What changed in this filing

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Item 1A. Risk Factors

2022-02-22 compared with 2021-03-03 · 130 added, 83 removed, 313 unchanged (40% of the section changed)

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Changes in how RL is maintained, or other indices are established or maintained, could adversely impact the selling prices for these products.

Many of the building products that we distribute, including oriented strand board, plywood, lumber, and rebar, are commodities that are widely available from other distributors or manufacturers, with prices and volumes determined frequently in an auction market based on participants’ perceptions of short-term supply and demand factors.

Many of the building products that we distribute, including oriented strand board (“OSB”), plywood, lumber, and rebar, are commodities that are widely available from other distributors or manufacturers, with prices and volumes determined frequently in an auction market based on participants’ perceptions of short-term supply and demand factors.

Prices of commodity products can also change as a result of national and international economic conditions, labor and freight costs, competition, market speculation, government regulation, and trade policies, as well as from periodic delays in the delivery of products.

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Overall, these pricing pressures may adversely affect our operating results and cash flows.

Although the rate of inflation has been low in recent years, we are currently experiencing a significant rise in inflation.

An inflationary environment can increase the cost of products we purchase.

However, economic conditions and market factors may make it difficult for us to raise our prices enough to keep up with the rate of inflation, which could reduce our profit margins or reduce the number of customers who can purchase our products.

If the current inflationary environment continues or worsens, we may not be able to adjust the pricing we charge for our products to offset increasing product costs, which would adversely impact our results of operations and cash flows.

Our earnings are highly dependent on volumes.

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Volumes for certain of the products that we distribute were significantly impacted in fiscal 2021 by COVID-19.

The pandemic has affected

our operational and financial performance and the extent of its effect on our operational and financial performance will continue to depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, scope, and severity of the pandemic, the actions taken to contain or mitigate its impact, and the direct and indirect economic efforts of the pandemic and related containment measures, among others.

Any failure to maintain, or increase volumes, combined with fluctuations, such as commodity price inflation or deflation, which would impact the purchase and/or selling price of our products, could adversely affect our results of operations, cash flows, and financial condition.

The pandemic has affected our operational and financial performance and the extent of its effect on our operational and financial performance will continue to depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, scope, and severity of the pandemic, the actions taken to contain or mitigate its impact, and the direct and indirect economic efforts of the pandemic and related containment measures, among others.

Any failure to maintain, or increase volumes, alone or combined with fluctuations, such as commodity price inflation or deflation, which would impact the purchase and/or selling price of our products, could adversely affect our results of operations, cash flows, and financial condition.

Our industry is highly fragmented and competitive.

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Also, financial stability is important to suppliers and customers in choosing distributors for their products, and affects the favorability of the terms on which we are able to obtain our products from our suppliers and sell our products to our customers.

Some of our competitors have less financial leverage or are part of larger companies, and, therefore, may have access to greater financial and other resources than those to which we have access.

Some of our competitors may have less financial leverage or are part of larger companies, and, therefore, may have access to greater financial and other resources than those to which we have access.

Finally, we may not be able to maintain our costs at a level sufficiently low for us to compete effectively.

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Market prices of building products historically have been volatile and cyclical, and we have limited ability to control the timing and amount of pricing changes.

Demand for building products is driven mainly by factors outside of our control, such as general economic and political conditions, interest rates, availability of mortgage financing, the construction, repair and remodeling markets, industrial markets, weather, and population growth.

Demand for building products is driven mainly by factors outside of our control, such as general economic and political conditions, interest rates, availability of mortgage financing, inflation, the construction, repair and remodeling markets, industrial markets, housing supply, weather, and population growth.

The supply of building products fluctuates based on available manufacturing capacity, and excess capacity in the industry can result in significant declines in market prices for those products.

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The home building industry peaked in 2005, and then underwent a significant decline.

Although the home building industry has improved and continues to improve, it is still far below its historical averages.

Although the home building industry has improved and continues to improve, it is still far below its peak in 2005.

According to the U.S.

Census Bureau, actual single-family housing starts in the United States during 2020 increased 11.5 percent from 2019 levels, but remain 42.2 percent below their peak in 2005.

Census Bureau, actual single-family housing starts in the United States during 2021 increased from 2020 levels but remain below their peak in 2005.

The multi-year downturn in the home building industry resulted in a substantial reduction in demand for the products we provide.

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Continued weakness in the new residential construction market would have a material adverse effect on our business, financial condition, and operating results.

Factors impacting the level of activity in the residential new construction markets include changes in interest rates, unemployment rates, high foreclosure rates and unsold/foreclosure inventory, availability of financing, labor costs and availability, vacancy rates, local, state and federal government regulation (including mortgage interest deductibility and other tax laws), weakening in the U.S.

Factors impacting the level of activity in the residential new construction markets include changes in interest rates, inflation, unemployment rates, housing inventory, high foreclosure rates and unsold/foreclosure inventory, availability of financing, labor costs and availability, vacancy rates, local, state and federal government regulation (including mortgage interest deductibility and other tax laws), weakening in the U.S.

economy or of any regional or local economy in which we operate, availability of supplies, the COVID-19 pandemic’s impact on the economy and consumer demand and preferences, and shifts in populations away from the markets that we serve.

In addition, the mortgage markets periodically experience disruption and reduced availability of mortgages for potential homebuyers due to more restrictive standards to qualify for mortgages, including with respect to new home construction loans.

In addition, the mortgage markets periodically experience disruption and reduced availability of mortgages for potential homebuyers due to more restrictive

standards to qualify for mortgages, including with respect to new home construction loans.

Because of these factors, there may be fluctuations in our operating results, and the results for any historical period may not be indicative of results for any future period.

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Historically, residential repair and remodeling activity has decreased in slow economic periods.

limit consumers’ spending, particularly on discretionary items, and affect their confidence level leading to reduced spending on home improvement projects.

General economic weakness, elevated unemployment levels, mortgage delinquency and foreclosure rates, limitations in the availability of mortgage and home improvement financing, and lower housing turnover all limit consumers’ spending, particularly on discretionary items, and affect their confidence level leading to reduced spending on home improvement projects.

Depressed activity levels in consumer spending for home improvement construction would adversely affect our business, liquidity, results of operations, and financial position.

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Our ability to offer a wide variety of products to our customers is dependent upon our ability to obtain adequate product supply from manufacturers and other suppliers.

Generally, our products are obtainable from various sources and in sufficient quantities.

Generally, our products are obtainable from various sources and in sufficient quantities subject to then current market conditions.

However, the loss of, or a substantial decrease in the availability of, key products from our suppliers, or the loss of key supplier arrangements, could adversely impact our financial condition, operating results, and cash flows.

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Operating Risks

The full effect of the COVID-19 pandemic on our business is currently unknown, and it may adversely affect our business and results from operations.

The global impact of COVID-19 continues to evolve.

COVID-19 has impacted our operations and financial performance and the extent of its effect on our operational and financial performance in future periods will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, scope and severity of the pandemic, the actions taken to contain or mitigate its impact, and the direct and indirect economic effects of the pandemic and related containment measures, among others.

In response to the spread of COVID-19, governmental authorities implemented numerous measures to try to contain the virus, including travel bans and restrictions, quarantines, shelter-in-place and work from home orders, and shutdowns of “non-essential” businesses.

While we were deemed an “essential” business, this status may not continue, which could adversely impact our ability to operate in the markets we serve.

Governmental measures have impacted, and may further impact, our workforce and operations, as well as those of our customers, vendors and suppliers.

We have distribution operations across the United States, and each state in which we operate has been affected by the outbreak of COVID-19 and taken various measures to try to contain it.

Varying levels of measures to contain the COVID-19 outbreak, and associated variants, in states across the United States could impact our operations in varying degrees, the impact of which we cannot reasonably predict.

