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Industry Risks
+Added: Adverse housing market conditions may negatively impact our business, liquidity, and results of operations, and increase the credit risk from our customers .
+Added: Our business depends on residential repair and remodel activity levels.
+Added: Historically, residential repair and remodeling activity has decreased in slow economic periods.
+Added: 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.
+Added: Depressed activity levels in consumer spending for home improvement construction would adversely affect our business, liquidity, results of operations, and financial position.
+Added: Furthermore, economic weakness causes unanticipated shifts in consumer preferences and purchasing practices, and in the business models and strategies of our customers.
+Added: 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.
+Added: Our business is also dependent on the new residential construction market and, in particular, single family home construction.
+Added: 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.
+Added: 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.
+Added: 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.
+Added: As a result, our results for any historical period may not be indicative of results for any future period.
+Added: In addition, we extend credit to numerous customers who are generally susceptible to the same economic business risks that we are.
+Added: Unfavorable housing market conditions could result in financial failures of one or more of our significant customers.
+Added: Furthermore, we may not be aware of deterioration in our customers’ financial position.
+Added: 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.
We may experience pricing and product cost variability.
−Removed: Our business has experienced, and is likely to continue experiencing, cycles relating to industry capacity and general economic conditions.
−Removed: 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.
−Removed: The length and magnitude of these cycles can vary over time and by product.
−Removed: Prices for our products are driven by many factors, including general economic conditions, demand for our products and competitive conditions in the industries within which we compete, and we have little influence over the timing and extent of price changes, which may be unpredictable and volatile.
+Added: Prices that we pay, and charge, for our products can be unpredictable and volatile.
+Added: Prices for our products are driven and influenced by many factors, including general economic conditions, demand for our products and competitive and other conditions in the industries within which we compete.
+Added: The factors that influence prices and costs also include, among others:
+Added: • The use of auction markets, which are based on participants’ perceptions of short-term supply and demand, to determine prices and volumes for many commodities building products;
+Added: • The use of published indices (including those published by Random Lengths), which may not accurately reflect changes in market conditions, to set selling prices for products;
+Added: • Labor and freight costs, periodic delays in the delivery of products and inventory levels in various distribution channels ;
+Added: • Government regulation, trade policies and market speculation;
+Added: • National and international economic conditions, including inflationary conditions;
+Added: • The ability of large customers to influence prices of outside building materials suppliers and distributors in a highly fragmented industry;
+Added: • Consolidation among customers, particularly dealers, and their customers (i.e., home builders), and resulting changes in purchasing policies and payment practices;
+Added: • Consolidation among suppliers and its effects on pricing, consignment arrangements, and discount programs.
If supply exceeds demand, prices for our products could decline, and our results of operations, cash flows, and financial condition could be adversely affected.
−Removed: Certain published indices (including those published by Random Lengths (“RL”)) contribute to the setting of selling prices for some of our products.
−Removed: Although RL is a widely circulated source of information for the wood products industry, it may not accurately reflect changes in market conditions for our products.
−Removed: Changes in how RL is maintained, or other indices are established or maintained, could adversely impact the selling prices for these products.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: These factors can cause short-term fluctuations in the price of our products, or costs related to our products.
+Added: Increases in prices or costs 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 for our products.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: In addition, continued consolidation among our customers, particularly dealers, and their customers (i.e., home builders), and changes in their respective purchasing policies and payment practices, could result in even further pricing pressure.
−Removed: A decline in the prices of the products we distribute could adversely impact our operating results.
+Added: In addition, 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 and adversely impact our results of operations and cash flows.
+Added: A decline in the prices of the products we distribute could also adversely impact our operating results.
When the prices of the products we distribute decline, customer demand for lower prices could result in lower sales prices and, to the extent that our inventory at the time was purchased at higher costs, lower margins.
Alternatively, in a rising price environment, our suppliers may increase prices or reduce discounts on the products we distribute, and we may be unable to pass on any cost increase to our customers, thereby resulting in reduced margins and profits.
−Removed: Furthermore, continued consolidation among our suppliers makes it more difficult for us to negotiate favorable pricing, consignment arrangements, and discount programs with our suppliers, thereby resulting in reduced margins and profits.
−Removed: Overall, these pricing pressures may adversely affect our operating results and cash flows.
−Removed: We are currently experiencing an uncertain inflationary environment.
−Removed: An inflationary environment can increase the cost of products we purchase.
−Removed: 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.
−Removed: 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.
−Removed: Our earnings are highly dependent on volumes.
−Removed: Our earnings are highly dependent on volumes, which are dependent on both the housing cycle, as well as our execution.
−Removed: In addition, selling commoditized products that are subject to fluctuating prices make it difficult to predict our financial results with any degree of certainty.
−Removed: 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.
−Removed: 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.
+Added: Our earnings are highly dependent on sales volumes.
+Added: Our earnings are highly dependent on sales volumes, which are dependent on both the housing cycle, as well as our execution.
+Added: In addition, selling commoditized products that are subject to fluctuating prices makes it difficult to predict our financial results with any degree of certainty.
+Added: Commodity and specialty product 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.
+Added: Any failure to maintain, or increase sales 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.
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The building products distribution industry is highly fragmented and competitive, and the barriers to entry for local competitors are relatively low.
−Removed: Competitive factors in our industry include pricing, availability of product, service, delivery capabilities, customer relationships, geographic coverage, and breadth of product offerings.
−Removed: 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.
+Added: Competitive factors in our industry include pricing, availability of products, service, delivery capabilities, customer relationships, geographic coverage, and breadth of product offerings.
+Added: Also, financial stability is important to suppliers and customers in choosing distributors for their products, and it 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 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.
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Our industry is highly cyclical, and prolonged periods of weak demand or excess supply may reduce our net sales and/or margins, which may cause us to incur losses or reduce our net income .
−Removed: The building products distribution industry is subject to cyclical market pressures.
−Removed: Prices of building products are determined by overall supply and demand in the market.
−Removed: 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.
+Added: The building products distribution industry is subject to cyclical market pressures and market prices of building products historically have been volatile and cyclical.
+Added: Prices of building products are determined by overall supply and demand in the market 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, inflation, the construction, repair and remodeling markets, industrial markets, housing supply, weather, and population growth.
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To the extent that prices and volumes experience a sustained or sharp decline, our net sales and margins likely would decline as well.
−Removed: Because we have substantial fixed costs, a decrease in sales and margin generally may have a significant adverse impact on our financial condition, operating results, and cash flows.
−Removed: Adverse housing market conditions may negatively impact our business, liquidity, and results of operations, and increase the credit risk from our customers .
−Removed: Our business depends to a significant degree on residential repair and remodel activity levels.
−Removed: Historically, residential repair and remodeling activity has decreased in slow economic periods.
−Removed: 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.
−Removed: Depressed activity levels in consumer spending for home improvement construction would adversely affect our business, liquidity, results of operations, and financial position.
−Removed: Furthermore, economic weakness causes unanticipated shifts in consumer preferences and purchasing practices, and in the business models and strategies of our customers.
−Removed: 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.
−Removed: Our business is also dependent on the new residential construction market and, in particular, single family home construction.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: In addition, we extend credit to numerous customers who are generally susceptible to the same economic business risks that we are.
−Removed: Unfavorable housing market conditions could result in financial failures of one or more of our significant customers.
−Removed: Furthermore, we may not be aware of deterioration in our customers’ financial position.
−Removed: 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.
+Added: Because we have meaningful fixed costs, a decrease in sales and margin generally may have a significant adverse impact on our financial condition, operating results, and cash flows.
Consolidation among competitors, suppliers, and customers could negatively impact our business .
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We believe these customer needs could result in fewer distributors as the remaining distributors become larger and capable of being consistent sources of supply.
−Removed: There can be no assurance that we will be able to take advantage effectively of this trend toward consolidation.
+Added: There can be no assurance that we will be able to take advantage
+Added: effectively of this trend toward consolidation.
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.
+Added: Furthermore, continued consolidation among our suppliers makes it more difficult for us to negotiate favorable pricing, consignment arrangements, and discount programs with our suppliers, thereby resulting in reduced margins and profits.
