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Item 1A. Risk Factors

2025-02-07 compared with 2024-02-09 · 202 added, 185 removed, 118 unchanged (77% of the section changed)

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If any of the following risks actually occurs, our business, financial condition or results of operation could be adversely affected.

Manufacturing and Operational Risks

We are exposed to political, economic and other risks that arise from operating a multinational business.

Our operations are subject to a number of potential risks.

Such risks principally include:

• uncertainties and instability in global and regional economic conditions, including changes related to market conditions caused by heightened inflation, potential economic recessions, and significant interest rate fluctuations;

• ongoing political instability and uncertainties, including, but not limited to, the ongoing conflict between Russia and Ukraine, the conflict between Israel and Hamas, the relationship between China and the U.S.

and other actual or anticipated military or political conflicts;

• terrorist activities and the U.S.

and international response thereto;

• wage inflation, labor shortages and labor unrest;

• trade protection measures and currency exchange controls;

• changes in tax laws or interpretations, tax rates and tax legislation;

• export duties and quotas;

• domestic and foreign customs and tariffs;

• current and changing regulatory environments;

• difficulties protecting our intellectual property;

• transportation delays and interruptions;

• costs and difficulties in integrating, staffing and managing international operations, especially in developing markets such as China, India, Latin America, the Middle East and Africa;

• difficulty in obtaining distribution support;

• health epidemics or new pandemics;

• natural disasters.

In addition, many of the nations in which we operate have developing legal and economic systems adding greater uncertainty to our operations in those countries than would be expected in North America, Western Europe and certain Asia Pacific markets.

These factors may have an adverse effect on our international operations in the future.

We continue to focus on operational improvement in developing markets such as China, India, Latin America, the Middle East and Africa.

These efforts will require us to hire, train and retain qualified personnel in countries where language, cultural or regulatory barriers may exist.

Any significant difficulties in continuing to improve or expand our operations in developing markets may divert management’s attention from our existing operations and require a greater level of resources than we plan to commit.

Expansion into developing markets may require modification of products to meet local requirements or preferences.

Modification to the design of our products to meet local requirements and preferences may take longer or be more costly than we anticipate and could have a material adverse effect on our ability to achieve international sales growth.

Changes in the availability and price of certain materials and components have resulted and could result in significant disruptions to the supply chain causing manufacturing inefficiencies, increased costs and lower profits.

We obtain materials and manufactured components from third-party suppliers.

Principal materials and components used in our various manufacturing processes include steel, castings, engines, tires, hydraulics, cylinders, drive trains, electric controls and motors, semiconductors, and a variety of other commodities and fabricated or manufactured items.

T he cost and availability of these materials, components and final assemblies have varied significantly in the past several years.

While we have seen improvements in certain areas of the supply chain, it is still not operating at optimal levels and additional fluctuations and disruptions are possible due to demand changes, inflation, geopolitical and economic uncertainty, regulatory and policy instability, the imposition of duties and tariffs (including on certain Chinese origin goods) and trade agreements/barriers, freight availability and costs, wage increases and labor shortages.

In an effort to mitigate this, the Company has increased the prices of our products, recouped tariffs through duty drawback and exclusions, and worked with suppliers to ensure optimum pricing and inventory levels.

However, if customers are unwilling to accept price increases in the Company’s products and the Company is unable to recover a substantial portion of increased costs from our suppliers, or through duty draw-back/exclusions, or otherwise offset the increased costs, then continued or increased fluctuations in costs of materials or inflation generally and continued supply chain challenges could have a material adverse effect on the Company’s results of operation, profitability, free cash flows, and financial condition.

In the absence of labor strikes or other unusual circumstances, substantially all materials and components are normally available from multiple suppliers.

However, certain of our businesses receive materials and components from a single source supplier, although alternative suppliers of such materials may be generally available.

Delays in our suppliers’ abilities, especially any sole suppliers for a particular business, to provide us with necessary materials and components may delay production at a number of our manufacturing locations, or may require us to seek alternative supply sources.

Delays in obtaining supplies may result from a number of factors affecting our suppliers, including capacity constraints, regulatory changes, global logistics network challenges and cost increases, labor shortages and disputes, wage increases, rising inflation, suppliers’ impaired financial condition, suppliers’ allocations to other purchasers, weather emergencies, pandemics or acts of war or terrorism.