Among other impacts to our business from the outbreak of COVID-19:

• We have experienced higher overall demand for our products due to economic conditions and changing consumer

behaviors driven by COVID-19, which may or may not continue;

• Our supply chain may be disrupted due to government restrictions or if our suppliers or vendors have raw material and/or labor disruptions as a result of the pandemic that cause us to experience disruptions in product availability;

• Our distribution capabilities may be disrupted if we are unable to secure sufficient supplies of products, if significant portions of our workforce are unable to work effectively, including because of illness, government actions or other restrictions, or if we have periods of disruptions due to deep cleaning and sanitizing our facilities.

In addition, we have incurred additional expense for cleaning, safety supplies and equipment, screening resources and other items and expect these costs to continue to some degree in the future although we may choose not to report them separately;

• We may experience an increase or decrease in commodity and other input costs due to market volatility and product availability;

• We may experience an increase in our working capital needs or an increase in our trade accounts receivable write-offs as a result of increased financial pressures on our suppliers and customers;

• We may experience changes to our internal controls over financial reporting as a result of changes in working environments, such as shelter-in-place and similar orders, as well as the potential for staffing limitations.

Our strategy includes pursuing acquisitions.

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If we do not effectively manage those risks and uncertainties, our financial condition, operating results, and cash flows may be negatively affected.

We may incur business disruptions.

The operations at our distribution facilities may be interrupted or impaired by various operating risks, including, but not limited to, risks associated with catastrophic events, such as fires, floods, earthquakes, explosions, natural disasters, severe weather, including hurricanes, tornados and droughts, and pandemics, including COVID-19, or other similar occurrences;

interruptions

in the delivery of products via railroad or other inbound transportation means;

We may incur business disruptions resulting from a variety of possible causes.

The operations at our distribution facilities may be interrupted or impaired by various operating risks, including, but not limited to, risks associated with catastrophic events, such as fires, floods, earthquakes, explosions, natural disasters, severe weather, including hurricanes, tornados and droughts, whether a result of climate change or otherwise, pandemics, including COVID-19, or other similar occurrences;

interruptions in the delivery of products via railroad or other inbound transportation means;

adverse government regulations;

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We may not have the resources or technical sophistication to anticipate or prevent rapidly evolving types of cyber-attacks.

Any compromise of our security could result in a loss or misuse of our confidential information, violation of applicable privacy and other laws, significant legal and financial exposure, damage to our reputation, interruption of our business operations, and a loss of confidence in our security measures;

Any compromise of our security could result in a loss or misuse of our confidential information, violation of applicable privacy and other laws, significant legal and financial exposure, theft, damage to our reputation, interruption of our business operations, and a loss of confidence in our security measures;

any of which could harm our business.

We may also be subject to phishing attacks, wherein individuals may fraudulently purport to be an agent of a reputable company in order to induce our employees to reveal information or obtain resources.

We may also be subject to phishing attacks, wherein individuals may fraudulently purport to be an agent of a reputable company in order to engage in theft or induce our employees to reveal confidential and other information or provide unauthorized resources.

We are also susceptible to malware, ransomware, denial of service, and other attacks that could adversely affect our information technology systems.

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Disruptions in these systems could materially impact our ability to buy and sell our products, as well as generally operate our business, which could reduce our revenue.

Our success depends on our ability to attract, train, and retain highly qualified associates and other key personnel while controlling related labor costs .

In order to be successful, we must attract, train, and retain a large number of highly qualified associates while controlling related labor costs.

Our ability to control labor costs is subject to numerous external factors, including prevailing wage rates and health and other insurance costs.

In many of our markets, highly qualified associates are in high demand and we compete with other businesses for these associates and invest resources in training and incentivizing them.

In particular, there is significant competition for qualified drivers in the transportation industry.

And interventions and enforcement under the FMCSA Compliance, Safety, and Accountability program may shrink the industry’s pool of drivers as those drivers with unfavorable scores may no longer be eligible to drive.

There can be no assurance that we will be able to attract or retain highly qualified associates in the future, including those employed by companies we may acquire.

As a result of labor shortages, particularly among our drivers and material handlers, we could be required to utilize temporary or contract labor.

