1、F I S C A L Y E A R 2 0 1 6?BROAD PRODUCT OFFERING AND SERVICE CAPABILITIESWe believe Wesco Aircraft offers one of the worlds broadest portfolios of aerospace products,including chemical,electrical and C-class hardware,as well as vendor-managed inventory and tooling,chemical management and quality a
2、ssurance services.VALUE PROPOSITIONOur value proposition is robust.For customers,we can reduce overhead,improve working capital and aggregate demand to buy better than they can individually.For suppliers,the value we bring includes improved utilization,demand forecasts to improve their production sy
3、stem and access to a significantly larger number of customers.HardwareChemicalsElectronic ProductsBearingsCustomer-Designed Products and ToolingQuality AssuranceChemical Management Services(CMS)Kitting ServicesVendor Managed Inventory(VMI)Tooling ServicesSuppliersCustomersSupplier BenefitsCustomer B
4、enefitsReduced finished goods inventoryPrice disciplineImproved working capital and cash flowAccess to more than 8,200 customersLower administrative and selling costsImproved on-time performanceImproved machine utilizationLower SG&AReduced working capitalLower excess and obsolescence expenseImproved
5、 productivitySupply base consolidation Substantial improvement in part quality Better on-time deliveryFewer stock shortagesLower average lead-timeWesco Aircraft Holdings,Inc.is the worlds leading distributor and provider of comprehensive supply chain management services to the global aerospace indus
6、try,based on annual sales.The companys services range from traditional distribution to the management of supplier relationships,quality assurance,kitting,just-in-time delivery and point-of-use inventory management.November 28,2016Dear Shareholders,Fiscal 2016 was a year of transformational change fo
7、r Wesco Aircraft,as we restructured the company to better reflect and support our position as a full-scale supply chain service provider to the global aerospace and defense industry.Our progress in fiscal 2016 led to better financial results than Wesco has reported in its recent history and provides
8、 a stronger foundation for the future.We came into the year faced with declining sales,elevated selling,general and administrative(SG&A)expenses,delivery performance challenges and procurement practices that were more in line with a smaller,more traditional distributor.We overcame many challenges to
9、 improve net sales,driven by growth in long-term contracts.We reduced SG&A expenses by$32 million,which helped deliver operating income of$159 million and Wescos first operating margin expansion in many years.Cash flow from operations was strong,and we paid down long-term debt by$111 million during
10、the year.In the past two fiscal years,we have significantly improved our credit profile through debt reductions of nearly$250 million.During fiscal 2016,we took the opportunity to leverage the accelerated integration of our fiscal 2014 acquisition of Haas and took the actions necessary to right-size
11、 the asset base and SG&A to reflect a slower growth environment;gained market share by cross-selling hardware and chemical customers;and improved the balance sheet.These changes should provide strong leverage for continued improved performance once underlying sales growth accelerates from our long-t
12、erm contractual position with large aerospace and defense customers and our strong sales wins and renewal performance.Wescos transformational actions at the close of fiscal 2015 and carried out through fiscal 2016 will serve to align our corporation to take advantage of the growing aerospace and def
13、ense industry,as we focus sales on servicing our largest long-term growth markets around large OEM and Tier 1 customers and expanding our MRO services.We believe these markets lend themselves to expanding Wescos value-added full-service supply chain model.At the same time,we remain well positioned t
14、o improve service to ad-hoc distribution markets as customer needs require.We enter fiscal 2017 with greater sales momentum and an expanding pipeline of growth opportunities.We executed our restructuring actions as planned,streamlining and reducing our cost structure by closing a number of sites,whi
15、le also opening three new larger sites for multi-commodity customer service in the regions where Wesco is experiencing significant growth.Our sales,operations and support personnel were re-aligned to better support our markets.Supply chain management initiatives made good progress this year,as we re
16、focused procurement practices in line with forecasted demand from our larger customer contracts,improving supplier delivery performance and increasing the number of long-term agreements with these critical partners.We have greater visibility and control of material receipts and disbursements,which h
17、as led to improvements in inventory and cash management timing and predictability.Additionally,we continued to pay down debt,refinanced our long-term debt and enhanced controls,all supporting our improving balance sheet.Our improved financial performance allows Wesco to target the end of fiscal 2017
18、 to begin strategic consideration of additional capital allocation opportunities.The scope and pace of transformational change is now largely behind Wesco.We delivered improvement across the business and better financial performance.We believe fiscal 2016 results provide the basis for a stronger fis
19、cal 2017.Contract sales momentum is on the right track,our cost structure is more aligned with sales opportunities,and the companys financial structure has been strengthened.Wescos vision is to be the best integrated supply chain solution provider with the broadest portfolio of products and services
20、 to our markets,supported by our long-term goals and our strong culture of values,positive people philosophy and a common operating system.Were on track to be the largest service provider in the industry,while improving profitability and delivering sustained performance.I want to thank our sharehold
21、ers,customers and suppliers for their ongoing support of Wesco.I also want to thank our employees,who remain engaged,supportive and dedicated to driving stronger performance in fiscal 2017.I am confident that together we will take Wesco Aircraft to higher levels of performance in the years ahead.Sin
22、cerely,David J.CastagnolaPresident and Chief Executive Officer?FINANCIAL HIGHLIGHTSFiscal Years Ended September 30,(in thousands,except per share data)201620152014Net sales$1,477,366$1,497,615$1,355,877 Income(loss)from operations 158,750 (206,365)183,934 Interest expense,net36,90137,09229,225Net in
23、come(loss)91,378 (154,744)102,102 Diluted net income(loss)per share 0.93 (1.60)1.05 Cash and cash equivalents$77,061$82,866$104,775 Accounts receivable 249,195 253,348 301,668 Net inventory 713,470 701,535 754,400 Total assets 1,956,205 2,020,973 2,412,274 Accounts payable 181,700 149,615 159,608 Lo
24、ng-term debt and capital lease obligations 843,616 954,730 1,081,825 Total stockholders equity 882,915 817,573 992,290 Notes:The company acquired Haas Group International in fiscal 2014.Long-term debt and capital lease obligations exclude current portions.NORTHAMERICASOUTHAMERICAAFRICAEUROPEMIDDLEEA
25、STASIAAUSTRALIA?Expanding to support customers worldwide 57 Locations|17 Countries|2,700+Employees|565,000+SKUsAMERICASSales/AdministrationValencia,CAOrlando,FLMelville,NYWest Chester,PAAustin,TXSanta Fe,Argentina Saltillo,MexicoCentral Stocking LocationsValencia,CARancho Cordova,CATempe,AZMcDonough
26、,GAMiami,FLWichita,KSAmesbury,MABerkeley,MOGreenville,NCMississauga,ONMechanicsburg,PAAustin,TXNorthlake,TXChihuahua,MXForward Stocking Locations Decatur,ALSavannah,GAAustin,TXFort Worth,TXAuburn,WALachine,QCQueretaro,MXEMEA/APACSales/AdministrationHuddersfield,UKCleckheaton,UKBremen,GermanyYokneam
27、Elite,IsraelMarcon,ItalyShanghai,ChinaSingaporeCentral Stocking LocationsHuddersfield,UK Crawley,UKGlasgow,UKLinlithgow,UKHamburg,GermanyShannon,IrelandMielec,PolandForward Stocking LocationsAberdeen,UKCheltenham,UKHuddersfield,UKToulouse,FranceHolon,IsraelAkko,IsraelRome,ItalyMelbourne,AustraliaChe
28、ngdu,ChinaPudong,China Shanghai,ChinaBangalore,IndiaBaguio City,PhilippinesSingaporeIstanbul,TurkeyUNITED STATES SECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-K/A(Amendment No.1)(Mark One)?ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the fisc
29、al year ended September 30,2016or?TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File No.001-35253WESCO AIRCRAFT HOLDINGS,INC.(Exact Name of Registrant as Specified in Its Charter)Delaware20-5441563(State of Incorpo
30、ration)(I.R.S.Employer Identification Number)24911 Avenue Stanford Valencia,California 91355(Address of Principal Executive Offices and Zip Code)(661)775-7200(Registrants Telephone Number,Including Area Code)Securities Registered pursuant to Section 12(b)of the Act:Title of Each ClassName of Each Ex
31、change on Which RegisteredCommon Stock,par value$0.001 per shareNew York Stock ExchangeSecurities Registered pursuant to Section 12(g)of the Act:NoneIndicate by check mark if the registrant is a well-known seasoned issuer,as defined in Rule 405 of the Securities Act.Yes?No?Indicate by check mark if
32、the registrant is not required to file reports pursuant to Section 13 or Section 15(d)of the Act.Yes?No?Indicate by check mark whether the registrant(1)has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such s
33、horter period that the registrant was required to file such reports),and(2)has been subject to such filing requirements for the past 90 days.Yes?No?Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website,if any,every Interactive Data File requir
34、ed to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months(or shorter period that the registrant was required to submit and post such files).Yes?No?Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contain
35、ed herein,and will not be contained,to the best of the registrants knowledge,in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.?Indicate by check mark whether the registrant is a large accelerated filer,an acceler
36、ated filer,or a non-accelerated filer,or a smaller reporting company.See definitions of“large accelerated filer,”“accelerated filer”and“smaller reporting company”in Rule 12b-2 of the Securities Exchange Act of 1934.Large accelerated filer?Accelerated filer?Non-accelerated filer?(Do not check if a sm
37、aller reporting company)Smaller reporting company?!?No?$?%?&?(&?)?)?)?*?+?,-.(&.?&!/?)?,!?0?)?&?(&?-&?&-(.!Documents Incorporated by ReferencePart III of this Annual Report on Form 10-K incorporates by reference certain information from the registrants definitive proxy statement for the 2017 annual
38、meeting of stockholders,which the registrant intends to file pursuant to Regulation 14A with the Securities and Exchange Commission not later than 120 days after the registrants fiscal year end of September 30,2016.With the exception of the sections of the definitive proxy statement specifically inc
39、orporated herein by reference,the definitive proxy statement is not deemed to be filed as part of this Annual Report on Form 10-K.EXPLANATORY NOTEWesco Aircraft Holdings,Inc.is filing this Amendment No.1 to Annual Report on Form 10-K/A(this“Amendment”)to amend its Annual Report on Form 10-K for the
40、year ended September 30,2016,originally filed with the Securities and Exchange Commission on November 28,2016(the“Original Filing”).Due to administrative error,the Report of Independent Registered Public Accounting Firm under Item 8 of the Original Filing was dated November 17,2016,rather than Novem
