What changed in this filing

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Item 1A. Risk Factors

2025-02-20 compared with 2024-02-20 · 142 added, 142 removed, 318 unchanged (47% of the section changed)

11 unchanged sentences

• the availability and cost of credit;

• interest rate fluctuations (including mortgage and credit card interest rates) and the availability of financing for our customers and consumers;

• interest rate fluctuations (including mortgage and credit card interest rates), sustained periods of elevated interest rates, and the availability of financing for our customers and consumers;

• the amount and type of residential and non-residential construction;

3 unchanged sentences

• increases in the cost of raw materials or any shortage in supplies or labor, including as a result of tariffs or other trade restrictions;

• disruptions or delays to the global supply chain;

• the effects of governmental regulation and initiatives to manage economic conditions;

2 unchanged sentences

While cyclicity in our new residential and non-residential construction end markets is moderated to a certain extent by R&R activity, much R&R spending is discretionary and can be deferred or postponed entirely when economic conditions are poor.

We have experienced sales declines in all of our end markets during recent economic downturns.

Uncertain economic and political conditions may make it difficult for us and our customers or suppliers to accurately forecast and plan future business activities.

We have experienced sales declines in all our end markets during recent economic downturns.

Uncertain economic and political conditions may make it difficult for us and our customers or suppliers to accurately forecast and plan future business activities or may cause delays or cancellation of construction projects.

For example, changes to policies related to global trade and tariffs may result in uncertainty surrounding the future of the global economy which could have an adverse impact on consumer spending as well as our input costs.

3 unchanged sentences

Our business depends on our relationships with our key customers, which consist mainly of wholesale distributors and retail home centers.

Our top ten customers together accounted for approximately 43%, 44% and 43% of our net revenues in the years ended

December 31, 2023, 2022 and 2021, respectively.

The Home Depot, a customer of our North America segment, represents 15%, 16%, and 17% of our consolidated net revenues during the years ended December 31, 2023, 2022, and 2021, respectively.

Lowe’s Companies, another customer of our North America segment, represents 11%, 11%, and 10% of our consolidated net revenues during the years ended December 31, 2023, 2022, and 2021, respectively.

Although we have established and maintain significant long-term relationships with our key customers, we cannot assure you that all of these relationships will continue or will not diminish.

Our top ten customers together accounted for approximately 46%, 43% and 44% of our net revenues in the years ended December 31, 2024, 2023 and 2022, respectively.

The Home Depot, a customer of our North America segment, represented 16%, 15%, and 16% of our consolidated net revenues during the years ended December 31, 2024, 2023 and 2022, respectively.

Lowe’s Companies, another customer of our North America segment, represented 12%, 11%, and 11% of our consolidated net revenues during the years ended December 31, 2024, 2023 and 2022, respectively.

Although we have established and maintain significant long-term relationships with our key customers, we cannot assure you that all these relationships will continue or will not diminish.

Some of our key customers are volume purchasers who are much larger than us and have strong bargaining power with their suppliers, which limits our ability to recover cost increases through higher selling prices.

We generally do not enter into long-term contracts with our customers, and they generally do not have an obligation to purchase products from us.

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Some of our competitors may have greater financial, marketing, and distribution resources and may develop stronger relationships with customers in the markets where we sell our products.

Some of our competitors may be less leveraged than we are, providing them with more flexibility to invest in new facilities and processes and also making them better able to withstand adverse economic or industry conditions.

Some of our competitors may be less leveraged than we are, providing them with more flexibility to invest in new facilities and processes and making them better able to withstand adverse economic or industry conditions.

In addition, some of our competitors, regardless of their size or resources, may choose to compete in the marketplace by adopting more aggressive sales policies, including price cuts, or by devoting greater resources to the development, promotion, and sale of their products.

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We cannot guarantee the successful implementation of these initiatives and related strategies throughout the geographic regions in which we operate or that such implementation will improve our operating results.

Any failure to successfully implement these initiatives and related strategies could adversely affect our business, financial condition, and results of operations, including increases in our severance and asset related charges.

We may, in addition, decide to alter or discontinue certain aspects of our business strategy at any time.

A disruption in our operations due to natural disasters, unstable geopolitical conditions or armed conflicts could have a material adverse effect on our business, financial condition, and results of operations.

Our business will suffer if we are unable to retain and recruit executives, managers and employees at a competitive cost.

The success of our business depends upon the skills, experience, and efforts of our executives and other key employees.

Our senior management team has acquired specialized knowledge and skills with respect to our business, and the loss of any of these individuals could harm our business, especially if we are not successful in developing adequate succession plans.

In addition, we rely on the specialized knowledge and experience of certain key technical employees.

Our business also depends on our ability to continue to recruit, train, and retain skilled employees.

The loss of the services of these key executives and employees, or our inability to hire new personnel with the requisite skills, could have a material adverse effect on our business, financial condition, and results of operations.

For example, our ability to develop new products or enhance existing products, sell products to our customers, or manage our business effectively could be impaired if we are unable to retain and attract qualified personnel.

In addition, a significant increase in the wages paid by competing employers could result in a reduction of our qualified labor force, an increase in the wage rates that we must pay, or both.

Lastly, we may experience higher levels of attrition within our professional workforce for a variety of reasons in the future, including if our compensation programs become uncompetitive or if the Company experiences significant disruption, including an economic downturn.

We may not be able to attract highly qualified employees to replace such key personnel, particularly if the underlying reasons for the loss make the Company uncompetitive or attractive as an employer.

A disruption in our operations due to natural disasters, changes in weather patterns and related extreme weather events, public health crises, unstable geopolitical conditions or armed conflicts could have a material adverse effect on our business, financial condition, and results of operations.

We operate facilities worldwide.

We have facilities located in areas that are vulnerable to hurricanes, earthquakes, wildfires, and other natural disasters.

In the event that a hurricane, earthquake, natural disaster, fire, pandemic, or other catastrophic event were to interrupt our operations for any extended period of time, it could delay shipment of merchandise to our customers, damage our reputation, or otherwise have a material adverse effect on our business, financial condition, and results of operations.

Weather patterns may affect our operating results and our ability to maintain our sales volume throughout the year.

Because our customers depend on suitable weather to engage in construction projects, increased frequency or duration of extreme weather conditions could have a material adverse effect on our financial results or financial condition.

Also, we cannot predict the effects that global climate change may have on our business.

In addition to changes in weather patterns, it might, for example, reduce the demand for construction, destroy forests (increasing the cost and reducing the availability of wood products used in construction), and increase the cost and reduce the availability of raw materials and energy.

Our global operations expose us to risks associated with public health crises, such as pandemics and epidemics, which could harm our business and cause our operational results to suffer.

In the event that a hurricane, earthquake, natural disaster, fire, public health crisis, or other catastrophic event were to interrupt our operations for any extended period of time, it could delay shipment of merchandise to our customers, damage our reputation, or otherwise have a material adverse effect on our business, financial condition, and results of operations.

In addition, our operations may be interrupted by armed conflicts, terrorist attacks or other acts of violence or war.

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For instance, instabilities in the Middle East and the ongoing conflict between Russia and Ukraine, including sanctions imposed on Russia, has had and could continue to have an adverse impact on our business, such as shortages in materials and heightened inflation on materials, freight, and other variable costs, such as utilities.

The consequences of any of these armed conflicts are unpredictable, and we may not be able to foresee events that could have an adverse effect on our business or your investment.

More generally, any of these events could cause consumer confidence and spending

to decrease or result in increased volatility in the worldwide financial markets.

The consequences of any of these armed conflicts are unpredictable, and we may not be able to foresee events that could have an adverse effect on our business.

More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the worldwide financial markets.

They could also result in economic recessions.

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While we continue to invest in innovation, brand building, and brand awareness, and intend to increase our investments in these areas in the future, these initiatives may not be successful.

Investment in a product could divert our attention and resources from other projects that become more commercially viable in the future.

Failure to anticipate and successfully react to changing consumer preferences could have a material adverse effect on our business, financial condition, and results of operations.

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Failure to effectively manage our inventory in anticipation of or in response to seasonal fluctuations could negatively impact our liquidity profile during certain seasonal periods.

We may be unable to protect our intellectual property, and we may face claims of intellectual property infringement.

We rely on a combination of patent, copyright, trademark, and trade secret laws, as well as confidentiality agreements, nondisclosure agreements, and other contractual commitments, to protect our intellectual property rights.

However, these measures may not be adequate or sufficient, and third parties may not always respect these legal protections even if they are aware of them.

In addition, our competitors may develop similar technologies and know-how without violating our intellectual property rights.

Furthermore, the laws of foreign countries may not protect our intellectual property rights to the same extent as the laws of the U.S.

The failure to obtain worldwide patent and trademark protection may result in other companies copying and marketing products based on our technologies or under brand or trade names similar to ours outside the jurisdictions in which we are protected.

impede our growth in existing regions, create confusion among consumers, and result in a greater supply of similar products that could erode prices for our protected products.

Litigation may be necessary to protect our intellectual property rights.

Intellectual property litigation can result in substantial costs, could distract our management, and could impinge upon other resources.

Our failure to enforce and protect our intellectual property rights may cause us to lose brand recognition and result in a decrease in sales of our products.

Moreover, while we are not aware that any of our products or brands infringes upon the proprietary rights of others, third parties may make such claims in the future.

From time to time, third parties may claim that we have infringed upon their intellectual property rights and we may receive notices from such third parties asserting such claims.

Any such infringement claims are thoroughly investigated and, regardless of merit, could be time-consuming and result in costly litigation or damages, undermine the exclusivity and value of our brands, decrease sales, or require us to enter into royalty or licensing agreements that may not be on acceptable terms and that could have a material adverse effect on our business, financial condition, and results of operations.

Changes in weather patterns and related extreme weather events, including as a result of global climate change, could significantly affect our financial results or financial condition.

Weather patterns may affect our operating results and our ability to maintain our sales volume throughout the year.

Also, we cannot predict the effects that global climate change may have on our business.

Prices and availability of raw materials, freight, energy and other critical inputs we use to manufacture our products are subject to fluctuations due to inflation and other factors, and we may be unable to pass along to our customers the effects of any price increases.

As a manufacturer, our sales and profitability are dependent on the availability and cost of raw materials, freight, energy and other inputs.

Prices and availability of our critical inputs fluctuate for a variety of reasons beyond our control, many of which cannot be anticipated with any degree of reliability.

The reasons for these fluctuations include, among other things, variable worldwide supply and demand across different industries, speculation in commodities futures, general economic or environmental conditions, inflation, political unrest and instability, such as the ongoing military conflict between Russia and Ukraine and instabilities in the Middle East, labor costs, competition, import duties, tariffs, worldwide currency fluctuations, freight, regulatory costs, and product and process evolutions that impact demand for the same materials.

Our most significant raw materials include logs and lumber, vinyl extrusions, glass, steel, and aluminum, each of which has been subject to periods of rapid and significant fluctuations in price.

Changes in the prices of critical inputs have, and may continue to have, a material adverse effect on our business, financial condition, and results of operations.

has imposed tariffs on various imported products, particularly from China, as well as on certain steel and aluminum products from other countries.

In addition, in February 2025, the U.S.

announced new and additional tariffs on foreign imports into the U.S., including most relevant to us, an additional 25% tariff on all imports from Canada.

These tariffs were suspended for 30 days to facilitate negotiations.

As of the date of this report, the proposed tariffs on all imports from Canada remain suspended.

The imposition of tariffs may impact the prices of materials purchased outside of the U.S.

and include goods in transit as well as increasing the price of domestically sourced materials, including, in particular, steel and aluminum.

T hese changes in U.S.

trade policy have resulted in, and may continue to result in, one or more foreign governments adopting responsive trade policies that make it more difficult or costly for us to do business in or import our products or components from those countries, or otherwise impact pricing and availability of raw materials.

As another example, as global demand for key chemicals increases, the limited number of suppliers and investment in greater supply capacity drives increased global pricing.

Additionally, anti-dumping and countervailing duty trade cases could impact our business and results of operations.

We cannot predict the extent to which the U.S.

or other countries will impose new or additional quotas, duties, tariff s, taxes or other similar restrictions upon the import or export of our products in the future, nor can we predict future trade policy or the terms of any renegotiated trade agreements and their impact on our business.

We have short-term supply contracts with certain of our largest suppliers that limit our exposure to short-term fluctuations in prices and the availability of our materials, but we are susceptible to longer-term fluctuations in prices.

Generally, we do not hedge against commodity price fluctuations but may from time to time.

Significant increases in the prices of raw materials for finished goods, including as a result of significant or protracted material shortages, may be difficult to pass through to customers and may negatively impact our profitability and net revenues.

We may attempt to modify products that use certain raw materials, but these changes may not be successful.

Some of our manufacturing operations require the use of substantial amounts of electricity and natural gas, which may be subject to significant price increases as the result of changes in overall supply and demand and the impacts of legislation and regulatory action.

The current conflict between Russia and Ukraine has, and may continue to, affect the price of oil and natural gas throughout the world and impact the availability of energy supplies and other inputs at our manufacturing sites, particularly in Europe.

Such a disruption in the supply of natural gas could impact our ability to continue our operations at such sites at normal levels.

We have taken actions in an attempt to reduce the impact of energy price increases.

However, these efforts may be insufficient to protect us against fluctuations in energy prices or shortages of natural gas and we could suffer adverse effects to net income and cash flow should we be unable to either offset or pass higher energy costs through to our customers in a timely manner or at all.

Our business may be affected by delays or interruptions in the delivery of raw materials, finished goods, and certain component parts.

A supply shortage or delivery chain interruption could have a material adverse effect on our business, financial condition, and results of operations.

We rely upon regular deliveries of raw materials, finished goods, and certain component parts.

For certain raw materials that are used in our products, we depend on a single or limited number of suppliers for our materials, and we typically do not have long-term contracts with our suppliers.

If we are not able to accurately forecast our supply needs, our limited number of suppliers may make it difficult to quickly obtain additional raw materials to respond to shifting or increased demand.

In addition, a supply shortage could occur as a result of unanticipated increases in market demand, including as a result of accelerated demand in reaction to the threat of tariffs or trade restrictions;

difficulties in production or delivery, including insufficient energy supply;

financial difficulties;

or catastrophic events in the supply chain.

Furthermore, because our products and the components of some of our products are subject to regulation, changes to these regulations could cause delays in delivery of raw materials, finished goods, and certain component parts.

We have experienced impacts to our supply chain from economic and geopolitical uncertainties, including the ongoing military conflict between Russia and Ukraine, which have resulted in delays in receiving materials, manufacturing downtime, increased backlogs, and delayed out-bound freight.

Until we can make acceptable arrangements with alternate suppliers, any interruption or disruption could impact our ability to ship orders on time and could idle some of our manufacturing capability for those products.

This could result in a loss of revenues, reduced margins, and damage to our relationships with customers, which could have a material adverse effect on our business, financial condition, and results of operations.

We are exposed to political, economic, and other risks that arise from operating a multinational business.

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These risks include:

• the difficulty of enforcing agreements and collecting receivables through foreign legal systems;

• the difficulty of enforcing agreements, collecting receivables, and protecting assets through foreign legal systems;

• trade protection measures and import or export licensing requirements;

3 unchanged sentences

• difficulty in staffing and managing widespread operations;

• the imposition of, or increases in, currency exchange controls;

• difficulty in transporting materials, components, and products;

• currency exchange rate fluctuations or the imposition of, or increases in, currency exchange controls;

• potential inflation and interest rate fluctuation in applicable non-U.S.

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We are subject to the credit risk of our customers, because we provide credit to our customers in the normal course of business.

Any failure by our customers to meet their obligations to us may have a material adverse effect on our business, financial

condition, and results of operations.

Any failure by our customers to meet their obligations to us may have a material adverse effect on our business, financial condition, and results of operations.

In addition, we may incur increased expenses related to collections in the future if we find it necessary to take legal action to enforce the contractual obligations of a significant number of our customers.

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If warranty claims exceed our estimates, it may have a material adverse effect on our business, financial condition, and results of operations.

Our annual effective tax rate and the amount of taxes we pay can change materially as a result of changes in U.S.

and foreign tax laws, changes in the mix of our U.S.

and foreign earnings, adjustments to our estimates for the potential outcome of any uncertain tax issues, and audits by federal, state and foreign tax authorities.

As a large multinational corporation, we are subject to U.S.

federal, state and local, and many foreign tax laws and regulations, all of which are complex and subject to significant change and varying interpretations.

Changes in these laws or regulations, or any change in the position of taxing authorities regarding their application, administration or interpretation, could have a material adverse effect on our business, consolidated financial condition or results of our operations.

For example, in August 2022, the U.S.

government enacted the Inflation Reduction Act of 2022 (the “Inflation Reduction Act”) into law, which includes a corporate alternative minimum tax and an excise tax on corporate stock repurchases.

Future changes in tax law could significantly impact our provision for income taxes, the amount of taxes payable, and our deferred tax asset and liability balances.

The Company must make judgments about the application of these inherently complex tax laws when calculating the provision for income taxes.

The Company’s provision for income taxes also includes estimates of additional tax that may be incurred for tax exposures and reflects various estimates and assumptions, including assessments of future earnings of the Company that could impact the valuation of its deferred tax assets.

The Company’s future results of operations and tax liability could be adversely affected by changes in the overall profitability of the Company, changes in the valuation of deferred tax assets and liabilities, changes in our effective tax rate as a result of a change in the mix of earnings in countries with differing statutory tax rates, and ongoing assessments of the Company’s tax exposures.

In addition, our products, and our customers’ products, are subject to import and excise duties and/or sales or value-added taxes in many jurisdictions in which we operate.

Increases in these indirect taxes could affect the affordability of our products and our customers’ products, and, therefore, reduce demand.

Recently, international tax norms governing each country’s jurisdiction to tax cross-border international trade have evolved, and are expected to continue to evolve, due in part to the Base Erosion and Profit Shifting project led by the OECD, which represents a coalition of member countries including the United States, and supported by the G20.

Changes in these laws and regulations, or any change in the position of tax authorities regarding their application, administration or interpretation could adversely affect our financial results.

In addition, a number of countries are actively pursuing changes to their tax laws applicable to multinational corporations.

Due to widely varying tax rates in the taxing jurisdictions applicable to our business, a change in income generation to higher taxing jurisdictions or away from lower taxing jurisdictions may also have an adverse effect on our financial condition and results of operations.

We make estimates of the potential outcome of uncertain tax issues based on our assessment of relevant risks and facts and circumstances existing at the time, and we use these assessments to determine the adequacy of our provision for income taxes and other tax-related accounts.

These estimates are highly judgmental.

Although we believe we adequately provide for any reasonably foreseeable outcome related to these matters, future results may include favorable or unfavorable adjustments to estimated tax liabilities, which may cause our effective tax rate to fluctuate significantly.

In addition, our income tax returns are subject to regular examination by domestic and foreign tax authorities.

These taxing authorities may disagree with the positions we have taken or intend to take regarding the tax treatment or characterization of any of our transactions.

If any tax authority were to successfully challenge the tax treatment or characterization of any of our transactions, it could have a material adverse effect on our business, consolidated financial condition or results of our operations.

Furthermore, regardless of whether any such challenge is resolved in our favor, the final resolution of such matter could be expensive and time consuming to defend and/or settle.

We may make acquisitions, divestitures, or investments in other businesses, which may involve risks or may not be successful.

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• the potential loss of key employees of the acquired company;

• our inability to retain the customers and partners of the acquired company;

• any damage to our reputation as a result of performance or customer satisfaction problems relating to an acquired business;

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Incurring additional debt to fund an acquisition may result in higher debt service and a requirement to comply with additional financial and other covenants, including potential restrictions on future acquisitions and distributions.

COVID-19 has had, and may continue to have, a negative impact on the global economy and on our business, operations, and results.

While the level of disruption caused by, and the economic impact of, the COVID-19 pandemic has lessened since 2021, there is no assurance that the pandemic will not worsen again, including as a result of the emergence of new strains of the virus, or another health-related emergency will not emerge.

Any worsening of the pandemic or a new health-related emergency and their effects on the economy could have an adverse impact on our business, financial condition, and results of operations.

Risks Relating to Labor and Supply Chain

As a manufacturer, our sales and profitability are dependent on the availability and cost of raw materials, freight, energy and other inputs.

Prices and availability of our critical inputs fluctuate for a variety of reasons beyond our control, many of which cannot be anticipated with any degree of reliability.

Our most significant raw materials include logs and lumber, vinyl extrusions, glass, steel, and aluminum, each of which has been subject to periods of rapid and significant fluctuations in price.

Changes in the prices of critical inputs have, and may continue to have, a material adverse effect on our business, financial condition, and results of operations.

has imposed tariffs on certain products imported into the U.S.

from China, as well as tariffs on certain steel and aluminum products imported from certain countries, and could impose additional tariffs or trade restrictions.

The imposition of tariffs may impact the prices of materials purchased outside of the U.S.

and include goods in transit as well as increasing the price of domestically sourced materials, including, in particular, steel and aluminum.

Impositions of tariffs by other countries could also impact pricing and availability of raw materials.

As another example, as global demand for key chemicals increases, the limited number of suppliers and investment in greater supply capacity drives increased global pricing.

Additionally, anti-dumping and countervailing duty trade cases could impact our business and results of operations.

While we believe our exposure to the potential increased costs of these tariffs and duties is no greater than the industry as a whole, our business and results of operations may be adversely affected if our efforts to mitigate their effects are unsuccessful.

We have short-term supply contracts with certain of our largest suppliers that limit our exposure to short term fluctuations in prices and availability of our materials, but we are susceptible to longer-term fluctuations in prices.

Generally, we do not hedge against commodity price fluctuations, but may from time to time.

Significant increases in the prices of raw materials for finished goods, including as a result of significant or protracted material shortages due to pandemic or otherwise, may be difficult to pass through to customers and may negatively impact our profitability and net revenues.