What changed in this filing

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Item 1A. Risk Factors

2022-03-04 compared with 2021-03-05 · 128 added, 82 removed, 368 unchanged (36% of the section changed)

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Risks and Uncertainties

We are subject to various risks that could materially and adversely affect our business, results of operations, cash flow, liquidity, or financial condition which make an investment in our securities risky.

We are subject to various risks that could materially and adversely affect our business, results of operations, cash flows, liquidity, or financial condition which make an investment in our securities risky.

You should understand that these risks could, in circumstances we may or may not be able to accurately predict, recognize, or control, have a material adverse effect on our business, growth, reputation, prospects, financial condition, operating results (including components of our financial results), cash flows, liquidity, and stock price.

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our operations could also be affected by factors, events, or uncertainties that are not presently known to us or that we currently do not consider to present significant risks to our operations.

Although the risks are organized by headings, and each risk is discussed separately, many are interrelated.

You should not interpret the disclosure of any risk factor to imply that the risk has not already materialized.

Because there is no way to determine in advance whether, or to what extent, any present uncertainty will ultimately impact our business, you should give equal weight to each of the following:

Risks Relating to the COVID-19 Pandemic

The global spread of the COVID-19 pandemic has been and continues to be a complex and rapidly-evolving situation, with governments, public institutions and other organizations imposing or recommending, and businesses and individuals implementing, at various times and to varying degrees, restrictions on various activities or other actions to combat its spread, such as restrictions and bans on travel or transportation, limitations on the size of gatherings, closures of or occupancy or other operating limitations on work facilities, schools, public buildings and businesses, cancellation of events, including sporting events, conferences and meetings, and quarantines and lock-downs.

The global spread of COVID-19 has been and continues to be a complex and rapidly-evolving situation, with governments, public institutions and other organizations imposing or recommending, and businesses and individuals implementing, at various times and to varying degrees, restrictions on various activities or other actions to combat its spread, such as restrictions and bans on travel or transportation, limitations on the size of gatherings, closures of or occupancy or other operating limitations on ports, work facilities, schools, public buildings and businesses, cancellation of events, including sporting events, conferences and meetings, and quarantines and lock-downs.

The COVID-19 pandemic and its consequences have and will continue to impact our business, operations, and financial results.

The extent to which the COVID-19 pandemic impacts our business, operations, and financial results, including the duration and magnitude of such effects, will depend on numerous evolving factors that we may not be able to accurately predict or assess, including the duration and scope of the COVID-19 pandemic (including the location and extent of resurgences of the virus and the availability of effective treatments or vaccines);

the negative impact the COVID-19 pandemic has on global and regional economies and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending.

The extent to which the COVID-19 pandemic impacts our business, operations, and financial results, including the duration and magnitude of such effects, will depend on numerous evolving factors that we may not be able to accurately predict or assess, including the duration and scope of the COVID-19 pandemic (including the location and extent of resurgences of the virus, particularly in light of new variants, and the availability of effective treatments or vaccines);

and the negative impact the COVID-19 pandemic has on global and regional economies and economic activity, including the duration and magnitude of its impact on unemployment rates and consumer discretionary spending.

Because the severity, magnitude and duration of the COVID-19 pandemic are uncertain, rapidly changing, and difficult to predict, the pandemic's impact on our operations and financial performance, as well as its impact on our ability to successfully execute our business strategy and initiatives, remains uncertain.

As the COVID-19 pandemic has spread to other jurisdictions and has been declared a global pandemic, the full extent of this outbreak and the related governmental, business and travel restrictions in order to contain the COVID-19 pandemic are continuing to evolve globally.

In response, we have created a COVID-19 task force,

which includes a cross-functional group of senior-level executives, to manage and respond to the everchanging health and safety requirements across the globe and communicate our response to the pandemic to our global factory and office leaders.

Local government mandates required us, in the first quarter of 2020, to keep our China factories closed for a period of approximately two weeks beyond the end of the Chinese Lunar New Year.

Our Mexico factory was closed for more than one week due to local health ordinance requirements during the second quarter of 2020.

As a part of our response to this pandemic, our COVID-19 task force has developed and we have implemented additional safety measures for all factory employees across the globe, including temperature scans upon entry, hand sanitizer stations located throughout the facilities, mandatory mask wearing, social distancing measures in gathering places and restricting all visitor access.

As the COVID-19 pandemic continues, the full extent of this outbreak and the related governmental, business and travel restrictions in order to contain the COVID-19 pandemic are continuing to evolve globally.

Our COVID-19 task force, which includes a cross-functional group of senior-level executives, continues to manage and respond to the ever-changing health and safety requirements across the globe and communicate our responses and recommended course of action to our global factory and office leaders.

