What changed in this filing

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Item 1A. Risk Factors

2021-10-27 compared with 2020-10-23 · 49 added, 55 removed, 186 unchanged (36% of the section changed)

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We compete based on numerous factors, including features and benefits, brand name recognition, product quality, product and system design, energy efficiency, customer relationships, service capabilities, and price.

Asian imports have also increased competition within the lighting market.

In addition, we operate in a highly competitive environment that is influenced by a number of general business and economic factors, such as economic vitality, employment levels, credit availability, interest rates, trends in vacancy rates and rent values, energy costs, and commodity costs.

Sales of lighting and building technology solutions depend significantly on the level of activity in new construction and renovation/retrofits.

Sales of lighting, lighting controls, and building technology solutions depend significantly on the level of activity in new construction and renovation/retrofits.

Declines in general economic activity, appropriations, and regulations, including tax and trade policy and other political uncertainties, may negatively impact new construction and renovation projects, which in turn may impact demand for our product and service offerings.

Our results may be adversely affected by fluctuations in the cost or availability of raw materials, components, purchased finished goods, or services.

Our business and results have been and may be adversely affected by fluctuations in the cost or availability of raw materials, components, purchased finished goods, or services.

We utilize a variety of raw materials and components in our production process including steel, aluminum, lamps, certain rare earth materials, LEDs, LED drivers, ballasts, wire, electronic components, power supplies, petroleum-based by-products, natural gas, and copper.

We also source certain finished goods externally.

Future increases in the costs of these items, including import tariffs, could adversely affect profitability, as there can be no assurance that future price increases will be successfully passed through to customers.

During fiscal 2021, the COVID-19 pandemic has caused a disruption in our supply chain for certain components and resulted in higher prices for significant commodities, including oil and steel, as well as increased warehousing and container costs, which has negatively impacted our business.

Future increases in our costs and/or continued disruptions in the supply or could negatively impact our profitability, as there can be no assurance that future price increases will be successfully passed through to customers.

We generally source these goods from a number of suppliers.

However, there are a limited number of suppliers for certain components and certain purchased finished goods, which on a limited basis results in sole-source supplier situations.

Disruptions in the supply of those items could negatively impact our performance.

Suppliers for certain of those items are our competitors that may, for various strategic reasons, choose to cease selling to us.

In addition, our ongoing efforts to improve the cost effectiveness of our products and services may result in a reduction in the number of our suppliers, and in turn, increased risk associated with reliance on a single or limited number of suppliers.

Furthermore, volatility in certain commodities, such as oil, impacts all suppliers and, therefore, may cause us to experience significant price increases from time to time regardless of the number and availability of suppliers.

Furthermore, volatility in certain commodities, such as oil, impacts all suppliers and, therefore, may result in additional price increases from time to time regardless of the number and availability of suppliers.

Profitability and volume could be negatively impacted by limitations inherent within the supply chain of certain of these component parts, including competitive, governmental, and legal limitations, natural disasters, and other events that could impact both supply and price.

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Our results may be adversely affected by our inability to maintain pricing.

Aggressive pricing actions by competitors, including Asian importers and those within the technology and services sectors, may affect our ability to achieve desired revenue growth and profitability levels under our current pricing strategies.

Aggressive pricing actions by competitors may affect our ability to achieve desired revenue growth and profitability levels under our current pricing strategies.

We may also decide to lower prices to match the competition or for other reasons or to exit unprofitable business.

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The success of new product and solution introductions depends on a number of factors, including, but not limited to, timely and successful product development, product quality, market acceptance, our ability to manage the risks associated with product life cycles, such as additional inventory obsolescence risk as product life cycles begin to shorten, new products and production capabilities, effective management of purchase commitments and inventory levels to support anticipated product manufacturing and demand, availability of products in appropriate quantities and costs to meet anticipated demand, and risk that new products may have quality or other defects in the early stages of introduction.

Accordingly, we cannot fully predict the ultimate effect of new product introductions on our business.

Additionally, new products and solutions may not achieve the same profit margins as expected and as compared to our historic products and solutions.

Accordingly, we cannot fully predict the ultimate effect of new product introductions on our business, Additionally, new products and solutions may not achieve the same profit margins as expected and as compared to our historic products and solutions.

Furthermore, other market participants, such as a well-established competitors, could develop alternative platforms for monetizing products, solutions, and services that result in a paradigm shift in our industry, particularly with respect to new and developing technologies.

We may pursue future growth through acquisitions, alliances, or investments, which may not yield anticipated benefits.

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The inability to effectively execute our business strategies could adversely affect our financial condition and results of operations.

