What changed in this filing

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Item 1A. Risk Factors

2022-02-23 compared with 2021-02-25 · 163 added, 122 removed, 35 unchanged (89% of the section changed)

Our business, financial condition and results of operations, and the market price for the Company's common shares are subject to numerous risks, many of which are driven by factors that cannot be controlled or predicted.

Our business, financial condition and results of operations, and the market price for our common stock are subject to numerous risks, many of which are driven by factors that cannot be controlled or predicted.

The following discussion, as well as other sections of this Annual Report on Form 10-K, including “Part II, Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations,” describe certain business and other risks affecting the Company.

In conjunction with reviewing the forward-looking statements and other information contained in this Annual Report on Form 10-K, consideration should be given to the risk factors described below as well as those in the Safe Harbor Statement at the beginning of this Annual Report on Form 10-K.These risks are not the only risks we face.

Our business operations and the market for our securities could also be adversely affected by additional factors that are not presently known to us, or that we currently consider to be immaterial in our operations.

These risks are not the only risks we face.

Risks Related to Our Business Operations

We apply judgments and make estimates in accounting for certain customer contracts, and changes in these judgments or estimates may have significant impacts on our earnings.

Changes in judgments or required estimates and any subsequent adjustments to those judgments or estimates (such as performance incentives, penalties, contract claims and contract modifications) could have a material effect on sales and profits.

Due to the substantial judgments applied and estimations involved with our accounting for customer contracts, our actual results could differ materially or could be settled unfavorably from our estimates.

Revenue representing 40%, 41% and 38% of 2020, 2019 and 2018 consolidated net sales, respectively, were recognized over time under the cost-to-cost method.

Refer to “Critical Accounting Estimates” within Item 7 of this Form 10-K for more detail of how our financial statements can be affected by accounting for revenue from contracts with customers.

The volatility of the commodity market on the cost of our principal raw materials and component parts, or substantial decreases in the availability of our principal raw materials and component parts, has impacted, and could continue to impact, our business, results of operations, and cash flows.

Our principal raw materials are commodity products primarily consisting of steel, aluminum, and resins.

We also purchase component parts such as glass for greenhouse roofing systems thus resulting in exposure to changes in the price and availability of glass, and furthermore, although not purchased by us, we also have exposure related to the availability of solar panels which has impacted installation of, and could reduce demand for, our solar racking projects.

As we have seen with the COVID-19 pandemic and broader market dynamics in 2021 and continuing in 2022, availability and pricing can be volatile due to a number of factors beyond our control, including general economic conditions, domestic and worldwide supply and demand, labor costs and availability, competition, freight costs and transportation, import duties, tariffs, and currency exchange rates.

We have experienced cost increases and disruptions to our supply deliveries for raw materials and component parts and may continue to experience cost increases and supply disruptions in the future.

We may not be successful in passing along pricing increases to our customers or in our efforts to mitigate the impact of supply chain disruptions.

The failure by our suppliers to deliver raw materials or component parts according to schedule, or at all, has resulted in manufacturing delays, capacity

constraints, project delays, cost inflation and logistics delays and has affected, and may continue to affect, our ability to meet our customers' needs.

Furthermore, the failure of any sourced raw materials or components to conform to our specifications could also result in delays in our ability to timely deliver, and may have an adverse impact on our relationships with our customers and our ability to fully realize the revenue expected from sales to those customers.

Commodity price fluctuations and increased competition could force us to lower our prices or to offer additional services or enhanced products at a higher cost to us, which could reduce our gross profit, net income, and cash flow and cause us to lose market share.

W e expect these supply chain inputs (material and transportation) and labor availability pressures along with the impact of material cost, labor and logistics inflation will continue at least into 2022 notwithstanding any actions we may take to mitigate such impacts.

The success of our business depends on our senior management team and other key employees and our ability to attract or retain a skilled and diverse workforce.

Our success is dependent on the management and leadership skills of our senior executive and divisional management teams.

We cannot assure you that we will be able to retain our existing senior management personnel, that we will have a successor prepared and available upon any loss of such personnel or that we will be able to attract additional qualified personnel through external recruitment when needed.

We have not entered into employment agreements with any of our senior management personnel.

Furthermore, our business segments are dependent on engineers and other technical personnel to perform a variety of key tasks which include the identification and implementation of improvements to our manufacturing process, redesign of our products for better performance, the development of new products and identification and execution of cost reduction activities.

Technical service personnel also work in conjunction with our sales force in the new product development process to determine the types of products and services that suit the particular needs of our customers.

We may not be able to successfully compete for, attract, retain, develop or motivate a skilled and diverse workforce that our business needs may require.

Our operations may be adversely impacted by the availability of labor at our manufacturing and distribution facilities or on our project sites.

The unexpected loss of a member of our senior management team, key employee or highly-skilled associate (including due to an increase in aggressive recruiting for talent in the current labor market) or our inability to attract and retain additional personnel could deplete our institutional knowledge base, erode our competitiveness and prevent us from successfully executing our business strategy.

The COVID-19 pandemic has significantly impacted worldwide economic conditions and adversely impacted, and may continue to adversely impact our business, results of operations, financial condition, and cash flows.

