MSC Industrial Direct (MSM) risk factors, FY2025 10-K

Risks Related to Our Business

1. 01Our business depends heavily on the operating levels of our customers and the economic factors that affect them, including general economic conditions
2. 02Changes in our customer and product mix, or adverse changes to the cost of goods we sell, could cause our gross margin percentage to fluctuate or decrease
3. 03Volatility in commodity, energy and labor prices, as well as periods of abnormal inflation, may adversely affect operating margins
4. 04We operate in a highly competitive industry, which is evolving and consolidating, which could have a material adverse effect on our business, financial condition, or results of operations
5. 05As a supplier to the public sector, we are subject to certain laws and regulations that mandate compliance standards, may result in potential liabilities and may increase our costs of doing business38% rewritten
6. 06Our business is exposed to the credit risk of our customers, which could have a material adverse effect on our business, financial condition, or results of operations
7. 07Failure to accurately forecast customer demand and timely purchase inventory could lead to excess inventories or inventory shortages, which could result in decreased operating margins, reduced cash flows and harm to our business
8. 08Interruptions in our ability to make deliveries to our customers could have a material adverse effect on our business, financial condition, or results of operations
9. 09Supply chain disruptions could have a material adverse effect on our business, financial condition, or results of operations
10. 10Our business depends on our ability to attract, train and retain qualified sales and customer service personnel and metalworking and specialty sales specialists
11. 11The loss of key suppliers or contractors or key brands could have a material adverse effect on our business, financial condition, or results of operations
12. 12Changes to trade policies or trade relationships could make sourcing products from overseas more difficult and/or costlier as well as negatively affect the markets we sell into70% rewritten
13. 13Opening or expanding our customer fulfillment centers exposes us to risks of delays and may affect our operating results
14. 14We establish insurance-related healthcare reserves based on historical claims experience and actuarial estimates, which could lead to adjustments in the future based on actual claims incurred21% rewritten
15. 15An interruption of operations at our headquarters or customer fulfillment centers could have a material adverse effect on our business, financial condition, or results of operations
16. 16Products that we sell may expose us to potential material liability for property damage, environmental damage, personal injury, or death linked to the use of those products by our customers
17. 17Goodwill and other indefinite-lived intangible assets recorded as a result of our acquisitions could become impaired
18. 18Climate change and societal and governmental responses to climate change could have a material adverse effect on our business, financial condition, or results of operations, including indirectly through impacts on our customers

Risks Related to Our Indebtedness

1. 19The terms of our credit facilities and senior notes impose operating and financial restrictions on us, which may limit our ability to respond to changing business and economic conditions
2. 20Our inability to maintain our committed and uncommitted credit facilities or to obtain additional financing could have a material adverse effect on our liquidity, business, financial condition, or results of operations

Risks Related to our Securities

1. 21Our principal shareholders own a significant amount of our voting stock and have rights to nominate directors to our Board of Directors, and their interests may differ from those of our other shareholders25% rewritten

Risks Related to IT and Intellectual Property

1. 22The growth of our digital platforms and E-commerce capabilities exposes us to particular risks, which could have a material adverse effect on our business, financial condition, or results of operations
2. 23Maintaining our IT systems and complying with data privacy laws may incur significant, recurring costs28% rewritten
3. 24Disruptions or breaches of our IT systems, or violations of data privacy laws, could have a material adverse effect on our business, financial condition, or results of operations
4. 25Our E-commerce channels are subject to risks related to online payment methods and other online transactions, including through purchasing platforms76% rewritten
5. 26Our success is dependent on our ability to hire and retain certain key management personnel28% rewritten
6. 27We are subject to litigation risk due to the nature of our business, which could have a material adverse effect on our business, financial condition, or results of operations55% rewritten
7. 28Changes in tax legislation and associated compliance requirements could adversely affect our financial resultsNew
8. 29We may encounter difficulties with acquisitions and other strategic transactions which could harm our business
9. 30We are subject to environmental, health and safety laws and regulations
10. 31Social and environmental responsibility policies and provisions may be difficult to comply with and may impose costs on us46% rewritten