{"url_path":"/sec/rbc/10-k/2026/item-1a","section_key":"item-1a","section_title":"Item 1A RISK FACTORS**","topic":"sec","document":{"doc_type":"10-K","doc_date":"2026-05-15","source_url":"https://www.sec.gov/Archives/edgar/data/1324948/0001213900-26-057626-index.html","accession_number":"0001213900-26-057626","cik":"0001324948","ticker":"RBC","issuer_name":"RBC Bearings INC","edgar_url":"https://www.sec.gov/Archives/edgar/data/1324948/0001213900-26-057626-index.html","primary_entity_key":"0001324948","primary_entity_name":"RBC Bearings INC"},"word_count":6271,"has_tables":true,"body_markdown":"** **\n\n**ITEM\n1A. RISK FACTORS**\n\n** **\n\n**Cautionary\nStatement as to Forward-Looking Information**\n\n** **\n\nThis\nreport includes “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities\nLitigation Reform Act of 1995. All statements other than statements of historical fact are “forward-looking statements” for\npurposes of federal and state securities laws, including: projections of earnings, cash flows, revenue or other financial items; statements\nof the plans, strategies and objectives of management for future operations; statements concerning proposed new services or developments;\nstatements regarding future economic conditions or performance or future growth rates in the markets we serve; statements regarding future\nraw material costs or supply; statements of belief; and statements of assumptions underlying any of the foregoing. Forward-looking statements\nmay include the words “may,” “could,” “estimate,” “intend,” “plan,” “continue,”\n“believe,” “expect,” “anticipate” or other comparable terminology, or the negative of such terms.\n\n \n\nAlthough\nwe believe that the expectations and assumptions reflected in any of our forward-looking statements are reasonable, actual results could\ndiffer materially from those projected or assumed in any of our forward-looking statements. Our future financial condition, results of\noperations, and cash flows, as well as any forward-looking statements, are subject to change and to inherent risks and uncertainties,\nsuch as those disclosed in this Annual Report on Form 10-K. Factors that could cause our actual results, performance and achievements\nor industry results to differ from estimates or projections contained in our forward-looking statements include, among others, the following:\n\n \n\n●The\nCompany’s failure to maintain effective disclosure controls and procedures and internal\ncontrol over financial reporting;\n\n \n\n●Competition\nin the bearings, engineered components and essential systems industries;\n\n \n\n●The\nloss of one or more of our significant customers or conditions that adversely affect the\nbusiness of any of our significant customers;\n\n \n\n●Weaknesses\nor cyclicality in any of the industries in which our customers operate;\n\n \n\n●Future\nreductions in U.S. governmental spending or changes in governmental programs, particularly\nmilitary equipment procurement programs;\n\n \n\n●Supply\nand costs of raw materials (particularly steel) and energy resources, the imposition or increase\nof import tariffs, and our ability to pass through these costs on a timely basis;\n\n \n\n●Changes\nin trade agreements or treaties and the imposition or increase of tariffs on our goods exported\nto other countries;\n\n \n\n●Our\nability to obtain and retain product approvals;\n\n \n\n●Risks\nassociated with utilizing information technology systems, including cyber events;\n\n \n\n●Work\nstoppages and other labor problems affecting us or our customers or suppliers;\n\n \n\n●Unexpected\nequipment failures or catastrophic events;\n\n \n\n●Our\nability to acquire and integrate complementary businesses;\n\n \n\n8\n\n \n\n \n\n●Unanticipated\nliabilities of acquired businesses;\n\n \n\n●Risks\nassociated with the substantial amount of goodwill that we have;\n\n \n\n●Our\nability to attract and retain our management team and other highly skilled personnel;\n\n \n\n●Risks\nassociated with operating internationally, including currency translation risks;\n\n \n\n●Possible\nliability and recalls with respect to our products;\n\n \n\n●Developments\nor disputes concerning patents or other proprietary rights;\n\n \n\n●The\ncancellation of orders in our backlog;\n\n \n\n●Risks\nassociated with the substantial amount of debt we incurred to finance the Dodge acquisition;\nand\n\n \n\n●Other\nrisks and uncertainties including\nbut not limited to those described from time to time in our current and quarterly reports\nfiled with the SEC.\n\n \n\nThese\nand additional factors that could cause actual results to differ from our forward-looking statements are set forth in this Annual Report\non Form 10-K under Part I, Item 1. “Business,” Part I, Item 1A. “Risk Factors,” Part II, Item 7. “Management’s\nDiscussion and Analysis of Financial Condition and Results of Operations,” and Part II, Item 8. “Financial Statements and\nSupplementary Data.” All forward-looking statements contained in this report and any subsequently filed reports are expressly qualified\nin their entirety by these cautionary statements.\n\n \n\nWe\nhave no duty to update any forward-looking statements after the date of this report to conform such statements to actual results or to\nchanges in our expectations. You are advised, however, to review any disclosures we make on related subjects in our future periodic filings\nwith the SEC.