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Item 2 — Management's Discussion and Analysis
Siteone Landscape Supply, Inc. · 10-Q · Q2 FY2026 · Period ended Jun 28, 2026
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The following information should be read in conjunction with the unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q. 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 Quarterly Report on Form 10-Q, particularly in “Special Note Regarding Forward-Looking Statements and Information” included herein and the section entitled “Risk Factors” in the Annual Report on Form 10-K for the fiscal year ended December 28, 2025.
Overview
SiteOne Landscape Supply, Inc. (collectively with all of its subsidiaries referred to in this Quarterly Report on Form 10-Q as “SiteOne,” the “Company,” “we,” “us,” and “our”) indirectly owns 100% of the membership interest in SiteOne Landscape Supply Holding, LLC (“Landscape Holding”). Landscape Holding is the parent and sole owner of SiteOne Landscape Supply, LLC (“Landscape”).
We are the largest and only national full product line wholesale distributor of landscape supplies in the United States and have an established presence in Canada. Our customers are primarily residential and commercial landscape professionals who specialize in the design, installation, and maintenance of lawns, gardens, golf courses, and other outdoor spaces. As of June 28, 2026, we had over 680 branch locations in 45 U.S. states and five Canadian provinces. Through our expansive North American network, we offer a comprehensive selection of approximately 180,000 SKUs, including hardscapes (such as concrete pavers and natural stone), irrigation, agronomics (including fertilizer, seed, control products, and ice melt), landscape accessories, nursery, and outdoor lighting to green industry professionals. We also provide value-added consultative services to complement our product offerings and to help our customers operate and grow their businesses.
Business Environment and Trends
The second quarter of 2026 continued to present challenges driven by economic uncertainty and weak consumer sentiment related to current geopolitical conflicts, inflation and affordability concerns, and rising interest rates. Our new residential construction and repair and upgrade end markets further softened during the quarter. Accordingly, we anticipate sustained pressure on Net sales growth and Net income for the foreseeable future. We have taken various actions to mitigate supply chain disruptions and the related impacts to commodity prices, including the implementation of price increases on certain products and measures to offset the effects of rising fuel costs. For the three months ended June 28, 2026, we achieved Net sales growth of 5%, primarily driven by acquisitions. Organic Daily Sales increased 1% for the three months ended June 28, 2026, primarily due to price contribution of approximately 3%, partially offset by softer end market demand. The positive pricing trend that began in the second half of the 2025 Fiscal Year (as defined below) has continued and overall prices are projected to increase approximately 3% for the 2026 Fiscal Year. Gross margin increased 50 basis points for the second quarter primarily due to the benefits of price realization and execution of our commercial initiatives, partially offset by higher freight and distribution costs as a result of fuel inflation, the addition of our fifth distribution center, and deflation in certain commodity products. Selling, general and administrative expenses (“SG&A”) increased 6% for the three months ended June 28, 2026, primarily reflecting the impact of acquisitions. Net income attributable to SiteOne increased to $139.3 million for the three months ended June 28, 2026, compared to $129.0 million for the same period of 2025, primarily due to improved gross margin, partially offset by lower sales volume and higher SG&A. Net cash provided by operating activities was $31.1 million for the six months ended June 28, 2026, compared to $7.1 million for the six months ended June 29, 2025, primarily driven by higher Net income and a positive contribution from working capital changes.
Looking forward, the trend of consumers spending more time at home and investing in their outdoor living spaces is expected to continue. Increases in home values, lack of affordable new homes, rising insurance costs, and elevated mortgage interest rates for prolonged periods have resulted in existing homeowners remaining in place for longer periods. Constraint on affordability continues with increasingly weaker new and existing home demand as a result of the current macroeconomic environment. However, the long-term outlook for the landscape supply industry remains strong, driven by favorable population trends, housing demand, and continued interest in outdoor living. We remain confident in the landscape supply industry growth opportunities and our ability to continue providing our customers, suppliers, and shareholders with exceptional value. We are the only national full product line wholesale distributor of landscape supplies in the United States. We have a robust acquisition pipeline and a flexible business model. We are committed to our strategic and operational initiatives and will continue to focus on driving growth organically and through acquisitions while gaining market share and delivering margin expansion by leveraging our scale, resources, and capabilities. In addition, our balanced end market mix, broad product portfolio, geographic coverage, and commercial and operational initiatives provide us with multiple opportunities to achieve growth and position us to be resilient in softer markets.
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As we continue to navigate through the current uncertainty presented by market and economic conditions, we are prepared to meet the challenges ahead due to our well-balanced business, strong financial condition, dedicated and experienced teams, and focused business strategy. Our balance sheet and liquidity position provide the flexibility to operate effectively and execute our growth strategy, as well as complete share repurchases through the evolving market conditions. We continue to monitor the impact on our business and the related risks and uncertainties of geopolitical conflicts, interest rate changes, tariffs, labor market conditions, and workforce availability, as well as end market demand and commodity prices. These conditions are beyond our control, and we cannot estimate with certainty the full extent of their impact on our business, results of operations, cash flows, and/or financial condition. To mitigate the effects of these conditions, we may take actions that alter our business operations if required or that we determine are in the best interests of our associates, customers, suppliers, and shareholders. The forward-looking statements in this Business Environment and Trends section are subject to significant risks and uncertainties. See Part I, Item 1A. - “Risk Factors”, in our Annual Report on Form 10-K for the fiscal year ended December 28, 2025 (the “2025 Fiscal Year”) for a discussion of the various risks that could have a material adverse effect on our reputation, business, financial position, results of operations, and cash flows.
Presentation
Our financial statements included in this report have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Our fiscal year is a 52- or 53-week period ending on the Sunday nearest to December 31 in each year. Our fiscal year ending January 3, 2027 (the “2026 Fiscal Year”) includes 53 weeks and our 2025 Fiscal Year included 52 weeks. Additionally, our fiscal quarters end on the Sunday nearest to March 31, June 30, and September 30, respectively. The three months ended June 28, 2026 and June 29, 2025 both included 13 weeks. The six months ended June 28, 2026 and June 29, 2025 both included 26 weeks.
We manage our business as a single reportable segment. Within our organizational framework, the same operational resources support multiple geographic regions, and performance is evaluated at a consolidated level. Each of our regions has similar operations and economic characteristics such as the nature of products and services, the types of customers to whom we sell, and the distribution methods utilized. In addition, our product categories have similar supply chain processes and classes of customers.
Key Business and Performance Metrics
We focus on a variety of indicators and key operating and financial metrics to monitor the financial condition and performance of our business. These metrics include:
Net sales. We generate Net sales primarily through the sale of landscape supplies, including hardscapes, irrigation supplies, fertilizer and control products, landscape accessories, nursery goods, and outdoor lighting products to our customers who are primarily landscape contractors serving the residential and commercial construction sectors. Our Net sales include billings for freight and handling charges, and commissions on the sale of control products that we sell as an agent. Net sales are presented net of any discounts, returns, customer rebates, and sales or other revenue-based taxes.