41、ber 28,2016.This Amendment is being filed solely to provide the Report of Independent Registered Public Accounting Firm under Item 8 dated as of November 28,2016 and the related Consent of Independent Registered Public Accounting Firm as Exhibit 23.1.This Amendment also includes new certifications b
42、y our chief executive officer and chief financial officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 as Exhibits 31.1,31.2 and 32.1.Except as discussed above,this Amendment does not amend or otherwise update any other information in the Original Filing.For convenience,the ent
43、ire Annual Report on Form 10-K,as amended,is being re-filed.2TABLE OF CONTENTS PagePart IItem 1.Business .5Item 1A.Risk Factors .15Item 1B.Unresolved Staff Comments .31Item 2.Properties .31Item 3.Legal Proceedings .31Item 4.Mine Safety Disclosures .31Part IIItem 5.Market for Registrants Common Equit
44、y,Related Stockholder Matters and Issuer Purchases of Equity Securities .32Item 6.Selected Financial Data .34Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations .35Item 7A.Quantitative and Qualitative Disclosures About Market Risk .58Item 8.Financial Statement
45、s and Supplementary Data .61Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .104Item 9A.Controls and Procedures .104Item 9B.Other Information .106Part IIIItem 10.Directors,Executive Officers and Corporate Governance .107Item 11.Executive Compensation .107I
46、tem 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters .107Item 13.Certain Relationships and Related Transactions,and Director Independence .107Item 14.Principal Accounting Fees and Services .108Part IVItem 15.Exhibits,Financial Statement Schedules .109
47、Signatures.110Exhibit Index.111CERTAIN DEFINITIONSUnless otherwise noted in this Annual Report,the term“Wesco Aircraft”means Wesco Aircraft Holdings,Inc.,our top-level holding company,and the terms“Wesco,”“the Company,”“we,”“us,”“our”and“our Company”mean Wesco Aircraft and its subsidiaries,including
48、(1)Wesco Aircraft Hardware Corp.(Wesco Aircraft Hardware),which is our primary historical domestic operating company and the sole member of Haas Group International,LLC,which we acquired,along with Haas Group,Inc.(now Haas Group,LLC)and its direct and indirect subsidiaries(collectively,Haas),on Febr
49、uary 28,2014,and(2)Wesco Aircraft Europe,Ltd.(Wesco Aircraft Europe),our primary historical foreign operating company.References to“fiscal year”mean the year ending or ended September 30.For example,“fiscal year 2016”or“fiscal 2016”means the period from October 1,2015 to September 30,2016.3PART ICAU
50、TIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTSThis Annual Report on Form 10-K contains forward-looking statements(including within the meaning of the Private Securities Litigation Reform Act of 1995)concerning Wesco and other matters.These statements may discuss goals,intentions and expectations
51、as to future plans,trends,events,results of operations or financial condition,or otherwise,based on current beliefs of management,as well as assumptions made by,and information currently available to,management.Forward-looking statements may be accompanied by words such as“achieve,”“aim,”“anticipate
52、,”“believe,”“could,”“drive,”“estimate,”“expect,”“forecast,”“future,”“grow,”“improve,”“increase,”“intend,”“may,”“outlook,”“plan,”“possible,”“potential,”“predict,”“project,”“should,”“target,”“will,”“would”or similar words,phrases or expressions.These forward-looking statements are subject to various r
53、isks and uncertainties,many of which are outside our control.Therefore,you should not place undue reliance on such statements.Factors that could cause actual results to differ materially from those in the forward-looking statements include,but are not limited to,the following:general economic and in
54、dustry conditions;conditions in the credit markets;changes in military spending;risks unique to suppliers of equipment and services to the U.S.government;risks associated with our long-term,fixed-price agreements that have no guarantee of future sales volumes;risks associated with the loss of signif
55、icant customers,a material reduction in purchase orders by significant customers or the delay,scaling back or elimination of significant programs on which we rely;our ability to effectively compete in our industry;our ability to effectively manage our inventory;our suppliers ability to provide us wi
56、th the products we sell in a timely manner,in adequate quantities and/or at a reasonable cost;our ability to maintain effective information technology systems;our ability to retain key personnel;risks associated with our international operations,including exposure to foreign currency movements;risks
57、 associated with assumptions we make in connection with our critical accounting estimates(including goodwill)and legal proceedings;our dependence on third-party package delivery companies;fuel price risks;our ability to establish and maintain effective internal control over financial reporting;fluct
58、uations in our financial results from period-to-period;4 environmental risks;risks related to the handling,transportation and storage of chemical products;risks related to the aerospace industry and the regulation thereof;risks related to our indebtedness;and other risks and uncertainties.The forego
59、ing list of factors is not exhaustive.You should carefully consider the foregoing factors and the other risks and uncertainties that affect our business,including those described under Part I,Item 1A.“Risk Factors”and the other documents we file from time to time with the Securities and Exchange Com
60、mission(SEC).All forward-looking statements included in this Annual Report on Form 10-K(including information included or incorporated by reference herein)are based upon information available to us as of the date hereof,and we undertake no obligation to update or revise publicly any forward-looking
61、statements,whether as a result of new information,future events or otherwise.5ITEM 1.BUSINESSCompany OverviewWe are the worlds leading distributors and providers of comprehensive supply chain management services to the global aerospace industry,based on an annual sales.Our services range from tradit
62、ional distribution to the management of supplier relationships,quality assurance,kitting,just-in-time(JIT)delivery and point-of-use inventory management.We supply over 565,000 active stock-keeping units(SKUs),including C-class hardware,chemicals,electronic components,bearings,tools and machined part
63、s.In fiscal 2016,sales of hardware including bearings and other products represented 52.3%of our net sales,sales of chemicals represented 40.6%of our net sales and sales of electronic components represented 7.1%of our net sales.We serve our customers under both(1)long-term contractual arrangements(C
64、ontracts),which include JIT contracts,that govern the provision of comprehensive outsourced supply chain management services and long-term agreements,or LTAs,that typically set prices for specific products,and(2)ad hoc sales.In February 2014,we acquired 100%of the outstanding stock of Haas,a provide
65、r of chemical supply chain management services to the commercial aerospace,airline,military,automotive,energy,pharmaceutical and electronics sectors.In July 2012,we acquired substantially all of the assets of Interfast,Inc.(Interfast),a Toronto-based value-added distributor of specialty fasteners,fa
66、stening systems and production installation tooling for the aerospace and electronics markets.Founded in 1953 by the father of our current Chairman of the Board of Directors,we have grown to serve over 8,000 customers,which are primarily in the commercial,military and general aviation sectors,includ
67、ing the leading original equipment manufacturers(OEMs)and their subcontractors,through which we support nearly all major Western aircraft programs,and also sell products to airline-affiliated and independent maintenance,repair and overhaul(MRO)providers.We also service industrial customers,which inc
68、lude customers in the automotive,energy,pharmaceutical and electronics sectors.We have 2,724 employees and operate across 57 locations in 17 countries.The following charts illustrate the composition of our fiscal year 2016 net sales based on our sales data.Sales Mix Customer Type End Use Contract 75
69、%Ad hoc 25%US Government 15%Airline/MRO 6%Distributors 4%OEM and Contractors 75%Commercial 59%Military 41%For additional information about our segment reporting,see Note 21 of the Notes to Consolidated Financial Statements in Part II,Item 8 of this Annual Report on Form 10-K.6Our Products and Servic
70、esWe conduct our operations through two reportable segments:North America and Rest of World.Year Ended September 30,201620152014Revenue%of RevenueRevenue%of RevenueRevenue%of RevenueNorth America .$1,185,31580%$1,198,20180%$1,030,51176%Rest of World.292,05120%299,41420%325,36624%Total.$1,477,366100%
71、$1,497,615100%$1,355,877100%Our ProductsWe offer more than 565,000 active SKUs,which fall into the following product categories during the year ended September 30,2016(dollars in thousands):HardwareChemicalsElectronic ComponentsBearingsOther ProductsNet product sales .$711,177$600,124$105,207$34,662
72、$26,196%of net product sales.48.2%40.6%7.1%2.3%1.8%Types of products offered .Blind fasteners Panel fasteners Bolts and screws Clamps Hi lok pins and collars Hydraulic fittings Inserts Lockbolts and collars Nuts Rivets Springs Valves Washers Adhesives Sealants and tapes Lubricants Oil and grease Pai
73、nts and coatings Industrial gases Coolants and metalworking fluids Cleaners and cleaning solvents Connectors Relays Switches Circuit breakers Lighted products Wire and cable Interconnect accessories Airframe control bearings Rod ends Spherical bearings Ball bearing Needle roller bearings Bushings Pr
74、ecision bearings Brackets Milled parts Shims Stampings Turned parts Welded assemblies Installation toolingHardwareSales of C-class aerospace hardware represented 48%,49%and 62%of our fiscal 2016,2015 and 2014 product sales,respectively.Fasteners,our largest category of hardware products,include a wi
75、de range of highly engineered aerospace parts that are designed to hold together two or more components,such as rivets(both blind and solid),bolts(including blind bolts),screws,nuts and washers.Many of these fasteners are designed for use in specific aircraft platforms and others can be used across
76、multiple platforms.Materials used in the manufacture of these fasteners range from standard alloys,such as aluminum,steel or stainless steel,to more advanced materials,such as titanium,Inconel and Waspalloy.7ChemicalsOn February 28,2014,we acquired Haas,a provider of chemical supply chain management
77、 services to the commercial aerospace,airline,military,automotive,energy,pharmaceutical and electronics sectors.Chemical sales represented 41%,40%,and 26%of our fiscal 2016,2015 and 2014 product sales,respectively.As a result of our acquisition of Haas,our chemical product offerings include adhesive
78、s;sealants and tapes;lubricants;oil and grease;paints and coatings;industrial gases;coolants and metalworking fluids;and cleaners and cleaning solvents.Electronic ComponentsWe offer highly reliable interconnect and electro-mechanical products,including connectors,relays,switches,circuit breakers,lig
79、hted products,wire and cable and interconnect accessories.We also offer value-added assembled products including mil-circular and rack and panel connectors and illuminated push button switches.We maintain large quantities of connector components in inventory,which allows us to respond quickly to cus
