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Item 1A. Risk Factors

2026-02-13 compared with 2025-02-07 · 223 added, 150 removed, 170 unchanged (69% 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.

Competition and Strategic Performance Risks

We may be unable to successfully integrate acquired or merged businesses, including REV.

We may not realize the anticipated benefits of such mergers and acquisitions.

Mergers and acquisitions have been and may continue to be a significant component of our growth strategy.

From time to time, we engage in strategic transactions involving risks, including, but not limited to, the possible failure to successfully integrate

and realize the expected benefits of such transactions.

While we believe that strategic acquisitions can improve our competitiveness and profitability, these activities could have a material adverse effect on our business, financial condition and operating results.

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

On February 2, 2026, we closed on the REV Transaction.

Our ability to realize the anticipated benefits of the REV Transaction, including the expected combination benefits, will depend, to a large extent, on the ability of management of the new combined company to integrate the businesses.

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 anticipated.

The risks associated with the REV Transaction and our other past or future acquisitions include:

• the business culture of the merged or acquired businesses 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 merged or acquired businesses;

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

• we may experience problems in retaining customers, distributors, dealers, suppliers, vendors, landlords and other business partners;

• a large transaction such as the REV Transaction could stretch our resources and divert management’s attention from existing operations.

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

While we believe we have successfully integrated acquisitions to date, we cannot ensure that previously acquired or newly merged or acquired companies, including REV, will operate profitably, that the intended beneficial effect from the REV Transaction or other acquisitions will be realized and that we will not encounter difficulties in implementing effective internal control processes in these merged or acquired businesses, particularly if such 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 the recent REV Transaction and any potential transaction includes business, legal, compliance and financial due diligence with the goal of identifying and evaluating the material risks, these due diligence reviews may not identify all of the issues necessary to accurately identify and estimate the cost and potential risks associated with such transactions or costs associated with any quality issues with the related products or services.

In addition, there may be added risks and challenges for managing and integrating REV’s business, or any other business, that differs from the risks and challenges associated with our business prior to completion of the REV Transaction or other transactions.

Further, we may need to consolidate or restructure 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.

We also may not realize the expected benefits of the REV Transaction or any acquired business, including operating and other cost synergies.

We have incurred, and expect to incur, substantial transaction and integration expenses related to the REV Transaction, which reflect in part the many processes, policies, procedures, operations, technologies and systems to be integrated.

We may also incur additional costs to maintain employee morale and to attract, motivate or retain management personnel and other key employees related to the REV Transaction or any other future acquisition.

If we are unable to realize expected synergies from the REV Transaction or other acquisition, or the merger-related costs to achieve these synergies is greater than expected, then the anticipated benefits of such transaction may not be realized fully or at all or may take longer to realize than expected.

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.

In addition, there can be no assurance that we will be able to locate suitable acquisition candidates in the future or acquire them on acceptable terms or that we will be able to finance future transactions.

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.”

Our results after the completion of the REV Transaction may be adversely impacted if we do not effectively manage our expanded operations following the completion of the REV Transaction.

Following the recent REV Transaction, the size of our business is now significantly larger.

Our ability to successfully manage this expanded business will depend, in part, upon management’s ability to design and implement strategic initiatives that address not only the integration of two independent stand-alone companies, but also the increased scale and scope of the combined business with its associated increased costs and complexity.

There can be no assurances that we will be successful or that we will realize the expected operating efficiencies, cost savings and other benefits anticipated from the REV Transaction.

Potential divestitures, and any retained liabilities from such sold businesses, could negatively impact our business and financial results.

As part of our portfolio management process, we review our operations for businesses which may no longer be aligned with our strategic initiatives and long-term objectives.

Concurrently with the public announcement of the execution of the REV Transaction, we announced that we would initiate a strategic review process regarding our Aerials business, including a possible divestiture of our Aerials business.

We may not be able to complete a transaction providing for a disposition of our Aerials business on favorable terms or on our anticipated timeline, if at all.

We also continue to review our portfolio and may pursue additional divestitures.

Any such potential transaction involves risks, including, but not limited to, disruption to operations, loss of synergies, significant transaction costs, potential impairment charges, disputes with buyers and potential adverse impacts on relationships with customers, suppliers, and employees.

