2 unchanged sentences
Additional risks and uncertainties not currently known to us, or those risks we currently view to be immaterial, may also materially and adversely affect our business, financial condition or results of operations.
−Removed: In addition, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 for a further discussion of some of the factors that could affect future results.
+Added: In addition, see Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 7 for further discussion of some of the factors that could affect future results.
If any of these risks materialize, our business, financial condition, results of operations or cash flows could be materially and adversely affected.
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Consumer confidence, employment rates, weather conditions, interest rates, credit standards and availability of consumer credit and income levels play a significant role in driving demand in institutional, commercial and residential construction, repair and remodeling sectors.
−Removed: A drop or weakness in consumer confidence, prolonged adverse weather conditions, lack of availability or increased cost of credit, tightened credit standards or increased unemployment could materially impact demand for and sales of our products and/or result in downward pressure on product pricing and our profit margins, any or all of which could adversely affect our financial results.
+Added: A drop or weakness in consumer confidence, prolonged adverse weather conditions, lack of availability or increased cost of credit, tightened credit standards or increased unemployment could materially impact demand for sales of our products and/or result in downward pressure on product pricing and our profit margins, any or all of which could adversely affect our financial results.
Volatility and disruption of financial markets could limit the ability of our customers to obtain adequate financing to maintain operations and may cause them to terminate existing purchase orders, reduce the volume of products they purchase from us in the future or impact their ability to pay their receivables.
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We cannot ensure adequate insurance protection against such a loss.
−Removed: We may be unable to realize intended benefits from our ongoing Supply Chain Optimization and Footprint Repositioning initiatives, restructuring and divestiture efforts, and as a result our profitability may be hurt or our business otherwise might be adversely affected.
+Added: We may be unable to realize intended benefits from our ongoing Supply Chain Optimization and Footprint Repositioning initiatives, restructuring and divestiture efforts, and as a result our profitability or our business otherwise might be adversely affected.
To operate more efficiently, control costs and refine our business focus, we periodically undertake restructuring plans, which can include facility consolidations, product rationalizations, workforce reductions and other cost reduction initiatives.
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Even if we ultimately succeed in recovering any amounts for which we were initially held liable, we may be temporarily required to bear these losses ourselves.
−Removed: The loss or financial instability of any significant customer or customers accounting for our backlog could adversely affect
−Removed: our business, financial condition, results of operations or cash flows.
+Added: The loss or financial instability of any significant customer or customers accounting for our backlog could adversely affect our business, financial condition, results of operations or cash flows.
A substantial part of our business is concentrated with a few customers, and we have certain customers that are significant to our business.
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Increases in the cost, and/or the availability, of raw materials, including as a result of tariffs or other trade protection measures, could adversely affect our business, financial condition, results of operations or cash flows.
−Removed: Our manufacturing processes depend on third parties for raw materials, in particular bar steel, brass, castings, copper, forgings, high-performance engineered plastic, plate steel, resin, sheet steel and zinc, as well as petroleum and other carbon-based fuel products.
+Added: Our manufacturing processes depend on third parties for raw materials, in particular bronze, iron, brass, stainless steel, carbon steel, zinc, and engineered plastics.
While we strive to maintain alternative sources for most raw materials, our business is subject to the risk of price fluctuations, including as a result of, or in reaction to, tariffs, import duties, or other trade protection measures instituted by the U.S.
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enter into new purchase contracts for our larger commodities, our business operations could be disrupted and our profitability could be adversely impacted.
−Removed: The ongoing updates to our Enterprise Resource Planning ("ERP") systems, as well as failures of our data security and information technology infrastructure or cybersecurity breaches, could cause substantial business interruptions and adversely affect our business.
−Removed: Utilizing a phased approach, we continue to update our ERP systems across our Zurn Elkay operations.
+Added: The ongoing updates to our Enterprise Resource Planning ("ERP") systems, as well as failures of our data security and information technology infrastructure, cybersecurity breaches or misuse of artificial intelligence tools, could cause substantial business interruptions and adversely affect our business.