80、tomer orders.In addition,our lighted switch assembly operation affords customers same day service,including engraving capabilities in multiple languages.BearingsOur product offering includes a variety of standard anti-friction products designed to both commercial and military aircraft specifications
81、,such as airframe control bearings,rod ends,spherical bearings,ball bearings,needle roller bearings,bushings and precision bearings.Other ProductsMachined parts are designed for a specific customer and are assigned unique OEM-specific SKUs.The machined parts we distribute include laser cut or stampe
82、d brackets,milled parts,shims,stampings,turned parts and welded assemblies made of materials ranging from high-grade steel or titanium to nickel based alloys.We stock a full range of tools needed for the installation of many of our products,including air and hydraulic tools as well as drill motors,a
83、nd we also offer factory authorized maintenance and repair services for these tools.In addition to selling these tools,we also rent or lease these tools to our customers.Our ServicesIn addition to our traditional distribution services,we have developed innovative value-added services,such as quality
84、 assurance,kitting and JIT supply chain management for our customers.Quality AssuranceOur quality assurance(QA)function is a key component of our service offering,with approximately 5%of our employees dedicated to this area.We believe we offer an industry-leading QA function as a result of our rigor
85、ous processes,sophisticated testing equipment and dedicated QA staff.Our superior QA performance is demonstrated by a comparison of our customers aggregate rejection rate of the products we deliver,which was 0.12%during fiscal 2016,to our rejection rate of the products we receive from our suppliers,
86、which was 3.82%during fiscal 2016.8Our QA department inspects the inventory we purchase to ensure the accuracy and completeness of documentation.For many of our customers,these inspections are conducted at our in-house laboratory,where we operate sophisticated testing equipment.We also maintain an e
87、lectronic copy of the relevant certifications for the inventory,which can include a manufacturer certificate of conformance,test reports,process certifications,material distributor certifications and raw material mill certifications.Our industry-leading QA capabilities also allow our JIT customers t
88、o reduce the number of personnel dedicated to the QA function and reduce the delays caused by the rejection of improperly inspected products.KittingKitting involves the packaging of an entire bill of materials or a complete“ship-set”of products,which reduces the amount of time workers spend retrievi
89、ng products from storage locations.Kits can be customized in varying configurations and sizes and can contain up to several hundred different products.All of our kits and components contain fully certified and traceable products and are assembled by our full-service kitting department at our Central
90、 Stocking Locations(CSLs),or at our customer sites.JIT Supply Chain ManagementJIT supply chain management involves the delivery of products on an as-needed basis to the point-of-use at a customers manufacturing line.JIT programs are designed to prevent excess inventory build-up and shortages and imp
91、rove manufacturing efficiency.Each JIT contract requires us to maintain an efficient inventory tracking,analysis and replenishment program and is designed to provide high levels of stock availability and on-time delivery.We believe customers that utilize our comprehensive JIT supply chain management
92、 services are frequently able to realize significant benefits including:reduced inventory levels and lower inventory excess and obsolescence(E&O)expense,in part because such customers only purchase what they need,and make more efficient use of their floor space;increased accuracy in forecasting and
93、planning,resulting in substantially improved on-time delivery,reduced expediting costs and fewer disruptions of production schedules;improved quality assurance resulting in a substantial reduction in customer product rejection rates;and reduced administrative and overhead costs relating to procureme
94、nt,QA,supplier management and stocking functions.Before signing a JIT contract,our customers typically experience outages of many SKUs and,in some cases,have up to a years worth of inventory on hand.As part of our JIT programs,we generally assume the customers existing inventory at the onset of the
95、contract,immediately reducing their inventory on-hand and the associated management costs.Customer inventory is generally assumed on a consignment basis and is entered in our database in a distinct customer-specific“virtual warehouse.”Software protocol in our IT systems requires the system to first“
96、look”to a customers consigned inventory when parts replenishment is required.In certain cases,we can sell this consigned inventory to our base of over 8,000 other active customers around the world,gradually drawing down the customers inventory.As the consigned inventory for each SKU is exhausted,our
97、 stock of Wesco-sourced product reserve is then used for replenishment.Another key strength of our JIT programs is our ability to utilize highly scalable and customizable point-of-use systems to develop an efficient supply chain management system and automated replenishment solution for any number o
98、f SKUs.In order to minimize inventory on hand,certain 9indicators are used to trigger the replenishment of product from a supplying location to the location of consumption.Our“Twin-Bin”system is an example of such an indicator.A JIT program designed around a Twin-Bin system utilizes a specially-manu
99、factured unit composed of two bins stacked on top of one another.In this system,a clear plastic bag,typically containing a 30-day supply of parts,is loaded in each bin.Production workers use all of the parts within the bottom bin before drawing a pullout slide between the two bins that drops the ful
100、l plastic bag of parts from the top bin into the bottom bin.An empty top bin indicates the need to initiate replenishment of the parts and provides a clear visual management process on the manufacturing floor.All replenishment activity is done via hand-held scanners that transmit orders to our stock
101、ing locations.In certain circumstances,we also provide our JIT customers with additional value-added services,including the implementation of process control and usage reduction programs;support for environmental,health and safety compliance(EHS)and reporting;and assistance with the development of w
102、aste management strategies.MRO SalesWe sell products to airline-affiliated,OEM-affiliated and independent MRO providers on both a Contract and ad hoc basis.We have recently expanded our efforts to increase our presence in both the commercial and military aerospace MRO markets,particularly as a resul
103、t of our acquisition of Interfast in 2012,our acquisition of Haas in 2014 and through the introduction of our Wesco e-commerce sales platform,which we believe provides us with a cost-effective way to further penetrate the MRO market.In addition,we have targeted domestic and international airlines an
104、d maintenance centers that we believe are assuming an expanded role within the MRO market.Going forward,we expect commercial MRO providers to benefit from the many of the same trends as those impacting the commercial OEM market,including industry passenger volumes and capacity utilization,as well as
105、 requirements to maintain aging aircraft and the cost of fuel,which can lead to greater utilization of existing planes.The commercial MRO market may also benefit from directives or notifications announced by international industry regulators and trade associations.Such directives or notifications ca
106、n serve to bolster required maintenance,and thus the demand for new and existing aerospace products.Furthermore,we expect demand in the military MRO market to be driven by changes in overall fleet size and the level of U.S.military operational activity domestically and overseas.We believe that our p
107、resence in this market helps us mitigate the volatility of new military aircraft sales with sales to the aftermarket.Customer ContractsWe sell products to our customers under two types of arrangements:(1)Contracts,which include JIT supply chain management contracts and LTAs,and(2)ad hoc sales.Contra
108、ctsJIT Contracts.JIT contracts are typically three to five years in length and are structured to supply the product requirement for specific SKUs,production lines or facilities.Given our direct involvement with JIT customers,volume requirements and purchasing frequency under these contracts is highl
109、y predictable.Under JIT contracts,customers commit to purchase specified products from us at a fixed price or a pass-through price,on an if-and-when needed basis,and we are often responsible for maintaining high levels of stock availability of those products.JIT contracts typically contain terminati
110、on for convenience provisions,which generally allow our customers to terminate their contracts on short notice without meaningful penalties,provided that we are reimbursed for the cost of any inventory specifically procured 10for the customer or inventory that is not commonly sold to our other custo
111、mers.JIT customers often purchase products from us that are not covered under their contracts on an ad hoc basis.For additional information about our JIT supply chain management services,see“-Our Products and Services-Our Services-JIT Supply Chain Management.”LTAs.Like JIT contracts,LTAs also typica
112、lly run for three to five years.LTAs are essentially negotiated price lists for customers or individual customer sites that cover a range of pre-determined products,purchased on an as-needed basis.LTAs allow the customer to buy contracted SKUs from us and may obligate us to maintain stock availabili
113、ty for those products.Once an LTA is in place,the customer is then able to place individual purchase orders with us for any of the contractually specified products.LTAs typically contain termination for convenience provisions,which generally allow for our customers to terminate their contracts on sh
114、ort notice without meaningful penalties,provided that we are reimbursed for the cost of any inventory specifically procured for the customer.LTA customers also frequently purchase products from us on an ad hoc basis,which are not captured under the pricing arrangement.Ad Hoc SalesAd hoc customers pu
115、rchase products from us on an as-needed basis and are generally supplied out of our existing inventory.Typically,ad hoc orders are for smaller quantities of products than those ordered under Contracts,and are often urgent in nature.Given our breadth and volume of inventory,it is not uncommon for eve
116、n our competitors to purchase products from us on an ad hoc basis when their own stocks prove to be inadequate.In an environment of increasing aircraft production,product shortages can become increasingly common for OEMs,subcontractors,MRO providers and distributors with less sophisticated forecasti
117、ng abilities and procurement organizations.Under each of the sales arrangements described above we typically warrant that the products we sell conform to the drawings and specifications that are in effect at the time of delivery in the applicable contract,and that we will replace defective or non-co
118、nforming products for a period of time that varies from contract to contract.We,in turn,look to the product manufacturer to indemnify us for liabilities resulting from defective or non-conforming products.We do not accrue for warranty expenses as our claims related to defective and non-conforming pr
119、oducts have been nominal.We believe that backlog is not a relevant measure of our business,given the long-term nature of our Contracts with our customers.CustomersWe sell to over 8,000 active customers worldwide.During fiscal 2016,no single customer represented more than 10%of our net sales,and only
120、 two customers accounted for over 5%of our net sales,with each consisting of multiple independent programs.Our top 10 customers collectively accounted for 46%of our net sales during fiscal 2016.During fiscal 2016,75%of our net sales were derived from major OEMs,such as Airbus,Boeing,BAE Systems,Bell
121、 Helicopter,Bombardier,Cessna,Embraer,Gulfstream,Lockheed Martin,Northrop Grumman and Raytheon,and certain of their subcontractors.Government sales comprised 15%of our net sales during fiscal 2016 and were derived from various military parts procurement agencies such as the U.S.Defense Logistics Age
122、ncy,or from defense contractors buying on their behalf.Aftermarket sales to airline-affiliated or independent MRO providers made up 6%of our fiscal 2016 net sales.The remaining 4%of our net sales were to other distributors.11During fiscal 2016,59%of our net sales were derived from customers supporti
123、ng commercial programs and 41%of our net sales were derived from customers supporting military programs.We also service international customers in markets that include Australia,Canada,China,France,Germany,India,Ireland,Israel,Italy,Malaysia,Mexico,Philippines,Poland,Saudi Arabia,Singapore,South Kor
124、ea,Turkey and the United Kingdom.For additional information about our net sales and long-lived assets by geographic area,see Note 21 of the Notes to Consolidated Financial Statements in Part II,Item 8 of this Annual Report on Form 10-K.ProcurementWe source our inventory from over 5,000 suppliers glo
125、bally,including Precision Castparts Corp.,Arconic(formerly Alcoa),PPG Industries,Lisi Aerospace,Consolidated Aerospace Manufacturing(CAM),TriMas,Esterline,RBC Bearings,Henkel and 3M.During fiscal 2016,Precision Castparts Corp.and Arconic supplied 12%and 8%,respectively,of the products we purchased.S
126、uppliers typically prefer to deal with a relatively small number of large and sophisticated distributors in order to improve machine utilization;reduce finished goods inventory and related obsolescence costs;maintain pricing discipline;improve performance in meeting on-time-delivery targets to the e
127、nd customers;and consolidate customer accounts,which can reduce administrative and overhead costs relating to sales and marketing,customer service and other functions.As a result of the scale of our operations and our long-standing relationships with many of our suppliers,we are often able to take a
128、dvantage of significant volume-based discounts when purchasing inventory.Given our industry position,financial strength and philosophy of cooperation with suppliers,we believe we are in an excellent position to become a distributor for new product lines as they become available.Our management analyz
129、es supply,demand,cost and pricing factors to make inventory investment decisions,which are facilitated by our highly customized IT systems,and we maintain close relationships with the leading suppliers in the industry.Our strong understanding of the global aerospace industry is derived from our long
130、-term relationships with major OEMs,subcontractors and suppliers.In addition,our direct insight into our customers production rates often allows us to detect industry trends.Furthermore,our ability to forecast demand,share inventory and usage information,and place purchase orders with our suppliers
131、well in advance of our customer requirements can provide us with a distinct advantage in an industry where inventory availability is critical for customers that need specific products within a stipulated timeframe to meet their own production and delivery commitments.However,despite our expertise in
132、 this area,effective inventory management is an ongoing challenge,and we continue to take steps to enhance the sophistication of our procurement practices and mitigate the negative impact of inventory builds on our cash flow.For additional information about the impact of inventory on our business,in
133、cluding our cash flows,see Part I,Item 1A.“Risk Factors-Risks Related to Our Business and Industry-We may be unable to effectively manage our inventory,which could have a material adverse effect on our business,financial condition and results of operations,”Part II,Item 7.“Managements Discussion and
134、 Analysis of Financial Condition and Results of Operations-Other Factors Affecting Our Financial Results-Fluctuations in Cash Flow,”and Part II,Item 7.“Managements Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates-Inventories.”Informa
135、tion Technology SystemsWe have invested to build integrated,highly customized IT systems that enable our purchasing and sales organization to make more informed decisions,our inventory management system to operate in an efficient manner and certain of our customers to make online purchases directly
136、from us.Our primary scalable IT infrastructure is based on IBM and Oracle servers,the Oracle Enterprise database and the Oracle JD Edwards EnterpriseOne(JDE),enterprise resource planning(ERP)system.Our chemical supply chain management system,tcmIS,is a proprietary system,developed using the Oracle E
137、nterprise database.These customized IT systems provide us visibility into inventory quantities,stocking 12locations and purchases across our customer base by individual SKU,enabling us to accurately fill 16,000 orders per day and provide an exceptional level of customer service.These systems are ful
138、ly capable of interfacing with external business systems,including Oracle,SAP,Microsoft and others,and we have developed additional functionality for JIT delivery and direct line feed of certain of the products we sell.This functionality includes recognition of signals and actions to fill customer b
139、ins from hand-held scanners,min/max data or proprietary signals from a customers ERP system.JDE and tcmIS also support our EDI functionality,which allows our system to interface with customers and suppliers,regardless of technology,data format or connectivity.TcmIS also supports additional chemical-
140、specific functionality,such as product labeling and Global Harmonized System compliance.For our shipping logistics and export compliance support,we employ Precision Softwares TRA/X.TRA/X enables us to ship globally while maintaining tracking numbers and rating information for each customer shipment.
141、In addition,at several of our distribution facilities,we use Minervas AIMS inventory management system in order to provide the best possible warehouse flow and cycle times.AIMS is tailored to fit our global warehouse operational needs and allows us to provide an expandable warehouse management syste
142、m that can also incorporate transaction processing,work-in-progress and other manufacturing operations.AIMS interfaces with a broad range of material handling equipment,including horizontal and vertical carousels,conveyors,sorting equipment,pick systems and cranes.SeasonalityOur net sales may fluctu
143、ate on a quarterly basis based on the number of production days at our customers facilities,which is driven by holidays and planned production shutdowns,particularly the winter holidays during our first fiscal quarter and the in summer months during our fourth fiscal quarter.CompetitionThe industry
144、in which we operate is highly competitive and fragmented.We believe the principal competitive factors in our industry include the ability to provide superior customer service and support,on-time delivery,sufficient inventory availability,competitive pricing and an effective QA program.Our competitor
145、s include both U.S.and foreign companies,including divisions of larger companies and certain of our suppliers,some of which have significantly greater financial resources than we do,and therefore may be able to adapt more quickly to changes in customer requirements than we can.In addition to facing
146、competition for Contract customers from our primary competitors,Contract customers or potential Contract customers may also determine that it is more cost effective to establish or re-establish an in-house supply chain management system.Under these circumstances,we may be unable to sufficiently redu
147、ce our costs in order to provide competitive pricing while also maintaining acceptable operating margins.EmployeesAs of September 30,2016,we employed 2,724 personnel worldwide,955 of which were located at customer sites.We have 745 employees located outside of North America.We are not a party to any
148、 collective bargaining agreements with our employees.Regulatory MattersGovernmental agencies throughout the world,including the U.S.Federal Aviation Administration(FAA),prescribe standards for aircraft components,including virtually all commercial airline and general aviation products,as well as reg
149、ulations regarding the repair and overhaul of airframes and engines.Specific regulations vary from country to country,although compliance with FAA requirements generally 13satisfies regulatory requirements in other countries.In addition,the products we distribute must also be certified by aircraft a
150、nd engine OEMs.If any of the material authorizations or approvals that allow us to supply products is revoked or suspended,then the sale of the related products would be prohibited by law,which would have an adverse effect on our business,financial condition and results of operations.From time to ti
151、me,the FAA or equivalent regulatory agencies in other countries propose new regulations or changes to existing regulations,which are usually more stringent than existing regulations.If these proposed regulations are adopted and enacted,we could incur significant additional costs to achieve complianc
152、e,which could have a material adverse effect on our business,financial condition and results of operations.We are also subject to government rules and regulations that include the U.S.Foreign Corrupt Practices Act(FCPA),the Bribery Act 2010(Bribery Act),the International Traffic in Arms Regulations(
153、ITAR),the Export Administration Regulations(EAR),economic sanctions and the False Claims Act.See“Risk Factors-Risks Related to Our Business and Industry-We are subject to unique business risks as a result of supplying equipment and services to the U.S.government directly and as a subcontractor,which
154、 could lead to a reduction in our net sales from,or the profitability of our supply arrangements with,the U.S.government”and“-Our international operations require us to comply with numerous applicable anti-corruption and trade control laws and regulations,including those of the U.S.government and va
155、rious other jurisdictions,and our failure to comply with these laws and regulations could adversely affect our reputation,business,financial condition and results of operations.”Environmental MattersWe are subject to extensive federal,state,local and foreign laws,regulations,rules and ordinances rel
156、ating to pollution,protection of the environment and human health and safety,and the handling,transportation,storage,treatment,disposal and remediation of hazardous substances,including potentially with respect to historical chemical blending and other activities that pre-dated our purchase of Haas.
