Item 1A. Risk Factors.
The following factors, among others, could cause our actual results to differ materially from the forward-looking statements we make. All forward-looking statements attributable to us or persons working on our behalf are expressly qualified by the following factors. This information should be read in conjunction with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, Item 7A, “Quantitative and Qualitative Disclosures about Market Risks” and the consolidated financial statements and related notes included in this Form 10-K.
Risks Related to the Global Macroeconomic Environment and Our International Operations
Adverse conditions in the global economy and disruptions of financial and commodities markets could negatively impact us and our customers.
Our results of operations are affected by the level of business activity of our customers, which in turn is affected by global economic conditions and market factors impacting the industries and markets that they serve. Certain global economies and the financial and commodities markets continue to experience significant uncertainty and volatility. Adverse economic conditions, disruptions in financial markets or lack of liquidity in these markets, particularly in North America, as well as those caused by political risk or instability globally, may adversely affect our revenues and operating results. Disruptions in financial markets can cause increases in interest rates and borrowing costs. Economic and financial market conditions may also affect the availability or the cost of financing for projects and for our customers’ capital or other expenditures, which can result in project delays or cancellations and thus affect demand for our products. There can be no assurance that any governmental responses to economic conditions or disruptions in the financial markets ultimately will stabilize the markets or increase our customers’ liquidity or the availability of credit for us or our customers. Although no single customer accounts for more than 5% of our sales, a payment default by one of our larger customers could have a negative short-term impact on earnings or liquidity. A financial or industry downturn could have an adverse effect on the collectability of our accounts receivable, which could result in longer payment cycles, increased collection costs and defaults, and limit our ability to borrow additional funds. Should one or more of our larger customers declare bankruptcy, it could adversely affect the collectability of our accounts receivable, along with credit loss reserves and net income. In addition, our ability to access the capital markets may be restricted at a time when we would like, or need, to do so.
The economic, political and financial environment may also affect our business and financial condition in ways that we currently cannot predict. Certain geopolitical conflicts, and resulting international responses, have contributed to further volatility and uncertainty in the global financial and commodities markets, resulting in fluctuations in oil and commodity prices. There can be no assurance that economic and political instability, both domestically and internationally (for example, resulting from the geopolitical conflicts, changes in the creditworthiness of the U.S. or any government, changes to economic or trade policies, sanctions, tariffs or participation in trade agreements or economic and political unions) will not adversely affect our results of operations, cash flows or financial position in the future.
Volatile trade policies, including a shift toward a “reciprocal” tariff regime in the U.S., and retaliatory measures by foreign governments, could materially increase our costs, disrupt supply availability and lead times, reduce price competitiveness, and adversely affect demand for our products and services.
Global trade policy remains highly volatile. Sudden, material changes in U.S. and foreign tariff rates, scope, exclusions and enforcement, particularly following the adoption of a “reciprocal” tariff approach by the U.S., as well as retaliatory actions by other jurisdictions, including counter-tariffs and expanded export controls on critical minerals, components, and technologies, could negatively affect the availability and cost of certain products and inputs, extend lead times and impair our ability to fulfill customer orders. These measures may also increase our logistics, compliance and working capital costs, and contribute to broader inflationary pressures. We may be unable to pass through incremental costs to customers in a timely manner or at all without adversely affecting our price competitiveness or margins. If we are unable to adjust pricing, sourcing or inventory strategies effectively, or if customers reduce or defer purchases (including due to demand destruction arising from higher end-market prices), our business, financial condition and results of operations could be materially affected.
Our global operations expose us to political, economic, legal, currency and other risks.
We operate a network of more than 700 sites, including distribution centers, fulfillment centers and sales offices with operations in approximately 50 countries. Approximately one-third of our employee population are non-U.S. employees. We derive approximately 26% of our revenues from sales outside of the U.S. As a result, we are subject to additional risks associated with owning and operating businesses in these foreign markets and jurisdictions.
Operating in the global marketplace exposes us to a number of risks including:
• geopolitical and security issues, including armed conflict and civil or military unrest, political instability, terrorist activity and human rights concerns;
Table of Contents
• natural disasters (including as a result of climate change) and public health crises (including pandemics such as COVID-19 and its variants), and other catastrophic events;
• global supply chain disruptions and large-scale outages or inefficient provision of services from utilities, transportation, data hosting, or telecommunications providers;
• abrupt changes in government policies, laws, regulations, executive orders, spending allocations, or treaties, including imposition of export, import, or doing-business regulations, trade sanctions, embargoes or other trade restrictions, as well as tariffs and trade measures that may increase the cost of goods, limit the availability of key materials, or otherwise disrupt supply chains, pricing, and demand;
• changing and expanding export controls, sanctions, and data localization rules which could restrict our ability to source, sell or service certain products, software or technologies;
• regulatory uncertainty, including potential challenges to agency rulemaking authority, which could increase litigation risks, complicate compliance planning, and disrupt our operations;
• tax increases, tariff increases, or retaliatory trade measures, including those intended to address trade imbalances or protect domestic industries, that could impact the pricing of our products, the cost and availability of raw materials and components used in production, and the competitiveness of our goods in key markets, while also contributing to broader economic uncertainty, inflationary pressures, and disruptions in our supply chain;
• government restrictions on, or nationalization of, our operations in any country;
• changes in labor conditions and difficulties in staffing and managing international operations, including logistical and communication challenges;
• monetary policy of the countries where we operate and related currency exchange rate fluctuations;
• challenges in protecting our IP rights in certain countries;
• local business and cultural factors that differ from our current standards and practices;
• continuing uncertainty regarding social, political, immigration, tax, and trade policies in the U.S. and abroad; and
• other social, political and economic instability, including recessions and other economic crises in other regions.
Broader geopolitical conflicts and instability could disrupt supply chains, energy markets, cross‑border data flows, and vendor operations, and may result in new or expanded trade controls, export restrictions, sanctions, or heightened cybersecurity threats. To the extent conflicts escalate or are further prolonged, it may have the effect of heightening many of the risks described above or elsewhere in these risk factors.
We are subject to various laws and regulations globally and any failure to comply could adversely affect our business.
We are subject to a broad range of laws and regulations in the jurisdictions where we operate globally, including, among others, those relating to data privacy and protection, cyber security, import and export requirements, anti-bribery and corruption, product compliance, extended producer responsibility requirements, supplier regulations regarding the sources of supplies or products (such as the Uyghur Forced Labor Prevention Act or other forced labor, traceability and country of origin verification requirements), sustainability and environmental protection, health and safety requirements, intellectual property, foreign exchange controls and cash repatriation restrictions, labor and employment, human rights, e-commerce, advertising and marketing, anti-competition, artificial intelligence and tax. Compliance with these domestic and foreign laws, regulations and requirements may be burdensome, increasing our cost of compliance and doing business. In addition, as a supplier to federal, state, and local government agencies, we must comply with certain laws and regulations relating specifically to our governmental contracts. Although we have implemented policies and procedures designed to facilitate compliance with various laws, we cannot assure you that our employees, contractors, or agents will not such laws and regulations, or our policies and procedures. Any such could result in the imposition of and , remediation costs, product restrictions or prohibitions, contractual , , to our reputation, and, in the case of laws and regulations relating to governmental contracts, the of those contracts.
Fluctuations in foreign currency have an effect on our results from operations.
The results of certain of our foreign operations are reported in the local currency and then translated into U.S. dollars at the applicable exchange rates for inclusion in our consolidated financial statements. The exchange rates between some of these currencies and the U.S. dollar have fluctuated significantly in recent years, and may continue to do so in the future. Even small fluctuations in exchange rates in currencies where we significantly transact, such as the Canadian dollar, could have material impacts on our business and financial results. We may incur losses related to foreign currency fluctuations, and foreign exchange controls may prevent us from repatriating cash in countries outside the U.S. In addition, because our financial statements are stated in U.S. dollars, such fluctuations may also affect the comparability of our results between financial
Table of Contents
periods. Refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risks” for additional details on foreign currency risks.
Risks Related to Our Strategic Initiatives and Acquisitions
Expansion into new business activities, industries, product lines, services offerings, or geographic areas could subject the Company to increased costs and risks and may not achieve the intended results.
We have invested significantly in expanding our digital solutions and digitalization initiatives, including but not limited to, our digital and data platform, e-commerce capabilities, enhancing the online customer experience, software as a service (SaaS), internet of things (IoT) technology, artificial intelligence capabilities, electrification, automation, grid modernization, security, design and engineering services, smart building technology and advisory services. If our efforts to transform and expand our digital and service capabilities are not successful, or are not developed and deployed on a timely basis, we may not realize the return on our investments as anticipated, or our operating results could be adversely affected by slower than expected sales growth or additional costs. Furthermore, engaging in or significantly expanding business activities in product sourcing, sales and services could subject the Company to unexpected costs and risks. Such activities could subject us to increased operating costs, product liability, regulatory requirements and reputational risks. Our expansion into new and existing markets, including manufacturing related or regulated businesses, may present competitive distribution and regulatory challenges that differ from current ones. We may be less familiar with the target customers and may face different or additional risks, as well as increased or costs, compared to existing operations. Growth into new markets may also bring us into direct competition with companies with whom we have little or no past experience as competitors. To the extent we are reliant upon expansion into new geographic, industry and product markets for growth and do not meet the new posed by such expansion, our future sales growth could be impacted, our operating costs could increase, and our business operations and financial results could be affected.
Our strategic and operational initiatives, including our business transformation enabled by digital initiatives, are subject to various risks and uncertainties, and we may be unable to implement the initiatives successfully.
We are engaged in a number of strategic and operational initiatives, including our digital transformation initiatives, designed to optimize costs and improve operational efficiency. Our ability to successfully execute these initiatives is subject to various risks and uncertainties and there can be no assurance regarding the timing of or extent to which we will realize the anticipated benefits, if at all. The design, development, and implementation of new systems and applications carries inherent risks, including potential technical failures, integration challenges, inadequacy of internal controls, and business disruptions. These risks could result in operational inefficiencies, system downtime, or other unforeseen complications that may adversely affect our business operations and customer relationships. Additionally, our initiatives may require significant capital investments and resource allocation, and any , cost , or implementation could impact our expected return on investment and overall business performance.
We may not be able to fully realize the anticipated benefits and cost savings of mergers and acquisitions.
In 2020, we completed our merger with Anixter; in 2022, we completed the acquisition of Rahi Systems; and in 2024 and 2025, we completed several acquisitions, including those of entroCIM, Independent Electric Supply, Ascent and Industrial Software Solutions. We consider and may pursue other acquisitions on an on-going basis. The success of these and future acquisitions, including anticipated benefits and cost savings, depends on the successful combination and integration of the companies’ businesses. It is possible that the integration process of an acquired business could result in the loss of key employees, higher than expected costs, diversion of management attention, the disruption of either company’s ongoing legacy businesses or inconsistencies in standards, controls, procedures and policies that adversely affect the Company’s ability to maintain relationships with customers, suppliers and employees or to achieve the anticipated benefits and cost savings of the transaction.
We have incurred, and expect to continue to incur, non-recurring costs associated with recent acquisitions and related integration activities. This includes transaction fees and expenses related to formulating and implementing integration plans, including facilities, systems consolidation and employment-related costs. We continue to assess the magnitude of these costs, and additional unanticipated costs may be incurred in the integration of the acquired companies’ businesses. Although we anticipate that the elimination of duplicative costs, as well as the realization of other efficiencies related to the integration of the businesses, should allow us to offset integration-related costs over time, this net benefit may not be achieved in the near term, or at all.
If we experience difficulties with the integration process, the anticipated benefits of recent or future mergers or acquisitions may not be realized or may take longer to realize than expected. These integration matters could have an adverse effect on us for an undetermined period.
Table of Contents
Any future acquisitions that we may undertake will involve inherent risks, any of which could cause us not to realize the anticipated benefits.
We have expanded our operations through organic growth and selected acquisitions of businesses and assets, such as our acquisitions of Rahi Systems, entroCIM, Independent Electric Supply, Ascent and Industrial Software Solutions, and may seek to do so in the future. Acquisitions involve various inherent risks, including: problems that could arise from the integration of the acquired business; uncertainties in assessing the value, strengths, weaknesses, contingent and other liabilities and potential profitability of acquisition candidates; the potential loss of key employees of an acquired business; the ability to achieve identified operating and financial synergies anticipated to result from an acquisition or other transaction; unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying the acquisition or other transaction rationale; and expansion into new countries or geographic markets where we may be less familiar with operating requirements, target customers and regulatory compliance. Additionally, elevated valuations and increasing acquisition multiples across various sectors, such as those related to data centers, artificial intelligence, and technology services, may impact our ability to execute acquisitions at acceptable prices or expected returns on investment. Any one or more of these factors could increase our costs or cause us not to realize the benefits anticipated to result from the acquisition of a business or assets.
Divestitures are subject to various risks and uncertainties.
In 2024 we completed the divestiture of our Wesco Integrated Supply business. We may consider and undertake divestitures of other businesses in the future. Divestitures involve risks and uncertainties, such as the separation of assets that are being sold, employee distraction, potential disruptions to customer and vendor relationships, and tax obligations or loss of tax benefits. If we are unable to successfully transition divested businesses, our business and financial results could be negatively impacted. After we divest a business, we may retain exposure on financial or performance guarantees and other contractual, employment, or severance obligations, and potential liabilities that may arise under law because of the disposition or the subsequent failure of an acquirer. Purchase price adjustments could be unfavorable and other future proceeds owed to us as part of these transactions could be lower than we expect. In addition, the of any business could impact our , resulting in the of sales or income, or a decrease in cash flows.