In addition, we continue to maintain safety measures for all our employees across the globe as pandemic conditions require, including implementing work-from-home arrangements, restricting travel except where essential and approved in advance, frequent office and factory sanitation, temperature scans upon entry, hand sanitizer stations located throughout our facilities and offices, mask wearing, social distancing measures in gathering places and restricting visitor access.

All factories are up to or near labor capacity as of the issuance of this report.

We have also taken measures to safeguard the health and well-being of our employees in our office locations throughout the world, including implementing work from home arrangements and a moratorium on all travel, except where essential and approved in advance.

We have implemented enhanced safety measures upon the reopening of our office locations, including more frequent office sanitation, temperature scans upon arrival, mandatory mask wearing, additional hand sanitizer locations, social distancing measures throughout locations and restricted visitor access.

The reopening of our offices continues to follow suggested guidelines by the Centers for Disease Control and Prevention, the World Health Organization, and local governmental orders and recommendations.

The continued safety and welfare of our employees will remain at the forefront of all decision-making.

We anticipate that restrictions enacted as a result of and the global health crisis caused by the COVID-19 pandemic will continue to negatively impact business activity across the globe, including our business.

We expect our sales demand to be negatively impacted into, at least, the first half of 2021 given the global reach and economic impact of the COVID-19 pandemic and the various quarantine and social distancing measures put in place to contain the spread of COVID-19.

We have also seen some disruptions in our supply chain that, if continued, may cause us difficulty in fulfilling customer orders.

Further, we continue to monitor and follow suggested guidelines by the Centers for Disease Control and Prevention, the World Health Organization, and local governmental orders and recommendations.

The continued safety and welfare of our employees will remain at the forefront of our decision-making.

We anticipate that these actions and the global health crisis caused by the COVID-19 pandemic will continue to negatively impact business activity across the globe, including our business.

We expect our sales demand to be negatively impacted into, at least, the first half of 2022 given the global reach and economic impact of the COVID-19 pandemic and the various quarantine and social distancing measures put in place to contain the spread of the COVID-19 pandemic.

A closure of one of our factories for a sustained period of time would, in the short run, impact our ability to meet customer demand and would negatively impact our results.

We will continue to actively monitor the situation and may take further actions altering our business operations as necessary or as required by federal, state, or local authorities.

We have also seen disruptions in our supply chain, due to difficulty in obtaining ICs and substantial delays in the transportation and the onloading and offloading of our product due to significant congestion at ports throughout the world.

This, in turn, causes significant congestion in other downstream transportation, such as via trucks and rail.

As such, these congestions have caused and continue to cause difficulty and delays in our ability to fulfill customer orders and have resulted in increased logistics costs.

We will continue to actively monitor these situations and may take further actions altering our business operations as necessary or as required by federal, state, or local authorities.

The potential effects of any such alterations or modifications may have a material adverse impact on our business during 2022.

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The domestic and international regulatory environment related to information security, data collection and privacy is increasingly rigorous and complex, with new and constantly changing requirements applicable to our business.

Compliance with these

requirements, including the European Union's General Data Protection Regulation and other domestic and international regulations, could result in additional costs and changes to our business practices.

Compliance with these requirements, including the European Union's General Data Protection Regulation and other domestic and international regulations, could result in additional costs and changes to our business practices.

Moreover, we rely heavily on computer systems to manage and operate our business, record and process transactions, and manage, support and communicate with our employees, customers, suppliers and other vendors.

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subsidiaries and to independent foreign distributors, who in turn distribute our products worldwide.

While we generally have a broad and varied customer base, during the years ended December 31, 2020, 2019 and 2018, Comcast accounted for sales totaling more than 10% of our net sales.

In addition to this customer, we have some customers that, individually, purchase a large amount of products from us.

While we generally have a broad and varied customer base, during the years ended December 31, 2021, 2020 and 2019, Comcast Corporation accounted for sales totaling more than 10% of our net sales.

During the year ended December 31, 2021, Daikin Industries Ltd.

also accounted for sales totaling more than 10% of our net sales.

In addition to these customers, we have some customers that, individually, purchase a large amount of products from us.

Although our broad distribution channels help to minimize the impact of the loss of any one customer, the loss of any of these large individual customers, or our inability to maintain order volume with these customers, may have an adverse effect on our sales, operating results, financial condition and cash flows.

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Dependence on Foreign Manufacturing

Although we own and operate factories in the PRC, Brazil and Mexico, third-party manufacturers located in Asia continue to manufacture a portion of our products.

Although we operate factories in the PRC, Brazil and Mexico and expect to commence manufacturing operations in a new factory in Vietnam in the third quarter of 2022, third-party manufacturers located in Asia continue to manufacture a portion of our products.

We believe that the loss of any one or more of our manufacturers would not have a long-term material adverse effect on our business, results of operations and cash flows, because numerous other manufacturers are available to fulfill our requirements;

however, the loss of any of our major third-party manufacturers may adversely affect our business, operating results, financial condition and cash flows until alternative manufacturing arrangements are secured.

Use of Third-Party Employment Agencies

We utilize the services of third-party employment or labor agencies to provide us with staff to support our production activities.

While we require these agencies to adhere to our Supplier Code of Conduct, which among other things prohibits forced labor in any manner and requires them to treat all employees with respect and dignity, use of these third-party agencies has come under worldwide scrutiny.

In October 2021, Reuters published an article indicating that individuals from China's Uyghur minority, originally resident in the Xinjiang Uyghur Autonomous Region of China ("XUAR"), were working in a factory operated by our Chinese subsidiary, Gemstar Technology (Qinzhou) Co.

The article alleged that the presence of these workers in our factory was indicative of "a transfer program described by some rights groups as forced labor." These workers were employed, managed by and provided to Gemstar by a third-party employment agency.

As a result of this article, we commissioned two separate audits.

Both audits confirmed that there were no indicia of forced labor or any other violations of human rights and that Gemstar compensated these individuals for their work at the same rates as workers of other ethnicities who had comparable skills and roles and at a level that was above the local minimum wage.

Although our review did not identify any instances in which individuals were obliged or in any other way forced to work at the Gemstar factory or were paid less than their promised wage, Gemstar terminated its relationship with that agency, ended its arrangement with these workers, and paid all outstanding wages and severance directly and individually to each of the workers in question.

Shortly after publication of the Reuters article, three U.S.

Senators heading the U.S.

Senate Foreign Affairs Committee (the "Committee") jointly wrote to us seeking information regarding these workers and the terms of their work at our Gemstar factory.

We cooperated fully with the Committee's inquiry and provided the Committee with timely and complete responses to all of its questions.

Nonetheless, the perception that we or an entity affiliated with us might have had associations with a program described by some as involving forced labor could result in reputational damage as well as lost revenue.

To date, as a result of this perception, one customer has put further business with us on hold.

Should additional customers cease doing business with us, the loss of revenue could become material, which would have an adverse effect on our business, results of operations and financial condition.

Legislation Pertaining to Forced Labor

On December 23, 2021, President Biden signed the Uyghur Forced Labor Prevention Act (the "UFLPA") which is to take effect on June 21, 2022.

The UFLPA creates a rebuttable presumption that all goods produced or manufactured, even partially, in XUAR, were made with forced labor and, therefore, would not be allowed entry at U.S.

Importers will be required to present clear and convincing evidence that goods from the XUAR are not made with forced labor.

Under the law, U.S.

Customs and Border Protection is tasked with developing targeting and enforcement strategies, the details of which are yet to be finalized.

The UFLPA also builds on prior legislation, such as 2020's Uyghur Human Rights Policy Act (the "UHRPA") by expanding the UHRPA's authorization of sanctions to cover foreign individuals responsible for human rights abuses related to forced labor.

While we do not source product from the XUAR and have increased actions to ensure our entire supply chain is free of any products made with forced labor, there is nonetheless a risk, particularly in light of prior media allegations about Gemstar, that our business, results of operations and financial condition could be adversely affected by the UFLPA, the UHRPA and related regulatory requirements and enforcement activity.

government has also recently expanded regulatory and enforcement activity related to a long-existing ban on U.S.

importation of products produced with forced labor.

Section 307 of the U.S.

Tariff Act of 1930, as amended ("Section 307") prohibits U.S.

importation of goods that are produced or manufactured, wholly or in part, in any non-U.S.

country by forced or indentured labor.

While we do not believe we or any of our affiliates have used forced labor, and Gemstar has terminated its relationship with the third-party labor agency, ended its arrangement with these workers in question, and paid all outstanding wages and severance directly and individually to each of these workers, we cannot guarantee that the relevant U.S.

authorities will not decide that forced labor exists or existed in the manufacturing of our products or in our supply chain and, pursuant to Section 307, prohibit or otherwise penalize U.S.

imports of certain of our products, which would have an adverse effect on our business, results of operations and financial condition.

In addition, if any new legislation or regulatory action that imposes additional restrictions or requirements on importation with respect to alleged use of forced labor were to be enacted in the United States or in other regions where we do business, our business, results of operations and financial condition could be adversely affected.

Dependence upon Key Suppliers

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Any extended interruption, shortage or termination in the supply of any of the components used in our products, or a reduction in their quality or reliability, or a significant increase in prices of components, would have an adverse effect on our operating results, financial position and cash flows.

Outsourced Labor

We continue to use outside resources to assist us in the development of some of our products and technologies.

While we believe that such outside services will continue to be available to us, if they cease to be available, the development of these products and technologies may be substantially delayed, which may have a material adverse effect on our operating results, financial condition and cash flows.

Disruptions Caused by Labor Disputes or Organized Labor Activities Could Materially Harm our Business and Reputation

Currently, approximately 1,700 of our Brazil and Mexico employees are represented by labor unions.

Disputes with the current labor unions or new union organizing activities could lead to production slowdowns or stoppages and make it difficult or

impossible for us to meet scheduled delivery times for product shipments to some of our customers, which could result in a loss of business and material damage to our reputation.

In addition, union activity and compliance with international labor standards could result in higher labor costs, which could have a material adverse effect on our financial position and results of operations.

Difficulty in Ordering ICs and Increases in Commodities and Freight Costs Have Adversely Affected and Will Continue to Adversely Affect Our Business.

We continue experiencing difficulty in ordering ICs for future use and that difficulty is expected to continue through at least mid to late 2022.

The global shortage of ICs is affecting a multitude of industries and we expect it to continue to adversely affect our business.

While we are identifying other sources of ICs and taking other production and inventory control steps in order to mitigate the effects caused by this shortage, we cannot guarantee that we will find alternative sources to meet our short- and longer-term IC needs and/or without experiencing increases in the prices we pay for these components.

If we are not able to find these alternative sources of ICs or are not able to purchase sufficient quantities of ICs from our current and alternative suppliers, we may not be able to produce sufficient quantities of products to meet our customers' demands.

This, in turn, may affect our ability to meet our quarterly revenue targets and otherwise adversely affect our business.

In addition, many of our products are paired with certain of our customers' products, like set-top boxes and televisions.

If those customers are not able to obtain sufficient quantities of ICs for their products, their demand for our products may decrease.

Also, we are beginning to experience increases in commodities and freight costs which could adversely affect our margins.

Further, we may incur additional freight costs to meet the delivery demands of our customers.

Transportation Costs and Impact of Oil Prices

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Additionally, tariffs and other export fees may be incurred to ship products from foreign manufacturers to the customer.

The inability to predict swings in demand or delays in production may increase the cost of freight which may have a material adverse effect on our product margins.

The inability to predict swings in

demand or delays in production may increase the cost of freight which may have a material adverse effect on our product margins.

In addition, we have an exposure to oil prices in two forms.

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The second is in the cost of delivery and freight, which would be passed on by the carriers that we use in the form of higher rates.

We record freight-in as a cost of sales and freight-out in operating expenses.

Rising oil prices may have an adverse effect on cost of sales and operating expenses.

In fact, we have already seen oil price increases immediately after the invasion by Russia into Ukraine.

Disruptions Caused by Labor Disputes or Organized Labor Activities Could Materially Harm our Business and Reputation

Currently, approximately 1,700 of our Brazil and Mexico employees are represented by labor unions.

Disputes with the current labor unions or new union organizing activities could lead to production slowdowns or stoppages and make it difficult or impossible for us to meet scheduled delivery times for product shipments to some of our customers, which could result in a loss of business and material damage to our reputation.

Leased Property

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We have historically made strategic acquisitions of businesses in industries adjacent to our core business and will likely acquire additional businesses in the future as part of our long-term growth strategy.

The success of future acquisitions depends in large part on our ability to integrate the operations and personnel of the acquired companies and manage challenges that may arise as a result of the acquisitions, particularly when the acquired businesses operate in new or foreign markets.

The success of future acquisitions depends in large

part on our ability to integrate the operations and personnel of the acquired companies and manage challenges that may arise as a result of the acquisitions, particularly when the acquired businesses operate in new or foreign markets.

In the event we do not successfully integrate such future acquisitions into our existing operations so as to realize the expected return on our investment, our results of operations, cash flow or financial condition could be adversely affected.

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Risks Relating to Regulation and Legal

Certain Regulatory and Financial Risks Related to Climate Change

Growing concerns about climate change may result in the imposition of additional regulations or restrictions to which we may become subject.

A number of governments or governmental bodies have introduced or are contemplating regulatory changes in response to climate change, including regulating greenhouse gas emissions.

The outcome of new legislation or regulation in the U.S.

and other jurisdictions in which we operate may result in new or additional requirements, additional charges to fund energy efficiency activities, and fees or restrictions on certain activities.

Compliance with these climate change initiatives may

also result in additional costs to us, including, among other things, increased production costs, additional taxes, reduced emission allowances or additional restrictions on production or operations.

Any adopted future climate change regulations could also negatively impact our ability to compete with companies situated in areas not subject to such limitations.

Even without such regulation, increased public awareness and adverse publicity about potential impacts on climate change emanating from us or our industry could harm us.

We may not be able to recover the cost of compliance with new or more stringent laws and regulations, which could adversely affect our results of operations, financial position or cash flows.

Significant Developments From Potential Changes in U.S.

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government implemented additional tariffs on certain goods imported from the PRC.

