What changed in this filing

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Item 1A. Risk Factors

2021-09-02 compared with 2020-09-03 · 117 added, 98 removed, 67 unchanged (76% of the section changed)

We recognize we are subject to the following risk factors based on our operations and the nature of the automotive industry in which we operate:

Coronavirus or Other Health Epidemics – The Coronavirus (COVID-19) pandemic is adversely affecting, and is expected to continue to adversely affect, our operations and supply chains and we have experienced and expect to continue to experience reductions in demand for certain of our products and services as a result of the pandemic.

Because we manufacture our products in facilities around the world, including in Mexico and through our joint venture partners in Europe, China and India, we are and will continue to be vulnerable to an outbreak of COVID-19 (or the resurgence of such an outbreak) or other contagious diseases in those regions as well as in the United States.

RISK RELATED TO CORONAVIRUS AND OTHER HEALTH EPIDEMICS

The Coronavirus (COVID-19) pandemic adversely affected, and may continue to adversely affect, our operations and supply chains, in particular related to semiconductor chips, and we have experienced and may continue to experience reductions in demand for certain of our products and services as a result of the pandemic.

Because we manufacture our products in facilities around the world, including in Mexico and through our joint venture partners in Europe, China and India, we have been and may continue to be vulnerable to an outbreak of COVID-19 (or the resurgence of such an outbreak) or other contagious diseases in those regions as well as in the United States.

The effects of COVID-19 and other contagious diseases have included and may continue to include disruptions or restrictions on our ability to travel, our ability to manufacture our affected products and our ability to ship these affected products to customers as well as disruptions that have and may continue to affect our key customers and suppliers, including those in these regions or other affected regions of the world, including in the United States, Mexico, China and neighboring countries.

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Further, we have complied with and may be required to comply with additional foreign, national, state or local governmental authority recommendations, guidelines, and/or mandates, which have resulted in and may result in additional temporary reduction in or suspension in work at certain of our locations and production facilities.

All of these additional actions have and will continue to adversely impact our operating results.

All of these additional actions have and may continue to adversely impact our operating results, financial condition and cash flows.

BUSINESS RISKS

Loss of Significant Customers, Vehicle Content, Vehicle Models and Market Share – Sales to General Motors Company, Ford Motor Company and Fiat Chrysler Automobiles represented approximately 62 percent of our annual net sales (based on fiscal 2021 results) and, accordingly, these customers account for a significant percentage of our outstanding accounts receivable.

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Components for certain customer models may also be “market tested” annually.

Therefore, the loss of any one of these customers, the loss of a contract for a specific vehicle model, a reduction in vehicle content, the early cancellation of a specific vehicle model, technological changes or a significant reduction in demand for certain key models could occur, and if so, could have a material adverse effect on our existing and future revenues and net income.

Our major customers also have significant under-funded legacy liabilities related to pension and postretirement health care obligations.

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If our major customers cannot fund their operations, we may incur significant write-offs of accounts receivable, incur impairment charges or require restructuring actions.

Production Slowdowns by Customers – Our major customers and many of their suppliers were significantly impacted by the Great Recession of 2008/2009.

Many of our major customers instituted production cuts during our fiscal 2009 and 2010.

While production subsequently increased after the cuts made in 2009, additional economic slowdowns or pandemics could bring about new production cuts which could have a material adverse effect on our existing and future revenues and net income.

Financial Distress of Automotive Supply Base – During the Great Recession, which impacted calendar years 2009 and 2010, deteriorating automotive industry conditions adversely affected STRATTEC and our supply base.

Lower production levels at our major customers, volatility in certain raw material and energy costs and the global credit market crisis resulted in severe financial distress among many companies within the automotive supply base.

During the above time frame, several automotive suppliers filed for bankruptcy protection or ceased operations.

The potential continuation or renewal of financial distress within the supply base (whether from COVID-19 or otherwise) and suppliers’ inability to obtain credit from lending institutions could lead to commercial disputes and possible supply chain interruptions.

In addition, the potential for future adverse industry conditions (including from COVID-19 or otherwise) may require us to provide financial assistance or other measures to ensure uninterrupted production.

The continuation or renewal of these industry conditions could have a material adverse effect on our existing and future revenues and net income.

Shortage of Raw Materials or Components Supply – In the event of catastrophic acts of nature such as fires, tsunamis, hurricanes and earthquakes or a rapid increase in production demands, either we or our customers or other suppliers may experience supply shortages of raw materials or components.

Production Slowdowns by Customers – Our major customers and many of their suppliers were significantly impacted by the Great Recession of 2008/2009, by the COVID-19 pandemic in 2020 and by a semiconductor chip shortage in 2021.

Many of our major customers instituted production cuts during our fiscal 2009 and 2010 due to the Great Recession and shuttered plants during 2020 and 2021 in response to the effects of the COVID-19 pandemic and the semiconductor chip shortage.

While production subsequently increased after the cuts made in 2009 and again in 2021 when plants reopened from the COVID-19 closures, the current semiconductor chip shortage and additional economic slowdowns, pandemics or part supply shortages could bring about new production cuts which could have a material adverse effect on our existing and future revenues, operating results, financial condition and cash flows.

Cross-border Trade Issues or Tariffs – Our business is impacted by international or cross-border trade, including the import and export of products and goods into and out of the United States and trade tensions among nations.

The shipping of goods across national borders is often more expensive and complicated than domestic shipping.

Customs and duty procedures and reviews,

including duty-free thresholds in various key markets, the application of tariffs, and security related governmental processes at international borders, may increase costs, discourage cross-border purchases, delay transit and create shipping uncertainties.

Further, uncertainties stemming from changes in U.S.

trade policies in particular with European countries and China, tariffs and the reaction of other countries thereto, could have an adverse effect on our business and may adversely imp act our results of operations, financial condition and cash flows or reduce profitability on certain of our products.

Highly Competitive Automotive Supply Industry – The automotive component supply industry is highly competitive.

Some of our competitors are companies, or divisions or subsidiaries of companies, that are larger than STRATTEC and have greater financial, global and technology capabilities.

Our products may not be able to compete successfully with the products of these other companies, which could result in loss of customers and, as a result, decreased sales and profitability.

Some of our major customers have previously announced that they will be reducing their supply base.

This could potentially result in the loss of these customers and consolidation within the supply base.

The loss of any of our major customers could have a material adverse effect on our existing and future revenues, results of operations, financial condition and cash flows.

In addition, our competitive position in the North American automotive component supply industry could be adversely affected in the event that we are unsuccessful in making strategic investments, acquisitions or alliances or in establishing joint ventures that would enable us to expand globally, in particular, with the VAST Automotive Group and their ability to fund and service global vehicle platforms.

We principally compete for new business at the beginning of the development of new models and upon the redesign of existing models by our major customers.

New model development generally begins two to five years prior to the marketing of such new models to the public.

The failure to obtain new business on new models or to retain or increase business on redesigned existing models could adversely affect our business and financial results.

In addition, as a result of relatively long lead times for many of our components, it may be difficult in the short-term for us to obtain new sales to replace any unexpected decline in the sale of existing products.

Finally, we may incur significant product development expense in preparing to meet anticipated customer requirements which may not be recovered.

Cyclicality and Seasonality in the Automotive Market – The automotive market is cyclical and is dependent on consumer spending, on the availability of consumer credit and to a certain extent, on customer sales incentives.

Economic factors adversely affecting consumer demand for automobiles and automotive production, such as rising fuel costs, could adversely impact our net sales and net income.

We typically experience decreased sales and operating income during the first fiscal quarter of each year due to the impact of scheduled customer plant shut-downs in July and new model changeovers during that period.

OPERATIONAL RISKS

Shortage of Raw Materials or Components Supply – In the event of catastrophic acts of nature such as fires, tsunamis, hurricanes, earthquakes and global pandemics or a rapid increase in production demands, either we or our customers or other suppliers may experience supply shortages of raw materials or components.

This could be caused by a number of factors, including a lack of production line capacity or manpower or working capital constraints.

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Similarly, if we or one of our own suppliers experience a supply shortage, we may become unable to produce the affected products if we cannot procure the components from another source.

Such production interruptions could impede a ramp-up in vehicle production and could have a material adverse effect on our business, results of operations and financial condition.

Such production interruptions could impede a ramp-up in vehicle production and could have a material adverse effect on our business, results of operations, financial condition and cash flows.

We consider the production capacities and financial condition of suppliers in our selection process, and expect that they will meet our delivery requirements.

However, there can be no assurance that strong demand, capacity limitations, shortages of raw materials, labor disputes or other problems will not result in any shortages or delays in the supply of components to us.

Cost Reduction – There is continuing pressure from our major customers to reduce the prices we charge for our products.

This requires us to generate cost reductions, including reductions in the cost of components purchased from outside suppliers.

If we are unable to generate sufficient production cost savings in the future to offset pre-programmed price reductions, our gross margin and profitability will be adversely affected.

Economic factors adversely affecting consumer demand for automobiles and automotive production, such as rising fuel costs, could adversely impact our net sales and net income.

Because of the COVID-19 pandemic, we have experienced supply chain disruptions in fiscal 2021 in particular with semiconductor chip shortages that impact our OEM customers’ ability to finish assembly of new vehicles and which have adversely impacted our results of operations and cash flows.

These shortages will most likely continue into our fiscal 2022.

Sources of and Fluctuations in Market Prices of Raw Materials – Our primary raw materials are high-grade zinc, brass, nickel silver, aluminum, steel and plastic resins.

These materials are generally available from a limited number of suppliers, but we have chosen to concentrate our sourcing with one primary vendor for each commodity or purchased component.

We believe our sources of raw materials are reliable and adequate for our needs.

However, the development of future sourcing issues related to using existing or alternative raw materials and the global availability of these materials as well as significant fluctuations in the market prices of these materials may have an adverse effect on our results of operations, financial condition and cash flows if the increased raw material costs cannot be recovered from our customers.

During fiscal 2021, we experienced higher raw material costs on the items listed above including freight costs on both raw material and purchased components.

Given the significant financial impact on us relating to changes in the cost of our primary raw materials, commencing with fiscal 2008 and thereafter, we began quoting quarterly material price adjustments for changes in our zinc costs in our negotiations with our customers.

Our success in obtaining these quarterly price adjustments in our customer contracts is dependent on separate negotiations with each customer.

It is not a standard practice for our customers to include such price adjustments in their contracts.

We have been successful in obtaining quarterly price adjustments in some of our customer contracts.

However, we have not been successful in obtaining the adjustments with all of our customers.

Foreign Operations – We own and operate manufacturing operations in Mexico.

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The success of these joint venture operations may be impacted by our partners’ ability to influence business decisions and therefore the operating results of the joint ventures could be adversely impacted.

These influences, as well as conflicts or disagreements with our joint venture partners, could negatively impact the operations and financial results of our joint venture investments, which could have an adverse impact on our financial results.

These influences, as well as conflicts or disagreements with our joint venture partners, could negatively impact the operations, financial results, financial condition and cash flows of our joint venture investments, which could have an adverse impact on our financial results, financial condition and cash flows.

In addition, failure of our partners to be able to continue to fund their portion of the joint venture operations could have a material adverse effect on the financial condition and financial results of our joint venture investments, which could have a material adverse effect on our financial results.

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The impact of any future planned capital expenditures or future expansion by VAST LLC in China, Brazil and India, may result in the need for additional future capital contributions to fund the operations of these joint venture investments.

