What changed in this filing

/stocks — the workspaceLOADING

Item 1A. Risk Factors

2023-02-21 compared with 2022-02-22 · 110 added, 145 removed, 298 unchanged (46% of the section changed)

5 unchanged sentences

Our business has experienced, and is likely to continue experiencing, cycles relating to industry capacity and general economic conditions.

During 2021, availability of certain building products we distribute was impacted by supply constraints driven by the COVID-19 pandemic and affected the market price of the commodity and commodity-based specialty products we buy and distribute.

For example, during early 2022, availability of certain building products we distribute was impacted by supply constraints driven by the COVID-19 pandemic, which affected the market price of the commodity and commodity-based specialty products we buy and distribute.

The length and magnitude of these cycles can vary over time and by product.

4 unchanged sentences

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 (“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.

In addition to the specialty building products we distribute such as engineered wood, siding, millwork, industrial products, and outdoor living, many of the other 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.

Prices of commodity products can be volatile as a result of national and international economic conditions, labor and freight costs, competition, market speculation, government regulation, and trade policies, periodic delays in the delivery of products and inventory levels in various distribution channels.

Short-term increases in the cost of these materials, some of which are subject to significant fluctuations, are sometimes passed on to our customers, but our pricing quotation periods and pricing pressure from our competitors may limit our ability to pass on such price changes.

We may also be limited in our ability to pass on increases in freight costs on our products.

We may also be limited in our ability to pass on increases in freight costs for our products.

At times, the sale price for any one or more of the products we produce or distribute may fall below our purchase costs, requiring us to incur losses on product sales.

Therefore, our profitability with respect to these commodity products depends, in significant part, on managing our cost structure.

Commodity product prices could be volatile in response to operating rates and inventory levels in various distribution channels.

Commodity price volatility affects our distribution business, with falling price environments generally causing reduced revenues and margins, potentially resulting in substantial declines in profitability and possible net losses.

Although we seek to recover increases in prices from our suppliers through price increases in our products, we may not be able to successfully do so.

Any increase in prices from our suppliers that is not offset by an increase in our prices could adversely affect our impact our operating results.

Large customers have historically been able to exert pressure on their outside suppliers and distributors to keep prices low in the highly fragmented building materials distribution industry.

5 unchanged sentences

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.

We are currently experiencing an uncertain inflationary environment.

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

2 unchanged sentences

Our earnings are highly dependent on volumes.

Our earnings are highly dependent on volumes, which fluctuate.

Commodity price inflation can increase our gross margins on relatively consistent or even lower year over year sales volumes, depending on the degree of commodity price inflation.

Fluctuations in commodity prices make it difficult to predict our financial results with any degree of certainty.

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, 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 earnings are highly dependent on volumes, which are dependent on both the housing cycle, as well as our execution.

In addition, selling commoditized products that are subject to fluctuating prices make it difficult to predict our financial results with any degree of certainty.

Commodity price inflation or deflation can increase or decrease our gross margins on relatively consistent year over year structural sales volumes, depending on the degree of commodity price change.

Any failure to maintain, or increase volumes, alone or combined with margin fluctuations due to 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.

If we are unable to compete effectively, our net sales and operating results may be reduced .

The building and industrial products distribution industry is highly fragmented and competitive, and the barriers to entry for local competitors are relatively low.

The building products distribution industry is highly fragmented and competitive, and the barriers to entry for local competitors are relatively low.

Competitive factors in our industry include pricing, availability of product, service, delivery capabilities, customer relationships, geographic coverage, and breadth of product offerings.

12 unchanged sentences

Adverse housing market conditions may negatively impact our business, liquidity, and results of operations, and increase the credit risk from our customers .

Our business depends to a significant degree on the new residential construction market and, in particular, single family home construction.

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 peak in 2005.

According to the U.S.

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.

We cannot predict the duration of the current housing industry market conditions or the timing or strength of any continued recovery of housing activity in our markets.

The home building industry also may not recover to historical levels.

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, 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.

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.

We also rely on residential repair and remodel activity levels.

Our business depends to a significant degree on residential repair and remodel activity levels.

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

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.

General economic weakness, inflation, elevated unemployment levels, mortgage delinquency and foreclosure rates, limitations in the availability of mortgage and home improvement financing, home equity value declines 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.

1 unchanged sentence

Such shifts may alter the nature and prices of products demanded by the end consumer, and, in turn, our customers and could adversely affect our operating performance.

Our business is also dependent on the new residential construction market and, in particular, single family home construction.

Factors impacting the level of activity in the residential new construction markets include increases in interest rates, inflation, unemployment rates, housing inventory, high foreclosure rates and unsold/foreclosure inventory, availability of financing and mortgages, 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, consumer demand and preferences, and shifts in populations away from the markets that we serve, all of which are beyond our control.

Weakness in new residential construction due to any or all of these factors would have a material adverse effect on our business, financial condition, and operating results, and these factors may also result in fluctuations in our operating results As a result, our results for any historical period may not be indicative of results for any future period.

In addition, we extend credit to numerous customers who are generally susceptible to the same economic business risks that we are.

Unfavorable housing market conditions could result in financial failures of one or more of our significant customers.

Furthermore, we may not necessarily be aware of any deterioration in our customers’ financial position.

Furthermore, we may not be aware of deterioration in our customers’ financial position.

If our larger customers’ financial positions were to become impaired, our ability to fully collect receivables from such customers could be impaired and negatively affect our operating results, cash flows, and liquidity.

5 unchanged sentences

There can be no assurance that we will be able to take advantage effectively of this trend toward consolidation.

The trend in our industry toward consolidation could make it more difficult for us to maintain operating margins.

The trend in our industry toward consolidation could make it more difficult for us to gain or retain market share or maintain operating margins.

Our customers and suppliers also continue to consolidate, and this consolidation could result in the loss of existing customers and suppliers to our competitors.

We typically do not enter into minimum purchase contracts with our customers or suppliers.

The loss of one or more of our significant customers or suppliers, or their decision to purchase or sell our products in significantly lower quantities than they have in the past, could significantly affect our financial condition, operating results, and cash flows.

We are subject to disintermediation risk.

10 unchanged sentences

Failure by our suppliers to continue to supply us with products on commercially reasonable terms, or at all, could have a material adverse effect on our financial condition, operating results, and cash flows.

Our dependence on international suppliers and manufacturers for certain products exposes us to risks that could affect our financial condition .

Our dependence on international suppliers and manufacturers for certain products exposes us to risks that could affect our financial condition and expose us to certain additional risks .

Many of our suppliers and manufacturers are located outside of the United States.

4 unchanged sentences

Our strategy includes pursuing acquisitions.

We may be unsuccessful in making and integrating mergers, acquisitions and investments, and completing divestitures.

The integration of acquisitions can involve significant anticipated and unanticipated operational challenges, including integrating different computer, enterprise resource planning, and accounting systems, integrating physical facilities and inventories, and integrating acquired personnel and corporate cultures into our business.

We may be unsuccessful in making and integrating mergers, acquisitions and investments.

The integration of acquisitions can involve significant anticipated and unanticipated operational challenges, including integrating different computer, enterprise resource planning, and accounting systems, integrating physical facilities and inventories, and integrating businesses and corporate cultures into our business.

Addressing these challenges requires the attention of management and the diversion of resources from existing operations.

Our failure to manage these operational challenges effectively and at anticipated costs could result in disruptions in overall operating performance and deficiencies in customer service of the combined business.

These disruptions and deficiencies could lead to increased costs, order and delivery errors, inventory and billing errors, the loss of employees, or the loss of customers, suppliers, or products either overall or in certain markets, which could adversely affect our financial condition, operating results, and cash flows.

These disruptions and deficiencies could lead to increased costs, order and delivery

errors, inventory and billing errors, the loss of employees, or the loss of customers, suppliers, or products either overall or in certain markets, which could adversely affect our financial condition, operating results, and cash flows.

As part of our overall strategy, we may make additional acquisitions or investments in the future.

2 unchanged sentences

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;

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 war, fires, floods, earthquakes, explosions, natural disasters, severe weather, including hurricanes, tornados and droughts, whether a result of climate change or otherwise, pandemics, or other similar occurrences;

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

3 unchanged sentences

unscheduled maintenance outages;

information system disruptions or failures due to any number of causes, including cyber-attacks;

information system disruptions or failures due to any number of causes;

violations of our permit requirements or revocation of permits;

4 unchanged sentences

We may be unable to effectively manage our inventory relative to our sales volume or as the prices of the products we distribute fluctuate, which could affect our business, financial condition, and operating results .

We purchase many of our products directly from manufacturers, which are then sold and distributed to customers.

We purchase most of our products directly from manufacturers, which are then sold and distributed to customers.

We must maintain, and have adequate working capital to purchase sufficient inventory to meet customer demand.

3 unchanged sentences

We must also manage our working capital to fund our inventory purchases.

Such issues and risks can be magnified by the diversity of product mix our business units carry across multiple major product categories.

Such issues and risks can be magnified by the diversity of product mix our distribution centers carry across multiple major product categories.

Excessive increases in the market prices of certain building products can put negative pressure on our operating cash flows by requiring us to invest more in inventory.

1 unchanged sentence

We are subject to information technology security risks and business interruption risks and may incur increasing costs in an effort to minimize and/or respond to those risks .

Our business employs information technology systems to secure confidential information, such as employee data, including social security numbers and personal health data.

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, 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 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.

Our business employs information technology systems to secure confidential information, such as employee personal data.

With the rapidly evolving sophistication of cyber-attacks, we may not be able to anticipate, prevent or mitigate our cybersecurity risks.

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

Although we utilize various procedures and controls to monitor and mitigate these threats, there can be no assurance that these procedures and controls will be sufficient to prevent security threats from materializing.

As cyber-attacks become more sophisticated generally, we may incur significant costs to strengthen our systems from outside intrusions, and/or obtain insurance coverage related to the threat of such attacks.

Additionally, our business is reliant upon information technology systems to, among other things, manage and route our sales calls, manage inventories and accounts receivable, make purchasing decisions, monitor our results of operations, and place orders with our vendors and process orders from our customers.

These systems may be vulnerable to natural disasters, telecommunications failures and similar events, employee errors or to intentional acts of misconduct, such as security breaches or attacks.

As cyber-attacks become more sophisticated, we may incur significant costs to strengthen our systems from outside intrusions, and/or obtain insurance coverage related to the threat of such attacks.

Additionally, our business is reliant upon information technology systems to, among other things, manage and route our sales calls, manage inventories and accounts receivable, make purchasing decisions, monitor our results of operations, place orders with our vendors and process orders from our customers.

These systems may be vulnerable to natural disasters, telecommunications or equipment failures, power outages and similar events, employee errors or to intentional acts of misconduct, such as security breaches or cyber-attacks.

The occurrence of any of these events or acts, or any other unanticipated problems, could result in damage to or the unavailability of these systems.

4 unchanged sentences

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.

Our ability to control labor costs is subject to numerous external factors, including labor availability, 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.

In particular, there is significant competition for qualified drivers in the transportation industry and increasingly more stringent regulatory requirements.

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.

1 unchanged sentence

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.

In addition, a shortage of qualified drivers could require us to increase driver compensation, let trucks sit idle, utilize third-party freight more so than normal, 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.

4 unchanged sentences

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 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.

Since we do not have direct control over the quality of products that are manufactured or supplied to us by third parties, we are particularly vulnerable to risks relating to the quality of such products.

In addition, operating hazards, such as unloading heavy products, operating large machinery and driving hazards, which are inherent in our business and some of which may be outside of our control, can cause personal injury and loss of life, damage to or destruction of property, plant, and equipment and environmental damage.

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.

In addition, operating hazards, such as delivering and unloading products, operating large machinery and driving hazards, which are inherent in our business and some of which may be outside of our control, can cause personal injury and loss of life, damage to or destruction of property, plant, and equipment and environmental damage.

We cannot predict or, in some cases, control the costs to defend or resolve such claims.

We cannot assure you that we will be able to maintain suitable and adequate insurance on acceptable terms or that such insurance will provide adequate protection against potential liabilities, and the cost of any product liability or other proceeding, even if resolved in our favor, could be substantial.

We cannot assure our ability to maintain suitable and adequate insurance on acceptable terms or that such insurance will provide adequate protection against potential liabilities, and the cost of any product liability or other proceeding, even if resolved in our favor, could be substantial.

Additionally, we do not carry insurance for all categories of risk that our business may encounter.

12 unchanged sentences

Wage increases or work stoppages by our unionized employees may reduce our results of operations .

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 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.

As of December 31, 2022, we employed approximately 2,100 associates and less than one percent of our associates are employed on a part-time basis.

Approximately 16 percent of our associates are represented by various local labor unions with terms and conditions of employment governed by Collective Bargaining Agreements (“CBAs”).

Five CBAs covering approximately five percent of our associates are up for renewal in fiscal 2023, which we expect to renegotiate by the end of fiscal 2023.

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.

5 unchanged sentences

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

We are subject to various federal, state, local, and other laws and regulations, including, among other things, transportation regulations promulgated by the DOT, work safety regulations promulgated by OSHA, employment regulations promulgated by the U.S.

We are subject to various federal, state, local, and other laws and regulations, including, among other things, transportation regulations promulgated by the Department of Transportation (“DOT”) and Federal Motor Carrier Safety Administration (“FMCSA”), work safety regulations promulgated by Occupational Safety and Health Administration, employment regulations promulgated by the U.S.

Equal Employment Opportunity Commission, regulations of the U.S.

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.

Department of Labor and Federal Trade Commission, regulations issued by the SEC, accounting standards issued by the Financial Accounting Standards Board (“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.

1 unchanged sentence

Our transportation operations, upon which we depend to distribute products from our distribution centers, are subject to the regulatory jurisdiction of the DOT and the FMCSA, which have broad administrative powers with respect to our transportation operations.

Vehicle dimensions and driver hours of service also are subject to both federal and state regulation.

More restrictive limitations, including those on vehicle weight and size, trailer length and configuration, or driver hours of service would increase our costs, which, if we are unable to pass these cost increases on to our customers, may increase our selling, general and administrative expenses and adversely affect our financial condition, operating results, and cash flows.

If we fail to comply adequately with the DOT and FMCSA regulations or such regulations become more stringent, we could experience increased inspections, regulatory authorities could take remedial action, including imposing fines or shutting down our operations, or we could be subject to increased audit and compliance costs.

More restrictive regulatory limitations, including those on vehicle weight and size, trailer length and configuration, or driver hours of service would increase our costs, which, if we are unable to pass these cost increases on to our customers, may increase our selling, general and administrative expenses and adversely affect our financial condition, operating results, and cash flows.

If we fail to comply adequately with such regulations or such regulations become more stringent, we could experience increased inspections, regulatory authorities could take remedial action, including imposing fines or shutting down our operations, or we could be subject to increased audit and compliance costs.

If any of these events were to occur, our financial condition, operating results, and cash flows could be adversely affected.

7 unchanged sentences

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.

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 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;

• 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 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.

The effect of global pandemics, such as COVID-19, and other widespread public health crises and governmental rules and regulations and our policies related to such may adversely affect our business and results from operations.

Public health crises, pandemics, and epidemics, such as COVID-19, have impacted.

our operations and financial performance.

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

Additionally, 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 polices could impact us in a significant way.

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.