\n\n** **\n\n**Risk\nFactors Relating to Our Company**\n\n** **\n\nOur\nbusiness, operating results, cash flows or financial condition could be materially adversely affected by any of the following risks.\nThe trading price of our common stock could decline due to any of these risks, and you could lose all or part of your investment. You\nshould carefully consider these risks before investing in shares of our common stock.\n\n \n\n**The\nCompany’s failure to maintain effective disclosure controls and procedures and internal control over financial reporting could\nresult in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which\ncould have a material adverse effect on the Company’s financial condition and the trading price of our common stock.**\n\n \n\nA\nmaterial weakness in a company’s internal control over financial reporting is a deficiency, or a combination of deficiencies, in\ninternal control over financial reporting such that there is a reasonable possibility that a material misstatement of that company’s\nannual or interim financial statements will not be prevented or detected on a timely basis.\n\n \n\nIf\nthe Company is unable to maintain effective internal control over financial reporting in the future, our ability to record, process and\nreport financial information timely and accurately could be adversely affected, which could subject the Company to litigation or investigations,\nrequire management resources, increase costs, negatively affect investor confidence and adversely impact our stock price.\n\n \n\n**The\nbearings, engineered components and essential systems industries are highly competitive, and competition could reduce our profitability\nor limit our ability to grow.**\n\n \n\nThe\nglobal bearings, engineered components and essential systems industries are highly competitive, and we compete with many U.S. and non-U.S.\ncompanies, some of which benefit from lower labor costs and fewer regulatory burdens than us. We compete primarily based on product qualifications,\nproduct line breadth, service and price. Certain competitors may be better able to manage costs than us or may have greater financial\nresources than we have. Due to the competitiveness in the bearings, engineered components and essential systems industries we may not\nbe able to increase prices for our products to cover increases in our costs, and we may face pressure to reduce prices, which could materially\nreduce our revenues, cash flows and profitability. Competitive factors, including changes in market penetration, increased price competition\nand the introduction of new products and technology by existing and new competitors, could result in a material reduction in our revenues,\ncash flows and profitability.\n\n \n\n9\n\n \n\n \n\n**The\nloss of a major customer, or a material adverse change in a major customer’s business, could result in a material reduction in\nour revenues, cash flows and profitability.**\n\n \n\nOur\ntop ten customers collectively accounted for approximately 35%, 44% and 44% of our net sales during fiscal 2026, 2025 and 2024, respectively.\nAccordingly, the loss of one or more of those customers or a substantial decrease in those customers’ purchases from us could result\nin a material reduction in our revenues, cash flows and profitability. If one of our major customers were to experience an adverse change\nin its business, that customer could reduce its purchases from us.\n\n \n\nThe\nconsolidation and combination of manufacturers could eliminate customers and/or put downward pricing pressures on sales of component\nparts. In addition, if one of our customers is acquired or merged with another entity, the new entity may discontinue using us as a supplier\nbecause of an existing business relationship between one of our competitors and the acquiring company, or because it may be more efficient\nto consolidate certain suppliers within the newly formed enterprise. The significance of the impact that such consolidations could have\non our business is difficult to predict because we do not know when or if one or more of our customers will engage in merger or acquisition\nactivity. However, if such activity involved our material customers it could materially impact our revenues, cash flows and profitability.\n\n** **\n\n**Weakness\nin any of the industries in which our customers operate, as well as the cyclical nature of our customers’ businesses generally,\ncould materially reduce our revenues, cash flows and profitability.**\n\n \n\nThe\nmining and construction equipment and other diversified industrial markets to which we sell products are, to varying degrees, cyclical\nand tend to decline in response to overall declines in industrial production. Margins in those industries are highly sensitive to demand\ncycles, and our customers (or our customers’ customers) in those industries historically have tended to delay large capital purchases\nand projects, including expensive maintenance and upgrades, during economic downturns. As a result, our business is also cyclical, and\nthe demand for our products by these customers depends, in part, on overall levels of industrial production, general economic conditions,\nand business confidence levels. Many of our customers have historically experienced periodic downturns, which often have had a negative\neffect on demand for our products. Future downward economic cycles or customer downturns could reduce sales of our products resulting\nin reductions in our revenues, cash flows and profitability.