StandardAero (SARO) risk factors, FY2025 10-K

Risks Related to Our Business and Industry

1. 01We are affected by factors that adversely impact the commercial and business aviation industries
2. 02Our business, financial condition, results of operations and prospects have been and may continue to be adversely affected by these and other similar events that impact the commercial and business aviation industries
3. 03We depend on certain component parts and material suppliers for our engine repair and overhaul operations, and any supply chain disruptions or loss of key suppliers could adversely affect our business, results of operations and financial condition
4. 04Inflation has adversely affected us and may continue to adversely affect us by increasing our costs beyond what we can recover through price increases
5. 05Future outbreaks and infectious diseases could adversely affect our business, results of operations and financial condition
6. 06Competition in our business is intense given the market in which we participate and the range of services that we provide within that market
7. 07Loss of an OEM authorization or license could negatively impact our ability to service an engine platform and damage our competitive advantage in such platform’s market
8. 08A portion of our revenue is generated from engine platforms that are mature and for which the installed base is flat or declining. If we are unable to offset the resulting declines in revenue as engines are retired, then our business, results of operations and financial condition would be adversely affected
9. 09A significant portion of our revenue is derived from a small number of customers
10. 10operations and financial condition would be adversely affected if our relationships with the customers for whom we provide services as a subcontractor are reduced or discontinued
11. 11We do not have volume commitments with our customers and, therefore, do not have guaranteed future sales
12. 12The prices that we charge under our fixed-price contracts are predetermined and we bear the risk that our costs or lead time may exceed our estimates
13. 13Damage to our reputation or the reputation of other parties in the aerospace industry could hurt our business
14. 14Our operations depend on our facilities, which are subject to physical and other risks that could disrupt our business
15. 15Implementing new or expanded platforms, products and services and keeping pace with technological or process developments in our industries may require significant capital and operational risk
16. 16development by our competitors of patents or methodologies that preclude us from providing aftermarket services could adversely affect our business, financial condition and results of operations
17. 17Acquisitions, joint ventures, business combinations and inorganic investments may prove risky for us
18. 18our becoming subject to material liabilities as a result of failure to negotiate adequate indemnification rights

Risks Related to Financial and Accounting Matters

1. 19Control environment and monitoring controlsNew
2. 20Period-end financial reporting and significant account balancesNew
3. 21Information technology general controlsNew
4. 22Our reported financial results may be adversely affected by changes in GAAP
5. 23If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of operations could be adversely affected
6. 24We may be subject to risks relating to changes in our tax rates or exposure to additional income tax liabilities26% rewritten
7. 25We are dependent upon continued availability of financing to manage our business and to execute our business strategy, and additional financing may not be available on terms acceptable to us

Risks Related to Information Technology, Intellectual Property and Cybersecurity

1. 26If we or our third-party partners fail to protect Confidential Information and/or experience data security incidents, there may be damage to our brand and reputation, material financial penalties and legal liability, which would materially adversely affect our business, results of operations and financial condition70% rewritten
2. 27relation to an attack or incident will be covered by our existing insurance policies or that applicable insurance will be available to us in the future on economically reasonable terms or at allNew
3. 28A disruption of our IT Systems and capabilities could lead to business disruption and could harm our reputation and result in financial penalty and legal liabilities, which would reduce our revenue and have a material adverse effect on our business, financial condition and results of operations
4. 29If we are unable to maintain, protect or enforce our rights in our proprietary technology, brands or other intellectual property, our competitive advantage, business, financial condition and results of operations could be harmed51% rewritten
5. 30remedies for trade secret misappropriation, the remedies and damages available to us under U.S. copyright laws for unauthorized use of our software may be limitedNew
6. 31If third parties claim that we infringe upon their intellectual property rights, our operations could be adversely affected

Risks Related to Government Regulation and Litigation

1. 32We will not be able to operate our business if we fail to comply with or obtain and maintain the necessary regulatory approvals
2. 33obtain and maintain recognized quality approvals, such as AS9110 (the standard for repair stations)
3. 34Our operations outside of North America are exposed to various risks, which could adversely affect our business, results of operations and financial condition
4. 35potentially adverse tax consequences from changes in tax laws, requirements relating to withholding taxes on remittances and other payments by subsidiaries and restrictions on our ability to repatriate dividends from our subsidiaries
5. 36accessories, embargoes on flights from certain airlines, sanctions on certain individuals and companies, and the stability of certain customers could impact the global economy and aviation sectorNew
6. 37We are subject to environmental, health and safety laws and regulations, violations of which could result in substantial costs, liabilities and impacts on our business and operations
7. 38The strategic priorities and financial performance of our business are subject to market and other dynamics related to efforts to reduce greenhouse gas emissions, which can pose risks in addition to opportunities
8. 39Sustainability and environmental, social and governance (“ESG”) matters may adversely impact our business and reputation30% rewritten
9. 40If we fail to comply with government procurement laws and regulations, we could lose business and be liable for various penalties or sanctions
10. 41We may be subject to periodic litigation and regulatory proceedings, which may adversely affect our business and financial performance
11. 42We may face large liability claims, which could adversely affect our business, results of operations and financial condition
12. 43the type and amount of maintenance on aircraft and component systems performed by our customers

Risks Related to Management and Employees

1. 44We are dependent on our senior management team and highly trained and qualified employees, and any work stoppage, difficulty hiring similar employees, retention issues or ineffective succession planning may materially adversely affect our business, results of operations and financial condition
2. 45If we face labor shortages or increased labor costs, our results of operations and our growth could be adversely affected
3. 46We have in the past, and may in the future, have underfunded pension plan liabilities. We have required, and may require, current and future operating cash flow to fund these shortfalls47% rewritten
4. 47The requirements of being a public company may strain our resources, increase our costs, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members

Risks Related to Our Indebtedness

1. 48Our substantial indebtedness could adversely affect our financial condition, limit our ability to raise additional capital to fund our operations and prevent us from fulfilling our obligations under our indebtedness
2. 49Despite our level of indebtedness, we and our subsidiaries may still incur substantially more debt. This could further exacerbate the risks to our financial condition described above and impair our ability to operate our business
3. 50We may not be able to generate sufficient cash flows from operations to service all of our indebtedness and may be forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful
4. 51Additionally, the New Credit Agreement permits us to pay certain dividends or make other restricted payments in the future, subject to certain limitations. Any dividends or other restricted payments would reduce our cash available to service our debt and the related risks that we now face would increase
5. 52unable to compete effectively or to take advantage of new business opportunities
6. 53In addition, the New 2024 Revolving Credit Facility has a springing financial covenant, which under certain circumstances, requires us to maintain a maximum consolidated first lien net leverage ratio and may require us to reduce debt or take other actions in order to comply with this ratio56% rewritten
7. 54Our variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly
8. 55We are a holding company with no operations and may not have access to sufficient cash to meet our financial obligations

Risks Related to Ownership of Our Common Stock

1. 56Our share price may change significantly, and you may not be able to resell 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
2. 57These broad market and industry fluctuations may materially adversely affect the market price of our common stock, regardless of our actual operating performance. In addition, price volatility may be greater if the public float and trading volume of our common stock are low
3. 58Carlyle owns a significant amount of our voting power, and their interests in our business may be different than yoursNew
4. 59We are not a “controlled company” within the meaning of the NYSE rules. However, we may continue to rely on exemptions from certain corporate governance requirements during a one-year transition periodNew
5. 60the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees41% rewritten
6. 61Future 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 decline88% rewritten
7. 62In addition, our shares of common stock reserved for future issuance under the 2024 Plan, the ESPP and the Prior Plan will become eligible for sale in the public market once those shares are issued, subject to provisions relating to various vesting agreements, lock-up agreements and Rule 144, as applicableNew
8. 63Our ability to raise capital in the future may be limited
9. 64If securities analysts do not publish research or reports about our business or if they downgrade our common stock or our industry, or if there is any fluctuation in our credit rating, the price of our common stock and trading volume could decline
10. 65Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our current management44% rewritten
11. 66requiring the approval of the holders of at least two-thirds of the voting power of all outstanding stock entitled to vote thereon, voting together as a single class, to amend or repeal our amended and restated certificate of incorporation or amended and restated bylawsNew
12. 67In addition, Carlyle currently has the right to designate six of our nine directors and will continue to have the right to designate a majority of our directors until it owns less than 25% of our outstanding shares of common stock
13. 68Our board of directors is authorized to issue and designate shares of our preferred stock in additional series without stockholder approval
14. 69Our amended and restated certificate of incorporation contains a provision renouncing our interest and expectancy in certain corporate opportunities
15. 70We currently do not intend to declare dividends on our common stock in the foreseeable future and, as a result, your only opportunity to achieve a return on your investment is if the price of our common stock appreciates
16. 71Our ability to use our net operating loss carryforwards and certain other tax attributes may become subject to limitation
17. 72Uncertainties in the interpretation and application of existing, new and proposed tax laws and regulations could materially affect our tax obligations and effective tax rate
18. 73If we redeem or repurchase shares of our stock, we could be subject to an excise taxNew