Non-GAAP Organic Sales. In managing our business, we consider all growth, including the opening of new greenfield branches, to be organic growth unless it results from an acquisition. When we refer to Organic Sales growth, we include increases in growth from newly-opened greenfield branches and decreases in growth from closing existing branches but exclude increases in growth from acquired branches until they have been under our ownership for at least four full fiscal quarters at the start of the fiscal reporting period.
Non-GAAP Selling Days. Selling Days are defined as business days, excluding Saturdays, Sundays, and holidays, that our branches are open during the year. Depending upon the location and the season, our branches may be open on Saturdays and Sundays; however, for consistency, those days have been excluded from the calculation of Selling Days.
Non-GAAP Organic Daily Sales. We define Organic Daily Sales as Organic Sales divided by the number of Selling Days in the relevant reporting period. We believe Organic Sales growth and Organic Daily Sales growth are useful measures for evaluating our performance as we may choose to open or close branches in any given market depending upon the needs of our customers or our strategic growth opportunities. Refer to “Results of Operations – Quarterly Results of Operations Data” for a reconciliation of Organic Daily Sales to Net sales.
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Cost of goods sold. Our Cost of goods sold includes all inventory costs, such as the purchase price paid to suppliers, net of any volume-based incentives and discounts, as well as inbound freight, handling, distribution, and other costs associated with inventory. Cost of goods sold also includes salaries, wages, employee benefits, payroll taxes, bonuses, depreciation, and amortization related to inventory production activities. Our Cost of goods sold excludes the cost to deliver the products to our customers through our branches, which is included in Selling, general and administrative expenses. Cost of goods sold is recognized primarily using the first-in, first-out method of accounting for the inventory sold.
Gross profit and gross margin. We believe that Gross profit and gross margin are useful for evaluating our operating performance. We define Gross profit as Net sales less Cost of goods sold. We define gross margin as Gross profit divided by Net sales.
Selling, general and administrative expenses (operating expenses). Our operating expenses are primarily comprised of Selling, general and administrative costs, which include compensation expenses (salaries, wages, employee benefits, payroll taxes, stock-based compensation, and bonuses), rent and facility related expenses, fleet and delivery related expenses including fuel costs, information technology, marketing, insurance, and repairs and maintenance expenses, as well as credit card processing and professional fees. Operating expenses also include depreciation and amortization.
Non-GAAP Adjusted EBITDA. In addition to the metrics discussed above, we believe that Adjusted EBITDA is useful for evaluating the operating performance and efficiency of our business. EBITDA represents consolidated Net income (loss) plus the sum of income tax expense (benefit), interest expense, net of interest income, and depreciation and amortization. Adjusted EBITDA represents EBITDA as further adjusted for items such as stock-based compensation expense, (gain) loss on sale of assets and termination of finance leases not in the ordinary course of business, financing fees, as well as other fees and expenses related to acquisitions, and other non-recurring (income) loss. Adjusted EBITDA includes Adjusted EBITDA attributable to non-controlling interest. Refer to “Results of Operations – Quarterly Results of Operations Data” for more information regarding how we calculate EBITDA and Adjusted EBITDA and the limitations of those metrics, as well as a reconciliation of Adjusted EBITDA to Net income (loss).
Key Factors Affecting Our Operating Results
In addition to the metrics described above, a number of other important factors may affect our results of operations in any given period.
Weather Conditions and Seasonality
In a typical year, our operating results are impacted by seasonality. Our Net sales and Net income have been higher in the second and third quarters of each fiscal year due to favorable weather and longer daylight conditions during these quarters. Our Net sales have been lower in the first and fourth quarters due to reduced demand for landscaping, irrigation, and turf maintenance activities in these quarters, and historically, we have incurred net losses in these quarters. Seasonal variations in operating results may also be significantly impacted by inclement weather conditions, such as snow and ice storms, wet weather, and hurricanes, which not only impact the demand for certain products like fertilizer and ice melt, but also may delay construction projects where our products are used.
Industry and Key Economic Conditions
Our business depends on demand from customers for landscape products and services. The landscape supply industry includes a significant amount of landscape products, such as irrigation systems, outdoor lighting, lawn care supplies, nursery goods, and landscape accessories, for use in the construction of newly built homes, commercial buildings and facilities, and recreational spaces. The landscape supply industry has historically grown in line with rates of growth in residential housing and commercial building. The industry is also affected by trends in home prices, mortgage interest rates, home sales, and consumer spending. As general economic conditions improve or deteriorate, consumption of these products and services also tends to fluctuate. The landscape supply industry also includes a significant number of agronomic products such as fertilizer, herbicides, and ice melt for use in maintaining existing landscapes or facilities. The use of these products is also tied to general economic activity, but levels of sales are not as closely correlated to construction markets.
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Popular Consumer Trends
Preferences in housing, lifestyle, and environmental awareness can also have an impact on the overall level of demand and mix for the products we offer. Examples of current trends we believe are important to our business include an ongoing interest in professional landscape services inspired by the popularity of home and garden television shows, magazines, and social media, the increasingly popular “outdoor living” trend, which has been a key driver of sales growth for our hardscapes and outdoor lighting products, and the social focus on eco-friendly products that promote water conservation, energy efficiency, and the adoption of “green” standards.
Acquisitions
In addition to our organic growth, we continue to grow our business through acquisitions in an effort to better service our existing customers and to attract new customers. These acquisitions have allowed us to further broaden our product lines and extend our geographic reach and leadership positions in local markets. In accordance with GAAP, the results of the acquisitions are reflected in our financial statements from the date of acquisition forward. Additionally, we incur transaction costs in connection with identifying and completing acquisitions as well as ongoing costs as we integrate acquired businesses and seek to achieve synergies. As of June 28, 2026, we completed the following acquisitions since the start of the 2025 Fiscal Year:
•In March 2026, we acquired all of the outstanding stock of Reinders, Inc. (“Reinders”). With twelve locations across Wisconsin, Michigan, Illinois, Indiana, Kansas, and Minnesota, Reinders is a wholesale distributor of irrigation, agronomics, lighting, and landscape supplies to landscape professionals.
•In January 2026, we acquired the assets and assumed the liabilities of Bourget Flagstone Co. (“Bourget Flagstone”), a division of Bourget Bros. Building Materials Inc. With one location in Santa Monica, California, Bourget Flagstone is a wholesale distributor of hardscapes products to landscape professionals.
•In November 2025, we acquired the assets and assumed the liabilities of French Broad Stone Yards, LLC (“French Broad”). With two locations in Arden and Brevard, North Carolina, French Broad is a wholesale distributor of hardscapes products to landscape professionals.
•In November 2025, we acquired the assets and assumed the liabilities of CC Landscaping Warehouse Plus, Inc. (“CC Landscaping”). With one location in Bradenton, Florida, CC Landscaping is a wholesale distributor of nursery products, bulk materials, and landscape supplies to landscape professionals.
•In October 2025, we acquired the assets and assumed the liabilities of Red’s Home and Garden, LP and Red’s Home and Garden GP, Inc. (collectively “Red’s Home and Garden”). With one location in Wilkesboro, North Carolina, Red’s Home and Garden is a wholesale distributor of nursery and hardscapes products to landscape professionals.