Heightened antitrust and foreign investment scrutiny could delay, condition, or prevent our strategic transactions.
Competition and foreign investment authorities in the U.S. and other jurisdictions are applying more expansive and unpredictable approaches to reviewing mergers, acquisitions, joint ventures, minority investments, and other strategic transactions. Premerger notification and reporting obligations under the Hart-Scott-Rodino Antitrust Improvements Act (“HSR Act”), as well as analogous merger control and foreign direct investment regimes globally, have become more burdensome, costly, and time-consuming. Recent rule changes and evolving agency practices require the submission of significantly more information, including detailed narratives, internal documents, data, and ordinary course materials. Filing fees and compliance costs have increased, and regulators are taking longer to accept filings as complete and to commence or conclude review periods. Even transactions that raise limited or no apparent competitive concerns can face prolonged timelines, significant expense, and uncertainty as to outcome. Authorities may also review consummated deals, require divestitures or unwinding, or impose penalties for alleged non-compliance. As a result, we may face , increased costs, and conditions, such as , behavioral commitments, or conduct restrictions, or we may be to close on expected terms or timelines, or at all. Evolving legal standards, shifting enforcement priorities, and new or revised rules that expand disclosure obligations, increase fees, or extend waiting periods may further reduce deal certainty. These factors could , or anticipated synergies and benefits, management, and affect our strategy, reputation, financial condition, and results of operations.
Risks Related to Our Information Systems and Technology and Intellectual Property
Any significant disruption or failure of our information systems could lead to interruptions in our operations, which may materially adversely affect our business operations, financial condition, and results of operations.
We operate a number of facilities and we coordinate company activities, including information technology systems, administrative services, and similar systems, through our headquarters and field operations. We rely on the proper functioning and availability of our information systems to successfully operate our business, including managing inventory, processing customer orders, shipping products, providing service to customers, maintaining customer and supplier information, and compiling financial results. Our operations depend on our ability to maintain existing systems and implement new technology, which includes allocating sufficient resources to upgrade our information technology systems, and to protect our equipment and the information stored in our databases against both man-made and natural disasters (including those as a result of climate change), as well as power losses, computer and telecommunications failures, technological breakdowns, unauthorized intrusions, cyber-attacks, and other events. Further, many of the products and services we provide to customers rely on information technology to transmit and store data in Company, cloud-based and third-party systems. Even where Company-managed information systems remain fully operational, a by a third-party’s systems or procedures could have
Table of Contents
effects on our operations. Any significant or prolonged unavailability or failure of critical information systems could materially impair our ability to maintain proper levels of inventories, process orders, meet the demands of our customers and suppliers in a timely manner, and other harmful effects on our business operations, which could negatively affect our financial results.
We may not be able to realize the anticipated benefits and cost savings of our digital transformation initiatives or enhancing existing, and deploying new, technology, digital products and information systems in our operations.
We are executing our digital transformation strategy and seek to continually enhance existing and deploy new technology, digital products and information systems as a part of our technology-enablement strategy. Such changes could fail to realize anticipated benefits, create new liability or disrupt our existing information systems or other aspects of our operations. Conversions to new information technology systems may result in cost overruns, delays or business interruptions. Efforts to align portions of our business on common enterprise platforms, systems and processes could result in unforeseen interruptions, increased costs or liability, and other negative effects. Sales enablement initiatives that improve data analytics and automate, optimize, digitize or outsource tasks could result in unforeseen consequences, including our ability to process orders, receive and ship products, maintain inventories, collect accounts receivable and pay expenses, therefore impacting our results of operations. Additionally, exploring and deploying use cases for artificial intelligence, generative artificial intelligence and large language models to our employees and streamline our operations may introduce new risks such as biased output, output, security and increased stakeholder or regulatory , which could impact the of our business processes, us to or , or the trust of our stakeholders. Our governance structures and control environment may not keep pace with the rapid adoption of these emerging technologies, potentially to oversight of their development and deployment. The dynamic and rapidly evolving nature of artificial intelligence technologies and their applications necessitates continuous monitoring and updating of systems, processes, and policies, which, if not managed, could the risks of , outcomes, or compliance . If our technology systems are , become or do not support our strategic, operational or compliance needs, or if the controls placed over the use of new and existing technology prove , it could result in a competitive or affect our business operations, reputation or financial condition.
Our increasing use and reliance on artificial intelligence (“AI”), including machine learning, generative AI, agentic AI and large language models, may expose us to significant risks that could adversely affect our operations, financial condition, and results of operations.
We have invested, and expect to continue to invest, significant time, capital, and resources to develop, upgrade, manage, and implement AI capabilities within our business and in support of our products and services. These initiatives are complex and may involve substantial upfront and ongoing expenditures, as well as diversion of management attention and internal resources. The design, testing, integration, and deployment of AI systems can be unpredictable and may take longer than anticipated, require greater expense than planned, or fail to deliver expected efficiencies or other benefits. In addition, implementation challenges, unforeseen technical limitations, integration issues with legacy systems or third‑party technologies, and change‑management complexities may disrupt our operations, impair productivity, or negatively affect the customer experience.
We also depend on third‑party AI vendors, platforms, cloud service providers, data sources, and other partners to enable and operate certain AI capabilities. These external dependencies may subject us to service outages, performance degradation, data accessibility constraints, changes in service offerings or roadmaps, discontinuation of products or features, pricing increases, or other unfavorable changes in terms and conditions. Providers may modify or terminate their contractual arrangements with us, fail to meet service‑level commitments, experience business or technical failures, or be affected by regulatory or legal restrictions that limit the availability or functionality of their AI solutions. Any such developments could require costly transitions to alternative solutions, reduce or delay our ability to innovate, disrupt critical workflows, or otherwise affect our business.
Integrating AI into critical business processes introduces operational risks and business continuity challenges. AI models and AI‑generated outputs can produce errors, inaccuracies, hallucinations, or biased results, and their performance and reliability may degrade over time, in new contexts, or when exposed to unanticipated inputs. These risks may result in flawed business decisions, operational interruptions, delays in order processing or fulfillment, impaired customer support, or quality issues in services and solutions, any of which could lead to reputational harm, customer dissatisfaction, contractual disputes, regulatory scrutiny, or financial losses. Model lifecycle risks, including data drift, concept drift, testing or validation, monitoring, or human oversight, could such outcomes. Furthermore, AI‑ automation may create single points of or amplify at scale if controls are not designed and enforced.
