Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following information should be read in conjunction with the accompanying consolidated financial statements and related notes included in this Annual Report on Form 10-K.
For the discussion of the financial condition and results of operations for the year ended December 29, 2024 compared to the year ended December 31, 2023, refer to “Part II – Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations” and “Liquidity and Capital Resources” in our Annual Report on Form 10-K for the fiscal year ended December 29, 2024 filed with the SEC on February 20, 2025, which discussion is incorporated herein by reference.
The following discussion may contain forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this Annual Report on Form 10-K, particularly in “Special Note Regarding Forward-Looking Statements and Information” and “Risk Factors”.
Overview
SiteOne Landscape Supply, Inc. (collectively with all of its subsidiaries referred to in this Annual Report on Form 10-K as “SiteOne,” the “Company,” “we,” “us,” and “our” or individually as “Holdings”) indirectly owns 100% of the membership interest in SiteOne Landscape Supply Holding, LLC (“Landscape Holding”). Landscape Holding is the parent and sole owner of SiteOne Landscape Supply, LLC (“Landscape”).
We are the largest and only national full product line wholesale distributor of landscape supplies in the United States and have an established presence in Canada. Our customers are primarily residential and commercial landscape professionals who specialize in the design, installation, and maintenance of lawns, gardens, golf courses, and other outdoor spaces. As of December 28, 2025, we had over 670 branch locations in 45 U.S. states and five Canadian provinces. Through our expansive North American network, we offer a comprehensive selection of approximately 180,000 SKUs, including hardscapes (such as pavers, natural stone, and blocks), irrigation supplies, fertilizer and control products (e.g., herbicides), landscape accessories, nursery goods, outdoor lighting, and ice melt products to green industry professionals. We also provide value-added consultative services to complement our product offerings and to help our customers operate and grow their businesses.
Table of Contents
Business Environment and Trends
During the 2025 Fiscal Year, we experienced a challenging end market environment with significant headwinds as a result of economic uncertainty, elevated interest rates, weakened consumer confidence, low existing home sales, inflation and affordability concerns, as well as deflationary impacts from commodity products like grass seed and PVC pipe. While we benefitted from steady growth in the maintenance end market and we believe our commercial initiatives drove market share gains during the year, this environment continued to negatively affect consumer confidence and discretionary spending which resulted in softer demand in the new residential construction and repair and upgrade end markets. Accordingly, we anticipate continued pressure on Net sales growth and Net income for the foreseeable future. Net sales grew 4% in the 2025 Fiscal Year, primarily driven by the execution of our sales initiatives as well as contributions from acquisitions. Organic Daily Sales increased by 1% in the 2025 Fiscal Year with pricing having a negligible impact. The negative pricing trend has significantly improved from the 3% decline we experienced in 2024 and was flat in 2025. We expect the impact of pricing to contribute approximately 1% to 3% to Organic Sales growth in the 2026 Fiscal Year. Gross margin increased 40 basis points for the 2025 Fiscal Year, primarily due to improved price realization, benefits from our commercial initiatives, and a positive contribution from acquisitions, partially offset by higher freight and logistics costs supporting our growth. Selling, general and administrative expenses (“SG&A”) increased 2% for the 2025 Fiscal Year. SG&A as a percentage of Net sales decreased 40 basis points to 30.1% for the 2025 Fiscal Year compared to 30.5% for the 2024 Fiscal Year, primarily driven by improved operating leverage from productivity initiatives and better cost alignment with market demand. Net income attributable to SiteOne increased 23% for the 2025 Fiscal Year, primarily due to Net sales growth, improved gross margin, and lower SG&A as a percentage of Net sales. Net cash provided by operating activities increased to $300.5 million for the 2025 Fiscal Year compared to $283.4 million for the 2024 Fiscal Year, primarily driven by higher Net income.
Looking forward, the trend of consumers spending more time at home and investing in their outdoor living spaces is expected to continue, although at lower levels compared to peak demand during the three-year COVID-19 pandemic. Increases in home values, lack of affordable new homes, rising insurance costs, and elevated mortgage interest rates for prolonged periods have resulted in existing homeowners remaining in place for longer periods. In 2025, constraint on affordability continued with increasingly weaker new and existing home demand as a result of the current macroeconomic environment. However, the long-term outlook for the landscape supply industry remains strong, driven by favorable population trends, housing demand, and continued interest in outdoor living. We remain confident in the landscape supply industry growth opportunities and our ability to continue providing our customers, suppliers, and shareholders with exceptional value. We are the only national full product line wholesale distributor of landscape supplies in the United States. We have a robust acquisition pipeline and a flexible business model. We are committed to our strategic and operational initiatives and will continue to focus on driving growth organically and through acquisitions while gaining market share and delivering margin expansion by leveraging our scale, resources, and capabilities. Looking ahead to the 2026 Fiscal Year, the impact of pricing on Organic Sales growth is expected to improve with positive pricing in most product categories, while commodity products like grass seed and PVC pipe are becoming less of a headwind. In addition, our balanced end market mix, broad product portfolio, geographic coverage, and commercial and operational initiatives provide us with multiple opportunities to achieve growth and position us to be resilient in softer markets.
As we continue to navigate through the current uncertainty presented by market and economic conditions, we are prepared to meet the challenges ahead due to our well-balanced business, strong financial condition, dedicated and experienced teams, and focused business strategy. Our balance sheet and liquidity position provide the flexibility to operate effectively and execute our growth strategy, as well as complete share repurchases through the evolving market conditions. We continue to monitor the impact on our business and the related risks and uncertainties of interest rate changes, tariffs, labor market conditions, and workforce availability, as well as end market demand, commodity prices, and the potential effects of uncertain political conditions and geopolitical conflicts. These conditions are beyond our control, and we cannot estimate with certainty the full extent of their impact on our business, results of operations, cash flows, and/or financial condition. To mitigate the effects of these conditions, we may take actions that alter our business operations if required or that we determine are in the best interests of our associates, customers, suppliers, and shareholders. The forward-looking statements in this Business Environment and Trends section are subject to significant risks and uncertainties. See Part I, Item 1A. - “Risk Factors”, for a discussion of the various risks that could have a material adverse effect on our reputation, business, financial position, results of operations, and cash flows.
Presentation
Our financial statements included in this report have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Our fiscal year is a 52- or 53-week period ending on the Sunday nearest to December 31 in each year. Our fiscal quarters end on the Sunday nearest to March 31, June 30, and September 30, respectively.
The discussion of our financial condition is presented for the 2025 Fiscal Year, which ended on December 28, 2025, and the 2024 Fiscal Year, which ended on December 29, 2024, both of which included 52 weeks and 252 Selling Days. “Selling Days” are defined below within the “Key Business and Performance Metrics” section.
Table of Contents
We manage our business as a single reportable segment. Within our organizational framework, the same operational resources support multiple geographic regions, and performance is evaluated at a consolidated level. Each of our regions has similar operations and economic characteristics such as the nature of products and services, the types of customers to whom we sell, and the distribution methods utilized. In addition, our product categories have similar supply chain processes and classes of customers.
Key Business and Performance Metrics
We focus on a variety of indicators and key operating and financial metrics to monitor the financial condition and performance of our business. These metrics include:
Net sales . We generate Net sales primarily through the sale of landscape supplies, including hardscapes, irrigation supplies, fertilizer and control products, landscape accessories, nursery goods, and outdoor lighting products to our customers who are primarily landscape contractors serving the residential and commercial construction sectors. Our Net sales include billings for freight and handling charges, and commissions on the sale of control products that we sell as an agent. Net sales are presented net of any discounts, returns, customer rebates, and sales or other revenue-based taxes.
Non-GAAP Organic Sales . In managing our business, we consider all growth, including the opening of new greenfield branches, to be organic growth unless it results from an acquisition. When we refer to Organic Sales growth, we include increases in growth from newly-opened greenfield branches and decreases in growth from closing existing branches but exclude increases in growth from acquired branches until they have been under our ownership for at least four full fiscal quarters at the start of the fiscal reporting period.
Non-GAAP Selling Days . Selling Days are defined as business days, excluding Saturdays, Sundays, and holidays, that our branches are open during the year. Depending upon the location and the season, our branches may be open on Saturdays and Sundays; however, for consistency, those days have been excluded from the calculation of Selling Days.
Non-GAAP Organic Daily Sales . We define Organic Daily Sales as Organic Sales divided by the number of Selling Days in the relevant reporting period. We believe Organic Sales growth and Organic Daily Sales growth are useful measures for evaluating our performance as we may choose to open or close branches in any given market depending upon the needs of our customers or our strategic growth opportunities. Refer to “Results of Operations – Quarterly Results of Operations Data” for a reconciliation of Organic Daily Sales to Net sales.
Cost of goods sold . Our Cost of goods sold includes all inventory costs, such as the purchase price paid to suppliers, net of any volume-based incentives and discounts, as well as inbound freight, handling, distribution, and other costs associated with inventory. Cost of goods sold also includes salaries, wages, employee benefits, payroll taxes, bonuses, depreciation, and amortization related to inventory production activities. Our Cost of goods sold excludes the cost to deliver the products to our customers through our branches, which is included in Selling, general and administrative expenses. Cost of goods sold is recognized primarily using the first-in, first-out method of accounting for the inventory sold.
Gross profit and gross margin . We believe that Gross profit and gross margin are useful for evaluating our operating performance. We define Gross profit as Net sales less Cost of goods sold. We define gross margin as Gross profit divided by Net sales.
Selling, general and administrative expenses (operating expenses) . Our operating expenses are primarily comprised of Selling, general and administrative costs, which include compensation expenses (salaries, wages, employee benefits, payroll taxes, stock-based compensation, and bonuses), rent and facility related expenses, fleet and delivery related expenses including fuel costs, information technology, marketing, insurance, and repairs and maintenance expenses, as well as credit card processing and professional fees. Operating expenses also include depreciation and amortization.
Non-GAAP Adjusted EBITDA . In addition to the metrics discussed above, we believe that Adjusted EBITDA is useful for evaluating the operating performance and efficiency of our business. EBITDA represents consolidated Net income (loss) plus the sum of income tax expense (benefit), interest expense, net of interest income, and depreciation and amortization. Adjusted EBITDA represents EBITDA as further adjusted for items such as stock-based compensation expense, (gain) loss on sale of assets and termination of finance leases not in the ordinary course of business, financing fees, as well as other fees and expenses related to acquisitions, and other non-recurring (income) loss. Adjusted EBITDA includes Adjusted EBITDA attributable to non-controlling interest. Refer to “Results of Operations – Quarterly Results of Operations Data” for more information regarding how we calculate EBITDA and Adjusted EBITDA and the limitations of those metrics, as well as a reconciliation of Adjusted EBITDA to Net income (loss).
Table of Contents
Key Factors Affecting Our Operating Results
In addition to the metrics described above, a number of other important factors may affect our results of operations in any given period.
Weather Conditions and Seasonality
In a typical year, our operating results are impacted by seasonality. Our Net sales and Net income have been higher in the second and third quarters of each fiscal year due to favorable weather and longer daylight conditions during these quarters. Our Net sales have been lower in the first and fourth quarters due to reduced demand for landscaping, irrigation, and turf maintenance activities in these quarters, and historically, we have incurred net losses in these quarters. Seasonal variations in operating results may also be significantly impacted by inclement weather conditions, such as snow and ice storms, wet weather, and hurricanes, which not only impact the demand for certain products like fertilizer and ice melt but also may delay construction projects where our products are used.
Industry and Key Economic Conditions
Our business depends on demand from customers for landscape products and services. The landscape supply industry includes a significant amount of landscape products, such as irrigation systems, outdoor lighting, lawn care supplies, nursery goods, and landscape accessories, for use in the construction of newly built homes, commercial buildings and facilities, and recreational spaces. The landscape supply industry has historically grown in line with rates of growth in residential housing and commercial building. The industry is also affected by trends in home prices, mortgage interest rates, home sales, and consumer spending. As general economic conditions improve or deteriorate, consumption of these products and services also tends to fluctuate. The landscape supply industry also includes a significant number of agronomic products such as fertilizer, herbicides, and ice melt for use in maintaining existing landscapes or facilities. The use of these products is also tied to general economic activity, but levels of sales are not as closely correlated to construction markets.
Popular Consumer Trends
Preferences in housing, lifestyle, and environmental awareness can also have an impact on the overall level of demand and mix for the products we offer. Examples of current trends we believe are important to our business include an ongoing interest in professional landscape services inspired by the popularity of home and garden television shows, magazines, and social media, the increasingly popular “outdoor living” trend, which has been a key driver of sales growth for our hardscapes and outdoor lighting products, and the social focus on eco-friendly products that promote water conservation, energy efficiency, and the adoption of “green” standards.
Acquisitions
In addition to our organic growth, we continue to grow our business through acquisitions in an effort to better service our existing customers and to attract new customers. These acquisitions have allowed us to further broaden our product lines and extend our geographic reach and leadership positions in local markets. In accordance with GAAP, the results of the acquisitions are reflected in our financial statements from the date of acquisition forward. Additionally, we incur transaction costs in connection with identifying and completing acquisitions as well as ongoing costs as we integrate acquired businesses and seek to achieve synergies. As of December 28, 2025, we have invested $175.9 million in 15 acquisitions since the start of the 2024 Fiscal Year. The following is a summary of the acquisitions completed during the 2025 Fiscal Year and the 2024 Fiscal Year:
• In November 2025, we acquired the assets and assumed the liabilities of French Broad Stone Yards, LLC (“French Broad”). With two locations in Arden and Brevard, North Carolina, French Broad is a wholesale distributor of hardscapes products to landscape professionals.
• In November 2025, we acquired the assets and assumed the liabilities of CC Landscaping Warehouse Plus, Inc. (“CC Landscaping”). With one location in Bradenton, Florida, CC Landscaping is a wholesale distributor of nursery products, bulk materials, and landscape supplies to landscape professionals.
• In October 2025, we acquired the assets and assumed the liabilities of Red’s Home and Garden, LP and Red’s Home and Garden GP, Inc. (collectively “Red’s Home and Garden”). With one location in Wilkesboro, North Carolina, Red’s Home and Garden is a wholesale distributor of nursery and hardscapes products to landscape professionals.
• In September 2025, we acquired the assets and assumed the liabilities of Autumn Ridge Stone and Landscape Supply, Inc. (“Autumn Ridge”). With one location in Holland, Michigan, Autumn Ridge is a wholesale distributor of hardscapes products and landscape supplies to landscape professionals.
Table of Contents
• In July 2025, we acquired the assets and assumed the liabilities of Nashville Nursery and Landscape Supply, Inc. (“Nashville Nursery”). With one location in Nashville, Tennessee, Nashville Nursery is a wholesale distributor of nursery products to landscape professionals.
• In July 2025, we acquired the assets and assumed the liabilities of Grove Nursery Center, Inc. and Nature’s Grove, LLC (collectively, “Grove Nursery”). With one location in northwest Minneapolis, Minnesota, Grove Nursery is a wholesale distributor of nursery products to landscape professionals.
• In March 2025, we acquired the assets and assumed the liabilities of Green Trade of Georgia, LLC (“Green Trade”). With one location in Jasper, Georgia, Green Trade is a wholesale distributor of nursery products to landscape professionals.
• In January 2025, our majority-owned subsidiary, Devil Mountain Wholesale Nursery, LLC (“Devil Mountain”), acquired the assets and assumed the liabilities of Pacific Nurseries, LLC (“Pacific Nurseries”). With one location in Colma, California, Pacific Nurseries is a wholesale distributor of nursery products to landscape professionals.
• In December 2024, we acquired the assets and assumed the liabilities of Custom Stone. With six locations across Texas, Custom Stone is a wholesale distributor of hardscapes products to landscape professionals.
• In December 2024, we acquired the assets and assumed the liabilities of OakStreet Wholesale Nursery, LLC (“OakStreet”). With one location in Fairview, Texas, OakStreet is a wholesale distributor of nursery products to landscape professionals.
• In July 2024, we acquired the assets and assumed the liabilities of Millican Nurseries, LLC (“Millican Nurseries”). With one location in Chichester, New Hampshire, Millican Nurseries is a wholesale distributor of nursery products to landscape professionals.
• In June 2024, we acquired the assets and assumed the liabilities of Cohen & Cohen Natural Stone Inc. (“Cohen & Cohen”). With one location in Ottawa, Ontario, Canada, Cohen & Cohen is a wholesale distributor of hardscapes to landscape professionals.
• In May 2024, we acquired the assets and assumed the liabilities of AC Florida Pavers, LLC, doing business as Hardscape.com (“Hardscape.com”). With four locations in Boca Raton, Ft. Myers, Tampa, and Jupiter, Florida, Hardscape.com is a wholesale distributor of hardscapes to landscape professionals.
• In April 2024, we entered into a Securities Purchase and Redemption Agreement, pursuant to which we acquired a 75% ownership interest in Devil Mountain Wholesale Nursery, LLC (“Devil Mountain”). We also entered into an amended operating agreement, the Second Amended and Restated Operating Agreement, in connection with the acquisition of our controlling interest that contains put and call options whereby the remaining 25% ownership interest in Devil Mountain may be sold to us through the exercise of the holders’ put option or purchased by us through the exercise of our call option. With eight wholesale nursery distribution branches and six growing facilities across California, Devil Mountain is a wholesale distributor of landscape trees and plants to landscape professionals.
• In April 2024, we acquired the assets and assumed the liabilities of Eggemeyer Land Clearing, LLC (“Eggemeyer”). With one location in New Braunfels, Texas, Eggemeyer is a wholesale distributor of bulk landscape supplies to landscape professionals.
We expect the execution of synergistic acquisitions to continue to be an integral part of our growth strategy, and we intend to continue expanding our product line, geographic reach, market share, and operational capabilities through future acquisitions.
Table of Contents
Volume-Based Pricing
We generally procure our products through purchase orders rather than under long-term contractual arrangements with firm commitments. We work to develop strong relationships with select suppliers that we target based on a number of factors, including brand and market recognition, price, quality, product support, service levels, delivery terms, and strategic positioning. We typically have annual supplier agreements, and while these agreements generally do not provide specific product pricing, many include volume-based financial incentives that are earned by meeting or exceeding purchase volume targets. Our ability to earn these volume-based incentives is an important factor in our financial results. Additionally, in certain cases, we enter into supply contracts with terms that exceed one year for the manufacture of our LESCO ® branded fertilizer, some nursery goods, grass seed, and hardscapes, which may require us to purchase products in the future.
Strategic Initiatives
We continue to undertake initiatives, utilizing our scale to improve our profitability, enhance supply chain efficiency, strengthen our pricing and category management capabilities, streamline and refine our marketing process, and invest in more sophisticated information technology systems and data analytics. We are focused on advancing our procurement and supply chain management initiatives to better serve our customers and reduce sourcing costs. We also continue to enhance our website and B2B e-Commerce platform as well as implement new inventory planning, stocking, and transportation management system functionalities to improve our reliability and level of service as well as help our customers be more efficient. In addition, we work closely with our local branches to improve sales, delivery, and branch productivity. We believe we will continue to benefit from the following initiatives, among others:
• Category management initiatives, including the implementation of organic growth strategies, assortment planning, private label expansion, line of business training, and supplier management.
• Supply chain initiatives, including the implementation of new inventory planning and stocking system functionalities, the continued expansion of our distribution network footprint and capabilities, local hubs in large markets, inbound freight optimization, and local fleet utilization and cost improvements.
• Sales force initiatives, including optimizing our commercial sales strategies, leads, and opportunities, while improving the skills and performance of the team.
• Marketing initiatives, including customer analytics and lifecycle marketing, product and private brand marketing, Hispanic customer engagement, optimization of our digital marketing strategy, and a continued focus on our Partners Program.
• Digital initiatives, including increasing customer demand as well as adoption of our website, mobile application, and overall B2B e-Commerce platform, SiteOne.com, which provides the convenience of an online sales channel, enhanced account management functionality, and industry specific productivity tools for our customers.
• Operational excellence initiatives, including the implementation of best practices in branch operations regarding safety, merchandising, stocking and assortment, customer engagement, delivery, labor management, as well as the additional automation and enhancement of branch systems, including the rollout of improved associate mobile capabilities.
Working Capital
Our business is characterized by a relatively high level of reported working capital, the effects of which can be compounded by changes in prices. In addition to affecting our Net sales, fluctuations in prices of supplies tend to result in changes in our reported inventories, trade receivables, and trade payables, even when our sales volumes and our rate of turnover of these working capital items remain relatively constant. Our working capital needs are exposed to these price fluctuations, as well as to fluctuations in our cost for transportation and distribution. We may not always be able to reflect these changes in our pricing. The strategic initiatives described above are designed to reduce our exposure to these fluctuations and maintain and improve our efficiency.
Table of Contents
Results of Operations
In the following discussion of our results of operations, we make comparisons between the 2025 Fiscal Year and the 2024 Fiscal Year (in millions, except percentages).
Consolidated Statements of Operations
December 30, 2024 to December 28, 2025
January 1, 2024 to December 29, 2024
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Other income
Operating income
Interest and other non-operating expenses, net
Income tax expense
Net income
Less:
Net income attributable to non-controlling interest
Adjustment of non-controlling interest to redemption value
Net income attributable to SiteOne
Comparison of the 2025 Fiscal Year to the 2024 Fiscal Year
Net sales
Net sales for the 2025 Fiscal Year increased 4% to $4,704.8 million as compared to $4,540.6 million for the 2024 Fiscal Year primarily due to contributions from acquisitions. Organic Daily Sales for the 2025 Fiscal Year increased 1% compared to the 2024 Fiscal Year due to steady growth in the maintenance end market and execution of our sales initiatives, partially offset by softer demand in the new residential construction and repair and upgrade end markets. Based upon year-over-year price changes in our highest selling SKUs, we estimate the pricing impact on 2025 Organic Daily Sales was negligible compared to the 2024 Fiscal Year. Organic Daily Sales for agronomic products (fertilizer, control products, ice melt, equipment, and other products) increased 7% primarily due to solid demand in the maintenance end market. Organic Daily Sales for landscaping products (hardscapes, irrigation supplies, landscape accessories, nursery goods, and outdoor lighting) decreased 1% due to softer demand in the new residential construction and repair and upgrade end markets, partially offset by benefits from our sales initiatives. Acquisitions contributed $110.7 million, or 2%, to Net sales growth for the 2025 Fiscal Year.
Cost of goods sold
Cost of goods sold for the 2025 Fiscal Year increased 3% to $3,069.6 million from $2,980.5 million for the 2024 Fiscal Year. The increase in Cost of goods sold, including Inventory costs, net of supplier incentives and discounts, Freight, handling, and distribution expenses, and Other Cost of goods sold was primarily attributable to increased Net sales growth.
A summary of significant segment expenses within Cost of goods sold is as follows (in millions):
December 30, 2024 to December 28, 2025
January 1, 2024 to December 29, 2024
Inventory costs, net of supplier incentives and discounts
Freight, handling, and distribution expenses
Other Cost of goods sold
Cost of goods sold
Refer to “ Note 12 . Segment Information” in the notes to the consolidated financial statements for additional information regarding significant segment expenses.
Table of Contents
Gross profit and gross margin
Gross profit for the 2025 Fiscal Year increased 5% to $1,635.2 million as compared to $1,560.1 million for the 2024 Fiscal Year. Gross profit growth was driven by higher Net sales. Gross margin increased 40 basis points to 34.8% for the 2025 Fiscal Year as compared to 34.4% for the 2024 Fiscal Year. The increase in gross margin reflects improved price realization, benefits from our commercial initiatives, and a positive contribution from acquisitions, partially offset by higher freight and logistics costs supporting our growth.
Selling, general and administrative expenses
SG&A for the 2025 Fiscal Year increased 2% to $1,415.6 million from $1,385.1 million for the 2024 Fiscal Year. The increase in SG&A, including Compensation, Facility, and Depreciation and amortization was primarily due to the impact of acquisitions. SG&A as a percentage of Net sales decreased 40 basis points to 30.1% for the 2025 Fiscal Year compared to 30.5% for the 2024 Fiscal Year, primarily driven by improved operating leverage from our productivity initiatives and better cost alignment with market demand.
A summary of significant segment expenses within SG&A is as follows (in millions):
December 30, 2024 to December 28, 2025
January 1, 2024 to December 29, 2024
Compensation expenses
Facility expenses
Depreciation and amortization expenses
Delivery expenses
Other Selling, general and administrative expenses
Selling, general and administrative expenses
Refer to “ Note 12 . Segment Information” in the notes to the consolidated financial statements for additional information regarding significant segment expenses.
Interest and other non-operating expense, net
Interest and other non-operating expense, net increased 10% to $35.0 million for the 2025 Fiscal Year from $31.9 million for the 2024 Fiscal Year. The increase in interest expense was primarily due to higher interest rates on borrowings in the 2025 Fiscal Year as compared to the 2024 Fiscal Year resulting from the maturity of our interest rate swaps on March 23, 2025 as well as higher interest expense attributable to equipment leases.
Income tax expense
Income tax expense was $45.7 million for the 2025 Fiscal Year as compared to $36.0 million for the 2024 Fiscal Year. The effective tax rate was 22.5% for the 2025 Fiscal Year as compared to 22.4% for the 2024 Fiscal Year. The increase in the effective tax rate was due primarily to excess tax benefits from stock-based compensation recognized as a component of Income tax expense decreasing as a percentage of Income before taxes. Excess tax benefits of $3.8 million were recognized for the 2025 Fiscal Year as compared to $3.3 million for the 2024 Fiscal Year.
Net income attributable to non-controlling interest
Net income attributable to non-controlling interest for the 2025 Fiscal Year increased to $2.0 million as compared to $0.8 million for the 2024 Fiscal Year. The increase in Net income attributable to non-controlling interest was the result of higher Net income for the Devil Mountain business in the 2025 Fiscal Year as compared to the 2024 Fiscal Year.
Adjustment of non-controlling interest to redemption value
Adjustment of non-controlling interest to redemption value was $3.6 million for the 2025 Fiscal Year as a result of adjustments of the carrying amount of the Redeemable non-controlling interest to what would be the redemption value assuming the security was redeemable as of December 28, 2025. There was no Adjustment of non-controlling interest to redemption value for the 2024 Fiscal Year.
Table of Contents
Net income attributable to SiteOne
Net income attributable to SiteOne for the 2025 Fiscal Year increased 23% to $151.8 million as compared to $123.6 million for the 2024 Fiscal Year. The increase in Net income was primarily due to Net sales growth, improved gross margin, and lower SG&A as a percentage of Net sales.
Quarterly Results of Operations Data
The following table sets forth certain financial data for each of the most recent eight fiscal quarters including our unaudited Net sales, Cost of goods sold, Gross profit, Selling, general and administrative expenses, Net income (loss), and Adjusted EBITDA data (including a reconciliation of Adjusted EBITDA to Net income (loss)). We have prepared the quarterly data on a basis that is consistent with the financial statements included in this Annual Report on Form 10-K. In the opinion of management, the financial information reflects all necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data. This information is not a complete set of financial statements and should be read in conjunction with our financial statements and related notes included in this Annual Report on Form 10-K. The results of historical periods are not necessarily indicative of the results of operations for a full year or any future period.
(In millions except per share information and percentages, unaudited)
2025 Fiscal Year
2024 Fiscal Year
Year
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Year
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Net sales
Cost of goods sold
Gross profit
Selling, general and administrative expenses
Other income, net
Operating income (loss)
Interest and other non-operating expenses, net
Income tax expense (benefit)
Net income (loss)
Less:
Net income (loss) attributable to non-controlling interest
Adjustment of non-controlling interest to redemption value
Net income (loss) attributable to SiteOne
Net income (loss) per common share:
Basic
Diluted
Adjusted EBITDA (a)
Net sales as a percentage of annual Net sales
Gross profit as a percentage of annual Gross profit
Adjusted EBITDA as a percentage of annual Adjusted EBITDA
Table of Contents
(a) In addition to our Net income (loss) determined in accordance with GAAP, we present Adjusted EBITDA in this Annual Report on Form 10-K to evaluate the operating performance and efficiency of our business. EBITDA represents Net income (loss) plus the sum of Income tax expense (benefit), interest expense, net of interest income, and depreciation and amortization. Adjusted EBITDA is further adjusted for stock-based compensation expense, (gain) loss on sale of assets and termination of finance leases not in the ordinary course of business, financing fees, as well as other fees and expenses related to acquisitions, and other non-recurring (income) loss. We believe that Adjusted EBITDA is an important supplemental measure of operating performance because:
• Adjusted EBITDA is used to test compliance with certain covenants under our long-term debt agreements;
• Adjusted EBITDA is frequently used by securities analysts, investors, and other interested parties in their evaluation of companies, many of which present an Adjusted EBITDA measure when reporting their results;
• Adjusted EBITDA is helpful in highlighting operating trends because it excludes the results of decisions that are outside the control of operating management and that can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, age and book depreciation of facilities, and capital investments;
• we consider (gains) losses on the acquisition, disposal, and impairment of assets as resulting from investing decisions rather than ongoing operations; and
• other significant non-recurring items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects comparability of our results.
Adjusted EBITDA is not a measure of our liquidity or financial performance under GAAP and should not be considered as an alternative to Net income, Operating income, or any other performance measures derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity. The use of Adjusted EBITDA instead of Net income has limitations as an analytical tool. For example, this measure:
• does not reflect changes in, or cash requirements for, our working capital needs;
• does not reflect our interest expense, net, or the cash requirements necessary to service interest or principal payments, on our debt;
• does not reflect our Income tax expense (benefit) or the cash requirements to pay our income taxes;
• does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
• does not reflect the recognition of the step-up basis in inventory from acquisitions (i.e., the adjustment to record inventory from historic cost to fair value at acquisition) as the adjustment does not reflect the ongoing expense associated with sale of our products as part of our underlying business; and
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and does not reflect any cash requirements for such replacements.
Management compensates for these limitations by relying primarily on the GAAP results and by using Adjusted EBITDA only as a supplement to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies limiting their usefulness as a comparative measure.
Table of Contents
The following table presents a reconciliation of Adjusted EBITDA to Net income (loss) (in millions, unaudited):
2025 Fiscal Year
2024 Fiscal Year
Year
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Year
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Reported Net income (loss)
Income tax expense (benefit)
Interest expense, net
Depreciation & amortization
EBITDA
Stock-based compensation (a)
(Gain) loss on sale of assets (b)
Financing fees (c)
Acquisitions and other adjustments (d)
Adjusted EBITDA (e)
(a) Represents stock-based compensation expense recorded during the period.
(b) Represents any gain or loss associated with the sale of assets and termination of finance leases not in the ordinary course of business.
(c) Represents fees associated with our debt refinancing and debt amendments.
(d) Represents professional fees and settlement of litigation, performance bonuses, and retention and severance payments related to historical acquisitions. Also included is the cost of inventory that was stepped up to fair value during the second quarter of 2024 related to the purchase accounting of Devil Mountain as well as charges during the fourth quarter of 2025 and 2024 for consolidating or closing certain branch locations. We cannot predict the timing or amount of any such fees or payments. These amounts are recorded in Cost of goods sold and Selling, general and administrative expenses in the Consolidated Statements of Operations.
(e) Adjusted EBITDA excludes any earnings or loss of acquisitions prior to their respective acquisition dates for all periods presented. Adjusted EBITDA includes Adjusted EBITDA attributable to non-controlling interest as follows (in millions):
2025 Fiscal Year
2024 Fiscal Year
Year
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Year
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Adjusted EBITDA attributable to non-controlling interest
The following table presents a reconciliation of Organic Daily Sales to Net sales (in millions, except Selling Days; unaudited):
2025 Fiscal Year
2024 Fiscal Year
Year
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Year
Qtr 4
Qtr 3
Qtr 2
Qtr 1
Reported Net sales
Organic sales (a)
Acquisition contribution (b)
Selling Days
Organic Daily Sales
(a) Organic sales equal Net sales less Net sales from branches acquired in 2025 and 2024.
(b) Represents Net sales from acquired branches that have not been under our ownership for at least four full fiscal quarters at the start of the 2025 Fiscal Year. Includes Net sales from branches acquired in 2025 and 2024.
Table of Contents
Liquidity and Capital Resources
We assess our liquidity in terms of our cash and cash equivalents on hand and the ability to generate cash to fund our operating and investing activities, repurchase shares, and service our debt, taking into consideration available borrowings and the seasonal nature of our business. We expect that cash and cash equivalents on hand, cash provided from operations, and available capacity under the ABL Facility will provide sufficient funds to operate our business, make capital expenditures, complete acquisitions and share repurchases, and meet all of our liquidity requirements for the next 12 months, including payment of interest and principal on our debt. Longer-term projects or significant investments in acquisitions may be financed through borrowings under our credit facilities or other forms of financing and will depend on then-existing conditions.
In October 2022, our Board of Directors approved a share repurchase authorization for up to $400.0 million of our common stock. We intend to purchase shares under the repurchase authorization from time to time on the open market at the discretion of management, subject to strategic considerations, market conditions, and other factors. The share repurchase authorization does not have an expiration date and may be amended, suspended, or terminated by our Board of Directors at any time. During the 2025 Fiscal Year, we repurchased 816,888 shares of our common stock at an average price per share of $119.62. As of December 28, 2025, the dollar value of shares that may yet be purchased under the share repurchase authorization was $214.3 million.
Our borrowing base capacity under the ABL Facility was $577.8 million as of December 28, 2025, after giving effect to outstanding letters of credit of $22.2 million. Our borrowing base capacity under the ABL Facility was $581.2 million as of December 29, 2024, after giving effect to outstanding letters of credit of $18.8 million. As of December 28, 2025, we had total cash and cash equivalents of $190.6 million, total gross long-term debt of $389.4 million, and total finance lease obligations (excluding interest) of $134.8 million.
Working capital was $1,012.0 million as of December 28, 2025, an increase of $103.2 million as compared to $908.8 million as of December 29, 2024. The change in working capital was primarily attributable to an increase in Cash and cash equivalents and higher inventory as a result of acquisitions.
Capital expenditures of $53.7 million for the 2025 Fiscal Year were 1.1% of Net sales for the year. Capital expenditures have averaged $42.1 million annually from the 2023 Fiscal Year to the 2025 Fiscal Year representing an average of 0.9% of Net sales over this time period. We expect capital expenditures to be in a range of 0.8% to 1.3% as a percentage of Net sales for the 2026 Fiscal Year.
The following table summarizes current and long-term material cash requirements for our aggregate contractual obligations and other commercial commitments as of December 28, 2025 (in millions):
Total
Next 12 Months
Beyond 12 Months
Long-term debt, including current maturities
Interest on long-term debt
Finance leases, including interest
Operating leases, including interest
Purchase obligations
Our gross long-term debt balance decreased $3.9 million since December 29, 2024 to $389.4 million. This decrease was primarily attributable to repayments under the term loans. We have current maturities on our long-term debt of $3.9 million, which related to the term loan facility. The projected interest payments on our debt only pertain to obligations and agreements outstanding as of December 28, 2025 and expected payments for agent administration fees. The projected interest payments are calculated for future periods through maturity dates of our long-term debt using interest rates in effect as of December 28, 2025. Certain of these projected interest payments may differ in the future based on changes in floating interest rates or other factors and events, including our entry into amendments of the term loan facility and the ABL Facility. The total amount of projected interest payments on long-term debt decreased $36.2 million since December 29, 2024 to $95.0 million, primarily due to a decrease in the remaining period to maturity of the term loans as well as a decline in the weighted average interest rate on long-term debt. Refer to “ Note 8 . Long-Term Debt” in the notes to the consolidated financial statements for further information regarding our debt instruments.
Our finance leases consist primarily of leases for our vehicle fleet. Our operating leases consist primarily of leases for equipment and real estate, which includes office space, branch locations, and distribution centers. The table above provides our expected payments of finance lease obligations including interest and the undiscounted rental payment obligations under operating lease agreements for the amounts due in the next 12 months and beyond 12 months. Refer to “ Note 6 . Leases” in the notes to the consolidated financial statements for additional information regarding our lease arrangements.
Table of Contents
Our purchase obligations include various commitments with vendors to purchase goods and services, primarily inventory. The largest purchase obligations include contracts with various farmers that run through the 2028 Fiscal Year and obligate us to make payments for grass seeds for approximately $46.7 million, which includes expected payments of $30.7 million for the 2026 Fiscal Year. There are also other supplier and service arrangements with vendors totaling $81.2 million, of which $50.0 million of payments are expected to be made in the 2026 Fiscal Year. These purchase obligations are generally cancelable, but we have no intent to cancel and incur a penalty for not meeting the minimum required purchases. We have excluded purchase orders and agreements made in the ordinary course of business that are cancelable without penalty. Any amounts for which we are liable under purchase orders for goods received are reflected in Accounts payable on our Consolidated Balance Sheets and are excluded from the table above. Refer to “ Note 10 . Commitments and Contingencies” in the notes to the consolidated financial statements for additional information regarding our purchase commitments.
Cash Flow Summary
Information about our cash flows, by category, is presented in our statements of cash flows and is summarized below (in millions):
For the year
Net cash provided by (used in):
December 30, 2024 to December 28, 2025
January 1, 2024 to December 29, 2024
Operating activities
Investing activities
Financing activities
Cash flow provided by operating activities
Net cash provided by operating activities for the 2025 Fiscal Year was $300.5 million compared to $283.4 million for the 2024 Fiscal Year. The increase primarily reflects higher Net income.
Cash flow used in investing activities
Net cash used in investing activities for the 2025 Fiscal Year was $83.4 million compared to $177.1 million for the 2024 Fiscal Year. The decrease reflects lower acquisition investments in the 2025 Fiscal Year compared to the 2024 Fiscal Year. Capital expenditures of $53.7 million were $13.2 million higher in the 2025 Fiscal Year compared to $40.5 million in the 2024 Fiscal Year due to increased investments in branch locations.
Cash flow used in financing activities
Net cash used in financing activities was $134.6 million for the 2025 Fiscal Year compared to $80.9 million in the 2024 Fiscal Year. The increase primarily reflects lower net borrowings to fund our acquisition investments and an increase in share repurchases during the 2025 Fiscal Year compared to the 2024 Fiscal Year.
External Financing
Term Loans
Landscape Holding and Landscape, as borrowers (collectively, the “Borrowers”), entered into the Fifth Amendment to the Amended and Restated Credit Agreement, the (“Fifth Amendment”), dated as of March 23, 2021, with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, the several banks and other financial institutions party thereto and certain other parties party thereto from time to time. The Fifth Amendment amended and restated the Amended and Restated Credit Agreement, dated as of April 29, 2016, among the Borrowers, the lenders from time to time party thereto and UBS AG, Stamford Branch as administrative agent and collateral agent (as amended prior to March 23, 2021, the “Existing Credit Agreement” and, as so amended and restated pursuant to the Fifth Amendment, the “Second Amended and Restated Credit Agreement”) to, among other things, incur $325.0 million of term loans (the “New Term Loans”).
On March 27, 2023, Landscape Holding, as representative for the Borrowers, entered into the First Amendment to the Second Amended and Restated Credit Agreement (the “Sixth Amendment”) to implement a forward-looking interest rate based on SOFR in lieu of LIBOR.
Table of Contents
On July 12, 2023, Landscape Holding, as representative for the Borrowers, entered into the Increase Supplement (the “Increase Supplement”) to the Second Amended and Restated Credit Agreement to provide for an additional $120.0 million of New Term Loans.
On July 2, 2024, Landscape Holding, as representative for the Borrowers, entered into the Second Amendment to the Second Amended and Restated Credit Agreement (the “Second Amendment”) that amended and restated the Second Amended and Restated Credit Agreement, dated as of March 23, 2021. The Second Amendment provided for, among other things, an aggregate principal amount of approximately $392.7 million in term loans, and made certain other changes to the existing credit agreement (the “Tranche B Term Loans”).
The Tranche B Term Loans bear interest, at Landscape Holding’s option, at either (i) an adjusted Term SOFR rate plus an applicable margin equal to 1.75% (with a Term SOFR floor of 0.50%) or (ii) an alternative base rate plus an applicable margin equal to 0.75%. Voluntary prepayments of the Tranche B Term Loans are permitted at any time, in minimum principal amounts, without premium or penalty, unless in connection with certain repricing transactions that occur within the first six months after the date of effectiveness of the Second Amendment. The Tranche B Term Loans will mature on March 22, 2030. The interest rates on the outstanding balance of the Tranche B Term Loans were 5.50012% and 6.27397% as of December 28, 2025 and December 29, 2024, respectively. The Tranche B Term Loans mature on March 22, 2030.
Subject to certain conditions, without the consent of the then existing lenders (but subject to the receipt of commitments), the Tranche B Term Loans may be increased (or a new term loan facility, revolving credit facility, or letter of credit facility added) by up to (i) the greater of (a) $392.0 million and (b) 100% of Consolidated EBITDA (as defined in the Second Amendment) for the trailing 12-month period plus (ii) an additional amount that will not cause the net secured leverage ratio after giving effect to the incurrence of such additional amount and any use of proceeds thereof to exceed 4.00 to 1.00.
The Tranche B Term Loans are subject to mandatory prepayment provisions, covenants, and events of default. Failure to comply with these covenants and other provisions could result in an event of default under the Second Amendment. If an event of default occurs, the lenders could elect to declare all amounts outstanding under the Tranche B Term Loans to be immediately due and payable and enforce their interest in collateral pledged under the agreement.
The Second Amendment contains customary representations and warranties and customary affirmative and negative covenants. The negative covenants limit the ability of Landscape Holding and Landscape to:
• incur additional indebtedness;
• pay dividends, redeem stock, or make other distributions;
• repurchase, prepay, or redeem subordinated indebtedness;
• make investments;
• create restrictions on the ability of Landscape Holding’s restricted subsidiaries to pay dividends or make other intercompany transfers;
• create liens;
• transfer or sell assets;
• make negative pledges;
• consolidate, merge, sell, or otherwise dispose of all or substantially all of Landscape Holding’s assets;
• change lines of business; and
• enter into certain transactions with affiliates.
Table of Contents
ABL Facility
Landscape Holding and Landscape (collectively, the “ABL Borrowers”) are parties to the credit agreement dated December 23, 2013 (as amended by the First Amendment to the Credit Agreement, dated June 13, 2014, the Second Amendment to the Credit Agreement, dated January 26, 2015, the Third Amendment to the Credit Agreement, dated February 13, 2015, the Fourth Amendment to the Credit Agreement, dated October 20, 2015, the Omnibus Amendment to the Credit Agreement, dated May 24, 2017, the Sixth Amendment to the Credit Agreement, dated February 1, 2019, and the Seventh Amendment to the Credit Agreement, dated July 22, 2022, the “ABL Credit Agreement”) providing for an asset-based credit facility (the “ABL Facility”) of up to $600.0 million, subject to borrowing base availability, with a maturity date of July 22, 2027. The ABL Facility is secured by a first lien on the inventory and receivables of the ABL Borrowers. The ABL Facility is guaranteed by SiteOne Landscape Supply Bidco, Inc., an indirect wholly-owned subsidiary of the Company, and each direct and indirect wholly-owned U.S. restricted subsidiary of Landscape. Availability is determined using borrowing base calculations of eligible inventory and receivable balances less the current outstanding ABL Facility and letters of credit balances.
Loans under the ABL Credit Agreement bear interest, at Landscape Holding’s option, at either (i) an adjusted Term SOFR rate equal to Term SOFR plus 0.10% (subject to a floor of 0.00%) plus an applicable margin of 1.25% or 1.50% or (ii) an alternate base rate plus an applicable margin of 0.25% or 0.50%, in each case depending on the average daily excess availability under the ABL Credit Agreement, and in each case subject to a 0.125% reduction when the Consolidated First Lien Leverage Ratio (as defined in the ABL Credit Agreement) is less than 1.50:1.00. Additionally, undrawn commitments under the ABL Credit Agreement bear a commitment fee of 0.20% or 0.25%, depending on the average daily undrawn portion of the commitments under the ABL Credit Agreement.
There was no outstanding balance under the ABL Facility as of December 28, 2025 and December 29, 2024. The commitment fees on unfunded amounts was 0.25% as of December 28, 2025 and December 29, 2024.
The ABL Facility is subject to mandatory prepayments if the outstanding loans and letters of credit exceed either the aggregate revolving commitments or the current borrowing base, in an amount equal to such excess. Additionally, the ABL Facility is subject to various covenants, including incurrence covenants that require the Company to meet minimum financial ratios, and additional borrowings and other corporate transactions may be limited by failure to meet these financial ratios. Failure to meet any of these covenants could result in an event of default under these agreements. If an event of default occurs, the lenders could elect to declare all amounts outstanding under these agreements to be immediately due and payable, enforce their interest in collateral pledged under the agreement, or restrict the ABL Borrowers’ ability to obtain additional borrowings under these agreements. The ABL Facility is secured by a first lien security interest over inventory and receivables and a second lien security interest over all other assets pledged as collateral.
Table of Contents
The ABL Facility contains customary representations and warranties and customary affirmative and negative covenants. The negative covenants are limited to the following: financial condition, fundamental changes, dividends and distributions, acquisitions, dispositions of collateral, payments and modifications of restricted indebtedness, negative pledge clauses, changes in line of business, currency, commodity and other hedging transactions, transactions with affiliates, investments, indebtedness, and liens. The negative covenants are subject to customary exceptions and also permit the payment of dividends and distributions, investments, permitted acquisitions, payments or redemptions of indebtedness under the Second Amended and Restated Credit Agreement, asset sales and mergers, consolidations, and sales of all or substantially all assets involving subsidiaries upon satisfaction of a “payment condition.” The payment condition is deemed satisfied upon 30-day specified excess availability and specified availability exceeding agreed upon thresholds and, in certain cases, the absence of specified events of default or known events of default and pro forma compliance with a consolidated fixed charge coverage ratio of 1.00 to 1.00.
Subject to certain conditions and subject to the receipt of commitments, the ABL Facility may be increased (or a new term loan facility added) by up to (i) the greater of (a) $450.0 million and (b) 100% of Consolidated EBITDA (as defined in the ABL Credit Agreement) for the period of the most recent four consecutive fiscal quarters ending prior to the date of such determination plus (ii) an additional amount that will not cause the Consolidated First Lien Leverage Ratio after giving effect to the incurrence of such additional amount and any use of proceeds thereof to exceed 5.00 to 1.00.
There are no financial covenants included in the ABL Credit Agreement, other than a springing minimum consolidated fixed charge coverage ratio of at least 1.00 to 1.00, which is tested only when specified availability is less than 10.0% of the lesser of (x) the then applicable borrowing base and (y) the then aggregate effective commitments under the ABL Facility, and continuing until such time as specified availability has been in excess of such threshold for a period of 20 consecutive calendar days.
Failure to comply with the covenants and other provisions included in the ABL Credit Agreement could result in an event of default under the ABL Facility. If an event of default occurs, the lenders could elect to declare all amounts outstanding under the ABL Facility to be immediately due and payable, enforce their interest in collateral pledged under the agreement, or restrict the ABL Borrowers’ ability to obtain additional borrowings thereunder.
Subsidiary ABL Facility
In connection with our acquisition of a controlling interest in Devil Mountain, on April 30, 2024, Devil Mountain entered into the Eighth Amendment to the Credit Agreement and Consent providing for an asset-based credit facility (the “Devil Mountain ABL Facility”) of up to $20.0 million, subject to borrowing base availability.
Loans under the Devil Mountain ABL Facility bear interest at either (i) an adjusted Term SOFR rate equal to Term SOFR plus an applicable margin of 1.90% or 2.10% or (ii) an alternate base rate plus an applicable margin of 0.80% or 1.00%, subject to a 0.20% reduction when the Fixed Charge Coverage Ratio (as defined in the Devil Mountain ABL Facility) is greater than 2.00:1.00. Additionally, undrawn commitments under the Devil Mountain ABL Facility bear a commitment fee of 0.25% on the actual undrawn portion of the commitments under the Devil Mountain ABL Facility based upon the daily utilization for the previous quarter. The Devil Mountain ABL Facility will mature on April 30, 2029. The interest rates on the outstanding balance under the Devil Mountain ABL Facility were 5.77272% and 6.65265% as of December 28, 2025 and December 29, 2024, respectively.
Limitations on Distributions and Dividends by Subsidiaries
The ability of our subsidiaries to make distributions and dividends to us depends on their operating results, cash requirements, financial condition, and general business conditions, as well as restrictions under the laws of our subsidiaries’ jurisdictions.
The agreements governing the Second Amended and Restated Credit Agreement and the ABL Facility restrict the ability of our subsidiaries to pay dividends, make loans, or otherwise transfer assets to us. Further, our subsidiaries are permitted under the terms of the Second Amended and Restated Credit Agreement and the ABL Facility and other indebtedness to incur additional indebtedness that may restrict or prohibit the making of distributions, the payment of dividends, or the making of loans to us.
Interest Rate Swaps
We are subject to interest rate risk with regard to existing and future issuances of debt. We have, in the past, utilized interest rate swap contracts to reduce our exposure to fluctuations in variable interest rates for future interest payments on existing debt. Prior to the termination of interest rate swaps 7, 8, and 9 upon maturity on March 23, 2025, we were party to interest rate swap contracts to convert the variable interest rate to a fixed interest rate on portions of the borrowings under the term loans.
Table of Contents
During the first quarter of 2021, we amended and restructured certain of our interest rate swap contracts using a strategy referred to as a “blend and extend”. In a blend and extend arrangement, the liability position of the existing interest rate swap arrangement is blended into the amended or new interest rate swap arrangement and the term to maturity of the hedged position is extended. We reclassified $5.9 million from Accrued liabilities and Other long-term liabilities to long-term debt with $1.5 million classified as Long-term debt, current portion and $4.4 million classified as Long-term debt, less current portion on our Consolidated Balance Sheets for the interest rate swap arrangements executed during the first quarter of 2021 that were determined to be hybrid debt instruments. As of December 28, 2025, there was no outstanding amount as the interest rate swaps were terminated upon maturity on March 23, 2025.
For additional information on interest rate swaps, refer to “ Note 1 . Nature of Business and Significant Accounting Policies” and “ Note 8 . Long-Term Debt” in the notes to the consolidated financial statements.
Critical Accounting Estimates
In order to prepare our financial statements in accordance with GAAP, we make estimates and assumptions that affect the amounts reported in our financial statements and accompanying notes. Such estimates are based upon management’s current judgments, which are normally based on knowledge and experience with regard to past and current events and assumptions about future events. Certain estimates are particularly sensitive due to their significance to the financial statements and the possibility that future events may be significantly different from our expectations.
While there are a number of accounting policies and estimates affecting our financial statements, we have identified the following critical accounting estimates that require us to make the most subjective or complex judgments in order to fairly present our consolidated financial statements.
Inventory Valuation
Summary:
Product inventories represent our largest asset and are recorded at the lower of actual cost or estimated net realizable value. Our goal is to manage our inventory effectively so that we minimize out of stock positions. To do this, we maintain an adequate inventory of approximately 180,000 SKUs and manage inventory at each branch based on sales history. At the same time, we continuously strive to better manage our slower moving classes of inventory.
During the year, we perform periodic cycle counts and write off excess or obsolete inventory as needed. Prior to year-end, we conduct a physical inventory at each branch and record any necessary additional write-offs to dispose of excess or obsolete products. Our inventories are generally not susceptible to technological obsolescence.
Judgments and Uncertainties:
Judgment is required to estimate the net realizable value of our inventory as it requires assumptions and projections to be made based on the historical recovery rates for our slower moving inventory. We monitor our inventory levels by branch and record provisions for excess inventories. The assumptions we make to record adjustments for excess or obsolete inventory are based on these historical recovery rates, such as recent history of usage of our products, expected future demand for our products, current market conditions, and other factors, including liquidation value.
Sensitivity of Estimates to Change:
Changes to the relevant assumptions and projections would impact our consolidated financial results in periods subsequent to recording these estimates. If we anticipate a change in assumptions such as future demand or market conditions to be less favorable than our previous estimates, additional inventory write-downs may be required. Conversely, if we are able to sell inventories that had been written down to a level below the ultimate realized selling price in a previous period, sales would be recorded with a lower or no offsetting charge to cost of sales. A 10% change to our current reserve for excess and obsolete inventory would not result in a material change to our consolidated financial statements; however, given the value of inventory on hand, a significant change in demand or market conditions could result in a material adjustment to our reserve in future periods. We have not recorded any material net adjustments or such changes to our inventory reserves during the 2025 Fiscal Year or the 2024 Fiscal Year.
Table of Contents
Goodwill
Summary:
Goodwill represents the acquired fair value of a business in excess of the fair values of tangible and identified intangible assets acquired and liabilities assumed. We test goodwill on an annual basis as of July fiscal month end and additionally if an event occurs or circumstances change that would indicate the carrying amount may be impaired.
The goodwill impairment test requires us to estimate and compare the fair value of a reporting unit to its carrying amount, including goodwill. If the fair value exceeds the carrying amount, the goodwill is not considered impaired. To the extent a reporting unit’s carrying amount exceeds its fair value, the reporting unit’s goodwill is deemed impaired, and an impairment charge is recognized based on the excess of a reporting unit’s carrying amount over its fair value.
Judgments and Uncertainties:
Judgment is required to determine whether impairment indicators exist and to estimate the fair value of our reporting units. Estimating the fair value of reporting units using the discounted cash flow model requires us to make assumptions and projections of revenue growth rates, gross margins, SG&A, capital expenditures, working capital, depreciation, terminal values, and weighted average cost of capital, among other factors.
The assumptions used to estimate fair value consider historical trends, macroeconomic conditions, and projections consistent with our operating strategy. Changes in these estimates could have a significant effect on whether or not an impairment charge is recorded and the magnitude of such a charge. Adverse market or economic events could result in impairment charges in future periods.
Sensitivity of Estimates to Change:
During the third quarter of the 2025 Fiscal Year, we performed our annual quantitative assessment of goodwill. No goodwill impairment charge was recorded as a result of the testing and the estimated fair value of each of our reporting units significantly exceeded its carrying value. In addition, a 10% decline in the projected cash flows or a 10% increase in the discount rate assumption utilized in our annual quantitative testing would not result in an impairment of any of our reporting units.
Recently Issued and Adopted Accounting Pronouncements
Refer to “ Note 1 . Nature of Business and Significant Accounting Policies” to our audited consolidated financial statements included in this Annual Report on Form 10-K, for a description of recently issued and adopted accounting pronouncements.
Accounting Pronouncements Issued But Not Yet Adopted
Refer to “ Note 1 . Nature of Business and Significant Accounting Policies” to our audited consolidated financial statements included in this Annual Report on Form 10-K, for a description of accounting pronouncements that have been issued but not yet adopted.
Table of Contents
