As filed with the Securities and Exchange Commission on January 3, 2022

No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Specialty Building Products, Inc.

(Exact name of registrant as specified in its charter)

Delaware

5040

86-1328149

(State or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification No.)

2160 Satellite Boulevard, Suite 450

Duluth, Georgia 30097

(678) 474-4577

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Jeff McLendon

Chief Executive Officer

Specialty Building Products, Inc.

2160 Satellite Boulevard, Suite 450

Duluth, Georgia 30097

(678) 474-4577

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies of all communications, including communications sent to agent for service, should be sent to:

Joshua N. Korff

Aaron Michael Schleicher

Allison C. Gallagher

Kirkland & Ellis LLP

601 Lexington Avenue

New York, New York 10022

(212) 446-4800

Ian D. Schuman

Stelios G. Saffos

R. Charles Cassidy III

Latham & Watkins LLP

1271 Avenue of the Americas

New York, New York 10020

(212) 906-1200

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: ☐

If this Form is filed to registered additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

CALCULATION OF REGISTRATION FEE



Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price (1)(2)	Amount of Registration Fee
Common stock, par value $0.01 per share	$100,000,000	$9,270.00

(1)	Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities act of 1933.

(2)	Includes shares of common stock subject to the underwriters’ option to purchase additional shares.

The registrant hereby amends this Registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

Subject to Completion, dated January 3, 2022

PROSPECTUS

LOGO

SPECIALTY BUILDING PRODUCTS, INC.

Common Stock

This is an initial public offering of Specialty Building Products, Inc. We are offering shares of our common stock, par value $0.01 per share.

Prior to this offering, there has been no public market for our common stock. It is currently estimated that the initial public offering price per share will be between $ and $ . We intend to apply to list our common stock on the Nasdaq Capital Market, or Nasdaq, under the symbol “SBP”.

Immediately after this offering, assuming an offering size as set forth above, SBP Varsity Holdings, L.P. (“SBP Varsity Holdings”), an entity controlled by funds advised by The Jordan Company, L.P., will own approximately % of our outstanding common stock (or % of our outstanding common stock if the underwriters’ option to purchase additional shares is exercised in full). After the completion of this offering, we expect to be a “controlled company” within the meaning of the corporate governance standards of Nasdaq. See “Management—Corporate Governance—Controlled Company Status.”

Investing in our common stock involves risks. See “Risk Factors” beginning on page 30 of this prospectus.


	Per Share	Total
Initial public offering price	$	$
Underwriting discounts and commissions(1)	$	$
Proceeds, before expenses, to us	$	$

(1)	We have agreed to reimburse the underwriters for certain expenses in connection with this offering. (See “Underwriting”).

The underwriters also may purchase up to additional shares from us at the initial offering price less the underwriting discounts and commissions within 30 days from the date of this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares to purchasers on or about , 2022.


Barclays*		Goldman Sachs & Co. LLC*		RBC Capital Markets



BofA Securities	Jefferies	Baird	Raymond James	Truist Securities	Wolfe\|Nomura Alliance

*	(listed alphabetically)

Prospectus dated , 2022

LOGO

TABLE OF CONTENTS


PROSPECTUS SUMMARY			4
FORWARD-LOOKING STATEMENTS			55
USE OF PROCEEDS			57
DIVIDEND POLICY			57
CAPITALIZATION			58
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS			62
DILUTION			73
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			75
BUSINESS			104
MANAGEMENT			124
EXECUTIVE COMPENSATION			131
PRINCIPAL STOCKHOLDERS			148
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS			150
DESCRIPTION OF CAPITAL STOCK			152
MATERIAL U.S. FEDERAL TAX CONSIDERATIONS FOR NON-U.S. HOLDERS			161
UNDERWRITING			165
LEGAL MATTERS			171
EXPERTS			171
WHERE YOU CAN FIND MORE INFORMATION			171
INDEX TO FINANCIAL STATEMENTS			F-1

ABOUT THIS PROSPECTUS

Neither we nor the underwriters have authorized anyone to provide you with information or make any representations other than those contained in this prospectus or in any free writing prospectuses prepared by or on behalf of us or to which we have referred you. We and the underwriters take no responsibility for, and provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, and only under circumstances and in jurisdictions where it is lawful to do so. You should assume that the information appearing in this prospectus is accurate as of the date on the front cover of this prospectus only. Our business, financial condition, results of operations and prospects may have changed since that date.

For investors outside the United States: we and the underwriters have not done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.

TRADEMARKS

We own or have rights to use various trademarks, service marks, and trade names that we use in connection with the operation of our business. This prospectus may contain trademarks, service marks, and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names, or products in this prospectus is not intended to, and does not imply a relationship with, or endorsement or sponsorship by us. Solely for convenience, the trademarks, service marks, and trade names referred to in this prospectus may appear without the ^®, TM, or SM symbols, but the omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the rights of the applicable owner of these trademarks, service marks, and trade names.

MARKET AND INDUSTRY DATA

We use market data and industry forecasts and projections throughout this prospectus, and in particular in the sections captioned “Prospectus Summary” and “Business.” We have obtained the market data from certain third-party sources of information, including publicly available industry publications and subscription-based publications, including Principia Consulting, LLC (“Principia”). Industry forecasts are based on industry surveys and the preparer’s expertise in the industry, and there can be no assurance that any of the industry forecasts will be achieved. Any industry forecasts are based on data (including third-party data), models and experience of various professionals and are based on various assumptions, all of which are subject to change without notice. While we are not aware of any misstatements regarding the market data presented herein, industry forecasts and projections involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors.”

BASIS OF PRESENTATION

We have a policy of ending our fiscal year on the Sunday nearest December 31st. Our fiscal year customarily consist of four 13-week quarters for a total of 52 weeks. However, certain years may consist of 53 weeks. Our 2020 fiscal year was 53 weeks and the year end was January 3, 2021. Our 2019 and 2018 fiscal years were 52 weeks, and the year ends were December 29, 2019 and December 30, 2108, respectively.

Specialty Building Products, Inc. (f/k/a SBP Buyer, Inc.), a Delaware corporation (the “Company”), was incorporated in December 2020 to serve as an acquisition vehicle in connection with SBP Varsity Holdings’ acquisition from existing equityholders of 100% of the equity interests of Specialty Building Products, LLC, the then-ultimate parent company of Specialty Building Products Holdings, LLC (“SBP Predecessor”), a Delaware limited liability company and the holding company through which we control our operating subsidiaries. We refer to this acquisition as the “TJC Acquisition.” The TJC Acquisition closed on January 21, 2021. As the Company had not commenced operations and only had nominal assets, liabilities and equity prior to consummation of the TJC Acquisition on January 21, 2021, the financial statements of Specialty Building Products, Inc. as of January 3, 2021 and for the period from incorporation through January 20, 2021 have not been included. SBP Predecessor is deemed “predecessor” of the Company and its subsidiaries for financial reporting purposes. Accordingly, the historical financial information presented in this prospectus (i) for periods prior to January 21, 2021, represents that of SBP Predecessor and its subsidiaries (referred to herein as the “Predecessor Periods”), and (ii) for periods from January 21, 2021, represents that of the Company and its subsidiaries, including SBP Predecessor, as successor (referred to herein as the “Successor Period”).

The Company was determined to be the accounting acquirer in connection with the TJC Acquisition and SBP Predecessor’s historical assets and liabilities are reflected at fair value as of January 21, 2021, the closing date of the TJC Acquisition. As a result of the TJC Acquisition, the results of operations and financial position of SBP Predecessor and the Company are not directly comparable.

On October 15, 2021, we closed a transaction to acquire all of the equity interests of each of Reeb Millwork, Corporation, a New Jersey corporation, R and K Logistics Incorporated, a Pennsylvania corporation, Reeb Millwork—Southeast a North Carolina corporation, Reeb Millwork of New England, Inc., a Rhode Island corporation, Reeb Millwork Corporation of Maryland, a Maryland corporation, Reeb Millwork Corporation of New York, a Delaware corporation (collectively, the “Reeb Companies”). We refer to this acquisition as the “Reeb Acquisition.” On November 1, 2021, we closed a transaction to acquire all of the issued and outstanding equity securities of DW Distribution, Inc., a Texas corporation (“DW Distribution”). We refer to this acquisition as the “DW Acquisition”. On December 2, 2021, we closed a transaction to acquire all of the equity securities of each of Millwork Sales of Royal Palm Beach, LLC, a Florida limited liability company and Millwork Sales of Orlando, a Florida limited liability company (collectively, the “Millwork Companies”). We refer to this acquisition as the “Millwork Acquisition.” All metrics in this prospectus exclude the Reeb Acquisition, the DW Acquisition and the Millwork Acquisition, unless otherwise stated or the context requires otherwise. See “Unaudited Pro Forma Condensed Combined Financial Statements” .

As described in more detail under “Unaudited Pro Forma Condensed Combined Financial Statements,” this prospectus includes pro forma financial information, pursuant to Rule 3-05 of Regulation S-X and prepared in accordance with Article 11 of Regulation S-X, to give effect to the TJC Acquisition and related financing adjustments and the Reeb Acquisition and related financing adjustments. In addition, in order to facilitate the comparison of our financial information on a period-over-period basis without giving effect to the Reeb Acquisition, this prospectus includes certain pro forma condensed combined financial information (the “Pro Forma Combined (TJC Acquisition Only) Financial Information”) for the fiscal year ended January 3, 2021, the nine months ended October 4, 2020 and the nine months ended October 3, 2021, each of which give effect to the TJC Acquisition as if it had occurred on December 30, 2019. The Pro Forma Combined (TJC Acquisition Only) Financial Information is derived from, and presented as a separate column in, the Unaudited Pro Forma Condensed Combined Financial Statements prepared in accordance with Article 11 of Regulation S-X and included within this prospectus.

We also present financial information for the twelve months ended October 3, 2021. Unless otherwise indicated, all references to financial information for the twelve month period ended October 3, 2021 refer to the Pro Forma Combined (TJC Acquisition Only) Financial Information, which was derived by adding the Pro Forma Combined (TJC Acquisition Only) Financial Information for the fiscal year ended January 3, 2021 to the Pro Forma Combined (TJC Acquisition Only) Financial Information for the nine months ended October 3, 2021, and then subtracting the Pro Forma Combined (TJC Acquisition Only) Financial Information for the nine months ended October 4, 2020.

In connection with the completion of this offering, we will effect a -for- stock split with respect to our common stock. We refer to this stock split throughout this prospectus as the “Stock Split.”

Certain amounts, percentages, and other figures presented in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals, dollars or percentage amounts of changes may not represent the arithmetic summation or calculation of the figures that precede them.

Through and including , 2022 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

PROSPECTUS SUMMARY

This summary highlights selected information contained elsewhere in this prospectus. It does not contain all of the information that may be important to you and your investment decision. Before investing in our common stock, you should carefully read this entire prospectus, including the matters set forth under the sections of this prospectus captioned “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

Unless the context otherwise requires, the terms “Specialty Building Products,” the “Company,” “our company,” “we,” “us” and “our” in this prospectus refer to SBP Predecessor (and, where appropriate, its consolidated subsidiaries), for periods prior to the closing date of the TJC Acquisition, and to Specialty Building Products, Inc. (and, where appropriate, its consolidated subsidiaries, including SBP Predecessor), for periods beginning on and after the closing date of the TJC Acquisition. Please see “Basis of Presentation” in the forepart of this prospectus.

Our Company

We believe we are the largest and fastest growing distributor of branded specialty building products in the United States. Over the last ten years, we have grown revenues at an approximate compound annual growth rate (“CAGR”) of 24.9% and transformed our business into a national distribution platform with 38 locations serving 42 states and all provinces in Canada. We serve a critical role and function in the residential building products supply chain and provide value-added services across our footprint. We focus on high growth, specialty product categories including composite decking and railing, exterior siding, exterior trim, weather resistant barriers, moulding, specialty doors and engineered wood products, and many of our products are benefiting from long-term secular growth trends such as investment in outdoor living spaces, material substitution and architectural design. Our products are primarily used in the residential housing market, with balanced exposure across repair and remodel (“R&R”) and new construction markets. We offer our comprehensive portfolio of over 37,000 stock keeping units (“SKUs”) to more than 22,000 customer locations including national, regional and local professional dealers, home improvement retailers and other providers of building products. Our suppliers include many of the leading consumer and trade branded products in the building products industry. Based on management estimates, we believe we are nearly three times the size of our largest competitor. In addition, we are a values-based organization and have a well-established reputation in the industry.

We serve as a critical link in the building products supply chain, connecting over 200 suppliers to more than 22,000 customer locations. Over our history, we have developed strong, trusted relationships with our customers and suppliers as a result of our ability to navigate complex supply chains, which often consist of high SKU counts, long lead times, large minimum order quantities, and just-in-time delivery requirements of bulky and cumbersome items. We have leveraged our scale, market leadership, and geographic and customer reach to secure distribution rights for products from many leading suppliers. In fiscal year 2020, approximately 85% of our sales were from products for which we had formal or practical exclusivity. This includes suppliers with leading consumer brands such as Trex, LP SmartSide and James Hardie, where we have established leading share positions across many of our markets. We believe we are the largest supplier of Trex composite decking and railing and LP SmartSide products in the geographic markets in which we operate. Since we established our relationship with Louisiana Pacific in 2017, we have grown our LP SmartSide net sales at a CAGR of approximately 220%, from approximately $4 million in 2017 to approximately $120 million in 2020. Our growing partnership with Trex is an example of the strength of our service offering, geographic breadth, and customer reach as we have displaced under-performing competitors in a broad distribution territory. As a result, from 2017 to 2020, our net sales attributable to Trex products increased at a CAGR of approximately 29%, from approximately $98 million in 2017 to approximately $210 million in 2020, and we believe we have significant runway for future growth.

We believe our longstanding commitment to developing strategic relationships with suppliers, broad offering of high-value products that are readily available, differentiated technical expertise, superior customer service and value-added services have enabled us to significantly grow our market and wallet share within our customer base. In addition, we have bolstered our customer relationships with our extensive field service organization, managing product assortment, inventory levels and merchandising for select customers and product categories. We believe we have significant opportunity to further expand our market leadership, product offering, geographic footprint and customer and supplier base. The depiction below illustrates our compelling value proposition for both suppliers and customers.

LOGO

As we have expanded our business throughout North America, we have made significant investments in our operating infrastructure with leading technology systems that are highly scalable. We integrate proprietary data collection, warehousing and analytics with customized business intelligence systems across our footprint. Our proprietary systems allow us to see the gross margin, operating expense, and income characteristics of transactions and even line items within transactions in real time. Rolling up this data using our technology toolset allows us unique insight into relative profitability of customers, products and services. This allows us to continually optimize our business across North America and at the local level, where our branch managers are empowered by these systems to make locally-optimized pricing, service level, and sales force decisions. We believe all of this enables us to intentionally design the business for enhanced profitable growth by providing our corporate and field management with clarity on the drivers of our profitability. We also believe our investment in technology is a key differentiator and a significant competitive advantage for us as we are able to provide our suppliers with unique insights into their product performance in various markets and also partner with our customers to optimize the timing, quantity, and frequency of their purchases. Moreover, we have equipped our sales force with mobile tools to serve our customers more quickly and efficiently, and we have created customer-facing on-line tools for merchandising our products. Our technology and commitment to the use of data empowers decision-making at every level and, we believe, provides us with strong and scalable foundation for growth and long-term competitive advantages in our industry.

allows us to serve as a one-stop-shop for national, regional and local customers. We offer a comprehensive selection of more than 37,000 SKUs across a variety of categories including exterior siding, trim, and finish products, moulding and millwork products, composite decking and railing products, specialty doors, interior finish products and engineered wood products, among others. The table below provides a summary overview of our key product categories.

LOGO

We have a diverse sales mix across our product categories, customers, end markets and geographies. For the twelve month period ended October 3, 2021, we derived approximately 45% of our net sales from local / independent professional dealers, 24% from national professional dealers, 13% from home improvement retailers, 11% from original equipment manufacturers (“OEMs”) and 7% from roofing distributors. Importantly, we have balanced exposure to both the R&R and new construction end markets, with approximately 46% of net sales attributable to R&R-based activity, and approximately 42% of net sales attributable to new construction. We expect that our end markets will continue to grow as a result of limited housing supply, low interest rates, rising home equity levels and a large installed base of aging homes in need of refurbishment. In addition, many of the products we sell are well positioned to benefit from favorable long-term demand trends driven by continued consumer investments in outdoor and indoor living spaces and material conversion as consumers increasingly prefer sustainable, low-maintenance building materials over traditional building materials. The charts below illustrate our net sales by product, customer type and end market.

LOGO

We are a values-based organization built around a core commitment to “do the right thing; even when it is hard.” We highly value all of our stakeholders: our customers, suppliers, employees, investors, and the communities in which we operate. We are committed to the core value of “using our influence to have a uniquely positive impact” on the people that we touch. In furtherance of these values, we are focused on sustainability and have implemented several initiatives to reduce our impact on the environment. We partner with leading consumer brands of specialty building products such as Trex and James Hardie who are committed to conservation, diverting waste from landfills and reducing their carbon footprint as they develop durable products primarily from recycled materials. Our sales force works to educate consumers about the benefits of sustainable specialty building products in an effort to accelerate the adoption of these products. Our wood-based products are sourced from suppliers such as ARAUCO and Louisiana Pacific, who only engage in certified Sustainable Forestry practices. ARAUCO has become the first certified carbon neutral forestry company in the world as a result of its responsible management of forests and plantations. The sustainable management of timber plantations reduces the impact of deforestation on natural forests and increases the capture of carbon dioxide. We leverage our business intelligence systems to not only assist in profitability growth, but also help us drive efficiency and sustainability throughout our organization. We are focused on Environmental, Social & Governance (“ESG”) matters by living our values and prioritizing employee wellness, as well as being committed to sourcing environmentally friendly products, reducing waste, and improving productivity across our operations.

We are a leading consolidator within the specialty building products distribution industry. We have completed seven acquisitions since 2017, and we believe we have a strong pipeline of future acquisition opportunities to further complement our existing business and expand our growth. Our organic and acquisition-driven growth strategies have led to significant increases in net sales and Adjusted EBITDA. For the twelve month period ended October 3, 2021, we generated net sales, net income and Adjusted EBITDA of $2,311 million, $71 million and $249 million, respectively. From fiscal year 2018 through the twelve month period ended October 3, 2021, net sales and Adjusted EBITDA increased at a CAGR of 36.4% and 79.0%, respectively. For discussion of our use of Adjusted EBITDA and reconciliation to net income, the most directly comparable GAAP metric, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. The charts below show our net sales and net sales growth, net income and net income margin, and Adjusted EBITDA and Adjusted EBITDA margin from fiscal year 2018 through the twelve month period ended October 3, 2021.

LOGO

Our Industry

Our products are widely used across several large, attractive markets within the North American residential housing industry. We serve the specialty building products market, which we define as the market for exterior siding, composite decking and railing, trim and finish, moulding and millwork, specialty doors, interior finish, engineered wood systems, and other specialty building products.

We expect the overall North American housing industry will continue to benefit from strong secular growth drivers, including the structural undersupply of new homes, aging housing stock, shifting demographics, and evolving consumer preferences. Within the specialty building products market, there are a number of compelling secular growth trends that are driving above average growth across our product categories, including outdoor living, material substitution and the “Home Fortress” mentality, which refers to the increased focus and demand for advanced architectural and design elements, and trends towards craftsman and farmhouse-style homes. As the largest distributor of specialty building products in North America according to Principia, we believe our product portfolio is well positioned to benefit from these trends and deliver above average growth in each of our core product categories as we have done historically.

LOGO

The vast majority of our product categories serve the residential R&R and new construction end-markets, and include exterior siding, trim and finish, moulding and millwork, composite decking and railing, specialty doors, interior finish, engineered wood systems, and other specialty building products. Principia estimates our total addressable demand in these markets to be approximately $55 billion annually. Based on data provided by Principia, the total annual demand for our key product categories increased at a 6.2% CAGR from fiscal years 2018 to 2020 and is expected to grow at a 11.0% CAGR from fiscal years 2020 to 2023, reaching $76 billion by fiscal year 2023. We believe that our product offerings position us within the highest growth segments of each of our product categories, where our products benefit the most from the key secular growth trends referenced above.

We have diversified end market exposure within the residential housing industry and across the specialty building products market. The vast majority of our sales are generated by activity in the R&R and new construction end markets, of which contribution to total net sales for the twelve month period ended October 3, 2021 was $1,072 million, or 46% of total net sales, and $976 million, or 42% of total net sales, respectively. Both the R&R market and new construction market accelerated since 2019 and each are expected to continue to grow as a result of favorable demographic trends, limited inventory, aging housing stock, shifting consumer preferences, low interest rates and record home equity. A substantially smaller portion of our sales comes from activity in the multi-family and OEM end markets, where contribution to total net sales for the twelve month period ended October 3, 2021 was $264 million, or 12% of total net sales.

over the long term. In addition, while 2021 has been a strong year in the market, there have been a number of limiting factors that have constrained growth, including industry-wide supply shortages and disruptions, labor constraints and price fluctuations. We believe these factors have led to above-average backlog which gives us confidence in strong continued growth and demand for our products for the foreseeable future.

The U.S. Census Bureau estimated the median home age in the United States of 41 years in 2019, an increase of 41% since 2000. According to estimates from the Home Improvement Research Institute annual spend on the home improvement and products market was approximately $460 billion in 2020, and this figure is expected to grow at an approximate CAGR of 5.6% over the next four years to approximately $570 billion in 2024. We expect that aging housing stock, low interest costs, rising home prices and associated increases in underlying home equity will continue to drive strong demand for R&R projects.

Near-term multi-family starts are expected to be influenced by shifting consumer preferences and higher vacancies in metropolitan centers borne by the COVID-19 pandemic. According to the National Association of Home Builders, multi-family construction starts are expected to reach 440,000 units in 2022, growing at a 5.8% CAGR since 2020.

We believe we are well positioned to benefit from favorable and accelerating secular growth trends in our markets and across our product categories. These trends include materials substitution, outdoor living, and the “Home Fortress” mentality. We expect further penetration by composite products across our product categories as advances in materials science improve product quality, affordability and design optionality for our customers. For example, according to Principia, the composite decking market grew at an attractive 15.7% CAGR from 2018 to 2020, increasing its penetration of the broader decking market from 19.1% in 2018 to 22.2% in 2020. We believe there is substantial opportunity for further penetration of composite products across our decking, railing and exterior siding, trim and finish categories as shown below.

LOGO

The COVID-19 pandemic has resulted in people spending extended amounts of time at home, which has served to accelerate repair and remodel spend. We believe hybrid work models will continue to drive spending inside and outside the home, benefitting all of our product categories, including composite decking and railing, exterior siding, moulding and millwork, and trim and finish. We believe the outdoor living market is currently growing at approximately twice the rate of the broader repair and remodel market. This is a trend that is expected to continue long-term, particularly as homeowners choose to spend more leisure time outdoors and an increasing number of Millennials enter the housing market. Inside the home, repair and remodel activity is increasingly influenced by design trends and the “Home Fortress” mentality, where we are seeing a shift in consumer preferences driving higher demand for advanced architectural and design elements, including craftsman and farmhouse-style homes. These trends benefit our interior finish and moulding product categories, in particular.

Our Competitive Strengths

Leading Distribution Platform in Specialty Building Products

We are a leading distributor of specialty building products and have built an expansive geographic footprint across a highly fragmented market. We believe we have established leading market share positions in all of our products. In addition, we are a leader in all geographic markets we serve, enabling us to strengthen long-term relationships with our customers and suppliers. We believe we have cultivated the industry’s largest and broadest portfolio of high-growth, high-margin branded products benefiting from secular growth trends including outdoor living, material conversion, and the “Home Fortress” mentality. Our scaled North American platform combined with our knowledge of local markets positions us as the preferred strategic growth partner for our suppliers as approximately 85% of our sales are from products where we have formal or practical exclusivity. In addition, our scale and leadership position across an extensive geographic and customer footprint provides us with access to premier consumer and trade brands that are well-recognized by customers for their high quality, unique aesthetic designs and superior performance. We have leveraged these capabilities to develop meaningful partnerships with Trex, James Hardie, LP SmartSide, and Therma-Tru, as well as others. For example, we increased net sales attributable to James Hardie products from approximately $7 million in 2017 to approximately $50 million in 2020, representing a CAGR of approximately 91%. We believe our significant scale, national reach and differentiated service capability position us to drive significant organic growth by expanding and strengthening our relationships with key suppliers, introducing new specialty products and increasing share with existing customers.

Broad Product Portfolio of Leading Brands across Large, High Growth Categories Benefiting from Long-Term Industry Tailwinds

We believe we offer the industry’s most comprehensive portfolio of high growth specialty building products that are benefiting from significant above-market growth as a result of structural, sustainable shifts in the market. With over 37,000 SKUs from more than 200 suppliers, our broad product offering creates a “one-stop” shop for customers and provides unique access to premier consumer and trade brands such as ARAUCO, James Hardie, LP SmartSide, Trex and Royal Group, among others. This comprehensive product portfolio provides a significant competitive advantage given our ability to fulfill demand for a diverse set of highly customized products across our footprint. Our products are benefitting from favorable supply and demand fundamentals such as a limited housing supply, low interest rates, rising home equity levels and a large installed base of aging homes in need of refurbishment. In addition, many of the products we supply are benefiting from secular growth trends such as outdoor living, material conversion, and the “Home Fortress” mentality. Outdoor living-related products are growing twice as fast as the overall R&R market given increasing consumer investment in outdoor living spaces. In addition, improving technology and material science capabilities of our suppliers have enhanced the quality, aesthetics and performance of materials such as composite decking and railing, polyvinyl chloride (“PVC”) and composite exterior trim, fiber cement and composite siding, composite mouldings and engineered wood systems. We believe we are the largest supplier of Trex composite decking and railing in the markets in which we operate. We believe there is a significant opportunity for further market penetration by these composite products. For example, composite decking represented approximately 22% of the decking market, in terms of linear feet sold in 2020, and is estimated to grow to approximately 50% of the market over time, according to The AZEK Company. We believe our product categories present substantial growth opportunities in the coming years and that our leading scale, comprehensive portfolio and strategic supplier relationships position us to capitalize on these highly attractive markets.

Critical Supply Chain Partner Delivering Compelling Value Proposition to Customers and Suppliers

become a trusted partner for products that are high SKU count, have long lead times and exhibit low turnover. Our suppliers value our local market knowledge and extensive sales force as well as our ability to distribute their products to fragmented markets, provide timely delivery in job-lot quantities and offer value-added services. As a result, we are able to benefit from strategic supplier agreements, favorable access to selected product lines and greater product availability. For example, in most markets, we are one of only two distributors contracted by leading suppliers such as Trex and James Hardie, as well as others to distribute their products. In fiscal year 2020, approximately 85% of our net sales were from products with formal or practical exclusivity. Our customers rely on us for our product breadth and availability, knowledgeable sales force and technical expertise as well as our purchasing scale, just-in-time delivery capability, and value-added services such as remanufacturing and pre-finishing. We also have an extensive field service organization serving home improvement retailer locations, where we are responsible for managing product assortment, inventory levels, and merchandising for selected product categories. For example, we have over 500 people managing the moulding aisle for more than 800 Home Depot locations. We believe our combined capabilities for both suppliers and customers provide us with significant and sustainable competitive advantages relative to smaller, local players.

Highly Scalable Platform Leveraging Proprietary Technology and Data Analytics to Drive Profitable Growth

We have invested significant resources into building a highly scalable operating infrastructure with advanced technology systems that we believe are best-in-class amongst specialty building products distributors. With all of our branches operating under a common information technology architecture, we empower local, real-time decision-making and enhance visibility across the platform to better understand the key drivers of growth and profitability. Our proprietary data warehouse and business intelligence systems allow us to see the gross margin, operating expense, and income characteristics of a large majority of our transactions, enabling us to analyze relative profitability for each customer and product. These key insights enable our corporate and local management teams to make informed business decisions that drive our product mix, pricing, inventory management, and growth strategies. As a result, we have been able to deliver consistent top line growth, significantly reduce our overhead expense, based on a percentage of net sales, and expand our net income and Adjusted EBITDA margins by approximately 430 and 570 basis points, respectively, from fiscal year 2018 through the twelve month period ended in October 3, 2021. We believe investing in technology provides us with a long-term competitive advantage in our industry, enhances our supplier and customer relationships, and affords us a strong foundation for future growth.

Attractive and Resilient Financial Profile

Over the past decade, we have built our platform into one of the largest distributors of specialty building products in North America, growing sales and Adjusted EBITDA every year, with increasing profitability. Since fiscal year 2018, we have increased our net sales at a CAGR of 36.4%, growing faster than our underlying markets, primarily driven by our strategic focus on products benefiting from secular growth tailwinds, proliferation of our products throughout our network, expansion into new geographies and contribution from accretive acquisitions. Furthermore, our Adjusted EBITDA increased at a 79.0% CAGR over the same period, benefiting from increased sales, product category expansion, operating expense efficiencies and synergies. We believe the diversified nature of our product categories, customer base, geographic footprint and end markets provides increased stability for our business relative to smaller, regionally- or locally-focused distributors. In fiscal year 2020, the largest concentration of our net sales was attributable to R&R activity, which is generally less cyclical than new construction. In addition, our branded specialty building products exhibit greater price stability when compared to commodity building products such as lumber, plywood and particleboard. On a quarterly basis from fiscal year 2019 through the twelve month period ended October 3, 2021, the average pricing volatility for our products was approximately 3% whereas the Random Lengths Index average price volatility was approximately 32%, according to RISI Inc. For the twelve month period ended October 3, 2021, we estimate that our earnings were favorably impacted by a transitory pricing benefit of approximately $27

million. Our attractive margins, efficient working capital management and minimal capital expenditure requirements enable us to generate significant positive cash flow. We believe our attractive financial profile and resilient business model provides us with significant financial flexibility to repay debt, reinvest in our business and fund strategic acquisitions, and will ultimately enable us to drive long-term shareholder value creation.

Proven Ability to Identify, Execute and Integrate Accretive Acquisitions

We believe we are the leading consolidator of specialty building products distributors that is focused on large, attractive and highly fragmented markets. Our management team has extensive experience utilizing a disciplined approach to identify, execute and integrate acquisitions, while maintaining an active pipeline of attractive consolidation opportunities across multiple product categories and geographies. We believe our industry leadership position, geographic footprint, strong reputation and values-based culture positions us as an acquirer-of-choice in our industry and allows us to achieve attractive multiples in our acquisitions. Since 2016, we have successfully completed eight strategic acquisitions, representing, in the aggregate, approximately $1.8 billion of LTM sales. We believe our recent acquisitions have strengthened our market position in several product categories and geographies, and also expanded our product offering into new categories. We believe we are a highly effective consolidation platform enhancing the operations of acquired companies by integrating them into our operating infrastructure and technology systems, while also realizing synergies from sales initiatives, procurement optimization, branch consolidation, overhead cost reductions and improved working capital management. For example, we were able to achieve significant synergies through our acquisition of Midwest Lumber Minnesota, Inc (“Midwest Lumber”) in 2018 by leveraging our new expanded footprint to win Louisiana Pacific’s Smart Side business as well as converting existing Midwest Lumber locations to supply Trex products. These changes increased our net sales attributable to Midwest Lumber at a CAGR of approximately 15% from fiscal years 2018 to 2020. We expect the execution of synergistic acquisitions to continue to be an integral part of our growth strategy.

Experienced and Values-Based Management Team with Strong Track Record of Execution

We believe our management team is among the most experienced in the industry, and is supported by a deep bench of branch managers with significant operational expertise, extensive customer and supplier relationships, and a proven ability to execute growth strategies across economic cycles. Our senior management team, consisting of our President and Chief Executive Officer, Jeff McLendon, our Chief Financial Officer Ronnie Stroud, our Chief Operating Officer Bryan Lovingood and our Chief Commercial Officer, Carl McKenzie, has over 75 years of combined experience, and their continuity of leadership has provided both stability and a clear long-term vision for us for almost 20 years. Under their leadership, we have entered into new product categories and geographic markets, instilled a strong, values-based collaborative culture, and attracted and developed industry-leading talent, all while expanding the business from approximately $200 million in net sales and seven locations in fiscal year 2010 to approximately $1.67 billion in net sales and 27 locations in fiscal year 2020. Although our business has scaled rapidly, both organically and through strategic acquisitions, our culture and values remain core to our business. We value all of our stakeholders and we are committed to the core value of “using our influence to have a uniquely positive impact” on the people that we touch. Through Company-led initiatives such as “Thrive” and “Serve,” we encourage our employees to prioritize personal wellness and to better serve our communities and the people we directly influence. Further, our commitment to sustainability permeates our organization as we have adopted several strategies to reduce our impact on the environment. We partner with the leading consumer brands of specialty building products such as Trex and James Hardie who are committed to preserving natural resources as they develop long-lasting products from recycled materials. Our wood-based products are sourced from suppliers such as ARAUCO and Louisiana Pacific, who only engage in certified Sustainable Forestry practices. We believe the combination of our consistent strategic vision, leading market position and unique values-based culture, will allow us to continue to attract and develop high-performing talent critical to our success.

Our Strategies

We intend to leverage our competitive strengths to deliver profitable, above-market growth and create shareholder value through the following core strategies:

Integrate our Full Product Suite Across our Network

Our approach to driving proliferation of our product portfolio across our footprint is two-fold: (i) cross-sell existing products into acquired markets; and (ii) cross-sell new products through existing markets.

(i) Cross-sell existing products into acquired markets

Our broad portfolio of leading brands enables us to leverage our network and cross-sell our existing products through newly added markets. Typically, new markets are added through acquisition and there is a significant opportunity to broaden our product offering within the newly acquired local market. Often our existing products are complementary, have significant customer and channel overlap, and strengthen our value proposition for customers and suppliers in the region. For example, subsequent to the opening of our Minneapolis branch through the acquisition of Midwest Lumber in 2018, we were successfully able to introduce LP SmartSide and Trex branded products to the market. We have been able to grow net sales from LP SmartSide and Trex to approximately $186 million and approximately $308 million, respectively, as of the twelve month period ended in October 3, 2021. As such, our composite decking and railing, and exterior siding, trim and finish categories have revenue growth at CAGRs of 58% and 17%, from $29 million and $42 million in fiscal year 2018 to $102 million and $65 million in the twelve month period ended in October 3, 2021, respectively at the Minneapolis branch. Our cross-selling strategy enables us to leverage our scale advantages to capture share from competitors and fortify our position in new markets.

(ii) Cross-sell new products through existing markets

We have a proven track record of being able to introduce new products from our portfolio to existing markets across our footprint. Our broad portfolio of leading brands spans over ten different product categories, which provides ample opportunity to cross-sell into underpenetrated markets. We have successfully implemented this strategy in our most mature markets in the southern U.S., such as Atlanta, Jacksonville, Greenville, Mobile and Raleigh, where we sell products across all of our categories. We believe there is significant whitespace across our broader footprint to which we can apply this strategy and drive above-market growth. For example, the Reeb Acquisition provided us with a brand new product category, specialty doors, which we expect to cross-sell through all of our existing markets, and the DW Acquisition complemented our new specialty door business. According to Principia, our addressable market for the top 100 core-based statistical areas (“CBSAs”) in the markets we serve is $22 billion. See “Prospectus Summary—Recent Developments.”

Continue to Expand our Relationships with Existing Suppliers

In the markets we serve we are often the leading distributor for many of our core product categories. Our suppliers manufacture leading brands in categories that are growing above-market. As such, our ability to aggregate demand at scale and execute just-in-time delivery makes us an indispensable partner in our suppliers’ supply chains. Our broad geographical footprint enables our suppliers to access a larger percentage of the North American market through a single distributor relationship, which has economies of scale benefits for both parties and makes our relationship co-dependent. We seek to continue to deepen our relationships with existing suppliers by enabling their growth with our scale, which in turn allows us to grow with them as they penetrate new and existing markets. For example, our four year relationship with Louisiana Pacific began with our acquisition of NILCO in 2017, through which we acquired a distribution market for LP SmartSide siding products. Later in 2017, we expanded our Louisiana Pacific product offering to Engineered Wood Products. In fiscal year 2020, our

LP SmartSide and Engineered Wood Products net sales were approximately $120 million, and approximately $134 million, respectively. Over this three year period, we added Louisiana Pacific products to our entire Eastern U.S. footprint, displacing incumbent distributors in each of those markets. Similarly, our relationship with Trex dates back to the early 1990s and, in fiscal year 2020, its core product categories represented approximately 13% of our net sales. When we acquired Midwest Lumber in 2018, Trex exited one distributor relationship and transitioned its product supply in those markets to us. We believe there is significant opportunity to continue to increase our distribution footprint alongside our suppliers over time.

Continue to Pursue Strategic, Accretive Acquisitions

The North American specialty building products market is highly fragmented and presents attractive opportunities for us to continue to grow through value enhancing acquisitions. Since 2016, we have executed five acquisitions to expand our platform across the U.S. and into Canada, and we closed three more acquisitions, the Reeb Acquisition, the DW Acquisition and the Millwork Acquisition, in the fourth quarter of 2021. In aggregate, these eight acquisitions represented approximately $1.8 billion in LTM sales at the time of acquisition. We expect to be acquisitive going forward and continually monitor acquisition targets that we believe will expand our platform. We believe our relationship-based approach and track record of executing on the terms and timeline we commit to make us an acquirer-of-choice in our industry. We employ a disciplined approach to identify, execute, and integrate acquisitions that expand our geographic presence and complement our existing product offering. Our acquisition strategy also has the potential to create sales synergies by enabling us to cross-sell existing products through our acquired markets, as well as the potential to generate cost synergies. Our acquisition strategy has given the Company a broader geographic presence and an expanded product mix. Our experienced mergers and acquisitions team actively maintains a large pipeline of synergistic acquisition targets that we expect will continue to drive our growth.

Enter Attractive New Markets to Further Expand Geographic Presence

We believe there are significant opportunities to leverage our existing network of suppliers and customers to expand our geographic reach. For example, while we currently serve more than 70 of the top 100 CBSA markets, our limited presence in the southwestern United States today represents significant whitespace for future growth. Historically, we have been able to successfully expand our geographic reach through the acquisition of well-run specialty distributors with strong market presence, such as our acquisitions of Alexandria Moulding Inc. (“Alexandria Moulding”) in 2018, Mid-State Lumber Corp. (“Mid-State Lumber”) in 2020 and DW Distribution in Q4 2021. Each of these acquisitions had strong supplier and / or customer overlap and expanded the breadth and depth of our product categories.

Expand Product Portfolio through Addition of Complementary, High-Growth Categories

We seek to expand our offerings by adding new product categories where there is strong customer overlap and potential for above average long-term growth. Similar to our existing portfolio, the most attractive product categories benefit from secular growth trends such as material substitution, outdoor living and the “Home Fortress” mentality. We believe that our specialty product expertise, differentiated scale and market reach makes us the preferred partner for suppliers to bring to market innovative new products. For example, in 2017 we helped our existing supplier, Louisiana Pacific, launch its SmartSide pre-finish and trim products. Often, suppliers with whom we do not have an existing relationship will approach us with new products they would like us to add to our portfolio. For example, in 2016 we began distributing Boral Limited’s TruExterior siding and trim products as part of our product offering, and as of fiscal year 2020, sales of TruExterior products have reached approximately $34 million, from $1.9 million in 2016, representing a CAGR of approximately 107.1%. Lastly, we also pursue expansion into new product categories through acquisition. For example, the Reeb Acquisition expands our product portfolio to include specialty doors, and, on a pro forma basis to give effect to

the Reeb Acquisition, for the twelve month period ended October 3, 2021 specialty doors represented approximately 17% of our combined net sales. Prior to the acquisition of the Reeb Companies, our product portfolio did not include a specialty doors category, and as a result, specialty doors did not contribute to our historical net sales for periods ending on or prior to October 3, 2021. The addition of new product categories generates tremendous cross-selling whitespace in all of our markets for future growth.

