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New words:
back, behavior, consumer, deterioration, distancing, expand, favorable, final, Marriott, Milwaukee, nominal, onboard, outlined, postponement, preserved, rapid, retroactively, scaled, slight, sudden, traditional, Treasury, unemployment, Wisconsin
Removed:
improved, previously, profitability, select, Washington
Financial report summary
?Competition
GMSRisks
- Our business depends on the construction industry and general business, financial market and economic conditions.
- Our sales depend upon the commercial new construction market and the commercial repair and remodel market.
- Homebuilding activity and the mortgage markets affect the demand for products we distribute, which in turn affects our business condition.
- Our business relies on private investment and a slower than expected economy may adversely affect our results.
- Within our local markets, we operate in a highly competitive industry and any failure to effectively compete could have a material adverse effect on us.
- The trend toward consolidation in our industry and broader markets may negatively impact our business.
- The success of our business depends, in part, on our ability to execute on our greenfield branch and acquisition strategy.
- Our acquisition strategy exposes us to significant risks and additional costs.
- Any inability to successfully integrate our recent or future acquisitions could have a material adverse effect on us.
- The loss of, or a significant decline in business with, one or more of our suppliers, or the development of alternatives to distributors in the supply chain, could adversely affect our business, financial condition, results of operations and cash flows.
- If we fail to qualify for supplier rebates or are unable to maintain or adequately renegotiate our rebate arrangements, our results of operations could be materially adversely affected.
- A material disruption at one of our suppliers’ facilities could prevent us from meeting customer demand, reduce our sales and negatively affect our overall financial results.
- Weather can materially affect our business and we are subject to seasonality.
- Most of our facilities are held under long-term, non-cancelable leases and a substantial number of such properties are leased from the former owners of acquired businesses. The interests of such lessors may be in conflict with our interests and we may be unable to renew leases on favorable terms or at all.
- Any significant fuel cost increases or shortages in the supply of fuel could disrupt our ability to transport and distribute our products to customers, which could adversely affect our results of operations.
- Environmental, health and safety laws and regulations and any changes to, or liabilities arising under, such laws and regulations could have a material adverse effect on our financial condition, results of operations and liquidity.
- We depend on our senior management, and our business may be adversely impacted if we lose any member of our senior management or are unable to recruit additional management and other personnel.
- Employee disputes or employee-related cost increases could disrupt operations of our businesses.
- Our business is cyclical and requires significant working capital to fund operations.
- A failure to implement or integrate, or a disruption in, our information technology systems could adversely affect our business and results of operations.
- We could be subject to cybersecurity risks, information technology interruptions, and business continuity risks.
- Trade policies could make sourcing product from foreign countries more difficult or more costly.
- Our foreign operations could have a material adverse effect on us.
- We are exposed to product liability, warranty, casualty, construction defect, contract, tort, employment and other claims and legal proceedings related to our business, the products we distribute, the services we provide and services provided for us by third parties.
- Our operations are subject to special hazards that may cause personal injury or property damage, subjecting us to liabilities and possible losses which may not be covered by insurance.
- Our business may be subject to additional obligations to collect and remit sales, use and other taxes and we may be subject to tax liabilities for past sales.
- Our leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk, give creditors secured claims to any collateral securing the debt, and restrict us from making certain strategic decisions.
- Despite our current level of indebtedness, we and our subsidiaries may incur more debt.
- We will require a significant amount of cash to service our indebtedness. The ability to generate cash or refinance our indebtedness as it becomes due depends on many factors, some of which are beyond our control.
- The 2018 Revolving Credit Facility restricts our ability and the ability of most of our subsidiaries to engage in some business and financial transactions.
- The market price of our common stock has been highly volatile and subject to wide fluctuations, which could cause the value of your investment to decline. The price of our common stock could decline substantially and, as a result, you may not be able to sell shares at or above the price you paid for them.
- As a “smaller reporting company,” we may avail ourselves of reduced disclosure requirements, which may make our common stock less attractive to investors.
- Our internal control over financial reporting may not be effective and our independent registered public accounting firm may not be able to certify as to their effectiveness, which could have a significant and adverse effect on our business and reputation.
- The coverage of our business or our common stock by securities or industry analysts or the absence thereof could adversely affect our stock price and trading volume.
- Lone Star may have conflicts of interest with other stockholders and may limit our minority stockholders' ability to influence corporate matters.
- We are required to pay Lone Star for certain tax benefits, and these amounts are expected to be material.
- We will not be reimbursed for any payments made to Lone Star under the TRA in the event that the tax benefits are disallowed.
- In certain cases, payments made by us under the TRA may be accelerated and/or significantly exceed the actual benefits we realize in respect of the Covered Tax Benefits.
- Certain provisions of the TRA limit our ability to incur additional indebtedness, which could adversely affect our business and growth strategy.
- We would be required to make tax gross-up payments to Lone Star if we consummate a corporate inversion or similar transaction that causes payments under the TRA to be subject to withholding taxes.
- We are a controlled company within the meaning of the New York Stock Exchange rules and, as a result, qualify for, and intend to continue relying on, exemptions from certain corporate governance requirements.
- Future sales of our common stock in the public market could cause our stock price to fall.
- We have no present intention to pay dividends on our common stock.
- Provisions of our amended and restated governing documents, Delaware law and other documents could discourage, delay or prevent a merger or acquisition at a premium price.
- Our amended and restated certificate of incorporation includes an exclusive forum clause, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
- We may be at increased risk of securities class action litigation.
Management Discussion
- Net sales for the year ended December 31, 2019 were $2,154.5 million compared to $2,044.3 million for the year ended December 31, 2018, representing an increase of $110.2 million, or 5.4%. There was one less day in the current period as compared to the prior period. Average daily net sales increased 5.8% over the prior period. Net sales from base business branches contributed $47.0 million of the net sales increase, and average daily base business net sales increased by 2.9% over the prior period. Net sales from acquired branches and existing branches that were strategically combined contributed $63.3 million of the net sales increase. The base business net sales increase was primarily due to strong commercial activity and product expansion into new geographic markets. The change in our base business net sales was also driven by the following factors: