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Any of the risks discussed below, or elsewhere in this Form 10-K or our other filings with the Securities and Exchange Commission, could have a material adverse impact on our business, financial condition or results of operations.
−Removed: COVID-19 Pandemic Risks
−Removed: 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
−Removed: To date, we have experienced delays in commercial construction projects and other adverse consequences due to the COVID-19 pandemic.
−Removed: 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.
−Removed: In addition, the pandemic contributed to an economic downturn that has impacted demand for certain of our products and services.
−Removed: Order lead times have been, and may continue to be, extended or delayed.
−Removed: Within the LSO segment, we also experienced the temporary closure of many of our customer's retail locations.
−Removed: We also were required temporarily to shut down our factories in this segment to comply with government "stay in place" orders.
−Removed: 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.
−Removed: 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
North American and global economic and industry-related business conditions materially affect our sales and results of operations
−Removed: Our Architectural Framing Systems, Architectural Glass and Architectural Services segments are significantly influenced by North American economic conditions and the cyclical nature of the North American commercial construction industry.
+Added: Our Architectural Framing Systems, Architectural Services and Architectural Glass segments are influenced by North American economic conditions and the cyclical nature of the North American commercial construction industry.
The commercial construction industry is impacted by macroeconomic trends, such as availability of credit, employment levels, consumer confidence, interest rates and commodity prices.
−Removed: In addition, changes in architectural design trends, demographic trends, and/or remote work trends could negatively impact demand for our products.
+Added: In addition, changes in architectural design trends, demographic trends, and/or remote work trends could impact demand for our products.
To the extent changes in these factors negatively impact the overall commercial construction industry, our revenue and profits could be significantly reduced.
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This industry is dependent on consumer confidence and the conditions of the U.S.
−Removed: A decline in consumer confidence, whether as a result of an economic slowdown (due to COVID-19 concerns discussed above or otherwise), uncertainty regarding the future or other factors, could result in a decrease in net sales and operating income of this segment.
+Added: A decline in consumer confidence, whether as a result of an economic slowdown, uncertainty regarding the future or other factors, could result in a decrease in net sales and operating income of this segment.
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
−Removed: 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.
+Added: Natural disasters, political crises, public health crises, and other catastrophic events or other events outside of our control, 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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Changes in our competitors' products, prices or services could negatively impact our share of demand, net sales or margins.
−Removed: Our Architectural Framing Systems and Architectural Glass segments have seen an increase in imports of products into the U.S.
−Removed: from international suppliers due to the relative strength of the U.S.
If foreign imports occur at increased levels for extended periods of time, our net sales and margins in those segments could be negatively impacted.
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Strategic Risks
−Removed: 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.
−Removed: 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.
+Added: We could be unable to effectively manage and implement our enterprise strategy, which could have a material adverse effect on our business, financial condition, and results of operations.
+Added: Our strategy includes differentiating our product and service offerings, shifting our business mix toward higher operating margins and return on invested capital performance, and moving 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.
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Risks related to acquisitions and integration activities could adversely affect our operating results
−Removed: 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.
+Added: We may complete acquisitions in the future as part of the execution of our strategic roadmap, including new geographies, adjacent market sectors and new product introductions.
There are risks inherent in completing acquisitions, including:
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Loss of key personnel and inability to source sufficient labor could adversely affect our operating results
−Removed: Our success depends on the skills of the Company's leadership, construction project managers and other key technical personnel, and our ability to secure sufficient manufacturing and installation labor.
+Added: Our success depends on the skills of our leadership, construction project managers and other key technical personnel, and our ability to secure sufficient manufacturing and installation labor.
In recent years, strong residential and commercial construction and low U.S.
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Continuing inflation may negatively impact our profitability.
−Removed: Rising inflation, interest rates, or construction costs could reduce the demand for our products and services and impact our profitability.
−Removed: 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.
+Added: Rising inflation, interest rates, and construction costs, or any one of them, could reduce the demand for our products and services and impact our profitability.
+Added: Higher interest rates make it more expensive to finance construction projects, and as a result, may reduce the number of projects available to us and the demand for our products and services, and also increase the interest expenses associated with our borrowings.
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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Our ability to mitigate these costs, or recover the cost increases through price increases, may 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
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In recent years, we have seen increased volatility in the price of aluminum that we purchase from both domestic and international sources.
−Removed: Due to our Architectural Framing Systems segment presence in Canada, we have significant cross-border activity, as our Canadian businesses purchase inputs from U.S.-based suppliers and sell to U.S.-based customers.
+Added: Due to our Architectural Framing Systems segment and Architectural Services segment presence in Canada, we have significant cross-border activity, as our Canadian businesses purchase inputs from U.S.-based suppliers and sell to U.S.-based customers.
A significant change in U.S.
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Our suppliers are subject to the fluctuations in general economic cycles.
−Removed: Global economic conditions may impact their ability to operate their businesses, including recent impacts from the evolving COVID-19 pandemic.
+Added: Global economic conditions may impact their ability to operate their businesses.
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.
−Removed: The performance and financial condition of one
−Removed: 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.
+Added: The performance and financial condition of one or more suppliers may cause us to alter our business
+Added: 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.
−Removed: Our operations are vulnerable to interruptions in the event of work stoppages, whether due to health concerns, such as COVID-19 or otherwise, labor disputes or shortages, and natural disasters that may affect our distribution and transportation to job sites.
+Added: Our operations are vulnerable to interruptions in the event of work stoppages, whether due to public health concerns, labor disputes or shortages, and natural disasters that may affect our distribution and transportation to job sites.
Moreover, our distribution system includes computer-controlled and automated equipment, which may be subject to a number of risks related to data and system security or computer viruses, the proper operation of software and hardware, power interruptions or other system failures.
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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, some of which are managed by third-parties.
−Removed: 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.
+Added: We could encounter difficulties in maintaining our existing systems, developing and implementing new systems or in our efforts to standardize enterprise resource planning and 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, 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.
−Removed: 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.
+Added: 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 in the last three years 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.
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public companies and laws and regulations applicable to our manufacturing and construction site operations.
−Removed: Our efforts to comply with evolving laws, regulations, and reporting standards may increase our general and administrative expenses, divert management time and attention, or limit our operational flexibility, all of which could have a material adverse effect on our business, financial position, and results of operations.
+Added: Our efforts to comply with evolving laws, regulations, and reporting standards, including climate-related regulations, may increase our general and administrative expenses, divert management time and attention, or limit our operational flexibility, all of which could have a material adverse effect on our business, financial position, and results of operations.
Additionally, new laws, rules, and regulations, or changes to existing laws or their interpretations, could create added legal and compliance costs and uncertainty for us.
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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.
−Removed: 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.
−Removed: 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.
+Added: Further, there may be additional risk in our ability to accurately forecast our operational and financial performance and provide earnings guidance as a result of evolving conditions resulting from public health crises, economic downturns, and continued inflationary cost increases.
+Added: Failure to meet our guidance or analyst expectations for net sales and earnings could have an adverse impact on the market price of our common stock.
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
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The assessment of impairment involves significant judgment and projections about future performance.
−Removed: Based on our annual impairment valuation analysis performed in the fourth quarter of fiscal 2022, there was no goodwill impairment identified.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Based on our annual impairment valuation analysis performed in the fourth quarter of fiscal 2023, there was no impairment of goodwill or indefinite and finite-lived intangibles identified.
+Added: 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 related to the Sotawall business and we recorded intangible impairment expense of $49.5 million.
+Added: With the realignment of the Sotawall business from the Architectural Framing Systems segment into the Architectural Services segment at the beginning of the first quarter of fiscal 2023, the historical comparative segment results for these two segments has been recast and as such this impairment expense recorded during fiscal 2022 is now reflected in the Architectural Services segment.
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.
−Removed: 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.
+Added: If revenue or profitability were to fall below forecasted levels, or if market conditions were
+Added: 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.
+Added: Failure to maintain effective internal controls over financial reporting could adversely impact our ability to timely and accurately report financial results and comply with our reporting obligations, which could materially affect our business.
+Added: Regardless of how internal financial reporting control systems are designed, implemented, and enforced, they cannot ensure with absolute certainty that our policy objectives will be met in every instance.
+Added: Because of the inherent limitations of all such systems, our internal controls over financial reporting may not always prevent or detect misstatements.
+Added: Failure to maintain effective internal control over financial reporting could adversely affect our ability to accurately and timely report financial results, to prevent or detect fraud, or to comply with the requirements of the SEC or the Sarbanes-Oxley Act of 2002, which could necessitate a restatement of our financial statements, and/or result in an investigation, or the imposition of sanctions, by regulators.
+Added: Such failure could additionally expose us to litigation and/or reputational harm, impair our ability to obtain financing, or increase the cost of any financing we obtain.
+Added: All of these impacts could adversely affect the price of our common stock and our business overall.
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.