Utilize our Scale and Operating Efficiencies to Enhance Profitability

We have invested significantly in our operating systems and infrastructure and believe that the investments we have made to date can support a much larger business than we have today. Our technologies enable real-time data collection across multiple source systems, including our enterprise resource planning system, logistics platform, and human resource information system. This data facilitates continuous optimization of product mix and fleet routes, product selection, and inventory management, reducing costs and reducing our overall environmental footprint. For example, our fleet optimization technology improves route efficiency, reducing driver headcount, miles driven, and ultimate fuel consumption. We leverage individual purchasing data through our customer analytics tools to inform customers of their purchasing habits and frequency. We are able to advise our customers how to optimize their purchasing, thus reducing overall shipping costs and avoiding unnecessary freight and rushed order costs. We will continue to utilize our technology platform to drive actionable, informed business decisions that enhance growth, strengthen efficiencies and improve profitability.

Continue to Invest in Attracting, Developing, and Retaining World Class Talent

We believe the success of our growth strategy and organization depends on our ability to attract, develop, and retain world class talent. Identifying, recruiting, training, integrating, and retaining qualified individuals requires significant time, expense, and attention. We will continue to invest in tools and programs to attract, develop, and retain our employees as we believe their development is critical to our culture and the execution of our strategies.

Summary Risk Factors

Our business and our ability to execute our strategy are subject to many risks. Before making a decision to invest in our common stock, you should carefully consider all of the risks and uncertainties described in the section of this prospectus captioned “Risk Factors” immediately following this Prospectus Summary and all of the other information in this prospectus. These risks include, but are not limited to, the following:

•

residential construction activity is seasonal, cyclical and influenced by many factors, and any reduction in the activity in one or both of these markets could have a material adverse effect on us;

•

the COVID-19 pandemic has impacted our business and operations and has disrupted our ability to procure enough supply to satisfy market demands, and the resulting future business and operational challenges posed by the COVID-19 pandemic could materially adversely affect us;

•

our industry is fragmented and competitive and we may not be able to compete successfully with existing competitors or new entrants to the market;

•

we generally do not have long-term commitments or contracts with our clients and consolidation in our customers’ industries could have a material adverse effect on us;

•

our business operations could suffer significant losses from natural disasters, catastrophes, fire or other unexpected events;

•

an inability to obtain the products that we distribute (including as a result of COVID-19) or increases in prices by our suppliers could result in lost net sales and reduced margins;

•

our key supplier relationships could be terminated;

•

we may be unable to successfully identify, acquire, close or successfully integrate acquisitions;

•

a tightening of mortgage lending or mortgage financing requirements or other reductions in the availability of consumer credit or increases in its cost could have a material adverse effect on us;

•

trade matters may disrupt our supply chain;

•

we depend on the services of key executives and any inability to attract and retain key management personnel could have a material adverse effect on us;

•

cybersecurity attacks may threaten our confidential information, disrupt operations and result in harm to our reputation and adversely impact our business and financial performance;

•

our ability to remediate our identified material weaknesses and/or establish and maintain effective internal controls in the future;

•

our substantial level of indebtedness could adversely affect our financial condition;

•

the unaudited pro forma financial information included in this prospectus may not be representative of our future results of operation and financial condition;

•

SBP Varsity Holdings controls us, and its interests may conflict with ours or yours in the future; and

•

after the completion of this offering, our status as a “controlled company” will grant us exemptions from certain corporate governance requirements and you will not have the same protections as those afforded to stockholders of companies that are subject to such governance requirements.

Organizational Corporate Structure

The following chart illustrates our simplified ownership and organizational structure, after giving effect to this offering. All subsidiaries are 100% directly or indirectly owned. Dotted lines denote indirect ownership.

LOGO

(1)	Co-borrower under the ABL Credit Agreement, Term Loan Facility and Senior Secured Notes.

(2)	Parent entity for operating subsidiaries.

(3)	Co-borrower under the ABL Credit Agreement, Term Loan Facility and Senior Secured Notes.

(4)	Sale, manufacturing, delivery and distribution of building products in the United States.

(5)	Sale, manufacturing, delivery and distribution of moulding products in the United States and Canada.

(6)	Sale, manufacturing, delivery and distribution of specialty doors in the United States and Canada.

Recent Developments

Preliminary Financial Data for the Quarter Ended January 2, 2022

The data presented below reflects our preliminary estimated unaudited financial results for the quarter ended January 2, 2022 (“Fiscal Q4 2021”) based upon information available to us as of the date of this prospectus. In preparing our preliminary estimated unaudited financial results, we have utilized accounting estimates in a manner consistent with the description in Note 1 in our unaudited condensed consolidated financial statements included elsewhere in this prospectus. However, this data is not a comprehensive statement of our financial results for Fiscal Q4 2021, and our actual results may differ materially from this preliminary estimated data, as our closing process and related audit have not been completed. During the preparation of our financial statements and related notes, additional adjustments to the preliminary estimated financial information presented below may be identified. Any such adjustments may be material. The preliminary financial data included in this prospectus has been prepared by, and is the responsibility of, our management. PricewaterhouseCoopers LLP has not audited, reviewed, compiled, or applied agreed-upon procedures with respect to the preliminary financial data. Accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto.

Based upon such preliminary estimated financial results, we expect various key metrics for Fiscal Q4 2021 to be between the ranges set out in the following table, as compared to the quarter ended January 3, 2021 (“Fiscal Q4 2020”):


	Successor Fiscal Q4 2021		Predecessor Fiscal Q4 2020
(in thousands)	Low	High
Net sales			$	418,017
Net income			$	(2,730	)
Adjusted EBITDA			$	29,928

Adjusted EBITDA is a non-GAAP measure and should not be considered in isolation, or as a substitute for our results as reported under GAAP. For a definition of Adjusted EBITDA and information regarding our use of the non-GAAP financial measure, see the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Metrics.”

The following table reconciles Net income, the most directly comparable GAAP measure, to Adjusted EBITDA:


	Successor Fiscal Q4 2021		Predecessor Fiscal Q4 2020
(in thousands)	Low	High
Reported Net income (loss)			$	(2,730)
Income tax (benefit) expense				11,260
Interest expense				4,056
Depreciation & amortization				7,592
Adjustments
Acquisition/Integration/Start-up Costs ⁽¹⁾				1,310
Bond Issuance/Financing Costs ⁽²⁾				(1,821)
Private Equity/Transaction Costs ⁽³⁾				11,387
Management Fees ⁽⁴⁾				—
Other (Income) Expense, net ⁽⁵⁾				(1,126)

Adjusted EBITDA ⁽⁶⁾			$	29,928

(1)	Expenses directly associated with the ongoing integration of Midwest Lumber and Alexandria Moulding, and the acquisitions of REEB, Dallas Wholesale and Millwork Sales.

(2)	Expenses incurred in connection with the Senior Secured Notes offering, the ABL Credit Agreement to fund the acquisitions and the operations of the company, and IPO readiness activities.

(3)	Expenses related mainly to the TJC Acquisition inclusive of incentive equity unit grants.

(4)	Management fees charged quarterly by TJC.

(5)	Other expenses incurred by the company including but not limited to branch relocation, severances paid, expenses associated with discontinuing/replacing a product line, and year-end vendor rebate adjustments.

(6)	Adjusted EBITDA excludes any earnings or losses from acquisitions prior to their respective acquisition dates for the presented periods.

We estimate that our net sales for Fiscal Q4 2021 will increase % to % as compared to Fiscal Q4 2020, primarily driven by continued growth in Organic net sales due to a continuing increase in demand from new single-family construction and residential repair and remodel end markets, partially influenced by COVID-19. We estimate that acquisitions completed during Fiscal Q4 2021 will contribute approximately % to % to the period-over-period increase.

We estimate that our net income for Fiscal Q4 2021 will increase % to % as compared to Fiscal Q4 2020, primarily driven by continued growth in Organic net sales due to the factors described above as well as increased efficiencies with respect to operating expenses, partially offset by increased transaction-related expenses.

We estimate that our Adjusted EBITDA for Fiscal Q4 2021 will increase % to % as compared to Fiscal Q4 2020, primarily attributable to additional margin realized from our increase in Organic net sales and, to a lesser extent, net sales from acquisitions.

Reeb Acquisition

On September 10, 2021, we entered into a definitive agreement to acquire all of the equity interests of each of Reeb Millwork Corporation, a New Jersey corporation, R and K Logistics, Incorporated, a Pennsylvania corporation, Reeb Millwork Corporation – Southeast, a North Carolina corporation, Reeb Millwork of New England, Inc., a Rhode Island corporation, Reeb Millwork Corporation of Maryland, Inc., a Maryland corporation, and Reeb Millwork Corporation of New York, a New York corporation (collectively, the “Reeb Companies”) for $575 million. We refer to this acquisition as the “Reeb Acquisition.”

The Reeb Companies are market leading fabricators and suppliers of pre-finished and unfinished exterior and interior doors and millwork, providing highly customized products to a diversified customer base. The Reeb Companies operate facilities in Bethlehem, Pennsylvania, Barclay, Maryland, Providence, Rhode Island, Mocksville, North Carolina and Syracuse, New York, which service customers in over twenty states. For the twelve months ended October 3, 2021 the Reeb Companies had net sales of $450 million, net income of $42 million, and EBITDA of $52 million. For discussion of our use of EBITDA and reconciliation to net income, the most directly comparable GAAP metric, please refer to “Recent Acquisition Non-GAAP Metrics” at the end of the Prospectus Summary. Pro forma for the Reeb Acquisition, the specialty doors product category represented approximately 17% of our combined net sales for the twelve month period ended October 3, 2021. Prior to the acquisition of the Reeb Companies, our product portfolio did not include a specialty doors category, and as a result, specialty doors did not contribute to our historical net sales for periods ending on or prior to October 3, 2021.

The Reeb Acquisition closed on October 15, 2021. In connection with the Reeb Acquisition, we borrowed $800 million in the form of a new term loan (the “Term Loan Facility”) to finance the acquisition. Approximately $600 million of the proceeds received from the Term Loan Facility was used to finance the Reeb Acquisition and pay related fees and expenses. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt Arrangements.”

Dallas Wholesale Builders Supply Acquisition

On October 8, 2021, we entered into a definitive agreement to acquire all of the equity securities of DW Distribution, Inc., a Texas corporation (“DW”), for $225 million in cash. We refer to this acquisition as the “DW Acquisition.”

Headquartered in DeSoto, Texas, DW Distribution is a wholesale distributor of an industry-leading array of building materials, millwork products and specialty door units. In addition to its DeSoto, Texas location, DW Distribution operates facilities in Arlington, Texas; Hutto, Texas; Lancaster, Texas; and Oklahoma City, Oklahoma that service customers located in Texas, Oklahoma, Arkansas, Louisiana and New Mexico. For the twelve months ended October 3, 2021, DW Distribution had net sales of $335 million, net income of $25 million, and EBITDA of $26 million. For discussion of our use of EBITDA and reconciliation to net income, the most directly comparable GAAP metric, please refer to “Recent Acquisition Non-GAAP Metrics” at the end of the Prospectus Summary.

The DW Acquisition closed on November 1, 2021. Approximately $200 million of the proceeds from the Term Loan Facility, along with cash on hand, was used to finance the DW Acquisition and pay related transaction fees and expenses.

Millwork Acquisition

On October 22, 2021, we entered into a definitive agreement to acquire all of the equity securities of Millwork Sales of Royal Palm Beach, LLC, a Florida limited liability company, and Millwork Sales of Orlando, LLC, a Florida limited liability company, (together, “Millwork”) for a purchase price of $192 million. We refer to this acquisition as the “Millwork Acquisition”.

Millwork is a distributor of millwork, hardware and related products to commercial dealers and retailers. The company operates facilities in Orlando and Royal Palm Beach, Florida, that service customers in Florida. For the twelve months ended October 3, 2021. Millwork Sales had net sales of $170 million, net income of $30 million, and EBITDA of $30 million. For discussion of our use of EBITDA and reconciliation to net income, the most directly comparable GAAP metric, please refer to “Recent Acquisition Non-GAAP Metrics” at the end of the Prospectus Summary.

The Millwork Acquisition closed on December 2, 2021, and we financed the Millwork Acquisition using approximately $192 million in borrowings under the ABL Credit Agreement.

Our Principal Stockholder

We have a valuable relationship with our principal equityholder, SBP Varsity Holdings, an entity controlled by funds advised by The Jordan Company, L.P. The Jordan Company, L.P. is a middle-market private equity investment firm headquartered in New York. Founded in 1982, the firm has raised original capital commitments in excess of $17 billion and has a 39-year track record of investing in and contributing to the growth of many businesses across a wide range of industries. The firm has completed over 120 platform investments and more than 400 add-on acquisitions. The Jordan Company, L.P. also has offices in Chicago and Stamford.

Corporate Information

The Company was incorporated in Delaware in December 2020 to serve as an acquisition vehicle in connection with the TJC Acquisition, whereby SBP Varsity Holdings acquired from existing equityholders 100% of the equity interests of Specialty Building Products, LLC, the then-ultimate parent company of SBP Predecessor, the holding company through which we control our operating subsidiaries. We are a holding company, and all of our operations are conducted through our subsidiaries. Our principal executive offices are located at 2160 Satellite Boulevard, Suite 450, Duluth, Georgia 30097. Our telephone number is (678) 474-4577. Our website address is www.specialtybuildingproducts.com. The information contained on, or that can be accessed through, our website is not incorporated by reference into this prospectus or the registration statement of which this prospectus is a part, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common stock.

THE OFFERING

Issuer

Specialty Buildings Products, Inc.

Common stock offered by us

shares.

Option to purchase additional shares

We have granted the underwriters a 30-day option to purchase up to additional shares of common stock from us at the initial public offering price less the underwriting discount.

Common stock to be outstanding immediately after this offering

shares (or shares if the underwriters’ option to purchase additional shares is exercised in full).

Use of proceeds

We expect to receive approximately $ million (or $ million if the underwriters’ option to purchase additional shares is exercised in full) based on an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds of approximately $ million that we will receive from this offering to fully repay the amounts outstanding under the ABL Credit Agreement. The remaining proceeds, if any, will be used to repay a portion of the amounts outstanding under the Term Loan Facility. See “Use of Proceeds.”

Controlled company

After this offering, assuming an offering size as set forth in this section, SBP Varsity Holdings will beneficially own approximately % of our common stock (or % of our common stock if the underwriters’ option to purchase additional shares is exercised in full). As a result, we expect to be a controlled company within the meaning of the corporate governance standards of Nasdaq. See “Management—Corporate Governance—Controlled Company Status.”

Dividend policy

We do not currently anticipate paying dividends on our common stock. Any declaration and payment of future dividends to holders of our common stock will be at the sole discretion of our board of directors (the “Board”) and will depend on many factors, including our financial condition, earnings, capital requirements, level of indebtedness, statutory and contractual restrictions applicable to the payment of dividends, and other considerations that our Board deems relevant. Because we are a holding company and have no direct operations, we will only be able to pay dividends from our available cash on hand and any funds we receive from our subsidiaries. Certain of our debt agreements limit the ability of certain of our subsidiaries to pay dividends. In addition, Delaware law may impose requirements that may restrict our ability to pay dividends. See “Dividend Policy.”

Listing

We intend to list our common stock on Nasdaq under the symbol “SBP.”

Risk factors

See “Risk Factors” beginning on page 24 and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in shares of our common stock.

Unless we specifically state otherwise or the context otherwise requires, the share information in this prospectus:

•

gives effect to a 1-for- stock split of our common stock, which will occur before the closing of this offering;

•

gives effect to the issuance of shares of common stock in this offering, at an assumed an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus;

•

assumes no exercise of the underwriters’ option to purchase up to an additional shares of common stock from us in this offering;

•

does not reflect shares of common stock that are reserved for future grants or sale under our new omnibus equity incentive plan (the “2022 Plan”), including a number of shares underlying stock options and restricted stock units with an aggregate grant date fair value of $14,571,925, which we expect to grant in connection with close of this offering;

•

does not reflect shares of common stock that are reserved for future issuance under our new employee stock purchase plan (the “2022 ESPP”); and

•

assumes the filing of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws, each in connection with the closing of this offering.

SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

Summary Historical Consolidated Financial Information

The following summary historical consolidated financial information as of January 3, 2021 (SBP Predecessor) and December 29, 2019 (SBP Predecessor), and for each of the three fiscal years in the period ended January 3, 2021 (SBP Predecessor), have been derived from the audited consolidated financial statements as of and for such periods, included elsewhere in this prospectus. The following summary historical condensed consolidated financial information as of October 3, 2021 (Successor), for the nine month period ended October 4, 2020 (SBP Predecessor), the period from January 4, 2021 to January 20, 2021 (SBP Predecessor), and the period from January 21, 2021 to October 3, 2021 (Successor), have been derived from the unaudited condensed consolidated financial statements as of and for such periods, included elsewhere in this prospectus. On January 21, 2021, the TJC Acquisition closed and SBP Varsity Holdings acquired from existing equityholders 100% of the equity interests of Specialty Building Products, LLC, the then-ultimate parent company of SBP Predecessor. SBP Predecessor is the holding company through which we control our operating subsidiaries. As the Company had not conducted operations prior to consummation of the TJC Acquisition on January 21, 2021, SBP Predecessor is deemed “predecessor” of the Company and its subsidiaries for financial reporting purposes. Accordingly, the historical financial information presented in this prospectus (i) for periods prior to January 21, 2021, represents that of SBP Predecessor and its subsidiaries, and (ii) for periods from and after January 21, 2021, represents that of the Company and its subsidiaries, including SBP Predecessor, as successor. As a result of the foregoing, the summary historical consolidated financial information for the Company (Successor) and SBP Predecessor are not comparable and are separated by a black line. The information set forth below is only a summary and is not necessarily indicative of our future results of operations, and you should read the following information together with our audited consolidated financial statements, unaudited condensed consolidated financial statements, the related notes and the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this prospectus.


	Successor		Predecessor
(in thousands, except per share amounts)	Period From January 21 through October 3, 2021		Period From January 4, 2021 through January 20, 2021			Nine Months Ended October 4, 2020			Year Ended January 3, 2021			Year Ended December 29, 2019			Year Ended December 30, 2018
Consolidated statements of operations data:
Net sales	$	1,778,140	$	114,608		$	1,252,053		$	1,670,070		$	1,389,570		$	984,160
Cost of sales		1,396,799		89,587			995,482			1,323,201			1,101,752			806,452

Gross profit		381,341		25,021			256,571			346,869			287,818			177,708

Distribution expenses		83,548		6,575			89,762			120,992			115,343			67,933
Selling expenses		51,861		2,685			42,794			57,640			56,137			32,142
General and administrative expenses		58,755		3,989			42,768			71,232			56,212			48,278
Amortization of intangible assets		25,113		1,007			11,092			15,312			23,040			13,154
Business acquisition and other related costs		6,549		26,182			—			—			—			—
Other operating income		47		(488	)		29			(1,020	)		(74	)		77

Income from operations		155,468		(14,929	)		70,126			82,713			37,160			16,124

Interest Expense/(Income), net		29,968		2,536			43,538			54,798			50,525			35,286

Income (loss) before income taxes		125,500		(17,465	)		26,588			27,915			(13,365	)		(19,162	)

Income tax expense (benefit)		34,360		127			5,840			9,896			(984	)		(7,235	)

Net income (loss)	$	91,140	$	(17,592	)	$	20,748		$	18,019		$	(12,381	)	$	(11,927	)

Basic and Diluted earnings per share		91,140		n/a			n/a			n/a			n/a			n/a

Other comprehensive income (loss)
Foreign currency translation adjustments		1,511		410			(1,749	)		2,434			(321	)		(275	)

Total other comprehensive income (loss)		1,511		410			(1,749	)		2,434			(321	)		(275	)

Comprehensive income (loss)	$	92,651	$	(17,182	)	$	18,999		$	20,453		$	(12,702	)	$	(12,202	)


	Successor		Predecessor
(in thousands)	As of October 3, 2021		As of January 3, 2021			As of December 29, 2019
Consolidated balance sheet data:
Cash and cash equivalents	$	33,428	$	24,118		$	15,847
Working capital(1)		470,618		314,511			226,764
Accounts receivable, net		300,625		200,619			136,262
Total assets		1,685,431		1,030,826			937,603
Total long-term debt		755,309		637,060			475,120
Total liabilities		1,199,379		947,423			793,653
Common stock		—		—			—
Additional paid in capital		393,401		—			—
Contributed capital		—		82,738			163,738
Accumulated other comprehensive income (loss)		1,511		1,838			(596	)
Retained earnings (accumulated deficit)		91,140		(1,173	)		(19,192	)
Total stockholders’ and member equity		486,052		83,403			143,950

(1)	Working capital represents total current assets less total current liabilities.

Summary Unaudited Pro Forma Condensed Combined Financial Information

The following summary unaudited pro forma combined balance sheet data as of October 3, 2021 has been prepared to give effect to the Reeb Acquisition and related financing adjustments (the “Reeb Transaction Accounting Adjustments”) as if the related transactions had occurred on October 3, 2021.

The following summary unaudited pro forma combined statement of operations data for the year ended January 3, 2021 and for the nine months ended October 3, 2021 and October 4, 2020, has been prepared to give effect to the TJC Acquisition and related financing adjustments (the “TJC Transaction Accounting Adjustments”) and the Reeb Transaction Accounting Adjustments as if the related transactions had occurred on December 30, 2019.

The following summary unaudited pro forma combined financial information is for illustrative and informational purposes only and is not necessarily indicative of the results that might have occurred had the relevant transactions occurred on the dates indicated, and is not intended to be a projection of future results. Future results may vary significantly from the results reflected because of various factors, including those discussed in the section titled “Risk Factors” in this prospectus. The following summary unaudited pro forma combined financial information should be read in conjunction with “Unaudited Pro Forma Condensed Combined Financial Statements,” which includes more information related to each of the TJC Transaction Accounting Adjustments and the Reeb Transaction Accounting Adjustments.


	Pro forma
(in thousands, except share and per share data)	Nine Months Ended October 3, 2021			Year Ended January 3, 2021			Nine Months Ended October 4, 2020
Net sales	$	2,240,632		$	2,051,140			1,530,972
Cost of sales		1,712,875			1,582,570			1,188,391

Gross profit		527,757			468,570			342,581

Distribution expenses		124,588			164,434			121,106
Selling expenses		72,563			78,763			59,067
General and administrative expenses		100,347			148,559			108,208
Amortization of intangible assets		38,781			51,449			38,195
Business acquisition and other related costs		448			—			—
Other operating income		(445	)		(919	)		(64	)

Income from operations		191,475			26,284			16,069

Interest Expense/(Income), net		53,164			82,234			64,126

Income (loss) before income taxes		138,311			(55,950	)		(48,057	)

Income tax expense (benefit)		42,461			(10,707	)		(11,568	)

Net income (loss)		95,850			(45,243	)		(36,489	)

Earnings (loss) per share:
Basic and Diluted	$	—		$	—		$	—
Weighted average number of shares outstanding:
Basic		—			—			—
Diluted		—			—			—


	Pro forma
(in thousands)	As of October 3, 2021
Consolidated balance sheet data:
Cash and cash equivalents		42,094
Working capital(1)		520,336
Accounts receivable, net		350,015
Total assets		2,398,194
Total long-term debt		1,325,371
Total liabilities		1,912,142
Common stock		—
Additional paid in capital		393,401
Accumulated other comprehensive income (loss)		1,511
Retained earnings		91,140
Total stockholders’ and member equity		486,052

(1)	Working capital represents total current assets less total current liabilities.

Recent Acquisition Non-GAAP Financial Metrics

We use EBITDA as a measure of operating performance, and we believe that this non-GAAP financial measure is useful to investors for supplemental period-to-period comparisons of our business and in understanding and evaluating our operating results. EBITDA assists investors in evaluating our financial performance on a consistent basis. We defined EBITDA as net income, less income tax expense, interest expense, and depreciation and amortization. The tables below show a reconciliation of this non-GAAP financial measure to net income, the most directly comparable GAAP metric.

The Reeb Acquisition Reconciliation of EBITDA to Net income


(in thousands)	Twelve-Month Period Ended October 3, 2021
	Unaudited
Reported Net Income	$	42,097
Interest expense		946
Taxes		816
Depreciation & amortization		8,452

EBITDA	$	52,311

The unaudited information included above for the Reeb Acquisition has been prepared using the Reeb Companies’ financial statements included in this prospectus.

The DW Acquisition Reconciliation of EBITDA to Net income


(in thousands)	Twelve-Month Period Ended October 3, 2021
	Unaudited
Reported Net Income	$	25,124
Interest expense		327
Depreciation & amortization		903

EBITDA	$	26,354

The unaudited information included above for the DW Acquisition has been prepared using the historical results of DW adjusted for items we believe are necessary to reflect GAAP net income for the period.

The Millworks Acquisition Reconciliation of EBITDA to Net income


(in thousands)	Twelve-Month Period Ended October 3, 2021
	Unaudited
Reported Net Income	$	29,769
Interest expense		18
Depreciation & amortization		436

EBITDA	$	30,223

The unaudited information included above for the Millworks Acquisition has been prepared using the historical results of Millworks adjusted for items we believe are necessary to reflect GAAP net income for the period.

RISK FACTORS

Investing in our common stock involves a high degree of risk. Our reputation, business, financial position, results of operations and cash flows are subject to various risks. You should consider and read carefully all of the risks and uncertainties described below, as well as other information included in this prospectus, including our consolidated financial statements and related notes, before making an investment decision. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us could materially and adversely affect our reputation, business, financial position, results of operations or cash flows. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment. This prospectus also contains forward-looking statements and estimates that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.

Risks Related to Our Business and Industries

Residential construction activity is cyclical and influenced by many factors, and any reduction in the activity in one or both of these markets could have a material adverse effect on us.

Historically, demand for our products has been closely tied to residential construction, including residential repair and remodel spending, in the United States and Canada. Our success and future growth prospects depend, to a significant extent, on conditions in these two geographic markets and the degree to which these markets are strong in the future.

The construction industry and related markets are cyclical and have in the past been, and may in the future be, materially and adversely affected by general economic and global financial market conditions. These factors impact not only our business, but those of our customers and suppliers as well. This influence is true with respect to macroeconomic factors within North America, particularly within our geographic footprint in the United States and Canada. For example, in 2008, residential construction activity dipped to historically low levels during the financial crisis. As a result, demand for many of our products dropped significantly.

The markets in the construction industry in which we operate are also subject to other more specific factors. Residential construction activity levels are influenced by and sensitive to a number of factors, including mortgage availability, the cost of financing a home (in particular, mortgage terms and interest rates), unemployment levels, household formation rates, gross domestic product, residential vacancy and foreclosure rates, demand for second homes, existing housing prices, rental prices, housing inventory levels, building mix between single- and multi-family homes, consumer confidence, seasonal weather factors, the available labor pool and government regulation, policy and incentives. In addition, the construction industry is impacted by the availability of labor and labor shortages may have an impact on the level of construction activity.

We cannot control the foregoing factors, we cannot be certain that they will remain at current levels, and there can be no assurances regarding whether any growth in our markets can be sustained. If construction activity in our markets decreases, whether locally, regionally or nationally, it could have a material adverse effect on our business, financial condition and results of operations.

The specialty building materials distribution industry is fragmented and competitive, and we may not be able to compete successfully with some of our existing competitors or new entrants in the markets we serve.

The specialty building materials distribution industry is fragmented and competitive. Our competition varies by product line, customer classification and geographic market. The principal competitive factors in our industry are:

•

pricing and availability of product;

•

service and delivery capabilities;

•

ability to assist with problem-solving;

•

customer relationships;

•

geographic coverage; and

•

breadth of product offerings.

Financial stability is also important to manufacturers and customers in choosing distributors for their products. We compete with many local, regional and, in some markets and product categories, national building materials distributors and dealers. In addition, some product manufacturers sell and distribute their products directly to our customers, and the volume of such direct sales could increase in the future. Manufacturers of products distributed by us may also enter into exclusive supplier arrangements with our competition or may decide to sell directly to our customers. Further, home center retailers, which have historically concentrated their sales efforts on retail consumers and small contractors, may intensify their marketing efforts to larger contractors and homebuilders. Our competitors may sell their products at lower prices because, among other things, they possess the ability to manufacture or supply similar products and services more efficiently or at a lower cost or have built a superior sales or distribution network. Some of our competitors have greater financial and other resources and may be able to withstand sales or price decreases better than we can. We also expect to continue to face competition from new market entrants. We may be unable to continue to compete effectively with these existing or new competitors.

In addition to pricing, we also compete based on service, quality, range of products and product availability. Our competitors may be positioned to provide better service and thereby establish stronger relationships with customers and suppliers. Our competitors may also sell preferred products, improve the design and performance of their products, develop a more comprehensive product portfolio, be better positioned to influence end-user product specifications or introduce new products with competitive prices and performance characteristics. While the majority of our products are not subject to frequent or rapid stylistic changes, trends do evolve over time, and our competitors may do a better job of predicting market developments or adapt more quickly to new technologies or evolving customer requirements.

Any failure by us to compete on price or service, to develop successful products and strategies or to generally maintain and improve our competitive position could have a material adverse effect on our business, financial condition and results of operations.

Our dependence on key customers with whom we do not have long-term contracts and consolidation within our customers’ industries could have a material adverse effect on us.

Our business is dependent on certain key customers. We had one major customer that accounted for approximately 15% of total net sales for fiscal years 2020 and 2019. As is customary in our industry, we do not enter into long-term contracts with our customers. As a result, our customers could stop purchasing our products, reduce their purchase levels or request reduced pricing structures at any time. We may therefore need to adapt our pricing and marketing strategies in response to a customer who may seek concessions in return for its continued or increased business. While we have exclusive, or effectively exclusive, arrangements with many suppliers, these are often not contractual and could be changed at any time, which could reduce or eliminate any competitive advantage that we have. In addition, a macroeconomic downturn or any other cause of consolidation in the U.S. homebuilding industry or among our other customers, as occurred during the financial crisis when a number of smaller businesses went out of business or were acquired, can significantly increase the market share and bargaining power of a limited number of customers and give them significant additional leverage to negotiate more favorable terms and place greater demands on us. A loss of one or more customers or a meaningful reduction in their purchases from us or further consolidation within our end-markets could have a material adverse effect on our business, financial condition and results of operations.

The trend toward consolidation in our industry may negatively impact our business.

The trend toward consolidation in our industry could cause markets to become more competitive as greater economies of scale are achieved by distributors that are able to efficiently expand their operations. We believe these factors could result in fewer overall distributors operating multiple locations. There can be no assurance that we will be able to continue to execute our acquisition growth strategy, and any failure to do so may make it more difficult for us to maintain or increase our economies of scales, including the level of rebates we receive from suppliers, and adversely affect our operating margins. Consolidation could also increase the competition for acquisition targets in our industry, resulting in higher acquisition costs and prices.

An inability to obtain the products that we distribute or increases in prices by our suppliers could result in lost net sales and reduced margins, damage relationships with customers or limit our ability to grow.

We distribute specialty building materials that are manufactured by a number of major suppliers. Disruptions in our sources of supply may occur as a result of unanticipated demand or production or delivery difficulties. When shortages occur, suppliers often allocate products among distributors. Although we believe that our relationships with our suppliers are strong and that we would have access to similar products from competing suppliers should products be unavailable from current sources, any supply shortage, particularly of the most commonly sold items, could result in a loss of net sales, reduced margins and damage relationships with customers. In addition, our suppliers may experience demand for products that outstrips their capacity. As a result, we may experience product shortages that limit our ability to grow into new markets or expand our product line into existing markets.

Our results of operations are impacted by price fluctuations. Volatility in prices of raw materials could cause our suppliers to increase their prices, which, could in turn, affect our financial results. Although we seek to recover increases in prices from our vendors through price increases in our products, we may not be able to successfully do so. Any increase in prices from our vendors that is not offset by an increase in our prices could materially and adversely affect our business, financial position, results of operations or cash flows.

Additionally, we must maintain and have adequate working capital to purchase sufficient inventory to meet customer demand. Due to the lead times required by our suppliers, we order products in advance of expected sales. In the future, if we are unable to manage our inventory and working capital effectively as we attempt to expand our business, our cash flows may be negatively affected, which could have a material adverse effect on our business, financial condition and operating results.

The termination of key supplier relationships, particularly those with whom we have limited distribution arrangements, may have an immediate material adverse effect on our business, financial condition and results of operations.

We distribute specialty building materials that we purchase from a number of major suppliers. For certain suppliers, including, among others, Trex, James Hardie, Louisiana Pacific and Royal Group, we have entered into limited distribution agreements, which either grant us exclusivity or limit the number of other distributors that have access to their products in that market. Certain other of our suppliers do not provide contractual exclusivity or territorial limitations to us, but as a business practice effectively limit their distributors to us and a small number of other companies to supply their products in each territory. In fiscal year 2020, 85% of our sales were from products where we had formal or practical limited distribution for such products. As is customary in our industry, most of our relationships with these suppliers are terminable without cause on short notice. We had one major supplier that accounted for approximately 13% and 10% of our purchases for the years ended January 3, 2021 and December 29, 2019 respectively. In addition, one major supplier that accounted for approximately 29% of our total accounts payable balances at January 3, 2021. Although we believe that relationships with our existing suppliers are strong and that in most cases we would have access to similar products from competing suppliers, the termination of key supplier relationships, a change in their use of limited distributors by territory or

any other disruption in our sources of supply, particularly of our most commonly sold items or for any supplier with whom we have exclusivity or limited distribution arrangements, could have a material adverse effect on our business, financial condition and results of operations.

Our business operations could suffer significant losses from natural disasters, catastrophes, fire or other unexpected events.

While we operate our business out of 26 facilities and maintain insurance covering our facilities, including business interruption insurance, our facilities could be materially damaged by natural disasters, such as floods, tornadoes, hurricanes and earthquakes, or by fire, adverse weather conditions or other unexpected events or disruptions to our facilities. We could incur uninsured losses and liabilities arising from such events, including damage to our reputation, and/or suffer material losses in operational capacity, which could have a material adverse impact on our business, financial condition and results of operations.

Trade matters may disrupt our supply chain.

Trade restrictions, including increased tariffs or quotas, embargoes, safeguards, and customs restrictions, as well as labor strikes, work stoppages, or boycotts, could increase the cost or reduce the supply of products available to us and adversely affect our business, financial condition, and results of operations.

Certain building materials that we distribute may come from foreign jurisdictions outside North America, such as Chile and Brazil. Such materials may be imported because they may not be available for domestic purchase in the United States or Canada or because there may be a shortfall of inventory available locally. We sourced approximately 31.5% of our products internationally for fiscal year 2020, of which approximately 10.0% were sourced from Canada, approximately 17.0% were sourced from South America, approximately 1.9% were sourced from Asia, approximately 1.2% were sourced from Europe and approximately 1.4% were sourced from Central America. The business, regulatory, and political environments in these countries differ from those in the United States. We cannot predict whether any of the countries from where we currently or in the future may source our products will be subject to additional trade restrictions imposed by the United States or other foreign governments, including the likelihood, type, or effect of any such restrictions. Despite our efforts to ensure the merchantability of these products, such products may not adhere to United States and Canadian standards or laws. Importation of such building materials could subject us to greater risk, including lawsuits by customers or governmental entities.

The propagation of COVID-19 throughout the world disrupted our ability to procure enough supply to satisfy market demands. As shutdowns of different types and severities were put in place, many of our local and foreign suppliers were forced to idle plants and cut back on production of their goods and services. As restrictions have eased over time, suppliers have slowly started ramping up their operations. A challenging labor market has made this process slower than anticipated, with many not yet operating at pre-COVID capacity. As of today, there is still a significant shortage in supply that continues to hinder our ability to fully satisfy the demand in the market.

Our global sourcing strategy is subject to risks and uncertainties, including, without limitation, changes in foreign country regulatory requirements, differing business practices associated with foreign operations, imposition of foreign tariffs and other trade barriers, political, legal, and economic instability, significant fluctuation in the value of the U.S. dollar against foreign currencies, foreign country tax rules, regulations and other requirements, such as changes in tax rates and statutory and judicial interpretations in tax laws, inflation, differing labor laws and changes in those laws, government price controls, and work stoppages and disruptions in the shipping of imported and exported products.

Our business, financial condition, results of operations and cash flows have been and in the future may be adversely affected by the COVID-19 pandemic.

Our operations and business have been adversely affected and could in the future be materially and adversely affected, whether directly or indirectly, by the COVID-19 pandemic and the resulting weakening of economic conditions in the United States and Canada. Local, state, provincial and federal governmental authorities have responded to the pandemic by implementing stringent measures in geographies where we operate to help control the spread of the virus, including restrictions on movement such as quarantines, “shelter-in-place,” “stay-at-home” orders, and travel restrictions, as well as restricting or prohibiting outright some or all forms of commercial and business activity, and other restrictions, including closures of school and childcare facilities. Although we were categorized as “essential” by the Cybersecurity and Infrastructure Security Agency of the U.S. Department of Homeland Security and were therefore permitted to operate consistent with applicable local, state, provincial and federal orders, certain of our geographies have been affected by “stay-at-home orders” based on state and severity of government-imposed actions. Any changes in governmental orders, including extending the duration thereof or a change in our designation, or any further, more severe, actions taken by governmental authorities or that we may choose to take whether required or not could have a material adverse effect on our operations.

Our customers have been and could continue to be negatively impacted by the COVID-19 pandemic, including as a result of project delays and other adverse impacts on demand, which could result in adverse impacts on our sales and have a material adverse effect on our business, results of operations and financial condition. Similarly, our suppliers and other parts of our supply chain have experienced and could continue to experience disruptions and other adverse impacts as a result of the pandemic that could cause us to be unable to obtain key products and supplies on a timely or cost-effective basis, or in some cases, at all, any of which could result in our being unable to service our customers’ demands, and adversely affect our business and results of operations. Please read “—Trade matters may disrupt our supply chain” for additional information.

The COVID-19 pandemic, including the actions that we have taken in response, has disrupted our internal operations and heightened certain risks, such as the risk that a significant portion of our workforce will suffer illness or otherwise not be permitted or be unable to work. We have experienced very few employee cases of COVID-19 and have not experienced any material outbreaks at our facilities. We, however, cannot predict whether these conditions and concerns will continue or whether we will experience more significant or frequent disruptions in the future. While very few of our employees have been required to work remotely to date, if we are required to increase this number in the future, it would heighten certain risks, including those related to cybersecurity and internal controls. In addition, in the event demand for our products is significantly reduced as a result of the COVID-19 pandemic and related economic impacts, we may need to assess different corporate actions and cost-cutting measures, including reducing our workforce or closing one or more distribution centers, and these actions could cause us to incur costs and expose us to other risks and inefficiencies, including whether we would be able to rehire our workforce or recommence operations if our business experiences a subsequent recovery.

The COVID-19 pandemic has also adversely affected economies worldwide and significantly disrupted financial and other capital markets, causing a significant deceleration of economic activity. This slowdown has decreased demand for a wide variety of goods and services, diminished trade levels, reduced production and led to widespread corporate downsizing, causing a sharp increase in unemployment. The impact of this outbreak on the U.S. and world economies is uncertain and, until the outbreak is contained, these adverse impacts could worsen, impacting all segments of the global economy, and result in a significant recession or worse. Conditions in the financial and capital markets have been extremely volatile and may limit or entirely restrict the availability of funding or increase the cost of funding, which could adversely affect our business, financial position and results of operations.

Considerable uncertainty still surrounds the COVID-19 virus and its potential effects, and the extent and effectiveness of responses taken on local, national and global levels. While we expect the pandemic and related

events will continue to have a negative effect on us, the unpredictable and unprecedented nature and fluidity of current circumstances makes it impractical to identify all potential risks or estimate the full extent and scope of the impact on our business and industry, as well as national, regional and global markets and economies. However, our ability to conduct our business in the manner previously or currently expected could be materially and adversely affected, and any of the foregoing risks and uncertainties as well as those that have not yet manifested themselves or been identified could have a material adverse impact on our business, financial condition, results of operations and cash flows.

Any inability to identify, acquire, close or successfully integrate acquisitions or other transaction-related issues could have a material adverse effect on us.

Acquisitions are a component of our growth strategy, but there can be no assurance that we will be able to continue to grow our business through acquisitions or that any businesses acquired will perform in accordance with expectations or that business judgments concerning the value, strengths and weaknesses of businesses acquired will prove to be correct. Historically, we have made a number of acquisitions, including the NILCO acquisition in 2017, the Midwest and Alexandria acquisitions in 2018, the Mid-State Lumber acquisition in 2020, and, the Reeb Acquisition and the DW Acquisition in 2021. The integration of acquired businesses can take a significant amount of time and also exposes us to significant risks and additional costs. Integrating these and any future acquisitions may strain our resources. Further, we may have difficulty integrating the operations, systems, controls, procedures or products of acquired businesses and may not be able to do so in a timely, efficient and cost-effective manner. These difficulties could include:

•

assimilating personnel, human resources and other administrative departments and potentially contrasting corporate cultures;

•

merging computer, technology and other information networks and systems;

•

diversion of the attention of our management and that of the acquired business;

•

merging or linking different accounting and financial reporting systems and systems of internal controls;

•

disrupting our relationship with, or loss of, key customers, suppliers or personnel;

•

interfering with, or loss of momentum in, our ongoing business or that of the acquired companies; and

•

delays or cost overruns in the integration process.

While historically we have not experienced any material integration issues, we have not fully integrated the Alexandria Moulding acquisition, and may encounter one or more of the issues discussed above, or others of which we are not yet aware. Any of these acquisition or other integration-related issues could divert management’s attention and resources from our day-to-day operations, cause significant disruption to our business and lead to substantial additional costs.

We may also be subject to claims or liabilities arising from the ownership or operation of our subsidiaries for the periods prior to our acquisition of them, including environmental liabilities. These claims or liabilities could be significant. Our ability to seek indemnification from the former owners of our subsidiaries for these claims or liabilities is limited by various factors, including the specific limitations contained in the respective acquisition agreements and the financial ability of the former owners to satisfy such claims or liabilities.

In addition, certain proposed acquisitions or dispositions may trigger a review by U.S. Department of Justice, or the DOJ, and the U.S. Federal Trade Commission, or FTC, and the State Attorneys General under their respective regulatory authority, focusing on the effects on competition, including the size or structure of the relevant markets and the pro-competitive benefits of the transaction. Any delay, prohibition or modification required by regulatory authorities could adversely affect the terms of a proposed acquisition or could require us to modify or abandon an otherwise attractive acquisition opportunity.

In addition, many of the businesses that we have acquired and will acquire have unaudited financial statements that have been prepared by the management of such companies and have not been independently reviewed or audited. We present certain unaudited financial information in this prospectus for the Reeb Acquisition that is derived from such unaudited financial statements prepared by management of such acquired businesses. We cannot assure you that the financial statements of companies we have acquired or will acquire would not be materially different if such statements were independently reviewed or audited. In addition, our results of operations from these acquisitions could, in the future, result in impairment charges for any of our intangible assets, including goodwill, or other long-lived assets, particularly if economic conditions worsen unexpectedly. These changes could materially negatively affect our results of operations, financial condition or liquidity.

We cannot assure you that we will identify or successfully complete transactions with suitable acquisition candidates in the future, nor can we assure you that completed acquisitions will be successful. Our inability to identify suitable acquisition targets, realize the anticipated benefits of an acquisition or to successfully integrate acquired companies as well as other transaction-related issues could have a material adverse effect on our business, financial condition and results of operations.

Our acquisition strategy exposes us to significant risks and additional costs.

Acquisitions also involve risks that the businesses acquired will not perform as expected and that business judgments concerning the value, strengths and weaknesses of acquired businesses will prove incorrect. We may not accurately assess the value, strengths, weaknesses or potential profitability of an acquisition target. We may become liable for certain unforeseen pre-acquisition liabilities of an acquired business, including, among others, tax liabilities, product liabilities, asbestos liabilities, environmental liabilities, pension liabilities and liabilities for employment practices, and these liabilities could be significant. In addition, an acquisition could result in the impairment of customer relationships or certain acquired assets such as inventory and goodwill. We may also incur costs and inefficiencies to the extent an acquisition expands the industries, products, markets or geographies in which we operate due to our limited exposure to and experience in a given industry, market or region. Large or a number of smaller acquisitions may also require that we incur additional debt to finance the transaction, which could be substantial and limit our flexibility in using our cash flow from operations for other purposes. Acquisitions can also involve post transaction disputes with the counter party regarding a number of matters, including a purchase price, inventory or other working capital adjustment, environmental liabilities or pension obligations. If any of these risks were to occur, our financial position, results of operations and liquidity may be adversely affected.

Any significant fuel cost increases or shortages in the supply of fuel could disrupt our ability to distribute products to our customers, which could adversely affect our results of operations.

We currently use our own fleet of over 230 owned and leased delivery vehicles in addition to third-party vehicles to service customers in the markets in which we operate. As a result, we are inherently dependent upon fuel to operate and are impacted by changes in diesel fuel prices. The cost of fuel has reached historically high levels during portions of the last several years, is largely unpredictable and has a significant impact on our results of operations. Fuel availability, as well as pricing, is also impacted by political and economic factors. It is difficult to predict the future availability of fuel due to a number of factors. Significant disruptions in the supply of fuel could have a negative impact on fuel prices and thus our business, financial condition and results of operations.

A tightening of mortgage lending or mortgage financing requirements or other reductions in the availability of consumer credit or increases in its cost could have a material adverse effect on us.

We depend on net sales generated from residential construction activity. Most home sales in the U.S. and Canada are financed through mortgage loans, and a significant percentage of renovation and other home repair activity is financed either through mortgage loans or other available credit. The financial crisis affected the financial position of many consumers and caused financial institutions to tighten their lending criteria, each of which contributed to a significant reduction in the availability of consumer credit. These developments resulted in a

significant reduction in total new housing starts in the U.S. and consequently, a reduction in demand for our products in the residential sector. Similarly, while they have remained relatively low in recent years, the rate of interest payable on any mortgage or other form of credit could rise in the future, thus increasing the cost of borrowing and potentially making the purchase of a home less attractive, which could in turn reduce the number of new housing starts in the U.S. and Canada. Any future tightening of mortgage lending or other reductions in the availability of consumer credit or increases in its cost that have an impact on the rate of residential construction or remodeling activity could have a material adverse effect on our business, financial condition and results of operations. See also “—Residential construction activity is cyclical and influenced by many factors, and any reduction in the activity in one or both of these markets could have a material adverse effect on us” above.

The seasonality of our business and its susceptibility to severe and prolonged periods of adverse weather and other conditions could have a material adverse effect on us.

Demand for our products in some markets is typically seasonal, with periods of snow or heavy rain negatively affecting construction activity. For example, sales of our products in Canada and the Northeast and Midwest regions of the United States are somewhat higher from spring through autumn when construction activity is greatest. Construction activity declines in these markets during the winter months in particular due to inclement weather, frozen ground and fewer hours of daylight. Construction activity can also be affected in any period by adverse weather conditions such as hurricanes, severe storms, torrential rains and floods, natural disasters such as fires and earthquakes and similar events, any of which could reduce demand for our products, push back existing orders to later dates or lead to cancellations. Furthermore, our ability to deliver products on time or at all to our customers can be significantly impeded by such conditions and events, such as those described above. These conditions, particularly when unanticipated, can leave both equipment and personnel underutilized. Additionally, the seasonal nature of our business has led to variation in our quarterly results in the past and may continue to do so in the future. This general seasonality of our business and any severe or prolonged adverse weather conditions or other similar events could have a material adverse effect on our business, financial condition and results of operations.

Changes in currency exchange and interest rates could have a material adverse effect on our operating results and liquidity.

We have operations in locations across the United States and Canada. On a combined basis, approximately 9.9% of our net sales for fiscal year 2020 was denominated in Canadian dollars. As such, our net sales, earnings and cash flow are exposed to risk from changes in currency exchange rates, which can be difficult to mitigate. Depending on the direction of changes relative to the U.S. dollar, Canadian dollar values can increase or decrease the reported values of our net assets and results of operations. We hedge this foreign currency exposure by evaluating the usage of certain derivative instruments which hedge certain, but not all, underlying economic exposures.

We are also exposed to changes in interest rates as the ABL Credit Agreement bears and the Term Loan Facility will bear, and certain of our future indebtedness may bear, interest at variable interest rates. As a result, future interest rate increases will negatively impact our financial results. Our ability to access capital markets could also be impeded if adverse market conditions occur.

We depend on the services of key executives and any inability to attract and retain key management personnel could have a material adverse effect on us.

Our key management personnel, including our Chief Executive Officer and Chief Financial Officer, are important to our success because they are instrumental in setting our strategic direction, operating our business and identifying expansion opportunities. Additionally, as our business grows, we may need to attract and hire additional management personnel. We have employment agreements with some members of senior management; however, we cannot prevent our executives from terminating their employment with us, and any replacements we hire may not be as effective. Further, any transition involves inherent risk and any failure to ensure a smooth

transition to new personnel could hinder our strategic planning, execution and future performance. While we strive to mitigate the negative impact associated with changes in our senior management team, there may be uncertainty among investors, employees, customers and others concerning our future direction and performance. Our ability to retain our key management personnel or to attract additional management personnel or suitable replacements when needed is dependent on a number of factors, including the competitive nature of the employment market. Any failure to retain key management personnel or to attract additional or suitable replacement personnel could have a material adverse effect on our business, financial condition and results of operations.

Employee benefit costs, including health care costs for our employees, and risks related to our unionized employees may adversely affect our business, results of operations and financial condition.

We provide health care and other benefits to our employees. In recent years, costs for health care have increased more rapidly than general inflation in the U.S. economy. If health care costs in the United States continue to increase, our cost to provide such benefits could increase, adversely impacting our profitability. Changes to health care regulations in the United States may also increase the cost to us of providing such benefits. Higher employee benefit costs could have an adverse effect on our business, results of operations and financial condition.

Approximately 13.8% of our workforce was unionized as of the end of fiscal year 2020, and we maintain collective bargaining agreements with two unions in the United States and Canada. There are risks associated with union negotiations which could adversely impact our profitability, such as wage increases or additional work rules imposed by future agreements. In addition, any work stoppages or other labor disturbances could have a material adverse effect on our business, financial condition and results of operations.

Credit and non-payment risks of our customers could have a material adverse effect on us.

We are subject to the credit risk of our customers because we have provided, and we expect to provide, credit to our customers in the normal course of business. All of our customers are sensitive to economic changes and to the cyclical nature of the residential construction industry. All customers have a credit limit and payment terms. A customer’s account stays open unless there is a material change in their business or the customer fails to abide by the credit limit and payment terms. Especially during protracted or severe economic declines and cyclical downturns in the residential construction industry, our customers may be unable to perform on their payment obligations, including their debts to us. While we partially insure against exposure from this risk, any failure by our customers to meet their obligations to us may have a material adverse effect on our business, financial condition, cash flows and results of operations. In addition, we may incur increased expenses related to collections in the future if we find it necessary to take legal action to enforce the contractual obligations of a significant number of our customers.

We occupy many of our distribution centers under long-term non-cancellable leases, and we may be unable to renew our leases at the end of their terms.

Many of our distribution centers are located on leased premises subject to non-cancellable leases. Typically, our leases have initial terms ranging from five to ten years, with options to renew for specified periods of time. We believe that our future leases will likely also be long-term and non-cancellable and have similar renewal options. If we close or stop fully utilizing a distribution center, we will most likely remain obligated to perform under the applicable lease, which would include, among other things, making the base rent payments, and paying insurance, taxes and other expenses on the leased property for the remainder of the lease term. Our future minimum aggregate rental commitments for leases for our buildings and equipment, as of October 3, 2021 and January 3, 2021, were $164.9 million and $162.5 million, respectively. In addition, at the end of the lease term and any renewal period for a facility, we may be unable to renew the lease without substantial additional cost, if at all. If we are unable to renew our facility leases, we may close or relocate a distribution center, which could

subject us to construction and other costs and risks, which in turn could have a material adverse effect on our business and operating results. Further, we may not be able to secure a replacement center in a location that is as commercially viable, including access to rail service, as the lease we are unable to renew. Having to close a center, even briefly to relocate, would reduce the sales that such center would have contributed to our net sales. Additionally, a relocated center may be less profitable. If we are unable to terminate leases when we stop fully utilizing a facility or exit a geographic market, or if we were required to vacate multiple facilities at the end of a lease team, it could have a significant adverse impact on our business, financial condition and results of operations.

We are exposed to product liability and other legal claims and proceedings that could have a material adverse effect on us.

The nature of our business exposes us to product liability, construction defect and other litigation and legal proceedings. We rely on manufacturers and other suppliers to provide us with the majority of the products we sell and distribute. As we do not have direct control over the quality of the products manufactured or supplied by such third party suppliers, we are exposed to risks relating to the quality of the products we distribute. It is possible that inventory from a manufacturer or supplier could be sold to our customers and later be alleged to have quality problems, subjecting us to potential claims from customers or third parties despite our customary disclaimer of product quality warranties. We are subject to these claims from time to time, which are typically resolved by seeking indemnification from the applicable manufacturers without material financial impact on us. However, while we seek indemnification against potential liability for product liability claims from relevant parties, including but not limited to manufacturers and other suppliers, we cannot guarantee that we will be able to recover any losses we incur from product liability claims through such indemnification claims, which are dependent upon the financial viability of the indemnifying party. Even if we are ultimately successful in defending any claim relating to the products we distribute, claims and proceedings, whether or not they have merit and regardless of the outcome, are typically expensive and can divert the attention of management and other personnel for significant periods of time. In addition to any damages we may be required to pay, we are generally obligated to indemnify our current and former directors and officers in connection with lawsuits and related settlement amounts. Such amounts could exceed the coverage provided under our insurance policies. Any such claims and proceedings can impact customer confidence and the general public’s perception of our company and products, even if the underlying assertions are proven to be false.

While we have established reserves we believe to be reasonable under the facts known and have insurance coverage in place for certain types of claims which limits its exposure to certain liabilities, the outcomes of litigation and similar disputes are often difficult to reliably predict and may result in decisions or settlements that are contrary to, or in excess of, our expectations, and losses may exceed our reserves. In addition, various factors and developments could lead us to make changes in our current estimates of liabilities and related insurance receivables or make new or modified estimates as a result of a judicial ruling or judgment, settlement, regulatory development or change in applicable law. Any claims or proceedings, particularly those in which we are unsuccessful or for which we did not establish adequate reserves, could harm our reputation and could have a material adverse effect on our business, financial condition and results of operations.

Our operations are subject to special hazards that may cause personal injury or property damage, subjecting us to liabilities and possible losses which may not be covered by insurance.

Operating hazards, such as unloading heavy products, operating large machinery and driving hazards, inherent in our business, some of which may be outside of our control, can cause personal injury and loss of life, damage to or destruction of property, plant and equipment and environmental damage. We maintain insurance coverage in amounts and against the risks we believe are consistent with industry practice, but this insurance may not be adequate or available to cover all losses or liabilities we may incur in our operations. Our insurance policies are subject to varying levels of deductibles. Losses up to our deductible amounts are accrued based upon our estimates of the ultimate liability for claims incurred and an estimate of claims incurred but not reported.

However, liabilities subject to insurance are difficult to estimate due to unknown factors, including the severity of an injury, the determination of our liability in proportion to other parties, the number of incidents not reported and the effectiveness of our safety programs. If we were to experience insurance claims or costs above our estimates, we might also be required to use working capital to satisfy these claims rather than using working capital to maintain or expand our operations.

Our operations may be subject to environmental, health and safety laws and regulations and consumer use of certain of our products are subject to approvals, which could have a negative impact on our business, financial condition and results of operations.

Our operations involve the use, handling, storage, and disposal of hazardous materials customary in distribution and light manufacturing, and are subject to environmental, health and safety laws and regulations at the national, state, local, and international levels. These laws and regulations include those governing the discharge of pollutants into the air and water, the use, management, and disposal of hazardous materials and wastes, chemicals in products, the cleanup of contaminated sites, and occupational health and safety. We have incurred and may continue to incur costs in complying with these laws and regulations. In addition, violations of, or liabilities under, these laws and regulations may result in restrictions being imposed on our operations or in our being subject to substantial fines, penalties, criminal proceedings, third-party property damage or personal injury claims, cleanup costs, or other costs. We may also become liable under certain of these laws and regulations for costs to investigate or remediate contamination at properties we own or operate, we formerly owned or operated. Liability under these laws and regulations can be imposed on a joint and several basis and without regard to fault or the legality of the activities giving rise to the contamination conditions. In addition, future developments such as more aggressive enforcement policies, the implementation of new, more stringent laws and regulations, or the discovery of presently unknown environmental conditions may require expenditures that could have an adverse effect on our business, financial condition, and results of operations.

In addition, consumer use of certain of our products is subject to approvals by municipalities, state departments of transportation, engineers and developers. These approvals and specifications, including building codes, may affect the products our customers or the end users are allowed or choose to use, and, consequently, failure to obtain or maintain such approvals or changes in building codes may affect the saleability of our products or may require us to make changes to our products that could increase the cost of doing business.

In the event any of the above risks were to materialize, it could have a material adverse impact on our business, financial condition and results of operations.

Our business and financial performance could be adversely impacted due to disruptions, delays, or outages of our information technology systems and computer networks.

Our distribution centers and our sales and service activities, including the processing, transmission and storage of electronic information utilized in connection with our operations, depend on the efficient, reliable and uninterrupted operation of complex and sophisticated information technology systems and computer networks, which may be subject to malfunction, failure, damage or disruption due to fire, flood, natural disasters, malicious attacks, human error, accidents, power disruptions, telecommunications failures, acts of terrorism or war, computer viruses, physical or electronic break-ins or other similar events. Our existing safety systems, data backup, and information technology emergency planning may not be sufficient to prevent long-term system or network outages or data loss. Additionally, because we have grown through various acquisitions, we have integrated and are integrating a number of disparate information technology systems across our organization in order to align our systems, further increasing the likelihood of problems. We may in the future integrate, replace or upgrade existing systems or implement new technology systems. These integrations and/or updated and new systems may not be successful, and may create new issues we currently do not face, or may significantly exceed our cost estimates.

Any disruption of our information technology systems or networks could interrupt or otherwise impair our operations and negatively impact our ability to meet customer needs and to maintain critical operational or

financial controls. These events could damage our reputation and cause us to incur unanticipated liabilities, including financial losses from remedial actions, business interruptions, loss of business and other unanticipated costs, which may not be covered by insurance. Despite the defensive measures we have taken to maintain and protect our information technology systems (and the information processed or transmitted by, or stored in, our systems), our systems may still be vulnerable to disruption and any such disruption and the resulting fallout could have a material adverse effect on our business, financial condition and results of operations.

Cybersecurity threats, attacks and other incidents may compromise our confidential information, disrupt operations, subject us to increased costs or liabilities and/or result in harm to our reputation, any of which could adversely impact our business and financial performance.

Cybersecurity threats and attacks are increasing in sophistication and frequency and may range from uncoordinated individual attempts to measures targeted specifically at us or our service providers in order to gain unauthorized access to, or otherwise disrupt, our information systems, and/or to gain unauthorized access to, corrupt, modify or destroy business, proprietary or other confidential information therein, and could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption or loss of data. Cybersecurity incidents may result from computer viruses, ransomware and other malware as well as human error, employee malfeasance, system errors or vulnerabilities, including vulnerabilities of our vendors, suppliers, and their products. Also, given the unpredictability of the timing, nature and scope of cybersecurity threats and attacks, we may be unable to anticipate attempted security breaches and, in turn, implement adequate preventative measures. Any such security incidents could result in mandatory notification requirements and costly remediation measures, damage our relationships with our customers and suppliers, adversely affect our reputation, cause a loss of confidence in us, or expose us to costly government enforcement investigations or actions, private litigation, or financial liability, possibly beyond the scope or limits of our insurance coverage. Such events may also disrupt our operations by distracting our management and other key personnel from performing their primary operational duties. Furthermore, mitigating the risk of future cybersecurity incidents could result in additional costs in order to invest in technology and personnel.

In addition, our systems and processes to protect against, detect, prevent, respond to and mitigate cybersecurity incidents and our organizational training for employees to develop an understanding of cybersecurity risks and threats may be unable to prevent security breaches, theft, modification, corruption or loss of data, employee malfeasance and additional known and unknown threats. Any breach in our systems or data-protection policies, or those of our third-party service providers, could have a material adverse effect on our business, financial condition and results of operations.

Corporate responsibility, specifically related to ESG matters, may impose additional costs and expose us to new risks.

Public ESG and sustainability reporting is becoming more broadly expected by investors, shareholders and other third parties. Certain organizations that provide corporate governance and other corporate risk information to investors and shareholders have developed, and others may in the future develop, scores and ratings to evaluate companies and investment funds based upon ESG or “sustainability” metrics. Many investment funds focus on positive ESG business practices and sustainability scores when making investments and may consider a company’s ESG or sustainability scores as a reputational or other factor in making an investment decision. In addition, investors, particularly institutional investors, use these scores to benchmark companies against their peers and if a company is perceived as lagging, these investors may engage with such company to improve ESG disclosure or performance and may also make voting decisions, or take other actions, to hold these companies and their boards of directors accountable. Board diversity is an ESG topic that is, in particular, receiving heightened attention by investors, shareholders, lawmakers and listing exchanges. We may face reputational damage in the event our corporate responsibility initiatives or objectives, including with respect to board diversity, do not meet the standards set by our investors, shareholders, lawmakers, listing exchanges or other constituencies, or if we are unable to achieve an acceptable ESG or sustainability rating from third party rating

services. A low ESG or sustainability rating by a third-party rating service could also result in the exclusion of our ordinary shares from consideration by certain investors who may elect to invest with our competition instead. Ongoing focus on corporate responsibility matters by investors and other parties as described above may impose additional costs or expose us to new risks.

If we are not able to maintain and enhance our brands, or if events occur that damage our reputation and brand, our ability to maintain and expand our customer base may be impaired.

The various local and regional brands under which we do business and their respective reputations have significantly contributed to the success of our business. Maintaining and enhancing our brands is critical to our ongoing success. Maintaining and enhancing our brands will depend largely on our ability to continue to provide useful, reliable and trustworthy products and provide products to the market in a manner which matches the lead times customers require. There is no certainty that we will continue to meet customer expectations and maintain our overall brand image. We may experience media, legislative or regulatory scrutiny of our impact on the environment, which may adversely affect our reputation. If we fail to provide adequate customer service, it could erode confidence in any one or more of our brands. As part of our broader branding and marketing strategy, we may choose to consolidate or change local or regional brands, which may result in us incurring impairment charges. We may also be subject to trademark or patent infringement claims relating to our key intellectual property. If we fail to promote and maintain our brands successfully or if we incur excessive expenses or impairment charges in this effort, it could have a material adverse effect on our business, financial condition and results of operations.

Changes in tax laws could adversely affect us.

We regularly assess our future ability to utilize tax benefits, including those in the form of certain tax carryforwards, that are recorded as deferred income tax assets on our balance sheets to determine whether a valuation allowance is necessary. A reduction in, or disallowance of, these tax benefits resulting from a legislative change or adverse determination by a taxing jurisdiction could have an adverse impact on our financial results and liquidity.

Significant judgment is required in determining our domestic and international provision for income taxes, deferred tax assets or liabilities and in evaluating our tax positions on a worldwide basis. In the course of our business, there will be many transactions and calculations where the ultimate tax determination is uncertain. For example, compliance with the Tax Cuts and Jobs Act of 2017 (“TCJA”) may require the collection of information not regularly produced within our Company, the use of estimates in our consolidated financial statements, and the exercise of significant judgment in accounting for its provisions. While we believe our tax positions are consistent with the tax laws in the jurisdictions in which we conduct our business, it is possible these positions may be contested or overturned by jurisdictional tax authorities, which may have a significant impact on our tax provision for income taxes. Tax laws are dynamic and subject to change as new laws are passed and new interpretations of the laws are issued or applied.

Insufficient insurance coverage could have a material adverse effect on us.

We maintain property, business interruption, counterparty and liability insurance coverage that we believe is consistent with industry practice. However, our insurance program does not cover, or may not adequately cover, every potential risk associated with our business and the consequences thereof. In addition, market conditions or any significant claim or a number of claims made by or against us could cause our premiums and deductibles to increase substantially and, in some instances, our coverage may be reduced or become entirely unavailable. In the future, we may not be able to obtain meaningful coverage at reasonable rates for a variety of risks. We also operate a large fleet of trucks and other vehicles and therefore face the risk of accidents. While we currently maintain insurance coverage to address a portion of these types of liabilities, we cannot make assurances that we will be able to obtain such insurance on acceptable terms in the future, if at all, or that any such insurance will

provide adequate coverage against potential claims. If our insurance coverage is insufficient, if we are not able to obtain sufficient coverage in the future, or if we are exposed to significant losses as a result of the risks for which we self-insure, any resulting costs or liabilities could have a material adverse effect on our business, financial condition and results of operations.

We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate our material weaknesses, or if we otherwise fail to establish and maintain effective internal control over financial reporting, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and, as a result, the value of our common stock.

We are not currently required to comply with the rules and regulations of the SEC to make an assessment of the effectiveness of internal control over financial reporting for that purpose. We are actively conducting a comprehensive review of our internal processes for the purposes of establishing a robust compliance program to meet the internal control requirements for a publicly traded company.

We have not completed an assessment of the effectiveness of our internal control over financial reporting, and our independent registered public accounting firm has not conducted an audit of our internal control over financial reporting. In connection with the preparation of our financial statements as of and for the fiscal years ended 2018, 2019 and 2020, we identified certain control deficiencies in the design and maintenance of our internal control over financial reporting that constituted material weaknesses in internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis. The material weaknesses relate to:

We lack a sufficient complement of accounting and financial reporting resources with the appropriate level of knowledge, experience and training required to meet the reporting requirements of a publicly traded company. This material weakness contributed to the following additional material weaknesses:

•

We did not design and maintain formal accounting policies, procedures and controls to support complete, accurate and timely financial accounting, reporting and disclosures, including with respect to revenue and period-end financial reporting. Also, we did not design and maintain effective controls relating to the accuracy and occurrence of the accounting for revenues to ensure the accuracy of customer order entry and master data, including price and ensure appropriate segregation of duties and controls to verify the financial statements are presented and disclosed completely and accurately;

•

We did not design and maintain effective controls over segregation of duties related to journal entries and account reconciliations. Specifically, certain personnel have the ability to both create and post journal entries and also prepare account reconciliations;

The above material weaknesses did not result in material misstatements to the consolidated financial statements. Additionally, these material weaknesses could result in a misstatement of substantially all of our accounts or disclosures that would result in a material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.

•

We did not design and maintain effective controls over information technology (“IT”) general controls for information systems that are relevant to the preparation of our financial statements. Specifically, we did not design and maintain i) program change management controls to ensure that information technology program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; ii) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate Company personnel; and (iii) computer

operations controls to ensure that critical batch jobs are monitored and data backups are authorized and monitored.

These IT deficiencies did not result in any misstatements to the financial statements, however, the deficiencies, when aggregated, could impact the Company’s ability to maintain effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would result in a material misstatement to the annual or interim financial statements that would not be prevented or detected.

We are in the process of implementing measures designed to improve our internal control over financial reporting to remediate these material weaknesses. These measures include:

•

Actively recruiting and hiring additional accounting and financial reporting personnel with the requisite technical and SEC reporting experience combined with expanding the capabilities of existing accounting and financial reporting personnel through continuous training and education in the accounting and reporting requirements under SEC rules and regulations.

•

Implementing formal policies, procedures and control activities combined with delivery of training on standards of documentary evidence.

•

Designing and implementing procedures and controls to incorporate enhanced segregation of duties, documentation standards and review protocols within our processes associated with manual journal entries and account reconciliations.

•

Designing and engaging in the implementation of an IT general controls framework that addresses risks associated with user access and security, application change management and computer operations.

We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses. If the steps we take do not correct the material weakness in a timely manner, we will be unable to conclude that we maintain effective internal control over financial reporting. Accordingly, there could continue to be a reasonable possibility that a material misstatement of our financial statements would not be prevented or detected on a timely basis.

If we fail to remediate our existing material weakness or identify new material weaknesses in our internal control over financial reporting, if we are unable to comply with the rules and regulations of the SEC in a timely manner, if we are unable to conclude that our internal controls over financial reporting are effective, or if our independent registered public accounting firm is unable to express an unqualified opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected. As a result of such failures, we could also become subject to investigations by the SEC or other regulatory authorities, and become subject to litigation from investors and stockholders, which could harm our reputation and financial condition or divert financial and management resources from our regular business activities.

The unaudited pro forma financial information included in this prospectus may not be representative of our future results of operation and financial condition.

The pro forma financial information contained in this prospectus is unaudited and is based, in part, on certain estimates and assumptions that we believe are reasonable. We cannot assure you that our estimates and assumptions will prove to be accurate over time. For example, we have made a preliminary allocation of the estimated purchase price paid as compared to the net assets acquired in the Reeb Acquisition, as if the Reeb Acquisition had closed on the dates indicated in the applicable pro forma presentations. When the actual

calculation and allocation of the purchase price to net assets acquired is performed, it will be based on the net assets assumed at the effective date of the Reeb Acquisition and other information at that date to support the allocation of the fair values of the Reeb Companies’ assets and liabilities. Accordingly, the actual amounts of net assets will vary from the pro forma amounts, and the final valuation of the Reeb Companies may be materially different than as reflected in the unaudited pro forma financial data contained herein. See “Unaudited Pro Forma Condensed Combined Financial Statements” and the notes thereto for more information. As a result of the foregoing, the unaudited pro forma financial information contained in this prospectus may not reflect what our results of operations and financial condition would have been had we been a combined entity during the periods presented, or what our results of operations and financial condition will be in the future. The challenge of integrating previously independent businesses makes evaluating our business and our future financial prospects difficult.

Risks Related to Our Indebtedness

If we do not generate sufficient cash flows, we may be unable to service all of our indebtedness.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash, make scheduled payments on or refinance our debt obligations depends on our successful financial and operating performance, which will be affected by a range of economic, competitive and business factors, many of which are outside of our control. If our cash flow and capital resources are insufficient to fund our debt service obligations or to repay our debt as it becomes due, including the ABL Credit Agreement, which will mature prior to the Company’s 6.375% senior secured notes due 2026 (the “Senior Secured Notes”), and the Term Loan Facility, which will mature in 2028, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets or operations, reducing or delaying capital investments or seeking to raise additional capital. Any refinancing of our debt could be at higher interest rates and may require us to comply with more restrictive covenants which could further restrict our business operations and the ability of subsidiaries to make cash available to us, by dividend, debt repayment or otherwise, to enable us to repay the amounts due under the Senior Secured Notes. Our ability to implement successfully any such alternative financing plans will be dependent on a range of factors, including general economic conditions, the level of activity in capital markets generally and the terms of our various debt instruments then in effect. In addition, the Senior Secured Notes, the Term Loan Facility and the ABL Credit Agreement are secured by liens on substantially all of our and the Subsidiary Guarantors’ assets, and any successor credit facilities or additional Senior Secured Notes are likely to be secured on a similar basis. As such, our ability to refinance the Senior Secured Notes, the Term Loan Facility and/or the ABL Credit Agreement, seek additional financing or our and our subsidiaries’ ability to make cash available to us, by dividend, debt repayment or otherwise, to enable the Co-Issuers to repay the amounts due under the Senior Secured Notes, the Term Loan Facility and/or the ABL Credit Agreement could be impaired as a result of such security interests and the agreements governing such security interests.

Our inability to generate sufficient cash flow to satisfy our debt obligations or to refinance our obligations on commercially reasonable terms could have a material adverse effect on our business, including our financial condition and results of operations, as well as on our subsidiaries’ ability to make cash available to us, by dividend, debt repayment or otherwise, to enable us to satisfy our obligations on the Senior Secured Notes, the Term Loan Facility and/or the ABL Credit Agreement.

Our substantial level of indebtedness could adversely affect our financial condition and prevent us from making payments on the Senior Secured Notes and our other debt obligations.

We have a substantial amount of debt. At October 3, 2021, we had approximately $748.1 million of total indebtedness, of which approximately $725.1 million would have been secured indebtedness. See “Capitalization.”

Our substantial level of indebtedness could have important consequences to you. For example, it could:

•

make it more difficult for us to satisfy our obligations;

•

increase our vulnerability to adverse economic and industry conditions;

•

limit our ability to obtain additional financing for future working capital, capital expenditures, materials, strategic acquisitions and other general corporate requirements;

•

expose us to interest rate fluctuations because the interest on the debt under the ABL Credit Agreement is imposed at variable rates;

•

require us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow for operations and other purposes, including making cash available to the Co-Issuers, by dividend, debt repayment or otherwise to enable the Co-Issuers to make payments on the Senior Secured Notes;

•

make it more difficult for us to satisfy our obligations to our lenders, resulting in possible defaults on and acceleration of such indebtedness;

•

limit our ability to refinance indebtedness or increase the associated costs;

•

require us to sell assets to reduce debt or influence our decision about whether to do so;

•

limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate or prevent us from carrying out capital spending that is necessary or important to our growth strategy and efforts to improve operating margins or our business; and

•

place us at a competitive disadvantage compared to any competitors that have less debt or comparable debt at more favorable interest rates and that, as a result, may be better positioned to withstand economic downturns.

In addition, the Indenture governing the Senior Secured Notes, the Term Loan Facility and the ABL Credit Agreement contain restrictive covenants that limit our and our subsidiaries’ ability to engage in activities that may be in our long-term best interests.

Restrictive covenants in the Indenture governing the Senior Secured Notes, the Term Loan Facility and the ABL Credit Agreement could restrict our operating flexibility.

The Indenture governing the Senior Secured Notes, the Term Loan Facility credit agreement (the “Term Loan Credit Agreement”) and the ABL Credit Agreement contain covenants that limit our ability to take certain actions. These restrictions may limit our ability to operate our businesses and may prohibit or limit our ability to enhance our operations or take advantage of potential business opportunities as they arise.

The Indenture governing the Senior Secured Notes, Term Loan Credit Agreement and the ABL Credit Agreement contain restrictive covenants that, among other things, limit our and/or our restricted subsidiaries’ ability to:

•

incur additional indebtedness or issue certain preferred stock;

•

pay dividends, redeem stock or make other distribution;

•

make other restricted payments or investments;

•

create liens on assets;

•

transfer or sell assets;

•

create restrictions on payment of dividends or other amounts by us to our restricted subsidiaries;

•

engage in certain mergers, consolidations or amalgamations of the Parent Guarantor or the Co-Issuers;

•

engage in certain transactions with affiliates; and

•

designate our subsidiaries as unrestricted subsidiaries.

In addition, under the ABL Credit Agreement, if availability goes below a certain threshold, the Company is required to comply with a minimum “consolidated fixed charge coverage ratio” (as defined in the ABL Credit Agreement).

Our ability to comply with the covenants and restrictions contained in the Indenture governing the Senior Secured Notes, the ABL Credit Agreement and Term Loan Credit Agreement may be affected by economic conditions and by financial, market and competitive factors, many of which are beyond our control. Our ability to comply with these covenants in future periods will also depend substantially on the pricing and sales volume of our products, our success at implementing cost reduction initiatives and our ability to successfully implement our overall business strategy. The breach of any of these covenants or restrictions could result in a default under the Indenture governing the Senior Secured Notes, the ABL Credit Agreement or the Term Loan Credit Agreement that would permit the holders or applicable lenders to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest and any applicable redemption premium. In that case, the applicable borrowers may be unable to borrow under the ABL Credit Agreement or the Term Loan Credit Agreement and the Co-Issuers may be unable to issue Additional Senior Secured Notes under the Indenture, may not be able to repay the amounts due under the ABL Credit Agreement or the Term Loan Facility and may not be able to make payments on the Senior Secured Notes. This could have serious consequences to our financial position, results of operations and/or cash flows and could cause us to become bankrupt or insolvent.

Indebtedness under our Term Loan Credit Agreement, ABL Credit Agreement and Account Purchase Agreement bears interest based on the London Interbank Offered Rate (“LIBOR”), which may be subject to regulatory guidance and/or reform that could cause interest rates under our current or future debt agreements to perform differently than in the past or cause other unanticipated consequences.

The ICE Benchmark Administration, the administrator of LIBOR, announced on March 5, 2021 that it intends to cease publication of LIBOR rates (i) with respect to U.S. dollar LIBOR with interest periods of 1 week and 2 months, after December 31, 2021 and (ii) with respect to U.S. dollar LIBOR with all other interest periods, after June 30, 2023, and as a result, methods of calculating LIBOR are evolving. We may need to renegotiate the terms of our Term Loan Credit Agreement, ABL Credit Agreement and Account Purchase Agreement to replace LIBOR with the new standard, such as the Secured Overnight Financing Rate (SOFR), or to otherwise agree with the agent under such facilities on a new means of calculating interest. At this time we cannot reasonably estimate the expected impact on our business of the discontinuation of LIBOR.

Risks Related to Our Common Stock and This Offering

SBP Varsity Holdings controls us, and its interests may conflict with ours or yours in the future.

Immediately following this offering, SBP Varsity Holdings, an entity controlled by funds advised by The Jordan Company, will beneficially own approximately % of our common stock, or % if the underwriters exercise in full their option to purchase additional shares in this offering. As a result, SBP Varsity Holdings will be able to control the election and removal of directors on the Board and thereby determine our corporate and management policies, including potential mergers or acquisitions, payment of dividends, asset sales, amendment of our certificate of incorporation or bylaws, and other significant corporate transactions for so long as it and its affiliates retain significant ownership of us. This concentration of our ownership may delay or deter possible changes in control of the Company, which may reduce the value of an investment in our common stock. Even when SBP Varsity Holdings and its affiliates cease to own shares of our stock representing a majority of the total voting power, for so long as SBP Varsity Holdings and its affiliates continue to own a significant portion of our stock, it will still be able to significantly influence the composition of our Board and the approval of actions requiring shareholder approval. Accordingly, for such period of time, SBP Varsity Holdings (and indirectly, The Jordan Company) will have significant influence with respect to our management, business plans and policies, including the appointment and removal of our officers, decisions on whether to raise future capital, and amending our charter and bylaws, which govern the rights attached to our common stock. In particular, for so long as SBP

Varsity Holdings and its affiliates continue to beneficially own a significant percentage of our stock, it could cause or prevent a change of control of the Company or a change in the composition of our Board and could preclude any unsolicited acquisition of us. The concentration of ownership could deprive you of an opportunity to receive a premium for your shares of common stock as part of a sale of us and ultimately might affect the market price of our common stock.

In addition, in connection with this offering, we will enter into the Director Nomination Agreement with SBP Varsity Holdings that provides it the right, but not the obligation, to nominate a number of individuals designated for election as our directors at any meeting of our stockholders (the “Varsity Directors”), such that, upon the election of each such individual, and each other individual nominated by or at the direction of our board of directors or a duly-authorized committee of the board, as a director of our company, the number of Varsity Directors serving as directors of our Company will be equal to: (i) if SBP Varsity Holdings and its affiliates together continue to beneficially own at least 50% of the total number of shares of our common stock entitled to vote generally in the election of directors (“Total Outstanding Securities”), the lowest whole number that is greater than 50% of the total number of directors comprising our board of directors; (ii) if SBP Varsity Holdings and its affiliates together continue to beneficially own at least 40% (but less than 50%) of the Total Outstanding Securities, the lowest whole number that is at least 40% of the total number of directors comprising our board of directors; (iii) if SBP Varsity Holdings and its affiliates together continue to beneficially own at least 30% (but less than 40%) of the Total Outstanding Securities, the lowest whole number that is at least 30% of the total number of directors comprising our board of directors; (iv) if SBP Varsity Holdings and its affiliates together continue to beneficially own at least 20% (but less than 30%) of the Total Outstanding Securities, the lowest whole number that is at least 20% of the total number of directors comprising our board of directors; and (v) if SBP Varsity Holdings and its affiliates together continue to beneficially own at least 10% (but less than 20%) of the Total Outstanding Securities, the lowest whole number that is at least 10% of the total number of directors comprising our board of directors. SBP Varsity Holdings may also assign such right to its affiliates. The Director Nomination Agreement will also provide for certain consent rights for SBP Varsity Holdings so long as it and its affiliates own at least 50% of the Total Outstanding Securities. Additionally, the Director Nomination Agreement will also prohibit us from increasing or decreasing the size of our Board without the prior written consent of SBP Varsity Holdings for so long as SBP Varsity Holdings and its affiliates hold at least 40% of the Total Outstanding Securities. See “Certain Relationships and Related Party Transactions—Director Nomination Agreement” for more details with respect to the Director Nomination Agreement.

The Jordan Company, its Affiliated Companies and Exempted Persons (both as defined in the certificate of incorporation) engage in a broad spectrum of activities, including investments in our industry generally. In the ordinary course of their business activities, The Jordan Company, its Affiliated Companies and Exempted Persons (both as defined in the certificate of incorporation) including SBP Varsity Holdings, may engage in activities where their interests conflict with our interests or those of our other shareholders, such as investing in or advising businesses that directly or indirectly compete with certain portions of our business or are suppliers or clients of ours. Our certificate of incorporation to be effective in connection with the closing of this offering will provide that none of The Jordan Company, its Affiliated Companies and Exempted Persons (both as defined in the certificate of incorporation) will have any duty to refrain from engaging, directly or indirectly, in the same business activities or similar business activities or lines of business in which we operate. The Jordan Company, its Affiliated Companies and Exempted Persons (both as defined in the certificate of incorporation) also may pursue acquisition opportunities that may be complementary to our business, and, as a result, those acquisition opportunities may not be available to us. In addition, The Jordan Company, its Affiliated Companies and Exempted Persons (both as defined in the certificate of incorporation) may have an interest in pursuing acquisitions, divestitures and other transactions that, in their judgment, could enhance their investment, even though such transactions might involve risks to you.

We are a holding company with no operations of our own, and we depend on our subsidiaries for cash to fund all of our operations and expenses, including to make future dividend payments, if any.

Our operations are conducted entirely through our subsidiaries, and our ability to generate cash to fund operations and expenses, to pay dividends or to meet debt service obligations is highly dependent on the earnings and the receipt of funds from our subsidiaries through dividends or intercompany loans. Deterioration in the financial condition, earnings or cash flow of our subsidiaries for any reason could limit or impair their ability to pay such distributions to us.

Additionally, the terms of the agreements governing the ABL Credit Agreement and the Senior Secured Notes restrict, and the terms of the agreement governing the Term Loan Facility will restrict, the ability of our subsidiaries to pay dividends, make loans or otherwise transfer assets to us. Furthermore, our subsidiaries are permitted under the terms of the ABL Credit Agreement, Term Loan Credit Agreement and the Senior Secured Notes 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 by such subsidiaries to us. In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock.

We do not currently expect to declare or pay dividends on our common stock for the foreseeable future. Payments of dividends, if any, will be at the sole discretion of our board of directors after taking into account various factors, including general and economic conditions, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications of the payment of dividends by us to our stockholders or by our subsidiaries to us, and such other factors as our board of directors may deem relevant. In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock. To the extent that we determine in the future to pay dividends on our common stock, none of our subsidiaries will be obligated to make funds available to us for the payment of dividends.

The market price of our common stock may be volatile and could decline after this offering.

Volatility in the market price of our common stock may prevent you from being able to sell your shares at or above the price you paid for your shares. The market price of our common stock may fluctuate significantly. Among the factors that could affect our stock price are:

•

industry or general market conditions;

•

domestic and international economic factors unrelated to our performance;

•

changes in our customers’ or their end-users’ preferences;

•

new regulatory pronouncements and changes in regulatory guidelines;

•

lawsuits, enforcement actions and other claims by third parties or governmental authorities;

•

actual or anticipated fluctuations in our quarterly operating results;

•

changes in securities analysts’ estimates of our financial performance or lack of research coverage and reports by industry analysts;

•

action by institutional stockholders or other large stockholders, including future sales;

•

failure to meet any guidance given by us or any change in any guidance given by us, or changes by us in our guidance practices;

•

announcements by us of significant impairment charges;

•

speculation in the press or investment community;

•

investor perception of us and our industry;

•

changes in market valuations or earnings of similar companies;

•

announcements by us or our competitors of significant contracts, acquisitions, dispositions or strategic partnerships;

•

war, terrorist acts and epidemic disease;

•

any future sales of our common stock or other securities; and

•

additions or departures of key personnel.

In particular, we cannot assure you that you will be able to resell your shares at or above your purchase price. The stock markets have experienced extreme volatility in recent years that has been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. In the past, following periods of volatility in the market price of a company’s securities, class action litigation has often been instituted against the affected company. Any litigation of this type brought against us could result in substantial costs and a diversion of our management’s attention and resources, which would harm our business, results of operations, financial condition and cash flows.

Future sales of shares by existing stockholders could cause our stock price to decline.

Sales of substantial amounts of our common stock in the public market following this offering, or the perception that these sales could occur, could cause the market price of our common stock to decline. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

After giving effect to the Stock Split and sale of shares in this offering, we will have outstanding shares of common stock. All of the shares sold pursuant to this offering will be immediately tradable without restriction under the Securities Act of 1933, as amended, or the Securities Act, except for any shares held by “affiliates,” as that term is defined in Rule 144 under the Securities Act, or Rule 144.

The remaining shares of common stock as of October 3, 2021, will be restricted securities within the meaning of Rule 144 under the Securities Act, but will be eligible for resale subject to applicable volume, means of sale, holding period and other limitations of Rule 144 under the Securities Act or pursuant to an exception from registration under Rule 701 under the Securities Act, subject to the lock-up agreements entered into by us, and our executive officers and directors.

Upon completion of this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to register the shares of common stock to be issued under our equity compensation plans and, as a result, all shares of common stock acquired under our plans will also be freely tradable under the Securities Act, subject to the terms of the lock-up agreements, unless purchased by our affiliates. In addition, shares of our common stock will be reserved for future issuances under the equity incentive plans we expect to adopt in connection with this offering.

We and our officers, directors, and holders of substantially all of our common stock have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of . Following the expiration of this 180-day lock-up period, shares of our common stock will be eligible for future sale, subject to the applicable volume, manner of sale, holding period and other limitations of Rule 144 under the Securities Act or pursuant to an exception from registration under Rule 701 under the Securities Act. See “Shares Available for Future Sale” for a discussion of the shares of common stock that may be sold into the public market in the future. In addition, our significant stockholders may distribute shares that they hold to their investors who themselves may then sell into the public market following the expiration of the

lock-up period. Such sales may not be subject to the volume, manner of sale, holding period and other limitations of Rule 144 under the Securities Act. As resale restrictions end, the market price of our common stock could decline if the holders of those shares sell them or are perceived by the market as intending to sell them. Furthermore, stockholders currently representing substantially all of the outstanding shares of our common stock will have the right to require us to register shares of common stock for resale under the Securities Act.

In the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement or employee arrangement or otherwise. Any of these issuances could result in substantial dilution to our existing stockholders and could cause the trading price of our common stock to decline.

Upon listing our shares on Nasdaq, we will be a “controlled company” within the meaning of Nasdaq rules and, as a result, we will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections as those afforded to stockholders of companies that are subject to such governance requirements.

After completion of this offering, SBP Varsity Holdings will continue to control a majority of the voting power of our outstanding common stock. As a result, we will be a “controlled company” within the meaning of the corporate governance standards of Nasdaq. Under these rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements, including:

•

the requirement that a majority of our Board consist of independent directors;

•

the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities;

•

the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and

•

the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.

Although we do not intend to utilize these exemptions immediately following this offering, we may elect to do so in the future. As a result, we may not have a majority of independent directors on our Board, our Compensation Committee and our Nominating & Governance Committee may not consist entirely of independent directors, and our Compensation and Nominating & Governance Committees may not be subject to annual performance evaluations. Accordingly, you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of other companies listed on .

If securities or industry analysts do not publish research or publish misleading or unfavorable research about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If there is no coverage of our company by securities or industry analysts, the trading price for our stock would be negatively impacted. In the event we obtain securities or industry analyst coverage, if one or more of these analysts downgrades our stock or publishes misleading or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price or trading volume to decline.

Future offerings of equity securities may adversely affect the market price of our common stock.

If, in the future, we decide to issue debt or equity securities that rank senior to our common stock, it is likely that such securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock and may result in dilution to owners of our common stock. We and, indirectly, our stockholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings. Thus, holders of our common stock will bear the risk of our future offerings reducing the market price of our common stock and diluting the value of their stock holdings in us.

Anti-takeover provisions in our amended and restated certificate of incorporation and amended and restated by-laws could discourage, delay or prevent a change of control of our company and may affect the trading price of our common stock.

Our amended and restated certificate of incorporation and amended and restated by-laws include a number of provisions that may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. For example, prior to the completion of this offering, our amended and restated certificate of incorporation and amended and restated by-laws will collectively:

•

allow us to authorize the issuance of undesignated preferred stock, the terms of which may be established and the shares of which may be issued without shareholder approval, and which may include supermajority voting, special approval, dividend or other rights or preferences superior to the rights of shareholders;

•

provide for a classified Board with staggered three-year terms;

•

provide that, at any time when The Jordan Company and its affiliated companies beneficially own, in the aggregate, less than % in voting power of our stock entitled to vote generally in the election of directors (“Voting Stock”), directors may only be removed for cause, and only by the affirmative vote of holders of at least 66²/₃% in voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class;

•

prohibit shareholder action by written consent from and after the date on which beneficially own, in the aggregate, less than % in Voting Stock;

•

provide that, for as long as The Jordan Company and its affiliated companies beneficially own, in the aggregate, at least % of Voting Stock, any amendment, alteration, rescission or repeal of our bylaws by our shareholders will require the affirmative vote of a majority in voting power of the outstanding shares of our stock entitled to vote thereon, and at any time when The Jordan Company and its affiliated companies beneficially own, in the aggregate, less than % in voting power of all outstanding shares of Voting Stock, any amendment, alteration, rescission or repeal of our bylaws by our shareholders will require the affirmative vote of the holders of at least 66²/₃% in voting power of all the then-outstanding shares of our stock entitled to vote thereon, voting together as a single class; and

•

establish advance notice requirements for nominations for elections to our Board or for proposing matters that can be acted upon by shareholders at shareholder meetings.

These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if the provisions are viewed as discouraging takeover attempts in the future.

Our amended and restated certificate of incorporation and amended and restated by-laws may also make it difficult for stockholders to replace or remove our management. Furthermore, the existence of the foregoing

provisions, could limit the price that investors might be willing to pay in the future for shares of our common stock. These provisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the best interests of our stockholders.

We do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

As a public company, we do not intend to declare and pay dividends on our common stock for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth, to develop our business, for working capital needs and for general corporate purposes. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares. In addition, our operations are conducted entirely through our subsidiaries. As such, to the extent that we determine in the future to pay dividends on our common stock, none of our subsidiaries will be obligated to make funds available to us for the payment of dividends. Further, the agreements governing the ABL Credit Agreement, Term Loan Credit Agreement and the Senior Secured Notes significantly restrict the ability of our subsidiaries to pay dividends or otherwise transfer assets to us.

Our amended and restated certificate of incorporation will designate the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Our amended and restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us, our stockholders, creditors or other constituents by any of our directors, officers, other employees, agents or stockholders, (iii) any action asserting a claim arising under the General Corporation Law of the State of Delaware, or the DGCL, our amended and restated certificate of incorporation or our amended and restated by-laws, or as to which the DGCL confers jurisdiction on the Court of Chancery of the State of Delaware or (iv) any action asserting a claim that is governed by the internal affairs doctrine, or the Delaware Forum Provision. The Delaware Forum Provision will not apply to any causes of action arising under the Securities Act or the Exchange Act. Our amended and restated certificate of incorporation will further provide that unless we consent in writing to the selection of an alternative forum, the federal district courts of the United States shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act (the Federal Forum Provision). By becoming a stockholder in our company, you will be deemed to have notice of and have consented to the provisions of our amended and restated certificate of incorporation related to choice of forum. The Delaware Forum Provision and the Federal Forum Provision in our amended and restated certificate of incorporation may impose additional litigation costs on stockholders in pursuing any such claims. Additionally, these forum selection clauses in our amended and restated certificate of incorporation may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors, officers or employees, which may discourage the filing of such lawsuits against us and our directors, officers and employees even though an action, if successful, might benefit our stockholders. In addition, while the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce our Federal Forum Provision. If the Federal Forum Provision is found to be unenforceable, we may incur additional costs associated with resolving such matters. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid. The Court of Chancery of the State of Delaware and the federal district courts of the United States may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders. If a court were to find the choice of forum

provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business, results of operations and financial condition.

Investors purchasing common stock in this offering will experience immediate and substantial dilution as a result of this offering and future equity issuances.

The initial public offering price per share will significantly exceed the net tangible book value per share of our common stock outstanding. As a result, investors purchasing common stock in this offering will experience immediate substantial dilution of $ per share, based on an assumed initial public offering price of $ , the midpoint of the price range reflected on the cover of this prospectus. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares. Investors purchasing shares of common stock in this offering will contribute approximately % of the total amount of equity invested in our company, but will own only approximately % of our total common stock immediately following the completion of this offering. In addition, if we issue additional equity securities in the future, investors purchasing common stock in this offering will experience additional dilution.

FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements.” Some of the forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is optimistic,” “intends,” “plans,” “estimates,” “anticipates” or the negative versions of these words or other comparable terms. Forward-looking statements include, without limitation, all matters that are not historical facts. They appear in a number of places throughout this prospectus and include, without limitation, statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, our financial position, results of operations, cash flows, prospects and growth strategies.

Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be outside our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of the market in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. In addition, even if our results of operations, financial condition and cash flows, and the development of the market in which we operate, are consistent with the forward-looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors, including, without limitation, the risks and uncertainties discussed under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus, could cause actual results and outcomes to differ materially from those reflected in the forward-looking statements. Furthermore, new risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this prospectus. Factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:

•

declines, volatility and cyclicality in the U.S. residential and non-residential construction markets;

•

the development of alternatives to distributors of our products in the supply chain and the disruption of our supply chain;

•

price fluctuations in our product costs, particularly with respect to the commodity-based products that we sell;

•

the spread of, and response to, COVID-19, and the inability to predict the ultimate impact on us;

•

general business and economic conditions;

•

risks involved with acquisitions and other strategic transactions, including our ability to identify, acquire, close or integrate acquisition targets successfully;

•

the impact of seasonality and weather-related impacts, including natural disasters or similar extreme weather events;

•

the highly competitive markets in which we compete and consolidation within our industry;

•

our ability to hire, engage and retain key personnel, including sales representatives, qualified branch, district and local managers and senior management;

•

tightening of mortgage lending or mortgage financing requirements or other reductions in the availability of consumer credit or increases in its cost;

•

the availability and cost of freight and energy, such as fuel;

•

our ability to identify, develop and maintain relationships with a sufficient number of qualified suppliers and the potential that our exclusive or restrictive supplier distribution rights are terminated;

•

the ability of our customers to make payments on credit sales;

•

our ability to identify and introduce new products and product lines effectively;

•

our ability to manage our inventory effectively;

•

costs and potential liabilities or obligations imposed by environmental, health and safety laws and requirements;

•

regulatory change and the costs of compliance with regulation;

•

exposure to product liability, construction defect and warranty claims and other litigation and legal proceedings;

•

potential harm to our reputation;

•

safety and labor risks associated with the distribution of our products as well as work stoppages and other disruptions due to labor disputes;

•

impairment in the carrying value of goodwill, intangible assets or other long-lived assets;

•

the domestic and international political environment with regard to trade relationships and tariffs, as well as difficulty sourcing products as a result of import constraints;

•

our ability to operate our business consistently through highly dispersed locations across the United States;

•

interruptions in the proper functioning of our IT systems, including from cybersecurity threats;

•

risks associated with raising capital;

•

our ability to continue our customer relationships with short-term contracts;

•

changes in vendor rebates or other terms of our vender agreements;

•

risks associated with exporting our products internationally;

•

our ability to renew or replace our existing leases on favorable terms or at all;

•

our ability to maintain effective internal controls over financial reporting and remediate any material weaknesses;

•

our substantial indebtedness and the potential that we may incur additional indebtedness;

•

changes in our credit ratings and outlook; and

•

our ability to generate the significant amount of cash needed to service our indebtedness.

USE OF PROCEEDS

We expect to receive net proceeds from this offering of approximately $ , based upon an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Each $1.00 increase or decrease in the assumed initial public offering price of $ per share would increase or decrease the net proceeds that we receive from this offering by approximately $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions payable by us. Similarly, each increase or decrease of one million in the number of shares of common stock offered by us would increase or decrease the net proceeds that we receive from this offering by approximately $ , assuming the assumed initial public offering price remains the same and after deducting the estimated underwriting discounts and commissions payable by us.

We intend to use the net proceeds of approximately $ million that we will receive from this offering to fully repay the amounts outstanding under the ABL Credit Agreement. The remaining proceeds, if any, will be used to repay a portion of the amounts outstanding under the Term Loan Facility. Approximately $600 million of amounts drawn under the Term Loan Facility was used to finance the purchase price for the Reeb Acquisition and related transaction fees and expenses. Approximately $200 million of amounts drawn under the Term Loan and cash on hand was used to finance the DW Acquisition and related transaction fees and expenses. We used approximately $191.6 million in borrowings under the ABL Credit Agreement to finance the Millwork Acquisition and related transaction fees and expenses. See “Prospectus Summary—Recent Developments.” The Term Loan Facility bears a variable interest rate and matures on October 15, 2028. The ABL Credit Agreement bears a variable interest rate and matures on September 30, 2025. See "Management’s Discussion and Analysis of Financial Condition and Results of Operations—Debt Arrangements." Certain of the underwriters or their affiliates are lenders under the Term Loan Facility, and as a result, may receive a portion of the net proceeds in connection with this offering. See “Underwriting.”

DIVIDEND POLICY

As a public company, we do not expect to declare or pay dividends on our common stock for the foreseeable future. Instead, we intend to retain future earnings, if any, to service our debt, finance the growth and development of our business and for working capital and general corporate purposes. Because we are a holding company and have no direct operations, we will only be able to pay dividends from our available cash on hand and any funds we received from our subsidiaries. Our ability to pay dividends to holders of our common stock is limited as a practical matter by our Term Loan Facility, ABL Credit Agreement and Senior Secured Notes, insofar as we may seek to pay dividends out of funds made available to us by our subsidiaries, because our subsidiaries’ debt instruments directly or indirectly restrict our subsidiaries’ ability to pay dividends or make loans to us. Any future determination to pay dividends on our common stock is subject to the discretion of our board of directors and will depend upon various factors, including our results of operations, financial condition, liquidity requirements, capital requirements, level of indebtedness, contractual restrictions with respect to payment of dividends, restrictions imposed by applicable law, general business conditions and other factors that our board of directors may relevant.

CAPITALIZATION

The following table sets forth our cash and cash equivalents and our consolidated capitalization as of October 3, 2021 on:

•

an actual basis; and

•

an as adjusted basis, after giving effect to (i) the Stock Split and (ii) the Reeb Acquisition (which includes the receipt of approximately $600 million in cash proceeds under the Term Loan Facility, all of which was used to finance the Reeb Acquisition and pay related transaction fees and expenses);

•

an as further adjusted basis, after giving effect to (i) the adjustments set forth above and (ii) our sale of shares of common stock in this offering at an assumed initial public offering price of $ per share, and the application of the net proceeds therefrom as described in “Use of Proceeds,” after deducting underwriting discounts and commissions and anticipated offering expenses payable by us.

You should read the following table in conjunction with the sections entitled “Use of Proceeds,” “Summary Historical and Pro Forma Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our financial statements and related notes included in this prospectus.


	As of October 3, 2021
(in thousands, except share data)	Actual			As Adjusted			As Further Adjusted
Cash and cash equivalents(1)(2)	$	33,428		$	33,428		$
Long term debt, including current portions:

ABL Credit Agreement(2)	$	56		$	56		$
Term Loan Facility(1)		0			600,000
Equipment Notes		428			428			428
Accounts Receivable Factoring Agreement		22,594			22,594			22,594
Senior Secured Notes		725,000			725,000			725,000
Total Debt		748,078			1,348,078
Stockholder’s equity:
Common stock, $0.01 par value; 1,000 shares authorized, 1000 issued and outstanding, actual; 1,000 shares authorized, shares issued and outstanding, as adjusted; shares authorized, shares issued and outstanding, as further adjusted		0
Additional paid-in capital		392,403
Accumulated other comprehensive (loss) income		(388	)		(388	)		(388	)
Retained earnings		91,935			91,935			91,935
Total stockholders’ equity		483,950

Total capitalization	$	1,232,028		$			$

(1)	On an as adjusted and as further adjusted basis, does not reflect the receipt of $200 million in proceeds under the Term Loan Facility and the payment of $225 million in cash to fund the DW Acquisition.

(2)	On an as adjusted and as further adjusted basis, does not reflect the receipt of $191.6 million in proceeds under the ABL Credit Agreement to fund the Millwork Acquisition.

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

The following unaudited pro forma condensed combined financial statements of the Company are presented to include the impacts of two separate transactions and each of their respective financing impacts.

The first transaction reflects the acquisition by SBP Varsity Holdings, L.P. (“SBP Varsity Holdings”), an entity controlled by funds advised by The Jordan Company, L.P., from existing equityholders of 100% of the equity interests of Specialty Building Products, LLC, the then-ultimate parent company of Specialty Building Products Holdings, LLC (“SBP Predecessor”), a Delaware limited liability company and the holding company through which we control our operating subsidiaries (such acquisition, the “TJC Acquisition”). The TJC Acquisition closed on January 21, 2021. The Company was determined to be the accounting acquirer in connection with the TJC Acquisition and SBP Predecessor’s historical assets and liabilities are reflected at fair value as of January 21, 2021, the closing date of the TJC Acquisition. As the Company had not conducted operations prior to consummation of the TJC Acquisition on January 21, 2021, SBP Predecessor is deemed “predecessor” of the Company and its subsidiaries for financial reporting purposes.

The second transaction reflects our acquisition of the Reeb Companies, which was consummated on October 15, 2021. We refer to this acquisition as the “Reeb Acquisition”.

The following unaudited pro forma condensed combined financial information has been prepared in accordance with Article 11 of Regulation S-X, Pro Forma Financial Information, as amended by the final rule, Release No. 33-10786 “Amendments to Financial Disclosures about Acquired and Disposed Businesses”, which is herein referred to as Article 11, and are being provided pursuant to Rule 3-05 of Regulation S-X.

SBP Predecessor’s 2020 fiscal year began on December 30, 2019 and ended on January 3, 2021, based on SBP Predecessor’s policy of ending the fiscal year on the Sunday nearest to December 31. Conversely, the Reeb Companies have a calendar fiscal year-end and interim periods based on a calendar year-end. For purposes of the unaudited pro forma condensed combined financial statements herein, “Fiscal Year 2020” means the fiscal year-ended January 3, 2021 for SBP Predecessor and the fiscal year-ended December 31, 2020 for the Reeb Companies. Similarly, references to “Fiscal Q3 2021” in the pro forma financial statements refers to the SBP Predecessor period from January 4, 2021 to January 20, 2021 and the Company’s period from January 21, 2021 to October 3, 2021 and the Reeb Companies’ nine months ended September 30, 2021. References to “Fiscal Q3 2020” in the pro forma financial statements refer to the SBP Predecessor nine-months ended October 4, 2020 and the Reeb Companies’ nine-months ended September 30, 2020.

The unaudited pro forma condensed combined balance sheet as of Fiscal Q3 2021 combines the historical balance sheets of the Company, which already includes the impact of the TJC Acquisition which closed on January 21, 2021, and the Reeb Acquisition on a pro forma basis as if it had been consummated on the last day of Fiscal Q3 2021. The unaudited pro forma condensed combined statements of operations of the Company for Fiscal 2020, Fiscal Q3 2021 and Fiscal Q3 2020 combine the historical statements of operations of the Company, SBP Predecessor and the Reeb Companies on a pro forma basis as if each had been consummated on December 30, 2019, the beginning of the earliest period presented.

The TJC Acquisition and the Reeb Acquisition and related financing transactions are summarized below:

The TJC Acquisition

On January 21, 2021, SBP Varsity Holdings acquired 100% of the equity interests of Specialty Building Products, LLC from its existing shareholders with a base purchase price of $1.1 billion, including debt assumed. The acquisition date fair value of consideration transferred was approximately $451 million, which consisted of cash consideration of approximately $428 million and rollover equity with a fair value of approximately $23 million, resulting in TJC obtaining a controlling interest in Specialty Building Products Holdings, LLC and a

change in control event. The Company was incorporated in December 2020 to serve as an acquisition vehicle in connection with the acquisition by SBP Varsity Holdings from existing equityholders of 100% of the equity interests of Specialty Building Products, LLC, the then-ultimate parent company of Specialty Building Products Holdings, LLC, a Delaware limited liability company and the holding company through which we control our operating subsidiaries. As a result, the Company is controlled by TJC. The transaction has been treated as a business combination in accordance with ASC 805 Business Combinations; however, the purchase price allocation has not been completed as of the date of this filing due to the final calculation of the deferred tax liability. In connection with the acquisition, on January 20, 2021, SBP Predecessor amended the senior secured note to allow for an additional borrowing of $75 million, which was used to partially fund the transaction.

The pro forma financial information gives effect to the TJC Acquisition, which includes adjustments for the following (collectively, the “TJC Transaction Accounting Adjustments”):

•

SBP Varsity Holdings’ acquisition of Specialty Building Products, LLC a base purchase price of approximately $1.1 billion.

•

Application of the acquisition method of accounting under the provisions of ASC 805

•

Additional senior secured note borrowing of $75 million by Specialty Building Products Holdings, LLC, as Borrower Representative

•

Non-recurring transaction costs

•

Non-recurring compensation expense associated with the accelerated vesting of the stock unit awards

•

Management fee charged by The Jordan Company

The Reeb Acquisition

On October 15, 2021, the Company closed its acquisition of the Reeb Companies for an estimated purchase price of approximately $575 million in cash.

The transaction will be treated as a business combination in accordance with ASC 805 Business Combinations; however, the valuation and treatment of consideration paid, acquired assets, intangible assets and assumed liabilities has not been finalized.

Management has conducted an initial review of the accounting policies of the Reeb Companies to determine if differences in accounting policies require reclassification adjustments to conform to the Company’s accounting policies and did not become aware of any material differences between the accounting policies of the Company and the Reeb Companies, other than the adoption of new accounting pronouncements.

Actual results may differ from unaudited pro forma condensed combined financial information provided herein once the Company has determined the final purchase price for the Reeb Companies, has finalized the required valuation and purchase price allocations and has identified any additional conforming accounting policy changes for the Reeb Companies. There can be no assurance that such finalization will not result in material changes.

The pro forma financial information gives effect to the Reeb Acquisition, which includes adjustments for the following (collectively, the “Reeb Transaction Accounting Adjustments”):

•

Application of the acquisition method of accounting under the provisions of ASC 805

•

The impacts of $600 million of the new term loan that was used to finance the Reeb Acquisition

For each of the TJC Acquisition and the Reeb Acquisition, the pro forma adjustments and allocation of purchase price are preliminary, are based on management’s current estimates of the fair value of the assets acquired or to be acquired and liabilities assumed or to be assumed, and are based on all available information, including preliminary work performed by independent valuation specialists. There can be no assurance that such finalization will not result in material changes.

Assumptions and estimates underlying the unaudited pro forma adjustments set forth in the unaudited pro forma condensed combined financial statements are described in the accompanying notes. The unaudited pro forma adjustments represent management’s estimates based on information available as of the date of these unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and analyses are performed. The unaudited pro forma condensed combined financial statements should be read in conjunction with the Company’s, SBP Predecessor’s and the Reeb Companies’ historical combined financial statements contained elsewhere in this Prospectus.

The estimated income tax rate applied to the pro forma adjustments is 25%. The estimated pro forma blended statutory rate, and all other tax amounts are stated at their historical amounts as the combined company’s overall effective tax rate has not yet been determined.

The following unaudited pro forma condensed combined financial statements are provided for illustrative purposes only and are based on available information and assumptions that the Company’s management believes are reasonable. They do not purport to represent what the actual consolidated results of operations or the consolidated financial position of the Company would have been had each of the TJC Acquisition and the Reeb Acquisition and their related financing transactions occurred on the dates indicated, or on any other date, nor are they necessarily indicative of the Company’s future consolidated results of operations or consolidated financial position after each of the TJC Acquisition and the Reeb Acquisition and their related financing transactions. The Company’s actual financial position and results of operations after these two transactions will differ, perhaps significantly, from the pro forma amounts reflected herein due to a variety of factors, including access to additional information, changes in value not currently identified and changes in operating results of the Company and the Reeb Companies following the date of the unaudited pro forma condensed combined financial statements.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET


	As of October 3, 2021
(in thousands, except par value and share amounts)	Specialty Building Products, Inc.		Reeb Companies		Reeb Transaction Accounting Adjustments				Pro Forma Combined
Assets
Current assets:
Cash and cash equivalents	$	33,428	$	8,709	$	(43	)	(gg)	$	42,094
Accounts receivable, net		300,625		49,390		—				350,015
Inventories		308,047		67,587		—				375,634
Prepaid expenses and other current assets		43,257		1,668		(2	)	(gg)		44,923

Total current assets		685,357		127,354		(45	)			812,666
Property and equipment, net		64,861		81,124		(37,124	)	(gg)(bb)		108,861
Operating lease right-of-use asset, net		106,482		—		73,470		(ee)		179,952
Intangible assets, net		571,911		—		243,800		(aa)		815,711
Goodwill		256,093		99		223,554		(ff)		479,746
Other long-term assets		727		531		—				1,258

Total assets	$	1,685,431	$	209,108	$	503,655			$	2,398,194

Liabilities and Stockholders’ and Member Equity
Current liabilities:
Account payable		112,500		12,979		—				125,479
Accrued expenses and other liabilities		58,539		39,627		—				98,166
Factor loan payable		22,594		—		—				22,594
Line of credit		56		—		—				56
Current debt		399		27,285		(10,660	)	(gg)		17,024
Current finance liabilities		5,596		—		—				5,596
Current operating lease liabilities		15,055		—		8,360		(ee)		23,415

Total current liabilities		214,739		79,891		(2,300	)			292,330
Long-term debt, net of debt issuance costs		755,309		32,698		537,364		(gg)(cc)		1,325,371
Long-term operating lease liabilities		89,907		—		65,110		(ee)		155,017
Long-term finance lease liabilities		15,590		—		—				15,590
Deferred tax liability		123,308		—		—				123,308
Other long-term liabilities		526		1,645		(1,645	)	(gg)		526

Total liabilities	$	1,199,379	$	114,234	$	598,529			$	1,912,142

Commitments and contingencies
Stockholders’ and member equity
Common stock		—		65		(65	)	(dd)		—
Additional paid in capital		393,401		19,500		(19,500	)	(dd)		393,401
Accumulated other comprehensive (loss) income		1,511		—		—				1,511
Retained earnings (accumulated deficit)		91,140		59,633		(59,633	)	(dd)		91,140

Total stockholders’ and member equity	$	486,052	$	79,198	$	(79,198	)		$	486,052

Non-controlling interest		—		15,676		(15,676	)	(gg)		—

Total liabilities and stockholders’ and member equity	$	1,685,431	$	209,108	$	503,655			$	2,398,194

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS


	Fiscal Year 2020
(in thousands, except share and per share data)	Specialty Building Products Holdings, LLC			TJC Transaction Accounting Adjustments				Pro Forma Combined (TJC Acquisition only)			Reeb Companies		Reeb Transaction Accounting Adjustments				Pro Forma Combined
Net sales	$	1,670,070		$	—			$	1,670,070		$	381,070	$	—			$	2,051,140
Cost of sales		1,323,201			396		(a)		1,323,597			261,174		(2,201	)	(i)		1,582,570

Gross profit		346,869			(396	)			346,473			119,896		2,201				468,570
Distribution expenses		120,992			2,998		(a)		123,990			31,571		8,873		(d)(i)		164,434
Selling expenses		57,640			69		(a)		57,709			21,054		—				78,763
General and administrative expenses		71,232			35,943		(a)(g)		107,175			36,846		4,538		(i)(j)		148,559
Amortization of intangible assets		15,312			20,549		(b)		35,861			—		15,588		(e)		51,449
Business acquisition and other related costs		—			—				—			—		—				—
Other operating income		(1,020	)		—				(1,020	)		101		—				(919	)

Income from operations		82,713			(59,955	)			22,758			30,324		(26,798	)			26,284
Interest expense/(income), net		54,798			(241	)	(c)		54,557			3,826		23,851		(f)(i)		82,234

Income (loss) before income taxes		27,915			(59,714	)			(31,799	)		26,498		(50,649	)			(55,950	)
Income tax expense (benefit)		9,896			(14,929	)	(h)		(5,033	)		485		(6,159	)	(h)		(10,707	)

Net income (loss)		18,019			(44,785	)			(26,766	)		26,013		(44,490	)			(45,243	)
Net income (loss) attributable to noncontrolling interests		—			—				—			1,063		(1,063	)	(i)		—

Net income (loss), net of noncontrolling interest	$	18,019		$	(44,785	)		$	(26,766)		$	24,950	$	(43,427	)		$	(45,243	)

Earnings (loss) per share:
Basic and Diluted																	$	—
Weighted average number of shares outstanding:
Basic																		—
Diluted																		—


	Fiscal Q3 2021
(in thousands, except share and per share data)	Specialty Building Products, Inc.		Specialty Building Products Holdings, LLC			TJC Transaction Accounting Adjustments				Pro Forma Combined (TJC Acquisition only)			Reeb Companies			Reeb Transaction Accounting Adjustments				Pro Forma Combined
Net sales	$	1,778,140	$	114,608		$	—			$	1,892,748		$	347,884		$	—			$	2,240,632
Cost of sales		1,396,799		89,587			—				1,486,386			228,150			(1,661	)	(i)		1,712,875

Gross profit		381,341		25,021			—				406,362			119,734			1,661				527,757
Distribution expenses		83,548		6,575			182		(a)		90,305			27,520			6,763		(d)(i)		124,588
Selling expenses		51,861		2,685			—				54,546			18,017			—				72,563
General and administrative expenses		58,755		3,989			1,039		(g)		63,783			36,652			(88	)	(i)		100,347
Amortization of intangible assets		25,113		1,007			970		(b)		27,090			—			11,691		(e)		38,781
Business acquisition and other related costs		6,549		26,182			(32,143	)	(g)		588			—			(140	)	(j)		448
Other operating income		47		(488	)		—				(441	)		(4	)		—				(445	)

Income from operations		155,468		(14,929	)		29,952				170,491			37,549			(16,565	)			191,475
Interest expense/(income), net		29,968		2,536			(11	)	(c)		32,493			674			19,997		(f)(i)		53,164

Income (loss) before income taxes		125,500		(17,465	)		29,963				137,998			36,875			(36,562	)			138,311
Income tax expense (benefit)		34,360		127			7,491		(h)		41,978			404			79		(h)		42,461

Net income (loss)		91,140		(17,592	)		22,472				96,020			36,471			(36,641	)			95,850
Net income (loss) attributable to noncontrolling interests		—		—			—				—			2,921			(2,921	)	(i)		—

Net income (loss), net of noncontrolling interest	$	91,140	$	(17,592	)	$	22,472			$	96,020		$	33,550		$	(33,720	)		$	95,850

Earnings (loss) per share:
Basic and Diluted																				$	—
Weighted average number of shares outstanding:
Basic																					—
Diluted																					—


	Fiscal Q3 2020
(in thousands, except share and per share data)	Specialty Building Products Holdings, LLC		TJC Transaction Accounting Adjustments				Pro Forma Combined (TJC Acquisition only)			Reeb Companies			Reeb Transaction Accounting Adjustments				Pro Forma Combined
Net sales	$	1,252,053	$	—			$	1,252,053		$	278,919		$	—			$	1,530,972
Cost of sales		995,482		297		(a)		995,779			194,262			(1,650	)	(i)		1,188,391

Gross profit		256,571		(297	)			256,274			84,657			1,650				342,581
Distribution expenses		89,762		2,249		(a)		92,011			22,421			6,674		(d)(i)		121,106
Selling expenses		42,794		52		(a)		42,846			16,221			—				59,067
General and administrative expenses		42,768		34,993		(a)(g)		77,761			25,909			4,538		(i)(j)		108,208
Amortization of intangible assets		11,092		15,412		(b)		26,504			—			11,691		(e)		38,195
Business acquisition and other related costs								—			—			—				—
Other operating income		29		—				29			(93	)		—				(64	)

Income from operations		70,126		(53,003	)			17,123			20,199			(21,253	)			16,069
Interest expense/(income), net		43,538		(181	)	(c)		43,357			3,554			17,215		(f)(i)		64,126

Income (loss) before income taxes		26,588		(52,822	)			(26,234	)		16,645			(38,468	)			(48,057	)
Income tax expense (benefit)		5,840		(13,206	)	(h)		(7,366	)		73			(4,275	)	(h)		(11,568	)

Net income (loss)		20,748		(39,616	)			(18,868	)		16,572			(34,193	)			(36,489	)
Net income (loss) attributable to noncontrolling interests		—		—				—			171			(171	)	(i)		—

Net income (loss), net of noncontrolling interest		20,748		(39,616	)			(18,868	)		16,401			(34,022	)			(36,489	)

Earnings (loss) per share:
Basic and Diluted																	$	—
Weighted average number of shares outstanding:
Basic																		—
Diluted																		—

NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

(in thousands, except share and per share amounts or otherwise noted)

Note 1. Description of the Transactions and Basis of Presentation

The TJC Acquisition Overview

On January 21, 2021, SBP Varsity Holdings acquired 100% of the equity interests of Specialty Building Products, LLC from its existing shareholders for a fair value of consideration transferred of approximately $451 million, resulting in SBP Varsity Holdings obtaining a controlling interest in the Company, which resulted in a change in control event. The transaction has been treated as a business combination in accordance with ASC 805 Business Combinations; however, the valuation and treatment of consideration paid, acquired assets, intangible assets and assumed liabilities has not been finalized. In connection with the acquisition, on January 20, 2021, SBP Predecessor amended the senior secured note to allow for an additional borrowing of $75 million, which was used to partially fund the transaction.

As the Company had not conducted operations prior to consummation of the TJC Acquisition on January 21, 2021, SBP Predecessor is deemed “predecessor” of the Company and its subsidiaries for financial reporting purposes. Accordingly, the historical financial information presented in this prospectus (i) for periods prior to January 21, 2021, represents that of SBP Predecessor and its subsidiaries (referred to herein as the “Predecessor Periods”), and (ii) for periods after January 21, 2021, represents that of the Company and its subsidiaries, including SBP Predecessor, as successor (referred to herein as the “Successor Period”).

Reeb Acquisition Overview

On October 15, 2021, the Company acquired all the equity interests of the Reeb Companies for a purchase price of $575 million, subject to customary working capital adjustments. The cash consideration for the Reeb Acquisition was funded through a new debt issuance as described below.

New Debt Issuance

In connection with the Reeb Acquisition, we borrowed $800 million in the form of a new term loan to finance the acquisition. Approximately $600 million of the gross proceeds received from the new term loan were used to finance the Reeb Acquisition and pay related fees and expenses, and the remainder was used to partially fund an additional acquisition in the fourth quarter of 2021. In the accompanying unaudited pro forma condensed combined financial statements, the Company has only reflected the impacts of $600 million of the financing as the remainder is not associated with the Reeb Acquisition.

The unaudited pro forma condensed combined financial statements for Fiscal 2020 are derived from the historical consolidated financial statements of SBP Predecessor and the historical combined financial statements of the Reeb Companies. The unaudited pro forma condensed combined financial statements for Fiscal Q3 2021 are derived from the historical consolidated financial statements of the Company and SBP Predecessor and the historical combined financial statements of the Reeb Companies. The unaudited pro forma condensed consolidated financial statements for Fiscal Q3 2020 are derived from the historical consolidated financial statements of SBP Predecessor.

Note 2. Accounting Policies

As part of preparing these unaudited pro forma condensed combined financial statements, the Company conducted an initial review of the accounting policies of Reeb to determine if differences in accounting policies require reclassification of results of operations or reclassification of assets or liabilities to conform to the

Company’s accounting policies and classifications. During the preparation of these unaudited pro forma condensed combined financial statements, the Company did not become aware of any material differences between accounting policies of the Company and Reeb, other than the adoption of new accounting pronouncements.

The pro forma financial data may not reflect all reclassifications necessary to conform the Company’s presentation to that of Reeb as the Company is still in process of conforming Reeb’s financial data as of the date of this Prospectus. When the review is finalized, the Company may identify differences between the accounting policies of the two companies that, when conformed, could have a material impact on the combined financial statements.

As the TJC Acquisition was the acquisition of the existing entity (SBP Predecessor), there was no required conforming of accounting policies.

Note 3. Preliminary Purchase Consideration and Purchase Price Allocation

Under the acquisition method of accounting, the identifiable assets acquired and liabilities assumed are recorded at the acquisition date fair values; however, the initial purchase price allocation based on the fair value of assets acquired and liabilities assumed has not been finalized. Management, with the assistance of a third-party valuation firm, has estimated the initial purchase price allocation presented within the unaudited pro forma condensed consolidated financial statements.

The table below represents management’s estimated purchase price allocation of consideration transferred to the assets acquired and liabilities assumed in the Reeb Acquisition (in thousands):


Estimated FV of Consideration	$	577,000

Assets Acquired
Cash		1,736
Accounts Receivable		40,963
Inventory		66,757
Prepaid & other		2,585
Property and Equipment		44,000
Intangibles		243,800
Other long-term assets		73,471

Total Assets Acquired		473,312

Liabilities Assumed
Accounts payable		16,305
Accrued expenses		30,927
Other current liabilities		8,360
Other long-term liabilities		68,091

Total Liabilities Assumed		123,683

Net Assets Acquired	$	349,629
Excess Fair Value attributed to Goodwill	$	227,371

The final total consideration and fair value allocated to the Reeb Companies’ assets and liabilities could differ materially from the preliminary purchase price allocation presented in these unaudited pro forma condensed combined financial statements. A decrease in the fair value of the Reeb Companies’ assets or an increase in the fair value of the Reeb Companies’ liabilities from management’s initial purchase price allocation presented would result in a dollar-for-dollar corresponding increase in the amount of goodwill that will result from the Reeb Acquisition. In addition, if the value of the property and equipment and identifiable intangible assets is higher than management’s initial purchase price allocation included in these unaudited pro forma condensed combined financial statements, it may result in higher depreciation and amortization expense than is presented in the unaudited pro forma condensed combined statements of operations. Any such increases could be material and could result in the Company’s actual future financial condition and results of operations differing materially from those presented in the unaudited pro forma condensed combined financial statements.

Note 4. Transaction Accounting Adjustments to Unaudited Pro Forma Condensed Combined Financial Statements

The adjustments included in the unaudited pro forma condensed combined statement of operations for Fiscal 2020, Fiscal Q3 2021, and Fiscal Q3 2020 are as follows:

(a) Depreciation expense—TJC Acquisition

The pro forma adjustment to depreciation expense represents increased depreciation expense resulting from the step-up in value of property and equipment to its preliminary estimated fair value. Depreciation expense is calculated on a straight-line basis over a weighted-average useful life estimate of 8.7 years. The pro forma adjustments for the periods presented are as follows (in thousands):


	Fiscal Year 2020						Fiscal Q3 2021		Fiscal Q3 2020
	Historical Depreciation		Preliminary Estimated Depreciation		Transaction Accounting Adjustment		Transaction Accounting Adjustment		Transaction Accounting Adjustment
Depreciation in cost of sales		1,044		1,440		396		—		297
Depreciation in distribution expenses		4,922		7,920		2,998		182		2,249
Depreciation in selling expenses		180		249		69		—		52
Depreciation in general and administrative expenses		1,074		1,458		384		—		288

Total						3,847		182		2,886

(b) Intangible amortization expense—TJC Acquisition

The pro forma adjustment to amortization expense represents the net impact of: (1) the estimated amortization expense associated with the estimated fair values of the Company’s acquired amortizable intangible assets using the remaining useful lives; less the (2) removal of previously amortized intangible assets that were not valued in the TJC Acquisition. The acquired intangible assets include trade names (estimated fair value of $241.3 million and estimated 20 year life), customer relationships (estimated fair value of $350.4 million and estimated 15 year life), technology and license related (estimated fair value of $4.5 million and estimated useful lives from one to seven years) and noncompete agreements (estimated fair value of $1.1 million and estimated useful life of five years). The pro forma adjustments for the periods presented are as follows (in thousands):

Fiscal Year 2020

Fiscal Q3 2021

Fiscal Q3 2020

Historical
Amortization

Preliminary
Estimated
Amortization

Transaction
Accounting
Adjustment

Amortization of intangible assets, net

15,804

36,353

20,549

970

15,412

(c) Amortization of premium, net and deferred financing—TJC Acquisition

The $75 million of debt incurred in conjunction with the TJC Acquisition was issued at a premium of $3.0 million and included $2.2 million of deferred financing costs and carries a fixed rate of 6.375% and matures in September 2026. The pro forma deferred financing costs are amortized over 5.5 years using the effective interest rate method. The pro forma adjustment also includes the estimated premium amortization of Senior Secured Notes over a period of 5.5 years using the effective interest rate method, net of the estimated increased interest expense associated with the additional indebtedness that was incurred by the Company for the TJC Acquisition (in thousands):


	Fiscal Year 2020			Fiscal Q3 2021			Fiscal Q3 2020
	Transaction Accounting Adjustment			Transaction Accounting Adjustment			Transaction Accounting Adjustment
Premium amortization, net of incremental interest		(446	)		(21	)		(335	)
Amortization of deferred financing costs		205			10			154

Interest expense/(income), net		(241	)		(11	)		(181	)

(d) Depreciation expense—Reeb Acquisition

The pro forma adjustment represents increased depreciation expense resulting from the step-up in value of property and equipment to management’s initial purchase price allocation. Depreciation expense is estimated on a straight-line basis over a weighted-average estimated useful life of 8.0 years. The pro forma adjustment is estimated to be approximately $2.5 million, $1.9 million, and $1.9 million of additional expense for Fiscal 2020, Fiscal Q3 2021, and Fiscal Q3 2020, respectively.

(e) Intangible amortization expense—Reeb Acquisition

The pro forma adjustment to amortization expense represents the impact of the estimated amortization expense associated with amortizable intangible assets included in management’s initial purchase price allocation, including trade names (estimated at $77.3 million and estimated 20-year life), developed technology (estimated at $9.7 million and estimated 8-year weighted average useful life) and customer relationships (estimated at $156.8 million and estimated 15-year life). The pro forma adjustment is estimated as $15.6 million, $11.7 million, and $11.7 million for Fiscal 2020, Fiscal Q3 2021, and Fiscal Q3 2020, respectively.

(f) Interest and financing expenses—Reeb Acquisition

The pro forma adjustment represents the estimated increase in interest expense and amortization of deferred financing costs of $13.3 million (amortized over seven years using the effective interest rate method) associated with the additional $600 million of indebtedness that was incurred by the Company to finance the Reeb Acquisition, net of interest expense for certain Reeb related party debt not assumed in the Reeb Acquisition (in thousands):


	Fiscal Year 2020			Fiscal Q3 2021			Fiscal Q3 2020
	Transaction Accounting Adjustment			Transaction Accounting Adjustment			Transaction Accounting Adjustment
Amortization of deferred financing costs		1,791			1,331			1,343
Interest expense		25,827			19,332			19,370
Related party interest		(647	)		(430	)		(515	)

Total		26,971			20,233			20,198

The $600 million of indebtedness carries a variable rate of interest. The rate used to estimate the pro forma interest expense was 4.25% based on the prevailing rates at issuance. An increase of 0.125% in the rate assumed would result in increased interest expense of $26.5 million, $19.9 million, and $19.9 million in the unaudited pro forma condensed combined statement of operations for Fiscal Year 2020, Fiscal Q3 2021 and Fiscal Q3 2020, respectively. This increase in interest expense in each period would cause a corresponding (increase)/decrease in net (loss)/income.

(g) Stock Compensation and Transaction Related Expenses—TJC Acquisition

The Fiscal 2020 and Fiscal Q3 2020 pro forma adjustment represents nonrecurring stock compensation expense, nonrecurring TJC Acquisition seller fees, and nonrecurring TJC Acquisition buyer fees expensed in Fiscal Q3 2021. The Fiscal 2020 and Fiscal Q3 2020 pro forma adjustment also includes the recurring TJC Management fee not charged in the year ended January 3, 2021. The Fiscal Q3 2021 pro forma adjustment represents the reversal of the nonrecurring expenses adjusted for in the Fiscal 2020 pro forma that were recognized in Fiscal Q3 2021 and the TJC management fee for the nine months ended October 3, 2021 (in thousands):


	Fiscal Year 2020		Fiscal Q3 2021			Fiscal Q3 2020
	Transaction Accounting Adjustment		Transaction Accounting Adjustment			Transaction Accounting Adjustment
Stock compensation expense		14,874		(14,874	)		14,874
Transaction related expenses		17,269		(17,269	)		17,269
TJC Management Fee		3,416		1,039			2,562

Total		35,559		(31,104	)		34,705

(h) Taxes—Combined impact of TJC Acquisition and Reeb Acquisition

The historical Reeb Companies were a pass-through S-Corporation for federal income taxes. Accordingly, their historical financial statements do not include a provision for federal taxes. In order to estimate the pro forma tax impacts of the Reeb Acquisition, Reeb’s historical income tax was estimated using a combined blended U.S. federal and state statutory tax rate of 25%.

The pro forma income tax effects related to the additional pro forma depreciation, amortization and other operating expense adjustments from the TJC Acquisition and the Reeb Acquisition are calculated using an estimated pro forma combined blended U.S. federal and state statutory tax rate of 25%. We have not finalized the deductibility of any transaction related expenses for tax purposes.

The Company estimates that a portion of the additional interest expense recorded for pro forma purposes would not have been deductible for tax purposes based on limitations on interest deductibility.

The Fiscal 2020 net impact of the above adjustments is a pro forma tax benefit of approximately $20.4 million, which is comprised of a benefit of approximately $15.0 million from the TJC Acquisition and a benefit of approximately $6.2 million from the Reeb Acquisition.

The Fiscal Q3 2021 net impact of the above adjustments is a pro forma tax expense of approximately $8.1 million, which is comprised of an expense of approximately $7.5 million from the TJC Acquisition and an expense of approximately $0.1 million from the Reeb Acquisition.

The Fiscal Q3 2020 net impact of the above adjustments is a pro forma tax benefit of approximately $16.9

million, which is comprised of an expense of approximately $13.2 million from the TJC Acquisition and an

expense of approximately $4.3 million from the Reeb Acquisition.

(i) Non-controlling interest and related adjustments

Prior to the Reeb Acquisition, the Reeb Companies consolidated certain variable interest entities that they did not wholly-own, therefore they recorded Net income attributable to noncontrolling interests in their historical Combined Statements of Operations included elsewhere in this Prospectus. These consolidated variable interest entities are not being acquired by the Company as part of the Reeb Acquisition, therefore the impacts of these entities have been removed from the unaudited pro forma condensed combined financial statements.


	Fiscal Year 2020			Fiscal Q3 2021			Fiscal Q3 2020
	Transaction Accounting Adjustment			Transaction Accounting Adjustment			Transaction Accounting Adjustment
Cost of sales		(2,201	)		(1,661	)		(1,650	)
Distribution expenses		6,397			4,906			4,817
General and administrative expenses		(13	)		(88	)		(13	)
Interest Expense/(Income), net		(3,120	)		(236	)		(2,983	)
Net income (loss) attributable to noncontrolling interests		(1,063	)		(2,921	)		(171	)

(j) Buyer Fees – Reeb Acquisition

The Fiscal 2020 and Fiscal Q3 2020 pro forma adjustment represents the nonrecurring Reeb Acquisition buyer fees that would not have been expensed in the period, estimated as $4.6 million. The Fiscal Q3 2021 pro forma adjustment represents the reversal of $0.1 million of nonrecurring expenses recognized as a Fiscal 2020 pro forma adjustment in the Successor Period.

The adjustments included in the unaudited pro forma condensed combined balance sheet as of Fiscal Q3

2021 are as follows:

(aa) Intangible assets, net – Reeb Acquisition

The pro forma adjustment of $243.8 million represents the amortizable intangible assets included in management’s initial purchase price allocation. The details of the specific assets acquired, and their useful lives is provided in (e) above.

(bb) Property and Equipment, net – Reeb Acquisition

The pro forma adjustment represents the incremental step-up in the value of property and equipment to management’s initial purchase price allocation. The pro forma adjustment is calculated as follows (in thousands):

As of October 3, 2021

Book
Value

Management
Initial
Purchase
Price
Allocation

Reeb
Transaction
Accounting
Adjustments

Property and Equipment, net

24,193

44,000

19,807

(cc) Long term debt, net of debt issuance costs – Reeb Acquisition

The pro forma adjustment of $566.4 million represents the additional indebtedness of $600 million, net of $13.3 million of debt issuance costs for net proceeds of $586.7 million, that was incurred by Specialty Building Products, Inc. for the Reeb Acquisition. The pro forma adjustment also includes a reduction of $20.3 million of certain Reeb related party debt not assumed in the Reeb Acquisition.

(dd) Shareholders’ and Members equity – Reeb Acquisition

The pro forma adjustment of $79.2 million represents the elimination of Reeb Companies historical shareholders’ equity accounts.

(ee) ASC 842 adoption – Reeb Acquisition

The pro forma adjustment represents the lease liability and right-of-use asset balance included in management’s initial purchase price allocation as $73.5 million. The current and long-term portion of the operating lease liability is estimated as $8.4 million and $65.1 million, respectively.

(ff) Goodwill – Reeb Acquisition

The pro forma adjustment of $223.6 million to goodwill reflects adjustments to record management’s initial purchase price allocation of goodwill resulting from the Reeb Acquisition. Goodwill resulting from the acquisition reflects the preliminary estimate of the excess of consideration transferred by Specialty Building Products, Inc. over management’s initial purchase price allocation of the Reeb Companies identifiable assets and liabilities.

(gg) Non-controlling Interest and Related Adjustments

Prior to the Reeb Acquisition, the Reeb Companies consolidated certain variable interest entities that they did not wholly-own, therefore they recorded noncontrolling interests in their historical Balance Sheet included elsewhere in this Prospectus. These consolidated variable interest entities are not being acquired by the Company as part of the Reeb Acquisition, therefore the impacts of these entities have been removed from the unaudited pro forma condensed combined financial statements.


	As of October 3, 2021
	Reeb Transaction Accounting Adjustments
Cash and cash equivalents		(43	)
Prepaid expenses and other current assets		(2	)
Property and Equipment, net		(56,931	)
Current debt		(10,660	)
Long-term debt, net of debt issuance costs		(28,995	)
Other long-term liabilities		(1,645	)
Non-controlling interest		(15,676	)

Note 5. Pro Forma Earnings Per Share

Net income (loss) per share is calculated using the pro forma combined income/(loss) after giving effect to the TJC Acquisition and Reeb Acquisition.

DILUTION

Investors purchasing our common stock in this offering will experience immediate and substantial dilution in the pro forma as adjusted net tangible book value of their shares of common stock. Dilution in pro forma as adjusted net tangible book value represents the difference between the initial public offering price of our common stock and the pro forma as adjusted net tangible book value per share of our common stock immediately after the offering.

Historical net tangible book value per share represents our total tangible assets (total assets excluding goodwill and other intangible assets, net) less total liabilities, divided by the number of shares of outstanding common stock. After giving effect to (i) the Reeb Acquisition, (ii) the filing and effectiveness of our amended and restated certificate of incorporation immediately prior to the closing of this offering and (iii) the sale of shares of common stock in this offering by us at an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), after deducting $ million in underwriting discounts and commissions and estimated offering expenses of $ million, the pro forma as adjusted net tangible book value as of October 3, 2021 would have been approximately $ million, or $ per share. This represents an immediate increase in pro forma as adjusted net tangible book value of $ per share to our existing stockholders and an immediate dilution of $ per share to new investors purchasing common stock in this offering.

The following table illustrates this dilution on a per share basis to new investors.


Assumed initial public offering price per share		$
Pro forma historical net tangible book value per share as of October 3, 2021, after giving effect to the Reeb Acquisition	$
Increase in as adjusted net tangible book value per share attributable to the investors in this offering	$
Pro forma net tangible book value per share after giving effect to this offering	$
Dilution per share to new investors participating in this offering		$

The following table summarizes on the pro forma as adjusted basis described above, as of October 3, 2021, the difference between the number of shares of common stock purchased from us, the total consideration paid or to be paid and the average price per share paid or to be paid by our existing stockholders and new investors in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. As the table shows, new investors purchasing common stock in this offering will pay an average price per share substantially higher than our existing stockholder paid.

Shares Purchased

Total Consideration

Average Price
Per Share

Number

Percent

Amount

Percent

Existing stockholders.

New investors

Total

If the underwriters exercise their option to purchase additional shares of our common stock in full, the percentage of shares of common stock held by existing stockholders will decrease to approximately % of the total number of shares of our common stock outstanding after this offering, and the number of shares held by new investors will increase to , or approximately % of the total number of shares of our common stock outstanding after this offering.

Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase (decrease) total consideration paid by new investors by approximately $ million, assuming that the number of shares offered by the Company, as set forth on the cover page of this prospectus, remains the same and after deducting an incremental $ million in underwriting discounts and commissions. We may also increase or decrease the number of shares we or they are offering. An increase (decrease) of 100,000 in the number of shares offered by us would increase (decrease) total consideration paid by new investors by $ million, assuming that the assumed initial public offering price remains the same, and after deducting an incremental $ million in underwriting discounts and commissions.

To the extent that equity awards are issued under our compensatory stock plans or we issue additional shares of common stock in the future, there will be further dilution to investors participating in this offering.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read in conjunction with the consolidated financial statements included elsewhere in this prospectus. 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 prospectus, particularly in “Risk Factors” and “Forward-Looking Statements.”

Corporate Overview

We believe we are the largest and fastest growing distributor of branded specialty building products in the United States. Over the last ten years, we have grown at a compound annual growth rate (“CAGR”) of 23.0% and transformed our business into a national distribution platform with 38 locations serving 42 states and all provinces in Canada. We serve a critical role and function in the residential building products supply chain and provide value-added services across our footprint. We focus on high growth, specialty product categories including composite decking and railing, exterior siding, exterior trim, weather resistant barriers, moulding and engineered wood products, and many of our products are benefiting from long-term secular growth trends such as investment in outdoor living spaces, material substitution and architectural design. Our products are primarily used in the residential housing market, with balanced exposure across repair and remodel (“R&R”) and new construction markets. We offer our comprehensive portfolio of over 37,000 stock keeping units (“SKUs”) to more than 22,000 customer locations including national, regional and local professional dealers, home improvement retailers and other providers of building products. Our suppliers include many of the leading consumer and trade branded products in the building products industry. Based on our net sales in fiscal year 2020, we estimate that we are nearly three times the size of our largest competitor. In addition, we are a values based organization and have a well-established reputation in the industry.

Basis of Presentation and the TJC Acquisition

Specialty Building Products, Inc. (f/k/a SBP Buyer, Inc.), a Delaware corporation (the “Company”), was incorporated in December 2020 to serve as an acquisition vehicle in connection with the acquisition by SBP Varsity Holdings from existing equityholders of 100% of the equity interests of Specialty Building Products, LLC, the then-ultimate parent company of Specialty Building Products Holdings, LLC (“SBP Predecessor”), a Delaware limited liability company and the holding company through which we control our operating subsidiaries. We refer to this acquisition as the “TJC Acquisition.” The TJC Acquisition closed on January 21, 2021. As the Company had not conducted operations prior to consummation of the TJC Acquisition on January 21, 2021, SBP Predecessor is deemed “predecessor” of the Company and its subsidiaries for financial reporting purposes. Accordingly, the historical financial information presented in this prospectus (i) for periods prior to January 21, 2021, represents that of SBP Predecessor and its subsidiaries (referred to herein as the “Predecessor Periods”), and (ii) for periods after January 21, 2021, represents that of the Company and its subsidiaries, including SBP Predecessor, as successor (referred to herein as the “Successor Period”).

The financial statements included herein have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). All amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations (the “MD&A”) are expressed in U.S. dollars, unless otherwise indicated. Our company has a policy of ending its fiscal year on the Sunday nearest December 31st; the year customarily consist of four 13-week quarters for a total of 52 weeks, however, certain years may consist of 53 weeks. Our 2020 fiscal year was 53 weeks and the year end was January 3, 2021. The Company’s 2019 and 2018 fiscal years were 52 weeks and the year ends were December 29, 2019 and December 30, 2018, respectively.

We manage our business as a single reportable segment. Within our organizational framework, the same operational resources support individual locations, and performance is evaluated at a consolidated level.

Summary of Factors Affecting our Performance

We believe our performance and continued success depend on a number of factors. These factors are also subject to a number of inherent risks and challenges, some of which are discussed below and referenced in the section titled “Risk Factors.”

Impact of COVID-19 on our Operations

Beginning in mid-March of 2020, local, state, provincial and federal authorities began issuing stay-at-home orders in response to the spread of the coronavirus disease, or COVID-19, which quickly spread throughout the United States and worldwide. These government-instituted restrictions, together with the economic volatility and uncertainty the pandemic created, had a significant impact on the United States economy in general and, in particular, the new-build housing market, which initially slowed in certain of our geographies. However, by the end of May 2020, most states started gradually resuming their normal economic activities and the residential housing market rebounded as a result.

These COVID-19 shutdowns have led to higher “do-it-yourself” demand as consumers are spending more time at home. The impact of the pandemic, along with shifts in consumer preferences and design trends, has accelerated repair and remodel spend. We believe that hybrid work models will continue to drive spending inside and outside the home, benefitting all of our product categories.

However, COVID-19 has had a mixed impact on our business, as our ability to effectively satisfy increased consumer demand for our products has been impeded, to a certain extent, by pandemic-related supply chain issues. Specifically, propagation of COVID-19 throughout the world disrupted our ability to procure enough supply to satisfy market demands. As shutdowns of different types and severities were put in place, many of our local and foreign suppliers were forced to idle plants and cut back on production of their goods and services. As restrictions have eased over time, suppliers have slowly started ramping up their operations. A challenging labor market has made this process slower than anticipated, with many not yet operating at pre-COVID capacity. As of today, there is still a significant shortage in supply that continues to hinder our ability to fully satisfy the demand in the market. As a result, the growth in our net sales has accelerated to a lesser degree than it otherwise would have had supply shortages not constrained our ability to fully satisfy the increase in consumer spend. To date, the COVID-19 pandemic has not had a material impact on our expenses or liquidity position. It continues to be difficult to predict the future financial impact of COVID-19 on our net sales, as we cannot predict the duration or scope of the pandemic.

Since the onset of the COVID-19 pandemic, we have focused on protecting the health and safety of our team members while maintaining our operations and continuing to meet the needs of our customers. We were categorized as “essential” by the Cybersecurity and Infrastructure Security Agency of the U.S. Department of Homeland Security and, therefore, were permitted to operate consistent with applicable local, state, provincial and federal orders. We have implemented business continuity and contingency planning measures as we continue to keep our distribution centers operational. Very few of our employees have been required to work remotely, and we have not experienced any outbreaks of COVID-19 at our facilities.

There is still considerable uncertainty regarding the extent and duration of the impact of the COVID-19 pandemic, and the pandemic and related economic impacts may affect our operations in 2021 and 2022, although conditions have improved as compared to 2020. Our access to supply continues to be constrained, as our partners continue to bring resources online to meet market demand. Due to the fluidity and unprecedented and uncertain nature of the pandemic, we cannot predict the full impact of the COVID-19 pandemic on our business or that of our customers and participants in our supply chain, or on economic conditions generally, including the effects on

construction activity. We continue to evaluate and assess the impact of COVID-19 on our business and operations as new facts and circumstances emerge. Overall, we are encouraged by the resilience of our business model which has responded to the very serious challenges, which have arisen as a result of the COVID-19 pandemic.

Residential Construction Activities

Sales of our products are closely tied to residential construction activity, including repair and remodel spending, in the United States and Canada. Activity levels in these markets can be materially affected by general economic and global financial market conditions. In addition, residential construction activity levels are influenced by and sensitive to mortgage availability, the cost of financing a home (in particular, mortgage and interest rates), unemployment levels, household formation rates, residential vacancy and foreclosure rates, existing housing prices, rental prices, housing inventory levels, consumer confidence and government policy and incentives.

Product Mix and Average Selling Price

We sell a variety of products, each with different Gross Profit margin and operating expense profiles. We calculate Gross Profit margin by dividing Gross Profit (net sales less cost of sales) by cost of sales. We define operating expenses as those required to prepare, sell and deliver the product to the customer (i.e., distribution expenses, selling expenses and general and administrative expenses). Our product mix impacts both our Gross Profit margins and our operating expenses. We utilize proprietary business intelligence analytics to optimize our product mix and volume such that it meets our customers’ needs, while ensuring we maintain strong margins.

The average selling prices we are able to obtain for our products affect our results of operations and our margins. Our average selling price can vary by market location, product mix, factors relating to supply and demand, and the actions of our customers and competitors.

Product Line Expansion

Specialty building products are among the fastest growing categories of building products, as customers transition from traditional wood products to products that are more durable and require less maintenance, have lower total cost of ownership, are more aesthetically pleasing and meet stringent jobsite requirements. We continually refine and expand our product offering, focusing on working with innovative brands in the specialty building products industry. We use our existing customer and supplier relationships to expand the product offering at acquired locations and bring new products to existing locations. Expanding our product lines also provides a competitive advantage when we offer products that our competitors do not.

Cost of Sales

The cost of supply constitutes the largest portion of our cost of goods sold, and fluctuations in the prices of these materials affect our results of operations and, in particular, our margins. We either do not have contracts with our suppliers or we have contracts that can range up to three years in length, with one-year contracts being the most typical. Our contracts typically cover engagement terms, rebates, and discounts, but do not cover pricing terms, and are subject to periodic negotiation and revision.

Seasonality

Demand for our products in some markets is seasonal, with periods of snow or heavy rain negatively affecting construction activity. For example, sales of our products in Canada and the Northeast and Midwest regions of the United States are somewhat higher from spring through autumn when construction activity is greatest. Construction activity declines in these markets during the winter months, in particular due to inclement weather, frozen ground and fewer hours of daylight. Historically, our net sales in the second and third quarters have been higher than in the other quarters of the year, particularly the first quarter.

In addition, unfavorable weather conditions, such as hurricanes or severe storms, or public holidays during peak construction periods can result in temporary cessation of projects and a material reduction in demand for our products and, consequently, may have an adverse effect on our net sales. Results of a fiscal quarter may therefore not be a reliable basis for the expectations of a full fiscal year and may not be comparable with the results in the other fiscal quarters in the same year or prior years.

Business Acquisitions

We leverage our relationships and network of industry participants and advisors to actively source and identify acquisition opportunities to complement our organic growth. In addition to increasing sales, we incur certain costs and expenses in connection with any acquisition. As a general matter, our results of operations are impacted by the results of the newly acquired business, the acquisition accounting, any debt incurred to acquire the business and capital expenditures to integrate the acquired business. We continue to pursue strategic acquisitions that enable us to add capacity in existing markets, gain leading market positions in underserved markets, access new geographical markets, broaden our product offerings, leverage cross-selling opportunities, and realize cost synergies. Any acquisition may present financial, managerial, operational and integration challenges, which, if not successfully overcome, may reduce our profitability.

On January 21, 2021, we consummated the TJC Acquisition. As a result of the TJC Acquisition, the results of operations and financial position of SBP Predecessor and the Company are not directly comparable. For more information, please see “—Basis of Presentation and the TJC Acquisition.”

Key Business Metrics

In addition to the measures presented in our consolidated financial statements, we use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions:


	Successor			Predecessor
(in millions, except percentages)	Period from January 21, 2021 to October 3, 2021			Period from January 4, 2021 to January 20, 2021			Nine months ending October 4, 2020
Net sales	$	1,778.1		$	114.6		$	1,252.1
Gross profit		381.3			25.0			256.6
Gross profit margin		21.4	%		21.8	%		20.5	%
Operating expenses		194.2			13.2			175.3
Net income		91.1			(17.6	)		20.7
Net income margin (% of net sales)		5.1	%		(15.4	)%		1.7	%
Adjusted EBITDA(1)		206.0			12.9			97.4
Adjusted EBITDA Margin (% of net sales)(1)		11.6	%		11.2	%		7.8	%


	Predecessor Fiscal Year
(in millions, except percentages)	2020			2019			2018
Net sales	$	1,670.1		$	1,389.6		$	984.6
Gross profit		346.9			287.8			177.7
Gross Profit Margin		20.8	%		20.7	%		18.0	%
Operating expenses		249.9			227.7			148.4
Net income		18.0			(12.4	)		(11.9	)
Net income margin (% of net sales)		1.1	%		(0.9	)%		(1.2	)%
Adjusted EBITDA(1)		127.3			80.9			50.2
Adjusted EBITDA Margin (% of net sales)(1)		7.6	%		5.8	%		5.1	%

(1)	For a definition of Adjusted EBITDA and Adjusted EBITDA Margin and information regarding our use and reconciliations of such non-GAAP financial measures to their respective most directly comparable GAAP measures, see the section titled “—Non-GAAP Financial Metrics.”

Components of our Operating Results

Net sales

We recognize revenue when performance obligations with the customer are satisfied. A performance obligation is a promise to transfer a distinct good to the customer and is the unit of account. The transaction price is allocated to each distinct performance obligation and recognized as revenue when the performance obligation is satisfied. All contracts have a single performance obligation as the promise to transfer the individual good is not separately identifiable from other promises and is, therefore, not distinct.

Substantially all of our sales are from the provision of products to customers under customer contracts in the form of purchase orders. Revenue is measured at the amount of consideration expected to be received in exchange for providing the products, net of customer deductions. Provisions for customer deductions for discounts, incentives and other pricing adjustments are determined by customer-specific agreements and historical experience. Revenue is recognized at a point in time when a customer accepts delivery and control of the product has been transferred to the customer. This occurs at the time of delivery to the customer. Payment terms are generally between 10 and 30 days from shipment.

On January 1, 2018, SBP Predecessor adopted ASC 606: Revenue from Contracts with Customers (ASC 606) and applied it to all contracts using the modified retrospective method. There was no impact of applying ASC 606 on initial adoption at January 1, 2018 or for the years ended January 3, 2021, December 29, 2019 and December 30, 2018, however, the adoption of this guidance resulted in additional quantitative disclosures to disaggregate revenue by category.

Cost of Sales

Cost of sales include cost of merchandise sold and inbound freight and are net of vendor rebates and discounts. In addition, depreciation expense and amortization expense related to assets directly involved in the generation of revenues are included in cost of sales. See “—Summary of Factors Affecting Our Performance— Costs of Sales.”

Gross Profit and Gross Profit Margin

Our gross profit comprises our net sales less our cost of sales. Gross Profit margin is our gross profit divided by our net sales.

Operating Expenses

Our operating expenses include distribution expenses, selling expenses and general and administrative expenses.

•

Distribution expenses consist of expenses associated with the delivery and warehousing of our products. These include but are not limited to delivery and warehouse labor, fleet expenses, and facility expenses.

•

Selling expenses consist of expenses associated with the sale of our products. These are primarily labor expenses for salespeople and sales managers, and commissions paid.

•

General and administrative expenses consist primarily of corporate and administrative labor expenses, administrative bonuses, legal expenses, information technology expenses, and insurance expenses.

Business acquisition and other related costs

Business acquisition and other related costs consist primarily of expenses incurred during the TJC acquisition of the Company, and expenses related to acquisitions of other businesses made by the company.

Amortization of intangible assets

Amortization of intangible assets consists primarily of the expensing of customer relationships and trade names over their estimated useful lives.

Other operating (income) expense

Other operating income/loss consists primarily of gain or loss made on sale of assets, and gain or loss related to foreign currency.

Interest expense

Interest expense consists of interest paid to service our Senior Secured Notes and our ABL Credit Agreement and debt extinguishment costs.

Income tax expense (benefit)

Prior to the acquisition, the Predecessor was a disregarded entity for tax purposes; however, its sole owner was a taxable C Corporation. Subsequent to the acquisition, the Company is now a taxable C Corporation. The Company provides fully for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”).

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. In assessing the realizability of deferred tax assets, the subsidiary considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Management’s estimate of the potential outcome of any uncertain tax issue is subject to its assessment of relevant risks, facts and circumstances existing at that time. The Company accounts for uncertain tax positions in accordance with ASC 740 and records a liability when such uncertainties meet the more likely than not recognition threshold.

Income tax expense/benefit is comprised of current and deferred tax expense/benefit. Current income tax expense/benefit represents our estimated taxes to be paid or refunded for the current period. In accordance with ASC 740, Income Taxes (“ASC 740”), we recognize deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the financial reporting and tax basis of assets and liabilities, as well as for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are recorded to reduce deferred tax assets to the amount we believe is more likely than not to be realized.

Results of Operations

The following table sets forth a summary of our consolidated results of operations for the periods indicated. This information should be read together with our condensed consolidated financial statements and related notes included elsewhere in this prospectus. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.


	Successor				Predecessor
(in thousands, except percentages)	Period from January 21, 2021 to October 3, 2021				Period from January 4, 2021 to January 20, 2021					Nine months ending October 4, 2020
Net sales	$	1,778,140	100.0	%	$	114,608		100.0	%	$	1,252,053	100.0	%
Cost of sales		1,396,799	78.6	%		89,587		78.2	%		995,482	79.5	%

Gross profit		381,341	21.4	%		25,021		21.8	%		256,571	20.5	%

Distribution expenses		83,548	4.7	%		6,575		5.7	%		89,762	7.2	%
Selling expenses		51,861	2.9	%		2,685		2.3	%		42,794	3.4	%
General and administrative expenses		58,754	3.3	%		3,989		4.0	%		42,768	3.4	%
Business acquisition and other related costs		6,549	0.4	%		26,182		22.8	%		—	0.0	%
Amortization of intangible assets		25,113	1.4	%		1,007		0.9	%		11,092	0.9	%
Other operating (income) loss		47	0.0	%		(488	)	(0.4	)%		29	0.0	%

Income from operations	$	155,468	8.7	%	$	(14,929	)	(13.5	)%	$	70,126	5.6	%

Interest expense		29,968	1.7	%		2,536		2.2	%		43,538	3.5	%

Income (loss) before income taxes		125,500	7.1	%		(17,465	)	(15.7	)%		26,588	2.1	%

Income tax expense (benefit)		34,360	1.9	%		127		0.1	%		5,840	0.5	%

Net income (loss)	$	91,140	5.1	%	$	(17,592	)	(15.9	)%	$	20,748	1.7	%

Comparison of the 2021 Successor (January 21, 2021 to October 3, 2021), the 2021 Predecessor (January 4, 2021 to January 20, 2021), and the 2020 Predecessor for Nine Month Period (ended October 4, 2020)

Net sales

Net sales were $1,778.1 million for January 21, 2021 to October 3, 2021 (Successor) and $114.6 million for January 4, 2021 to January 20, 2021 (Predecessor) as compared to $1,252.1 million for the nine months ended October 4, 2020 (Predecessor). The increase in net sales was primarily driven by strong organic growth, and the contribution from acquisition completed in 2020. Organic net sales were $1,635.4 million for January 21, 2021 to October 3, 2021 (Successor) and $103.6 million for January 4, 2021 to January 20, 2021 (Predecessor) as compared to $1,252.1 million for the nine months ended October 4, 2020 (Predecessor), and grew driven by a continuing increase in demand from new single-family construction and residential repair and remodel end markets, partially influenced by COVID-19. Exterior trim, siding and finish, and moulding and millwork products accounted for most of the total organic sales growth. The acquisition completed in 2020 and continued pricing increases both also contributed to the total sales growth.

