SHS » Topics » Item 1A. Risk Factors.

This excerpt taken from the SHS 10-Q filed Oct 31, 2008.
Item 1A. Risk Factors.

 

Information disclosing the risk factors affecting the Company is set forth in Item 1A of Part I of the Company’s 2007 Annual Report on Form 10-K.  In light of the recent global economic crisis, the Company is updating its risk factors as follows.  The information in this Item 1A should be considered in conjunction with the other risk factors in the Company’s 2007 Annual Report on Form 10-K and the statements under the caption “Safe Harbor Statement” at the beginning of Management’s Discussion and Analysis in Item 2 of Part I of this report.

 

Worldwide Economic Conditions

 

As has been widely reported, the financial markets in the U.S., Europe, and the Asia-Pacific region have been in a period of severe disruption in recent months.  The turbulence has been most immediately evident in the extreme tightening of credit markets, the resulting loss of liquidity, and historic drops in stock prices.  In response, governments around the world have taken unprecedented steps intended to minimize the depth and breadth of the crisis.  Despite these efforts, it is impossible to predict the duration or overall severity of the current economic disruption.

 

These economic developments and governmental responses may adversely affect the Company’s business, financial condition, and results of operations in a number of ways.  Continued worldwide financial turmoil could cause the Company’s lenders to be unable to meet their funding commitments under the Company’s revolving credit facility, the terms of which are described in more detail in Note 7 in the Notes to Consolidated Financial Statements in the Company’s 2007 Annual Report on Form 10-K.  Similarly, if the Company were to seek additional borrowings, its ability to access the credit markets could be limited.  Tightening credit markets could also have a material impact on the Company’s customers and suppliers and their ability to finance their operations, which could result in a decrease in, or deferral of, orders for the Company’s products or an increase in the Company’s cost of production.  A prolonged economic slowdown, recession, or depression could similarly have a material and adverse impact on the Company’s business, financial condition, and results of operations.

 

These excerpts taken from the SHS 10-K filed Mar 11, 2008.

Item 1A.    Risk Factors.

        The Company's business, financial condition, results of operations and cash flows can be affected by a number of factors, including but not limited to those set forth below and elsewhere in this annual report on Form 10-K, any one of which could cause actual results to vary materially from recent results or from anticipated future results.

International Operations

        The Company depends on the strength of the economies in various parts of the world, particularly in the U.S. and Europe. As a result of this worldwide exposure, net revenue and profitability may be harmed as a result of economic conditions in the major markets in which the Company operates, including, but not limited to, recessions, inflation and deflation, general weakness in the agriculture, construction and specialty markets, changes in governmental laws and policies, and changes in consumer purchasing power.

Technology Change

        The hydraulic industry and markets for component parts of mobile hydraulics are subject to technological change, evolving industry standards, changing customer requirements and improvements in and expansion of product offerings. Although the Company believes that it has the technological capabilities to remain competitive, technological advances or developments by competitors or others could result in the Company needing to make significant capital expenditures in order to remain competitive and to avoid material adverse effects on its business, financial conditions and results of operations.

7


Implementation of New Business System

        The Company is in the process of implementing a common business system at all locations. Any significant problems incurred related to this system implementation may delay or stop manufacturing and hinder the Company's ability to ship product in a timely manner or affect the Company's ability to access financial information. These problems could result in the loss of customers, a decrease in revenue or significant costs to correct the problem.

Raw Material Availability

        The Company purchases raw materials and component parts from suppliers to be used in the manufacture of products. Changes in relationships with suppliers or increases in the costs of purchased raw materials including steel and other metals, and component parts could result in manufacturing interruptions, delays, inefficiencies, or the inability to market products. In addition, profit margins would decrease if prices of purchased raw materials or component parts increase and the Company is unable to pass on those increases to its customers.

Pricing and Competitive Pressures from OEM Customers

        A majority of the Company's sales are directly to OEM customers. Increasingly, OEM customers are seeking to use their positions as volume purchasers in the mobile hydraulics market to obtain preferential pricing and to obtain substantial quality assurance protection from suppliers.

Currency Exchange Rates

        The Company has a number of manufacturing sites throughout the world and sells products in several countries other than those where the product is manufactured. As a result, the Company has exposure to changing exchange rates between the various currencies in its customer's countries and the currencies in which the Company's manufacturing facilities are located. The Company's most significant foreign currency exposures are the euro, Japanese yen, Slovakian koruna, Polish zloty, and Danish kroner. Exchange rate fluctuations between these currencies and against the U.S. dollar could adversely affect the Company's results of operations. The Company does enter into forward contracts to reduce the impact of currency fluctuations on cash flows related to forecasted sales denominated in currencies other than the functional currency of the selling location.