•In September 2025, we acquired the assets and assumed the liabilities of Autumn Ridge Stone and Landscape Supply, Inc. (“Autumn Ridge”). With one location in Holland, Michigan, Autumn Ridge is a wholesale distributor of hardscapes products and landscape supplies to landscape professionals.
•In July 2025, we acquired the assets and assumed the liabilities of Nashville Nursery and Landscape Supply, Inc. (“Nashville Nursery”). With one location in Nashville, Tennessee, Nashville Nursery is a wholesale distributor of nursery products to landscape professionals.
•In July 2025, we acquired the assets and assumed the liabilities of Grove Nursery Center, Inc. and Nature’s Grove, LLC (collectively, “Grove Nursery”). With one location in northwest Minneapolis, Minnesota, Grove Nursery is a wholesale distributor of nursery products to landscape professionals.
•In March 2025, we acquired the assets and assumed the liabilities of Green Trade of Georgia, LLC (“Green Trade”). With one location in Jasper, Georgia, Green Trade is a wholesale distributor of nursery products to landscape professionals.
•In January 2025, our then majority-owned subsidiary, Devil Mountain Wholesale Nursery, LLC (“Devil Mountain”), acquired the assets and assumed the liabilities of Pacific Nurseries, LLC (“Pacific Nurseries”). With one location in Colma, California, Pacific Nurseries is a wholesale distributor of nursery products to landscape professionals.
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Volume-Based Pricing
We generally procure our products through purchase orders rather than under long-term contractual arrangements with firm commitments. We work to develop strong relationships with select suppliers that we target based on a number of factors, including brand and market recognition, price, quality, product support, service levels, delivery terms, and strategic positioning. We typically have annual supplier agreements, and while these agreements generally do not provide specific product pricing, many include volume-based financial incentives that are earned by meeting or exceeding purchase volume targets. Our ability to earn these volume-based incentives is an important factor in our financial results. Additionally, in certain cases, we enter into supply contracts with terms that exceed one year for the manufacture of our LESCO® branded fertilizer, some nursery goods, grass seed, and hardscapes, which may require us to purchase products in the future.
Strategic Initiatives
We continue to undertake initiatives, utilizing our scale to improve our profitability, enhance supply chain efficiency, strengthen our pricing and category management capabilities, streamline and refine our marketing process, and invest in more sophisticated information technology systems and data analytics. We are focused on advancing our procurement and supply chain management initiatives to better serve our customers and reduce sourcing costs. We also continue to enhance our website and B2B e-Commerce platform as well as implement new inventory planning, stocking, and transportation management system functionalities to improve our reliability and level of service as well as help our customers be more efficient. In addition, we work closely with our local branches to improve sales, delivery, and branch productivity. We believe we will continue to benefit from the following initiatives, among others:
•Category management initiatives, including the implementation of organic growth strategies, assortment planning, private label expansion, line of business training, and supplier management.
•Supply chain initiatives, including the implementation of new inventory planning and stocking system functionalities, the continued expansion of our distribution network footprint and capabilities, local hubs in large markets, inbound freight optimization, and local fleet utilization and cost improvements.
•Sales force initiatives, including optimizing our commercial sales strategies, leads, and opportunities, while improving the skills and performance of the team.
•Marketing initiatives, including customer analytics and lifecycle marketing, product and private brand marketing, Hispanic customer engagement, optimization of our digital marketing strategy, and a continued focus on our Partners Program.
•Digital initiatives, including increasing customer demand as well as adoption of our website, mobile application, and overall B2B e-Commerce platform, SiteOne.com, which provides the convenience of an online sales channel, enhanced account management functionality, and industry specific productivity tools for our customers.
•Operational excellence initiatives, including the implementation of best practices in branch operations regarding safety, merchandising, stocking and assortment, customer engagement, delivery, labor management, as well as the additional automation and enhancement of branch systems, including the rollout of improved associate mobile capabilities.
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Working Capital
Our business is characterized by a relatively high level of reported working capital, the effects of which can be compounded by changes in prices. In addition to affecting our Net sales, fluctuations in prices of supplies tend to result in changes in our reported inventories, trade receivables, and trade payables, even when our sales volumes and our rate of turnover of these working capital items remain relatively constant. Our working capital needs are exposed to these price fluctuations, as well as to fluctuations in our cost for transportation and distribution. We may not always be able to reflect these changes in our pricing. The strategic initiatives described above are designed to reduce our exposure to these fluctuations and maintain and improve our efficiency.
Results of Operations
In the following discussion of our results of operations, we make comparisons between the three and six months ended June 28, 2026 and June 29, 2025 (in millions, except percentages).
Consolidated Statements of Operations
Three Months Ended Six Months Ended
June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025
Net sales $ 1,530.7 100.0 % $ 1,461.6 100.0 % $ 2,470.8 100.0 % $ 2,401.0 100.0 %
Cost of goods sold 966.2 63.1 % 930.2 63.6 % 1,587.5 64.3 % 1,559.8 65.0 %
Gross profit 564.5 36.9 % 531.4 36.4 % 883.3 35.7 % 841.2 35.0 %
Selling, general and administrative expenses 370.7 24.2 % 349.1 23.9 % 720.6 29.2 % 692.3 28.8 %
Other income 3.8 0.2 % 5.1 0.3 % 9.0 0.4 % 9.0 0.4 %
Operating income 197.6 12.9 % 187.4 12.8 % 171.7 6.9 % 157.9 6.6 %
Interest and other non-operating expenses, net 10.0 0.7 % 10.3 0.7 % 18.0 0.7 % 17.7 0.7 %
Income tax expense 48.3 3.2 % 45.0 3.1 % 38.5 1.6 % 35.6 1.5 %
Net income 139.3 9.1 % 132.1 9.0 % 115.2 4.7 % 104.6 4.4 %
Less:
Net income attributable to non-controlling interest 1.0 0.1 % 1.2 0.1 % 0.9 — % 1.0 — %
Adjustment of non-controlling interest to redemption value (1.0) (0.1) % 1.9 0.1 % 1.6 0.1 % 1.9 0.1 %
Net income attributable to SiteOne $ 139.3 9.1 % $ 129.0 8.8 % $ 112.7 4.6 % $ 101.7 4.2 %
Net sales
Net sales for the three months ended June 28, 2026 increased 5% to $1,530.7 million, compared to $1,461.6 million for the three months ended June 29, 2025, and increased 3% to $2,470.8 million for the six months ended June 28, 2026, compared to $2,401.0 million for the six months ended June 29, 2025. These increases were due primarily to contributions from acquisitions. Organic Daily Sales increased 1% in the second quarter and were flat in the first half of 2026 due primarily to price inflation in response to rising costs and our commercial initiatives, partially offset by softer end market demand. We estimate price increases contributed 3% for the three and six months ended June 28, 2026 based upon year-over-year price changes in our highest selling SKUs. Organic Daily Sales for agronomic products (fertilizer, control products, ice melt, equipment, and other products) increased 5% during the second quarter and 4% during the first half of 2026 due primarily to price inflation in response to rising costs. Organic Daily Sales for landscaping products (irrigation supplies, hardscapes, landscape accessories, nursery goods, and outdoor lighting) were flat during the second quarter and decreased 1% during the first half of 2026 due to weak demand in the new residential construction and repair and upgrade end markets. Acquisitions contributed $49.2 million, or 3%, to the Net sales growth for the second quarter of 2026 and $61.6 million, or 3%, to the Net sales growth for the six months ended June 28, 2026.
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Cost of goods sold
Cost of goods sold increased 4% to $966.2 million for the three months ended June 28, 2026, compared to $930.2 million for the three months ended June 29, 2025, and increased 2% to $1,587.5 million for the six months ended June 28, 2026, compared to $1,559.8 million for the six months ended June 29, 2025. The increase in Cost of goods sold, including Inventory costs, net of supplier incentives and discounts, and Freight, handling, and distribution expenses, was primarily attributable to acquisitions as well as fuel inflation and the addition of our fifth distribution center that commenced operations in the fourth quarter of 2025.
A summary of significant expenses within Cost of goods sold is as follows (in millions):
Three Months Ended Six Months Ended
June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025
Inventory costs, net of supplier incentives and discounts $ 884.7 $ 860.4 $ 1,443.0 $ 1,436.6
Freight, handling, and distribution expenses 62.0 49.8 105.2 85.1
Other Cost of goods sold 19.5 20.0 39.3 38.1
Cost of goods sold $ 966.2 $ 930.2 $ 1,587.5 $ 1,559.8
Gross profit and gross margin
Gross profit increased 6% to $564.5 million for the three months ended June 28, 2026, compared to $531.4 million for the three months ended June 29, 2025, and increased 5% to $883.3 million for the six months ended June 28, 2026, compared to $841.2 million for the six months ended June 29, 2025. Gross profit growth was primarily driven by higher Net sales and improved price realization. Gross margin increased 50 basis points to 36.9% for the second quarter of 2026, compared to 36.4% for the second quarter of 2025, and increased 70 basis points to 35.7% for the six months ended June 28, 2026, compared to 35.0% for the six months ended June 29, 2025. The increase in gross margin is primarily due to the benefits of price realization and execution of our commercial initiatives, partially offset by higher freight and distribution costs as a result of fuel inflation, the addition of our fifth distribution center, and deflation in certain commodity products.
Selling, general and administrative expenses
SG&A increased 6% to $370.7 million for the three months ended June 28, 2026, compared to $349.1 million for the three months ended June 29, 2025, and increased 4% to $720.6 million for the six months ended June 28, 2026, compared to $692.3 million for the six months ended June 29, 2025. SG&A as a percentage of Net sales increased 30 basis points to 24.2% for the three months ended June 28, 2026, compared to 23.9% for the three months ended June 29, 2025, and increased 40 basis points to 29.2% for the six months ended June 28, 2026, compared to 28.8% for the six months ended June 29, 2025. The increase in SG&A was primarily due to the impact of acquisitions, fuel cost inflation, and higher healthcare costs.
A summary of significant segment expenses within SG&A is as follows (in millions):
Three Months Ended Six Months Ended
June 28, 2026 June 29, 2025 June 28, 2026 June 29, 2025
Compensation expenses $ 215.3 $ 203.1 $ 426.8 $ 407.9
Facility expenses 65.3 61.4 127.5 121.1
Depreciation and amortization expenses 34.3 33.6 67.8 67.3
Delivery expenses 21.5 19.3 38.5 36.6
Other Selling, general and administrative expenses 34.3 31.7 60.0 59.4
Selling, general and administrative expenses $ 370.7 $ 349.1 $ 720.6 $ 692.3
Interest and other non-operating expenses, net
Interest and other non-operating expenses, net decreased $0.3 million to $10.0 million for the three months ended June 28, 2026, compared to $10.3 million for the three months ended June 29, 2025, and increased $0.3 million to $18.0 million for the six months ended June 28, 2026, compared to $17.7 million for the six months ended June 29, 2025. The decrease in interest expense for the three months ended June 28, 2026, compared to the three months ended June 29, 2025 was primarily due to lower average interest rates on borrowings during the second quarter of 2026, compared to the second quarter of 2025. The increase in interest expense for the six months ended June 28, 2026, compared to the six months ended June 29, 2025, was primarily due to the maturity of our interest rate swaps in the first quarter of 2025.
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Income tax expense
Income tax expense was $48.3 million for the three months ended June 28, 2026, compared to $45.0 million for the three months ended June 29, 2025. The effective tax rate was 25.7% for the three months ended June 28, 2026, compared to 25.4% for the three months ended June 29, 2025. The increase in the effective tax rate was primarily due to higher state tax expense. There were no excess tax benefits recognized for either the three months ended June 28, 2026 or the three months ended June 29, 2025.
Income tax expense was $38.5 million for the six months ended June 28, 2026, compared to $35.6 million for the six months ended June 29, 2025. The effective tax rate was 25.0% for the six months ended June 28, 2026, compared to 25.4% for the six months ended June 29, 2025. The decrease in the effective tax rate was primarily due to an increase in the amount of excess tax benefits from stock-based compensation recognized as a component of Income tax expense in the Consolidated Statements of Operations. Excess tax benefits of $0.2 million were recognized for the six months ended June 28, 2026, compared to tax deficiencies of $0.3 million for the six months ended June 29, 2025.
Net income attributable to non-controlling interest
Net income attributable to non-controlling interest decreased $0.2 million to $1.0 million for the three months ended June 28, 2026, compared to $1.2 million for the three months ended June 29, 2025, and decreased $0.1 million to $0.9 million for the six months ended June 28, 2026, compared to $1.0 million for the six months ended June 29, 2025. The changes in Net income attributable to non-controlling interest were primarily due to the acquisition of the remaining 25% interest in Devil Mountain on June 1, 2026.
Adjustment of non-controlling interest to redemption value
Adjustment of non-controlling interest to redemption value was $(1.0) million for the three months ended June 28, 2026 and $1.6 million for the six months ended June 28, 2026, compared to $1.9 million for the three and six months ended June 29, 2025. The decreases in the adjustment to the carrying amount of the Redeemable non-controlling interest are due to the Company’s acquisition of the remaining 25% interest in Devil Mountain on June 1, 2026.
Net income attributable to SiteOne
Net income attributable to SiteOne increased $10.3 million to $139.3 million for the three months ended June 28, 2026, compared to $129.0 million for the three months ended June 29, 2025, and increased $11.0 million to $112.7 million for the six months ended June 28, 2026, compared to $101.7 million for the six months ended June 29, 2025. The increase in Net income attributable to SiteOne for the three and six months ended June 28, 2026, compared to the three and six months ended June 29, 2025 was primarily due to an increase in Gross profit as a result of the improvement in gross margin, partially offset by lower sales volume and higher SG&A.
