What changed in this filing

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Item 1A. Risk Factors

2021-11-09 compared with 2020-11-10 · 66 added, 44 removed, 309 unchanged (26% of the section changed)

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Additional risks not currently known to us or that we currently believe are immaterial may also impair our business operations, financial condition, and liquidity .

Many of the risks listed below are, and will be, exacerbated by the COVID-19 pandemic and any worsening of the economic environment.

Risks Relating to the Macroeconomic Environment and Our Global Presence

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If a business interruption occurs and we are unsuccessful in our continuing efforts to minimize the impact of these events, our business, results of operations, financial position, and cash flows could be materially adversely affected.

The COVID-19 pandemic is currently impacting countries, communities, workforces, supply chains, and markets around the world, and as a result, we have experienced disruptions and restrictions on our employees’ ability to travel, as well as temporary closures of our facilities and the facilities of our customers, suppliers, and other vendors in our supply chain.

result of the COVID-19 pandemic, some of our employees have transitioned to working from home on a full-time or part-time basis, which may increase our vulnerability to cyber and other information technology risks.

The COVID-19 pandemic has had, and we expect that it will continue to have, a negative impact on our financial condition and results of operations in the near term and may have a material impact on our financial condition, liquidity, and results of operations in future periods.

The COVID-19 pandemic impacted and continues to impact countries, communities, workforces, supply chains, and markets around the world, and as a result, we have experienced disruptions and restrictions on our employees’ ability to travel, as well as temporary closures of our facilities and the facilities of our customers, suppliers, and other vendors in our supply chain.

As a result of the ongoing impacts of the COVID-19 pandemic, some of our employees are continuing to work from home on a full-time or part-time basis, which may increase our vulnerability to cyber and other information technology risks.

The COVID-19 pandemic had a significant, negative impact on our sales and operating results during fiscal 2020 and continued

to negatively affect certain of our businesses in fiscal 2021.

The COVID-19 pandemic may have a negative impact on our financial condition and results of operations in future periods.

The extent to which the COVID-19 pandemic will further impact our business and our financial results will depend on future developments, which are highly uncertain and cannot be predicted.

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the severity of the virus;

variant strains of the virus;

the duration of the pandemic;

the impact on our suppliers’ and customers’ supply chains and financial positions, including their ability to pay us;

resumption of high levels of infections and hospitalizations;

the success of public health advancements, including vaccine production and distribution;

the resulting impact on our suppliers’ and customers’ supply chains and financial positions, including their ability to pay us;

the actions that may be taken by various governmental authorities in response to the outbreak in jurisdictions in which we operate;

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instability in economic or political conditions, including sovereign debt levels, Eurozone uncertainty, inflation, recession, and actual or anticipated military or political conflicts;

the impact of the United Kingdom ’ s withdrawal from the EU on January 31, 2020 (commonly referred to as “ Brexit ” ), subject to a transition period that is set to end on December 31, 2020, could cause disruptions to, and create uncertainty surrounding, our business, including affecting our relationships with existing and potential customers and suppliers.

the impact of the United Kingdom ’ s withdrawal from the EU (commonly referred to as “ Brexit ” ) could cause disruptions to, and create uncertainty surrounding, our business, including affecting our relationships with existing and potential customers and suppliers.

The effects of Brexit, including long-lasting effects of Brexit on EU market access, will depend on more permanent agreements between the United Kingdom and the EU to be negotiated during the transition period;

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Economic conditions in China have been, and may continue to be, volatile and uncertain.

In addition, the legal and regulatory system in China is still developing and subject to change.

In addition, the legal and regulatory system in China continues to evolve and is subject to change.

Accordingly, our operations and transactions with customers in China could be adversely affected by changes to market conditions, changes to the regulatory environment, or interpretation of Chinese law.

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The risk of U.S.

federal income tax reporting and compliance obligations with respect to our subsidiaries that now are treated as CFCs may deter our current shareholders from increasing their investment in us, and others from investing in us, which could impact the demand for, and value of, our shares.

federal income tax reporting and compliance obligations with respect to our subsidiaries that are treated as CFCs may deter our current shareholders from increasing their investment in us, and others from investing in us, which could impact the demand for, and value of, our shares.

Risks Relating to the Industry in Which We Operate

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As a supplier of automotive electronics products, our sales of these products and our profitability have been and could continue to be negatively affected by significant declines in global or regional economic or credit conditions and changes in the operations, products, business models, part-sourcing requirements, financial condition, and market share of automotive manufacturers, as well as potential consolidations among automotive manufacturers.