If any such transaction is delayed, not completed, or completed on terms less favorable than anticipated, we may not realize the expected benefits of such divestiture transaction, and our business, financial condition, and results of operations could be materially adversely affected.

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;

if we fail to compete effectively, both in product offerings and price, demand for our products may decrease and our business could suffer.

Our industry is highly competitive.

Our competitors include a variety of both domestic and foreign companies in all major markets.

To compete successfully, our products must excel in terms of quality, reliability, durability, productivity, price, delivery times, features, customization, technical capability, product innovation, ease of use, safety and comfort, and we must provide excellent customer service and support.

Some of our competitors are smaller companies which may have lower operating costs and greater operational flexibility and may focus on regional markets where they have competitive advantages of proximity and relationships with local municipalities or other regional customers.

Other competitors are large, well-established companies with capacity, financial and other resources that may be in excess of ours.

The greater financial resources of certain of our competitors may put us at a competitive disadvantage.

Low-cost competition from China and other developing markets could also result in decreased demand for our products.

If competition in our industry intensifies or if our current competitors lower their prices for competing products, we may lose sales or be required to lower the prices we charge for our products.

One of our strategic initiatives is Innovate, which in part aims at the continuing and timely 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 more technologically advanced and 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.

Product development, improvements and introductions also require significant financial and technological resources, talent, research, planning, design, development, engineering and testing at the technological, product and manufacturing process levels.

competitors’ new products arrive in the market before any of our similar new offerings arrive, or competitors offer more attractive features and functions prior to us, then demand for our equipment could be adversely affected or render our product obsolete.

Additionally, if we are unable to match or surpass the advances of artificial intelligence that our competitors implement for their products or for internal operations, our competitive position could be impacted.

Any new products that we develop may also not receive market acceptance for a number of reasons, including changes in customer preferences or our failure to properly gauge customer preferences.

New products may also not generate meaningful net sales or profits for us relative to our expectations and our investments, or they may reduce sales from existing models and adversely affect our results of operations.

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

Certain of our businesses depend on the performance of dealers and disruptions within our dealer network could have a negative effect on our business.

Certain of our businesses rely on their independent dealer networks to sell our products to end customers.

Such businesses are therefore affected by our ability to establish new relationships and maintain relationships with existing dealers.

The geographic coverage of our dealers and their individual business conditions can affect the ability of our dealers to sell our products to customers.

In a number of markets, there is a lack of exclusivity with dealers, which may decrease our bargaining leverage.

In addition, recent consolidation of dealers in certain businesses, as well as the growth of larger, multi-location dealers, may result in increased bargaining power on the part of dealers, which could have a material adverse effect on our business.

While our dealer agreements are often for a multi-year term, we cannot provide assurance that we will be able to renew our dealer agreements on favorable terms, or at all, at their respective scheduled expiration dates.

If one or more of our significant dealers chooses not to renew a contract with us or to re-negotiate an agreement under advantageous terms, our sales and results of operations could be adversely affected.

Some of our dealer agreements include guarantees, which could have a negative impact on our financial performance if we are required to fulfill them.

In addition, laws in many of the locations in which we operate make it difficult for us to terminate or not renew dealer agreements, which may make it difficult for us to optimize our dealer network.

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.

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

government has continued to impose tariffs on a broad range of foreign goods from an increasing number of countries and regions that it perceives as engaging in unfair trade practices.

Foreign governments have imposed, and may continue to impose, retaliatory tariffs on imports from the U.S.

as well as other barriers to trade.

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

The indirect impact of inflationary pressure on costs throughout the supply chain and the direct impact, for example, on costs for machines we import outside of the U.S., leads to higher input costs and potentially lower margins on certain products we sell.

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

imports, and the potential imposition of tariffs by other countries on U.S.

imports, have made the cost of some of our products more expensive for our non-U.S.

customers and such costs could further increase.

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.

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

However, the end of certain tariff exclusions, and the increasing amount of new and proposed tariffs, could further destabilize global trade and economic conditions in many of the regions where we do business.

The extent and duration of the tariffs and the resulting impact on general economic conditions and on our business are uncertain and depend on various factors, such as recent legal challenges to the U.S.’s imposition of tariffs, negotiations between the U.S.

and affected countries, the responses of other countries or regions, relief that may be granted, availability and cost of alternative sources of supply and demand for our products in affected markets.

