What changed in this filing

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Item 1A. Risk Factors

2025-02-26 compared with 2024-02-27 · 77 added, 54 removed, 227 unchanged (37% of the section changed)

35 unchanged sentences

Macroeconomic conditions, such as high inflationary pressure, changes to monetary policy, high interest rates, volatile currency exchange rates, credit and sovereign debt concerns, decreasing consumer confidence and spending, including capital spending, concerns about the stability and liquidity of certain financial institutions, the introduction of or changes in tariffs or trade barriers, and global or local recessions can adversely impact demand for our products, which could negatively impact our business, financial condition, or results of operations.

Recent macroeconomic conditions have been adversely impacted by geopolitical instability and military hostilities in multiple geographies (including the conflict between Ukraine and Russia and the conflict between Israel and Hamas), and monetary and financial uncertainties.

Recent macroeconomic conditions have been adversely impacted by geopolitical instability and military hostilities in multiple geographies (including the conflict between Ukraine and Russia and the conflict between Israel, Hamas and Hezbollah), and monetary and financial uncertainties.

The results of these macroeconomic conditions, and the actions taken by governments, central banks, companies, and consumers in response, have resulted in, and may continue to result in, higher inflation in the U.S.

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We have also divested and may again consider divesting businesses or assets that we do not regard as part of our core businesses.

These transaction opportunities may come in the form of acquisitions, joint ventures, investments, divestitures or other structures.

These transaction opportunities may come in the form of acquisitions, JVs, investments, divestitures or other structures.

There are risks associated with such transactions, including, without limitation, general business risk, technology risk, market acceptance risk, litigation risk, environmental risk, regulatory approval risk and risks associated with the failure to complete announced transactions.

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We rely on highly specialized technical personnel and management, and the failure to attract and retain these individuals could impair our expected growth and future success.

We depend upon the continued services and performance of key executives, senior management and skilled technical personnel, particularly our sales engineers and other professionals with significant experience in the key industries we serve.

We continue to depend upon the continued services and performance of key executives, senior management and skilled technical personnel, particularly our sales engineers and other professionals with significant experience in the key industries we serve.

Our ability to compete effectively and our future success depend on our continuing to identify, hire, develop, motivate, and retain highly skilled personnel for all areas of our organization.

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We may not be able to continue to attract and retain the qualified personnel necessary to continue to advance our business and achieve our strategic objectives.

In addition, we have recently appointed several new senior executives, including our new Senior Vice President and General Manager of AES;

Senior Vice President and General Manager of EMS;

Senior Vice President, Global Operations and Supply Chain;

Vice President, General Counsel and Corporate Secretary;

Vice President and Chief Technology Officer;

and Senior Vice President and Chief Administrative Officer.

Our continued performance will depend in part on the success of our new leadership.

Additionally, as demand for our products and services increases, our existing personnel may not be able to effectively scale their job functions with the increased demand.

If we are unable to identify, hire, develop, motivate, and retain new qualified personnel with relevant local qualifications and experience, our existing workforce may become too lean to accommodate the increased demand, which may have a material adverse effect on our ability to grow and scale our business.

If we suffer loss or disruption to our facilities, supply chains, distribution systems or information technology systems due to catastrophe or other events, our business could be seriously harmed.

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If any of these facilities, supply chains or systems were to experience a catastrophic loss or disruption, it could disrupt our operations, delay production and shipments, result in defective products or services, damage customer relationships and our reputation and result in legal exposure and large repair or replacement expenses.

Additionally, there was a fire at our UTIS manufacturing facility in Ansan, South Korea in early February 2021, which resulted in extensive damage to the manufacturing site.

Commercial operations resumed in late 2021, with the launch of a replacement production line at one of our Suzhou, China facilities, and commercial production at our new location in Siheung, South Korea commenced in late-January 2023.

Disruptions to our South Korean operations and certain customer relationships in South Korea directly resulting from the closure of the UTIS facility continued to be experienced through 2023.

The extent to which these events will continue to affect our results of operations and financial position remains uncertain.

In 2021, we experienced fire damage in our Ansan, South Korea manufacturing facility, the impacts of which have since largely been resolved.

The third-party insurance coverage that we maintain will vary from time to time in both type and amount depending on cost, availability and our decisions regarding risk retention, and may be unavailable or insufficient to protect us against losses or disruptions.

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We expect our net sales in foreign markets to continue to represent a substantial majority of our consolidated net sales.

We maintain significant manufacturing and administrative operations in China, Germany, Belgium, England, South Korea and Hungary, and approximately 64% of our employees were located outside the U.S.