Cost of sales

Cost of sales was $1,396.8 million for January 21, 2021 to October 3, 2021 (Successor) and $89.6 million for January 4, 2021 to January 20, 2021 (Predecessor) as compared to $995.5 million for the nine months ended October 4, 2020 (Predecessor). The increase in cost of sales was primarily driven by the increase in net sales as noted in the section above. As a percentage of net sales, cost of sales was 78.6% for January 21, 2021 to October 3, 2021 (Successor) and 78.2% for January 4, 2021 to January 20, 2021 (Predecessor) as compared to 79.5% for the nine months ended October 4, 2020 (Predecessor).

Gross profit

Gross profit was $381.3 million for January 21, 2021 to October 3, 2021 (Successor) and $25.0 million for January 4, 2021 to January 20, 2021 (Predecessor) as compared to $256.6 million for the nine months ended October 4, 2020 (Predecessor). The increase in Gross profit was primarily due to the growth in net sales as described above. Gross profit margin was 21.4% for January 21, 2021 to October 3, 2021 (Successor) and 21.8% for January 4, 2021 to January 20, 2021 (Predecessor) as compared to 20.5% for the nine months ended October 4, 2020 (Predecessor). The gross profit margin expansion was primarily attributable to pricing gains in net sales not fully impacting our average cost of goods sold and change in product mix.

Operating expenses

•

Distribution expenses. Distribution expenses were $83.5 million for January 21, 2021 to October 3, 2021 (Successor) and $6.6 million for January 4, 2021 to January 20, 2021 (Predecessor) as compared to $89.8 million for the nine months ended October 4, 2020 (Predecessor). The increase is primarily due to an increase in sales described above. Distribution expenses as a percentage of net sales decreased to 4.7% for January 21, 2021 to October 3, 2021 (Successor) and 5.7% for January 4, 2021 to January 20, 2021 (Predecessor) as compared to 7.2% for the nine months ended October 4, 2020 (Predecessor). The changes were due mainly to increased operating efficiencies.

•

Selling expenses. Selling expenses were $51.9 million for January 21, 2021 to October 3, 2021 (Successor) and $2.7 million for January 4, 2021 to January 20, 2021 (Predecessor) as compared to $42.8 million for the nine months ended October 4, 2020 (Predecessor). Sales expenses as a percentage of net sales decreased to 2.9% for January 21, 2021 to October 3, 2021 (Successor) and 2.3% for January 4, 2021 to January 20, 2021 (Predecessor) as compared to 3.4% for the nine months ended October 4, 2020 (Predecessor). The changes were due mainly to improved results from the salesforce working across our territories.

•

General and administrative expenses. General and administrative expenses were $58.8 million for January 21, 2021 to October 3, 2021 (Successor) and $4.0 million for January 4, 2021 to January 20, 2021 (Predecessor) as compared to $42.8 million for the nine months ended October 4, 2020 (Predecessor). General and administrative expenses as a percentage of net sales were 3.3% for January 21, 2021 to October 3, 2021 (Successor) and 3.5% for January 4, 2021 to January 20, 2021 (Predecessor) as compared to 3.4% for the nine months ended October 4, 2020 (Predecessor). The change was primarily driven by increase in compensation expense and integration costs incurred.

Business acquisition and other related costs

Business acquisition and other related costs were $6.5 million for January 21, 2021 to October 3, 2021 (Successor) and $26.2 million for January 4, 2021 to January 20, 2021 (Predecessor) as compared to $0.0 million for the nine months ended October 4, 2020 (Predecessor). These expenses are directly related to the TJC Acquisition in the Predecessor period and incentive compensation expense that vested upon the transaction in the Successor period.

Amortization of intangible assets

Amortization of intangible assets was $25.1 million for January 21, 2021 to October 3, 2021 (Successor) and $1.0 million for January 4, 2021 to January 20, 2021 (Predecessor) as compared to $11.1 million for the nine months ended October 4, 2020 (Predecessor). This increase was due to the increased intangible asset amortization associated with the TJC Acquisition in the Successor period.

Interest expense

Interest expense was $30.0 million for January 21, 2021 to October 3, 2021 (Successor) and $2.5 million for January 4, 2021 to January 20, 2021 (Predecessor) as compared to $43.5 million for the nine months ended

October 4, 2020 (Predecessor). The absence of a write-off of $11.3 million of unamortized debt issue cost which occurred in period of the nine months ended October 4, 2020 (Predecessor) was the main contributor to the decrease. This decrease was offset by an increase in interest expense due to a larger debt balance in the Successor period associated to the TJC acquisition.

Income tax expense

Income tax expense was $34.4 million for January 21, 2021 to October 3, 2021 (Successor) and $0.1 million for January 4, 2021 to January 20, 2021 (Predecessor) as compared to $5.8 million for the nine months ended October 4, 2020 (Predecessor). This increase was primarily due to an increase in taxable income between the periods and to a change in effective tax rate associated with permanent differences and the change of the valuation allowance related to the Company’s and the Predecessor’s deferred tax asset for interest deduction limitations.

Net income (loss)

Net income was $91.1 million for January 21, 2021 to October 3, 2021 (Successor) and a Net loss of $17.6 million for January 4, 2021 to January 20, 2021 (Predecessor) as compared to Net income of $20.7 million for the nine months ended October 4, 2020 (Predecessor). The increase was primarily due a continued increase in Organic sales partially influenced by COVID-19 and increased efficiencies with respect to operating expenses, but partially offset by increased transaction-related expenses in the January 4, 2021 to January 20, 2021 (Predecessor) period. Net income margin was 5.1% for January 21, 2021 to October 3, 2021 (Successor) and (15.4%) for January 4, 2021 to January 20, 2021 (Predecessor) as compared to 1.7% for the nine months ended October 4, 2020 (Predecessor).

Adjusted EBITDA

Adjusted EBITDA was $206.0 million for January 21, 2021 to October 3, 2021 (Successor) and $12.9 million for January 4, 2021 to January 20, 2021 (Predecessor) as compared to $97.4 million for the nine months ended October 4, 2020 (Predecessor). This increase was primarily attributable to additional margin realized from our increase in Organic net sales. Adjusted EBITDA margin was 11.6% for January 21, 2021 to October 3, 2021 (Successor) and 11.2% for January 4, 2021 to January 20, 2021 (Predecessor) as compared to 7.8% for the nine months ended October 4, 2020 (Predecessor).


	Predecessor Fiscal Year
(in thousands, except percentages)	2020					2019					2018
Net sales	$	1,670,070		100.0	%	$	1,389,570		100.0	%	$	984,607		100.0	%
Cost of sales		1,323,201		79.2	%		1,101,752		79.3	%		806,899		82.0	%
Gross profit		346,869		20.8	%		287,818		20.7	%		177,708		18.0	%
Distribution expenses		120,992		7.2	%		115,343		8.3	%		67,933		6.9	%
Selling expenses		57,640		3.5	%		56,137		4.0	%		32,142		3.3	%
General and administrative expenses		71,232		4.3	%		56,212		4.0	%		48,278		4.9	%
Amortization of intangible assets		15,312		0.9	%		23,040		1.7	%		13,154		1.3	%
Other operating (income) loss		(1,020	)	(0.1	)%		(74	)	0.0	%		77		0.0	%

Income from operations	$	82,713		5.0	%	$	37,160		2.7	%	$	16,124		1.6	%
Interest expense		54,798		3.3	%		50,525		3.6	%		35,286		3.6	%
Income (loss) before income taxes		27,915		1.7	%		(13,365	)	(1.0	)%		(19,162	)	(2.0	)%
Income tax expense (benefit)		9,896		0.6	%		(984	)	(0.1	)%		(7,235	)	(0.7	)%

Net income (loss)	$	18,019		1.1	%	$	(12,381	)	(0.9	)%	$	(11,927	)	(1.2	)%

Comparison of the 2020 Fiscal Year to the 2019 Fiscal Year

Net sales

Net sales were $1,670.1 million for fiscal year 2020, an increase of $280.5 million, or 20.2%, from $1,389.6 million for fiscal year 2019. The increase in net sales was primarily driven by strong organic growth, with a minor contribution from acquisition completed in 2020. Organic net sales grew 19.4%, or $269.5 million, driven by increased demand in new single-family construction and residential repair and remodel end markets, partially influenced by COVID-19. Composite decking and railing, and exterior trim, siding and finish products accounted for the majority of the total organic sales growth between the two periods, growing 20% over the prior year. The acquisition completed in 2020 contributed less than 1% to the total year over year net sales growth and increased pricing benefited 2020 sales by 3%.

Cost of sales

Cost of sales was $1,323.2 million for fiscal year 2020, an increase of $221.4 million, or 20.1%, from $1,101.8 million for fiscal year 2019. The increase in cost of sales in fiscal year 2020 compared to fiscal year 2019 is primarily driven by the increase in net sales as noted in the section above. As a percentage of net sales, cost of sales was 79.2% for fiscal year 2020 compared to 79.3% for fiscal year 2019.

Gross profit

Gross profit was $346.9 million for fiscal year 2020, an increase of $59.1 million, or 20.5%, from $287.8 million for fiscal year 2019. The increase in Gross profit was primarily due to the growth in net sales as described above. Gross profit margin for fiscal year 2020 was 20.8% as compared to 20.7% for fiscal year 2019. The gross profit margin expansion was primarily attributable to pricing gains in net sales not fully impacting our average cost of goods sold.

Operating expenses

•

Distribution expenses. Distribution expenses were $121.1 million for fiscal year 2020, an increase of $5.8 million, or 5.0%, from $115.3 million for fiscal year 2019. Distribution expenses as a percentage of net sales decreased to 7.2% in fiscal year 2020 from 8.3% in fiscal year 2019 due mainly to increased operating efficiencies and the implementation of prior acquisition synergies.

•

Selling expenses. Selling expenses were $57.6 million for fiscal year 2020, an increase of $1.5 million, or 2.7%, from $56.1 million for fiscal year 2019. Sales expenses as a percentage of net sales decreased to 3.5% in fiscal year 2020 from 4.0% in fiscal year 2019 due mainly to improved resource allocation in our territories and the implementation of prior acquisition synergies.

•

General and administrative expenses. General and administrative expenses were $71.2 million for fiscal year 2020, an increase of $15.0 million, or 26.7%, from $56.2 million for fiscal year 2019. General and administrative expenses as a percentage of net sales increased to 4.3% in fiscal year 2020 from 4.0% in fiscal year 2019 due mainly to incentive unit compensation expenses incurred in 2020.

Amortization of intangible assets

Amortization of intangible assets was $15.3 million for fiscal year 2020, a decrease of $7.7 million, or (33.5%), from $23.0 million for fiscal year 2019. This decrease was primarily attributable to the $5.5 million amortization charge in 2019 related to a change in an estimated useful life of a certain intangible asset, no longer impacting 2020 results.

Interest expense

Interest expense was $54.8 million for fiscal year 2020, an increase of $4.3 million, or 8.5%, from $50.5 million for fiscal year 2019. This increase was primarily due to a write-off of $11.3 million of unamortized debt issue cost in 2020. This increase was offset by a decrease in interest expense on the term loan due to a lower principal balance and lower interest rates.

Income tax expense

Income tax expense was $9.9 million for fiscal year 2020, an increase of $10.9 million, or 1,090.0%, from an income tax benefit of $1.0 million for fiscal year 2019. This increase was primarily due to an increase of $41.3 million in taxable, not net income between the periods.

Net income (loss)

Net income was $18.0 million for fiscal year 2020, an increase of $30.4 million, or 245.2%, from a net loss of $12.4 million in fiscal year 2019. The increase was primarily due to increased Organic sales partially influenced by COVID-19 and increased efficiencies with respect to operating expenses. Net income margin was 1.1% for fiscal year 2020 as compared to a net loss margin of 0.9% in fiscal year 2019.

Adjusted EBITDA

Adjusted EBITDA was $127.3 million for fiscal year 2020, an increase of $46.4 million, or 57.4%, from $80.9 million for fiscal year 2019. This increase was primarily attributable to additional margin realized from our increase in Organic net sales. Adjusted EBITDA margin was 7.6% for fiscal year 2020 as compared to 5.8% for fiscal year 2019.

Comparison of the 2019 Fiscal Year to the 2018 Fiscal Year

Net sales

Net sales were $1,389.6 million for fiscal year 2019, an increase of $405.0 million, or 41.1%, from $984.6 million for fiscal year 2018. The increase in net sales was primarily driven by contribution from acquisitions, and strong organic growth. Acquisitions completed in 2018 contributed 70.2%, or $284.5 million, to the total year over year net sales growth. Organic net sales grew 14.1%, or $120.5 million, driven by increased demand in new single-family construction and residential repair and remodel end markets. Composite decking and railing, and exterior trim, siding and finish products accounted for the majority of the total organic sales growth between the two periods, growing 17.5% over the prior year. Improved pricing benefited 2019 sales by less than 1%.

Cost of sales

Cost of sales was $1,101.8 million for fiscal year 2019, an increase of $294.9 million, or 36.5%, from $806.9 million for fiscal year 2018. The increase in cost of sales in fiscal year 2019 compared to fiscal year 2018 was primarily driven by the increase in net sales, including acquisitions, as noted in the section above. As a percentage of net sales, cost of sales was 79.3% for fiscal year 2019 compared to 82.0% for fiscal year 2018.

Gross profit

Gross profit was $287.8 million for fiscal year 2019, an increase $110.1 million, or 62.0%, from $177.7 million for fiscal year 2018. Gross profit margin for fiscal year 2019 was 20.7% as compared to 18.0% for fiscal year 2018. The increase in gross profit was primarily attributable to the growth in net sales as described above. The gross profit margin expansion was primarily attributable to a product mix with higher gross profit margin being contributed by the acquisitions.

Operating expenses

•

Distribution expenses. Distribution expenses were $115.3 million for fiscal year 2019, an increase of $47.4 million, or 69.8%, from $67.9 million for fiscal year 2018. The increase was primarily due to the addition of acquisition operations to our results. Distribution expenses as a percentage of net sales grew to 8.3% in fiscal year 2019 from 6.9% in fiscal year 2018 due mainly to additional expenditures on infrastructure to support new product initiatives in 2019.

•

Selling expenses. Selling expenses were $56.1 million for fiscal year 2019, an increase of $24.0 million, or 74.8%, from $32.1 million for fiscal year 2018. The increase was primarily attributable to the addition of acquisition operations to our results. Selling expenses as a percentage of net sales grew to 4.0% in fiscal year 2019 from 3.3% in fiscal year 2018 mainly due to hiring of additional sales and sales management personnel to support new product initiatives in 2019.

•

General and administrative expenses. General and administrative expenses were $56.2 million for fiscal year 2019, an increase of $7.9 million, or 16.4%, from $48.3 million for fiscal year 2018. The increase was primarily due to the addition of acquisition operations to our results. General and administrative expenses as a percentage of net sales decreased to 4.0% in fiscal year 2019 from 4.9% in fiscal year 2018 mainly due to a decrease in acquisition-related expenses between the periods.

Amortization of intangible assets

Amortization of intangible assets was $23.0 million for fiscal year 2019, an increase of $9.8 million, or 74.3%, from $13.2 million for fiscal year 2018. This increase was primarily attributable to a full year of amortization expense associated with intangible assets originating from the 2018 acquisitions. This decrease was primarily attributable to the $5.5 million amortization charge in 2019 related to a change in an estimated useful life of a certain intangible asset, no longer impacting 2020 results.

Interest expense

Interest expense was $50.5 million for fiscal year 2019, an increase of $15.2 million, or 43.1%, from $35.3 million for fiscal year 2018. This increase was primarily due to borrowings made in connection with the acquisitions completed in 2018, and increased working capital needs to support top line growth. The Company expensed $7.4 million of unamortized debt issuance cost related to the extinguishment of certain participants of the term note in 2018. There were no such write-offs in 2019.

Income tax expense

Income tax benefit was $1.0 million for fiscal year 2019, an increase of $6.2 million, or 86.1%, from an income tax benefit of $7.2 million for fiscal year 2018. This decrease was primarily due to a valuation allowance and an increase in taxable income in 2019. The company became a C corporation in October in 2018.

Net income (loss)

Net loss was $12.4 million for fiscal year 2019, which represented a decrease of $0.5 million, or (4.2%), from a net loss of $11.9 million in fiscal year 2018. Net loss margin was 0.9% for fiscal year 2019 as compared to a net loss margin of 1.2% in fiscal year 2018.

Adjusted EBITDA

Adjusted EBITDA was $80.9 million for fiscal year 2019, an increase of $30.7 million, or 61.2%, from $50.2 million for fiscal year 2018. This increase was primarily attributable to the contribution from acquisitions, and additional margin realized from our increase in Organic net sales. Adjusted EBITDA margin was 5.8% for fiscal year 2019 as compared to 5.1% for fiscal year 2018.

Non-GAAP Financial Metrics

We use Organic net sales, Adjusted EBITDA, and Adjusted EBITDA Margin as measures of operating performance, and we believe that these non-GAAP financial measures are useful to investors for supplemental period-to-period comparisons of our business and in understanding and evaluating our operating results for the following reasons:

•

Organic net sales assists investors in understanding the stand-alone contribution apart from newly acquired businesses. We calculate Organic net sales as net sales, less net sales from acquired branches that have not been under our ownership for at least four fiscal quarters at the start of the relevant fiscal year.

•

Adjusted EBITDA and Adjusted EBITDA Margin assist investors in evaluating our financial performance on a consistent basis. We defined Adjusted EBITDA as net income, less income tax expense, interest expense, and depreciation and amortization, as well as expenses associated with acquisitions, the integration expenses of those acquisitions, expenses incurred in the procurement of our Senior Secured Notes and our ABL Credit Agreement, expenses related to incentive equity units awarded, costs associated with change in ownership of the company, and other non-recurring expenses incurred by the company which include but are not limited to branch relocations, severances paid, expenses associated with discontinuing/replacing product lines and unrealized gains/losses due to foreign exchange rate fluctuations. Adjusted EBITDA and Adjusted EBITDA Margin also exclude certain non-cash expenses such as depreciation and amortization. Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by net sales.

The tables below show a reconciliation of these non-GAAP financial measures to their most directly comparable financial measures calculated in accordance with GAAP.

Reconciliation of Net sales to Organic net sales


	Successor		Predecessor
(in thousands)	Period from January 21, 2021 to October 3, 2021		Period from January 4, 2021 to January 20, 2021		Nine months ending October 4, 2020
Reported Net Sales	$	1,778,140	$	114,608	$	1,252,053

Acquisition contribution (1)		142,706		10,997		—

Organic Net sales (2)	$	1,635,434	$	103,612	$	1,252,053

(1)

Represents net sales from acquired branches that have not been under our ownership for at least four fiscal quarters at the start of the 2021 fiscal year. Includes net sales from branches acquired in 2020. Excludes any sales from acquisitions prior to their respective acquisition dates for the presented periods.

(2)	Organic net sales equals reported net sales less net sales from branches acquired in 2021 and 2020.


	Fiscal Year
(in thousands)	2020		2019
Reported Net Sales	$	1,670,070	$	1,389,570
Acquisition contribution(1)		10,984		—

Organic Net sales(2)	$	1,659,086	$	1,389,570

(1)

Represents net sales from acquired branches that have not been under our ownership for at least four fiscal quarters at the start of the 2020 fiscal year. Includes net sales from branches acquired in 2020. Excludes any sales from acquisitions prior to their respective acquisition dates for the presented periods.

(2)	Organic net sales equals reported net sales less net sales from branches acquired in 2019 and 2020.


	Fiscal Year
(in thousands)	2019		2018
Reported Net Sales	$	1,389,570	$	984,607
Acquisition contribution(1)		412,424		127,966

Organic Net sales(2)	$	977,146	$	856,641

(1)	Represents Net sales from acquired branches that have not been under our ownership for at least four fiscal quarters at the start of the 2019 fiscal year. Includes only net sales from branches acquired in 2018.

(2)	Organic net sales equals reported net sales less net sales from branches acquired in 2018.

Reconciliation of Adjusted EBITDA and Adjusted EBITDA margins to Net income (loss)


	Successor			Predecessor
(in thousands)	Period from January 21, 2021 to October 3, 2021			Period from January 4, 2021 to January 20, 2021			Nine months ending October 4, 2020
Reported Net income (loss)	$	91,140		$	(17,592	)	$	20,749
Income tax (benefit) expense		34,360			127			5,840
Interest expense		29,968			2,536			43,538
Depreciation & amortization		35,862			1,667			19,488
Adjustments:
Acquisition/Integration/Start-up Costs (1)		2,250			261			2,196
Bond Issuance/Financing Costs (2)		1,253			4			2,656
Private Equity/Transaction Costs (3)		7,778			26,150			166
Management Fees (4)		2,520			—			—
Other (Income) Expense, net (5)		865			(300	)		2,762

Adjusted EBITDA (6)	$	205,996		$	12,855		$	97,395

Net sales	$	1,778,140		$	114,608		$	1,252,053
Net income margin (% of Net sales)		5.1	%		(15.3	)%		1.7	%
Adjusted EBITDA Margin (6)		11.6	%		11.2	%		7.8	%

(1)	Expenses directly associated with the ongoing integration of Midwest Lumber and Alexandria Moulding, and the acquisitions of REEB, Dallas Wholesale and Millwork Sales.

(2)	Expenses incurred in connection with the Senior Secured Notes offering, our ABL Credit Agreement to fund the acquisitions and the operations of the company, and to IPO readiness activities.

(3)	Expenses related mainly to the TJC acquisition inclusive of incentive equity unit grants.

(4)	Management fees charged quarterly by TJC.

(5)	Other expenses incurred by the company including but not limited to branch relocation, severances paid, and expenses associated with discontinuing/replacing a product line.

(6)	Adjusted EBITDA and Adjusted EBITDA Margin exclude any earnings or losses from acquisitions prior to their respective acquisition dates for the presented periods.


`	Predecessor Fiscal Year
(in thousands)	2020			2019			2018
Reported Net income (loss)	$	18,019		$	(12,381	)	$	(11,927	)
Income tax (benefit) expense		9,896			(984	)		(7,235	)
Interest expense		54,798			50,525			35,286
Depreciation & amortization		27,080			32,718			18,173
Adjustments:
Acquisition/Integration/Start-up Costs(1)		3,506			5,280			9,936
Bond Issuance/Financing Costs(2)		835			362			198
Private Equity/Transaction Costs(3)		11,553			485			474
Other (Income) Expense, net(4)		1,636			4,894			5,293

Adjusted EBITDA(5)	$	127,322		$	80,900			50,198

Net sales	$	1,670,070		$	1,389,570		$	984,607
Net income margin (% of Net sales)		1.1	%		(0.9	%)		(1.2	%)
Adjusted EBITDA Margin(5)		7.6	%		5.8	%		5.1	%

(1)	Expenses directly associated with the acquisition of Midwest Lumber, Alexandria Moulding, and Mid-State Lumber, and the ongoing integration of Midwest Lumber and Alexandria Moulding.

(2)	Expenses incurred in connection with the Senior Secured Notes offering and our ABL Credit Agreement to fund the acquisitions and the operations of the company.

(3)	Expenses related mainly to awards of incentive equity units ($10.7 million in 2020) and costs associated with the sale of the company by the then current equity owner to SBP Varsity Holdings.

(4)	Other expenses incurred by the company including but not limited to branch relocation, severances paid, expenses associated with discontinuing/replacing a product line, and year-end vendor rebate adjustments.

(5)	Adjusted EBITDA and Adjusted EBITDA Margin exclude any earnings or losses from acquisitions prior to their respective acquisition dates for the presented periods.

Pro Forma Combined (TJC Acquisition Only) Financial Information Reconciliation: Net Income to Adjusted EBITDA

In order to facilitate comparison of our financial information on a period-over-period basis, we have included the below reconciliation of the Pro Forma Combined (TJC Acquisition Only) Financial Information Net Income (loss) to Pro Forma Combined (TJC Acquisition Only) Financial Information Adjusted EBITDA for the fiscal year ended January 3, 2021, the nine months ended October 4, 2020 and the nine months ended October 3, 2021, each of which give effect to the TJC Acquisition as if it had occurred on December 30, 2019. This TJC Pro Forma Combined (TJC Acquisition Only) Financial Information does not give effect to our acquisition of the Reeb Companies, which was consummated on October 15, 2021. For more information, please see “Basis of Presentation” in the forepart of this prospectus.

We also include below a reconciliation of these metrics for the twelve months ended October 3, 2021, which is derived by adding the pro forma amounts below for the fiscal year ended January 3, 2021 to the amounts for the nine months ended October 3, 2021, and then subtracting the amounts for the nine months ended October 4, 2020.


(in thousands)	Period from January 4, 2021 to October 3, 2021 Pro forma			Fiscal 2020 Pro forma			Nine months ending October 4, 2020 Pro forma			Trailing Twelve Months Period Ended October 3, 2021 Pro forma Adjusted EBITDA
Reported Net income (loss)		96,020			(26,766	)		(18,868	)		88,122
Income tax (benefit) expense		41,978			54,557			(7,366	)		103,901
Interest expense		32,493			(5,033	)		43,357			(15,897	)
Depreciation & amortization		38,767			51,482			37,786			52,463
Adjustments
Acquisition/Integration/Start-up Costs		2,511			3,506			2,196			3,821
Bond Issuance/Financing Costs		319			835			2,656			(1,502	)
Private Equity/Transaction Costs		35,449			11,566			1,602			45,413
Management Fees		2,520			—			—			2,520
Other (Income) Expense, net		(17	)		1,622			1,326			279
SBP Transaction Fees(1)		(31,104	)		35,559			34,705			(30,250	)

Adjusted EBITDA		218,936			127,328			97,394			248,870

(1)	The following reflects the reversal of the pro forma affected Stock Compensation, Buyers Fees, and Transaction Expenses.

Liquidity and Capital Resources

Overview

We are financed principally through a combination of cash generated from operations, sales of equity and debt securities and from borrowings under our various debt facilities. Our principal use of funds is for all expenses typically incurred in the day-to-day operation of our businesses including, but not limited to, working capital, capital expenditures and finance costs among others. Our principal use of funds also includes the making of acquisitions and their associated costs, together with repayments of debt and other capital amounts, among others. We believe, however, that cash generated from operations, together with amounts available under the ABL Credit Agreement, as detailed below, will be sufficient to meet our future working capital requirements and liquidity needs for at least the next 12 months.

Our ability to fund future working capital requirements, to make scheduled payments of interest on the bank facilities and bond obligations, and to satisfy any of our other present or future debt obligations will depend on our future operating performance, which will be affected by general economic, financial and other factors including factors beyond our control. See “Risk Factors.”

We review investment opportunities in the normal course of our business and may, if suitable opportunities arise, make selected investments to implement our business strategy. Historically, the funding for any such investments has come from cash flow from operations, member contributions and additional indebtedness.

Capital expenditures

Capital expenditures, net of proceeds from sale of assets, for January 21, 2021 to October 3, 2021 (Successor) were $3.8 million and consisted primarily of machinery, replacement delivery and warehouse equipment, and leasehold improvements.

Capital expenditures, net of proceeds from sale of assets, for January 4, 2021 to January 20, 2021 (Predecessor) were $0.3 million and consisted primarily of leasehold improvements.

Capital expenditures, net of proceeds from sale of assets, for the nine months ended October 4, 2020 (Predecessor) were $2.9 million and consisted primarily of manufacturing equipment, replacement delivery and warehouse equipment, and leasehold improvements.

Capital expenditures, net of proceeds from sale of assets, for fiscal year 2020 were $4.0 million and consisted primarily of machinery, replacement delivery and warehouse equipment, and leasehold improvements.

Capital expenditures, net of proceeds from sale of assets, for fiscal year 2019 were $4.1 million and consisted primarily of replacement delivery and warehouse equipment, and leasehold improvements.

Capital expenditures, net of proceeds from sale of assets, for fiscal year 2018 were $1.6 million and consisted primarily of replacement delivery and warehouse equipment, and leasehold improvements.

Debt Arrangements

ABL Credit Agreement and Term Loan Credit Agreement

On October 1, 2018, we entered into a new ABL Credit Agreement to provide for a line of credit. The line of credit is secured by certain of our accounts receivable, inventories, equipment, and other personal property.

The ABL Credit Agreement includes sub-facilities for letters of credit and short-term borrowings referred to as swing line borrowings. Borrowings under the ABL Credit Agreement are made on a revolving basis in an amount not to exceed the lesser of the commitments thereunder and the then applicable borrowing base and are available in U.S. or Canadian dollars. The borrowing base shall be calculated, as of any date, by an amount equal to the sum of (a) a specified percentage of the loan parties’ eligible accounts receivable, plus (b) the lesser of (i) a specified percentage of the net orderly liquidation value or (ii) a specified percentage of the average cost of the loan parties’ eligible inventory, plus (c) the cash of the loan parties on deposit in accounts subject to a first priority perfected lien and control agreements in favor of the agent under the ABL Credit Agreement, minus (d) such reserves as the agent under the ABL Credit Agreement establishes in its permitted discretion. In addition, the credit agreement governing the ABL Credit Agreement will provide that we will have the right at any time, subject to customary conditions, to solicit existing or prospective lenders to provide incremental increases in the revolving credit commitments under the ABL Credit Agreement in an aggregate amount not to exceed a specified dollar amount. The lenders under our ABL Credit Agreement will not be under any obligation to provide any such incremental loans or commitments, and any such addition of or increase in loans will be subject to certain customary conditions precedent and other provisions.

On October 15, 2021, we entered into a new Term Loan Credit Agreement to provide for $800 million of term loans, the proceeds of which were used, in part, to finance the purchase price for the Reeb Acquisition and related transaction fees and expenses. The Term Loan Credit Agreement is also secured by certain of our accounts receivable, inventories, equipment, and other personal property. As of October 3, 2021, there was $0.1 million and $0 outstanding under the ABL Credit Agreement and Term Loan Credit Agreement, respectively.

Interest Rate and Fees

ABL Credit Agreement

Borrowings under our ABL Credit Agreement bear interest, at the option of the Borrowers, at a rate per annum equal to certain margins based on average availability plus either (x) in the case of U.S. Dollar denominated loans, (a) a base rate determined by reference to the highest of (i) the U.S. prime rate published in The Wall Street Journal from time to time, (ii) the federal funds effective rate, plus 1/2 of 1% and (iii) one month LIBOR rate plus 1.00%, subject to a floor of 1.25% per annum or (b) a LIBOR rate determined by reference to the London interbank offered rate, adjusted for statutory reserve requirements, subject to a floor of 0.50% per annum and (y) in the case of Canadian Dollar denominated loans, (a) a base rate determined by reference to the highest of (i) a per annum rate designated by Bank of America (acting through its Canadian branch), (ii) the federal funds effective rate, plus 1/2 of 1% and (iii) one month LIBOR rate plus 1.00%, subject to a floor of

1.25% per annum or (b) a LIBOR rate determined by reference to the London interbank offered rate, adjusted for statutory reserve requirements, subject to a floor of 0.50% per annum.

During the continuation of any payment event of default, the interest rate is, with respect to overdue principal, the applicable interest rate, plus 2.00% per annum and, with respect to any other overdue amount, the interest rate applicable to base rate loans, plus 2.00% per annum. In addition, during the continuation of any bankruptcy event of default under the ABL Credit Agreement, the outstanding principal amount under the ABL Credit Agreement shall bear interest at the applicable interest rate, plus 2.00% per annum.

A per annum fee equal to the applicable margin with respect to the LIBOR rate under the ABL Credit Agreement in effect from time to time accrues on the aggregate face amount of outstanding letters of credit under the ABL Credit Agreement, payable in arrears at the end of each quarter after the closing of our ABL Credit Agreement and upon termination of the ABL Credit Agreement.

The Borrowers will pay to the lenders under the ABL Credit Agreement a commitment fee of 0.375% per annum on the undrawn portion of the commitments in respect of the ABL Credit Agreement, subject to one step- down of 0.25% based on average utilization. All commitment fees will be payable quarterly in arrears after the closing of our ABL Credit Agreement and upon the termination of the commitments.

Term Loan Credit Agreement

Borrowings under our Term Loan Credit Agreement bear interest, at the option of the Borrowers, at a rate per annum equal to certain margins based on our consolidated first lien debt ratio plus a base rate determined by reference to the highest of (i) the U.S. prime rate published in The Wall Street Journal from time to time, (ii) the federal funds effective rate, plus 1/2 of 1% and (iii) one month LIBOR rate plus 1.00%, subject to a floor of 1.50% per annum or (b) a LIBOR rate determined by reference to the London interbank offered rate, adjusted for statutory reserve requirements, subject to a floor of 0.50% per annum. Upon the consummation of an initial public offering the margin will reduce by 0.25%.

During the continuation of any payment event of default, the interest rate will be, with respect to overdue principal, the applicable interest rate, plus 2.00% per annum and, with respect to any other overdue amount, the interest rate applicable to base rate loans, plus 2.00% per annum. In addition, during the continuation of any bankruptcy event of default under the Term Loan Credit Agreement, the outstanding principal amount under the Term Loan Credit Agreement shall bear interest at the applicable interest rate, plus 2.00% per annum.

Amortization and Maturity

The ABL Credit Agreement does not amortize and will terminate on September 30, 2025.

The Term Loan Credit Agreement amortizes at 1% per annum paid in four equal quarterly installments with the remainder due and payable on October 15, 2028.

Guarantee and Security

All obligations of the Borrowers under the ABL Credit Agreement, the Term Loan Credit Agreement and, at the option of the Borrowers, the obligations of the Borrowers or any of their restricted subsidiaries under certain hedge agreements and cash management arrangements provided by any lender party to the ABL Credit Agreement or any of its affiliates and certain other persons are unconditionally guaranteed by the Borrowers, Holdings and certain of the Borrowers’ existing and subsequently acquired or organized direct or indirect material wholly-owned U.S. restricted subsidiaries, with customary exceptions.

All obligations of the Borrowers under the ABL Credit Agreement, the Term Loan Credit Agreement and, at the option of the Borrowers, certain hedge agreements and cash management arrangements provided by any

lender party to the ABL Credit Agreement or any of its affiliates and certain other persons, and the guarantees of such obligations, are secured, subject to permitted liens and other exceptions, by (i) a perfected pledge of all the capital stock of each direct, wholly owned material restricted subsidiary held by the Borrowers, Holdings and each subsidiary guarantor (limited to 65% of the capital stock of certain subsidiaries and subject to customary exceptions) and (ii) a perfected security interest in substantially all other tangible and intangible assets of the Borrowers, Holdings and the subsidiary guarantors, subject to customary exceptions (the “Collateral”).

The Term Loan Facility is senior in right of payment and secured on a first-priority basis with respect to the Collateral other than the ABL Priority Collateral (as defined below) (the “Term Priority Collateral”) and a second-priority basis with respect to the ABL Priority Collateral (as defined below). The Term Loan Facility is pari passu in right of payment with the ABL Credit Agreement.

The ABL Credit Agreement is senior in right of payment and secured on a first-priority basis with respect to, subject to certain exceptions, accounts receivable (including credit card receivables), inventory, cash, cash equivalents, securities and deposit accounts, general intangibles and certain other assets, in each case, to the extent evidencing or reasonably related to the foregoing (other than capital stock and intellectual property), and books and records to the extent related to the foregoing and, in each case, proceeds thereof (the “ABL Priority Collateral”) and a second-priority basis with respect to Term Priority Collateral.

Certain Covenants and Events of Default

The Term Loan Credit Agreement and the ABL Credit Agreement contains a number of covenants that, among other things, restrict, subject to certain exceptions, the Borrowers’ ability and the ability of the restricted subsidiaries of the Borrowers to:

•

incur additional indebtedness and guarantee certain indebtedness;

•

create or incur liens;

•

engage in mergers or consolidations;

•

sell, transfer or otherwise dispose of assets;

•

pay dividends and distributions or repurchase capital stock;

•

prepay, redeem or repurchase certain indebtedness;

•

make investments, loans and advances; and

•

enter into certain transactions with affiliates.

The above restrictions, including the restriction regarding the ability of the Company to pay dividends and distributions or repurchase capital stock, can have an adverse affect on our liquidity, particularly if distributions from our operating subsidiaries are insufficient to meet our obligations under our debt. There are, however, exceptions to certain of those restrictions to pay for our general corporate operating and overhead expenses, taxes, and certain other fees and expenses. If an event of default occurs, the lenders under the Term Loan Facility and/or the ABL Credit Agreement will be entitled to take various actions, including the acceleration of amounts due under the Term Loan Facility and/or the ABL Credit Agreement and all actions permitted to be taken by secured creditors. The Term Loan Facility will cross-default, upon a payment event of default under the ABL Credit Agreement or acceleration of the indebtedness under the ABL Credit Agreement following an event of default under the ABL Credit Agreement and will cross-default to any other indebtedness in a principal amount in excess of the greater of (x) a specified dollar amount and (y) an amount equal to a specified percentage of our pro forma consolidated EBITDA for the most recent four fiscal quarter period. The ABL Facility will cross- default to an event of default under the ABL Credit Agreement.

Senior Secured Notes

On September 30, 2020 Specialty Building Products Holdings, LLC, a Delaware limited liability company and SBP Finance Corp., a Delaware corporation, together as Co-Issuers, issued $600,000,000 in aggregate

principal amount of 6.375% senior secured notes due 2026 and on November 5, 2020, the Co-Issuers issued an additional $50,000,000 in aggregate principal amount of 6.375% senior secured notes due 2026 and on January 21, 2021, the Co-Issuers issued an additional $75,000,000 in aggregate principal amount of 6.375% senior secured notes due 2026 (collectively, the “Senior Secured Notes”). The Senior Secured Notes were issued pursuant to an indenture dated as of September 30, 2020 (as supplemented by the First Supplemental Indenture dated as of November 5, 2020, as further supplemented by the Second Supplemental Indenture dated as of January 21, 2021 and as further amended and supplemented from time to time, the “Indenture”), among the Co-Issuers, the Guarantors party thereto, and Ankura Trust Company, LLC, as trustee and as collateral agent for the Senior Secured Notes. As of October 3, 2021, there is $725 million in aggregate principal amount of 6.375% senior secured notes due 2026 outstanding.

Accounts Receivable Factoring Agreement

Pursuant to the terms of the Account Purchase Agreement, we may elect to receive advances for receivables from a single customer for sales in Canada and the United States. Proceeds from transfers under the Account Purchase Agreement reflect the face value of accounts receivable, net of expected rebates and discounts, less a factor’s fee. The factor’s fee is equal to 0.075% of the face value of accounts receivable, net of expected rebates and discounts. There are contractual limits on the amounts of accounts receivable that can be transferred, and we are charged interest on the total amount outstanding on the secured loan equal to LIBOR plus 1.25% per annum. As of October 3, 2021 and January 3, 2021 we recognized a liability of $22.6 million and $21.4 million, respectively, which is recorded as a factor loan payable in the Consolidated Balance Sheets. As of January 3, 2021 and December 29, 2019, we recognized a liability of $21.4 million and $15.1 million, respectively, which is recorded as a factor loan payable in the Consolidated Balance Sheets. We provide collection services on the factored accounts but does not receive any fees for acting as the collection agent, and as such have not recognized any servicing assets or liabilities as of January 3, 2021 and December 29, 2019. In addition, we recorded interest expense under this program in the Consolidated Statements of Operations of $0.3 million and $0.3 million for the periods ended October 3, 2021 and October 4, 2020, respectively. We recorded interest expense under this program in the Consolidated Statements of Operations of $0.3 million, $0.7 million, and $.2 million for the years ended January 3, 2021, December 29, 2019 and December 30, 2018, respectively.

Equipment Notes

We have a master agreement with a bank which provides for borrowings for the purchase of equipment, subject to approval by the bank. We currently have three equipment notes outstanding under this master agreement that expire on various dates through 2022. Principal and interest at approximately 4% are due monthly under these agreements. Borrowings outstanding under this agreement as of October 3, 2021 (Successor) and January 3, 2021 (Predecessor) totaled $0.4 million and $0.8 million, respectively. Borrowings outstanding under this agreement at January 3, 2021 and December 29, 2019 totaled $0.8 million and $1.3 million.

Historical Cash Flows

Information about our cash flows for the 2021 Successor (January 21, 2021 to October 3, 2021), the 2021 Predecessor (January 4, 2021 to January 20, 2021), and the 2020 Predecessor for Nine Month Period (ended October 4, 2020) is presented in our statements of cash flows and is summarized below:


	Successor			Predecessor
(in thousands)	Period from January 21, 2021 to October 3, 2021			Period from January 4, 2021 to January 20, 2021			Nine months ending October 4, 2020
Net cash provided by (used in):
Operating activities		(6,047	)		20,778			44,719
Investing activities		(329,521	)		(267	)		(2,923	)
Financing activities		368,487			58,000			(31,732	)

Information about our cash flows for fiscal years 2020, 2019 and 2018 is presented in our statements of cash flows and is summarized below:


	Fiscal Year
(in thousands)	2020			2019			2018
Net cash provided by (used in):
Operating activities		24,788			(436	)		(16,650	)
Investing activities		(54,128	)		(4,093	)		(267,668	)
Financing activities		36,961			6,465			286,139

Net cash flows used in operations

Net cash flow from operations for January 21, 2021 to October 3, 2021 (Successor) was an outflow of $6.0 million and an inflow of $20.8 million for January 4, 2021 to January 20, 2021 (Predecessor) compared to an inflow of $44.7 million for the nine months ended October 4, 2020 (Predecessor). Most of this change is driven by a growth in inventories due to an increase in the availability of supply in the Successor period.

Net cash flow from operations for fiscal year 2020 was an inflow of $24.8 million compared to an outflow of $0.4 million for fiscal year 2019, a difference of $25.2 million in operating cash flow performance in fiscal year 2020. The increase in cash inflows was primarily due to accrued interest expense and customer rebates increasing, and other net working capital accounts decreasing compared to the previous period.

Net cash flow from operations for fiscal year 2019 was an outflow of $0.4 million compared to an outflow of $16.7 million for fiscal year 2018. The decrease in net cash used in operations was driven primarily by an increase in inventory due to new product initiatives being introduced into the company.

Net cash flows used in investing activities

Net cash used in investing activities was $329.5 million for January 21, 2021 to October 3, 2021 (Successor), $0.3 million for January 4, 2021 to January 20, 2021 (Predecessor) compared to $2.9 million for the nine months ended October 4, 2020 (Predecessor). The change was primarily a result of the TJC Acquisition in the Successor period.

Net cash used in investing activities was $54.1 million for fiscal year 2020 compared to $4.1 million for fiscal year 2019, an increase in use of cash of $50.0 million. The increase is attributable to the acquisition of Mid-State Lumber.

Net cash used in investing activities was $4.1 million for fiscal year 2019 compared to $267.7 million for fiscal year 2018, a decrease of $263.6 million. The decrease in cash outflow was primarily driven by a reduction of $266.1 million in cash outflow with respect to purchases of businesses, net of cash acquired in fiscal year 2019 compared with fiscal year 2018. These were related to the acquisitions completed in 2018.

Net cash flows provided by financing activities

Net cash flow provided by financing activities was $368.5 million for January 21, 2021 to October 3, 2021 (Successor), $58.0 million for January 4, 2021 to January 20, 2021 (Predecessor) compared to net cash flow used in financing activities $31.7 million for the nine months ended October 4, 2020 (Predecessor). The change was primarily a result of contributed capital from the TJC Acquisition in the Successor period, partially offset by the proceeds from additional issuance of senior secured debt in the Predecessor period.

Net cash flow provided by financing activities was $37.0 million in fiscal year 2020 compared to

$6.5 million in fiscal year 2019, an increase of $30.5 million. The net increase in cash inflows from financing activities was driven mainly by new bond proceeds partially offset by the repayment of our term loan facility and a distribution to shareholders.

Net cash flow provided by financing activities was $6.5 million in fiscal year 2019 compared to $286.1 million in fiscal year 2018, a decrease of $279.6 million. The cash flow provided by financing activities for fiscal year 2019 was primarily related to drawings under revolving lines of credit, which were largely offset by repayments of drawings under revolving lines of credit and repayment of term debt. The significant cash flow provided by financing activities in fiscal year 2018 was predominately related to the incurrence of indebtedness to fund the 2018 acquisitions, which was partially offset by the refinancing of existing indebtedness and the repayment of revolving lines of credit.

Internal Control Over Financial Reporting

In connection with the preparation of our financial statements as of and for the fiscal years ended 2018, 2019 and 2020, we identified certain control deficiencies in the design and maintenance of our internal control over financial reporting that constituted material weaknesses in internal control over financial reporting.

•

We are in the process of implementing measures designed to improve our internal control over financial reporting to remediate these material weaknesses. These measures include:

•

Actively recruiting and hiring additional accounting and financial reporting personnel with the requisite technical and SEC reporting experience combined with expanding the capabilities of existing

accounting and financial reporting personnel through continuous training and education in the accounting and reporting requirements under SEC rules and regulations.

•

Implementing formal policies, procedures and control activities combined with delivery of training on standards of documentary evidence.

•

Designing and engaging in the implementation of an IT general controls framework that addresses risks associated with user access and security, application change management and computer operations.

We cannot assure you that the measures we have taken to date, and are continuing to implement, will be sufficient to remediate the material weaknesses we have identified or avoid potential future material weaknesses. See “Risk Factors—Risks Related to Our Business and Industries—We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate our material weaknesses, or if we otherwise fail to establish and maintain effective internal control over financial reporting, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and, as a result, the value of our common stock”.

Quantitative and Qualitative Disclosures about Market and Other Financial Risk

Our operations expose us to various financial risks. We have a risk management program in place, as approved by the Board of Directors of the Company, which seeks to limit the impact of our currency exchange rate risk.

The sections below present further information about our exposure to the risks arising from our use of financial instruments and our objectives, policies and processes for measuring and managing the risk.

Concentration of Credit Risk

We had one major supplier that accounted for approximately 13%, 10% and 16% of purchases for the years ended January 3, 2021, December 29, 2019 and December 30, 2018, respectively and 17% for the nine months ended October 3, 2021. We had one major supplier that accounted for approximately 29% and 40% of the total accounts payable balances at January 3, 2021, December 29, 2019, respectively. We maintain our cash in bank deposit accounts through our primary relationship bank which, at times, may exceed federally insured limits. We have not experienced any losses in such accounts. Our management monitors the financial status of our primary bank and believes it is not exposed to any significant credit risk on cash.

We had one major customer that accounted for approximately 15% of total net sales for the years ended January 3, 2021 and December 29, 2019 and the nine months ended October 3, 2021. We had no major customers that accounted for more than 10% of net sales for the year ended December 30, 2018. We had no major customers that accounted for more than 10% of total accounts receivable at January 3, 2021, December 29, 2019 and October 3, 2021.

Insuring Receivables from Third Parties

We are subject to the credit risk of our customers because we provide credit to our customers in the normal course of business. All of our customers are sensitive to economic changes and to the cyclical nature of the residential construction markets. All customers have a credit limit and payment terms. A customer’s account stays open unless there is a material change in their business or the customer fails to abide by the credit limit and payment terms. We utilize a credit insurance program with two independent third parties to insure accounts receivable from certain named customers. One policy provides for an annual $450,000 deductible and 10% coinsurance per claim. The other policy has no annual deductible and has a 10% coinsurance per claim. The allowance for credit losses was $955,000 and $648,000 at January 3, 2021 and December 29, 2019, respectively.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements in fiscal years 2020 and 2019, or in the nine month period ending October 3, 2021.

Critical Accounting Policies and Estimates

A summary of our significant accounting policies is included in note 1 to our annual audited consolidated financial statements, included elsewhere in the prospectus of which this registration forms a part. The preparation of financial statements requires our management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Our estimates and assumptions are based on historical experiences and changes in the business environment. Actual results may differ from estimates under different conditions, sometimes materially. Critical accounting policies and estimates are defined as those that could have a significant impact on the reporting of our financial condition and results of operations and require management judgment. Our critical accounting policies and estimates are described below.

Revenue Recognition

Substantially all our sales are from the provision of products to customers under customer contracts and purchase orders. Revenue is measured at the amount of consideration expected to be received in exchange for providing the products, net of customer deductions. Customer deductions provided for discounts, incentives and other pricing adjustments are determined by customer-specific agreements and historical experience. Revenue is recognized when control of the product is transferred to the customer. Depending upon the terms of the contract, this may occur at the time of delivery or shipment. Payment terms are generally between 10 and 30 days from shipment. All amounts billed to a customer in a sales transaction related to shipping and handling, if any, represent revenue earned for the goods provided and are classified as sales.

Employee Compensation Plan (Successor)

The Specialty Building Products Management Incentive Plan (the “Incentive Plan”) provides for the issuance of equity-based compensation awards including the grants of Class B Units of SBP Varsity Holdings the Parent of the Company. Although these units are of SBP Varsity Holdings and not the Company, the Company records compensation expense in accordance with ASC 718 Stock Compensation for these awards.

The Company grants equity awards to employees, some of which are subject to service-only graded vesting conditions over a five-year period, while other grants require a combination of service-based and market-based vesting conditions. These grants include both a market condition (a specified return on investment) as well as an implied performance condition (the occurrence of some form of liquidity event or series of events that provide required returns on investment to certain investors). The likelihood of this condition, the implied performance condition, being satisfied is not generally considered probable unless such an event is imminent or has occurred.

For awards with service-based vesting only, the Company recognizes compensation expense on a straight-line basis over the requisite service period. For awards with multiple vesting conditions including service-based, performance-based, and market-based vesting conditions, the Company assesses the probability of the grantee attaining the performance trigger at each reporting period. Awards that are deemed probable of attainment are recognized in expense over the requisite service period of the grant, using a graded attribution model. The Company does not estimate pre-vesting forfeitures, but instead accounts for any forfeitures in the period in which it occurs by adjusting compensation cost at the time of the forfeiture.

The fair value of each equity award is estimated using an appropriate valuation method. The Company establishes the enterprise value of the Company using generally accepted valuation methodologies including discounted cash flow analysis, comparable public company analysis and comparable acquisitions analysis. When appropriate, the Company also considered and gave weight to preliminary indications of value in an IPO provided by the Company’s underwriters. The Company added cash and deducted debt to determine the total equity value of the Company. After

establishing a total equity value of the Company, the Company allocated the equity value among the securities that comprise the capital structure of SBP Varsity Holdings the entity upon which the incentive units are issued, using the Option-Pricing Method, which allocates the fair value of total equity to the various components of equity based on estimated liquidity events as well as the economic and control rights of each class of units. A discount for lack of marketability was applied to reflect the increased risk arising from the inability to readily sell the units. The resulting value for the employee equity awards is used for financial reporting purposes. The Company was assisted by independent valuation experts to apply the above models to calculate fair value estimates.

Volatility assumptions used in the option-pricing model are based on peer company volatility because there is no active trading market for equity units and therefore limited ability to estimate a meaningful volatility based on the equity unit price fluctuations. The expected term assumption is based on estimated time to a significant liquidity event. The risk-free interest rate used in the model is based on the implied yield curve available on U.S. Treasury zero coupon issues at the date of grant with a remaining term equal to the Company’s expected term assumption. The Company has never declared or paid cash dividends on equity shares and has no current expectation to do so.

See Note 8 – Employee Compensation Plans for additional information regarding our equity-based awards.

Employee Compensation Plans (Predecessor)

We have established an incentive-based compensation plan to advance the interest of the Company by providing the incentive units to key employees. These units under the plan are intended to be treated as “profits interests” under IRS Revenue Procedure 93-27 and IRS Revenue Procedure 2001-43. A portion of these units are performance based and vest upon the sale of the partnership, while the other portion vests over time. For the time-vesting units, unless earlier terminated or forfeited, 20% of the units will vest on each of the first five anniversaries of the effective date, if there has not been a cessation of the employee’s employment. One hundred percent (100%) of the units will vest upon the occurrence of a sale of the partnership, provided, the employee has maintained continuous employment by us through the effective date of the sale. No units have been forfeited or cancelled as of the end of fiscal year 2020.

The profits interests are recorded as a liability. For the period from January 4, 2021 to January 20, 2021, $14.9 million was recorded as compensation expense, based on the value and the vesting portion of the time based units. For the years ended January 3, 2021, December 29, 2019 and December 30, 2018, $10.7 million, $0.5 million and $0.5 million were recorded, respectively, as compensation expense, based on the value and the vesting portion of the time based units.

Fair Value of Financial Instruments

ASC 820, Fair Value Measurements and Disclosures (ASC 820), defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.

Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date.

Level 1

Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2

Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3

Valuation is based upon other unobservable inputs that are significant to the fair value measurement.

ASC 820 also applies to measurements under other accounting pronouncements, such as ASC 825, Financial Instruments (ASC 825) that require or permit fair value measurements. ASC 825 requires disclosures of the fair value of financial instruments.

Our financial instruments include cash, accounts receivable, accounts payable, accrued expenses, stock-based compensation liability, and long-term debt. Our nonfinancial assets such as property and equipment, goodwill and intangible assets are not measured at fair value on a recurring basis; however, they are subject to fair value adjustments in certain circumstances, such as when there is evidence that impairment may exist.

The carrying amounts of cash, accounts receivable, accounts payable, accrued expenses and line of credit approximate their fair value because of the short-term maturity and highly liquid nature of these instruments. We determine the fair value of long-term debt based on various factors including maturity schedules, call features and current market rates. We also use quoted market prices, when available, or the present value of estimated future cash flows to determine fair value of our stock-based compensation liability and long-term debt. See Note 6 for fair value measurements for long-term debt.

See Note 2 related to fair value measurements for the allocation of the assets acquired and liabilities assumed in the acquisition of the Predecessor.

Income Taxes

Prior to the acquisition, the Predecessor was a disregarded entity for tax purposes; however, its sole owner was a taxable C Corporation. The Predecessor provides fully for income taxes in accordance with ASC 740, Income Taxes (“ASC 740”). Subsequent to the acquisition, the Company is now a taxable C Corporation.

Earnings per Share (Successor) and Earnings per Unit (Predecessor)

Basic earnings per unit (or common share) is computed by dividing net income (loss) by the weighted-average number of units (or shares) outstanding during the period. Diluted earnings per unit (or share) is calculated by adjusting outstanding units (or shares) assuming participation in or conversion of all potentially dilutive securities, but not units (or shares) that are anti-dilutive.

In the Predecessor period, the Company analyzed the calculation of earnings per unit and determined that it resulted in values that would not be meaningful to the users of the condensed consolidated financial statements as the equity structure of the Company contained only a single common unit issued and outstanding with no potentially dilutive securities in existence. Therefore, earnings per unit information in the predecessor period has not been presented.

In the Successor period, 1,000 shares of SBP, Inc. were issued and outstanding for the entire period presented with no potentially dilutive securities in existence. The Class B Units, as described in Note 8, are units of SBP Varsity Holdings and are not potentially dilutive securities of the Company. Therefore, the Company’s basic and diluted earnings per share are equal in the condensed consolidated financial statements for the Successor period.

Acquisitions

The Company accounts for all acquisitions in accordance with ASC 805, Business Combinations, (ASC 805) which requires that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date. The excess of the purchase price over the fair value of the assets less liabilities is recognized as goodwill.

100

The process for estimating fair value of intangible assets, certain tangible assets, assumed liabilities and contingent consideration requires the use of judgment to determine the appropriate assumptions. ASC 805 defines the measurement period by which purchase price adjustments should be finalized as not to exceed one year from the acquisition date. Certain adjustments to the preliminary estimates of fair values of assets and liabilities made subsequent to the acquisition date, but within the measurement period, which is one year or less, are recorded in goodwill. Acquisition costs are expensed as incurred and are reported as general and administrative expenses.

Accounting Pronouncements Recently Adopted

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02 (Topic 842), Lease Accounting. On December 31, 2018, SBP Predecessor adopted this standard using the modified retrospective approach and applied it to all leases. ASC 842 establishes a new lease accounting model for leases. The most significant changes include the clarification of the definition of a lease, the requirement for lessees to recognize for all leases a right-of-use asset and a corresponding lease liability in our Consolidated Balance Sheets, and additional quantitative and qualitative disclosures which are designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases. Lease expense will continue to be recognized in the Consolidated Statement of Operations in a manner similar to prior accounting guidance.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which is an update to existing guidance under the Investments topic of the Codification. This update introduced a new impairment model for financial assets, known as the current expected credit losses (“CECL”) model that is based on expected losses rather than incurred losses. The CECL model requires an entity to estimate credit losses on financial assets, including trade accounts receivable, based on historical information, current information and reasonable and supportable forecasts. Under this guidance companies record an allowance through earnings for expected credit losses upon initial recognition of the financial asset. SBP Predecessor adopted the applicable aspects of this guidance on a modified retrospective basis as of December 30, 2019. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-04, Goodwill and Other, Simplifying the Test for Goodwill Impairment. This guidance removes Step 2 of the goodwill impairment test, which required a hypothetical purchase price allocation. A goodwill impairment is now the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. All other goodwill impairment guidance remains largely unchanged. SBP Predecessor adopted this guidance effective December 30, 2019. This guidance only impacts our consolidated financial statements if there is a future impairment of goodwill.

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements on fair value measurements by removing, modifying and adding certain disclosure requirements in ASC 820. ASU 2018-13 is effective for our annual and interim periods beginning after December 15, 2019. SBP Predecessor adopted this standard as of December 30, 2019 and the adoption of this guidance did not have a material impact on our consolidated financial statements.

In August 2018, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing

101

Arrangement That Is a Service Contract, which reduces complexity for the accounting for costs of implementing a cloud computing service arrangement and aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). SBP Predecessor adopted this guidance prospectively on January 4, 2021 and the adoption of this guidance did not have a material impact on the Predecessor’s condensed consolidated financial statements.

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The purpose of ASU 2020-04 is to provide optional guidance for a period of time related to accounting for reference rate reform on financial reporting. It is intended to reduce the potential burden of reviewing contract modifications related to discontinued rates. The amendments and expedients in this update are effective as of March 12, 2020 through December 31, 2022 and may be elected by topic. The Predecessor adopted this guidance prospectively on January 4, 2021 and the adoption of this guidance did not have a material impact on SBP Predecessor condensed consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, an update to existing guidance under the Income Taxes topic of the Codification. This updated guidance simplifies the accounting for income taxes by removing certain exceptions to the general principles in the Income Taxes topic. This guidance is effective for public companies annual and interim periods beginning after December 15, 2020. SBP Predecessor adopted this guidance prospectively on January 4, 2021 and the adoption of this guidance did not have a material impact on the Predecessor condensed consolidated financial statements.

Accounting Pronouncements Not Yet Adopted

There are no recent accounting pronouncements pending adoption that the Company expects will have a material impact on the condensed consolidated financial statements.

Quarterly Results of Operations

The following tables set forth our historical unaudited consolidated statements of income and operating results for each of the quarters indicated. The information for each quarter has been prepared on the same basis as our audited consolidated financial statements included elsewhere in this prospectus and reflects, in the opinion of management, all adjustments necessary for a fair statement of the financial information presented. Our historical results are not necessarily indicative of future operating results, and our interim results are not necessarily indicative of the results to be expected for the full year or any other period. The quarterly financial data set forth below should be read together with our consolidated financial statements and related notes included elsewhere in this prospectus.

102


	Successor									Predecessor
(in thousands, except percentages)	Q3 2021			Q2 2021			Period from January 21, 2021 to April 4, 2021			Period from January 4, 2021 to January 20, 2021			Q4 2020			Q3 2020			Q2 2020			Q1 2020			Q4 2019
Net sales	$	648,397		$	671,889		$	457,854		$	114,608		$	418,017		$	452,273		$	415,061		$	384,719		$	333,270
Cost of sales		520,036			514,679			362,083			89,587			327,719			358,367			325,893			311,221			267,497

Gross profit		128,361			157,210			95,771			25,021			90,298			93,906			89,167			73,498			65,772

Distribution expenses		21,697			36,976			24,875			6,575			31,230			31,561			32,086			26,115			29,895
Selling expenses		18,469			19,248			14,144			2,685			14,846			14,183			13,466			15,146			13,493
General and administrative expenses		22,999			21,104			14,651			3,989			27,329			13,662			14,757			14,350			13,347
Business acquisition and other related costs		588			—			5,961			26,182			1,136			—			—			—			—
Amortization of intangible assets		8,996			9,039			7,077			1,007			4,221			3,341			3,918			3,832			9,082
Other operating (income) loss		96			(501	)		454			(488	)		(1,050	)		180			(618	)		468			113

Income from operations	$	55,516		$	71,344		$	28,609		$	(14,929	)	$	12,586		$	30,979		$	25,559		$	13,588		$	(158	)

Interest expense		10,741			10,787			8,440			2,536			11,260			19,869			9,741			13,928			10,981

Income (loss) before income taxes		44,775			60,557			20,169			(17,465	)		1,326			11,110			15,818			(340	)		(11,139	)

Income tax expense (benefit)		12,406			16,475			5,480			127			4,056			3,321			4,703			(2,183	)		(1,068	)

Net income (loss)	$	32,369		$	44,082		$	14,689		$	(17,592	)	$	(2,730	)	$	7,789		$	11,116		$	1,843		$	(10,071	)


	Successor									Predecessor
(in thousands, except percentages)	Q3 2021			Q2 2021			Period from January 21, 2021 to April 4, 2021			Period from January 4, 2021 to January 20, 2021			Q4 2020			Q3 2020			Q2 2020			Q1 2020			Q4 2019
Reported Net income (loss)	$	32,369		$	44,082		$	14,689		$	(17,592	)	$	(2,730	)	$	7,789		$	11,116		$	1,843		$	(10,071	)
Income tax (benefit) expense		12,406			16,475			5,480			127			4,056			3,321			4,703			(2,183	)		(1,068	)
Interest expense		10,741			10,787			8,440			2,536			11,260			19,869			9,741			13,928			10,981
Depreciation & amortization		13,022			12,906			9,934			1,667			7,592			6,159			6,604			6,725			12,079
Adjustments:
Acquisition/Integration/Start-up Costs ⁽¹⁾		1,014			907			329			261			1,310			426			435			1,335			1,624
Bond Issuance/Financing Costs ⁽²⁾		1,083			19			152			4			(1,821	)		2,424			19			213			194
Private Equity/Transaction Costs ⁽³⁾		847			692			6,239			26,150			11,387			—			166			—			485
Management Fees ⁽⁴⁾		1,724			796			—			—			—			—			—			—			—
Other (Income) Expense, net ⁽⁵⁾		859			(189	)		195			(300	)		(1,126	)		1,578			111			1,072			1,209

Adjusted EBITDA ⁽⁶⁾	$	74,063		$	86,475		$	45,458		$	12,855		$	29,928		$	41,566		$	32,895		$	22,933		$	15,433

Net sales	$	648,397		$	671,889		$	457,854		$	114,608		$	418,017		$	452,273		$	415,061		$	384,719		$	333,270
Net income margin (% of Net sales)		5.0	%		6.6	%		3.2	%		-15.3	%		-0.7	%		1.7	%		2.7	%		0.5	%		-3.0	%
Adjusted EBITDA Margin ⁽⁶⁾		11.4	%		12.9	%		9.9	%		11.2	%		7.2	%		9.2	%		7.9	%		6.0	%		4.8	%

(1)	Expenses directly associated with the ongoing integration of Midwest Lumber and Alexandria Moulding, and the acquisitions of REEB, Dallas Wholesale and Millwork Sales.

(2)	Expenses incurred in connection with the Senior Secured Notes offering, the ABL Credit Agreement to fund the acquisitions and the operations of the company, and IPO readiness activities.

(3)	Expenses related mainly to the TJC acquisition inclusive of incentive equity unit grants.

(4)	Management fees charged quarterly by TJC.

(5)	Other expenses incurred by the company including but not limited to branch relocation, severances paid, expenses associated with discontinuing/replacing a product line, and year-end vendor rebate adjustments.

(6)	Adjusted EBITDA and Adjusted EBITDA Margin exclude any earnings or losses from acquisitions prior to their respective acquisition dates for the presented periods.

103

BUSINESS

Overview

We serve as a critical link in the building products supply chain, connecting over 200 suppliers to more than 22,000 customer locations. Over our history, we have developed strong, trusted relationships with our customers and suppliers as a result of our ability to navigate complex supply chains, which often consist of high SKU counts, long lead times, large minimum order quantities, and just-in-time delivery requirements of bulky and cumbersome items. We have leveraged our scale, market leadership, and geographic and customer reach to secure distribution rights for products from many leading suppliers. In fiscal year 2020, approximately 85% of our sales were from products for which we had formal or practical exclusivity. This includes suppliers with leading consumer brands such as Trex, LP SmartSide and James Hardie, where we have established leading share positions across many of our markets. We believe we are the largest supplier of Trex composite decking and railing and LP SmartSide products in the geographic markets in which we operate. Since we established our relationship with Louisiana Pacific in 2017, we have grown our LP SmartSide net sales at a CAGR of approximately 220% from approximately $4 million in 2017 to approximately $120 million in 2020. Our growing partnership with Trex is an example of the strength of our service offering, geographic breadth, and customer reach as we have displaced under-performing competitors in a broad distribution territory. As a result, from 2017 to 2020, our net sales attributable to Trex products increased at a CAGR of approximately 29% from approximately $98 million in 2017 to approximately $210 million in 2020, and we believe we have significant runway for future growth.

104

LOGO

We focus on high-value, high-margin products, many of which are growing faster than the overall market by partnering with premier brands. Our product breadth and expansive geographic presence across North America allows us to serve as a one-stop-shop for national, regional and local customers. We offer a comprehensive selection of more than 37,000 SKUs across a variety of categories including exterior siding, trim, and finish products, moulding and millwork products, composite decking and railing products, specialty doors, interior finish products and engineered wood products, among others. The table below provides a summary overview of our key product categories.

105

LOGO

106

brands of specialty building products such as Trex and James Hardie who are committed to conservation, diverting waste from landfills and reducing their carbon footprint as they develop durable products primarily from recycled materials. Our sales force works to educate consumers about the benefits of sustainable specialty building products in an effort to accelerate the adoption of these products. Our wood-based products are sourced from suppliers such as ARAUCO and Louisiana Pacific, who only engage in certified Sustainable Forestry practices. ARAUCO has become the first certified carbon neutral forestry company in the world as a result of its responsible management of forests and plantations. The sustainable management of timber plantations reduces the impact of deforestation on natural forests and increases the capture of carbon dioxide. We leverage our business intelligence systems to not only assist in profitability growth, but also help us drive efficiency and sustainability throughout our organization. We are focused on Environmental, Social & Governance (“ESG”) matters by living our values and prioritizing employee wellness, as well as being committed to sourcing environmentally friendly products, reducing waste, and improving productivity across our operations.

LOGO

Our Industry

107

for advanced architectural and design elements, and trends towards craftsman and farmhouse-style homes. As the largest distributor of specialty building products in North America according to Principia, we believe our product portfolio is well positioned to benefit from these trends and deliver above average growth in each of our core product categories, as we have done historically.

LOGO

Based on data from the National Association of Home Builders, there were approximately 1.4 million total annual housing starts in the United States in 2020, an increase of 7% from 2019. According to the Rosen Consulting Group, in a study using data from the U.S. Census Bureau and the National Association of Home Builders, the U.S. housing sector is currently undersupplied by approximately 5.5 million homes. The study estimates that U.S. housing starts would need to accelerate to more than 2 million housing units per year over the next 10 years in order to balance demand. This represents an increase of more than 700,000 units per year (or approximately 60%) relative to the pace of housing production in 2020. As such, we expect residential new construction demand to remain strong over the long term. In addition, while 2021 has been a strong year in the market, there have been a number of limiting factors that have constrained growth, including industry-wide supply shortages and disruptions, labor constraints and price fluctuations. We believe these factors have led to above-average backlog which gives us confidence in strong continued growth and demand for our products for the foreseeable future.

108

LOGO

109

Our Competitive Strengths

Leading Distribution Platform in Specialty Building Products

Broad Product Portfolio of Leading Brands across Large, High Growth Categories Benefiting from Long-Term Industry Tailwinds

Critical Supply Chain Partner Delivering Compelling Value Proposition to Customers and Suppliers

We play an essential role in the supply chain for rapidly growing specialty building products, connecting a diverse set of leading suppliers to a highly fragmented customer base, and serving more than 22,000 unique customer locations. Over time, we have developed long-term relationships with our suppliers and customers to become a trusted partner for products that are high SKU count, have long lead times and exhibit low turnover. Our suppliers value our local market knowledge and extensive sales force as well as our ability to distribute their

110

products to fragmented markets, provide timely delivery in job-lot quantities and offer value-added services. As a result, we are able to benefit from strategic supplier agreements, favorable access to selected product lines and greater product availability. For example, in most markets, we are one of only two distributors contracted by leading suppliers such as Trex and James Hardie, as well as others to distribute their products. In fiscal year 2020, approximately 85% of our net sales were from products with formal or practical exclusivity. Our customers rely on us for our product breadth and availability, knowledgeable sales force and technical expertise as well as our purchasing scale, just-in-time delivery capability, and value-added services such as remanufacturing and pre-finishing. We also have an extensive field service organization serving home improvement retailer locations, where we are responsible for managing product assortment, inventory levels, and merchandising for selected product categories. For example, we have over 500 people managing the moulding aisle for more than 800 Home Depot locations. We believe our combined capabilities for both suppliers and customers provide us with significant and sustainable competitive advantages relative to smaller, local players.

Highly Scalable Platform Leveraging Proprietary Technology and Data Analytics to Drive Profitable Growth

Attractive and Resilient Financial Profile

111

Proven Ability to Identify, Execute and Integrate Accretive Acquisitions

Experienced and Values-Based Management Team with Strong Track Record of Execution

We believe our management team is among the most experienced in the industry, and is supported by a deep bench of branch managers with significant operational expertise, extensive customer and supplier relationships, and a proven ability to execute growth strategies across economic cycles. Our senior management team, consisting of our President and Chief Executive Officer Jeff McLendon, our Chief Financial Officer Ronnie Stroud, our Chief Operating Officer Bryan Lovingood and our Chief Commercial Officer, Carl McKenzie, has over 75 years of combined experience, and their continuity of leadership has provided both stability and a clear long-term vision for us for almost 20 years. Under their leadership, we have entered into new product categories and geographic markets, instilled a strong, values-based collaborative culture, and attracted and developed industry-leading talent, all while expanding the business from approximately $200 million in net sales and seven locations in fiscal year 2010 to approximately $1.67 billion in net sales and 27 locations in fiscal year 2020. Although our business has scaled rapidly, both organically and through strategic acquisitions, our culture and values remain core to our business. We value all of our stakeholders and we are committed to the core value of “using our influence to have a uniquely positive impact” on the people that we touch. Through Company-led initiatives such as “Thrive” and “Serve,” we encourage our employees to prioritize personal wellness and to better serve our communities and the people we directly influence. Further, our commitment to sustainability permeates our organization as we have adopted several strategies to reduce our impact on the environment. We partner with the leading consumer brands of specialty building products such as Trex and James Hardie who are committed to preserving natural resources as they develop long-lasting products from recycled materials. Our wood-based products are sourced from suppliers such as ARAUCO and Louisiana Pacific, who only engage in certified Sustainable Forestry practices. We believe the combination of our consistent strategic vision, leading market position and unique values-based culture, will allow us to continue to attract and develop high-performing talent critical to our success.

112

Our Strategies

We intend to leverage our competitive strengths to deliver profitable, above-market growth and create shareholder value through the following core strategies:

Integrate our Full Product Suite Across our Network

(i) Cross-sell existing products into acquired markets

Our broad portfolio of leading brands enables us to leverage our network and cross-sell our existing products through newly added markets. Typically, new markets are added through acquisition and there is a significant opportunity to broaden our product offering within the newly acquired local market. Often our existing products are complementary, have significant customer and channel overlap, and strengthen our value proposition for customers and suppliers in the region. For example, subsequent to the opening of our Minneapolis branch through the acquisition of Midwest Lumber in 2018, we were successfully able to introduce LP SmartSide and Trex branded products to the market. We have been able to grow net sales from LP SmartSide and Trex to approximately $186 million and approximately $308 million, respectively, as of the twelve month period ended in October 3, 2021. As such, our composite decking and railing, and exterior siding, trim and finish categories have revenue growth at CAGRs of 58% and 17%, from $29 million and $42 million in fiscal year 2018, to $102 million and $65 million in the twelve month period ended in October 3, 2021, respectively, at the Minneapolis branch. Our cross-selling strategy enables us to leverage our scale advantages to capture share from competitors and fortify our position in new markets.

(ii) Cross-sell new products through existing markets

We have a proven track record of being able to introduce new products from our portfolio to existing markets across our footprint. Our broad portfolio of leading brands spans over ten different product categories, which provides ample opportunity to cross-sell into underpenetrated markets. We have successfully implemented this strategy in our most mature markets in the southern U.S., such as Atlanta, Jacksonville, Greenville, Mobile and Raleigh, where we sell products across all of our categories. We believe there is significant whitespace across our broader footprint to which we can apply this strategy and drive above-market growth. For example, the Reeb Acquisition provided us with a brand new product category, specialty doors, which we expect to cross-sell through all of our existing markets, and the DW Acquisition complemented our new specialty door business. According to Principia, our addressable market for the top 100 CBSAs in the markets we serve is $22 billion. See “Prospectus Summary—Recent Developments.”

Continue to Expand our Relationships with Existing Suppliers

113

dates back to the early 1990s and, in fiscal year 2020, its core product categories represented approximately 13% of our net sales. When we acquired Midwest Lumber in 2018, Trex exited one distributor relationship and transitioned its product supply in those markets to us. We believe there is significant opportunity to continue to increase our distribution footprint alongside our suppliers over time.

Continue to Pursue Strategic, Accretive Acquisitions

Enter Attractive New Markets to Further Expand Geographic Presence

Expand Product Portfolio through Addition of Complementary, High-Growth Categories

114

Utilize our Scale and Operating Efficiencies to Enhance Profitability

Continue to Invest in Attracting, Developing, and Retaining World Class Talent

Business History

We were founded in 1987 in Duluth, Georgia as Atlantic Trading Company. Driven since 2003 by our current management team, we have grown into a leading specialty building products distributor within the markets in which we operate. We have grown geographically, both organically and through strategic acquisitions, including through the acquisitions of NILCO in 2017, Midwest Lumber and Alexandria in 2018 and Mid-State Lumber in 2020. We have also focused on expanding our specialty product offering to better serve our growing customer base. For example, the Reeb Acquisition will provide us with a brand new product category, specialty doors, which we expect to be cross-sold through all of our existing markets.

115

We operate from 37 locations in North America, serving 42 states in the United States and all provinces in Canada, as detailed below.

LOGO

Our Product and Service Offerings

Our ability to provide a comprehensive product offering is essential to our success. We supply a broad and deep line of specialty building products, with over 37,000 SKUs to more than 22,000 customer locations from over 200 suppliers. Our product portfolio includes siding, trim and other exterior products, composite decking and railing, moulding and other interior finish materials, engineered wood systems and other building products.

Exterior / Trim / Siding

Our exterior products include fiber cement siding and trim, cellular PVC trim, cedar lap and shake siding, engineered wood siding and trim and other high value wood and composite siding and exterior trim products. Exterior trim and siding sales are driven by both new construction and by repair and replacement activity, as these products are exposed to the elements and typically require replacement at regular intervals. The products we supply are growing at above-market rates as they benefit from material conversion trends and are taking share from traditional wood and vinyl products because of their durability, low maintenance, and superior aesthetics. Sales of exterior, trim and siding accounted for 24% of our fiscal year sales for the twelve months ended October 3, 2021.

Moulding / Millwork

Our moulding and millwork products include linear mouldings (such as door and window casing, base, crown moulding, chair railing and picture moulding), stair parts, door components, and other materials. We supply a full range of solid wood, finger joint wood, and composite mouldings in a variety of wood species and in various composite substrates. This breadth allows us to cover the needs of the entire market. Our value-add capabilities include creating custom moulding profiles to match an existing moulding or create a unique look for a homeowner. We employ internal remanufacturing and coating capabilities including resizing, pre-cutting, precision routing, and assembly of components. These services are required to customize certain products before delivery, to produce low velocity items locally, and to provide fault tolerance for a very long and complex

116

primary supply chain. We also have an extensive field service organization serving a wide variety of home improvement retail locations. In these locations, we are responsible for the moulding aisle. We manage assortment, reorder product, stock product in store, merchandise and complete other related tasks on behalf of our customers. All of these capabilities also act as a significant barrier to entry. Moulding and millwork have a significant amount of repair and remodel exposure and are among our most complex and highest margin products. Sales of moulding / millwork accounted for 21% of our fiscal year sales for the twelve months ended October 3, 2021.

Composite Decking / Railing

We supply composite decking and railing products from the most-recognized brands in the industry. We believe we are the largest supplier of Trex composite decking and railing in the geographic markets in which we operate. Composite decking materials make up approximately 22% of the total decking market by volume, as of fiscal year 2020. Composite materials are taking share from pressure-treated, commodity lumber as well as from exotic hardwoods, offering superior aesthetics, requiring limited maintenance, and comprising environmentally friendly materials as they are manufactured from recycled plastic. We also supply a full range of other railing and accessory products that serve all of the functional and design requirements in the decking market. Sales of composite decking and railing accounted for 14% of our fiscal year sales for the twelve months ended October 3, 2021.

Interior Finish

Our interior finish products include premium materials for use in interior fine carpentry and surfaces applications. We provide engineered finger joint boards for custom millwork or finish carpentry, prefinished wood products, decorative columns, decorative paneling, wood or wood substitute wall coverings (such as vjoint and shiplap), timbers, beams, and accents. All of these products are made from premium wood or composite materials in a wide variety of species. Many of these products are solid natural wood products that have very complex supply chains and are in limited supply. Our effectiveness and scale has allowed us to become a distributor of choice for the best finish product producers in the world. These supply relationships are a significant barrier to entry for other distributors. These products are used to construct the architectural elements of building interiors and have significant exposure to residential R&R demand. Sales of interior finish products accounted for 8% of our fiscal year sales for the twelve months ended October 3, 2021.