Global logistics network challenges include shortages of shipping containers, ocean freight capacity constraints, international port delays, trucking and chassis shortages, railway and air freight capacity, rising inflation, wage increases and labor availability constraints, which have resulted in delays, shortages of key manufacturing components, increased order backlogs, and increased transportation costs.

While we experienced some supply chain improvements in 2023, we could in the future again experience significant disruption of the supply of some of our parts, materials, components and final assemblies that we obtain from suppliers or subcontractors.

We continue to actively monitor and mitigate our supply chain risk, but there can be no assurance that our mitigation plans will be effective.

Any delay or disruptions in receiving supplies have resulted and could further result in manufacturing inefficiencies caused by us having to wait for parts to arrive on production lines, could impair our ability to deliver products to our customers and delay sales, and, accordingly, could have a material adverse effect on our business, results of operations, financial condition and/or cash flows.

In addition, we purchase material and services from our suppliers on terms extended based on our overall credit rating.

Deterioration in our credit rating may impact suppliers’ willingness to extend terms and in turn accelerate cash requirements of our business.

Consolidation within our customer base and suppliers may negatively impact our pricing and product margins.

Over the last few years, some of our larger customers have been actively growing through acquisitions.

This consolidation has increased the concentration of our largest customers, resulting in increased pricing pressure from our customers.

Should our larger customers continue to grow through acquisitions, their buying influence may grow and negatively impact our negotiating leverage.

Some of our suppliers have undergone a similar process of consolidation.

The consolidation of our largest suppliers has resulted in limited sources of supply for certain parts and components and increased cost pressures from our suppliers.

Any future consolidation of our customer base or our suppliers could negatively impact our business, financial condition, results of operations and cash flows.

If this trend in customer and supplier consolidation continues, it could have an unfavorable impact on our pricing and product margins.

Our business may suffer if our equipment fails to perform as expected.

If our equipment does not perform as expected or should we or any government safety regulator determine that a safety or other defect or noncompliance exists with respect to our equipment, we may receive warranty claims, need to perform a safety recall campaign, or need to delay product deliveries, the costs of which could become substantial .

It could also lead to product liability, breach of warranty, and other claims.

As a manufacturer of equipment, we must manage the cost and risk associated with product warranties, repairs and recalls, regulatory penalties, product liability, breach of warranty, and other claims with respect to our products.

We establish warranty reserves that represent our estimate of the costs we expect to incur to fulfill our warranty obligations.

We base our estimate for warranty reserves on our historical experience and other related assumptions.

If actual results materially differ from these estimates, our results of operations could be materially affected.

In addition, any

actual or perceived defect or quality issue in our products could lead to negative public perceptions about the safety of our products and could cause harm to our overall business, reputation, financial condition and operating results.

A material disruption to one of our significant manufacturing plants could adversely affect our ability to generate revenue.

If operations at a significant facility were disrupted as a result of equipment failures, natural disasters, health epidemics, work stoppages, power outages or other reasons, our business, financial conditions and results of operations could be adversely affected.

Interruptions in production could increase costs and delay delivery of units in production.

Production capacity limits could cause us to reduce or delay sales efforts until production capacity is available.

Financial and General Economy Risks

The imposition of new or increased international tariffs may have a material adverse effect on our business, financial condition and results of operations.

Rising international tariffs, including any tariffs applied to goods traded between the U.S.

and China, the U.S.

and Mexico and the U.S.

and Canada, could materially and adversely affect our business and results of operations.

government has previously and now again recently imposed tariffs on certain foreign goods from a variety of countries and regions that it

perceives as engaging in unfair trade practices.

Foreign governments have imposed, and may impose in the future, retaliatory tariffs on goods that their countries import from the U.S.

Such changes can make it difficult or costly for us to do business in, or import our products from, those countries.

For example, tariffs on certain Chinese origin goods impact the cost of material and machines we import directly from our manufacturing operations in China, as well as the cost of material and components imported on our behalf by suppliers.

The indirect impact of inflationary pressure on costs throughout the supply chain and the direct impact, for example, on costs for machines we import from our manufacturing operations in China, leads to higher input costs and lower margins on certain products we sell.

In addition, tariffs imposed by the Chinese government on U.S.

imports have made the cost of some of our products more expensive for our Chinese customers.

We have been able to mitigate some effects of tariffs through the U.S.

government’s duty draw-back mechanism, tariff exclusion process, footprint utilization, and prudent sourcing.

However, with certain tariff exclusions ending and with any new tariffs, it could further negatively impact global trade and economic conditions in many of the regions where we do business.

Such tariffs may result in significant increases in our material and component costs and the cost of machinery imported directly from our international manufacturing operations, which may make our products less cost competitive and reduce gross margins.

It may also adversely impact demand for our products in certain locations.

It may be time-consuming and costly for us to modify our business operations to adapt to or comply with such tariffs.

If we become unable to recover a substantial portion of any increased tariff related costs, the recent or increased international tariffs could materially and adversely affect our business, financial condition and results of operations.

Our business is sensitive to general economic conditions, government spending priorities and the cyclical nature of markets we serve.

Demand for our products is affected by the general strength of the economies in which we sell our products, customers’ perceptions concerning the timing of economic cycles, customers’ replacement or repair cycles, prevailing interest rates, residential and non-residential construction spending, government spending priorities, capital expenditure allocations of our customers, the timing of regulatory standard changes, oil and gas related activity and other factors.

The last several years have been marked by geopolitical instability, including the conflict between Russia and Ukraine as well as Israel and Hamas, social concerns, supply chain and freight constraints, pandemic, labor shortages and wage increases, high inflation, high interest rates, foreign currency exchange volatility, and continuing concerns of possible recessions, all of which have increased ongoing economic uncertainty and instability in the global markets.

The last several years have been marked by geopolitical instability, including the conflict between Russia and Ukraine as well as Israel and Hamas, social concerns, supply chain and freight constraints, a pandemic, labor shortages and wage increases, high inflation, high interest rates, foreign currency exchange volatility, and recessions, all of which have increased ongoing economic uncertainty and instability in the global markets.

This instability can make it extremely difficult for our customers, our suppliers and us to accurately forecast and plan future business activities.

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Any decrease or delay in government funding of highway construction and maintenance, other infrastructure projects and overall government spending could cause our revenues and profits to decrease.

While we expect sales to remain stable in 2024, we cannot provide any assurance that there will not be global economic weakness or a recession based on the above uncertainties or other unknown factors.

If economic conditions in the U.S., Europe and other key markets do not show continued stability or improvement, we may experience negative impacts to our net sales, financial condition, profitability and cash flows, which could result in the need for us to record impairments.

Our consolidated financial results are reported in U.S.

dollars while certain assets and other reported items are denominated in the currencies of other countries, creating currency exchange and translation risk.

Our Company operates in many areas of the world, involving transactions denominated in a variety of currencies.

We are subject to currency exchange risk to the extent that our costs are denominated in currencies other than those in which the Company earns revenue.

Additionally, the reporting currency for our consolidated financial statements is the U.S.

Certain of our assets, liabilities, expenses, revenues and earnings are denominated in other countries’ currencies, including the Euro, British Pound, Chinese Yuan, Indian Rupee, Australian Dollar and Mexican Peso.

Those assets, liabilities, expenses, revenues and earnings are translated into U.S.

dollars at the applicable foreign exchange rates to prepare our consolidated financial statements.

Therefore, fluctuations in foreign exchange rates between the U.S.

dollar and those other currencies affect the value of those items as reflected in our consolidated financial statements, even if their value remains unchanged in their original currency.

Due to volatility of foreign exchange rates to the U.S.

dollar, fluctuations in foreign exchange rates may have an impact on the accuracy of our financial guidance.

Such fluctuations in foreign exchange rates relative to the U.S.

dollar may cause our actual results to differ materially from those anticipated in our guidance and have a material adverse effect on our business or results of operations.

We have a significant amount of debt outstanding and must comply with restrictive covenants in our debt agreements.

Our credit agreement and other debt agreements contain financial and restrictive covenants that may limit our ability to, among other things, borrow additional funds or take advantage of business opportunities.

As of December 31, 2023, we are in compliance with the financial covenants.

However, increases in our debt, increases in our interest expense or decreases in our earnings could cause us to fail to comply with these financial covenants.

Failing to comply with such covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all our indebtedness or otherwise have a material adverse effect on our financial position, results of operations and debt service capability.

Our level of debt and the financial and restrictive covenants contained in our credit agreement could have important consequences on our financial position and results of operations, including increasing our vulnerability to increases in interest rates because debt under our credit agreement bears interest at variable rates.

Recent channel adjustments reflect macro uncertainty, high interest rates, geopolitical uncertainties, and shorter delivery lead times.

We cannot provide any assurance that there will not be continued, increased global economic weakness and recessions based on the above uncertainties or other factors.

The imposition of tariffs by the United States could trigger the adoption of tariffs by other countries as well.

Any resulting escalation of trade tensions, including a trade war, could have a significant adverse effect on world trade and the world economy.

If economic conditions in the U.S., Europe and other key markets weaken, we may experience further negative impacts to our net sales, financial condition, profitability and cash flows, which could result in the need for us to record impairments.

We have a significant amount of debt outstanding and must comply with covenants in our debt agreements.

On October 8, 2024, we entered into an Incremental Assumption, Borrowing Subsidiary Agreement and Amendment No.

2 to our credit agreement which (i) increased the size of our existing revolving credit facilities to $800 million and extended the maturity of our existing revolving credit facilities to expire on October 8, 2029, and (ii) provided for a new seven-year term loan facility in an aggregate principal amount of $1,250 million with a maturity date of October 8, 2031.

We also issued an additional $750 million of senior unsecured notes on October 8, 2024, which will mature in 2032.

Following the acquisition of ESG our debt levels have now increased significantly.

Our ability to make required payments of principal and interest on our increased debt levels will depend on future performance of our combined businesses, which, to a certain extent, is subject to general economic, financial, competitive and other factors that are beyond our control.

In addition, our credit agreement contains financial and restrictive covenants that may limit our ability to, among other things, borrow additional funds or take advantage of business opportunities.

While we are currently in compliance with the financial

covenants, increases in our debt or decreases in our earnings could cause us to fail to comply with these financial covenants.

Our failure to comply with such covenants could result in an event of default that, if not cured or waived, could result in the acceleration of all our indebtedness or otherwise have a material adverse effect on our financial position, results of operation and debt service capability.

Our increased level of debt and the financial and restrictive covenants contained in our credit agreement could have important consequences on our financial position and results of operations, including increasing our vulnerability to increases in interest rates because debt under our credit agreement bears interest at variable rates.

We may be unable to generate sufficient cash flow to service our debt obligations and operate our business.

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If it becomes necessary to access additional capital, it is possible that any such alternatives in the current market could be on terms less favorable than under our existing credit facility terms, which could have a negative impact on our consolidated financial position, results of operations or cash flows.

Our consolidated financial results are reported in U.S.

dollars while certain assets and other reported items are denominated in the currencies of other countries, creating currency exchange and translation risk.

Our Company operates in many areas of the world, involving transactions denominated in a variety of currencies.

We are subject to currency exchange risk to the extent that our costs are denominated in currencies other than those in which the Company earns revenue.

Additionally, the reporting currency for our consolidated financial statements is the U.S.

Certain of our assets, liabilities, expenses, revenues and earnings are denominated in other countries’ currencies, including the Euro, British Pound,

Chinese Yuan, Indian Rupee, Australian Dollar and Mexican Peso.

Those assets, liabilities, expenses, revenues and earnings are translated into U.S.

dollars at the applicable foreign exchange rates to prepare our consolidated financial statements.

Therefore, fluctuations in foreign exchange rates between the U.S.

dollar and those other currencies affect the value of those items as reflected in our consolidated financial statements, even if their value remains unchanged in their original currency.

Due to volatility of foreign exchange rates to the U.S.

dollar, fluctuations in foreign exchange rates may have an impact on the accuracy of our financial guidance.

Such fluctuations in foreign exchange rates relative to the U.S.

dollar may cause our actual results to differ materially from those anticipated in our guidance and have a material adverse effect on our business or results of operations.

Some of our customers rely on financing with third parties to purchase our products.

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Competition and Strategic Performance Risks

We may be unable to successfully integrate acquired businesses, including ESG.

