5
Given the global nature of our business, COVID-19
has had an adverse impact on our revenues and
operating margins in all of our businesses and is expected to continue
to have an impact at least in the short
term. In particular, our Robotics
and Process Industries businesses as well as our
service businesses have
been materially impacted. The ultimate extent to which the
pandemic impacts our business, liquidity,
results
of operations and financial condition will depend on future developments,
which are highly uncertain and
cannot be predicted with confidence, including the availability
and effectiveness of vaccines, future mutations
of the COVID-19 virus and any resulting impact on the
effectiveness of vaccines, the duration and
extent of
the pandemic and waves of infection, travel restrictions
and social distancing, the duration and extent of
business closures and business disruptions and the effectiveness
of actions taken to contain, treat and
prevent the disease. If we or our customers experience
prolonged shutdowns or other business disruptions,
our business, liquidity,
results of operations and financial condition may
be materially adversely affected and
our ability to access the capital markets may be limited.
Our business is exposed to risks associated with
the volatile global economic environment and
political conditions.
Adverse changes in economic or political conditions,
particularly in locations where our customers or
operations are located, as well as concerns about global trade,
global health crises, developments in energy
prices, and terrorist activities, could have a material adverse
effect on our business, financial condition,
results of operations and liquidity and may adversely impact
the demand for our products and services.
These and other factors may prevent our customers and
suppliers from obtaining the financing required to
pursue their business activities as planned, which may
force them to modify,
delay or cancel plans to
purchase or supply our products or services. In addition, if
our customers do not generate sufficient revenue,
or fail to timely obtain access to the capital markets, they
may not be able to pay,
or may delay payment of,
the amounts they owe us. Customers with liquidity issues
have delayed payments of amounts they owe us
and this had lead and may lead to additional bad debt expense for
us, which may adversely affect our results
of operations and cash flows. We are also subject
to the risk that the counterparties to our credit agreements
and hedging transactions may go bankrupt if they suffer
catastrophic demand on their liquidity that prevents
them from fulfilling their contractual obligations to us.
Our business environment is influenced also by numerous other
economic or political uncertainties which
may affect the global economy and the international
capital markets. In periods of slow economic growth
or
decline, our customers are more likely to buy less of our
products and services, and as a result we are more
likely to experience decreased revenues. Our businesses
are affected by the level of investments and
demand in the markets that we serve, principally utilities,
industry and transport & infrastructure. At various
times during the last several years, we also have experienced,
and may experience in the future, gross
margin declines in certain businesses, reflecting the effect
of factors such as competitive pricing pressures,
inventory write-downs, charges associated with the cancellation
of planned expansion and increases in
component and manufacturing costs resulting from higher
labor and material costs borne by our
manufacturers and suppliers that, as a result of competitive
pricing pressures or other factors, we are unable
to pass on to our customers. Economic downturns also
may lead to restructuring actions and associated
expenses. Uncertainty about future economic conditions
makes it difficult for us to forecast operating results
and to make decisions about future investments.
In addition, we are subject to the risks that our business
operations in or with certain countries may be
adversely affected by trade tariffs, trade
or economic sanctions or other restrictions imposed on these
countries, including the trade tensions between the United
States and China in recent years. These could
lead to increased costs for us or for our customers or limit
our ability to do business in or with certain
countries. In addition, actual or potential investors that object
to certain of these business operations may
adversely affect the price of our shares by disposing
or deciding not to purchase our shares. These countries
may from time to time include countries that are identified
by the United States as state sponsors of terrorism.
If any countries where or with whom we do business are
subject to such sanctions or restrictions, our
business, consolidated operating results, financial condition
and the trading price of our shares may be
adversely affected. In 2021, our total revenues
from business with countries identified by the U.S.
government as state sponsors of terrorism represented
significantly less than 1 percent of our total revenues.
Based on the amount of revenues and other relevant quantitative
and qualitative factors, we have determined