What changed in this filing

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Item 1A. Risk Factors

2022-02-17 compared with 2021-02-24 · 45 added, 40 removed, 298 unchanged (22% of the section changed)

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Strategic, Business, and Operational Risks

The industries in which we operate are cyclical, and, accordingly, our business is subject to changes in the economy.

We operate in cyclical industries.

Periodic downturns in economic conditions usually have a significant adverse effect on cyclical industries due to decreased demand for new and replacement products.

The industries in which our customers operate are cyclical in nature, which can expose our business to unpredictable demand and volatility.

Our business is subject to the demands of our customers and the broader economy, and we have particular exposure to the cyclicality of energy products, agriculture products, and consumer products.

Additionally, periodic downturns in economic conditions typically have a significant adverse effect on cyclical industries due to decreased demand for new and replacement products.

Decreased demand could result in lower sales volumes, lower prices, and/or a decline in or loss of profits.

While the business cycles of the various end markets we serve may not typically coincide, an economic downturn could affect disparate cycles simultaneously.

The railcar industry has previously experienced sharp cyclical downturns and at such times operated with a minimal backlog.

While the business cycles of our different operations may not typically coincide, an economic downturn could affect disparate cycles simultaneously.

The impacts of such an economic downturn may magnify the adverse effect on our business.

The COVID-19 pandemic continues to have a material adverse effect on our results of operations and could have a material adverse effect on our ability to operate, financial condition, liquidity, access to capital, payment of dividends, and capital investments.

The COVID-19 pandemic has had and continues to have a material adverse effect on our results of operations and could have a material adverse effect on our ability to operate, financial condition, liquidity, access to capital, payment of dividends, and capital investments.

The World Health Organization has declared the COVID-19 outbreak a pandemic, and the virus continues to spread in areas where we operate and sell our products and services.

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The prolonged negative economic impact of the COVID-19 pandemic and the related governmental response could have a material adverse effect on our ability to operate, results of operations, financial condition, liquidity, access to capital, payment of dividends, and capital investments.

Several public health organizations have recommended, and many local governments have implemented, certain measures to slow and limit the transmission of the virus, including shelter-in-place and social distancing ordinances.

Such preventive measures, or others we may voluntarily put in place, may have a material adverse effect on our business for an indefinite period of time, such as the potential shut down of certain facilities, decreased employee availability, potential border closures, restrictions on shipping, and other potential impacts.

Our suppliers and customers may also face these and other challenges, which could lead to a disruption in our supply chain as well as decreased demand, or our customers' inability to pay, for our products and services.

The COVID-19 pandemic has also resulted in periodic shortages of certain personal protective equipment ("PPE"), which may continue or worsen if the COVID-19 pandemic has a prolonged negative impact on the supply chain for PPE.

Several public health organizations have recommended certain measures to slow and limit the transmission of the virus, including quarantines, travel restrictions, and social distancing.

Such preventive measures, or others we may voluntarily put in place, may have a material adverse effect on our business for an indefinite period of time, such as the potential shut down of certain facilities, potential border closures, restrictions on shipping, and other potential impacts.

Additionally, illness or exposure to the virus may lead to decreased employee availability.

Our suppliers and customers have also faced these and other challenges, which have disrupted and could continue to disrupt our supply chain.

These challenges could also result in decreased demand, or our customers' inability to pay, for our products and services.

The COVID-19 pandemic has also resulted in periodic shortages of certain personal protective equipment ("PPE"), which may reoccur if the COVID-19 pandemic has a prolonged negative impact on the supply chain for PPE.

An inability to procure PPE for operations may have a material adverse effect on our business, including potential shut down of certain facilities or operations.

These issues may also materially affect our future access to our sources of liquidity, particularly our cash flows from operations, financial condition, capitalization, access to capital, and capital investments.

The COVID-19 pandemic may also materially affect our future access to our sources of liquidity, particularly our cash flows from operations, financial condition, capitalization, access to capital, and capital investments.

Although these disruptions may continue to occur, the long-term economic impact and near-term financial impacts of the COVID-19 pandemic, including but not limited to, possible additional impairment, restructuring, and other charges, cannot be reliably quantified or estimated at this time due to the uncertainty of future developments.

