What changed in this filing

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Item 1A. Risk Factors

2022-02-07 compared with 2021-11-08 · 24 added, 30 removed, 382 unchanged (12% of the section changed)

5 unchanged sentences

We have experienced and may continue to experience disruption of our facilities, suppliers and contract manufacturers, which has and may continue to negatively impact our sales and operating results.

In addition, we have experienced and may continue to experience shipping and logistics challenges as our customers have also closed their facilities and are operating under similar restrictions.

Both NE and SE net revenue declined in the second half of fiscal 2020.

NE revenue declined as the COVID-19 pandemic resulted in certain customer operation and logistic shutdowns that led to shipment or acceptance delays and a demand slowdown in Field Instruments with orders pushed out into future periods, while SE revenue declined as customers were unable to provide on-site verification and acceptance due to facility closures and other restrictions.

In addition, we have experienced and may continue to experience shipping and logistics challenges.

In the first six months of fiscal year 2022, we experienced higher than expected supply chain and commodity costs, including manufacturing, logistics and procurement, due to inflationary pressure.

We expect these high costs to continue through the remainder of fiscal year 2022.

NSE has experienced some impact to customer demand.

Customer demand will continue to be challenging to calibrate, due to the nature and timing of the COVID-19 pandemic.

Worldwide distribution by central governments of the vaccines commenced in late 2020.

There have been logistical and operational challenges with the rollout and global demand for the vaccine has far exceeded supply.

It will take some time for the global population to receive vaccines, allowing for widespread immunity to develop.

At the same time, new and potentially more contagious variants of the virus are developing in several countries and regions in which we operate.

For example, we operate a shared services center in Pune, India that provides important finance and IT support services where the emergence of a more virulent variant of the virus led to a spike in illness and death rates for a period of time, impacting the health and safety risks to our employees and increasing our risk of business disruptions.

There have been logistical and operational challenges with the rollout and global demand for the vaccine has far exceeded supply, particularly in developing nations.

New and potentially more contagious variants of the virus are developing in several countries and regions in which we operate.

When and as normal business operations resume, we will need to expand globally the safety measures we have already undertaken at sites conducting essential business, such as enhanced sanitation procedures, health checks and social distancing protocols, none of which can completely eliminate the risk of exposure or spread of COVID-19.

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federal and other governmental vaccine mandates.

federal vaccine mandates for federal contractors or OSHA requirements, could, in some circumstances, result in skilled labor impacts including voluntary attrition or difficulty finding labor, or otherwise adversely affect our ability to operate our manufacturing facilities, obtain supplies, or deliver our products in a timely manner.

Such mandates, could, in some circumstances, result in skilled labor impacts including voluntary attrition or difficulty finding labor, or otherwise adversely affect our ability to operate our manufacturing facilities, obtain supplies, or deliver our products in a timely manner.

Additional vaccine mandates may be announced in other regions in which we operate or source supplies.

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In fiscal 2020, we entered into a $300 million secured credit facility to strengthen our liquidity position.

In December 2021, we terminated this facility and entered into a $300 million asset-based secured credit facility.

If there is a long-term economic downturn or a prolonged recession as a result of the pandemic, we could face additional liquidity needs and challenges.

There can be no assurance that we will be able to obtain financing on favorable terms or at all.

Due to the evolving and highly uncertain nature of this event, it is currently not possible to estimate the ultimate direct or indirect impacts the COVID-19 pandemic may have on our business.

However, any prolonged disruption of manufacturing of our products, commerce and related activity caused by the pandemic or significant decrease in demand for our products could materially and adversely affect our results of operations and financial conditions.

Surges in infection rate, new shutdowns, emergence of new and potentially more contagious variants of the virus and the slow pace of vaccine rollout may impact our suppliers and our ability to source materials in a timely manner.

Any prolonged disruption of manufacturing of our products, commerce and related activity caused by the pandemic or significant decrease in demand for our products could materially and adversely affect our results of operations and financial conditions.

Surges in infection rate, new shutdowns, emergence of new and potentially more contagious variants of the virus and staffing and labor supply challenges may impact our suppliers and our ability to source materials in a timely manner.

Further, ongoing supply chain constraints and inflationary pressure could have a negative impact on our results.

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to our quarterly revenue and operating results as well as on our liquidity and on our ability to satisfy our indebtedness obligations, including the compliance with the covenants that apply to our indebtedness.

To the extent the COVID-19 pandemic adversely affects our business

and financial results, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, such as those relating to our quarterly revenue and operating results as well as on our liquidity and on our ability to satisfy our indebtedness obligations, including the compliance with the covenants that apply to our indebtedness.

We refer you to “Management’s Discussion and Analysis of Financial Position and Results of Operations” for a more detailed discussion of the potential impact of the COVID-19 pandemic and associated economic disruptions, and the actual operational and financial impacts that we have experienced to date.

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Our business and results of operations have been, and could continue to be, adversely affected by this dependency.

Specific concerns we periodically encounter with our suppliers

include stoppages or delays of supply, insufficient vendor resources to supply our requirements, substitution of more expensive or less reliable products, receipt of defective parts or contaminated materials, increases in the price of supplies and an inability to obtain reduced pricing from our suppliers in response to competitive pressures.

Additionally, the ability of our contract manufacturers to fulfill their obligations may be affected by economic, political or other forces that are beyond our control, including the COVID-19 pandemic.

Specific concerns we periodically encounter with our suppliers include stoppages or delays of supply, insufficient vendor resources to supply our requirements, substitution of more expensive or less reliable products, receipt of defective parts or contaminated materials, increases in the price of supplies and an inability to obtain reduced pricing from our suppliers in response to competitive pressures.

Additionally, the ability of our contract manufacturers to fulfill their obligations may be affected by economic, political or other forces that are beyond our control, including the COVID-19

Any such failure could have a material impact on our ability to meet customers’ expectations and may materially impact our operating results.

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Dependence on a limited number of customers exposes us to the risk that order reductions from any one customer can have a material adverse effect on periodic revenue.

Further, to the extent that there is consolidation among communications equipment manufacturers and service providers, we will have increased dependence on fewer customers who may be able to exert increased pressure on our prices and other

contract terms.

Customer consolidation activity and periodic manufacturing and inventory initiatives could also create the potential for disruptions in demand for our products as a consequence of such customers streamlining, reducing or delaying purchasing decisions.

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These actions could require us to raise our prices, which could decrease demand for our products.

As a result, these actions, including potential retaliatory measures by China and further escalation into a potential “trade war”, may adversely impact our business.

result, these actions, including potential retaliatory measures by China and further escalation into a potential “trade war”, may adversely impact our business.

In January 2021, President Biden commenced his new administration with a number of executive orders and actions, including a temporary halt of pending U.S.

1 unchanged sentence

This executive order could negatively impact certain products and equipment we deliver to military and defense clients.

In January 2022, in light of the military conflict between Russia and Ukraine and potential military incursions by Russia, the Biden administration indicated that it could broaden restrictions on exports to Russia and potentially block foreign shipments of technology, telecommunications and consumer electronics products to Russia if made using U.S.

If these measures are invoked, we may not be able to ship certain orders and our business could be negatively impacted.

Given the uncertainty regarding the scope and duration of these trade actions by the United States or other countries, as well as the potential for additional trade actions, the impact on our operations and results remains uncertain.

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Our new corporate headquarters are located in Scottsdale, Arizona, a desert climate, subject to extreme heat and drought.

The geographic location of our Northern California offices and production facilities subject them to earthquake and wildfire risks.

The geographic location of our Northern California offices and production facilities subject them to drought, earthquake and wildfire risks.

It is impossible to predict the timing, magnitude or location of such natural disasters or their impacts on the local economy and on our operations.

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We may seek to access the capital or credit markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time.

For example, in December 2021, we entered into a $300 million asset-based secured credit facility.

Our access to the financial markets and the pricing and terms we receive in the financial markets could be adversely impacted by various factors, including changes in financial markets and interest rates.

29 unchanged sentences

• Incur or guarantee additional indebtedness;

• Incur or suffer to exist liens securing indebtedness;

• Incur or suffer to existing liens securing indebtedness;

• Make investments;

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• Engage in a new line of business;

• Amending certain material agreements, including material leases and debt agreements;

• Amend certain material agreements, including material leases and debt agreements;

• Enter into sale leaseback transactions.

The elimination of LIBOR after June 2023 may affect our financial results .

All LIBOR tenors relevant to us will cease to be published or will no longer be representative after June 30, 2023.

This means that any of our LIBOR-based borrowings that extend beyond June 30, 2023 will need to be converted to a replacement rate.

In the U.S., the Alternative Reference Rates Committee (AARC), a committee of private sector entities convened by the Federal Reserve Board and the Federal Reserve Bank of New York, has recommended the Secured Overnight Financing Rate (SOFR) plus a recommended spread adjustment as LIBOR's replacement.

There are significant differences between LIBOR and SOFR, such as LIBOR being an unsecured lending rate while SOFR is a secured lending rate, and SOFR is an overnight rate while LIBOR reflects term rates at different maturities.

If our LIBOR-based borrowings are converted to SOFR, the differences between LIBOR and SOFR, plus the recommended spread adjustment, could result in interest costs that are higher than if LIBOR remained available, which could have a material adverse effect on our operating results.

Although SOFR is the ARRC's recommended replacement rate, it is also possible that lenders may instead choose alternative replacement rates that may differ from LIBOR in ways similar to SOFR or in other ways that would result in higher interest costs for us.

It is not yet possible to predict the magnitude of LIBOR's end on our borrowing costs given the remaining uncertainty about which rates will replace LIBOR.

Our ability to use our net operating loss carryforwards to offset future taxable income may be subject to certain limitations.

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For additional discussion regarding litigation, see “Legal Proceedings” in Note 18.

Commitments and Contingencies in the Notes to the Consolidated Financial Statements in Item 8.

“Commitments and Contingencies.”

Unregistered Sales of Equity Securities and Use of Proceeds

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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-Q

Item 1A. Risk Factors