Using temporary or contract labor typically requires higher cost, and temporary or contract labor may be less productive than full-time associates.

In addition, a shortage of qualified drivers could require us to increase driver compensation, let trucks sit idle, utilize common carriers, utilize less experienced drivers, or face difficulty meeting customer demands, all of which could adversely affect our growth and profitability.

Furthermore, our success is highly dependent on the continued services of our management team.

The loss of services of one or more key members of our senior management team could have a material adverse effect on us.

We are exposed to product liability and other claims and legal proceedings related to our business and the products we distribute, which may exceed the coverage of our insurance .

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Such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, or a breach of warranties.

We are also from time to time subject to casualty, contract, tort, and other claims relating to our business, the products we have distributed in the past or may in the future distribute, and the services we have provided in the past or may in the future provide, either directly or through third parties.

We are also from time to time subject to casualty, contract, tort, and other claims relating to

our business, the products we have distributed in the past or may in the future distribute, and the services we have provided in the past or may in the future provide, either directly or through third parties.

We rely on manufacturers and other suppliers, including manufacturers and suppliers located outside of the United States, to provide us with the products we sell or distribute.

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There can be no assurance that any current or future claims will not adversely affect our financial position, cash flows, or results of operations.

Our business operations could suffer significant losses from natural disasters, catastrophes, fire, or other unexpected events .

While we maintain insurance covering our facilities, including business interruption insurance, our warehouse facilities could be materially damaged by natural disasters, such as floods, tornadoes, hurricanes, and earthquakes, or by fire, adverse weather conditions, civil unrest, condemnation, or other unexpected events or disruptions to our facilities.

Our business operations could suffer significant losses from climate changes, natural disasters, catastrophes, fire, or other unexpected events .

While we maintain insurance covering our facilities and equipment, including business interruption insurance, our warehouse facilities could be materially damaged by natural disasters, such as floods, tornadoes, hurricanes, and earthquakes, or by fire, adverse weather conditions, civil unrest, condemnation, or other unexpected events or disruptions to our facilities.

We could incur uninsured losses and liabilities arising from such events, including damage to our reputation, and/or suffer material losses in operational capacity, which could have a material adverse impact on our business, financial condition, and results of operations.

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As of January 1, 2022, we employed approximately 2,055 employees and less than one percent of our employees are employed on a part-time basis.

Approximately 22 percent of our employees were represented by various local labor union with terms and conditions of employment governed by CBAs.

Six CBAs covering approximately six percent of our employees are up for renewal in fiscal 2021.

Approximately 21 percent of our employees were represented by various local labor unions with terms and conditions of employment governed by collective bargaining agreements (“CBAs”).

Six CBAs covering approximately six percent of our employees were up for renewal in fiscal 2021.

Four of those CBAs were successfully renewed, and another is expected to be completed before the end of the first quarter 2022.

The remaining CBA was terminated as a result of the local union disclaiming interest in continuing to represent the employees at the particular location.

Two CBAs covering approximately four percent of our employees are up for renewal in fiscal 2022.

Although we have generally had good relations with our unionized employees, and expect to renew collective bargaining agreements as they expire, no assurances can be provided that we will be able to reach a timely agreement as to the renewal of the agreements, and their expiration or continued work under an expired agreement, as applicable, could result in a work stoppage.

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Wage increases could also be significant in an inflationary environment even in our non-unionized locations.

All of these factors could negatively impact our operating results and cash flows.

All or some of these factors could negatively impact our operating results and cash flows.

Federal, state, local, and other regulations could impose substantial costs and restrictions on our operations that would reduce our net income .

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Department of Labor, regulations issued by the SEC, accounting standards issued by the Financial Accounting Standards Board (the “FASB”) or similar entities, and state and local zoning restrictions, building codes and contractors’ licensing regulations.

More burdensome regulatory requirements in these or other areas may increase our general and administrative costs and adversely affect our financial condition, operating

results, and cash flows.