We manufacture a substantial amount of our products in the PRC and are presently subjected to these additional tariffs and will remain so until the tariff lists are altered.

We manufacture a substantial amount of our products in the PRC and are presently subject to these additional tariffs and will remain so until the tariff lists are altered.

These tariffs, and other governmental action relating to international trade agreements or policies, may adversely impact demand for our products, our costs, customers, suppliers and/or the U.S.

economy or certain sectors thereof and, as a

result, adversely impact our business.

economy or certain sectors thereof and, as a result, adversely impact our business.

These additional tariffs may cause us to increase prices to our customers which may reduce demand, or, if we are unable to increase prices, result in lowering our margin on products sold.

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to Mexico and a third-party manufacturing partner outside of the PRC.

This transition was substantially completed by the third quarter of 2020.

Policy Changes Affecting International Trade Could Adversely Impact the Demand for Our Products and Our Competitive Position

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Additionally, the United Kingdom's exit from the European Union has caused and may continue to cause significant volatility in global stock markets, currency exchange rate fluctuations and global economic uncertainty.

Although it is unknown what the terms of the United Kingdom's future relationship with the European Union will be, it is possible there will be greater restrictions on imports and exports between the United Kingdom and the European Union and increased regulatory complexities.

The United Kingdom and the European Union entered into a free trade agreement that now governs the relationship between the United Kingdom and the European Union.

While the United Kingdom and the European Union can generally continue to trade with each other without the imposition of tariffs for imports and exports, there are new customs requirements that require additional documentation and data, and there are also new controls on the movement and reporting of goods.

Although we have not experienced any material disruption in our business as a result of the United Kingdom's exit from the European Union, we do not know the extent that this exit and the free trade agreement will ultimately have on the business and regulatory environment in the United Kingdom, the rest of the European Union or other countries, although it is possible there will be tighter controls and administrative requirements for imports and exports between the United Kingdom and the European Union or other countries, as well as increased regulatory complexities.

Any of these factors could adversely impact customer demand, our relationships with customers and suppliers and our results of operations.

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Our international operations, and resulting revenues, continue to grow, making up a significant part of our current business and future strategic plans.

Additionally, we operate factories in the PRC, Brazil and Mexico, engineering centers in India, Korea and Japan and rely on third-party manufacturers located in Asia.

We presently operate factories in the PRC, Brazil and Mexico, engineering centers in India, Korea and Japan and rely on third-party manufacturers located in Asia.

In addition, we expect to commence manufacturing operations in Vietnam in the third quarter of 2022.

As a result, we are increasingly exposed to the challenges and risks of doing business outside the United States, which could reduce our revenues or profits, increase our costs, result in significant liabilities or sanctions, or otherwise disrupt our business.

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(4) the difficulties involved in managing an organization doing business in many different countries;

(5) uncertainties as to the enforceability of contract and intellectual property rights under local laws;

(5) uncertainties as to the enforceability of contract and intellectual

property rights under local laws;

(6) rapid changes in government policy, political or civil unrest, acts of terrorism, or the threat of international boycotts or U.S.

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We are also currently subject to tax controversies in various jurisdictions, and these jurisdictions may assess additional tax liabilities against us.

Developments in an audit, investigation, or other tax controversy could have a material effect on our

operating results or cash flows in the period or periods for which that development occurs, as well as for prior and subsequent periods.

Developments in an audit, investigation, or other tax controversy could have a material effect on our operating results or cash flows in the period or periods for which that development occurs, as well as for prior and subsequent periods.

We regularly assess the likelihood of an adverse outcome resulting from these proceedings to determine the adequacy of our tax accruals.

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We are subject to a wide variety of complex domestic and foreign laws and regulations, and legal compliance risks, including securities laws, tax laws, employment and pension-related laws, competition laws, U.S.

and foreign export and trading laws, and laws governing improper business practices.

We are affected by new laws and regulations, and changes to existing laws and regulations, including interpretations by courts and regulators.

and foreign export and trading laws, laws governing improper business practices, and health, safety and environmental laws and regulations.

These laws and regulations not only govern our current operations and products, but could also impose liability on us for our past operations.

From time to time, our Company, our operations and the industries in which we operate are being reviewed or investigated by regulators, which may lead to enforcement actions or the assertion of private litigation claims and damages.

Our costs to comply with these laws and regulations may increase as these requirements become more stringent in the future, and these increased costs may adversely affect our results of operations, cash flow or financial condition.

Although we believe that we have adopted appropriate risk management and compliance programs to mitigate these risks, the global and diverse nature of our operations means that compliance risks will continue to exist.

Investigations, examinations and other proceedings, the nature and outcome of which cannot be predicted, will likely arise from time to time.

