Changes in domestic and foreign governmental and public policy changes, risks associated with emerging
markets, changes in statutory tax rates and laws, and unanticipated outcomes with respect to tax audits could adversely affect the combined companys business, profitability and reputation.
Apergys and the combined companys domestic and international sales and operations are subject to risks associated with changes in laws, regulations
and policies (including environmental and employment regulations, export/import laws, tax policies such as export subsidy programs and research and experimentation credits, carbon emission regulations and other similar programs). Failure to comply
with any of the foregoing laws, regulations and policies could result in civil and criminal, monetary and non-monetary penalties, as well as damage to Apergys reputation. In addition, Apergy cannot
provide assurance that its costs of complying with new and evolving regulatory reporting requirements and current or future laws, including environmental protection, employment, data security, data privacy and health and safety laws, will not exceed
Apergys estimates. In addition, Apergy has made investments in certain countries, including Argentina, Australia, Bahrain, Colombia and Oman, and with the combined company, will also include Angola, Azerbaijan, Equatorial Guinea, Ghana, India,
Kazakhstan, Malaysia, Nigeria, Russia, Saudi Arabia and the United Arab Emirates, and may in the future invest in other countries, any of which may carry high levels of currency, political, compliance, or economic risk. While these risks or the
impact of these risks are difficult to predict, any one or more of them could adversely affect the combined companys business, results of operations and reputation.
Apergy is, and the combined company will be, subject to taxation in a number of jurisdictions. Accordingly, its effective tax rate is impacted by changes in
the mix among earnings in countries with differing statutory tax rates, changes in the valuation allowance of deferred tax assets, and disagreements with taxing authorities with respect to the interpretation of tax laws and changes in tax laws. The
amount of income taxes and other taxes paid could be adversely impacted by changes in statutory tax rates and laws (which have been and may in the future be under active consideration in various jurisdictions) and are subject to ongoing audits by
domestic and international authorities. For example, the U.S. bill commonly referred to as the Tax Cuts and Jobs Act, which we refer to as the Tax Act, which was enacted on December 22, 2017, significantly changed U.S. tax law by, among other
things, imposing a repatriation tax on deemed repatriated earnings of foreign subsidiaries and imposing limitations on the ability to deduct interest expense. If changes in statutory tax rates or laws or audits result in assessments different from
amounts estimated, then Apergys business, results of operations, financial condition and cash flows may be adversely affected. In addition, changes in tax laws could have an adverse effect on Apergys customers, resulting in lower demand
for Apergys products and services.
Failure to attract, retain and develop personnel for key management could have an adverse effect on the
combined companys results of operations, financial condition and cash flows.
The combined companys growth, profitability and
effectiveness in conducting its operations and executing its strategic plans depend in part on its ability to attract, retain and develop qualified personnel, align them with appropriate opportunities for key management positions and support for
strategic initiatives. Additionally, during periods of increased investment in the oil and gas industry, competition to hire may increase and the availability of qualified personnel may be reduced. If the combined company is unsuccessful in its
efforts to attract and retain qualified personnel, the combined companys business, results of operations, financial condition, cash flows, market share and competitive position could be adversely affected. Additionally, the combined company
could miss opportunities for growth and efficiencies.
The credit risks of the combined companys customer base could result in losses.
Many of the combined companys customers will be oil and gas companies that have faced or may in the future face liquidity constraints during
adverse commodity price environments. These customers impact the combined companys overall exposure to credit risk as they are also affected by prolonged changes in economic and industry conditions such as the current downturn in the oil and
gas industry as a result of the lower crude oil and nature gas price environment. If a significant number of the combined companys customers experience a prolonged business decline or disruptions, the combined company may incur increased
exposure to credit risk and bad debts.
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