What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2022-09-09 compared with 2021-09-10 · 61 added, 66 removed, 198 unchanged (39% of the section changed)

5 unchanged sentences

Risks Related to Our Strategy

Our financial condition and results of operations for future periods may be adversely affected by the COVID-19 outbreak or other outbreaks of infectious disease or similar public health threats and the resulting economic impact.

Our financial condition and results of operations for future periods may be adversely impacted by epidemics, pandemics, outbreaks of infectious disease or similar public health threats and the resulting economic impact.

Lower levels of economic activity in our end markets could adversely affect our operating results. 

3 unchanged sentences

The markets in which we operate are subject to competitive pressures that could affect selling prices, and therefore could adversely affect our operating results. 

We have a concentration of net sales to the petroleum/convenience store market, and any substantial change in this market could have an adverse effect on our business. 

We have a concentration of net sales to the refueling and convenience store and grocery markets, and any substantial change in this market could have an adverse effect on our business. 

The Company may pursue future growth through strategic acquisitions and investments, which may not yield anticipated benefits.

12 unchanged sentences

Changes in a shift in product mix can have a significant impact on our gross margins.

We may not recognize all revenues from our backlog or receive all payments anticipated under awarded projects and customer contracts.

We may be required to write-off or impair capitalized costs or intangible assets in the future, or we may incur restructuring costs or other charges, each of which could harm our earnings.

Risks Related to Legal and Regulatory Matters

Any actual or perceived failure by us to comply with legal or regulatory requirements related to privacy or data security in one or multiple jurisdictions could result in proceedings, actions, or penalties against us.

The costs of litigation and compliance with environmental regulations, if significantly increased, could have an adverse effect on our operating profits.

3 unchanged sentences

A significant decline in our stock price could adversely affect our ability to raise additional capital.

Changes in the method of determining London Interbank Offered Rate ("LIBOR"), or the replacement of LIBOR with an alternative reference rate, may adversely affect interest expense related to outstanding debt

Anti-takeover provisions in our organizational documents and in Ohio law could make difficult or delay a change in management or negatively impact our share price.

RISKS RELATED TO OUR STRATEGY

Our financial condition and results of operations for future periods may be adversely affected by the COVID-19 outbreak or other outbreaks of infectious disease or similar public health threats and the resulting economic impact.

COVID-19 and variants thereof continue to spread globally and resulted in authorities implementing numerous measures in 2020 and 2021 to try to contain the virus, such as but not limited to travel bans and restrictions, quarantines, shelter in place orders, and shutdowns.

These measures have impacted previous operating results and may continue to impact our workforce and operations, the operations of our customers, and those of our respective vendors and suppliers if the virus continues to spread resulting in further mandated actions.

The occurrence of regional epidemics or a global pandemic such as COVID-19 may adversely affect our operations, financial condition, and results of operations.

The COVID-19 pandemic has had widespread, rapidly evolving, and unpredictable impacts on global society, economies, financial markets, and business practices.

The extent to which global pandemics impact our business going forward will depend on factors such as the duration and scope of the pandemic;

governmental, business, and individuals' actions in response to the pandemic;

and the impact on economic activity including the possibility of recession or financial market instability.

Infectious diseases, including COVID-19 and its variants, continue to spread globally, resulting in authorities implementing numerous measures to try to contain them, including but not limited to, travel bans and restrictions, quarantines, shelter in place orders, and shutdowns.

These measures have impacted previous operating results and may continue to impact our workforce and operations, the operations of our customers, and those of our respective vendors and suppliers if the diseases continues to spread resulting in further mandated actions.

We have experienced some limited disruptions in supply from some of our suppliers, although the disruptions to date have not been significant.

Additionally, there was a disruption to the construction markets, as well as inventory de-stocking by our distributors, which had a negative impact to sales.

Additionally, infectious diseases cause disruption to the construction markets, as well as inventory de-stocking by our distributors, both of which had a negative impact on our sales.

Restrictions on access to our manufacturing facilities or on our support operations or workforce, or similar limitations for our vendors and suppliers, and restrictions or disruptions of transportation, such as reduced availability of air transport, port closures, and increased border controls or closures, could limit our capacity to meet customer demand, lead to increased costs and have a material adverse effect on our financial condition and results of operations.

The outbreak continues to increase economic and demand uncertainty.

These uncertainties could make it more difficult for us to assess the quality of our product order backlog and to estimate future financial results.

The outbreak of COVID-19 caused an economic slowdown, and it is increasingly possible that its continued spread could lead to a global recession, which could have a material adverse effect on demand for our products and on our financial condition and results of operations.

The spread of COVID-19 caused us to modify our business practices in fiscal 2021 (including employee travel, employee work locations, limitations on physical participation in meetings, events and conferences, and responsible efforts to preserve cash and control spending.

We may take further actions as may be required by government authorities or that we determine are in the best interests of our employees, customers, partners, and suppliers.

There is no certainty that such measures will be sufficient to mitigate the risks posed by the virus and its consequences, and our ability to perform critical functions could be harmed.

In addition, given the challenges posed by COVID-19, our workforce operated at reduced levels at our manufacturing facilities, which had an adverse impact on our ability to timely meet future customer orders.

The duration of further business disruption and related financial impact cannot be reasonably estimated at this time.

However, it may materially affect our ability to obtain raw materials and components, manage customer credit risk, or manufacture products in a timely manner, and it also may impair our ability to meet customer demand for products, result in lost sales, additional costs, or penalties, or damage our reputation.

The extent to which COVID-19 or any other health epidemic will further impact our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of COVID-19 and the actions to contain COVID-19 or treat its impact, among others.

Further, the continued existence of the pandemic may adversely impact the health of our workforce, which could result in higher healthcare costs.

Lower levels of economic activity in our end markets could adversely affect our operating results.

Our businesses operate in several market segments including the petroleum/convenience markets, parking lot and garage markets, quick-service restaurant market, retail and grocery store markets, the automotive market, the warehouse market, and the sports complex market.

Our businesses operate in several market segments including the refueling and convenience store markets, parking lot and garage markets, quick-service restaurant market, retail and grocery store markets, the automotive market, the warehouse market, and the sports complex market, to name a few.

Operating results can be negatively impacted by volatility in these markets.

Future downturns in any of the markets we serve could adversely affect our overall sales, profitability, and cash flow.

In addition, customer difficulties in the future could result from economic declines or issues arising from the cyclical nature of their business and, in turn, result in decreases in product demand, increases in bad debt write-offs, decreases in timely collection of accounts receivable and adjustments to our allowance for doubtful accounts receivable, resulting in material reductions to our revenues and net earnings.

In addition, customer difficulties in the future could result from economic declines or issues arising from the cyclical nature of their business and, in turn, result in decreases in product demand, increases in bad debt write-offs, decreases in timely collection of accounts receivable and adjustments to our allowance for credit losses, resulting in material reductions to our revenues and net earnings.

Our business is cyclical and seasonal, and in downward economic cycles our operating profits and cash flows could be adversely affected.

7 unchanged sentences

Economic and political conditions worldwide have from time to time contributed to slowdowns in our industry at large, as well as to the specific markets in which we operate.

When combined with ongoing customer consolidation activity and periodic manufacturing and inventory initiatives, an uncertain macro-economic and political climate, including but not limited to the effects of possible weakness in domestic and foreign financial and credit markets, could lead to reduced demand from our customers and increased price competition for our products, increased risk of excess and obsolete inventories and uncollectible receivables, and higher overhead costs as a percentage of revenue.

When combined with ongoing customer consolidation activity and periodic manufacturing and inventory initiatives, an uncertain macro-economic and political climate, including but not limited to a recession or inflationary pressures, and the effects of possible weakness in domestic and foreign financial and credit markets, could lead to reduced demand from our customers and increased price competition for our products, increased risk of excess and obsolete inventories and uncollectible receivables, and higher overhead costs as a percentage of revenue.

If the markets in which we participate experience further economic downturns, as well as a slow recovery period, this could negatively impact our sales and revenue generation, margins, and operating expenses, and consequently have a material adverse effect on our business, financial condition and results of operations.

20 unchanged sentences

We may not have sufficient resources to continue to make such investments and we may be unable to maintain our competitive position.

We have a concentration of net sales to the petroleum / convenience store market, and any substantial change in this market could have an adverse effect on our business.

Approximately 34% of our net sales in fiscal year 2021 are concentrated in the petroleum/convenience store market.

Sales to this market segment are dependent upon the general conditions prevailing in and the profitability of the petroleum/convenience store industry and general market conditions.

Our petroleum market business can be subject to reactions by the petroleum industry to world political events, particularly those in the Middle East, to the price and supply of oil and to a decline in demand resulting from an economic recession or other factors.

Major disruptions in the petroleum industry generally result in a curtailment of retail marketing efforts, including expansion and refurbishing of retail outlets, by the petroleum industry and adversely affect our business.

Any substantial change in purchasing decisions by one or more of our larger customers whether due to actions by our competitors, customer financial constraints, and industry factors or otherwise, could have an adverse effect on our business.

We have a concentration of net sales to the refueling and convenience store and grocery markets, and any substantial change in this market could have an adverse effect on our business.

The Company has a concentration of sales in the refueling and convenience store and grocery markets.

Sales to the refueling and convenience store market are dependent upon the general conditions prevailing in and the profitability of the Petroleum industry and general market conditions.

The refueling and convenience store market can be subject to reactions by the petroleum industry due to world political events, to the price and supply of oil, and to a decline in demand resulting from an economic recession, or other factors.

Major disruptions in the petroleum industry generally result in a curtailment of retail marketing efforts, including expansion and refurbishing of retail outlets by the petroleum industry, which could adversely affect our business.

The operating environment for the grocery market continues to be characterized by the fragmentation of local, regional, and national retailers, including both retail and digital formats, market consolidation, intense competition, and entry of non-traditional competitors.

Customer behavior shifted quickly and considerably during the pandemic, including a shift from food away from home to food at home.

The changing operating environment along with changes in customer behaviors within the grocery market could have an adverse impact on the purchasing decisions by one or more of our larger customers in this market.

In addition, actions by our competitors, our customer’s financial constraints, and industry factors or otherwise, could have an adverse effect on our business in either of these markets.

The Company may pursue future growth through strategic acquisitions and investments, which may not yield anticipated benefits

The Company has strengthened its business through strategic acquisitions including the recent acquisition of JSI, and may continue to do so as opportunities arise in the future.

The Company has strengthened its business through strategic acquisitions including the fiscal 2021 acquisition of JSI and may continue to do so as opportunities arise in the future.

The Company will benefit from such activity only to the extent that it can effectively leverage and integrate the assets or capabilities of the acquired businesses including, but not limited to, personnel, technology, and operating processes.

32 unchanged sentences

The Company’s strategic sourcing plans include mitigating supply chain risk by utilizing multiple suppliers for a commodity to avoid significant dependence on any single supplier.

Although an interruption of these supplies and components could disrupt our operations, we believe generally that alternative sources of supply exist and could be readily arranged prior to the COVID-19 pandemic.

As a result, we have increased our safety stock in certain components in order to mitigate a potential disruption to our operations resulting from an anticipated shortage of these same components.

Although an interruption of these supplies and components could disrupt our operations, we believe generally that alternative sources of supply exist and could be readily arranged.

To mitigate the risk of disruptions in the supply chain, we have increased our safety stock in certain components in order to mitigate a potential disruption to our operations resulting from an anticipated shortage of these same components.

With regard to price fluctuations of our raw material and component purchases, the price risk for materials the Company purchases is related to price increases in commodity items that affect all users of the materials, including the Company’s competitors.

2 unchanged sentences

The Company is also impacted by shortages and the availability of transportation of our products to our customers, in addition to rising fuel prices.

On occasion, the Company’s Lighting Segment has implemented price increases and surcharges with customers to offset raw material price increases and to mitigate the impact of trade tariffs.

The Company’s Display Solutions Segment generally establishes new sales prices, reflective of the then current raw material prices, for each program as it begins with further price increases throughout the life of the program when warranted.

The Company’s Lighting Segment has implemented price increases and surcharges with customers to offset raw material price increases along, rising transportation costs, and to mitigate the impact of trade tariffs.

The Company’s Display Solutions Segment generally establishes new sales prices, reflective of the then current raw material prices and transportation costs, for each program as it begins, with further price increases throughout the life of the program when warranted.

Although the Company attempts to pass along increased costs in the form of price increases or surcharges to its customers, the Company may be unsuccessful in doing so for competitive reasons.

6 unchanged sentences

Any failure to identify and address or to prevent a cyber- or malware-attack could result in service interruptions, operational difficulties, loss of revenues or market share, liability to our customers or others, the diversion of corporate resources, injury to our reputation and increased service and maintenance costs.

In August 2020, we experienced a malware incident affecting certain of our network systems.

Immediately following the incident, actions were taken to recover the affected systems and to verify through third-party testing that no confidential data was extracted or compromised.

There was minimal business interruption and immaterial net financial impact resulting from the incident. Since the incident occurred, we have significantly enhanced and will continue to improve our cybersecurity controls in order to minimize the likelihood or impact of a reoccurrence.

We have significantly enhanced and will continue to improve our cybersecurity controls in order to minimize the likelihood or impact of a cybersecurity or malware attack.

Our information systems are protected through physical and software security as well as redundant backup systems, however, as cyber-attacks continue to evolve, we are committed to investing in our cyber defenses in order to mitigate the risks.

53 unchanged sentences

Consequently, changes in the product mix of our sales from quarter-to-quarter or from year-to-year can have a significant impact on our reported gross profit margins.

We may not recognize all revenues from our backlog or receive all payments anticipated under awarded projects and customer contracts.

We had backlog of orders of approximately $112.4 million and $89.7 million, as of June 30, 2022, and June 30, 2021, respectively, with respect to expected future revenues.

Our customers have the right under some circumstances to terminate contracts or defer the timing of our shipments or installments and their payments to us.

We may not receive all of the revenues from our backlog.

If we do not receive all of the revenues we currently expect to receive, our future operating results will be adversely affected.

In addition, a delay in the receipt of revenues, even if such revenues are eventually received, may cause our operating results for a particular quarter to fall below our expectations.

We may be required to write-off or impair capitalized costs or intangible assets in the future, or we may incur restructuring costs or other changes, each of which could harm our earnings.

In accordance with generally accepted accounting principles in the United States, we capitalize certain expenditures and advances relating to our acquisitions, pending acquisitions, project development costs, interest costs related to project financing and certain other assets.

In addition, we have considerable unamortized assets.

From time to time in future periods, we may be required to incur a charge against earnings in an amount equal to any unamortized capitalized expenditures and advances, net of any portion thereof that we estimate will be recoverable, through sale or otherwise, relating to:

(i) any operation or other asset that is being sold, permanently shut down, impaired or has not generated or is not expected to generate sufficient cash flow;

(ii) any project that is not expected to be successfully completed;

and (iii) any goodwill or other intangible assets that are determined to be impaired.

As a result of such actions, we would expect to incur restructuring expenses and accounting charges which may be material and may have a material effect on our financial condition.

RISKS RELATED TO LEGAL AND REGULATORY MATTERS

There are numerous state, federal and foreign laws, regulations, decisions and directives regarding privacy and the collection, storage, transmission, use, processing, disclosure, and protection of personally identifiable information and other personal, customer or other data, the scope of which is continually evolving and subject to differing interpretations.

For example, in the U.S., Health Insurance Portability and Accountability Act (“HIPAA”) privacy and security rules require us as a business associate to protect the confidentiality of patient health information, and the Federal Trade Commission asserts authority over protection of privacy and the use of cyber security in information systems.

In Europe, the General Data Protection Regulation (“GDPR”), which went into effect in May 2018, imposes several stringent requirements for controllers and processors of personal data that will increase our obligations and, in the event of violations, may impose significant fines of up to the greater of 4% of worldwide annual revenue or €20 million.

In the UK, a Data Protection Bill that substantially implements the GDPR became law in May 2018.

China and Russia have also passed laws that require individually identifiable data on their citizens to be maintained on local servers and that may restrict transfer or processing of that data.

Further, in June 2018, California passed the California Consumer Privacy Act of 2018 (“CCPA”), which became effective on January 1, 2020.

CCPA imposes stringent data privacy and data protection requirements for the data of California residents and provides for penalties for noncompliance of up to $7,500 per violation.

The restrictions imposed by these laws and regulations may limit the use and adoption of our products, reduce overall demand for our products, require us to modify our data handling practices and impose additional costs and burdens.

In addition, U.S.

and international laws that have been applied to protect user privacy (including laws regarding unfair and deceptive practices in the U.S.

and GDPR in the EU) may be subject to evolving interpretations or applications in light of privacy developments.

As a result, we may be subject to significant consequences, including penalties and fines, for any failure to comply with such laws, regulations, and directives.

Data protection legislation around the world is comprehensive and complex and there has been a recent trend towards more stringent enforcement of requirements regarding protection and confidentiality of personal data.

The restrictions imposed by such laws and regulations may limit the use and adoption of our products and services, reduce overall demand for our products and services, require us to modify our data handling practices, and impose additional costs and burdens.

With increasing enforcement of privacy, data protection and cyber security laws and regulations, there is no guarantee that we will not be subject to enforcement actions by governmental bodies or that our costs of compliance will not increase significantly.

Enforcement actions can be costly and interrupt regular operations of our business.

In addition, there has been a developing trend of civil lawsuits and class actions relating to breaches of consumer data held by large companies.

While we have not been named in any such suits, if a substantial breach or loss of data from our records were to occur, we could become a target of such litigation.

Any inability to adequately address privacy and security concerns, even if unfounded, or comply with applicable laws, regulations, policies, industry standards, contractual obligations, or other legal obligations could result in additional cost and liability to us, damage our reputation, inhibit sales, and adversely affect our business.

Our failure to comply with applicable laws and regulations could result in enforcement action against us, including fines and public censure, claims for damages by customers and other affected individuals, damage to our reputation and loss of goodwill (both in relation to existing customers and prospective customers), any of which could harm our business, results of operations and financial condition.

The costs of litigation and compliance with environmental regulations, if significantly increased, could have an adverse effect on our operating profits.

20 unchanged sentences

A significant decline in our stock price could adversely affect our ability to raise additional capital.

The market price of our common stock has experienced fluctuations in prior years.

The market price of our common stock has experienced fluctuations in fiscal 2021 and prior years.

Our progress in developing and commercializing our products, our quarterly operating results, announcements of new products by us or our competitors, our perceived prospects, changes in general conditions in the economy or the financial markets, adverse events related to our strategic relationships, and other developments affecting us, or our competitors could cause the market price of our common stock to fluctuate substantially.

2 unchanged sentences

These market fluctuations, regardless of the cause, may materially and adversely affect our stock price, regardless of our operating results, and this could impact our ability to raise capital.

Amounts drawn under our credit facility may bear interest rates in relation to LIBOR, depending on our selection of repayment options.

On July 27, 2017, the Financial Conduct Authority (“FCA”) in the UK announced that it would phase out LIBOR as a benchmark by the end of 2021.

It is unclear whether new methods of calculating LIBOR will be established such that it continues to exist after 2021.

Federal Reserve is considering replacing U.S.

dollar LIBOR with a newly created index called the Broad Treasury Financing Rate, calculated with a broad set of short-term repurchase agreements backed by treasury securities.

The overall financial market may be disrupted as a result of the phase-out or replacement of LIBOR.

Disruption in the financial market or the inability to renegotiate our credit facility with favorable terms could have a material adverse effect on our business, financial position, and operating results.

Anti-takeover provisions in our organizational documents and in Ohio law could make difficult or delay a change in management or negatively impact our share price.

Certain provisions of our Articles of Incorporation and Code of Regulations could make it more difficult for a third party to acquire control of us even if such a change in control would increase the value of our common stock and could prevent or hinder attempts by our shareholders to replace or remove our current board of directors or management.

We have a number of provisions in place that will hinder takeover attempts and could reduce the market value of our common stock or prevent sale at a premium.

These provisions include:

the authorization of undesignated preferred stock, which makes it possible for the board of directors to issue preferred stock with voting or other rights or preferences in a manner that could delay or prevent a transaction or a change in control;

a provision that specifies that special meetings of our shareholders may be called only by our board of directors, our chairman of the board, if one has been elected, our president, or persons holding 50% of our outstanding voting stock;

any business combination between us and a beneficial owner of 15% or more of our voting power requires the vote of 66 2/3% of the voting power of disinterested shareholders for five years after a party became an interested shareholder;

any person who becomes a beneficial owner of 15% or more of our voting power must offer to purchase all of our voting securities and securities convertible into or exercisable for our voting securities within 25 days after achieving 15% ownership.

The price to be paid would be the greater of the highest price paid by such 15% owner in acquiring its shares or the highest trading price for a period of time prior to such person becoming a 15% owner;

the votes of holders of 66 2/3% of all outstanding shares is required to amend our Articles of Incorporation and to approve mergers, reorganizations, and similar transactions;

and advance notice requirements by shareholders for director nominations and actions to be taken at annual meetings.

Ohio corporation law contains provisions that may discourage takeover bids for our company that have not negotiated with the board of directors.

Such provisions could limit the price that investors might be willing to pay in the future for our shares of common stock.

Additionally, shareholders may act by written consent without a meeting only if such written consent is signed by all shareholders.

UNRESOLVED STAFF COMMENTS

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors