Item 1A. Risk Factors
Item 1A. Risk Factors
Factors that could materially and adversely affect our business, financial
condition and/or results of operations are described in the 2021 Form 10-K. Additional risk factors not presently known to us or that
we currently deem immaterial may also impair our business, financial condition and/or results of operations. As of the date of this Quarterly
Report on Form 10-Q, there have been no material changes to the risk factors disclosed in our 2021 Form 10-K, other than the inflation
rate risk and share repurchase risk discussed below.
Inflation Rate Risk
Beginning in April 2021, the
inflation rate in the US, as measured by the Consumer Price Index (CPI) has steadily increased. In 2019, the inflation rate was approximately
1.8%, while it dropped to approximately 1.2% in 2020. These data are reported monthly, showing year-over-year changes in prices across
a basket of goods and services. For 2021, inflation increased from the 1.4%-2.6% range in the first quarter, to 4.2% in April, and was
in the 5.0% range through the end of the third quarter of 2021, before increasing to the 6.0%-7.0% range in the fourth quarter. For the
full year, the inflation rate was 4.7% in 2021, the highest annual rate since the 5.4% rate recorded in 1990. The inflation rate continued
to increase throughout the second quarter of 2022, reaching approximately 9.1% in June 2022. The increased inflation rate has had an impact
on the Company’s expenses in several areas, including wages, fuel and medical and other supplies. This has compressed gross profit
margins, as the Company is generally unable to pass these higher costs on to its customers, particularly in the short term. Looking to
the rest of 2022, we anticipate a moderation of the inflation rate when compared to the first quarter of the year but expect that inflation
will remain above the levels seen in the previous 10 years, when the annual inflation rate ranged from 0.1% to 2.4%. If inflation is above
the levels that the Company anticipates in 2022, gross margins could be below plan.
Share Repurchase Program Risk
We have adopted a share repurchase program to repurchase shares of
our common stock; however, any future decisions to reduce or discontinue repurchasing our common stock pursuant to our share repurchase
program could cause the market price for our common stock to decline.
Although our Board has authorized the share repurchase program, any
determination to execute our share repurchase program will be subject to, among other things, our financial position and results of operations,
available cash and cash flow, capital requirements and other factors, as well as our Board’s continuing determination that the repurchase
program is in the best interests of our stockholders and is in compliance with all laws and agreements applicable to the repurchase program.
Our share repurchase program does not obligate us to acquire any common stock. If we fail to meet any expectations related to share repurchases,
the market price of our common stock could decline, and could have a material adverse impact on investor confidence. Additionally, price
volatility of our common stock over a given period may cause the average price at which we repurchase our common stock to exceed the stock’s
market price at a given point in time.
We may further increase or decrease the amount
of repurchases of our common stock in the future. Any reduction or discontinuance by us of repurchases of our common stock pursuant to
our current share repurchase program could cause the market price of our common stock to decline. Moreover, in the event repurchases of
our common stock are reduced or discontinued, our failure or inability to resume repurchasing common stock at historical levels could
result in a lower market valuation of our common stock.
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