What changed in this filing

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Item 1A. Risk Factors

2022-08-01 compared with 2021-08-02 · 66 added, 40 removed, 208 unchanged (34% of the section changed)

Investors should consider carefully the following risk factors in addition to the other information included and incorporated by reference in this Annual Report on Form 10-K that we believe are applicable to our businesses and the industries in which we operate.

Investors should carefully consider the following risk factors in addition to the other information included and incorporated by reference in this Annual Report on Form 10-K that we believe are applicable to our businesses and the industries in which we operate.

While we believe we have identified the key risk factors affecting our businesses, there may be additional risks and uncertainties that are not presently known or that are not currently believed to be significant that may adversely affect our results of operations.

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Failure to achieve our sales and margin growth objectives in our product lines and business units;

Failure to identify, consummate and successfully integrate acquisitions;

Failure to implement or properly execute our growth strategies, including failures to identify, consummate and successfully integrate acquisitions and/or other opportunities to diversify, extend and expand our business;

Declining gross margin reflecting competitive pricing pressures or product mix;

Limitations on our ability to leverage our support-function cost structure while maintaining an adequate structure to achieve our growth objectives.

In addition, the impact of the COVID-19 pandemic resulted in sales declines across our three business units at various times during fiscal 2021.

While many regions are seeing a recovery from the outbreak, the situation continues to evolve and the effects of the pandemic could adversely affect the Company’s revenues, earnings, liquidity and cash flows.

The impact of the COVID-19 pandemic and its effects negatively impacted our sales results in certain prior periods.

The situation continues to evolve and the effects of the pandemic could adversely affect the Company’s revenues, earnings, liquidity and cash flows.

We have historically incurred significant charges for inventory obsolescence and may incur similar charges in the future.

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We are dependent on a limited number of vendors to supply us with essential products.

Disruptions to the supply chain could adversely impact our business.

The products we supply are currently produced by a relatively small number of manufacturers.

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To the extent that our significant suppliers are unwilling or unable to continue to do business with us, extend lead times, limit supplies due to capacity constraints or other factors, there could be a material adverse effect on our business.

We experienced some COVID-19 related component delays impacting new product development schedules.

Further, as a result of COVID-19 and its effects, we experienced some COVID-19 related component delays impacting new product development schedules.

The global markets have generally suffered, and are continuing to suffer, from material disruptions to certain supply chains.

Changes in our relationships with suppliers, shortages in availability of materials, production delays, regulatory

restrictions, public health crises, or other supply chain disruptions, whether due to our suppliers or customers, could have a material adverse effect on our operations and results.

Increases in the costs of supplies could result in manufacturing interruptions, delays, inefficiencies or our inability to market products.

In addition, our profit margins would decrease if prices of purchased raw materials, component parts or finished goods increase and we are unable to pass on those increases to our customers.

As various locations have seen recovery from COVID-1 9, there have been increases in demand, which have, in turn, created significant disruption to the global supply chain .

These disruptions have been further exacerbated by other events and conditions, including the conflict between Russia and Ukraine and collectively adversely affected our ability to receive goods on a timely basis and increased our material costs.

Short-term or sustained increases in market demand may exceed our suppliers’ production capacity or otherwise strain our supply chain.

Our failure, or our suppliers’ failure, to meet the demand for raw materials and components could adversely affect our business and results of operations.

Further disruptions to the supply chain because of the COVID-19 pandemic and its impact, or other world or domestic events could materially adversely impact our operations and business.

While we actively monitor and take steps to mitigate supply chain risk, there can be no assurance that our mitigation plans will prevent disruptions that may arise from shortages of materials that we use in the production of our products.

We rely heavily on information technology systems that, if not properly functioning, could materially adversely affect our business.

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A significant disruption or failure in the design, operation, security or support of our information technology systems could significantly disrupt our business.

Our information technology systems may be subject to cyber attacks, security breaches or computer hacking.

Our information technology systems may be subject to cyber attacks, security breaches, computer hacking, as well as other damage, disruptions or shutdowns.

Experienced computer programmers and hackers may be able to penetrate our security controls and misappropriate or compromise sensitive personal, proprietary or confidential information, create system disruptions or cause shutdowns.

They also may be able to develop and deploy viruses, worms and other malicious software programs that attack our systems or otherwise exploit any security vulnerabilities.

Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as user names, passwords or other information in order to gain access to our customers’ data or our data, including our intellectual property and other confidential business information, employee information or our information technology systems.

Additionally, third parties may attempt to fraudulently induce employees or customers into disclosing sensitive information such as usernames, passwords or other information in order to gain access to our customers’ data or our data, including our intellectual property and other confidential business information, employee information or our information technology systems.

Our systems and the data stored on those systems may also be vulnerable to security incidents or security attacks, acts of vandalism or theft, coordinated attacks by activist entities, misplaced or lost data, human errors or other similar events that could negatively affect our systems and its data, as well as the data of our business partners.

Further, third parties, such as hosted solution providers, that provide services to us, could also be a source of security risk in the event of a failure of their own security systems and infrastructure.

The costs to mitigate or address security threats and vulnerabilities before or after a cyber incident could be significant.

Our remediation efforts may not be successful and could result in interruptions, delays or cessation of service, and loss of existing or

potential suppliers or customers.

We have experienced cybersecurity incidents in the past, but none of these incidents, individually or in the aggregate, has had a material adverse effect on our business, reputation, operations or products.

The Company implemented various information technology protections designed to detect and reduce cybersecurity incidents, although there can be no assurance that our protections will be successful.

The Company also regularly evaluates its protections against cybersecurity incidents, including in response to specific threats and as part of the Company's information security program.

There can be no assurance, however, that the Company will be able to prevent or remediate all future cybersecurity incidents or that the cost associated with responding to any such incident or impact of such incident will not be significant or material.

Further, our remediation efforts may not be successful and could result in interruptions, delays or cessation of service, and loss of existing or potential suppliers or customers.

In addition, breaches of our security measures and the unauthorized dissemination of sensitive personal, proprietary or confidential information about us, our business partners or other third parties could expose us to significant potential liability and reputational harm.

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We sell many of our components at prices that are significantly lower than the cost of the equipment or other goods in which they are incorporated.

Since a defect or failure in a product could give rise to failures in the equipment that incorporates them, we may face claims for damages that are disproportionate to the revenues and profits we receive from the components involved in the claims.

Because a defect or failure in a product could give rise to failures in the equipment that incorporates them, we may face claims for damages that are disproportionate to the revenues and profits we receive from the components involved in the claims.

While we typically have provisions in our agreements with our suppliers that hold the supplier accountable for defective products, and we and our suppliers generally exclude consequential damages in our standard terms and conditions, our ability to avoid such liabilities may be limited as a result of various factors, including the inability to exclude such damages due to the laws of some of the countries where we do business.

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The extension of credit involves considerable judgment and is based on management’s evaluation of factors that include such things as a customer’s financial condition, payment history and the availability of collateral to secure customers’ receivables.

The risks associated with extending credit to our customers could be exacerbated by economic weakness and market disruption.

Failure to successfully implement our growth initiatives, or failure to realize the benefits expected from these initiatives if implemented, may create ongoing operating losses or otherwise adversely affect our business, operating results and financial condition.

Our growth strategy focuses on expanding our healthcare and our power conversion businesses.

In 2015, we acquired certain assets, including inventory, receivables, fixed assets and certain other assets, of International Medical Equipment and Services, Inc.

(“IMES”) and launched Power and Microwave Technologies Group (“PMT”), which combines our core engineered solutions, power grid and microwave tube business with new RF and power technologies.

We may be unable to implement our growth initiatives or reach profitability in the near future or at all, due to many factors, including factors outside of our control.

If our investments in these growth initiatives do not yield anticipated returns for any reason, our business, operating results and financial condition may be adversely affected.

We may not be successful in identifying, consummating and integrating future acquisitions.

As part of our growth strategy, our intent is to acquire additional businesses or assets.

We may be unable to implement our growth initiatives or strategic priorities or reach profitability in the near future or at all, due to many factors, including factors outside of our control.

We also cannot be certain that executing on our strategy will generate the benefits we expect.

If we fail to execute successfully on our strategic priorities, if we pursue strategic priorities that prove to be unsuccessful, or if our investments in these growth initiatives do not yield anticipated returns for any reason, our business, financial position, results of operations and cash flows may be materially and adversely affected.

We may not be successful in identifying, consummating and integrating future acquisitions, if any.

We may not be able to identify attractive acquisition candidates or complete the acquisition of identified candidates at favorable prices and upon advantageous terms.

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If any of these risks materialize, they may result in disruptions to our business and the diversion of management time and attention, which could increase the costs of operating our existing or acquired businesses or negate the expected benefits of the acquisitions.

Economic weakness and uncertainty could adversely affect our revenues and gross margins.

Economic weakness and uncertainty and other challenges could adversely affect our revenues and gross margins.

Our revenues and gross profit margins depend significantly on global economic conditions, the demand for our products and services and the financial condition of our customers.

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The effects of a tightened credit environment could include the insolvency of key vendors or their inability to obtain credit to finance development and/or manufacture products resulting in product delays as well as the inability of customers to obtain credit to finance operations and/or customer insolvencies.

and the timing thereof by our customers may have a significant impact on our results and, where such spending is delayed or cancelled, it could have a material negative impact on our operating results.

Spending and the timing thereof by our customers may have a significant impact on our results and, where such spending is delayed or cancelled, it could have a material negative impact on our operating results.

Current global economic conditions remain uncertain and challenging.

Weakness in the markets in which we operate could negatively impact our revenue and operating expenses, and consequently have a material adverse effect on our business, financial condition and results of operations.

Our operating results produced net income for fiscal 2021, but operating results for fiscal 2020 and fiscal 2019 reflected a net loss.

Our operating results produced net income for fiscal 2022 and fiscal 2021, but operating results in prior years (including fiscal 2020 and fiscal 2019) reflected a net loss.

There can be no assurance that we will continue recovery in the near future;

nor is there any assurance that such worldwide economic volatility in connection with the COVID-19 pandemic, its repercussions, actions taken in response to the pandemic and attempts at recovery will not continue.

nor is there any assurance that worldwide economic volatility will not continue or worsen.

Further, challenges in the supply chain and disruptions in our logistics capability could further negatively impact our gross profit margins.

See “We are dependent on a limited number of vendors to supply us with essential products.

Further, disruptions to the supply chain could adversely impact our business” and “Major disruptions to our logistics capability or to the operations of our key vendors or customers could have a material adverse impact on our operations.”

Prolonged periods of inflation could increase costs, have an adverse effect on general economic conditions and impact consumer spending, which could impact our profitability and have a material adverse effect on our business and results of operations.

Inflation has risen on a global basis and the United States has recently experienced historically high levels of inflation.

If the inflation rate continues to increase, it can also push up the costs of labor and other expenses.

There is no assurance that our revenues will increase at the same rate to maintain the same level of profitability.

Inflation and government efforts to combat inflation, such as raising the benchmark interest rate, could increase market volatility and have an adverse effect on the financial market and general economic conditions.

Such adverse conditions could negatively impact demand for our products, which could adversely affect our profitability, results of operations and cash flow.

Our business and results of operations are subject to a broad range of uncertainties arising out of world and domestic events.

Our business and results of operations are subject to uncertainties arising from world and domestic events.

These uncertainties may include a global economic slowdown, pandemics and other public health issues (including the COVID-19 pandemic), natural disasters, military action, terrorist activities, political and social turmoil, civil unrest and other crises.

These uncertainties may include a global economic slowdown, pandemics and other public health issues (including the COVID-19 pandemic), natural disasters, changes in global, national, or regional economies, inflation, governmental policies, political unrest, military action and armed conflicts (such as the 2022 Russian invasion of Ukraine), terrorist activities, political and social turmoil, civil unrest and other crises.

Such conditions have impacted and may continue to impact customer demand as well as our suppliers’ ability to supply us with necessary materials and, ultimately, may have an impact on our business, financial condition, results and stock price.

The COVID-19 outbreak was declared a pandemic in March 2020 based on the rapid increase in global exposure.

In response, the governments of many countries, states, cities and other geographic regions (including areas in which we have operations) took preventative or protective actions, such as imposing restrictions on business operations and requiring individuals to stay at home.

As the impact of the COVID-19 outbreak and responses to the pandemic continue to evolve and be felt, our ability to meet customer demand for products may be impaired or, similarly, our customers may experience adverse business consequences due to COVID-19.

The ongoing impact of the COVID-19 outbreak and responses to the pandemic continue to evolve.

The COVID-19 crisis has caused disruptions in global economies, financial markets and rapid shifts in governmental and public health policies in the countries where we operate, or our customers are located or the industries in which we and our customers compete.

The COVID-19 crisis and the actions taken by governments, businesses and individuals to curtail the spread, abatement and resurgence of the disease have negatively impacted, and could continue to negatively impact our business, results of operations, cash flows and financial condition.

During fiscal 2021, the Company experienced decreases in demand for certain products as a result of the impact of COVID-19 on certain customers and in certain regions.

A significant reduced demand for products or impaired ability to meet customer demand (including disruptions at our transportation service providers or vendors) could cause a material adverse effect on our business, operations and financial performance.

COVID-19 continues to spread in various regions of the world.

The extent to which our business will be impacted will depend on future developments which are highly uncertain and cannot be predicted.

These include but not limited to the continued duration and spread of the pandemic, its severity, the effectiveness of actions to vaccinate populations, contain the virus or treat its impact and how quickly and to what extent normal economic and operating conditions resume.

A significant reduced demand for products or impaired ability to meet customer demand (including disruptions at our transportation service providers or vendors) as a result of resurgences of the COVID-19 pandemic and/or in response to the pandemic’s continued effects or the reactions to the pandemic and its effects could cause a material adverse effect on our business, operations and financial performance.

Various regions of the world continue to be affected by the COVID-19 pandemic and certain areas have undertaken renewed disease control measures.

The extent to which our business will continue to be impacted by the COVID-19 pandemic and its effects will depend on future developments which are highly uncertain and cannot be predicted.

The potential effects of COVID-19, the responses to the pandemic and the various recovery initiatives may also impact many of our risk factors described herein;

however, as this is an unprecedented and changing situation, the potential impacts to such risk factors remain uncertain.

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.

This is a very dynamic situation and we cannot at this time 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.

We may continue to 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.

This is a very dynamic situation, and we cannot at this time reasonably estimate the scope of its impact on our employees, operations, suppliers or customers, or the full extent to which COVID-19 or its impact and effects could continue to affect the global economy and our results.

Major disruptions to our logistics capability or to the operations of our key vendors or customers could have a material adverse impact on our operations.

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We depend on third party transportation service providers for the delivery of products to our customers.

A major interruption or disruption in service at any of our distribution centers, or a disruption at the operations of any of our significant vendors or customers, for any reason, including reasons beyond our control (such as natural disasters, pandemics (such as COVID-19), work stoppages, power loss, cyber attacks, incidents of terrorism or other significant disruptions of services from our third party providers) could cause cancellations or delays in a significant number of shipments to customers and, as a result, could have a severe impact on our business, operations and financial performance.

A major interruption or disruption in service at any of our distribution centers, or a disruption at the operations of any of our significant vendors or customers, for any reason, including reasons beyond our control (such as natural disasters, pandemics or other health crises (such as COVID-19), work stoppages, power loss, cyber attacks, incidents of terrorism or other significant disruptions of services from our third party providers) could cause cancellations or delays in a significant number of shipments to customers and, as a result, could have a severe impact on our business, operations and financial performance.

Further, challenges within global logistics networks, including shortages of shipping containers, international port congestion, and trucking shortages and freight capacity constraints have resulted in delays in receiving key manufacturing components and increased order backlogs and transportation costs.

Such logistical disruption may cause us to incur higher costs and may also result in longer lead times for our customers.

Uncertainties related to the magnitude and duration of global supply chain disruptions have adversely affected, and may continue to adversely affect, our business.

If we are unable to recover a substantial portion of the increase in material and transportation costs from our customers through price adjustments and/or surcharges, our business or results of operations could be adversely affected.

We may also experience an increase in order cancellations if any such pricing actions are not accepted by our customers.

Risks Related to International Operations

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Because we source and sell our products worldwide, our business is subject to risks associated with doing business internationally.

These risks include the costs and difficulties of managing foreign entities, limitations on the repatriation and investment of funds, cultural differences that affect customer preferences and business practices, unstable political or economic conditions, geopolitical risks and demand or supply reactions from events that could include political crises and conflict (such as the Russian invasion of Ukraine), war, a major terrorist attack, natural disasters, actual or threatened public health emergencies (such as COVID-19, including virus variants and resurgences and responses to those developments such as continued or new government-imposed lockdowns and travel restrictions), trade protection measures and import or export licensing requirements, monetary policy, inflation, economic growth, recession, commodity prices, currency volatility, currency controls, and changes in tax laws.