7 unchanged sentences

Factors associated with our industry, the operation of our business, and the markets for our products may cause our quarterly financial results to fluctuate, including:

• the commodity nature of many of our products and their price movements, which are driven largely by capacity utilization rates and industry cycles that affect supply and demand;

• general economic conditions, including but not limited to housing starts, construction labor shortages, repair and remodel activity and commercial construction, foreclosure rates, interest rates, unemployment rates, and mortgage availability and pricing, as well as other consumer financing mechanisms, that ultimately affect demand for our products;

• supply chain disruptions, including those caused by the spread of contagious illness;

• supply chain disruptions, including those caused by the spread of contagious illness and geopolitical risks;

• the highly competitive nature of our industry;

• the commodity nature of many of our products and their price movements, which are driven largely by capacity utilization rates and industry cycles that affect supply and demand;

• the cessation or reduction of supplier incentive programs, such as supplier rebates and/or deviation programs, and/or our inability to collect supplier incentives due to us;

• disintermediation;

1 unchanged sentence

• 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;

• our 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;

• cost of compliance with government regulations;

2 unchanged sentences

• labor disruptions, shortages of skilled and technical labor, or increased labor costs;

• the impact of cost inflation, which may arise from changes in the economic environment, such as potential litigation;

• the impact of inflation, which may arise from changes in the economic environment;

• increased healthcare costs;

10 unchanged sentences

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 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.

Our level of indebtedness could still have considerable consequences for us.

For example, our substantial indebtedness could:

As of December 31, 2022, we had no outstanding debt under our revolving credit facility, and approximately $300.0 million of debt outstanding under our senior secured notes.

Additionally, as of December 31, 2022, outstanding commitments under our finance leases were approximately $273.1 million.

Our level of indebtedness could still have considerable consequences to our financial condition and operating results.

For example, our indebtedness could:

• make us more vulnerable to general adverse economic and industry conditions;

20 unchanged sentences

Refer to Note 9, Long-Term Debt , for further details.

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 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;

however, we do not believe that the discontinuation of LIBOR as a reference rate in our loan agreements will have a material adverse effect on our financial position or materially affect our interest expense.

Despite our current levels of debt, we may still incur more debt, which would increase the risks described in these risk factors relating to indebtedness .

6 unchanged sentences

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.

26 unchanged sentences

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

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.

Besides passing fuel costs on to customers, we have at times entered into forward purchase contracts for fuel used at some of our facilities that protect against fuel price increases.

If the cost of fuel, third-party freight or other energy prices increase or availability of third-party freight providers is reduced, our results of operations could be adversely affected .

Petroleum and energy prices and availability of petroleum products are subject to political, geopolitical, 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 We also utilize third-party freight providers to deliver our products and the costs associated with them could affect the expense incurred to deliver products to our customers.

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 or third-party freight costs through increased prices or fuel surcharges to our customers.

Besides trying to pass fuel costs to customers, we have at times entered into forward purchase contracts for fuel used at some of our facilities that protect against fuel price increases.

If shortages occur in the supply of necessary petroleum products and we are not able to pass along the full impact of increased petroleum prices to our customers or otherwise protect ourselves by entering into forward purchase contracts, then our results of operations would be adversely affected.

7 unchanged sentences

The value of our deferred tax assets could become impaired, which could materially and adversely affect our operating results.

As of January 1, 2022, we had approximately $60 million in net deferred tax assets.

As of December 31, 2022, we had $56.2 million in net deferred tax assets.

These deferred tax assets include temporary differences arising from such items as property, plant and equipment, accrued compensation, and accounting reserves related to inventory and other items in conjunction with net state operating loss carryovers that can be used to offset taxable income in future periods and reduce income taxes payable in those future periods.

1 unchanged sentence

For example, we were required to evaluate and maintain reasonable valuation allowances against our remaining state net operating loss carryforwards against our U.S.

deferred tax assets as of January 1, 2022.

deferred tax assets as of December 31, 2022.

These valuation allowances are calculated based on the probability that we will not realize taxable income in the states in which we carry net operating loss carryforwards in a time suitable to take advantage of them.

