What changed in this filing

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Item 1A. Risk Factors

2021-12-17 compared with 2020-12-22 · 73 added, 61 removed, 194 unchanged (41% of the section changed)

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Any reduction in demand would adversely affect our business, results of operations, and financial condition.

Demand for our homes is subject to fluctuations, often due to factors outside of our control, such as employment levels, consumer confidence and spending, housing demand, availability of financing for homebuyers, interest rates, availability and prices of new homes compared to existing inventory, and demographic trends.

Demand for our homes and rental apartments is subject to fluctuations, often due to factors outside of our control, such as employment levels, consumer confidence and spending, housing demand, availability of financing for homebuyers, interest rates, availability and prices of new homes compared to existing inventory, and demographic trends.

In a housing market downturn, our sales and results of operations will be adversely affected;

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Adverse changes in economic conditions in markets where we conduct our operations and where prospective purchasers of our homes live have had and may in the future have a negative impact on our business.

Adverse changes in employment levels, job

growth, consumer confidence, interest rates, perceptions regarding the strength of the housing market, and population growth, or an oversupply of homes for sale may reduce demand or depress prices for our homes and cause home buyers to cancel their agreements to purchase our homes.

Adverse changes in mortgage interest rates, employment levels, job growth, consumer confidence, perceptions regarding the strength of the housing market, and population growth, or an oversupply of homes for sale may reduce demand or depress prices for our homes and cause home buyers to cancel their agreements to purchase our homes.

This, in turn, could adversely affect our results of operations and financial condition.

Significant inflation, higher interest rates or deflation could adversely affect our business and financial results.

Inflation can adversely affect us by increasing costs of land, materials and labor, and interest rates.

All of these factors can have a negative impact on housing affordability.

In a highly inflationary environment, we may be unable to raise the sales prices of our homes at or above the rate of inflation, which could reduce our profit margins.

In addition, our cost of capital, labor and materials can increase, which could have an adverse impact on our business or financial results.

Alternatively, deflation could cause an overall decrease in spending and borrowing capacity, which could lead to deterioration in economic conditions and employment levels.

Deflation could also cause the value of our inventories to decline or reduce the value of existing homes.

These, or other factors that increase the risk of significant deflation, could have a negative impact on our business or financial results.

Our ability to execute on our business strategies is uncertain, and we may be unable to achieve our goals.

We cannot assure you that (i) our strategies, and any related initiatives or actions, will be successful or that they will generate growth, earnings or returns at any particular level or within any particular time frame;

We cannot guarantee that (i) our strategies, which include expanding our geographic footprint, product lines and price points, and becoming a more capital and operationally efficient home builder, and any related initiatives or actions, will be successful or that they will generate growth, earnings or returns at any particular level or within any particular time frame;

(ii) in the future we will achieve positive operational or financial results or results in any particular metric or measure equal to or better than those attained in the past;

or (iii) we will perform in any period as well as other homebuilders.

or (iii) we will perform in any period as well as other home builders.

We also cannot provide any assurance that we will be able to maintain our strategies, and any related initiatives or actions, in the future and, due to unexpectedly favorable or unfavorable market conditions or other factors, we may determine that we need to adjust, refine or abandon all or portions of our strategies, and any related initiatives or actions, though we cannot guarantee that any such adjustments will be successful.

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We can also be affected by poor relations with the residents of communities we develop because efforts made by us to resolve issues or disputes that may arise in connection with the operation or development of their communities, or in connection with the transition of a homeowners association, could be deemed unsatisfactory by the affected residents and subsequent actions by these residents could adversely affect sales or our reputation.

In addition, we could decide or be required to make material expenditures related to the settlement of such issues or disputes, which could adversely affect our results of operations.

In addition, we could decide or be required to make material expenditures related to the settlement of such issues or disputes, which could adversely affect the results of our operations.

A significant portion of our revenues and income from operations is generated from California in our Traditional Home Building segment.

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a decline in foreign buyer demand;

severe weather including drought and the risk of local governments imposing building moratoriums;

severe weather including drought;

the risk of local governments imposing building moratoriums;

natural disasters such as earthquakes and wild fires;

environmental incidents;

and declining population and/or growth rates and the related reduction in housing demand in these regions.

If home sale activity or selling prices decline in California, our costs may not decline at all or at the same rate and, as a result, our consolidated financial results may be adversely affected.

and declining population and/or growth rates and the related reduction in housing demand in this region.

