What changed in this filing

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Item 1A. Risk Factors

2024-02-22 compared with 2023-02-23 · 55 added, 60 removed, 233 unchanged (33% of the section changed)

Set forth below are the risks that we believe are material to our investors.

Set forth below are the risks, some of which have occurred and any of which may occur in the future, that we believe are material to our investors.

This section contains forward-looking statements.

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Our business is affected by general economic conditions, both inside and outside the U.S.

Both domestic and international markets experienced significant inflationary pressures in 2022 and inflation rates in the U.S., as well as in other countries in which we operate, continue at elevated levels for the near-term.

Both domestic and international markets experienced significant inflationary pressures in 2023 and inflation rates in the U.S., as well as in other countries in which we operate, continue at elevated levels.

If the global economy and financial markets, or economic conditions in Europe, the U.S.

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• creating longer sales cycles, and greater difficulty in collecting sales proceeds and slower adoption of new technologies.

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Economic, political, foreign currency and other risks associated with international sales and operations could adversely affect our results of operations.

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• interruption to transportation flows for delivery of parts to us and finished goods to our customers;

• changes in a specific country's or region's political, economic or other conditions;

• changes in a specific country's or region's political, economic, social or other conditions;

• changes in diplomatic and trade relationships, including new tariffs, trade protection measures, import or export licensing requirements, trade embargoes and sanctions and other trade barriers;

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• tariffs imposed by the U.S.

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government on various imports from China and by the Chinese government on certain U.S.

• the impact of public health epidemics/pandemics on the global economy, such as the COVID-19 pandemic;

• the impact of public health emergencies, pandemics, epidemics or other health outbreaks on the global economy, such as the COVID-19 pandemic;

• uncertainties regarding the collectability of accounts receivable;

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• increases in materials, energy, labor or other manufacturing-related costs or higher supply chain logistics costs;

• negative consequences from changes in tax laws;

• negative consequences from changes in or interpretation of laws and regulations, including those related to tax and import/export;

• difficulty in staffing and managing widespread operations;

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An impasse in federal government budget decisions could lead to substantial delays or reductions in federal spending.

We are subject to risks associated with public health epidemics and pandemics, such as the ongoing COVID-19 pandemic.

Our global operations expose us to risks associated with public health epidemics and pandemics.

COVID-19 has had an adverse impact on certain of our operations, supply chains and distribution systems, and we may experience unpredictable reductions in supply and demand for certain of our products and services.

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We are subject to risks associated with public health emergencies, pandemics, epidemics, or other health outbreaks.

Our global operations expose us to risks associated with public health emergencies, epidemics, pandemics and other health outbreaks, including the COVID-19 pandemic.

COVID-19 had an adverse impact on certain of our operations, supply chains and distribution systems, and we may experience unpredictable reductions in supply and demand for certain of our products and services.

National, state and local governments have implemented and may continue to implement safety precautions, including quarantines, border closures, increased border controls, travel restrictions, shelter in place orders and shutdowns and other measures.

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Our ability to continue to manufacture products is highly dependent on our ability to maintain the safety and health of our factory employees.

The ability of our employees to work may be significantly impacted by the COVID-19 pandemic or future epidemics and pandemics.

The ability of our employees to work may be significantly impacted by future epidemics and pandemics.

In addition, the duration and extent of future revenues from sales of products related to the COVID-19 response are uncertain and dependent primarily on customer testing demand as well as therapy and vaccine demand.

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If we fail to adequately develop products or predict our customers’ needs and future activities, we may invest heavily in research and development of products and services that do not lead to significant revenues.

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It may be difficult for us to implement our strategies for improving internal growth.

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Our business could be adversely affected in the short term if any of our large third-party suppliers abruptly discontinues selling products to us.

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Our inability to complete any pending acquisitions or to successfully integrate any new or previous acquisitions could have a material adverse effect on our business.