Various uncertainties and risks are associated with the implementation of a number of aspects of our global business strategies, including but not limited to, the development, marketing and selling of new products and solutions, new product development, the development, marketing, and selling of lighting, building technology, and software-based solutions, and effective integration of acquisitions.

new product development;

the development, marketing, and selling of lighting, building technology, and software-based solutions;

effective integration of acquisitions;

and our environmental strategies and climate change commitments.

Those uncertainties and risks include, but are not limited to:

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obsolescence of current products and slow new product development;

inability to effectively participate in the emerging opportunities utilizing our digital lighting and building technology systems;

inability to effectively participate in opportunities utilizing our digital lighting and building technology systems;

additional streamlining efforts;

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and unforeseen difficulties in the implementation of the management operating structure.

Problems with strategy execution could offset anticipated benefits, disrupt service to customers, and impact product quality as well as adversely affect our business.

Problems with strategy execution could offset anticipated benefits, disrupt service to customers, and impact product quality as well as adversely affect our business and reputation.

With the addition of new products and solutions, we may encounter new and different competitors that may have more experience with respect to such products and solutions.

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Risks Related to Our Operations

The COVID-19 pandemic could have a material adverse effect our ability to operate, results of operations, financial condition, liquidity, and capital investments.

The COVID-19 pandemic could have a material adverse effect on our ability to operate, results of operations, financial condition, liquidity, and capital investments.

The World Health Organization has declared the COVID-19 outbreak a pandemic, and the virus continues to spread in areas where we operate and sell our products and services.

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Several public health organizations have recommended, and some governments have implemented, certain measures to slow and limit the transmission of the virus, including shelter in place, social distancing ordinances, and business shutdowns.

There is considerable uncertainty regarding the extent to which the COVID-19 outbreak will continue to spread and the extent and duration of governmental and other measures implemented to try to slow the spread of the virus

There is considerable uncertainty regarding the extent to which the COVID-19 outbreak will continue to spread, including the impact of identified and potential new variants, the extent and duration of governmental and other measures implemented to try to slow the spread of the virus, and public response to the pandemic.

The pandemic and such preventive measures, or others required or that we may voluntarily put in place, may have a material adverse effect on our business for an indefinite period of time, such as the potential shut down of certain locations;

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disruptions to the businesses of our channel partners;

Our suppliers and customers have also faced these and other challenges, which has led to a disruption in our supply chain for certain components as well as decreased construction and renovation spending and consumer demand for our products and services.

We may incur additional costs related to additional testing and screening of our employees, governmental vaccination mandates, and additional safety requirements from organizations such as OSHA.

Our suppliers and customers have also faced these and other challenges, which has led to a disruption in our supply chain for certain components, decreased construction and renovation spending and consumer demand for our products and services, rising commodity costs, and increased freight, warehousing, and container costs.

These disruptions and challenges may continue for an indefinite period of time and may also materially affect our future access to our sources of liquidity, particularly our cash flows from operations, financial condition, capitalization, and capital investments.

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Additionally, the continual development of new technologies by existing and new source suppliers — including non-traditional competitors with significant resources — looking for either direct market access or partnerships with competing large manufacturers, coupled with significant associated exclusivity and/or patent activity, could adversely affect our ability to sustain operating profit margins and desirable levels of sales volume.

In addition, there are new competitors, including Asian importers, small startup companies, and global electronics, technology, and software companies, offering competing solutions, sometimes deploying different technologies.

In addition, there are new competitors, including small startup companies and global electronics, technology, and software companies, offering competing solutions, sometimes deploying different technologies.

These competitors may vertically integrate and begin offering total solution packages that directly compete with our offerings.

Certain global and more diversified electrical manufacturers as well as certain global technology and building solution providers may be able to obtain a competitive advantage over us by offering broader and more integrated solutions utilizing electrical, lighting, controls, building automation systems, and data analytics, and small startup companies may offer more localized product sales and support services within individual regions.

Certain global and more diversified electrical manufacturers as well as certain global technology and building solution providers may be able to obtain a competitive advantage, either through internal development or acquisitions, over us by offering broader and more integrated solutions utilizing electrical, lighting, controls, building automation systems, and data analytics, and small startup companies may offer more localized product sales and support services within individual regions.

We may be unable to sustain significant customer and/or channel partner relationships.

Relationships with customers are directly impacted by our ability to deliver quality products and services.

Although no individual customer exceeded 10% of sales during the current fiscal year, the loss of or a substantial decrease in the volume of purchases by certain larger customers could harm our business in a meaningful manner.

Although no individual customer exceeded 10% of sales during the fiscal 2021, the loss of or a substantial decrease in the

volume of purchases by certain larger customers could harm our business in a meaningful manner.

We have relationships with channel partners such as electrical distributors, home improvement retailers, independent sales agencies, system integrators, and value-added resellers.

While we maintain positive, and in many cases long-term, relationships with these channel partners, the sudden or unplanned loss of a number of these channel partners or a

substantial decrease in the volume of purchases from a major channel partner or a group of channel partners could adversely affect our business.

While we maintain positive, and in many cases long-term, relationships with these channel partners, the sudden or unplanned loss of a number of these channel partners or a substantial decrease in the volume of purchases from a major channel partner or a group of channel partners could adversely affect our business.

We could be adversely affected by disruptions to our operations.

The breakdown of equipment or other events, including, but not limited to, labor disputes, strikes, workplace violence, pandemics, cyber-attacks, civil disruptions, or catastrophic events such as war or natural disasters, leading to production interruptions in our or one or more of our suppliers’ facilities could adversely affect us.

The breakdown of equipment or other events, including, but not limited to, labor disputes, strikes, workplace violence, pandemics, climate change, brown outs and other power outages, water scarcity, cyber-attacks, civil disruptions, or catastrophic events such as war or natural disasters, leading to production interruptions in our or one or more of our suppliers’ facilities could adversely affect us.

Approximately 55% of our finished products are manufactured in Mexico, a country that periodically experiences heightened civil unrest or may experience trade disputes with the U.S., both of which could cause a disruption of the supply of products to or from these facilities.

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Further, our reputation among actual and potential customers may be harmed and result in a loss of business.

While we have developed business continuity plans, including alternative capacity, to support responses to such events or disruptions and maintains insurance policies covering, among other things, physical damage and business interruptions, these policies may not cover all losses.

While we have developed business continuity plans, including alternative capacity, to support responses to such events or disruptions and maintain insurance policies covering, among other things, physical damage and business interruptions, these policies may not cover all losses.

We could incur uninsured losses and liabilities arising from such events, including damage to our reputation, loss of customers, and substantial losses in operational capacity.

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Information security risks also exist with respect to the use of portable electronic devices, such as laptops and smartphones, which are particularly vulnerable to loss and theft.

We may also be subject to disruptions of any of these systems arising from events that are wholly or partially beyond our control (for example, natural disasters, acts of terrorism, cyber attacks, epidemics, computer viruses, and electrical/telecommunications outages).

We may also be subject to disruptions of any of these systems arising from events that are wholly or partially beyond our control (for example, natural disasters, acts of terrorism, cyber attacks, including but not limited to ransomware attacks, epidemics, computer viruses, and electrical/telecommunications outages).

All of these risks are also applicable where we rely on outside vendors to provide services, which may operate in a cloud environment.

We are dependent on third-party vendors to operate secure and reliable systems which may include data transfers over the internet.

We also provide and maintain technology built on our local operating system to enable lighting controls and building technology systems.

We also provide and maintain technology to enable lighting controls and building technology systems.

In addition to the risks noted above, there are other risks associated with these customer offerings.

For example, a customer may depend on integral information from, or functionality of, our technology to support that customer’s other systems, such that a failure of our technology could impact those systems, including by loss or destruction of data.

Likewise, a customer’s failure to properly configure, update, or upgrade its own network and integrations with our technology are outside of our control and could result in a failure in functionality or security of our technology.

Likewise, a customer’s failure to properly configure, update, segregate, or upgrade its own network and integrations with our technology are outside of our control and could result in a failure in functionality or security of our technology.

Certain of our third-party vendors and we may receive and store personal information in connection with human resources operations, customer offerings, and other aspects of the business.

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The legal and regulatory data privacy framework is evolving and uncertain.

For example, the European Court of Justice’s decision in October 2015 to invalidate the Safe Harbor data privacy

program between the United States and the European Union, the European Union’s implementation of the General Data Protection Regulation in 2018, the European Union’s pending ePrivacy Regulation, and California’s implementation of its Consumer Privacy Act of 2018 and Connected Device Privacy Act of 2018 (f.k.a.

SB-327) all could disrupt our ability to use or transfer data or sell products and solutions because such activities may not be in compliance with applicable law in certain jurisdictions.

For example, the European Court of Justice’s decision in October 2015 to invalidate the Safe Harbor data privacy program between the United States and the implementation of Data Protection Commission v.

Facebook Ireland, Schrems (aka Schrems II) as well as the new and proposed privacy and security laws around the world all could disrupt our ability to use or transfer data or sell products and solutions because such activities may not be in compliance with applicable law in certain jurisdictions.

