Loar Holdings (LOAR) risk factors, FY2024 10-K

Risks Related to Our Strategy

1. 01Our business focuses almost exclusively on the aerospace and defense industry
2. 02We rely heavily on certain customers for a significant portion of our sales
3. 03We have in the past consummated acquisitions and intend to continue to pursue acquisitions. Our business may be adversely affected if we cannot consummate acquisitions on satisfactory terms, or if we cannot effectively integrate acquired operations
4. 04We depend on our executive officers, senior management team and highly trained employees, and any work stoppage, difficulty hiring similar employees, or ineffective succession planning could adversely affect our business
5. 05Because our operations are conducted through our subsidiaries, we are dependent on the receipt of distributions and dividends or other payments from our subsidiaries for cash to fund our operations and expenses and future dividend payments, if any
6. 06We may need to raise additional capital, and we cannot be sure that additional financing will be available
7. 07Our business may be adversely affected by changes in budgetary priorities of the U.S. Government
8. 08We generally do not have guaranteed future sales of our products. Further, when we enter into fixed price contracts with some of our customers, we take the risk for cost overruns

Risks Related to Our Operations

1. 09Our sales to manufacturers of aircraft are cyclical, and a downturn in sales to these manufacturers may adversely affect us
2. 10Our business depends on the availability and pricing of certain components and raw materials from suppliers
3. 11Our operations depend on our manufacturing facilities, which are subject to physical and other risks that could disrupt production
4. 12Our business may be adversely affected if we were to lose our government or industry approvals, if more stringent government regulations were enacted or if industry oversight were to increase
5. 13Our commercial business is sensitive to the number of flight hours that our customers’ planes spend aloft, the size and age of the worldwide aircraft fleet and our customers’ profitability. These items are, in turn, affected by general economic and geopolitical and other worldwide conditions
6. 14Technology failures or cyber security breaches or other unauthorized access to our information technology systems or sensitive or proprietary information could have an adverse effect on the Company’s business and operations
7. 15Technology failures or cyber security breaches or other unauthorized access to information technology systems of our customers, suppliers or vendors could have an adverse effect on the Company’s business and operations
8. 16We could incur substantial costs as a result of data protection concerns
9. 17Our inability to adequately enforce and protect our intellectual property or defend against assertions of infringement could prevent or restrict our ability to compete
10. 18Price inflation for labor and materials, further exacerbated by the Russian invasion of Ukraine, could adversely affect our business, results of operations and financial condition
11. 19Contracting in the defense industry is subject to significant regulation, including rules related to bidding, billing and accounting kickbacks and false claims, and any non-compliance could subject us to fines and penalties or possible debarment
12. 20We are subject to certain unique business risks as a result of supplying equipment to the U.S. Government
13. 21audit our contract-related costs and fees, including allocated indirect costs
14. 22We face significant competition
15. 23If we are unable to adapt to technological change, demand for our products may be reduced
16. 24Regulations designed to address climate change may result in additional compliance costs
17. 25Failure to maintain a level of corporate social responsibility could damage our reputation and could adversely affect our business, financial condition or results of operations
18. 26Negative publicity could damage our brand reputation, particularly at the subsidiary level, and negatively impact our revenue and results of operations

Risks Related to Legal and Regulatory Matters

1. 27We could incur substantial costs as a result of violations of or liabilities under environmental laws and regulations
2. 28We may be subject to periodic litigation and regulatory proceedings, which may adversely affect our business and financial performance
3. 29We could be adversely affected if one of our products causes an aircraft to crash

Risks Related to Financial Matters

1. 30Tariffs on certain imports to the United States and other potential changes to U.S. tariff and import/export regulations may have a negative effect on global economic conditions and our business, financial results and financial condition
2. 31Our financial results of operations could be adversely affected by impairment of our goodwill or other intangible assets
3. 32We may be subject to risks relating to changes in our tax rates or exposure to additional income tax liabilities

General Risks

1. 33We face risks related to health pandemics, epidemics, outbreaks and other public health crises, such as the COVID-19 pandemic
2. 34Our stock price may be volatile, and an investment in our common stock could suffer a decline in value
3. 35Our future operating results will be impacted by changes in global economic and political conditions
4. 36While general economic and political conditions have not impaired our ability to access credit markets and finance our operations to date, we may experience future adverse effects that may be material to our cash flows, competitive position, financial condition, results of operations or our ability to access capital

Risks Related to Our Indebtedness

1. 37Our indebtedness, which is subject to variable interest rates, could adversely affect our financial health and could harm our ability to react to changes to our business
2. 38limit, along with the financial and other restrictive covenants contained in the documents governing our indebtedness, among other things, our ability to borrow additional funds, make investments and incur liens
3. 39Our ability to make payments on and to refinance our indebtedness and to fund our operations will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control
4. 40The terms of our Credit Agreement restrict our current and future operations, particularly our ability to respond to changes or to take certain actions
5. 41engage in certain business activities

Risks Related to Ownership of Our Common Stock

1. 42We are an “emerging growth company” and we cannot be certain if the reduced disclosure requirements applicable to “emerging growth companies” will make our common stock less attractive to investors
2. 43We have incurred significant increased costs and became subject to additional regulations and requirements as a result of becoming a public company, and our management is now required to devote substantial time to new compliance matters, which could lower our profits or make it more difficult to run our business
3. 44Failure to comply with requirements to design, implement and maintain effective internal controls could have a material adverse effect on our business and stock price
4. 45Our stock price may be volatile or may decline regardless of our operating performance, and you may not be able to resell your shares of our common stock at or above the price you paid or at all, and you could lose all or part of your investment as a result
5. 46Your percentage ownership in our Company may be diluted by future issuances of our common stock, which could reduce your influence over matters on which stockholders vote
6. 47Because we have no current plans to pay cash dividends on our common stock, you may not receive any return on investment unless you sell your shares of common stock for a price greater than that which you paid for it
7. 48Future sales, or the perception of future sales, by us or our existing stockholders in the public market could cause the market price for our common stock to decline
8. 49If securities analysts do not publish research or reports about our business or if they downgrade our stock or our sector, our stock price and trading volume could decline
9. 50Anti-takeover provisions in our organizational documents and under Delaware law could delay or prevent a change of control
10. 51the required approval of at least 66 2/3% of the voting power of the outstanding shares of capital stock entitled to vote generally in the election of directors, voting together as a single class, to adopt, amend, or repeal certain provisions of our certificate of incorporation
11. 52Our Board is authorized to issue and designate shares of our preferred stock in additional series without stockholder approval
12. 53Pursuant to the Voting Agreement, Abrams Capital, GPV Loar LLC, Dirkson Charles and Brett Milgrim directly control a majority of the voting power of the shares of our common stock eligible to vote in the election of our directors, and their interests may conflict with ours or yours in the future
13. 54Insiders have substantial influence over us, which could limit your ability to affect the outcome of key transactions, including a change of control