Item 1A. Risk Factors
The following risks and uncertainties may have a material effect on our business, prospects, financial condition, results of operations, and cash flows, and should be considered in connection with the other information contained in this Annual Report on Form 10-K. If any of the events described below were to actually occur, our business, prospects, financial condition, results of operations, or cash flows could be adversely affected, and results could differ materially from expected and historical results. The risks and uncertainties described below are not the only risks facing our company. Risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, prospects, financial condition, results of operations, and cash flows.
Risks Related to Our Operations
We depend heavily on a relatively limited number of customers, and the loss of any major customer would have a material adverse effect on our business.
During 2025, sales to various U.S. and foreign divisions of our ten largest customers accounted for approximately 49% of our consolidated net sales. The loss of all or a substantial portion of sales to these customers would cause us to lose a substantial portion of our revenue and would lower our operating profit margin and cash flows from operations.
Work stoppages or similar difficulties and unanticipated business disruptions could significantly disrupt our operations, reduce our revenues and materially affect our earnings.
We have a complex network of suppliers, owned and leased manufacturing locations, co-manufacturing locations, distribution networks, and information systems that support our ability to consistently provide our products to our customers. Factors that are hard to predict or are beyond our control, such as supply chain disruptions, raw material shortages, natural disasters, including hurricanes, tornadoes, and other adverse weather, other catastrophic events, such as disasters occurring at our customers’, suppliers’, co-manufacturers’ or our manufacturing facilities, political unrest, terrorism, generalized labor unrest, including strikes at our suppliers, customers or end-users, or public health crises could damage or disrupt our operations or our customers’, suppliers’, co-manufacturers’ or distributors’ operations. These disruptions may require additional resources to restore our supply chain or distribution network. If we cannot respond to in our operations, whether by finding
alternative suppliers or replacing capacity at key manufacturing or distribution locations, or if we are unable to quickly repair any damage to our information, production, or supply systems, we may be late in delivering, or be unable to deliver, products to our customers and may also be unable to track orders, inventory, receivables, and payables. If that occurs, our customers’ confidence in us and long-term demand for our products could decline. Any of these events could materially and adversely affect our product sales, financial condition, and operating results.
We purchase raw materials from suppliers and sell products to customers outside the U.S. and are subject to several risks related to doing business internationally.
We obtain a portion of our raw materials from overseas suppliers, actively participate in overseas manufacturing operations, and sell to a large number of international customers. During the year ended December 31, 2025, sales to customers located outside of the U.S. accounted for 46% of our consolidated net sales. Risks related to international operations that have adversely impacted and may continue to adversely impact our business, results of operations and reputation as well as our customers and suppliers include:
• changes in tariff regulations and the imposition of trade restrictions or prohibitions, import tariffs or other duties or taxes, which may make our products more costly to export or import
• changes in monetary and fiscal policies, laws and regulations, and other activities of governments, agencies and similar organizations;
• fluctuations in interest rates and currency exchange rates, including the relative strength or weakness of the U.S. dollar against foreign currencies that are important to our business;
• recessions or marked declines specific to a particular country or region;
• difficulties establishing and maintaining relationships with local original equipment manufacturers, distributors and dealers;
• difficulty in staffing and managing geographically diverse operations;
• differing labor regulations;
• compliance with respect to anti-bribery, competition, export and import, trade sanctions, data privacy, environmental, human rights and other laws;
• political uncertainty, instability, civil unrest, government controls over certain sectors and human rights and forced labor concerns in countries, including but not limited to, China, in which our suppliers, manufacturing operations, and customers are located; and
• changes in the geopolitical environment, wars, conflicts, or trade barriers or blockades in the European Union and Asia, which may adversely affect business activity and economic conditions globally and could continue to contribute to instability in global financial and foreign exchange markets, as well as disrupt the free movement of goods, services, and people between countries.
These and other risks may also increase the relative price of our products compared to those manufactured in other countries, thereby reducing the demand for our products in the markets in which we operate, which could have a material adverse effect on our business, prospects, financial condition, results of operations, or cash flows.
In addition, we could be adversely affected by violations of the Foreign Corrupt Practices Act (the “FCPA”) and similar worldwide anti-bribery laws, as well as export controls, which may include International Traffic in Arms Regulation and Export Administration Regulations, and economic sanction laws (collectively, “Trade Laws”). The FCPA and similar anti-bribery laws in other jurisdictions generally prohibit companies and their intermediaries from offering, providing, or authorizing the provision of anything of value directly or indirectly to government officials and other persons for the purpose of obtaining or retaining business. Further, certain Trade Laws may require us to obtain export licenses or authorizations prior to exporting our products and technology, or may even restrict our ability to export our products and services to, or otherwise transact or deal with, certain countries, territories, and persons. We cannot assure you that our internal controls and procedures will prevent violations of Trade Laws committed by our employees or agents. If we are found to be liable for violations of Trade Laws, we could from or civil or other sanctions, including of export privileges or authorization needed to conduct aspects of our international business, which could have a material effect on our business, prospects, financial condition, results of operations, or cash flows.
We currently source certain raw materials from international suppliers. Import tariffs, taxes, customs duties and/or other trade regulations imposed by the U.S. government on foreign countries, or by foreign countries on the U.S., could significantly increase the prices we pay for raw materials. Changes in U.S. administrative policy have led, and may continue to lead, to significant increases in tariffs for imported goods among other possible changes, which has and may continue to result in foreign governments proposing or implementing their own retaliatory tariffs on goods imported from the U.S. Additionally, our customers’ businesses may be negatively impacted by import tariffs, taxes, customs duties and/or other trade regulations
imposed by the U.S. government on foreign countries or by foreign countries on the U.S., which could, in turn, reduce our customers’ demand for the components that we manufacture for them. Any reduction in customer demand for our components as a result of such tariffs, taxes, customs duties and/or other trade regulations, could have a material adverse effect on our business, prospects, financial condition, results of operations, cash flows or liquidity. We cannot predict whether, and to what extent, there may be changes to international trade agreements or whether quotas, duties, tariffs, exchange controls or other restrictions on our products will be changed or imposed. See “— Changes in U.S. administrative policy, including the imposition of or increases in tariffs, changes to existing trade agreements and any resulting changes in international trade relations, may have an adverse effect on our business. ”
In addition, an open conflict or war across any region could affect our ability to obtain raw materials. The military conflicts (including the ongoing war between Russia and Ukraine and conflict in the Middle East), and related sanctions, export controls or other actions that may be initiated by nations could adversely affect our business and our supply chain or our business partners or customers in other countries. If we are unable to source our products from the countries where we wish to purchase them, either because of the occurrence or threat of wars or other conflicts, regulatory changes or for any other reason, or if the cost of doing so increases, it could have a material adverse effect on our business, financial condition, liquidity and results of operations. Disruptions in the supply of raw materials and components could temporarily impair our ability to manufacture our products for our customers or require us to pay higher prices to obtain these raw materials or components from other sources, which could have a material effect on our business, liquidity and results of operations.
We have international operations that are subject to foreign economic uncertainties and foreign currency fluctuation.
Appro ximately 46% of our revenues are denominated in foreign currencies, which may result in additional risk of fluctuating currency values and exchange rates and controls on currency exchange. Changes in the value of foreign currencies could increase our U.S. dollar costs for, or reduce our U.S. dollar revenues from, our foreign operations. Any increased costs or reduced revenues as a result of foreign currency fluctuations could affect our profits. In 2025, the U.S. dollar weakened against foreign currencies which unfavorably affected our revenue by $0.6 million. In contrast, a weakening of the U.S. dollar may beneficially affect our business, prospects, financial condition, results of operations, or cash flows.
Increased prices or significant shortages of the commodities that we use in our businesses have had, and could continue to have, a material adverse effect on our business, prospects, financial condition, liquidity, results of operations or cash flows.
We purchase large quantities of steel, aluminum, alloy and other metal commodities, for the manufacture of our products. We also purchase significant quantities of copper and precious metals, including gold and silver used in the manufacture of certain of our products. Historically, prices for commodities and precious metals have fluctuated, however prices for certain metals, including, but not limited to, silver, have recently shown increased volatility. Significant price increases for these commodities and precious metals have, and could continue to have, an adverse effect on our liquidity and operating profits if we cannot timely mitigate the price increases by successfully sourcing lower cost commodities or precious metals or by passing the increased costs on to customers. Shortages or other disruptions in the supply of these commodities or precious metals could also delay sales or increase costs.
Quality problems with our products could harm our reputation, erode our competitive advantage and could result in a product recall.
Quality is important to us and our customers, and our products and solutions are held to high quality and performance standards. In the event our products and solutions fail to meet these standards, our reputation could be harmed, which could damage our competitive advantage, causing us to lose customers and resulting in lower revenues.
The majority of our products are components of our customers’ products that are used in critical industrial applications. A failure of our components could lead to a product recall. If a recall were to happen as a result of our components failing, we could bear a substantial part of the cost of correction. In addition to the cost of fixing the parts affected by the component, a recall could result in the loss of a portion of or all of the customer’s business and damage our reputation. A successful product recall claim requiring that we bear a substantial part of the cost of correction, or the loss of a key customer could have a material adverse effect on our business, prospects, financial condition, results of operations, or cash flows.
Our inability to effectively manage the timing, quality and costs of new program launches could adversely affect our financial performance.
In connection with the award of new business, we obligate ourselves to deliver new products and services that are subject to our customers' timing, performance and quality standards. Additionally, we must effectively coordinate the activities of numerous suppliers in order for the program launches of our products to be successful. Given the complexity of new program launches, we may experience difficulties managing product quality, timeliness and associated costs. In addition, new program launches require a significant ramp up of costs; however, our sales related to these new programs generally are dependent upon the timing and success of our customers' introduction of new products. Our inability to effectively manage the timing, quality and costs of these new program launches could adversely affect our financial condition, operating results and cash flows.
We face the challenge of accurately aligning our capacity and/or inventory levels with our demand.
We face periods when demand fluctuates significantly higher or lower than our normal operating levels, including variability driven by supply chain inconsistency. Accurately forecasting our expected volumes and appropriately adjusting our capacity and/or inventory levels are important factors in determining our results of operations and cash flows. We manage our capacity by adjusting our manufacturing workforce, capital expenditures and purchases from suppliers. In periods of weak demand, we may face under-utilized capacity, inventory and unrecovered overhead costs, while in periods of strong demand we may experience unplanned costs, be unable to secure sufficient raw materials and could fail to meet customer demand. We cannot guarantee that we will be able to adequately adjust our manufacturing capacity and/or inventory levels in response to significant changes in customer demand, which could harm our business. If we do not accurately align our manufacturing capabilities and/or inventory levels with demand it could have a material effect on our results of operations, financial condition and cash flows.
Our markets are highly competitive, and many of our competitors have significant advantages that could adversely affect our business.
We face substantial competition in the sale of components, system subassemblies, and finished devices in the vertical end markets into which we sell our products. Our competitors are continuously exploring and implementing improvements in technology and manufacturing processes to improve product quality, and our ability to remain competitive will depend, among other things, on whether we are able to keep pace with such quality improvements in a cost-effective manner. Due to this competitiveness, we may not be able to increase prices for our products to cover cost increases. In many cases we face pressure from our customers to reduce prices, which could adversely affect our business, prospects, financial condition, results of operations, or cash flows. In addition, our customers may choose to purchase products from one of our competitors rather than pay the prices we seek for our products, which could adversely affect our business, prospects, financial condition, results of operations, or cash flows.
The loss of key personnel and the inability to attract and retain qualified employees could have a material adverse impact on our operations.
We are dependent on the continued services of key executives and personnel. The departure of our key personnel without adequate replacement could severely disrupt our business operations. Additionally, we need qualified managers and skilled employees with technical and manufacturing industry experience to operate our businesses successfully. From time to time, there may be shortages of skilled labor, which may make it more difficult and expensive for us to attract and retain qualified employees. If we are unable to attract and retain qualified individuals or our costs to do so increase significantly, our operations would be materially adversely affected.
Our business depends upon good relations with our employees. Work stoppages, slowdowns or legal action by our employees represented by labor councils or unions, as applicable, may have a material adverse effect on our business, financial condition, results of operations and cash flows .