Cyclicality: Risks Associated with General Economic Conditions

        The capital goods industry in general and mobile hydraulics industry in particular are subject to economic cycles. Cyclical downturns have in the past had and could in the future have a material adverse effect on the demand for the Company's products and, consequently, on the Company's business, financial condition, and results of operations. Demand for the Company's products is dependent upon the general condition of the off-highway mobile equipment industry which may be affected by numerous factors, including levels of construction activity, weather conditions and interest rates. The Company's results of operations are also subject to price competition and the cost of supplies and labor, both of which are affected by general economic conditions. The Company derives substantial sales from cyclical industries, including the turf care, material handling, construction and agricultural equipment industries. Periods of economic recession in the U.S. or Europe or any other major industrial market could cause a substantial decrease in the Company's net sales and have a material adverse effect on the Company's business, financial condition and results of operations.

8


Income Tax Estimates

        The Company is subject to income taxes in the U.S. and numerous non-U.S. jurisdictions. Significant judgment is required in determining the Company's worldwide provision for income taxes. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. The Company is periodically under audit by tax authorities. Although management believes its tax estimates are reasonable, the final outcome of tax audits and any related litigation could be materially different than that which is reflected in historical income tax provisions and accruals. If the outcome of a given tax audit or related litigation is materially different from the Company's estimates, the determination could result in material differences between the Company's originally reported income tax provision or net income and the final reported financial results.

Catastrophic Events

        Unforeseen events, including war, terrorism and other international conflicts, public health issues, and natural disasters such as earthquakes, hurricanes or other adverse weather and climate conditions, whether occurring in the U.S. or abroad, could disrupt the Company's operations, disrupt the operations of suppliers or customers, or result in political or economic instability. These events could reduce demand for hydraulic and electric products and make it difficult or impossible for the Company to manufacture products, deliver products to customers, or to receive products from suppliers.

        The foregoing list is not exhaustive. There can be no assurance that the Company has correctly identified and appropriately assessed all factors affecting the Company or that the publicly available and other information with respect to these matters is complete and correct. Additional risks and uncertainties not presently known to the Company or that are currently believed to be immaterial also may adversely impact the business. Should any risks or uncertainties develop into actual events, these developments could have a material adverse effect on the Company's business, financial condition, and results of operations.

9




Item 1A.    Risk Factors.



        The Company's business, financial condition, results of operations and cash flows can be affected by a number of factors, including but not limited to those set
forth below and elsewhere in this annual report on Form 10-K, any one of which could cause actual results to vary materially from recent results or from anticipated future results.



International Operations



        The Company depends on the strength of the economies in various parts of the world, particularly in the U.S. and Europe. As a result of this worldwide exposure,
net revenue and profitability may be harmed as a result of economic conditions in the major markets in which the Company operates, including, but not limited to, recessions, inflation and deflation,
general weakness in the agriculture, construction and specialty markets, changes in governmental laws and policies, and changes in consumer purchasing power.



Technology Change



        The hydraulic industry and markets for component parts of mobile hydraulics are subject to technological change, evolving industry standards, changing customer
requirements and improvements in and expansion of product offerings. Although the Company believes that it has the technological capabilities to remain competitive, technological advances or
developments by competitors or others could result in the Company needing to make significant capital expenditures in order to remain competitive and to avoid material adverse effects on its business,
financial conditions and results of operations.



7









Implementation of New Business System



        The Company is in the process of implementing a common business system at all locations. Any significant problems incurred related to this system implementation
may delay or stop manufacturing and hinder the Company's ability to ship product in a timely manner or affect the Company's ability to access financial information. These problems could result in the
loss of customers, a decrease in revenue or significant costs to correct the problem.



Raw Material Availability



        The Company purchases raw materials and component parts from suppliers to be used in the manufacture of products. Changes in relationships with suppliers or
increases in the costs of purchased raw materials including steel and other metals, and component parts could result in manufacturing interruptions, delays, inefficiencies, or the inability to market
products. In addition, profit margins would decrease if prices of purchased raw materials or component parts increase and the Company is unable to pass on those increases to its customers.



