What changed in this filing

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Item 1A. Risk Factors

2024-03-14 compared with 2023-03-08 · 80 added, 116 removed, 394 unchanged (33% of the section changed)

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Risks Relating to Economic Conditions and Global Events

General economic factors beyond our control could adversely affect our business and results of operations.

General political and economic factors beyond our control could adversely affect our business and results of operations.

These factors include, but are not limited to, supply chain disruptions, labor shortages, wage pressures, geo-political matters and conflicts, rising inflation and potential economic slowdown or recession, as well as increases in costs including fuel and energy costs, foreign currency exchange rate fluctuations, and other matters that influence consumer spending and preferences.

Additionally, the invasion of Ukraine by Russia has escalated tensions among the United States, the North Atlantic Treaty Organization ("NATO") and Russia.

Such invasion, ongoing military conflict, resulting sanctions and related countermeasures by NATO states, the United States and other countries could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, and supply chain interruptions.

Among other events, the invasion of Ukraine by Russia has escalated tensions among the United States, the North Atlantic Treaty Organization ("NATO") and Russia.

Conflict in the Middle East has led to disruption of international shipping lanes, causing shipping delays and fluctuating freight costs.

These conflicts and the resulting sanctions and related countermeasures could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, and supply chain interruptions.

Additionally, they have the potential to spread to or exacerbate tensions in other countries or regions, leading to new and unanticipated disruptions.

Global markets continued to face threats and uncertain economic and financial market conditions that may also adversely affect the financial condition of our customers, suppliers and other business partners.

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Additionally, disruptions in financial markets could reduce our access to debt capital markets, negatively affecting our ability to implement our business strategy.

Risks Relating to the COVID-19 Pandemic

The COVID-19 pandemic and its consequences, including related measures to curtail its spread, 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, 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, including any new variants, 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.

We anticipate that the global health crisis caused by the COVID-19 pandemic will continue to negatively impact business activity across the globe, and as such, we expect our sales demand to be negatively impacted into, at least, the first half of 2023 given the global reach and economic impact of the COVID-19 pandemic and the various governmentally imposed lockdowns, quarantine and social distancing measures put in place to contain the spread of the COVID-19 pandemic.

A future suspension of our manufacturing operations would impact our ability to meet customer demand and could have a significant adverse effect on our financial condition and results of operations.

COVID-19 also continues to impact the global supply chain causing disruptions to service providers, logistics and the flow and availability of supplies and products.

Our manufacturing sites, as well as our suppliers and outsourcing partners, and our supply chain have been adversely affected and may continue to be adversely impacted as a result of restrictions and logistics and operational challenges.

These disruptions have resulted in and may continue to result in supply shortages and delays impacting market conditions and business operations across all industries worldwide, including our own.

As a result, we may experience further disruptions to our manufacturing operations, supply chain and/or distribution channels in the future, and these disruptions may be prolonged.

We remain cautious about how the economy might behave for the next few years and we continue to actively monitor the potential impact on our operations and may take further actions altering our business operations as necessary or as required by international, federal, state, or local authorities.

Risks Relating to Operations

Cybersecurity Issues:

Security Breaches, Failure to Maintain the Integrity of and Protect Internal or Customer Data May Result in Faulty Business Decisions, Operational Inefficiencies, Damage to our Reputation and/or Subject Us to Costs, Fines, or Lawsuits

Our business requires collection, processing, and retention of large volumes of internal and sensitive and confidential customer data, including personally identifiable information of our customers in various information systems that we maintain and in those maintained by third parties with whom we contract, including in areas such as customer product servicing, human resources outsourcing, website hosting, and various forms of electronic communications.

Cybersecurity Incidents, Failure to Maintain the Integrity of and Protect Internal or Customer Data May Result in Faulty Business Decisions, Operational Inefficiencies, Damage to our Reputation and/or Subject Us to Costs, Fines, or Lawsuits

Our business requires collection, processing, and retention of large volumes of data, including personally identifiable information of our customers in various information systems that we maintain and in those maintained by third parties with whom we contract, including in areas such as customer product servicing, human resources outsourcing, website hosting, and various forms of electronic communications.

We and third parties who provide services to us also maintain personally identifiable information about our employees.

The integrity and protection of that customer, employee, and company data, including proprietary information, is critical to us.

If that data is inaccurate or

incomplete, we may make faulty decisions.

Our customers and employees also have a high expectation that we and our service providers will adequately protect their personal information.