If we determine in the future that there is not sufficient positive evidence to support the remaining valuation of our deferred tax assets, either due to the risk factors described herein or other factors which may impact our net operating carryforwards or other components of our deferred tax assets such as our temporary differences which may arise from tax legislation which we cannot foresee, we may be required to further adjust the valuation allowance to reduce our deferred tax assets, in specific areas or in total.

If we determine in the future that there is not sufficient positive evidence to support the remaining valuation of our deferred tax assets, either due to Part 1, Item 1A, Risk Factors described herein or other factors which may impact our net operating

carryforwards or other components of our deferred tax assets such as our temporary differences which may arise from tax legislation which we cannot foresee, we may be required to further adjust the valuation allowance to reduce our deferred tax assets, in specific areas or in total.

Such a reduction could result in material non-cash expenses in the period in which the valuation allowance is adjusted and could have a material adverse effect on our results of operations .

10 unchanged sentences

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 .

17 unchanged sentences

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.

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 bear interest 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.

Our revolving credit facility includes available interest rate options based on the London Inter-bank Offered Rate (“LIBOR”), which will be discontinued as an available rate option after June 30, 2023.

Under the terms of the facility, LIBOR will be replaced with the Secured Overnight Financing Rate (“SOFR”) with respect to the applicable variable rate interest options thereunder, with effect on or before June 30, 2023.

There can be no assurances as to whether SOFR will be a more or less favorable reference rate than LIBOR, and the consequences of replacing LIBOR with SOFR cannot be entirely predicted.

However, at this time, we do not believe that the replacement of LIBOR by SOFR as a reference rate in our revolving credit facility will have a material adverse effect on our financial position or materially affect our interest expense.

Changes in, or interpretation of, accounting principles could result in unfavorable accounting changes .

Our consolidated financial statements are prepared in conformity with U.S.

generally accepted accounting principles and accompanying accounting pronouncements, implementation guidelines, and interpretations.

These rules are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles.

Changes in these rules or their interpretation, such as recent changes regarding lease accounting standards, could significantly change our reported results and may even retroactively affect previously reported transactions.

Changes resulting from the adoption of new or revised accounting principles may result in materially different financial results and may require that we make changes to our systems, processes, and controls.

Risks Relating to Our Common Stock

Our stock price may fluctuate significantly.

The market price of our stock historically has experienced and may continue to experience significant price fluctuations similar to those experienced by the broader stock market in recent years.

In addition, the price of our stock may fluctuate significantly in response to various factors, including:

• actual or anticipated fluctuations in our operating results;

• announcements by us or our competitors of significant acquisitions, dispositions or expansion plans;

• market conditions in our industry;

• changes in market valuation or earnings of our Company or other companies in our industry:

• changes in accounting standards, policies, guidance, interpretations or principles;

• the operating and stock price performance of other comparable companies;

• investor perception of our Company;

• results from material litigation or governmental investigation;

• changes in laws or regulations affecting our Company or significant products we sell and

• general overall economic, political and market conditions.

Broad market and industry factors may materially harm the market price of our common stock, regardless of our operating performance.

We could be the subject of securities class action litigation due to stock price volatility, which could divert management’s attention and adversely affect our results of operations .

3 unchanged sentences

If any of our stockholders were to bring a similar lawsuit against us, the defense and disposition of the lawsuit could be costly and divert the time and attention of our management and harm our operating results.

If securities or industry analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about our business or us.

If one or more of the analysts who covers us downgrades our stock or publishes unfavorable research

about our business or our industry, our stock price would likely decline.

If one or more of these analysts ceases coverage of our Company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

The activities of activist stockholders could have a negative impact on our business and results of operations .

2 unchanged sentences

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.

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 .

1 unchanged sentence

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

Changes in, or interpretation of, accounting principles could result in unfavorable accounting changes .

Our consolidated financial statements are prepared in conformity with U.S.

generally accepted accounting principles and accompanying accounting pronouncements, implementation guidelines, and interpretations.

These rules are subject to interpretation by the SEC and various bodies formed to interpret and create appropriate accounting principles.

UNRESOLVED STAFF COMMENTS

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

What changed 10-K

Item 1A. Risk Factors