What changed in this filing

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Item 1A. Risk Factors

2022-02-25 compared with 2021-02-25 · 104 added, 79 removed, 121 unchanged (60% of the section changed)

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Our forward-looking statements express our current expectations or forecasts of possible future results or events, including projections of earnings and other financial performance measures, statements of management’s expectations regarding our plans and objectives and industry, general economic and other forecasts of trends, future dividend payments, share repurchases and other matters.

Forward-looking statements speak only as of the date of this filing, and we undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur.

Forward-looking statements speak only as of the date of this filing, and we undertake no obligation to publicly update or revise such statements to reflect new circumstances or unanticipated events as they occur.

You can identify these statements by the fact that they do not relate strictly to historic or current facts and often use words such as “anticipate,” “estimate,” “expect,” “intend,” “believe,” “will likely result,” “outlook,” “project,” “may,” “can,” “plan,” “target,” “potential,” “should” and other words and expressions of similar meaning.

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Risks Relating to Macroeconomic Conditions

The demand for our swimming pool, irrigation, landscape and related outdoor living products may be adversely affected by unfavorable economic conditions.

Consumer discretionary spending affects our sales and is impacted by factors outside of our control, including general economic conditions, the residential housing market, unemployment rates and wage levels, interest rate fluctuations, inflation, disposable income levels, consumer confidence and access to credit.

The demand for our swimming pool, irrigation, landscape and related outdoor living products may be adversely affected by changes in consumer discretionary spending or unfavorable economic conditions.

Consumer discretionary spending significantly affects our sales and is impacted by factors outside of our control, including general economic conditions, the residential housing market, unemployment rates, wage levels, interest rate fluctuations, inflation, disposable income levels, consumer confidence and access to credit.

In economic downturns, the demand for swimming pool, irrigation, landscape and related outdoor living products may decline, often corresponding with declines in discretionary consumer spending, the growth rate of pool eligible households and swimming pool construction.

Maintenance and repair products and certain replacement and refurbishment products are required to maintain existing swimming pools, and each currently accounts for approximately 60% and 25% of net sales related to our swimming pool business;

Maintenance and repair products and certain replacement and refurbishment products are required to maintain existing swimming pools, and each currently accounts for approximately 60% and 20% to 25% of net sales related to our swimming pool business;

however, the growth in this portion of our business depends on the expansion of the installed pool base and could also be adversely affected by decreases in construction activities, similar to the trends between late 2006 and early 2010.

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Such downturns expose us to certain additional risks, including but not limited to the risk of customer closures or bankruptcies, which could shrink our potential customer base and inhibit our ability to collect on those customers’ receivables.

We believe that homeowners’ access to consumer credit is a critical factor enabling the purchase of new pools, irrigation systems and outdoor living products.

We believe that homeowners’ access to consumer credit at attractive interest rates is a critical factor enabling the purchase of new pools, irrigation systems and outdoor living products.

Between late 2006 and early 2010, the unfavorable economic conditions and downturn in the housing market resulted in significant tightening of credit markets, which limited the ability of consumers to access financing for new swimming pools and irrigation systems.

Although we have seen improvement since 2010, tightening consumer credit could prevent consumers from obtaining financing for pool, irrigation and related outdoor projects, which could negatively impact our sales of construction-related products.

The COVID-19 pandemic and associated responses could adversely impact our business and results of operations.

The COVID-19 pandemic has significantly impacted economic activity and markets throughout the world.

In response, governmental authorities have imposed, and others in the future may impose, stay-at-home orders, shelter-in-place orders, quarantines, executive orders and similar government orders and restrictions to control the spread of COVID-19.

Any similar tightening of consumer credit or any increase in interest rates in the future could prevent consumers from obtaining financing for pool, irrigation and related outdoor projects, which could negatively impact our sales of construction-related products.

Discretionary spending is often adversely affected during times of economic, social or political uncertainty.

The potential for natural or man-made disasters or extreme weather, geopolitical events and security issues, labor or trade disputes and similar events could create these types of uncertainties and negatively impact our business in ways that we cannot presently predict.

The COVID-19 pandemic, other pandemics or epidemics in the future, and associated responses could adversely impact our business and results of operations.