+Added: We continue to update our ERP systems across our Zurn Elkay operations.
If these updates are ineffective, we could incur substantial business interruptions, including the inability to perform routine business transactions, which could have a material adverse effect on our financial performance.
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however, to date, we have not experienced a material threat or incident.
−Removed: In addition, at times a large percentage of our workforce may be working remotely in response to outbreaks of infectious disease, which may heighten these risks.
+Added: In addition, at times a large percentage of our workforce may be working remotely, which may heighten these risks.
While we have taken steps to maintain and enhance our cybersecurity by implementing additional security technologies, internal controls, network and data center resiliency, redundancy and disaster recovery processes and backup systems, upgrading our remote work environment and by obtaining insurance coverage, these measures may be inadequate and our technology systems could be vulnerable to disability, failures or unauthorized access.
−Removed: As a result, any inability by us to successfully manage our information systems, or respond effectively to any attack on or interference with our systems, including matters related to system and data security, privacy, reliability, compliance, performance and access, problems related to our systems caused by natural disasters, security breaches or malicious attacks, and any inability of these systems to fulfill their intended business purpose, could impede our ability to record or process orders, manufacture and ship in a timely manner, account for and collect receivables, protect sensitive data of the Company, our customers, our employees, our suppliers and other business partners, comply with our third party obligations of confidentiality and care, or otherwise carry on business in the normal course.
+Added: Furthermore, continued geopolitical turmoil, including the Russia-Ukraine conflict, has heightened the risk of cyberattacks.
+Added: As discussed further below, the rapid evolution and increased adoption of artificial intelligence and machine learning technologies may intensify our cybersecurity risks.
+Added: As a result, any inability by us to successfully manage our information systems, or respond effectively to any attack on or interference with our systems, including matters related to system and data security, privacy, reliability, compliance, performance and access, problems related to our systems caused by natural disasters, security breaches or malicious attacks, misuse of artificial intelligence tools, and any inability of these systems to fulfill their intended business purpose, could impede our ability to record or process orders, manufacture and ship in a timely manner, account for and collect receivables, protect sensitive data of the Company, our customers, our employees, our suppliers and other business partners, comply with our third party obligations of confidentiality and care, or otherwise carry on business in the normal course.
Any such events could require costly remediation beyond levels covered by insurance and could cause us to lose customers and/or revenue, including as a result of legal or regulatory claims or proceedings, or damage our reputation, any of which could have a material adverse effect on our business and operating results.
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Increased frequency of weather events could disrupt construction activity and adversely affect the demand for our products.
−Removed: Demand for our products is primarily driven by commercial construction activity, remodeling and retrofit opportunities, and to a lesser extent, new home starts.
+Added: Demand for our products is primarily driven by institutional and commercial construction activity, remodeling and retrofit opportunities, and to a lesser extent, new home starts.
Weather is an important variable affecting financial performance as it significantly impacts construction activity.
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Our business and operations, and the operations of our suppliers, business partners and customers, may be adversely affected by future outbreaks of infectious diseases.
−Removed: Future outbreaks of infectious diseases, including further developments in the COVID pandemic, may result in widespread or localized health crises that adversely affect general commercial activity and the economies and financial markets of the countries and localities in which we operate, sell, and purchases goods and services.
+Added: Future outbreaks of infectious diseases may result in widespread or localized health crises that adversely affect general commercial activity and the economies and financial markets of the countries and localities in which we operate, sell, and purchases goods and services.
Any outbreak of infectious disease poses the risk that we or our employees, contractors, suppliers, customers, transportation providers, and other business partners may be prevented or impaired from conducting ordinary course business activities for an indefinite period of time, either at specific branches or on a broader scale, including due to shutdowns necessitated for the health and well-being of our employees, the employees of our business partners, or shutdowns that may be requested or mandated by governmental authorities.
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The ultimate impact of an infectious disease outbreak on our business depends on the severity, location and duration of outbreaks, and the actions of government and health officials in response to the outbreaks, none of which is predictable at this time.