These investigations, examinations and other proceedings may subject us to significant liability and require us to make significant accruals or pay significant settlements, fines and penalties, which may have a material adverse effect on our results of operations, cash flow or financial condition.

These investigations, examinations and other proceedings may subject us to significant liability and require us to make significant

accruals or pay significant settlements, fines and penalties, which may have a material adverse effect on our results of operations, cash flows or financial condition.

Patents, Trademarks, and Copyrights

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Because of the rapid innovation of products and technologies that is characteristic of our industry, there can be no assurance that rights granted under any patent will provide competitive advantages to us or will be adequate to safeguard and maintain our proprietary rights.

We further believe that our business is not materially dependent upon any single patent, trade secret, trademark, trade name, copyright, and know-how.

We further believe that while our business is not materially dependent upon any single patent, trade secret, trademark, trade name, copyright, or know-how, we do have "families" of patents that are interrelated, which if patents within these "families" are determined to be invalid or unenforceable, could have a detrimental effect on our business.

Despite our efforts to protect such intellectual property and other proprietary information from unauthorized use or disclosure, third parties may attempt to disclose, obtain or use our intellectual property and information without our authorization.

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Unauthorized use of our intellectual property by third parties, the failure of foreign countries to have laws to protect our intellectual property rights, or an inability to effectively enforce such rights in foreign countries could have an adverse effect on our business.

In addition, as is typical in our business, third parties may challenge the validity of our patents.

In the event that such challenges prove successful, the value of our patents may decline which, in turn, could have an adverse effect on our business.

Further, some of our products include or use technology and/or components of third parties.

While it may be necessary in the future to seek or renew licenses relating to various aspects of such products, we believe that, based upon past experience and industry practice, such licenses may be obtained on commercially reasonable terms;

however, there can be no guarantee that

such licenses may be obtained on such terms or at all.

however, there can be no guarantee that such licenses may be obtained on such terms or at all.

Because of technological changes in the wireless and home control industry, current extensive patent coverage, and the rapid rate of issuance of new patents, it is possible certain components of our products and business methods may unknowingly infringe upon the patents of others.

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The amounts claimed may be substantial, but they may not bear any reasonable relationship to the merits of the claims or the extent of any real risk of court awards assessed against us or in our favor.

We are Exposed to Greater Risks of Liability for Omissions or System Failures

If a customer or third party believes that he or she has suffered harm to person or property due to an actual or alleged security system failure, he or she (or their insurers) may pursue legal action against us, and the cost of defending the legal action and of any judgment against us could be substantial.

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Regulations Related to the Use of Conflict-Free Minerals May Increase Our Costs and Expenses, and an Inability to Certify that Our Products are Conflict-Free May Adversely Affect Customer Relationships

The Dodd-Frank Wall Street Reform and Consumer Protection Act contains provisions to improve the transparency and accountability of the use by public companies in their products of minerals mined in certain countries and to prevent the sourcing of such "conflict" minerals.

sourcing of such "conflict" minerals.

As a result, the SEC enacted new annual disclosure and reporting requirements for public companies that use these minerals in their products, which apply to us.

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Further, if we are unable to certify that our products are conflict free, we may face challenges with our customers, which may place us at a competitive disadvantage, and our reputation may be harmed.

We are Required to Comply with Numerous Complex and Increasingly Stringent Domestic and Foreign Health, Safety and Environmental Laws and Regulations, the Cost of Which is Likely to Increase

Our operations are subject to various domestic and foreign health, safety and environmental laws and regulations.

These laws and regulations not only govern our current operations and products, but also impose potential liability on us for our past operations.

We expect health, safety and environmental laws and regulations to impose increasingly stringent requirements upon our industry and us in the future.

Risks Relating to Finance

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Potential Fluctuations in Quarterly Results

We may from time to time increase our operating expenses to fund greater levels of R&D, sales and marketing activities, development of new distribution channels, improvements in our operational and financial systems and development of our customer support capabilities, and to support our efforts to comply with various government regulations.

We may from time to time increase our operating expenses to fund greater levels of R&D, sales and marketing activities, development of new distribution channels, improvements in our operational and financial systems, moving manufacturing capabilities to other countries and development of our customer support capabilities, and to support our efforts to comply with various government regulations.

To the extent such expenses precede or are not subsequently followed by increased revenues, our business, operating results, financial condition and cash flows will be adversely affected.

In addition, we may experience significant fluctuations in future quarterly operating results that may be caused by many other factors, including demand for our products, introduction or enhancement of products by us and our competitors, the loss or acquisition of any significant customers, market acceptance of new products, price reductions by us or our competitors, mix of distribution channels through which our products are sold, product or supply constraints, level of product returns, mix of customers and products sold, component pricing, mix of international and domestic revenues, foreign currency exchange rate fluctuations and general economic conditions.

In addition, as a strategic response to changes in the competitive environment, we may from time to time make certain pricing or marketing decisions or acquisitions that may have a material adverse effect on our business, results of operations or financial condition.

In addition, as a strategic response to changes in the competitive environment,

we may from time to time make certain pricing or marketing decisions or acquisitions that may have a material adverse effect on our business, results of operations or financial condition.

As a result, we believe period-to-period comparisons of our results of operations are not necessarily meaningful and should not be relied upon as an indication of future performance.

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As a result, changes between the foreign exchange rates and the U.S.

dollar affect the amounts we record for our foreign assets, liabilities, revenues and

expenses, and could have a negative effect on our financial results.

dollar affect the amounts we record for our foreign assets, liabilities, revenues and expenses, and could have a negative effect on our financial results.

We expect that our exposure to foreign currency exchange rate fluctuations will grow as the relative contribution of our non-U.S.

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These reforms have resulted in plans to phase out and eventually replace LIBOR.

On November 30, 2020, the Financial Conduct Authority, which regulates LIBOR, announced it would cease publication of the one-week and two-month USD LIBOR immediately after December 31, 2021 and cease publications of the remaining tenors immediately after June 30, 2023.

The Financial Conduct Authority, which regulates LIBOR, announced it would cease publication of the one-week and two-month USD LIBOR immediately after December 31, 2021 and cease publications of the remaining tenors immediately after June 30, 2023.

On January 7, 2021, we executed an amendment to our Second Amended Credit Agreement which defines the Secured Overnight Financing Rate ("SOFR") as the replacement benchmark for LIBOR upon its phase out.

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• place us at a competitive disadvantage compared to businesses in our industry that have less debt.

A significant portion of our operations are conducted through our subsidiaries.

A significant portion of our operations is conducted through our subsidiaries.

As a result, our ability to generate sufficient cash flow for our needs is dependent on the earnings of our subsidiaries and the payment of those earnings to us in the form of dividends, loans or advances and through repayment of loans or advances from us.

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In addition, any payment of dividends, loans or advances by our subsidiaries may be subject to statutory or contractual restrictions.

Payments to us by our subsidiaries will also be contingent upon our subsidiaries' earnings and business considerations.

Payments to us by our

subsidiaries will also be contingent upon our subsidiaries' earnings and business considerations.

Our right to receive any assets of any of our subsidiaries upon their liquidation or reorganization will be effectively subordinated to the claims of that subsidiary's creditors, including trade creditors.

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Downgrades in these ratings will increase our cost of borrowing and may have an adverse effect on our access to the capital markets, including our access to the commercial paper market.

An inability to

access the capital markets may have a material adverse effect on our results of operations, cash flow, liquidity or financial condition.

An inability to access the capital markets may have a material adverse effect on our results of operations, cash flow, liquidity or financial condition.

Additionally, any failure to comply with covenants in the instruments governing our debt could result in an event of default which, if not cured or waived, would have a material adverse effect on us.

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Historically, we have had large fluctuations in the price of our common stock, and such fluctuations may continue.

The market price for our common stock is volatile and may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

The trading market for our common stock has historically been at low volumes and our market price is volatile and may fluctuate significantly in response to a number of factors, most of which we cannot control, including:

• the public's response to press releases or other public announcements by us or third parties, including our filings with the SEC and announcements relating to product and technology development, relationships with new and existing customers, litigation and other legal proceedings in which we are involved and intellectual property impacting us or our business;

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• market conditions or trends in our industry or the economy as a whole.

In the past, stockholders have instituted securities class action litigation following periods of market volatility.

If we were involved in securities litigation, we may incur substantial costs and our resources and the attention of management may be diverted from our business.

Stockholders of other companies have instituted securities class action litigation against such companies after periods of price volatility in such companies' stock.

If we were to become involved in such securities litigation, we may incur substantial costs and the attention of management may be diverted from our business.

In addition, our officers and directors periodically sell shares of our common stock which they own, many times pursuant to trading plans established under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

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Nonetheless, the market price of our stock may be affected by such sales of shares by our officers and directors.

If Securities or Industry Analysts Fail to Continue Publishing Research About Our Business, Our Stock Price and Trading Volume May Decline

The trading market for our common stock has historically been at low volumes and is influenced by the research and reports that industry or securities analysts publish about us or our business.

If one or more of these analysts cease coverage of our company or fail to publish reports on us regularly, we may lose visibility in the financial markets, which in turn may cause our stock price or trading volume to decline.

Future Sales of Our Equity May Depress the Market Price of Our Common Stock

Future Sales of Our Shares By Our Largest Stockholders May Depress the Market Price of Our Common Stock

We have several institutional stockholders that own significant blocks of our common stock.

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Moreover, while such large stockholders are attempting to sell their shares, other stockholders may not be able to sell their shares at the price and time that such other stockholders desire due to the low trading volumes of our stock.

Additionally, in March 2016, we issued common stock purchase warrants to Comcast to purchase up to 725,000 shares of our common stock at a price of $54.55 per share.

The right to exercise the warrants is subject to vesting over three successive two-year periods (the third two-year period commenced on January 1, 2020 and ends on December 31, 2021) based on the level of purchases of goods and services from us by Comcast and its affiliates, as defined in the warrants.

To the extent that the warrants vest and Comcast exercises the warrants and sells any of the shares of common stock issuable upon exercise, or the perception that such sales may occur, could adversely affect the market price and/or trading volume of our common stock.

Based upon the volume of goods and services purchased by Comcast during the first and second two-year period which ended on December 31, 2017 and December 31, 2019, Comcast vested in 275,000 of the warrants.

Additionally, in

March 2016, we issued common stock purchase warrants to Comcast to purchase up to 725,000 shares of our common stock at a price of $54.55 per share.

The right to exercise the warrants was subject to vesting over three successive two-year periods (the third two-year period commenced on January 1, 2020 and ended on December 31, 2021) based on the level of purchases of goods and services from us by Comcast and its affiliates, as defined in the warrants, and Comcast is vested in 275,000 of the warrants as of the end of the periods.

To the extent that Comcast exercises the warrants and sells any of the shares of common stock issuable upon exercise, or the perception that such sales may occur, could adversely affect the market price and/or trading volume of our common stock.

Approved Stock Repurchase Programs May Not Result in a Positive Return of Capital to Stockholders

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Also considered in this decision is the effect any such repurchases may have on our cash balances and needs, cash flow, and short- and long-term borrowing.

Our stock price has experienced substantial price volatility in the past and may continue to do so in the future.

Additionally, we, the technology industry and the stock market as a whole have experienced extreme stock price and volume fluctuations that have affected stock prices in ways that may have been unrelated to our and these companies' operating performance.

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Higher inflation rates, interest rates, tax rates and unemployment rates, higher labor and healthcare costs, recessions, changing governmental policies, laws and regulations, and other economic factors could also adversely affect demand for some of our products and our results of operations, cash flow, liquidity or financial condition and that of our customers, vendors and suppliers.

Global economic uncertainty continues to exist.

Global economic uncertainty continues to exist, particularly in light of the ongoing COVID-19 pandemic.

The continuation or worsening of the global economic downturn may adversely impact our net sales, the collection of accounts receivable, funding for working capital needs, expected cash flow generation from current and acquired businesses, and our investments, which may adversely impact our results of operations, cash flow, liquidity or financial condition.

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Certain of our components are available only from a single source or limited sources.

If certain key suppliers were to become capacity constrained or insolvent as a result of an economic downturn, it may result in a reduction or interruption in supplies or a significant increase in the price of supplies and adversely impact our financial results.

financial results.

In addition, credit constraints at key suppliers may result in accelerated payment of accounts payable by us, impacting our cash flow.

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We purchase raw materials and energy for use in the manufacturing, distribution and sale of our products.

So called "Acts of God," such as hurricanes, earthquakes, tsunamis,

floods, volcanic activity, wildfires, and other natural disasters, as well as man-made disasters and the spread of contagious diseases in locations where we lease and/or own properties and equipment or manage our business, and these circumstances could continue or worsen in the future to an extent and for durations that we are not able to predict.

So called "Acts of God," such as hurricanes, earthquakes, tsunamis, floods, volcanic activity, wildfires, and other natural disasters, as well as man-made disasters and the spread of contagious diseases in locations where we lease and/or own properties and equipment or manage our business, and these circumstances could continue or worsen in the future to an extent and for durations that we are not able to predict.

Actual or threatened war, terrorist activity, political unrest, civil or geopolitical strife, and other acts of violence could have a similar effect.

As with the effects we have already experienced from the COVID-19 pandemic, any one or more of these events could disrupt raw material and fuel supplies and increase our costs, reduce our ability to manufacture and supply our products, and/or increase our operating costs, all of which could adversely affect our earnings or cash flows and profits.

As with the effects we have already experienced from the COVID-19 pandemic, any one or more of these events, including the recent actions taken by Russia against Ukraine, could disrupt sales volumes, raw material and fuel supplies and increase our costs, reduce our ability to manufacture and supply our products, and/or increase our operating costs, all of which could adversely affect our earnings or cash flows and profits.

Although raw materials and energy supplies (including oil and natural gas) are generally available from various sources in sufficient quantities, unexpected shortages and increases in the cost of raw materials and energy, or any deterioration in our relationships with or the financial viability of our suppliers, may have an adverse effect on our earnings or cash flow in the event we are unable to offset higher costs in a timely manner by sufficiently decreasing our operating costs or raising the prices of our products.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors