What changed in this filing

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Item 1A. Risk Factors

2022-04-22 compared with 2021-04-22 · 66 added, 57 removed, 95 unchanged (56% of the section changed)

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The novel coronavirus (COVID-19) pandemic, efforts to mitigate the pandemic, and the related weakening economic conditions, have impacted our business and could have a significant negative impact on our operations, liquidity, financial condition and financial results

In early 2020, a novel strain of coronavirus, COVID-19, started to impact the global economic environment causing extreme volatility and uncertainty in global markets.

In March 2020, the World Health Organization declared COVID-19 to be a global pandemic and we started to see certain impacts to our business.

This contagious disease outbreak, which has continued to spread, and the related adverse public health developments, and government orders to "stay in place," have adversely affected work forces, economies and financial markets globally.

Quarantines and "stay in place" orders, the timing and length of containment and eradication solutions, travel restrictions, absenteeism by infected workers, labor shortages or other disruptions to our supply chain or to our customers, have adversely impacted our sales and operating results and have resulted in some continued project delays.

In addition, the pandemic contributed to an economic downturn that could affect the ability of our customers to obtain financing for projects, which could therefore impact demand for our products and services.

Order lead times could be extended or delayed and our pricing or pricing by our suppliers for needed materials could increase.

Some critical materials, products or services may become unavailable if the regional or global spread were significant enough to prevent alternative sourcing.

To date, we have experienced delays in commercial construction projects due to COVID-19.

While the construction and construction-related industries are considered an "essential service" in most jurisdictions in which we operate, site closures or project delays have occurred and increased social distancing and health-related precautions are required on many work sites, which may cause additional project delays and additional costs to be incurred.

To date, we have experienced delays in commercial construction projects and other adverse consequences due to the COVID-19 pandemic.

Quarantines and "stay in place" orders, the timing and length of containment and eradication solutions, travel restrictions, construction site closures and project delays, absenteeism by infected workers, labor shortages and other disruptions to our supply chain or to our customers, have adversely impacted our sales and operating results.

In addition, the pandemic contributed to an economic downturn that has impacted demand for certain of our products and services.

Order lead times have been, and may continue to be, extended or delayed.

Within the LSO segment, we also experienced the temporary closure of many of our customer's retail locations.

We also were required temporarily to shut down our factories in this segment to comply with government "stay in place" orders.

We expect this global pandemic to continue to have an impact on our future revenue and results of operations, the size and duration of which we are currently unable to predict.

The global outbreak of COVID-19 continues to evolve rapidly.

The extent to which COVID-19 will impact our business will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate severity and spread of the disease, the intensity and duration of outbreaks, travel restrictions and social distancing requirements in the United States and other countries, business closures or business disruptions, and the effectiveness of actions taken in the United States and other countries to contain, treat and eradicate the disease.

Given the speed and frequency of continuously evolving developments with respect to this pandemic, we cannot reasonably estimate the magnitude of the impact to our future results of operations, liquidity or financial position.

To the extent that our customers and suppliers are adversely impacted by the COVID-19 outbreak, this could reduce the availability, or result in delays, of materials or supplies, or delays in customer payments, which in turn could materially interrupt our business operations and/or impact our results of operations and liquidity.

We expect this global pandemic to continue to have an impact on our future revenue and results of operations, although the negative impacts on our business directly due to the COVID-19 pandemic had moderated by the end of fiscal 2022.

The extent to which COVID-19 will continue to impact our businesses in the future will depend on numerous evolving factors including, but not limited to, the emergence of new variants of the coronavirus, such as the Delta and Omicron variants, and the effectiveness of ongoing public health initiatives, which have been boosted by vaccine production and distribution.

Market and Industry Risks

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Global instability and uncertainty arising from events outside of our control, such as significant natural disasters, political crises, public health crises and pandemics, and/or other catastrophic events could materially affect our results of operations

Natural disasters, political crises, public health crises, such as the current COVID-19 pandemic, and other catastrophic events or other events outside of our control may damage our facilities or the facilities of third parties on which we depend, have broader adverse impacts on the commercial construction market, consumer confidence and spending, and/or impact both the well-being of our employees and our ability to operate our facilities.

Natural disasters, political crises, public health crises, such as the current COVID-19 pandemic, and other catastrophic events or other events outside of our control, including Russia's invasion of Ukraine, may negatively impact our facilities or the facilities of third parties on which we depend, have broader adverse impacts on the commercial construction market, consumer confidence and spending, and/or impact both the well-being of our employees and our ability to operate our facilities.

These types of disruptions or other events outside of our control could affect our business negatively, cause delays or cancellation of commercial construction projects or cause us to temporarily close our facilities, harming our operating results.

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Accordingly, loss of a significant customer, a significant reduction in pricing, or a shift to a less favorable mix of value-added picture framing glass or acrylic products for one or more of those customers could materially reduce LSO net sales and operating results.

Many customers in this segment temporarily closed retail outlets, during a portion of fiscal 2021, as a result of "stay in place" orders within the United States, resulting in reduced demand for our product.

We are unable to estimate the severity or longer-term impact resulting from this COVID-19 pandemic on our business in this segment.

Strategic Risks

We could be unable to effectively manage and implement our new enterprise strategy, which could have a material adverse effect on our business, financial condition, and results of operations.

Our growth strategy includes differentiating our product and service offerings, shifting our business mix toward higher operating margins and return on invested capital performance, and shifting away from our historical, decentralized operating model.

Execution of this strategy will require additional investments of time and resources and could fail to achieve the desired results.

For example, we may be unable to increase our sales and earnings by differentiating our product and service offerings in a cost-effective manner.

We may fail to accurately predict future customer needs and preferences, and thus focus on the wrong business mix.

Our centralized operating system may not produce the desired operating efficiencies.

Risks related to acquisitions and integration activities could adversely affect our operating results

We have completed and may complete additional acquisitions in the future to accelerate the execution of our growth strategies, including new geographies, adjacent market sectors and new product introductions.

There are risks inherent in completing acquisitions, including:

• diversion of management’s attention from existing business activities;

• difficulties or delays in integrating and assimilating information and financial systems, operations and products of an acquired business or other business venture or in realizing projected efficiencies, growth prospects, cost savings and synergies;

• potential loss of key employees, customers and suppliers of the acquired businesses or adverse effects on relationships with existing customers and suppliers;

• adverse impact on overall profitability if the acquired business does not achieve the return on investment projected at the time of acquisition;

• with respect to the acquired assets and liabilities, inaccurate assessment of additional post-acquisition capital investments;

undisclosed, contingent or other liabilities;

problems executing backlog of material supply or installation projects;

unanticipated costs;

and an inability to recover or manage such liabilities and costs.

If one or more of these risks were to arise in a material manner, our operating results could be negatively impacted.

Operational Risks

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In recent years, strong residential and commercial construction and low U.S.

unemployment has caused increased competition for experienced construction project managers and other labor.

unemployment have caused increased competition for experienced construction project managers and other labor.

If we are unable to retain existing employees, provide a safe and healthy working environment, and/or recruit and train additional employees with the requisite skills and experience, our operating results could be adversely impacted.

If we are unable to manage our supply chain effectively, including availability and price of materials used in our products, our results of operations will be negatively affected

Our Architectural Framing Systems and Architectural Services segments use aluminum as a significant input to their products.

While we structure many of our supply agreements in a way to moderate the effects of fluctuations in the market for raw aluminum and we endeavor to adjust our pricing to offset potential impacts, operating results could be negatively impacted by price movements in the market for raw aluminum.

Continuing inflation may negatively impact our profitability.

Rising inflation, interest rates, or construction costs could reduce the demand for our products and services and impact our profitability.

Higher interest rates may make it more expensive to finance construction projects, and as a result, reduce the number of projects and the demand for our products and services.

Cost inflation, including significant cost increases for freight, aluminum, glass, paint and other materials used in our operations, has impacted, and could continue to impact, our profitability.

The availability and price of necessary raw materials for our products may be negatively impacted by the international sanctions and market volatility caused by Russia’s invasion of Ukraine.

Continued supply and demand imbalances for these resources may continue to exert upward pressure on costs.

Furthermore, in some of our segments, we operate on contracts wherein we bear part or all of the risk of inflation on materials costs and the cost of installation services.

Our ability to mitigate these costs, or recover the cost increases through price increases, may continue to lag the cost increases, which could negatively impact our margins.

If we are unable to manage our supply and distribution chains effectively our results of operations will be negatively affected

Our Architectural Framing Systems and Architectural Services segments use aluminum as a significant input to their products and our operating results in those two segments could be negatively impacted by supply chain disruptions and adverse price movements in the market for raw aluminum.

In recent years, we have seen increased volatility in the price of aluminum that we purchase from both domestic and international sources.

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They may also be impacted by the increasing costs or availability of raw materials, labor and distribution, resulting in demands for less attractive contract terms or an inability for them to meet our requirements or conduct their own businesses.

The performance and financial condition of one or more suppliers may cause us to alter our business terms or to cease doing business with a particular supplier or suppliers, or change our sourcing practices generally, which could in turn adversely affect our business and financial condition.

The performance and financial condition of one

or more suppliers may cause us to alter our business terms or to cease doing business with a particular supplier or suppliers, or change our sourcing practices generally, which could in turn adversely affect our business and financial condition.