The extent to which the COVID-19 pandemic affects our results will also depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of COVID-19 and actions taken to contain the outbreak or treat its impact, among others.

Shortages of skilled labor and/or qualified employees have adversely impacted and could continue to impact our operations.

We depend on skilled labor in the manufacture, maintenance, and repair of railcar products and on other qualified employees in all aspects of our business.

Some of our facilities are located in areas where demand for skilled laborers exceeds supply.

We have experienced shortages of qualified employees and/or skilled labor and increased turnover at certain facilities, resulting in increased labor costs from temporary workers and operating inefficiencies.

Shortages of, or the inability to attract, train, integrate and retain, some types of skilled laborers, such as welders, restrict our ability to maintain or increase production rates and could increase our labor costs.

An overall labor shortage, lack of skilled labor, increased turnover, or higher labor costs could adversely impact our operations and profitability.

Risks related to our operations outside of the U.S., particularly Mexico, could decrease our profitability.

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Many items manufactured by us in Mexico are sold in the U.S., and the transportation and import of such products may be disrupted.

Some foreign countries where we operate have regulatory authorities that regulate products sold or used in those countries.

The countries in which we operate, including Canada and Mexico, have regulatory authorities that regulate products sold or used in those countries.

If we fail to comply with the applicable regulations within the foreign countries where we operate, we may be unable to market and sell our products in those countries.

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Our inability to re-lease or sell leased or unleased railcars on favorable terms could result in lower lease rates, lower lease utilization percentages, and reduced revenues and operating profit.

The limited number of customers for certain of our products, the variable purchase patterns of our customers in all of our segments, and the timing of completion, delivery, and customer acceptance of orders may cause our revenues and income from operations to vary substantially each quarter, potentially resulting in significant fluctuations in our quarterly results.

The limited number of customers for certain of our products, the variable purchase patterns of our customers, and the timing of completion, delivery, and customer acceptance of orders may cause our revenues and income from operations to vary substantially each quarter, potentially resulting in significant fluctuations in our quarterly results.

Some of the markets we serve have a limited number of customers.

The volumes purchased by customers in each of our business segments vary from year to year, and not all customers make purchases every year.

The volumes purchased by customers vary from year to year, and not all customers make purchases every year.

As a result, the order levels for our products have varied significantly from quarterly period to quarterly period in the past and may continue to vary significantly in the future.

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As a result of these quarterly fluctuations, we believe that comparisons of our sales and operating results between quarterly periods may not be meaningful and should not be relied upon as indicators of future performance.

Fluctuations in the price and supply of raw materials and parts and components used in the production of our products could have a material adverse effect on our ability to cost-effectively manufacture and sell our products.

In some instances, we rely on a limited number of suppliers for certain raw materials and parts and components needed in our production.

Fluctuations in the price and supply of materials used in the production of our products could have a material adverse effect on our ability to cost-effectively manufacture and sell our products.

In some instances, we rely on a limited number of suppliers for certain materials needed in our production.

A significant portion of our business depends on the adequate supply of numerous specialty and other parts and components at competitive prices such as brakes, wheels, side frames, bolsters, and bearings for the railcar business.

Our manufacturing operations partially depend on our ability to obtain timely deliveries of raw materials, parts, and components in acceptable quantities and quality from our suppliers.

Certain raw materials and parts and components for our products are currently available from a limited number of suppliers and, as a result, we may have limited control over pricing, availability, and delivery schedules.

If we are unable to purchase a sufficient quantity of raw materials and parts and components on a timely basis, we could face disruptions in our production and incur delays while we attempt to engage alternative suppliers.

Our manufacturing operations partially depend on our ability to obtain timely deliveries of materials in acceptable quantities and quality from our suppliers.

Certain materials for our products are currently available from a limited number of suppliers and, as a result, we may have limited control over pricing, availability, and delivery schedules.

The inability to purchase a sufficient quantity of materials on a timely basis could create disruptions in our production and result in delays while we attempt to engage alternative suppliers.

Worsening economic or commercial conditions could reduce the number of available suppliers, potentially increasing our rejections for poor quality and requiring us to source unknown and distant supply alternatives.

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Changes in the price and demand for steel could lower our margins and profitability.

The principal material used in our manufacturing segments is steel.

Market steel prices may exhibit periods of volatility.

The principal material used in our manufacturing segment is steel.

Market steel prices exhibit periods of volatility.

Steel prices may experience further volatility as a result of scrap surcharges assessed by steel mills and other market factors.

We often use contract-specific purchasing practices, supplier commitments, contractual price escalation provisions, and other arrangements with our customers to mitigate the effect of this volatility on our operating profits for the year.

To the extent that we do not have such arrangements in place, a change in steel prices could materially lower our profitability.

To the extent that we do not have such arrangements in place, an adverse change in steel prices lowers our profitability in the Rail Products Group.

In addition, meeting production demands is dependent on our ability to obtain a sufficient amount of steel.

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Reductions in the availability of energy supplies or an increase in energy costs may increase our operating costs.

We use various gases, including natural gas, at our manufacturing facilities and use diesel fuel in vehicles to transport our products to customers and to operate our plant equipment.

We use various gases, including natural gas, at our manufacturing facilities.

An outbreak or escalation of hostilities between the U.S.

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It is important that the data processed by these systems remains confidential, as it often includes sensitive information relating to our business, customers, employees, and vendors.

Failure to prevent or mitigate data loss or system intrusions from cybersecurity attacks or other security breaches could expose us, our vendors, or our customers to a risk of loss or misuse of such information, adversely affect our operating and financial results, restrict or prevent operations or financial reporting, result in litigation or potential liability and otherwise harm our business.

At times, certain of our vendors have suffered cybersecurity attacks.

Although these incidents have not had a material adverse impact on our operations, failure to prevent or mitigate data loss or system intrusions from cybersecurity attacks or other security breaches could expose us, our vendors, or our customers to a risk of loss or misuse of such information, adversely affect our operating and financial results, restrict or prevent operations or financial reporting, result in litigation or potential liability and otherwise harm our business.

Likewise, data privacy breaches from our systems could expose personally identifiable information of our employees or contractors, sensitive customer data, or vendor data to unauthorized persons, adversely impacting our customer service, employee relationships, and our reputation.

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Increasing insurance claims and expenses could lower profitability and increase business risk.

We are subject to potential liability for claims alleging property damage and personal and bodily injury or death arising from the use of or exposure to our products, especially in connection with products we manufacture that our customers install along U.S.

highways or that our customers use to transport hazardous, flammable, toxic, or explosive materials.

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As a result, there could be a material adverse effect on our business, operations, or financial condition.

See Note 15 of the Consolidated Financial Statements for more detailed information on any material pending legal proceedings other than ordinary routine litigation incidental to our business, including the current status of the Company's highway products litigation.

While state and federal procedural rules exist to curtail the filing of claims against the Company in jurisdictions unrelated to the underlying claims, courts sometime may not enforce these rules, exposing us to a greater likelihood of unfavorable results and increased litigation costs.

Whenever our products are sold to or ultimately owned and/or operated by governments or their authorized agencies, we may be unable to seek redress or recourse to at-fault parties.

Whenever our products were sold to or are ultimately owned and/or operated by governments or their authorized agencies, we may be unable to seek redress or recourse to at-fault parties.

When litigation arising from the installation, maintenance, replacement, or use of our products is filed against the Company, recourse to such governments or authorized agencies may be subject to sovereign immunity or related defenses thereby exposing the Company to risk of liability and increased costs irrespective of fault.

Many of our products are sold to leasing companies, contractors, distributors, and installers who may misuse, abuse, improperly install or improperly or inadequately maintain or repair such products thereby potentially exposing the Company to claims that could increase our costs and weaken our financial condition.

Many of our products are or were sold to leasing companies, contractors, distributors, and installers who may misuse, abuse, improperly install or improperly or inadequately maintain or repair such products thereby potentially exposing the Company to claims that could increase our costs and weaken our financial condition.

The products we manufacture are designed to work optimally when properly assembled, operated, installed, repaired, and maintained.

When this does not occur, the Company may be subjected to claims or litigation associated with personal or bodily injuries or death and property damage.

Although the Company has completed the sale of its highway products business, it has retained responsibility for certain existing litigation and claims and for certain potential future claims related to the ET-Plus® System, a highway guardrail end-terminal system.

See Note 15 of the Consolidated Financial Statements for more detailed information on these retained obligations.