During fiscal 2020, approximately 10% of our net sales were to customers in the aerospace, defense, oil, and gas end market, 9% of our net sales were to customers in the industrial equipment end market, and 9% of our net sales were to customers in the commercial transportation market.

The aerospace and defense industry has undergone significant fluctuations in demand as a result of economic and political conditions, including the impact of the COVID-19 pandemic.

Demand in the oil and gas market is impacted by oil price volatility.

The industrial equipment industry is dependent upon economic conditions, including customer investment in factory automation, intelligent buildings, and process control systems, as well as market conditions in the rail transportation, solar and lighting, and other major industrial markets we

During fiscal 2021, approximately 10% of our net sales were to customers in the commercial transportation market, 9% of our net sales were to customers in the industrial equipment end market, and 8% of our net sales were to customers in the data and devices end market.

Demand in the commercial transportation industry is impacted by the economic environment and market conditions in the heavy truck, construction, agriculture, and recreational vehicle markets.

The industrial equipment industry is dependent upon economic conditions, including customer investment in factory and warehouse automation, process control systems, and building automation and smart city infrastructure, as well as market conditions in the rail transportation, lighting, and other major industrial markets we serve.

Demand for data and devices can fluctuate significantly, depending on the underlying business and consumer demand for data communication, computer, and

consumer electronics products.

The overall market trends of increased data connectivity and continued movement to high-speed cloud applications have had a favorable impact on demand.

We encounter competition in substantially all areas of the electronic components industry.

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Like other suppliers to the electronics industry, we are subject to continuing pressure to lower our prices.

We have historically experienced, and we expect to continue to experience, continuing pressure to lower our prices.

In recent years, we have experienced price erosion averaging from 1% to 2% each year.

We have experienced, and we expect to continue to experience, continuing pressure to lower our prices.

Although price erosion was not significant in fiscal 2021, we have historically experienced price erosion averaging from 1% to 2% each year.

To maintain our margins, we must continue to reduce our costs by similar amounts.

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Many of these raw materials are produced in a limited number of countries around the world or are only available from a limited number of suppliers.

In addition, the prices of many of these raw materials continue to fluctuate.

The prices of many of these raw materials continue to increase and fluctuations may persist in the future.

In addition, feedstock for resins and resins themselves, as well as certain other commodities, are increasingly subject to varied and unrelated force majeure events worldwide further impacting price and availability.

If we have difficulty obtaining these raw materials, the quality of available raw materials deteriorates, or there are significant price increases for these raw materials, it could have a substantial impact on the price we pay for raw materials.

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Accordingly, we cannot provide assurance that we will be able to obtain non-conflict 3TG in sufficient quantities or at competitive prices.

Further, since our supply chain is complex, we may face reputational challenges with our customers and other stakeholders if we are unable to sufficiently verify the origins and chain of custody for all conflict minerals used in our products through our due diligence procedures.

Further, since our supply chain is complex, we may face reputational challenges with our customers and other stakeholders if we are unable to meet customer non-conflict 3TG standards or sufficiently verify the origins and chain of custody for all conflict minerals used in our products through our due diligence procedures.

We may use components and products manufactured by third parties.

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In the normal course of business, we rely on information technology networks and systems, some of which are managed by third parties, to process, transmit, and store electronic information, and to manage or support a variety of business processes and activities.

Additionally, we collect and store certain data, including proprietary business information and customer and employee data, and may have access to confidential or personal information in certain of our businesses that is subject to privacy and security laws, regulations, and customer-imposed controls.

employee information or related data, including the EU’s General Data Protection Regulation, which went into effect in May 2018, and the California Consumer Privacy Act of 2018, which went into effect in January 2020.

In addition, several other countries in which we operate or do business, such as China, have enacted or are considering enacting laws that require personal data relating to their citizens to be maintained on local servers and impose additional data transfer restrictions.

If countries in which we operate or do business adopt data localization or data residency laws, we could be required to implement new or expand existing data storage protocols, build new storage facilities, and/or devote additional resources to comply with the requirements of such laws, any of which could have significant cost implications.

Despite our cybersecurity measures (including employee and third-party training, monitoring of networks and systems, and maintenance of backup and protective systems) which are continuously reviewed and upgraded to mitigate persistent and continuously evolving cybersecurity threats, our information technology networks and infrastructure may still be vulnerable to damage, disruptions, or shutdowns due to attack by hackers or breaches, employee error or malfeasance, power outages, computer viruses, telecommunication or utility failures, systems failures, natural disasters, pandemics (including COVID-19), or other catastrophic events.

