Item 1A. Risk Factors
The Company’s business, operating results, financial condition and cash flows may be affected by a number of factors including, but not limited to those discussed below. Any of these factors could cause the Company’s actual results to vary materially from recent results or future anticipated results.
Industry and Economic Risks
Due to the Company’s dependency on the energy and communication industries, the Company is susceptible to negative trends relating to those industries that could adversely affect the Company’s operating results.
The Company’s sales to the energy and communication industries represent a substantial portion of the Company’s historical sales. The concentration of revenue in such industries is expected to continue into the foreseeable future. Demand for products to these
industries depends primarily on capital spending by customers for constructing, rebuilding, maintaining or upgrading their systems. The amount of capital spending and, therefore, the Company’s sales and profitability are affected by a variety of factors, including general economic conditions, access by customers to financing, government regulation, demand for energy and cable services, energy prices, technological factors and the ability of our customers to utilize available inventory. As a result, some customers may significantly reduce or delay their spending or may not continue as going concerns, which could have a material adverse effect on the Company’s business, operating results and financial condition. In addition, as the Company adjusts its business to reflect such changes and uncertainties in the Company’s industries and customer demand, the Company has incurred and may in the future incur exit-related costs and impairments of goodwill, definite lived intangible assets and property, fixtures and equipment. These costs and impairments could have a significant negative impact on the Company’s operating results for the period in which they are incurred. Consolidation presents an additional risk to the Company in that merged customers will rely on relationships with a source other than the Company. Consolidation may also increase the pressure on suppliers, such as the Company, to sell product at lower prices.
The intense competition in the Company’s markets, particularly communication, may lead to a reduction in sales and earnings.
The markets in which the Company operates are highly competitive. The level of intensity of competition may increase in the foreseeable future due to anticipated growth in the telecommunication and data communication industries and potential new entrants into the market. The Company’s current competitors in the telecommunication and data communication markets are larger companies with significant influence over the distribution network. The Company may not be able to compete successfully against its competitors, many of which may have access to greater financial resources than the Company. In addition, the pace of technological development in the telecommunication market is rapid and these advances (i.e., wireless or fiber optic network infrastructure) and the ability of the Company’s larger competitors or new providers to adapt more efficiently may adversely affect the Company’s ability to compete in the telecommunications market. If the Company is unable to continue to compete effectively, its sales and margins could decline and its business, financial condition and results of operations would be affected.
Competitors’ introduction of products embodying new technologies or the emergence of new industry standards can render existing products or products under development obsolete or unmarketable and result in lost sales.
The energy and communication industries are characterized by rapid change in technology and customer requirements. Low Earth Orbit (LEO) Satellite communication, 5G, wireless and other communication technologies currently being deployed may represent a threat to copper, coaxial and fiber optic-based systems by reducing the need and desire for wire-line networks. Future advances or further development of these or other new technologies can render existing products or products under development obsolete or unmarketable, which may have a material adverse effect on the Company’s business, operating results and financial condition as a result of lost sales.
Price increases or delayed or decreased availability of raw materials could result in lower earnings.
The Company’s cost of sales may be adversely affected by increases in the market prices of the raw materials used in the Company’s manufacturing processes. The Company has experienced, and is expected to continue to experience, a high tariff environment and inflationary pressures that have impacted its profit margins, primarily due to tariffs on raw materials (specifically, steel and aluminum). While tariffs imposed under the International Emergency Economic Powers Act (IEEPA) in 2025 were ruled to be illegal in February 2026 by the U.S. Supreme Court, the steel and aluminum tariffs remain in place and additional tariffs have been and may continue to be established. The Company has implemented price increases in the U.S. and internationally to mitigate rising material and tariff costs, and additional increases may be needed in the future to maintain profit margins. Price increases could impact the demand for the Company’s products. The Company may not be able to pass on further price increases in raw materials to the Company’s customers through increases in product prices. Further, to the extent amounts are refunded for previously paid tariffs that impacted the Company, it is unknown how such refunds would be processed or the timeline for doing so and whether any such amounts would be recovered by the Company. In addition, any decrease or delay in the availability of these materials or generally in the global supply chain could production and delivery to the Company’s customers. In limited circumstances, the Company relies on sole source suppliers for certain materials and may face or in establishing an alternative source. As a result of these factors, the Company’s operating results and financial condition could be affected.
The Company’s international operations subject the Company to additional business risks that may have a material adverse effect on the Company’s business, operating results and financial condition.
International sales account for a substantial portion of the Company’s net sales (53%, 55%, and 48% in 2025, 2024 and 2023, respectively). Due to its international sales, the Company is subject to the risks of conducting business internationally, including unexpected changes in, or impositions of, legislative or regulatory requirements, which could materially adversely affect U.S. dollar sales or operating expenses, tariffs and other barriers and restrictions, potentially longer payment cycles, greater difficulty in accounts receivable collection, reduced or limited protection of intellectual property rights, potentially adverse taxes and the burdens of complying with a variety of international laws and communications standards, including implementing appropriate internal controls. For example, the Company is subject to antitrust and tax requirements, anti-boycott regulations, import/export/customs regulations and
other international trade regulations, the USA Patriot Act and the Foreign Corrupt Practices Act. Any new regulatory or trade initiatives, including tariffs, could impact the Company’s operations in certain countries. Failure to comply with any such legal requirements could subject the Company to monetary liabilities and other sanctions, which could harm its business, results of operations and financial condition.
The Company is also subject to foreign currency volatility, which could materially impact the Company’s operating results, including the impact of hyper-inflationary conditions in certain economies, particularly where exchange controls limit or eliminate the Company’s ability to convert from local currency. The Company’s operations are also exposed to general geopolitical risks, such as political and economic instability, social unrest, acts of war, military conflict, international hostilities or the perception that hostilities may be imminent, terrorism and changes in diplomatic and trade relationships, including any retaliatory measures, sanctions or tariffs imposed in response to any acts of war or military conflicts in connection with its operations. Any such disruption could cause delays in the production and distribution of the Company’s products and the loss of sales and customers, particularly in regions where the Company maintains manufacturing operations or relies on cross border sourcing. Moreover, these types of events could impact consumer spending or the economy in the impacted regions or depending upon the , globally, or lead to long-term in the currency markets. These risks of conducting business internationally and the in global economic conditions may have a material effect on the Company’s business, operating results and financial condition.
The Company's financial condition and results could be adversely affected by its level of debt and changes in interest rates.
Any period of interest rate increases may adversely affect the Company’s profitability. In addition, a higher level of floating rate debt would increase the exposure to changes in interest rates. As of December 31, 2025, the Company’s total debt, including notes payable, was $39.5 million and the unused availability under its credit facility (the "Facility") was $52.0 million. The interest rate for the Facility is defined as the Secured Overnight Financing Rate (“SOFR”) plus 1.225% unless the Company’s funded debt to Earnings before Interest, Taxes and Depreciation ratio exceeds 3.00 to 1, at which point the SOFR spread becomes 1.600%. The Facility agreement also contains, among other provisions, requirements for maintaining levels of net worth and profitability. These covenants may restrict the Company’s operations and prevent it from pursuing opportunities that would otherwise be in the Company’s best interest for long-term growth. The Facility is currently scheduled to expire on June 30, 2028. Our ability to make scheduled payments on our debt obligations or enter into a new or extended credit facility depends upon our financial condition and operating performance, which is subject to prevailing economic and competitive conditions and to financial, business and other factors, many of which are beyond our control. If we are unable to timely make such payments, establish an extended term for our repayment obligations or establish a new credit facility for future borrowing, our financial condition, operations, liquidity and business prospects would be affected.
Natural disasters, severe weather, climate change concerns, public health concerns, epidemics or pandemics could have a material adverse effect on the Company’s business, operating results and financial condition.
Natural disasters, severe weather and the effects of climate change, including increased frequency and severity of storms, floods, fires, fog, mist, freezing conditions, sea-level rise and other climate-related events, and other catastrophic events could disrupt our operations, cause damage to our business operations, our suppliers or our customers; and have an adverse effect on the Company’s operations, business and financial condition. Extreme weather conditions could also limit the availability of our resources, increase the costs of our products or cause the installation of our products and systems to be delayed or canceled. Further, legislative and regulatory responses to climate change initiatives could require the Company to incur increased costs, such as costs incurred to purchase carbon offsets or otherwise pay for the Company’s emissions, and make additional and significant capital investments in the Company’s business.
The Company also is subject to public health concerns, including viral outbreaks such as the COVID-19 pandemic. As with the disruption experienced with the COVID-19 pandemic, any future viral outbreak or health pandemic could disrupt the global supply chain, which could have a material adverse effect on the Company’s ability to secure raw materials and supplies and could result in increased costs and the loss of sales and customers. The impact of any viral outbreak or health pandemic could potentially exacerbate all the risks discussed and lead to the creation of new risks, any of which could have a material adverse effect on the Company’s business, operating results and financial condition. The duration and scope of any future viral outbreak or health pandemic cannot be predicted, and therefore, any anticipated negative financial impact to the Company’s operating results cannot be reasonably estimated.
Business, Operations and Human Capital Risks
The Company’s business could suffer if the Company fails to offer quality products and a high level of customer service, as well as develop and successfully introduce new and enhanced products that meet the changing needs of the Company’s customers.
The Company’s reputation and sales rely on its ability to continue to offer high quality products with timely delivery, accompanied by a high level of customer service, particularly in cases of emergency. If changes in the availability of materials or delays in the supply chain or transportation industry or advances in the products and level of customer service offered by competitors, among other factors, negatively impact the Company’s ability to meet customer expectations, its sales and profits may suffer. The
Company’s ability to anticipate changes in technology and industry standards and to successfully develop and introduce new products on a timely basis is a significant factor in the Company’s ability to grow and remain competitive. New product development often requires long-term forecasting of market trends, development and implementation of new designs and processes and a substantial capital commitment. The trend toward consolidation of the energy, telecommunications and data communication industries may require the Company to quickly adapt to rapidly changing market conditions and customer requirements. In addition, as the Company expands its offerings in new areas, its success with these products and services will depend on its ability to offer quality, reliability and other competitive advantages. Any failure by the Company to anticipate or respond in a cost-effective and timely manner to technological developments or changes in industry standards or customer requirements, or any significant delays in product development or introduction or any failure of new products to be widely accepted by the Company’s customers, could have a material adverse effect on the Company’s business, operating results and financial condition as a result of reduced net sales.
The Company may not be able to successfully integrate businesses that it may acquire in the future or complete acquisitions on satisfactory terms, which could have a material adverse effect on the Company’s business, operating results and financial condition.
A portion of the Company’s growth in sales and earnings has been generated from acquisitions. The Company expects to continue a strategy of identifying and acquiring businesses with complementary products. In connection with this growth strategy, the Company faces certain risks and uncertainties in addition to the risks faced in the Company’s day-to-day operations, including the risks pertaining to integrating acquired businesses (including integrating the acquired businesses’ internal controls and procedures into our existing control structure), realizing the benefits of acquired technology, expanding exposure to unknown liabilities, utilizing and retaining new personnel and operating in new jurisdictions. Further, internal controls over financial reporting of acquired businesses may not meet required U.S. public company standards. The process of identifying, negotiating and integrating acquisitions can divert substantial time and attention of management and impose unexpected costs. In addition, the Company may incur debt to finance future acquisitions, and the Company may issue securities in connection with future acquisitions that may dilute the holdings of current and future shareholders. Covenant restrictions relating to additional indebtedness could restrict the Company’s ability to pay dividends, fund capital expenditures, consummate additional acquisitions and significantly increase the Company’s interest expense. Any failure to successfully complete acquisitions or to integrate such strategic acquisitions could have a material effect on the Company’s business, operating results and financial condition.
The Company may have interruptions in or lose business due to the uncertainty of the global economy, including due to the lack of available funding for the Company’s customers.
The demand for the Company’s products is significantly affected by the amount of discretionary business and consumer spending, each of which is impacted by the continued uncertainty of the global economy. The Company’s operations have been affected by and could continue to be adversely affected by global economic conditions such as recession, political or social unrest, economic instability, inflation, rising interest rates, tariffs and other trade restrictions, acts of war, military conflict, international hostilities or the perception that hostilities may be imminent, terrorism and changes in diplomatic and trade relationships, including any retaliatory measures, sanctions or tariffs imposed in response to any acts of war or military conflicts, public health concerns or otherwise. If these conditions adversely impact the liquidity and financial position of the Company’s customers, their demand for the Company’s products could decrease and their ability to pay in full and/or on a timely basis may also be impacted. A decline in demand for the Company’s products and/or of funding to fulfill payment terms could have a impact on the Company’s operating results and financial condition.
The Company employs information technology systems to support its business, and any material breach, interruption or failure may adversely impact the Company’s business.
The Company employs information technology systems to support its business. Security breaches and other disruptions to the Company’s information technology infrastructure have interfered and, in the future, could interfere with the Company’s operations and could also compromise information belonging to the Company and its customers, suppliers and employees, exposing the Company to liability which could adversely impact the Company’s business and reputation. In the ordinary course of business, the Company relies on information technology networks and systems, some of which are managed by third parties, to process, transmit and store electronic information, and to manage or support a variety of business processes and activities. Further, artificial intelligence tools are increasingly being used in our industry, and we are evaluating the use of such tools throughout our company. There are risks involved in developing and using artificial intelligence tools in our operations. Additionally, the Company collects and stores certain data, including proprietary business information, and has access to confidential or personal information in certain of its businesses that is subject to privacy and security laws, regulations and customer-imposed controls. Despite the Company’s cybersecurity measures and oversight of such matters by the Audit Committee and the Board of Directors, which are continuously reviewed and upgraded, the Company’s information technology networks and infrastructure and protected data are still to , or due to attack by hackers or , employee or , power , computer viruses, telecommunication or utility , systems , service providers including cloud services, natural or other events. Use of artificial intelligence may increase these , as well. It is possible for such to remain for an
extended period, up to and including several years. In addition, the Company is subject to various data privacy laws in the many jurisdictions in which it operates, which are rapidly changing and require extensive compliance efforts. Any events that compromise the Company’s systems or any failures to comply with applicable privacy laws could result in legal claims or proceedings, liability or penalties under privacy laws, disruption in operations, and damage to the Company’s reputation, which could adversely affect the Company’s business.
The Company depends on maintaining a skilled workforce, and any interruption in the workforce could negatively impact the Company’s operating results and financial condition.
The Company’s ability to sustain and grow its business requires a commitment to hire, retain and develop a highly skilled and diverse management team and workforce. Failure to ensure that the Company has the depth and breadth of personnel with the necessary skill set and experience, failure to compete within and outside the Company’s markets to attract and retain employees, the loss of key employees or interruptions in the Company's workforce, including unionization efforts and changes in labor relations, could impede the Company’s ability to deliver its growth objectives and execute its strategy. Labor shortages or increased labor-related costs have directly affected our results and, if they are significant or sustained, could adversely affect our results of operations and financial condition. Additionally, the health of the Company's employees is critical, and workplace safety is the Company's top priority.
The Company continues to develop and invest in human capital through continuing education, work-related certifications, and talent and performance management systems. These efforts directly impact the Company’s ability to deliver its growth objectives and execute its strategy, though the Company remains susceptible to interruptions in the workforce that could affect the Company’s operating results and financial condition.
A material disruption or unforeseen difficulties with any of our manufacturing facilities could negatively impact our operating results and financial condition.
The Company operates 26 manufacturing facilities domestically and internationally to strategically serve its worldwide markets. Equipment failures, operational interruptions, natural disasters and other unanticipated disruptions may decrease our ability to manufacture our products in a timely manner at our anticipated cost. Interruptions in our production due to such a disruption may lead to decreasing sales and necessitate capital expenditures, therefore negatively impacting our operating results and financial condition.
The Company may also face unforeseen difficulties if we decide to build, lease, expand, redesign, relocate or consolidate facilities. Despite planning, a real estate project may entail uncertainties regarding cost, timeliness, personnel and materials, and any of these variables may negatively impact the Company’s operating results and financial condition.
The Company’s stock price is subject to volatility.
The stock market in general is highly volatile. As a result, the market price of the Company’s common shares is similarly volatile and could be subject to wide fluctuations in response to a number of factors, some of which may be beyond the Company’s control. These factors include, among others, actual or anticipated fluctuations in the Company’s operating results; changes in, or the inability to, achieve estimates of, its operating results by analysts, investors or management; analysts’ recommendations regarding its stock or its competitors’ stock; sales of substantial amounts of its common shares by shareholders; actions or announcements by the Company or its competitors; the maintenance and growth of the value of the Company’s brands; litigation; legislation or other regulatory developments affecting the Company or its industry; widespread illness or pandemics; natural disasters; cyber-attacks; terrorist acts; war or other calamities and changes in general market and economic conditions.
Legal, Tax and Regulatory Risks
The Company may be adversely impacted by laws, regulations, and litigation.
The Company is subject to various laws and regulations in the many jurisdictions in which it operates. For example, extensive environmental regulations related to air and water quality, the discharge of pollutants, climate change, the handling of toxic waste and the handling and transport of products and components classified as hazardous impact its daily operations. Various employment and labor laws and regulations govern the Company’s relationships with its employees throughout the world and affect operating costs. These laws and regulations relate to matters including employment discrimination, minimum wage requirements, overtime, unemployment tax rates, workers’ compensation rates, working conditions, immigration status, tax reporting and other wage and benefit requirements. The introduction of new laws or regulations, or changes in existing laws or regulations, including minimum wage increases, mandated benefits, climate change-related disclosures or other requirements that impose additional obligations on the Company, have increased and could further increase the costs of doing business.
The Trump administration has called for significant changes to U.S. trade, healthcare, immigration and government regulatory policy and has implemented policy changes at a rapid pace. Changes to U.S. policy implemented by the U.S. Congress, the Trump administration or any new administration have impacted among other things, the U.S. and global economy, international trade
relations, unemployment, immigration, healthcare, taxation, the U.S. regulatory environment, inflation and other areas. As such policy changes continue to be made, face legal challenges and court rulings, uncertainty remains as to how those changes will further impact our business and the business of our competitors over the long term, and the extent to which we will benefit from them or be negatively affected by them. For example, President Trump imposed tariffs on foreign countries under the International Emergency Economic Powers Act (IEEPA) in 2025. In February 2026, the U.S. Supreme Court held that the IEEPA does not authorize the President to impose tariffs, therefore striking the tariffs that President Trump imposed pursuant to the IEEPA. Such developments underscore the pace of change and the potential for legal challenges and implementation uncertainty affecting the regulatory environment in which we operate. It is difficult to predict what continued impact changes in federal policy, including environmental, immigration, trade and tax policies, will have on our industry, the economy as a whole, consumer confidence and spending. As a result, the nature, timing and impact on our business of potential changes to the current legal and regulatory frameworks are uncertain.
At any given time, the Company may also be subject to litigation or claims related to its products, suppliers, customers, employees, shareholders, distributors, sales representatives, intellectual property or acquisitions, among other things, the disposition of which may have an adverse effect upon the Company’s business, financial condition, or results of operation. The outcome of litigation is difficult to assess or quantify. Lawsuits can result in the payment of substantial damages by defendants. If the Company is required to pay substantial damages and expenses as a result of these or other types of lawsuits, the Company’s business and results of operations would be adversely affected. Regardless of whether any claims against the Company are valid or whether it is liable, claims may be expensive to defend, may cause reputational (particularly where any relate to significant to persons and property) and may time and money away from the Company’s operations. Insurance may not be available at all or in sufficient amounts to cover any liabilities with respect to these or other matters. An judgment or other liability in excess of the Company’s insurance coverage or financial statement accruals for any could affect the Company’s business and operating results.
The Company may not be able to successfully manage its intellectual property and may be subject to infringement claims.
The Company relies on a combination of contractual rights and patent, trademark, copyright and trade secret laws to establish and protect its proprietary technology. Third parties have challenged and in the future may challenge, invalidate, circumvent, infringe or misappropriate the Company’s intellectual property, or such intellectual property may not be sufficient to permit the Company to take advantage of current market trends or otherwise to provide competitive advantages, which could result in costly redesign efforts, discontinuance of certain product offerings or other competitive harm. Others, including its competitors may independently develop similar technology, duplicate or design around the Company’s intellectual property, and in such cases, the Company could not assert its intellectual property rights against such parties. The Company may also be subject to in the event its technology upon or otherwise a third party’s proprietary rights. Any claim from third parties may result in a on its ability to use the intellectual property subject to these or the requirement to pay a licensing fee or royalty. The Company may be to to enforce or determine the scope and enforceability of its intellectual property rights, trade secrets and know-how, which is expensive, could cause a of resources and may not prove , especially in countries where such rights are more to enforce. The of intellectual property protection or the to obtain third party intellectual property could its business and ability to compete.
Tax matters, including changes in tax rates, disagreements with taxing authorities and imposition of new taxes could impact the Company’s operating results and financial condition.
The Company is subject to income taxes in the U.S. (federal and state) and numerous foreign jurisdictions. Tax laws, regulations, and administrative practices in various jurisdictions may be subject to significant change, with or without notice, due to economic, political, and other conditions, and significant judgment is required in evaluating and estimating the provision and accruals for these taxes. There are many transactions that occur during the ordinary course of business for which the ultimate tax determination is uncertain. The Company’s effective tax rates could be affected by numerous factors, including but not limited to, intercompany transactions, the relative amount of its foreign earnings, including earnings being lower than anticipated in jurisdictions where the Company has lower statutory rates and higher than anticipated in jurisdictions where the Company has higher statutory rates, losses incurred in jurisdictions for which the Company is not able to realize the related tax benefit, changes in foreign currency exchange rates, changes in its deferred tax assets and liabilities and any related valuation, and changes in the relevant tax, accounting, and other laws, regulations, administrative practices, principles, and interpretations. In addition, many countries are actively pursuing changes to their tax laws applicable to corporate multinationals, which could affect our U.S. federal corporate income tax rate and the tax credits we could receive from foreign income. These future changes could materially affect the Company’s financial position and results of operations.