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Quarterly Results of Operations Data
The following table sets forth certain financial data for each of the most recent eight fiscal quarters including our unaudited Net sales, Cost of goods sold, Gross profit, Selling, general and administrative expenses, Net income (loss), and Adjusted EBITDA data (including a reconciliation of Adjusted EBITDA to Net income (loss)). We have prepared the quarterly data on a basis that is consistent with the financial statements included in this Quarterly Report on Form 10-Q. In the opinion of management, the financial information reflects all necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data. This information is not a complete set of financial statements and should be read in conjunction with our financial statements and related notes included in this Quarterly Report on Form 10-Q. The results of historical periods are not necessarily indicative of the results of operations for a full year or any future period.
(In millions, except per share information and percentages)
2026 2025 2024
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3
Net sales $ 1,530.7 $ 940.1 $ 1,045.6 $ 1,258.2 $ 1,461.6 $ 939.4 $ 1,013.1 $ 1,208.8
Cost of goods sold 966.2 621.3 688.8 821.0 930.2 629.6 675.5 797.8
Gross profit 564.5 318.8 356.8 437.2 531.4 309.8 337.6 411.0
Selling, general and administrative expenses 370.7 349.9 365.9 357.4 349.1 343.2 364.5 349.1
Other income, net (3.8) (5.2) (4.1) (5.4) (5.1) (3.9) (2.0) (8.0)
Operating income (loss) 197.6 (25.9) (5.0) 85.2 187.4 (29.5) (24.9) 69.9
Interest and other non-operating expenses, net 10.0 8.0 8.2 9.1 10.3 7.4 6.7 9.5
Income tax expense (benefit) 48.3 (9.8) (5.4) 15.5 45.0 (9.4) (10.1) 15.8
Net income (loss) 139.3 (24.1) (7.8) 60.6 132.1 (27.5) (21.5) 44.6
Less:
Net income (loss) attributable to non-controlling interest 1.0 (0.1) 0.6 0.4 1.2 (0.2) 0.2 0.2
Adjustment of non-controlling interest to redemption value (1.0) 2.6 0.6 1.1 1.9 — — —
Net income (loss) attributable to SiteOne $ 139.3 $ (26.6) $ (9.0) $ 59.1 $ 129.0 $ (27.3) $ (21.7) $ 44.4
Net income (loss) per common share:
Basic $ 3.16 $ (0.60) $ (0.20) $ 1.32 $ 2.88 $ (0.61) $ (0.48) $ 0.98
Diluted $ 3.14 $ (0.60) $ (0.20) $ 1.31 $ 2.86 $ (0.61) $ (0.48) $ 0.97
Adjusted EBITDA(a) $ 237.2 $ 25.5 $ 37.6 $ 127.5 $ 226.7 $ 22.4 $ 31.8 $ 114.8
Net sales as a percentage of annual Net sales 22.2 % 26.7 % 31.1 % 20.0 % 22.3 % 26.6 %
Gross profit as a percentage of annual Gross profit 21.8 % 26.7 % 32.5 % 19.0 % 21.7 % 26.3 %
Adjusted EBITDA as a percentage of annual Adjusted EBITDA 9.1 % 30.8 % 54.7 % 5.4 % 8.4 % 30.3 %
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(a) In addition to our Net income (loss) determined in accordance with GAAP, we present Adjusted EBITDA in this Quarterly Report on Form 10-Q to evaluate the operating performance and efficiency of our business. EBITDA represents Net income (loss) plus the sum of Income tax expense (benefit), interest expense, net of interest income, and depreciation and amortization. Adjusted EBITDA is further adjusted for stock-based compensation expense, (gain) loss on sale of assets and termination of finance leases not in the ordinary course of business, financing fees, as well as other fees and expenses related to acquisitions, and other non-recurring (income) loss. We believe that Adjusted EBITDA is an important supplemental measure of operating performance because:
•Adjusted EBITDA is used to test compliance with certain covenants under our long-term debt agreements;
•Adjusted EBITDA is frequently used by securities analysts, investors, and other interested parties in their evaluation of companies, many of which present an Adjusted EBITDA measure when reporting their results;
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•Adjusted EBITDA is helpful in highlighting operating trends, because it excludes the results of decisions that are outside the control of operating management and that can differ significantly from company to company depending on long-term strategic decisions regarding capital structure, the tax jurisdictions in which companies operate, age and book depreciation of facilities, and capital investments;
•we consider (gains) losses on the acquisition, disposal, and impairment of assets as resulting from investing decisions rather than ongoing operations; and
•other significant non-recurring items, while periodically affecting our results, may vary significantly from period to period and have a disproportionate effect in a given period, which affects comparability of our results.
Adjusted EBITDA is not a measure of our liquidity or financial performance under GAAP and should not be considered as an alternative to Net income, Operating income, or any other performance measures derived in accordance with GAAP, or as an alternative to cash flow from operating activities as a measure of our liquidity. The use of Adjusted EBITDA instead of Net income has limitations as an analytical tool. For example, this measure:
•does not reflect changes in, or cash requirements for, our working capital needs;
•does not reflect our interest expense, net, or the cash requirements necessary to service interest or principal payments, on our debt;
•does not reflect our Income tax expense (benefit) or the cash requirements to pay our income taxes;
•does not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
•does not reflect the recognition of the step-up basis in inventory from acquisitions (i.e., the adjustment to record inventory from historic cost to fair value at acquisition) as the adjustment does not reflect the ongoing expense associated with sale of our products as part of our underlying business; and
•although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and does not reflect any cash requirements for such replacements.
Management compensates for these limitations by relying primarily on the GAAP results and by using Adjusted EBITDA only as a supplement to provide a more complete understanding of the factors and trends affecting the business than GAAP results alone. Because not all companies use identical calculations, our presentation of Adjusted EBITDA may not be comparable to other similarly titled measures of other companies limiting their usefulness as a comparative measure.
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The following table presents a reconciliation of Adjusted EBITDA to Net income (loss) (in millions):
2026 2025 2024
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3
Reported Net income (loss) $ 139.3 $ (24.1) $ (7.8) $ 60.6 $ 132.1 $ (27.5) $ (21.5) $ 44.6
Income tax expense (benefit) 48.3 (9.8) (5.4) 15.5 45.0 (9.4) (10.1) 15.8
Interest expense, net 10.0 8.0 8.2 9.1 10.3 7.4 6.7 9.5
Depreciation and amortization 36.2 35.1 34.7 35.4 35.3 35.4 35.6 35.9
EBITDA 233.8 9.2 29.7 120.6 222.7 5.9 10.7 105.8
Stock-based compensation(a) 2.1 14.2 5.5 5.6 2.3 13.6 5.5 5.2
(Gain) loss on sale of assets(b) (0.6) (1.6) 0.3 0.1 (0.5) (0.2) 1.5 0.3
Financing fees(c) — — — — — — — 0.5
Acquisitions and other adjustments(d) 1.9 3.7 2.1 1.2 2.2 3.1 14.1 3.0
Adjusted EBITDA(e) $ 237.2 $ 25.5 $ 37.6 $ 127.5 $ 226.7 $ 22.4 $ 31.8 $ 114.8
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(a) Represents stock-based compensation expense recorded during the period.
(b) Represents any gain or loss associated with the sale of assets and termination of finance leases not in the ordinary course of business.
(c) Represents fees associated with our debt refinancing and debt amendments.
(d) Represents professional fees and settlement of litigation, performance bonuses, and retention and severance payments related to historical acquisitions. Also included is the cost of inventory that was stepped up to fair value related to the purchase accounting of Devil Mountain as well as charges during the fourth quarter of 2025 and 2024 for consolidating or closing certain branch locations. We cannot predict the timing or amount of any such fees or payments. These amounts are recorded in Cost of goods sold and Selling, general and administrative expenses in the Consolidated Statements of Operations.
(e) Adjusted EBITDA excludes any earnings or loss of acquisitions prior to their respective acquisition dates for all periods presented. Adjusted EBITDA includes Adjusted EBITDA attributable to non-controlling interest as follows (in millions):
2026 2025 2024
Qtr 2 Qtr 1 Qtr 4 Qtr 3 Qtr 2 Qtr 1 Qtr 4 Qtr 3
Adjusted EBITDA attributable to non-controlling interest $ 1.3 $ 0.7 $ 1.1 $ 1.0 $ 1.8 $ 0.3 $ 0.8 $ 0.8
The following table presents a reconciliation of Organic Daily Sales to Net sales (in millions, except Selling Days):
2026 2025
Qtr 2 Qtr 1 Qtr 2 Qtr 1
Reported Net sales $ 1,530.7 $ 940.1 $ 1,461.6 $ 939.4
Organic Sales(a) 1,479.2 927.7 1,459.3 939.4
Acquisition contribution(b) 51.5 12.4 2.3 —
Selling Days 64 64 64 64
Organic Daily Sales $ 23.1 $ 14.5 $ 22.8 $ 14.7
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(a) Organic Sales equal Net sales less Net sales from branches acquired in 2026 and 2025.
(b) Represents Net sales from acquired branches that have not been under our ownership for at least four full fiscal quarters at the start of the 2026 Fiscal Year. Includes Net sales from branches acquired in 2026 and 2025.
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Liquidity and Capital Resources
We assess our liquidity in terms of our cash and cash equivalents on hand and the ability to generate cash to fund our operating and investing activities, repurchase shares, and service our debt, taking into consideration available borrowings and the seasonal nature of our business. We expect that cash and cash equivalents on hand, cash provided from operations, and available capacity under the ABL Facility will provide sufficient funds to operate our business, make capital expenditures, complete acquisitions and share repurchases, and meet all of our liquidity requirements for the next 12 months, including payment of interest and principal on our debt. Longer-term projects or significant investments in acquisitions may be financed through borrowings under our credit facilities or other forms of financing and will depend on then-existing conditions.
In October 2022, our Board of Directors approved a share repurchase authorization for up to $400.0 million of our common stock. We intend to purchase shares under the repurchase authorization from time to time on the open market at the discretion of management, subject to strategic considerations, market conditions, and other factors. The share repurchase authorization does not have an expiration date and may be amended, suspended, or terminated by our Board of Directors at any time. During the six months ended June 28, 2026, we repurchased 952,216 shares of our common stock for approximately $113.8 million at an average price per share of $119.46. In July 2026, we repurchased 100,692 shares of our common stock for approximately $10.0 million at an average price of $99.29 under a 10b5-1 plan that authorized the purchase of the Company’s common stock. For the 2026 Fiscal Year through July 29, 2026, we repurchased 1,052,908 shares of our common stock for approximately $123.8 million at an average price per share of $117.53. As of July 29, 2026, the dollar value of shares that may yet be purchased under the share repurchase authorization was $90.5 million.
Our borrowing base capacity under the ABL Facility was $443.0 million as of June 28, 2026, after giving effect to $124.1 million of revolving credit loans under the ABL Facility and outstanding letters of credit of $32.9 million. Our borrowing base capacity under the ABL Facility was $577.8 million as of December 28, 2025, after giving effect to outstanding letters of credit of $22.2 million. As of June 28, 2026, we had total cash and cash equivalents of $87.4 million, total gross long-term debt of $510.9 million, and total finance lease obligations (excluding interest) of $137.3 million.
Working capital was $1,098.4 million as of June 28, 2026, an increase of $86.4 million, compared to $1,012.0 million as of December 28, 2025. The increase in working capital was primarily attributable to the seasonality of our business and acquisitions.
The following table summarizes current and long-term material cash requirements related to our long-term debt as of June 28, 2026 (in millions):
Total Next 12 Months Beyond 12 Months
Long-term debt, including current maturities $ 510.9 $ 3.9 $ 507.0
Interest on long-term debt $ 116.6 $ 30.5 $ 86.1
Our gross long-term debt balance increased $121.5 million since December 28, 2025. This increase was primarily attributable to funding a seasonal increase in working capital as well as higher acquisition investments, share repurchases, and capital expenditures. We have current maturities on our long-term debt of $3.9 million, which relates to the term loan facility. The projected interest payments on our debt only pertain to obligations and agreements outstanding as of June 28, 2026, and expected payments for agent administration fees. The projected interest payments are calculated for future periods through maturity dates of our long-term debt using interest rates in effect as of June 28, 2026. Certain of these projected interest payments may differ in the future based on changes in floating interest rates or other factors and events, including our entry into interest rate swap contracts and amendments of the term loan facility and the ABL Facility. The total amount of projected interest on long-term debt increased by $21.6 million since December 28, 2025, to $116.6 million, primarily due to borrowings under the ABL Facility. Refer to “Note 9. Long-Term Debt” in the notes to the consolidated financial statements for further information regarding our debt instruments.
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Cash Flow Summary
Information about our cash flows, by category, is presented in our statements of cash flows and is summarized below (in millions):
Six Months Ended
Net cash provided by (used in): June 28, 2026 June 29, 2025
Operating activities $ 31.1 $ 7.1
Investing activities $ (116.5) $ (37.9)
Financing activities $ (17.2) $ 1.3
Cash flow provided by operating activities
Net cash provided by operating activities for the six months ended June 28, 2026 was $31.1 million, compared to $7.1 million for the six months ended June 29, 2025. The increase was primarily driven by higher Net income and a positive contribution from working capital changes in the first six months of 2026 compared to the same period of 2025.
Cash flow used in investing activities
Net cash used in investing activities was $116.5 million for the six months ended June 28, 2026, compared to $37.9 million for the six months ended June 29, 2025. The increase reflected higher acquisition investments and capital expenditures in the first six months of 2026 compared to the same period of 2025. Capital expenditures were $40.6 million for the first six months of 2026 compared to $29.1 million for the same period of 2025 due to increased investments in branch locations and information technology.
Cash flow (used in) provided by financing activities
Net cash used in financing activities was $(17.2) million for the six months ended June 28, 2026, compared to net cash provided by financing activities of $1.3 million for the six months ended June 29, 2025. The change in cash flows for financing activities primarily reflected an increase in share repurchases, partially offset by higher net borrowings under the ABL Facility during the first six months of 2026 compared to the same period of 2025.
External Financing
Term Loans
Landscape Holding and Landscape, as borrowers (collectively, the “Borrowers”), entered into the Fifth Amendment to the Amended and Restated Credit Agreement, the (“Fifth Amendment”), dated as of March 23, 2021, with JPMorgan Chase Bank, N.A., as administrative agent and collateral agent, the several banks and other financial institutions party thereto, and certain other parties party thereto from time to time. The Fifth Amendment amended and restated the Amended and Restated Credit Agreement, dated as of April 29, 2016, among the Borrowers, the lenders from time to time party thereto, and UBS AG, Stamford Branch as administrative agent and collateral agent (as amended prior to March 23, 2021, the “Existing Credit Agreement” and, as so amended and restated pursuant to the Fifth Amendment, the “Second Amended and Restated Credit Agreement”) in order to, among other things, incur $325.0 million of term loans (the “New Term Loans”).
On March 27, 2023, Landscape Holding, as representative for the Borrowers, entered into the First Amendment to the Second Amended and Restated Credit Agreement (the “Sixth Amendment”) to implement a forward-looking interest rate based on SOFR in lieu of LIBOR.
On July 12, 2023, Landscape Holding, as representative for the Borrowers, entered into the Increase Supplement (the “Increase Supplement”) to the Second Amended and Restated Credit Agreement to provide for an additional $120.0 million of New Term Loans.
On July 2, 2024, Landscape Holding, as representative for the Borrowers, entered into the Second Amendment to the Second Amended and Restated Credit Agreement (the “Second Amendment”) that amended and restated the Second Amended and Restated Credit Agreement, dated as of March 23, 2021. The Second Amendment provided for, among other things, an aggregate principal amount of approximately $392.7 million in term loans, and made certain other changes to the existing credit agreement (the “Tranche B Term Loans”).
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The Tranche B Term Loans bear interest, at Landscape Holding’s option, at either (i) an adjusted Term SOFR rate plus an applicable margin equal to 1.75% (with a Term SOFR floor of 0.50%) or (ii) an alternative base rate plus an applicable margin equal to 0.75%. Voluntary prepayments of the Tranche B Term Loans are permitted at any time, in minimum principal amounts, without premium or penalty, unless in connection with certain repricing transactions that occur within the first six months after the date of effectiveness of the Second Amendment.
Subject to certain conditions, without the consent of the then existing lenders (but subject to the receipt of commitments), the Tranche B Term Loans may be increased (or a new term loan facility, revolving credit facility, or letter of credit facility added) by up to (i) the greater of (a) $392.0 million and (b) 100% of Consolidated EBITDA (as defined in the Second Amendment) for the trailing 12-month period plus (ii) an additional amount that will not cause the net secured leverage ratio after giving effect to the incurrence of such additional amount and any use of proceeds thereof to exceed 4.00 to 1.00.
The Tranche B Term Loans are subject to mandatory prepayment provisions, covenants, and events of default. Failure to comply with these covenants and other provisions could result in an event of default under the Second Amendment. If an event of default occurs, the lenders could elect to declare all amounts outstanding under the Tranche B Term Loans to be immediately due and payable and enforce their interest in collateral pledged under the agreement.
Amendments of Term Loans
On July 2, 2024, Landscape Holding and Landscape entered into the Second Amendment that amends and restates the Second Amended and Restated Credit Agreement, dated as of March 23, 2021. The Second Amendment provides for, among other things, an aggregate principal amount of approximately $392.7 million in Tranche B Term Loans, and makes certain other changes to the existing credit agreement. Proceeds of the Tranche B Term Loans were used, among other things, (i) to repay in full the term loans outstanding immediately prior to the effectiveness of the Second Amendment, (ii) to repay certain loans outstanding under the ABL Facility, and (iii) to pay fees, costs, and expenses related to the foregoing transactions. The Tranche B Term Loans bear interest, at Landscape Holding’s option, at either (i) an adjusted Term SOFR rate plus an applicable margin equal to 1.75% (with a Term SOFR floor of 0.50%) or (ii) an alternative base rate plus an applicable margin equal to 0.75%. Voluntary prepayments of the Tranche B Term Loans are permitted at any time, in minimum principal amounts, without premium or penalty, unless in connection with certain repricing transactions that occur within the first six months after the date of effectiveness of the Second Amendment. The Tranche B Term Loans will mature on March 22, 2030. The interest rate on the outstanding balance of the Tranche B Term Loans was 5.38718% and 5.50012% as of June 28, 2026 and December 28, 2025, respectively.
The Second Amendment contains customary representations and warranties and customary affirmative and negative covenants. The negative covenants limit the ability of Landscape Holding and Landscape to:
•incur additional indebtedness;
•pay dividends, redeem stock, or make other distributions;
•repurchase, prepay, or redeem subordinated indebtedness;
•make investments;
•create restrictions on the ability of Landscape Holding’s restricted subsidiaries to pay dividends or make other intercompany transfers;
•create liens;
•transfer or sell assets;
•make negative pledges;
•consolidate, merge, sell, or otherwise dispose of all or substantially all of Landscape Holding’s assets;
•change lines of business; and
•enter into certain transactions with affiliates.
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ABL Facility
Landscape Holding and Landscape (collectively, the “ABL Borrowers”) are parties to the credit agreement dated December 23, 2013 (as amended by the First Amendment to the Credit Agreement, dated June 13, 2014, the Second Amendment to the Credit Agreement, dated January 26, 2015, the Third Amendment to the Credit Agreement, dated February 13, 2015, the Fourth Amendment to the Credit Agreement, dated October 20, 2015, the Omnibus Amendment to the Credit Agreement, dated May 24, 2017, the Sixth Amendment to the Credit Agreement, dated February 1, 2019, and the Seventh Amendment to the Credit Agreement, dated July 22, 2022, the “ABL Credit Agreement”) providing for an asset-based credit facility (the “ABL Facility”) of up to $600.0 million, subject to borrowing base availability. The ABL Facility is secured by a first lien on the inventory and receivables of the ABL Borrowers. The ABL Facility is guaranteed by SiteOne Landscape Supply Bidco, Inc. (“Bidco”), an indirect wholly-owned subsidiary of the Company, and each direct and indirect wholly-owned U.S. restricted subsidiary of Landscape. Availability is determined using borrowing base calculations of eligible inventory and receivable balances less the current outstanding ABL Facility and letters of credit balances.
On April 22, 2026, the Company, through its subsidiaries, entered into the First Amendment to the Amended and Restated Credit Agreement (the “First Amendment”). The First Amendment amends the ABL Credit Agreement, dated as of July 22, 2022, to among other things, (i) extend the final scheduled maturity to April 22, 2031, subject to a springing maturity date of 91 days prior to the maturity of the Second Amended and Restated Credit Agreement, (ii) increase the letter of credit sublimit from $30.0 million to $50.0 million, (iii) remove the 10 basis point credit spread adjustment that was applied to SOFR-based borrowings, and (iv) make such other changes as agreed to by the parties pursuant to the First Amendment.
Loans under the ABL Credit Agreement bear interest, at Landscape Holding’s option, at either (i) an adjusted Term SOFR rate equal to Term SOFR plus an applicable margin of 1.25% or 1.50% or (ii) an alternate base rate plus an applicable margin of 0.25% or 0.50%, in each case depending on the average daily excess availability under the ABL Credit Agreement, and in each case subject to a 0.125% reduction when the Consolidated First Lien Leverage Ratio (as defined in the ABL Credit Agreement) is less than 1.50:1.00. Additionally, undrawn commitments under the ABL Credit Agreement bear a commitment fee of 0.20% or 0.25%, depending on the average daily undrawn portion of the commitments under the ABL Credit Agreement.
The weighted average interest rate on outstanding balances under the ABL Facility was 4.75248% as of June 28, 2026. There was no outstanding balance under the ABL Facility as of December 28, 2025. The commitment fees on unfunded amounts was 0.25% as of June 28, 2026 and December 28, 2025.
The ABL Facility is subject to mandatory prepayments if the outstanding loans and letters of credit exceed either the aggregate revolving commitments or the current borrowing base, in an amount equal to such excess. Additionally, the ABL Facility is subject to various covenants, including incurrence covenants that require the Company to meet minimum financial ratios, and additional borrowings and other corporate transactions may be limited by failure to meet these financial ratios. Failure to meet any of these covenants could result in an event of default under these agreements. If an event of default occurs, the lenders could elect to declare all amounts outstanding under these agreements to be immediately due and payable, enforce their interest in collateral pledged under the agreement, or restrict the ABL Borrowers’ ability to obtain additional borrowings under these agreements. The ABL Facility is secured by a first lien security interest over inventory and receivables and a second lien security interest over all other assets pledged as collateral.
The ABL Facility contains customary representations and warranties and customary affirmative and negative covenants. The negative covenants are limited to the following: financial condition, fundamental changes, dividends and distributions, acquisitions, dispositions of collateral, payments and modifications of restricted indebtedness, negative pledge clauses, changes in line of business, currency, commodity and other hedging transactions, transactions with affiliates, investments, indebtedness, and liens. The negative covenants are subject to customary exceptions and also permit the payment of dividends and distributions, investments, permitted acquisitions, payments or redemptions of indebtedness under the Second Amended and Restated Credit Agreement, asset sales and mergers, consolidations, and sales of all or substantially all assets involving subsidiaries upon satisfaction of a “payment condition.” The payment condition is deemed satisfied upon 30-day specified excess availability and specified availability exceeding agreed upon thresholds and, in certain cases, the absence of specified events of default or known events of default and pro forma compliance with a consolidated fixed charge coverage ratio of 1.00 to 1.00.
Subject to certain conditions and subject to the receipt of commitments, the ABL Facility may be increased (or a new term loan facility added) by up to (i) the greater of (a) $450.0 million and (b) 100% of Consolidated EBITDA (as defined in the ABL Credit Agreement) for the period of the most recent four consecutive fiscal quarters ending prior to the date of such determination plus (ii) an additional amount that will not cause the Consolidated First Lien Leverage Ratio, after giving effect to the incurrence of such additional amount and any use of proceeds thereof, to exceed 5.00 to 1.00.
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There are no financial covenants included in the ABL Credit Agreement, other than a springing minimum consolidated fixed charge coverage ratio of at least 1.00 to 1.00, which is tested only when specified availability is less than 10.0% of the lesser of (x) the then applicable borrowing base and (y) the then aggregate effective commitments under the ABL Facility, and continuing until such time as specified availability has been in excess of such threshold for a period of 20 consecutive calendar days.
Failure to comply with the covenants and other provisions included in the ABL Credit Agreement could result in an event of default under the ABL Facility. If an event of default occurs, the lenders could elect to declare all amounts outstanding under the ABL Facility to be immediately due and payable, enforce their interest in collateral pledged under the agreement, or restrict the ABL Borrowers’ ability to obtain additional borrowings thereunder.
Subsidiary ABL Facility
In connection with our acquisition of a controlling interest in Devil Mountain, on April 30, 2024, Devil Mountain entered into the Eighth Amendment to the Credit Agreement and Consent providing for an asset-based credit facility (the “Devil Mountain ABL Facility”) of up to $20.0 million, subject to borrowing base availability.
Loans under the Devil Mountain ABL Facility bear interest at either (i) an adjusted Term SOFR rate equal to Term SOFR plus an applicable margin of 1.90% or 2.10% or (ii) an alternate base rate plus an applicable margin of 0.80% or 1.00%, subject to a 0.20% reduction when the Fixed Charge Coverage Ratio (as defined in the Devil Mountain ABL Facility) is greater than 2.00:1.00. Additionally, undrawn commitments under the Devil Mountain ABL Facility bear a commitment fee of 0.25% on the actual undrawn portion of the commitments under the Devil Mountain ABL Facility based upon the daily utilization for the previous quarter. There was no outstanding balance as of June 28, 2026. The interest rate on the outstanding balance under the Devil Mountain ABL Facility was 5.77272% as of December 28, 2025.
Limitations on Distributions and Dividends by Subsidiaries
The ability of our subsidiaries to make distributions and dividends to us depends on their operating results, cash requirements, financial condition, and general business conditions, as well as restrictions under the laws of our subsidiaries’ jurisdictions.
The agreements governing the Second Amended and Restated Credit Agreement and the ABL Facility restrict the ability of our subsidiaries to pay dividends, make loans, or otherwise transfer assets to us. Further, our subsidiaries are permitted under the terms of the Second Amended and Restated Credit Agreement and the ABL Facility and other indebtedness to incur additional indebtedness that may restrict or prohibit the making of distributions, the payment of dividends, or the making of loans to us.
Interest Rate Swaps
We are subject to interest rate risk with regard to existing and future issuances of debt. We have utilized interest rate swap contracts to reduce our exposure to fluctuations in variable interest rates for future interest payments on existing debt. Prior to the termination of interest rate swaps 7, 8, and 9 upon maturity on March 23, 2025, we were party to interest rate swap contracts to convert the variable interest rate to a fixed interest rate on portions of the borrowings under the term loans.
We recognized any differences between the variable interest rate payments and the fixed interest rate settlements from the swap counterparties as an adjustment to interest expense over the life of the swaps. We had designated these swaps as cash flow hedges and recorded the changes in the estimated fair value of the swaps to Accumulated other comprehensive income (loss) (“AOCI”) on our Consolidated Balance Sheets.
Critical Accounting Estimates
The accounting estimates we believe to be most sensitive due to their significance to the financial statements and the possibility that future events may be significantly different from our expectations are inventory valuation and goodwill. Refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the 2025 Fiscal Year for additional detail and discussion of these critical accounting estimates. There have been no material changes to our critical accounting estimates as described in our most recent Annual Report.
Recently Issued and Adopted Accounting Pronouncements
Refer to “Note 1. Nature of Business and Significant Accounting Policies” in the notes to the consolidated financial statements.
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Accounting Pronouncements Issued But Not Yet Adopted
Refer to “Note 1. Nature of Business and Significant Accounting Policies” in the notes to the consolidated financial statements.
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