In recent years, we have been the target of attempted cyber intrusions, and must continuously monitor and develop our systems to protect the integrity and functionality of our information technology infrastructure and access to and the security of our employees’, customers’, and suppliers’ data.

Security breaches and other disruptions to our information technology infrastructure or violations of data privacy laws could result in legal claims or proceedings, liability or penalties under privacy laws, disruption in operations, and damage to our reputation which could materially adversely affect our business.

customer-imposed controls.

Specifically, we are subject to the laws of various states and countries where we operate or do business related to solicitation, collection, processing, transferring, storing, or use of consumer, customer, vendor, or employee information or related data, including the EU’s General Data Protection Regulation, which went into effect in May 2018, and the California Consumer Privacy Act of 2018, which went into effect in January 2020.

In addition, several other countries in which we operate or do business, such as China, have enacted or are considering enacting laws that impose additional data transfer restrictions.

If countries in which we operate or do business were to adopt data localization or data residency laws, we could be required to implement new or expand existing data storage protocols, build new storage facilities, and/or devote additional resources to comply with the requirements of such laws, any of which could have significant implications to business operations and costs.

In addition to our own systems, we have outsourced, and expect to continue to outsource, certain support services, including cloud storage systems, cloud computing services, and system development and support services to third parties, which has in the past and in the future may subject our information technology and other sensitive information to additional risk.

Despite our cybersecurity measures (including employee training, monitoring of networks and systems, and maintenance of backup and protective systems) which are reviewed and upgraded to mitigate evolving cybersecurity threats, our information technology networks and infrastructure has been and may still be vulnerable to damage, disruptions (including, but not limited to, computer viruses and other malware, denial of service, and ransomware), or shutdowns due to attack by hackers, state-sponsored organizations with significant financial and technological resources, breaches, employee error or malfeasance, power outages, computer viruses, telecommunication or utility failures, systems failures, natural disasters, pandemics (including COVID-19), or other catastrophic events, which may require us to notify regulators, customers, or employees, and enlist identity theft protection in the event of a privacy breach.

We have been the target of attempted cyber intrusions.

We continue to monitor and develop our systems to protect the integrity and functionality of our information technology infrastructure and access to and the security of our intellectual property and our employees’, customers’, and suppliers’ data.

Security breaches and other disruptions to our information technology infrastructure or violations of applicable laws could result in legal claims or proceedings, liability or penalties, disruption in operations, and damage to our reputation which could materially adversely affect our business.

While we have experienced, and expect to continue to experience, threats to our information technology networks and infrastructure, to date none of these threats have had a material impact on our business or operations.

In addition, as a result of the COVID-19 pandemic, some of our employees have transitioned to working from home on a full-time or part-time basis, which may increase our vulnerability to cyber and other information technology risks.

In addition, as a result of the ongoing impacts of the COVID-19 pandemic, some of our employees are continuing to work from home on a full-time or part-time basis, which may increase our vulnerability to cyber and other information technology risks.

Covenants in our debt instruments may adversely affect us.

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If we are unable to enforce our commercial agreements, whether at all or in material part, our results of operations, financial position, and cash flows could be adversely affected.

Further, any failure to maintain compliance with trade regulations could limit our ability to import and export raw materials and finished goods into or from the relevant jurisdiction, which could negatively impact our results of operations, financial position, and cash flows.

We also must comply with applicable trade regulations in the jurisdictions where we operate.

A small portion of our products, including defense-related products, may require governmental import and export licenses, whose issuance may be influenced by geopolitical and other events.

Any failure to maintain compliance with trade regulations could limit our ability to import and export raw materials and finished goods into or from the relevant jurisdiction, which could negatively impact our results of operations, financial position, and cash flows.

In this regard, we are investigating our past compliance with relevant U.S.

trade controls and have made voluntary disclosures of apparent trade controls violations to the U.S.

Department of Commerce’s Bureau of Industry and Security (“BIS”) and the U.S.

State Department’s Directorate of Defense Trade Controls (“DDTC”).

We are cooperating with the BIS and DDTC on these matters, and both our internal assessment and the resulting investigations by the agencies remain ongoing.

We are unable to predict the timing and final outcome of the agencies’ investigations.

An unfavorable outcome may include fines or penalties imposed in response to our disclosures, but we are not yet able to reasonably estimate the extent of any such fines or penalties.

While we have reserved for potential fines and penalties relating to these matters based on our current understanding of the facts, the investigations into these matters have yet to be completed and the final outcome of such investigations and related fines and penalties may differ from amounts currently reserved.

We could be adversely affected by violations of the U.S.

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We operate in many parts of the world that have experienced governmental corruption to some degree, and in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices.

Despite our training and compliance program, we cannot provide assurance that our internal control policies and procedures always will protect us from reckless or criminal acts committed by our employees or agents.

Despite our training and compliance

program, we cannot provide assurance that our internal control policies and procedures always will protect us from reckless or criminal acts committed by our employees or agents.

Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our results of operations, financial position, and cash flows.

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If we violate these laws, we could be fined, criminally charged, or otherwise sanctioned by regulators.

addition, environmental and health and safety laws are becoming more stringent, resulting in increased costs and compliance requirements.

In addition, environmental and health and safety laws are becoming more stringent, resulting in increased costs and compliance requirements.

Certain environmental laws assess liability on current or previous owners or operators of real property for the costs of investigation, removal, and remediation of hazardous substances or materials at their properties or at properties at which they have disposed of hazardous substances.

Liability for investigation, removal, and remediation costs under certain federal and state laws is retroactive, strict, and joint and several.

Liability for investigation, removal, and remediation costs under certain regulatory regimes, such as U.S.

federal and state laws, is retroactive, strict, and joint and several.

In addition to cleanup actions brought by governmental authorities, private parties could bring personal injury or other claims due to the presence of, or exposure to, hazardous substances.

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While we plan for future capital and operating expenditures to maintain compliance with environmental laws, we cannot provide assurance that our costs of complying with current or future environmental protection and health and safety laws, or our liabilities arising from past or future releases of, or exposures to, hazardous substances will not exceed our estimates or adversely affect our results of operations, financial position, and cash flows or that we will not be subject to additional environmental claims for personal injury, property damage, and/or cleanup in the future based on our past, present, or future business activities.

Our products are subject to various requirements related to chemical usage, hazardous material content, and recycling.

The EU, China, and other jurisdictions in which our products are sold have enacted or are proposing to enact laws addressing environmental and other impacts from product disposal, use of hazardous materials in products, use of chemicals in manufacturing, recycling of products at the end of their useful life, and other related matters.

Our products are subject to various requirements related to chemical usage, hazardous material content, recycling, and other circular economy initiatives.

These laws include but are not limited to the EU Restriction of Hazardous Substances, End of Life Vehicle, and Waste Electrical and Electronic Equipment Directives;

the EU REACH Regulation;

and the China law on Management Methods for Controlling Pollution by Electronic Information Products.

and the China Administrative Measures for the Restriction of Hazardous Substances in Electrical and Electronic Products.

These laws prohibit the use of certain substances in the manufacture of our products and directly and indirectly impose a variety of requirements for modification of manufacturing processes, registration, chemical testing, labeling, and other matters.

These laws continue to proliferate and expand in these and other jurisdictions to address other materials and other aspects of our product manufacturing and sale.

These laws continue to proliferate and

expand in these and other jurisdictions to address other materials and other aspects of our product manufacturing and sale.

These laws could make the manufacture or sale of our products more expensive or impossible, could limit our ability to sell our products in certain jurisdictions, and could result in liability for product recalls, penalties, or other claims.

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Moreover, under Swiss law, we generally may not issue registered shares for an amount below par value without prior shareholder approval to decrease the par value of our registered shares.

Any such actions for which our shareholders must vote will require that we file a preliminary proxy statement with the SEC and convene a meeting of shareholders, which would delay the timing to execute such actions.

Any such actions for which our shareholders must vote will require that we file a proxy statement with the SEC and convene a meeting of shareholders, which would delay the timing to execute such actions.

Such limitations provide the board of directors less flexibility with respect to our capital management.

do not believe that Swiss law requirements relating to the issuance of shares will have a material adverse effect on us, we cannot provide assurance that situations will not arise where such flexibility would have provided substantial benefits to our shareholders and such limitations on our capital management flexibility would make our stock less attractive to investors.

While we do not believe that Swiss law requirements relating to the issuance of shares will have a material adverse effect on us, we cannot provide assurance that situations will not arise where such flexibility would have provided substantial benefits to our shareholders and such limitations on our capital management flexibility would make our stock less attractive to investors.

We might not be able to make distributions on our shares without subjecting shareholders to Swiss withholding tax.

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dollar and the Swiss franc may limit the amount available for any future distributions on our shares without subjecting shareholders to Swiss withholding tax.

Under Swiss law, the registered share capital in our unconsolidated Swiss statutory financial statements is required to be denominated in Swiss francs.

The registered share capital in our unconsolidated Swiss statutory financial statements is denominated in Swiss francs.

Although distributions that are effected through a return of contributed surplus or registered share capital are expected to be paid in U.S.

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The aggregate par value of our registered shares held by us and our subsidiaries may not exceed 10% of our registered share capital.

We may repurchase our registered shares beyond the statutory limit of 10%, however, only if our shareholders have adopted a resolution at a general meeting of shareholders authorizing the board of directors to repurchase registered shares in an amount in excess of 10% and the repurchased shares are dedicated for cancellation.

We may repurchase our registered shares

beyond the statutory limit of 10%, however, only if our shareholders have adopted a resolution at a general meeting of shareholders authorizing the board of directors to repurchase registered shares in an amount in excess of 10% and the repurchased shares are dedicated for cancellation.

Additionally, various corporate law proposals in Switzerland, if passed in the future, may affect our ability to repurchase our shares.

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The board of directors may, in its discretion, refuse to register shares as shares with voting rights if a shareholder does not fulfill certain disclosure requirements in our articles of association.

Additionally, various proposals in Switzerland for corporate law changes, if passed in the future, may require shareholder registration in order to exercise voting rights for shareholders who hold their shares in street name through brokerages and banks.

Such a registration requirement could make our stock less attractive to investors.

Certain provisions of our articles of association may reduce the likelihood of any unsolicited acquisition proposal or potential change of control that our shareholders might consider favorable.

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In addition, the New York Stock Exchange (“NYSE”), on which our shares are listed, requires shareholder approval for issuances of shares equal to 20% or more of the outstanding shares or voting power, with limited exceptions.

Global legislative and regulatory actions and proposals could cause a material change in our worldwide effective corporate tax rate.

Global legislative and regulatory actions and proposals could cause a material change in our worldwide effective corporate tax rate and our global cash taxes.

Various legislative and regulatory proposals have been directed at multinational companies with operations in lower-tax jurisdictions.

There has been heightened focus on adoption of such legislation and on other initiatives, such as:

the OECD ’ s initiative to develop agreed-upon best practices to prevent base erosion and profit shifting, which contemplate changes to numerous long-standing tax principles related to the distribution of profits between affiliated entities in different tax jurisdictions,

the OECD ’ s initiative to develop agreed-upon best practices to prevent base erosion and profit shifting, which contemplate the creation of a global minimum corporate tax rate and changes to numerous long-standing tax principles related to the distribution of profits between affiliated entities in different tax jurisdictions,

EU and other country efforts to adopt certain OECD proposals and modified OECD proposals (including the Anti-Tax Avoidance Directive, state aid cases, and various transparency proposals), and

tax policy changes in the U.S., such as additional federal tax reform measures, new tax regulations, and revisions to the Model Income Tax Treaty.

If these proposals are adopted in the main jurisdictions in which we do business, they could, among other things, cause double taxation, increase audit risk, and materially increase our worldwide corporate effective tax rate.

If these proposals are adopted in the main jurisdictions in which we do business, they could, among other things, increase cash taxes, cause double taxation, increase audit risk, and materially increase our worldwide corporate effective tax rate.

We cannot predict the outcome of any specific legislative proposals or initiatives, and we cannot provide assurance that any such legislation or initiative will not apply to us.

In October 2021, the OECD made progress in its efforts to reform the international tax system with 136 of the 140 participating countries and jurisdictions joining a global minimum tax agreement.

This agreement introduces a 15% global minimum corporate tax rate which will apply to companies with revenue over a set threshold.

This tax will be assessed on a country-by-country basis, potentially starting as early as 2023.

Legislation in the U.S.

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We cannot predict the likelihood that, or final form in which, any such proposed legislation might become law, the nature of regulations that may be promulgated under any future legislative enactments, the effect such enactments and increased regulatory scrutiny may have on our business, or the outcome of any specific legislative proposals.

Therefore, we cannot provide assurance that any such

legislative action will not apply to us.

Therefore, we cannot provide assurance that any such legislative action will not apply to us.

In addition, we are unable to predict whether the final form of any potential legislation discussed above also would affect our indirect sales to U.S.

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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