More burdensome regulatory requirements in these or other areas may increase our general and administrative costs and adversely affect our financial condition, operating results, and cash flows.

Moreover, failure to comply with the regulatory requirements applicable to our business could expose us to litigation and substantial fines and penalties that could adversely affect our financial condition, operating results, and cash flows.

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In addition, we could incur costs to comply with such environmental laws and regulations, the violation of which could lead to substantial fines and penalties.

Our operations could also in the future be subject to regulations related to climate change.

The ongoing effect of the COVID-19 pandemic and other widespread public health crises may adversely affect our business and results from operations.

Public health crises, pandemics, and epidemics, such as the ongoing COVID-19 pandemic, have impacted, and could continue to impact, our operations and financial performance.

The extent of the effect of the ongoing COVID-19 pandemic on our operational and financial performance in future periods will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration, scope and severity of the pandemic and the spread of COVID-19 variants, the actions taken to contain or mitigate its impact, and the direct and indirect economic effects of the pandemic and related containment measures, among others.

While we were deemed an “essential” business at the time, this status may not be the case again, which could adversely impact our ability to operate in the markets we serve.

Governmental measures have impacted, and may further impact, our workforce and operations, as well as those of our customers, vendors and suppliers.

We have distribution operations across the United States, and each state in which we operate has been affected by the outbreak of COVID-19 and taken various

measures to try to contain it.

Varying levels of regulatory, legal and other measures to contain the COVID-19 outbreak, and associated variants, in states across the United States could impact our operations in varying degrees, the impact of which we cannot reasonably predict.

Among other impacts to our business from the outbreak of COVID-19:

• We have experienced higher overall demand for our products due to economic conditions and changing consumer

behaviors driven by COVID-19, which may or may not continue;

• We may experience an increase or decrease in commodity and other input costs due to market volatility and product availability;

• We may experience an increase in our working capital needs or an increase in our trade accounts receivable write-offs as a result of increased financial pressures on our suppliers and customers;

Our vaccination policies and governmental regulations concerning mandatory COVID-19 vaccination of employees could have a material adverse impact on our business and results of operations.

During 2021, we implemented a mandatory vaccination policy for our corporate-based workforce and new hires joining our Company.

Our policy did not and does not extend to hourly employees working outside our corporate office who joined our Company prior to the implementation of our policy.

In September 2021, President Biden issued an executive order directing the Occupational Safety and Health Administration (“OSHA”) to create rules requiring U.S.

employers with 100 or more employees to require COVID-19 vaccinations or weekly employee testing before coming to work.

On January 13, 2022, the U.S.

Supreme Court issued an order that halted implementation of President Biden’s vaccine and testing requirement aimed at large businesses and sent the case back to the U.S.

Court of Appeals.

On January 26, 2022, OSHA announced a withdrawal of the vaccination and testing requirement for businesses.

Although OSHA withdrew the vaccination and testing requirement as an enforceable emergency temporary standard (“ETS”), OSHA intends to continue moving the ETS forward through the rule-making process as a proposed rule.

Accordingly, it is possible that the company may be subject to the specific policies outlined in the ETS if it becomes a final rule under OSHA’s rule-making authority.

Implementation of these rules, future rules, or our own vaccination policies, as well as navigating conflicts between state, local and federal rules, could cause us to experience additional challenges in retaining our employees.

Regulatory impacts from these rules, or future rules, requiring company-wide vaccination could impact us in a significant way if we are required to apply vaccination requirements to our entire employee population.

We expect that the market for both hourly workers and professional workers will remain challenging at least through fiscal 2022.

If we fail to attract, motivate, train and retain qualified personnel, or if we experience excessive turnover, we may experience declining sales, manufacturing delays or other operating inefficiencies, increased recruiting, training and relocation costs and other difficulties, and our results of operations, cash flows and financial condition, and the trading price of our common stock may be adversely impacted.

Financial Risks

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• the impact of actuarial assumptions and regulatory activity on pension costs and pension funding requirements;

• the financial condition and creditworthiness of our customers;

• our creditworthiness in addition to the financial condition and creditworthiness of our customers;

• our substantial indebtedness, including the possibility that we may not generate sufficient cash flows from operations or that future borrowings may not be available in amounts sufficient to fulfill our debt obligations and fund other liquidity needs;

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Our level of indebtedness could limit our financial and operating activities and adversely affect our ability to incur additional debt to fund future needs.

At January 2, 2021, we had approximately $288 million of debt outstanding under our revolving credit facility, and approximately $43 million of debt outstanding under our term loan facility.

At January 1, 2022, we had no outstanding debt under our revolving credit facility, and approximately $300 million of debt outstanding under our senior secured notes.

Additionally, as of January 1, 2022, outstanding commitments under finance leases were $275 million.

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If compliance with our debt obligations materially limits our financial or operating activities, or hinders our ability to adapt to changing industry conditions, we may lose market share, our revenue may decline and our operating results may be negatively affected.

Our cash flows and capital resources may be insufficient to make required payments on our indebtedness or future indebtedness .

Our ability to make scheduled payments under our revolving credit facility and term loan facility depends on our successful financial and operating performance, cash flows, and capital resources, which in turn depend upon prevailing economic conditions and certain financial, business, and other factors, many of which are beyond our control.

These factors include, among others:

• economic and demand factors affecting the building products distribution industry;

• external factors affecting availability of credit;

• pricing pressures;

• increased operating costs;

• competitive conditions;

• operational disruption associated with the Cedar Creek integration;

• other operating difficulties.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell material assets or operations, obtain additional capital, or restructure our debt.

There is no assurance that we could obtain additional capital or refinance our debt on terms acceptable to us, or at all.

If we are required to dispose of material assets or operations to meet our debt service and other obligations, the value realized on the disposition of such assets or operations will depend on market conditions and the availability of buyers.

Accordingly, any such sale may not, among other things, be for a sufficient dollar amount to repay our indebtedness.

If we do not make scheduled payments on our debt, we will be in default and the outstanding principal and interest on our debt could be declared to be due and payable, in which case we could be forced into bankruptcy or liquidation or required to substantially restructure or alter our business operations or debt obligations.

The instruments governing our indebtedness contain various covenants limiting the discretion of our management in operating our business, including requiring us to maintain a minimum level of excess liquidity .

Our revolving credit facility and term loan facility contain various covenants and restrictions, including customary financial covenants that limit management’s discretion in operating our business.

Our revolving credit facility and senior secured notes contain various covenants and restrictions, including customary financial covenants that limit management’s discretion in operating our business.

In particular, these instruments limit our ability to, among other things:

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• make investments;

• repurchase stock;

• pay dividends and make distributions;

• sell or acquire assets, including certain real estate assets, outside the ordinary course of business;

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Refer to Note 6, Long-Term Debt , for further details.

Borrowings under our revolving credit facility and term loan facility bear interest at a variable rate, which subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under our revolving credit facility and term loan facility are at variable rates of interest and expose us to interest rate risk.

Borrowings under our revolving credit facility bears interest at a variable rate, which subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.

Borrowings under our revolving credit facility is at variable rates of interest and expose us to interest rate risk.

If interest rates increase, our debt service obligations on this variable rate indebtedness would increase even though the amount borrowed remained the same.

Although we may elect in the future to take certain actions to reduce interest rate volatility in connection with our variable rate borrowings, we cannot provide assurances that we will be able to do so or that those actions will be effective.

Our revolving credit facility and our term loan facility include available interest rate options based on the London Inter-bank Offered Rate (“LIBOR”).

It is widely expected that LIBOR will be discontinued after 2021, and the U.S.

Our revolving credit facility includes available interest rate options based on the London Inter-bank Offered Rate (“LIBOR”).

It is widely expected that LIBOR will be discontinued after June 30, 2023, and the U.S.

and other countries are currently working to replace LIBOR with alternative reference rates.

Our revolving credit facility provides procedures for determining an alternative base rate in the event that LIBOR is discontinued.