The COVID-19 pandemic has significantly impacted economic activity and markets throughout the world since early 2020.

In response, various governmental authorities have imposed stay-at-home orders, shelter-in-place orders, quarantines, executive orders and similar government orders and restrictions to control the spread of COVID-19.

Such orders or restrictions have resulted in temporary store closures, limitation of store hours, limitations on the number of people in stores or in warehouses, enhanced requirements on sanitation, social distancing practices and travel restrictions, among other effects.

In almost all of our markets, we are designated as an essential business under the relevant state and local regulations and have been allowed to remain open;

In almost all of our markets, we are designated as an essential business under the relevant state and local regulations;

however, if this changes, it could adversely impact our financial condition and operating results.

Our sales in March and April 2020 were adversely impacted by the COVID-19 pandemic, and in the first quarter of 2020, we recorded impairment charges of $6.9 million related to the pandemic.

For additional information, see Note 3 of our “Notes to Consolidated Financial Statements,” included in Item 8 of this Form 10-K .

During 2020, there were declines followed by resurgences of COVID-19 cases throughout the U.S., and cases generally rose during the fourth quarter.

In December 2020, the first COVID-19 vaccines were approved for use in the U.S., and the early stages of distribution of the vaccine are in process as of the date of this report.

Recently, variants of the virus that causes COVID-19 have been identified in the U.S.

and elsewhere, and information about them is rapidly emerging, including how easily they might spread, whether they could cause more severe illness, and whether currently authorized vaccines will protect against them.

Accordingly, COVID-19 may have negative impacts on our business in the future, and any future adverse impacts on our business may be worse than we anticipate.

Variants of the virus that cause COVID-19 continue to be identified in the U.S.

and elsewhere, which has led to uncertainty over the scope and duration of the pandemic.

Accordingly, COVID-19, or any other future pandemic or other major public health crisis, may have negative impacts on our business in the future, and any future adverse impacts on our business may be worse than we anticipate.

Impacts from the COVID-19 pandemic, coupled with heightened demand, could also adversely impact our supply chain, making it difficult to source and receive products needed to keep our customers adequately supplied.

The ultimate impact will depend on the severity and duration of the COVID-19 pandemic and any future resurgences and actions taken by governmental authorities and other third parties in response, including the distribution and acceptance of vaccines, each of which is uncertain, rapidly changing and difficult to predict.

In addition, our recent growth rates driven by home-centric trends influenced by the COVID-19 pandemic may not be sustainable and may not be indicative of future growth rates.

The ultimate impact will depend on the severity and duration of the COVID-19 pandemic, any future resurgences and actions taken by governmental authorities and other third parties in response, including the distribution and acceptance of vaccines, each of which is uncertain, rapidly changing and difficult to predict.

Our recent growth rates driven by home-centric trends influenced by the COVID-19 pandemic may not be sustainable and may not be indicative of future growth rates.

Risks Relating to Our Business and Industry

We are susceptible to adverse weather conditions.

We are susceptible to adverse weather conditions, which could intensify as a result of climate change.

Given the nature of our business, weather is one of the principal external factors affecting our business and the effect of seasonality has a significant impact on our results.

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While warmer weather conditions favorably impact our sales, global warming trends and other significant climate changes can create more variability in the short term or lead to other unfavorable weather conditions that could adversely impact our sales or operations.

Drought conditions or water management initiatives may lead to municipal ordinances related to water use restrictions.

Drought conditions or water management initiatives may lead to government-imposed water use restrictions.

Such restrictions could result in decreased pool and irrigation system installations which could negatively impact our sales.

Certain extreme weather events, such as hurricanes, tropical storms and wildfires may impact our ability to deliver our services or cause damage to our facilities.

As a consequence of these or other catastrophic or uncharacteristic events, we may experience interruption to our operations, increased costs or losses of property, equipment or inventory, which would adversely affect our revenue and profitability.

For a discussion regarding seasonality and weather, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Seasonality and Quarterly Fluctuations,” of this Form 10-K.