The shipping of goods across national borders is often more expensive and complicated than domestic shipping.

Customs and duty procedures and reviews, including duty-free thresholds in various key markets, the application of tariffs, and security related governmental processes at international borders, may increase costs, discourage cross-border purchases, delay transit and create shipping uncertainties.

Further, uncertainties stemming from changes in U.S.

trade policies in particular with European countries and China, tariffs and the reaction of other countries thereto, could have an adverse effect on our business and may adversely impact our results of operations or financial condition or reduce profitability on certain of our products.

Currency Exchange Rate Fluctuations – Our sales are denominated in U.S.

We have manufacturing operations in Mexico, and as a result, a portion of our manufacturing costs are incurred in Mexican pesos.

Therefore, fluctuations in the U.S.

dollar/Mexican peso exchange rate may have a material effect on our profitability, cash flows, financial position, and may significantly affect the comparability of our results between financial periods.

Any depreciation in the value of the U.S.

dollar in relation to the value of the Mexican peso will adversely affect the cost of our Mexican operations when translated into U.S.

Similarly, any appreciation in the value of the U.S.

dollar in relation to the value of the Mexican peso will decrease the cost of our Mexican operations when translated into U.S.

Sources of and Fluctuations in Market Prices of Raw Materials – Our primary raw materials are high-grade zinc, brass, nickel silver, aluminum, steel and plastic resins.

These materials are generally available from a limited number of suppliers, but we have chosen to concentrate our sourcing with one primary vendor for each commodity or purchased component.

We believe our sources of raw materials are reliable and adequate for our needs.

However, the development of future sourcing issues related to using existing or alternative raw materials and the global availability of these materials as well as significant fluctuations in the market prices of these materials may have an adverse effect on our financial results if the increased raw material costs cannot be recovered from our customers.

Our success in obtaining these quarterly price adjustments in our customer contracts is dependent on separate negotiations with each customer.

It is not a standard practice for our customers to include such price adjustments in their contracts.

We have been successful in obtaining quarterly price adjustments in some of our customer contracts.

However, we have not been successful in obtaining the adjustments with all of our customers.

Cyber Vulnerability – In the ordinary course business, we collect and store sensitive data, including our proprietary business information and that of our customers, suppliers and business partners, as well as personally identifiable information of our customers and employees, in our internal data centers, cloud services and on our networks.

The secure processing, maintenance and transmission of this information is critical to our operations and business strategy.

Despite our security measures, our information technology and infrastructure, as well as that of our partners, may be vulnerable to malicious attacks or breaches due to employee error, malfeasance or other disruptions, including as a result of rollouts of new systems.

Any such breach or operation failure would compromise our networks or that of our business partners and the information stored could be accessed, publically disclosed, lost or stolen.

Although we have cyber security insurance in place, such access or other loss of information could result in legal claims or proceedings, regulatory fines or penalties, disruption in our operations, damage to our reputation, or loss of confidence in our products and services, any of which could have a negative impact on our business, results of operations, financial condition and cash flows.

Qualified Personnel – Our business success depends, to a significant degree, on attracting and retaining qualified personnel.

Our ability to sustain and grow our business requires us to hire, retain, develop and motivate a highly skilled and diverse management team and workforce.

These types of employees are in high demand and often have competing employment opportunities.

The labor market for skilled employees is highly competitive and we may lose key employees or be forced to increase their compensation to retain these types of employees.

Failure to ensure that we have the leadership capacity with the necessary skill set and experience could impede our ability to deliver our growth objectives and execute our strategic plan.

Organizational and reporting changes resulting from any future leadership transition or corporate initiatives could result in increased turnover.

Additionally, any unplanned turnover or inability to attract and retain key employees could have a negative effect on our results of operations, including by significantly increasing our recruitment, training and other related employee costs.

Moreover, the loss of key personnel, or the failure to attract qualified personnel, could have a material adverse effect on our business, results of operations, financial condition and cash flows.

Disruptions Due to Work Stoppages and Other Labor Matters – Our major customers and many of their suppliers have unionized work forces.

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The current contract with our unionized associates is effective through September 17, 2021.

We may encounter further labor disruption and we may also encounter unionization efforts in our other plants or other types of labor conflicts, any of which could have an adverse effect on our business and our financial results.

Labor contracts between General Motors Company, Ford Motor Company and Fiat Chrysler Automobiles and their unionized associates under the United Auto Workers union expire in September 2023.

In addition, their respective labor agreements with the Canadian auto workers union expire in September and October 2020.

In addition, their respective labor agreements with the Canadian auto workers union expire in Fall 2023.

Labor disruptions encountered by our customers during the contract period could have an adverse effect on our business and our financial results.

Compliance Related to Regulations Related to Conflict Minerals – We are required to disclose the use of tin, tantalum, tungsten and gold (collectively, “conflict minerals”) mined from the Democratic Republic of the Congo and adjoining countries (the “covered countries”) if a conflict mineral(s) is necessary to the functionality of a product manufactured, or contracted to be manufactured, by us.

We may determine, as part of our compliance efforts, that certain products or components we obtain from our suppliers could contain conflict minerals.

If we are unable to conclude that all our products are free from conflict minerals originating from covered countries, this could have a negative impact on both our existing and future business, reputation and/or results of operations.

We may also encounter challenges to satisfy customers who require that our products be certified as conflict free, which could place us at a competitive disadvantage if we are unable to substantiate such a claim.

Compliance with these rules could also affect the sourcing and availability of some of the minerals used in the manufacture of products or components we obtain from our suppliers, including our ability to obtain products or components in sufficient quantities and/or at competitive prices to sell to our customers.

Environmental, Safety and Other Regulations – We are subject to Federal, state, local and foreign laws and other legal requirements related to the generation, storage, transport, treatment and disposal of materials as a result of our manufacturing and assembly operations.

These laws include, among others, the Resource Conservation and Recovery Act (as amended), the Clean Air Act (as amended) and the Comprehensive Environmental Response, Compensation and Liability Act (as amended).

We have an environmental management system that is ISO-14001 certified.

We believe that our existing environmental management system is adequate for current and anticipated operations and we have no current plans for substantial capital expenditures in the environmental area.

An environmental reserve was established in 1995 for estimated costs to remediate a site at our Milwaukee facility.

The site was contaminated from a former above-ground solvent storage tank, located on the east side of the facility.

The contamination occurred in 1985 and is being monitored in accordance with Federal, state and local requirements.

We do not currently anticipate any material adverse impact on our results of operations, financial condition or competitive position as a result of compliance with Federal, state, local and foreign environmental laws or other related legal requirements.

However, risk of environmental liability and changes associated with maintaining compliance with environmental laws is inherent in the nature of our business and there is no assurance that material liabilities or changes could not arise.

Highly Competitive Automotive Supply Industry – The automotive component supply industry is highly competitive.

Some of our competitors are companies, or divisions or subsidiaries of companies, that are larger than STRATTEC and have greater financial, global and technology capabilities.

Our products may not be able to compete successfully with the products of these other companies, which could result in loss of customers and, as a result, decreased sales and profitability.

Some of our major customers have previously announced that they will be reducing their supply base.

This could potentially result in the loss of these customers and consolidation within the supply base.

The loss of any of our major customers could have a material adverse effect on our existing and future net sales and net income.

We principally compete for new business at the beginning of the development of new models and upon the redesign of existing models by our major customers.

New model development generally begins two to five years prior to the marketing of such new models to the public.

The failure to obtain new business on new models or to retain or increase business on redesigned existing models could adversely affect our business and financial results.

Finally, we may incur significant product development expense in preparing to meet anticipated customer requirements which may not be recovered.

FINANCIAL RISKS

During the above time frame, several automotive suppliers filed for bankruptcy protection or ceased operations.