Pricing and Competitive Pressures from OEM Customers



        A majority of the Company's sales are directly to OEM customers. Increasingly, OEM customers are seeking to use their positions as volume purchasers in the mobile
hydraulics market to obtain preferential pricing and to obtain substantial quality assurance protection from suppliers.




Currency Exchange Rates



        The Company has a number of manufacturing sites throughout the world and sells products in several countries other than those where the product is manufactured.
As a result, the Company has exposure to changing exchange rates between the various currencies in its customer's countries and the currencies in which the Company's manufacturing facilities are
located. The Company's most significant foreign currency exposures are the euro, Japanese yen, Slovakian koruna, Polish zloty, and Danish kroner. Exchange rate fluctuations between these currencies
and against the U.S. dollar could adversely affect the Company's results of operations. The Company does enter into forward contracts to reduce the impact of currency fluctuations on cash flows
related to forecasted sales denominated in currencies other than the functional currency of the selling location.



Cyclicality: Risks Associated with General Economic Conditions



        The capital goods industry in general and mobile hydraulics industry in particular are subject to economic cycles. Cyclical downturns have in the past had and
could in the future have a material adverse effect on the demand for the Company's products and, consequently, on the Company's business, financial condition, and results of operations. Demand for the
Company's products is dependent upon the general condition of the off-highway mobile equipment industry which may be affected by numerous factors, including levels of construction
activity, weather conditions and interest rates. The Company's results of operations are also subject to price competition and the cost of supplies and labor, both of which are affected by general
economic conditions. The Company derives substantial sales from cyclical industries, including the turf care, material handling, construction and agricultural equipment industries. Periods of economic
recession in the U.S. or Europe or any other major industrial market could cause a substantial decrease in the Company's net sales and have a material adverse effect on the Company's business,
financial condition and results of operations.



8









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Income Tax Estimates



        The Company is subject to income taxes in the U.S. and numerous non-U.S. jurisdictions. Significant judgment is required in determining the Company's
worldwide provision for income taxes. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. The Company is periodically
under audit by tax authorities. Although management believes its tax estimates are reasonable, the final outcome of tax audits and any related litigation could be materially different than that which
is reflected in historical income tax provisions and accruals. If the outcome of a given tax audit or related litigation is materially different from the Company's estimates, the determination could
result in material differences between the Company's originally reported income tax provision or net income and the final reported financial results.



Catastrophic Events



        Unforeseen events, including war, terrorism and other international conflicts, public health issues, and natural disasters such as earthquakes, hurricanes or
other adverse weather and climate conditions, whether occurring in the U.S. or abroad, could disrupt the Company's operations, disrupt the operations of suppliers or customers, or result in political
or economic instability. These events could reduce demand for hydraulic and electric products and make it difficult or impossible for the Company to manufacture products, deliver products to
customers, or to receive products from suppliers.



        The
foregoing list is not exhaustive. There can be no assurance that the Company has correctly identified and appropriately assessed all factors affecting the Company or that the
publicly available and other information with respect to these matters is complete and correct. Additional risks and uncertainties not presently known to the Company or that are currently believed to
be immaterial also may adversely impact the business. Should any risks or uncertainties develop into actual events, these developments could have a material adverse effect on the Company's business,
financial condition, and results of operations.



9









This excerpt taken from the SHS 10-K filed Mar 12, 2007.

Item 1A.   Risk Factors.

The Company’s business, financial condition, results of operations and cash flows can be affected by a number of factors, including but not limited to those set forth below and elsewhere in this annual report on Form 10-K, any one of which could cause actual results to vary materially from recent results or from anticipated future results.

International Operations

The Company depends on the strength of the economies in various parts of the world, particularly in the U.S. and Europe. As a result of this worldwide exposure, net revenue and profitability may be harmed as a result of economic conditions in the major markets in which the Company operates, including, but not limited to, recessions, inflation and deflation, general weakness in the agriculture, construction and specialty markets, and changes in consumer purchasing power.

Technology Change

The hydraulic industry and markets for component parts of mobile hydraulics are subject to technological change, evolving industry standards, changing customer requirements and improvements in and expansion of product offerings. Although the Company believes that it has the technological capabilities to remain competitive, technological advances or developments by competitors or others could result in the Company making significant capital expenditures in order to remain competitive and to avoid material adverse effects on its business, financial conditions and results of operations.

Implementation of New Business System

The Company is in the process of implementing a common business system at all locations. Any significant problems incurred related to this system implementation may delay or stop manufacturing and hinder the Company’s ability to ship product in a timely manner or affect the Company’s ability to access financial information. These problems could result in the loss of customers, a decrease in revenue or significant costs to correct the problem.

Raw Material Availability

The Company purchases raw materials and component parts from suppliers to be used in the manufacture of products. Changes in relationships with suppliers or increases in the costs of purchased raw materials including steel and other metals, and component parts could result in manufacturing

8




interruptions, delays, inefficiencies, or the inability to market products. In addition, profit margins would decrease if prices of purchased raw materials or component parts increase and the Company is unable to pass on those increases to its customers.

Pricing and Competitive Pressures from OEM Customers

A majority of the Company’s sales are directly to OEM customers. Increasingly, OEM customers are seeking to use their positions as volume purchasers in the mobile hydraulics market to obtain preferential pricing and to obtain substantial quality assurance protection from suppliers.

Currency Exchange Rates

The Company has a number of manufacturing sites throughout the world and sells products in several countries other than those where the product is manufactured. As a result, the Company has exposure to movements in the exchange rates of various currencies against the U.S. dollar and against the currencies of countries in which the main manufacturing facilities are located. The Company’s most significant foreign currency exposures are the euro, Japanese yen, Slovakian koruna, Polish zloty, and Danish kroner. Exchange rate fluctuations relative to the U.S. dollar could adversely affect the Company’s results of operations. The Company does enter into forward contracts to reduce the impact of currency fluctuations on cash flows related to forecasted sales denominated in currencies other than the functional currency of the selling location.

Cyclicality: Risks Associated with General Economic Conditions

The capital goods industry in general and mobile hydraulics industry in particular are subject to economic cycles. Cyclical downturns have in the past had and could in the future have a material adverse effect on the demand for the Company’s products and, consequently, on the Company’s business, financial condition, and results of operations. Demand for the Company’s products is dependent upon the general condition of the off-highway mobile equipment industry which may be affected by numerous factors, including levels of construction activity, weather conditions and interest rates. The Company’s results of operations are also subject to price competition and the cost of supplies and labor, both of which are affected by general economic conditions. The Company derives substantial sales from cyclical industries, including the turf care, material handling, construction and agricultural equipment industries. Periods of economic recession in the U.S. or Europe or any other major industrial market could cause a substantial decrease in the Company’s net sales and have a material adverse effect on the Company’s business, financial conditions and results of operations.

Income Tax Estimates

The Company is subject to income taxes in the U.S. and numerous non-U.S. jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. The Company is periodically under audit by tax authorities. Although management believes tax estimates are reasonable, the final outcome of tax audits and any related litigation could be materially different than that which is reflected in historical income tax provisions and accruals. Based on the outcome of a given tax audit or related litigation, a material effect on the Company’s income tax provision or net income may result in the period or periods from initial recognition in the Company’s reported financial results to the final closure of that tax audit or settlement of related litigation when the ultimate tax and related cash flow is known with certainty. In 2007 the Company will adopt Financial Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109” (FIN No. 48), which requires that a tax position have a greater than 50 percent likelihood of being sustained in order to

9




recognize in the financial statements. The Company does not expect the adoption of FIN No. 48 to have a significant impact on its consolidated financial statements.

Catastrophic Events

Unforeseen events, including war, terrorism and other international conflicts, public health issues, and natural disasters such as earthquakes, hurricanes or other adverse weather and climate conditions, whether occurring in the U.S. or abroad, could disrupt the Company’s operations, disrupt the operations of suppliers or customers, or result in political or economic instability. These events could reduce demand for hydraulic and electric products and make it difficult or impossible for the Company to manufacture products, deliver products to customers, or to receive products from suppliers.

The foregoing list is not exhaustive. There can be no assurance that the Company has correctly identified and appropriately assessed all factors affecting the Company or that the publicly available and other information with respect to these matters is complete and correct. Additional risk and uncertainties not presently known to the Company or that are currently believed to be immaterial also may adversely impact the business. Should any risks or uncertainties develop into actual events, these developments could have a material adverse effect on the Company’s business, financial condition, and results of operations.

10




This excerpt taken from the SHS 10-K filed Mar 10, 2006.
Item 1A.   Risk Factors.

The Company’s business, financial condition, results of operations and cash flows can be affected by a number of factors, including but not limited to those set forth below and elsewhere in this annual report on Form 10-K, any one of which could cause actual results to vary materially from recent results or from anticipated future results.

International Operations

The Company depends on the strength of the economies in various parts of the world, particularly in the U.S. and Europe. As a result of this worldwide exposure, net revenue and profitability may be harmed as a result of economic conditions in the major markets in which the Company operates, including, but not limited to, recessions, inflation and deflation, general weakness in the agriculture, construction and specialty markets, and changes in consumer purchasing power.

Technology Change

The hydraulic industry and markets for component parts of mobile hydraulics are subject to technological change, evolving industry standards, changing customer requirements and improvements in and expansion of product offerings. Although the Company believes that it has the technological capabilities to remain competitive, technological advances or developments by competitors or others could result in the Company making significant capital expenditures in order to remain competitive and to avoid material adverse effects on its business, financial conditions and results of operations.

Implementation of New Business System

The Company is in the process of implementing a common business system at all locations. Any significant problems incurred related to this system implementation may delay or stop manufacturing and hinder the Company’s ability to ship product in a timely manner or affect the Company’s ability to access financial information. These problems could result in the loss of customers, a decrease in revenue or significant costs to correct the problem.

Raw Material Availability

The Company purchases raw materials and component parts from suppliers to be used in the manufacture of products. Changes in relationships with suppliers or increases in the costs of purchased raw materials including steel and other metals, and component parts could result in manufacturing

7




interruptions, delays, inefficiencies, or the inability to market products. In addition, profit margins would decrease if prices of purchased raw materials or component parts increase and the Company is unable to pass on those increases to its customers.

Pricing and Competitive Pressures from OEM Customers

A majority of the Company’s sales are directly to OEM customers. Increasingly, OEM customers are seeking to use their positions as volume purchasers in the mobile hydraulics market to obtain preferential pricing and to obtain substantial quality assurance protection from suppliers.

Currency Exchange Rates

The Company has a number of manufacturing sites throughout the world and sells products in several countries other than those where the product is manufactured. As a result, the Company has exposure to movements in the exchange rates of various currencies against the U.S. dollar and against the currencies of countries in which the main manufacturing facilities are located. The Company’s most significant foreign currency exposures are the euro, pound sterling and Danish kroner. Exchange rate fluctuations relative to the U.S. dollar could adversely affect the Company’s results of operations.

Cyclicality: Risks Associated with General Economic Conditions

The capital goods industry in general and mobile hydraulics industry in particular are subject to economic cycles. Cyclical downturns have in the past had and could in the future have a material adverse effect on the demand for the Company’s products and, consequently, on the Company’s business, financial condition, and results of operations. Demand for the Company’s products is dependent upon the general condition of the off-highway mobile equipment industry which may be affected by numerous factors, including levels of construction activity, weather conditions and interest rates. The Company’s results of operations are also subject to price competition and the cost of supplies and labor, both of which are affected by general economic conditions. The Company derives substantial sales from cyclical industries, including the turf care, material handling, construction and agricultural equipment industries. Periods of economic recession in the U.S. or Europe or any other major industrial market could cause a substantial decrease in the Company’s net sales and have a material adverse effect on the Company’s business, financial conditions and results of operations.

Income Tax Estimates

The Company is subject to income taxes in the U.S. and numerous non-U.S. jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes. In the ordinary course of business, there are many transactions and calculations where the ultimate tax determination is uncertain. The Company is periodically under audit by tax authorities. Although management believes tax estimates are reasonable, the final outcome of tax audits and any related litigation could be materially different than that which is reflected in historical income tax provisions and accruals. Based on the status of a given tax audit or related litigation, a material effect on the Company’s income tax provision or net income may result in the period or periods from initial recognition in the Company’s reported financial results to the final closure of that tax audit or settlement of related litigation when the ultimate tax and related cash flow is known with certainty.

Catastrophic Events

Unforeseen events, including war, terrorism and other international conflicts, public health issues, and natural disasters such as earthquakes, hurricanes or other adverse weather and climate conditions, whether occurring in the U.S. or abroad, could disrupt the Company’s operations, disrupt the operations of suppliers or customers, or result in political or economic instability. These events could reduce demand for

8




hydraulic and electric products and make it difficult or impossible for the Company to manufacture products, deliver products to customers, or to receive products from suppliers.

The foregoing list is not exhaustive. There can be no assurance that the Company has correctly identified and appropriately assessed all factors affecting the Company or that the publicly available and other information with respect to these matters is complete and correct. Additional risk and uncertainties not presently known to the Company or that are currently believed to be immaterial also may adversely impact the business. Should any risks or uncertainties develop into actual events, these developments could have a material adverse effect on the Company’s business, financial condition, and results of operations.

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