The legal and regulatory landscape governing AI is rapidly evolving and varies across jurisdictions. New or existing laws, regulations, standards, contractual obligations, or industry guidelines applicable to AI, covering areas such as transparency, accountability, safety, human oversight, data protection and privacy, cybersecurity, intellectual property, and product liability, may require us to modify our AI development and deployment practices, implement additional controls, or limit certain use
Table of Contents
cases. We may incur significant costs to achieve and maintain compliance, including expenses associated with audits, assessments, documentation, disclosures, incident reporting, third‑party assurance, and remediation. Divergent or conflicting requirements across jurisdictions may increase complexity and compliance risk. Failure to comply with applicable AI‑related requirements, or to meet evolving customer, supplier, or market expectations regarding responsible AI, could result in investigations, enforcement actions, fines, litigation, contractual liabilities, or reputational damage.
Our competitive position could be adversely affected if we do not successfully integrate AI into our operations, processes, and offerings at the pace or scale achieved by competitors, or if competing solutions deliver superior performance, cost savings, or customer outcomes. Competitors may leverage AI more effectively to improve pricing, procurement, supply chain resilience, sales enablement, product content, design and engineering services, customer engagement, or service delivery, which could pressure our margins, reduce demand for our products and services, or erode our market share.
Our use of AI also presents risks related to data privacy and security, intellectual property, and content protection. AI systems often rely on large volumes of data, which can heighten the risk of unauthorized access, use, or disclosure, as well as data quality issues. Prompting or training on inappropriate data sources, or insufficient segregation of inputs and outputs, could create security vulnerabilities, confidentiality breaches, or violations of contractual obligations. We may face allegations that our AI tools or outputs infringe, misappropriate, or otherwise violate third‑party intellectual property rights, that we lack sufficient rights in training data or model outputs, or that we cannot prevent unauthorized use or copying of content generated by or incorporated into AI systems. We may also encounter challenges in protecting proprietary content, software, and know‑how when leveraging third‑party AI tools or sharing data with vendors. Any of these issues could result in , , defense costs, settlements, judgments, or operational restrictions.
Although we maintain governance processes and internal safeguards designed to evaluate, approve, and oversee AI use cases and systems, these controls may not be designed or operate effectively in all circumstances or keep pace with rapid technological change. Gaps in policies, training, documentation, testing, validation, monitoring, or human‑in‑the‑loop oversight could lead to unintended outcomes, compliance failures, biased or inaccurate outputs, privacy or security incidents, or other adverse effects. In addition, limitations in our ability to explain or audit certain AI model behaviors may hinder our ability to detect, remediate, and report issues in a timely manner, or to satisfy regulatory, contractual, or customer requirements.
Any of the foregoing risks, individually or in the aggregate, could result in increased costs, operational disruptions, diminished efficiency, reduced revenue, lower profitability, compliance or legal exposure, reputational harm, and other adverse impacts on our business, financial condition, and results of operations.
Our business depends on cloud-based services operated by various third-party service providers, and any disruption in or interference with our use of these services could have adverse effects on our business, operational results, and financial condition.
We rely heavily on cloud-based services, systems and networks operated or supported by various third-party service providers to operate critical business systems, to process, transmit and store information, and to conduct our business activities and transactions with employees, customers, vendors and other third parties. Our utilization of these cloud-based services and systems will increase as we continue to implement our digital transformation initiatives. This reliance makes us vulnerable to service malfunctions, interruptions, or outages caused by technical failures, natural disasters, or cybersecurity and other security breaches. Such disruptions can adversely impact our operations as well as our ability to serve our customers, diminishing customer satisfaction and potentially damaging our business reputation. Moreover, we have limited control over these third-party providers and the need to manage multiple external service providers increases operational complexity. If any of our cloud service providers do not perform effectively, or if we to monitor their performance (including their to comply with service-level agreements or regulatory requirements), we could incur additional expenses to remediate made by such providers, or could be subject to , or regulatory and actions. In addition, our third-party service providers might unilaterally or limit our access to services, increase pricing, alter service terms, or seek to their contractual relationship with us, affecting our operations. The to maintain our relationships or renew our contracts with cloud service providers on commercially terms could pose to our business. Although we could seek alternative providers, we may incur significant costs in connection with the transition or experience operational . In light of these factors, the cumulative impact of such issues, whether service , regulatory , or remediation costs, reputational , or cost escalations, could pose substantial risks to our operational and our ability to meet our strategic objectives, thereby potentially to material effects on our overall business performance and financial results.
Table of Contents
We may experience a failure in or breach of our information security systems, or those of our third-party product suppliers or service providers, as a result of cyber-attacks or information security breaches.
Because we rely heavily on information technology both in serving our customers and in our enterprise infrastructure in order to achieve our objectives, we may be vulnerable to damage or intrusion from a variety of cyber-attacks, including computer viruses, ransomware, worms or other malicious software programs that seek to gain access to our systems and networks, or those of our third-party service providers. Additionally, third parties may fraudulently attempt to induce employees or customers into disclosing sensitive information such as user names, passwords and other information in order to gain access to our customers’ data or our data, including our intellectual property and other confidential business information, or our information technology systems. Information technology security threats to our systems, networks and data have dramatically increased in recent years due to the proliferation of new technologies and the increased sophistication and activities of perpetrators. We have seen, and will continue to see, industry-wide , which could cause widespread to our or other parties’ systems. In addition, the risk of cyber-attacks has increased as a result of geopolitical , including the Middle East and Russia-Ukraine . These and pose a risk to the security of our systems and networks and the confidentiality, availability and of our proprietary and confidential information.
Although we actively manage information technology security risks within our control and continually seek to enhance our controls and processes designed to protect our systems, computers, networks and data, there can be no assurance that such actions will be sufficient to mitigate all potential risks. As cyber threats continue to evolve, we may be required to expend additional resources to continue to enhance our information security measures and remediate any information security vulnerabilities. Despite the precautions we take to mitigate the risks of such events, an attack on our enterprise information technology system, or those of third parties with which we do business, could result in theft or unauthorized disclosure of our proprietary or confidential information or a breach of confidential customer, supplier or employee information. Such events could impair our ability to conduct our operations or cause disruptions to our supply chain, which could have an adverse impact on revenue and our reputation. Additionally, such an event could us to regulatory sanctions or , lawsuits or other legal action or cause us to incur legal liabilities and costs, which could be significant, in order to address and remediate the effects of an attack and related security . The insurance coverage we maintain may be to cover or liabilities relating to a cybersecurity attack.
Malicious actors increasingly leverage AI to enhance the frequency, speed, sophistication and coordination of cyber-attacks, including through highly convincing phishing, deepfake impersonations and other social engineering techniques. These techniques heighten risks of business email compromise, fraudulent payment or procurement instructions, unauthorized access to systems and data, and manipulation of customer or supplier communications. AI-enabled attacks may also evade traditional detection tools, propagate rapidly across systems and third-party environments, and complicate incident response and attribution. Even with employee training, enhanced controls and layered defenses, such threats could result in data loss or corruption, operational disruption, financial , regulatory inquiries, , reputational , and other impacts.
In addition, the legal and regulatory environment surrounding information security and privacy in the U.S. and international jurisdictions is constantly evolving and additional laws and regulations regarding AI are being considered and implemented. Violation or non-compliance with any of these laws or regulations, contractual requirements relating to data security and privacy, or our own privacy and security policies, either intentionally or unintentionally, or through the acts of intermediaries could have a material adverse effect on our brand, reputation, business, financial condition and results of operations, as well as subject us to significant fines, litigation losses, third-party damages and other liabilities.
We could incur significant and unexpected costs in our efforts to successfully avoid, manage, defend and litigate intellectual property matters.
We rely on certain trademarks, patents, trade secrets, copyrights, and other intellectual property, and are continuing to develop intellectual property in connection with the digital transformation of our business and operations. We cannot be certain that others have not or will not infringe upon our intellectual property, or that in-house or third-party solutions, including the output of large language models, will not potentially infringe upon the intellectual property rights of others. Intellectual property litigation could be costly and time consuming, and we could incur significant legal expenses pursuing these claims against others. From time to time, we may receive notices from third parties that allege intellectual property infringement. Any dispute or litigation involving intellectual property could be costly and time-consuming due to its complexity and uncertainty. Our intellectual property portfolio may not be useful in asserting a or negotiating a license in response to a claim of or . In addition, as a result of such , we may our rights to utilize technology or may be required to pay substantial or license fees with respect to rights or be required to redesign or our products or services at a substantial cost, any of which could impact our operating results.
Table of Contents
Risks Related to Our Industry, Markets and Business Operations
Loss of key suppliers could decrease sales, profit margins and earnings.
Most of our agreements with suppliers are terminable by either party on 60 days’ notice or less for any reason. We currently source products from thousands of suppliers. However, our 10 largest suppliers in 2025 accounted for approximately 32% of our purchases by dollar volume for the period. The loss of, or a substantial decrease in the availability of, products from any of these suppliers, a supplier’s change in sales strategy to reduce its reliance on distribution channels, the loss of key preferred supplier agreements, or disruptions in a key supplier’s operations could have a material adverse effect on our business. Although we believe our relationships with our key suppliers are good, they could change their strategies as a result of a change in control, expansion of their direct sales force, changes in the marketplace or other factors beyond our control, including a key supplier becoming financially distressed or experiencing operational or business disruptions which could materially affect our supply chain, increase our costs or disrupt our ability to deliver products to our customers in a timely and cost- manner. We derive a meaningful portion of and cash flow from supplier rebates, volume discounts, co-op/marketing funds and other incentive arrangements with suppliers. These arrangements may be , changed or (sometimes on short notice), and typically depend on sales thresholds, product mix targets and other performance conditions. If suppliers modify the terms of these programs, or if we to specified conditions, our margins could .
We have been, and may continue to be, adversely affected by supply chain challenges, including product shortages, delays and price increases, which could decrease sales, profit margins and earnings.
Supply interruptions could arise from shortages of raw materials, effects of economic, political or financial market conditions on a supplier’s operations, labor disputes or weather conditions affecting products or shipments, transportation disruptions, natural disasters, outbreaks of disease, information system disruptions or other reasons beyond our control.
Since the start of the COVID-19 pandemic, our industry and the broader economy experienced supply chain challenges, including shortages in raw materials and components, labor shortages and transportation constraints, leading to product delays, backlogged orders, increased transportation cost and longer lead times. In 2024 and 2025, we saw continued improvements in supply chain resilience, with manufacturers further adjusting their production footprints through diversification, reshoring, nearshoring and other strategies designed at mitigating tariff and other supply chain risks, alongside continued volatility in the availability of certain raw materials, components and products. While we continue to aggressively and proactively manage supply chain developments, we have experienced, and may continue to experience, some delays in receiving products from our suppliers. We cannot be certain that particular products will be available to us, or available in quantities sufficient to meet customer demand. Any product shortages and delays could our ability to make scheduled deliveries to our customers in a timely manner and cause us to be at a competitive .
Product shortages and delays in deliveries, along with other factors such as price inflation and higher transportation, import or export costs, including tariffs, could result in price increases from our suppliers. We may be unable to pass these price increases on to our customers, which could erode our profit margins. Supply chain constraints, increased product costs and inflationary pressures could continue or escalate in the future, for example if the Russia-Ukraine, Middle East or other geopolitical conflicts escalate or are further prolonged, which would have an adverse impact on our business and results of operations. Trade policy dynamics, including reciprocal tariff frameworks, shifting tariff exclusions, country-of-origin rules, retaliatory duties and export controls affecting critical inputs, may exacerbate product shortages, extend supplier lead times and increase costs. Even where we can re-source, nearshore or redesign supply routes, such actions may require time and capital and may not fully offset availability, increased costs or customer deferrals, which could pressure our sales and margins.
Wesco conducts regular climate risk assessments to determine the materiality of climate-related risks to our business, with the most recent assessment in December 2024. Wesco’s climate-related risk assessments include analysis of multiple temperature scenarios, and incorporate recommendations from recognized standards such as the TCFD and IFRS S2. The effects of global climate change could increase the frequency and intensity of acute physical risks (such as tropical storms, severe winter weather, drought, flooding, or wildfires), chronic physical risks (such as rising sea levels or shifting precipitation patterns) and transition risks (such as rising costs of regulatory compliance), which could cause or exacerbate supply chain interruptions. For example, some of our customers’, suppliers’ and our operations are in water-stressed regions or areas prone to flooding or wildfires, and our facilities depend on power grids that may be impacted by severe weather. With global climate change increasing the frequency and severity of such events, it is possible that we could face greater climate-related risks in the future, which could result in temporary or in operations, increase our operating costs and capital expenditures, and reduce revenue and .
The profitability of our business is also dependent upon the efficiency of our supply chain. An inefficient or ineffective supply chain strategy or operations could increase operational costs, decrease sales, profit margins and earnings, which could adversely affect our business.
Table of Contents
Product cost fluctuations could decrease sales, profit margins and earnings.
Some of our products, such as wire and conduit, are commodity price based products and may be subject to significant price fluctuations which are beyond our control. Recently, we have experienced fluctuations in commodity costs, as well as in the costs of raw materials and components generally, as a result of global economic conditions and other trends. Increases in these costs could erode our profit margin and negatively impact our results of operations to the extent we are unable to successfully mitigate and offset the impact of these costs. While increases in the cost of energy or products could have adverse effects, decreases in those costs, particularly if severe, could also adversely impact us by creating deflation in selling prices, which could cause our profit margin to deteriorate. Fluctuations in energy or raw materials costs can also adversely affect our customers.
Challenges in managing working capital and inventory in response to evolving customer demands, supply chain disruptions, and market fluctuations could significantly impact our cash flow, profit margins, and overall business performance.
Our ability to manage our working capital, including our inventory position, as well as efficiently managing our receivables and payables, is important to the successful operation of our business and resulting cash flow, and if we do not manage our working capital adequately, it can affect our cash flows, results of operations, and financial performance. Evolving customer demand patterns and supply chain disruptions may require rapid adjustments in inventory management strategies. Additionally, our business may continue to adjust the proportion of direct ship sales versus stock sales. An increase in direct ship sales could negatively impact product margins and other financial metrics, while an increase in stock sales could negatively impact inventory carrying costs and free cash flow, either of which could have a negative impact on our business and financial performance. Furthermore, fluctuations in foreign exchange rates, particularly in international markets, combined with varying interest rates, can significantly affect the cost of inventory, the value of receivables, and the cost of debt, thereby impacting our working capital efficiency, ability to fund growth initiatives and overall financial .
A decline in project volume could adversely affect our sales and earnings.
While much of our sales and earnings are generated by comparatively smaller and more frequent orders, the fulfillment of large orders for large capital projects generates significant sales and earnings. Accordingly, our results of operations can fluctuate depending on whether and when large project awards occur and the commencement and progress of work under large contracts already awarded.
The awarding and timing of projects is unpredictable and depends on many factors outside of our control. Project awards often involve complex and lengthy negotiations and competitive bidding processes. These processes can be impacted by a wide range of factors including a customer’s decision to not proceed with a project or its inability to obtain necessary governmental approvals or financing, commodity prices, interest rates, and overall market and economic conditions. Slow macro-economic growth rates, difficult credit market conditions for our customers, weak demand for our customers’ products or other customer spending constraints can result in project delays or cancellations. In addition, some our competitors may also be more willing to take greater or unusual risks or include terms and conditions in a contract that we might not deem acceptable. Our involvement in large, complex projects and multi-site customer programs may also expose us to heightened execution, contractual, and working capital risk, as they often involve customer specific technical requirements, longer fulfillment timelines, milestone-based payment terms, tight delivery windows, , service level commitments, provisions, or performance warranties.
We have risks associated with the sale of nonconforming products and services.
Historically, we have experienced a small number of cases in which our vendors supplied us with products that did not conform to the agreed upon specifications. Additionally, we may inadvertently sell a product not suitable for a customer’s application. We address this risk through our quality control processes, by seeking to limit liability and our warranty in our customer contracts, and by seeking to obtain indemnification rights from vendors. However, there can be no assurance that we will be able to include protective provisions in all of our contracts or that vendors will adequately fulfill their obligations to us. In addition, we may be exposed to significant costs and reputational harm from product liability claims, recalls, or safety issues. Such events, regardless of merit, may lead to litigation, direct or third-party claims, regulatory scrutiny, and reduced customer confidence, adversely impacting our financial condition and operating results.
Disruptions to our logistics capability, or our failure to effectively manage supply chain logistics during periods of disruption, may have an adverse impact on our operations.
Our global logistics services are operated through distribution centers around the world. An interruption of operations at any of our distribution centers could have a material adverse effect on the operations of sites served by the affected distribution center. Such disaster related risks and effects are not predictable with certainty and, although they typically can be mitigated, they cannot be eliminated. We seek to mitigate our exposures to disaster events in a number of ways. For example, where
Table of Contents
feasible, we design the configuration of our facilities to reduce the consequences of disasters. We also maintain insurance for our facilities against casualties, and we evaluate our risks and develop contingency plans for dealing with them. Disruptions to our logistics capability or supply chain may have an adverse impact on our ability to serve our customers, based on factors such as a lack of depth and breadth in the suppliers we do business with, failure to utilize and optimize warehouse space availability in key markets, failure to achieve network optimization and last mile solutions, and failure to improve our supply chain resiliency through technological improvements.
Although we have reviewed and analyzed a broad range of risks applicable to our business, the risks that most significantly affect us may not be those that we have concluded are most likely to occur. Furthermore, although our reviews have led to more systematic business continuity and contingency planning, our plans are in varying stages of development and execution, such that they may not be adequate at the time of occurrence for the magnitude of any particular disaster event that we may encounter.
We also depend on transportation service providers for the delivery of products to our customers. Any significant interruption or disruption in service at one or more of our distribution centers due to severe weather or natural disasters (including as a result of climate change), information technology upgrades, operating issues, disruptions to our transportation network, public heath crises, pandemics, or other unanticipated events, could impair our ability to obtain or deliver inventory in a timely manner, increase transportation costs, cause cancellations or delays in shipments to customers or otherwise disrupt our normal business operations.
Our reliance on third-party service providers for outsourced functions could negatively impact our reputation, operations or financial results.
We engage third-party suppliers for various outsourced services. This approach aims to enhance efficiency and generate cost savings. However, it also increases our operational complexity and reduces our direct control over these functions. Dependence on these providers subjects us to risks such as inadequate service levels, untimely support, non-compliance with legal requirements and industry standards, and potential disruptions if these relationships are terminated or not renewed. These factors could lead to missed deadlines, reputational harm, or challenges in adapting to regulatory or market changes. In the event of substandard performance by our service providers, or if we are unable to promptly replace them with competent alternatives, our business, reputation, and financial condition could be adversely affected. We may consider outsourcing additional functions in the future, further heightening these risks.
An increase in competition could decrease sales, profit margins, and earnings.
We operate in a highly competitive industry and compete directly with global, national, regional and local providers of like products and services. Some of our existing competitors have, and new market entrants may have, greater resources than us. Competition is generally based on product line breadth, product availability, service capabilities and price. Other sources of competition are buying groups formed by smaller distributors to increase purchasing power and provide some cooperative marketing capability, as well as e-commerce companies. There may be new market entrants with non-traditional business and customer service models, resulting in increased competition and changing industry dynamics.
Existing or future competitors may seek to gain or retain market share by reducing prices, and we may be required to lower our prices or may lose business, which could adversely affect our financial results. We may be subject to supplier price increases while not being able to increase prices to customers. Also, to the extent that we do not meet changing customer preferences or demands, or to the extent that one or more of our competitors becomes more successful with private label products, on-line offerings or otherwise, our ability to attract and retain customers could be materially adversely affected. Existing or future competitors also may seek to compete with us for acquisitions, which could have the effect of increasing the price and reducing the number of suitable acquisitions. These factors, in addition to competitive pressures resulting from the fragmented nature of our industry, could affect our sales, profit margins and earnings. Additionally, changes in customer procurement practices, such as increased direct sourcing, vendor consolidation, or adoption of digital procurement platforms, algorithmic or AI-enabled pricing, procurement or sales tools, could shift volume away from us, heighten price competition, and pressure margins.
Our continued success may depend on our ability to execute ESG programs as planned and may impact our reputation and operating costs.
Customers, suppliers, employees, community partners, shareholders and regulatory agencies in various jurisdictions globally request disclosure and action relating to ESG objectives and performance. We commit time and resources to ESG efforts, consistent with our corporate values and in ways designed to strengthen our business, including programs focused on sustainability. Our failure to execute our ESG programs and objectives as planned, or in accordance with the evolving expectations of various stakeholders or regulators in the U.S., Europe and globally, including compliance with standards and regulations such as the EU Corporate Sustainability Reporting Directive (CSRD)’s ESRS standards, ISSB standards
Table of Contents
incorporated into law by various countries globally, the Science Based Targets initiative, and California climate disclosure rules under Senate Bills 253 and 261, could adversely affect the Company’s reputation, business and financial performance. For example, an isolated incident of non-compliance, underperformance or inaccuracy in reporting, the aggregate effect of individually insignificant incidents or the failures of suppliers in our supply chain, can erode trust and confidence in the Company and our brand and adversely affect our business and financial performance, particularly if such events result in claims of misleading ESG-related statements or disclosures, adverse publicity, governmental investigations, enforcement actions, fines, or litigation. The continually evolving nature of ESG frameworks and climate disclosure regimes, particularly the CSRD and its ESRS standards, creates uncertainty regarding the timing, scope, applicability, and assurance requirements of disclosures, as well as the operational measures expected to support those disclosures, including climate transition plans and supply chain due diligence. These uncertainties our compliance roadmap, may require systems and controls , data collection from numerous third parties, and may increase audit or assurance costs. Evolving and compartmentalized reporting requirements across jurisdictions could lead to report interpretation, potential of , and enforcement risk. To the extent we face or in obtaining reliable data, implementing new processes, or securing necessary assurance, we may incur higher costs, experience reputational , or face regulatory or legal exposure.
Simultaneously, increased expectations and regulations around ESG reporting and performance may result in higher operating expenses, capital expenditures and costs of goods sold (including those related to deploying low-carbon technologies, expanding our electric vehicle fleet, strengthening ESG monitoring and reporting programs, calculating and disclosing different scopes of GHG emissions in the manner and timeline expected by regulators and other stakeholders, enhancing supply chain transparency programs, securing assurance by third-party auditors over ESG data, developing and implementing climate transition plans that may be requested by customers or required by regulations, transitioning suppliers due to their ESG programs, other costs to pursue our ESG goals or supplier price increases as manufacturers and services providers accommodate their own ESG-related expenses), which could reduce our profitability and cash flow. Additionally, certain customers may set net-zero emissions targets, and we could face pressure from such customers to further reduce emissions to assist them in the achievement of such targets or risk the loss of their business, which could result in increased costs or decreased revenue and may adversely impact financial performance.
Risks Related to Tax Matters
Changes in tax laws or challenges to the Company’s tax positions by taxing authorities could adversely impact the Company’s results of operations and financial condition.
We are subject to taxes in jurisdictions in which we do business, including, but not limited to, taxes imposed on our income, receipts, stockholders’ equity, property, sales, purchases and payroll. As a result, the tax expense we incur can be adversely affected by changes in tax law. We cannot always anticipate these changes in tax law, which can cause unexpected volatility in our results of operations. Changes in the tax law at the federal and state/provincial levels, in particular, in the U.S. and Canada, jurisdictions which account for most of our income before taxes, can have a material adverse effect on our results of operations.
The Organization for Economic Cooperation and Development (the “OECD”) issued rules with effect from 2024, subject to phase-in and certain transitional relief, to address the tax challenges arising from the digitalization of the global economy, including a global minimum tax. Many of the OECD’s member states have enacted the required domestic legislation implementing the OECD’s global minimum tax rules. The OECD recently released additional rules, which are intended to become effective January 1, 2026, implementing a “side-by-side" system which exempts U.S.-based multinational companies from two of the three taxing mechanisms provided for in the global minimum tax rules. The side-by-side rules must still be adopted by the OECD member states through local legislation to become effective. The Company continues to evaluate the impact of developments concerning the global minimum tax rules. The Company does not expect the global minimum tax rules to have a material impact on the Company’s worldwide tax expense, but they are expected to create significant additional compliance obligations. Other provisions of the OECD rules, including standardized intercompany pricing for routine marketing and distribution activities, are still being developed by the OECD.
The One Big Beautiful Bill Act (“OBBBA”), enacted on July 4, 2025, made permanent certain expiring provisions of the 2017 Tax Cuts and Jobs Act (“TCJA”) and modified other provisions of the TCJA, as well as the Inflation Reduction Act of 2022 (the “IRA”). These changes included the permanent extension of 100% “bonus” depreciation for certain property, the permanent restoration of the tax-basis EBITDA-based limitation on the deductibility of business interest expense subject to certain modifications to the computation of tax-basis EBITDA, and the immediate expensing of qualified domestic research and development expenses. The OBBBA also made permanent, with certain modifications, certain TCJA provisions concerning the current taxation of income from international operations. The OBBBA contained various effective dates with certain provisions becoming effective in 2025 and others in 2026 and beyond. The Company has reflected the estimated impact of the OBBBA on current and deferred income taxes in its Consolidated Balance Sheets. Modifications to the computation of the tax-basis EBITDA-based limitation on the deductibility of business interest expense, which become effective in 2026, could have a material adverse impact in future periods on our ability to deduct incremental interest expense on our borrowings.
Table of Contents
The U.S. federal government provides incentives to promote investment in renewable energy and other qualifying projects in the form of tax credits and other financial incentives. The IRA significantly expanded the tax credits available for the investment in or production of renewable energy and made eligible tax credits transferable for the first time. The Company purchased transferable tax credits (“TTCs”) which we used to offset our 2024 and 2025 U.S. federal income tax liabilities. The Company may purchase additional TTCs to offset future federal income tax liabilities. The OBBBA made material modifications to the tax credit provisions in the IRA, which could impact the availability of TTC’s for purchase and increase the risk of disallowance or recapture of TTC’s purchased by the Company in future periods.
The purchase of TTCs involves risks and uncertainties. These include a determination by the Internal Revenue Service (“IRS”) that the underlying investment or production is not eligible for tax credits or that such tax credits are not eligible for transfer. In some cases, the IRS can also impose a penalty of 20% of the amount of ineligible tax credits disallowed. Also, certain TTCs are subject to recapture if the underlying project does not remain in service for the required period of time under the law. The disallowance by the IRS or recapture of purchased TTC’s could result in material additional tax expense in future periods. These lost TTCs may be offset, at least in part, by other income recognized for the recovery of losses from insurance coverage, or seller/sponsor indemnifications or guarantees.
Finally, the tax laws to which the Company is subject are inherently complex and ambiguous. Therefore, we must interpret the applicable laws and make subjective judgments about the expected outcome upon challenge by the applicable taxing authorities. As a result, the impact on our results from operations of the application of enacted tax laws to our facts and circumstances is sometimes uncertain. If a tax authority successfully challenges our interpretation and application of the tax law to our facts and circumstances, there can be no assurance that we can accurately predict the outcome and the taxes ultimately owed upon effective settlement, which may differ from the tax expense recognized in our Consolidated Statements of Income and Comprehensive Income and accrued in our Consolidated Balance Sheets. Additionally, if we cannot meet liquidity requirements in the U.S., we may have to repatriate funds from overseas to meet these liabilities, which would result in additional income taxes being incurred on the amount repatriated.
Risks Related to Our Indebtedness and Capital Structure
Our outstanding indebtedness requires debt service commitments that could adversely affect our ability to fulfill our obligations and could limit our growth and impose restrictions on our business, and fluctuations in interest rates could affect the cost of our indebtedness.
We have incurred significant indebtedness to finance mergers and acquisitions, including the merger with Anixter in 2020, to support working capital growth, investments in our digital platform and to fund investments in our operations. Additionally, in 2025, we incurred significant additional indebtedness to finance the redemption of the Series A Preferred Stock. As a result, a substantial portion of our cash flow from operations must be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes. As of December 31, 2025, excluding debt discount and debt issuance costs, we had $5.8 billion of consolidated indebtedness. We and our subsidiaries may also undertake additional borrowings in the future, subject to certain limitations contained in the debt instruments governing our indebtedness.
Our debt service obligations impact our ability to operate and grow our business. Our payments of principal and interest on our indebtedness reduce the amount of funds available to us to invest in operations, future business opportunities, acquisitions, and other potentially beneficial activities. Our debt service obligations also reduce our flexibility to adjust to changing market conditions and may increase our vulnerability to adverse economic, political, financial market and industry conditions. A portion of our indebtedness, including amounts outstanding under our accounts receivable securitization and revolving credit facilities, bears interest at variable rates. In the future, we may also incur additional indebtedness that bears interest at variable rates. In a rising interest rate environment, or one in which interest rates may be affected by market disruptions, the interest expense on our variable rate borrowings will increase. Our ability to service and refinance our indebtedness, make scheduled payments on our operating and finance leases, fund capital expenditures, acquisitions or other business opportunities, repurchase shares, and pay dividends will depend in large part on both our future performance and the availability of additional financing in the future, as well as prevailing interest rates and other market conditions and other factors beyond our control. We cannot you that we will be to obtain additional financing on terms acceptable to us or at all. Refer to Item 7A, “Quantitative and Qualitative Disclosures About Market Risks” for additional details on interest risks.
There can be no assurance that our business will continue to generate sufficient cash flows from operations in the future to service our debt, make necessary capital expenditures, or meet other cash needs. If the financial performance of the Company does not meet current expectations, then our ability to service or repay our indebtedness may be adversely impacted. If unable to do so, we may be required to refinance all or a portion of our existing debt, sell assets, or obtain additional financing. If we are unable to repay indebtedness, lenders having secured obligations could proceed against the collateral securing these obligations.
Table of Contents
Our debt agreements contain restrictive covenants that may limit our ability to operate our business.
Our credit facilities and our other debt agreements contain various covenants that restrict or limit our ability to, among other things:
• incur additional indebtedness or create liens on assets;
• engage in mergers, acquisitions or consolidations;
• make loans or other investments;
• transfer, lease or dispose of assets outside the ordinary course of business;
• pay dividends, repurchase equity interests, make other payments with respect to equity interests, repay or repurchase subordinated debt; and
• engage in affiliate transactions.
In addition, certain of these debt agreements contain financial covenants that may require us to maintain certain financial ratios and other requirements in certain circumstances. As a result of these covenants, our ability to respond to changes in business and economic conditions and to obtain additional financing, if needed, may be significantly restricted, and we may be prevented from engaging in transactions or taking advantage of new business opportunities that might otherwise be beneficial to us. Our ability to comply with these covenants and restrictions may be affected by economic, financial and industry conditions or regulatory changes beyond our control. Failure to comply with these covenants or restrictions could result in an event of default, under our revolving lines of credit or the indentures governing our outstanding notes which, if not cured or waived, could accelerate our repayment obligations. See the Liquidity and Capital Resources section in Item 7, “Management’s Discussion and Analysis” for further details.
General Risk Factors
We are subject to costs and risks associated with global laws and regulations affecting our business, as well as litigation for product liability or other matters affecting our business.
The global legal and regulatory environment is complex and exposes us to compliance costs and risks, as well as litigation and other legal proceedings, which could materially affect our operations and financial results. These laws and regulations may change, sometimes significantly, as a result of political or economic events, and some changes are anticipated to occur in the future. They include laws and regulations covering taxation, trade, import and export, labor and employment (including wage and hour), product safety, product labeling, occupational safety and health, data privacy, data protection, intellectual property, AI, and sustainability and environmental matters (including those relating to global climate change and its impact). We are also subject to securities and exchange laws and regulations and other laws applicable to publicly-traded companies such as the Foreign Corrupt Practices Act. Furthermore, as a government contractor selling to federal, state and local government entities, we are also subject to a wide variety of additional laws and regulations, including the Federal Acquisition Regulation (“FAR”) and Defense Federal Acquisitions Regulation Supplement (“DFARS”), and additional compliance obligations, such as Cybersecurity Maturity Model Certification (CMMC) compliance, domestic preference and Buy America/Build America requirements. Proposed laws and regulations in these and other areas could affect the cost of our business operations.
From time to time we are involved in legal proceedings, audits or investigations which may relate to, for example, product liability, labor and employment (including wage and hour), tax, escheat, import and export compliance, government contracts, FAR and DFARS compliance, worker health and safety, intellectual property misappropriation or infringement, antitrust and business practices, and general commercial and securities matters. While we believe the outcome of any pending matter is unlikely to have a material adverse effect on our financial condition or liquidity, additional legal proceedings may arise in the future and the outcome of these as well as other contingencies could require us to take actions, which could adversely affect our operations, could diminish our intellectual property portfolio or could require us to pay substantial amounts of money. Even if we successfully defend against claims, we may incur significant costs that could affect our results of operations, financial condition and cash flow.
Table of Contents
We must attract, retain and motivate our employees, and the failure to do so may adversely affect our business.
Our success depends on hiring, retaining and motivating our employees, including executive, managerial, sales, technical, operations, marketing and support personnel. We may have difficulty locating and hiring qualified personnel. In addition, we may have difficulty retaining such personnel once hired, and key people may leave and compete against us. The loss of key personnel or our failure to attract and retain other qualified and experienced personnel could disrupt or adversely affect our business, its sales and operating results. In addition, our operating results could be adversely affected by increased costs due to increased competition for employees, higher employee turnover, increasing levels of retirement, the possibility of a shrinking workforce in various regions globally, which may also result in increased employee benefit or other costs or the loss of significant customer business, proprietary information, or tacit knowledge, which could impact our operational , capabilities, and customer relationships. Furthermore, talent management and succession planning, along with potential in adapting to evolving workplace trends and expectations, could our ability to respond to market changes and maintain a competitive edge, which could lead to decreased productivity, reduced market share, and ultimately, a in financial performance.