Certain extreme weather events, such as hurricanes, tornadoes, earthquakes, tropical storms, floods, drought and wildfires, may adversely impact us in several ways, including interfering with our ability to deliver our products and services, interfering with our receipt of supplies from our vendors, reducing demand for our products and services, and damaging our facilities.

Climate change may increase the frequency or severity of natural disasters and other extreme weather events in the future, which would increase our exposure to these risks.

Concern over climate change may also result in new or increased legal and regulatory requirements designed to reduce or mitigate the effects of climate change, which could increase our operating or capital expenses.

For additional discussion regarding seasonality and weather, see Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Seasonality and Quarterly Fluctuations,” of this Form 10-K.

Our distribution business is highly dependent on our ability to maintain favorable relationships with suppliers.

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A decision by our largest suppliers, acting individually or in concert, to sell their products directly to retailers or other end users of their products, bypassing distribution companies like ours, would have an adverse effect on our business.

Additionally, if our suppliers experience difficulties or disruptions in their operations (including due to the COVID-19 pandemic) or if we lose a single significant supplier due to financial failure or a decision to sell exclusively to retailers or end-use consumers, we may experience increased supply costs or may experience delays in establishing replacement supply sources that meet our quality and control standards and may lose revenue.

Additionally, if our suppliers experience difficulties or disruptions in their operations, if there is any material interruption in our supply chain or if we lose a single significant supplier due to financial failure or a decision to sell exclusively to retailers or end-use consumers, we may experience increased supply costs or delays in establishing replacement supply sources that meet our quality and control standards, which may affect our profitability.

Thus far, the COVID-19 pandemic has not materially impacted our supply chain, and we do not expect it to materially impact our supply chain in 2022, although we can provide no assurances to this effect.

We depend on a global network of suppliers to source our products, including our own branded products and products we have exclusive distribution rights to.

Product quality, warranty claims or safety concerns could negatively impact our sales and expose us to litigation.

Failure to achieve and maintain a high level of product and service quality and safety could damage our reputation, expose us to litigation and negatively impact our financial performance.

We rely on manufacturers and other suppliers to provide us with the products we distribute.

As we increase the number of Pool Corporation and Pool Systems Pty.

branded products we distribute, our exposure to potential liability claims may increase.

To succeed, we must continue to maintain effective business relationships with qualified suppliers who can timely and efficiently supply us with high quality products.

As we increase the number of Pool Corporation and affiliate branded products we distribute, our exposure to potential liability claims may increase.

Product and service quality issues could negatively impact customer confidence in our brands and our business.

If our product and service offerings do not meet applicable safety standards or our customers’ expectations regarding safety or quality, we could experience lost sales and increased costs and be exposed to legal, financial and reputational risks, as well as governmental enforcement actions.

Actual, potential or perceived product safety concerns, including health-related concerns, could damage our reputation and expose us to litigation, as well as government enforcement actions, and result in costly product recalls and other liabilities.

Actual, potential or perceived product safety concerns, including health-related concerns, could damage our reputation with current or prospective customers, vendors and employees.

Product quality or safety issues could also expose us to litigation, as well as government enforcement actions, and result in costly product recalls and other liabilities.

Similar concerns impacting our competitors could damage the reputation of our industry and indirectly have an unfavorable impact on our operations.

We face intense competition both from within our industry and from other leisure product alternatives.

Within our industry, we directly compete against various regional and local distributors as they compete against our customers for the business of pool owners and other end-use customers.

We indirectly compete against mass market retailers and large pool or irrigation supply retailers as they purchase the great majority of their needs directly from manufacturers, and to a lesser extent with internet retailers, as they purchase the majority of their needs from distributors.

Within our industry, we directly compete against various regional and local distributors for the business of pool owners and other end-use customers.

We indirectly compete against mass market retailers and large pool or irrigation supply retailers as they purchase the great majority of their needs directly from manufacturers.

We compete to a lesser extent with internet retailers, as they purchase the majority of their needs from distributors.

Outside of our industry, we compete indirectly with alternative suppliers of big-ticket consumer discretionary products, such as boat and motor home distributors, and with other companies who rely on discretionary homeowner expenditures, such as home remodelers.

New competitors may emerge as there are low barriers to entry in our industry, which has led to highly competitive markets consisting of various-sized entities, ranging from small or local operators to large regional businesses.