\n\n** **\n\n**Future\nreductions or changes in U.S. government spending could negatively affect our business.**\n\n \n\nIn\nfiscal 2026, approximately 1% of our net sales were made directly, and we estimate that approximately an additional 7% of our net sales\nwere made indirectly, to the U.S. government to support military or other government projects. Our failure (or the failure of our customers\nthat are prime contractors to the government) to obtain new government contracts, the cancellation of government contracts relating to\nour products, or reductions in federal budget appropriations for programs in which our products are used could materially reduce our\nrevenues, cash flows and profitability. A reduction in federal budget appropriations relating to our products could result from a shift\nin government defense spending to other programs in which we are not involved or a reduction in U.S. government defense spending generally\n(due to budget reduction initiatives or a shift in government spending priorities).\n\n** **\n\n**Fluctuating\nsupply and costs of subcomponents, raw materials and energy resources could materially reduce our revenues, cash flows and profitability.**\n\n \n\nOur\nbusiness is dependent on the availability and costs of subcomponents, raw materials, particularly steel (generally in the form of stainless\nand chrome steel, which are commodity steel products), and energy resources. The availability and prices of subcomponents, raw materials\nand energy resources may be subject to change due to, among other things, new laws or regulations, economic inflation, suppliers’\nallocations to other purchasers, interruptions in production or deliveries by suppliers and changes in exchange rates and supplier costs\nand profit expectations. Although we currently maintain alternative supply sources, our business is subject to the risk of price fluctuations\nand periodic delays in the delivery of certain subcomponents or raw materials. Disruptions in the supply of subcomponents, raw materials\nor energy resources could temporarily impair our ability to manufacture our products for our customers or require us to pay higher prices\nin order to obtain these items from other sources, which could thereby affect our net sales and profitability.\n\n \n\nWhere\nour customer contracts permit us to do so, we seek to pass through a significant portion of our additional costs to our customers through\nsteel surcharges or price increases. However, many of our contracts are fixed-price contracts under which we are not able to pass these\nadditional costs on to our customers. Even where we are able to pass these steel surcharges or price increases to our customers, there\nmay be a lag of several months between the time we experience a cost increase and the time we are able to implement surcharges or price\nincreases, particularly for orders already in our backlog. Competitive pressures and the terms of certain of our long-term contracts\nmay require us to absorb at least part of these cost increases. As a result, our gross margin percentage could decline. We cannot provide\nassurances that we will be able to continue to pass these additional costs on to our customers at all or on a timely basis or that our\ncustomers will not seek alternative sources of supply if there are significant or prolonged increases in the price of subcomponents or\nother raw materials or energy resources.\n\n** **\n\n10\n\n \n\n** **\n\n**U.S. and international import tariffs and\nother trade policies could adversely affect our revenue and profit margin.**\n\n** **\n\nThe United States imposes\ntariffs on many of the raw materials and component parts we import from foreign sources (including our foreign operations) to support\nour U.S. manufacturing operations. Most notably, steel, which is our largest raw material import, is subject to what is known as a “Section\n232 tariff.” These tariffs increase our cost for imported raw materials and component parts, which decreases our profitability to\nthe extent that we are unable to pass the increased cost on to our customers.\n\n \n\nIn addition to driving up\nour operating costs, these tariffs and other changes in U.S. trade policy have caused foreign countries to implement retaliatory tariffs\nand other responsive trade policies that apply to our U.S.-manufactured products sold in those countries, thereby causing those products\nto be more expensive, which may reduce our sales in those countries, thereby adversely affecting our revenue, cash flow and profitability.\nIn addition, any foreign tariff-driven reduction in sales of our customers’ products into which our products are integrated will\ncorrespondingly reduce the demand for our products, thereby adversely affecting our revenue, profitability and cash flow.\n\n \n\nThe international trade situation\nis very fluid and subject to rapid change, including litigation, as the U.S. increases, decreases, suspends or reinstates tariffs against\nvarious countries and products and those countries respond. The tariffs and retaliatory tariffs are driving escalating global trade conflicts\nwhich have led to, and may continue to lead to, inflationary pressures and uncertainty, which could impact our operations.