The potential continuation or renewal of financial distress within the supply base (whether from COVID-19 or otherwise) and our suppliers’ inability to obtain credit from lending institutions could lead to commercial disputes and possible supply chain interruptions.

The continuation or renewal of these industry conditions could have a material adverse effect on our existing and future revenues, financial results, financial condition and cash flows.

Cost Reduction – There is continuing pressure from our major customers to reduce the prices we charge for our products.

This requires us to generate cost reductions, including reductions in the cost of components purchased from outside suppliers.

If we are unable to generate sufficient production cost savings in the future to offset pre-programmed price reductions, our gross margin and profitability will be adversely affected.

Currency Exchange Rate Fluctuations – Our sales are denominated in U.S.

We have manufacturing operations in Mexico, and as a result, a portion of our manufacturing costs are incurred in Mexican pesos.

Therefore, fluctuations in the U.S.

Any depreciation in the value of the U.S.

dollar in relation to the value of the Mexican peso will adversely affect the cost of our Mexican operations when translated into U.S.

Similarly, any appreciation in the value of the U.S.

dollar in relation to the value of the Mexican peso will decrease the cost of our Mexican operations when translated into U.S.

Program Volume and Pricing Fluctuations – We incur costs and make capital expenditures for new program awards based upon certain estimates of production volumes over the anticipated program life for certain vehicles.

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This machinery and equipment is capitalized and depreciated over the expected useful life of each respective asset.

Therefore, the loss of any one of our major customers, the loss of specific vehicle models or the early cancellation of a vehicle model could result in impairment in the value of these assets which may have a material adverse effect on our financial results.

Credit Facilities – Historically, from time to time we have relied on our existing credit facilities to provide us with adequate working capital to operate our business and fund our capital expenditures, including our expansion initiatives.

We cannot provide assurance that we will be able to refinance, extend the maturity of, or otherwise amend the terms of our existing credit facilities, or that any refinancing, extension, or amendment will be on terms favorable to us or even on commercially reasonable terms.

If our lenders reduce or terminate our access to amounts under our credit facilities, we may not have sufficient capital to fund our working capital needs and/or we may need to secure additional capital or financing to fund our working capital requirements or to repay outstanding debt under our credit facilities.

Moreover, new credit facilities resulting from any refinancing of our existing facilities could have a significantly higher rate of interest and greater borrowing costs than our existing facilities.

We can make no assurance that we will be successful in ensuring our availability of amounts under our credit facilities or in connection with raising additional capital and that any amount, if raised, will be sufficient to meet our cash flow requirements.

If we are not able to maintain our borrowing availability under our credit facilities and/or raise additional capital when needed, we may be forced to sharply curtail our efforts to manufacture and promote the sale of our products or to curtail our operations.

There can be no assurance that the financial terms or covenants of any new credit facility will be the same or as favorable as those under our existing facilities.

Additionally, our ability to complete a refinancing of our existing credit facilities prior to their respective maturities is subject to a number of conditions beyond our control.

For example, if a disruption in the financial markets were to occur at the time that we intended to refinance our credit facilities, we might be restricted in our ability to access the credit lines.

The restrictive covenants in any such new credit facility may limit our ability to engage in acts that may be in our best long term interests.

A breach of any of these types of restrictive covenants in our credit facilities could result in a default under these facilities.

If a default occurs, the lenders under our credit facilities may elect to declare all outstanding borrowings, together with accrued interest, to be immediately due and payable, to terminate any commitments they have to provide further borrowings and to exercise any other rights they have under the facilities or applicable law.

Warranty Claims – We are exposed to warranty claims in the event that our products fail to perform as expected, and we may be required to participate in the repair costs incurred by our customers for such products.

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In 2015 and 2018, our increased warranty provision was the result of various known or expected customer warranty issues outstanding and estimated future warranty costs to be incurred as of June 2015 and June 2018, respectively, for which amounts were reasonably estimable.

As additional information becomes available, actual results may differ from recorded estimates.

If our customers demand higher warranty-related cost recoveries, or if our products fail to perform as expected, it could have a material adverse impact on our results of operations and financial condition.

Cyber Vulnerability – Cyber attacks or security breaches could compromise confidential, business critical information, cause a disruption in our operations or harm our reputation.

While we have a cyber security monitoring program, a significant cyber attack could result in loss of critical business information and/or could negatively impact our operations, any of which could have a negative impact on our financial results.

As additional information becomes available, actual results may differ from recorded estimates or we may need to record additional warranty provisions, similar to as in 2015 and 201 8 .

LEGAL AND REGULATORY RISKS

We have an environmental management system that is ISO-14001 certified.

An environmental reserve was established in 1995 for estimated costs to remediate a site at our Milwaukee facility.

The site was contaminated from a former above-ground solvent storage tank, located on the east side of the facility.

The contamination occurred in 1985 and is being monitored in accordance with Federal, state and local requirements.

We may determine, as part of our compliance efforts, that certain products or components we obtain from our suppliers could contain conflict minerals.

Income Taxes – We are a U.S.-based multinational company subject to tax in multiple U.S.

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We regularly assess the likely outcomes of these audits in order to determine the appropriateness of our tax provision.

Qualified Personnel – Our business success depends, to a significant degree, on attracting and retaining qualified personnel.

Our ability to sustain and grow our business requires us to hire, retain, develop and motivate a highly skilled and diverse management team and workforce.

These types of employees are in high demand and often have competing employment opportunities.

The labor market for skilled employees is highly competitive and we may lose key employees or be forced to increase their compensation to retain these types of employees.

Failure to ensure that we have the leadership capacity with the necessary skill set and experience could impede our ability to deliver our growth objectives and execute our strategic plan.

Organizational and reporting changes resulting from any future leadership transition or corporate initiatives could result in increased turnover.

The loss of key personnel, or the failure to attract qualified personnel, could have a material adverse effect on our business, financial condition or results of operations.

outstanding debt under our credit facilities.

Moreover, new credit facilities resulting from any refinancing of our existing facilities could have a significantly higher rate of interest and greater borrowing costs than our existing facilities.

There can be no assurance that the financial terms or covenants of any new credit facility will be the same or as favorable as those under our existing facilities.

Additionally, our ability to complete a refinancing of our existing credit facilities prior to their respective maturities is subject to a number of conditions beyond our control.

For example, if a disruption in the financial markets were to occur at the time that we intended to refinance our credit facilities, we might be restricted in our ability to access the credit lines.

The restrictive covenants in any such new credit facility may limit our ability to engage in acts that may be in our best long term interests.

A breach of any of these types of restrictive covenants in our credit facilities could result in a default under these facilities.

GENERAL RISK FACTOR

In addition to the specific risks above, we, our customers, and our suppliers may be adversely affected by changing economic conditions throughout the world.

These conditions may result in reduced consumer and investor confidence, instability in the credit and financial markets, volatile corporate profits, and reduced business and consumer spending.

We, our customers, and our suppliers and the economy as a whole also may be affected by future world or local events outside of our control, such as tariffs and other trade protection measures put in place by the United States or other countries, acts of terrorism, developments in the war on terrorism, civil unrest, conflicts in international situations, weather events, natural disasters, outbreaks of infectious diseases, such as the COVID-19 pandemic, and government or political related developments or issues, including changes in tax laws and regulations.

These factors could have a material adverse impact on our results of operations, financial condition, and cash flows.

Additionally, political and social turmoil, international conflicts and terrorist acts may put pressure on global economic conditions that may adversely impact our operating results.

Unstable political, social or economic conditions may make it difficult for us, our customers and our suppliers to accurately forecast and plan future business activities.

If such conditions arise or persist, they could have a material adverse impact on our results of operations, financial condition and cash flows.

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