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If any of the risks described below actually occurs, our business, financial condition or results of operations could be materially and adversely affected.
+Added: Our financial condition and results of operations for fiscal 2020 and future periods may be adversely affected by the recent COVID-19 outbreak or other outbreak of infectious disease or similar public health threat.
+Added: The novel strain of coronavirus (COVID-19) continues to spread globally and has resulted in authorities implementing numerous measures to try to contain the virus, such as travel bans and restrictions, quarantines, shelter in place orders, and shutdowns.
+Added: These measures have impacted and may continue to impact our workforce and operations, the operations of our customers, and those of our respective vendors and suppliers.
+Added: We have significant manufacturing operations in the U.S.
+Added: and China, and each of these countries has been affected by the outbreak and taken measures to try to contain it.
+Added: We have experienced some limited disruptions in supply from some of our suppliers, although the disruptions to date have not yet been material.
+Added: There is considerable uncertainty regarding such measures and potential future measures, and restrictions on our access to our manufacturing facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers, and restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures, could limit our capacity to meet customer demand and have a material adverse effect on our financial condition and results of operations.
+Added: The outbreak has significantly increased economic and demand uncertainty.
+Added: These uncertainties also make it more difficult for us to assess the quality of our product order backlog and to estimate future financial results.
+Added: It is likely that the current outbreak or continued spread of COVID-19 will cause an economic slowdown, and it is likely that it will lead to a global recession, which could have a material adverse effect on demand for our products and on our financial condition and results of operations.
+Added: The spread of COVID-19 has caused us to modify our business practices (including employee travel, employee work locations, and cancellation of physical participation in meetings, events, and conferences), and we may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, and suppliers.
+Added: There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus, and our ability to perform critical functions could be harmed.
+Added: In addition, in light of concerns about the spread of COVID-19, our workforce has been operating at reduced levels at our manufacturing facilities, which could have an adverse impact on our ability to timely meet future customer orders.
+Added: The duration of the business disruption and related financial impact cannot be reasonably estimated at this time but may materially affect our ability to obtain raw materials, manage customer credit risk, manufacture products or deliver inventory in a timely manner, and impair our ability to meet customer demand for products, result in lost sales, additional costs, or penalties, or damage our reputation.
+Added: The extent to which COVID-19 or any other health epidemic will further impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others.
Our operating results are substantially dependent on the acceptance of new products.
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For example, we continue converting the majority of our Wolfspeed power production from 100mm to 150mm substrates.
−Removed: If we are unable to make this transition in a timely or cost-effective manner, our results could be negatively impacted.
+Added: If we are unable to complete this transition in a timely or cost-effective manner, our results could be negatively impacted.
In connection with our efforts to cost-effectively manage our growth, we have increasingly relied on contractors for production capacity, logistics support and certain administrative functions including hosting of certain information technology software applications.
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Uncertainty about global economic conditions could result in customers postponing purchases of our products and services in response to tighter credit, unemployment, negative financial news and/or declines in income or asset values and other macroeconomic factors, which could have a material negative effect on demand for our products and services and, accordingly, on our business, results of operations or financial condition.
−Removed: For example, any economic and political uncertainty caused by the United States tariffs imposed on goods from China, among other potential countries, and any corresponding tariffs from China or such other countries in response, may negatively impact demand and/or increase the cost for our products.
+Added: For example, any economic and political uncertainty caused by the United States tariffs imposed on goods from China, among other potential countries, and any corresponding tariffs or currency devaluations from China or such other countries in response, has, and may in the future, negatively impact demand and/or increase the cost for our products.
Additionally, our international sales are subject to variability as our selling prices become less competitive in countries with currencies that are declining in value against the U.S.
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Dollar weakens against the foreign currencies in which we are billed.
+Added: Our results of operations, financial condition and business could be harmed if we are unable to balance customer demand and capacity.
+Added: As customer demand for our products changes, we must be able to adjust our production capacity to meet demand.
+Added: We are continually taking steps to address our manufacturing capacity needs for our products.
+Added: If we are not able to increase or decrease our production capacity at our targeted rate or if there are unforeseen costs associated with adjusting our capacity levels, we may not be able to achieve our financial targets when our factories are underutilized.
+Added: We may be unable to build or qualify new capacity on a timely basis to meet customer demand and customers may fulfill their orders with one of our competitors instead.
+Added: In addition, as we introduce new products and change product generations, we must balance the production and inventory of prior generation products with the production and inventory of new generation products, whether manufactured by us or our contract manufacturers, to maintain a product mix that will satisfy customer demand and mitigate the risk of incurring cost write-downs on the previous generation products, related raw materials and tooling.
+Added: Due to the proportionately high fixed cost nature of our business (such as facility costs), if demand does not materialize at the rate forecasted, we may not be able to scale back our manufacturing expenses or overhead costs to correspond to the demand.
+Added: This could result in lower margins and adversely impact our business and results of operations.
+Added: Additionally, if product demand decreases or we fail to forecast demand accurately, our results may be adversely impacted due to higher costs resulting from lower factory utilization, causing higher fixed costs per unit produced.
+Added: Further, we may be required to recognize impairments on our long-lived assets or recognize excess inventory write-off charges, or excess capacity charges, which would have a negative impact on our results of operations.
+Added: In addition, our efforts to improve quoted delivery lead-time performance may result in corresponding reductions in order backlog.
+Added: A decline in backlog levels could result in more variability and less predictability in our quarter-to-quarter net revenue and operating results.
+Added: Variations in our production could impact our ability to reduce costs and could cause our margins to decline and our operating results to suffer.
+Added: All of our products are manufactured using technologies that are highly complex.
+Added: The number of usable items, or yield, from our production processes may fluctuate as a result of many factors, including but not limited to the following:
+Added: • variability in our process repeatability and control;
+Added: • contamination of the manufacturing environment;
+Added: • equipment failure, power outages, fires, flooding, information or other system failures or variations in the manufacturing process;
+Added: • lack of consistency and adequate quality and quantity of piece parts, other raw materials and other bill of materials items;
+Added: • inventory shrinkage or human errors;
+Added: • defects in production processes (including system assembly) either within our facilities or at our suppliers;
+Added: • any transitions or changes in our production process, planned or unplanned.
+Added: In the past, we have experienced difficulties in achieving acceptable yields on certain products, which has adversely affected our operating results.
+Added: We may experience similar problems in the future, and we cannot predict when they may occur or their severity.
+Added: In some instances, we may offer products for future delivery at prices based on planned yield improvements or increased cost efficiencies from other production advances.
+Added: Failure to achieve these planned improvements or advances could have a significant impact on our margins and operating results.
+Added: In addition, our ability to convert volume manufacturing to larger diameter substrates can be an important factor in providing a more cost-effective manufacturing process.
+Added: We continue converting the majority of our Wolfspeed power production from 100mm to 150mm substrates.
+Added: If we are unable to make this transition in a timely or cost-effective manner, our results could be negatively impacted.
We are subject to risks related to international sales and purchases.
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• disruptions in or inadequate infrastructure of the countries where we operate;
−Removed: • the impact of public health epidemics on employees and the global economy, such as the coronavirus currently impacting China;
+Added: • the impact of public health epidemics on employees and the global economy, such as COVID-19;
• difficulties in collecting accounts receivable;
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• the burden of complying with foreign and international laws and treaties.
−Removed: For example, the United States tariffs imposed on Chinese goods, among other potential countries and any corresponding tariffs from China or such other countries in response may negatively impact demand and/or increase the costs for our products.
+Added: For example, the United States tariffs imposed on Chinese goods, among other potential countries and any corresponding tariffs from China or such other countries in response has, and may in the future, negatively impact demand and/or increase the costs for our products.
In some instances, we have received and may continue to receive incentives from foreign governments to encourage our investment in certain countries, regions or areas outside of the United States.
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Government incentives may include tax rebates, reduced tax rates, favorable lending policies and other measures, some or all of which may be available to us due to our foreign operations.
−Removed: Any of these incentives could be reduced or eliminated by governmental authorities at any time or as a result of our inability to maintain minimum operations necessary to earn the incentives.
+Added: Any of these incentives could be reduced or eliminated by governmental authorities at any time or as a result of our inability to
+Added: maintain minimum operations necessary to earn the incentives.
Any reduction or elimination of incentives currently provided for our operations could adversely affect our business and results of operations.
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In addition, as we diversify our product offerings and as pricing differences in the average selling prices among our product lines widen, a change in the mix of sales among our product lines may increase volatility in our revenue and gross margin from period to period.
−Removed: Our results of operations, financial condition and business could be harmed if we are unable to balance customer demand and capacity.
−Removed: As customer demand for our products changes, we must be able to adjust our production capacity to meet demand.
−Removed: We are continually taking steps to address our manufacturing capacity needs for our products.
−Removed: If we are not able to increase or decrease our production capacity at our targeted rate or if there are unforeseen costs associated with adjusting our capacity levels, we may not be able to achieve our financial targets when our factories are underutilized.
−Removed: We may be unable to build or qualify new capacity on a timely basis to meet customer demand and customers may fulfill their orders with one of our competitors instead.
−Removed: In addition, as we introduce new products and change product generations, we must balance the production and inventory of prior generation products with the production and inventory of new generation products, whether manufactured by us or our contract manufacturers, to maintain a product mix that will satisfy customer demand and mitigate the risk of incurring cost write-downs on the previous generation products, related raw materials and tooling.
−Removed: Due to the proportionately high fixed cost nature of our business (such as facility costs), if demand does not materialize at the rate forecasted, we may not be able to scale back our manufacturing expenses or overhead costs to correspond to the demand.
−Removed: This could result in lower margins and adversely impact our business and results of operations.
−Removed: Additionally, if product demand decreases or we fail to forecast demand accurately, our results may be adversely impacted due to higher costs resulting from lower factory utilization, causing higher fixed costs per unit produced.
−Removed: Further, we may be required to recognize impairments on our long-lived assets or recognize excess inventory write-off charges, or excess capacity charges, which would have a negative impact on our results of operations.
−Removed: In addition, our efforts to improve quoted delivery lead-time performance may result in corresponding reductions in order backlog.
−Removed: A decline in backlog levels could result in more variability and less predictability in our quarter-to-quarter net revenue and operating results.
If we are unable to effectively develop, manage and expand our sales channels for our products, our operating results may suffer.
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We also cannot be sure that we would have adequate remedies for any breach of such agreements or other misappropriation of our trade secrets, or that our trade secrets and proprietary know-how will not otherwise become known or be independently discovered by others.
−Removed: Variations in our production could impact our ability to reduce costs and could cause our margins to decline and our operating results to suffer.
−Removed: All of our products are manufactured using technologies that are highly complex.
−Removed: The number of usable items, or yield, from our production processes may fluctuate as a result of many factors, including but not limited to the following:
−Removed: • variability in our process repeatability and control;
−Removed: • contamination of the manufacturing environment;
−Removed: • equipment failure, power outages, fires, flooding, information or other system failures or variations in the manufacturing process;
−Removed: • lack of consistency and adequate quality and quantity of piece parts, other raw materials and other bill of materials items;
−Removed: • inventory shrinkage or human errors;
−Removed: • defects in production processes (including system assembly) either within our facilities or at our suppliers;
−Removed: • any transitions or changes in our production process, planned or unplanned.
−Removed: In the past, we have experienced difficulties in achieving acceptable yields on certain products, which has adversely affected our operating results.
−Removed: We may experience similar problems in the future, and we cannot predict when they may occur or their severity.
