing

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Item 1A. Risk Factors

2023-12-20 compared with 2022-12-19 · 55 added, 67 removed, 186 unchanged (40% of the section changed)

5 unchanged sentences

Risks Related to Economic Conditions

The COVID-19 pandemic has negatively disrupted, and may continue to negatively disrupt, our business and results of operations.

Throughout the COVID-19 pandemic, we have supported, and continue to support, multiple “critical infrastructure” sectors by manufacturing materials and products needed for medical supply chains, packaging, transportation, energy, communications, and other critical infrastructure industries.

We have continued to operate during the COVID-19 pandemic in all our production

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facilities, having taken the recommended public health measures to ensure worker and workplace safety.

As a result, there have been unfavorable impacts on our manufacturing efficiencies.

We continue to actively monitor the evolving circumstances and impact of the COVID-19 pandemic, which has negatively disrupted, and may continue to negatively disrupt, our business and results of operations in the future.

For example, in the second quarter of 2022, our revenue growth in Asia-Pacific was negatively impacted by COVID-19 lockdowns in China.

COVID-19 lockdown restrictions in China continue to be implemented from time to time.

The full extent of the COVID-19 pandemic on our operations and the markets we serve remains highly uncertain and will depend largely on future developments related to the COVID-19 pandemic, including infection rates increasing or returning in various geographic areas, variations of COVID-19, the ultimate duration of the COVID-19 pandemic, actions by government authorities to contain the outbreak or treat its impact, such as reimposing previously lifted measures or putting in place additional restrictions, and the widespread distribution and acceptance of an effective vaccine, among other things.

These developments are constantly evolving and cannot be accurately predicted.

Changes in United States or international economic conditions, including declines in the industries we serve, could adversely affect the profitability of any of our operations.

In 2023, approximately 34 percent of our revenue was generated in the United States, while approximately 66 percent was generated outside the United States.

The COVID-19 pandemic and related preventative and mitigation measures implemented by governments around the world and the conflict between Russia and Ukraine have to date negatively impacted the global economy and created significant volatility and disruption of financial markets.

The COVID-19 pandemic and related preventative and mitigation measures implemented by governments around the world and the conflicts in Europe and the Middle East have to date negatively impacted the global economy and created significant volatility and disruption of financial markets.

A general sustained slowdown in the global economy or in a particular region or industry or an increase in trade tensions with U.S.

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or international trade policy could have an adverse impact on our business.

Further, the level of impact from the COVID-19 pandemic and the reactions of governmental authorities and others thereto as well as the conflict between Russia and Ukraine may have significant adverse effects on international trade policy.

Further, the conflicts in Europe and the Middle East may have significant adverse effects on international trade policy.

Significant movements in foreign currency exchange rates or change in monetary policy may harm our financial results.

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We recognize foreign currency transaction gains and losses arising from our operations in the period incurred.

As a result, currency fluctuations between the United States dollar and the currencies in which we do business

As a result, currency fluctuations between the United States dollar and the currencies in which we do business have caused and may continue to cause foreign currency transaction and translation movements, which historically have been material and could continue to be material.

We cannot predict the effects of exchange rate fluctuations upon our future operating results because of the number of currencies involved, the variability of currency exposures and the potential volatility

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have caused and may continue to cause foreign currency transaction and translation movements, which historically have been material and could continue to be material.

of currency exchange rates.

We take actions to manage our foreign currency exposure, such as entering into hedging transactions, where applicable, but we cannot assure that our strategies will adequately protect our consolidated operating results from the effects of exchange rate fluctuations.

For example, uncertainty surrounding the impact of the COVID-19 pandemic, the impact of the conflict between Russia and Ukraine, changes in monetary policies and the effects of the departure of the United Kingdom from the European Union ("Brexit") have caused increased volatility in global currency exchange rates that have resulted in the strengthening of the United States dollar against the foreign currencies in which we conduct business.