Despite the security measures we have in place, our facilities and systems, and those of the retailers, dealers, licensees and other third-party suppliers and vendors with which we do business, may be vulnerable to security breaches, cyberattacks, acts of vandalism or misconduct, computer viruses, misplaced or lost data, programming and/or human errors or other similar events.

Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential customer, employee, supplier or Company information, whether caused by us, an unknown third party, or the retailers, dealers, licensees or other third-party suppliers and vendors with which we do business, could result in losses, severely damage our reputation, expose us to the risks of litigation and liability, disrupt our operations and have a material adverse effect on our business, results of operations and financial condition.

As cybersecurity threats evolve in sophistication and become more prevalent worldwide, we continue to increase our sensitivity and attention to these threats, seek additional investments and resources to address these threats and enhance the security of our facilities and systems and strengthen our controls and procedures to monitor, protect against and mitigate these threats.

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 ("GDPR"), China's newly enacted Personal Information Protection Law ("PIPL") 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.

If that data is inaccurate or incomplete or inaccessible, we may make faulty decisions.

Despite the security measures we have in place, our facilities and systems, and those of the retailers, dealers, licensees and other third-party suppliers and vendors with which we do business, may be vulnerable to cybersecurity threats, attacks or incidents, acts of vandalism or misconduct, computer viruses, misplaced or lost data, programming and/or human errors or other similar events.

Any cybersecurity incidents involving the misappropriation, loss or other unauthorized disclosure of customer, employee, supplier or Company information, whether caused by us, an unknown third party, or the retailers, dealers, licensees or other third-party suppliers and vendors with which we do business, could result in losses, severely damage our reputation, expose us to the risks of litigation and liability, disrupt our operations and have a material adverse effect on our business, results of operations and financial condition.

As cybersecurity threats evolve in sophistication and become more prevalent worldwide, we continue to aim to increase our sensitivity and attention to these threats, seek additional investments and resources to address these threats and enhance the security of our facilities and systems and strengthen our controls and procedures to monitor, protect against and mitigate these threats.

The domestic and international legal and 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 ("GDPR"), China's newly enacted Personal Information Protection Law ("PIPL") and other domestic (including state law) and international regulations, could result in additional costs and changes to our business practices.

Computer systems are important to production planning, finance, company operations and customer service, among other business-critical processes.

Despite our efforts to prevent disruptions to our computer systems, these systems may be affected by damage or interruption from, among other causes, power outages, system failures, computer viruses and other intrusions, including cyberattacks.

Despite our efforts to prevent disruptions to our computer systems, these systems may be affected by damage, disruption, attack, or interruption from, among other causes, power outages, system failures, computer viruses and other intrusions, including cybersecurity incidents.

Computer hardware and storage equipment that is integral to efficient operations, such as email, telephone and other functionality, is concentrated in certain physical locations in the various continents in which we operate.

We rely on software applications, enterprise cloud storage systems and cloud computing services provided by third-party vendors, and our business may be adversely affected by service disruptions in or security breaches to such systems.

Remote work and remote access to our systems has increased, which also increases the risk of cybersecurity attacks on our systems surface.

In addition, there has been a global increase in cyberattack volume, frequency, and sophistication driven by the global enablement of remote workforces.

Geopolitical tensions or conflicts, such as Russia’s invasion of Ukraine, may further heighten the risk of cybersecurity attacks.

We continue to mitigate these risks in a number of ways, including through additional investment, engagement of third-party experts and consultants, improving the security of our facilities and systems (including through upgrades to our security and information technology systems), providing training for all employees (with more enhanced or frequent training based on role or responsibility), assessing the continued appropriateness of relevant insurance coverage and strengthening our controls and procedures to monitor, mitigate and respond appropriately to these threats.

We carry cyber insurance, and while we have not incurred any material losses due to any failure of or disruptions to our systems, or from any breaches of or attacks, we cannot be certain that our coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or that any insurer will not deny coverage as to any future claim.

Remote work and remote access to our systems has increased, which also increases the risk of cybersecurity incidents on our systems surface.

In addition, there has been a global increase in cybersecurity threat volume, frequency, and sophistication driven by the global enablement of remote workforces.

Geopolitical tensions or conflicts, such as Russia’s invasion of Ukraine, may further heighten the risk of cybersecurity incidents.

We continue to try to mitigate these risks in a number of ways, including through additional investment, engagement of third-party experts and consultants, improving the security of our facilities and systems (including through upgrades to our security and information technology systems), providing training for all employees (with more enhanced or frequent training based on role or responsibility), assessing the continued appropriateness of relevant insurance coverage and strengthening our controls and procedures to monitor, mitigate and respond appropriately to these threats.

We carry cyber insurance, and while we have not incurred any material losses due to any failure of or disruptions to our systems, or from any cybersecurity incidents, we cannot be certain that our coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on economically reasonable terms, or that any insurer will not deny coverage as to any future claim.

Proprietary Technologies

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We may experience technical, financial, resource or other difficulties or delays related to the further development of our technologies.

Delays may have adverse financial effects and may allow competitors to gain an advantage over us in the

marketplace or in the standards setting arena.

Delays may have adverse financial effects and may allow competitors to gain an advantage over us in the marketplace or in the standards setting arena.

There can be no assurance that we will continue to have adequate staffing or that our development efforts will ultimately be successful.

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There can be no assurance that we will be successful at developing and marketing new products or enhancing our existing products, or that these new or enhanced products will achieve consumer acceptance and, if achieved, will sustain that acceptance.

In addition, there can be no assurance that products developed by others will not render our products non-competitive or obsolete or that we will be able to obtain or maintain the rights to use proprietary technologies developed by others which are incorporated in our products.

In addition, there can be no assurance that products developed by others will not render our products non-competitive or obsolete or that we will be able to obtain or

maintain the rights to use proprietary technologies developed by others which are incorporated in our products.

Any failure to anticipate or respond adequately to technological developments and customer requirements, or any significant delays in product development or introduction, may have a material adverse effect on our operating results, financial condition and cash flows.

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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, 2022, 2021 and 2020, Comcast Corporation accounted for sales totaling more than 10% of our net sales.

During the years ended December 31, 2022 and 2021, Daikin Industries Ltd.

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

While we generally have a broad and varied customer base, during the years ended December 31, 2023, 2022 and 2021, Daikin Industries Ltd.

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

During the years ended December 31, 2022 and 2021, Comcast Corporation also accounted for sales totaling more than 10% of our net sales.

In addition to these customers, we have some customers that, individually or through their subsidiaries or affiliated partners, purchase a large amount of products from us.

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Manufacturing Risks

We operate factories in the PRC, Brazil and Mexico and expect to commence manufacturing operations in a new factory in Vietnam in the first half of 2023.

We are currently evaluating our manufacturing footprint with the expectation that once the Vietnam factory is operating efficiently, we will reduce our manufacturing capacity, most likely, by shutting down an existing facility.

If this were to occur, we would record an impairment charge and severance expense in amounts that are not presently calculable, yet could be material.

We operate factories in the PRC, Vietnam, Mexico and Brazil.

In addition, we utilize third-party manufacturers located in Asia to manufacture a portion of our products.

We believe that the loss of any one or more of these third-party 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 took 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.

U.S.-China Trade and Supply Chain Compliance Risks

In recent years, U.S.-China trade and investment has become subject to additional regulatory conditions and restrictions, including restrictions on certain imports and exports, increased tariffs, inbound and outbound investment restrictions, and enhanced prohibitions targeting the use of forced labor in supply chains.

Political leaders, regulatory agencies and legislators have also increased their focus on enforcing these rules and monitoring companies’ compliance.

We maintain policies and procedures designed to ensure compliance with these rules, and we do not believe that these rules or our efforts to comply with them materially impact our business, but it is possible that these restrictions, tariffs and related government initiatives will expand and that their effect our business will become more onerous, and we cannot be certain that our compliance efforts will in all cases be successful.

In the United States, among other relevant restrictions, the Uyghur Forced Labor Prevention Act (the "UFLPA") creates a rebuttable presumption that all goods produced or manufactured, even partially, in the PRC’s Xinjiang Uyghur Autonomous Region ("XUAR") were made with forced labor and, therefore, would not be allowed entry at U.S.

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

While we do not authorize

the sourcing of any 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 and government inquiries focusing on our subsidiary Gemstar and Uyghur individuals previously working at its facilities in non-XUAR locations in China, that our business, results of operations and financial condition could be adversely affected by the UFLPA, related regulatory requirements and enforcement activity, or related customer concerns.

Gemstar has terminated its relationship with the third-party labor agency that engaged these workers, ended its arrangement with the workers in question, and paid all outstanding wages and severance directly and individually to each of these workers;

further, we believe that we have addressed all outstanding questions from government authorities concerning this matter.

Nonetheless, our reliance on international supply chains involves a risk of adverse effects to our business, including from government restrictions and enforcement efforts.

Among other things, we utilize third-party suppliers as well as third-party employment or labor agencies to provide us with staff to support our production activities.

While we require these suppliers and 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 third-party agencies has come under worldwide scrutiny.

If a supplier or third-party labor agency were to engage in actual or apparent non-compliance with our Supplier Code of Conduct or otherwise violate applicable laws or regulations, this could create compliance challenges for us and adversely affect our business or our customer relationships.

Dependence upon Key Suppliers

We continue to operate in a supply-constrained environment, and we are heavily dependent on third-party suppliers and their ability to deliver sufficient quantities of key components and products at reasonable prices and in time for us to meet schedules

for the delivery of our products and services.

Most of the components used in our products are available from multiple sources.

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Difficulty in Ordering Integrated Circuits 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.

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

We have experienced difficulty in ordering ICs in the recent past and this difficulty could continue in the future.

While we have identified other sources of ICs and are taking other production and inventory control steps in order to mitigate the effects caused by these types of shortages, we cannot guarantee that the alternative sources will 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 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.

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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 continuing to experience increases in commodities and freight costs which have and may continue to adversely affect our margins.

Also, we are continuing to experience increases in freight costs which have and may continue to adversely affect our margins.

At the same time, in order to secure components for our products or services, we have and may continue to make advance payments to suppliers and/or enter into non-cancelable commitments with suppliers.

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We typically cannot recover the increased cost of air freight from our customers.

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

Additionally, tariffs and other

export fees may be incurred to ship products from foreign manufacturers to the customer.

These increases in costs and tariffs may have a material adverse effect on our product margins.

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Rising oil prices may have an adverse effect on cost of sales and operating expenses, and Russia's invasion of Ukraine may continue to create uncertainty in oil prices.

Conflict in the Middle East may produce continued or increased disruptions to international shipping and fluctuating freight costs.

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

Currently, approximately 800 of our Brazil and Mexico employees are represented by labor unions.

Additionally, approximately 400 of our Vietnam employees are covered by a collective bargaining agreement.

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

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Risks Related to Doing Business in the PRC

Presently, we manufacture a majority of our products in our factories in the PRC.

Presently, we manufacture many of our products in our factories in the PRC.

Additionally, many of our contract manufacturers are located in the PRC.

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Our ability to operate in the PRC may be adversely affected by changes in Chinese laws and regulations, including those relating to taxation, labor and social insurance, import and export tariffs, raw materials, environmental regulations, land use rights, property and other matters.

Additionally, in light of recent geo-political tensions and competing territorial claims, the PRC's relationships with other countries or governments could grow more complex or openly adversarial, potentially leading to far-reaching market disruptions.

Potential conflict across the Taiwan Strait or between the PRC and other countries or governments could cause a significant adverse effect to our business, and could lead to a disruption in our ability to operate in or source from the PRC.

The PRC Laws and Regulations Governing Our Current Business Operations are Sometimes Vague and Uncertain

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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.

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.

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As a result of these tariffs and other governmental action, we moved production of many of our products destined for the U.S.

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

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

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

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

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 first half of 2023.

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

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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In the ordinary course of our business, there are many transactions and calculations which make the ultimate tax determination uncertain.

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

We become subject to tax controversies in various jurisdictions at various times, 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.

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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.

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.

Potential for Litigation

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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.

As a result, the SEC enacted annual disclosure and reporting requirements for public companies to conduct due diligence to determine the source of any conflict minerals used in our products and to make annual disclosures in filings with the SEC.

As a result, the SEC enacted annual disclosure and reporting requirements for public

companies to conduct due diligence to determine the source of any conflict minerals used in our products and to make annual disclosures in filings with the SEC.

Because our supply chain is broad-based and complex, we may not be able to easily verify the origins for all minerals used in our products.

In addition, the new rules may reduce the number of suppliers who provide components and products containing conflict-free minerals and thus may increase the cost of the components used in manufacturing our products and the costs of our products to us.

In addition, the rules may reduce the number of suppliers who provide components and products containing conflict-free minerals and thus may increase the cost of the components used in manufacturing our products and the costs of our products to us.

Any increased costs and expenses may have a material adverse impact on our financial condition and results of operations.

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Actual events or results may be unfavorable to management's projections, which may have a material adverse effect on our projected operating results, financial condition and cash flows.