−Removed: In some instances, we may offer products for future delivery at prices based on planned yield improvements or increased cost efficiencies from other production advances.
−Removed: Failure to achieve these planned improvements or advances could have a significant impact on our margins and operating results.
−Removed: In addition, our ability to convert volume manufacturing to larger diameter substrates can be an important factor in providing a more cost-effective manufacturing process.
−Removed: We continue converting the majority of our Wolfspeed power production from 100mm to 150mm substrates.
−Removed: If we are unable to make this transition in a timely or cost-effective manner, our results could be negatively impacted.
The markets in which we operate are highly competitive and have evolving technical requirements.
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We depend on a number of sole source and limited source suppliers for certain raw materials, components, services and equipment used in manufacturing our products, including key materials and equipment used in critical stages of our manufacturing processes.
−Removed: Although alternative sources generally exist for these items, qualification of many of these alternative
−Removed: sources could take up to six months or longer.
+Added: Although alternative sources generally exist for these items, qualification of many of these alternative sources could take up to six months or longer.
Where possible, we attempt to identify and qualify alternative sources for our sole and limited source suppliers.
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We may also be adversely affected by an increase in freight surcharges due to rising fuel costs and added security.
+Added: The risks mentioned above, including our sole source or limited source suppliers' ability to produce products and adequately access capital, and our ability to arrange effective shipping arrangements, may further increase due to the COVID-19 pandemic.
In our fabrication process, we consume a number of precious metals and other commodities, which are subject to high price volatility.
Our operating margins could be significantly affected if we are not able to pass along price increases to our customers.
−Removed: In addition, production could be disrupted by the unavailability of the resources used in production such as water, silicon, electricity and gases.
+Added: In addition, production could be disrupted by the unavailability of the resources used in production such as water,
+Added: silicon, electricity and gases.
Future environmental regulations could restrict supply or increase the cost of certain of those materials.
−Removed: We are subject to a number of risks associated with the sale of the Lighting Products business unit, and these risks could adversely impact our operations, financial condition and business.
−Removed: On May 13, 2019, we closed the sale of our former Lighting Products business unit to IDEAL.
−Removed: We are subject to a number of risks associated with this transaction, including risks associated with:
−Removed: • the restrictions on and obligations with respect to our remaining businesses following closing set forth in the transition services agreement and the LED supply agreement, in each case between us and IDEAL, including the need to provide transition services in connection with the transaction, which may result in the diversion of resources and focus from our remaining businesses;
−Removed: • issues, delays, complications and/or additional costs associated with the transition of the operations, systems, technology infrastructure and data, third-party contracts, and personnel of the Lighting Products business unit and provision of transition services, each, as applicable, within the term of the transition services agreement;
−Removed: • any required payments of indemnification obligations under the Purchase Agreement for retained liabilities and breaches of representations, warranties or covenants;
−Removed: • our failure to realize the full purchase price anticipated under the Purchase Agreement, including the ability of the Lighting Products business unit to generate adjusted EBITDA in the third year post-closing sufficient to result in payment of the targeted earnout or any earnout payment.
−Removed: As a result of these risks, we may be unable to realize the anticipated benefits of the transaction, including the total amount of cash we expect to realize.
−Removed: Our failure to realize the anticipated benefits of the transaction would adversely impact our operations, financial condition and business and could limit our ability to pursue additional strategic transactions.
Our revenue is highly dependent on our customers’ ability to produce, market and sell more integrated products.
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Failure to obtain a necessary license or develop an alternative solution could cause us to incur substantial liabilities and costs and to suspend the manufacture of affected products.
+Added: We are subject to a number of risks associated with the sale of the Lighting Products business unit, and these risks could adversely impact our operations, financial condition and business.
+Added: On May 13, 2019, we closed the sale of our former Lighting Products business unit to IDEAL.
+Added: We are subject to a number of risks associated with this transaction, including risks associated with:
+Added: • the restrictions on and obligations with respect to our remaining businesses following closing set forth in the transition services agreement and the LED supply agreement, in each case between us and IDEAL, including the need to provide transition services in connection with the transaction, which may result in the diversion of resources and focus from our remaining businesses;
+Added: • issues, delays, complications and/or additional costs associated with the transition of the operations, systems, technology infrastructure and data, third-party contracts, and personnel of the Lighting Products business unit and provision of transition services, each, as applicable, within the term of the transition services agreement;
+Added: • any required payments of indemnification obligations under the Purchase Agreement for retained liabilities and breaches of representations, warranties or covenants;
+Added: • our failure to realize the full purchase price anticipated under the Purchase Agreement, including the ability of the Lighting Products business unit to generate adjusted EBITDA in the third year post-closing sufficient to result in payment of the targeted earnout or any earnout payment.
+Added: As a result of these risks, we may be unable to realize the anticipated benefits of the transaction, including the total amount of cash we expect to realize.
+Added: Our failure to realize the anticipated benefits of the transaction would adversely impact our operations, financial condition and business and could limit our ability to pursue additional strategic transactions.
As a result of our continued expansion into new markets, we may compete with existing customers who may reduce their orders.
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The adoption of or changes in government and/or industry policies, standards or regulations relating to the efficiency, performance or other aspects of our products may impact the demand for our products.
−Removed: For example, electric vehicle incentives in China declined in fiscal 2019 and continue to decline.
Demand for our products may also be impacted by changes in government and/or industry policies, standards or regulations that discourage the use of certain traditional lighting technologies.
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Should the value of any such investments we hold decline, the related write-down in value could have a material adverse effect on our financial condition and results of operations.
−Removed: For example, the value of our Lextar investment declined from the date of our investment in December 2014 through the end of the second quarter of fiscal 2020 with variability between quarters, and may continue to decline in the future.
+Added: For example, the value of our Lextar investment declined from the date of our investment in December 2014 through the end of the third quarter of fiscal 2020 with variability between quarters, and may continue to decline in the future.
Our business may be adversely affected by uncertainties in the global financial markets and our or our customers’ or suppliers’ ability to access the capital markets.
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regulations issued as a result of the significant changes to the U.S.
−Removed: tax law included within the Tax Cuts and Jobs Act of 2017 (the Tax Legislation);
+Added: tax law included within the Tax Cuts and Jobs Act of 2017 ("TCJA") and the Coronavirus Aid, Relief and Economic Security Act of 2020 ("CARES Act");
• the resolution of issues arising from tax audits with various authorities;
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• the repatriation of non-U.S.
−Removed: earnings for which we have not previously provided for taxes or any changes in legislation that may result in these earnings being taxed, regardless of our decision regarding repatriation of funds, for example, the Tax Legislation, enacted in the second quarter of fiscal 2018, included a one-time tax on deemed repatriated earnings of non-U.S.
+Added: earnings for which we have not previously provided for taxes or any changes in legislation that may result in these earnings being taxed, regardless of our decision regarding repatriation of funds.
+Added: For example, the TCJA included a one-time tax on deemed repatriated earnings of non-U.S.
subsidiaries.
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Historically, our common stock has experienced substantial price volatility, particularly as a result of significant fluctuations in our revenue, earnings and margins over the past few years, and variations between our actual financial results and the published expectations of analysts.
−Removed: For example, the closing price per share of our common stock on the Nasdaq Global Select Market ranged from a low of $39.69 to a high of $68.50 during the twelve months ended December 29, 2019.
+Added: For example, the closing price per share of our common stock on the Nasdaq Global Select Market ranged from a low of $29.15 to a high of $68.50 during the twelve months ended March 29, 2020.
If our future operating results or margins are below the expectations of stock market analysts or our investors, our stock price will likely decline.
Speculation and opinions in the press or investment community about our strategic position, financial condition, results of operations or significant transactions can also cause changes in our stock price.