We may not realize the anticipated benefits of such acquisitions, including the acquisition of ESG.

From time to time, we engage in strategic transactions involving risks, including the possible failure to successfully integrate and realize the expected benefits of such transactions.

We have consummated many acquisitions in the past and anticipate making additional acquisitions in the future.

On October 8, 2024, we acquired ESG for $2 billion.

Our ability to realize the

anticipated benefits of the acquisition, including the expected tax benefits and synergies, will depend, to a large extent, on our ability to integrate the businesses of both companies.

Management will be required to devote significant attention and resources to the integration process, which may disrupt business and, if implemented ineffectively, could preclude realization of the full benefits we expect.

The risks associated with the ESG acquisition and our other past or future acquisitions include:

• the business culture of the acquired business may not match well with our culture;

• we may acquire or assume unexpected liabilities;

• faulty assumptions may be made regarding the integration process;

• unforeseen difficulties may arise in integrating operations and systems;

• we may fail to retain, motivate and integrate key management and other employees of the acquired business;

• higher than expected finance costs may arise due to unforeseen changes in tax, trade, environmental, labor, safety, payroll or pension policies in any jurisdiction in which the acquired business conducts its operations;

• we may experience problems in retaining customers and integrating customer bases;

• a large acquisition could stretch our resources and divert management’s attention from existing operations.

The successful integration of any previously acquired or newly acquired business also requires us to implement effective internal control processes in these acquired businesses.

While we believe we have successfully integrated acquisitions to date, we cannot ensure that previously acquired or newly acquired companies, including ESG, will operate profitably, that the intended beneficial effect from these acquisitions will be realized and that we will not encounter difficulties in implementing effective internal control processes in these acquired businesses, particularly when the acquired business operates in foreign jurisdictions and/or was privately owned.

See Risk Factor entitled “We must comply with an injunction and related obligations resulting from the settlement of an SEC investigation” for additional consequences if we were to commit a violation of the reporting and internal control provisions of the federal securities laws.

While our evaluation of any potential transaction includes business, legal, compliance and financial due diligence with the goal of identifying and evaluating the material risks involved, these due diligence reviews may not identify all of the issues necessary to accurately estimate the cost and potential risks of a particular acquisition or costs associated with any quality issues with an acquisition target's products or services.

In addition, to the extent that we seek or make acquisitions in machinery and industrial businesses that are significantly different from our existing operations, there will be added risks and challenges for managing and integrating these businesses.

Further, we may need to consolidate or restructure our acquired or existing facilities, which may require expenditures related to reductions in workforce and other charges resulting from the consolidations or restructurings, such as the write-down of inventory and lease termination costs.

Any of the foregoing could adversely affect our business and results of operations.

Many of these factors will be outside our control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy.

If we are unable to close or fail to successfully integrate acquired businesses, this could have an adverse effect on our business, financial condition and results of operations.

We also may not realize the expected benefits of any newly acquired business, including expected synergies.

For instance, if we are unable to realize expected synergies from the ESG acquisition, or the cost to achieve these synergies is greater than expected, then the anticipated benefits of the acquisition may not be realized fully or at all or may take longer to realize than expected.

Further, we may be unable to achieve or maintain our long-term net leverage targets which could result in an event of default under our outstanding debt obligations.

See Risk Factor entitled, “We have a significant amount of debt outstanding and must comply with covenants in our debt agreements.”

The timing and amount of benefits from our strategic initiatives may not be as expected and our financial results could be adversely impacted.

Each business in our Company is unique, but all businesses are managed to the “Execute, Innovate, Grow” operating framework.

This is part of our continuing strategy to deliver long-term growth and earnings to our stockholders.

We have made, and continue to make, significant investments in these strategic initiatives.

However, we cannot provide any assurance that we will be able to realize the full anticipated benefits of these initiatives.

Although “Execute, Innovate, Grow” is expected to improve future operating margins and revenue growth, if we are unable to achieve expected benefits from these initiatives or are unable to complete them without material disruption to our businesses, the timing and amount of benefits may not be as expected and could adversely impact the Company’s competitive position, financial condition, profitability and/or cash flows.

The industry in which we operate is highly competitive and subject to pricing pressure;

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One of our strategic initiatives is Innovate, which in part aims at the introduction of new or improved products, technologies and capabilities.

If we are unable to continue to improve existing equipment products and technologies that meet our customers’ expectations, or the industry’s expectations, including, but not limited to electrification options discussed below, the demand for our equipment could be substantially adversely affected.

Our ability to match new product offerings to diverse global customers’ anticipated preferences for different types and sizes of equipment and various equipment features and functionality, at affordable prices, is critical to our success.

If we are unable to continue to improve existing equipment products and technologies that meet our customers’ expectations, or the industry’s expectations, including, but not limited to more electric powered and lower emission products, the demand for our equipment could be substantially adversely impacted.

Our ability to predict and match new product offerings to diverse global customers’ anticipated preferences for different types and sizes of equipment and various equipment features and functionality, at affordable prices, is critical to our success.

This requires a thorough understanding of our existing and potential customers on a global basis.

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Any new products that we develop may also not receive market acceptance or otherwise generate meaningful net sales or profits for us relative to our expectations and our investments.

Failure to compete effectively could result in lower revenues from our products and services, lower gross margins or cause us to lose market share.

In response to changes in customer preferences concerning global climate changes, sustainability and related changes in regulations, we may continue to face greater pressure to develop products that generate less greenhouse gas emissions.

Like many manufacturers, we foresee sales of electric-powered vehicles and hybrid equipment becoming increasingly important and we continue to actively develop and offer more electric powered and lower emission products.

We are at risk of losing competitive advantages if we do not accurately predict, prepare for and respond to customer demands for new innovations with respect to electric-powered vehicles or mobile equipment and other technologies that minimize emissions, or if we are unable to do so on a cost-effective basis.

We may face limitations on our ability to integrate acquired businesses.

From time to time, we may engage in strategic transactions involving risks, including the possible failure to successfully integrate and realize the expected benefits of such transactions.

We consummated a variety of acquisitions in the past three years and anticipate making additional acquisitions in the future including acquisitions that could be substantial in size.

Our ability to realize the anticipated benefits of any purchase, including the expected combination benefits, will depend, to a large extent, on our ability to integrate any acquired businesses.

The risks associated with integrating acquired businesses include:

• the business culture of the acquired business may not match well with our culture;

• technological and product synergies, economies of scale and cost reductions may not occur as expected;

• we may acquire or assume unexpected liabilities;

• faulty assumptions may be made regarding the acquisition and integration process;

• unforeseen difficulties may arise in integrating operations and systems;

• we may fail to attract, retain, motivate and integrate key management and other employees of the acquired business;

• we may experience problems in retaining customers;

• a large acquisition could stretch our resources and divert management’s attention from the existing operations.

The successful integration of any newly acquired business also requires us to implement effective internal control processes in these acquired businesses.

We cannot ensure that any newly acquired companies will operate profitably, that the intended beneficial effect from these acquisitions will be realized and that we will not encounter difficulties in implementing effective internal control processes in these acquired businesses, particularly when the acquired business operates in foreign jurisdictions and/or was privately owned.

Any of the foregoing could adversely affect our business, financial condition and results of operations.

The timing and amount of benefits from our strategic initiatives may not be as expected and our financial results could be adversely impacted.

Each business in our Company is unique, but all businesses are managed to the “Execute, Innovate, Grow” operating framework.

This is part of our continuing strategy to deliver long-term growth and earnings to our stockholders.

We have made, and continue to make, significant investments in these strategic initiatives.

However, we cannot provide any assurance that we will be able to realize the full anticipated benefits of these initiatives.

Failure to compete effectively could result in lower revenues from our products and services, lower gross margins or loss of market share.

Manufacturing and Operational Risks

We are exposed to political, economic and other risks that arise from operating a multinational business.

Our operations are subject to a number of potential risks.

Such risks principally include:

• uncertainties and instability in global and regional economic conditions, including changes related to market conditions caused by heightened inflation, economic recessions, and significant interest rate fluctuations;

and other actual or anticipated military or political conflicts;

• domestic and foreign customs and tariffs;

• export duties and quotas;

• trade protection measures and currency exchange controls;

• changes in tax laws or interpretations, tax rates and tax legislation;

• current and changing regulatory environments;

• terrorist activities and the U.S.

and international response thereto;

• wage inflation, labor shortages and labor unrest;

• difficulties protecting our intellectual property;

• transportation delays and interruptions;

• costs and difficulties in integrating, staffing and managing international operations, especially in developing markets;

• difficulty in obtaining distribution support;

• health epidemics or new pandemics;

• natural disasters.

These factors may have an adverse effect on our international operations in the future.

Efforts to improve operations in developing markets also requires us to hire, train and retain qualified personnel in countries where language, cultural or regulatory barriers may exist, and may require a greater level of management’s attention.

Expansion into developing markets may also require modification of products to meet local requirements or preferences.

As a global manufacturer, quotas, duties, tariffs and the possibility of an escalation or further developments of current trade conflicts could continue to negatively impact global trade and economic conditions in many of the regions where we do business.

See the Risk Factor entitled “The imposition of new or increased international tariffs may have a material adverse effect on our business, financial condition and results of operations” for additional details.

The Coalition of American Manufacturers of Mobile Access Equipment, an alliance of mobile access equipment producers in the U.S.

of which we are a member, pursued anti-dumping and countervailing cases against unfairly traded Chinese imports of mobile access equipment.

Department of Commerce has issued countervailing and anti-dumping duty rates on mobile access equipment from China.

If these duties are not enough to offset the subsidies provided by the Chinese government to Chinese mobile access equipment manufacturers and/or if the duties are modified as a result of any appeal process, we may continue to operate at a disadvantage to Chinese manufacturers.

This could result in reduced demand for our products in the U.S.

and have an adverse effect on our business or results of operations.

Similarly, following an official complaint by several of our EU competitors, the European Commission recently concluded an anti-dumping investigation into mobile access equipment imported from China.

As a result of the anti-dumping investigation, the European Commission imposed a range of anti-dumping duties on manufacturers who produce equipment in China, with the highest duties assigned to Chinese owned competitors.

If such duties are not enough to offset any subsidies provided by the Chinese government to Chinese manufacturers and/or if their duties are modified as a result of any appeal process, it could result in reduced demand for our products in the E.U.

and have an adverse effect on our business or results of operation.

We obtain materials and manufactured components from third-party suppliers.

Principal materials and components used in our various manufacturing processes include steel, castings, engines, tires, hydraulics, cylinders, drive trains, cab chassis, electric controls and motors, semiconductors, and a variety of other commodities and fabricated or manufactured items.

The cost and availability of these materials, components and final assemblies have varied significantly in past years.

While we have seen improvements in the supply chain, additional fluctuations and disruptions are possible due to demand changes, inflation, geopolitical and economic uncertainty, regulatory and policy instability, the imposition of duties and tariffs and trade agreements/barriers, freight availability and costs, wage increases and labor shortages.

The Company has mitigated these risks with price increases on our products, recouped tariffs through duty drawback and exclusions, and working with suppliers to ensure optimum pricing and inventory levels.

However, if customers become unwilling to accept any future price increases in the Company’s products and the Company is unable to recover a substantial portion of increased costs from our suppliers, or through duty draw-back/exclusions, or otherwise offset the increased costs, then increased fluctuations in costs of materials or inflation generally and supply chain challenges could have a material adverse effect on the Company’s results of operation, profitability, free cash flows, and financial condition.

In the absence of labor strikes or other unusual circumstances, substantially all materials and components are normally available from multiple suppliers.

However, certain of our businesses receive materials and components from a single source supplier, although alternative suppliers of such materials may be generally available.

Delays in obtaining supplies may result from a number of factors affecting our suppliers, including capacity constraints, regulatory changes, global logistics network challenges and cost increases, labor shortages and disputes, wage increases, inflation, suppliers’ impaired financial condition, suppliers’ allocations to other purchasers, weather emergencies, pandemics or acts of war or terrorism.

We actively monitor and mitigate our supply chain risk, but there can be no assurance that our mitigation plans will be effective.

Any delay or disruptions in receiving supplies could result in manufacturing inefficiencies caused by us having to wait for parts to arrive on production lines, could impair our ability to deliver products to our customers and delay sales, and, accordingly, could have a material adverse effect on our business, results of operations, financial condition and/or cash flows.