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If these or other suppliers encounter financial, operating or other difficulties, or if our relationship with them changes, we might not be able to quickly establish or qualify replacement sources of supply.

The supply chains for our businesses could also be disrupted by supplier capacity constraints, bankruptcy or exiting of the business for other reasons, decreased availability or increased cost of key raw materials or commodities, such as energy, and external events such as global economic downturns and macroeconomic trends, natural disasters, pandemic health issues such as COVID-19, war, terrorist actions, governmental

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actions and legislative or regulatory changes.

Any of these factors could result in production interruptions, delays, extended lead times and inefficiencies.

A significant disruption in, or breach in security of, our information technology systems or violation of data privacy laws could adversely affect our business.

As a part of our ongoing effort to upgrade our current information systems, we periodically implement new enterprise resource planning software and other software applications to manage certain of our business operations.

As we implement and add functionality, problems could arise that we have not foreseen.

Such problems could disrupt our ability to provide quotes, take customer orders and otherwise run our business in a timely manner.

When we upgrade or change systems, we may suffer interruptions in service, loss of data or reduced functionality.

In addition, if our new systems fail to provide accurate pricing and cost data our results of operations and cash flows could be adversely affected.

We also rely on our information technology systems to process, transmit and store electronic information (including sensitive data such as confidential business information and personally identifiable data relating to employees, customers and other business partners) and to manage or support a variety of critical business processes and activities (such as interacting with suppliers, selling our products and services, fulfilling orders and billing, collecting and making payments, shipping products, providing services and support to customers, tracking customer activity, fulfilling contractual obligations and otherwise conducting business).

Our systems may be vulnerable to damage or interruption from natural disasters, power loss, telecommunication failures, terrorist attacks, computer hackers, computer viruses, ransomware, phishing, computer denial-of-service attacks, unauthorized access to customer or employee data or company trade secrets, and other attempts to harm our systems.

Certain of our systems are not redundant, and our disaster recovery planning is not sufficient for every eventuality.

Despite any precautions we may take, such problems could result in, among other consequences, interruptions in our services, which could harm our reputation and financial results.

Our key business partners face similar risks and any security breach of their systems could adversely affect our security posture.

Any of the cyber-attacks, breaches or other disruptions or damage described above, if significant, could materially interrupt our operations, delay production and shipments, result in theft of our and our customers’ intellectual property and trade secrets, damage customer, business partner and employee relationships and our reputation or result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws and increased cost for security and remediation, each of which could adversely affect our business and financial results.

Our liability insurance may not be sufficient in type or amount to cover us against claims related to security breaches, cyber-attacks and other related breaches.

If we are unable to maintain reliable information technology systems and appropriate controls with respect to global data privacy and security requirements and prevent data breaches, we may suffer regulatory consequences in addition to business consequences.

As a global organization, we are subject to data privacy and security laws, regulations, and customer-imposed controls in numerous jurisdictions as a result of having access to and processing confidential, personal and/or sensitive data in the course of our business.

A significant cyber-attack or other disruption in, or breach in security of, our information technology systems could adversely harm our operating results and financial condition, damage our reputation or otherwise materially harm our business.

We rely on information technology systems to process, transmit and store electronic information (including sensitive data such as confidential business information, medical information, financial data and personally identifiable data relating to employees, customers and other business partners) and to manage or support a variety of critical business processes and activities (such as interacting with suppliers, selling our products and services, fulfilling orders and billing, collecting and making payments, shipping products, providing services and support to customers, tracking customer activity, fulfilling contractual obligations and otherwise conducting business).

We use a risk-based approach to implementing security controls, reviewing the security controls of certain key business partners and third-party service providers and conducting due diligence on companies we propose to acquire.

Despite our efforts, any particular system we operate or use may be susceptible to compromise of a vulnerability or a privileged account, damage or interruption from natural disasters, power loss, telecommunication failures, data center failure, third party provider failures (including failures at cloud services), hardware and software failures, human error or sabotage, terrorist attacks, geopolitical events, computer hackers, computer viruses, ransomware, phishing, computer denial-of-service attacks, unauthorized access to customer or employee data or company trade secrets, and other attempts to harm our systems and access our information.

We and our third-party providers experience cyber-attacks and other attempts to gain unauthorized access to our products, services, and systems and data on a regular basis, and we anticipate continuing to be subject to such attempts as cyber-attacks become increasingly sophisticated and more difficult to predict and protect against, particularly with the advancement of artificial intelligence.

Despite our and our third-party providers’ implementation of security measures, our products, services, and systems and data, are vulnerable to cyber-attacks, data breaches, malware, inadvertent error, disruptions, tampering or other theft or misuse, including by employees, contingent workers, malicious actors, or nation-states or their agents.

Although most of our systems leverage data backups, our disaster recovery planning is not sufficient for every eventuality.

In addition, our customers rely upon our products (i.e.

instruments, etc.) within their environments, which may be at risk of compromise.

Risks affecting our products may include those associated with remote access solutions, system vulnerabilities, or delay of security updates, which may require customers to take action such as network isolation, password change, or manual update.

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Cyber-attacks, disruptions or other incidents described above, or breaches of security in our networks, in our customers’ or third-party providers’ networks, in third-party products we use, or in cloud-based services provided to us, regardless of whether the breach is attributable to a vulnerability in our products or services, a privileged account compromise, or a failure to maintain the digital security infrastructure or security tools that protect the integrity of our products, services, and systems and data, could materially interrupt our operations or our customer’s operations, delay production and shipments, impact quality, result in theft of our and our customers’ intellectual property and trade secrets, damage our reputation or key relationships, result in defective products or services, legal claims and proceedings, liability and penalties under privacy laws and increased cost for security and remediation, in each case resulting in an adverse effect on our business and financial results.

A violation of data privacy laws could adversely harm our operating results and financial condition, damage our reputation or otherwise materially harm our business.

If we are unable to maintain reliable information technology systems and appropriate controls with respect to global data privacy and security requirements, we may suffer regulatory consequences in addition to business consequences.

As a global organization, we are subject to data privacy and security laws, regulations, and customer-imposed controls in numerous jurisdictions as a result of producing, collecting, processing, storing and transmitting confidential, personal and/or sensitive data in the course of our business.

For example, in the U.S., individual states regulate data breach and security requirements and multiple governmental bodies assert authority over aspects of the protection of personal privacy.

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Government enforcement actions can be costly and interrupt the regular operation of our business, and data breaches or violations of data privacy laws can result in fines, reputational damage and civil lawsuits, any of which may adversely affect our business, reputation and financial statements.

We may have difficulty attracting and retaining a highly qualified workforce.

Our success is largely dependent upon our ability to attract and retain highly qualified scientific, technical, clinical and management workforce in a highly competitive environment.

Qualified individuals are in high demand, and we may incur significant costs to attract them.

We may face difficulty in attracting and retaining key talent for a number of reasons, including management changes or recruitment by competitors.

Our ability to attract and retain key talent also depends in part on how well we maintain a strong workplace culture that is attractive to employees.

Macroeconomic conditions, specifically increased competition for employees and wage inflation, could have a material impact on our ability to attract and retain talent, our turnover rate and the cost of operating our business.

We cannot ensure that we will be able to hire or retain the personnel necessary for our operations or that the loss of any personnel will not have a material impact on our financial condition and results of operations.

Our success is largely dependent upon our ability to attract and retain a highly qualified workforce, comprised of scientific, technical, clinical, and management talent.

We have in the past, and may in the future, have difficulty in attracting and retaining such talent.

Our success in doing so is largely dependent upon various factors, including a highly competitive market, sought-after skills, management changes, competitor recruitment, and maintaining an attractive workplace culture.

Macroeconomic shifts such as increased competition for employees and wage inflation, have previously and could in the future affect our talent retention, turnover rates and operational costs.

We cannot ensure that we will be able to hire or retain the personnel necessary for our operations or that the departure of any personnel will not have a material impact on our financial condition and results of operations.

We may incur unexpected costs from increases in fuel and raw material prices, which could reduce our earnings and cash flows.

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While we may seek to minimize the impact of price increases through higher prices to customers and various cost-saving measures, our earnings and cash flows could be adversely affected in the event these measures are insufficient to cover our costs.

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Because we rely heavily on third-party package-delivery services, a significant disruption in these services or significant increases in prices may disrupt our ability to ship products, increase our costs and lower our profitability.

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We have significant operations in California, near major earthquake faults, which make us susceptible to earthquake risk.

An earthquake or other natural disaster (including the effects of climate change such as sea level rise, drought, flooding, wildfires and more intense weather events), could disrupt our operations or impair our critical systems.

Any of these disruptions or other events outside of our control, such as strikes or other labor unrest, could have an adverse effect on our results of operations.

In addition, if any of our facilities, including our manufacturing or warehouse facilities, or the facilities of our suppliers, third-party service providers, or customers, is affected by natural disasters, such as earthquakes, tsunamis, power shortages or outages, fires, floods or monsoons, public health crises, such as pandemics and epidemics, political crises, such as terrorism, war, political instability or other conflict, or other events outside of our control, such as trade protectionism, strikes or other labor unrest, our results of operations could be adversely affected.

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outside of our control, such as trade protectionism, strikes or other labor unrest, our results of operations could be adversely affected.

Moreover, these types of events could negatively impact customer spending in the impacted regions or depending upon the severity, globally, which could also adversely impact our operating results.

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Legal, Quality and Regulatory Risks

Changes in governmental regulations may reduce demand for our products or increase our expenses.

New governmental regulations or changes in existing governmental regulations may reduce demand for our products or increase our expenses.

We compete in many markets in which we and our customers must comply with federal, state, local and international regulations, such as environmental, health and safety and food and drug regulations.

We develop, configure and market our products to meet customer needs created by those regulations.

Any significant change in regulations could reduce demand for our products or increase our expenses.

Any significant change in regulations, such as the Inflation Reduction Act of 2022 (IRA), which contains drug price negotiation provisions, or change in the interpretation of existing regulations, could reduce demand for our products or increase our expenses.

For example, we manufacture pharmaceuticals and many of our instruments are marketed to the pharmaceutical industry for use in discovering and developing drugs.

Changes in the U.S.

Food and Drug Administration’s (the FDA) regulation of the drug discovery and development process could have an adverse effect on the demand for these products.

Food and Drug Administration’s (the FDA) regulation of the drug discovery and development process could have an adverse effect on the demand for these products, and increased FDA regulation of laboratory-developed tests could delay and add to the cost of commercialization of these products, as well as subject us to additional regulatory controls.

We are subject to laws and regulations governing government contracts, and failure to address these laws and regulations or comply with government contracts could harm our business by leading to a reduction in revenues associated with these customers.

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The laws governing government contracts differ from the laws governing private contracts and government contracts may contain pricing terms and conditions that are not applicable to private contracts.

We are also subject to investigation for compliance with the

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regulations governing government contracts.

We are also subject to investigation for compliance with the regulations governing government contracts.

A failure to comply with these regulations could result in suspension of these contracts, criminal, civil and administrative penalties or debarment.

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Any such failure could, among other things, lead to increased costs, lost revenues, reimbursement to customers for lost drug product, registered intermediates, registered starting materials, and active pharmaceutical ingredients, other customer claims, damage to and possibly termination of existing customer relationships, time and expense spent investigating the cause and, depending on the cause, similar losses with respect to other batches or products.

Production problems in our drug and biologic manufacturing operations could be particularly significant because the cost of raw materials for such manufacturing is often high.

