What changed in this filing

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Item 1A. Risk Factors

2023-06-30 compared with 2022-07-01 · 109 added, 87 removed, 43 unchanged (82% of the section changed)

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These forward-looking statements involve risks and uncertainties.

Our actual results

could differ materially from those forward-looking statements as a result of many factors, including those more fully described below and elsewhere in our public reports.

Our actual results could differ materially from those forward-looking statements as a result of many factors, including those more fully described below and elsewhere in our public reports.

We do not undertake to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.

Disruptions in the financial markets have historically created, and may continue to create, uncertainty in economic conditions that may adversely affect our customers and our business.

The financial markets in the United States, Europe and Asia have in the past been, and may in the future be, volatile.

The tightening of credit in financial markets, worsening of economic conditions, a prolonged global, national or regional economic recession or other similar events could have a material adverse effect on the demand for our products and on our sales, pricing and profitability.

We are unable to predict the likely occurrence or duration of these adverse economic conditions and the impact these events may have on our operations and the end users who purchase our products.

If we fail to compete effectively, our revenue and profit margins could decline.

We face a variety of competition in all of the markets in which we participate.

Competitive pricing, including price competition or the introduction of new products, could have material adverse effects on our revenues and profit margins.

Our ability to compete effectively depends to a significant extent on the specification or approval of our products by architects, engineers, and customers.

If a significant segment of those communities were to decide that the design, materials, manufacturing, testing, or quality control of our products is inferior to that of any of our competitors, our sales and profits would be materially and adversely affected.

Risks Specific to our Company

If we lose a large customer, our sales and profits would decline.

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Loss of all or a part of our sales to a large channel partner would have a material effect on our revenues and profits until an alternative channel partner could be developed.

An increase in the price of raw materials and energy could negatively affect our sales and profits.

It is common in the laboratory and healthcare furniture industries for customers to require delivery at extended future dates, as products are frequently installed in buildings yet to be constructed.

Since prices are normally quoted on a firm basis in the industry, we bear the burden of possible increases in labor, material and energy costs between the quotation of an order and the delivery of the products.

Our principal raw materials are steel, including stainless steel, wood and epoxy resin.

Numerous factors beyond our control, such as general economic conditions, competition, worldwide demand, labor costs, energy costs, and import duties and other trade restrictions, influence prices for our raw materials.

During the fiscal year ended April 30, 2022, prices for two of our principal raw materials, steel and epoxy resin, increased 149% and 162%, respectively.

We have not always been able, and in the future we might not be able, to increase our product prices in amounts that correspond to increases in costs of raw materials, without materially and adversely affecting our sales and profits.

Where we are not able to increase our prices, increases in our raw material costs will adversely affect our profitability.

Our future growth may depend on our ability to penetrate new international markets.

International laws and regulations, construction customs, standards, techniques and methods differ from those in the United States.

Significant challenges of conducting business in foreign countries include, among other factors, geopolitical tensions, local acceptance of our products, political instability, currency controls, changes in import and export regulations, changes in tariff and freight rates and fluctuations in foreign exchange rates.

Events outside our control may affect our operating results.

We have little control over the timing of shipping customer orders, as customers' required delivery dates are subject to change by the customer.

Construction delays and customer changes to product designs are among the factors that may delay the start of manufacturing and shipments of orders.

Shipments that we anticipate in one quarter may occur in another quarter, affecting both quarters' results.

Weather conditions, such as unseasonably warm, cold, or wet weather, can also affect and sometimes delay projects.

Political and economic events can also affect our revenues.

When sales do not meet our expectations, our operating results will be reduced for the relevant quarters.

Our principal markets are in the laboratory and healthcare building construction industry.

This industry is subject to significant volatility due to various factors, none of which is within our control.

Declines in construction activity or demand for our products could materially and adversely affect our business and financial condition.

We depend on key management and technical personnel, the loss of whom could harm our business.

We depend on certain key management and technical personnel.

The loss of one or more key employees may materially and adversely affect us.

Our success also depends on our ability to attract and retain additional highly qualified technical, marketing, and management personnel necessary for the maintenance and expansion of our activities.

We might not be able to attract or retain such personnel.

Our stock price is likely to be volatile and could drop.

The trading price of our Common Stock could be subject to wide fluctuations in response to quarter-to-quarter variation in operating results, announcement of technological innovations or new products by us or our competitors, general conditions in the construction and construction materials industries, relatively low trading volume in our common stock and other events or factors.

In addition, in recent years, the stock market has experienced extreme price fluctuations.

This volatility has had a substantial effect on the market prices of securities issued by many companies for reasons unrelated to the operating performance of those companies.

Securities market fluctuations may adversely affect the market price of our common stock.

We rely on the talents and efforts of key management and our Associates.

If we are unable to retain or motivate key personnel, hire qualified personnel, or maintain and continue to adapt our corporate culture, we may not be able to grow or operate effectively.

Our performance largely depends on the talents and efforts of our Associates.

Our ability to compete effectively and our future success depends on our continuing to identify, hire, develop, motivate, and retain key management and highly skilled personnel for all areas of our organization.

In addition, our total compensation program may not always be successful in attracting new employees and retaining and motivating our existing employees.

Restrictive immigration policy and regulatory changes may also affect our ability to hire, mobilize, or retain some of our global talent.

In addition, we believe that our corporate culture fosters innovation, creativity, and teamwork.

As our organization grows and evolves, we may need to implement more complex organizational management structures or adapt our corporate culture and work environments to ever-changing circumstances, such as during times of a natural disaster or pandemic, and these changes could affect our ability to compete effectively or have an adverse effect on our corporate culture.

With the constant evolution of workforce dynamics, if we do not manage these changes effectively, it could materially adversely affect our culture, reputation, and operational flexibility.

We are subject to other risks that might also cause our actual results to vary materially from our forecasts, targets, or projections, including:

• Failing to anticipate the need for, appropriately invest in and effectively manage the human, information technology and logistical resources necessary to support our business, including managing the costs associated with such resources;

• Failing to generate sufficient future positive operating cash flows and, if necessary, secure adequate external financing to fund our growth;

• Failing to anticipate the need for and appropriately invest in information technology and logistical resources necessary to support our business, including managing the costs associated with such resources;

• Failing to generate sufficient future positive operating cash flows and, if necessary, secure and maintain adequate external financing to fund our operations and any future growth;

• Interruptions in service by common carriers that ship goods within our distribution channels.

Disruptions of our supply chain could have a material adverse effect on our operating and financial results.

Disruption of our supply chain capabilities due to trade restrictions, political instability, severe weather, natural disasters, public health crises, war, terrorism, or labor supply could impair our ability to source key components.

If we are required to obtain these components from an alternate source, we may not be able to obtain pricing on as favorable terms.

Additionally, we may be forced to pay additional transportation costs and/or we may experience a delay in our ability to meet demand for our products.

Any of the foregoing disruptions could exacerbate other risk factors and have an adverse effect on operating results and financial condition.

During fiscal year 2022, we experienced increases in raw material costs as a result of supply chain disruptions, and we could continue to experience such increases.

We recently experienced a network cyber attack that disrupted our domestic operations.

Our business and reputation are impacted by information technology system failures and network disruptions.

We, and our global supply chain, are exposed to information technology system failures or network disruptions caused by natural disasters, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins, ransomware or other cybersecurity incidents, or other events or disruptions.

System redundancy and other continuity measures may be ineffective or inadequate, and our, or our vendors', business continuity and disaster recovery planning may not be sufficient for all eventualities.

Such failures or disruptions can adversely impact our business by, among other things,

preventing access to our cloud-based systems, interfering with customer transactions or impeding the manufacturing and shipping of our products.

These events could materially adversely affect our business, reputation, results of operations and financial condition.

Future cybersecurity incidents could expose us to liability and damage our reputation and our business.

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Failure to prevent or mitigate data loss or other security incidents could expose us or our customers, associates and vendors to a risk of loss or misuse of such information, cause customers to lose confidence in our data protection measures, damage our reputation, adversely affect our operating results or result in litigation or potential liability for us.

As disclosed in our Form 10-Q for the period ended October 31, 2021, on November 5, 2021, the Company experienced a criminal network cyber attack that led to a disruption of our domestic operations, including manufacturing, engineering, administration, and sales operations.

By November 15, 2021, we had substantially restored our operations.

We engaged third party experts, including a cybersecurity firm, to perform a fulsome forensic investigation of this attack;

among other things, the cybersecurity firm assessed whether any confidential or sensitive data had been compromised.

Based on the results of the investigation, we do not believe any confidential or sensitive data has been downloaded, stolen from the Company's systems, or otherwise exfiltrated.

The Company had insurance coverage against recovery costs and business interruption resulting from cyber attacks.

However, the Company incurred expenses and losses in excess of its existing insurance coverage.

As of April 30, 2022, the Company no longer had active insurance coverage against potential cyber attacks.

While the Company will seek to obtain insurance for losses related to any similar future events, there can be no assurance that such insurance will be available to the Company.

Any future such events, particularly if not covered by insurance, could have material adverse effects on the Company's business and/or results of operations.

Additionally, we expect to continue to make investments in our information technology infrastructure.

The implementation of these investments may be more costly or take longer than we anticipate, or could otherwise adversely affect our business operations, which could negatively impact our financial position, results of operations or cash flows.

Internal Controls Over Financial Reporting.

Internal controls over financial reporting may not be effective at preventing or detecting material misstatements.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect material misstatements in the Company's consolidated financial statements.

Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Risks Related to Operations

Sales to customers outside the United States or with international operations expose us to risks inherent in international sales.

During fiscal year 2023, 34% of our revenues were derived from sales outside of the United States.

A key element of our growth strategy is to expand our worldwide customer base and our international operations.

Operating in international markets requires significant resources and management attention and subjects us to regulatory, economic and political risks that are different from those in the United States.

We cannot assure you that our expansion efforts into other international markets will be successful.

Our experience in the United States and other international markets in which we already have a presence may not be relevant to our ability to expand in other emerging markets.

Our international expansion efforts may not be successful in creating further demand for our products outside of the United States or in effectively selling our products in the international markets we enter.

If we fail to compete effectively, our revenue and profit margins could decline.

We face a variety of competition in all of the markets in which we participate.

Competitive pricing, including price competition or the introduction of new products, could have material adverse effects on our revenues and profit margins.

Our ability to compete effectively depends to a significant extent on the specification or approval of our products by architects, engineers, and customers.

An increase in the price of raw materials could negatively affect our sales and profits.

It is common in the laboratory and healthcare furniture industries for customers to require delivery at extended future dates, as products are frequently installed in buildings yet to be constructed.

Since prices are normally quoted on a firm basis in the industry, we bear the burden of possible increases in labor and material costs between the quotation of an order and the delivery of the products.

Our principal raw materials are steel, including stainless steel, wood and epoxy resin.

We have not always been able, and in the future we might not be able, to increase our product prices in amounts that correspond to increases in costs of raw materials.

Where we are not able to increase our prices, increases in our raw material costs will adversely affect our profitability.

Events outside our control may affect our operating results.

We have little control over the timing of shipping customer orders, as customers' required delivery dates are subject to change by the customer.

Construction delays and customer changes to product designs are among the factors that may delay the start of manufacturing.

Weather conditions, such as unseasonably warm, cold, or wet weather, can also affect and sometimes delay projects.

Political and economic events can also affect our revenues.

When sales do not meet our expectations, our operating results will be reduced for the relevant quarters.

Our principal markets are in the laboratory and healthcare building construction industry.

This industry is subject to significant volatility due to various factors, none of which is within our control.

Declines in construction activity or demand for our products could materially and adversely affect our business and financial condition.

We face numerous manufacturing and supply chain risks.

In addition, our reliance upon sole or limited sources of supply for certain materials, components, and services could cause production interruptions, delays and inefficiencies.

We purchase materials, components, and equipment from third parties for use in our manufacturing operations.

Our results of operations could be adversely impacted if we are unable to adjust our purchases to reflect changes in customer demand and market fluctuations.

Suppliers may extend lead times, limit supplies, or increase prices.

If we cannot purchase sufficient products at competitive prices and of sufficient quality on a timely enough basis to meet increasing demand, we may not be able to satisfy market demand, product shipments may be delayed, our costs may increase, or we may breach out contractual commitments and incur liabilities.

In addition, some of our businesses purchase certain required products from sole or limited source suppliers for reasons of quality assurance, regulatory requirements, cost effectiveness, availability or uniqueness of design.

If these or other suppliers encounter financial, operating, or other difficulties, or if our relationship with them changes, we might not be able to quickly establish or qualify replacement sources of supply.

The supply chains for our businesses were impacted in fiscal year 2023 from factors outside our control and could also be disrupted in the future for such reasons as supplier capacity constraints, supplier bankruptcy or exiting of the business for other reasons, decreased availability of key raw materials or commodities and external events such as natural disasters, pandemics or other public health problems, war, terrorist actions, governmental actions and legislative or regulatory changes.

Any of these factors could result in production interruptions, delays, extended lead times and inefficiencies.

Our revenues and other operating results depend in large part on our ability to manufacture our products in sufficient quantities and in a timely manner.

Any interruptions we experience in the manufacture of our products or changes to the way we manufacture products could delay our ability to recognize revenues in a particular period.

In addition, we must maintain sufficient production capacity in order to meet anticipated customer demand, which carries fixed costs that we may not be able to offset because we cannot always immediately adapt our production capacity and related cost structures to changing market conditions, which would adversely affect our operating margins.

If we are unable to manufacture our products consistently, in sufficient quantities, and on a timely basis, our revenues, gross margins, and our other operating results will be materially and adversely affected.

Disruptions in the financial markets have historically created, and may continue to create, uncertainty in economic conditions that may adversely affect our customers and our business.

The financial markets in the United States, Europe and Asia have in the past been, and may in the future be, volatile.

We are unable to predict the likely occurrence or duration of these adverse economic conditions and the impact these events may have on our operations and the end users who purchase our products.

Our future growth may depend on our ability to penetrate new international markets.

International laws and regulations, construction customs, standards, techniques and methods differ from those in the United States.

Significant challenges of conducting business in foreign countries include, among other factors, geopolitical tensions, local

acceptance of our products, political instability, currency controls, changes in import and export regulations, changes in tariff and freight rates and fluctuations in foreign exchange rates.

The effects of geopolitical instability, including as a result of Russia's invasion of Ukraine, may adversely affect us and heighten significant risks and uncertainties for our business, with the ultimate impact dependent on future developments, which are highly uncertain and unpredictable.

Ongoing geopolitical instability could negatively impact the global and U.S.

economies in the future, including by causing supply chain disruptions, rising energy costs, volatility in capital markets and foreign currency exchange rates, rising interest rates, and heightened cybersecurity risks.

The extent to which such geopolitical instability adversely affects our business, financial condition, and results of operations, as well as our liquidity and capital profile, is highly uncertain and unpredictable.

If geopolitical instability adversely affects us, it may also have the effect of heightening other risks related to our business.

In response to the military conflict between Russia and Ukraine that began in February 2022, the United States and other North Atlantic Treaty Organization member states, as well as non-member states, announced targeted economic sanctions on Russia.

The long-term impact on our business resulting from the disruption of trade in the region caused by the conflict and associated sanctions and boycotts is uncertain at this time due to the fluid nature of the ongoing military conflict and response.

The potential impacts include supply chain and logistics disruptions, financial impacts including volatility in foreign exchange and interest rates, increased inflationary pressure on raw materials and energy, and other risks, including an elevated risk of cybersecurity threats and the potential for further sanctions.

Legal and Regulatory Compliance Risks

Changes in U.S.

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economy, which in turn could have a material adverse effect on our business, financial condition and results of operations.

The impact of COVID-19 and future pandemics could adversely affect our business, results of operations, financial condition, and liquidity.

We are continuing to closely monitor developments related to the COVID-19 pandemic to assess its impact on our business;

however, due to the wide-ranging and highly uncertain nature of this event, it currently is not possible to estimate the ultimate direct and indirect impact of COVID-19 on our business, results of operations, financial condition, or liquidity with reasonable certainty.

Thus far, throughout the pandemic, we believe we have successfully navigated the risks associated with COVID-19 and have been able to successfully maintain our business operations.

The extent of the continued impact of COVID-19 on our business and financial results depends on future developments, including the emergence of new and different strains of the virus and the effectiveness of vaccinations and other public health measures.

Other pandemics are also possible with similar or worse public health outcomes.

Expectations related to environmental, social, and governance ("ESG") considerations could expose us to potential liabilities, increased costs, and reputational harm.

We are subject to laws, regulations, and other measures that govern a wide range of topics, including those related to matters beyond our core products and services.

For instance, new laws, regulations, policies, and international accords relating to ESG matters, including sustainability, climate change, human capital, and diversity, are being developed and formalized in Europe, the U.S., and elsewhere, which may entail specific, target-driven frameworks and/or disclosure requirements.

The implementation of these may require considerable investments.

Any failure, or perceived failure, by us to adhere to any public statements or initiatives, comply with federal, state or international environmental social and governance laws and regulations, or meet evolving and varied stakeholder expectations and standards could result in legal and regulatory proceedings against us and could materially adversely affect the Company's business reputation, results of operations, financial condition, and stock price.

General Risks

Our stock price is likely to be volatile and could drop.

In addition, in recent years, the stock market has experienced extreme price fluctuations.

This volatility has had a substantial effect on the market prices of securities issued by many companies for reasons unrelated to the operating performance of those companies.

Securities market fluctuations may adversely affect the market price of our common stock.

We currently, and may in the future, have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation ("FDIC"), the loss of which would have a severe negative effect on our operations and liquidity.

We may maintain our cash assets at financial institutions in the U.S.

in amounts that may be in excess of the FDIC insurance limit of $250,000.

Actual events involving limited liquidity, defaults, non-performance or other adverse developments that affect financial institutions, transactional counterparties or other companies in the financial services industry of the financial services industry generally, or concerns or rumors about any events of these kinds or other similar risks, have in the past and may in the future lead to market-wide liquidity problems.

In the event of a failure or liquidity issues of or at any of the financial institutions where we maintain our deposits or other assets, we may incur a loss to the extent such loss exceeds the FDIC insurance limitation, which could have a material adverse effect upon our liquidity, financial condition, and our results of operations.

Similarly, if our customers or partners experience liquidity issues as a result of financial institution defaults or non-performance where they hold cash assets, their ability to pay us may become impaired and could have a material adverse effect on our results of operations, including the collection of accounts receivable and cash flows.

The impact of investor concerns on U.S.

or international financial systems could impact our ability to obtain favorable financing terms in the future.

Investor concerns regarding the U.S.

or international financial systems could result in less favorable commercial financing terms, including higher interest rates or costs and tighter financial and operating covenants, or systemic limitations on access to credit and liquidity sources, thereby making it more difficult for us to acquire financing on terms favorable to us, or at all, and could have material adverse impacts on our liquidity, our business, financial condition or results of operations, and our prospects.

The impact of future pandemics could adversely affect our business, results of operations, financial condition, and liquidity.

While we believe we successfully navigated the risks associated with the recent COVID-19 pandemic and were able to successfully maintain our business operations, the extent of the impact of future COVID-19 variations or other pandemics on our business and financial results is, by nature of this type of event, highly uncertain.

The sweeping nature of pandemics makes it extremely difficult to predict how and to what extent our business and operations could be affected in the long run.

Our workforce, and the workforce of our vendors, service providers, and counterparties, could be affected by COVID-19, which could result in an adverse impact on our ability to conduct business.

We are continuing to take precautions to protect the safety and well-being of our employees while striving to provide uninterrupted services to our customers.

Since the onset of the pandemic, we have continued to support our business operations.

However, no assurance can be given that these actions will be sufficient, nor can we predict the level of disruption that will occur to our employees' ability to provide customer support and service.

In addition, the increase in the number of our employees working remotely has increased certain risks to our business, including increased demand on our information technology resources and systems, greater potential for phishing and other cyber attacks, and an increase in the number of points of potential attack.

Any failure to manage these risks effectively and to identify and respond to any cyber attacks on a timely basis may adversely affect our business.

New processes, procedures, and controls may be required to respond to any changes in our business

Further, should any key employees become ill from COVID-19 and unable to work, our ability to operate our internal controls may be adversely impacted.

Additional factors related to COVID-19 or other major public health issues that could have material and adverse effects on our ability to successfully operate include, but are not limited to, the following:

• The efforts of governmental and non-governmental organizations in combating the spread and severity of COVID-19 or other major public health issues may not be effective.

Further, we cannot predict how legal and regulatory responses to concerns about COVID-19 or other major public health issues will impact our business;

Our workforce, and the workforce of our vendors, service providers, and counterparties, could be affected by a pandemic, which could result in an adverse impact on our ability to conduct business.

No assurance can be given that the actions we take to protect our Associates and our operations will be sufficient, nor can we predict the level of disruption that could occur to our employees' ability to provide customer support and service.

New processes, procedures, and controls may be required to respond to any changes in our business environment.

Further, should any key employees become ill during the course of a future health event and be unable to work, our ability to operate our internal controls may be adversely impacted.

Additional factors related to major public health issues that could have material and adverse effects on our ability to successfully operate include, but are not limited to, the following:

• The effectiveness of any governmental and non-governmental organizations in combating the spread and severity, including any legal and regulatory responses;

• A general decline in business activity, especially as it relates to our customers' expansion or consolidation activities;

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• Severe disruptions to and instability in the global financial markets, and deterioration in credit and financing conditions, which could affect our access to capital necessary to fund business operations or current investment and growth strategies.

• A material disruption in our supply chain, which could affect our ability to source products from vendors on a timely basis or on favorable terms.

Sales to customers outside the United States or with international operations expose us to risks inherent in international sales.

During fiscal year 2022, 26% of our revenues were derived from sales outside of the United States.

A key element of our growth strategy is to expand our worldwide customer base and our international operations.

We cannot assure you that our expansion efforts into other international markets will be successful.

Our experience in the United States and other international markets in which we already have a presence may not be relevant to our ability to expand in other emerging markets.

Unresolved Staff Comments

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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