We also face exposure to fluctuations in foreign currency exchange rates because we conduct business outside of the United States.

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may adversely affect business activity, political stability and economic conditions in the U.K., the EU and elsewhere.

Such developments and their ultimate impact, or the perception that any of these developments are likely to occur, could have a material adverse effect on economic growth or business activity in the U.K., the Eurozone or the EU, and could result in the relocation of businesses, cause business interruptions, lead to economic recession or depression, inhibit the growth of the European economy, cause greater volatility in all of the global currencies that we currently use to transact business and impact the stability of the financial markets, availability of credit, political systems or financial institutions and the financial and monetary system.

Such developments and their ultimate impact, or the perception that any of these developments are likely to occur, could have a material adverse effect on economic growth or business activity in the U.K., the Eurozone or the EU, and could result in the relocation of businesses, cause business interruptions, lead to economic recession or depression, inhibit the growth of the European economy, cause greater volatility in the global currencies that we currently use to transact business and impact the stability of the financial markets, availability of credit, political systems or financial institutions and the financial and monetary system.

Such developments could have a material adverse effect on our business, financial position, liquidity and results of operations.

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Furthermore, lenders may not agree to extend us new, additional or continuing credit.

Economic uncertainty or adverse economic conditions resulting from the impacts of and responses to the COVID-19 pandemic could result in significant or sustained disruption of global financial markets, thereby reducing our ability to access capital.

Economic uncertainty or adverse economic conditions resulting from the impacts of and responses to pandemics and other public health issues (including the COVID-19 pandemic), natural disasters, changes in global, national, or regional economies, inflation, governmental policies, political unrest, military action and armed conflicts (such as the 2022 Russian invasion of Ukraine), terrorist activities, political and social turmoil, civil unrest and other crises could result in significant or sustained disruption of global financial markets, thereby reducing our ability to access capital.

In any such case, our business, operating results or financial condition could be adversely impacted.

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We are subject to applicable export control laws and regulations of the United States and other countries.

United States laws and regulations applicable to us include the Arms Export Control Act, the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”) and the trade and trade sanctions laws and regulations administered by the Office of the United States Trade Representative and the United States Department of the Treasury’s Office of Foreign Assets Control.

United States laws and regulations applicable to us include the Arms Export Control Act, the International Traffic in Arms Regulations (“ITAR”), the Export Administration Regulations (“EAR”), anti-money laundering laws and regulations and the trade and trade sanctions laws and regulations administered by the Office of the United States Trade Representative and the United States Department of the Treasury’s Office of Foreign Assets Control.

The import and export of our products are subject to international trade agreements, the modification or repeal of which could impact our business.

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Violations of these laws or regulations could result in significant additional sanctions including fines, more onerous compliance requirements, more extensive debarments from export privileges, loss of authorizations needed to conduct aspects of our international business and criminal penalties and may harm our ability to enter contracts with customers who have contracts with the U.S.

A violation of the laws or the regulations enumerated above could materially adversely affect our business, financial condition and results of operations.

A violation of the laws or the regulations enumerated above could materially adversely affect our business, reputation, financial condition and results of operations.

Ongoing changes to tariffs and trade relations may adversely affect our business.

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Certain institutional investors, investment funds, other influential investors, customers, suppliers and other third parties are also increasingly focused on ESG practices.

Companies that do not adapt to or comply with the evolving investor or stakeholder expectations and standards, or which are perceived to have not responded appropriately, may suffer from reputational damage and result in the business, financial condition and/or stock price of a company being materially and

adversely affected.

Further, this increased focus on ESG issues may result in new regulations and/or third party requirements that could adversely impact our business, or certain shareholders reducing or eliminating their holdings of our stock.

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Many factors may cause the market price for our common stock to change, including:

(i) our operating results as compared to investors’ expectations in any period, (ii) market perceptions concerning our future earnings prospects, (iii) adverse changes in general market conditions or economic trends and (iv) changes or events in our industry or the world, such as market reactions to the COVID-19 pandemic.

natural disasters, changes in global, national, or regional economies, inflation , governmental policies, political unrest, military action and armed conflicts (such as the 2022 Russian invasion of Ukraine), terrorist activities, political and social turmoil, civil unrest and other crises.

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