What changed in this filing

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Item 1A. Risk Factors

2024-03-06 compared with 2023-03-10 · 60 added, 97 removed, 156 unchanged (50% of the section changed)

7 unchanged sentences

Business and Operational Risks

Our inability to successfully manage acquisitions, divestitures, and other significant transactions could harm our financial results, business, and prospects.

As part of our business strategy, we acquire or divest businesses or assets, enter into strategic alliances and joint ventures, or make investments to realize anticipated benefits, which are actions that involve a number of inherent risks and uncertainties.

Material acquisitions, dispositions, and other strategic transactions involve numerous risks, including, but not limited to:

Our inability to successfully manage acquisitions, divestitures, and other significant transactions or to otherwise execute our strategic plan could harm our financial results, business, and prospects.

As part of our publicly-announced business strategy, we acquire or divest businesses or assets, enter into strategic alliances and joint ventures, make investments to realize anticipated benefits, or undertake cost-cutting initiatives, all of which are actions that involve a number of inherent risks and uncertainties.

Material acquisitions, dispositions, and other strategic transactions and initiatives involve numerous risks, including, but not limited to the following:

• we may not be able to identify suitable acquisition candidates, or we may not be able to dispose of assets, at prices we consider attractive;

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We may not be able to achieve the synergies and other benefits we expect from strategic transactions as successfully or as rapidly as projected, if at all.

Prolonged negative economic conditions, volatile energy prices, and other unfavorable changes in U.S., global, or regional economic and market conditions could adversely affect our business.

Prolonged negative economic conditions, volatile energy prices, and other unfavorable changes in US, global, or regional economic and market conditions could adversely affect our business.

We could be adversely impacted by prolonged negative economic conditions affecting either our suppliers or customers, as well as the capital markets.

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Sustained declines or significant and frequent fluctuations in the price of oil and natural gas may have a material and adverse effect on our operations and financial condition.

Volatility in energy prices may also impact the Company’s plant costs, as well as overall conditions in passenger transit markets served.

Our ability to maintain or improve our profitability could be adversely impacted by cost pressures.

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Our success is in part dependent on the accuracy and proper utilization of our management information and communications systems.

We are currently working through an enterprise resource planning (“ERP”) system transition.

Certain divisions of our Company migrated into the new ERP system during 2016, additional divisions have since migrated, including during 2022.

We recently completed an enterprise resource planning (“ERP”) system transition.

Certain divisions of our Company migrated into the new ERP system during 2016 and additional divisions have since migrated, with the most recent migration completed in 2022.

Acquired entities are also regularly assessed for transition onto the Company’s central ERP system.

We also began the implementation of a global financial planning and consolidation system during 2021 that became operational in 2022.

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Our business employs systems and websites that allow for the storage and transmission of proprietary or confidential information regarding our customers, employees, job applicants, and other parties, including financial information, intellectual property, and personal identification information.

Security breaches and other disruptions could compromise our information, expose us to liability, and harm our reputation and business.

In October 2020, we experienced a cyber-attack on our information technology systems.

While the cyber-attack caused temporary disruption and interference with our operations, it did not result in a material adverse effect on our business operations.

Physical or electronic data or security breaches and other disruptions could compromise our information, expose us to liability, and harm our reputation and business.

Cyber attacks on information systems constitute an ongoing risk across companies and industries, and although they have not historically had a material adverse effect on our business, in the past they have caused temporary disruption and interference with our operations.

Despite the steps we take to deter and mitigate cybersecurity risks, we may not be successful.

We may not have the resources or technical sophistication to anticipate or prevent current or rapidly evolving types of cyber-attacks including data and security breaches, malware, ransomware, hacking, and identity theft.

Data and security breaches can also occur as a result of non-technical issues, including an intentional or inadvertent breach by our employees or by persons with whom we have commercial relationships.

Data and security breaches can also occur as a result of non-technical issues, including an intentional or inadvertent physical or electronic data or security breach by our employees or by persons with whom we have commercial relationships.

In 2023, the United States Securities and Exchange Commission adopted new cybersecurity rules requiring disclosure of material cybersecurity incidents and processes assessing, identifying, and managing material cybersecurity risks and the corporate governance structure designed to address such risks.