If our customers are attracted by the alternatives afforded by any of our competitors, they may be less inclined to purchase products or services from us, impacting our results of operations.

Given the density and demand for pool products, some geographic markets that we serve also tend to have a higher concentration of competitors than others, particularly California, Texas, Florida and Arizona.

These states encompass our four largest markets and represented approximately 53% of our net sales in 2021.

The entry of significant new competitors into these markets could negatively impact our sales.

More aggressive competition by store- and internet-based mass merchants and large pool or irrigation supply retailers could adversely affect our sales.

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Should store‑ and internet-based mass market retailers increase their focus on the pool or irrigation industries, or increase the breadth of their pool and irrigation and related product offerings, they may become a more significant competitor for our direct customers and end-use consumers, which could have an adverse impact on our business.

We may face additional competitive pressures if large pool or irrigation supply retailers look to expand their customer base to compete more directly within the distribution channel.

Additionally, because the internet facilitates competitive entry, price transparency and comparison shopping, increased internet sales by us or our competitors could increase the level of competition we face or reduce our margin.

Further, we may face additional competitive pressures if large pool or irrigation supply retailers look to expand their customer base to compete more directly within the distribution channel.

We depend on our ability to attract, develop and retain highly qualified personnel.

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If we are unable to attract and hire additional personnel during the peak season, our operating results could be negatively impacted.

Additionally, competition for qualified employees could require us to pay higher wages to attract a sufficient number of employees.

The pandemic and other events over the past couple of years have increased employees’ expectations regarding compensation, workplace flexibility and work-home balance.

These developments have made it more difficult for us to attract and retain top talent.

We do not expect these developments to have a material adverse impact on us, but we can provide no assurances to this effect.

Past growth may not be indicative of future growth.

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• identify appropriate acquisition candidates and successfully integrate acquired businesses;

• identify appropriate locations for new sales centers and successfully integrate them into our network;

• maintain favorable supplier arrangements and relationships;

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If we do not manage these potential difficulties successfully, our operating results could be adversely affected.

Our results in 2020 were positively impacted by home-centric trends resulting from the COVID-19 pandemic.

Our results in 2020 and 2021 were positively impacted by home-centric trends resulting from the COVID-19 pandemic.

These trends may not continue, or may reverse, which could adversely impact our results of operations.

In addition, in recent years our customers have had difficulty employing a sufficient number of qualified individuals to keep up with the demand for pool maintenance, refurbishment and installation.

In addition, in recent years our customers have had difficulty employing a sufficient number of qualified individuals to keep up with the demand for pool installation, maintenance and refurbishment.

If this trend continues or accelerates, our results of operations could be negatively impacted.

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If we maintain insufficient inventory levels and prices rise for these products, we could be forced to purchase products at higher prices and forego profitability in order to meet customer demand.

While always present, these challenges have been heightened over the past couple years, as the pandemic has altered consumer spending trends.

Our business, financial condition and results of operations could be negatively impacted if either or both of these situations occur frequently or in large volumes.

The cost of chemical products could increase our cost of sales and adversely affect our results of operations and financial condition.

Based on our 2020 product classifications, sales for our pool and hot tub chemicals product category represented approximately 10% of total net sales for 2020 and 12% of total net sales in 2019 and 2018.

Our principal chemical products are granular chlorine compounds and liquid chlorine, which are commodity materials.

The prices of these chemical products are a function of, among other things, manufacturing capacity and demand.

We have generally passed through chlorine price increases to our customers.

The price of granular chlorine compounds and liquid chlorine may increase in the future, and we may not be able to pass on any such increase to our customers.

We purchase chlorine products primarily from the largest domestic suppliers.

The alternate sources of supply we currently view as reliable may ultimately be unable to supply us with all of our principal chemical products, including chlorine products.

Additionally, significant price fluctuations or shortages in our principal chemical products may increase our cost of sales, and our results of operations and financial condition could be adversely affected.

Risks Relating to Technology, Cybersecurity and Data Privacy

We rely on information technology systems to support our business operations.

A significant disturbance, breach or cybersecurity attack of our technological infrastructure could adversely affect our financial condition and results of operations.

Information technology supports several aspects of our business, including among others, product sourcing, pricing, customer service, transaction processing, inventory management, financial reporting, collections and cost management.

Our ability to operate effectively on a day-to-day basis, communicate with our customers and accurately report our results depends on a reliable technological infrastructure, which is inherently susceptible to internal and external threats.

We are vulnerable to interruption by fire, natural disaster, power loss, telecommunication failures, internet failures, security breaches and other catastrophic events.

Exposure to various types of cyber-attacks such as malware, computer viruses, worms, ransomware or other malicious acts, as well as human error, could also potentially disrupt our operations, result in a significant interruption in the delivery of our goods and services or result in the loss of sensitive data.

We are making, and expect to continue to make, investments in technology to maintain and update our computer systems and to expand our ability to engage in e-commerce with our customers.

We may not implement these changes as quickly or successfully as our customers expect.

In addition, implementing significant system changes increases the risk of computer system disruption.

The potential problems and interruptions associated with implementing technology initiatives or conversions (including those contemplated under our currently pending multi-year systems upgrade project further described elsewhere herein), as well as providing training and support for those initiatives, could disrupt or reduce our operational efficiency.

Advances in computer and software capabilities, encryption technology and other discoveries increase the complexity of our technological environment, including how each interact with our various software platforms.

Such advances could delay or hinder our ability to process transactions or could compromise the integrity of our data, resulting in a material adverse impact on our financial condition and results of operations.

We also may experience occasional system interruptions and delays that make our information systems unavailable or slow to respond, including the interaction of our information systems with those of third parties or the failure of software of services provided by third parties that we do not control.

A lack of sophistication or reliability of our information systems could adversely impact our operations and customer service and could require major repairs or replacements, resulting in significant costs and foregone revenue.

Like other companies our size, we devote significant resources to protect our systems and data from cyber-attacks.

Despite our substantial efforts to defend against these attacks, we have faced various attempted cyber-attacks that did not result in a material adverse effect on our operations, operating results or financial condition.

The risk of breaches is likely to continue to increase due to several factors, including the increasing sophistication of cyber-attacks and the wider accessibility of cyber-attack tools.

Known and newly discovered software and hardware vulnerabilities are constantly evolving, which increases the difficulty of detecting and successfully defending against them.

Consequently, we may not be able to implement security barriers or other preventative measures that repel all future cyber-attacks or detect such attacks in a timely manner to minimize the potential business disruption and unfavorable financial impacts.

Although we maintain insurance coverage that may, subject to policy terms and conditions (including self-insured deductibles, coverage restrictions and monetary coverage caps), cover certain aspects of our cyber risks, such insurance coverage may be unavailable or insufficient to cover our losses.

Failure to maintain the security of confidential information could damage our reputation and expose us to litigation.

Additionally, changes in data privacy laws and our ability to comply with them could have a material adverse effect on us.

We collect and store data that is sensitive to us and our employees, customers and vendors.

The failure to maintain security over and prevent unauthorized access to our data, our customers’ personal information, including credit card information, or data belonging to our suppliers, could put us at a competitive disadvantage.

Such a breach could result in damage to our reputation and subject us to potential litigation, liability, fines and penalties and require us to incur significant expense to address and remediate or otherwise resolve these issues, resulting in a possible material adverse impact on our financial condition and results of operations.

A variety of state, national, foreign and international laws and regulations apply to the collection, use, retention, protection, security, disclosure, transfer and other processing of personal and other data.

The European Union and other international regulators, as well as state governments, have recently enacted or enhanced data privacy regulations, such as the California Consumer Privacy Act, and other governments are considering establishing similar or stronger protections.

These regulations impose certain obligations for handling specified personal information in our systems and for apprising individuals of the information we have collected about them.

Many of these laws are complex and change frequently and often conflict with the laws in other jurisdictions.

Despite our best efforts to comply, any noncompliance could result in incurring potential substantial penalties and reputational damage.

Risks Relating to Legal, Regulatory and Compliance Matters

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These laws and regulations have changed substantially and rapidly over the last 25 years and we anticipate that there will be continuing changes.