+Added: Artificial intelligence presents challenges that can impact our business by posing security risks to confidential or proprietary information and personal data.
+Added: The use of artificial intelligence, combined with an uncertain regulatory environment, may result in reputational harm, liability, or other adverse consequences to our business operations.
+Added: We may adopt and integrate artificial intelligence tools into our systems for specific use cases after review by our Legal and Information Security teams.
+Added: Our vendors and third-party partners may incorporate artificial intelligence tools into their offerings with or without disclosing this use to us.
+Added: The providers of these artificial intelligence tools may not meet existing or rapidly evolving regulatory or industry standards concerning privacy and data protection, which may result in a loss of intellectual property or confidential information and/or cause harm to our reputation and the public perception of the effectiveness of our security measures.
+Added: Further, bad actors around the world use increasingly sophisticated methods, including the use of artificial intelligence, to engage in illegal activities involving the theft and misuse of personal information, confidential information and intellectual property.
+Added: Any of these outcomes could damage our reputation, result in the loss of valuable property and information and adversely impact our business.
Financial Risks
−Removed: Our debt levels could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, inhibit us from making beneficial acquisitions, adversely impact our ability to implement our capital allocation strategy and prevent us from making debt service payments.
+Added: Our debt levels could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, inhibit us from making beneficial acquisitions, adversely impact our ability to
+Added: implement our capital allocation strategy and prevent us from making debt service payments.
In addition, changing or increasing interest rates, including the rates under our debt agreements, could adversely affect our business or financial condition.
−Removed: As a leveraged company, our ability to generate sufficient cash flow from operations to make scheduled payments on our debt will depend on a range of economic, competitive and business factors, many of which are outside our control.
+Added: Our ability to generate sufficient cash flow from operations to make scheduled payments on our debt will depend on a range of economic, competitive and business factors, many of which are outside our control.
Our business may not generate sufficient cash flow from operations to meet our debt service and other obligations, and currently anticipated cost savings and operating improvements may not be realized on schedule, or at all.
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Our inability to generate sufficient cash flow to satisfy our debt obligations or to refinance our obligations on commercially reasonable terms would have a material adverse effect on our business, financial condition, results of operations and cash flows.
−Removed: Our indebtedness could also have other important consequences with respect to our ability to manage and grow our
−Removed: business successfully, including the following:
−Removed: • it may limit our ability to borrow money for our working capital, capital expenditures, strategic initiatives, acquisitions or other purposes;
−Removed: • it may make it more difficult for us to satisfy our obligations with respect to our indebtedness, and any failure to comply with the obligations of any of our debt instruments, including restrictive covenants and borrowing conditions, could result in an event of default under our credit agreement and our other indebtedness;
−Removed: • a portion of our cash flow from operations will be dedicated to the repayment of our indebtedness and so will not be available for other purposes;
−Removed: • it may limit our flexibility in planning for, or reacting to, changes in our operations or business, or in taking advantage of strategic opportunities;
−Removed: • at times we may be more highly leveraged than some of our competitors, which may place us at a competitive disadvantage;
−Removed: • it may make us more vulnerable to downturns in our business or the economy;
−Removed: • it may restrict us from making strategic acquisitions or divestitures, introducing new technologies or exploiting business opportunities;
−Removed: • along with the financial and other restrictive covenants in the documents governing our indebtedness, among other things, may limit our ability to borrow additional funds, make acquisitions or capital expenditures, acquire or dispose of assets or take certain of the actions mentioned above, or adversely impact our ability to implement our capital allocation strategy (which includes paying dividends on our common stock), any of which could restrict our operations and business plans.
−Removed: We recently amended our credit facilities to switch from eurodollar loans based on LIBOR to term Secured Overnight Financing Rate (“SOFR”) loans.
+Added: Our indebtedness could also have other important consequences with respect to our ability to manage and grow our business successfully.
+Added: We amended our credit facilities to switch from eurodollar loans based on LIBOR to term Secured Overnight Financing Rate (“SOFR”) loans.
