Insiders ranked by realized 90-day signed return on their open-market trades at Pool Corp. Minimum 3 scored trades. Returns are signed - a sale followed by a rally counts against the insider.
Real-time Form 4 intelligence. Smarter insider tracking.
YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.12pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
-0.12pp
Flat
Net-tone change vs last year's 10-K.
MD&A
-
Not scored
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
incident+7
threats+6
harm+4
vulnerabilities+3
damage+2
Positive rising
profitability+2
best+1
successful+1
greater+1
improve+1
Risk Factors (Item 1A)
7,072 words
Risk Factors
Investing in our securities involves multiple risks and uncertainties. Certain factors that may affect our business and could cause actual results to differ materially from those expressed in any forward-looking statement are described below. Investors should carefully consider the risks described below in addition to the other information set forth in this Annual Report on Form 10-K. If any of the events described below were to occur, our business, prospects, financial condition or results of operations could be materially adversely affected and the price of our common stock could decline. The risks discussed below are not the only risks we face. Other risks or uncertainties not presently known to us, or that we currently believe are immaterial, may emerge or materially affect our business if they occur. Further, our business may also be affected by additional factors that generally apply to all companies operating in the U.S. and globally, which we have not included below.
Risks Relating to Macroeconomic Conditions or Events
The demand for our products may be adversely affected by unfavorable economic conditions and changes in discretionary consumer spending.
Demand for our products is subject to fluctuations and is difficult to predict, often due to factors outside of our control. Discretionary consumer spending significantly affects our sales and is impacted by a variety of factors, including changes in general economic conditions, the housing market, rates, wage levels, interest rate fluctuations, inflation, disposable income levels, consumer confidence and access to credit. Any material in discretionary consumer spending could reduce our sales and our business. In times of economic uncertainty, the demand for swimming pool, irrigation, landscape and related outdoor living products typically , often corresponding with in discretionary consumer spending. Currently, we estimate that approximately 64% of our net sales are derived from maintenance and minor repair products, while approximately 22% of our sales are derived from products used to remodel, renovate, and upgrade pools. However, the growth in these portions of our business depends on the expansion of the installed pool base, which has been and could in the future be affected by decreases in construction activities, similar to the trends experienced since the latter half of 2022. Economic or uncertainty may also cause consumers to discretionary replacement, renovation and upgrade activity. Even in generally economic conditions, or in the housing market could have a material impact on our financial performance. Such us to certain additional risks, including but not limited to the risk of customer or , which could shrink our potential customer base and inhibit our ability to collect on those customers’ receivables.
No section text extracted for this filing. The 10-K may use a non-standard template that the parser doesn't recognize - the original doc is still linked in the Stats tab.
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 and to a lesser extent, major renovations and remodel projects. Unfavorable economic conditions or a downturn in the housing market could result in a significant tightening of credit markets, which can limit the ability of consumers to access financing for these purchases.
Discretionary spending is often adversely affected during times of economic, social or political uncertainty, whether caused by health threats, man-made or natural disasters, technological change or other similar events discussed below in this Item 1A. Likewise, new pool construction and major remodeling projects over the past few years have decreased, impacted by higher interest rates and inflation, increased economic uncertainties, tightened consumer credit and fewer new housing developments. These events could create uncertainties that negatively impact our business in ways that we cannot presently predict.
Catastrophic events or societal unrest could adversely impact our operations.
An outbreak of disease or similar public health threat, terrorism and other acts of violence, wars, rioting, labor strife, civil disturbances, societal unrest, geopolitical tensions or political instability could negatively impact us directly by interfering with our ability to operate due to adverse impacts on our workforce, supply chain or operations or indirectly by depressing macroeconomic conditions. Our customers could also encounter hardships that negatively impact their ability to make timely payments to us or to continue doing business with us.
Risks Relating to Our Business and Industry
We are susceptible to adverse weather conditions, which could intensify as a result of changing climate patterns.
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. In 2025, we generated 61% of our net sales and 78% of our operating income in the second and third quarters of the year. These quarters represent the peak months of swimming pool use, pool and irrigation installation and maintenance activities. Unfavorable weather during these quarters in our largest geographic regions can significantly affect our results, as further described in “Seasonality and Weather” in Item 1 of this Form 10-K. Natural disasters and other significant weather events can create more variability in our reported results in the short term or otherwise adversely impact our sales or operations. Drought conditions or water management initiatives may lead to government-imposed water use restrictions or an increase in the number of homeowners unwilling to construct or maintain a pool. Such restrictions could result in decreased pool and irrigation system installations which could negatively impact our sales.
Certain extreme weather events and natural disasters, such as hurricanes, tornadoes, earthquakes, tropical storms, floods, intense storms, drought, wildfires and extreme heat, 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. In the past, we have experienced short-term impacts on our sales due to closures from weather events such as Hurricanes Francine, Helene and Milton in 2024. Similar events in the future could result in similar short-term impacts or potentially result in more severedamage to our business. The areas in which we operate, including Florida, California, Texas and other coastal areas, have experienced, and are expected to continue to experience, natural disasters and extreme weather events. The physical effects of changing climate patterns may increase the frequency or severity of natural disasters and extreme weather events in the future, which would increase our exposure to these risks.
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 and stable relationships with suppliers.
As a distribution company, maintaining favorable relationships with our suppliers is critical to our success. We believe that we add considerable value to the swimming pool and irrigation supply chains by purchasing products from a large number of manufacturers and distributing the products to a highly fragmented customer base on conditions that are more favorable than these customers could obtain on their own. We believe that we currently enjoygood relationships with our suppliers, who generally offer us competitive pricing, return policies and promotional allowances. However, any failure to maintain favorable relationships with our suppliers could have an adverse effect on our business.
Our largest suppliers are Pentair plc, Zodiac Pool Systems, Inc. and Hayward Holdings, Inc., which accounted for 20%, 12% and 11%, respectively, of the costs of products we sold in 2025. A decision by our largest suppliers, acting individually or in concert, to sell their products directly to retailers or other end users, bypassing distribution companies like ours, would have an adverse effect on our business. 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 any significant supplier due to financial failure or any other reason, 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.
We purchase many of our products from suppliers pursuant to vendor arrangements that entitle us under certain conditions to receive rebates. These rebates effectively reduce the costs of our products. Rebate arrangements are subject to renegotiation with our suppliers from time to time. If we fail to qualify for these rebates or are unable to renew rebate programs at desirable terms, or a supplier materially reduces or stops offering rebates, our costs could increase substantially, and our gross margin and net income could be materially adversely affected.
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 a global network of manufacturers and other suppliers to provide us with the products we distribute. To succeed, we must continue to maintain effective business relationships with qualified suppliers who can timely and efficiently supply us with high quality products. Our proprietary and exclusive brand products we distribute also expose us to potential liability claims. 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, increased costs and be exposed to legal, financial and reputational risks, including litigation, governmental enforcement actions and costly product recalls. 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 national, regional and local distributors for the business of pool owners and other end-use customers. We indirectly compete against store-based mass market retailers and large pool or irrigation supply retailers as they purchase the majority of their supplies directly from manufacturers. We compete to a lesser extent with internet retailers, as they purchase the majority of their supplies from distributors. Outside of our industry, we compete indirectly with alternative suppliers of big-ticket discretionary leisure or homeowner products, such as boat and motor home distributors and with other home and backyard remodelers. We may not be able to compete effectively against our competitors and other leisure and homeowner product alternatives, which could have an adverse impact on our business.
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, Florida, Texas and Arizona. These states encompass our four largest markets and represented approximately 53% of our net sales in 2025. The entry of significant new competitors into these markets could negatively impact our sales.
We may also be unable to market and sell products if they are not competitive, including on the basis of price, quality, technical performance, ease of use, availability, delivery timing and reliability. Competitive pressures may limit our ability to maintain or raise prices, and an inability to maintain revenue or raise prices to offset increases in costs could have a significant adverse effect on our gross margin.
More aggressive competition by store- and internet-based mass merchants and large pool or irrigation supply retailers could adversely affect our sales.
We face competition from both store-based and internet-based mass market retailers, which have greater scale and bargaining power than us. Today these retailers carry a limited range of, and devote a limited amount of shelf space to, merchandise and products targeted to our industry. Historically, mass market retailers have generally expanded by adding new stores and products, but their offering of pool and irrigation related products has remained relatively constant. 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 would likely become a more significant competitor for our direct customers and end-use consumers, which could have an adverse impact on our business. Additionally, because the internet facilitates competitive entry, online ordering, price transparency and comparison
shopping, increased internet transactions by us or our customers or competitors could increase the level of competition we face, reduce our margins or reduce our customers’ reliance on us. Further, we may face additional competitive pressures if large pool or irrigation supply retailers look to expand their customer base to compete more directly with us.
We depend on our ability to attract, develop and retain highly qualified personnel.
We consider our employees to be the foundation for our growth and success. As such, our future success depends in large part on our ability to attract, retain and motivate qualified personnel. This includes succession planning related to our executive officers and key management personnel. Hiring and retaining such qualified individuals may be adversely impacted by several factors, including (i) uncertainties regarding general economic conditions or industry conditions, (ii) our failure to offer competitive compensation and (iii) increased competition for qualified individuals. If we are unable to attract and retain key personnel, our operating results could be adversely affected.
Given the seasonal nature of our business, we may hire additional employees during the summer months, including seasonal and part-time employees, who generally are not employed during the off-season. 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 and retain a sufficient number of employees.
Inflation and other events over the past few years have increased employees’ expectations regarding compensation and benefits and workplace flexibility. These developments have made it more difficult and costly for us to attract and retain top talent. While we do not expect these developments to have a material adverse impact on us, we can provide no assurances to this effect.
Past growth may not be indicative of future growth.
Historically, we have experienced substantial sales growth through organic market share gains, new sales center openings, expanded product offerings and acquisitions that have increased our size, scope and geographic footprint. Our various business strategies and initiatives, including our growth initiatives, are subject to business, economic and competitive uncertainties and contingencies, many of which are beyond our control. While we contemplate continued growth through internal expansion and acquisitions, no assurance can be made as to our ability to:
penetrate new markets;
generate sufficient cash flows to support expansion plans and general operating activities;
obtain financing;
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; and
identify and close or consolidate locations or divest assets which no longer meet our objectives.
If we do not successfully manage these potential difficulties or successfully execute our business strategies and initiatives, our operating results could be adversely affected.
We are subject to inventory management risks. Insufficient inventory may result in lost sales opportunities or delayed revenue, while excess inventory may negatively impact our gross margin.
We strive to balance the need to maintain inventory levels that are sufficient to maximize operational efficiencies and minimize potential supply chain constraints against the risk of inventory obsolescence due to changing consumer preferences and fluctuating commodity prices. To successfully manage our inventories, we must estimate demand from our customers and purchase products that substantially correspond to consumer demand, which depends in part on our ability to identify and respond to evolving trends in demographics and consumer preferences. If we overestimate demand and purchase too much of a particular product, we face a risk that the price of that product will fall, leaving us with inventory that we cannot sell at optimal profit margins. In addition, we may have to write down such inventory if we are unable to sell it for its recorded value. If we underestimate demand and purchase insufficient quantities of products, inventory shortages could result in delayed revenue or loss of sales opportunities altogether as potential customers turn to competitors’ products that are readily available. If we maintain insufficient inventory levels and prices rise for these products, we could be forced to purchase products at higher prices and foregoprofitability in order to meet customer demand. Our business, financial condition and
results of operations could be negatively impacted if we fail to (i) timely identify or effectively respond to changing consumer tastes, preferences, spending patterns and swimming pool, irrigation, landscape and related outdoor living products needs, (ii) accurately forecast demand for these products or (iii) successfully manage our inventories.
Changes in our customer base or customer preferences could change the mix of products we sell and reduce our profitability.
Changes in our customer base could impact our revenues or gross margin, reducing our profitability. Our business could be adversely impacted if (i) consolidation of our customers leads to changes in purchasing habits, (ii) more people choose to live in urban settings, rented space or housing complexes with a single community pool or (iii) more homeowners bypass our customers by directly purchasing their own supplies or undertaking their own improvement projects.
Our gross margins vary across our products and can change over time due to a variety of factors, including changes in the mix of products we sell. We derive higher revenues or profits from certain of our products compared to others. If customers or end-users opt to use an increased amount of lower-revenue or lower-margin products, our results of operations would be adversely affected.
Risks Relating to Technology, Cybersecurity, Artificial Intelligence and Data Privacy
We rely on information technology systems to support our business operations. A significant disruption, 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, transaction processing, customer service, pricing, product sourcing, 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, including by fire, natural disaster, extreme weather events, 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, social engineering 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 experience delays in making these updates and may not implement these changes as quickly or successfully as our customers expect, or as quickly or successfully as changes implemented by our competitors. 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, 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 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. Increasing complexity of technology could increase our cost of doing business.
We devote significant resources to protect our systems and data from cyber-attacks. Refer to Item 1C, “Cybersecurity” of this Form 10-K for further information on our cybersecurity risk management, strategy and governance. In recent years we have faced, and expect to continue to face, various attempted cyber-attacks of increasing sophistication. To date, we are not aware of any cybersecurity incident or threat that materially impacted or could reasonably be anticipated to materially affect our business, results of operations or financial condition. However, we cannot guarantee that we will not experience such an incident in the future. The risk of breaches is likely to continue to increase due to several factors, including (i) the increasing use of machine learning, artificial intelligence (AI) and other sophisticated techniques to initiate cyber attacks and social engineering threats, such as phishing or deepfake schemes, (ii) the wider accessibility of cyber-attack tools that can circumvent security controls and evade detection, (iii) the expanded size, scope, use and complexity of our systems, and (iv) our increased reliance on e-commerce, open source software, cloud computing services and work-from-home staffing. 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, which may result in significant expenses from system downtime, lower sales, increases in insurance costs, fines and fees, lost business relationships, managerial distractions, litigation, increases to regulatory oversight, expenditures for additional threatprevention technologies or reputational harm, any of which could materially impact us. We also participate in a broader ecosystem of supply chain partners, both digital and physical, who face similar risks. Cyber-attacks on our partners could negatively impact our business.
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.
We use AI in our business, which could result in reputational harm, competitive harm and legal liability, and adversely affect our business, results of operation and financial condition.
As part of our broader digital transformation strategy, we are integrating artificial intelligence to support our internal business functions and exploring additional uses for the future. AI presents risks and challenges and may result in unintended consequences, including producing inaccurate data. AI algorithms and training methodologies may be flawed. While we aim to develop and use AI responsibly, we may be unsuccessful in identifying or resolving issues and risks before they arise. The AI-related legal and regulatory landscape is evolving and remains uncertain and may be inconsistent from jurisdiction to jurisdiction. Our obligations to comply with the evolving legal and regulatory landscape could entail significant costs or limit our ability to incorporate certain AI capabilities into our operations and products. AI-related issues, deficiencies and failures could also give rise to legal or regulatory action (including with respect to proposed legislation regulating AI in jurisdictions such as the European Union and others, and as a result of new and different applications of existing data protection, privacy, intellectual property and other laws), damage our reputation or otherwise materially harm our business.
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.
In the course of doing business, we collect and store data that is sensitive to us and our employees, customers and vendors. The failure to prevent unauthorized access to our data or the personal data of our customers or 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 enacted or enhanced data privacy regulations, such as the California Consumer Privacy Rights 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
The nature of our business subjects us to potential non-compliance with employment, environmental, health, transportation, safety and other governmental regulations. Changes in, expanded enforcement of, or adoption of new federal, state, local or international laws and regulations could increase our costs of doing business.
We are subject to numerous federal, state, local and international laws and regulations, many of which are complex and subject to varying interpretations, including regulations related to employment, environmental, health, transportation and safety requirements, which govern such things as packaging, labeling, handling, transportation, storage and sale of chemicals and fertilizers. These laws and regulations, and related enforcement levels, may change as a result of a variety of factors, including political, economic or social events. Changes in, expanded enforcement of, or adoption of new federal, state, local or international laws and regulations, including those governing minimum wage or living wage requirements, the classification of exempt and non-exempt employees or other wage, labor or workplace regulations, could adversely impact our results of operations.
We sell algaecides and pest control products that are regulated as pesticides under the Federal Insecticide, Fungicide and Rodenticide Act and various state pesticide laws. These laws primarily relate to labeling, annual registration and licensing. Management has processes in place to facilitate and support our compliance with these requirements. However, failure to comply with these laws and regulations may result in investigations, the assessment of administrative, civil and criminalfines, damages, seizures, disgorgements, penalties or the imposition of injunctive relief. Although we presently do not expect to incur any capital or other expenditures relating to regulatory matters in amounts that may be material to us, we may be required to make such expenditures in the future. These laws and regulations have changed substantially and rapidly over the years, and we anticipate that there will be continuing changes. It is possible that the costs of compliance with increasingly prescriptive laws and regulations will continue to increase. We might not be able to successfully anticipate and remain in compliance with evolving future regulatory requirements, which could adversely impact our results of operations.
Governmental actions designed to address changing climate patterns or the failure to comply with climate-related and other sustainability requirements could adversely affect our business and increase our costs of doing business.
Concerns over changing climate patterns have led to, and may in the future continue to lead to, new or increased legal and regulatory requirements designed to reduce or mitigate the effects of changing climate patterns, which could increase our compliance obligations. In particular, advocates of change are continuing to explore ways to reduce greenhouse gas emissions. These changes over time could affect the availability and cost of certain consumer products, commodities and energy, which in turn may impact our ability to procure certain products or services required for the operation of our business at the quantities and levels we require. The regulation of greenhouse gas emissions could result in additional taxes or other costs to us or require us to modify our facilities or vehicle fleet. Changes in customers’ attitudes toward the environmental impact of a pool’s energy consumption or pool chemical products could reduce demand for our products.
Climate-related and other sustainability disclosures we make reflect our current plans and aspirations, and it is possible that we may not be able to achieve our desired impact, which may cause us to suffer from legal claims, reputational damage or a loss of demand for our products. Investors or other stakeholders could react negatively to disclosures we make on climate-related and other sustainability matters, which could negatively impact our relationships with such stakeholders or result in claims that our disclosures harmed them or us.
Various governmental bodies in Europe and the United States, particularly in the state of California, have adopted or proposed laws or regulations increasing the obligations of companies to disclose information about climate-related and other sustainability matters. We expect that these initiatives will expose us to additional compliance costs and potential risks.
We handle and store chemicals, fertilizers and other combustible materials that involve fire, safety and casualty risks.
We handle and store chemicals and fertilizers, including certain combustibles and oxidizing compounds, at our sales centers and at our chemical re-packaging plant. In addition to training our employees on safety protocols and procedures, we follow local fire marshal regulations at our facilities, which vary by jurisdiction and are subject to change, and assess the need for sprinklers and chemical storage vaults. A fire, explosion or flood affecting one of our facilities could give rise to safety and casualty losses and related liability claims. We also maintain what we believe is prudent insurance protection. However, we cannot guarantee that our insurance coverage will be
adequate to cover future claims that may arise or that we will be able to maintain adequate insurance in the future at rates we consider reasonable. Successfulclaims for which we are not fully insured may adversely affect our working capital and profitability. In addition, changes in the insurance industry have generally led to higher insurance costs and decreased availability of coverage.
We conduct business internationally, which exposes us to additional risks.
Our ability to successfully conduct operations in, and source products and materials from, international markets is affected by many of the same risks we face in our U.S. operations, as well as unique costs and difficulties of managing international operations. Our international operations, including Canada and Mexico, accounted for 7% of our total net sales in 2025 and expose us to certain additional risks, including:
difficulty in staffing international subsidiary operations;
different political, economic and regulatory conditions;
local laws and customs;
currency fluctuations (including changes in the relative strength of the U.S. dollar compared to foreign currencies), exchange controls and repatriation restrictions;
adverse tax consequences; and
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, as well as delivery delays or failures if we order products from vendors with whom we have no prior relations. Fluctuations in other factors relating to international trade, such as tariffs, trade restrictions, transportation costs and inflation are additional risks for our international operations.
We do not have operations in the Middle East, Russia, Ukraine or South America. However, the contributory effects of the geopolitical conflicts in these and other areas globally may result in higher inflation, labor costs, energy and commodity prices and costs of materials and services (together with shortages or inconsistent availability of materials and services), which could negatively affect our business (particularly our European operations), results of operations and financial condition.
Changes in import policy or trade relations, interruptions in our supply chain or increased commodity or supply chain costs could adversely affect our results of operations.
Because we source certain products from outside the United States, major changes in tax policy, import or export regulations, other trade restrictions or trade relations, such as the imposition of tariffs or duties on imported products, could adversely affect our business, results of operations, effective income tax rate, liquidity and net income. Additionally, following annual administrative reviews, final duty rates determined by the U.S. Department of Commerce may be higher or lower than rates paid at import. As a result, we may receive refunds or owe additional duties on imported product. The outcome can vary by year and by product.
The variability and complexity of tariffs and duties exposes us to the risk of higher costs and inadvertentnoncompliance associated with our imported products. Moreover, in recent years, the United States has increased its tariff rates or imposed new tariffs or trade restrictions. Changes in laws, court rulings or differences in interpretation on product classification could lead to changes in duty and tariff rates on these or other imported products.
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, including our estimated share price and the period that our employees will exercise vested stock options. Our actual results may vary significantly from our projected results. 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.
Financial Risks
The cost of servicing our debt could reduce our profitability if interest rates increase or remain at elevated levels.
Our unsecured syndicated senior credit facility, term facility and receivables securitization facility bear interest at variable rates. We have entered into interest rate swap contracts to reduce our exposure to fluctuations in variable interest rates on current and future interest payments that we owe on a portion of our variable rate borrowings. While the Federal Reserve has been cutting interest rates since the latter parts of 2024, interest rates remain relatively high compared to the recent past. If interest rates remain elevated or increase, the cost of servicing our variable rate debt not covered by our interest rate swaps could materially reduce our profitability and cash flows. For additional information regarding our interest rate risk, see Item 7A, “Quantitative and Qualitative Disclosures about Market Risk” of this Form 10-K.
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.
We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. Changes in tax laws, tax policy, tax rates, tax law interpretations and accounting standards and guidance related to tax matters may cause fluctuations in or adversely affect our effective tax rate. Our effective tax rate may also be impacted by changes in the geographic mix of our earnings.
We cannot assure you we will continue paying dividends or repurchasing shares 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 reports filed with the SEC and internal control over financial reporting designed to provide reasonable assurance regarding the reliability and compliance of our financial statements with U.S. generally accepted accounting principles. We cannot assure you these measures will be effective.
Item 1B. Unresolv ed Staff Comments
None.
Item 1C. Cybersecurity
Risk Management and Strategy
Our cybersecurity program, which is primarily documented in our business interruption and incident response policy, is designed to assess, identify and manage material risks from cybersecurity threats. Our program leverages components from the National Institute of Standards and Technology Cybersecurity Framework (NIST CSF), which we use to help us identify, assess and manage cybersecurity risks relevant to our business. Our cybersecurity program is a component of our overall enterprise risk program. We deploy multiple strategies and dedicate significant resources toward systems designed to identify, assess, manage, mitigate and respond to cybersecurity threats. We also consistently strive to improve the detection and response capabilities of our cybersecurity program. To do this, we monitor best cybersecurity practices and endeavor to incorporate those in our own cybersecurity program.
Our cybersecurity policies and procedures include the controls and technology we use to identify, assess and respond to cybersecurity threats and incidents. These policies and procedures also focus on identifying vulnerabilities in our internal and external environments and remediating those vulnerabilities. To combat cybersecurity risk, we focus on proactive procedures such as patch management and emphasize the importance of cybersecurity across our organization. We provide our employees quarterly cybersecurity training courses that expose them to cybersecurity risks and threat actor tactics and we conduct simulated phishing exercises to test and educate employees on real-world threats.
We evaluate our controls and response protocols at least twice a year using external third-party assessors and consultants in both advisory and adversarial engagements. These third-party experts are familiar with our systems and could be retained in the event of a significant incident to assist us in evaluating and responding to such an incident. We also regularly test our environment as part of our focus on identifying and eliminating vulnerabilities. We incorporate the lessons learned from these engagements into our cybersecurity program. Recognizing the risks posed by external partners, we have implemented a third-party risk management program , which includes due diligence assessments, contractual safeguards, and regular monitoring of vendors and partners with access to our systems or data; however, we cannot ensure in all circumstances that their defensive efforts will be successful.
Like most large organizations, we face constant and dynamic risks related to cybersecurity. The emergence of artificial intelligence and its role in accelerating cybersecurity attacks will only make this area of risk more dynamic and difficult to prevent. In recent years we have faced, and expect to continue to face, various attempted cyberattacks including those that bear the hallmarks of being produced through the use of AI. We continue to observe attacks that are well planned and sophisticated. To date, we are not aware of any cybersecurity incident or threat that materially affected or could reasonably be anticipated to materially affect our business, results of operations or financial condition. However, we cannot guarantee that we will not experience such an incident in the future. For a further description of these risks, see “Risk Factors – Risks Relating to Technology, Cybersecurity, Artificial Intelligence and Data Privacy,” included in Item 1A of this Form 10-K, which should be read in conjunction with this Item 1C.
Governance
Our Board of Directors (Board) is responsible for oversight of our risk management programs and assisting management in addressing specific risks, including cybersecurity risk. The Audit Committee assists our Board in reviewing cybersecurity and other information technology risks, controls and procedures, including our plans to mitigate cybersecurity risks and to respond to data breaches. The Audit Committee also helps in reviewing with management any specific cybersecurity issues that could have a material impact on us. Our Chief Information Officer (CIO) provides the Board with updates on cybersecurity risks at regularly scheduled board meetings at least twice a year. These updates include the results of any third-party reviews and related remediation items.
Primary responsibility for assessing, monitoring and managing our cybersecurity risks rests with our CIO , who has held that role since 2019 and has been employed by the company since 2004. With over 20 years of experience in cybersecurity, our CIO has extensive cybersecurity expertise and in-depth knowledge and experience instrumental in developing and executing our cybersecurity strategies. Our CIO oversees our cyber governance programs, evaluates our compliance with applicable standards and remediates known risks. Our CIO also oversees our internal phishing tests, leads our employee cyber training program and seeks to promote company-wide awareness of cybersecurity risk through broad-based communications and educational initiatives.
At the day-to-day operational level, our CIO manages an information security team tasked with executing our cybersecurity program. This team includes a director of network security, technical director of enterprise architecture, system architects and network security staff. Members of our information technology (IT) management group, led by our CIO, have extensive years of combined experience in defending large, complex corporate environments. Our CIO, IT management group, architects and network security team members receive briefings and annual training on cybersecurity threats and response methods that provide real world threat scenarios to measure the effectiveness of our programs and technologies in protecting our systems. Our team of professionals also monitors our compliance with laws governing privacy rights, data protection and cybersecurity.
Our incident response policy outlines our protocols for assessing, managing and responding to cyber incidents. This policy guides the response of our global IT team, which, depending on the significance of the incident, may include escalating the issue to executive management, notifying one or more members of our Board, maintaining communication with users and notifying law enforcement and other agencies if warranted. We may also receive assistance from a third-party security operations center (SOC) and other industry-leading third-party providers.