Modifying our business operations to continuously adapt to or comply with rapidly evolving tariffs may be time-consuming and costly.

If we become unable to recover a substantial portion of any tariff related costs from our customers, suppliers, duty draw-back, or other available avenues, it 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, 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.

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 multiple global conflicts, social concerns, supply chain and freight constraints, a pandemic, labor shortages and wage increases, high inflation, slower economic growth, high interest rates, foreign currency exchange volatility, recessions, tariffs and potential international trade wars, 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.

Certain of our businesses depend upon continued federal, state, and local government expenditures, which have not always remained constant over time.

Current government spending levels on programs our businesses support may not be sustainable as a result of changes in government leadership, policies or priorities.

Certain of our sales are subject to risks specific to doing business with the U.S.

government and municipalities, including, but not limited to budgetary constraints or fluctuations, changes in government programs or requirements, realignment of funds to other government priorities, government shutdowns and other potential delays in government appropriations processes, delays in the payment of our invoices by government authorities, and adoption of new laws or regulations and our ability to meet specified performance thresholds.

These or other factors could cause government agencies and departments to delay or reduce their purchases or deliveries under contracts, exercise their right to terminate contracts, or not exercise options to renew contracts, any of which could cause us to lose sales.

A significant decline in overall government spending or a shift in expenditures away from agencies or programs that we support could cause a material decline in our sales and harm our financial results.

Some of our customers also depend substantially on government funding of highway construction, maintenance and other infrastructure projects.

Policies of governments attempting to address local deficit or structural economic issues could have a material impact on our customers and markets.

There is an expectation of significant infrastructure and government spending, including in relation to the Infrastructure Investment and Jobs Act, the Inflation Reduction Act and the CHIPS and Science Act.

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.

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

The current market environment generally 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.

Additionally, changes in trade agreements, the continued imposition of tariffs by the United States, retaliatory tariffs by other countries and 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.

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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.

Following our recent REV Transaction and the acquisition of ESG, our debt levels have 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.

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.

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Our ability to generate sufficient cash depends on numerous factors beyond our control and our business may not generate sufficient cash flow from operating activities.

Our ability to make payments on, and refinance, our debt and fund planned capital expenditures will depend on our ability to generate cash in the future.

Our ability to make

payments on, and refinance, our debt and fund planned capital expenditures will depend on our ability to generate cash in the future.

To some extent, this is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control, including high interest rates.

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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.

Cancellations, reductions or delays in customer orders, customer breaches of purchase agreements, reduction in expected backlog, reductions in profitability of backlog due to fluctuations in product costs, or our inability to meet customer delivery schedules may adversely affect our results of operations.

Certain of our businesses may have a backlog due to the nature of our production and sales process, and our financial results are affected if any backlog order is deferred or canceled.

Our estimates of backlog for some of our contracts could be affected by variables beyond our control and may not be entirely realized, if at all.

In addition, given the nature of our customers and our markets, there is a risk that a portion of our backlog may not be fully realized in the future.

Failure to realize sales from our existing or future backlog could negatively impact our financial results.

In addition, certain of our businesses, as a result of firm purchase orders from our customers, enter into agreements to produce and sell products at a specified price based upon our estimation of the cost to produce and the timing of delivery.

Due to the nature of these product cost estimates and the fluctuations in input costs and availability, we may underestimate the costs of production and therefore overestimate the profitability in our backlog.

As a result, the actual profitability on those sales in the future may differ materially from our initial estimates when we recorded the firm purchase order in backlog.

Our ability to meet customer delivery schedules is dependent on a number of factors including, but not limited to, access to components and raw materials, an adequate and capable workforce, assembling/engineering expertise for certain projects and sufficient manufacturing capacity.

The availability of these factors may in some cases be subject to conditions outside of our control.

A failure to deliver in accordance with our performance obligations may result in damage to existing customer relationships, damage to our reputation and a loss of future bidding opportunities, which could cause the loss of future business and could negatively impact our financial performance.

Our consolidated financial results are reported in U.S.

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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.

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.

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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.

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

We rely on sales of our products to generate cash from operations.

Significant portions of our sales are financed by third-party finance companies on behalf of our customers.

The availability of financing by third parties is affected by general economic conditions, credit worthiness of our customers and estimated residual value of our equipment.

Deterioration in credit quality of our customers or estimated residual value of our equipment could negatively impact the ability of our customers to obtain resources they need to purchase our equipment.

Some of our customers have been unable to obtain the credit they need to buy our equipment.

There can be no assurance third-party finance companies will continue to extend credit to our customers.

High interest rates could have a dampening effect on the financial condition of some of our customers and their ability to repay credit obligations.

As a result, some of our customers may need to cancel existing orders and some may be compelled to sell their equipment at less than fair value to raise cash, which could have a negative impact on residual values of our equipment.

Significant portions of our sales are financed by third-party finance companies on behalf of our dealers and customers.

The availability and terms of financing to dealers and retail purchasers by third parties is affected by general economic conditions, credit worthiness of our individual dealers and customers and estimated residual value of our equipment.

Deterioration in credit quality of our customers or dealers, or estimated residual value of our equipment, could negatively impact the ability of our customers or dealers to obtain resources they need to purchase our equipment.

Although we assist our customers and dealers with arranging their financing with third parties for purchases of our products, some of our customers and dealers have been unable to obtain the credit they need to buy our products.

There can be no assurance third-party finance companies will continue to extend credit to our customers and dealers.

Additionally, a decrease in the availability of financing, more restrictive lending practices or an increase in the cost of wholesale financing can prevent dealers from carrying adequate levels of inventory, which limits product offerings available to the end customer and could lead to reduced sales of our products.

For some businesses, a small number of financial institutions provide our dealers’ total financed products outstanding in a floor plan financing program at any point in time.

Substantial increases in interest rates and decreases in the general availability of credit may have an adverse impact upon our business and results of operations.

High interest rates could have a dampening effect on the financial condition of some of our customers and dealers and their ability to repay credit obligations.

As a result, some of our customers and dealers may need to cancel existing orders and some may be compelled to sell their equipment at less than fair value to raise cash, which could have a negative impact on residual values of our equipment.

These economic conditions could have a material adverse effect on demand for our products and on our financial condition and operating results.

We are exposed to losses from providing credit support to some of our customers.

We may assist customers in their rental, leasing and acquisition of our products by facilitating financing transactions directly between (i) end-user customers, distributors and rental companies and (ii) third-party financial institutions, providing recourse in certain circumstances.

We are exposed to losses from providing credit support to some of our customers and dealers.

We may with the rental, leasing and acquisition of our products by facilitating financing transactions directly between (i) end-user customers, dealers, distributors and rental companies and (ii) third-party financial institutions, providing recourse in certain circumstances.

The expectation of losses or non-performance is assessed based on consideration of historical customer assessments, current financial conditions, reasonable and supportable forecasts, equipment collateral value and other factors.

Many of these factors, including the assessment of a customer’s ability to pay, are influenced by economic and market factors that cannot be predicted with certainty.

Our maximum liability is generally limited to our customer’s remaining payments due to the third-party financial institutions at the time of default.

In the event of a customer default, we are generally able to recover and dispose of the equipment at a minimum loss, if any, to us.

Many of these factors, including the assessment of a customer’s or dealer’s ability to pay, are influenced by economic and market factors that cannot be predicted with certainty.

Our maximum liability is generally limited to remaining payments due to the third-party financial institutions at the time of default or repurchase of the products.

In the event of a default, we are generally able to recover and dispose of the equipment at a minimal loss, if any, to us.

During periods of economic weakness, collateral underlying our guarantees of indebtedness of customers can decline sharply, thereby increasing our exposure to losses.

In the future, we may incur losses in excess of our recorded reserves if the financial condition of our customers were to deteriorate further or the full amount of any anticipated proceeds from the sale of the collateral supporting our customers’ financial obligations is not realized.

In the future, we may incur losses in excess of our recorded reserves if the financial condition of our customers was to deteriorate further or the full amount of any anticipated proceeds from the sale of the collateral supporting our customers’ financial obligations is not realized.

Historically, losses related to guarantees have been immaterial;

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An unexpected change in customer financial condition or future economic uncertainty could result in additional requirements for specific reserves, which could have a negative impact on our consolidated financial position.

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.

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.

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.