Regardless, there can be no assurances as to what alternative base rates may be and whether such base rate will be more or less favorable than LIBOR.

The consequences of these developments with respect to LIBOR cannot be entirely predicted;

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We have sold and leased back certain of our distribution centers under long-term non-cancelable leases, and may enter into similar transactions in the future.

Many of these leases are (or will be) finance leases, and our debt and interest expense may increase as a result.

All of these leases are (or will be) finance leases, and our debt and interest expense may increase as a result.

As a result of real estate financing transactions through sale-leaseback arrangements, a substantial number of our distribution centers are leased under non-cancelable leases.

These leases typically have initial terms of approximately fifteen years, and most provide options to renew for specified periods of time.

These leases typically have initial terms of approximately fifteen years, and

most provide options to renew for specified periods of time.

We may enter into additional sale and lease-back transactions in the future.

The leases resulting from these transactions are generally recognized and accounted for as finance leases, which may be counted as indebtedness, including for purposes of financial covenants in the agreements governing our debt, and may significantly increase the stated interest expense that is recognized in our income statements.

Many of our distribution centers are leased, and if we close a leased distribution center, we will still be obligated under the applicable lease.

Many of our distribution centers are leased, and if we close a leased distribution center before expiration of the lease, we will still be obligated under the applicable lease.

In addition, we may be unable to renew the leases at the end of their terms.

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Additionally, the revenue and profit generated at a relocated distribution center may not equal the revenue and profit generated at the previous location.

We may not have or be able to raise the funds necessary to finance a required repurchase of our senior secured notes.

Subject to certain exceptions, upon the occurrence of a change in control under the indenture governing our senior secured notes, we are required to offer to repurchase all of the outstanding notes.

It is possible that we would not have sufficient funds at the time that we are required to make any such repurchase of our senior secured notes, and we cannot assure the holders of the senior secured notes that we will have sufficient financial resources, or will be able to arrange financing, to pay the repurchase price in cash with respect to any such notes upon a change in control.

Our failure to repurchase the senior secured notes when required would result in an event of default with respect to such notes which could, in turn, constitute a default under the terms of our other indebtedness, if any.

Certain important corporate events, such as leveraged recapitalizations that would increase the level of our indebtedness, may not constitute a change in control under the indenture governing our senior secured notes.

A lowering or withdrawal of the ratings assigned to our debt securities by rating agencies may increase our future borrowing costs and reduce our access to capital .

Any rating assigned to our debt could be lowered or withdrawn entirely by a rating agency if, in that rating agency’s judgment, future circumstances relating to the basis of the rating, such as adverse changes, so warrant.

Any future lowering of our ratings likely would make it more difficult or more expensive for us to obtain additional debt financing.

A change in our product mix could adversely affect our results of operations .

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As a result, our revenue, operating performance, cash flows, and net income may be adversely affected.

If petroleum prices increase, our results of operations could be adversely affected .

Petroleum prices and availability of petroleum products are subject to political, economic, and market factors that are outside our control.

Political events in petroleum-producing regions as well as hurricanes and other weather-related events may cause the price of fuel to increase.

Within our business units, we deliver products to our customers primarily via our fleet of trucks.

If petroleum or energy prices increase, our results of operations could be adversely affected .

Petroleum and energy prices and availability of petroleum products are subject to political, economic, and market factors that are outside our control.

Political events in petroleum-producing regions as well as hurricanes and other weather-related events

or natural disasters may cause the price of fuel to increase or the availability of fuel to decrease.

Within our business units, we deliver products to our customers primarily via our fleet of trucks, which we fuel both onsite and through street fuel programs.

Our operating profit may be adversely affected if we are unable to obtain the fuel we require or to fully offset the anticipated impact of higher fuel prices through increased prices or fuel surcharges to our customers.

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We retain a significant portion of the accident risk under our vehicle liability and workers’ compensation insurance programs;

and, beginning in fiscal 2018, we were self-insured for health insurance, which is limited by stop-loss coverage.

Our self-insurance accruals are based on actuarially estimated, undiscounted cost of claims, which includes claims incurred but not reported.

and we are self-insured for health insurance, the exposure of which is limited by stop-loss coverage.

Our self-insurance accruals are based on actuarial estimated, undiscounted cost of claims, which includes claims incurred but not reported.

While we believe our estimation processes are well designed, every estimation process is inherently subject to limitations.

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Our expected annual effective tax rate could be volatile and materially change as a result of changes in mix of earnings and other factors.

Our overall effective tax rate is equal to our total tax expense as a percentage of our total profit or loss before tax.

Our overall effective tax rate is equal to our total income tax expense, also referred to as provision for income taxes, as a percentage of our income or loss before provision for income taxes.

However, tax expenses and benefits are determined separately for each tax paying entity or group of entities that is consolidated for tax purposes in each jurisdiction.

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Significant assumptions include, but are not limited to, the discount rate, projected return on plan assets, and mortality rates.

In addition, the amount and timing of our pension funding obligations are influenced by funding requirements that are established by the Employee Retirement Income and Security Act of 1974, the Pension Protection Act, Congressional Acts, or other governing bodies.

In addition, the amount and timing of our pension funding obligations are influenced by funding requirements that are established by the

Employee Retirement Income and Security Act of 1974, the Pension Protection Act, Congressional Acts, or other governing bodies.

Costs and liabilities related to our participation in multi-employer pension plans could increase .

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The amount of any increase or decrease in our required contributions to these multi-employer pension plans will depend upon the outcome of collective bargaining, actions taken by trustees who manage the plan, governmental regulations, the actual return on assets held in the plan, the continued viability and contributions of other employers which contribute to the plan, and the potential payment of a withdrawal liability, among other factors.

Our cash flows and capital resources may be insufficient to make required payments on our indebtedness or future indebtedness .

Our ability to make scheduled payments under our revolving credit facility and senior secured notes depends on our successful financial and operating performance, cash flows, and capital resources, which in turn depend upon prevailing economic conditions and certain financial, business, and other factors, many of which are beyond our control.

These factors include, among others:

• economic and demand factors affecting the building products distribution industry;

• external factors affecting availability of credit;

• pricing pressures;

• increased operating costs;

• competitive conditions;

• other operating difficulties.

There is no assurance that we could obtain additional capital or refinance our debt on terms acceptable to us, or at all.

Accordingly, any such sale may not, among other things, be for a sufficient dollar amount to repay our indebtedness.

Risks Relating to Our Common Stock

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Uncertainties associated with such activities could interfere with our ability to effectively execute our strategic plan, impact long-term growth, and limit our ability to hire and retain personnel.

In addition, actions of these stockholders may cause periods of fluctuation in our stock price based on temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

We do not expect to pay dividends on our common stock, and the terms of our loan agreements place restrictions on our ability to pay dividends on our common stock, so any returns to stockholders will be limited to the value of their stock .

We have not declared or paid any cash dividends on our common stock since 2007, and we are restricted from doing so under the terms of our revolving credit facility and term loan facility.

In addition, our term loan facility requires us to make certain future loan payments from our available cash flow.

Regardless of the restrictions in and requirements under our loan agreements, or the terms of any potential future indebtedness, for the foreseeable future we anticipate that we will retain all available funds and earnings to support our operations and finance the growth and development of our business.

Therefore, we do not expect to pay cash dividends in the foreseeable future, so any return to stockholders will be limited to the appreciation in their stock.

In addition, actions of these stockholders may cause periods of fluctuation in our stock price based on

temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.

The terms of our revolving credit facility and senior secured notes place restrictions on our ability to pay dividends on our common stock, so any returns to stockholders may be limited to the value of their stock .

We have not declared or paid any cash dividends on our common stock since 2007, and we are subject to certain condition in order to do so under the terms of our revolving credit facility and senior secured notes.

As we have no current intention of paying dividends, unless we should decide to do so in the future, any return to stockholders may be limited to the appreciation in their stock.

General Risk Factors

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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