Ducommun (DCO) risk factors, FY2024 10-K

Other

1. 01Our indebtedness could limit our financing options, adversely affect our financial condition, and prevent us from fulfilling our debt obligations
2. 02We require a considerable amount of cash to run our business
3. 03We require a considerable amount of cash to fund our anticipated voluntary principal prepayments on our Credit Facilities
4. 04The covenants in our credit facilities impose restrictions that may limit our operating and financial flexibility
5. 05At December 31, 2024, we were in compliance with the leverage covenant under the 2022 Credit Facilities. However, there is no assurance that we will continue to be in compliance with the leverage covenant in future periods
6. 06The typical trading volume of our common stock may affect an investor’s ability to sell significant stock holdings in the future without negatively impacting stock price

BUSINESS AND OPERATIONAL RISKS

1. 07Our end-use markets are cyclical
2. 08We depend upon a select base of industries and customers, which subjects us to unique risks which may adversely affect us
3. 09A significant portion of our business depends upon U.S. Government defense spending
4. 10Exports of certain of our products and our production facility in Guaymas, Mexico are subject to various export control regulations and authorizations, and we may not be successful in obtaining the necessary U.S. Government approvals and related export licenses for proposed sales to certain foreign customers
5. 11Contracts with some of our customers, including Federal government contracts, contain provisions which give our customers a variety of rights that are unfavorable to us and the OEMs to whom we provide products and services, including the ability to terminate a contract at any time for convenience
6. 12Further consolidation in the aerospace industry could adversely affect our business and financial results
7. 13Our growth strategy includes evaluating selected acquisitions, which entails certain risks to our business and financial performance
8. 14We may not be successful in achieving expected operating efficiencies and sustaining or improving operating expense reductions, and may experience business disruptions associated with restructuring, performance center consolidations, realignment, cost reduction, and other strategic initiatives
9. 15As we move up the value chain to become a more value added supplier, enhanced design, product development, manufacturing, supply chain project management and other skills will be required
10. 16Risks associated with operating and conducting our business outside the United States could adversely impact us
11. 17Customer pricing pressures could reduce the demand and/or price for our products and services
12. 18Our products and processes are subject to risk of obsolescence as a result of changes in technology and evolving industry and regulatory standards
13. 19We may not have the ability to renew facilities leases on terms favorable to us and relocation of operations presents risks due to business interruption

LEGAL, REGULATORY, TAX, AND ACCOUNTING RISKS

1. 20We are subject to extensive regulation and audit by the Defense Contract Audit Agency
2. 21We are subject to a number of procurement laws and regulations. Our business and our reputation could be adversely affected if we fail to comply with these laws
3. 22Our operations are subject to numerous extensive, complex, costly and evolving laws, regulations and restrictions, including cybersecurity requirements, and failure to comply with these laws, regulations and restrictions could subject us to penalties and sanctions that could harm our business
4. 23Environmental liabilities could adversely affect our financial results
5. 24We may be subject to litigation, other legal proceedings and indemnity claims, and, if any of these are resolved adversely against us in amounts that exceed the limits of our insurance coverage, it could have a material adverse effect on our business, financial condition, and results of operations
6. 25Product liability claims in excess of insurance could adversely affect our financial results and financial condition
7. 26We use estimates when bidding on fixed-price contracts. Changes in our estimates could adversely affect our financial results
8. 27Goodwill and/or other assets could be impaired in the future, which could result in substantial charges
9. 28Further, impairment charges may be incurred against other intangible assets or long-term assets if asset utilization declines, customer demand declines or other circumstances indicate that the asset carrying value may not be recoverable
10. 29We expect to face increased costs and resources needed to comply with the SEC cybersecurity rule and cybersecurity threats
11. 30Unanticipated changes in our tax provision or exposure to additional income tax liabilities could affect our profitability
12. 31Our ability to accurately report our financial results or prevent fraud may be adversely affected if our internal control over financial reporting is not effective
13. 32We are dependent upon our ability to attract and retain key personnel
14. 33Labor disruptions by our employees could adversely affect our business
15. 34We rely on our suppliers to meet the quality and delivery expectations of our customers

GENERAL RISKS

1. 35Cybersecurity attacks, internal system or service failures may adversely impact our business and operations
2. 36We may be unable to adequately protect or enforce our intellectual property rights
3. 37Assertions by third parties that we violated their intellectual property rights could have a material adverse effect on our business, financial condition, and results of operations
4. 38Damage or destruction of our facilities caused by storms, earthquake, fires or other causes could adversely affect our financial results and financial condition