We are subject to disintermediation risk.
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Loss of key products or key suppliers and manufacturers could affect our financial health .
−Removed: 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.
+Added: Our ability to offer a wide variety of products to our customers, including our private label products, 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 subject to then current market conditions.
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Many of our suppliers and manufacturers are located outside of the United States.
−Removed: Thus, import taxes or costs, including new or increased tariffs, anti-dumping duties, countervailing duties, or similar duties, some of which could be applied retroactively, could increase the cost of the products that we distribute.
+Added: Thus, compliance with federal laws and regulations regarding the importation of products, import taxes or costs, including new or increased tariffs, anti-dumping duties, countervailing duties, or similar duties, some of which could be applied retroactively, could increase the cost of the products that we distribute.
In addition, quotas, embargoes, sanctions, safeguards, and customs restrictions, as well as foreign labor strikes, work stoppages, or boycotts, could reduce the supply of the products available to us.
+Added: Geopolitical events, including war and terrorism, could also cause a reduction in the supply or increase the costs of the products available to us.
If we become subject to a reduction in available supply of imported products and we are unable to mitigate that reduction through alternative sources, or if the costs of our imported products increase and we are not able to pass along those increased costs to our customers, then our business, financial condition, and results of operations could be adversely affected.
Operating Risks
−Removed: Our strategy includes pursuing acquisitions.
−Removed: We may be unsuccessful in making and integrating mergers, acquisitions and investments.
−Removed: 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.
−Removed: Addressing these challenges requires the attention of management and the diversion of resources from existing operations.
−Removed: 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.
−Removed: These disruptions and deficiencies could lead to increased costs, order and delivery
−Removed: 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.
−Removed: As part of our overall strategy, we may make additional acquisitions or investments in the future.
−Removed: These acquisitions or investments would be subject to the same risks and uncertainties described above.
−Removed: If we do not effectively manage those risks and uncertainties, our financial condition, operating results, and cash flows may be negatively affected.
+Added: 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 .
+Added: We purchase most of our products directly from manufacturers, which are then sold and distributed to customers.
+Added: We must maintain, and have adequate working capital to purchase sufficient inventory to meet customer demand.
+Added: Due to the lead times required by our suppliers, we order products in advance of expected sales.
+Added: As a result, we are required to forecast our sales and purchases accordingly.
+Added: In periods characterized by significant changes in the overall economy and activity in the residential and commercial building and home repair and remodel industries, it can be especially difficult to forecast our sales accurately.
+Added: We must also manage our working capital to fund our inventory purchases.
+Added: Such issues and risks can be magnified by the diversity of product mix our distribution centers carry across multiple major product categories.
+Added: 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.
+Added: In the future, if we are unable to effectively manage our inventory, our cash flows may be negatively affected, which could have a material adverse effect on our business, financial condition, and operating results.
We may incur business disruptions resulting from a variety of possible causes.
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and labor disputes and shortages.
−Removed: 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 .
−Removed: We purchase most of our products directly from manufacturers, which are then sold and distributed to customers.
−Removed: We must maintain, and have adequate working capital to purchase sufficient inventory to meet customer demand.
−Removed: Due to the lead times required by our suppliers, we order products in advance of expected sales.
−Removed: As a result, we are required to forecast our sales and purchases accordingly.
−Removed: In periods characterized by significant changes in the overall economy and activity in the residential and commercial building and home repair and remodel industries, it can be especially difficult to forecast our sales accurately.
−Removed: We must also manage our working capital to fund our inventory purchases.
−Removed: Such issues and risks can be magnified by the diversity of product mix our distribution centers carry across multiple major product categories.
−Removed: 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.
−Removed: In the future, if we are unable to effectively manage our inventory, our cash flows may be negatively affected, which could have a material adverse effect on our business, financial condition, and operating results.
+Added: Interruption or impairment of operations at one or more of our facilities could impact our ability to service customers, or could result in the loss of customers, suppliers or inventory, which could adversely affect our financial condition, operating results and cash flows.
+Added: Our strategy includes pursuing acquisitions.
+Added: We may be unsuccessful in making and integrating mergers, acquisitions and investments.
+Added: As part of our overall strategy, we may make acquisitions or investments in the future.
+Added: Acquisitions and investments involve significant risks and uncertainties, including uncertainties as to the future financial performance of the acquired business, the achievement of expected synergies, or exposure to unforeseen liabilities of acquired companies.
+Added: In addition, 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.
+Added: Addressing the risks and challenges associated with acquisitions and investments requires the attention of management and the diversion of resources from existing operations.
+Added: Our failure to manage these risks and challenges effectively and at anticipated costs, or to manage other consequences of an acquisition or investment, could result in a failure to achieve anticipated benefits and synergies from an acquisition or investment, could cause disruptions in overall operating performance and deficiencies in customer service of the combined business, and could adversely affect our financial condition, operating results and cash flows.
+Added: Disruptions and deficiencies associated with integrating an acquired business could also 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.
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 .
−Removed: Our business employs information technology systems to secure confidential information, such as employee personal data.
−Removed: With the rapidly evolving sophistication of cyber-attacks, we may not be able to anticipate, prevent or mitigate our cybersecurity risks.
−Removed: 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.
+Added: Our business employs information technology systems to secure confidential information, such as employee personal data, but with the rapidly evolving sophistication of cyber-attacks, we may not be able to anticipate, prevent or mitigate our cybersecurity risks.
+Added: Any compromise of our security could result in a loss or misuse of our confidential information or confidential information of our customers or suppliers, 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 susceptible to phishing attacks, malware, ransomware, denial of service, and other attacks that could adversely affect our information technology systems.
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Such damage or unavailability could, despite any existing disaster recovery and business continuity arrangements, interrupt the availability of one or more of our information technology systems.
−Removed: We have from time to time experienced such disruptions and they may occur in the future.
−Removed: 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.
+Added: We have from time to time experienced such disruptions, and while such disruptions did not materially affect our business, they may occur in the future.
+Added: Future 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 .
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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.
−Removed: In particular, there is significant competition for qualified drivers in the transportation industry and increasingly more stringent regulatory requirements.
+Added: In particular, there continues to be significant competition for qualified drivers in the transportation industry and increasingly more stringent regulatory requirements relating to drivers.
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.
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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.
−Removed: Our business operations could suffer significant losses from climate changes, natural disasters, catastrophes, fire, or other unexpected events .
+Added: Our business operations could suffer significant losses from 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.
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In addition, war, terrorism, geopolitical uncertainties, and public health issues could cause damage or disruption to the global economy, and thus could have a material adverse effect on us, our suppliers and our customers.
+Added: Our business operations and financial results could suffer from the impacts of climate change .
+Added: Climate change, and its effects on weather patterns, the frequency and severity of weather-related events, and temperatures, could adversely impact our business.
+Added: Extreme weather and temperatures could affect the availability of raw materials for the products that we distribute, the ability of our suppliers to deliver products to our distribution facilities and our ability to deliver those products to our customers.
+Added: They could also result in lost production, supply chain disruption and increased transportation costs.
+Added: Unpredictable weather and climate changes could also cause the price of the products we buy and sell to fluctuate significantly, including during and as a result of prolonged periods of heavy rain or drought, fires or other unpredictable weather events.
+Added: Any or all of these effects could materially and adversely impact our business or results of operations.
Our operating results depend on the successful implementation of our strategy.
We may not be able to implement our strategic initiatives successfully, on a timely basis, or at all .
−Removed: We regularly evaluate the performance of our business and, as a result of such evaluations, we have in the past undertaken and may in the future undertake strategic initiatives within our businesses.
+Added: We regularly evaluate the performance of our business and, as a result of such evaluations, we have in the past undertaken and may in the future undertake strategic initiatives within our businesses, including initiatives to migrate our sales mix toward higher‑margin specialty product categories, foster a performance-driven culture committed to business excellence and profitable growth, and maintain a disciplined capital structure and pursue investments that increase the value of the Company.
Strategic initiatives that we may implement now or in the future may not result in improvements in future financial performance and could result in additional unanticipated costs.
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Approximately 28 percent of our associates are represented by various local labor unions with terms and conditions of employment governed by Collective Bargaining Agreements (“CBAs”).
−Removed: 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.
+Added: Six CBAs covering approximately nine percent of our associates are up for renewal in fiscal year 2024, of which one has already been renegotiated, one is currently under negotiation, and we expect to renegotiate the remainder before their renewal dates.
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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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.
−Removed: 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.
+Added: Moreover, failure to comply with the regulatory
+Added: 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.
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.
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We are subject to federal, state, and local environmental protection laws and may have to incur significant costs to comply with these laws and regulations in the future .
−Removed: Environmental liabilities could arise on the land that we have owned, own or lease, including as a result of the use of underground fuel storage tanks, and these liabilities could have a material adverse effect on our financial condition and performance.
+Added: Environmental liabilities could arise on the land that we have owned, currently own or lease, including as a result of the use of underground fuel storage tanks, and these liabilities could have a material adverse effect on our financial condition and performance.
Federal, state, and local laws and regulations relating to the protection of the environment, including those regulating the use and maintenance of underground storage tanks, may require a current or previous owner or operator of real estate to investigate and remediate hazardous materials, substances and waste releases at or from the property.
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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.
−Removed: Our operations could also in the future be subject to regulations related to climate change.
−Removed: 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.
−Removed: Public health crises, pandemics, and epidemics, such as COVID-19, have impacted.
−Removed: our operations and financial performance.
−Removed: 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.
−Removed: 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.
−Removed: Regulatory impacts from these rules, or future rules, requiring Company-wide polices could impact us in a significant way.
−Removed: 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.
+Added: In addition, although their impact is difficult to predict, it is also possible that legislation and regulations enacted at the federal, state or local level relating to climate change, could result in changes to the way we conduct business or store or deliver products, and could result in significantly increased costs of compliance, including for transportation, environmental monitoring and reporting, capital expenditures, or insurance premiums and deductibles.
+Added: These potential changes or increased costs could adversely impact our business and results of operations.
+Added: The effect of epidemics, global pandemics or other widespread public health crises and governmental rules and regulations could significantly disrupt our operations or those of our customers or suppliers.
+Added: If an epidemic, global pandemic, or other widespread public health crises disrupts the worldwide economy or if similar widespread disease outbreaks occur in the future, our business, financial condition and results of operations could be negatively affected to the extent such event harms the economy or regions in which we operate.
+Added: In particular, any outbreak or resurgence of COVID-19 or a similar variant or any other future variants, or governmental imposition of mandatory or voluntary closures in areas where our manufacturing facilities, suppliers or customers are located, could severely disrupt our operations.
+Added: In addition to this potential direct impact on our facilities and operations, continuing outbreaks of the virus could negatively impact our industry and end markets as a whole or result in a longer-term economic recession.
+Added: Any of these factors could negatively affect our business, financial condition, cash flows, profitability, and results of operations.
Financial Risks
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• disruption in our information technology systems;
+Added: • federal laws and regulations regarding the importation of products may cause us to incur significant costs to comply with such laws and regulations in the future;
• significant maintenance issues or failures with respect to our tractors, trailers, forklifts, and other major equipment;
31 unchanged sentences
If we fail to comply with these covenants and restrictions, a default may allow the creditors under the relevant instruments to accelerate the related debts and to exercise their remedies under these agreements, which typically will include the right to declare the principal amount of that debt, together with accrued and unpaid interest, and other related amounts, immediately due and payable, to exercise any remedies the creditors may have to foreclose on assets that are subject to liens securing that debt, and to terminate any commitments they had made to supply further funds.
−Removed: Refer to Note 9, Long-Term Debt , for further details.
+Added: Refer to Note 8, Debt and Finance Leases , in Item 8 of this Annual Report for further details.
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 .
12 unchanged sentences
If we close a distribution center that is subject to a non-cancelable lease, we would remain committed to perform our obligations under the applicable lease, which would include, among other things, payment of the base rent, insurance, taxes, and other expenses on the leased property for the balance of the lease term.
−Removed: Management may explore offsets to remaining obligations, such as subleasing opportunities or negotiated lease terminations, but there can be no assurance that we can offset remaining obligations on commercially reasonable terms or at all.
−Removed: Our obligation to continue making rental payments with respect to leases for closed distribution centers could have a material adverse effect on our business and results of operations.
+Added: Management may explore offsets to remaining obligations, such as subleasing opportunities or negotiated lease terminations, but there can be no assurance that we can offset
+Added: remaining obligations on commercially reasonable terms or at all.
+Added: Our obligation to continue to perform our obligations with respect to leases for closed distribution centers could have a material adverse effect on our business and results of operations.
In addition, at the end of a lease term and any renewal period for a leased distribution center, or for those locations where we have no renewal options remaining, we may be unable to renew the lease without additional cost, if at all.
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As a result, our revenue, operating performance, cash flows, and net income may be adversely affected.
−Removed: 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 .
+Added: If the costs 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.
4 unchanged sentences
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.
−Removed: We establish insurance-related deductible/retention reserves based on historical loss development factors, which could lead to adjustments in the future based on actual development experience.
+Added: We establish insurance-related deductible/retention liabilities based on historical loss development factors, which could lead to adjustments in the future based on actual development experience.
We retain a significant portion of the accident risk under our vehicle liability and workers’ compensation insurance programs;
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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.
−Removed: 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
−Removed: 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.
+Added: 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 .
−Removed: Our expected annual effective tax rate could be volatile and materially change as a result of changes in mix of earnings and other factors.
+Added: Our expected annual effective tax rate could be volatile and materially change as a result of changes in the mix of earnings and other factors.
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.
3 unchanged sentences
New and unforeseen changes in tax legislation may impact our effective tax rate in future periods, both on a federal and state level, which may have an impact on our net income and result in material non-cash expenses in the relevant period.
−Removed: Changes in actuarial assumptions for our pension plan could impact our financial results, and funding requirements are mandated by the Federal government .
−Removed: We sponsor a defined benefit pension plan.
−Removed: Most of the participants in our pension plan are inactive, with all remaining active participants no longer accruing benefits, and the pension plan is closed to new entrants.
−Removed: However, unfavorable changes in various assumptions underlying the pension benefit obligation could adversely impact our financial results.
−Removed: Significant assumptions include, but are not limited to, the discount rate, projected return on plan assets, and mortality rates.
−Removed: 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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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.
−Removed: 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.
+Added: Borrowings under our revolving credit 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 bear interest at variable rates of interest and expose us to interest rate risk.
1 unchanged sentence
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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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 .
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• results from material litigation or governmental investigation;
−Removed: • changes in laws or regulations affecting our Company or significant products we sell and
+Added: • changes in laws or regulations affecting our Company or significant products we sell;
• 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.
+Added: In addition, share repurchases pursuant to our new share repurchase program could affect our stock price and increase its volatility.
+Added: The existence of a share repurchase program could also cause our stock price to be higher than it would be in the absence of such a program and could potentially reduce the market liquidity for our stock.
+Added: There can be no assurance that any share repurchases will enhance stockholder value because the market price of our common stock may decline below the levels at which we repurchased shares of common stock.
+Added: Although our share repurchase program is intended to enhance long-term stockholder value, short-term stock price fluctuations could reduce the program’s effectiveness.
+Added: Furthermore, the program does not obligate the Company to repurchase any dollar amount or number of shares of common stock, and may be suspended or discontinued at any time and any suspension or discontinuation could cause the market price of our stock to decline.
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 .
5 unchanged sentences
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.
−Removed: If one or more of the analysts who covers us downgrades our stock or publishes unfavorable research
−Removed: about our business or our industry, our stock price would likely decline.
+Added: If one or more of the analysts who cover 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.
3 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.
−Removed: 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.
+Added: In addition, the 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 .
−Removed: 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.
−Removed: 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.
−Removed: UNRESOLVED STAFF COMMENTS
+Added: We have not declared or paid any cash dividends on our common stock since 2007, and we are subject to certain conditions in order to do so under the terms of our revolving credit facility and senior secured notes.
+Added: As we have no current intention of paying dividends, unless we decide to do so in the future, any return to stockholders may be limited to the appreciation in their stock.
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.