Engineered Wood Products

Our engineered wood products include I-joists, laminated veneer lumber (“LVL”) beams, laminated strand lumber (“LSL”), glulam beams, and specialty metal framing connectors. These specialty materials are used as the structural framing members in residential and commercial buildings. We provide value-added engineering and design services to ensure the materials we supply are capable of supporting the structural loads required, and to provide the engineered wood design and installation drawings on a job-by-job basis for many of our customers. We also cut materials to length, cut holes for utilities, package materials for delivery to the jobsite and provide detailed schematics of how the materials are to be installed by the framing contractor. These services save the framing contractor and builder time and money on the job site by ensuring accuracy, reducing waste, and providing prefabricated structural elements that would otherwise have to be built on site. Sales of engineered wood systems accounted for 9% of our fiscal year sales for the twelve months ended October 3, 2021.

Other Building Products

Our other building products include specialty wood-based products for OEM customers, weather barrier systems, and specialized structural components. Our product offerings in this category are focused on high-value, high-margin, niche products and accounted for 8% of our fiscal year sales for the twelve months ended October 3, 2021.

117

Our Position in the Value Chain

We play a critical role in the value chain of specialty building products and serve as a valuable supply chain partner to both the manufacturer and customer. In our distribution markets leading manufacturers of specialty building products typically partner with a limited number of distributors (often only two, sometimes one) who are responsible for effective distribution of the manufacturer’s products in a specified geographic market. This creates a mutually beneficial partnership between us and the manufacturer, where we are very focused on promoting sales of that specific manufacturer’s products. This type of working partnership strongly aligns the interests of the manufacturer and the distributor. Our focus has been on partnering with the most successful manufacturers in the specialty building products industry.

Value Added Design and Delivery

We provide value-added services as many specialty building products require some level of customization and/or value-add before being delivered to the job site. These services include engineering and design, cut to length, prefabrication, pre-finishing, assembly and packaging. These are services that would be very challenging for the manufacturer to provide at scale and therefore they must rely on their distribution partners to deliver the right finished product to the right location at the right time.

Value Added Sales

We employ a sales force of more than 250 professionals, who have extensive knowledge or product application and local building codes to educate consumers, drive demand and provide technical support. We act as an extension of the manufacturer’s sales force, educating the marketplace about the products they sell and acting as a trusted partner and solution provider to both suppliers and end customers. While our customers’ salespeople understand and know how to sell the products they stock and sell regularly, they do not stock most of the products we provide. Instead, they buy these products from us only after they receive an order from their customer. The sale of specialty building products is a technical sale that requires an understanding of the product, application, and local building code to ensure the right materials, right quantity, and key ancillary products are delivered.

For example, a contractor installing cedar shingle siding to create a Cape Cod style home needs to know which grade of shingle to use, how many shingles are needed to complete the job, and which fasteners and underlayment are required to properly install the shingles. Our sales people help provide this information as the pro dealer or retail salesperson may not have the requisite product expertise, and there is no individual at the mill that produced the cedar shingles that can provide the information. Our suppliers rely on us to be an extension of their sales force and bring the product to market, and our customers rely on us to be an extension of their sales force and provide the expertise they need to make the sale.

Inventory Management

Specialty building products are generally high-SKU, low-turnover items. Local building materials dealers and retailers are focused on inventory management and working capital efficiency, and do not have the space, systems and staffing to handle the logistics required to stock specialty building products. While they cannot economically maintain the stock of specialty building products required to service a market, their customers (contractors and homeowners) require that they be able to respond quickly to orders for these items (typically one to two days from order to delivery). We fill this gap and provide just-in-time supply for specialty building products with long lead times and highly complex supply chains.

An example of this dynamic can be seen with Trex which produces over 975 SKUs of composite decking and railing materials in 20 colors and finishes. A contractor building a deck may place an order with our customer, the pro dealer, for material in one of those colors to be delivered to the jobsite the following day. A local dealer cannot economically stock all of the materials that Trex provides and Trex cannot ship materials to the dealer in small quantities and short lead times. Therefore, Trex and the dealer rely on large distributors like us

118

to be able to fill those orders. In the markets where we operate, we have aggregated a significant part of the market such that we can buy from Trex with scale, stock the full breadth of their products, and be able to deliver to local dealers on short lead times.

Mouldings present an equally complex challenge for the local pro dealer or retailer. While the dealer or retailer may keep up to two dozen profiles of mouldings in stock, there can be as many as 800 profiles sold in a local market and many of those mouldings are produced in South America, shipped by the container load, four profiles at a time on a twelve to fourteen week lead time. Serving a given market requires a flow of several hundred containers per month to be able to provide the range of profiles required. Local dealers do not have the volume of sales to justify the quantity of material required nor do they have the systems and staffing or space required to manage the logistics of the supply chain. Large distributors however, can aggregate the market, manage the complex supply chain, and have the inventory on hand to be able to deliver to the dealer tomorrow.

All of the products that we sell exhibit some combination of high-SKU count, long lead times, and complex supply chains. We sell products that local distributors cannot economically buy direct. We provide a full breadth of finish products, all of the products requiring value-added services, and we deliver the complete package to the dealer on one truck daily, so they do not have to source from multiple providers. This level of service is highly valued by our customer and depending upon the market we believe very few and sometimes none of our competitors have the breadth of product and service that we provide.

Our Industry and Core End Markets

Residential Repair & Remodel

Residential R&R spending accounted for approximately 46% of our net sales for the twelve month period ended October 3, 2021. R&R sales tend to be less cyclical than new construction, particularly for exterior products that are exposed to the elements and where maintenance is less likely to be deferred. We expect that factors including the overall age of the U.S. housing stock, rising home prices supporting increased underlying home equity and availability of consumer capital will drive continued growth in R&R spending. According to the U.S. Census Bureau, the median home age in the United States was 41 years in 2019, an increase of 41% since 2000. We believe the increasing average age of the 135 million existing homes in the United States will continue to drive demand for R&R projects. The Home Improvement Research Institute estimates the total home improvement market grew by 13.8% in 2020 and that sales for home improvement products will rise 9.9% in 2021. We are positioned to capitalize on this projected growth, as R&R spending drives the majority of our sales.

LOGO

119

Increased home improvement spending has been a by-product of the COVID-19 pandemic, as homeowners under stay-at-home orders have been forced to spend more time at home and are investing more in their homes as a result. Our sales for fiscal year 2020 demonstrated this acceleration with year-over-year growth of 21% for residential R&R sales. Outdoor and exterior projects make heavy use of specialty building products like composite decking, composite exterior trim, fiber cement siding and wood composite siding, which are key product categories for us.

Residential New Construction

Residential new home construction (including single-family and multi-family homes) accounted for approximately 42% of our net sales for the twelve month period ended October 3, 2021. Our sales in this market tend to lag housing starts by approximately eight to twelve weeks as our products are primarily used as finished materials and are therefore installed near the end of the construction process. The pace of housing starts is driven by demographic and population shifts, mortgage interest rates, the ability of builders to obtain skilled labor, and builders’ economic outlook. U.S. residential new construction peaked in 2006, before experiencing a downturn from 2007 to 2011. Since 2011, we have experienced the continuing recovery of residential new construction, which has translated into increased demand for the products we sell. Our large footprint, strong customer relationships, and comprehensive offering of leading products and brands positions us to capitalize on continued growth in the new housing market.

Based on data from the National Association of Home Builders, there were approximately 1.4 million total annual housing starts in the United States in 2020, an increase of 7% from 2019. According to the Harvard Joint Center for Housing studies, since 1974, annual additions to the housing supply exceeded household growth by an average of 30%, driven by replacement of older units, demand for second homes, geographic shifts in the population, and a normal amount of vacancies.

However, for most of the last decade, housing production has barely kept pace with household formation. We believe this indicates there is significant pent-up demand for housing and the market will see continued growth. According to the Rosen Consulting Group, in a study using data from the U.S. Census Bureau and the National Association of Home Builders, the U.S. housing sector is currently undersupplied by approximately 5.5 million homes.

LOGO

120

Our Customers

Our primary customers include national, regional and local professional dealers, home improvement retailers and other providers of building products. We also serve buying groups and independent distributors. Our customers rely on us to provide branded, high-margin specialty building products that they cannot profitably source directly themselves due to high-SKU count, long lead times and product customization and design requirements prior to final delivery. We have a diverse and active customer based throughout the United States and Canada. Our efforts to increase our range of product offerings has allowed us to expand our customer base, both organically and through strategic acquisitions, to a wider, more diverse mix of customers. The average length of our relationships with our top ten customers is over twenty years and we had only one major customer that accounted for approximately 15% of our net sales for the years ended January 3, 2021 and December 29, 2019.

Our Suppliers

We supply over 37,000 SKUs from more than 200 suppliers. We maintain long-term, deep relationships with our suppliers as a trusted partner, fully integrated into their growth strategies. Our suppliers rely on us to distribute their products to fragmented end markets, providing timely delivery, value-added services, acting as an extension of their salesforce and educating the marketplace, including dealers and contractors, about their products. We tailor our product offering and adjust our supplier base to meet the needs of our customers and accommodate shifting consumer preference. For certain suppliers, including Trex, James Hardie, Louisiana Pacific and Royal Group, we are one of a few designated exclusive distributors of their products within select markets. In some markets we are the sole exclusive distributor. For the remainder of our suppliers, although we have not been granted contractual exclusivity for their products in the regions in which we operate, these suppliers effectively limit their distributors to us and a small number of other companies to supply their products. No supplier provided more than approximately 13% of the products we sold and on a combined basis for fiscal year 2020.

Competition

Our competitors are smaller specialty products focused distributors who represent a subset of our product mix and/or a smaller geography than our company. A few larger commodity focused distributors also participate in some specialty products to a limited extent. We have access to premium trade and consumer brands and favorable terms with suppliers based on our significant scale. The breadth and quality of our specialty products offering coupled with our geographic reach also gives us greater access to large customers than our smaller competitors.

Seasonality

In a typical year, our operating results are impacted by seasonality. Demand for our products in some markets is typically seasonal, with periods of snow or heavy rain negatively affecting construction activity. For example, sales of our products in Canada and the Northeast and Midwest regions of the United States are somewhat higher from spring through autumn when construction activity is greatest. Construction activity declines in these markets during the winter months in particular due to inclement weather, frozen ground and fewer hours of daylight. Construction activity can also be affected in any period by adverse weather conditions such as hurricanes, severe storms, torrential rains and floods.

Intellectual Property

To establish and protect our intellectual property rights in the United States and Canada, we rely on a combination of trademarks, registered brand names, licenses, patents, copyrights, and internet domain names. Through regular internal portfolio reviews, we assess our intellectual property to ensure that it is up to date and

121

adequate. We monitor for any potential violation or unauthorized use of our intellectual property through various means, including in-house monitoring during trade shows and expositions. We diligently enforce and defend our intellectual property rights, as required.

Human Capital Resources

As of October 3, 2021, we employed approximately 2,653 full- and part-time employees working primarily in the United States and Canada. Our total number of employees fluctuates throughout the year depending on our customers’ needs.

As of October 3, 2021, approximately 378 of our employees were unionized, representing 13.5% of the total workforce. We maintain collective bargaining agreements between certain of our subsidiaries in the United States and Canada and United Steel Workers and Teamsters, which are slated to expire or to be renegotiated in between May 2022 and December 2023. We believe that we have positive and constructive relationships with both our unionized and non-unionized employees. We regularly hold open discussions with union representatives and have generally been successful in renegotiating our collective bargaining agreements as they expire. There are currently no material grievances outstanding at any of our unionized locations.

Our culture is based on a longstanding set of core values that start with “doing the right thing, even when it is hard.” We also value “using our influence to make a uniquely positive impact” on the people we touch. We regularly engage with staff on issues affecting the business through written and video media along with local and company-wide sales meetings, branch meetings, training sessions, and other live means. In our ongoing effort to retain our diverse workforce, we have completed numerous employee engagement surveys. In these surveys we solicit input on working conditions, benefits, and overall employee satisfaction.

There are several company led initiatives that are used to support our employees and the communities where they live.

Impact: A company sponsored program that provides financial assistance to eligible employees who are experiencing hardships. This program is funded primarily by the Senior management of the company.

Serve: The company provides all employees with paid time off and financial matching to serve their communities.

Thrive: Encourages employee wellness by providing resources and a community to foster physical, financial, spiritual and emotional health.

Our Employee Engagement department focuses on attracting, developing and retaining a diverse and inclusive workforce. We lead by our Core Values and hire the best candidate for the position while fostering an environment that allows underrepresented groups to have leadership opportunities. We work with local organizations to strengthen our workforce and have programs with unemployment offices and half-way programs.

Our focus on employment development and retention is vast. We have an online learning system, USL University, that has a wide variety of programs to strengthen an employee’s skill set, leadership ability and product knowledge for our industry. We have implemented an employee review program, Check Point. Check Point is a process where the manager and employee connect on a personal level. It is a method to understand what is happening in the lives of our employees, including their hopes, dreams, fears and frustrations.

Through leveraging our core values, we aspire to create an environment where all employees can learn, grow, and achieve their goals.

122

Government Regulations

Our operations are subject to ongoing and changing federal, provincial, territorial, state and local laws and regulations affecting our business, including permitting, licensing and environmental matters (including those pertaining to the discharge of materials into the environment, the handling and disposition of wastes and the cleanup of contaminated soil and ground water), health, sanitation and safety. We are regulated under many environmental, health and safety laws, including the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Air Act, the Clean Water Act and the Occupational Safety and Health Act, each as amended. Although we strive to comply with such laws and have processes in place designed to achieve compliance, we may be unable to prevent violations of these or other laws from occurring. We could also incur significant investigation and clean-up costs for contamination at any currently or formerly owned or operated facilities, including any manufacturing facilities.

We endeavor to maintain complete compliance with these and other legal and regulatory regimes in connection with our operations and, as such, we have incurred, and will continue to incur, limited capital and operating expenditures to achieve and maintain compliance with such legal and regulatory requirements.

Our Facilities

Our corporate office is located at 2160 Satellite Boulevard, Suite 450, Duluth, Georgia 30097. We own and lease approximately 80 properties in the United States and Canada. These properties include warehouses, offices and product storage facilities.

Legal Proceedings

At any given time, we may be a party to regulatory proceedings or to litigation or be subject to non-litigated claims arising out of the normal operations of our businesses such as general liability or product liability and employment claims. See “Risk Factors— Risks Related to Our Business and Industries—Legal and regulatory claims and proceedings could have a material adverse effect on us.” We believe that no litigation currently pending against us, if adversely determined, would have a material adverse effect on our financial position or results of operations. Nevertheless, we are from time to time involved in litigation incidental to the conduct of our business and despite facing only one current claim, there can be no guarantee that we will not face additional claims in the future.

123

MANAGEMENT

Below is a list of the names, ages (as of October 1, 2021), positions and a brief account of the business experience of the individuals who serve as (i) our executive officers, (ii) our directors and (iii) persons who are expected to become directors prior to completion of this offering.


Name	Age	Position
Michael Denvir	46	Director
Barry Gallup, Jr.	33	Director
Kimberly Anthony	53	Director Nominee
G. Michael Callahan, Jr	67	Director Nominee
James S. Scully	56	Director Nominee
Ugo Ude	42	Director Nominee
Ann Adams	51	Director Nominee
Jeffery McLendon	54	Director, Chief Executive Officer and President
Ronald Stroud	55	Chief Financial Officer
Bryan Lovingood	62	Chief Operating Officer
Carl McKenzie	61	Chief Commercial Officer
Christopher Gerhard	48	Executive Vice President

Mike Denvir has served on our board since January 2021. Mr. Denvir has been a Partner of The Jordan Company since 2008, after joining The Jordan Company in 2001. He is also a member of the firms Partnership Board and Executive Committee. Mr. Denvir has held leadership roles in management and investment strategy for The Jordan Company since 2001. He currently serves on the board of directors of Anchor, ARCH Global Precision, CFS Brands, Spartech and Worldwide Clinical Trials. Mr. Denvir holds a BA degree in Economics from the University of Notre Dame. We believe Mr. Denvir’s significant management experience qualifies him to serve as a member of our board of directors.

Barry Gallup, Jr. has served on our board since January 2021. Mr. Gallup is a Partner of The Jordan Company. Mr. Gallup has worked on the execution and management of several of The Jordan Company’s portfolio companies since 2012. He currently serves on the board of directors of Agility, ARCH Global Precision, Arclin, RFJ Auto, RFour and Young Innovations. Prior to The Jordan Company, Mr. Gallup worked in the Investment Banking Division at Morgan Stanley. Mr. Gallup holds a BBA degree in Finance from the University of Notre Dame. We believe Mr. Gallup’s significant management experience qualifies him to serve as a member of our board of directors.

Kimberly Anthony has agreed to serve on our board of directors. Ms. Anthony has served as Executive Director (CEO) of MomsHope, Inc. since 2020 and Co-Executive Director of Pro Ministry (NFL) at Athletes in Action (“AIA”) from 2015 to 2020. Ms. Anthony has held various senior leadership roles at AIA since 2000 and served on the Executive Team that determined the direction and policies for the largest international sports ministry in the world. She has been an advocate for gender and racial equity in the workplace and has founded initiatives that have had social and economic impact on under-resourced communities. Ms. Anthony holds a BA degree in Sociology with a Psychology emphasis from the University of California at Los Angeles. She is also both a UCLA and Virginia Sports Hall of Fame Gymnastics Champion who competed on the US National team in the 1980’s, breaking racial barriers in the sport. We believe Mrs. Anthony’s 20 + years of experience as a senior leader, drive for excellence as a former world class athlete, and the diverse perspective she brings as a black female qualifies her to serve as a member of our board of directors.

G. Michael Callahan, Jr has agreed to serve on our board of directors. Mr. Callahan previously served as Chief Executive Officer of Gypsum Management & Supply, Inc. (NYSE:GMS) headquartered in Tucker, Georgia from 2015 to 2019. Mr. Callahan began his career with GMS as Vice President of Finance, rising to the Chief Financial Officer position in 1995 and became President in 2013. Under his leadership, GMS has grown to become the largest national distributor of gypsum wallboard, acoustical ceilings, metal framing products and other specialty interior products used in residential and commercial construction. This expansion was the result

124

of over forty acquisitions and numerous greenfield expansions throughout North America during Mr. Callahan’s tenure. After selling a controlling interest to private equity firm AEA Investors in April 2014, GMS went public on the NYSE in June of 2016. Mr. Callahan’s prior business experience was in the banking field, having worked for the C&S National Bank and its successor Nations Bank. Mr. Callahan has served on the Policy Advisory Board of the Harvard Joint Center for Housing Studies, the Billion Dollar Roundtable for the National Association of Wholesalers and has participated in a number of industry events as a speaker or panel member. He is Chairman of the Board of Directors of Eagle Ranch in Chestnut Mountain, Georgia, a residential counseling and therapy center for children and families in crisis. Mr. Callahan holds a Bachelor of Arts in Economics from Georgia State University. We believe Mr. Callahan’s years of experience in the building products industry qualifies him to serve as a member of our board of directors.

James S. Scully has agreed to serve on our board of directors. Mr. Scully has served as a director of J. Jill, Inc. since August 2017 and served as Interim CEO from December 2019 to February 2021. Mr. Scully is currently an Operating Partner of Archimedes Advisors (Churchill Capital Group), Managing Partner and President of Elm Street Advisors LLC, and a private investor. Mr. Scully serves on the Board of Advisors for Faherty Brand, LLC, and previously served on the Board of BH Cosmetics from December 2018 until September 2020. Previously, he served as Avon Products, Inc.’s Executive Vice President and Chief Operating Officer from January 2016 to September 2017. He also served as Avon’s Executive Vice President and Chief Financial Officer from March 2015 to December 2016. Prior to his role at Avon, Mr. Scully served as the Chief Operating Officer of the J. Crew Group, Inc., a specialty apparel and accessories retailer. Mr. Scully served as J. Crew’s Executive Vice President and Chief Financial Officer from September 2005 to May 2012 and Chief Administrative Officer from April 2008 to April 2013. Prior to joining J. Crew in 2005, Mr. Scully served in key roles at Saks Incorporated from 1997 to 2005, including at various times as Executive Vice President of Human Resources and Strategic Planning, Senior Vice President of Strategic and Financial Planning and Senior Vice President, Treasurer. Mr. Scully held the position of Senior Vice President of Corporate Finance at Bank of America (formerly NationsBank) from 1994 to 1997. Mr. Scully began his career in the banking industry at Connecticut National Bank. Mr. Scully is a veteran, having served in the U.S. Army Reserves from 1987-1999 and including participation in Operations Desert Shield/Storm. Mr. Scully has a Bachelor of Arts from Siena College. We believe Mr. Scully’s extensive leadership experience combined with his management and operational expertise qualifies him to serve as a member of our board of directors.

Ugo Ude has agreed to serve on our board of directors. Mr. Ude has been a Partner, General Counsel and Chief Compliance Officer of The Jordan Company since 2017. Mr. Ude leads the legal and compliance affairs at The Jordan Company. Prior to that, Mr. Ude was a Partner in the Corporate & Securities practice at Mayer Brown, LLP where he represented private equity funds in all facets of their business. Mr. Ude joined Mayer Brown in 2006 and worked there until his departure in September 2017 to join The Jordan Company. Mr. Ude has a JD from Columbia Law School and a BA from Yale University. We believe Mr. Ude’s significant track record in advising companies on various legal and business strategies qualifies him to serve as a member of our board of directors.

Ann Adams has agreed to serve on our board of directors. Ms. Adams has been Executive Vice President and Chief Transformation Officer of Norfolk Southern Corporation since 2019. She oversees a number of diverse areas including information technology, human resources, labor relations, corporate communications, sustainability and corporate giving. Prior to her current role, Ms. Adams was Vice President of Human Resources at Norfolk Southern Corporation from 2016 to 2019. Ms. Adams has a PhD and MA from Rice University and a BA from Davidson College. We believe Ms. Adams’ broad leadership experience and success in managing a diverse range of corporate practices qualifies her to serve as a member of our board of directors.

Jeff McLendon has served as SBP’s Director, President and Chief Executive Officer since December 2020 and President and Chief Executive Officer of the Company since 2004. Mr. McLendon was previously the President of Linmar Systems and, before that, SNAPS Solutions, both technology consulting and integration companies based in Atlanta, Georgia. Prior to SNAPS Solutions, Mr. McLendon held a variety of positions within Stork B.V., a

125

multinational engineering and manufacturing company based in the Netherlands. Mr. McLendon holds a Bachelor of Science in Agricultural Engineering from the University of Georgia. We believe Mr. McLendon’s depth of industry experience qualifies him to serve as a member of our board of directors.

Ronald Stroud has served as SBP’s Chief Financial Officer since December 2020 and Chief Financial Officer of the Company since August 2006. Prior to joining SBP, Mr. Stroud was employed by KPMG as a Senior Consultant in its Assurance Based Advisory Services Group. Mr. Stroud holds a Bachelor of Arts in Economics from the University of Georgia and a Master of Business Administration from the University of Tennessee at Chattanooga, where he was a Beta Gamma Sigma honor graduate.

Bryan Lovingood has served as our Chief Operating Officer since April 2016. Prior to becoming Chief Operating Officer, Mr. Lovingood had served as our Director of Sales and Operations beginning in 2008. As Chief Operating Officer, Mr. Lovingood works to ensure for the profitability of each of our branches and oversees the daily activities of our branch managers. Mr. Lovingood has a B.S.A. in Poultry Science from the University of Georgia.

Carl McKenzie has served as our Chief Commercial Officer since April 2016. Mr. McKenzie joined the Company in 2005 as Director of Marketing, and become a Director of Product Management in 2007. Mr. McKenzie’s focus has been on developing programs and strategies that drive organic growth in the business and working within the organization to get broad based execution. Mr. McKenzie has a B.A. from Bates College.

Christopher Gerhard has served as an Executive Vice President of the Company since August 2021. Mr. Gerhard was previously at Trex as Vice President, Sales of Trex since June 2012. From May 2006 through June 2012, Mr. Gerhard served in a number of capacities at Trex, most recently as Director, Field Sales. From 2002 to May 2006, Mr. Gerhard served in various capacities with Kraft Foods North America, a manufacturer of food and beverages, most recently as Southeast Region Customer Category Manager. Mr. Gerhard received a B.A. degree in English from the University of North Carolina—Greensboro, and a Masters in Science degree from Ohio University.

Corporate Governance

Board Composition and Director Independence

Our business and affairs are managed under the direction of our Board. In connection with this offering, we will amend and restate our certificate of incorporation and bylaws, and following completion of this offering, our Board will be composed of eight directors. Our certificate of incorporation will provide that the authorized number of directors may be changed only by resolution of our Board and with the prior written consent of SBP Varsity Holdings and its affiliates for so long as it holds director nomination rights.

Our certificate of incorporation will also provide that our Board will be divided into three classes of directors, with the classes as nearly equal in number as possible. Subject to any earlier resignation or removal in accordance with the terms of our certificate of incorporation and bylaws:

•

our Class I directors will be , , and , each of whom will serve until the first annual meeting of shareholders following the completion of this offering;

•

our Class II directors will be , , and , each of whom will serve until the second annual meeting of shareholders following the completion of this offering; and

•

our Class III directors will be Jeff McLendon, , and , each of whom will serve until the third annual meeting of shareholders following the completion of this offering.

Upon completion of this offering, we expect that each of our directors will serve in the classes as indicated above. In addition, our certificate of incorporation will provide that prior to the first date (the “Trigger Date”) on

126

which The Jordan Company and its affiliated companies ceases to beneficially own in the aggregate (directly or indirectly) 45% or more of the voting power of the then outstanding shares of our capital stock entitled to vote generally in the election of directors (“Voting Stock”), (A) any director nominated or designated for nomination by The Jordan Company or its affiliated companies may be removed with or without cause upon the affirmative vote of stockholders representing at least a majority of the voting power of the then outstanding shares of the corporation entitled to vote thereon, voting together as a single class and (B) any director who was not nominated or designated for nomination by The Jordan Company or its affiliated companies may only be removed for cause and only upon the affirmative vote of stockholders representing at least sixty-six and two-thirds percent (66²⁄₃%) of the voting power of the then outstanding shares of the corporation entitled to vote thereon, at a meeting of the Corporation’s stockholders called for that purpose and (ii) on and after the Trigger Date, directors may only be removed for cause and only upon the affirmative vote of stockholders representing at least sixty-six and two-thirds percent (66²⁄₃%) of the voting power of the then outstanding shares of the corporation entitled to vote thereon, at a meeting of our stockholders called for that purpose. In addition, we will enter into a Director Nomination Agreement with SBP Varsity Holdings that provides SBP Varsity Holdings and its affiliates the right to designate nominees for election to our Board for so long as SBP Varsity Holdings and its affiliates beneficially owns 10% or more of the Original Amount (as defined below). See “Certain Relationships and Related Party Transactions—Director Nomination Agreement” for more details with respect to the Director Nomination Agreement.

We anticipate that, prior to our completion of this offering, the Board will determine that , , and meet the requirements to be independent directors under the listing standards of Nasdaq. In making this determination, our Board considered the relationships that each such non-employee director has with us and all other facts and circumstances that our Board deemed relevant in determining their independence.

Controlled Company Status

After completion of this offering, SBP Varsity Holdings will continue to control a majority of our outstanding common stock. As a result, we will be a “controlled company.” Under Nasdaq rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, group, or another company is a “controlled company” and may elect not to comply with certain Nasdaq corporate governance requirements, including the requirements that, within one year of the date of the listing of our common stock:

•

we have a board that is composed of a majority of “independent directors,” as defined under the rules of such exchange;

•

we have a compensation committee that is composed entirely of independent directors;

•

we have a nominating and corporate governance committee that is composed entirely of independent directors; and

•

we have an annual performance evaluation of the nominating and corporate governance and compensation committees.

Although we do not intend to utilize these exemptions immediately following this offering, we may elect to do so in the future. As a result, we may not have a majority of independent directors on our Board. In addition, our Compensation and Nominating & Governance Committees may not consist entirely of independent directors and/or may not be subject to annual performance evaluations. Accordingly, you may not have the same protections afforded to shareholders of companies that are subject to all of the Nasdaq corporate governance requirements.

127

Board Committees

Upon completion of this offering, our Board will have an Audit Committee, a Compensation Committee and a Nominating & Governance Committee. The composition, duties and responsibilities of these committees will be as set forth below. In the future, our Board may establish other committees, as it deems appropriate, to assist it with its responsibilities.

Audit Committee

Following this offering, our Audit Committee will be composed of , and , with serving as chair of the committee. We intend to comply with the audit committee requirements of the SEC and Nasdaq, which require that the Audit Committee be composed of at least one independent director at the closing of this offering, a majority of independent directors within 90 days following this offering and all independent directors within one year following this offering. We anticipate that, prior to the completion of this offering, our Board will determine that and meet the independence requirements of Rule 10A-3 under the Exchange Act and the applicable listing standards of Nasdaq. We anticipate that, prior to our completion of this offering, our Board will determine that is an “audit committee financial expert” within the meaning of SEC regulations and applicable listing standards of Nasdaq. The Audit Committee’s responsibilities upon completion of this offering will include:

•

appointing, approving the compensation of, and assessing the qualifications, performance, and independence of our independent registered public accounting firm;

•

pre-approving audit and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm;

•

reviewing our policies on risk assessment and risk management;

•

reviewing and discussing with management and the independent registered public accounting firm our annual and quarterly financial statements and related disclosures as well as critical accounting policies and practices used by us;

•

reviewing the adequacy of our internal control over financial reporting;

•

establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns;

•

recommending, based upon the Audit Committee’s review and discussions with management and the independent registered public accounting firm, whether our audited financial statements shall be included in our Annual Report on Form 10-K;

•

monitoring our compliance with legal and regulatory requirements as they relate to our financial statements and accounting matters;

•

preparing the Audit Committee report required by the rules of the SEC to be included in our annual proxy statement;

•

reviewing all related party transactions for potential conflict of interest situations and approving all such transactions; and

•

reviewing and discussing with management and our independent registered public accounting firm our earnings releases and scripts.

128

Compensation Committee

Following this offering, our Compensation Committee will be composed of , and , with serving as chair of the committee. The Compensation Committee’s responsibilities upon completion of this offering will include:

•

annually reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer;

•

evaluating the performance of our chief executive officer in light of such corporate goals and objectives and determining and approving the compensation of our chief executive officer;

•

reviewing and approving the compensation of our other executive officers;

•

appointing, compensating and overseeing the work of any compensation consultant, legal counsel, or other advisor retained by the compensation committee;

•

conducting the independence assessment outlined in rules with respect to any compensation consultant, legal counsel, or other advisor retained by the compensation committee;

•

annually reviewing and reassessing the adequacy of the committee charter in its compliance with the listing requirements of ;

•

reviewing and establishing our leadership compensation, philosophy and guidelines;

•

overseeing and administering our equity compensation plans;

•

reviewing and making recommendations to our Board with respect to director compensation; and

•

reviewing and discussing with management the compensation discussion and analysis to be included in our annual proxy statement or Annual Report on Form 10-K.

Nominating & Governance Committee

Following this offering, our Nominating and Governance Committee will be composed of , and , with serving as chair of the committee. The Nominating and Governance Committee’s responsibilities upon completion of this offering will include:

•

developing and recommending to our Board criteria for board and committee membership;

•

developing and recommending to our Board best practices and corporate governance principles;

•

subject to the rights of SBP Varsity Holdings under the Director Nomination Agreement as described in “Certain Relationships and Related Party Transactions—Director Nomination Agreement,” identifying and recommending to our Board the persons to be nominated for election as directors and to each of our Board’s committees;

•

developing and recommending to our Board a set of corporate governance guidelines; and

•

reviewing and recommending to our Board the functions, duties and compositions of the committees of our Board.

Compensation Committee Interlocks and Insider Participation

None of our executive officers currently serves, or in the past fiscal year has served, as a member of the Board or compensation committee of any entity that has one or more executive officers serving on our Board or Compensation Committee.

Risk Oversight

Our Board will oversee the risk management activities designed and implemented by our management. Our Board will execute its oversight responsibility for risk management both directly and through its committees. The

129

full Board will also consider specific risk topics, including risks associated with our strategic plan, business operations and capital structure. In addition, our Board will receive detailed regular reports from members of our senior management and other personnel that include assessments and potential mitigation of the risks and exposures involved with their respective areas of responsibility.

Our Board will delegate to the Audit Committee oversight of our risk management process. Our other committees of our Board will also consider and address risk as they perform their respective committee responsibilities. All committees will report to the full Board as appropriate, including when a matter rises to the level of a material or enterprise level risk.

Code of Business Conduct and Ethics

Prior to completion of this offering, we intend to adopt a code of business conduct and ethics that applies to all of our employees, officers, and directors, including those officers responsible for financial reporting. Upon the closing of this offering, our code of business conduct and ethics will be available on our website. We intend to disclose any amendments to the code, or any waivers of its requirements, on our website.

130

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The purpose of this compensation discussion and analysis section is to provide information about the material elements of compensation that are paid, awarded to, or earned by, our “named executive officers,” who consist of our principal executive officer, principal financial officer, and the three other most highly compensated executive officers. For fiscal year 2021, our named executive officers, were:

•

Jeffery McLendon, President and Chief Executive Officer;

•

Ronald Stroud, Chief Financial Officer;

•

Bryan Lovingood, Chief Operating Officer;

•

Carl McKenzie, Chief Commercial Officer; and

•

Chris Gerhard, Executive Vice President.

Historical Compensation Decisions

Our compensation approach is necessarily tied to our stage of development. Prior to this offering, we and our operating subsidiaries were privately-held and owned by private equity companies. As a result, we have not been subject to any stock exchange listing or SEC rules requiring a majority of our board of directors to be independent or relating to the formation and functioning of board committees, including audit, compensation and nominating committees. Most, if not all, of our prior compensation policies and determinations, including those made for fiscal year 2021, have been the product of negotiations between the named executive officers, our Chief Executive Officer and the board of directors with guidance from a compensation consultant.

Compensation Philosophy and Objectives

Upon completion of this offering, our compensation committee will review and approve the compensation of our named executive officers and oversee and administer our executive compensation programs and initiatives. As we gain experience as a public company, we expect that the specific direction, emphasis and components of our executive compensation program will continue to evolve. For example, over time we may reduce our reliance upon subjective determinations made by our Chief Executive Officer and/or board of directors in favor of a more empirically-based approach that involves more frequent use of benchmarking against peer companies, which we previously used every few years. Accordingly, the compensation paid to our named executive officers for fiscal year 2021 is not necessarily indicative of how we will compensate our named executive officers after this offering.

We have strived to create an executive compensation program that balances short-term versus long-term payments and awards, cash payments versus equity awards and fixed versus contingent payments and awards in ways that we believe are most appropriate to motivate our executive officers. Our executive compensation program is designed to:

•

attract and retain talented and experienced executives in our industry;

•

reward executives whose knowledge, skills and performance are critical to our success;

•

align the interests of our executive officers and stockholders by motivating executive officers to increase stockholder value and rewarding executive officers when stockholder value increases;

•

ensure fairness among the executive management team by recognizing the contributions each executive makes to our success;

•

foster a shared commitment among executives by aligning their individual goals with the goals of the executive management team and our company; and

131

•

compensate our executives in a manner that incentivizes them to manage our business to meet our long-range objectives.

To achieve these objectives, the compensation committee expects to implement new compensation plans in order to tie a substantial portion of the executives’ overall compensation to key strategic financial and operational goals.

Historically, our private equity investors, together with select members of our board of directors, determined the compensation of our executives following consultation with a compensation consultant and our Chief Executive Officer. Compensation amounts historically have been highly individualized, resulted from arm’s length negotiations and have been based on a variety of factors including, in addition to the factors listed above, our financial condition and available resources, our need for that particular position to be filled and the compensation levels of our other executive officers, each as of the time of the applicable compensation decision. In addition, our compensation consultant surveyed the competitive market for corresponding positions within comparable geographic areas and companies of similar size and stage of development operating in our industry. As a result of this survey in 2018, our compensation consultant determined that our executives’ pay was between the 40th and 50th percentile of the competitive market.

Our executive compensation program rewards team accomplishments while promoting individual accountability and depends on our results as well as business unit results and individual accomplishments. A portion of total compensation is placed at risk through annual performance bonuses and long-term incentives. For example, our executives’ target annual performance bonus is 50% (100% for our Chief Executive Officer) of base salary with a maximum payout at 200% of target. As shown in the Summary Compensation Table, in 2021, the annual performance bonuses represented between 12% to 16% of the total compensation for our named executive officers. The combination of incentives is designed to balance annual operating objectives and Company earnings performance with longer-term stockholder value creation.

We seek to provide competitive compensation that is commensurate with performance. We generally target compensation at the median of the market and calibrate both annual and long-term incentive opportunities to generate less-than-median awards when goals are not fully achieved and greater-than-median awards when goals are exceeded.

We seek to promote a long-term commitment to us by our executives. We believe that there is great value in having a team of long-tenured, seasoned managers. Our team-focused culture and management processes are designed to foster this commitment. In addition, the vesting schedules attached to equity awards reinforce this long-term orientation. Subject to acceleration of vesting upon a “Sale of the Company” (as defined in the executives’ award agreement), vesting of the executives’ Class B Units of SBP Varsity Holdings (“Class B Units”) is subject to such executive’s continued employment with us through the applicable vesting date detailed in their award agreement.

Compensation Committee Procedures

Upon completion of this offering, the compensation committee will meet outside the presence of all of our executive officers, including our named executive officers, to consider appropriate compensation for our Chief Executive Officer. For all other named executive officers, the compensation committee will meet outside the presence of all executive officers except our Chief Executive Officer. Going forward, our Chief Executive Officer will review annually each other named executive officer’s performance with the compensation committee and recommend appropriate base salary, cash performance awards and grants of long-term equity incentive awards for all other executive officers. Based upon the recommendations of our Chief Executive Officer and in consideration of the objectives described above and the principles described below, the compensation committee will approve the annual compensation packages of our executive officers other than our Chief Executive Officer. The compensation committee also will annually analyze our Chief Executive Officer’s performance and

132

determine his base salary, cash performance awards and grants of long-term equity incentive awards based on its assessment of his performance with input from any consultants engaged by the compensation committee.

In order to ensure that we continue to remunerate our executives appropriately, the compensation committee has retained Frederic W. Cook & Co. (“FW Cook”) as its independent compensation consultant to review its policies and procedures with respect to executive compensation in connection with this offering. FW Cook assists the compensation committee by providing comparative market data on compensation practices and programs based on an analysis of peer competitors and by providing guidance on industry best practices. The compensation committee retains the right to modify or terminate its relationship with FW Cook or select other outside advisors to assist the compensation committee in carrying out its responsibilities.

Mitigation of Risk

We have determined that any risks arising from our compensation programs and policies are not reasonably likely to have a material adverse effect on us. Our compensation programs and policies mitigate risk by combining performance-based, long-term compensation elements with payouts that are highly correlated to the value delivered to stockholders. The combination of performance measures for annual bonuses and the equity compensation programs, share ownership and retention guidelines for executive officers, as well as the multiyear vesting schedules for equity awards encourage employees to maintain both a short and a long-term view with respect to our performance.

Elements of Compensation

Our current executive compensation program consists of the following components:

•

base salary;

Large accelerated filer

Accelerated filer

Non-accelerated filer

☒ (Do not check if a smaller reporting company)

Smaller reporting company

Emerging growth company

Specialty Building Products, Inc. S-1