We maintain significant manufacturing and administrative operations in China, Germany, England, South Korea and Hungary, and approximately 66% of our employees were located outside the U.S.

as of December 31, 2024.

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The foregoing risks may be particularly acute in emerging markets such as China, where our operations are subject to greater uncertainty due to increased volatility associated with the developing nature of the economic, legal and governmental systems of these countries, changes in bilateral and multilateral arrangements with the U.S.

and other governments, and challenges that some multinational customers that are headquartered in emerging markets may have complying fully with U.S.

and other governments, and challenges that

some multinational customers that are headquartered in emerging markets may have complying fully with U.S.

and other developed market extraterritorial regulations.

On February 1, 2025, President Donald J.

Trump signed an executive order imposing 25% tariffs on most goods from Mexico and Canada and a 10% additional tariff on all goods from China, effective February 4, 2025.

The tariffs on Mexico and Canada were delayed by 30 days following negotiations.

Additionally, a 25% tariff on steel and aluminum was reinstated on February 11, 2025.

The situation remains fluid, and the duration and outcome of these tariff actions are uncertain.

As a result, we are unable to predict the ultimate result and duration of any tariff actions by the U.S.

government, or countermeasures that may be taken by other nations.

It remains unclear what additional actions, if any, will be taken by the U.S.

or other governments with respect to international trade agreements, the imposition of tariffs on goods imported into the U.S., tax policy related to international commerce, increased export control, sanctions and investment restrictions, import or use of foreign communications equipment, or other trade matters.

Although the ultimate scope and timing of any such tariffs is indeterminable, if implemented, they could have a significant impact on our financial condition and results of operations.

Based on our manufacturing practices and locations, there can be no assurance that any future executive or legislative action in the U.S.

or other countries relating to tax policy and trade regulation would not adversely affect our business, operations and financial results.

Government regulation of usage, import or export of our products, or our technology within our products, changes in that regulation, or our failure to obtain required approvals for our products, could harm our international and domestic sales and adversely affect our revenue and costs of sales.

Failure to comply with such regulations could result in enforcement actions, fines, penalties or restrictions on export privileges.

In addition, costly tariffs on our equipment, restrictions on importation, trade protection measures and domestic preference requirements of certain countries could limit our access to these markets and harm our sales.

These regulations could adversely affect the sale or use of our products, substantially increase our cost of sales, and adversely affect our business and revenue.

In addition, our business has been, and may continue to be, adversely affected by the lack of development, or disruptions, of transportation or other critical infrastructure, including wireless infrastructure, in emerging markets.

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We rely on information technology systems to protect this information and to keep financial records, process orders, manage inventory, coordinate shipments to customers, and operate other critical functions.

Our information technology systems are susceptible to damage, disruptions or shutdowns due to power outages, hardware failures, telecommunication failures, systems upgrades (including the planned implementation of a new enterprise resource planning system) and user errors.

If we experience a disruption in our information technology systems, it could result in the loss of sales and customers and significant incremental costs, which could materially adversely affect our business.

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Accordingly, despite our security measures or those of our third-party service providers, we have experienced and may in the future experience security breaches, including breaches that we may not be able to detect.

breaches of our information technology systems, including through mobile devices, could result in the misappropriation or unauthorized disclosure of confidential information belonging to us or to our customers, suppliers, business partners, employees or other third parties, which could result in our suffering significant financial and reputational damage.

Security breaches of our information technology systems, including through mobile devices, could result in the misappropriation or unauthorized disclosure of confidential information belonging to us or to our customers, suppliers, business partners, employees or other third parties, which could result in our suffering significant financial and reputational damage.

If we are unable to protect sensitive information, our customers or governmental authorities could question the adequacy of our security processes and procedures and our compliance with applicable laws and regulations, including evolving government cyber security requirements for government contractors.

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Compliance with these various laws may be onerous and require us to incur substantial costs or to change our business practices in a manner that adversely affects our business, while failure to comply with such laws may subject us to substantial penalties.

Employee benefit cost increases could reduce our profitability.

Our profitability is affected by employee benefit costs, particularly medical and other employee benefits.

In recent years, employee medical costs have increased due to factors such as the increase in health care costs in the U.S.

These factors will continue to put pressure on our business and financial performance, as employee benefit costs continue to escalate.

We may not succeed in limiting future cost increases.

Continued employee benefit cost increases could have an adverse effect on our results of operations, cash flows and financial position.

Emerging issues related to the development and use of AI could give rise to legal or regulatory action, damage our reputation, or otherwise materially harm our business.

The use of generative AI technologies by employees and personnel to perform routine work is becoming more common within our business industry.

Disclosure and use of personal data in generative AI technologies is subject to various privacy laws and other privacy obligations.

Governments have passed and are likely to pass additional laws regulating generative AI.

Our use of this technology is currently limited, but could result in additional compliance costs, regulatory investigations and actions, and lawsuits should we determine to increase our adoption and use of the technology.

If we are unable to use generative AI due to these additional costs, it could make our business less efficient and result in competitive disadvantages.

Changes in accounting guidance may cause us to experience greater volatility in our financial results.

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If we are unsuccessful in adapting to the requirements of any new standard, then we may experience greater volatility in our quarterly and annual results, which may cause our stock price to decline.

We may experience difficulties in implementing our new enterprise resource planning system.

We are in the midst of a multi-year design and implementation of a new enterprise resource planning system (ERP), which will replace our existing financial and operating systems.

The implementation of this ERP requires an investment of significant personnel and financial resources, including substantial expenditures for outside consultants, system hardware and software in addition to other expenses in connection with the transformation of our organizational structure and financial and operating processes.

We may experience difficulties in implementing our new ERP system.

We are in the midst of a multi-year design and implementation of a new ERP system, which will replace our existing financial and operating systems.

The implementation of this ERP requires an investment of significant personnel and financial resources,

including substantial expenditures for outside consultants, system hardware and software in addition to other expenses in connection with the transformation of our organizational structure and financial and operating processes.

As we work to complete the implementation phase of this ERP, and even after the implementation phase, we may experience additional delays, increased costs and other difficulties, including potential design defects, miscalculations, testing requirements, re-work due to changes in business plans or reporting standards, and the diversion of management’s attention from day-to-day business operations.

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In 2023, the U.S.

Environmental Protection Agency issued a new rule under the Toxic Substances Control Act, requiring manufacturers and importers of PFAS to submit additional reporting information about production volumes, industrial uses, byproducts, worker exposure, and disposal.

EPA issued a new rule under the Toxic Substances Control Act, requiring manufacturers and importers of PFAS to submit additional reporting information about production volumes, industrial uses, byproducts, worker exposure, and disposal.

In 2023, certain EU member states submitted a proposal to the European Chemicals Agency calling for the phase out of the manufacture, import, sale, and use of PFAS substances beginning in late 2025.

In 2024, among other things, U.S.

EPA issued new regulations regarding PFAS in drinking water, PFAS reporting obligations under Toxic Substances Control Act, and designated two PFAS chemicals (Perfluorooctanoic acid and Perfluorooctane sulfonic acid) as hazardous substances under Comprehensive Environmental Response, Compensation, and Liability Act.

While PFAS regulation continues to advance at the federal level and in many states, the full scope of such regulation is still being developed.

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In addition, our customers’ requirements, priorities and ways of doing business with respect to environmental matters, and climate change specifically, also may have an impact on our business, operations and financial success.

For example, in 2022, the SEC issued proposed rule-makings on climate change.

The proposed rules, depending on how they are finally adopted, as well as other changes the government might implement, could impose significant new burdens on the company and our suppliers, with significant potential costs and operational impacts, and adversely impact our ability to win business and operate successfully.

For example, the SEC finalized a rule in 2024 to enhance and standardize climate-related disclosures.

The rule, which faces legal challenge and has been voluntarily stayed by the SEC, as well as other changes the government might implement, could impose significant new burdens on our Company and our suppliers, with significant potential costs and operational impacts, and adversely impact our ability to win business and operate successfully.

Environmental matters may significantly impact our business and operations and present evolving risks and challenges.

Environmental impacts, including climate change specifically, create short and long-term financial risks to our business globally.

Increased worldwide focus on climate change has led to legislative and regulatory efforts to combat both potential causes and adverse impacts of climate change, including regulation of greenhouse gas emissions.

New or more stringent laws and regulations related to greenhouse gas emissions and other climate change related concerns have affected and will likely continue to affect us, our suppliers and our customers.

There can be no assurance the company will meet the evolving sustainability expectations and standards of our investors and other external stakeholders.

In addition, some environmental laws impose liability, sometimes without fault, for investigating and/or cleaning up contamination on, or emanating from, properties currently or formerly owned, leased or operated by us, as well as for damages to property or natural resources and for personal injury arising out of such contamination.

Increased worldwide focus on climate change has led to legislative and regulatory efforts to combat both potential causes and adverse impacts of climate change, including regulation of GHG emissions.

New or more stringent laws and

regulations related to GHG emissions and other climate change related concerns have affected and will likely continue to affect us, our suppliers and our customers.

There can be no assurance our Company will meet the evolving sustainability expectations and standards of our investors and other external stakeholders.

In addition, some environmental laws impose liability, sometimes retroactively and without fault, for investigating and/or cleaning up contamination on, or emanating from, properties currently or formerly owned, leased or operated by us, as well as for damages to property or natural resources and for personal injury arising out of such contamination.

Such liability may be joint and several, meaning that we could be held responsible for more than our share of the liability involved, or even the entire liability.

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The defense and prosecution of intellectual property infringement suits are both costly and time consuming, even if the outcome is favorable to us.

If we are not successful in protecting our proprietary technology or if the protection afforded to us is

not sufficiently broad, our competitors may be able to manufacture and offer products substantially similar to our own, thereby reducing demand for our products and adversely affecting our results of operations and financial position.

If we are not successful in protecting our proprietary technology or if the protection afforded to us is not sufficiently broad, our competitors may be able to manufacture and offer products substantially similar to our own, thereby reducing demand for our products and adversely affecting our results of operations and financial position.

We may also be adversely affected by, and subject to increased competition as a result of, the normal expiration of our issued patents.

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Failure to satisfy these financial ratios or to comply with the covenants in our credit agreement would constitute a default.

An uncured default with respect to one or more of our covenants could result in outstanding borrowings thereunder being declared immediately due and payable, which may also trigger an obligation to repay other outstanding indebtedness.

An uncured default with respect to one or more of our covenants could result in outstanding borrowings thereunder being

declared immediately due and payable, which may also trigger an obligation to repay other outstanding indebtedness.

Any such acceleration of our indebtedness would have a material adverse effect on our cash flows, financial position and results of operations.

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We may incur substantial costs to comply with climate change legislation and related regulatory initiatives.

There has been a broad range of proposed or promulgated international, national and state laws and/or regulations focusing on greenhouse gas (GHG) emission reduction and global climate change.

These proposed or promulgated laws and/or regulations apply or could apply in countries where we have interests or may have interests in the future.

Laws and regulations in this field continue to evolve and, while they are likely to be increasingly widespread and stringent, at this stage it is not possible to accurately estimate either a timetable for implementation or our future compliance costs relating to implementation.

Under the 2015 Paris Agreement, parties to the United Nations Framework Convention on Climate Change agreed to undertake ambitious efforts to reduce GHG emissions and strengthen adaptation to the effects of climate change.

Subsequently, there has been a broad range of proposed or promulgated international, national and state laws and/or regulations focusing on GHG emissions reduction, climate-related financial risk management, and global climate change.

On January 21, 2025, President Trump signed an executive order directing his administration to initiate a withdrawal of the U.S.

from the Paris Agreement.

However, laws and/or regulations may still apply or could apply in countries in countries that remain party to the Paris Agreement where we have interests or may have interests in the future.

Laws and regulations in this field continue to evolve and are likely to be increasingly widespread, stringent, and complex, as different countries mandate different disclosure requirements.

We are preparing for required climate-related compliance deadlines in the jurisdictions in which we operate;

however, at this stage it is not possible to accurately estimate either a timetable for implementation in all instances or our future compliance costs relating to implementation.

Jurisdictions in which we operate, including, in particular, the EU, are preparing national legislation and protection plans to implement their emission reduction commitments under the Paris Agreement.

In June 2021, the European Climate Law set legally binding targets of net zero GHG emissions by 2050, and a 55% reduction in GHG emissions by 2030.

In December 2022, the EU announced forthcoming regulations to support the 2030 climate target, including a revision of the EU Emissions Trading System (ETS), and the introduction of a Carbon Border Adjustment Mechanism.

Our operations in Europe participate in the ETS and we meet our obligations through a combination of free and purchased emission allowances.

In December 2022, the EU announced forthcoming regulations to support the 2030 climate target, including a revision of the EU Emissions Trading System, and the introduction of a Carbon Border Adjustment Mechanism.

Our operations in Europe participate in the Emissions Trading System and we meet our obligations through a combination of free and purchased emission allowances.

We anticipate the forthcoming regulations will result in an accelerated reduction of our free allowances and higher market prices for purchased allowances.

In addition, in January 2023, the EU adopted the Corporate Sustainability Reporting Directive which requires EU and non-EU companies with activities in the EU to file annual sustainability reports including climate-related information.

These and other future regulations could result in increased costs, additional capital expenditures, and/or restrictions on operations.

In the U.S., addressing climate change is a stated priority of the current presidential administration, and in February 2021, the U.S.

recommitted to the Paris Agreement after having withdrawn in August 2017.

Environmental Protection Agency, in addition to several state governments, promulgated regulations directed at GHG emissions reductions from certain types of facilities.

