What changed in this filing

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Item 1A. Risk Factors

2020-10-13 compared with 2019-10-10 · 51 added, 16 removed, 229 unchanged (23% of the section changed)

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You should consider the following factors carefully, in addition to other information contained in this Annual Report on Form 10-K, before making an investment decision with respect to our securities.

We face risks related to the recent novel coronavirus outbreak (“the coronavirus ” or “COVID-19 ” ) and actions in response thereto, which have exacerbated or could further exacerbate conditions in our other risk factors noted below.

The risks described below are not the only risks we face.

Our business operations could also be affected by additional factors that are not presently known to us or that we currently consider to be immaterial in our operations.

Risks Related to our Business

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The development and introduction of new products generally require substantial and effective research, development and marketing expenditures, some or all of which may be unrecoverable if the new products do not gain market acceptance.

New product development itself is inherently risky, as research failures, competitive barriers arising out of the intellectual property rights of others, launch and production difficulties, customer rejection and unexpectedly short product life cycles may occur even after substantial effort and expense on our part.

New product development itself is inherently risky, as research failures, competitive barriers arising out of the intellectual property rights of others, launch and production difficulties, customer rejection and unexpectedly short product life cycles as well as other factors and events beyond our control, such as the COVID-19 pandemic and its impact, may occur even after substantial effort and expense on our part.

Even in the case of a successful launch of a new product, the ultimate benefit we realize may be uncertain if the new product “cannibalizes” sales of our existing products beyond expected levels.

See “ Government regulation imposes significant costs on us, and future regulatory changes (or related customer responses to regulatory changes) could increase those costs or limit our ability to produce and sell our products ” for a discussion of additional risks associated with new product development and launches.

We face intense competition in our markets.

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the overall tax rate of our business, which may be affected by a number of factors, including the use of tax attributes, the financial results of our international subsidiaries and the timing, size and integration of acquisitions we may make from time to time;

the occurrence of a widespread outbreak of an illness or any other communicable disease, any other public health crisis, natural disaster or other force majeure event ;

the incurrence of restructuring, impairment or other charges;

general economic conditions and specific economic conditions in our industry and the industries of our customers.

Additionally, the COVID-19 pandemic and its impact may exacerbate these factors and has caused greater fluctuations in our operating results from quarter-to-quarter.

Accordingly, we believe that quarter-to-quarter comparisons of our operating results are not necessarily meaningful.

Investors should not rely on the results of one quarter as an indication of our future performance.

Our business could be adversely affected by a widespread threat to public health.

In December 2019, COVID-19 was reported in China and has subsequently spread worldwide.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic.

In response to the COVID-19 outbreak, countries and local governments across the world implemented “Shelter in Place,” “Safe at Home,” quarantine or similar orders that restricted workforce and/or required closures of “non-essential” businesses along with restrictions on travel.

Such restrictions and closures initially disrupted our sales office in China, limited travel by our salesforce and delayed product shipments.

While our facilities otherwise have remained operational as essential businesses, there can be no assurances that we will not have to close facilities due to concerns over the health and well-being of our employees, or as a result of government directives.

Further, while we have implemented policies and practices to protect our employees at each of our locations, including sanitizing and cleaning protocols, social distancing, remote work, and suspending non-essential employee travel, there can be no assurances that these efforts will be successful in preventing health concerns from impacting our operations.

The spread of a widespread threat to public health such as COVID-19 has currently had limited disruption and impact to our third party business partners, suppliers, service providers, and customers.

Although the disruptions, delays and modifications to our operations caused by COVID-19 have not had a material impact on our results of operations, there continues to be significant uncertainty relating to the COVID-19 outbreak as well as the potential effects of such outbreak on our business which could negatively affect our costs, customer orders, and collection of accounts receivable, which may be material.

In addition, the deterioration of worldwide economic conditions may impact the proper functioning of financial and capital markets, foreign currency exchange rates, and commodity and energy prices, as well as demand for our products.

Even after the COVID-19 pandemic subsides, we may experience adverse impacts to our business and financial results due to any economic recession or depression that has occurred, and due to any major public health crises that may occur in the future.

Given the uncertainties related to the outbreak, including its duration and severity, we cannot reasonably estimate the scope of its impact on our employees, operations, suppliers, or customers, or the full extent to which COVID-19 could continue to affect the global economy and our results.

Acquisitions involve a number of risks, any of which could cause us not to realize the anticipated benefits.

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Any one or more of these factors could cause us not to realize the benefits we anticipate to result from an acquisition.

Moreover, acquisition opportunities we pursue could materially affect our liquidity and capital resources and may require us to incur indebtedness, seek equity capital or both.

Moreover, acquisition opportunities we pursue could materially affect our liquidity and capital resources and may require us to incur indebtedness, seek equity capital or both and there can be no assurances that we can obtain indebtedness or equity capital on terms acceptable to the Company.

Increased borrowings would correspondingly increase the Company's financial leverage, and could result in lower credit ratings and increased future borrowing costs.

These risks could also reduce the Company's flexibility to respond to changes in its industry or in general economic conditions.

In addition, future acquisitions could result in our assuming more long-term liabilities relative to the value of the acquired assets than we have assumed in our previous acquisitions.

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These strategic changes may include a reduction in the number of brands or variety of products they carry or a shift of shelf space to private label products or increased use of global or centralized procurement initiatives.

Further, the impact of COVID-19 may result in a change in demand for or availability of our products as a result of customers modifying their restocking, fulfillment, or shipping practices in response to the global pandemic.

In addition, our business is based primarily upon individual sales orders placed by customers rather than contracts with a fixed duration.

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Sustained price increases or surcharges in turn may lead to declines in volume, and while we seek to project tradeoffs between price increases and surcharges, on the one hand, and volume, on the other, there can be no assurance that our projections will prove to be accurate.

In particular, as a result of the COVID-19 pandemic and increased demand in trucking in certain areas of the United States following the reopening of state economies, we anticipate that the Company may experience increased transportation costs and delays in customer shipments.

Given the varying level of state re-openings and the continued spread of the pandemic in the United States (and uncertainty regarding how states will respond to such continued spread), the duration and magnitude of the increased transportation costs cannot be predicted at this time and there can be no assurances that such costs and/or shipping disruptions will not continue to increase.

We are subject to volatility in the price and availability of natural gas, as well as other sources of energy.

From time to time, we may use forward purchase contracts or financial instruments to moderate the volatility of a portion of our energy costs.

The success or failure of any such transactions depends on a number of factors, including our ability to anticipate and manage volatility in energy prices, the general demand for fuel by the manufacturing sector, seasonality and the weather patterns throughout the United States and the world.

The success or failure of any such transactions depends on a number of factors, including our ability to anticipate and manage

volatility in energy prices, the general demand for fuel by the manufacturing sector, seasonality and the weather patterns throughout the United States and the world.

The prices of other commodities such as paper, plastic resins, synthetic rubber and steel significantly influence the costs of packaging, replacement parts and equipment we use in the manufacture of our products and the maintenance of our facilities.

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Our business could be negatively affected by supply, capacity, information technology and logistics disruptions or the costs incurred to avoid these disruptions.

Supply, capacity, information technology and logistics disruptions (which may be caused by a variety of factors, including weather conditions, governmental controls, tariffs, national emergencies, natural disasters or other force majeure events) could adversely affect our ability to manufacture, package or transport our products.

Supply, capacity, information technology and logistics disruptions (which may be caused by a variety of factors, including public health crises such as the COVID-19 outbreak, weather conditions, governmental controls, tariffs, national emergencies, natural disasters or other force majeure events) could adversely affect our ability to manufacture, package or transport our products.

