Table of Contents
manufacturers with China continuing to be the dominant import source. Financial instability among key vendors, political instability and labor unrest in
source countries or elsewhere in our supply chain, changes in the costs of commodities in our supply chains (fuel, labor and currency exchange rates), port
labor disputes, weather-related events, natural disasters, work stoppages, shipping capacity restrains, retaliatory trade restrictions imposed by either the
United States or a major source country, tariffs, currency exchange rates and transport availability, capacity and costs are beyond our control and could
negatively impact our business if they seriously disrupted the movement of products through our supply chain or increased their costs. Additionally, as we
add fulfillment capabilities or pursue strategies with different fulfillment requirements, our network becomes increasingly complex. If our fulfillment network
does not operate properly or if a vendor fails to deliver on its commitments, then we will experience delay in inventory, increased delivery costs, merchandise
out-of-stocks which would negatively affect our results of operations.
Failure to effectively manage our third party installers could result in increased operational and legal risks and negatively impact our business, financial
condition and results of operations.
We use third party installers to provide installation services to our customers, and, as the general contractor, we are subject to regulatory requirements and
risks, applicable to general contractors, including the management of the permitting, licensing and quality of our third party installers. Our failure to
effectively manage such requirements, the third party installers, and our internal processes regarding installation services could result in lost sales, fines and
lawsuits, as well as damage to our reputation, which could negatively affect our business.
Operating internationally presents unique challenges, including some that have required us to adapt our store operations, merchandising, marketing and
distribution functions to serve customers in Canada and Mexico. Our business and results of operations could be negatively affected if we are unable to
effectively address these challenges.
We expect a significant portion of our anticipated store growth over the next five years will be in Canada and Mexico. Expanding internationally presents
unique challenges that may increase the anticipated costs and risks, and slow the anticipated rate, of such expansion. Our future operating results in these
countries or in other countries or regions in which we currently operate or may operate in the future could be negatively affected by a variety of factors,
including unfavorable political or economic factors, adverse tax consequences, volatility in foreign currency exchange rates, increased difficulty in enforcing
intellectual property rights, costs and difficulties of managing international operations, challenges with identifying and contracting with local suppliers and
other risks created as a result of differences in culture, laws and regulations. These factors could restrict our ability to operate our international businesses
profitably and therefore have a negative impact on our financial position and results of operations. In addition, our reported results of operations and
financial position could also be negatively affected by exchange rates when the activities and balances of our foreign operations are translated into U.S.
dollars for financial reporting purposes.
We must comply with various and multiple laws and regulations that differ substantially in each area where we operate. Changes in existing or new laws
and regulations or regulatory enforcement priorities, or our inability to comply with such laws and regulations, could adversely affect our business,
financial condition and results of operations.
Laws and regulations at the local, regional, state, federal and international levels change frequently, and the changes can impose significant costs and other
burdens of compliance on our business and our vendors. If we fail to comply with these laws, rules and regulations, or the manner in which they are
interpreted or applied, we may be subject to government enforcement action, litigation, damage to our reputation, civil and criminal liability, damages, fines
and penalties, and increased cost of regulatory compliance, any of which could adversely affect our results of operations and financial performance. These
laws, rules and regulations include, but are not limited to, import and export requirements, U.S. laws such as the Foreign Corrupt Practices Act, and local laws
prohibiting corrupt payments to governmental officials. Although we have implemented policies and procedures to help ensure compliance with these laws,
there can be no certainty that our employees and third parties with whom we do business will not take actions in violation of our policies or laws. Many of
these laws are complex, evolving and are subject to varying interpretations and enforcement actions. Any changes in regulations, the imposition of
additional regulations, or the enactment of any new legislation could have an adverse impact, directly or indirectly, on our financial condition and results of
operations. We may also be subject to investigations or audits by governmental authorities and regulatory agencies as a result of enforcing existing laws and
regulations or changes in enforcement priorities, which can occur in the ordinary course of business or which can result from increased scrutiny from a
particular agency towards an industry, country or practice.
Future litigation or governmental proceedings could result in material adverse consequences, including judgments or settlements, negatively affecting our
business, financial condition and results of operations.
We are, and in the future will become, involved in lawsuits, regulatory inquiries, and governmental and other legal proceedings arising out of the ordinary
course of our business. Some of these proceedings may raise difficult and complicated factual and legal issues and can be subject to uncertainties and
complexities. The timing of the final resolutions to lawsuits, regulatory inquiries, and governmental and other legal proceedings is typically uncertain.
Additionally, the possible outcomes of, or
13