If home sale activity or sales prices decline in California, our costs may not decline at all or at the same rate and, as a result, our consolidated financial results may be adversely affected.

In the construction of a high-rise building, whether a for-sale or a for-rent property, we incur significant costs before we can begin construction, sell and deliver the units to our customers, or commence the collection of rent and recover our costs.

We may be subject to delays in construction that could lead to higher costs that could adversely affect our operating results.

Changing market conditions during the construction period could negatively impact selling prices and rents, which could adversely affect our operating results.

Changing market conditions during the construction period could negatively impact sales prices and rents, which could adversely affect our operating results.

Before a high-rise building generates any revenues, we make significant expenditures to acquire land;

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It generally takes several years for us to acquire the land and construct, market, and deliver units or lease units in a high-rise building.

Completion times vary on a building-by-building basis depending on the complexity of the project, its stage of development when acquired, and the regulatory and

community issues involved.

As a result of these potential delays in the completion of a building, we face the risk that demand for housing may decline during the period and we may be forced to sell or lease units at a loss or for prices that generate lower profit margins than we initially anticipated.

Furthermore, if construction is delayed, we may face increased costs as a result of inflation or other causes and/or asset carrying costs (including interest on funds used to acquire land and construct the building).

Completion times vary on a building-by-building basis depending on the complexity of the project, its stage of development when acquired, our relationship with any joint venture partners that may be involved in a project, and the regulatory and community issues involved.

As a result of these potential delays in the completion of a building, we face the risk that demand for housing may decline during this period and we may be forced to sell or lease units at a loss or for prices that generate lower profit margins than we initially anticipated.

These costs can be significant and can adversely affect our operating results.

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We have received a deposit from our home buyer for each home reflected in our backlog, and generally we have the right to retain the deposit if the home buyer does not complete the purchase.

In some cases, however, a home buyer may cancel the agreement of sale and receive a complete or partial refund of the deposit for reasons such as state and local law, the home buyer’s inability to obtain mortgage financing, his or her inability to sell his or her current home, or our inability to complete and deliver the home within the specified time.

In some cases, however, a home buyer may cancel the agreement of sale and receive a complete or partial refund of the deposit for reasons such as state and local law, the home buyer’s inability to obtain mortgage financing, the home buyer’s inability to sell their current home, or our inability to complete and deliver the home within the specified time.

At October 31, 2021, we had 10,302 homes with a sales value of $9.50 billion in backlog.

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delivery of fewer homes;

sale of fewer homes or higher cancellations by our home buyers;

sale of fewer homes;

higher cancellations by our home buyers;

an increase in selling incentives and/or reduction of prices;

and realization of lower gross margins due to lower selling prices or an inability to increase selling prices to offset increased costs of the homes delivered.

and realization of lower gross margins due to lower sales prices or an inability to increase sales prices to offset increased costs of the homes delivered.

If we are unable to compete effectively in our markets, our business could decline disproportionately to that of our competitors.

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At October 31, 2021, we had approximately 80,900 home sites that we owned or controlled through options.

In the future, changes in the general availability of land, competition for available land, availability of financing to acquire land, zoning regulations that limit housing density, and other market conditions may hurt our ability to obtain land for new residential communities at prices that will allow us to make a reasonable profit.

If the supply of land appropriate for development of our residential communities becomes more limited because of these factors or for any other reason, the cost of land could increase and/or the number of homes that we are able to sell and build could be reduced.

In the future, changes in the general availability of land, competition for available land, availability of financing to acquire land,

zoning regulations that limit housing density, and other market conditions may hurt our ability to obtain land for new residential communities at prices that will allow us to make a reasonable profit.

If the supply of land appropriate for the development of our residential communities becomes more limited because of these factors or for any other reason, the cost of land could increase and/or the number of homes that we are able to sell and build could be reduced.

If the market value of our land and homes declines, our results of operations will likely decrease.

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Despite our quality control and jobsite safety efforts, we may discover that our subcontractors were engaging in improper construction or safety practices or that the components purchased from building supply companies are not performing as specified.

The occurrence of such events could require us to repair homes in

accordance with our standards and as required by law, or to respond to claims of improper oversight of construction sites.

The occurrence of such events could require us to repair homes in accordance with our standards and as required by law, or to respond to claims of improper oversight of construction sites.

The cost of satisfying our legal obligations in these instances may be significant, and we may be unable to recover the cost of repair from subcontractors, suppliers and insurers.

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These joint ventures generally borrow money to help finance their activities.

In certain circumstances, the joint venture participants, including ourselves, are required to provide guarantees of certain obligations relating to the joint ventures.

In certain circumstances, the joint venture participants, including us, are required to provide guarantees of certain obligations relating to the joint ventures.

In most of these joint ventures, we do not have a controlling interest and, as a result, are not able to require these joint ventures or their participants to honor their obligations or renegotiate them on acceptable terms.

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Further, we may experience delays and increased expenses as a result of legal challenges to our proposed communities, whether brought by governmental authorities or private parties.

Our mortgage subsidiary is subject to various state and federal statutes, rules, and regulations, including those that relate to licensing, lending operations, and other areas of mortgage origination and financing.

The impact of those statutes, rules, and regulations can increase our home buyers’ cost of financing, increase our cost of doing business, and restrict our home buyers’ access to some types of loans.

Our mortgage subsidiary, TBI Mortgage Company, is subject to various state and federal statutes, rules, and regulations, including those that relate to licensing, lending operations, and other areas of mortgage origination and financing.

The impact of

those statutes, rules, and regulations can increase our home buyers’ cost of financing, increase our cost of doing business, and restrict our home buyers’ access to some types of loans.

Product liability claims and litigation and warranty claims that arise in the ordinary course of business may be costly, which could adversely affect our business.

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These estimated costs are based on an analysis of our historical claims and industry data, and include an estimate of claims incurred but not yet reported.

The projection of losses related to these liabilities requires actuarial assumptions that are subject to variability due to uncertainties regarding construction defect claims relative to our markets and the types of product we build, insurance industry practices, and legal or regulatory actions and/or interpretations, among other factors.

The projection of losses related to these liabilities requires actuarial assumptions that are subject to variability due to uncertainties regarding construction defect claims relative to our markets and the types of products we build, insurance industry practices, and legal or regulatory actions and/or interpretations, among other factors.

Key assumptions used in these estimates include claim frequencies, severities, and settlement patterns, which can occur over an extended period of time.

In addition, changes in the frequency and severity of reported claims and the estimates to settle claims can impact the trends and assumptions used in the actuarial analysis, which could be material to our consolidated

financial statements.

Due to the degree of judgment required and the potential for variability in these underlying assumptions, our actual future costs could differ from those estimated, and the difference could be material to our consolidated financial statements.

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See Note 7 – “Accrued Expenses” in Item 15(a)1 of this Form 10-K for additional information regarding these warranty charges.

Our multi-unit buildings are subject to swings in delivery volume due to their extended construction time, levels of pre-sales, and quick delivery of units once buildings are complete.

Our multi-unit buildings are subject to fluctuations in delivery volume due to their extended construction time, levels of pre-sales, and quick delivery of units once buildings are complete.

Our quarterly operating results will fluctuate depending on the timing of completion of construction of our multi-unit buildings, levels of pre-sales, and the relatively short delivery time of the pre-sold units once the building is completed.

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In addition, increases in local real estate taxes could adversely affect our potential home buyers, who may consider those costs in determining whether to make a new home purchase and decide, as a result, not to purchase one of our homes.

Changes in the income tax laws that would reduce or eliminate tax deductions or incentives to homeowners could make housing less affordable or otherwise reduce the demand for housing, which in turn could reduce our sales and hurt our results of operations.

Changes in tax laws could reduce or eliminate tax deductions or incentives for homeowners and could make housing less affordable or otherwise reduce the demand for housing, which in turn could reduce our sales and hurt our results of operations.

Further, while we believe that our recorded tax balances are adequate, it is not possible to predict the effects of possible changes in the tax laws or changes in their interpretation and whether they could have a material adverse impact on our operating results.

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We are subject to extensive environmental regulations, which may cause us to incur additional operating expenses, subject us to longer construction cycle times, or result in material fines or harm to our reputation.

We are subject to a variety of local, state and federal statutes, ordinances, rules and regulations concerning the protection of health and the environment, including those regulating the emission or discharge of materials into the environment, the management of storm water runoff at construction sites, the handling, use, storage and disposal of hazardous substances, impacts to wetlands and other sensitive environments, and the remediation of contamination at properties that we own or develop.

impacts to wetlands and other sensitive environments, and the remediation of contamination at properties that we own or develop.

