Item 1A. Risk Factors
Item 1A. Risk Factors.
Information regarding risk factors appears in Part I, Item 1A—"Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2019. The information presented below updates and should be read in connection with the risk factors and information previously disclosed therein.
We are subject to various risks related to public health crises, including the global coronavirus (COVID-19) pandemic, which could have material and adverse impacts on our business, financial condition, liquidity and results of operations.
Any outbreaks of contagious diseases and other adverse public health developments in countries where we operate could have a material and adverse impact on our business, financial condition, liquidity and results of operations. For example, the COVID-19 pandemic has caused widespread disruptions to our Company in the first nine months of 2020. During the first quarter of 2020, these disruptions were primarily limited to our manufacturing operations in China, portions of which were closed during the end of January and first half of February due to government mandates. As the virus spread to the rest of the world beginning in March, most of our other operations outside of China also were impacted. These impacts have continued to varying degrees throughout the second and third quarters, as regions have had varying levels of success mitigating the impacts of the virus, resulting in varying degrees of reopening. As of September 30, 2020, we were still experiencing significant disruptions, which include, depending on the specific location, full or partial shutdowns of our facilities as mandated by government decree, government actions limiting our ability to adjust certain costs, significant travel restrictions, “work-from-home” orders, limited availability of our workforce, supplier constraints, supply-chain interruptions, logistics challenges and limitations, and reduced demand from certain customers.
In addition, in these challenging and dynamic circumstances, we are working to protect our employees, maintain business continuity and sustain our operations, including ensuring the safety and protection of our people who work in our plants and distribution centers across the world, many of whom support the manufacturing and delivery of products deemed part of the critical infrastructure or essential businesses by the applicable local or country governments. The extent to which the COVID-19 pandemic will continue to impact our business and financial results going forward will be dependent on future developments such as the length and severity of the crisis, the potential resurgence of the crisis, future government actions in response to the crisis and the overall impact of the COVID-19 pandemic on the global economy and capital markets, among many other factors, all of which remain highly uncertain and unpredictable.
In addition, the COVID-19 pandemic increases the likelihood and potential severity of other risks previously discussed in Part I, Item 1A—"Risk Factors," in our Annual Report on Form 10-K for the year ended December 31, 2019. These include, but are not limited to, the following:
• A protracted economic downturn could negatively affect the financial condition of the industries and customers we serve, which may result in an increase in bankruptcies or insolvencies, a delay in payments, and decreased sales.
• A scarcity of resources or other hardships caused by the COVID-19 pandemic may result in increased nationalism, protectionism and political tensions which may cause governments and/or other entities to take actions that may have a significant negative impact on the ability of the Company, its suppliers and its customers to conduct business.
• The impact of the COVID-19 pandemic may cause us to restructure our business or divest some of our businesses or product lines in the future, which may have a material adverse effect on our results of operations, financial condition, and cash flows.
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• To mitigate the spread of COVID-19, we have transitioned a significant subset of our employee population to a remote work environment, which may exacerbate various cybersecurity risks to our business, including an increased demand for information technology resources, an increased risk of phishing and other cybersecurity attacks, and an increased risk of unauthorized dissemination of sensitive personal information or proprietary or confidential information.
• The COVID-19 pandemic has disrupted the supply of raw materials, and we may experience increased difficulties in obtaining a consistent supply of materials at stable pricing levels.
• If the financial performance of our businesses were to decline significantly as a result of the COVID-19 pandemic, we could incur a material non-cash charge to our income statement for the impairment of goodwill and other intangible assets.
• The continued global spread of COVID-19 has led to disruption and volatility in the global capital markets, which may increase the cost of, and adversely impacted access to, capital. In addition, as a public limited company incorporated under the laws of England and Wales, we may have even less flexibility with respect to certain aspects of capital management.
• If the financial performance of our businesses were to decline significantly for an extended period of time as a result of the COVID-19 pandemic, we may face challenges to comply with the covenants contained in our credit arrangements.
As of the date of this Quarterly Report on Form 10-Q, given the speed with which the COVID-19 pandemic is evolving and the uncertainty of its duration and impact, we are not able to predict the impact of the COVID-19 pandemic on our business, financial condition, liquidity and financial results, and there can be no assurance that the COVID-19 pandemic will not have a material adverse effect on our financial results during any quarter or year in which we are affected.