The clear trend in environmental, health, transportation and safety regulations is to place more restrictions and limitations on activities that impact the environment, such as the use and handling of chemicals.

Increasingly, strict restrictions and limitations have resulted in higher operating costs for us and it is possible that the costs of compliance with such laws and regulations will continue to increase.

Our attempts to anticipate future regulatory requirements that might be imposed and our plans to remain in compliance with changing regulations and to minimize the costs of such compliance may not be as effective as we anticipate.

Our business could be impacted by our public statements regarding various corporate environmental social and governance (“ESG”) initiatives or changes in consumers’ view of our products.

As part of our strategy regarding ESG matters, we may set targets aimed at reducing our impact on the environment and climate change or targets relating to other sustainability matters.

It is possible that we may not be able to achieve such targets or our desired impact, which may cause us to suffer from reputational damage or our business or financial condition could be adversely affected.

Actions we take to achieve our strategy or targets could result in increased costs to our operations and changes in customers’ attitudes towards the environmental impact of our pool chemical products could reduce our sales.

In addition, investors and stakeholders are increasingly focused on ESG matters, and positions we take or refrain from taking on ESG issues could negatively impact our reputation or relations with investors, customers, vendors, employees and others.

We store chemicals, fertilizers and other combustible materials that involve fire, safety and casualty risks.

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operations, as well as unique costs and difficulties of managing international operations.

Our international operations, which accounted for 9% of our total net sales in 2020, expose us to certain additional risks, including:

Our international operations, including Canada and Mexico, which accounted for 10% of our total net sales in 2021, expose us to certain additional risks, including:

• difficulty in staffing international subsidiary operations;

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• local laws and customs;

• currency fluctuations;

• currency fluctuations, exchange controls and repatriation restrictions;

• adverse tax consequences;

• dependence on other economies.

• adverse consequences for violating anti-corruption, anti-competition, economic sanctions, immigration and other laws governing international commerce.

For foreign-sourced products, we may be subject to certain trade restrictions that would prevent us from obtaining products.

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Fluctuations in other factors relating to international trade, such as tariffs, transportation costs and inflation are additional risks for our international operations.

Excess tax benefits or deficiencies recognized from our accounting for share-based awards impact our reported earnings.

In 2017, we adopted Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting .

Our projections of financial statement impacts related to ASU 2016-09 are subject to several assumptions which can vary significantly, including our estimated share price and the period that our employees will exercise vested stock options.

Excess tax benefits or deficiencies recognized under ASU 2016-09 vary from quarter to quarter and past results may not be indicative of future results.

General Risks

Changes in tax laws and accounting standards related to tax matters have caused, and may in the future cause, fluctuations in our effective tax rate.

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Our effective tax rate may also be impacted by changes in the geographic mix of our earnings.

In the first quarter of 2017, we adopted Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting , on a prospective basis.

Excess tax benefits or deficiencies recognized under ASU 2016-09 vary from quarter to quarter and past results may not be indicative of future results.

Risks Relating to Technology, Cybersecurity and Data Privacy

We rely on information technology systems to support our business operations.

A significant disturbance or breach of our technological infrastructure could adversely affect our financial condition and results of operations.

Additionally, failure to maintain the security of confidential information could damage our reputation and expose us to litigation.

Information technology supports several aspects of our business, including among others, product sourcing, pricing, customer service, transaction processing, financial reporting, collections and cost management.

Our ability to operate effectively on a day-to-day basis and accurately report our results depends on a solid technological infrastructure, which is inherently susceptible to internal and external threats.

We are vulnerable to interruption by fire, natural disaster, power loss, telecommunication failures, internet failures, security breaches and other catastrophic events.

Exposure to various types of cyber-attacks such as malware, computer viruses, worms or other malicious acts, as well as human error, could also potentially disrupt our operations or result in a significant interruption in the delivery of our goods and services.

We are making, and expect to continue to make, investments in technology to maintain and update our computer systems.

Implementing significant system changes increases the risk of computer system disruption.

The potential problems and interruptions associated with implementing technology initiatives, as well as providing training and support for those initiatives, could disrupt or reduce our operational efficiency.

These regulations impose certain obligations for handling specified personal information in our systems and for apprising individuals of the information we have collected about them.