Certain of our production employees working outside the United States are represented by labor councils or unions. Although we believe that employee and labor councils and/or unions relations are generally positive, there is no assurance that this will continue in the future, and problems or changes affecting employees in certain locations may affect relations with our employees at other locations. We may also be subject to labor union efforts to organize groups of our employees from time to time. These organizational efforts, if successful, decrease our operational flexibility, which could adversely affect our operating efficiency. In addition, our response to any organizational efforts could be perceived negatively and harm our business and reputation. Work stoppages may also be caused by the inability of national unions and the governments of countries in which we operate from reaching agreement and are outside of our control. Labor disputes, work stoppages or other in our production or in our supply chain could have a material effect on our customer relations, our productivity, the of our facilities and on our operations as a whole, resulting in an impact on our business, financial condition, results of operations and cash flows.
We and the third parties with whom we work are subject to numerous, evolving U.S. and foreign laws, regulations, and rules, contractual obligations, industry standards, policies and other obligations related to data privacy and security. Our (or the third parties with whom we work) actual or perceived failure to comply with such obligations could materially adversely affect our business, financial condition, results of operations, and reputation.
We and the third parties with whom we work are, and may increasingly become, subject to various laws, rules, regulations, treaties, decisions and industry standards, as well as contractual obligations, relating to data privacy and security in the jurisdictions in which we operate.
In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, privacy laws, consumer protection laws, and similar laws (e.g., wiretapping laws). Rights provided by such laws may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making. For example, the California Consumer
Privacy Act of 2018 (“CCPA”) applies to personal data of California residents, and requires businesses to provide specific disclosures in privacy notices and honor requests of such individuals to exercise certain privacy rights. The CCPA provides fines and allows private litigants affected by certain data breaches to recover significant statutory damages. The exercise of these rights may impact our business and ability to provide our products and services.
Outside the United States, an increasing number of laws, regulations, and industry standards may govern data privacy and security. For example, we may be subject to data protection and privacy laws in the European Union, Brazil, Mexico, and China, including the European Union’s General Data Protection Regulation (“EU GDPR”), Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais, or “LGPD”) (Law No. 13,709/2018), Mexico’s Federal Law on the Protection of Personal Data Held by Private Parties (Ley Federal de Protección de Datos Personales en Posesión de los Particulares), and China’s Personal Information Protection Law (“PIPL”), each of which imposes strict requirements on the processing of personal data. For example, under GDPR, companies may face temporary or definitive bans on data processing and other corrective actions; fines of up to the greater of 20 million Euros under the EU GDPR or 4% of annual global revenue; or private litigation brought by classes of data subjects.
In addition, we may be unable to transfer personal data from Europe and other jurisdictions to the United States or other countries due to data localization requirements or limitations on cross-border data flows. Europe and other jurisdictions have enacted laws requiring data to be localized or limiting the transfer of personal data to other countries. Although there are currently various mechanisms that may be used to transfer personal data from Europe to the United States in compliance with law, these mechanisms are subject to legal challenges, and there is no assurance that we can satisfy or rely on these measures.
In addition to data privacy and security laws, we are contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the future. We are also bound by other contractual obligations related to data privacy and security, and our efforts to comply with such obligations may not be successful. We publish privacy policies and other statements concerning data privacy, and security. Regulators in the United States are increasingly scrutinizing these statements, and if these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, misleading, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences. We or third parties with whom we work may at times fail (or be perceived to have failed) in efforts to comply with data privacy and security obligations, and we could face significant consequences, including but not limited to: government enforcement actions, and mass arbitration demands, additional reporting requirements and/or oversight, or restrictions on processing personal data, or orders to or not use personal data.
Any of these events could result in significant adverse consequences, including fines and penalties, the inability to transfer data and work with partners, vendors and other third parties, and injunctions against our processing or transferring of personal data necessary to operate our business, which could have a material adverse effect on our reputation, business, or financial condition.
A security breach or disruption to our information technology systems, or those of the third parties with whom we work, could materially adversely affect our business, financial condition, results of operations, and reputation.
We rely on proprietary and third-party information technology systems to process, transmit and store information and to manage or support our business processes. We store and maintain confidential financial and business information regarding us and persons with whom we do business on our information technology systems. We also collect and hold personal data of our employees in connection with their employment. In addition, we engage third-party service providers that may collect and hold personal data of our employees in connection with providing business services to us, including, but not limited to, web hosting, accounting, payroll and benefit services. The protection of the information technology systems on which we rely is critically important to us. We take steps, and generally require third-party service providers to take steps, to protect the security of the information maintained in our and our service providers’ information technology systems, including the use of systems, software, tools, and monitoring to provide security for processing, transmitting, and storing of the information. Despite our security measures and business continuity plans, we face risks associated with security breaches or disruptions to the information technology systems on which we rely, which could result from, among other incidents social-engineering attacks (including through deep fakes, which may be increasingly more to identify as fake, and phishing attacks), malware (including as a result of advanced intrusions), -of-service attacks, credential stuffing attacks, credential harvesting, code (such as computer viruses and worms), ransomware attacks, supply-chain attacks, software bugs, server , software or hardware , of data or other information technology assets, adware, telecommunications , personnel or , attacks or facilitated by AI, and other similar .
Such threats are prevalent and continue to rise, are increasingly difficult to detect, and come from a variety of sources, including traditional computer “hackers,” threat actors, “hacktivists,” organized criminal threat actors, personnel (such as through theft or misuse), sophisticated nation states, and nation-state-supported actors.
In particular, severe ransomware attacks are becoming increasingly prevalent – particularly for companies like ours that are engaged manufacturing – and can lead to significant interruptions in our operations, loss of sensitive data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. Future or past business transactions (such as acquisitions or integrations) could expose us to additional
cybersecurity risks and vulnerabilities, as our systems could be negatively affected by vulnerabilities present in acquired or integrated entities’ systems and technologies. Furthermore, we may discover security issues that were not found during due diligence of such acquired or integrated entities, and it may be difficult to integrate companies into our information technology environment and security program. Our third-party service providers could also be the source of a cybersecurity attack on, or breach of, our information technology systems. Techniques used in cybersecurity attacks to obtain unauthorized access, disable or sabotage information technology systems change frequently, as data breaches and other cybersecurity events have become increasingly commonplace, including as a result of the intensification of state-sponsored cybersecurity attacks during periods of geopolitical conflict.
The security measures put in place by us and our service providers cannot provide absolute security and there can be no assurance that we or our service providers will not suffer a data security incident in the future, that unauthorized parties will not gain access to sensitive information stored on our or our service providers’ systems, that such access will not, whether temporarily or permanently, impact, interfere with, or interrupt our operations, or that any such incident will be discovered in a timely manner. Further, we may be required to expend significant additional resources to continue to enhance information security measures and internal processes and procedures or to investigate and remediate any information security vulnerabilities.