−Removed: In particular, speculation on our go-forward strategy, competition in some of the markets we address such as electric vehicles and LED lighting, the ramp up of our Wolfspeed business, and the potential or perceived potential impact of tariffs, may have a dramatic effect on our stock price.
+Added: In particular, speculation on our go-forward strategy, competition in some of the markets we address such as electric vehicles and LED lighting, the ramp up of our Wolfspeed business, and the effect of tariffs or COVID-19 on our business, may have a dramatic effect on our stock price.
We have outstanding debt which could materially restrict our business and adversely affect our financial condition, liquidity and results of operations.
−Removed: Our indebtedness currently consists of $575.0 million aggregate principal amount of the Notes and potential borrowings from our revolving line of credit.
−Removed: Our ability to pay interest and repay the principal for any outstanding indebtedness under our line of credit or the Notes is dependent upon our ability to manage our business operations and generate sufficient cash flows to service such debt.
+Added: As of March 29, 2020, our indebtedness consisted of $575.0 million aggregate principal amount of our 2023 Notes and potential borrowings from our revolving line of credit.
+Added: Additionally, we issued and sold an additional $575.0 million aggregate principal amount of convertible senior notes on April 21, 2020 (the 2026 Notes and collectively with the 2023 Notes, the Notes) and, using the net proceeds of the 2026 Notes offering, repurchased $150.2 million of aggregate principal amount of the 2023 Notes.
+Added: Our ability to pay interest and repay the principal for any outstanding indebtedness under our line of credit and the Notes is dependent upon our ability to manage our business operations and generate sufficient cash flows to service such debt.
There can be no assurance that we will be able to manage any of these risks successfully.
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• increasing our interest expense if interest rates increase.
−Removed: Our line of credit requires us to maintain compliance with certain financial ratios.
+Added: Our line of credit requires us to maintain compliance with an asset coverage ratio.
In addition, our line of credit contains certain restrictions that could limit our ability to, among other things:
incur additional indebtedness, dispose of assets, create liens on assets, make acquisitions or engage in mergers or consolidations, and engage in certain transactions with our subsidiaries and affiliates.
−Removed: The Indenture governing the Notes requires us to repurchase the Notes upon certain fundamental changes relating to our common stock, and also prohibits our consolidation, merger, or sale of all or substantially all of our assets except with or to a successor entity assuming our obligations under the Indenture.
−Removed: The restrictions imposed by our line of credit and by the Indenture governing our Notes could limit our ability to plan for or react to changing business conditions, or could otherwise restrict our business activities and plans.
−Removed: Our ability to comply with our loan covenants and the provisions of the Indenture governing our Notes may also be affected by events beyond our control and if any of these restrictions or terms is breached, it could lead to an event of default under our line of credit or the Notes.
+Added: The Indentures governing the Notes require us to repurchase the Notes upon certain fundamental changes relating to our common stock, and also prohibits our consolidation, merger, or sale of all or substantially all of our assets except with or to a successor entity assuming our obligations under the Indentures.
+Added: The restrictions imposed by our line of credit and by the Indentures governing our Notes could limit our ability to plan for or react to changing business conditions, or could otherwise restrict our business activities and plans.
+Added: Our ability to comply with our loan covenants and the provisions of the Indentures governing our Notes may also be affected by events beyond our control and if any of these restrictions or terms is breached, it could lead to an event of default under our line of credit or the Notes.
A default, if not cured or waived, may permit acceleration of our indebtedness.
In addition, our lenders could terminate their commitments to make further extensions of credit under our line of credit.
−Removed: If our indebtedness is
−Removed: accelerated, we cannot be certain that we will have sufficient funds to pay the accelerated indebtedness or that we will have the ability to refinance accelerated indebtedness on terms favorable to us or at all.
+Added: If our indebtedness is accelerated, we cannot be certain that we will have sufficient funds to pay the accelerated indebtedness or that we will have the ability to refinance accelerated indebtedness on terms favorable to us or at all.
Regulations related to conflict-free minerals may force us to incur additional expenses.
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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.