Item 1A. Risk Factors
Item 1A. Risk Factors
Except as noted below, there have been no material changes to the risk factors disclosed in the 2024 Annual Report under Item 1A, “Risk Factors.”
Changes in U.S. administrative policy, including the imposition of or increases in tariffs, changes to existing trade agreements and any resulting changes in international trade relations, may have an adverse effect on our business.
Changes in laws or policies governing the terms of trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where we manufacture products, such as Mexico and China, could have a material adverse effect on our business and financial results. For example, the U.S. government has recently taken actions or made proposals that are intended to address trade imbalances or trade practices, specifically with China, among other countries, which include encouraging increased production in the United States. The impact of these tariffs is subject to a number of factors, including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any retaliatory responses to such actions that the target countries may take and any mitigating actions that may become available. Despite recent trade negotiations between the United States and the Mexican, Canadian and Chinese governments, given the uncertainty regarding the scope and duration of any new tariffs, as well as the potential for additional tariffs or trade barriers by the United States, Mexico, Canada, China or other countries, we can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful. A trade war or other significant changes in trade regulations could have a material adverse effect on our business, financial condition and results of operations.
If renegotiations of existing tariffs are unsuccessful or additional tariffs or trade restrictions are implemented by the United States or other countries in connection with a global trade war, the resulting escalation of trade tensions could have a material adverse effect on world trade and the global economy. Even in the absence of further tariffs or trade restrictions, the related uncertainty and the market's fear of an economic slowdown could lead to a decrease in consumer spending, and we may experience lower net sales than expected. Reduced net sales may result in reduced operating cash flows if we are not able to appropriately manage inventory levels or leverage expenses.
While the future financial impact of these actions and potential additional U.S. tariff actions and retaliatory actions by other countries remains unknown, the potential implications and ramifications of tariffs could have a material adverse effect on our financial statements in any particular reporting period.
Changes in U.S. or foreign tax laws, or an extended government shutdown, could have a material adverse effect on our business, cash flow, results of operations and financial condition.
The U.S. and foreign tax laws and regulations, as well as the administrative interpretations of those laws and regulations, are constantly under review and may be changed at any time, possibly with retroactive effect. We currently have a $12.7 million tax refund receivable at September 30, 2025, which is being processed for refund at the IRS service center based on provisions in the CARES Act. Any legislative changes to the CARES Act or significant delays in receiving our tax refund could adversely impact our business, cash flow, results of operations and financial condition. For instance, the U.S. federal government has been shut down since October 1, 2025, and an extended government shutdown could delay our receipt of the refund from the IRS.
No assurance can be given as to whether, when, or in what form changes to the applicable tax laws applicable to us may be enacted, or when the government will reopen. Changes in tax laws, tax rulings, or interpretations of existing laws, or an extended government shutdown, could materially affect our business, cash flow, results of operations, and financial condition.
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