Production problems in our drug and biologic manufacturing operations could be particularly

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significant because the cost of raw materials for such manufacturing is often high.

If problems in preparation or manufacture of a product or failures to meet required quality standards for that product are not discovered before such product is released to the market, we may be subject to adverse regulatory actions, including product recalls, product seizures, injunctions to halt manufacture and distribution, restrictions on our operations, civil sanctions, including monetary sanctions, and criminal actions.

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In addition, we are subject to inspections by these regulatory authorities.

Failure by us or by our customers to comply with the requirements of these regulatory authorities,

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including without limitation, remediating any inspectional observations to the satisfaction of these regulatory authorities, could result in warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution, restrictions on our operations, civil or criminal sanctions, or withdrawal of existing or denial of pending approvals, including those relating to products or facilities.

Failure by us or by our customers to comply with the requirements of these regulatory authorities, including without limitation, remediating any inspectional observations to the satisfaction of these regulatory authorities, could result in warning letters, product recalls or seizures, monetary sanctions, injunctions to halt manufacture and distribution, restrictions on our operations, civil or criminal sanctions, or withdrawal of existing or denial of pending approvals, including those relating to products or facilities.

In addition, such a failure could expose us to contractual or product liability claims, contractual claims from our customers, including claims for reimbursement for lost or damaged active pharmaceutical ingredients or personal injury, as well as ongoing remediation and increased compliance costs, any or all of which could be significant.

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Any noncompliance by us with applicable laws and regulations or the failure to maintain, renew or obtain necessary permits and licenses could result in criminal, civil and administrative penalties and could have an adverse effect on our results of operations.

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Our reputation, ability to do business and financial statements may be impaired by improper conduct by any of our employees, agents, business partners or other third parties.

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We place considerable emphasis on obtaining patent and trade secret protection for significant new technologies, products and processes because of the length of time and expense associated with bringing new products through the development process and into the marketplace.

Our success depends in part on our ability to develop patentable products and obtain and enforce patent protection for our products both in the U.S.

Our success depends in part on our ability to develop patentable products and obtain, defend and enforce patent protection for our products both in the U.S.

and in other countries.

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In addition, our trade secrets may otherwise become known or be independently developed by our competitors.

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We also depend in part on our trademarks and the strength of our proprietary brands, which we consider important to our business.

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In preparing our financial statements, we record the amount of tax that is payable in each of the countries, states and other jurisdictions in which we operate.

Our future effective tax rate, however, may be lower or higher than experienced in the past due to numerous factors, including a change in the mix of our profitability from country to country, changes in accounting for income taxes, the results of examinations and audits of our tax filings and recently enacted and future changes in tax laws in jurisdictions in which we operate.

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our tax filings and recently enacted and future changes in tax laws in jurisdictions in which we operate.

Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations, which could have an adverse effect on our business, results of operations and cash flows.

In December 2021, the Organization for Economic Cooperation and Development (“OECD”) published a proposal for the establishment of a global minimum tax rate of 15% (the “Pillar Two rule”).

The OECD has recommended that the Pillar Two rule become effective for fiscal years beginning after January 1, 2024.

To date, member states are in various stages of implementation and the OECD continues to refine technical guidance.

We are closely monitoring developments of the Pillar Two rule and are currently evaluating the potential impacts in each of the countries in which we operate;

however, we currently do not expect the Pillar Two rule to have a material impact on our effective tax rate.

Our existing and future indebtedness may restrict our investment opportunities or limit our activities and negatively impact our credit ratings.

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Also, an acceleration of the debt under certain of our debt instruments would trigger an event of default under other of our debt instruments.

Unresolved Staff Comments

The company owns and leases office, engineering, laboratory, production and warehouse space throughout the world.

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Legal Proceedings

There are various lawsuits and claims against the company involving product liability, intellectual property, employment and commercial issues.

See Note 12 to our Consolidated Financial Statements – Commitments and Contingencies .

Mine Safety Disclosures

Not applicable.

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