Despite our best efforts to comply, any noncompliance could result in incurring potential substantial penalties and reputational damage.

Our numerous procedures and protocols designed to mitigate cybersecurity risks (including processes to timely notify appropriate personnel for assessment and resolution and company-wide training programs), our investments in information technology security and our updates to our business continuity plan may not prevent or effectively mitigate adverse consequences from cybersecurity risks.

Such a breach could result in damage to our reputation and subject us to potential litigation, liability, fines and penalties, resulting in a possible material adverse impact on our financial condition and results of operations.

General Risk Factors

We cannot assure you we will continue paying dividends at the current rates, or at all.

We cannot assure you we will continue periodic dividends on our capital stock at the current rates, or at all.

Any quarterly dividends on our common stock will be paid from funds legally available for such purpose when, and if, declared by our Board of Directors.

Decisions on whether, when and in which amounts to continue making any future dividend distributions will remain at all times entirely at the discretion of our Board of Directors, which reserves the right to change or terminate our dividend practices at any time and for any reason without prior notice.

Holders of our common stock should be aware they have no contractual or other legal right to receive dividends.

Similarly, holders of our common stock should be aware that repurchases of our common stock under any repurchase plan then in effect are completely discretionary and may be suspended or discontinued at any time for any reason regardless of our financial position.

Lapses in our disclosure controls and procedures or internal control over financial reporting could materially and adversely affect us.

We maintain disclosure controls and procedures designed to provide reasonable assurances regarding the accuracy and completeness of our SEC reports and internal control over financial reporting designed to provide reasonable assurance regarding the reliability and compliance with U.S.

generally accepted accounting principles (“GAAP”) of our financial statements.

We cannot assure you these measures will be effective.

We may be adversely affected by changes in LIBOR reporting practices or the method in which LIBOR is determined.

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In July 2017, the Financial Conduct Authority (the regulatory authority over LIBOR) stated they will plan for a phase out of regulatory oversight of LIBOR after 2021 to allow for an orderly transition to an alternative reference rate.

On November 30, 2020, ICE Benchmark Administration, the administrator of LIBOR, with the support of the United States Federal Reserve and the United Kingdom’s Financial Conduct Authority, announced plans to consult on ceasing publication of USD LIBOR on December 31, 2021 for only the one week and two month USD LIBOR tenors and on June 30, 2023 for all other USD LIBOR tenors.

On November 30, 2020, ICE Benchmark Administration (“IBA”), the administrator of LIBOR, with the support of the United States Federal Reserve and the United Kingdom’s Financial Conduct Authority, announced plans to consult on ceasing publication of USD LIBOR on December 31, 2021 for only the one week and two month USD LIBOR tenors, and on June 30, 2023 for all other USD Libor tenors.

While this announcement extends the transition period to June 2023, the United States Federal Reserve concurrently issued a statement advising banks to stop new USD LIBOR issuances by the end of 2021.

The full impact of the transition away from LIBOR, including the discontinuance of LIBOR publication and the adoption of a replacement rate for LIBOR, remains unclear.

These changes may have an adverse impact on our financing costs and any floating rate indebtedness we may incur.

Disruptions from natural or man-made disasters or extreme weather, public safety issues, geopolitical events and security issues, labor or trade disputes and similar events could have a material adverse effect on our business.

Natural or man-made disasters or extreme weather (including as a result of climate change), public safety issues, geopolitical events and security issues (including terrorist attacks, armed hostilities or insurrections), labor or trade disputes and similar events can lead to uncertainty and have a negative impact on demand for our products, in addition to causing disruptions to our supply chain.

Discretionary spending is generally adversely affected during times of economic, social or political uncertainty.

Although the Alternative Reference Rates Committee has endorsed the Secured Overnight Financing Rate (“SOFR”) as its preferred replacement for LIBOR, the market transition away from LIBOR towards SOFR may be complicated, and there is no guarantee that SOFR will become a widely accepted benchmark in place of LIBOR.

The full impact of the transition away from LIBOR, including the discontinuance of LIBOR publication and the transition to a replacement rate may have an adverse impact on our financing costs and any floating rate indebtedness we may incur.

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