\n\n \n\nWhile we have not\nexperienced a material impact on our business to date, no assurance can be given that will continue to be the case. We are\ncontinuing to evaluate the trade situation as it evolves and we are assessing mitigation strategies, including supply chain\nadjustments and pricing actions. The ultimate impact of tariffs on our operations and financial results is currently uncertain and\nwill depend on the scope, duration, and potential expansion of the measures implemented.\n\n** **\n\n**Some\nof our products and operations are subject to certain approvals and government regulations and the loss of such approvals, or our failure\nto comply with such regulations, could materially reduce our revenues, cash flows and profitability.**\n\n** **\n\nEssential\nto servicing the Aerospace & Defense market is the ability to obtain product approvals. We have a substantial number of product\napprovals, which enable us to provide products used in virtually all domestic aircraft platforms presently in production or\noperation. Product approvals are typically issued by the FAA to designated OEMs who are Production Approval Holders of FAA-approved\naircraft. These Production Approval Holders provide quality control oversight and generally limit the number of suppliers directly\nservicing the commercial Aerospace market. Regulations enacted by the FAA provide for an independent process (the PMA process) that\nenables suppliers who currently sell their products to the Production Approval Holders to also sell products to the aftermarket. Our\nforeign sales may be subject to similar approvals or U.S. export control restrictions. We cannot assure you that we will not lose\napprovals for our Aerospace products in the future. The loss or suspension of product approvals could result in lost sales and\nmaterially reduce our revenues, cash flows and profitability.\n\n \n\nThe\nrepair and overhaul of aircraft parts and accessories throughout the world is highly regulated by government agencies, including the\nFAA. Our repair and overhaul operations are subject to certification pursuant to regulations established by the FAA and foreign government\nagencies, with regulations varying from country to country, although compliance with FAA requirements generally satisfies regulatory\nrequirements in other countries. Our failure to comply with these regulations, or our compliance with new and more stringent government\nregulations, if enacted, could have an adverse effect on our business, financial condition and results of operations.\n\n \n\nAs\na U.S. government contractor, we are subject to various procurement and other laws, regulations and contract terms applicable to our\nindustry, including the FAR, the DFARS, the Truth in Negotiations Act, the False Claims Act, the Procurement Integrity Act, the International\nTraffic in Arms Regulations promulgated under the Arms Export Control Act, the Close the Contractor Fraud Loophole Act, the Foreign Corrupt\nPractices Act, and Cost Accounting Standards (CAS), and we could be adversely affected by any negative finding by the U.S. government as to our compliance with them,\nincluding suspension or debarment from future government contracting.\n\n \n\n11\n\n \n\n** **\n\n**The\nretirement of commercial aircraft could reduce our revenues, cash flows and profitability.**\n\n \n\nWe\nsell replacement parts used in the repair and overhaul of jet engine and aircraft components, as well as provide such repair and overhaul\nservices ourselves. As aircraft or engines for which we offer replacement parts or repair and overhaul services are retired, demand for\nthese parts and services could decline and could reduce our revenue, cash flows and profitability.\n\n \n\n**Risks\nassociated with utilizing information technology systems could adversely affect our operations.**\n\n \n\nWe\nrely upon our information technology (“IT”) systems to process, transmit and store electronic information to manage and operate\nour business. Further, in the ordinary course of business we store sensitive data, including intellectual property, on our networks.\nThe secure maintenance and transmission of this information is critical to our business operations.\n\n \n\nWe\nmay face cyber events and other IT security threats, including malware, ransomware, phishing and other intrusions, to our IT infrastructure,\nattempts to gain unauthorized access to proprietary, classified or confidential information, and threats to the physical security of\nour IT systems. As a U.S. government contractor, our risk of cyber events may be greater than the risk faced by other companies that\nare not government contractors. In addition to security threats, our IT systems may also be subject to network, software or hardware\nfailures. The unavailability of our IT systems, the failure of these systems to perform as anticipated, or any significant breach of\ndata security could cause loss of data, disrupt our operations, require significant management attention and resources, subject us to\nliability to third parties or regulatory actions or contract termination, and negatively impact our reputation among our customers and\nthe public, which could have a negative impact on our financial and competitive position, results of operations and liquidity. In addition,\nour business with our customers and vendors could be impacted by cyber events on their IT systems.\n\n \n\nTo\naddress the risk to our IT systems and data, we maintain an IT security program designed to resist cyber events and to mitigate the damage\nfrom successful events. Refer to Part I, Item 1C of this Annual Report for details regarding our data protection and cybersecurity risk\nmanagement program.\n\n \n\n**Work\nstoppages and other labor problems could materially reduce our ability to operate our business.**\n\n \n\nWe\ncurrently have three collective bargaining agreements covering employees at our Plymouth, Indiana, Fairfield, Connecticut and West Trenton,\nNew Jersey facilities, representing approximately 4% of our U.S.-based hourly employees as of March 28, 2026. While we believe our relations\nwith our employees are satisfactory, the inability to satisfactorily negotiate and enter into new collective bargaining agreements upon\nexpiration, or a lengthy strike or other work stoppage at any of our facilities, particularly at some of our larger facilities, could\nmaterially reduce our ability to operate our business. In addition, any attempt by our employees not currently represented by a union\nto join a union could result in additional expenses, including with respect to wages, benefits and pension obligations.\n\n \n\nIn\naddition, work stoppages at one or more of our customers or suppliers (including suppliers of transportation services), many of which\nhave large unionized workforces, could also cause disruptions to our business that we cannot control, and these disruptions could materially\nreduce our revenues, cash flows and profitability.\n\n** **\n\n**Unexpected\nequipment failures or catastrophic events could increase our costs and reduce our sales due to production curtailments or shutdowns.**\n\n \n\nOur\nmanufacturing processes are dependent upon critical pieces of turning, milling, grinding, and electrical equipment, and this equipment\ncould, on occasion, be out of service as a result of unanticipated failures. In addition to equipment failures, our facilities are also\nsubject to the risk of catastrophic loss due to unanticipated events such as fires, explosions, earthquakes or violent weather conditions.\nIn the future, we could experience material plant shutdowns or periods of reduced production as a result of these types of equipment\nfailures or catastrophes. Interruptions in production capabilities would inevitably increase our production costs and reduce revenues,\ncash flows and profitability for the affected period.\n\n** **\n\n12\n\n \n\n** **\n\n**We\nmay not be able to continue to make the acquisitions necessary for us to realize our growth strategy.**\n\n \n\nThe\nacquisition of businesses that complement or expand our operations is an important element of our business strategy. We frequently engage\nin evaluations of potential acquisitions and negotiations for possible acquisitions, some of which, if consummated, could be significant\nto us. We cannot assure you that we will be successful in identifying attractive acquisition candidates or completing acquisitions on\nfavorable terms in the future. Our inability to acquire businesses, or to operate them profitably once acquired, could have a material\nadverse effect on our business, financial position, cash flow and growth.\n\n \n\nOur\nability to realize anticipated benefits and synergies from our acquisitions could be affected by a number of factors, including: the\nneed for greater than expected cash or other financial resources or management time in order to implement or integrate acquisitions;\nincreases in other expenses related to an acquisition, including restructuring and other exit costs; the timing and impact of purchase\naccounting adjustments; difficulties in employee or management integration, including labor disruptions or disputes; and unanticipated\nliabilities associated with acquired businesses.\n\n \n\nAny\npotential cost-saving opportunities may take several quarters or years following an acquisition to implement, and any results of these\nactions may not be realized for several quarters thereafter, if at all.\n\n \n\n**Businesses\nthat we acquire may have liabilities for which we are liable.**\n\n** **\n\nIn\norder to complete an acquisition, it may be necessary for us to assume the liabilities of the acquired business. These liabilities may\nbe known at the time of the acquisition, but could be underestimated by us, or they may not be known to us until after the acquisition.\nIn the case of an acquisition in which we do not assume all the liabilities of the acquired business, we typically obtain indemnification\nfrom the seller against the unassumed liabilities, although no assurance can be given that such indemnification will be sufficient in\namount, scope or duration to fully offset the risk of the unassumed liabilities. Liabilities of acquired businesses that ultimately are\nborne by us (either because we assume them or our indemnification right proves to be insufficient or unenforceable) could have a material\nadverse effect on our business, financial condition or results of operations. In addition, after we complete an acquisition we may learn\nof other matters that adversely affect us, such as issues relating to the acquired business’s compliance with applicable laws,\nor issues relating to its supply chain, customer relationships or order demand.