Additional regulations could be forthcoming at the U.S.

federal or state level that could result in increased operating costs for compliance, required acquisition or trading of emission allowances, or compliance costs associated with additional regulatory frameworks for a range of potential carbon reduction projects, including carbon capture, use, and sequestration projects.

Addressing climate change was a stated priority of the former presidential administration, including recommitting the U.S.

to the Paris Agreement and enacting legislation to advance objectives to achieve a net zero emissions economy by 2050.

For example, the IRA, the Bipartisan Infrastructure Law, and the CHIPS and Science Act, provide incentives to promote climate-friendly technologies and innovation that may increase the demand for the products we produce.

EPA, in addition to several state governments, promulgated regulations directed at GHG emissions reductions from certain types of facilities.

California adopted the Climate Accountability Package in 2023 that introduces extensive climate-related disclosure requirements, and the SEC finalized a rule in 2024 to enhance and standardize climate-related disclosures.

Both disclosure measures face legal challenge, and the SEC has voluntarily stayed its rule.

On February 11, 2025, the acting Chairman of the SEC directed the SEC staff to request that the courts hearing legal challenges to the climate-related disclosure rules not schedule the case for argument to provide time for the SEC to deliberate and determine the appropriate next steps in these cases.

The Trump administration has indicated that it will take a different approach towards climate change compared to its predecessor and there is uncertainty regarding what regulatory or executive actions may be forthcoming.

uncertainties, it is difficult to accurately estimate at this time if U.S.

federal or state level activity could result in increased operating costs for compliance, required acquisition or trading of emission allowances, or compliance costs associated with additional regulatory frameworks for a range of potential carbon reduction projects, including carbon capture, use, and sequestration projects.

Additionally, demand for the products we produce may be reduced.

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Initiatives to address such ESG issues may be costly and may not have the desired effect.

Evolving stakeholder expectations and our efforts and ability to manage these issues and accomplish our goals, commitments, and targets present numerous operational, regulatory, reputational, financial, legal, and other risks, any of which may be outside of our control or could have adverse impacts on our business, including on our stock price.

Our failure or perceived failure to achieve some or all of our ESG goals or maintain ESG practices that meet evolving stakeholder expectations or regulatory requirements could harm our reputation, adversely impact our ability to attract and retain employees or customers and expose us to increased scrutiny from the investment community, regulatory authorities and others or subject us to liability.

Further, there is uncertainty around the accounting standards and climate-related disclosures associated with emerging laws and reporting requirements and the related costs to comply with the emerging regulations.

Our failure, or even the perceived failure, to achieve our ESG goals or maintain ESG practices that meet evolving stakeholder expectations or regulatory requirements could harm our reputation.

This could adversely impact our ability to attract and retain customers and talent, and expose us to increased scrutiny from the investment community and enforcement authorities.

Any risks could have adverse impacts on our business, including on our stock price;

however, ESG-related opportunities may result in positive business impacts.

Further, there are ESG-related laws and reporting requirements adopted in multiple jurisdictions that will likely increase future compliance costs.

Our failure, or even perceived failure, to achieve some or all of our ESG goals or maintain ESG practices that meet evolving stakeholder expectations or regulatory requirements could adversely impact our ability to attract and retain employees or customers, expose us to increased scrutiny from the investment community, regulatory authorities and others, or subject us to liability.

Furthermore, perceptions about our action or inaction on certain ESG-related issues could also harm our reputation, particularly if stakeholders disagree with our goals and initiatives.

Damage to our reputation and loss of brand equity may reduce demand for our products and services, adversely affecting our future financial performance and stock price, as well as require additional resources to rebuild our reputation.

Conversely, our efforts to actively manage material ESG issues could increase employee and customer loyalty, support risk mitigation, resiliency, operational efficiencies, and positive reputation, influence cost of capital or access to finance, or other outcomes that may positively benefit our business.

Our business could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading value of our securities.

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While we strive to maintain constructive communications with our shareholders, activist shareholders have engaged and may, from time to time, engage in proxy solicitations or shareholder proposals, or otherwise attempt to effect changes and assert influence on our board of directors and management.

settlement agreement with the shareholder and certain of its affiliates regarding, among other things, changes to the composition of our board of directors, including the appointment of two new independent directors.

For example, as previously reported, in February 2023, after an activist shareholder provided notice of its intention to conduct a proxy contest to seek to elect several director candidates to our board of directors, we entered into a settlement agreement with the shareholder and certain of its affiliates regarding, among other things, changes to the composition of our board of directors, including the appointment of two new independent directors.

Responding to actions by activist shareholders can be costly and time-consuming, disrupting our operations and diverting the attention of management and our employees.

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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