Compliance with such rules could be costly and burdensome, and failure to adequately comply could have an adverse impact on the Company and its reputation.

Federal, state, and foreign government bodies and agencies have adopted or are considering the adoption of laws and regulations regarding the collection, use, and disclosure of personal information obtained from customers and individuals.

The costs of compliance with, and other burdens imposed by, such data privacy laws and regulations, including those of the European Union (“E.U.”) and the U.K.

which are, in some respects, more stringent than U.S.

standards, could be significant.

The costs of compliance with, and other burdens imposed by, such data privacy laws and regulations, including those of the European Union (“EU”) and the UK which are, in some respects, more stringent than US standards, could be significant.

Any compromise or breach of our security, including from the cyber-attack that we experienced or any future attack, could result in a violation of applicable privacy and other laws, legal and financial exposure, negative impacts on our customers’ willingness to transact business with us, and a loss of confidence in our security measures, which could have an adverse effect on our results of operations and our reputation.

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The steel industry is cyclical and prices and availability are subject to these cycles, as well as to international market forces.

We also use significant amounts of cement and aggregate in our precast products and ties offerings.

We also use significant amounts of cement and aggregate in our precast products offerings.

Our technology based solutions and services are dependent on electronic components and the ability to source these items.

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Labor disputes may have a material and adverse effect on our operations and profitability.

Two of our manufacturing facilities are staffed by employees represented by labor unions.

Approximately 44 employees employed at these facilities are currently working under two separate collective bargaining agreements.

Disputes with regard to the terms of these agreements or our potential inability to renegotiate acceptable contracts with these unions could result in, among other things, strikes, work stoppages, slowdowns, or lockouts, which could cause a disruption of our operations and have a material and adverse effect on our results of operations, financial condition, and liquidity.

One of our manufacturing facilities is staffed by employees represented by labor unions.

Approximately 11 employees employed at this facility are currently working under a collective bargaining agreement.

Disputes with regard to the terms of this agreement or our potential inability to renegotiate an acceptable contract with this union could result in, among other things, strikes, work stoppages, slowdowns, or lockouts, which could cause a disruption of our operations and have a material and adverse effect on our results of operations, financial condition, and liquidity.

Actions of activist shareholders could be disruptive and potentially costly and the possibility that activist shareholders may seek changes that conflict with our strategic direction could cause uncertainty about the strategic direction of our business.

In April of 2023, the Company entered into an agreement with an activist investor, 22NW, LP, and various of its affiliates (collectively, “22NW”) that had filed a Schedule 13D with the SEC with respect to the Company, which agreement provided that 22NW could appoint a non-voting Board Observer.

In January of 2024, the Company entered into a new cooperation agreement with 22NW providing for the nomination of the Board Observer to stand for election to the Board of Directors of the Company at the 2024 Annual Meeting of Shareholders in return for certain customary confidentiality and standstill provisions.

22NW remains a greater than 5% owner of Company stock.

Activist investors may attempt to effect changes in the Company’s strategic direction and how the Company is governed, or to acquire control over the Company.

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Much of our future success depends on the continued availability and service of key personnel, including our Chief Executive Officer, the executive team, and other highly skilled employees.

As a result of the pandemic, the Company is experiencing a tight labor market which has constricted the labor pool and driven up labor costs as we compete for talent.

The Company is experiencing a tight labor market which has constricted the labor pool and driven up labor costs as we compete for talent.

Changes in demographics, training requirements, and the availability of qualified personnel could negatively affect our ability to compete and lead to a reduction in our profitability.

A pandemic could continue to adversely affect our business.

The COVID-19 pandemic is adversely affecting, and any future pandemics could adversely affect, our operations and supply chains and we have experienced and expect to continue to experience unpredictable reductions in demand for certain of our products and services.

If we do not successfully manage our supply chain or identify new sources of supplies, we may be unable to satisfy customer orders, which could harm our reputation and customer relationships and materially adversely affect our business, financial condition, and operating results.

Though we have implemented and enhanced safety measures and protocols in accordance with local government orders, a pandemic-related outbreak at any one of our facilities could result in production delays or otherwise interrupt our operations.

While the COVID-19 pandemic has adversely affected each of the markets we serve, the impact on the midstream energy markets has been particularly adverse, and has contributed to volatility in the prices of oil and natural gas, weakened demand, and reduced customer spending.

In the rail, transit, friction management, and fabricated steel products businesses, governmental stay-at-home orders and government and business work-from-home orders and arrangements in the U.S.

and globally, particularly in the U.K., have resulted in reduced traffic and demand for our products and services, and many public works projects have been deferred or delayed as a result of governmental pandemic mitigation efforts, adversely impacting our businesses.

and non-domestic governmental and private pandemic mitigation measures such as stay-at-home orders have slowed travel and movement of goods throughout the world, contributing to a reduction in demand for our products and services.

Such measures have also contributed to a tight labor market which in turn adversely impacts our supply chain.

We expect that these adverse impacts will continue but we are unable to predict the extent, nature, or duration of the impacts on our results of operations and financial condition at this time.

We may not foresee or be able to control certain events that could adversely affect our business.

We may not foresee or be able to control certain events that could adversely affect our business or the stability of our supply chain.

Unexpected events, including fires or explosions at our facilities, natural disasters, such as hurricanes, flooding, and winter storms causing power failures or travel restrictions with respect to our operations, armed conflicts, terrorism, health epidemics, or pandemics such as COVID-19, and related restrictions on travel, economic or political uncertainties or instability, civil unrest, strikes, unplanned outages, equipment failures, failure to meet product specifications, or disruptions in certain areas of our operations, may cause our operating costs to increase or otherwise negatively impact our financial performance.

For example, we have in the past experienced unpredictable reductions in demand for certain of our products and services due to a global health pandemic, which adversely affected our operations and supply chain.

Events such as these, or other catastrophic events, could in the future adversely affect our business and results of operations, including with respect to disruptions of our supply chain.

A pandemic-related outbreak or other disaster affecting any one of our facilities could result in production delays or otherwise interrupt our operations.

US and non-domestic governmental and private pandemic mitigation measures such as stay-at-home orders can slow travel and movement of goods throughout the world, contributing to a reduction in demand for our products and services.

Our supply chain could be negatively affected by global shipping disruptions, trade restrictions or embargoes or similar impacts arising from geopolitical conflict, including but not limited to the ongoing conflicts between Ukraine and Russia, or Israel and Hamas.

Such conditions can also contribute to a tight labor market which in turn may adversely impact our supply chain.

Competitive Risks

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Efforts to improve pricing could negatively impact our sales volume in all product categories.

We may be required to invest more heavily to maintain and expand our product offerings.

We may be required to invest more heavily to maintain and expand our product

There can be no assurance that new product offerings will be widely accepted in the markets we serve.

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If we are unable to protect our intellectual property and prevent its improper use by third parties, our ability to compete may be harmed.

We possess and in some cases license intellectual property including proprietary rail product and precast concrete formulations and systems and component designs, and we own a number of patents and trademarks under the intellectual property laws of the U.S., Canada, Europe, and other countries in which product sales are possible.

We possess and in some cases license intellectual property including proprietary rail product and precast concrete formulations and systems and component designs, and we own a number of patents and trademarks under the intellectual property laws of the US, Canada, Europe, and other countries in which product sales are possible.

While we have not perfected patent and trademark protection of our proprietary intellectual property for all products in all countries, we periodically assess our portfolio to determine the need for pursuing further protection.

The decision not to obtain patent and trademark protection in additional countries may result in other companies copying and marketing products that are based upon our proprietary intellectual property.

This, and failure to continue such licenses, could impede growth into new markets where we do not have such protections and result in a greater supply of similar

products in such markets, which in turn could result in a loss of pricing power and reduced revenue.

This, and failure to continue such licenses, could impede growth into new markets where we do not have such protections and result in a greater supply of similar products in such markets, which in turn could result in a loss of pricing power and reduced revenue.

In some cases, we may decide that the best way to protect our intellectual property is to retain proprietary information as trade secrets and confidential information rather than to apply for patents, which would involve disclosure of proprietary information to the public.

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Our future performance and market value could cause write-downs of long-lived and intangible assets in future periods.

We are required under U.S.

generally accepted accounting principles to review intangible and long-lived assets for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

We are required under US generally accepted accounting principles to review intangible and long-lived assets for impairment when events or changes in circumstances indicate that the carrying value may not be recoverable.

In addition, goodwill is required to be tested for impairment at least annually.

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No impairments of goodwill or intangible assets were recorded in 2023.

Impairment charges were recorded on long-lived assets related to the Company's precision measurement products and systems business during 2022 and the since divested IOS Test and Inspection Services business during 2020.

Impairment charges were recorded on long-lived assets related to the Company's precision measurement products and systems business during 2022.

No assurances can be given that we will not be required to record future significant charges related to tangible or intangible asset impairments.

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We cannot be certain that we will be able to comply with the financial tests and other covenants, or, if we fail to do so, that we will be able to obtain waivers or amended terms from our lenders.

An uncured default with respect to one or more of the covenants could result in the amounts outstanding being declared immediately due and payable, which may also trigger an obligation to redeem our outstanding debt securities and repay all other outstanding indebtedness.

An uncured default with respect to one or more of the covenants could result in the amounts outstanding being declared immediately due and

payable, which may also trigger an obligation to redeem our outstanding debt securities and repay all other outstanding indebtedness.

Any such acceleration of our indebtedness would have a material and adverse effect on our business, financial condition, and results of operations.

The phase-out of LIBOR and transition to SOFR as a benchmark interest rate will have uncertain and possibly adverse side effects.

In advance of the cessation of the London Interbank Offered Rate (“LIBOR”) on June 30, 2023, on August 12, 2022, the Company amended its Credit Agreement to obtain approval for the VanHooseCo acquisition and temporarily modify certain financial covenants to accommodate the transaction.

The Second Amendment also provided for the conversion from LIBOR-based to be based on the Secured Overnight Financing Rate (“SOFR”).

Due to the broad use of LIBOR as a reference rate, the impact of this transition to SOFR could adversely affect our financing costs, including spread pricing on our senior secured facilities and any other variable rate debt obligations, as well as our operations and cash flows.

There is no guarantee that the transition from LIBOR to SOFR will not

result in financial market disruptions, significant increases in benchmark rates, or borrowing costs to borrowers, any of which could affect our interest expense and earnings and may have an adverse effect on our business, results of operations, financial condition, and stock price.

Whether or not SOFR attains market acceptance as a LIBOR replacement tool remains uncertain.

Legal, Tax, and Regulatory Risks

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In addition, we could suffer a significant loss of business from a customer who is dissatisfied with the resolution of a warranty claim.

Violations of the U.S.

Foreign Corrupt Practices Act and similar worldwide anti-corruption laws and other foreign governmental regulations, could result in fines, penalties, and criminal sanctions against the Company, its officers, or both and could have a material and adverse effect on our business.

Foreign Corrupt Practices Act and other similar worldwide anti-corruption laws, such as the U.K.

Bribery Act, prohibit improper payments for the purpose of obtaining or retaining business.

Violations of the US Foreign Corrupt Practices Act and similar worldwide anti-corruption laws and other foreign governmental regulations, could result in fines, penalties, and criminal sanctions against the Company, its officers, or both and could have a material and adverse effect on our business.

The US Foreign Corrupt Practices Act and other similar worldwide anti-corruption laws, such as the UK Bribery Act, prohibit improper payments for the purpose of obtaining or retaining business.

Although we have established an internal control structure, corporate policies, compliance, and training processes to reduce the risk of violation, we cannot ensure that these procedures protect us from violations of such policies by our employees or agents.

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Violations of such laws or allegations of violation could disrupt our business and result in material adverse results to our operating results or future profitability.

Our foreign operations are subject to governmental regulations in the countries in which we operate, as well as U.S.

Our foreign operations are subject to governmental regulations in the countries in which we operate, as well as US laws.

These regulations include those related to currency conversion, repatriation of earnings, taxation of our earnings and the earnings of our personnel, and the increasing requirement in some countries to make greater use of local employees and suppliers, including, in some jurisdictions, mandates that provide for greater local participation in the ownership and control of certain local business assets.

Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.

We have certain tax attributes, including U.S.

federal, state and foreign operating loss carryforwards, and federal research and development credits, which may be available to offset future taxable income in certain jurisdictions.

We have certain tax attributes, including US federal, state and foreign operating loss carryforwards, and federal research and development credits, which may be available to offset future taxable income in certain jurisdictions.

Realization of these net operating loss and research and development credit carryforwards depends on future income, and there is a risk that certain of our existing carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could adversely affect our operating results and financial condition.

In addition, under Sections 382 and 383 of the Internal Revenue Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in ownership by “5 percent shareholders” over a rolling three-year period, the corporation’s ability to use its pre-change net operating loss carryovers and other pre-change tax attributes, such as research and development credits, to offset its post-change income or taxes may be limited.

Similar rules apply under U.S.

state tax laws.

Similar rules apply under US state tax laws.

We have, and may in the future, experience ownership changes as a result of shifts in our stock ownership.

As a result, if we earn net taxable income, our ability to use our pre-change U.S.

net operating loss carryforwards to offset U.S.

federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.

As a result, if we earn net taxable income, our ability to use our pre-change US net operating loss carryforwards to offset US federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us.

Changes in our tax rates or exposure to additional income tax liability could impact our profitability and management projections, estimates, and judgments, particularly with respect to reserves for litigation, deferred tax assets, and the fair market value of certain assets and liabilities, may be inaccurate and not be indicative of our future performance.

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Additionally, government actions concerning “Buy America” provisions, taxation, tariffs, the environment, or other matters could impact our operating results.

Government actions in the U.S.

or other countries where we have a higher concentration of business may change tax policy, trade policy, or enact other legislation that could create an unfavorable environment for the Company, making it more difficult to compete or adversely impact our operating results.

The United States-Mexico-Canada Trade Agreement (“USMCA”) and certain other international trade agreements could affect our business, financial condition, and results of operations.

On July 1, 2020, the USMCA became effective, replacing the North American Free Trade Agreement.

It is uncertain how the USMCA will impact foreign trade and our international operations.

However, given the amount of North American trade that moves by truck and rail, it could have a significant impact on supply and demand for the raw materials that we use in manufacturing processes and for finished goods in the markets we serve, and could adversely impact the amount, movement, and patterns of products that we ship.

Potential material modifications to USMCA, or certain other international trade agreements, including with respect to the modification of trade agreements with or among the E.U.

and the U.K., may have a material adverse effect on our business, financial condition, and results of operations.

Government actions in the US or other countries where we have a higher concentration of business may change tax policy, trade policy, or enact other legislation that could create an unfavorable environment for the Company, making it more difficult to compete or adversely impact our operating results.

Legislative or regulatory initiatives related to climate change could have a material adverse effect on our business.

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A portion of our sales are derived from our international operations, which expose us to certain risks inherent in doing business on an international level.

Doing business outside the U.S.

subjects the Company to various risks, including changing economic and political conditions, work stoppages, exchange controls, currency fluctuations, armed conflicts, and unexpected changes in U.S.

and foreign laws relating to tariffs, trade restrictions, transportation regulations, foreign investments, and taxation.

Increasing sales to foreign countries, including Brazil, Canada, China, India, Mexico, the U.K., and countries within the E.U., expose the Company to increased risk of loss from foreign currency fluctuations and exchange controls as well as longer accounts receivable payment cycles.

Doing business outside the US subjects the Company to various risks, including changing economic and political conditions, work stoppages, exchange controls, currency fluctuations, armed conflicts, and unexpected changes in US and foreign laws relating to tariffs, trade restrictions, transportation regulations, foreign investments, and taxation.

Increasing sales to foreign countries, including Brazil, Canada, China, India, Mexico, the UK, and countries within the EU, expose the Company to increased risk of loss from foreign currency fluctuations and exchange controls as well as longer accounts receivable payment cycles.

We have little control over most of these risks and may be unable to anticipate changes in international economic and political conditions and, therefore, be unable to alter our business practices in time to avoid the adverse effect of any of these possible changes.

Changes in exchange rates for foreign currencies may reduce international demand for our products or increase our labor or supply costs in non-U.S.

Fluctuations in the relative values of the U.S.

dollar, Canadian dollar, British pound, and Euro may result in volatile earnings that reflect exchange rate translation in our Canadian and European sales and operations.

dollar strengthens in value as compared to the value of the Canadian dollar, British pound, or Euro, our reported earnings in dollars from sales in those currencies will be unfavorable.

Conversely, a favorable result will be reported if the U.S.

dollar weakens in value as compared to the value of the Canadian dollar, British pound, or Euro.

Changes in exchange rates for foreign currencies may reduce international demand for our products or increase our labor or supply costs in non-US markets.

Fluctuations in the relative values of the US dollar, Canadian dollar, British pound, and Euro may result in volatile earnings that reflect exchange rate translation in our Canadian and European sales and operations.

If the US dollar strengthens in value as compared to the value of the Canadian dollar, British pound, or Euro, our reported earnings in dollars from sales in those currencies will be unfavorable.

Conversely, a favorable result will be reported if the US dollar weakens in value as compared to the value of the Canadian dollar, British pound, or Euro.

Additionally, international trade agreements, including The United States-Mexico-Canada Trade Agreement (“USMCA”), could affect our business, financial condition, and results of operations.

Potential material modifications to USMCA, or certain other international trade agreements, including with respect to the modification of trade agreements with or among the EU and the UK, may have a material adverse effect on our business, financial condition, and results of operations.

Economic conditions and regulatory changes caused by the United Kingdom’s exit from the European Union could adversely affect our business.

Pursuant to a June 2016 referendum, the U.K.

left the E.U.

on January 31, 2020, commonly referred to as “Brexit.” The U.K.

government and the E.U.

operated under a transitional arrangement that expired on December 31, 2020.

The EU-UK Trade and Cooperation Agreement was agreed in principle and became provisionally operative on January 1, 2021, and formally in force on May 1, 2021, and terms of this new relationship between the U.K.

remains subject to uncertainties.

There has been volatility in

currency exchange rate fluctuations between the U.S.

dollar relative to the British pound, which could continue.

The withdrawal of the U.K.

from the E.U.

has also created market volatility and could continue to contribute to instability in global financial and foreign exchange markets, political institutions, and regulatory agencies as negotiations of trade deals between the U.K.

and the E.U., and also between the U.K.

and other countries, possibly including the U.S., occur during the near future.

Pursuant to a June 2016 referendum, the UK left the EU on January 31, 2020, commonly referred to as “Brexit.” The UK government and the EU operated under a transitional arrangement that expired on December 31, 2020.

There has been volatility in currency exchange rate fluctuations between the US dollar relative to the British pound, which could continue.

The withdrawal of the UK from the EU has also created market volatility and could continue to contribute to instability in global financial and foreign exchange markets, political institutions, and regulatory agencies as negotiations of trade deals between the UK and the EU, and also between the UK and other countries, possibly including the US, occur during the near future.

Brexit is an unprecedented event, and, accordingly, it is unclear what long-term economic, financial, trade, and legal effects will result.

The majority of our U.K.

operations are heavily concentrated within the U.K.

however, this could adversely affect the future growth of our U.K.

operations into other European locations.

operations represented approximately 9% and 11% of our total revenue for the years ended December 31, 2022 and 2021, respectively.

During the years ended December 31, 2022 and 2021 less than 1% of our consolidated net revenue was from the U.K.

operation’s sales exported to E.U.

UNRESOLVED STAFF COMMENTS

The majority of our UK operations are heavily concentrated within the UK borders;

however, this could adversely affect the future growth of our UK operations into other European locations.

Our UK operations represented approximately 8% and 9% of our total revenue for the years ended December 31, 2023 and 2022, respectively.

During the years ended December 31, 2023 and 2022 less than 1% of our consolidated net revenue was from the UK operation’s sales exported to EU members.

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