\n\n \n\n**Goodwill\nand indefinite-lived intangibles comprise a significant portion of our total assets, and if we determine that goodwill and indefinite-lived\nintangibles have become impaired in the future, our results of operations and financial condition in such years may be materially and\nadversely affected.**\n\n** **\n\nGoodwill\nrepresents the excess of cost over the fair market value of net assets acquired in business combinations. Indefinite-lived intangibles\nrepresent repair station certifications obtained in business combinations and assumed to have indefinite lives. As of March 28, 2026,\nwe had $2,003.4 of goodwill and $24.3 of indefinite-lived intangibles, representing approximately 40% of our total assets. We review\ngoodwill and indefinite-lived intangibles at least annually for impairment and any excess in carrying value over the estimated fair value\nis charged to the results of operations. Our estimates of fair value are based on assumptions about the future operating cash flows,\ngrowth rates, discount rates applied to these cash flows, and current market estimates of value. If we are required to record a charge\nto earnings because of an impairment of goodwill or indefinite-lived intangibles, our results of operations and financial condition could\nbe materially and adversely affected.\n\n** **\n\n**We\ndepend heavily on our senior management and other key personnel, the loss of whom could materially affect our financial performance and\nprospects.**\n\n \n\nOur\nbusiness is managed by a number of key personnel, including our CEO Dr. Michael J. Hartnett. Our future success will depend on,\namong other things, our ability to retain the services of these personnel and to hire their successors and other highly qualified employees\nat all levels.\n\n \n\n**Our\ninternational operations are subject to risks inherent in such activities.**\n\n \n\nWe\nhave operations in Australia, England, Canada, France, Germany, India, Mexico, the Peoples Republic of China, Poland and Switzerland.\nOf our 65 facilities in 11 countries, 21 are located outside the U.S., including 12 manufacturing facilities in four countries**.**\n\n \n\nIn\nfiscal 2026, approximately 11% of our net sales were generated by our international operations. Our foreign operations are subject to\nthe risks inherent in such activities such as: currency devaluations, logistical and communication challenges, costs of complying with\na variety of foreign laws and regulations, greater difficulties in protecting and maintaining our rights to intellectual property, difficulty\nin staffing and managing geographically diverse operations, acts of terrorism or war or other acts that may cause social disruption which\nare difficult to quantify or predict, and general economic conditions in these foreign markets. Our international operations may be negatively\nimpacted by changes in government policies, such as changes in laws and regulations, restrictions on imports and exports, sources of\nsupply, duties or tariffs, the introduction of measures to control inflation, and changes in the rate or method of taxation. To date\nwe have not experienced significant difficulties with the foregoing risks associated with our international operations.\n\n \n\n13\n\n \n\n \n\n**Currency\ntranslation risks may have a material impact on our results of operations.**\n\n \n\nThe\nmajority of our foreign operations utilize the local currency as their functional currency. Foreign currency transaction gains and losses\nare included in earnings. Foreign currency transaction exposure arises primarily from the transfer of foreign currency from one subsidiary\nto another within the group and to foreign currency-denominated trade receivables and payables. Unrealized currency translation gains\nand losses are recorded on the balance sheet upon translation of the foreign operations’ functional currency to the reporting currency.\nBecause our financial statements are denominated in U.S. dollars, changes in currency exchange rates between the U.S. dollar and the\ncurrencies used by our international operations have had, and will continue to have, an impact on our earnings. We periodically enter\ninto derivative financial instruments such as cross currency swaps to reduce the effect of fluctuations in exchange rates on transactions\nand account balances denominated in non-functional currencies. Currency fluctuations may affect our financial performance in the future\nand we cannot predict the impact of future exchange rate fluctuations on our results of operations. See Part II, Item 7A. “Quantitative\nand Qualitative Disclosures about Market Risk—Foreign Currency Exchange Rates” of this Annual Report on Form 10-K.\n\n** **\n\n**We\nmay incur material losses for product liability and recall-related claims.**\n\n \n\nWe\nare subject to a risk of product and recall-related liability in the event that the failure, use or misuse of any of our products results\nin personal injury, death or property damage or our products do not conform to our customers’ specifications. In particular, our\nproducts are installed in a number of types of vehicle fleets, including airplanes, helicopters, trains, automobiles, heavy trucks and\nfarm equipment, many of which may be subject to government-ordered recalls as well as voluntary recalls by the manufacturer. If one of\nour products is found to be defective, causes a fleet to be disabled or otherwise results in a product recall, significant claims may\nbe brought against us. We currently maintain insurance coverage for product liability claims but not for recall-related claims. We cannot\nassure you that product liability claims, if made, would not exceed our insurance coverage limits. Claims that are not covered by insurance,\nor that exceed insurance coverage limits, could result in material losses. Claims that are covered by insurance could result in increased\nfuture insurance costs.