In addition, an increased regulatory focus on reducing greenhouse gas emissions has lead to legislative mandates in certain jurisdictions that require new homes to be more energy efficient than existing homes, or that mandate energy efficient features, such as solar panels, be included in new construction.

The environmental regulations applicable to each community in which we operate vary greatly depending on the location of the community site, the site's environmental conditions and the present and former use of the site.

Environmental regulations may cause delays, may cause us to incur substantial compliance, remediation or other costs, and can prohibit or severely restrict development and homebuilding activity.

Environmental regulations may cause delays, may cause us to incur substantial compliance, remediation or other costs, and can prohibit or severely restrict development and home building activity.

In addition, noncompliance with these regulations could result in fines and penalties, obligations to remediate, permit revocations or other sanctions;

and contamination or other environmental conditions at or in the vicinity of our developments, whether or not we were responsible for such conditions, may result in claims against us for personal injury, property damage or other losses.

From time to time, the United States Environmental Protection Agency and other federal or state agencies review homebuilders' compliance with environmental laws and may levy fines and penalties for failure to strictly comply with applicable environmental laws or impose additional requirements for future compliance as a result of past failures.

From time to time, the United States Environmental Protection Agency and other federal or state agencies review home builders' compliance with environmental laws and may levy fines and penalties for failure to strictly comply with applicable environmental laws or impose additional requirements for future compliance as a result of past failures.

Any such actions taken with respect to us may increase our costs or harm our reputation.

Further, we expect that increasingly stringent requirements will be imposed on homebuilders in the future.

Further, we expect that increasingly stringent requirements will be imposed on home builders in the future.

Environmental regulations can also have an adverse impact on the availability and price of certain raw materials such as lumber.

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If that happens, our operating results could be harmed.

Currently, the strong demand for homes has caused multiple disruptions in our supply chain, and has resulted in shortages in certain building materials and tightness in the labor market.

This has caused our construction cycle to lengthen and costs of building materials to increase.

If shortages and cost increases in building materials and tightness in the labor market persist for a prolonged period of time, our profit margins and results of operations could be adversely impacted.

We are subject to one collective bargaining agreement that covers less than 2% of our employees.

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normally, a significant portion of our agreements of sale are entered into with customers in the winter and spring months.

Construction of one of our traditional homes typically proceeds after signing the agreement of sale with our customer and can require seven months or more to complete.

Weather-related problems may occur from time to time, delaying starts or closings or increasing costs and reducing profitability.

In addition, delays in opening new communities or new sections of existing communities could have an adverse impact on home sales and revenues.

Construction of one of our traditional homes typically proceeds after signing the agreement of sale with our customer and typically require 9 to 12 months to complete, although construction times can extend beyond 12 months in periods of high demand or when materials and labor shortages are widespread - conditions that characterize the current environment.

In addition, weather-related problems may occur from time to time, delaying starts or closings or increasing costs and reducing profitability.

In addition, delays in opening new communities or new sections of

existing communities could have an adverse impact on home sales and revenues.

Expenses are not incurred and recognized evenly throughout the year.

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We are in the midst of a multi-year process of implementing a complex new enterprise resource planning system (“ERP”).

The ERP implementation requires the integration of the new ERP with multiple new and existing information systems and business processes, and is designed to accurately maintain our books and records and provide information to our management team important to the operation of the business.

Our ERP implementation will continue to require ongoing investment.

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Additionally, conversion from our old system to the ERP may cause inefficiencies until the ERP is stabilized and mature.

The implementation of our ERP mandated new procedures and many new key controls over financial reporting.

The implementation of our ERP mandated new procedures and many new controls over financial reporting.

These procedures and controls are not yet mature in their operation and not fully tested by our internal auditors.

If we are unable to adequately implement and maintain procedures and controls relating to our ERP, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired and impact our assessment of the effectiveness of our internal controls over financial reporting.

Risks Related to Indebtedness and Financing

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Our business and results of operations depend substantially on our ability to obtain financing, whether from bank borrowings or from financing in the public debt mark ets.

Each of our revolving credit facility, which provides for approximately $1.9 billion in committed borrowing capacity, and our $800.0 million term loan matures in November 2025.