Additionally, we have long-lived and intangible assets, including goodwill, recorded on our consolidated balance sheet.

Additionally, we have long-lived and intangible assets recorded on our consolidated balance sheet.

We assess these assets for impairment whenever events or changes in circumstances indicate that the fair value may be below its carrying value.

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The validity of their and our assumptions, the timing and scope of the markets within which we compete, economic conditions, customer buying patterns, the timeliness of equipment development, pricing of products, and availability of capital for infrastructure improvements may affect these predictions.

In addition, market data upon which we rely is based on third-party reports that may be inaccurate.

addition, market data upon which we rely is based on third-party reports that may be inaccurate.

The inaccuracy of any of these projections and/or market data may adversely affect our operating results and financial condition.

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Bank National Association ("U.S.

Bank"), we may elect to pay interest on the revolving line of credit ("Credit Line") based on LIBOR or a base rate as specified in the Second Amended Credit Agreement.

LIBOR is subject to recent national, international and other regulatory guidance and proposals for reform.

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

The Financial Conduct Authority, which regulates LIBOR, announced it would cease publications of the remaining tenors of LIBOR 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.

The calculation of interest rates under the SOFR replacement benchmarks could negatively impact our business and financial results.

Bank"), we may elect to pay interest on the revolving line of credit ("Credit Line") based on the Secured Overnight Financing Rate ("SOFR") plus an applicable margin or a base rate (based on the prime rate of U.S.

Bank or as otherwise specified in the Second Amended Credit Agreement), plus an applicable margin.

To the extent these interest rates increase, our interest expense will increase, which could adversely affect our financial condition, operating results and cash flows.

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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.

Our subsidiaries are separate and distinct legal entities and have no obligation to pay any amounts due on our debt or to provide us with funds to meet our cash flow needs.

Except for Universal Electronics BV, which has guaranteed the performance under our Credit Line, our subsidiaries are separate and distinct legal entities and have no obligation to pay any amounts due on our debt or to provide us with funds to meet our cash flow needs.

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

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The Price of Our Common Stock is Volatile and May Decline Regardless of Our Operating Performance

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

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

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

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.

If one or more of these stockholders were to sell large portions of their holdings in a relatively short time, the prevailing market price of our common stock may be negatively affected.

Further, due to our historically low trading volumes, such large stockholders may not be able to sell the number of shares they wish to sell and/or in the time frame in which they wish to sell.

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.

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.

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.

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.

Price volatility over a given period may cause the average price at which we repurchase our own stock to exceed the stock's price at a given point in time.

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Because we conduct our business on a global platform, our business is sensitive to global and regional business and economic conditions.

Adverse changes in global, national, regional economies, governmental policies (including in areas such as trade, travel, immigration, healthcare, and related issues), and geopolitical conditions (such as the Russian invasion of Ukraine, tension across the Taiwan Strait and tension between the United States and the PRC, and the ramifications of those and other events) impact our activities.

Adverse changes in global, national, regional economies, governmental policies (including in areas such as trade, travel, immigration, healthcare, and related issues), and geopolitical conditions (such as the Russian invasion of Ukraine, conflict in the Middle East, tension across the Taiwan Strait and tension between the United States and the PRC, and the ramifications of those and other events) impact our activities.

Additionally, we conduct business in countries that have policies which restrict outbound U.S.

Dollar transactions.

During 2023, we experienced these conditions in Argentina and expect these restrictions to continue.

Such conditions in the United States and worldwide may impact our business due to weak economic conditions, changes in energy prices and currency values, political instability, heightened travel security measures, advisories, or disruptions, and concerns over disease, violence, war, or terrorism may reduce the demand for some of our products and impair the ability of those with whom we do business to satisfy their obligations to us, each of which could adversely affect our results of operations, cash flow, liquidity or financial condition.

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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, including the 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.

As with the effects we have already experienced from the COVID-19 pandemic, any one or more of these events, including the actions

taken in the ongoing conflicts in the Middle East and 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.

There are also inherent climate-related risks wherever our business is conducted.

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Such events could result in increases in our costs and expenses and harm our future revenue, cash flows and financial positions.

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.

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.

In recent years, some raw material and energy prices have increased, particularly silicon and plastic packaging.

The cost of raw materials and energy has in the past experienced, and likely will in the future continue to experience, periods of volatility.

UNRESOLVED STAFF COMMENTS

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