Our manufacturer's warranties expose us to product replacement and repair claims.

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The loss of the services of one or more key members of our management team could result in increased costs associated with attracting and retaining a replacement and could disrupt our operations and result in a loss of revenues.

Shortages of skilled labor could adversely impact our operations.

We depend on skilled labor in the manufacture, maintenance, and repair of our products.

Some of our facilities are located in areas where demand for skilled laborers may exceed supply.

Shortages of, or the inability to attract, train, integrate and retain, some types of skilled laborers, such as welders, could restrict our ability to maintain or increase production rates and could increase our labor costs.

Some of our employees belong to labor unions, and strikes or work stoppages could adversely affect our operations.

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The United Kingdom’s Financial Conduct Authority (the authority that regulates LIBOR) has announced that it would phase out the most popular LIBOR indices by the end of June 2023.

It is unclear whether new methods of calculating LIBOR will be established or if alternative benchmark reference rates will be adopted.

In the U.S., the Alternative Reference Rates Committee has identified the Secured Overnight Financing Rate ("SOFR") as its preferred alternative to LIBOR.

Certain of our and our subsidiaries’ indebtedness utilize LIBOR or an alternative benchmark reference rate for calculating the applicable interest rate.

After LIBOR is phased out, the interest rates for these obligations might be subject to change.

The replacement of LIBOR with an alternative benchmark reference rate may adversely affect interest rates and result in higher borrowing costs under these agreements and any future agreements.

The replacement of LIBOR with SOFR or an alternative benchmark reference rate may adversely affect interest rates and result in higher borrowing costs under these agreements and any future agreements.

This could materially and adversely affect our results of operations, cash flows, ability to acquire debt financing, and liquidity.

We cannot predict the effect of the elimination of LIBOR or the establishment and use of alternative benchmark reference rates and the corresponding effects on our cost of capital.

We cannot predict the effect of the elimination of LIBOR or the establishment and use of SOFR or alternative benchmark reference rates and the corresponding effects on our cost of capital.

Risks Related to Laws and Regulations

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and rail-related safety standards for railroad equipment, tracks, and operations, including the packaging and transportation of hazardous, flammable, explosive, and toxic materials.

Our highway products business is subject to regulation by the USDOT, the FHWA, and various state highway departments and administrative agencies.

These organizations, with participation from AASHTO, establish certain specifications, product testing criteria, and performance standards related to the manufacture of our highway products.

Our operations are also subject to regulation of health and safety matters by the U.S.

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Under certain circumstances, strict liability concepts may apply and if we are found liable in any such incident, it could have a material adverse effect on our financial condition, business, and operations.

Some of our customers place orders for our products (i) in reliance on their ability to utilize tax benefits or tax credits such as accelerated depreciation, or (ii) to utilize federal-aid programs that allow for purchase price reimbursement or other government funding or subsidies, any of which benefits or programs could be discontinued or allowed to expire without extension thereby reducing demand for certain of our products.

Some of our customers place orders for our products in reliance on their ability to utilize tax benefits, which could be discontinued or allowed to expire without extension thereby reducing demand for certain of our products.

There is no assurance that the U.S.

government will reauthorize, modify, or otherwise not allow the expiration of such tax benefits, subsidies, or federal-aid programs that may include funding of the purchase or purchase price reimbursement of certain of our products.

In instances where such benefits, subsidies, or programs are allowed to expire or are otherwise modified or discontinued, the demand for our products could decrease, thereby creating the potential for a material adverse effect on our financial condition or results of operations.

government will reauthorize, modify, or otherwise not allow the expiration of tax benefits, such as accelerated depreciation.

In instances where such benefits are allowed to expire or are otherwise modified or discontinued, the demand for our products could decrease, thereby creating the potential for a material adverse effect on our financial condition or results of operations.

Changes in accounting standards or inaccurate estimates or assumptions in the application of accounting policies could adversely affect our financial results .

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A small number of stockholders could significantly influence our business.

One stockholder controls more than 20% of our outstanding common stock.

A small number of stockholders collectively control more than 20% of our outstanding common stock.

Accordingly, a small number of stockholders could affect matters that require stockholder approval, such as the election of directors and the approval of significant business transactions.

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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