\n\n \n\n**Our\nintellectual property and proprietary information are valuable, and any inability to protect them could adversely affect our business\nand results of operations; in addition, we may be subject to infringement claims by third parties.**\n\n \n\nOur\nability to compete effectively is dependent upon our ability to protect and preserve the intellectual property and proprietary information\nowned, licensed or otherwise used by us. We have numerous U.S. and foreign trademark registrations and patents. We also have U.S. and\nforeign trademark and patent applications pending. We cannot assure you that our pending trademark and patent applications will result\nin trademark registrations and issued patents, and our failure to secure rights under these applications may limit our ability to protect\nthe intellectual property rights that these applications were intended to cover. Although we have attempted to protect our intellectual\nproperty and proprietary information both in the United States and in foreign countries through a combination of patent, trademark, copyright\nand trade secret protection, and non-disclosure agreements, these steps may be insufficient to prevent unauthorized use of our intellectual\nproperty and proprietary information, particularly in foreign countries where the protection available for such intellectual property\nand proprietary information may be limited. We cannot assure you that any of our intellectual property rights will not be infringed upon\nor that our trade secrets will not be misappropriated or otherwise become known to or independently developed by competitors. We may\nnot have adequate remedies available for any such infringement or other unauthorized use. We cannot assure you that any infringement\nclaims asserted by us will not result in our intellectual property being challenged or invalidated, that our intellectual property will\nbe held to be of adequate scope to protect our business, or that we will be able to deter current and former employees, contractors or\nother parties from breaching confidentiality obligations and misappropriating trade secrets.\n\n \n\nWe\ncould become subject to litigation claiming that our intellectual property or proprietary information infringes the rights of a third\nparty. In that event, we could incur substantial defense costs and, if such litigation is successful, we could be required to pay the\nclaimant damages for our past use of such intellectual property or proprietary information, and we could either be required to pay royalties\nfor our use of it in the future or be prohibited from using it in the future. Our inability to use our intellectual property and proprietary\ninformation on a cost-effective basis in the future could have a material adverse effect on our revenue, cash flow and profitability.\nSee Part I, Item 1. “Business—Intellectual Property” of this Annual Report on Form 10-K.\n\n** **\n\n14\n\n \n\n** **\n\n**Cancellation\nof orders in our backlog could negatively impact our revenues, cash flows and profitability.**\n\n \n\nAs\nof March 28, 2026, we had an order backlog of $2.3 billion. However, orders included in our backlog may be subject to cancellation, delay\nor other modifications by our customers and we cannot assure you that these orders will ultimately be fulfilled.\n\n** **\n\n**Quarterly\nperformance can be affected by the timing of government product inspections and approvals.**\n\n \n\nA\nportion of our revenue is associated with contracts with the U.S. government that require onsite inspection and approval of the products\nby government personnel before we may ship the products, and we have no control over the timing of those inspections and approvals. If\nproducts scheduled for delivery in one quarter are not inspected or approved until the following quarter, the delay would adversely affect\nour sales and profitability for the quarter in which the shipments were scheduled.\n\n** **\n\n**We\nincurred substantial debt in order to complete the Dodge and VACCO acquisitions, which could constrain our business and exposes us to\nthe risk of defaults under our debt instruments.**\n\n \n\nIn\nfiscal 2022, we incurred $1,800.0 of total debt to finance the acquisition of Dodge Industrial and in July 2025 we incurred $200.0 of\ndebt to finance the acquisition of VACCO Industries. As of March 28, 2026, our total debt was $875.5. This debt could or will have important\nconsequences, including, but not limited to:\n\n \n\n●this\ndebt requires us to make significant interest and principal payments in the future;\n\n \n\n●a\nsubstantial portion of our cash flow from operations will be used to repay the principal\nand interest on our debt, thereby reducing the funds available to us for other purposes including\nfor strategic acquisitions, working capital, capital expenditures, and general corporate\npurposes;\n\n \n\n●our\nflexibility in planning for and reacting to changes in our business, the competitive landscape\nand the markets in which we operate may be limited; and\n\n \n\n●we\nmay be placed at a competitive disadvantage relative to other companies in our industry with\nless debt or comparable debt on more favorable terms.\n\n \n\nOur\nability to make scheduled payments on and to refinance our indebtedness depends on and is subject to our financial and operating performance\nand no assurance can be given that our business will generate sufficient cash flow to service our debt.\n\n \n\nAdditionally,\nour ability to comply with the financial and other covenants contained in our debt instruments could be affected by, among other things,\nchanges in our results of operations, the incurrence of additional indebtedness, the pricing of our products, our success at implementing\ncost reduction initiatives, our ability to successfully implement our overall business strategy, or changes in industry-specific or general\neconomic conditions which are beyond our control. The breach of any of these covenants could result in a default or event of default\nunder our debt instruments, which, if not cured or waived, could result in our being required to repay these borrowings before their\ndue date. If we are forced to refinance these borrowings on less favorable terms or cannot refinance these borrowings, our prospects,\nbusiness, financial condition, results of operations and cash flows could be materially and adversely affected and could cause us to\nbecome bankrupt or otherwise insolvent. In addition, these covenants may restrict our ability to engage in transactions that we believe\nwould otherwise be in the best interests of our business and stockholders.\n\n \n\n**Increases\nin interest rates would increase the cost of servicing our bank debt and could reduce our profitability.**\n\n \n\nFuture\nincreases in interest rates would increase the cost of servicing our bank debt (*i.e.*, term loan and revolving credit facility),\nwhich could materially reduce our profitability and cash flows.\n\n \n\n15\n\n \n\n \n\n**Use\nof artificial intelligence could expose us to operational, compliance, and data-related risk.**\n\n** **\n\nWe\ncurrently utilize artificial intelligence-enabled tools primarily to support administrative and efficiency-focused\nfunctions. While these tools are not used to make operational, financial reporting, or customer-related decisions, we are still exposed\nto certain risks including potential data and security or privacy breaches, reliance on third-party AI service providers, inaccurate\nor incomplete outputs, and evolving regulatory and legal requirements. These risks could result in negative consequences for the Company\nsuch as, but not limited to, increased inefficiencies, increased training and legal costs, and contractual or legal claims.\n\n** **\n\n**Risk\nFactors Related to our Capital Stock**\n\n \n\n**Provisions\nin our charter documents may prevent or hinder efforts to acquire a controlling interest in us.**\n\n \n\nProvisions\nof our certificate of incorporation and bylaws may discourage, delay or prevent a merger, acquisition or other change in control that\nstockholders may consider favorable, including transactions that might benefit our stockholders or in which our stockholders might otherwise\nreceive a premium for their shares. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove\nour management.\n\n \n\nPursuant\nto our charter documents, our Board of Directors (the “Board”) consists of nine members serving staggered three-year terms\nand divided into three classes. As a result, two annual meetings are required to change a majority of the Board members.\n\n \n\nOur\ncertificate of incorporation authorizes the issuance of 10,000,000 shares of preferred stock, with such designations, rights and preferences\nas may be determined from time to time by the Board, without stockholder approval. We utilized this authorization to issue 4,600,000\nshares of 5.00% Series A Mandatory Convertible Preferred Stock in fiscal 2022, which converted into shares of our common stock in October\n2024. In the future the Board could authorize the issuance of some or all of the authorized shares of preferred stock with rights, preferences\nand privileges that could have the effect of discouraging, delaying or preventing a change in control of us, or that could impede our\nstockholders’ ability to approve a transaction they consider in their best interests. Although we have no present intention to\nissue any additional preferred stock, no assurance can be given that we will not do so in the future. Holders of our common stock do\nnot have preemptive rights to subscribe for a pro rata portion of preferred stock or any other capital stock that we may issue in the\nfuture.\n\n** **\n\n**We\ndo not expect to pay cash dividends on our common stock in the foreseeable future.**\n\n \n\nExcept\nfor a $2.00 per common share special dividend paid in 2014, we have never paid any cash dividends on our common stock and we do not expect\nto pay cash dividends on the common stock in the foreseeable future. Instead, we plan to apply earnings and excess cash, if any, to the\nservice of our debt, and the expansion and development of our business (although the Company does have a $100.0 common stock repurchase\nplan that we have never executed under). Thus, any return on an investment in our common stock would depend solely on an increase, if\nany, in the market value of the common stock."}