SOFR is a relatively new reference rate, and its composition and characteristics are not the same as LIBOR.
1 unchanged sentence
As indicated above, SOFR is a relatively new reference rate.
−Removed: Any failure of SOFR to gain market acceptance could cause the SOFR to be modified or discontinued.
+Added: Any failure of SOFR to gain market acceptance could cause it to be modified or discontinued.
Our current credit facilities provide a mechanism for determining an alternative rate of interest upon the occurrence of certain events related to the discontinuance of SOFR.
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• enter into certain transactions with our affiliates.
−Removed: These agreements contain covenants that restrict our ability to take certain actions, such as incurring additional debt, if
−Removed: we are unable to meet defined specified financial ratios, which could result in limiting our long-term growth prospects by hindering our ability to incur future indebtedness or grow through acquisitions.
+Added: These agreements contain covenants that restrict our ability to take certain actions, such as incurring additional debt, if we are unable to meet defined specified financial ratios, which could result in limiting our long-term growth prospects by hindering our ability to incur future indebtedness or grow through acquisitions.
Failure to comply with certain covenants in these agreements could result in a default.
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These expectations, policies and standards may be more restrictive than current laws and regulations as well as our own pre-existing policies;
−Removed: they may be customer-driven, established by the industry sectors in which we operate or imposed by third-party organizations or other constituencies.
+Added: they may be customer-driven, established by the industry sectors in which we operate or
+Added: imposed by third-party organizations or other constituencies.
Our compliance with these policies, standards and third party certification requirements could be costly and could in some cases require us to change the way in which we operate.
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with any shortfall of the 15% minimum tax resulting in a related tax assessment ("Top-Up Tax").
−Removed: The implementation of the Pillar 2 global minimum tax rules is intended to apply for tax years beginning in 2024.
+Added: The implementation of the Pillar 2 global minimum tax rules has begun to apply for tax years beginning in 2024.
The main purpose of such rules is to minimize tax base erosion and profit shifting from higher tax jurisdictions to lower tax jurisdictions by multi-national companies.
On February 2, 2023, the OECD issued various administrative guidance including transitional safe harbor rules available in conjunction with the implementation of the Pillar 2 global minimum tax.
−Removed: Based upon the current OECD rules and administrative guidance, the Company does not anticipate being subject to material Top-Up Taxes as various tax jurisdictions begin enacting such legislation.
+Added: Based upon the current OECD rules and administrative guidance, as well as the related legislation of those countries which has been enacted to date, the Company does not anticipate being subject to material Top-Up Taxes.
The Company is continuing to monitor the potential impact of the Pillar 2 proposals and developments on our consolidated financial statements and related disclosures, including eligibility for any transitional safe harbor rules.
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On occasion we are involved in such investigations and/or cleanup, and also have been or could be named as a PRP in environmental matters.
−Removed: The discovery of additional contamination, including at acquired facilities, the imposition of more stringent environmental, health and safety laws and regulations, including cleanup requirements, disputes with our insurers or the insolvency of other responsible parties could require us to incur significant capital expenditures or operating costs materially in excess of our accruals.
+Added: The discovery of additional contamination, including at acquired facilities, the imposition of more stringent environmental, health and safety laws and regulations, including cleanup requirements, disputes with our insurers or the
+Added: insolvency of other responsible parties could require us to incur significant capital expenditures or operating costs materially in excess of our accruals.
Future investigations we undertake may lead to discoveries of contamination that must be remediated, and decisions to close facilities may trigger remediation requirements that are not currently applicable.
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See Item 8, Note 17, Commitments and Contingencies for additional details.
+Added: Our inability to achieve our sustainability strategy goals and targets could adversely impact our business, financial condition, results of operations or cash flows.
+Added: Achieving our sustainability strategy goals and targets included in our annual Sustainability Report may be impacted by factors such as availability of resources, technological advances, legislative and regulatory changes, and customer or supplier requirements, many of which are not in our control.
+Added: We are committed to meeting these goals and targets, however, the inability to do so could adversely impact our business or financial condition.
+Added: Also, changing standards for measuring and reporting on applicable sustainability metrics could result in increased costs and adversely impact our results of operations or cash flows.
+Added: Additionally, if our sustainability strategy and initiatives are misaligned with evolving stakeholder expectations, it could negatively impact our reputation.
Risks Related to the Spin-Off Transaction
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In certain circumstances, we would be entitled to indemnity from Regal Rexnord Corporation for all or a portion of such additional tax, but there is no assurance that Regal Rexnord Corporation would have the ability to satisfy any such indemnity obligation.
−Removed: As a result of the Spin-Off Transaction, we are subject to certain limitations on Company actions for two years, including certain business combinations, that might otherwise be advantageous.
−Removed: Under relevant agreements governing the Spin-Off Transaction, we are prohibited from taking certain actions during the two-year period following the closing that could cause aspects of the Spin-Off Transaction to fail to qualify for their intended tax treatment.
−Removed: If we breach or are deemed to have breached these restrictions, the tax-free treatment of some or all of the Spin-Off Transaction could be impaired, and we could be subject to substantial additional U.S.
−Removed: federal and state income taxes.
−Removed: These restrictions might interfere with our current business and prevent us from taking advantage of opportunities that might be advantageous.
Risks Related to the Merger with Elkay
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The excess of the purchase price over those fair values was recorded as goodwill.
−Removed: To the extent the value of goodwill or intangibles becomes impaired in the future, we may be required to incur material non-cash charges relating to such impairment.
+Added: the extent the value of goodwill or intangibles becomes impaired in the future, we may be required to incur material non-cash charges relating to such impairment.
Our operating results may be significantly impacted from both the impairment and the underlying trends in the business that triggered the impairment.
−Removed: We may be unable to successfully integrate Elkay’s business into our business or achieve the anticipated benefits of the Merger.
−Removed: The success of the Merger depends, in part, on our ability to realize the anticipated benefits and cost savings from adding Elkay’s businesses, and we cannot assure successful integration or realization of the anticipated benefits of the Merger.
−Removed: Potential difficulties that may be encountered as we continue the integration process which may result in Zurn Elkay performing differently than expected include, among others:
−Removed: • the inability to successfully integrate Elkay in a manner that permits the achievement of full revenue, expected cash flows and cost savings anticipated from the Merger;
−Removed: • not realizing anticipated synergies;
−Removed: • integrating personnel from Elkay and the loss of key employees;
−Removed: • potential unknown liabilities and unforeseen expenses;
−Removed: • integrating relationships with customers, vendors and business partners;
−Removed: • performance shortfalls as a result of the diversion of management’s attention caused by completing the Merger and integrating Elkay’s operations;
−Removed: • the disruption of, or the loss of momentum in, our ongoing business or inconsistencies in standards, controls, procedures and policies.
Our results may suffer if we do not effectively manage our expanded operations following the Merger.
Following the Merger, the size of our business has increased significantly.
−Removed: Our future success will depend, in part, on our ability to manage this expanded business, resulting in risks and uncertainties, including the need to efficiently and timely integrate the operations and business of Elkay, to combine systems and management controls, and to integrate relationships with customers, vendors and business partners.
+Added: Our future success will depend, in part, on our ability to continue to manage this expanded business, resulting in risks and uncertainties, including the need to efficiently and timely integrate the operations and business of Elkay, to combine systems and management controls, and to integrate relationships with customers, vendors and business partners.
Sales of substantial amounts of the Zurn Elkay Common Stock in the open market by the former Elkay stockholders could depress the trading price of our common stock.
1 unchanged sentence
These sales may adversely affect the trading price of our Common Stock.
−Removed: Certain of these stockholders, who received Zurn Elkay shares in the Merger aggregating approximately 23% of our outstanding common stock as of December 31, 2023, agreed not to sell or transfer their shares, subject to certain exceptions, prior to December 31, 2023.
Certain former stockholders of Elkay have registration rights, the exercise of which could adversely affect the market price of our Common Stock.
2 unchanged sentences
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.