Future adverse consequences arising from the COVID-19 pandemic, the conflict between Russia and Ukraine, and Brexit may include continued volatility in exchange rates.

For example, the impact of conflicts in Europe and the Middle East, changes in monetary policies and the effects of the departure of the United Kingdom from the European Union ("Brexit") have caused increased volatility in global currency exchange rates that have resulted in the strengthening of the United States dollar against the foreign currencies in which we conduct business.

Future adverse consequences arising from the conflicts in Europe and the Middle East and Brexit may include continued volatility in exchange rates.

Any significant fluctuation in exchange rates may be harmful to our financial condition and results of operations.

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Risks Related to Our Business and Operations

A disruption in, shortage of, or price increases for, supply of our components and raw materials may adversely impact our business, financial condition, results of operations and cash flows.

While we manufacture certain parts and components used in our products, we require substantial amounts of raw materials and purchase some parts and components from suppliers.

The availability and prices for raw materials, parts and components may be subject to curtailment or change due to, among other things, suppliers' allocation to other purchasers, interruptions in production by suppliers and changes in exchange rates and prevailing price levels, including as a result of inflation.

The COVID-19 pandemic and the conflict between Russia and Ukraine have negatively impacted, and may continue to negatively impact, the availability and prices for raw materials, parts, and components.

While we generally attempt to pass along higher raw material, part and component costs to our customers in the form of price increases, there historically has been a delay between an increase in our raw material costs and our ability to increase the prices of our products.

Additionally, we may not be able to increase the prices of our products due to competitive pricing pressure and other factors.

Shortages in raw materials or our inability to pass along price increases could affect the prices we charge, our operating costs and our competitive position, which could adversely affect our business, financial condition, results of operations and cash flows.

In addition, our facilities, supply chains, distribution systems and products may be impacted by natural or man-made disruptions, including armed conflict, demand surges, damaging weather or other acts of nature (including weather or other acts of nature caused by climate change), pandemics or other public health crises.

A shutdown of, or inability to utilize, one or more of our facilities, our supply chain, or our distribution system could significantly disrupt our operations, delay production and shipments, impact our relationships and reputation with customers, suppliers, employees and others, result in lost or decreased sales, or result in legal exposure and large remediation or other expenses, which could adversely affect our business, financial condition, results of operations and cash flows.

Failure to retain our existing senior management team or the inability to attract and retain qualified personnel could hurt our business and inhibit our ability to operate and grow successfully.

The COVID-19 pandemic has created labor force disruptions impacting factory production and other operations.

Our success will continue to depend to a significant extent on the continued service of our executive management team and the ability to recruit, hire and retain other key management personnel, including factory production workers and other staff, to support our growth and operational initiatives and replace those who retire or resign.

Failure to retain our leadership team and workforce and to attract and retain other important management and technical personnel could place a constraint on our global growth and operational initiatives, possibly resulting in inefficient and ineffective management and operations, which would likely harm our revenues, operations and product development efforts and eventually result in a decrease in profitability.

The Company may be subject to risks relating to organizational changes.

We regularly execute organizational changes such as acquisitions, divestitures and realignments to support our growth and cost management strategies.

We also engage in initiatives aimed to increase productivity, efficiencies and cash flow and to reduce costs.

The Company commits significant resources to identify, develop and retain key employees to ensure uninterrupted leadership and direction.

If we are unable to successfully manage these and other organizational changes, the ability to complete such activities and realize anticipated synergies or cost savings as well as our results of operations and financial condition could be materially adversely affected.

We cannot offer assurances that any of these initiatives will be beneficial to the extent

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anticipated, or that the estimated efficiency improvements, incremental cost savings or cash flow improvements will be realized as anticipated or at all.

Political conditions in and between the United States and foreign countries in which we operate could adversely affect us.

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• unanticipated or unfavorable circumstances arising from host country laws or regulations;

• threats of war, terrorism or governmental instability, including the conflict between Russia and Ukraine;

• threats of war, terrorism or governmental instability, including conflicts in Europe and the Middle East;

• changes in tax rates, adoption of new tax laws or other additional tax policies, and other proposals to reform United States and foreign tax laws that impact how United States multinational corporations are taxed on foreign earnings;

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• exchange controls or other trade restrictions including transfer pricing restrictions when products produced in one country are sold to an affiliated entity in another country.

• government responses to the COVID-19 pandemic.

Any of these events could reduce the demand for our products, limit the prices at which we can sell our products, interrupt our supply chain, or otherwise have an adverse effect on our operating performance.

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presidential administration has criticized existing trade agreements, and while it remains unclear what actions the current or future administration may take with respect to existing and proposed trade agreements, or restrictions on trade generally, more stringent export and import controls may be ultimately imposed in the future.

Failure to retain our existing senior management team or the inability to attract and retain qualified personnel could hurt our business and inhibit our ability to operate and grow successfully.

Failure to retain our leadership team and workforce and to attract and retain other important management and technical personnel could place a constraint on our global

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growth and operational initiatives, possibly resulting in inefficient and ineffective management and operations, which would likely harm our revenues, operations and product development efforts and eventually result in a decrease in profitability.

The Company may be subject to risks relating to organizational changes.

We regularly execute organizational changes such as acquisitions, divestitures and realignments to support our growth and cost management strategies.

We also engage in initiatives aimed to increase productivity, efficiencies and cash flow and to reduce costs.

The Company commits significant resources to identify, develop and retain key employees to ensure uninterrupted leadership and direction.

We cannot offer assurances that any of these initiatives will be beneficial to the extent anticipated, or that the estimated efficiency improvements, incremental cost savings or cash flow improvements will be realized as anticipated or at all.

Increased information technology threats and more sophisticated and targeted cybercrime could pose a risk to our systems, networks, products, solutions and services.

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While we attempt to mitigate these risks by employing a number of measures, including employee training, comprehensive monitoring of our networks and systems, and maintenance of backup and protective systems, our systems, networks, products, solutions and services remain potentially vulnerable to advanced persistent threats.

The techniques used by criminals to obtain unauthorized access to sensitive data

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change frequently and often are not recognizable until launched against a target.

The techniques used by criminals to obtain unauthorized access to sensitive data change frequently and often are not recognizable until launched against a target.

Accordingly, we may be unable to anticipate these techniques or implement adequate preventative measures.

It is therefore possible that in the future we may suffer a criminal attack, unauthorized parties may gain access to personal information in our possession and we may not be able to identify any such incident in a timely manner.

The interpretation and application of data protection laws, including federal, state and international laws, relating to the collection, use, retention, disclosure, security and transfer of personally identifiable data in the U.S., Europe and elsewhere (including but not limited to the European Union’s GDPR, the Brazilian General Data Protection Law and the CCPA), are uncertain and evolving.

It is possible that these laws may be interpreted and applied in a manner that is inconsistent with our data practices.

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A breach in information privacy could result in legal or reputational risks and could have a negative impact on our revenues and results of operations.

A disruption in, shortage of, or price increases for, supply of our components and raw materials may adversely impact our business, financial condition, results of operations and cash flows.

While we manufacture certain parts and components used in our products, we require substantial amounts of raw materials and purchase some parts and components from suppliers.

The conflicts in Europe and the Middle East have negatively impacted, and may continue to negatively impact, the availability and prices for raw materials, parts, and components.

Additionally, we may not be able to increase the prices of our products due to competitive pricing pressure and other factors.

Shortages in raw materials or our inability to pass along

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price increases could affect the prices we charge, our operating costs and our competitive position, which could adversely affect our business, financial condition, results of operations and cash flows.

If our intellectual property protection is inadequate, others may be able to use our technologies and tradenames and thereby reduce our ability to compete, which could have a material adverse effect on us, our financial condition and results of operations.

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Any divestiture may result in a dilutive impact to our future earnings if we are unable to offset the dilutive impact from the loss of revenue associated with the divestiture, as well as significant write-offs, including those related to goodwill and other intangible assets, which could have a material adverse effect on our results of operations and financial condition.