As a result of the COVID-19 pandemic, there could be further restrictions on our ability to travel or disruptions in our supply chain or ability to manufacture our products, as well as temporary closures of our facilities or those of our suppliers or customers, any of which could impact our sales and operating results.

Some of our products require raw materials that are provided by a limited number of suppliers, or are demanded by other industries or are simply not available at times.

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In addition, an increase in truck or ocean freight costs may reduce our profitability, and a decrease in transportation availability may affect our ability to deliver our products to our customers and consequently decrease customer satisfaction and future orders.

See “ Increases in energy, commodity and transportation costs would increase our operating costs, and we may be unable to pass all these increases on to our customers in the form of higher prices and surcharges ” for additional risks related to increased transportation costs and logistics disruptions.

Technology failures or cyber security breaches could have an adverse effect on the Company's business and operations.

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We cannot guarantee that the security measures in place will prevent disruptions, failures, cyber-attacks or privacy breaches in the information technology or phone systems of the Company, our customers or third parties, which could adversely affect our communications and business operations.

These risks may be increased as more employees work from home as part of our response to the COVID-19 pandemic.

We may not have the resources or technical sophistication to anticipate, prevent or detect rapidly-evolving types of cyber-attacks.

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Furthermore, security breaches pose a risk to confidential data and intellectual property, which could result in damage to our competitiveness and reputation.

In fiscal year 2019 we implemented a new enterprise resource planning system (“ERP”).

The ERP is designed to accurately maintain our books and records and provide information important to the operation of our business.

Any potential disruptions with the ERP could affect our ability to process orders, ship product and send invoices.

Our enterprise resource planning system (“ERP”) is designed to accurately maintain our books and records and provide information important to the operation of our business.

Any potential disruptions with the ERP system could affect our ability to process orders, ship product and send invoices.

These difficulties could, in turn, negatively impact our financial results including sales, earnings and cash flow.

Further development and maintenance of the ERP will continue to require investment of human and financial resources, which may cause increased costs and other difficulties.

Further development and maintenance of the ERP system will continue to require investment of human and financial resources, which may cause increased costs and other difficulties.

Changes in inventory strategy by our customers as well as other external factors could adversely affect our sales and increase our inventory risk.

From time to time, customers in both our Retail and Wholesale Products Group and our Business to Business Products Group have changed inventory levels as part of managing their working capital requirements.

Any change in inventory levels by our customers would harm our operating results for the financial periods affected by the reductions.

Any decrease in inventory levels by our customers would harm our operating results for the financial periods affected by the reductions.

In particular, continued consolidation within the retail industry could potentially reduce inventory levels maintained by our retail customers, which could adversely affect our results of operations for the financial periods affected by the reductions.

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In addition to the regulatory matters described above, our operations are subject to various federal, state, local and foreign laws and regulations relating to the mining, manufacture, packaging, labeling, content, storage, distribution and advertising of our products and the conduct of our business operations.

For example, in the United States, some of our products, product claims, labeling and advertising are regulated by the Food and Drug Administration, the Consumer Product Safety Commission, the Occupational Health and Safety Administration, the Environmental Protection Agency and the Federal Trade Commission.

For example, in the United States, some of our products, product claims, labeling and advertising are regulated by the Food and Drug Administration, the Consumer Product Safety Commission, the Occupational Health and Safety Administration, the Mine Safety and Health Administration, the Environmental Protection Agency and the Federal Trade Commission.

Most states have agencies that regulate in parallel to these federal agencies.

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Loss of or failure to obtain necessary permits and registrations could delay or prevent us from meeting product demand, introducing new products, building new facilities or acquiring new businesses and could adversely affect operating results.

If these laws or regulations are changed or interpreted differently in the future, it may become more difficult or expensive for us to comply.

As a result of closures caused by government action taken in response to COVID-19, the Company has experienced some delays in obtaining such permits and registrations for its products.