In addition, $2.67 billion of our senior notes become due and payable at various times from February 2022 through November 2029.

We cannot be certain that

we will be able to continue to replace existing financing or find additional sources of financing in the future on favorable terms or at all.

If we are not able to obtain suitable financing at reasonable terms or replace existing debt and credit facilities when they become due or expire, our costs for borrowings will likely increase and our revenues may decrease or we could be precluded from continuing our operations at current levels.

Substantially all of our revolving credit facility, which provides for approximately $1.90 billion in committed borrowing capacity, and our $650.0 million term loan mature in November 2026.

In addition, $2.00 billion of our senior notes become due and payable at various times from April 2023 through November 2029.

We cannot be certain that we will be able to replace existing financing or find additional sources of financing in the future on favorable terms or at all.

If we are not able to obtain suitable financing at reasonable terms or replace existing debt and credit facilities when they become due or expire, our costs for borrowings may increase and our revenues may decrease or we could be precluded from continuing our operations at current levels.

Increases in interest rates can make it more difficult and/or expensive for us to obtain the funds we need to operate our business.

The amount of interest we incur on our revolving bank credit facility and term loan fluctuates based on changes in short-term interest rates and the amount of borrowings we incur.

The amount of interest we incur on our revolving bank credit facility and term loan (exclusive of the amount we have hedged with interest rate swap transactions as further described in Note 6 – “Loans Payable, Senior Notes, and Mortgage Company Loan Facility” in Item 15(a)1 of this Form 10-K) fluctuates based on changes in short-term interest rates and the amount of borrowings we incur.

Increases in interest rates generally and/or any downgrade in the ratings that national rating agencies assign to our outstanding debt securities could increase the interest rates we must pay on any subsequent issuances of debt securities, and any such ratings downgrade could also make it more difficult for us to sell such debt securities.

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Generally, when our mortgage subsidiary closes a mortgage for a home buyer at a previously locked-in rate, it already has an agreement in place with an investor to acquire the mortgage following the closing.

Our mortgage loans are sold to investors with limited recourse provisions derived from industry-standard representations and warranties in the relevant agreements.

Our mortgage loans are sold to investors

with limited recourse provisions derived from industry-standard representations and warranties in the relevant agreements.

These representations and warranties primarily involve the absence of misrepresentations by the borrower or other parties, the appropriate underwriting of the loan and in some cases, a required minimum number of payments to be made by the borrower.

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In connection with the outbreak of the global COVID-19 pandemic in 2020, the United States declared a national emergency in March 2020 and the World Health Organization and the U.S.

Centers for Disease Control and Prevention have recommended containment and mitigation measures.

Centers for Disease Control and Prevention recommended containment and mitigation measures.

Numerous states and municipalities have also declared public health emergencies.

Along with these declarations, extraordinary and wide-ranging actions have been taken by international, federal, state, and local public health and governmental authorities to mitigate the impact of COVID-19, including quarantines, stay-at-home orders and business closure mandates requiring that individuals substantially restrict daily activities and that businesses substantially modify, curtail or cease normal operations.

Many of these measures are currently in place in many jurisdictions throughout the United States, and additional measures may be imposed by governmental authorities in the future as the country has experienced a resurgence of the pandemic in the fall and winter of 2020.

Due to these restrictions, and in an effort to ensure the safety of our employees, customers, trade partners and the communities in which we operate, we substantially modified our business operations, which resulted in, among other things,

disruption in our ability to deliver homes in fiscal 2020, and in particular in certain regions of the country that were highly impacted by the pandemic in the Spring of 2020.

There is significant uncertainty regarding the extent to which and how long COVID-19 and related government directives, actions and economic relief efforts will disrupt the U.S.

Many of these measures are currently in place in, or are being contemplated by, many jurisdictions throughout the United States.

Additional measures may be imposed by governmental authorities in the future as the country continues to experience periodic resurgences of the pandemic, especially the outbreak of new variants.

Due to these restrictions, and in an effort to ensure the safety of our employees, customers, trade partners and the communities in which we operate, we have modified our business operations since the onset of the pandemic, which has resulted in, among other things, disruptions to our ability to deliver homes.

There is continuing significant uncertainty regarding the extent to which and how long COVID-19 and related government directives, actions and economic relief efforts will disrupt the U.S.

economy and level of employment, capital markets, secondary mortgage markets, consumer confidence, demand for our homes and availability of mortgage loans to homebuyers.

The extent to which COVID-19 impacts our operational and financial performance will depend on future developments, including the duration and spread of COVID-19, the acceptance and effectiveness of vaccines, and the impact of COVID-19 and related containment and mitigation measures on our customers, trade partners and employees, all of which are highly uncertain, unpredictable and outside our control.

The extent to which COVID-19 impacts our operational and financial performance will depend on future developments, including the duration of the COVID-19 pandemic, the acceptance and effectiveness of vaccines, and the impact of COVID-19 and related containment and mitigation measures on our customers, trade partners and employees, all of which are highly uncertain, unpredictable and outside our control.

If COVID-19 continues to have a significant negative impact on economic conditions over a prolonged period of time, our results of operations and financial condition could be materially adversely impacted.

Adverse weather conditions, natural disasters, and other conditions could disrupt the development of our communities, which could harm our sales and results of operation.

Adverse weather conditions, natural disasters, and other conditions could disrupt the development of our communities, which could harm our sales and results of operations.

Adverse weather conditions and natural disasters, such as hurricanes, tornadoes, earthquakes, floods, droughts, and wildfires, can have serious effects on our ability to develop our residential communities.

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Our future success depends, to a significant degree, on the efforts of our senior management and our ability to attract qualified personnel.

Our operations could be adversely affected if key members of our senior management leave our employ or we cannot attract qualified personnel to manage our business.

Our operations could be adversely affected if key members of our senior management leave the Company or we cannot attract qualified personnel to manage our business.

Information technology failures and data security breaches could harm our business.

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Many of these resources are provided to us and/or maintained on our behalf by third-party service providers pursuant to agreements that specify certain security and service level standards.

Our ability to conduct our business may be impaired if these resources are compromised, degraded, damaged or fail, whether due to a virus or other harmful circumstance, intentional penetration or disruption of our information technology resources by a third party, natural disaster, hardware or software corruption, failure or error (including a failure of security controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error or failure, intentional or unintentional personnel actions (including the failure to follow our security protocols), or lost connectivity to our networked resources.

Our ability to conduct our business may be impaired if these resources are compromised, degraded, damaged or fail, whether due to a virus or other harmful circumstance, intentional breach or disruption of our information technology resources by a third party, natural disaster, hardware or software corruption, failure or error (including a failure of security controls incorporated into or applied to such hardware or software), telecommunications system failure, service provider error or failure, intentional or unintentional personnel actions (including the failure to follow our security protocols), or lost connectivity to our networked resources.

A significant and extended disruption in the functioning of these resources could impair our operations, damage our reputation, and cause us to lose customers, sales and revenue.

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In addition, the costs of maintaining adequate protection against such threats, as they develop in the future (or as legal requirements related to data security increase) could be material.

direct target of an external cyber-attack that temporarily disrupted access to certain of our systems and may have resulted in the compromise of some proprietary internal data.

To date, neither of these incidents has individually or in the aggregate resulted in any material liability to us, any material damage to our reputation, or any material disruption to our operations.

However, we expect that we will continue to be the target of additional and increasingly sophisticated cyber-attacks and data security breaches, and the safeguards we have designed to help prevent these incidents from occurring may not be successful.

Recently, there has been a surge in widespread cyber-attacks during the COVID-19 pandemic.

Any increase in the frequency or scope of cyber-attacks during the pandemic may exacerbate these data security risks.

In 2019, certain of our loan applicants experienced identity theft that we determined had occurred through the unauthorized access of one of our third-party service provider’s information systems, and, in the first quarter of fiscal 2020, we were the direct target of an external cyber-attack that temporarily disrupted access to certain of our systems and may have resulted in the compromise of some proprietary internal data.

Neither of these incidents has individually or in the aggregate resulted in any material liability to us, any material damage to our reputation, or any material disruption to our operations.

However, as a result of a widespread increase in the frequency and number of cyber-attacks, we expect that we will continue to be the target of additional and increasingly sophisticated cyber-attacks and data security breaches, and the safeguards we have designed to help prevent these incidents from occurring may not be successful.

Any further increase in the frequency or scope of cyber-attacks may exacerbate these data security risks.

If we experience additional cyber-attacks or data security breaches in the future, we could suffer material liabilities, our reputation could be materially damaged, and our operations could be materially disrupted.

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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