System failures, ineffective system implementation or disruptions, failure to comply with data privacy and security laws or regulations, or the compromise of security with respect to internal or external systems or portable electronic devices could damage our systems or infrastructure, subject us to liability claims, or regulatory fines, penalties, or intervention, harm our reputation, interrupt our operations, disrupt customer operations, and adversely affect our internal control over financial reporting, business, financial condition, results of operations, or cash flows.

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foreign currency fluctuations;

unstable political, social, regulatory, economic, financial, and market conditions;

unstable political, social, regulatory, economic, financial, and market

laws that prohibit shipments to certain countries or restricted parties and that prohibit improper payments to government officials such as the Foreign Corrupt Practices Act and the U.K.

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trade restrictions and disruption;

shipping delays or disruptions;

criminal activities;

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We could be adversely affected to the extent we are unable to mitigate the impacts of the tariffs.

We operate six manufacturing facilities in Mexico, which are authorized to operate as Maquiladoras by the Ministry of Economy of Mexico.

Maquiladora status allows us to import certain items from the United States into Mexico duty-free, provided that such items, after processing, are exported from Mexico within a stipulated time frame.

We operate seven manufacturing facilities in Mexico, some of which are authorized to operate as Maquiladoras by the Ministry of Economy of Mexico.

Maquiladora status allows us to import raw materials into Mexico duty-free, provided that such items, after processing, are exported from Mexico within a stipulated time frame.

Maquiladora status, which is renewed periodically, is subject to various restrictions and requirements, including compliance with the terms of the Maquiladora program and other local regulations, which have become stricter in recent years.

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Such liabilities could adversely impact our business.

In June 2016, the United Kingdom (“U.K.”) held a referendum in which voters approved an exit from the European Union (“E.U.”) commonly referred to as “Brexit.” The U.K.

subsequently withdrew from the European Union on January 31, 2020, subject to a transition period that is set to end on December 31, 2020.

Although it is unknown what the terms of the U.K.'s relationship with the E.U.

will be, it is possible that there will be greater restrictions on imports and exports between the U.K.

countries and increased regulatory complexities.

These changes could cause disruptions to and create uncertainty surrounding our business and the business of existing and future customers and suppliers as well as have an impact on our employees based in Europe, which could adversely impact our business.

The actual effects of Brexit will depend on any agreements the U.K.

makes to retain access to E.U.

markets either during a transitional period or more permanently.

We continue to monitor conditions affecting our international locations, including potential changes in income from a strengthening or weakening in foreign exchange rates in relation to the U.S.

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The laws and regulations impacting us impose increasingly complex, stringent, and costly compliance activities, including but not limited to environmental, health, and safety protection standards and permitting, labeling, and other requirements regarding, among other things, electronic and wireless communications, air emissions, wastewater discharges, the use, handling, and disposal of hazardous or toxic materials, remediation of environmental contamination, and working conditions for and compensation of our employees.

In addition, permits and environmental controls are required for certain of our operations to limit air and water pollution, and these permits are subject to modification, renewal, and revocation by issuing authorities.

Some environmental laws, such as Superfund, the Clean Water Act, and comparable laws in U.S.

states and other jurisdictions world-wide, impose joint and several liability for the cost of environmental remediation, natural resource damages, third-party claims, and other expenses, without regard to the fault or the legality of the original conduct, on those persons who contributed to the release of a hazardous substance into the environment.

We may also be affected by future standards, laws or regulations, including those

imposed in response to energy, climate change, product functionality, geopolitical, corporate social responsibility, or similar concerns.

Environmental laws and regulations have generally become stricter in recent years, and federal, state, and local governments domestically and internationally are considering new laws and regulations, including those governing raw material composition, carbon dioxide and

other air emissions, end-of-life product dispositions, and energy efficiency.

We may be affected by those or other future standards, laws or regulations, including those imposed in response to energy, climate change, our carbon footprint, product functionality, geopolitical, corporate social responsibility, or similar concerns.

These standards, laws, or regulations may impact our costs of operation, the sourcing of raw materials, and the manufacture and distribution of our products and place restrictions and other requirements or impediments on the products and solutions we can sell in certain geographical locations or on the willingness of certain investors to own our shares.

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Widespread product recalls could result in significant losses due to the costs of a recall, the destruction of product inventory, penalties, and lost sales due to the unavailability of a product for a period of time.

In addition, products we developed that incorporate new technologies, such as LED technology, generally provide for more extensive warranty protection which may result in higher costs if warranty claims on these products are higher than historical amounts.

We may also be liable if the use of any of our products cause harm, whether from fire, shock, harmful materials or components, alleged adverse health impacts from exposure to light emitted by our products, or any other personal injury or property damage, and we could suffer losses from a significant product liability judgment against us in excess of our insurance limits.

In addition, products we developed that incorporate technologies, such as LED, generally provide for more extensive warranty protection which may result in higher costs if warranty claims on these products are higher than historical amounts.

We may also be liable if the use or failure of any of our products cause harm, whether from fire, shock, harmful materials or components, alleged adverse health impacts from exposure to light emitted by our products, or any other personal injury or property damage, and we could suffer losses from a significant product liability judgment against us in excess of our insurance limits.

We may not be able to obtain indemnity or reimbursement from our suppliers or other third parties for the warranty costs or liabilities associated with our products.

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The market price of our common shares could fluctuate significantly for many reasons, including reasons unrelated to our specific performance, such as reports by industry analysts, investor perceptions, or negative announcements by customers, competitors, or suppliers regarding their own performance, as well as general global economic, industry, and political conditions.

Since management does not provide guidance, our performance could be different than analyst expectations causing a decline in our stock price.

Our performance could be different than analyst expectations causing a decline in our stock price.

To the extent that other large companies within our industry experience declines in share price, our share price may decline as well.

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Changes to LIBOR may adversely impact the interest rate paid on some of our loans and consequently, our earnings and cash flows.

The borrowing facilities under our Credit Agreement currently allow us to incur variable debt that is indexed to the London Inter-Bank Offered Rate (“LIBOR”).

We expect that interest on those borrowings would be based on LIBOR, plus an applicable margin.

The borrowing facilities under our Credit Agreement (defined in the Debt and Lines of Credit note within the Notes to Consolidated Financial Statements ) currently allow us to incur variable debt that is indexed to the London Inter-Bank Offered Rate (“LIBOR”) or an alternate base rate plus an applicable margin.

On July 27, 2017, the U.K.

Financial Conduct Authority, which regulates LIBOR, announced that it will no longer persuade or compel banks to submit rates for the calculation of LIBOR to the LIBOR administrator after 2021.

The announcement also indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021.

Consequently, at this time, it is not possible to predict whether and to what extent banks will continue to provide LIBOR submissions to the LIBOR administrator or whether any additional reforms to LIBOR may be enacted in the United Kingdom or elsewhere.

Similarly, it is not possible to predict whether LIBOR will continue to be viewed as an acceptable benchmark for certain securities, loans, and liabilities, what rate or rates may become accepted alternatives to LIBOR or the effect of any such changes in views or alternatives on the value of securities whose interest rates are tied to LIBOR.

Recent proposals for LIBOR reforms may result in the establishment of new methods of calculating LIBOR or the establishment of one or more alternative benchmark rates.

Although our Credit Agreement provides for application of successor base rates, the successor base rates may be related to LIBOR, and the consequences of any potential cessation, modification or other reform of LIBOR cannot be predicted at this time.

As a result, our interest expense may increase, our ability to refinance some or all of our existing indebtedness may be impacted and our available cash flow may be adversely affected.

Financial Conduct Authority, which regulates LIBOR, announced that it will phase out rates for the calculation of LIBOR.

As a result of this change, certain LIBOR tenors and currencies will be eliminated by the end of calendar 2021 with all other tenors and currencies of LIBOR eliminated by the end of June 2023.

Although there are potential reference rate replacements for LIBOR, it is not possible to predict what rate or rates may become accepted alternatives to LIBOR for certain securities, loans, and liabilities, or the effect of these alternatives on the value of securities whose interest rates are tied to LIBOR.

Even though our current Credit Agreement expires prior to the final phase out of LIBOR tenors and currencies, the consequences of the phase out of LIBOR cannot be predicted on any potential cessation, modification, renewal, or new credit agreement we may execute.

As a result, our future interest expense may increase, our ability to refinance some or all of our existing indebtedness may be impacted, and our available cash flow may be adversely affected.

Risks related to our defined benefit retirement plans may adversely impact results of operations and cash flows.

Significant changes in actual investment returns on defined benefit plan assets, discount rates, and other factors could adversely affect our results of operations and the amount of contributions we are required to make to the defined benefit plans in future periods.

Significant changes in actual investment returns on defined benefit plan assets, discount rates, and other factors could adversely affect our comprehensive income and the amount of contributions we are required to make to the defined benefit plans in future periods.

As our defined benefit plan assets and liabilities are marked-to-market on an annual basis, large non-cash gains or losses could be recorded in the fourth quarter of each fiscal year.

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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