157、Actual or alleged violations of EHS laws,or permit requirements could result in restrictions or prohibitions on operations and substantial civil or criminal sanctions,as well as,under some EHS laws,the assessment of strict liability and/or joint and several liability.Furthermore,we may be liable for
158、 the costs of investigating and cleaning up environmental contamination on or from our operations or at off-site locations,including potentially with respect to historical chemical blending and other activities that pre-dated our purchase of our businesses.We may therefore incur additional costs and
159、 expenditures beyond those currently anticipated to address all such known and unknown situations under existing and future EHS laws.In addition,governmental,regulatory and societal demands for increasing levels of product safety and environmental protection are resulting in increased pressure for m
160、ore stringent regulatory control with respect to the chemical industry.The European Unions Registration,Evaluation,Authorization and Restriction of Chemicals(REACH)regulations enacted in 2009 have been a continuing source of compliance obligations and restrictions on certain chemicals,and REACH-like
161、 regimes have now been adopted in several other countries.In the United States,the core provisions of the Toxic Substances Control Act(TSCA)were amended in June 2016 for the first time in nearly 40 years.Among the more significant changes are that these amendments mandate safety reviews of existing
162、chemicals with regulatory action to restrict any“high risk”chemicals identified as result of such reviews.The amendments to the TSCA also mandate that the EPA establish a new inventory of existing chemicals,a process expected to result in identification of certain chemicals that may not have been pr
163、operly characterized on the original inventory and in restrictions on the use of such chemicals pending completion of a safety review.These types of changes in the Companys regulatory environment,14particularly,but not limited to,in the United States,the European Union,Canada and China,could lead to
164、 heightened regulatory scrutiny and could adversely impact our ability to supply certain products and provide supply chain management services to our customers.Such changes also could result in compliance obligations for us directly or as part of our supply chain management services to customers,fin
165、es,ongoing monitoring and other future business activity restrictions,which could have a material adverse effect on the Companys liquidity,financial position and results of operations.Available InformationWe file annual,quarterly and current reports and other information with the SEC.You may read an
166、d copy any documents that we file at the SECs public reference room at 100 F Street,N.E.,Washington,D.C.20549.You may call the SEC at 1-800-SEC-0330 to obtain further information about the public reference room.In addition,the SEC maintains an Internet website(www.sec.gov)that contains reports,proxy
167、 and information statements and other information regarding registrants that file electronically with the SEC,including us.You may also access,free of charge,our reports filed with the SEC(for example,our Annual Report on Form 10-K,our Quarterly Reports on Form 10-Q and our Current Reports on Form 8
168、-K and any amendments to those forms)through the“Investor Relations”portion of our website().We also make available on our website our(1)Corporate Governance Guidelines,(2)Code of Business Conduct and Ethics,which applies to our directors,officers and employees,(3)Whistleblower Policy and(4)the char
169、ters of the Audit,Compensation and Nominating and Corporate Governance Committees.Reports filed with or furnished to the SEC will be available as soon as reasonably practicable after they are filed with or furnished to the SEC.Our website is included in this Annual Report as an inactive textual refe
170、rence only.The information found on our website is not part of this or any other report filed with or furnished to the SEC.15ITEM 1A.RISK FACTORSYou should consider and read carefully all of the risks and uncertainties described below,as well as other information included in this Annual Report,inclu
171、ding our consolidated financial statements and related notes.The risks described below are not the only ones facing us.The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adver
172、sely affect our business,financial condition or results of operations.This Annual Report also contains forward-looking statements and estimates that involve risks and uncertainties.Our actual results could differ materially from those anticipated in the forward-looking statements as a result of spec
173、ific factors,including the risks and uncertainties described below.Risks Related to Our Business and IndustryWe are directly dependent upon the condition of the aerospace industry,which is closely tied to global economic conditions,and if the volatility in the global financial markets were to result
174、 in a slowdown in the current economic recovery or a return to a recession,our business,financial condition and results of operations could be negatively impacted.Demand for the products and services we offer are directly tied to the delivery of new aircraft,aircraft utilization,and repair of existi
175、ng aircraft,which,in turn,are impacted by global economic conditions.For example,2009 revenue passenger miles(RPMs)on commercial aircraft declined due to the global recession.During the same period,the industry experienced declines in large commercial,regional and business jet deliveries.While deman
176、d for commercial and regional jets recovered,business jet orders and deliveries remain well below their pre-recession peak,reflecting a deeper downturn in the last recession and an uncertain economic outlook.A slowdown in the global economy,or a return to a recession,would negatively impact the aero
177、space industry,and could negatively impact our business,financial condition and results of operations.Military spending,including spending on the products we sell,is dependent upon national defense budgets,and a reduction in military spending could have a material adverse effect on our business,fina
178、ncial condition and results of operations.During the year ended September 30,2016,41%of our net sales were related to military aircraft.The military market is significantly dependent upon government budget trends,particularly the U.S.Department of Defense(DoD)budget.Future DoD budgets could be negat
179、ively impacted by several factors,including,but not limited to,a change in defense spending policy by the current and future presidential administrations and Congress,the U.S.governments budget deficits,spending priorities,the cost of sustaining the U.S.military presence in overseas operations and p
180、ossible political pressure to reduce U.S.Government military spending,each of which could cause the DoD budget to decline.A decline in U.S.military expenditures could result in a reduction in military aircraft production,which could have a material adverse effect on our business,financial condition
181、and results of operations.In particular,military spending may be negatively impacted by the Budget Control Act of 2011(the Budget Control Act),which was passed in August 2011.The Budget Control Act established limits on U.S.government discretionary spending,including a reduction of defense spending
182、by approximately$490 billion between the 2012 and 2021 U.S.government fiscal years,and also provided that the defense budget would face“sequestration”cuts of up to an additional$500 billion during that same period to the extent that discretionary spending limits were exceeded.The impact of sequestra
183、tion was reduced with respect to the governments 2014 and 2015 fiscal years,in exchange for extending sequestration into fiscal years 2022 and 2023,following the enactment of the Bipartisan Budget Act of 2013 in December 2013.The impact of sequestration was further reduced with respect to the govern
184、ments 2016 and 2017 fiscal years,following the enactment of the Bipartisan Budget Act of 2015 in November 2015.Sequestration is 16currently scheduled to resume in the governments 2018 fiscal year.We are unable to predict the impact the cuts associated with Sequestration will ultimately have on fundi
185、ng for the military programs which we support.However,such cuts could result in reductions,delays or cancellations of these programs,which could have a material adverse effect on our business,financial condition and results of operations.We are subject to unique business risks as a result of supplyi
186、ng equipment and services to the U.S.government directly and as a subcontractor,which could lead to a reduction in our net sales from,or the profitability of our supply arrangements with,the U.S.government.Companies engaged in supplying defense-related equipment and services to U.S.government agenci
187、es are subject to business risks specific to the defense industry.We contract directly with the U.S.government and are also a subcontractor to customers contracting with the U.S.government.Accordingly,the U.S.government may unilaterally suspend or prohibit us from receiving new contracts pending res
188、olution of alleged violations of procurement laws or regulations,reduce the value of existing contracts or audit our contract-related costs and fees.In addition,most of our U.S.government contracts and subcontracts can be terminated by the U.S.government or the contracting party,as applicable,at its
189、 convenience.Termination for convenience provisions provide only for our recovery of costs incurred or committed,settlement expenses and profit on the work completed prior to termination.In addition,we are subject to U.S.government inquiries and investigations,including periodic audits of costs that
190、 we determine are reimbursable under government contracts.U.S.government agencies routinely audit government contractors to review performance under contracts,cost structure and compliance with applicable laws,regulations,and standards,as well as the adequacy of and compliance with internal control
191、systems and policies.Any costs found to be misclassified or inaccurately allocated to a specific contract are not reimbursable,and to the extent already reimbursed,must be refunded.Also,any inadequacies in our systems and policies could result in payments being withheld,penalties and reduced future
192、business.If a government inquiry or investigation uncovers improper or illegal activities,we could be subject to civil or criminal penalties or administrative sanctions,including contract termination,fines,forfeiture of fees,suspension of payment and suspension or debarment from doing business with
193、U.S.government agencies,any of which could materially adversely affect our reputation,business,financial condition and results of operations.We are also subject to the federal False Claims Act,which provides for substantial civil penalties and treble damages where a contractor presents a false or fr
194、audulent claim to the government for payment.Actions under the False Claims Act may be brought by the government or by other persons on behalf of the government(who may then share in any recovery).We do not have guaranteed future sales of the products we sell and when we enter into Contracts with ou
195、r customers we generally take the risk of cost overruns,and our business,financial condition,results of operations and operating margins may be negatively affected if we purchase more products than our customers require,product costs increase unexpectedly,we experience high start-up costs on new Con
196、tracts or our Contracts are terminated.A majority of our Contracts are long-term,fixed-price agreements with no guarantee of future sales volumes,and they may be terminated for convenience on short notice by our customers,often without meaningful penalties,provided that we are reimbursed for the cos
197、t of any inventory specifically procured for the customer or inventory that is not commonly sold to our other customers.In addition,we purchase inventory based on our forecasts of anticipated future customer demand.As a result,we may take the risk of having excess inventory in the event that our cus
198、tomers do not place orders consistent with our forecasts,particularly with respect to inventory that has a more limited shelf-life.We also run the risk of not being able to pass along or otherwise recover unexpected increases in our product costs,including as a result of commodity price increases,wh
199、ich may increase above our established prices at the time we 17entered into the Contract and established prices for products we provide.When we are awarded new Contracts,particularly JIT contracts,we may incur high costs,including salary and overtime costs to hire and train on-site personnel,in the
200、start-up phase of our performance.In the event that we purchase more products than our customers require,product costs increase unexpectedly,we experience high start-up costs on new Contracts or our Contracts are terminated,our business,financial condition,results of operations and operating margins
201、 could be negatively affected.If we lose significant customers,significant customers materially reduce their purchase orders or significant programs on which we rely are delayed,scaled back or eliminated,our business,financial condition and results of operations may be adversely affected.Our top ten
202、 customers for the year ended September 30,2016 accounted for 46%of our net sales.A reduction in purchasing by or loss of one of our larger customers for any reason,including changes in manufacturing or procurement practices,loss of a customer as a result of the acquisition of such customer by a pur
203、chaser who does not fully utilize a distribution model or uses a competitor,in-sourcing by customers,a transfer of business to a competitor,an economic downturn,failure to adequately service our clients or to manage the implementation of new customer sites,decreased production or a strike,could have
204、 a material adverse effect on our business,financial condition and results of operations.As an example of changes in manufacturing practices that could impact us,OEMs such as Boeing and Airbus are currently incorporating an increasing amount of composite materials in the aircraft they manufacture.Ai
205、rcraft utilizing composite materials generally require the use of significantly fewer C-class aerospace parts than new aircraft made of more traditional non-composite materials,although the parts used are generally higher priced than C-class aerospace parts used in non-composite aircraft structures.
206、As Boeing,Airbus and other customers increase their reliance on composite materials,they may materially reduce their purchase orders from us.As an example of the potential loss of business due to customer in-sourcing,a major OEM is undertaking an initiative to cause its first and second tier supplie
207、rs to source certain OEM-specific materials,including fasteners,directly from the OEM itself,rather than through distributors such as us.If such initiative is broadly implemented by the OEM,or if other OEMs pursue similar initiatives,a portion of our sales to their suppliers,and consequently our bus
208、iness,financial condition and results of operations,could be adversely affected.We expect to derive a significant portion of our net sales from certain aerospace programs in their early production stages.In particular,our future growth will be dependent,in part,upon our sales to various OEMs and sub
209、contractors.If production of any of the programs we support is terminated or delayed,or if our sales to customers affiliated with these programs are reduced or eliminated,our business,financial condition and results of operations could be adversely affected.In addition,during fiscal 2014,we modified
210、 and extended a contract with an existing customer that resulted in a$66.3 million reduction in net sales to the customer during fiscal 2015 compared to fiscal 2014,and a further reduction of$26.4 million in net sales to the customer during fiscal 2016 compared to fiscal 2015.We operate in a highly
211、competitive market and our failure to compete effectively may negatively impact our results of operations.We operate in a highly competitive global industry and compete against a number of companies,including divisions of larger companies and certain of our suppliers,some of which may have significa
212、ntly greater financial resources than we do,and therefore may be able to adapt more quickly to changes in customer requirements than we can.Our competitors consist of both U.S.and foreign companies and range in size from divisions of large public corporations to small privately held entities.We beli
213、eve that 18our ability to compete depends on superior customer service and support,on-time delivery,sufficient inventory availability,competitive pricing and effective quality assurance programs.In order to remain competitive,we may have to adjust the prices of some of the products and services we s
214、ell and continue investing in our procurement,supply-chain management and sales and marketing functions,the costs of which could negatively impact our results of operations.In addition,we face competition for our Contract customers from both competitors in our industry and the in-sourcing of supply-
215、chain management by our customers themselves.If any of our Contract customers decides to in-source the services we provide or switch to one of our competitors,we would be adversely affected.We may be unable to effectively manage our inventory,which could have a material adverse effect on our busines
216、s,financial condition and results of operations.Due to the lead times required by many of our suppliers,we typically order products,particularly hardware products,in advance of expected sales,and the volume of such orders may be significant.Lead times generally range from several weeks up to two yea
217、rs,depending on industry conditions,which makes it difficult to successfully manage our inventory as we plan for future demand.In addition,demand for our products can fluctuate significantly,which can also negatively impact our cash flows and inventory management.For example,we believe that the stra
218、tegic inventory purchases we made during fiscal 2013,2014 and 2015,combined with lower than expected demand and a lack of discipline around our inventory planning process,negatively impacted our cash flows.In addition,we may choose to dispose of slow-moving inventory in the future if we determine th
219、at the market and economics make it prudent to do so.For example,in the three months ended September 30,2015,we determined that inventory previously purchased in connection with a specific program which was subsequently terminated,to have no alternative use,and we recorded a reserve of$33.0 million
220、for such inventory.In addition,in the three months ended September 30,2015,management implemented a new strategy of providing integrated supply chain services more tailored to customer demand through long-term contracts and focused forecasted consumption,including changes to our inventory purchasing
221、 strategy,holding inventory for shorter periods and the planned scrapping of long dated inventory.The new strategy and updates for fiscal 2015 sales activities led to changes in the sell through rates,holding period of aged inventory and others estimates used in the E&O reserve for our hardware inve
222、ntory,which increased our E&O inventory reserves by$43.8 million.If we are unable to effectively manage our inventory,our cash flows may be negatively affected,which could have a material adverse effect on our business,financial condition and results of operations.If suppliers are unable to supply u
223、s with the products we sell in a timely manner,in adequate quantities and/or at a reasonable cost,we may be unable to meet the demands of our customers,which could have a material adverse effect on our business,financial condition and results of operations.Our inventory is primarily sourced directly
224、 from producers and manufacturing firms,and we depend on the availability of large supplies of the products we sell.Our largest supplier for the year ended September 30,2016 was Precision Castparts Corp.During fiscal 2016,12%of the products we purchased were from Precision Castparts Corp.and 8%were
225、purchased from Arconic(formerly Alcoa).In addition,our ten largest suppliers during fiscal 2016 accounted for 32%of our purchases.These manufacturers and producers may experience capacity constraints that result in their being unable to supply us with products in a timely manner,in adequate quantiti
226、es and/or at a reasonable cost.Contributing factors to manufacturer capacity constraints include,among other things,industry or customer demands in excess of machine capacity,labor shortages and changes in raw material flows.Any significant interruption in 19the supply of these products or terminati
227、on of our relationship with any of our suppliers could result in us being unable to meet the demands of our customers,which would have a material adverse effect on our business,financial condition and results of operations.Our business is highly dependent on complex information technology.The provis
228、ion and application of IT is an increasingly critical aspect of our business.Among other things,our IT systems must frequently interact with those of our customers,suppliers and logistics providers.Our future success will depend on our continued ability to employ IT systems that meet our customers d
229、emands.The failure or disruption of the hardware or software that supports our IT systems,including redundancy systems,could significantly harm our ability to service our customers and cause economic losses for which we could be held liable and which could damage our reputation.In addition,we are su
230、bject to cybersecurity risk,which includes,but is not limited to,malicious software and unauthorized attempts to gain access to sensitive,confidential or otherwise protected information related to us,our customers or suppliers.A cyber-related attack could cause a loss of data and interruptions or de
231、lays in our business(particularly with respect to our tcmIS operating system),cause us to incur remediation costs,subject us to claims and damage our reputation.In addition,the failure or disruption of our IT systems,communications or utilities could cause us to interrupt or suspend our operations o
232、r otherwise adversely affect our business.Our property and business interruption insurance may be inadequate to compensate us for all losses that may occur as a result of any system or operational failure or disruption which could have a material adverse effect on our business,results of operations
233、and financial condition.Our competitors may have or may develop IT systems that permit them to be more cost effective and otherwise better situated to meet customer demands than IT systems we are able to acquire or develop.Larger competitors may be able to develop or license IT systems more cost eff
234、ectively than we can by spreading the cost across a larger revenue base,and competitors with greater financial resources may be able to acquire or develop IT systems that we cannot afford.If we fail to meet the demands of our customers or protect against disruptions of our IT systems,we may lose cus
235、tomers,which could seriously harm our business and adversely affect our operating results and operating cash flow.We may be unable to retain personnel who are key to our operations.Our success,among other things,is dependent on our ability to attract,develop and retain highly qualified senior manage
236、ment and other key personnel.Competition for key personnel is intense,and our ability to attract and retain key personnel is dependent on a number of factors,including prevailing market conditions and compensation packages offered by companies competing for the same talent.The inability to hire,deve
237、lop and retain these key employees may adversely affect our operations.There are risks inherent in international operations that could have a material adverse effect on our business,financial condition and results of operations.While the majority of our operations are based in the United States,we h
238、ave significant international operations,with facilities in Australia,Canada,China,France,Germany,India,Israel,Italy,Mexico,Singapore and the United Kingdom,and customers throughout North America,Latin America,Europe,Asia and the Middle East.For the years ended September 30,2016 and 2015,35%and 34%,
239、respectively,of our net sales were derived from customers located outside the United States.Our international operations are subject to,without limitation,the following risks:the burden of complying with multiple and possibly conflicting laws and any unexpected changes in regulatory requirements;20
240、political risks,including risks of loss due to civil disturbances,acts of terrorism,acts of war,guerilla activities and insurrection;unstable economic,financial and market conditions and increased expenses as a result of inflation,or higher interest rates;difficulties in enforcement of third-party c
241、ontractual obligations and collecting receivables through foreign legal systems;difficulties in staffing and managing international operations and the application of foreign labor regulations;differing local product preferences and product requirements;and potentially adverse tax consequences from c
242、hanges 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.In addition,fluctuations in the value of foreign currencies affect the dollar value of our net investment in f
243、oreign subsidiaries,with these fluctuations being included in a separate component of stockholders equity.At September 30,2016,we reported a cumulative foreign currency translation adjustment of$75.4 million in stockholders equity as a result of foreign currency translation adjustments,and we may in
244、cur additional adjustments in future periods.In addition,operating results of foreign subsidiaries are translated into U.S.dollars for purposes of our statements of comprehensive income at average monthly exchange rates.Moreover,to the extent that our net sales are not denominated in the same curren
245、cy as our expenses,our net earnings could be materially adversely affected.For example,a portion of labor,material and overhead costs for our facilities in the United Kingdom,Germany,France and Italy are incurred in British Pounds or Euros,but in certain cases the related net sales are denominated i
246、n U.S.dollars.Changes in the value of the U.S.dollar or other currencies could result in material fluctuations in foreign currency translation amounts or the U.S.dollar value of transactions and,as a result,our net earnings could be materially adversely affected.At times we engage in hedging transac
247、tions to manage or reduce our foreign currency exchange risk,but these transactions may not be successful and,as a result,our business,financial condition and results of operations could be materially adversely affected.During fiscal 2016 and 2015,fluctuations in foreign currency exchange rates had
248、a negative impact on net sales of$30.2 million and$25.4 million,respectively.Our international operations also cause our business to be subject to the U.S.Export Control regime and similar regulations in other countries,in particular in the United Kingdom.In the United States,items of a commercial n
249、ature are generally subject to regulatory control by the U.S.Department of Commerces Bureau of Industry and Security under EAR,and the U.S.Department of States ITAR and other international trade regulations may apply as well.Consequently,regulatory authorities may require us to obtain export license
250、s or other export authorizations to export the products we sell abroad,depending upon the nature of items being exported,as well as the country to which the export is to be made.We cannot be certain that our applications for export licenses or other authorizations will be granted or approved.Further
251、more,the export license and export authorization process is often time-consuming.Violation of export control regulations could subject us to fines and other penalties,such as losing the ability to export for a period of years,which would limit our sales and significantly hinder our attempts to expan
252、d our business internationally.21Our total assets include substantial intangible assets,and the write-off of a significant portion of our intangible assets would negatively affect our financial results.Our total assets reflect substantial intangible assets.At September 30,2016,goodwill and intangibl
253、e assets,net represented 39.6%of our total assets.Goodwill represents the excess of the purchase price of acquired businesses over the fair value of the assets acquired and liabilities assumed resulting from acquisitions,including the acquisition of our Company by affiliates of The Carlyle Group(Car
254、lyle)and the acquisition of Haas.Intangible assets represent trademarks,backlogs,non-compete agreements,technology and customer relationships.On at least an annual basis,we assess whether there has been impairment in the value of goodwill and indefinite-lived intangible assets.If our testing identif
255、ies impairment under generally accepted accounting principles in the United States(GAAP),the impairment charge we calculate would result in a charge to income from operations.For example,during the three months ended September 30,2015,we recorded a non-cash goodwill impairment of$263.8 million in ou
256、r North America segment.Any determination requiring the write-off of a significant portion of goodwill and unamortized identified intangible assets would negatively affect our results of operations and total capitalization,which could be material.Our international operations require us to comply wit
257、h numerous applicable anti-corruption and trade control laws and regulations,including those of the U.S.government and various other jurisdictions,and our failure to comply with these laws and regulations could adversely affect our reputation,business,financial condition and results of operations.Do
258、ing business on a worldwide basis requires us and our subsidiaries to comply with the laws and regulations of the U.S.government and various other jurisdictions,and our failure to successfully comply with these rules and regulations may expose us to liabilities.These laws and regulations apply to co
259、mpanies,individual directors,officers,employees and agents,and may restrict our operations,trade practices,investment decisions and partnering activities.In particular,our international operations are subject to U.S.and foreign anti-corruption laws and regulations,such as the FCPA,the Bribery Act an
260、d other applicable anti-corruption regimes.These laws generally prohibit us from corruptly providing anything of value,directly or indirectly,to government officials for the purposes of improperly influencing official decisions,improperly obtaining or retaining business,or otherwise obtaining favora
261、ble treatment.As part of our business,we may deal with governments and state-owned business enterprises,the employees and representatives of which may be considered government officials for purposes of the FCPA,the Bribery Act or other applicable anti-corruption laws.Some anti-corruption laws,such a
262、s the Bribery Act,also prohibit commercial bribery and the acceptance of bribes,and the FCPA further requires publicly traded companies to maintain adequate record-keeping and internal accounting practices to accurately reflect the transactions of the company.In addition,some of the international lo
263、cations in which we operate lack a developed legal system and have elevated levels of corruption,and our industry is highly regulated,which increases our risk of violating anti-corruption laws.As an exporter,we must comply with various laws and regulations relating to the export of products,services
264、 and technology from the United States and other countries having jurisdiction over our operations.In the U.S.,these laws include,among others,EAR administered by the U.S.Department of Commerces Bureau of Industry and Security,ITAR administered by the U.S.Department of States Directorate of Defense
265、Trade Controls(DDTC),and trade sanctions,regulations and embargoes administered by the U.S.Department of the Treasurys Office of Foreign Assets Control(OFAC).These laws and regulations may require us to obtain individual validated licenses from the relevant agency to export,re-export,or transfer com
266、modities,software,technology,or services to certain jurisdictions,individuals,or entities22Violations of these legal requirements are punishable by criminal fines and imprisonment,civil penalties,disgorgement of profits,injunctions,debarment from government contracts,seizure and forfeiture of unlawf
267、ul attempted exports,and/or denial of export privileges,as well as other remedial measures.We have established policies and procedures designed to assist us,our personnel and our agents to comply with applicable U.S.and international laws and regulations.However,there can be no assurance that our po
268、licies and procedures will effectively prevent us,our employees and our agents from violating these regulations in every transaction in which we may engage,and violations,allegations or investigations of such violations could materially adversely affect our reputation,business,financial condition an
269、d results of operations.If any of our customers were to become insolvent or experience substantial financial difficulties,our business,financial condition and results of operations may be adversely affected.If any of the customers with whom we do business becomes insolvent or experiences substantial
270、 financial difficulties we may be unable to timely collect amounts owed to us by such customers and may not be able to sell the inventory we have purchased for such customers,which could have a material adverse effect on our business,financial condition and results of operations.Our suppliers or our
271、 customers may experience damage to or disruptions at our or their facilities caused by natural disasters and other factors,which may result in our business,financial condition and results of operations being adversely affected.Several of our facilities or those of our suppliers and customers could
272、be subject to a catastrophic loss caused by earthquakes,tornadoes,floods,hurricanes,fire,power loss,telecommunication and information systems failure or other similar events.Should insurance be insufficient to recover all such losses or should we be unable to reestablish our operations,or if our cus
273、tomers or suppliers were to experience material disruptions in their operations as a result of such events,our business,financial condition and results of operations could be adversely affected.We are dependent on access to and the performance of third-party package delivery companies.Our ability to
274、 provide efficient distribution of the products we sell to our customers is an integral component of our overall business strategy.We do not maintain our own delivery networks,and instead rely on third-party package delivery companies.We cannot assure you that we will always be able to ensure access
275、 to preferred delivery companies or that these companies will continue to meet our needs or provide reasonable pricing terms.In addition,if the package delivery companies on which we rely experience delays resulting from inclement weather or other disruptions,we may be unable to maintain products in
276、 inventory and deliver products to our customers on a timely basis,which may adversely affect our business,financial condition and results of operations.A significant labor dispute involving us or one or more of our customers or suppliers,or a labor dispute that otherwise affects our operations,coul
277、d reduce our net sales and harm our profitability.Labor disputes involving us or one or more of our customers or suppliers could affect our operations.If our customers or suppliers are unable to negotiate new labor agreements and our customers or suppliers plants experience slowdowns or closures as
278、a result,our net sales and profitability could be negatively impacted.While our employees are not currently unionized,they may attempt to form unions in the future,and the employees of our customers,suppliers and other service providers may be,or may in the future be,unionized.We cannot assure you t
279、hat there will not be any strike,lock out or material labor dispute with respect to our business or those of our customers or suppliers in the future that materially affects our business,financial condition and results of operations.23We may be materially adversely affected by high fuel prices.Fluct
280、uations in the global supply of crude oil and the possibility of changes in government policies on the production,transportation and marketing of jet fuel make it impossible to predict the future availability and price of jet fuel.In the event there is an outbreak or escalation of hostilities or oth
281、er conflicts or significant disruptions in oil production or delivery in oil-producing areas or elsewhere,there could be reductions in the production or importation of crude oil and significant increases in the cost of jet fuel.If there were major reductions in the availability of jet fuel or signif
282、icant increases in its cost,commercial airlines would face increased operating costs.Due to the competitive nature of the airline industry,airlines are often unable to pass on increases in fuel prices to customers by increasing fares.As a result,an increase in jet fuel could result in a decrease in
283、net income from either lower margins or,if airlines increase ticket fares,lower net sales from reduced airline travel.Decreases in airline profitability could decrease the demand for new commercial aircraft,resulting in delays of or reductions in deliveries of commercial aircraft that utilize the pr
284、oducts we sell,and,as a result,our business,financial condition and results of operations could be materially adversely affected.Our financial results may fluctuate from period-to-period,making quarter-to-quarter comparisons of our business,financial condition and results of operations less reliable
285、 indicators of our future performance.There are many factors,such as the cyclical nature of the aerospace industry,fluctuations in our ad hoc sales,delays in major aircraft programs,planned production shutdowns,downward pressure on sales prices and changes in the volume of our customers orders that
286、could cause our financial results to fluctuate from period-to-period.For example,during the year ended September 30,2016,25%of our net sales were derived from ad hoc sales.The prices we charge for ad hoc sales are typically higher than the prices under our Contract sales.However,ad hoc customers may
287、 not continue to purchase the same amount of products from us as they have in the past,so it cannot be assured that in any given year we will be able to generate similar net sales from our ad hoc customers as we did in the past.We are also actively working to transition customers from ad hoc purchas
288、es to Contracts,which may also result in a reduction in ad hoc purchases.In addition,our acquisition of Haas has contributed to lower our ad hoc sales as a percentage of net sales.A significant diminution in our ad hoc sales in any given period could result in fluctuations in our financial results a
289、nd operating margins.As a result of these factors,we believe that quarter-to-quarter comparisons of our financial results are not necessarily meaningful and that these comparisons cannot be relied upon as indicators of future performance.We will continue to incur a significant increase in costs as a
290、 result of operating as a publicly traded company,and our management will be required to devote substantial time to new compliance requirements and investor needs.As a publicly traded company,we will continue to incur significant legal,accounting and other expenses.In addition,the Sarbanes-Oxley Act
291、 of 2002(the Sarbanes-Oxley Act)and the rules of the SEC and the New York Stock Exchange have imposed various requirements on public companies.Our management and other personnel will continue to devote a substantial amount of time to these compliance initiatives.Moreover,these rules and regulations
292、will continue to result in increased legal and financial compliance costs and make some activities more time-consuming and costly.For example,we believe these rules and regulations make it more difficult and more expensive for us to maintain appropriate levels of director and officer liability insur
293、ance.We are subject to health,safety and environmental laws and regulations,any violation of which could subject us to significant liabilities and penalties.We are subject to extensive federal,state,local and foreign laws,regulations,rules and ordinances relating to pollution,protection of the envir
294、onment and human health and safety,and the handling,transportation,storage,treatment,disposal and remediation of hazardous substances,including 24potentially with respect to historical chemical blending and other activities that pre-dated the purchase of the Haas business by us.Actual or alleged vio
295、lations of EHS laws,or permit requirements could result in restrictions or prohibitions on operations and substantial civil or criminal sanctions,as well as,under some EHS laws,the assessment of strict liability and/or joint and several liability.Furthermore,we may be liable for the costs of investi
296、gating and cleaning up environmental contamination on or from our operations or at off-site locations,including potentially with respect to historical chemical blending and other activities that pre-dated the purchase of the Haas business by us.We may therefore incur additional costs and expenditure
297、s beyond those currently anticipated to address all such known and unknown situations under existing and future EHS laws.Governmental,regulatory and societal demands for increasing levels of product safety and environmental protection are resulting in increased pressure for more stringent regulatory
298、 control with respect to the chemical industry.The European Unions REACH regulations enacted in 2009 have been a continuing source of compliance obligations and restrictions on certain chemicals,and REACH-like regimes have now been adopted in several other countries.In the United States,the core pro
299、visions of the Toxic Substances Control Act(TSCA)were amended in June 2016 for the first time in nearly 40 years.Among the more significant changes are that these amendments mandate safety reviews of existing chemicals with regulatory action to restrict any“high risk”chemicals identified as result o
300、f such reviews.The amendments to the TSCA also mandate that the EPA establish a new inventory of existing chemicals,a process expected to result in identification of certain chemicals that may not have been properly characterized on the original inventory and in restrictions on the use of such chemi
301、cals pending completion of a safety review.These type of changes in the Companys regulatory environment,particularly,but not limited to,in the United States,the European Union,Canada and China,could lead to heightened regulatory scrutiny and could adversely impact our ability to supply certain produ
302、cts and provide supply chain management services to our customers.Such changes also could result in compliance obligations for us directly or as part of our supply chain management services to customers,fines,ongoing monitoring and other future business activity restrictions,which could have a mater
303、ial adverse effect on our business,financial condition and results of operations.In addition,these concerns could influence public perceptions regarding our operations and our ability to attract and retain customers and employees.Moreover,changes in EHS regulations could inhibit or interrupt our ope
304、rations,or require us to modify our facilities or operations.Accordingly,environmental or regulatory matters may cause us to incur significant unanticipated losses,costs,capital expenditures or liabilities,which could reduce our profitability.Such losses,costs,capital expenditures or liabilities wil
305、l be subject to evolving regulatory requirements and will depend on the timing of the promulgation and enforcement of specific standards which impose requirements on our operations.As a result,these losses,costs,capital expenditures or liabilities may be more than currently anticipated.Our operation
306、s involve risks associated with the handling,transportation,storage and disposal of chemical products that may increase our operating costs and reduce our profitability.Our business is subject to hazards inherent in the handling,transportation,storage and disposal of chemical products.These hazards
307、include:chemical spills,storage tank leaks,discharges or releases of toxic or hazardous substances or gases and other hazards incident to the handling,transportation,storage and disposal of dangerous chemicals.We are also potentially subject to other hazards,including natural disasters and severe we
308、ather;explosions and fires;transportation problems,including interruptions,spills and leaks;mechanical failures;unscheduled downtimes;labor difficulties;and other risks.Many potential hazards can cause bodily injury and loss of life,severe damage to or destruction of property and equipment and envir
309、onmental damage,and may result in suspension of our own or our customers operations and the imposition of civil or criminal penalties and liabilities.Furthermore,25we are subject to present and future claims with respect to our employees when working within our own operations or when supplying chemi
310、cals to and/or providing chemical management services at our customers operations,other persons,including potentially our customers and their employees,workers compensation and other matters.We maintain property,business interruption,products liability and casualty insurance policies which we believ
311、e are in accordance with customary industry practices,as well as insurance policies covering other types of risks,including pollution legal liability insurance,but we are not fully insured against all potential hazards and risks incident to our business.Each of these insurance policies is subject to
312、 customary exclusions,deductibles and coverage limits,in accordance with industry standards and practices.As a result of market conditions,premiums and deductibles for certain insurance policies can increase substantially and,in some instances,certain insurance may become unavailable or available on
313、ly for reduced amounts of coverage.If we were to incur a significant liability for which we were not fully insured,it could have a material adverse effect on our business,results of operations,financial condition and liquidity.If the temperature control systems on which we rely fail,certain of the c
314、hemical products we sell may become“non-conforming”while in storage or in transit,and as a result,we may be responsible for providing replacement products to our customers,which could have a material adverse effect on our business,financial condition and results of operations.Many of the chemical pr
315、oducts we sell are sensitive to temperature.Our storage facilities and the vehicles maintained by the third-party delivery companies on whom we rely utilize sophisticated temperature control systems to ensure safe storage and handling of these products.If these temperature control systems fail,produ
316、cts that are sensitive to temperature may become non-conforming to the customers specifications,and we may be responsible for providing replacement products,which could have a material adverse effect on our business,financial condition and results of operations.Our reputation and/or our business,fin
317、ancial condition and results of operations could be adversely affected if one of the products we sell causes an aircraft to crash.We may be exposed to liabilities for personal injury,death or property damage as a result of the failure of a product we have sold.We typically agree to indemnify our cus
318、tomers against certain liabilities resulting from the products we sell,and any third party indemnification we seek from our suppliers and our liability insurance may not fully cover our indemnification obligations to customers.We also may not be able to maintain insurance coverage in the future at a
319、n acceptable cost.Any liability for which third-party indemnification is not available that is not covered by insurance could have a material adverse effect on our business,financial condition and results of operations.In addition,a crash caused by one of the products we have sold could damage our r
320、eputation for selling quality products.We believe our customers consider safety and reliability as key criteria in selecting a provider of aircraft products and believe our reputation for quality assurance is a significant competitive strength.If a crash were to be caused by one of the products we s
321、old,or if we were to otherwise fail to maintain a satisfactory record of safety and reliability,our ability to retain and attract customers may be materially adversely affected.We sell products to a highly regulated industry and our business may be adversely affected if our suppliers or customers lo
322、se government approvals,if more stringent government regulations are enacted or if industry oversight is increased.The aerospace industry is highly regulated in the United States and in other countries.The FAA prescribes standards and other requirements for aircraft components in the U.S.and compara
323、ble agencies,such as the European Aviation Safety Agency,the Civil Aviation Administration of China 26and the Japanese Civil Aviation Bureau,regulate these matters in other countries.Our suppliers and customers must generally be certified by the FAA,the DoD and similar agencies in foreign countries.
324、If any of our suppliers government certifications are revoked,we would be less likely to buy such suppliers products,and,as a result,would need to locate a suitable alternate supply of such products,which we may be unable to accomplish on commercially reasonable terms or at all.If any of our custome
325、rs government certifications are revoked,their demand for the products we sell would decline.In each case,our business,financial condition and results of operations may be adversely affected.In addition,if new and more stringent government regulations are adopted or if industry oversight increases,o
326、ur suppliers and customers may incur significant expenses to comply with such new regulations or heightened industry oversight.In the case of our suppliers,these expenses may be passed on to us in the form of price increases,which we may be unable to pass along to our customers.In the case of our cu
327、stomers,these expenses may limit their ability to purchase products from us.In each case,our business,financial condition and results of operations may be adversely affected.We may be unable to successfully consummate or integrate future acquisitions,which could negatively impact our business,financ
328、ial condition and results of operations.We may consider future acquisitions,some of which could be material to us.Depending upon the acquisition opportunities available,we may need to raise additional funds through the capital markets or arrange for additional debt financing in order to consummate s
329、uch acquisitions.We may be unable to raise the capital required for future acquisitions on satisfactory terms or at all,which could adversely affect our business,financial condition and results of operations.The results of the United Kingdoms referendum on withdrawal from the European Union may have
330、 a negative effect on global economic conditions,financial markets and our business,which could reduce the price of our common stock.We have material business operations in both the United Kingdom and the broader European Union.In June 2016,a majority of voters in the United Kingdom elected to withd
331、raw from the European Union in a national referendum.The referendum was advisory,and the terms of any withdrawal are subject to a negotiation period that could last at least two years after the government of the United Kingdom formally initiates a withdrawal process.Nevertheless,the referendum has c
332、reated significant uncertainty about the future relationship between the United Kingdom and the European Union,and has given rise to calls for the governments of other European Union member states to consider withdrawal.These developments,or the perception that any of them could occur,have had and m
333、ay continue to have a material adverse effect on global economic conditions and the stability of global financial markets,and could significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets.Asset valuations,currency exchange rates and credit ratings may be especially subject to increased market volatility.Lack of clarit
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