Certain data privacy and security obligations have required us to implement and maintain specific security measures or industry-standard or reasonable security measures to protect our information technology systems and sensitive information. Applicable data privacy and security obligations may require us, or we may voluntarily choose, to notify relevant stakeholders, including affected individuals, customers, regulators, and investors, of security incidents, or to take other actions, such as providing credit monitoring and identity theft protection services. Such disclosures and related actions can be costly, and the disclosure or the failure to comply with such applicable requirements could lead to adverse consequences. Our contracts may not contain limitations of liability, and even where they do, there can be no assurance that limitations of liability in our contracts are sufficient to protect us from liabilities, damages, or claims related to our data privacy and security obligations. We cannot be sure that our insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms or at all, or that such coverage will pay future . In addition to experiencing a security , third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to our competitive or market position.
A data security incident could compromise our or our service providers’ information technology systems, and the information stored by us or our service providers, including personally identifiable information of employees, could be accessed, misused, publicly disclosed, corrupted, lost, or stolen. Any data breach or a security failure of our or our service providers’ information technology systems could interrupt our operations, result in downtime, divert our planned efforts and resources from other projects, damage our reputation and brand, damage our competitive position or subject us to liability claims or regulatory penalties under applicable law. Various events described above have occurred in the past and may occur in the future. Although impacts of past events have been immaterial, the impacts of such events in the future may materially and affect our business, financial condition, or results of operations.
Pandemics, epidemics, disease outbreaks and other public health crises could materially adversely impact our business, financial condition, results of operations and cash flows.
Pandemics, epidemics or disease outbreaks in the U.S. or globally have disrupted, and may in the future disrupt, our business, which could materially affect our results of financial condition, results of operations and cash flows. Any such events may adversely impact our global supply chain and global manufacturing operations and cause us to again suspend our operations in countries and states where we operate. In particular, we have experienced, and could continue to experience, among other things: (1) global supply disruptions, especially in China; (2) labor disruptions; (3) an inability to manufacture; (4) an inability to sell and distribute our products to our customers; (5) a decline in customer demand during and following the pandemic, whether as a result of our inability to satisfy customer demand in a timely manner due to raw material shortages, supply chain , inflationary cost pressures, or work experienced by one or more of our customers; and (6) an ability to access credit and the capital markets, especially in light of the fluctuating interest rates. Any new pandemic or other public health , or future public health , could have a material impact on our business, financial condition, results of operations and cash flows going forward and may also have the effect of heightening other risks and uncertainties below.
Physical effects of climate change or legal, regulatory or market measures intended to address climate change could materially adversely affect our business and operations.
Risks associated with climate change are subject to ongoing societal, regulatory and political focus in the U.S. and globally. Shifts in weather patterns caused by climate change could increase the frequency, severity, or duration of certain adverse
weather conditions and natural disasters, such as hurricanes, tornadoes, earthquakes, wildfires, droughts, extreme temperatures, or flooding, which could result in more significant business and supply chain interruptions, damage to our products and facilities as well as the infrastructure of our customers, reduced workforce availability, increased costs of raw materials and components, increased liabilities, and decreased revenues than what we have experienced in the past from such events. In addition, increased public concern over climate change could result in new legal or regulatory requirements designed to mitigate the effects of climate change, which could include the adoption of more stringent environmental laws and regulations or stricter enforcement of existing laws and regulations. Such developments could result in increased compliance costs and adverse impacts on raw material sourcing, manufacturing operations, and the distribution of our products, which could adversely affect our business and operations.
If we are unable to secure and maintain patent or other intellectual property protection for our intellectual property, our ability to compete will be harmed.
We rely upon patents, copyrights, trademarks, and trade secret laws to establish and maintain its proprietary rights for various trade names. There can be no assurance that any of our patents, trademarks or other intellectual property rights will not be challenged, invalidated, or circumvented, or that any rights granted thereunder will provide competitive advantages to us. In addition, there can be no assurance that patents will be issued from pending patent applications filed by us or that claims allowed on any future patents will be sufficiently broad to protect us from infringement. Further, the laws of some foreign countries may not permit the protection of our proprietary rights to the same extent as do the laws of the U.S.
Risks Related to Legal and Regulatory Compliance
Environmental, health and safety laws and regulations impose substantial costs and limitations on our operations, environmental compliance may be more costly than we expect, and any adverse regulatory action may materially adversely affect our business.
Our business activities are subject to extensive federal, state, local, and foreign laws and regulations relating to pollution control, protection of the environment and occupational safety and health. These laws and regulations govern, among other things, air emissions, wastewater discharges, the generation, storage, handling and disposal of hazardous waste generated at our facilities, the investigation and remediation of contamination and maintaining a safe work-place environment. Under such laws and regulations, we are required to obtain permits from governmental authorities for some of our operations.
The risks of substantial costs, liabilities and limitations on our operations related to compliance with these laws and regulations are an inherent part of our business, and future conditions may develop, arise or be discovered that create substantial compliance or remediation liabilities and costs. Compliance with environmental, health and safety legislation and regulatory requirements may prove to be more limiting and costly than we anticipate. We maintain a compliance program to assist in preventing and, if necessary, correcting environmental problems. To date, we have committed, and expect to continue to make, significant expenditures in our efforts to achieve and maintain compliance with these requirements at our facilities. If we violate or fail to comply with these laws, regulations or permits, we could be fined or otherwise sanctioned by regulators. Under some environmental laws and regulations, we could also be held responsible for all the costs relating to any contamination at our past or present facilities and at third-party waste disposal sites.
From time to time, we may be subject to legal proceedings or investigations brought by private parties or governmental authorities with respect to environmental, occupational health and safety matters, including matters involving alleged noncompliance with or liability under environmental, health and safety laws, such as Occupational and Safety Health Authority standards, property damage or personal injury or fatality. Additionally, new laws and regulations, including those which may relate to emissions of greenhouse gases, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new clean-up requirements could require us to incur costs or become the basis for new or increased liabilities that could have a material adverse effect on our business, prospects, financial condition, results of operations, or cash flows.
Additionally, some of the medical devices that we produce may be subject to regulation by numerous government agencies, including the Food and Drug Administration (“FDA”) and comparable agencies outside the U.S. To varying degrees, each of these agencies requires us to comply with laws and regulations governing the development, testing, manufacturing, labeling, marketing and distribution of medical devices. We cannot guarantee that we will be able to obtain marketing clearance for our new products or enhancements or modifications to existing products. If such approval is obtained, it may:
• take a significant amount of time;
• require the expenditure of substantial resources;
• involve stringent clinical and pre-clinical testing, as well as increased post-market surveillance;
• involve modifications, repairs or replacements of our products; and
• result in limitations on the proposed uses of our products.
We are subject to periodic inspections by the FDA to determine compliance with the FDA’s requirements, including primarily the quality system regulations and medical device reporting regulations. The results of these inspections can include inspectional observations on FDA’s Form-483, warning letters, or other forms of enforcement. If the FDA were to conclude that we are not in compliance with applicable laws or regulations, or that any of our medical devices are ineffective or pose an unreasonable health risk, the FDA could ban such medical devices, detain or seize adulterated or misbranded medical devices, order a recall, repair, replacement or refund of such devices, refuse to grant pending pre-market approval applications or require certificates of foreign governments for exports, and/or require us to notify health professionals and others that the devices present unreasonable risks of substantial harm to the public health. The FDA may also impose operating restrictions on a company-wide basis, and/or restrain certain conduct resulting in of applicable law pertaining to medical devices, and assess civil or our officers, employees, or us. The FDA may also recommend to the Department of Justice. Any regulatory action, depending on its magnitude, may restrict us from effectively marketing and selling our products.
U.S. and foreign governmental regulations have become increasingly stringent and more common, and we may become subject to more rigorous regulation by governmental authorities in the future. Penalties for a company’s non-compliance with foreign governmental regulation could be severe, including revocation or suspension of a company’s business license and criminal sanctions. Any domestic or foreign governmental law or regulation imposed in the future may have a material adverse effect on us.
Changes in U.S. administrative policy, including the imposition of or increases in tariffs, changes to existing trade agreements and any resulting changes in international trade relations, may have an adverse effect on our business.
Changes in laws or policies governing the terms of trade, and in particular increased trade restrictions, tariffs or taxes on imports from countries where our customers, suppliers or we manufacture products, such as Mexico and China, could have a material adverse effect on our business and financial results. For example, the U.S. government has recently taken actions or made proposals that are intended to address trade imbalances or trade practices, specifically with China, among other countries, which include encouraging increased production in the U.S. These proposals could result in increased customs duties and the renegotiation of some U.S. trade agreements. Changes in U.S. and foreign governments’ trade policies have resulted and may continue to result in tariffs on imports into, and exports from, the U.S. In the past, the U.S. imposed tariffs on imports from several countries, including China, Canada, the European Union, India and Mexico. In response, China, Canada, the European Union, India and Mexico have proposed or implemented their own tariffs on certain exports from the U.S. into those countries. Because we, our customers, and our suppliers conduct business in China and Mexico, potential reductions in trade with China and Mexico and diminished relationships between China and Mexico and the U.S., as well as the continued escalation of tariffs, could have a material effect on our business and results of operations.
The impact of these tariffs is subject to a number of factors, including the effective date and duration of such tariffs, changes in the amount, scope and nature of the tariffs in the future, any retaliatory responses to such actions that the target countries may take and any mitigating actions that may become available. We can provide no assurance that any strategies we implement to mitigate the impact of such tariffs or other trade actions will be successful. A trade war or other significant changes in trade regulations could have a material adverse effect on our business, financial condition and results of operations.
If renegotiations of existing tariffs are unsuccessful or additional tariffs or trade restrictions are implemented by the U.S. or other countries in connection with a global trade war, the resulting escalation of trade tensions could have a material adverse effect on world trade and the global economy. Even in the absence of further tariffs or trade restrictions, the related uncertainty and the market's fear of an economic slowdown could lead to a decrease in consumer spending, and we may experience lower net sales than expected. Reduced net sales may result in reduced operating cash flows if we are not able to appropriately manage inventory levels or leverage expenses.
Changes in U.S. or foreign tax laws, or an extended government shutdown, could have a material adverse effect on our business, cash flow, results of operations and financial condition.
We are subject to taxes in a variety of U.S. and foreign jurisdictions, including Mexico. Significant judgment is required to determine our consolidated income tax provision and related liabilities. Our effective tax rate could be affected by various factors, such as changes in the mix of earnings in jurisdictions with varying statutory tax rates, changes in the recognition and/or release of valuation allowances, changes in the amount of unrecognized tax benefits, our ability to operate our business in a manner consistent with our corporate structure and intercompany arrangements, and changes to tax rates or tax laws, regulations, or accounting principles (or interpretations thereof). The taxing authorities of the jurisdictions in which we operate may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. If such a disagreement were to occur, and our position was not sustained, we could be required to pay additional taxes, interest, and penalties, which could result in one-time tax charges, higher effective tax rates, reduced cash flows, and lower overall profitability of our operations.
We currently have a $12.9 million tax refund receivable, which is being processed for refund at the Internal Revenue Service based on provisions in the Coronavirus Aid, Relief, and Economic Security Act. Significant delays in receiving our tax refund could adversely impact us.
The U.S. and foreign tax laws and regulations, as well as the administrative interpretations of those laws and regulations, are constantly under review and may be changed at any time, possibly with retroactive effect. For instance, the recently enacted legislation commonly referred to as the One Big Beautiful Bill Act (along with prior U.S. federal tax reform legislation) has resulted in significant changes to the taxation of business entities, including, among other changes, imposition of minimum taxes and excise taxes, changes to the taxation of income derived from international operations, changes in the deduction and amortization of research and development expenditures, and limitations on the deductibility of business interest. Future guidance from the Internal Revenue Service and other tax authorities with respect to these and other legislation may affect us, and certain aspects of such legislation could be repealed or modified in future legislation or sunset in future years. No assurance can be given as to whether, when, or in what form changes to the applicable tax laws applicable to us may be enacted. Changes in tax laws or interpretations of existing tax laws could materially affect our business, cash flow, results of operations, and financial condition.
Our ability to use our Net Operating Loss carryforwards and certain other tax attributes may be limited.
As of December 31, 2025, we had federal and tax effected state Net Operating Loss (“NOL”) carryforwards of approximately $47.9 million and $16.7 million, respectively. Federal NOL carryforwards generated in taxable years beginning after December 31, 2017, may be carried forward indefinitely but are permitted to be used in any taxable year to offset only up to 80% of taxable income in such taxable year, if any. State utilization and carryforward limitations vary by state. There also may be periods during which the use of state NOL carryforwards is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.
Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, and corresponding provisions of state law, if a corporation undergoes an “ownership change,” which generally is defined as a greater than 50% change, by value, in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and certain other tax attributes to offset its post-change income or taxes may be limited. We may have experienced ownership changes in the past, and we may experience ownership changes as a result of subsequent shifts in our stock ownership, some of which may be outside of our control. If our ability to use our NOL carryforwards and certain other tax attributes is materially limited by any ownership change, it could harm our future results of operations by effectively increasing our future tax obligations.
The Company has been, and could in the future be, subject to actions or requests from activist stockholders, and such activism could adversely affect the strategic direction and business results of the Company.
The Company has been, and may again be, subject to actions and requests from activist stockholders. We value constructive input from investors and regularly engage in dialogue with our stockholders. The Board of Directors (the “Board”) and management team are committed to acting in the best interests of all of our stockholders. There can be no assurance, however, that the actions taken by the Board and management in seeking to maintain constructive engagement with our stockholders will be successful, and we may be subject to formal or informal actions or requests from stockholders or others that could adversely affect the strategic direction or business results of the Company. Uncertainties related to, or the results of, any actions or requests by activist stockholders could cause our stock price to experience periods of volatility. We cannot predict, and no assurances can be given as to, the outcome or timing of any matters relating to actions or requests by activist stockholders or the ultimate impact on our business, liquidity, financial condition, results of operations, or strategy.
Risks Related to Our Capital Structure
Our indebtedness and Series D Perpetual Preferred Stock (the “Series D Preferred Stock”) could adversely affect our business, prospects, financial condition, results of operations, or cash flows.
As of December 31, 2025, we had $159.5 million of indebtedness, consisting of $120.3 million in term loans (the “Term Loans”) outstanding under our Term Loan Facility (as defined herein) and $4.7 million in revolving loans (“Revolving Loans”) outstanding borrowings under the ABL Facility (as defined herein). Based on interest rates in effect as of December 31, 2025, annual cash interest payments on the Term Loans would be approximately $10.9 million, annual paid-in-kind interest payments on the Term Loans would be approximately $5.4 million, and annual cash interest payments on the Revolving Loans, assuming no change in the amount outstanding, would be $0.3 million. As of December 31, 2025, we had $11.4 million of outstanding letters of credit issued under the ABL Facility and $26.7 million in undrawn commitments, as well as $10.0 million in delayed draw term loan commitments, which was fully drawn in January 2026. The Term Loans mature on April 16, 2030 and the Revolving Loans mature on December 30, 2029.
In addition, as of December 31, 2025, 65,000 shares of Series D Preferred Stock were issued and outstanding. Holders of the Series D Preferred Stock are entitled to receive, when, as, and if declared by our Board, quarterly cash dividends on the Series
D Preferred Stock on March 31, June 30, September 30 and December 31 in each year (each such date a “Dividend Payment Date”), which are cumulative from the applicable initial issuance date of the Series D Preferred Stock and payable in arrears. The dividend rate for the Series D Preferred Stock from and including the initial issuance date of March 22, 2021 until March 22, 2026 will be 10.0% per annum of the $1,000 liquidation preference per share of Series D Preferred Stock. On any such Dividend Payment Date, if the dividend is not paid in cash, the liquidation preference per share of Series D Preferred Stock shall be increased to 12.0% per annum. On and after March 22, 2026, the dividend rate on the Series D Preferred Stock will increase by an amount equal to 2.5% per annum of the then liquidation rate, and shall continue to increase by an amount equal to 2.5% on each anniversary date following March 22, 2026. Beginning on September 30, 2027 and continuing on every dividend payment date thereafter, the Board shall declare and we shall pay in cash a dividend unless otherwise prohibited by law or any then effective credit agreement. As of December 31, 2025, dividends were accruing on the Series D Preferred Stock of 12.0%, the carrying value of the Series D Preferred Stock shares was $112.4 million, which included $65.7 million of accumulated and deemed dividends. Our Series D Preferred Stock and all of our existing and future indebtedness rank senior to our common stock. For instance, in the event of a , winding up or , our assets would be available to make payments to holders of all existing and future indebtedness and Series D Preferred Stock before payments to holders of our common stock and there may not be sufficient assets remaining to pay anything to common stockholders.
Our debt and Series D Preferred Stock obligations could have important consequences, including:
• increasing our vulnerability to adverse economic, industry, or competitive developments;
• requiring a substantial portion of our cash flows from operations to be dedicated to the payment of principal and interest on our indebtedness and, in the future, if permitted under then effective credit agreements and applicable law, dividends on our Series D Preferred Stock that are currently accrued but unpaid, therefore reducing our ability to use our cash flows to fund operations, capital expenditures, and future business opportunities;
• exposing us to the risk of increased interest rates, which could cause our debt service obligations to increase significantly;
• any failure to comply with the obligations of any of our agreements, including restrictive and financial covenants could result in an event of default under our debt agreements;
• restricting us from making strategic acquisitions or causing us to make non-strategic divestitures;
• limiting our ability to obtain additional financing for working capital, capital expenditures, product and service development, debt service requirements, acquisitions, and general corporate or other purposes; and
• limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who are less highly leveraged and who, therefore, may be able to take advantage of opportunities that our leverage and capital structure may prevent us from exploring.
If any one of these events were to occur, our business, prospects, financial condition, results of operations, or cash flows could be materially and adversely affected. For more information regarding our indebtedness, please see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”
Despite our indebtedness level, we may still be able to incur substantial additional amounts of debt or issue additional shares of preferred stock, which could further exacerbate the risks associated with our substantial indebtedness.
We and our subsidiaries may be able to incur substantial additional indebtedness in the future. Although the agreements governing our existing indebtedness contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and under certain circumstances, the amount of indebtedness that could be incurred in compliance with these restrictions could be substantial. If new indebtedness is added to our and our subsidiaries’ debt levels, the related risks that we now face could increase. In addition, we can issue shares of our preferred stock in one or more series and can set the terms of the preferred stock without seeking any further approval from our common stockholders. Any preferred stock that we issue may rank ahead of our common stock in terms of dividend priority or liquidation premiums and may have greater voting rights than our common stock, which could dilute the value of our common stock to current stockholders, and include additional restrictive covenants.
The agreements governing our indebtedness and our Series D Preferred Stock contain covenants and other restrictions that may limit operating and financial decisions.
The agreements governing our indebtedness contain affirmative, restrictive and financial covenants, and the Certificate of Designation for our Series D Preferred Stock contains provisions that impose significant operating and financial restrictions, in each case th at limit our ability to engage in specified types of transactions and to take other actions that may be in our long-term best interest. The agreements governing our indebtedness include covenants which limit our ability to, among other things:
• incur additional indebtedness or issue certain preferred equity;
• pay dividends on, repurchase, or make distributions in respect of our capital stock, prepay, redeem, or repurchase certain debt or make other restricted payments;
• make certain investments and acquisitions;
• create certain liens;
• enter into agreements restricting our subsidiaries’ ability to pay dividends to us;
• consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets;
• alter our existing businesses; and
• enter into certain transactions with our affiliates.
Further, the covenants in our debt agreements require us to meet specified financial ratios and satisfy other financial condition tests. Our ability to meet those financial ratios and tests will depend on our ongoing financial and operating performance, which, in turn, will be subject to economic conditions and to financial, market, and competitive factors, many of which are beyond our control.
In addition, the Certificate of Designation for our Series D Preferred Stock contains provisions that may likewise impose significant operating and financial restrictions on our business, including, limiting our ability to amend our certificate of incorporation (including the Certificate of Designation) without obtaining the vote or consent of a majority of the holders of Series D Preferred Stock if such amendment would have a material adverse effect on the rights, preferences and privileges or powers of the Series D Preferred Stock, subject to certain exceptions. Failure to comply with our debt agreements or the Certificate of Designation could have a material adverse effect on our business, prospects, liquidity, financial condition or results of operation. Furthermore, if we were unable to repay the amounts due and payable under our secured debt agreements, including the Term Loan Facility and the ABL Facility, the lenders thereunder could proceed against the collateral granted to them to secure our borrowings. Such actions by the lenders could also cause cross defaults under our other debt agreements. If we are unable to cure covenant defaults within any applicable grace periods or obtain waivers or acceptable refinancing, such could result in the acceleration of some or all of the indebtedness incurred thereunder, which could lead to , reorganization or .
We may not be able to generate sufficient cash to service all of our indebtedness and other obligations, and we may not be able to refinance our debt obligations as they mature.
Our ability to make scheduled payments on or to refinance our debt obligations and outstanding Series D Preferred Stock depends on our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to certain financial, business and other factors beyond our control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal, premium, if any, and interest on our indebtedness or make dividend payments with respect to the Series D Preferred Stock.
We regularly review our capital structure, various financing alternatives and conditions in the debt and equity markets in order to opportunistically enhance our capital structure. In connection therewith, we may seek to refinance or retire existing indebtedness or redeem the Series D Preferred Stock, incur new or additional indebtedness or issue equity or equity-linked securities, in each case, depending on market and other conditions. As our debt obligations mature or if our cash flows and capital resources are insufficient to fund our debt service or cash dividend obligations, we may be forced to reduce or delay investments and capital expenditures, or to sell assets, seek additional capital, or restructure or refinance our indebtedness or redeem our Series D Preferred Stock. Our ability to restructure or refinance our debt or redeem our Series D Preferred Stock will depend on the condition of the capital markets and our financial condition at such time. Any refinancing of our debt or financings related to the redemption of our Series D Preferred Stock could be at higher cost and may require us to comply with more onerous covenants, which could further restrict our business operations. The terms of our existing or future debt instruments and Series D Preferred Stock may restrict us from adopting some of these alternatives. In addition, any to make payments of interest and principal on our outstanding indebtedness on a timely basis would likely result in a reduction of our credit rating, which could our ability to incur additional indebtedness. These alternative measures may not be and may not permit us to meet our scheduled debt service obligations.
The price of our common stock may be volatile.
The market price of our common stock could be subject to significant fluctuations and may decline. Among the factors that could affect our stock price are:
• macro or micro-economic factors;
• our operating and financial performance and prospects;
• quarterly variations in the rate of growth of our financial indicators, such as earnings per share, net income and revenues;
• changes in revenue or earnings estimates or publication of research reports by analysts;
• loss of any member of our senior management team;
• speculation in the press or investment community;
• strategic actions by us or our competitors, such as acquisitions or restructuring;
• sales of our common stock by stockholders;
• general market conditions;
• domestic and international economic, legal, and regulatory factors unrelated to our performance;
• loss of a major customer;
• actions or requests by activist stockholders;
• issuance of additional equity; and
• the declaration and payment of a dividend.
The stock markets in general have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. In addition, due to the market capitalization of our stock, our stock tends to be more volatile than large capitalization stocks that comprise the Dow Jones Industrial Average or Standard and Poor’s 500 Index.
Provisions in our charter documents and Delaware law may inhibit a takeover, which could adversely affect the value of our common stock.
Our certificate of incorporation and bylaws, as well as Delaware corporate law, contain provisions that could delay or prevent a change of control or changes in our management that a stockholder might consider favorable and may prevent stockholders from receiving a takeover premium for their shares. These provisions include, for example, the authorization of the Board to issue up to five million preferred shares without a stockholder vote and that stockholders may not call a special meeting.
We are a Delaware corporation subject to the provisions of Section 203 of the Delaware General Corporation Law, an anti-takeover law. Generally, this statute prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder for a period of three years after the date of the transaction in which such person became an interested stockholder, unless the business combination is approved in a prescribed manner. A business combination includes a merger, asset sale or other transaction resulting in a financial benefit to the stockholder. We anticipate that the provisions of Section 203 may encourage parties interested in acquiring us to negotiate in advance with the Board, because the stockholder approval requirement would be avoided if a majority of the directors then in office approve either the business combination or the transaction that results in the stockholder becoming an interested stockholder.
These provisions apply even if the offer may be considered beneficial by some of our stockholders. If a change of control or change in management is delayed or prevented, the market price of our common stock could decline.
Risks Related to Acquisitions and Divestitures
Acquisitions may constitute an important part of our future growth strategy.
Acquiring businesses that complement or expand our operations has been and may continue to be a key element of our business strategy. We regularly evaluate acquisition transactions, sign non-disclosure agreements, and participate in processes with respect to acquisitions, some of which may be material to us. We cannot assure you that we will be successful in identifying attractive acquisition candidates or completing acquisitions on favorable terms in the future. In addition, we may borrow funds or issue equity to acquire other businesses, increasing our interest expense and debt levels or diluting our existing stockholders’ ownership interest in us. Our inability to acquire businesses, or to operate them profitably once acquired, could have a material adverse effect on our business, financial condition, results of operations, and cash flows. Our borrowing agreements limit our ability to complete acquisitions without prior approval of our lenders. We have had difficulty with purchase accounting and other aspects related to the accounting for our acquisitions, which resulted in material weaknesses in our internal control over financial reporting. Although we have remediated these material , there can be no assurances we will not face similar issues with respect to any future acquisitions.
We may not realize all of the anticipated benefits from any future strategic acquisition, or those benefits may take longer to realize than expected.
We either may not realize all of the anticipated benefits from any future strategic portfolio acquisition, or it may take longer to realize such benefits. Achieving those benefits depends on the timely, efficient, and successful execution of a number of post-acquisition events, including integrating the acquired businesses into our existing businesses. The integration process may disrupt the businesses and, if implemented ineffectively, would preclude the realization of the full anticipated benefits. The difficulties of combining the operations of acquired companies include, among others:
• the diversion of management’s attention to integration matters;
• difficulties in the integration of operations and systems, including, without limitation, the complexities associated with managing the expanded operations of a significantly larger and more complex company, addressing possible differences in corporate cultures and management philosophies and the challenge of integrating complex systems, technology, networks, and other assets of each of the acquired companies;
• difficulties in achieving anticipated cost savings, synergies, business opportunities, and growth prospects from combining the acquired businesses with our own;
• the inability to implement effective internal controls, procedures, and policies for acquired businesses as required by the Sarbanes-Oxley Act of 2002 within the time periods prescribed thereby;
• the exposure to potential unknown liabilities and unforeseen increased expenses or delays associated with acquired businesses;
• challenges in keeping existing customers and obtaining new customers;
• challenges in attracting and retaining key personnel; and
• the disruption of, or the loss of momentum in, ongoing operations or inconsistencies in standards, controls, procedures and policies.
Many of these factors will be outside of our control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could materially impact our business, prospects, financial condition, results of operations, or cash flows.
The indemnification provisions of acquisition agreements by which we have acquired companies may not fully protect us and may result in unexpected liabilities.
Certain of the acquisition agreements from past acquisitions require the former owners to indemnify us against certain liabilities related to the operation of each of their companies before we acquired it. In most of these agreements, however, the liability of the former owners is limited in amount and duration and certain former owners may not be able to meet their indemnification responsibilities. These indemnification provisions may not fully protect us, and as a result we may face unexpected liabilities that adversely affect our profitability and financial position.
Our participation in joint ventures could expose us to additional risks from time to time.
We currently have a 49% investment in a Chinese joint venture (the “JV”) and may participate in additional joint ventures from time to time. Our participation in joint ventures is subject to risks that may not be present with other methods of ownership, including:
• our joint venture partners could have investment and financing goals that are not consistent with our objectives, including the timing, terms, and strategies for any investments, and what levels of debt to incur or carry;
• we could experience an impasse on certain decisions because we do not have sole decision-making authority, which could require us to expend additional resources on resolving such impasses or potential disputes, including litigation or arbitration;
• our ability to transfer our interest in a joint venture to a third party may be restricted and the market for our interest may be limited;
• our joint venture partners might become bankrupt, fail to fund their share of required capital contributions or fail to fulfill their obligations as a joint venture partner, which may require us to infuse our own capital into the venture on behalf of the partner despite other competing uses for such capital; and
• our joint venture partners may have competing interests in our markets that could create conflict of interest issues.
Any divestitures and discontinued operations could negatively impact our business and retained liabilities from businesses that we may sell could adversely affect our financial results.
As part of our portfolio management process, we review our operations for businesses which may no longer be aligned with our strategic initiatives and long-term objectives. Divestitures pose risks and challenges that could negatively impact our business, including required separation or carve-out activities and costs, disputes with buyers, or potential impairment charges. We may also dispose of a business at a price or on terms that are less than we had previously anticipated. After reaching an agreement with a buyer for the disposition of a business, we are also subject to satisfaction of pre-closing conditions, as well as necessary regulatory and governmental approvals on acceptable terms, which may prevent us from completing a transaction. Dispositions may also involve continued financial involvement, as we may be required to retain responsibility for, or agree to indemnify buyers against contingent liabilities related to businesses sold, such as lawsuits, tax liabilities, lease payments, product liability claims, or environmental matters. Under these types of arrangements, performance by the businesses or other conditions outside of our control could affect future financial results.
General Risk Factors
Damage to our reputation could harm our business, including our competitive position and business prospects.
Our ability to attract and retain customers, suppliers, investors, and employees is impacted by our reputation. Harm to our reputation can arise from various sources, including employee misconduct, security breaches, unethical behavior, litigation, or regulatory outcomes. The consequences of damage to our reputation include, among other things, increasing the number of
litigation claims and the size of damages asserted or subjecting us to enforcement actions, fines, and penalties, all of which would cause us to incur significant defense related costs and expenses.
Unstable market and economic conditions and adverse developments with respect to financial institutions and associated liquidity risk may have serious adverse consequences on our business, financial condition and stock price.
The global credit and financial markets have recently experienced extreme volatility and disruptions, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, inflationary pressure and interest rate changes, increases in unemployment rates and uncertainty about economic stability. The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, terrorism or other geopolitical events. Sanctions imposed by the United States and other countries in response to such conflicts may also adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic .
In addition, in 2023 the closures of financial institutions and their placement into receivership with the Federal Deposit Insurance Corporation, created bank-specific and broader financial institution liquidity risk and concerns. Future adverse developments with respect to specific financial institutions or the broader financial services industry may lead to market-wide liquidity shortages, impair the ability of companies to access near-term working capital needs, and create additional market and economic uncertainty.
There can be no assurance that future credit and financial market instability and a deterioration in confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, liquidity shortages, volatile business environment or continued unpredictable and unstable market conditions. If the equity and credit markets deteriorate, or if adverse developments are experienced by financial institutions, it may cause short-term liquidity risk and also make any necessary debt or equity financing more difficult, more costly and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to or modify our business plans.