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If we fail to develop new products or enhance existing products, or our customers do not accept the new or enhanced products we develop, our revenue and profitability could be adversely impacted.

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We believe that we must continue to enhance our existing products and to develop and manufacture new products with improved capabilities in order to continue to be a leading provider of precision technology solutions.

We also believe that we must continue to make improvements in our productivity in order to maintain our competitive position.

We also believe that we must continue to make improvements in our productivity in order to maintain our

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competitive position.

Difficulties or delays in research, development or production of new or enhanced products or failure to gain market acceptance of new or enhanced products and technologies may reduce future sales and adversely affect our competitive position.

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Our recent historical growth has depended, and our future growth is likely to continue to depend, in part on our acquisition strategy and the successful integration of acquired businesses into our existing operations.

For example, in November 2022, we completed our acquisition of CyberOptics.

For example, in August 2023, we completed our acquisition of the ARAG Group.

We intend to continue to seek additional acquisition opportunities both to expand into new markets and to enhance our position in existing markets throughout the world.

We cannot assure we will be able to successfully identify suitable acquisition opportunities, prevail against competing potential acquirers, negotiate appropriate acquisition terms, obtain financing that may be needed to consummate such acquisitions, complete proposed acquisitions, successfully integrate acquired businesses into our existing operations or expand into new markets.

In addition, we cannot assure that any acquisition, including the recent acquisition of CyberOptics, once successfully integrated, will perform as planned, be accretive to earnings, or prove to be beneficial to our operations and cash flow.

In addition, we cannot assure that any acquisition, including the recent acquisitions of the ARAG Group and CyberOptics Corporation ("CyberOptics"), once successfully integrated, will perform as planned, be accretive to earnings, or prove to be beneficial to our operations and cash flow.

The success of our acquisition strategy is subject to other risks and uncertainties, including:

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• the ability to generate future cash flows or the availability of financing.

In addition, an acquisition could adversely impact our operating performance as a result of the incurrence of acquisition-related debt, pre-acquisition potential tax liabilities, acquisition expenses, the amortization of acquisition-acquired assets, or possible future impairments of goodwill or intangible assets associated with the acquisition.

In addition, an acquisition could adversely impact our operating performance as a result of incurring acquisition-related debt, pre-acquisition potential tax liabilities, acquisition expenses, the amortization of acquisition-acquired assets, or possible future impairments of goodwill or intangible assets associated with the acquisition.

We may also face liability with respect to acquired businesses for violations of environmental laws occurring prior to the date of our acquisition, and some or all of these liabilities may not be covered by environmental insurance secured to mitigate the risk or by indemnification from the sellers from which we acquired these businesses.

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We assess at least annually whether there has been any impairment in the value of our intangible assets.

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price and market capitalization declines, or if future cash flow estimates decline, we could incur, under current applicable accounting rules, a non-cash charge to operating earnings for goodwill impairment.

If future operating performance at one or more of our business units were to fall significantly below current levels, if competing or alternative technologies emerge, if market conditions for acquired businesses decline, if significant and prolonged negative industry or economic trends exist, if our stock price and market capitalization declines, or if future cash flow estimates decline, we could incur, under current applicable accounting rules, a non-cash charge to operating earnings for goodwill impairment.

Any determination requiring the write-off of a significant portion of unamortized intangible assets would negatively affect our results of operations and equity book value, the effect of which could be material.

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Risks Related to Legal, Compliance and Regulatory Matters

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Changes in environmental laws or regulations could result in higher expenses and payments, and uncertainty relating to environmental laws or regulations may also affect how we conduct our operations and structure our investments and could limit our ability to enforce our rights.

Changes in environmental and climate change laws or regulations, including laws relating to greenhouse gas emissions, could subject us to additional costs and restrictions, including increased energy and raw material

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If environmental laws or regulations are either changed or adopted and impose significant operational restrictions and compliance requirements upon us or our products, they could negatively impact our business, capital expenditures, results of operations, financial condition and competitive position.

It is our policy to apply strict standards for environmental protection to all of our operations within and outside of the United States, even when we are not subject to local government regulations.

We may incur substantial costs, including cleanup costs, fines and civil or criminal sanctions, liabilities resulting from third-party property damage or personal injury claims, or our products could be prohibited from entering certain jurisdictions, if we were to violate or become liable under environmental laws, if our products become non-compliant with environmental laws or if we were to undertake environmental protection actions voluntarily.

We may incur substantial costs, including cleanup costs,

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fines and civil or criminal sanctions, liabilities resulting from third-party property damage or personal injury claims, or our products could be prohibited from entering certain jurisdictions, if we were to violate or become liable under environmental laws, if our products become non-compliant with environmental laws or if we were to undertake environmental protection actions voluntarily.

Expectations relating to environmental, social and governance considerations expose us to potential liabilities, increased costs, reputational harm and other adverse effects on our business.

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Risks Related to Our Capital Structure

Our inability to comply with our existing credit facilities’ restrictive covenants or to access additional sources of capital could impede our growth or the repayment or refinancing of existing indebtedness.

The limits imposed on us by the restrictive covenants contained in our credit facilities could prevent us from making acquisitions or cause us to lose access to these facilities.

Our existing credit facilities contain restrictive covenants that limit our ability to, among other things:

Our inability to comply with the restrictive covenants included in the agreements governing our debt or to access additional sources of capital could impede our growth or the repayment or refinancing of existing debt.

The limits imposed on us by the restrictive covenants contained in the agreement governing our debt could prevent us from making acquisitions or cause us to lose access to these facilities.

The agreements governing our existing debt contain restrictive covenants that limit our ability to, among other things:

• borrow money or guarantee the debts of others;

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These restrictions could limit our ability to plan for or react to market conditions or meet extraordinary capital needs and could otherwise restrict our financing activities.

Our ability to comply with the covenants and other terms of our credit facilities will depend on our future operating performance.

Our ability to comply with the covenants and other terms of the agreement governing our debt will depend on our future operating performance.

If we fail to comply with such covenants and terms, we may be in default and the maturity of the related debt could be accelerated and become immediately due and payable.

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If we are unable to obtain necessary waivers and the debt under our credit facilities is accelerated, we would be required to obtain replacement financing at prevailing market rates.

We may need new or additional financing in the future to expand our business or refinance existing indebtedness.

If we are unable to access capital on satisfactory terms and conditions, we may not be able to expand our business or meet our payment requirements under our existing credit facilities.

We may need new or additional financing in the future to expand our business or refinance existing debt.

If we are unable to access capital on satisfactory terms and conditions, we may not be able to expand our business or meet our payment requirements under our existing debt.

Our ability to obtain new or additional financing will depend on a variety of factors, many of which are beyond our control.

We may not be able to obtain new or additional financing because we have substantial debt or because we may not have sufficient cash flow to service or repay our existing or future debt.

In addition, depending on market conditions and our financial performance, neither debt nor equity financing may be available on

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satisfactory terms or at all.

In addition, depending on market conditions and our financial performance, neither debt nor equity financing may be available on satisfactory terms or at all.

Finally, as a consequence of worsening financial market conditions, our credit facility providers may not provide the agreed credit if they become undercapitalized.

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Changes in interest rates could adversely affect us.

Any period of interest rate increases may adversely affect our profitability.

As of October 31, 2022, we had $ 738,822 of total debt outstanding, of which 35 percent was priced at interest rates that float with the market.

As of October 31, 2023, we had $ 1,749,305 of total debt outstanding, of whic h $553,020 was p riced at interest rates that float with the market.

A one percentage point increase in the interest rate on the floating rate debt in 2023 would have resulted in approximately $5,530 of additional interest expense.

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Unresolved Staff Comments

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Cybersecurity

Not applicable.

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