While the Company has taken steps to mitigate such delays, there can be no assurances that there will not be further delays as governments and agencies continue to respond to the COVID-19 outbreak.

Further, if applicable laws or regulations are changed or interpreted differently in the future, it may become more difficult or expensive for us to comply.

In addition, investigations or evaluations of our products by government agencies may require us to adopt additional labeling, safety measures or other precautions, or may effectively limit or eliminate our ability to market and sell these products.

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This could make us less competitive and could have a material adverse impact on our business, operating results and financial condition.

See Item 3 “Legal Proceedings” for more information about specific legal matters related to our patents.

The loss of any key member of our senior management team may impede the implementation of our business plans in a timely manner.

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The loss or other unavailability of one or more of the key members of our senior management team could adversely impact our ability to manage our operations effectively and/or pursue our business strategy.

No Company-owned life insurance coverage has been obtained on these team members.

No Company-owned life insurance coverage has been obtained on current team members.

Further, in the event of a loss of a key member of our senior management team, it is uncertain whether COVID-19 and its impact may result in difficulties in recruiting and hiring for such positions.

We face risks to our domestic and international sales and business operations due to economic, political, regulatory and other conditions.

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and other countries.

In particular, it is uncertain what impact COVID-19 and the reactions of governmental authorities and others thereto will have on international trade and what impact any changes in international trade will have on the economy or on the businesses of the Company and those of its customers and its suppliers.

These developments, as well as the risks outlined above, could have a material adverse effect on the Company’s business, financial condition and results of operations.

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If any of the products that we sell cause, or appear to cause, harm to any of our customers or to consumers, we could be exposed to product liability lawsuits, heightened regulatory scrutiny, requirements for additional labeling, withdrawal of products from the market, indemnification obligations, imposition of fines or criminal penalties or other governmental actions.

Any of these actions could result in material write-offs of inventory, material impairments of intangible assets, goodwill and fixed assets, material restructuring charges and other adverse impacts on our business operations.

Any of these actions could result in material write-offs of inventory, material impairments of intangible assets, goodwill and fixed assets, material

restructuring charges and other adverse impacts on our business operations.

We cannot predict with certainty the eventual outcome of any pending or future litigation, and we could be required to pay substantial judgments or settlements against us or change our product formulations in response to governmental action.

Further, lawsuits can be expensive to defend, whether or not they have

merit, and the defense of these actions may divert the attention of our management and other resources that would otherwise be engaged in managing our business and our reputation could suffer, any of which could harm our business.

Further, lawsuits can be expensive to defend, whether or not they have merit, and the defense of these actions may divert the attention of our management and other resources that would otherwise be engaged in managing our business and our reputation could suffer, any of which could harm our business.

Failure to maintain effective internal control over financial reporting could have a material adverse effect on our business, operating results and stock price.

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however, there can be no assurance that we will be able to maintain the adequacy of our internal control over financial reporting, as such standards are modified, supplemented or amended from time to time in future periods.

Further, as a result of COVID-19, a portion of our workforce has been and continues to work from home, so new processes, procedures, and controls could be required due to the changes in our business environment, which could negatively impact our internal control over financial reporting.

Accordingly, we cannot assure that we will be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act.

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If these restrictions increase, they may impact who buys and holds our stock.

Future dividends on our common stock may be restricted or eliminated.

Dividends are declared at the discretion of our Board of Directors, and future dividends will depend on our future earnings, cash flow, financial requirements and other factors, including market and economic conditions.

We are not obligated to continue a dividend for any fixed period, and the payment of dividends could be suspended or discontinued at any time at our discretion and without prior notice.

Although we have maintained our dividend despite the impact of COVID-19, there can be no assurance that we will continue to do so, particularly if the situation deteriorates.

The amount and timing of any future dividends may vary, and the payment of any dividend does not assure that we will pay dividends in the future.

ITEM 1B – UNRESOLVED STAFF COMMENTS

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