The COVID-19 pandemic began to impact our operations late in the first quarter of 2020 as government authorities imposed mandatory closures, work from home orders and social distancing protocols, which resulted in temporary curtailment of some operations and increased costs to operate certain facilities, and has continued to impact our operations as new strains of the COVID-19 virus have been identified.

In addition to existing travel and activity restrictions, jurisdictions may continue to close borders, impose prolonged quarantines and further restrict travel and other activities.

The pandemic has caused a global recession of potentially extended duration.

Our top priority continues to be focused on our organization—keeping our team and their families as safe as possible, maintaining our supply chain and providing a high level of responsiveness to customer needs.

We continued to proactively execute our pandemic “playbook” in 2021 and early 2022 and make adjustments to our operating protocols as we navigate forward, including to redesign production processes, adjust shift schedules and assignments, implement aggressive new workplace sanitation practices, adjust our work environments to improve airflow and ensure access to personal protective equipment to minimize infection risk.

Further actions may be required in response to evolving conditions such as renewed travel restrictions, quarantine, and stay-at-home orders.

Throughout 2021 and continuing in 2022, COVID-19, as well as broader market dynamics have resulted in impacts to our business, including increased material cost inflation, labor availability issues (due to illness and otherwise) and logistics challenges and costs increases.

We have also been impacted by supply constraints for materials and commodities used in our operations.

Throughout the COVID-19 pandemic, we have been focused, and will continue to focus, on managing our working capital, closely monitoring customer credit and collection activities, and working to extend payment terms, although we may not be successful in doing so.

It is not possible to predict the ultimate impact of COVID-19 on our business, results of operations, financial position or cash flows, and the duration of such impact may vary dramatically by geography and line of business.

However, while the pandemic continues, we expect to experience continued adverse impacts of the pandemic on our business and financial statements, including through disruptions to the supply chain, limiting access to our distribution channels, reducing the availability of our workforce and subcontractors and heightened cybersecurity

risk, all of which may pose material risk to our results of operations, financial condition, and cash flows.

Further, the COVID-19 pandemic may exacerbate the potential impact of the other risks described herein on our results of operations, financial condition and cash flows.

A significant portion of our net sales are concentrated with a few customers.

The loss of any of those customers would adversely affect our business, results of operations, and cash flows.

A loss of sales, whether due to decreased demand from the end markets we serve or from the loss of any significant customer in these markets, a decrease in the prices that we can realize from sales of our products to customers in these markets, or a loss, bankruptcy, or significant decrease in business from any of our major customers, could have a significant adverse effect on our profitability and cash flows.

Our ten largest customers accounted for approximately 35%, 34%, and 46% of our net sales during 2020, 2019, and 2018, respectively, with our largest customer, a retail home improvement center, accounting for approximately 14% of our consolidated net sales during each of the years 2020, 2019 and 2018.

A portion of our business is dependent on laws and regulations pertaining to the cannabis industry, and this industry faces significant opposition that could adversely affect this portion of our business.

One of our businesses makes and sells greenhouses and botanical extraction and processing equipment which may be sold to companies that cultivate, process and sell cannabis products for recreational and medicinal use.

This business is dependent on state laws and regulations pertaining to the cannabis industry that legalize and regulate cannabis use.

While several states have legalized cannabis for medical or recreational purposes, it remains illegal under federal law.

Even in those states in which cannabis use has been legalized, its use remains a violation of federal criminal law, which preempts state laws that legalize its use.

Strict enforcement of federal law regarding cannabis would likely have an adverse impact on our customers, and correspondingly, may adversely impact our gross profit, net income and cash flows.

The cultivation, processing and distribution of cannabis in states where it has been legalized is subject to significant regulatory requirements.

If our customers who purchase greenhouses and extraction and processing equipment are unable to obtain and maintain the licenses, permits, authorizations or accreditations required to comply with state and local regulations, we may experience the aforementioned adverse effects on our business and results of operations.

Our business that engages in the sale of greenhouses and botanical extraction equipment is dependent, in part, on increasing legalization and market acceptance of medical and recreational cannabis use.

We cannot predict the future increase in state legalization or the future market potential of legalized cannabis use.

Other well-established business sectors with powerful economic influence may take action that could adversely impact the cannabis market.

The failure of further legalization or market acceptance, or the adverse action by competing well-established business sectors, may suppress our customers’ demand for our products and thereby reduce our gross profit and net income.

A loss of sales, whether due to decreased demand from the end markets we serve, the loss or bankruptcy of any significant customer in these markets, a decrease in the prices that we can realize from sales of our products to customers in these markets, or a significant decrease in business from any of our major customers, could have a significant adverse effect on our profitability and cash flows.

Our ten largest customers accounted for approximately 38%, 35%, and 34% of our net sales during 2021, 2020, and 2019, respectively, with our largest customer, a retail home improvement center, accounting for approximately 13% of our consolidated net sales during 2021 and approximately 14% of our consolidated net sales during each of the years 2020 and 2019.

Our business is highly competitive and increased competition could reduce our gross profit, net income, and cash flow.

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Competition is based primarily on product functionality, quality, price, raw material and inventory availability, and the ability to meet delivery schedules dictated by customers.

We compete in our principal markets with companies of various sizes, some of which have greater financial and other resources than we do, and some of which have better established brand names in the markets we serve.

In recent months, our ability to meet delivery schedules, prices and raw material and inventory availability have all been negatively impacted by the COVID-19 pandemic as well as broader market dynamics.

The markets in which we operate are characterized by changing technologies and introductions of new products and services, so we also face competition from the introduction by competitors of new products or technologies.

We compete in our principal markets with companies of various sizes, some of which have greater scale and financial and other resources than we do, have better established brand names and may be better able to withstand a change in conditions in the markets we serve.

Increased competition could force us to lower our prices or to offer additional services or enhanced products at a higher cost to us, which could reduce our gross profit, net income, and cash flow and cause us to lose market share.

If the subcontractors and suppliers we rely upon do not perform their contractual obligations, our revenues and cash flows would be adversely affected.

Further, if we do not have sufficient resources to invest or are otherwise unable to correctly identify customer needs and preferences, innovate and drive improvements or efficiencies in existing products, develop new products, technologies or services in the markets we participate in, or successfully commercialize our innovation efforts, we may lose market share.

Even when we successfully innovate and develop new and enhanced products and services, we often incur substantial costs in doing so, and our profitability may suffer.

If the subcontractors we rely upon do not perform their contractual obligations, our revenues and cash flows would be adversely affected.

Some of our construction contracts with customers involve subcontracts with other companies that perform a portion of the services or provide systems that are integral to the end product that we provide to our customers.

There is a risk that our subcontractors may not perform their contractual obligations, and therefore may cause disputes regarding the quality and timeliness of work performed by our subcontractors or other customer concerns with the subcontractor.

There is a risk that our subcontractors may not perform their contractual obligations, and we are dependent on our subcontractors to ensure the quality and timeliness of work performed by them, which may subject us to customer concerns or disputes regarding the work performed by our subcontractors.

Any such disputes or concerns could materially and adversely impact our ability to perform our obligations as the prime contractor.

Similarly, the failure by our suppliers to deliver raw materials, components or equipment parts according to schedule, or at all, may affect our ability to meet our customers' needs and may have an adverse effect upon our profitability.

Failure of our raw materials or components to conform to our specification could also result in delays in our ability to timely deliver, and may have an adverse impact on our relationships with our customers, and our ability to fully realize the revenue expected from sales to those customers.

Our operations are subject to seasonal fluctuations that may impact our cash flow.

Our net sales are generally lower in the first and fourth quarters primarily as a result of reduced activity in the building industry due to inclement weather.

Our operations are subject to seasonal fluctuations and the cyclical nature of construction activity that may impact our cash flow.

Our net sales are generally lowest in the first quarter primarily as a result of reduced activity in the building industry due to inclement weather.

Therefore, our cash flow from operations may vary from quarter to quarter.

If, as a result of any such fluctuation, our quarterly cash flows were significantly reduced, we may not be able to service our indebtedness or maintain covenant compliance.

The expiration, elimination or reduction of solar rebates, credits and incentives may adversely impact our business.

A variety of federal, state and local government agencies provide incentives to promote electricity generation from renewable sources such as solar power.

These incentives are in the form of rebates, tax credits and other financial incentives which help to motivate end users, distributors, system integrators and others to install solar powered generating systems.

Any changes to reduce, shorten or eliminate the scope and availability of these incentive programs could materially and adversely impact the demand for our related products, our financial condition and results of operations.

The nature of our business exposes us to product liability, product warranty and other claims, and other legal proceedings.

We are involved in product liability, product warranty and other claims relating to the products we manufacture and distribute.

Although we currently maintain what we believe to be suitable and adequate insurance in excess of our self-insured amounts for product liability and other claims, there can be no assurance that we will be able to maintain such insurance on acceptable terms or that such insurance will provide adequate protection against potential liabilities.

Product liability claims can be expensive to defend and can divert the attention of management and other personnel for significant periods, regardless of the ultimate outcome.

Claims of this nature could also have a negative impact on customer confidence in our products and our Company.

We cannot assure you that any current or future claims will not adversely affect our reputation, financial condition, operating results, and cash flows.

We depend on our senior management team and other key employees, and the unexpected loss of any member could adversely affect our operations.

Our success is dependent on the management and leadership skills of our senior executive and divisional management teams.

The unexpected loss of any of these individuals or our inability to attract and retain additional personnel could prevent us from successfully executing our business strategy.

We cannot assure you that we will be able to retain our existing senior management personnel or to attract additional qualified personnel when needed.

We have not entered into employment agreements with any of our senior management personnel.

Furthermore, construction activity has historically been cyclical and dependent on economic conditions, including interest rates, availability of financing, inflation, employment, spending habits, consumer confidence and other factors outside our control.

Residential and commercial construction is also affected by the cost and availability of skilled labor, which could impact both the cost and pace of construction activity, as well as the construction methods used, all of which could adversely affect demand for our products.

If our cash flows were significantly reduced due to seasonal fluctuations or reduced construction activity, we may not be able to service our indebtedness or maintain covenant compliance.

Our ongoing and expected restructuring plans and other cost savings initiatives may not be as effective as we anticipate, and we may fail to realize the cost savings and increased efficiencies that we expect to result

from these actions, which could negatively affect our operating results.

We continually seek ways to simplify or improve processes, eliminate excess capacity and reduce costs in all areas of our operations, which from time to time includes restructuring and integration activities.

We have implemented significant restructuring activities across our manufacturing, sales and distribution footprint, which include workforce reductions and facility consolidations.

Costs of future initiatives may be material and the savings associated with them are subject to a variety of risks, including our inability to effectively eliminate duplicative back-office overhead and overlapping sales personnel, rationalize manufacturing capacity, synchronize information technology systems, consolidate warehousing and distribution facilities and shift production to more economical facilities.

As a result, the contemplated costs to effect these initiatives may materially exceed estimates.

The initiatives we are contemplating may require consultation with various employees and consultants which may influence the timing, costs and extent of expected savings and may result in the loss of skilled employees in connection with the initiatives.

If we are unable to implement our cost savings initiatives as timely and/or effectively as planned, our business may be adversely affected by the impact of our ability to continue to meet customer demand, maintain a high level of quality throughout the execution of the plans, and achieve the expected financial benefits of such plans, and therefore, potentially resulting in a material adverse effect on our business, results of operations and financial condition.

Macroeconomic factors outside of our control may adversely affect our business, our industry, and the businesses and industries of many of our customer and suppliers.

Macroeconomic factors have a significant impact on our business, customer demand and the availability of credit and other capital, affecting our ability to generate profitable margins.

Our operations are subject to the effects of domestic and international economic conditions, including global industrial production rates, inflation, deflation, interest rates, availability of capital, debt levels, consumer spending, energy availability, commodity prices, and the effects of governmental initiatives to manage economic conditions, including government monetary and trade policies, tax laws and regulations.

Tariffs placed on imported products used by our customers, such as solar panels, could impact cost and availability of these products to our customers which could impact the demand for our products or services.

In addition, fluctuations in the U.S.

dollar impact the prices we charge and costs we incur to export and import products.

We are unable to predict the impact on our business of changes in domestic and international economic conditions.

We currently face challenging market conditions, and domestic or global economies, or certain industry sectors of those economies that are key to our sales, may further deteriorate, which could result in a corresponding decrease in demand for our products and negatively impact our results of operations and financial condition.

Economic, political, and other risks associated with foreign operations could adversely affect our financial results and cash flows.

Although the significant majority of our business activity takes place in the United States, we derive a portion of our revenues and earnings from operations in Canada, China and Japan, and are subject to risks associated with doing business internationally.

Our sales originating outside the United States represented approximately 5% of our consolidated net sales during the year ended December 31, 2021.

We believe that our business activities outside of the United States involve a higher degree of risk than our domestic activities, such as the possibility of unfavorable circumstances arising from host country laws or regulations, changes in tariff and trade barriers and import or export licensing requirements and expose us to currency exchange rate fluctuations between the United States Dollar and foreign currencies.

In addition, any local or global health issue or uncertain political climates, international hostilities, natural disasters, or any terrorist activities could adversely affect customer demand, our operations and our ability to source and deliver products and services to our customers.

Climate change and climate change legislation or regulations may adversely affect our business.

Legislative and regulatory changes in response to the potential effects of climate change may require additional costs and investment for compliance, including an increase in our capital expenditures to reduce our emissions and increased cost of purchased energy for both us and our suppliers, which may increase our costs to procure raw materials, components or equipment parts.

As climate change continues to increase the severity of weather, physical effects—such as damage to facilities, capital equipment and inventory or disruption in production, product distribution or field operations as a result of heat, drought, wildfires, major storm events and shifts in regional weather patterns and intensities—may also significantly affect our operations and financial results.

Concerns over global climate change and environmental sustainability over time, including due to expectations of our stockholders, customers and employees, may influence our strategic direction, supply chain, or delivery channels.

Future terror attacks, war, natural disasters or other catastrophic events beyond our control could negatively impact our operations and financial results.

Terror attacks, war, or other civil disturbances, natural or man-made disasters (which may become more frequent due to climate change), other catastrophic events or public health crises could cause catastrophic loss or other material damage to our facilities or lead to economic instability, decreased capacity to produce our products and decreased demand for our products.

Recently, we've experienced operating disruptions related to severe weather across the U.S.

From time to time, terrorist attacks worldwide have caused instability in global financial markets.

We could incur uninsured losses and liabilities arising from such events, and any resulting business interruptions could have an adverse effect on our operations, cash flows and financial results.

Risks Related to Information Technology

Our business and financial performance may be adversely affected by cybersecurity attacks, information systems interruptions, equipment failures, and technology integration.

Our business may be impacted by disruptions to our own or third-party information technology (“IT”) infrastructure, which could result from (among other causes) cyber-attacks on, or failures of, such infrastructure or compromises to its physical security, as well as from damaging weather or other acts of nature.

Cyber-based risks, in particular, are evolving and include, but are not limited to, both attacks on our IT infrastructure and attacks on the IT infrastructure

of third parties (both on premises and in the cloud) attempting to gain unauthorized access to our confidential or other proprietary information, classified information, or information relating to our employees, customers and other third parties.

Due to the increasing number and sophistication of attempted intrusions and attacks on Company networks, cyber-based attacks will continue and we will likely experience increasing numbers of them going forward.

We continue to make investments and adopt measures designed to enhance our protection, detection, response, and recovery capabilities, and to mitigate potential risks to our technology, products, services and operations from potential cyber-attacks.

However, given the unpredictability, sophistication and scope of cyber-attacks, it is possible that potential vulnerabilities could go undetected for an extended period.

We could potentially be subject to production downtimes, operational delays, other detrimental impacts on our operations or ability to provide products and services to our customers, the theft of confidential or otherwise protected information, misappropriation of assets, destruction or corruption of data, security breaches, other manipulation or improper use of our or third-party systems, networks or products, financial losses from remedial actions, loss of business or potential liability, and/or damage to our reputation.

Due to the evolving nature of such risks, the impact of any potential incident cannot be predicted, but under certain circumstances could materially and adversely affect our competitive position, results of operations and cash flows.

We rely on information technology (IT) systems, some of which are provided and/or managed by third-parties, to process, transmit and store electronic information (including sensitive data such as confidential business information and personally identifiable data relating to employees, customers and other business partners), and to manage or support a variety of critical business processes and activities (such as receiving and fulfilling orders, billing, collecting and making payments, shipping products, providing services and support to customers, and fulfilling contractual obligations).

Our ability to effectively manage our business depends on the security, reliability, and capacity of these IT systems.

These systems (including those we acquire through business acquisitions) can be damaged, disrupted or shut down due to attacks by computer hackers, computer viruses, ransomware, human error or malfeasance, power outages, hardware failures, telecommunication or utility failures, catastrophes, or other unforeseen events.

While, we maintain information technology measures designed to protect us against intellectual property theft, data breaches, sabotage and other external or internal cyber-attacks or misappropriation, Cyber-attacks are increasingly difficult to identify and prevent, and it is possible that potential vulnerabilities could go undetected for an extended period.

Our systems are not fully redundant and our disaster recovery planning may not be sufficient.

Any interruptions to our IT systems could disrupt our operations, causing delays or cancellation of customer orders or impeding the manufacture or shipment of products, processing of transactions or reporting of financial results.

Security breaches can result in the misappropriation, destruction or unauthorized disclosure of confidential information or personal data belonging to us or to our employees, partners, customers, or suppliers, damage customer, business partner and employee relationships and our reputation and result in legal claims and proceedings, liability and penalties under data protection laws and regulations.

Some of our systems have experienced past security breaches, and, although they did not have a material adverse effect on our operating results, there can be no assurance that future incidents will not have material adverse effects on our operations or financial results.

In addition, our IT systems require an ongoing commitment of significant resources to maintain and enhance existing systems and develop new systems to keep pace with continuing changes in information processing technology, evolving legal and regulatory standards and customer expectations, changes in the techniques used to obtain unauthorized access to data and information systems, and the information technology needs associated with our changing products and services.

In addition, we are subject to data privacy and security laws, regulations, and customer-imposed controls in a number of jurisdictions as a result of having access to and processing confidential, personal and/or sensitive data in the course of our business.

Compliance with the varying data privacy regulations across the United States and around the world has required, and will continue to require, significant expenditures.

There can be no assurance that we will be able to successfully maintain, enhance and upgrade our systems as necessary to effectively address changing cybersecurity risks and legal requirements, and our efforts to do so may be costly.

Risks Related to Acquisitions

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• Diversion of senior management’s attention from existing business activities;

• Failure to integrate any acquisition into our operations successfully that may result in incurring unforeseen obligations , loss of key customers, suppliers, and employees of the acquired businesses, or loss of existing customers and suppliers;

• Difficulties or delays in integrating and assimilating information and systems that may require significant unforeseen upgrades or replacement of our primary information technology systems across significant parts of our businesses and operations to successfully integrate acquisitions.

The implementation of new information technology solutions could lead to interruptions of information flow internally and to our customers and suppliers while the implementation project is being completed.

Any failure to integrate legacy systems of acquisitions or to implement new systems properly could negatively impact our operations and financial results.

• Consummating a large acquisition could require us to raise additional funds through additional equity or debt financing, which could be dilutive to shareholder value, increase our interest expense and reduce our cash flows and available funds.

• Failure to integrate any acquisition into our operations successfully;

• Unforeseen obligations, loss of key customers, suppliers, and employees of the acquired businesses, or loss of existing customers and suppliers;

• Difficulties or delays in integrating and assimilating information and systems that may require significant unforeseen upgrades or replacement of our primary IT systems across significant parts of our businesses and operations, which could lead to interruptions of information flow internally and to our customers and suppliers;

• The need to raise additional funds through additional equity or debt financing, which could be dilutive to stockholder value, increase our interest expense and reduce our cash flows and available funds;

• Adverse impact on overall profitability if the acquired business does not achieve the return on investment projected at the time of acquisition.

We have not completed an assessment of the internal controls over financial reporting for our 2020 acquisitions, and therefore, significant deficiencies or material weaknesses may exist.

Under current SEC guidelines, the period in which management may omit an assessment of an acquired business's internal control over financial reporting from its assessment of the registrant's internal control may not extend beyond one year from the date of acquisition, nor may such assessment be omitted from more than one annual management report on internal control over financial reporting.

Pursuant to this guidance, we have excluded our 2020 acquisitions from the scope of management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2020.

However, we will be required to include these acquisitions in the scope of our assessment beginning in 2021.

In connection with our 2021 assessment, “significant deficiencies” or “material weaknesses” in internal control over financial reporting may be detected in 2020 acquired companies.

To the extent that such deficiencies are identified, we may incur

costs associated with our efforts to address these deficiencies that could negatively affect our financial condition and operating results.

Furthermore, if we are unable to correct such deficiencies in a timely manner, our ability to record, process, summarize and report financial data may be adversely affected, which may result in a material misstatement in our financial statements.

Such failure could materially and adversely impact our business and subject us to potential investigations, liability and penalties.

General Risks Related to Investment in Our Securities

The COVID-19 pandemic has significantly impacted worldwide economic conditions and could have a material adverse effect on our business, results of operations, financial condition, and cash flows.

The COVID-19 pandemic began to impact our operations late in the first quarter of 2020 as government authorities imposed mandatory closures, work from home orders and social distancing protocols.

While vaccinations against COVID-19 have been developed, they are not yet widely available.

In addition new strains of the COVID-19 virus have been identified which may be resistant to vaccines or have higher morbidity rates than the initially identified strain of the virus.

As a result, we cannot predict when the impact of COVID-19 on our business will end.

We have adjusted our work environments to improve airflow and implement required social distancing protocols.

COVID-19 may further impact our operations by causing delays in our receipt of raw materials and other product components due to disruptions in our supply chain, limiting access to our distribution channels, reducing the availability of our workforce and subcontractors through government mandated closures or work from home orders and increasing the frequency of cyber attacks on our information technology infrastructure.

The unpredictable changes in our supply chain or our production capacity and customer demand resulting from the COVID-19 pandemic may pose material risk to our results of operations, financial condition, and cash flows.

We are continuously monitoring the impact of COVID-19 on our business and operations and taking action to mitigate the risks involved.

However, prolonged disruption to the economy and the end markets we serve may have a material adverse impact our business, results of operations, financial condition, and cash flows.

Macroeconomic factors outside of our control may adversely affect our business, our industry, and the businesses and industries of many of our customer and suppliers.

Macroeconomic factors have a significant impact on our business, customer demand and the availability of credit and other capital, affecting our ability to generate profitable margins.

Our operations are subject to the effects of domestic and international economic conditions including government monetary and trade policies, tax laws and regulations, as well as, the relative debt levels of the U.S.

and the other countries in which we sell our products.

Tariffs placed on imported products used by our customers could impact cost and availability of these products to our customers which could impact the demand for our products or services.

In addition, fluctuations in the U.S.

dollar impact the prices we charge and costs we incur to export and import products.

We are unable to predict the impact on our business of changes in domestic and international economic conditions.

The markets in which we operate have been challenging in the past, and the possibility remains that the domestic or global economies, or certain industry sectors of those economies that are key to our sales, may deteriorate, which could result in a corresponding decrease in demand for our products and negatively impact our results of operations and financial condition.

Risks Related to Financing and Accounting Matters

We apply judgments and make estimates in accounting for certain customer contracts, and changes in these judgments or estimates may have significant impacts on our earnings.

Revenue representing 47%, 40% and 41% of 2021, 2020 and 2019 consolidated net sales, respectively, were recognized over time under the cost-to-cost method.

Refer to “Critical Accounting Estimates” within Item 7 of this Annual Report on Form 10-K for more detail of how our financial statements can be affected by accounting for revenue from contracts with customers.

If events occur or indicators of impairment are present that may cause the carrying value of long-lived and indefinite-lived assets to no longer be recoverable or to exceed the fair value of the asset, or that may lead to a reduction in the fair value of the asset, significant non-cash impairment charges to earnings may be taken that may have a material adverse impact on our results of operations.

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It is possible that we will be required to record additional non-cash impairment charges to our earnings in the future, which could be significant and have a material adverse impact on our results of operations.

Refer to “Critical Accounting Estimates” within Item 7 of this Form 10-K for more detail of how our financial statements can be affected by asset impairment.

Increases in future levels of leverage and size of debt service obligations could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our obligations.

Refer to “Critical Accounting Estimates” within Item 7 of this Annual Report on Form 10-K for more detail of how our financial statements can be affected by asset impairment.

As of December 31, 2021, we had $24.5 million outstanding indebtedness.

Our ability to make scheduled payments on, or refinance, our debt obligations depend on our financial condition and operating performance, which are subject to prevailing economic, industry and competitive conditions and to certain financial, business, legislative, regulatory and other factors beyond our control.

We may need to incur additional debt in the future to fund strategic acquisitions, investments or for other purposes, which debt could have significant adverse consequences to our business.

Our Senior Credit Agreement entered into on January 24, 2019 contains several financial and other restrictive covenants.

A significant decline in our operating income along with increased levels of debt could cause us to violate these covenants which could result in our incurring of additional financing fees that would be costly and adversely affect our profitability and cash flows.

We may also use our Senior Credit Agreement or otherwise incur additional debt for acquisitions, operations and capital expenditures that could adversely impact our ability to meet these covenants.

We could incur substantial costs in order to comply with, or to address any changes in or violations of, environmental, health and safety laws.

Our operations and facilities are subject to a variety of stringent federal, state, local, and foreign laws and regulations relating to the protection of the environment and human health and safety.

Compliance with these laws and regulations sometimes involves substantial operating costs and capital expenditures, and failure to maintain or achieve compliance with these laws and regulations or with the permits required for our operations could result in substantial costs and liabilities, such as fines and civil or criminal sanctions, third-party claims for property damage or personal injury, cleanup costs or temporary or permanent discontinuance of operations, including claims arising from the businesses and facilities that we have sold.

For certain businesses we have divested, we have provided limited indemnifications for environmental contamination to the successor owners.

We have also acquired and continue to acquire businesses and facilities to add to our operations.

While we sometimes receive indemnification for pre-existing environmental contamination, the party providing the indemnification may not have sufficient resources to cover the cost of any required measures.

Certain facilities of ours have been in operation for many years and we may be liable for remediation of any contamination at our current or former facilities;

or at off-site locations where wastes have been sent for disposal, regardless of fault or whether we, our predecessors or others are responsible for such contamination.

We have been responsible for remediation of contamination at some of our locations, and while such costs have not been material to date, the cost of remediation of any of these and any newly-discovered contamination cannot be quantified, and we cannot assure you that it will not materially affect our profits or cash flows.

Changes in environmental laws, regulations or enforcement policies, including without limitation new or additional regulations affecting disposal of hazardous substances and waste, greenhouse gas emissions or use of fossil fuels, could have a material adverse effect on our business, financial condition, or results of operations.

The volatility of the commodity market on the cost of our principal raw materials, and the highly competitive market environment in which we do business could significantly impact our gross profit, net income, and cash flow.

Our principal raw materials are commodity products consisting of steel, aluminum, and resins, for which, at times, availability and pricing can be volatile due to a number of factors beyond our control, including general economic conditions, domestic and worldwide demand, labor costs, competition, import duties, tariffs, and currency exchange rates.

Climate change and climate change legislation or regulations may adversely affect our business.

Legislative and regulatory changes in response to the potential effects of climate change may require additional costs and investment for compliance, including but not limited to, an increase in the cost of purchased energy and electricity.

Physical effects of climate change, such as disruption in production and product distribution as a result of major storm events and shifts in regional weather patterns and intensities, may also significantly affect our operations and financial results.

Economic, political, and other risks associated with foreign operations could adversely affect our financial results and cash flows.

Our sales originating outside the United States represented approximately 7% of our

consolidated net sales during the year ended December 31, 2020.

Future terror attacks, war, natural disasters or other catastrophic events beyond our control could negatively impact our operations and financial results.

Terror attacks, war, or other civil disturbances, natural disasters, other catastrophic events or public health crises, such as the coronavirus, could lead to economic instability, decreased capacity to produce our products and decreased demand for our products.

From time to time, terrorist attacks worldwide have caused instability in global financial markets.

Concerns over global climate changes and environmental sustainability over time or a pandemic disease outbreak may influence the Company's strategic direction, supply chain, or delivery channels.

Also, our facilities could be subject to damage from fires, floods, earthquakes or other natural or man-made disasters.

Such interruptions could have an adverse effect on our operations, cash flows and financial results.

A significant decline in our operating income or use of our Senior Credit Agreement (or other additional indebtedness) for acquisitions, operations and capital expenditures could cause us to violate these covenants which could result in our incurring of additional financing fees that would be costly and adversely affect our profitability and cash flows.

We also may face risk associated with the discontinuation of and transition from LIBOR.

The publication of the one-week and two-month USD LIBOR maturities and non-USD LIBOR maturities ceased immediately after December 31, 2021, with the remaining USD LIBOR maturities ceasing immediately after June 30, 2023.

At this time, it is not

possible to predict how markets will respond to Secured Overnight Financing Rate, or SOFR, the preferred alternative rate for LIBOR, or other alternative reference rates.

Borrowings under our revolving credit facility bear interest at a variable interest rate based upon LIBOR plus an additional margin, and, as of December 31, 2021, we had $24.5 million outstanding on the revolving credit facility under our Senior Credit Facility that terminates on January 23, 2024.

We cannot predict the effect of the potential changes to or elimination of LIBOR, the use of SOFR or other alternative rates or benchmarks and the corresponding effects on our cost of capital.

Risks Related to Legal and Regulatory Matters

This business is dependent on state laws and regulations pertaining to the cannabis industry that legalize and regulate cannabis use.

While several states have legalized cannabis for medical or recreational purposes, it remains illegal under federal law.

Even in those states in which cannabis use has been legalized, its use remains a violation of federal criminal law, which preempts state laws that legalize its use.

Strict enforcement of federal law regarding cannabis would likely have an adverse impact on our customers, and correspondingly, may adversely impact our gross profit, net income and cash flows.

The cultivation, processing and distribution of cannabis in states where it has been legalized is subject to significant regulatory requirements.

If our customers who purchase greenhouses and extraction and processing equipment are unable to obtain and maintain the licenses, permits, authorizations or accreditations required to comply with state and local regulations, we may experience adverse effects on our business and results of operations.

We cannot predict the future increase in state legalization or the future market potential of legalized cannabis use.

Other well-established business sectors with powerful economic influence may take action that could adversely impact the cannabis market.

Imposed tariffs and potential future tariffs may result in increased costs and could adversely affect our results of operations.

In 2018, the United States imposed Section 232 tariffs on certain steel (25%) and aluminum (10%) products imported into the U.S.

These tariffs have created volatility in the market and have increased the costs of these inputs.

Tariffs imposed in the United States on certain steel (25%) and aluminum (10%) products imported into the U.S.

have created volatility in the market and have increased the costs of these inputs.

Increased costs for imported steel and aluminum products have led domestic sellers to respond with market-based increases to prices for such inputs as well.

The new tariffs, along with any additional tariffs or trade restrictions that may be implemented by the U.S.

These tariffs, along with any additional tariffs or trade restrictions that may be implemented by the U.S.

or other countries, could result in further increased costs, shifting in competitive positions and a decreased available supply of steel, resins and aluminum as well as additional imported components and inputs.

3 unchanged sentences

The tariffs could adversely affect the income from operations for some of our businesses and customer demand for some of our products which could have a material adverse effect on our consolidated results of operations, financial position and cash flows.

The expiration, elimination or reduction of solar rebates, credits and incentives may adversely impact our business.

A variety of federal, state and local government agencies provide incentives to promote electricity generation from renewable sources such as solar power.

The nature of our business exposes us to product liability, product warranty and other claims, and other legal proceedings.

We are involved in product liability, product warranty and other claims relating to the products we manufacture and distribute.

Product liability claims can be expensive to defend and can divert the attention of management and other personnel for significant periods, regardless of the ultimate outcome.

Claims of this nature could also have a negative impact on customer confidence in our products, our brands and our Company.

In the ordinary course of business, we are also subject to other types of legal and regulatory proceedings.

Any claims raised in legal and regulatory proceedings, whether with or without merit, could be time consuming and expensive to defend and could divert management’s attention and resources.

We cannot assure you that any current or future claims will not adversely affect our reputation, financial condition, operating results, and cash flows.

We could incur substantial costs in order to comply with, or to address any changes in or violations of, environmental, health, safety and other laws.

Our operations and facilities are subject to a variety of stringent federal, state, local, and foreign laws and regulations, including those relating to the protection of the environment and human health and safety.

We are subject to the risk that we, our employees, our affiliated entities, contractors, agents or their respective officers, directors, employees and agents may take actions determined to be in violation of any of these laws, for which we might be held responsible, particularly as we expand our operations geographically through organic growth and acquisitions.

We cannot provide assurance that our internal controls and compliance systems, including our Code of Ethics and Statement of Policy, will protect us from acts committed by employees, agents or business partners of ours that violate U.S.

and/or non-U.S.

laws, including the laws governing payments to government officials, bribery, fraud, kickbacks and false claims, pricing, sales and marketing practices, conflicts of interest, competition, employment practices, workplace behavior, export and import compliance, economic and trade sanctions, money laundering and data privacy.

An actual or alleged violation could result in substantial fines, sanctions, civil or criminal penalties, debarment from government contracts, curtailment of operations in certain jurisdictions, competitive or reputational harm, litigation or regulatory action and other consequences that might adversely affect our results of operations, financial condition or strategic objectives.

For certain businesses we have divested, we have provided limited indemnifications for environmental contamination to the successor owners.

We have also acquired and continue to acquire businesses and facilities to add to our operations.

Certain facilities of ours have been in operation for many years and we may be liable for remediation of any contamination at our current or former facilities;

or at off-site locations where wastes have been sent for disposal, regardless of fault or whether we, our predecessors or others are responsible for such contamination.

Changes in laws, regulations or enforcement policies, including without limitation new or additional regulations affecting disposal of hazardous substances and waste, greenhouse gas emissions or use of fossil fuels, could have a material adverse effect on our business, financial condition, or results of operations.

We are subject to certain additional regulations as a United States government contractor or subcontractor.

Some of our revenue is derived from contracts with agencies of the United States government and subcontracts with its prime contractors.

As a United States government contractor or subcontractor, we are subject to federal contracting regulations, including the Federal Acquisition Regulations, which govern the allowability of costs incurred by us in the performance of United States government contracts.

In connection with our United States government business, we are also subject to government audits and to review and approval of our policies, procedures, and internal controls for compliance with procurement regulations and applicable laws.

In certain circumstances, if we do not comply with the terms of a government contract or with regulations or statutes, we could be subject to downward contract price adjustments or refund obligations or could in extreme circumstances be

assessed civil and criminal penalties or be debarred or suspended from obtaining future contracts for a specified period of time.

Unresolved Staff Comments

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What changed 10-K

Item 1A. Risk Factors