If we encounter problems with distribution, our ability to deliver our products to market could be adversely affected.

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We believe that future orders of our products or services will depend on our ability to maintain the performance, reliability, quality and timely delivery standards required by our customers.

We have in the past and are currently subject to product liability and warranty claims, including certain legal claims related to a commercial sealant product formerly incorporated into our products.

If our products have performance, reliability or quality problems, or products are installed using incompatible glazing materials or installed improperly (by us or a customer), we may experience additional warranty expense;

We have in the past and are currently subject to product liability and warranty claims, including certain legal claims related to a commercial sealant product formerly incorporated into our products, and there is no certainty we will prevail on these claims.

reduced or canceled orders;

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No assurance can be given that coverage under insurance policies, if applicable, will be adequate to cover future product liability claims against us.

If we are unable to recover on an insurance claims, in whole or in part, or if we exhaust our available insurance coverage at some point in the future, then we might be forced to expend legal fees and settlement or judgment costs, which could negatively impact our profitability, results of operations, cash flows and financial condition.

If we are unable to recover on insurance claims, in whole or in part, or if we exhaust our available insurance coverage at some point in the future, then we might be forced to expend legal fees and settlement or judgment costs, which could negatively impact our profitability, results of operations, cash flows and financial condition.

Project management and installation issues could adversely affect our operating results

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Any one or more of such issues could result in losses on individual contracts that could negatively impact our operating results.

Risks related to acquisitions and integration activities could adversely affect our operating results

There are risks inherent in completing acquisitions, including:

• diversion of management’s attention from existing business activities;

• potential loss of key employees, customers and suppliers of the acquired businesses or adverse effects on relationships with existing customers and suppliers;

• adverse impact on overall profitability if the acquired business does not achieve the return on investment projected at the time of acquisition;

• with respect to the acquired assets and liabilities, inaccurate assessment of additional post-acquisition capital investments;

undisclosed, contingent or other liabilities;

problems executing backlog of material supply or installation projects;

unanticipated costs;

and an inability to recover or manage such liabilities and costs.

If one or more of these risks were to arise in a material manner, our operating results could be negatively impacted.

Difficulties in maintaining our information technology systems, and potential security threats, could negatively affect our operating results and/or our reputation

Our operations are dependent upon various information technology systems that are used to process, transmit and store electronic information, and to manage or support our manufacturing operations and a variety of other business processes and activities.

We could encounter difficulties in maintaining our existing systems, and developing and implementing new systems.

Difficulties in maintaining our information technology systems, and potential cybersecurity threats, could negatively affect our operating results and/or our reputation

We could encounter difficulties in maintaining our existing systems, developing and implementing new systems or in our efforts to standardize information technology systems across our business units.

Such difficulties could lead to disruption in business operations and/or significant additional expenses that could adversely affect our results.

Additionally, information technology security threats are increasing in frequency and sophistication.

Our information technology and Internet based systems have been in the past, and may be in the future, subject to attempts to gain unauthorized access, breach, malfeasance or other system disruptions, none of which have been material to us to date.

These threats pose a risk to the security of our systems and networks, and the confidentiality, availability and integrity of our data.

Additionally, our information technology and Internet based systems, and those of our third-party service providers, are subject to cyber-attacks of increasing frequency and sophistication.

These systems have in the past been, and may in the future be, subject to cyber-attacks and other attempts to gain unauthorized access, breach, damage, disrupt or otherwise compromise such systems, none of which have been material to us to date.

These cyber threats pose a risk to the security of our systems and networks, and the confidentiality, availability and integrity of our data.

Should such an attack succeed, it could lead to the compromise of confidential information, manipulation and destruction of data and product specifications, production downtimes, disruption in the availability of financial data, or misrepresentation of information via digital media.

The occurrence of any of these events could adversely affect our reputation and could result in litigation, regulatory action, project delay claims, and increased costs and operational consequences of implementing further data protection systems.

The occurrence of any of these events could adversely affect our reputation and could result in litigation, loss of data and intellectual property, regulatory action, project delay claims, and increased costs and operational consequences of implementing further data protection systems.

Violations of legal and regulatory compliance requirements, including environmental laws, and changes in existing legal and regulatory requirements, may have a negative impact on our business and results of operations.

We are subject to a legal and regulatory framework imposed under federal and state laws and regulatory agencies, including laws and regulations that apply specifically to U.S.

We are subject to a legal and regulatory framework imposed under federal and state laws and regulatory agencies, including

laws and regulations that apply specifically to U.S.

public companies and laws and regulations applicable to our manufacturing and construction site operations.

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Financial Risks

Due to our self-insurance programs, we may have a material adverse effect on our operating results in the event of a material product liability claim

We obtain third-party insurance to provide coverage for potential risk in areas such as employment practices, workers' compensation, directors and officers, automobile, architect's and engineer's errors and omissions, product rework and general liability, as well as medical insurance and various other coverages.

However, we retain a high amount of risk on a self-insured basis, partially through our wholly-owned insurance subsidiary.

Therefore, a material architectural product liability event could have a material adverse effect on our operating results.

We are self-insured for certain costs associated with our operations and an increase in our insurance claims and expenses may have a material negative impact on our operating results

We obtain third-party insurance to provide coverage for potential risk in areas such as employment practices, workers' compensation, directors and officers, automobile, engineer's errors and omissions, product rework and general liability, as well as medical insurance and various other coverages.

However, we retain a high amount of risk on a self-insured basis through our wholly-owned insurance subsidiary, in particular for product liability, medical and workers’ compensation claims.

Therefore, a significant increase in the number or size of these claims could have a material adverse effect on our operating results.

Foreign currency effects could negatively affect our sales and operating income

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produced by international competitors become more price competitive and exports of our U.S.-fabricated products become less price competitive.

If we are not able to counteract these types of price pressures through superior quality and service, our net sales and operating income could be negatively impacted.

If we are not able to counteract these types of price pressures through superior quality, service and prudent hedging programs, our net sales and operating income could be negatively impacted.

Additionally, our international subsidiaries report their results of operations and financial position in their relevant functional currencies (local country currency), which are then translated into U.S.

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Our sales and earnings guidance and resulting external analyst estimates are largely based on our view of our business and the broader commercial construction market.

Further, there is additional risk in our ability to accurately forecast and provide guidance in the current environment, given the evolving conditions as a result of the COVID-19 pandemic and related economic downturn.

Further, there is additional risk in our ability to accurately forecast our operational and financial performance and provide earnings guidance as a result of evolving conditions because of the COVID-19 pandemic and related economic downturn, continued inflationary cost increases and uncertainty resulting from the Russian invasion of Ukraine.

Failure to meet our guidance or analyst expectations for net sales and earnings would have an adverse impact on the market price of our common stock.

We may experience further impairment of our goodwill and indefinite-lived intangible assets, in the future, which could adversely impact our financial condition and results of operations

Our assets include a significant amount of goodwill and indefinite-lived intangible assets.

We may experience further impairment of our goodwill, indefinite- and finite-lived intangible assets and long-lived assets, in the future, which could adversely impact our financial condition and results of operations

Our assets include a significant amount of goodwill, indefinite- and finite-lived intangible assets and long-lived assets.

We evaluate goodwill and indefinite-lived intangible assets for impairment annually in our fiscal fourth quarter, or more frequently if events or changes in circumstances indicate that the carrying value of a reporting unit may not be recoverable.

We evaluate finite-lived intangible assets and long-lived assets for impairment if events or changes in circumstances indicate that the carrying value of the long-lived asset may not be recoverable.

The assessment of impairment involves significant judgment and projections about future performance.

Based on our analysis performed in the fourth quarter of fiscal 2021, we determined impairment of goodwill at two of our reporting units within the Architectural Framing Systems segment, EFCO and Sotawall, and we determined impairment of the EFCO tradename.

As a result, we recorded a goodwill impairment expense of $63.8 million and an indefinite-lived intangible asset impairment expense of $6.3 million.

Based on our annual impairment valuation analysis performed in the fourth quarter of fiscal 2022, there was no goodwill impairment identified.

During fiscal 2021, our annual impairment analysis determined impairment of goodwill at two of our reporting units within the Architectural Framing Systems segment and we determined impairment of our EFCO trade name.

As a result, in the prior year, we recorded a goodwill impairment expense and an indefinite-lived intangible asset impairment expense of $63.8 million and $6.3 million, respectively.

During the fourth quarter of fiscal 2022, based on the finalization of our plans for integrating the Sotawall business into the Architectural Services segment, beginning in fiscal 2023, we determined impairment of indefinite and finite-lived intangibles within the Architectural Framing Systems segment and we recorded intangible impairment expense of $49.5 million.

Refer to additional information included within Notes 1 and 6 to the Financial Statements contained in Item 8 within this Annual Report on Form 10-K.

The discounted cash flow projections and revenue projections used in these analyses are dependent upon achieving forecasted levels of revenue and profitability.

If revenue or profitability were to fall below forecasted levels, or if market conditions were to decline in a material or sustained manner, further impairment could be indicated at these or our other reporting units and we could incur an additional non-cash impairment expense that would negatively impact our financial condition and results of operations.

If revenue or profitability were to fall below forecasted levels, or if market conditions were to decline in a material or sustained manner, further impairment could be indicated and we could incur an additional non-cash impairment expense that would negatively impact our financial condition and results of operations.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors